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FEDERAL
DEPOSIT
INSURANCE
CORPORATION

ANNUAL REPORT 2013

THIS PAGE INTENTIONALLY LEFT BLANK.

FEDERAL
DEPOSIT
INSURANCE
CORPORATION

ANNUAL REPORT 2013

ANNUAL REPORT 2013

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

OFFICE OF THE CHAIRMAN

March 14, 2014
Dear Sir,
In accordance with:
♦♦ the provisions of section 17(a) of the Federal Deposit Insurance Act,
♦♦ the Chief Financial Officers Act of 1990, Public Law 101-576,
♦♦ the Government Performance and Results Act of 1993 (as amended) and the GPRA Modernization Act of 2010,
♦♦ the provisions of Section 5 (as amended) of the Inspector General Act of 1978, and
♦♦ the Reports Consolidation Act of 2000,
the Federal Deposit Insurance Corporation (FDIC) is pleased to submit its 2013 Annual Report (also referred to as the
Performance and Accountability Report), which includes the audited financial statements of the Deposit Insurance Fund
(DIF) and the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund (FRF).
In accordance with the Reports Consolidation Act of 2000, the FDIC assessed the reliability of the performance data
contained in this report. No material inadequacies were found, and the data are considered to be complete and reliable.
Based on internal management evaluations, and in conjunction with the results of independent financial statement audits,
the FDIC can provide reasonable assurance that the objectives of Section 2 (internal controls) and Section 4 (financial
management systems) of the Federal Managers’ Financial Integrity Act of 1982 have been achieved, and that the FDIC has no
material weaknesses. Additionally, the U.S. Government Accountability Office did not identify any significant deficiencies in
the FDIC’s internal controls for 2013. We are committed to maintaining effective internal controls corporate-wide in 2014.
Sincerely,

Martin J. Gruenberg
Chairman

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

2 FEDERAL DEPOSIT INSURANCE CORPORATION

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

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

Activities Related to Systemically Important Financial Institutions................................................................................... 15

	

Supervision and Consumer Protection................................................................................................................................... 19

	

Resolutions and Receiverships................................................................................................................................................ 37

	

Effective Management of Strategic Resources...................................................................................................................... 43

II.	 Financial Highlights...............................................................................................................47
Deposit Insurance Fund Performance ........................................................................................................................................ 47
Corporate Operating Budget.......................................................................................................................................................... 49
Investment Spending...................................................................................................................................................................... 50

III.	 Performance Results Summary.......................................................................................................51
Summary of 2013 Performance Results by Program.................................................................................................................. 51
2013 Budget and Expenditures by Program ............................................................................................................................... 53
Performance Results by Program and Strategic Goal................................................................................................................ 54
Prior Years’ Performance Results................................................................................................................................................. 59

IV.	 Financial Section....................................................................................................................67
Deposit Insurance Fund (DIF)...................................................................................................................................................... 68
FSLIC Resolution Fund (FRF)....................................................................................................................................................... 89
Government Accountability Office Auditor’s Report.................................................................................................................. 99
Management’s Response.............................................................................................................................................................. 106

V.	 Corporate Management Control.........................................................................................109
Management Report on Final Actions........................................................................................................................................ 109

VI.	Appendices..........................................................................................................................113
A. Key Statistics............................................................................................................................................................................. 113
B. Overview of the Industry......................................................................................................................................................... 129
C. More About the FDIC............................................................................................................................................................... 131
D. Office of Inspector General’s Assessment of the Management and Performance Challenges Facing the FDIC ........ 140

ANNUAL REPORT 2013 3

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

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

Message from the Chairman
I am pleased to
present the Federal
Deposit Insurance
Corporation’s (FDIC)
2013 Annual Report.

SUMMARY
During 2013, the
banking industry
continued to
experience a
process of gradual
recovery that has
been evident for
the past four years
since the financial crisis. Fewer institutions reported
quarterly losses, lending grew at a modest pace, credit
quality continued to improve, the number of problem banks
declined, and fewer banks failed.
In addition, we have seen sustained improvement in all
the key bank performance indicators: three years of net
income growth; improved credit quality; and growth in loan
balances. Lower loan-loss provisions, reflecting improved
credit quality, drove much of the improvement in earnings
over the last few years. Revenue growth has remained
flat. Going forward, industry earnings will depend more on
increased lending, consistent with sound underwriting.

also the challenge of managing interest rate risk. From a
supervisory standpoint, interest rate risk will be a key focus
of our examiners.
The FDIC is well prepared to carry out our mission of
maintaining stability and public confidence in the nation’s
financial system by insuring deposits, examining and
supervising financial institutions for safety and soundness
and consumer protection, and managing receiverships. At
the end of 2013, the FDIC insured $6.0 trillion of deposits in
over 600 million accounts at 6,800 institutions.
In addition to carrying out our basic core mission
responsibilities, our policy agenda includes the following:
♦♦ Carrying forward our major new responsibilities for
reviewing and evaluating the resolution plans submitted
by the largest bank holding companies and certain other
systemically important financial institutions (SIFIs)
under Title I of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act), continuing
to develop a strategy for resolving SIFIs under the
new authorities provided the FDIC under Title II of the
Dodd-Frank Act, and promoting cross-border cooperation
and coordination with respect to an orderly resolution of
a globally active SIFI;
♦♦ Implementing new capital, liquidity, trading and
derivatives rules to reduce systemic risk and improve the
resilience of the financial system;

Internal indicators for the FDIC also continued to move in a
positive direction. The numbers of both failed and problem
institutions continued to decline in 2013, although they still
remain elevated. Meanwhile, the Deposit Insurance Fund
(DIF), which had been nearly $21 billion in the red during
the financial crisis, stood at over $47 billion at year-end.

♦♦ Continuing the FDIC’s Community Banking Initiatives,
including further research on the future of community
banks and providing technical assistance to community
banks such as our recently-released series of training
videos on key risk management and consumer
compliance issues; and

While some uncertainties remain, we now seem to be
moving from an environment where the key focus had
been repairing the damage from the financial crisis and the
economic recession, into one where institutions are likely
to explore opportunities to expand lending as conditions
improve. One key issue lies with rising interest rates, which
will provide banks an opportunity to increase margins, but

♦♦ Continuing our focus on expanding access to the
mainstream banking system for everyone who lives in the
United States, including the national household survey of
the unbanked and underbanked that the FDIC conducts
jointly with the U.S. Census Bureau.
The FDIC also recognizes that information technology
and cybersecurity developments pose increasing risk to

MESSAGE FROM THE CHAIRMAN 5
ANNUAL REPORT 2012

ANNUAL REPORT 2013
the financial services sector. We are actively engaged
in efforts to promote the security and resilience of the
financial services sector through the newly formed FFIEC
Cybersecurity and Critical Infrastructure Working Group
and the Financial and Banking Information Infrastructure
Committee. The FDIC has also taken steps to ensure its
operational readiness and response capabilities through
internal exercises and the execution of several cyber-related
performance goals.
A great strength of the FDIC continues to be a highly
dedicated and motivated workforce. The FDIC’s employees
understand the agency’s mission and how it relates to what
they do. For the third year in a row, the FDIC took a top
spot in the Best Places to Work in the Federal Government
based on a survey conducted by the Office of Personnel
Management.

STRENGTHENING THE
DEPOSIT INSURANCE FUND
AND RESOLVING FAILED BANKS
The FDIC has made significant progress in rebuilding
the DIF. In 2010 and 2011, the FDIC Board of Directors
approved a comprehensive, long-term plan for fund
management based on Dodd-Frank Act requirements and on
an FDIC historical analysis of DIF losses. We experienced
a steady increase in the year-end fund balance from 2011
through this year. The DIF balance rose to $47.2 billion
at the end of 2013. Assessment revenue, a decrease in the
estimate of losses from banks that have failed, and fewer
bank failures were the main drivers of fund growth in 2013.
The fund is on track to build up the reserve ratio, the ratio
of the DIF to all insured deposits, to the statutorily required
level of 1.35 percent by September 2020.
Bank failures in 2013 totaled 24, down dramatically from
a peak of 157 in 2010, while the number of banks on the
problem bank list (banks rated 4 or 5 on the CAMELS
rating scale) fell to 467 from a high of 888 in March 2011.
These trends are still significantly higher than historical
averages. As a result, although these trends are positive
and may be accelerating to some degree, the FDIC must still
devote considerable resources to managing receiverships,
examining problem institutions, and implementing
provisions of the Dodd-Frank Act.

6 MESSAGE FROM THE CHAIRMAN

Nonetheless, as the banking industry continues to recover,
the FDIC will require fewer resources. The FDIC’s
authorized workforce for 2013 was 8,026 full-time equivalent
positions compared with 8,713 the year before. The 2013
Corporate Operating Budget was $2.7 billion, a decrease of
$600 million (18 percent) from 2012.
For 2014, the Board reduced the budget by 11 percent
to $2.4 billion and reduced authorized staffing by
approximately 10 percent to 7,199 positions, in anticipation
of a further drop in bank failure activity in the years ahead.
Two temporary satellite offices that were set up to handle
the crisis-related workload have now closed. The last of
them, in Jacksonville, Florida, will close in 2014. However,
contingent resources are included in the budget to ensure
readiness should economic conditions unexpectedly
deteriorate.
During 2013, the FDIC successfully continued to use
resolution strategies instituted in 2008 to protect insured
depositors of failed institutions at the least cost to the
DIF. The FDIC actively marketed failing institutions and
sold a large majority to other financial institutions. These
strategies protected insured depositors and preserved
banking relationships in many communities, providing
depositors and customers with uninterrupted access to
essential banking services. [All told, these strategies
saved the FDIC over $40 billion since the beginning of the
financial crisis.]

IMPLEMENTING THE FDIC’S
NEW AUTHORITIES UNDER THE
DODD-FRANK ACT AND OTHER
FINANCIAL REFORMS
The Dodd-Frank Act included far-reaching changes to make
financial regulation more effective in addressing systemic
risks and provided significant new authorities to the FDIC
and other U.S. regulators to plan for and manage the orderly
failure of a SIFI. In particular, Title I of the Act requires
all bank holding companies with assets over $50 billion, as
well as nonbank financial companies designated as systemic
by the Financial Stability Oversight Council, to prepare
resolution plans (or “living wills”) to demonstrate how they
would be resolved in a rapid and orderly manner under the
Bankruptcy Code in the event of material financial

distress or failure. Title II of the Act provides the FDIC
with back-up authority to place a failing SIFI, including a
consolidated bank holding company or a nonbank financial
company deemed to pose a risk to the financial system, into
an FDIC receivership, should an orderly resolution under
the Bankruptcy Code not be possible. In 2013, the FDIC
made considerable progress in implementing both of these
new authorities. Significant progress has also been made
on the implementation of key improvements to supervisory
standards included in the Act, as well as those that are the
product of international efforts.
With respect to the living will process, it is widely
recognized that U.S. SIFIs present a challenge to resolution
in bankruptcy or under an FDIC receivership, because they
are organized under a holding company structure with
potentially thousands of interconnected subsidiaries that
span legal and regulatory jurisdictions across international
borders and share funding and critical support services.
Title I provided new authority intended to make these
companies more resolvable under the Bankruptcy Code,
in a process jointly overseen by the FDIC and the Board of
Governors of the Federal Reserve System.
By the end of 2013, all covered bank holding companies
had submitted their initial plans, and the 11 largest, most
systemically significant companies had submitted their
second round resolution plans by October 1st. The FDIC
and Federal Reserve Board developed guidance with
specific benchmarks for those companies to address in
the second-round submissions. The benchmarks included
global cooperation with foreign regulators, multiple
insolvencies of subsidiaries, counterparty derivative
actions, maintenance of critical operations, funding, and
liquidity. The companies were required to provide analysis
to support the strategies and assumptions contained in
their resolution plans. The FDIC and Federal Reserve
Board have been evaluating the plans under the standards
provided in the statute.
When bankruptcy is not a viable option and a resolution
under the bankruptcy process would pose a systemic
risk to the U.S. financial system and economy, the Title II
Orderly Liquidation Authority (OLA) of the Dodd-Frank
Act provides broad new back-up authorities to place any
systemically important financial institution into an FDIC

receivership. The FDIC has worked for several years to
develop the strategic and operational capability to carry out
this new authority.
During 2013, the FDIC released for public comment a
Federal Register Notice on the Single Point of Entry (SPOE)
strategy, developed by the FDIC to manage an orderly
resolution of a SIFI. Under the strategy, the FDIC would
take control of the top-tier holding company, allowing the
firm’s operating subsidiaries, both domestic and foreign,
to remain open and operating. The strategy is designed
to diminish contagion effects while removing culpable
management and imposing losses on shareholders and
unsecured creditors without imposing costs on taxpayers.
The Federal Register Notice provides a detailed overview
of what would be a complex resolution process, describing
how it would address key issues of liquidity, capital,
restructuring, and governance consistent with purposes and
authorities contained in Title II.
The FDIC’s Systemic Risk Advisory Committee continued
to provide advice and guidance on a wide range of issues
regarding the resolution of large SIFIs. The Committee
members have a wide range of knowledge and experience,
including leading federal regulatory agencies; managing
complex firms; administering bankruptcies; and working in
the legal system, the accounting field, and academia.
Also during the year, the FDIC continued to engage our
major foreign counterparts with whom we would have
to collaborate on a cross-border basis in resolving failing
global SIFIs. We worked directly with regulators in the
United Kingdom, Switzerland, Germany, Japan, and the
European Union. As part of our efforts in this area, the
FDIC, in conjunction with the prudential regulators in
our jurisdictions and internationally, has been working
to develop contingency plans for the failure of Global
SIFIs (G-SIFIs). Of the 28 G-SIFIs designated by the
Financial Stability Board of the G-20 countries, eight are
headquartered in the United States.
The FDIC made progress with efforts to develop
international capital standards as a member of the Basel
Committee on Banking Supervision and implement
Dodd-Frank Act reforms to strengthen the safety and
soundness of the financial system.

MESSAGE FROM THE CHAIRMAN 7

ANNUAL REPORT 2013
In July 2013, the FDIC approved an interim final rule that
implemented the international Basel III capital agreement.
The interim final rule adopted, with revisions, the June
2012 proposals related to the Basel III, Standardized,
and Advanced Approaches rules. The interim final rule
on Basel III strengthens both the quality and quantity of
risk-based capital for all banks. The FDIC and the other
federal banking agencies carefully considered more
than 2,500 comments, the majority of which were from
community banking institutions. Most of the key concerns
of community banks were addressed through a few
significant modifications to the proposed rule. The new
capital requirements become effective for most banking
organizations on January 1, 2015.

COMMUNITY BANKING INITIATIVE

Also in July 2013, the FDIC approved a joint Notice
of Proposed Rulemaking that would increase the
supplementary leverage capital requirements for the largest,
most systemically important banking organizations. The
NPR addresses one of the main causes of the financial
crisis, the excessive leverage that had built up in the system.

We launched a number of community banking initiatives
in 2012, including the first comprehensive study on the
role and future of community banks in the United States.
Our research efforts continued through 2013. During the
year, we published an update of trends in community bank
structure and performance through year-end 2012. This
updated study showed that, by a number of measures,
community banks in 2012 enjoyed their best year since
before the financial crisis began. Our research efforts will
continue into the coming year as we address topics such
as banking industry consolidation, rural depopulation, and
Minority Depository Institutions.

In October 2013, the FDIC and the other federal banking
agencies issued a Notice of Proposed Rulemaking to
implement the Basel III liquidity coverage ratio (LCR)
standard. The LCR requires covered companies to
maintain a sufficient amount of high quality liquid assets
to cover a short-term stress event and applies to large,
internationally active banking organizations and certain of
their subsidiaries.
Finally, in December 2013, the FDIC with four other
agencies jointly issued final rules to implement Section 619
of the Dodd-Frank Act (often referred to as the “Volcker
Rule”). The purpose of the Volcker Rule is to limit the type
and amount of speculative risk that can be undertaken by
entities that are supported by the public safety net. In order
to achieve that goal, the provision places prohibitions and
restrictions on the ability of depository institution holding
companies, insured depository institutions, and their
subsidiaries and affiliates to engage in proprietary trading or
investing in, or having relationships with, hedge funds and
private equity funds.

8 MESSAGE FROM THE CHAIRMAN

The financial crisis and its aftermath had significant
consequences for community banks, which play a crucial
role in the U.S. financial system. Community banks account
for about 14 percent of the banking assets in the United
States, but provide nearly 46 percent of the small loans that
FDIC-insured depository institutions make to businesses
and farms.
The FDIC is the lead federal supervisor for the majority
of community banks, and the insurer of all. The FDIC has
a particular responsibility for the safety and soundness
of community banks, and for understanding and
communicating the role they play in the banking system.

As part of our outreach to community bankers, I
participated in roundtable discussions with community
bankers in each of the FDIC’s six supervisory regions during
the year. Our supervisory and compliance examiners
undertook an Examination and Rulemaking Review with the
goal of identifying ways to make the supervisory process
more efficient, consistent, and transparent. In response to
concerns about pre- and post-examination processes, our
supervisory staff developed a web-based tool that generates
a pre-examination document and information request
tailored to a specific institution’s operations and business
lines. We are also improving how information is shared
electronically between bankers and examiners.
During 2013, the FDIC launched a technical assistance video
program designed to provide useful information to bank

directors, officers, and employees on areas of supervisory
focus and proposed regulatory changes. Throughout the
year, we released technical videos that address the roles
and responsibilities of bank board directors, the FDIC’s
Risk Management and Compliance Examination processes,
a virtual version of the FDIC’s Directors’ College Program
that regional offices deliver throughout the year, and a
variety of supervisory topics, including interest rate risk,
troubled debt restructurings, appraisals and evaluations,
the allowance for loan and lease losses, evaluations of
municipal securities, and flood insurance. The feedback on
the videos has been very positive.
Throughout 2013, FDIC supervisory staff also continued
to offer additional on-site technical training opportunities
on subjects of interest to community bankers. As part of
this ongoing effort, our supervisory staff hosted Director
and Banker Colleges in each region. These Colleges are
typically conducted jointly with state trade associations
and address topics of interest to community bankers. We
conducted extensive outreach to community bankers
on complex rulemakings, including the Basel III capital
rulemaking process.
Finally, we continue to rely on our Advisory Committee on
Community Banking as an ongoing forum for discussing
critical issues and receiving valuable feedback and input
from the industry. The advisory committee met three
times during 2013. The Committee, which is composed
of 15 community bank CEOs from around the country, is
a valuable resource for input on a wide variety of topics,
including examination policies and procedures, capital
and other supervisory issues, credit and lending practices,
deposit insurance assessments and coverage, and regulatory
compliance issues.

PROTECTING CONSUMERS
AND EXPANDING ACCESS
TO BANKING SERVICES
Expanding access to the banking system for all those living
in the United States is part of the FDIC’s core mission.
The FDIC biennial National Survey of Unbanked and
Underbanked Households, conducted jointly with the

Census Bureau, has documented that a large portion of the
population in our country has either no access or limited
access to insured institutions. We have undertaken a major
effort through a number of initiatives to protect consumers
and expand access to mainstream banking services. This
continues to be an important priority for the agency.
The FDIC’s Advisory Committee on Economic Inclusion
— composed of bankers, community and consumer
organizations, and academics — has continued to explore
strategies to bring the unbanked into the financial
mainstream. In 2013, the committee focused on promoting
household savings, reaching the underserved through
mobile technology, examining financial education strategies
for school-aged youth, and providing access to safe and
affordable savings and transaction products.
At the local level, the FDIC’s Alliance for Economic
Inclusion organizes coalitions of financial institutions,
community organizations, local government officials, and
other partners in communities across the country to bring
unbanked and underbanked households into the financial
mainstream. The effort includes better access to basic retail
financial services, such as checking and savings accounts,
affordable remittance products, small-dollar loans,
targeted financial education programs, and asset-building
programs. These partnerships are currently operating in 16
communities nationwide.
Our efforts in this area are also focused on supervisory
guidance designed to promote safe and sound practices and
to promote consumer protection. During 2013, the FDIC
issued final guidance regarding deposit advance products
that are offered or may be offered by FDIC-supervised
institutions. The guidance is intended to ensure that banks
are aware of the potential credit, reputation, operational
and compliance risks associated with deposit advance
products. The guidance also recognizes consumers’ need
for responsible small-dollar credit products and encourages
institutions to develop new or innovative programs to
effectively meet the need for small-dollar credit that do not
exhibit the risks associated with deposit advance products
and payday loans.

MESSAGE FROM THE CHAIRMAN 9

ANNUAL REPORT 2013
CONCLUSION
The recovery of the banking industry continued to advance
during 2013 with stronger earnings and improved asset
quality. The industry is experiencing fewer bank failures
and problem institutions, and the FDIC’s Deposit Insurance
Fund is steadily growing. Despite these improvements, we
remain mindful of uncertainties and potential challenges,
and are pursuing a number of important policy initiatives.
The workforce of the FDIC remains committed to carrying
out our core mission responsibility of maintaining stability

10 FEDERAL DEPOSIT INSURANCE CORPORATION
MESSAGE FROM THE CHAIRMAN

and public confidence in the nation’s financial system.
I am very grateful to the dedicated professionals of the
FDIC for their commitment to public service and their
continued dedication to the mission of the FDIC.
Sincerely,

Martin J. Gruenberg

Message from the Chief Financial Officer
I am pleased to present
the Federal Deposit
Insurance Corporation’s
(FDIC) 2013 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 22 consecutive years, the U.S. Government
Accountability Office (GAO) has issued unmodified
(unqualified) audit opinions for the two funds administered
by the FDIC: the Deposit Insurance Fund (DIF) and the
Federal Savings and Loan Insurance Corporation (FSLIC)
Resolution Fund (FRF). We take pride in our responsibility
and demonstrate discipline and accountability as stewards
of these funds. We remain proactive in executing sound
financial management and in providing reliable financial
data.
During 2013, the FDIC continued to make significant
progress in rebuilding the DIF. Since year-end 2009, the
DIF balance increased by $68.1 billion to $47.2 billion as
of year-end 2013. This increase in the DIF balance was
primarily due to cumulative assessment revenue of $49.2
billion and a decrease in the estimated losses for both
actual and anticipated bank failures of $15.1 billion.

FINANCIAL RESULTS FOR 2013
For 2013, the DIF’s comprehensive income totaled $14.2
billion compared to comprehensive income of $21.1 billion
during 2012. This $6.9 billion year-over-year decrease was
primarily due to a $6.0 billion decrease in other revenue
(which is attributable to the 2012 transfer of fees from

TLGP) and a $2.7 billion decrease in assessments; partially
offset by a $1.5 billion decrease in the provision for
insurance losses and a $156 million net increase from the
sale of Citigroup trust preferred securities (TruPS).
Assessment revenue was $9.7 billion for 2013. The decrease
of $2.7 billion, from $12.4 billion in 2012, was primarily
due to lower risk-based assessment rates resulting from
continued improvements in banks’ CAMELS ratings and
financial condition. In addition, in 2013, the DIF refunded
$5.9 billion in prepaid assessments to the 5,625 insured
depository institutions that had remaining balances. This
final payment marked the end of the prepaid assessment
program, which began with the collection of $45.7 billion in
prepaid assessments on December 30, 2009.
The provision for insurance losses was negative $5.7
billion for 2013, compared to negative $4.2 billion for 2012.
The negative provision for 2013 primarily resulted from
a reduction of $1.0 billion in the contingent liability for
anticipated failures due to the improvement in the financial
condition of troubled institutions and a decrease of
$4.8 billion in the estimated losses for institutions that
failed in prior years.
Only 24 banks failed in 2013, the fewest since the beginning
of the crisis in 2008 when 25 banks failed. Failures during
the crisis peaked at 157 in 2010. Even though the banking
crisis has subsided, the FDIC will still emphasize effectively
managing risks to the DIF, as we rebuild the Fund in the
post-banking crisis environment. Financial operations
will continue to be based on sound financial management
techniques, which will include a strong enterprise-wide risk
management and internal control program.
Sincerely,

Steven O. App

MESSAGE FROM THE CHIEF FINANCIAL OFFICER 11
ANNUAL REPORT 2013

ANNUAL REPORT 2013
FDIC Senior Leaders

Seated (left to right): Mark Pearce, Arthur Murton, Richard Osterman, Jr., Doreen Eberley, Barbara Ryan,
Chairman Martin Gruenberg, Director Jeremiah Norton, Arleas Upton Kea, and Andrew Gray.
Standing (left to right): Cottrell Webster, Steven App, Russell Pittman, the late D. Michael Collins, Bret Edwards,
Eric Spitler, Fred Gibson, Stephen Quick, and Craig Jarvill.
Not pictured: Vice Chairman Thomas Hoenig, Kymberly Copa, E. Melodee Brooks, Diane Ellis, Christopher
Farrow, Robert Harris, Martin Henning, and Suzannah Susser.

12 FEDERAL DEPOSIT INSURANCE CORPORATION

I.

Management’s
Discussion and
Analysis

The Year in Review
OVERVIEW
Although the number of bank failures declined in 2013
compared to the previous year, the FDIC remained fully
engaged in its mission-critical responsibilities. In 2013,
the FDIC continued to make progress in fulfilling its
responsibilities under the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-Frank Act) and related
rulemakings. Also during 2013, the FDIC made progress
with community banking initiatives including releasing
numerous technical assistance videos on topics relating to
risk management and consumer protection. The sections
below highlight some of our accomplishments during
the year.

INSURANCE
The FDIC insures bank and savings association deposits. As
insurer, the FDIC must continually evaluate and effectively
manage how changes in the economy, the financial markets,
and the banking system affect the adequacy and the viability
of the Deposit Insurance Fund (DIF).

Long-Term Comprehensive Fund Management Plan
In 2010 and 2011, the FDIC developed a comprehensive,
long-term management plan designed to reduce the effects
of cyclicality and achieve moderate, steady assessment
rates throughout economic and credit cycles, while also

maintaining a positive fund balance, even during a banking
crisis. That plan is combined with the Restoration Plan,
originally adopted in 2008 and subsequently revised, which
is designed to ensure that the reserve ratio will reach 1.35
percent of estimated insured deposits by September 30,
2020, as required by the Dodd-Frank Act.1 These plans
include a reduction in rates that the FDIC Board adopted
to become effective once the reserve ratio reaches
1.15 percent.
To increase the probability that the fund reserve ratio will
reach a level sufficient to withstand a future crisis, the
FDIC Board has—pursuant to the long-term management
plan—set the Designated Reserve Ratio (DRR) for the DIF
at 2.0 percent. Using historical fund loss and simulated
income data from 1950 to 2010, FDIC analysis showed
the reserve ratio would have had to exceed 2.0 percent
before the onset of the two crises that occurred since the
late 1980s to have maintained both a positive fund balance
and stable assessment rates throughout both crises. The
analysis assumed a moderate, long-term average industry
assessment rate, consistent with the rates set forth in the
plan. The FDIC views the 2.0 percent DRR as a long-term
goal and the minimum level needed to withstand future
crises of the magnitude of past crises. Under provisions of
the Federal Deposit Insurance Act (FDI Act) that require the
FDIC Board to set the DRR for the DIF annually, the FDIC
Board voted in October 2013 to maintain the 2.0 percent
DRR for 2014.

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

1

MANAGEMENT’S DISCUSSION AND ANALYSIS 13

ANNUAL REPORT 2013
As part of the long-term management plan, the FDIC also
suspended dividends indefinitely when the fund reserve
ratio exceeds 1.5 percent. Instead, the plan prescribes
progressively lower assessment rates that will become
effective when the reserve ratio exceeds 2.0 percent and
2.5 percent. These lower assessment rates serve almost the
same function as dividends, but provide more stable and
predictable effective assessment rates over time.

State of the Deposit Insurance Fund
Estimated losses to the DIF were $1.2 billion from failures
occurring in 2013, and were lower than losses from failures
in each of the previous five years. The fund balance
continued to grow throughout 2013, with 16 consecutive
quarters of positive growth. Assessment revenue, a
decrease in the estimate of losses from banks that have
failed, and a decline in loss provisions for anticipated bank
failures drove the increase in the fund balance during 2013.
The fund reserve ratio rose to 0.79 percent of estimated
insured deposits at December 31, 2013, from 0.44 percent at
the end of 2012.
To ensure that the DIF had sufficient liquidity to handle a
high volume of failures during the recent crisis, the Board
issued a rule in 2009 that required insured depository
institutions to prepay 13 quarters of estimated risk-based
assessments.2 The $45.7 billion in assessments prepaid on
December 30, 2009, resolved the FDIC’s immediate liquidity
needs. As required by the rule, the FDIC refunded in
aggregate $5.9 billion in remaining prepaid assessments at
the end of June 2013 to 5,625 insured institutions.

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

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

Definition of Deposit at Foreign Branches
of U.S. Banks
On September 10, 2013, the FDIC Board of Directors
approved a final rule clarifying that funds on deposit in
foreign branches of U.S. banks are not FDIC-insured,
even though they can be deposits for purposes of the
national depositor preference statute. Under the FDI Act,
funds deposited in a foreign branch of a U.S. bank are not
considered deposits, unless the deposits are also payable
at an office of the bank in the United States (a dually
payable deposit). A 2012 Consultation Paper by the United
Kingdom’s Prudential Regulation Authority (PRA) proposed
that banks from non-European Economic Area countries
that have depositor preference laws be prohibited from
accepting deposits at their United Kingdom (U.K.) branches,
unless the banks take steps to ensure that U.K. depositors
are no worse off than depositors in the bank’s home country
if the bank fails. The PRA paper mentioned that such
efforts could include changing deposit account agreements
to make U.K. branch deposits dually payable in the United
States, which would put the U.K. branch deposits on the
same footing as U.S. deposits under the U.S. depositor
preference statute. As a result, the FDIC anticipates that
some large U.S. banks will change their deposit agreements
to make their U.K. branch deposits payable in both the
United Kingdom and the United States to provide depositor
preference to U.K. branch deposits. The final rule clarifies
that these U.K. branch deposits are not FDIC-insured.

	 The cash collected from the prepayment did not initially affect the DIF balance (i.e., the DIF’s net worth). Rather, each quarter, the
DIF recognized as revenue prepaid amounts used to cover each institution’s quarterly risk-based assessment.

2

14 MANAGEMENT’S DISCUSSION AND ANALYSIS

ACTIVITIES RELATED TO SYSTEMICALLY
IMPORTANT FINANCIAL INSTITUTIONS
Risk Monitoring Activities for Systemically Important
Financial Institutions
The Dodd-Frank Act expanded the FDIC’s responsibilities
for overseeing and monitoring the largest, most complex
bank holding companies and large, nonbank systemically
important financial institutions (SIFIs) designated by
the Financial Stability Oversight Council (FSOC) for
supervision by the Board of Governors of the Federal
Reserve System (FRB). In 2013, the FDIC’s complex
financial institution program activities included ongoing
reviews of all banking organizations with more than
$100 billion in assets as well as certain nonbank financial
companies. Given the scope of the FDIC’s responsibilities
under the Dodd-Frank Act, the FDIC developed additional
risk assessment tools, processes, and procedures to better
identify major risks at SIFIs, to ensure corrective actions
when warranted, and to efficiently allocate resources.
Additionally, the complex financial institution program
prepares the FDIC to resolve insured depository institutions
(IDIs) in the event of failure, including the review of
IDI-prepared resolution plans.
In the FDIC’s back-up supervisory role, as outlined in
Sections 8 and 10 of the FDI Act and Sections 23A and
23B of the Federal Reserve Act, the FDIC has expanded
resources and developed and implemented policies and
procedures to guide back-up supervisory activities. These
activities include participating in supervisory activities with
other regulatory agencies, performing analyses of industry
conditions and trends, and exercising examination and
enforcement authorities, when necessary.
In addition, the FDIC continues to work closely with other
federal regulators to gain a better understanding of the
risk measurement and management practices of SIFIs, and
assess the potential risks they pose to financial stability.

Title I Resolution Plans
Title I of the Dodd-Frank Act requires that each bank
holding company with total consolidated assets of $50
billion or more, and each nonbank financial company that
the FSOC determined should be subject to supervision

Paul Volcker, former Federal Reserve Chairman,
offers his perspective on Title I resolution planning at
a Systemic Resolution Advisory Committee meeting.
by the FRB, prepare a resolution plan, or “living will,”
and periodically provide the plan to the FRB and the
FDIC. Section 165(d) of the Dodd-Frank Act requires the
company’s resolution plan to provide for its rapid and
orderly resolution under the bankruptcy code in the event
of the company’s material financial distress or failure. The
FDIC and the FRB issued a joint rule to implement the
requirements for resolution plans to be filed pursuant to
Section 165(d) [the 165(d) Rule].
In addition to the 165(d) Rule, the FDIC issued a separate
rule that requires all IDIs with greater than $50 billion
in assets to submit resolution plans to the FDIC (IDI
Rule). The IDI’s resolution plan should enable the FDIC,
as receiver, to resolve the IDI using the FDIC’s traditional
resolution powers under the Federal Deposit Insurance
Act (FDI Act), in a manner that ensures that depositors
receive access to their insured deposits generally within
one business day of the IDI’s failure, maximizes the net
present value return from the disposition of its assets, and
minimizes the amount of any loss realized by creditors.
The 165(d) Rule was effective as of November 30, 2011,
and provides for staggered initial submission dates for the

MANAGEMENT’S DISCUSSION AND ANALYSIS 15

ANNUAL REPORT 2013
resolution plans of covered companies. Thereafter, unless
otherwise agreed to by the FDIC and the FRB, each covered
company must submit a plan annually, on or before the
anniversary of its initial submission date. Initial submission
dates for IDI resolution plans under the IDI Rule, which
was effective April 1, 2012, conform to those for covered
companies under the 165(d) Rule. Under the 165(d) Rule,
the initial submission date is based upon nonbank assets (or
for a foreign-based covered company, U.S. nonbank assets)
as of November 30, 2011, and is set by the rule as follows:
♦♦ July 1, 2012: “First Wave Companies” are covered
companies with $250 billion or more in nonbank assets
(or U.S. nonbank assets for foreign-based covered
companies).
♦♦ July 1, 2013: “Second Wave Companies” are covered
companies with $100 billion or more in nonbank assets
(or U.S. nonbank assets for foreign-based covered
companies).
♦♦ December 31, 2013: “Third Wave Companies” are all other
covered companies which are covered companies with
less than $100 billion in nonbank assets (or U.S. nonbank
assets for foreign-based covered companies).
Any company that becomes subject to the 165(d) Rule after
its effective date (including nonbank financial companies
designated by the FSOC), and any IDI that becomes subject
to the IDI Rule after its effective date, must submit its initial
resolution plan by the next July 1 that is at least 270 days
after the date it became subject to the respective rule (or
following its designation by FSOC).
Eleven First Wave Companies submitted initial 165(d) plans
in July 2012. Based upon review of the initial resolution
plans, the FDIC and the FRB developed guidance for
the First Wave Companies to permit alternate resolution
strategies and to clarify information that should be included
in their 2013 resolution plan submissions. This guidance
is posted on the FDIC’s public Website3. In the guidance,
the FDIC and the FRB identified an initial set of significant
obstacles to achieving a rapid and orderly resolution that
each of the First Wave companies should address in its plan,
including the actions or steps the company has taken or

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

3

16 MANAGEMENT’S DISCUSSION AND ANALYSIS

proposes to take to remediate or otherwise mitigate each
obstacle (with a timeline for any proposed actions). The
agencies extended the second submission filing date to
October 1, 2013, giving the First Wave Companies additional
time to develop resolution plans complying with the
guidance. Each of the First Wave Companies submitted its
second submission plan by the October 1 deadline, and the
agencies are currently reviewing the plans.
Four Second Wave Companies submitted initial resolution
plans by the July 1, 2013, submission date. The FDIC and
the FRB reviewed those plans. One hundred and sixteen
Third Wave Companies and twenty-two Third Wave IDIs
submitted initial resolution plans by December 31, 2013.
The FDIC and the FRB are currently reviewing those plans.
Three nonbank SIFIs designated by the FSOC for FRB
supervision are expected to submit initial resolution plans
in 2014.

Title II Resolution Strategy Development
The preferred approach for the resolution of a large,
complex financial company is for the firm to file for
reorganization or liquidation under the U.S. Bankruptcy
Code, just as any failed nonfinancial company would. In
certain circumstances, however, resolution under the
bankruptcy code may result in serious adverse effects
on financial stability in the United States. In such cases,
the Orderly Liquidation Authority (OLA) set out in Title
II of the Dodd-Frank Act serves as a potential alternative
that could be invoked pursuant to a statutorily prescribed
recommendation and determination process, coupled with
an expedited judicial review process.
Prior to the recent crisis, the FDIC’s receivership authority
focused on IDIs. No regulator had the authority to place
the bank holding company (BHC) or affiliates of an IDI
or any other nonbank financial company into an FDIC
receivership to avoid systemic consequences. The OLA
addresses those limitations and gives the FDIC the back-up
powers necessary to potentially resolve a failing BHC or
other SIFI in an orderly manner that imposes accountability
on shareholders, creditors, and management of the failed
company while mitigating systemic risk and imposing no
cost on taxpayers.

The FDIC has largely completed the core rulemakings
necessary to carry out its responsibilities under Title
II of the Dodd-Frank Act. Additionally, the FDIC has
been developing a strategic approach, referred to as the
“Single Point of Entry (SPOE)”, to carry out those orderly
liquidation authorities. During 2013, the FDIC reviewed
the characteristics of each domestic company and studied
previous financial downturns to determine the systemic
effects and channels of contagion, and consulted with
external practitioners and experts on key resolution
components and options. The FDIC discussed the SPOE
concept at outreach events with other domestic government
agencies, the Systemic Resolution Advisory Committee,
industry groups, the academic community, and international
financial regulators. In December 2013, the FDIC approved
publication of a notice in the Federal Register that provides
greater detail on the SPOE strategy and discusses the
key issues that will be faced in the resolution of a SIFI.4
Comments are expected in early 2014, and the FDIC will
consider those comments as resolution strategies continue
to be developed.

Cross-border Efforts
Advance planning and cross-border coordination for
the resolution of globally active SIFIs will be essential
to minimizing disruptions to global financial markets.
Recognizing that global SIFIs create complex international
legal and operational concerns, the FDIC continues to
reach out to foreign regulators to establish frameworks for
effective cross-border cooperation.
As part of the bilateral efforts, the FDIC and the Bank of
England, in conjunction with the prudential regulators
in our respective jurisdictions, have been developing
contingency plans for the failure of a global SIFI that
has operations in the U.S. and the U.K. Of the 28 G-SIFIs
designated by the Financial Stability Board (FSB) of the
G-20 countries, four are headquartered in the U.K., and
another eight are headquartered in the U.S. Moreover,
approximately 70 percent of the reported foreign activities
of the eight U.S. G-SIFIs emanates from the U.K. The

FDIC and U.K. authorities released a joint paper on
resolution strategies in December 2012, reflecting the
close working relationship between the two authorities.
This joint paper focuses on the application of “top-down”
resolution strategies for a U.S. or a U.K. financial group
in a cross-border context and addresses several common
considerations to these resolution strategies. In December
2013, the FDIC and the Bank of England, including the
Prudential Regulation Authority, in conjunction with the
Federal Reserve Board and the Federal Reserve Bank of
New York, held a staff-level tabletop exercise exploring
cross-border issues and potential mitigating actions that
could be taken by regulators in the event of a resolution.
The FDIC also is coordinating with representatives from
European authorities to discuss issues of mutual interest,
including the resolution of European global SIFIs and
ways in which we can harmonize receivership actions.
The FDIC and the European Commission (E.C.) have
established a joint Working Group composed of senior
executives from the FDIC and the E.C. to focus on both
resolution and deposit insurance issues. The agreement
establishing the Working Group provides for meetings twice
a year with other interim interchanges and the exchange of
detailees. In 2013, the Working Group convened formally
twice, and there has been ongoing collaboration at the
staff level, including discussions of the FDIC’s experience
with resolutions, the SPOE strategy, the E.C.’s proposed
European Union (E.U.)-wide Credit Institution and
Investment Firm Recovery and Resolution Directive, the
E.C.’s proposed amendment to harmonize further deposit
guarantee schemes E.U.-wide, and the E.C.’s proposal for a
Single Resolution Mechanism that would apply to Euro-area
Member States, as well as any others that would opt-in. The
FDIC and the E.C. also have exchanged staff members for
short periods to enhance staff experience with respective
resolution authorities. In 2014, at the request of the E.C.,
the FDIC is planning to conduct a training seminar on
resolutions for E.C. staff.
The FDIC continues to foster its relationships with
other jurisdictions that regulate global SIFIs, including

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

4

MANAGEMENT’S DISCUSSION AND ANALYSIS 17

ANNUAL REPORT 2013
Switzerland, Germany, and Japan. In 2013, the FDIC had
significant principal and staff-level engagements with these
countries to discuss cross-border issues and potential
impediments that would affect the resolution of a global
SIFI. This work will continue in 2014 with plans to host
tabletop exercises with staff from these authorities. The
development of joint resolution strategy papers, similar
to the one with the U.K., as well as possible exchanges of
detailees, has also been discussed.

Systemic Resolution Advisory Committee

In a significant demonstration of cross-border cooperation
on resolution issues, the FDIC signed a November 2013
joint letter with the Bank of England, the Swiss Financial
Market Supervisory Authority, and the German Federal
Financial Supervisory Authority, to the International Swaps
and Derivatives Association, Inc. (ISDA). This letter
encouraged ISDA to develop provisions in derivatives
contracts that would provide for the short-term suspension
of early termination rights and other remedies in the event
of a G-SIFI resolution. The adoption of such changes would
allow derivatives contracts to remain in effect throughout
the resolution process following the implementation of a
number of potential resolution strategies. International
coordination and outreach and efforts to address
impediments to an orderly resolution of a global SIFI are
expected to continue.

♦♦ The ways in which specific resolution strategies would
affect stakeholders and their customers.

In 2011, the FDIC Board approved the creation of the
Systemic Resolution Advisory Committee. The Committee
provides important advice to the FDIC regarding systemic
resolutions. The Committee advises the FDIC on a variety
of issues including:
♦♦ The effects on financial stability and economic conditions
resulting from the failure of a SIFI.

♦♦ The tools available to the FDIC to wind down the
operations of a failed organization.
♦♦ The tools needed to assist in cross-border relations with
foreign regulators and governments when a systemic
company has international operations.
Members of the Committee have a wide range of experience
including managing complex firms; administering
bankruptcies; and working in the legal system, accounting
field, and academia. A meeting of the Systemic Resolution
Advisory Committee was held on December 11, 2013. The
Committee discussed, among other topics, the bankruptcy
process for large financial companies, the FDIC’s SPOE
strategy, and international coordination in financial
company resolutions.

Honored guest Paul Tucker from the Bank of England, seated to the right of Chairman Gruenberg, with several
members of the Systemic Resolution Advisory Committee and FDIC Board: (seated, from left) William Donaldson,
Vice Chairman Hoenig, Paul Volcker, Chairman Gruenberg, Paul Tucker, and Director Norton; (standing, from
left) Simon Johnson, Michael Bradfield, Richard Herring, Anat Admati, John Koskinen, Donald Kohn, Douglas
Peterson, and David Wright.

18 MANAGEMENT’S DISCUSSION AND ANALYSIS

Coordinating Interagency Resolution Planning
In 2013, the FDIC continued to promote interagency
information-sharing and cooperative resolution planning by
holding quarterly meetings with the other federal regulatory
agencies. The FDIC also conducted eight interagency
outreach meetings with the financial market utilities
(FMUs) that were designated by the FSOC.

study prepared by the Office of Financial Research, cyber
security, market volatility, market and trading disruptions,
money market mutual fund reforms, and fixed income
valuations, among other topics.

SUPERVISION AND
CONSUMER PROTECTION

The FSOC was created by the Dodd-Frank Act in July 2010
to promote the financial stability of the United States. It is
composed of ten voting members, including the Chairperson
of the FDIC, and five non-voting members.

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

The FSOC’s responsibilities include the following:

Examination Program

♦♦ Identifying risks to financial stability, responding to
emerging threats in the system, and promoting market
discipline.

The FDIC’s strong bank examination program is the core
of its supervisory program. As of December 31, 2013, the
FDIC was the primary federal regulator for 4,316 FDICinsured, state-chartered institutions that were not members
of the Federal Reserve System (generally referred to as
“state nonmember” institutions). Through risk management
(safety and soundness), consumer compliance and the
Community Reinvestment Act (CRA), and other specialty
examinations, the FDIC assesses an institution’s operating
condition, management practices and policies, and
compliance with applicable laws and regulations. The FDIC
also educates bankers and consumers on matters of interest
and addresses consumer questions and concerns.

Financial Stability Oversight Council

♦♦ Designating a nonbank financial company for supervision
by the FRB subject to heightened prudential standards.
♦♦ Designating FMUs and payment, clearing, or settlement
activities that are, or are likely to become, systemically
important.
♦♦ Facilitating regulatory coordination and informationsharing regarding policy development, rulemaking,
supervisory information, and reporting requirements.
♦♦ Monitoring domestic and international financial
regulatory proposals and advising Congress and making
recommendations to enhance the integrity, efficiency,
competiveness, and stability of U.S. financial markets.
♦♦ Producing annual reports describing, among other things,
the Council’s activities and potential emerging threats to
financial stability.
During 2013, the FSOC designated three nonbank financial
companies for FRB supervision, including enhanced
prudential standards. Also during 2013, the FSOC issued its
third annual report. Generally, at each of its meetings, the
FSOC discusses various risk issues and, in 2013, the FSOC
meetings addressed U.S. fiscal issues, an asset management

As of December 31, 2013, the FDIC conducted 2,284
statutorily required risk management examinations,
including a review of Bank Secrecy Act (BSA) compliance,
and all required follow-up examinations for FDICsupervised problem institutions, within prescribed time
frames. The FDIC also conducted 1,986 statutorily required
CRA/compliance examinations (1,585 joint CRA/compliance
examinations, 396 compliance-only examinations, and 5
CRA-only examinations) and 5,057 specialty examinations.
As of December 31, 2013, all CRA/compliance examinations
were conducted within the time frame established by policy.
The following table compares the number of examinations,
by type, conducted from 2011 through 2013.

MANAGEMENT’S DISCUSSION AND ANALYSIS 19

ANNUAL REPORT 2013
FDIC EXAMINATIONS 2011 – 2013
2013

2012

2011

2,077

2,310

2,477

203

249

227

0

1

3

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

0

1

1

State Member Banks

4

2

4

2,284

2,563

2,712

1,585

1,044

825

396

611

921

5

10

11

1,986

1,665

1,757

406

446

466

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

2,323

2,642

2,802

Bank Secrecy Act

2,328

2,585

2,734

Subtotal–Specialty Examinations

5,057

5,673

6,002

Total

9,327

9,901

10,471

Risk Management
As of December 31, 2013, there were 467 insured
institutions with total assets of $152.7 billion designated
as problem institutions for safety and soundness purposes
(defined as those institutions having a composite CAMELS5
rating of “4” or “5”), compared to the 651 problem
institutions with total assets of $232.7 billion on December
31, 2012. This constituted a 28 percent decline in the
number of problem institutions and a 34 percent decrease
in problem institution assets. In 2013, 238 institutions with
aggregate assets of $78.7 billion were removed from the
list of problem financial institutions, while 54 institutions
with aggregate assets of $13.9 billion were added to the list.
First National Bank, located in Edinburg, Texas, was the
largest failure in 2013, with $3.1 billion in assets. The FDIC
is the primary federal regulator for 306 of the 467 problem
institutions, with total assets of $93.2 billion.

During 2013, the FDIC issued the following formal and
informal corrective actions to address safety and soundness
concerns: 51 Consent Orders and 207 Memoranda of
Understanding (MOUs). Of these actions, 22 Consent
Orders and 27 MOUs were issued, based in whole or in part,
on apparent violations of the BSA.

Compliance
As of December 31, 2013, 66 insured state nonmember
institutions, about 2 percent of all supervised institutions,
with total assets of $64 billion, were problem institutions for
compliance, CRA, or both. All existing problem institutions
for compliance were rated “4” for compliance purposes.
For CRA purposes, the majority are rated “Needs to
Improve,” and four are rated “Substantial Noncompliance.”
As of December 31, 2013, all follow-up examinations for
problem institutions were performed on schedule.

	 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).

5

20 MANAGEMENT’S DISCUSSION AND ANALYSIS

Overall, banks demonstrated strong consumer compliance
programs. The most significant consumer protection issue
that emerged from the 2013 compliance examinations
involved banks’ failure to adequately monitor third-party
vendors. For example, we found violations involving unfair
or deceptive acts or practices relating to issues such as
failure to disclose material information about new products
being offered, deceptive marketing and sales practices, and
misrepresentations about the costs of products. As a result,
the FDIC issued consumer restitution and civil money
penalty actions.
During 2013, the FDIC issued the following formal and
informal corrective actions to address compliance
concerns: 19 Consent Orders and 55 MOUs. In certain
cases, the Consent Orders issued by the FDIC contain
requirements for institutions to pay restitution in the form
of refunds to consumers for different violations of laws.
During 2013, over $45 million was refunded to consumers
by institutions subject to Consent Orders. These refunds
primarily related to unfair or deceptive practices by
institutions, as discussed above. Additionally, in 2013, the
FDIC issued 54 Civil Money Penalties (CMPs) relating to
consumer compliance.

Bank Secrecy Act/Anti-Money Laundering
The FDIC pursued a number of BSA, Anti-Money
Laundering (AML), and Counter-Terrorist Financing (CTF)
initiatives in 2013.
The FDIC held a symposium for approximately one-third
of the agency’s 300 BSA/AML subject matter experts.
Training topics covered electronic payments, suspicious
activity monitoring, third-party payment processor
relationships, foreign correspondent banking, money
service businesses, and other higher-risk topics. In
addition, a teleconference was held to discuss activity
observed by the Office of Foreign Assets Control related to
foreign correspondent transactions.
The FDIC conducted an International AML and CTF training
session in November 2013, in the Dominican Republic,
for members of the Association of Supervisors of Banks
of the Americas (ASBA). The training focused on AML/
CTF controls, the AML examination process, customer due

diligence, and suspicious activity monitoring, as well as
AML compliance issues related to higher risk institutions,
products, services, customers, and geographical locations.

Information Technology, Cyber Fraud,
and Financial Crimes
To address the specialized nature of technology-related
supervision, cyber risks, and controls in the banking
industry, the FDIC routinely conducts information
technology (IT) examinations at FDIC-supervised
institutions. The FDIC and other banking agencies also
conduct IT examinations of major technology service
providers (TSPs) that support financial institutions.
The result of an IT examination is a rating under the
Federal Financial Institutions Examination Council
(FFIEC) Uniform Rating System for Information
Technology (URSIT).
In 2013, the FDIC conducted 2,323 IT and operations risk
examinations at financial institutions and TSPs. Further, as
part of its ongoing supervision process, the FDIC monitors
significant events, such as data breaches and natural
disasters that may affect financial institution operations
or customers.
In addition to the FDIC’s operations and technology
examination program, the FDIC monitors cybersecurity
issues in the banking industry on a regular basis through
on-site examinations, regulatory reports, and intelligence
reports. The FDIC works with groups such as the Financial
and Banking Information Infrastructure Committee (FBIIC),
the Financial Services Sector Coordinating Council for
Critical Infrastructure Protection and Homeland Security
(FSSCC), the Financial Services Information Sharing and
Analysis Center (FS-ISAC), other regulatory agencies, law
enforcement and others to share information regarding
emerging issues and coordinate responses.
Throughout 2013, FDIC staff participated in workshops,
sponsored by the National Institute of Standards and
Technology (NIST), to develop the Cybersecurity
Framework required by Executive Order 13636. The goal of
the workshops was to create the initial body of standards,
guidelines, best practices, tools, and procedures that will
be used to populate the first draft of the Cybersecurity

MANAGEMENT’S DISCUSSION AND ANALYSIS 21

ANNUAL REPORT 2013
Framework. Also, the FDIC has actively engaged through
the FBIIC to participate in interagency discussions
associated with various elements of the Executive Order.
Other major accomplishments during 2013 to promote IT
security and combat cyber fraud and other financial crimes
included the following:
♦♦ Held a Financial Crimes Conference for staff that
focused on all types of financial fraud, and how the law
enforcement community and regulators can effectively
respond. The conference was co-sponsored by the U.S.
Department of Justice and held in June 2013.
♦♦ Coordinated a nationwide video conference about
distributed denial of service (DDoS) attacks with the FBI,
financial regulatory agencies, large financial institutions,
U.S. Treasury Department, and representatives from the
largest technology service providers. There were over
300 participants in 35 field offices.
♦♦ Published a Consumer News article about using
technology to manage personal finances in the Spring
2013 edition.
♦♦ Published a Supervisory Insights article on “The
Evolution of Bank Information Technology Examinations”
in the Summer 2013 edition.
♦♦ Hosted the FFIEC IT Examiners Conference that
addressed technology and operational issues facing the
federal financial regulatory agencies.

mission. The 2013 conference explored “Strategies for
Success through Collaboration,” and encouraged interactive
discussion among those who believe MDIs and Community
Development Financial Institutions (CDFI) are uniquely
positioned to create positive change in their communities.
Nearly 120 MDI and CDFI bankers, representing 77 banks,
attended.
In December 2012, the FDIC initiated a research-based
study on MDIs. The study, conducted in earnest in 2013,
sought to better understand the role MDIs play in our
financial system and in our communities. It also addressed
the types of challenges MDIs face in the post-crisis
environment. The study followed a methodology similar
to that used in the FDIC’s 2012 Community Banking Study,
dividing institutions into groups of “community banks”
and “non-community banks.” The study focused on
structural changes in MDIs; their geography; the financial
performance of MDIs over time; capital formation; and the
broader community impact of these institutions. The FDIC
anticipates that the study will be published in early 2014.
The FDIC continued to seek ways to improve
communication and interaction with MDIs and to respond
to the concerns of minority bankers. Many MDIs took
advantage of FDIC technical assistance on nearly 60 bank
supervision, compliance, and resolution and receivership
topics, including, but not limited to, the following:
♦♦ Corporate Governance.

♦♦ Assisted financial institutions in identifying and shutting
down “phishing” Websites that attempt to fraudulently
obtain and use an individual’s confidential personal or
financial information.

♦♦ New Capital Rules.

♦♦ Issued a Consumer Alert pertaining to emails fraudulently
claiming to be from the FDIC.

♦♦ Loan Underwriting and Administration.

Minority Depository Institution Activities

♦♦ Investment Policy and Investment Securities Monitoring.

The preservation of minority depository institutions (MDIs)
remains a high priority for the FDIC. In June 2013, the
FDIC hosted the 2013 Interagency Minority Depository
Institution and Community Development Financial
Institution Bank Conference. Every two years, the FDIC,
the Office of the Comptroller of the Currency (OCC), and
the FRB host this important interagency conference for
FDIC-insured MDIs to help preserve and promote their

♦♦ Funds Management.

22 MANAGEMENT’S DISCUSSION AND ANALYSIS

♦♦ Capital Stress Testing.
♦♦ New Mortgage Rules.

♦♦ Troubled Debt Restructuring.

♦♦ Interest Rate Risk Modeling/Stress Testing.
♦♦ Third-Party Risk.
♦♦ Internal Audit Programs.
♦♦ Information Technology Risk Assessment, Strategic
Planning and Business Continuity Planning.

♦♦ Home Mortgage Disclosure Act.
♦♦ Community Reinvestment Act.
♦♦ Bank Secrecy Act and Anti-Money Laundering.
♦♦ Branch Opening and Closing Requirements.
♦♦ Mergers/Acquisition.
♦♦ Prompt Corrective Action.
♦♦ FDIC Loss Share Agreements.
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 an examination, to provide technical assistance to
management regarding examination recommendations,
or to discuss other issues of interest. Several MDIs took
advantage of this initiative in 2013. Also, the FDIC regional
offices held outreach training efforts and educational
programs for MDIs through conference calls and banker
roundtables. Topics of discussion for these sessions
included both compliance and risk management matters.
Additional discussions included the economy, overall
banking conditions, Basel III capital rules, new mortgage
rules, and other bank examination issues.

Capital Rulemaking and Guidance
In July 2013, the FDIC acted on two important regulatory
capital rulemakings. First, the FDIC joined the FRB
and OCC in issuing rulemakings that significantly revise
and strengthen risk-based capital regulations through
implementation of the Basel III international accord
(Basel III rulemaking). Second, these agencies also issued
an NPR that would strengthen leverage capital requirements
for the eight largest U.S. bank holding companies and their
insured banks.

Basel III Rulemaking
The Basel III rulemaking adopts with revisions the notices
of proposed rulemaking (NPRs) that the banking agencies
proposed in June 2012 regarding the Basel Committee on
Banking Supervision capital framework, the standardized
approach for risk-weighted assets, and the advanced
approaches for risk-based capital. The rule strengthens
the definition of regulatory capital, increases risk-based
capital requirements, and makes selected changes to

the calculation of risk-weighted assets. It introduces a
capital conservation buffer that, if breached, would trigger
limitations on a bank’s capital distributions and certain
other discretionary payments. The rule also incorporates
standards of creditworthiness other than external credit
ratings, consistent with the Dodd-Frank Act, and establishes
due diligence requirements for securitization exposures.
Banking organizations subject to the advanced
approaches risk-based capital rule also must meet a
3 percent supplementary leverage ratio requirement and
a countercyclical capital buffer. Additionally, several
enhancements to the advanced approaches risk-based
capital rule are included in the rule to incorporate aspects
of Basel III, as well as requirements introduced by the Basel
Committee on Banking Supervision in the “Enhancements
to the Basel II Framework” (2009 Enhancements).
The rule significantly changes aspects of the NPRs
to address a number of community bank comments.
Specifically, unlike the NPR, the rule retains the current
risk-weighting approach for residential mortgages. It allows
for an opt-out from the regulatory capital recognition of
accumulated other comprehensive income (AOCI), except
for large banking organizations that are subject to the
advanced approaches capital requirements. Finally, the
FRB has adopted the grandfathering provisions of Section
171 of the Dodd-Frank Act for trust preferred securities
issued by smaller bank holding companies.
The rule becomes effective January 1, 2015, for banking
organizations not subject to the advanced approaches
risk-based capital rule. For banking organizations that are
subject to the advanced approaches capital requirements,
the effective date is January 1, 2014. For all banking
organizations, the interim final rule includes a phase-in
period for certain aspects of the rule including the new
capital ratios and adjustments to and deductions from
regulatory capital.

Enhanced Supplementary Leverage Ratio Standards
for Certain Bank Holding Companies and their
Subsidiary Insured Depository Institutions
In July 2013, the federal banking agencies issued an NPR
that would raise the supplementary leverage requirements
for the largest, most systemically important banking
organizations and their subsidiary insured depository

MANAGEMENT’S DISCUSSION AND ANALYSIS 23

ANNUAL REPORT 2013
institutions (IDIs). The new requirements would apply to
the largest, most interconnected banking organizations
with at least $700 billion in total consolidated assets at the
top-tier bank holding company or at least $10 trillion in
assets under custody [covered Bank Holding Companies
(BHCs)] and any IDI subsidiary of these bank holding
companies (covered IDIs). For covered IDIs, the proposed
rule would establish a supplementary leverage ratio of
6 percent as a “well-capitalized” threshold for prompt
corrective action. For covered BHCs, the proposed rule
establishes a capital conservation buffer composed of
tier 1 capital of 2 percent of total leverage exposure;
therefore, these BHCs would need to maintain a
supplementary leverage ratio of 5 percent to avoid
restrictions on capital distributions.
The Enhanced Supplementary Leverage Ratio NPR was
published in the Federal Register on August 20, 2013, and
the comment period ended October 21, 2013. The FDIC is
reviewing public comments and is working with the other
federal banking agencies to develop a final rule.

Regulatory Reporting Under the Interim
Final Capital Rule
In August 2013, the FDIC and the other federal banking
agencies issued for comment the first stage of proposed
revisions to the Consolidated Reports of Condition and
Income (Call Report), which would align the regulatory
capital components and ratios portion of the regulatory
capital schedule with the Basel III revised regulatory
capital definitions. The agencies also proposed to make
similar changes to the Federal Financial Institutions
Examination Council - FFIEC 101 regulatory capital report
for advanced approaches institutions and to revise nine
risk-weighted assets schedules in this report consistent
with the revised advanced approaches regulatory capital
rules. These proposed regulatory capital reporting changes
would take effect as of the March 31, 2014, report date
for advanced approaches banking organizations. The
Call Report revisions would be applicable to all other
institutions as of March 31, 2015. The second stage of Call
Report revisions would update the risk-weighted assets
portion of the regulatory capital schedule to reflect the
standardized approach to risk weighting in the Basel III final

24 MANAGEMENT’S DISCUSSION AND ANALYSIS

rules effective as of the March 31, 2015, report date. The
risk-weighted assets reporting proposal is expected to be
published for comment in 2014.

Stress Testing Guidance
In July 2013, the FDIC, along with the other federal banking
agencies, issued guidance that outlines high-level principles
for implementation of Section 165(i) (2) of the Dodd-Frank
Act stress tests for companies with $10 billion to $50 billion
in consolidated assets.
The guidance discusses supervisory expectations for the
Dodd-Frank Act stress test practices and offers additional
details about methodologies that should be employed by
these companies. It also underscores the importance of
stress testing as an ongoing risk management practice that
supports a company’s forward-looking assessment of its
risks and better equips the company to address a range of
macroeconomic and financial outcomes.
The comment period on this joint proposed guidance ended
on September 25, 2013, and the final guidance is being
developed.

Other Rulemaking and Guidance under the
Dodd-Frank Act
The Dodd-Frank Act required various agencies to establish
goals for the completion of rules and/or policy guidance
on several topics. Although these goals were not included
in the FDIC’s 2013 Annual Performance Plan, rules
and guidance on these various topics were finalized or
progressed in 2013. These topics include:
♦♦ Proprietary trading and other investment restrictions
(often referred to as the “Volcker Rule”).
♦♦ Credit risk retention requirements for securitizations.
♦♦ Appraisal requirements for higher-priced mortgages.
♦♦ Examination standards for the classification and appraisal
of securities.
♦♦ Capital, margin, and other requirements for over-thecounter (OTC) derivatives.
♦♦ Mortgage rules.

Volcker Rule
On December 10, 2013, the FDIC, along with the other
federal banking agencies, the Commodities Futures Trading
Commission (CFTC), and the Securities and Exchange
Commission (SEC), approved a joint final rule to implement
the provisions of Section 619 of the Dodd-Frank Act, also
known as the “Volcker Rule.” The Volcker Rule, which
added new Section 13 to the BHC Act, generally prohibits
any banking entity from engaging in proprietary trading or
acquiring or retaining an interest in, sponsoring, or having
certain relationships with, a hedge fund or private equity
fund, subject to certain exemptions.
Based on comments received after issuance of the final rule,
the agencies issued a joint interim final rule with request for
comment on January 14, 2014, to permit banking entities to
retain interests in and sponsorship of certain collateralized
debt obligations backed primarily by trust preferred
securities issued by community banks. Under the final
rule, these investments would have met the definition of
“covered funds” and would have been subject to investment
prohibitions. The agencies also released a non-exclusive list
of qualified collateralized debt obligations backed primarily
by trust preferred securities to help banks determine
compliance with the new interim final rule.
The final rule becomes effective April 1, 2014; the interim
final rule would take effect on the same date. The FRB
extended the conformance period until July 21, 2015. In
the final rule, the agencies tailored the compliance program
for banking entities engaged in covered activities based on
asset size and amounts in trading assets and liabilities, and
provided a phase-in of reporting of quantitative measures
for covered trading activities. Beginning June 30, 2014,
banking entities with $50 billion or more in consolidated
trading assets and liabilities will be required to report
quantitative measurements. Banking entities with at
least $25 billion, but less than $50 billion, in consolidated
trading assets and liabilities will become subject to this
requirement on April 30, 2016. Those banking entities with
at least $10 billion, but less than $25 billion, in consolidated
trading assets and liabilities will become subject to the
requirement on December 31, 2016. The agencies will
review the data collected prior to September 30, 2015, and
revise the collection requirement as appropriate. For ease

of reference, the FDIC maintains a page on its Website
dedicated to information on the Volcker Rule.

Credit Risk Retention for Securitizations
In August 2013, the FDIC, jointly with the OCC, the FRB,
the Department of Housing and Urban Development (HUD),
the SEC, and the Federal Housing Finance Agency (FHFA),
approved an NPR to implement the securitization credit risk
retention provisions of Section 941 of the Dodd-Frank Act
(Section 941), which added Section 15G to the Securities
and Exchange Act of 1934. This was the second NPR to
implement that provision. Section 15G generally requires
securitizers of asset-backed securities (ABS) to retain not
less than 5 percent of the credit risk of assets collateralizing
ABS issuances and generally prohibits a securitizer from
directly or indirectly hedging or otherwise transferring the
credit risk the securitizer is required to retain. Similar to
the prior NPR, the current NPR provides the sponsors of
ABSs with various options for meeting the risk retention
requirements. As required by the Dodd-Frank Act, the
proposed rule defines a “qualified residential mortgage”
(QRM), that is, a mortgage which is statutorily exempt
from risk retention requirements. The NPR would align
the definition of QRM with the definition of “qualified
mortgage” (QM) as prescribed by the Consumer Financial
Protection Bureau (CFPB) in 2013 and asked for comment
on an alternative definition. In addition, the proposed rule
would: provide an exemption for securitizations solely
collateralized by commercial mortgages, commercial real
estate loans, or automobile loans, if such loans meet certain
underwriting standards; and provide various securitization
structure-specific risk retention options. The public
comment period ended on October 30, 2013, and comments
are under review.

Appraisal Requirements for Higher-Priced Mortgages
In January 2013, the FDIC, jointly with the OCC, FRB,
National Credit Union Administration (NCUA), FHFA, and
CFPB, issued the final rule that establishes new appraisal
requirements for higher-priced mortgage loans. Under the
Dodd-Frank Act, mortgage loans are higher-priced if they
are secured by a consumer’s home and have interest rates
above certain thresholds. The final rule became effective on
January 18, 2014.

MANAGEMENT’S DISCUSSION AND ANALYSIS 25

ANNUAL REPORT 2013
In July 2013, the FDIC, along with the OCC, FRB, NCUA,
FHFA, and CFPB, issued a proposed rule that would create
exemptions from certain appraisal requirements for a
subset of higher-priced mortgage loans. The comment
period ended on September 9, 2013. The rule was finalized
in December 2013 and is effective January 18, 2014.
The final rule provides that the following three types of
higher-priced mortgage loans would be exempt from the
Dodd-Frank Act appraisal requirements: loans of $25,000
or less; certain “streamlined” refinancings; and certain loans
secured by manufactured housing.

Uniform Agreement on the Classification
and Appraisal of Securities Held by
Financial Institutions
In October 2013, the FDIC issued interagency guidance
with the OCC and the FRB that revised examination
standards for the adverse classification of securities held
in bank investment portfolios. The guidance reiterates
the importance of a robust investment analysis process
and the agencies’ longstanding asset classification
definitions. It also addresses Section 939A of the
Dodd-Frank Act, which directed the agencies to remove
any reference to, or requirement of reliance on, credit
ratings in regulations and replace them with appropriate
standards of creditworthiness. State nonmember
institutions are expected to perform an investment
security creditworthiness assessment that does not rely
solely on external credit ratings. FDIC examiners will use
the statement to determine whether an asset should be
adversely classified during supervisory reviews.

Over-The-Counter Derivatives
The U.S. regulators, including the FDIC, in their capacity as
members of the Basel Committee on Banking Supervision,
negotiated with international regulators to develop
international standards that will be used to implement the
margin requirements for uncleared OTC derivatives. The
international convergence document was published in
early September 2013, and U.S. rulemaking activities
are continuing.

Mortgage Rules
In January 2013, the CFPB issued, after required
consultation with the FDIC and the other financial

26 MANAGEMENT’S DISCUSSION AND ANALYSIS

regulatory agencies, a number of final rules to implement
various provisions of the Mortgage Reform and AntiPredatory Lending Act, i.e., Title XIV of the Dodd-Frank
Act. Key areas of the new rules include: (1) determining
a consumer’s ability to repay and the qualified mortgage
safe harbor; (2) loan originator compensation; (3) mortgage
loan servicing; (4) new escrow requirements; (5) new
requirements and expanded coverage under the Home
Ownership and Equity Protection Act (HOEPA); (6) new
requirements under the Equal Credit Opportunity Act
(ECOA); and (7) implementing Regulation B. In addition,
the CFPB issued or proposed several supplemental rules
during 2013 to clarify certain aspects of many of the rules.
To ensure examiner preparedness and to assist FDICsupervised institutions in their compliance planning for this
significant overhaul of mortgage regulation, throughout
2013, the FDIC worked extensively to develop and issue
training materials for its examiners in advance of January
2014, when the rules generally were effective. The FDIC
also hosted a series of banker outreach calls, providing
overviews of the new rules and answering questions, in
collaboration with the CFPB.
On December 13, 2013, the FDIC, along with the OCC,
FRB, and NCUA, issued a statement to clarify safetyand-soundness expectations and CRA considerations for
regulated institutions engaged in residential mortgage
lending in light of the CFPB’s Ability-to-Repay and Qualified
Mortgage (QM) Standards Rule, which was issued January
10, 2013, and was effective on January 10, 2014. The
agencies recognize that many institutions may originate
both QM and non-QM residential mortgage loans, based on
the institution’s business strategy and risk appetite. The
agencies will not subject a residential mortgage loan to
regulatory criticism based solely on the loan’s status as a
QM or a non-QM.

Liquidity and Funds Management
Rulemaking and Guidance
Liquidity Coverage Ratio
In October 2013, the FDIC, together with the OCC and the
FRB, issued an interagency proposed rule to implement
the Liquidity Coverage Ratio (LCR). The proposed rule
would implement a quantitative liquidity requirement
consistent with the LCR established by the Basel Committee

on Banking Supervision. The requirement would apply to
large, internationally active banking organizations and their
consolidated subsidiary depository institutions with $10
billion or more in total consolidated assets. The proposal
requires banks to hold a minimum level of liquid assets to
support contingent liquidity events and provides a standard
way of expressing a bank’s on-balance sheet liquidity
position to stakeholders and supervisors. The proposal
establishes a transition schedule that is more accelerated
than the Basel standard as it would require covered
companies to fully meet the minimum LCR by January 1,
2017, two years earlier than Basel requires.
The LCR proposal was published in the Federal Register
on November 29, 2013, and comments were due by
January 31, 2014.

Depositor and Consumer Protection
Rulemaking and Guidance
Guidance on Social Media
In December 2013, the FFIEC, on behalf of its members
(the FDIC, CFPB, FRB, NCUA, OCC, and State Liaison
Committee), issued final supervisory guidance on the
applicability of consumer protection and compliance laws,
regulations, and policies to activities conducted via social
media by banks, savings associations, and credit unions,
as well as nonbank entities supervised by the CFPB and
state regulators. The final guidance is intended to help
financial institutions understand and manage the potential
consumer compliance, legal, reputation, and operational
risks associated with the use of social media. It provides
considerations that financial institutions may find useful in
conducting risk assessments and crafting and evaluating
policies and procedures regarding social media.

Revisions to Interagency Questions and Answers
Regarding Community Reinvestment
In November 2013, the FDIC, FRB, and OCC published
revisions to “Interagency Questions and Answers Regarding
Community Reinvestment.” The Questions and Answers
document provides additional guidance to financial
institutions and the public on the agencies’ CRA regulations.
The revisions focus primarily on community development.

Guidance on Reporting Financial Abuse
of Older Adults
In September 2013, the FDIC, CFPB, CFTC, Federal Trade
Commission (FTC), NCUA, OCC, and SEC issued guidance
to clarify that the privacy provisions of the Gramm-LeachBliley Act generally permit financial institutions to report
suspected elder financial abuse to appropriate authorities.
The Act generally requires that a financial institution
notify consumers and give them an opportunity to opt out
before providing nonpublic personal information to a third
party. The guidance clarifies that it is generally acceptable
under the law for financial institutions to report suspected
elder financial abuse to appropriate local, state, or federal
agencies.

Other Rulemaking and Guidance Issued
During 2013, the FDIC issued and participated in the
issuance of other rulemaking and guidance in several areas
as described below.

Guidance on Deposit Advance Products
In November 2013, the FDIC published supervisory
guidance to FDIC-supervised financial institutions that offer
or may consider offering deposit advance products. The
guidance is intended to ensure that banks are aware of a
variety of safety and soundness, compliance, and consumer
protection risks posed by deposit advance loans. It
supplements the FDIC’s existing guidance on payday loans
and subprime lending, and encourages banks to respond to
customers’ small-dollar credit needs.

FDIC Supervisory Approach to Payment Processing
Relationships with Merchant Customers That Engage
in Higher-Risk Activities
In September 2013, the FDIC issued guidance clarifying
its policy and supervisory approach related to facilitating
payment processing services directly, or indirectly
through a third party, for merchant customers engaged
in higher-risk activities. Facilitating payment processing
for these types of merchant customers can pose risks to
financial institutions; however, those that properly manage
these relationships and risks are neither prohibited nor
discouraged from providing payment processing services to
customers operating in compliance with applicable law.

MANAGEMENT’S DISCUSSION AND ANALYSIS 27

ANNUAL REPORT 2013
Modifications to the Statement of Policy for
Section 19 of the Federal Deposit Insurance Act
On February 8, 2013, the FDIC modified the Statement
of Policy for Section 19 of the Federal Deposit Insurance
Act. Section 19 of the Act prohibits, without prior written
consent of the FDIC, a person convicted of a criminal
offense involving dishonesty, breach of trust, money
laundering, or who has entered into a pretrial diversion
program, from participating in the affairs of an FDICinsured institution. The updated Statement of Policy
included modifications to the de minimis exceptions
regarding the potential fine and the number of days of
imprisonment. These modifications to the de minimis
criteria are expected to reduce the number of Section 19
applications and regulatory burden, consistent with safety
and soundness.

Recordkeeping and Confirmation Requirements for
Securities Transactions
On September 4, 2013, the FDIC published an NPR
regarding the removal of Part 390, Subpart K (formerly OTS
Part 551), which governs recordkeeping and confirmation
requirements for securities transactions effected for
customers by state savings associations. The FDIC carefully
reviewed Part 390, Subpart K, and compared it with Part
344, a substantially identical FDIC regulation governing
recordkeeping and confirmation requirements for securities
transactions effected for customers by state nonmember
banks. Although the two rules are substantively the same,
one difference between Part 390, Subpart K and Part 344
concerned the number of securities transactions that
could be effected by an IDI without triggering certain
reporting and confirmation requirements (Small Transaction
Exception). The threshold for Part 390, Subpart K’s Small
Transaction Exception is an average of 500 or fewer
transactions over the prior three calendar year period. The
NPR proposed amending Part 344 to increase the threshold
for the Small Transaction Exception applicable to all FDICsupervised institutions effecting securities transactions
for customers from an average of 200 transactions to 500
transactions per calendar year over the prior three calendar
year period. The FDIC supports the idea that increasing
the number of securities transactions to which the Small
Transaction Exception would apply will ensure parity for
all FDIC-supervised institutions. Increasing the threshold

28 MANAGEMENT’S DISCUSSION AND ANALYSIS

for the Small Transaction Exception also recognizes that
the securities activities of FDIC-supervised depository
institutions have increased over the three decades since
the FDIC established the original scope of the Small
Transaction Exception. The comment period for the NPR
ended on November 4, 2013, with no comments having been
received. Consequently, on December 10, 2013, the FDIC
issued a final rule as proposed in the NPR without change;
the Final Rule was effective January 21, 2014.

Guidance on Interest Rate Risk Management
In October 2013, the FDIC issued a Financial Institution
Letter (FIL) reiterating expectations for institutions
to prudently manage their interest rate risk exposure,
particularly in a challenging interest rate environment.
The guidance reminds institutions that interest rate risk
management should be viewed as an ongoing process
that requires effective measurement and monitoring,
clear communication of modeling results, conformance
with policy limits, and appropriate steps to mitigate risk.
The guidance states that a number of institutions report
a significantly liability-sensitive balance sheet position,
which means that in a rising interest rate environment, the
potential exists for adverse effects to net income and, in
turn, earnings performance. Additionally, for a number
of FDIC-supervised institutions, the potential exists for
material securities depreciation relative to capital in a rising
interest rate environment.

Advisory on Mandatory Clearing Requirements for
Over-the-Counter Interest Rate and Credit Default
Swap Contracts
On June 7, 2013, the FDIC completed a supervisory
advisory on mandatory clearing requirements for over-thecounter interest rate and credit default swap contracts.
This guidance was issued as an advisory because the
requirements are Commodity Futures Trading Commission
regulations that could impact FDIC-supervised institutions.

Qualified and Non-Qualified Mortgage Loans
On December 13, 2013, the FDIC, along with the OCC,
FRB, and NCUA, issued a statement to clarify safetyand-soundness expectations and CRA considerations for
regulated institutions engaged in residential mortgage
lending in light of the CFPB’s Ability-to-Repay and Qualified

Mortgage (QM) Standards Rule, which was issued January
10, 2013, and was effective on January 10, 2014. The
agencies recognize that many institutions may originate
both QM and non-QM residential mortgage loans, based on
the institution’s business strategy and risk appetite. The
agencies will not subject a residential mortgage loan to
regulatory criticism based solely on the loan’s status as a
QM or a non-QM.

Interagency Guidance on Leveraged Lending
On March 26, 2012, the FDIC and the other federal banking
agencies proposed revisions to the 2001 interagency
guidance on leveraged financing. The proposal’s purpose
was to update the existing guidance and clarify regulatory
expectations in light of significant growth in the leveraged
lending market, and incorporate lessons learned from the
recent financial crisis. The proposal describes expectations
for the sound risk management of leveraged lending
activities, including well-defined underwriting standards,
effective management information systems, a prudent credit
limit and concentration framework, and strong pipeline
management policies. In March 2013, the OCC, the FRB,
and the FDIC issued final guidance on leveraged lending.
This guidance outlined for agency-supervised institutions
high-level principles related to safe-and-sound leveraged
lending activities, including expectations for the content of
credit policies, the need for well-defined underwriting and
valuation standards, and the importance of credit analytics
and pipeline management. This guidance was effective on
March 22, 2013.

Director and Officer Liability Insurance Policies
On October 12, 2013, the FDIC issued an Advisory
Statement on Director and Officer Liability Insurance
Policies, Exclusions, and Indemnification for Civil
Money Penalties. The advisory discusses the importance
of thoroughly reviewing and understanding the risks
associated with coverage exclusions contained in director
and officer liability insurance policies and serves as
a reminder that an insured depository institution or
depository institution holding company may not purchase
an insurance policy that would indemnify institutionaffiliated parties (IAPs) for CMPs assessed against
them. Even if the IAP agrees to reimburse the depository

institution for the cost of such coverage, the purchase of the
insurance policy by the depository institution is prohibited.

Interagency Supervisory Guidance on
Troubled Debt Restructurings
On October 24, 2013, the FDIC and the other federal
financial institution regulatory agencies jointly issued
supervisory guidance clarifying certain issues related to
the accounting treatment and regulatory classification
of commercial and residential real estate loans that have
undergone troubled debt restructurings (TDRs). The
agencies’ guidance reiterates key aspects of previously
issued guidance and discusses the definition of a collateraldependent loan and the classification and charge-off
treatment for impaired loans, including TDRs. It also
encourages institutions to work constructively with
borrowers and reaffirms that the agencies view prudent
loan modifications as positive actions when they mitigate
credit risk. The guidance explains that when modified
loans are determined to be TDRs for accounting purposes,
the TDR label does not mean that the loan is automatically
required to be in nonaccrual status, or to be adversely
classified, for its remaining life.

Income Tax Allocation in a Holding
Company Structure
In December 2013, the FDIC and the other federal banking
agencies issued for comment a proposed Addendum to
the 1998 Interagency Policy Statement on Income Tax
Allocation in a Holding Company Structure. Since the
beginning of the financial crisis, many disputes have
occurred between holding companies in bankruptcy and
failed IDIs regarding the ownership of tax refunds generated
by the IDIs. Certain court decisions have found that holding
companies in bankruptcy own tax refunds created by failed
IDIs based on language in their tax-sharing agreements
that the courts interpreted as creating a debtor-creditor
relationship as opposed to acknowledging an agency
relationship. The proposed Addendum seeks to remedy this
problem by requiring IDIs to clarify that their tax sharing
agreements acknowledge that an agency relationship exists
between the holding company and its subsidiary IDI with
respect to tax refunds, and provides a sample paragraph to
accomplish this goal. The proposed Addendum would also

MANAGEMENT’S DISCUSSION AND ANALYSIS 29

ANNUAL REPORT 2013
clarify how certain requirements of Sections 23A and 23B of
the Federal Reserve Act apply to tax allocation agreements
between IDIs and their affiliates. The comment period
closed on January 21, 2014.

Regulatory Relief
During 2013, the FDIC issued six FILs that provide guidance
to help financial institutions and facilitate recovery in areas
damaged by wildfires and other natural disasters. In these
FILs, the FDIC encouraged banks to work constructively
with borrowers experiencing financial difficulties as a result
of natural disasters, and clarified that prudent extensions
or modifications of loan terms in such circumstances can
contribute to the health of communities and serve the
long-term interests of lending institutions.
On February 19, 2013, FDIC-supervised institutions were
informed that they could begin submitting interagency
bank merger applications, notices of change in control, and
notices of change of director or senior executive officer
through FDICconnect, a secure transaction-based Website
for FDIC-insured institutions.
On July 25, 2013, the FDIC issued, jointly with the other
federal banking agencies, a Statement to Encourage
Financial Institutions to Work with Student Loan
Borrowers Experiencing Financial Difficulties. In
addition, on October 9, 2013, the FDIC along with
other federal regulatory agencies issued a Statement to
Encourage Institutions to Work with Borrowers Affected
by Government Shutdown.

Banker Teleconferences
In 2013, the FDIC hosted a series of banker teleconferences
to maintain open lines of communication and update
supervised institutions about related rulemakings, guidance,
and emerging issues in risk management supervision, and
compliance and consumer protection. Participants of the
teleconferences included bank directors, officers, staff, and
other banking industry professionals.
For the risk management supervision series, four
teleconferences were held in 2013. The topics discussed
included: (1) the Financial Accounting Standards Board’s
proposal to change the accounting for credit losses, (2)
leveraged lending guidance, (3) the interim final capital rule,
and (4) emerging technology issues for banks and servicers.

30 MANAGEMENT’S DISCUSSION AND ANALYSIS

For the compliance and consumer protection series, five
teleconferences were held in 2013. The topics discussed
included: (1) the CFPB’s final rules on the ability to repay,
qualified mortgage standards, escrow requirements, and
the loan originator compensation requirements involving
the prohibition on mandatory arbitration clauses and
single premium credit insurance, (2) the CFPB’s final
rules on mortgage servicing, (3) the CFPB’s final rules on
loan originator compensation and changes to the HOEPA,
( 4) consumer complaints and their role in institutions’
compliance management systems; and 5) the FFIEC social
media guidance.

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

Advisory Committee on Economic Inclusion
The Advisory Committee on Economic Inclusion (ComE-IN)
provides the FDIC with advice and recommendations
on important initiatives focused on expanding access to
banking services to underserved populations. This may
include reviewing basic retail financial services such as
check cashing, money orders, remittances, stored value
cards, small-dollar loans, savings accounts, and other
services that promote individual asset accumulation and
financial stability. During 2013, the Committee met in May
and October to discuss savings initiatives; Safe Accounts,
including bank prepaid cards, and mobile financial
services. During the October meeting, staff presented to
the Committee a plan for producing a white paper on IDIs’
use of mobile financial services (MFS) to better serve the

During 2013, the FDIC revised the household survey
instrument and conducted the third nationwide survey
in partnership with the U.S. Census Bureau. The survey
focuses on basic checking and savings account ownership,
but it also explores households’ use of alternative financial
services to better understand the extent to which families
are meeting their financial needs outside of mainstream
financial institutions. Results of the survey will be
published in 2014.
The FDIC’s planned initiation of work on a new survey
of banks about their efforts to serve unbanked and
underbanked customers was delayed until 2014. During
2013, the FDIC explored alternative methods for gathering
this information from banks, including the possible
incorporation of this data collection into a larger survey of
banks on the challenges and opportunities they are facing
(an outgrowth of the FDIC’s Community Banking Initiative).

Chairman Gruenberg emphasizes a point during the
May 2013 ComE-IN meeting.
unbanked and underbanked. The presentation outlined
three goals for the use of this technology: access to the
banking system for the unbanked, sustainability for the
underbanked or new entrants to the system, and growth
of consumers’ ability to deepen banking relationships and
fulfill financial goals.

FDIC National Survey of Unbanked and
Underbanked Households and Survey of Banks’
Efforts to Serve the Unbanked and Underbanked
As part of its ongoing commitment to expanding economic
inclusion in the United States, the FDIC works to fill the
research and data gap regarding household participation
in mainstream banking and the use of nonbank financial
services. In addition, Section 7 of the Federal Deposit
Insurance Reform Conforming Amendments Act of 2005
(Reform Act) mandates that the FDIC regularly report
on banks’ efforts to bring individuals and families into
the conventional finance system. In response, the FDIC
regularly conducts and reports on surveys of households
and banks to inform the efforts of financial institutions,
policymakers, regulators, researchers, academics,
and others.

Partnership to Promote Consumer Access:
Alliance for Economic Inclusion
The goal of the FDIC’s Alliance for Economic Inclusion
(AEI) initiative is to collaborate with financial institutions;
community organizations; local, state, and federal agencies;
and other partners in select markets, to launch broad-based
coalitions to bring unbanked and underbanked consumers
and owners of small businesses into the financial
mainstream.
During 2013, the FDIC supported 16 AEI programs across
the nation. Many AEIs formed committees and work groups
to address specific challenges and financial services needs
of their communities. These included retail financial series
for underserved populations, savings initiatives, affordable
remittance products, small-dollar loan programs, targeted
financial education programs, and other asset-building
programs.
In 2012, the FDIC launched AEI initiatives in two additional
markets: the Appalachian region of West Virginia and
Northeastern Oklahoma. In 2013, these new efforts
expanded focus in two particular areas of need: small
business and tribal organizations. The West Virginia AEI,
working in collaboration with the Appalachian Regional
Commission, collaborates with state-wide and local service
providers to support financial access for small business and

MANAGEMENT’S DISCUSSION AND ANALYSIS 31

ANNUAL REPORT 2013
microenterprise in the state. The AEI partners hosted three
Small Business Resource Summits in Wheeling, Huntington,
and Fairmont to provide resources and educational
opportunities to the small business community. The
Northeast Oklahoma AEI (NEOK AEI) serves a significant
Native American community as well as the City of Tulsa,
Oklahoma. Oklahoma has a larger Native American
population than any state other than California, and about
60 percent of the state’s Native Americans lives in the
northeastern quadrant. In 2013, the NEOK AEI initiated
work to support consumers interested in improving their
credit profile and worked with America Saves in supporting
the first Oklahoma Saves campaign.
The FDIC also provided program guidance and technical
assistance in the expansion of 52 Bank On programs.
Bank On initiatives are designed to reduce barriers to
banking and increase access to the financial mainstream.

Advancing Financial Education
The FDIC expanded its financial education efforts during
2013 through a strategy that included providing access to
timely and high-quality financial education products,
sharing best practices, and working through partnerships
to reach consumers.
The existing suite of Money Smart products for consumers
was enhanced with the release of Money Smart for Older
Adults in partnership with the CFPB. This stand-alone
training module developed by both agencies provides
information to raise awareness among older adults (age 62
and older) and their caregivers on how to prevent, identify,
and respond to elder financial exploitation, plan for a secure
financial future, and make informed financial decisions.
The instructor-led module offers practical information that
can be implemented immediately. Money Smart for Older
Adults is designed to be delivered by representatives of

A group of dedicated individuals within both the FDIC and the CFPB joined forces to deliver a new product
designed to help older Americans make informed financial decisions and avoid exploitation. Members of the
FDIC team, shown here from left, are Cassandra Duhaney, Debra Stabile, Irma Matias, Lekeshia Frasure, Luke
Reynolds, Ron Jauregui, James Williams, Evelyn Manley, and Glenn Gimble.

32 MANAGEMENT’S DISCUSSION AND ANALYSIS

financial institutions, adult protective service agencies,
senior advocacy organizations, law enforcement, and
others that serve this population. Between its release on
June 12, 2013, and December 31, 2013, more than 15,000
copies were released.
Through training and technical assistance, the FDIC
emphasizes the importance of pairing education with access
to appropriate banking products and services. The FDIC
conducted more than 173 outreach events to promote
the Money Smart program, including 68 train-the-trainer
workshops with approximately 1,200 participants. More
than 35,000 Money Smart instructor-led curriculum copies
were distributed, and more than 50,000 people used the
computer-based curriculum, exemplifying effective results
from the outreach sessions. The FDIC also entered into
23 new collaborative agreements with financial institutions
and nonprofit organizations, to facilitate the use of the
Money Smart program.
A series of webinars for bankers on community
development and economic inclusion topics were piloted
during 2013. Five webinars were conducted during 2013
and each averaged more than 400 participants.

Leading Community Development
In 2013, the FDIC provided professional guidance and
technical assistance to banks and community organizations
in outreach activities and events designed to foster
an understanding and connection between financial
institutions and other community stakeholders. As
such, the FDIC conducted 49 community development
forums linking bank and community partners to facilitate
opportunities for banks and community stakeholders
to address community credit and development needs,
including interagency resource forums with the OCC and
the Federal Reserve Banks and other stakeholders in the
recovery efforts of communities in the Northeast impacted
by Superstorm Sandy. The FDIC also conducted 50 CRA
roundtables that provided market-specific training for
bankers and 32 workshops for nonprofit stakeholders on
CRA, effectively engaging with financial institutions to
promote community development.

Community Banking Initiatives
The FDIC is the lead federal regulator for the majority
of community banks, and the insurer of all. As such, the
FDIC has an ongoing responsibility to better understand
the challenges facing community banks, and to share
that knowledge with bankers and the general public.
Community banks play a crucial role in the American
financial system. These institutions account for about 14
percent of the banking assets in our nation, but they provide
nearly 46 percent of all the small loans that FDIC-insured
depository institutions make to businesses and farms.
They also hold the majority of industry deposits in banking
offices located in rural counties and micropolitan counties
with populations up to 50,000.
In 2012, the FDIC issued a comprehensive study of the
evolution of community banking in the United States
over the past 25 years, and commenced a review of
its examination, rulemaking, and guidance processes
with a goal of identifying ways to make the supervisory
process more efficient, consistent, and transparent. Our
2012 activities under this initiative included a national
conference on the Future of Community Banking and a
series of roundtables with community bankers in each of
the FDIC’s six regions.
These efforts under the Community Banking Initiative
continued on a number of fronts in 2013. First, the results
of the 2012 FDIC Community Banking Study were
presented to a range of industry and academic audiences,
furthering our dialogue with key stakeholder groups as to
the trends that are shaping this key sector of our financial
system. Using our research definition of the community
bank, we published updated community bank reference
data on fdic.gov to reflect year-end 2012 data. Employing
these data, our researchers found that community banks
experienced a significant decline in problem loans, loan loss
provisions, and failures during 2012, while they expanded
their loan portfolios and were more profitable than in any
year since 2007.
FDIC researchers applied the analytical framework
developed for our Community Banking Study to the case of
MDIs. While MDIs represent a fairly small share of banking
industry charters and assets, they were found to be highly

MANAGEMENT’S DISCUSSION AND ANALYSIS 33

ANNUAL REPORT 2013
effective in reaching the minority and low- and moderateincome communities that they have been chartered to serve.
Preliminary research results were presented in June at the
2013 Interagency Minority Depository Institution and CDFI
Bank Conference, and a written report is forthcoming.
Ongoing research topics include the effects of rural
depopulation on community banks and the contribution of
community banks to small business lending. In October
2013, FDIC researchers presented a paper entitled “Do
Community Banks Increase New Firms’ Access to Credit?”
at the “Community Banking in the 21st Century,” conference
co-sponsored by the FRB and the Conference of State Bank
Supervisors (CSBS). These and other research initiatives
will continue in 2014.
The FDIC also has continued and enhanced its examination
and rulemaking review. Based on feedback received
at community banker roundtables and our ongoing
review of the FDIC’s bank examination process, the
FDIC implemented enhancements to our supervisory
and rulemaking processes in 2013. The FDIC developed
a Web-based tool to tailor information requests for risk
management examinations to the characteristics of the
institution being examined. As a result, information
requests have generally been shorter than previous
examination request lists. In addition, more business
transactions have been made available through
FDICconnect, a secure, transactions-based Website, which
ensures better access for bankers and supervisory staff.
The FDIC also has enhanced its efforts to actively
communicate with the institutions it supervises. The
FDIC developed an information package to be sent to the
institution prior to the start of the pre-examination phase of
compliance examinations to improve communication with
the field manager and to offer resources that are available
to the institution at any time throughout the examination
process. The FDIC has also developed a brochure for
community bankers entitled “Technical Assistance for
Managing Consumer Compliance Responsibilities,”
highlighting ways in which examiners can provide
assistance to community banks.
The Directors’ Resource Center, a special section of the
FDIC’s Website, is dedicated to providing useful information
to bank directors, officers, and employees on areas of

34 MANAGEMENT’S DISCUSSION AND ANALYSIS

FDIC staff look at video monitors of the set during
filming of the bank director videos. From left:
Lou Bervid, Rob Moss, Vince Moore, and
Arnie Kunkler.
supervisory focus and regulatory changes. One key element
of this resource center is a Technical Assistance Video
Program. Three series of videos were released during 2013.
The first series is the new director education videos; these
videos cover director responsibilities and fiduciary duties
as well as the FDIC examination process. The second
series is a virtual version of the FDIC’s Directors’ College
Program; these videos address interest rate risk, third-party
risk, the CRA, the BSA, corporate governance, and
information technology. The third series of videos provides
more in-depth technical training on a variety of issues,
including interest rate risk, appraisals and evaluations,
flood insurance, the evaluation of municipal securities,
fair lending, the allowance for loan and lease losses, and
troubled debt restructurings.

The FDIC’s Website also has a section dedicated to the
Regulatory Capital Interim Final Rule. This section
contains links to the rule, pertinent FILs, instructions
for regulatory reporting, and other items. The FDIC
conducted comprehensive outreach to community banks
to inform them about the new requirements. Several
resources targeted to community institutions include an
educational video, an interagency community bank guide,
and an expanded guide for FDIC- supervised institutions.
The FDIC also responds to questions submitted to
regulatorycapital@fdic.gov, a dedicated mailbox for
questions on the new rule. Additionally, to supplement
the online informational resources, staff hosted outreach
sessions in each regional office to discuss the new
requirements and address bankers’ questions and concerns.
On August 15, 2013, staff held a national conference call
that had wide participation from bankers as well as FDIC
supervisory and examination team members, with nearly
1,700 lines used for the call. In November 2013, the FDIC,
with the other federal banking agencies, released an
estimation tool to help community bankers evaluate the
potential effects on their capital ratios from the revised
capital approaches.
In addition, the FDIC’s Advisory Committee on Community
Banking continued to provide timely information and input
to the FDIC on a variety of community bank policy and
operational issues throughout 2013. The Committee held
three meetings in 2013 and provided input on a number of
key issues and initiatives, including the FDIC’s community
bank study and report, community bank outreach and
technical assistance, proposed improvements to the FDIC’s
regulatory and supervisory processes, mobile banking
issues, payment system developments and implications,
information technology examination issues, vendor
management issues, troubled debt restructuring guidance,
the Uniform Agreement on Classification and Appraisal of
Securities, bank cybersecurity issues, the Money Smart
for Small Businesses Program, flood insurance issues, the
interagency social media guidance, as well as the potential
effects of various regulatory and legislative developments
on community banks.
Looking forward, the FDIC will continue to make
community bank issues a high priority by following up
on the Community Banking Study; pursuing additional

research relating to the continued viability of community
banks; and continuing our review of examination and
rulemaking processes with the goal of identifying additional
ways to make the supervisory process more efficient,
consistent, and transparent, consistent with safe and sound
banking practices. The FDIC will also be commencing a
comprehensive review of all of its regulations, as required
by the Economic Growth and Regulatory Paperwork
Reduction Act, to identify any regulations that are outdated,
unnecessary or unduly burdensome, with a focus on
community banking issues.

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

Consumer Complaints by Product and Issue
The FDIC receives complaints and inquiries by telephone,
fax, mail, email, and online through the FDIC’s Website.
Between January 1, 2013, and December 31, 2013, the FDIC
handled 16,887 written and telephone complaints and
inquiries. Of this total, 8,271 related to FDIC-supervised
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. As
part of the complaint and inquiry handling process, the
FDIC works collaboratively with the other federal financial
regulatory agencies to ensure that complaints and inquiries
are forwarded to the appropriate agencies for response.

MANAGEMENT’S DISCUSSION AND ANALYSIS 35

ANNUAL REPORT 2013
The FDIC carefully analyzes the products and issues
involved in complaints about FDIC-supervised institutions.
The number of complaints received about a specific bank
product and issue can serve as a red flag to prompt further
review of practices that may raise consumer protection or
supervisory concerns.
Between January 1, 2013, and December 31, 2013, the five
most frequently identified consumer product complaints
about FDIC-supervised institutions concerned checking
accounts (18 percent), unsecured credit cards (15 percent),
residential real estate loans (14 percent), bank operations
(9 percent), and business and commercial loans (7
percent). The issues most commonly cited in checking
account complaints related to banks’ overdraft fees and
service charges. Unsecured credit card complaints most
frequently described billing disputes and error resolution.
The largest share of complaints about residential real estate
loans related to loan modifications, while business and
commercial loan complaints usually involved repossession
and foreclosure. Many complaints regarding bank
operations raised issues about bank management and staff.
The FDIC investigated 80 complaints alleging discrimination
between January 1, 2013, and December 31, 2013. The
number of discrimination complaints investigated has
fluctuated over the past several years but averaged
approximately 104 complaints per year between 2007 and
2013. Over this period, 37 percent of these complaints
investigated alleged discrimination based on the race, color,
national origin, or ethnicity of the applicant or borrower.
Twenty-five percent related to discrimination allegations
based on age, 8 percent involved the sex of the borrower or
applicant, and 3 percent concerned a handicap or disability.
Consumer refunds generally involve the financial institution
offering a voluntary credit to the consumer’s account
that is often a direct result of complaint investigations
and identification of a banking error or violation of
law. Between January 1, 2013, and December 31, 2013,
consumers received a total of nearly $5.6 million in
refunds from financial institutions as a result of the FDIC’s
consumer response program.

Public Awareness of Deposit Insurance Coverage
The FDIC provides a significant amount of education for
consumers and the banking industry on the rules for deposit
insurance coverage. An important part of the FDIC’s
deposit insurance mission is to ensure that bankers and
consumers have access to accurate information about the
FDIC’s rules for deposit insurance coverage. The FDIC
has an extensive deposit insurance education program
consisting of seminars for bankers, electronic tools for
estimating deposit insurance coverage, and written and
electronic information targeted to both bankers and
consumers.
The FDIC continued its efforts to educate bankers and
consumers about the rules and requirements for FDIC
insurance coverage. As of December 31, 2013, the FDIC
conducted 15 telephone seminars for bankers on deposit
insurance coverage, reaching an estimated 28,000 bankers
participating at approximately 8,000 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).
As of December 31, 2013, the FDIC received and answered
approximately 94,677 telephone deposit insurance-related
inquiries from consumers and bankers. The FDIC Call
Center addressed 44,541 of these inquiries, and deposit
insurance coverage subject-matter experts handled the
other 50,136. In addition to telephone inquiries about
deposit insurance coverage, the FDIC received 2,499 written
inquiries from consumers and bankers. Of these inquiries,
99 percent received responses within two weeks, as
required by corporate policy.

Center for Financial Research
The Center for Financial Research (CFR) was founded
by the FDIC in 2004 to encourage and support innovative
research on topics that are important to the FDIC’s role as
deposit insurer and bank supervisor. During 2013, the CFR
co-sponsored two major research conferences.
The CFR organized and sponsored the 23rd Annual
Derivatives Securities and Risk Management Conference
jointly with Cornell University’s Johnson Graduate School

36 MANAGEMENT’S DISCUSSION AND ANALYSIS

of Management and the University of Houston’s Bauer
College of Business. The conference was held in March
2013 at the FDIC’s Seidman Center and attracted over
100 researchers from around the world. Conference
presentations included credit default swap markets, term
structure and credit risk, credit and contagion risk, and
commodity markets.
The CFR also organized and sponsored the 13th Annual
Bank Research Conference jointly with the Journal for
Financial Services Research (JFSR), in October 2013. The
conference was attended by more than 120 participants and
included over 20 presentations on topics related to global
banking, financial stability, and the financial crisis.

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 deposits in an FDIC-insured institution due to a failure.
Upon closure of an institution, typically by its chartering
authority—the state for state-chartered institutions and
the Office of the Comptroller of the Currency (OCC) for
national banks and federal savings associations—the FDIC
is appointed receiver and is responsible for resolving the
failed institution.
The FDIC uses a variety of business practices to resolve a
failed institution. These practices are typically associated
with either the resolution process or the receivership
process. Depending on the characteristics of the institution,
the FDIC may recommend several of these methods
to ensure the prompt and smooth payment of deposit
insurance to insured depositors, to minimize the impact
on the DIF, and to speed dividend payments to uninsured
depositors and other creditors of the failed institution.
The resolution process involves evaluating and marketing a
failing institution, soliciting and accepting bids for the sale
of the institution, determining which bid is least costly to
the DIF, and working with the acquiring institution through
the closing process.
To minimize disruption to the local community, the
resolution process must be performed as quickly and
smoothly as possible. There are three basic resolution
methods used by the FDIC: purchase and assumption

transactions, deposit payoffs, and Deposit Insurance
National Bank (DINB) assumptions.
The purchase and assumption (P&A) transaction is the most
commonly used resolution method. In a P&A transaction,
a healthy institution purchases certain assets and assumes
certain liabilities of the failed institution. A variety of
P&A transactions can be used. Since each failing bank
situation is different, P&A transactions provide flexibility
to structure deals that result in the highest value for the
failed institution. For each possible P&A transaction, the
acquirer may either acquire all or only the insured portion
of the deposits. Loss sharing may be offered by the receiver
in connection with a P&A transaction. In a loss-share
transaction, the FDIC as receiver agrees to share losses on
certain assets with the acquirer. The FDIC usually agrees
to absorb a significant portion (for example, 80 percent) of
future losses on assets that have been designated as “shared
loss assets” for a specific period of time (for example, five
to ten years). The economic rationale for these transactions
is that keeping shared loss assets in the banking sector can
produce a better net recovery than the FDIC’s immediate
liquidation of these assets.
Deposit payoffs are only executed if a bid for a P&A
transaction is more costly to the DIF than liquidation
or if no bids are received, in which case the FDIC, in its
corporate capacity, makes sure that the customers of
the failed institution receive the full amount of their
insured deposits.
The Federal Deposit Insurance Act authorizes the FDIC to
establish a DINB to assume the insured deposits of a failed
bank. A DINB is a new national bank with limited life and
powers that allows failed-bank customers a brief period
of time to move their deposit account(s) to other insured
institutions. Though infrequently used, a DINB allows
for a failed bank to be liquidated in an orderly fashion,
minimizing disruption to local communities and
financial markets.
The receivership process involves performing the closing
functions at the failed institution, liquidating any remaining
failed institution assets, and distributing any proceeds
of the liquidation to the FDIC and other creditors of the
receivership. In its role as receiver, the FDIC has used
a wide variety of strategies and tools to manage and sell

MANAGEMENT’S DISCUSSION AND ANALYSIS 37

ANNUAL REPORT 2013
of bank assets. In 2013, securitization sales totaled
$954 million.

retained assets. These include, but are not limited to,
asset sale and/or management agreements, structured
transactions, and securitizations.

Financial Institution Failures
During 2013, there were 24 institution failures, compared to
51 failures in 2012. 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.

As a result of our marketing and collection efforts, the book
value of assets in inventory decreased by $5.7 billion (34
percent) in 2013. The following chart shows the beginning
and ending balances of these assets by asset type.
ASSETS IN INVENTORY BY ASSET TYPE
Dollars in Millions
Asset Type

Commercial Loans

24

51

92

$6.0

$11.6

$34.9

$5.1

$11.0

$31.1

$1.2

$2.8

$7.6

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

	Estimated DIF losses from 2011 and 2012 failures are updated as of
December 31, 2013.

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. For 95 percent of the failed institutions, at
least 90 percent of the book value of marketable assets is
marketed for sale within 90 days of an institution’s failure
for cash sales and within 120 days for structured sales.
Structured sales for 2013 totaled $199 million in unpaid
principal balances from commercial real estate and
acquisition, development, and construction assets acquired
from various receiverships. Cash sales of assets for the year
totaled $260 million in book value. In addition to structured
and cash sales, the FDIC also uses securitizations to dispose

38 MANAGEMENT’S DISCUSSION AND ANALYSIS

274

604

954

1,265

1,145

1,134

365

417

Net Investments in Subsidiaries

2011

Estimated Loss to the DIF

2

99

Owned Assets

Total Deposits of Failed Institutions

1	

69

117

179

7,487

12,120

$11,304

$16,997

Other Assets/Judgments

2012

2

$1,179

Real Estate Mortgages

2013

1

$893

Consumer Loans

FAILURE ACTIVITY 2011–2013
Dollars in Billions

Total Assets of Failed Institutions1

12/31/12

Securities

The following chart provides a comparison of failure
activity over the last three years.

Total Institutions

12/31/13

Structured and Securitized Assets
Total

Receivership Management Activities
The FDIC, as receiver, manages failed banks and their
subsidiaries with the goal of expeditiously winding up
their affairs. The oversight and prompt termination of
receiverships help to preserve value for the uninsured
depositors and other creditors by reducing overhead and
other holding costs. Once the assets of a failed institution
have been sold and the final distribution of any proceeds is
made, the FDIC terminates the receivership. In 2013, the
number of receiverships under management increased by
3 percent, as a result of new failures. The following chart
shows overall receivership activity for the FDIC in 2013.
RECEIVERSHIP ACTIVITY
Active Receiverships as of 12/31/121

466

New Receiverships

24

Receiverships Terminated

10

Active Receiverships as of 12/31/131

480

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

1

Minority and Women Outreach
The FDIC relies on contractors to help meet its mission.
During 2013, the FDIC has awarded 995 contracts. Of these,
282 contracts (28 percent) were awarded to minority- and
women-owned businesses (MWOBs). The total value of
contracts awarded in 2013 was $573 million, of which $199
million (35 percent) was awarded to MWOBs, compared
to 30 percent for all of 2012. In 2013, the FDIC paid $141
million of its total contract payments (25 percent) to
MWOBs. Engagements of minority and women-owned law
firms (MWOLFs) were 18 percent of all legal engagements
for 2013, with total payments of $13 million going to
MWOLFs (13 percent) of all payments to outside counsel,
compared to 13 percent for all of 2012.
In 2013, the FDIC participated in a combined total of
25 business expos, one-on-one matchmaking sessions,
and panel presentations. Dissemination of information
and responses to inquiries regarding FDIC business
opportunities for minorities and women took place at these
sessions. In addition to targeting MWOBs, these efforts
also targeted veteran-owned and small disadvantaged
businesses. Vendors were provided with the FDIC’s
general contracting procedures, prime contractors’
contact information, and possible upcoming solicitations.
Vendors were also encouraged to register with the FDIC’s
Contractors Resource List (a principal database for vendors
interested in doing business with the FDIC).
The FDIC participated in trade events where information
was provided to MWOLFs about opportunities for
legal representation and how to enter into co-counsel
arrangements with majority law firms. In addition to
attending nine bar association conferences during 2013,
the FDIC presented a training workshop for MWOLFs
entitled “Anatomy of a Bank Closing” to provide firms
with ideas for marketing their services to FDIC in-house
attorneys following the resolution of a financial institution.
This workshop was presented at events sponsored by the
National Association of Minority and Women Owned Law
Firms (NAMWOLF) affinity group. These events were
well-attended and received with great enthusiasm. The
FDIC continues to explore new opportunities to partner
with NAMWOLF.

The FDIC also conducted a series of outreach events
to raise awareness, and provide information on how to
purchase Owned Real Estate (ORE) through the FDIC’s
Owned Assets Marketplace and Auctions program.
These events also facilitated interaction between smaller
investors and asset managers, which includes minority
and women-owned (MWO) firms. These included three
informational sessions with 95 participants, and several
workshops/webinars targeting small investors and MWO
investors in the southeast.
In 2013, the FDIC’s Office of Minority and Women Inclusion
(OMWI) participated with other Dodd-Frank Act agency
OMWIs in drafting an interagency policy statement for
assessing the diversity policies and practices of entities
regulated by their agencies. The proposed statement
was posted for comments in the Federal Register on
October 25, 2013. The comment period was extended
45 days and ended on February 7, 2014. The FDIC will
continue efforts in 2014 to fully implement Section 342
of the Dodd-Frank Act.
In 2014, the FDIC will continue to encourage and foster
diversity and inclusion of minorities and women in its
business, procurement activities and outside counsel
engagements, and MWO investors, as well as promote
strong commitment to diversity inclusion within its
workforce and with all financial institutions and law firms
that do business with the FDIC.

Protecting Insured Depositors
The FDIC’s ability to attract healthy institutions to assume
deposits and purchase assets of failed banks and savings
associations at the time of failure minimizes the disruption
to customers and allows assets to be returned to the private
sector immediately. Assets remaining after resolution
are liquidated by the FDIC in an orderly manner, and the
proceeds are used to pay creditors, including depositors
whose accounts exceeded the insurance limit. During 2013,
the FDIC paid dividends of $7 million to depositors whose
accounts exceeded the insurance limit.

Professional Liability and Financial Crimes Recoveries
FDIC staff works to identify potential claims against
directors, officers, fidelity bond insurance carriers,
appraisers, attorneys, accountants, mortgage loan brokers,

MANAGEMENT’S DISCUSSION AND ANALYSIS 39

ANNUAL REPORT 2013
title insurance companies, securities underwriters,
securities issuers, and other professionals who may
have contributed to the failure of an IDI. Once a claim is
determined to be meritorious and cost-effective to pursue,
the FDIC initiates legal action against the appropriate
parties. During 2013, the FDIC recovered more than $674
million from professional liability claims and settlements.
The FDIC also authorized lawsuits related to 42 failed
institutions against 316 individuals for director and officer
liability and authorized 10 other lawsuits for fidelity
bond, liability insurance, attorney malpractice, appraiser
malpractice, and securities law violations for residential
mortgage-backed securities. Eighty-three residential
mortgage malpractice and fraud lawsuits were pending as of
year-end 2013. Also, by year-end 2013, the FDIC’s caseload
included 119 professional liability lawsuits (up from 95 at
year-end 2012) and 796 open investigations (down from
1,343 at year-end 2012).
In addition, as part of the sentencing process for those
convicted of criminal wrongdoing against institutions that
later failed, a court may order a defendant to pay restitution
or to forfeit funds or property to the receivership. The
FDIC, working with the U.S. Department of Justice,
collected $8.4 million from criminal restitution and
forfeiture orders through year-end 2013. As of year-end
2013, there were 4,073 active restitution and forfeiture
orders (down from 4,860 at year-end 2012). This includes
126 orders held by the FSLIC Resolution Fund orders,
(i.e., orders arising out of failed financial institutions that
were in receivership or conservatorship by the Federal
Savings and Loan Insurance Corporation or the Resolution
Trust Corporation).

International Outreach
Throughout 2013, the FDIC played a leading role among
international standard-setting, regulatory, supervisory,
and multi-lateral organizations by supporting the global
development of effective deposit insurance and bank
supervision systems, maintaining public confidence and
financial stability, and promoting effective resolution
regimes as integral components of the financial safety net.
Among the key institutions the FDIC collaborated with were
the Association of Supervisors of Banks of the Americas
(ASBA), the Basel Committee on Banking Supervision

40 MANAGEMENT’S DISCUSSION AND ANALYSIS

(BCBS), the European Forum of Deposit Insurers, the
Financial Stability Board (FSB), the Financial Stability
Institute (FSI), the International Association of Deposit
Insurers (IADI), the International Monetary Fund (IMF),
and the World Bank.
Key to the international collaboration was the ongoing
dialogue among FDIC Chairman Martin J. Gruenberg, other
senior FDIC leaders, and a number of policymakers and
senior financial regulators from the United Kingdom (U.K.)
about the implementation of the Dodd-Frank Act, Basel III,
and how changes in U.S., U.K., and European Union (EU)
financial regulations affect global information sharing,
crisis management, and recovery and resolution activities.
In light of the large number of cross-border operations of
large, complex financial institutions, the primary areas of
discussion and collaboration were the FDIC’s OLA under
Title II of the Dodd-Frank Act, and the importance of crossborder coordination in the event a SIFI begins to experience
financial distress. In addition, FDIC leadership was engaged
in numerous consultations with EU policymakers on
creating a Banking Union in Europe to encompass bank
supervision, resolution, and deposit insurance.
During 2013, the FDIC participated in both Governors
and Heads of Supervision and BCBS meetings. The
FDIC supported work streams, task forces, and policy
development group meetings to participate in BCBS
work on a variety of topics. The FDIC assisted in several
quantitative analyses conducted by the BCBS, including
those with respect to the leverage ratio and liquidity
standards. Additionally, the FDIC participated in BCBS
initiatives related to topics including comparability
and simplicity within the Basel Accord, standards
implementation, accounting, external audits, review of
the trading book, capital planning, liquidity standards, and
credit ratings
and securitizations.

International Association of Deposit Insurers (IADI)
Since its founding in 2002, IADI has grown from 26 founding
members to 71 deposit insurers from 69 jurisdictions. IADI
contributes to the security of individual depositors and
global financial stability and is recognized as the standardsetting body for deposit insurance by all the major public
international financial institutions, including the FSB, the

Group of 20 (G-20), the BCBS, the IMF, and the World Bank.
Chairman Gruenberg served as the President of IADI and
the Chair of its Executive Council from November 2007
to October 2012. FDIC Vice Chairman Thomas Hoenig
currently serves on IADI’s Executive Council.
Under the FDIC’s leadership, IADI has made significant
progress in advancing the 2009 IADI and BCBS Core
Principles for Effective Deposit Insurance Systems
(Core Principles). In February 2011, the FSB approved
the Core Principles and the Core Principles Assessment
Methodology for inclusion in its Compendium of Key
Standards for Sound Financial Systems. During 2013, an
IADI Steering Committee led by the FDIC and the Canada
Deposit Insurance Corporation was established to review
and update the Core Principles. The Steering Committee
plans to submit a revised document to the FSB in July 2014.
To-date, IADI has trained over 250 staff members from
over 70 jurisdictions in conducting self-assessments for
compliance with the Core Principles.
The Core Principles are officially recognized by both the
IMF and World Bank and are now accepted for use in
their Financial Sector Assessment Program (FSAP). This
represents an important milestone in the acceptance
of the role of effective systems of deposit insurance in
maintaining financial stability. The FDIC has also worked
with senior officials at the World Bank and IMF, and
formalized IADI collaboration and support of the deposit
insurance review portion of the FSAP reviews. This support
includes the provision of FDIC member-experts for IMF/
World Bank FSAP Review Teams and the on-going training
of additional IADI experts for subsequent FSAP missions.
Core Principles regional workshops, training sessions,
self-assessment reviews and Steering Committee meetings
were held in Istanbul, Turkey; Manila, Philippines; Basel,
Switzerland; Warsaw, Poland; Buenos Aires, Argentina; and
Mumbai, India during 2013. In addition, the FDIC hosted
the IADI executive training seminar, “Claims Management:
Reimbursement to Insured Depositors” July 16-18, 2013,
at the Seidman Center in Arlington, Virginia. Fifty-three
people from 31 jurisdictions participated in the seminar.
The FDIC continued its global role in supporting the
development of effective deposit insurance and banking
supervision systems through the provision of training,
consultations, and briefings to foreign bank supervisors,

deposit insurance authorities, international financial
institutions, partner U.S. agencies, and other governmental
officials. Many of these consultations were multi-day study
tours that enabled delegations to receive in-depth advice
on a wide range of deposit insurance issues. Officials from
the European Commission, the Ukraine Deposit Guarantee
Fund, the Malaysian Deposit Insurance Corporation, the
Philippine Deposit Insurance Corporation, the Bank of
Thailand, and the Central Bank of Kenya benefited from
these extended consultations.

Association of Supervisors of Banks of
the Americas (ASBA)
The FDIC has been a member of ASBA since its founding
in 1999 and supports ASBA’s mission of promoting
sound banking supervision and regulation throughout
the Western Hemisphere. In recognition of the FDIC’s
enduring leadership in ASBA, the General Assembly elected
FDIC Director of Risk Management Supervision Sandra
Thompson to serve a two-year term as Vice Chairman
of ASBA in November 2011, a position she held until her
departure from the FDIC in early 2013. In this capacity,
Director Thompson presided over meetings of the Training
and Technical Cooperation Committee, the General
Assembly, and the ASBA board.
To assist ASBA in promoting capacity- and leadershipbuilding in the Americas, the FDIC currently chairs
the Association’s Training and Technical Cooperation
Committee, and led two ASBA technical assistance training
missions in 2013, including Financial Institution Analysis in
Panama City, Panama, and Anti-Money Laundering in Santo
Domingo, Dominican Republic. The FDIC continued to
provide subject-matter experts as instructors and speakers
to support ASBA-sponsored training programs, seminars,
and conferences.
In support of building institutional leadership, the
FDIC hosted its second Secondment Program in the
spring of 2013, designed to demonstrate how the FDIC
has successfully implemented best international bank
supervisory practices into its Risk Management and
Supervision programs. Three ASBA members, representing
bank supervisory agencies from the National Commission
of Banks and Insurances of Honduras; the Bank of Jamaica;
and the Superintendent of Banking, Insurance, and Private

MANAGEMENT’S DISCUSSION AND ANALYSIS 41

ANNUAL REPORT 2013
Pension Funds Administrators of Peru, participated in
this intensive eight-week study tour at the various policy
and operational levels within the FDIC at headquarters, a
regional office, and a field office.
In addition, to promote and influence sound bank
supervision policy, and the adoption of international best
practices, the FDIC actively participates in Research
and Guidance Working Groups sponsored by ASBA,
including those on Corporate Governance, Enterprise Risk
Management, and Anti-Money Laundering and Combating
the Financing of Terrorism.

Foreign Visitors Program
The FDIC’s international efforts supporting the development
of effective deposit insurance systems, bank supervisory
practices, and bank resolution regimes continued to grow in
2013. FDIC management and staff met with 533 individuals,
representing over 39 jurisdictions during the year.
Discussions with European authorities were an important
focus of the FDIC’s international efforts this year. Senior
management and subject-matter experts provided advice
and consultation on a number of major European initiatives,
including the Single Supervisory mechanism, the proposed
bank recovery and resolution directive, and the directive on
deposit guarantee schemes.
Questions about the FDIC’s expanded authorities under the
Dodd-Frank Act continued to be a common area of intense
interest, with particular focus on how the FDIC would
resolve a SIFI with cross-border operations. Other major
topics discussed include the FDIC’s management of the DIF,
offsite monitoring methodologies, and corporate training
programs.
During 2013, the FDIC provided subject-matter experts to
participate in seven FSI seminars around the world. The
topics included resolution planning, liquidity risk, stress
testing, bank resolution, SIFI resolution, and supervising
SIFIs. Additionally, 204 individuals representing over 16
jurisdictions attended training programs offered through the
FDIC’s Corporate University.
The FDIC made major strides in strengthening its
relationships with Chinese authorities in 2013. The 5th
U.S.-China Strategic and Economic Dialogue was held
in Washington, D.C. in July. U.S. Treasury Secretary

42 MANAGEMENT’S DISCUSSION AND ANALYSIS

Jacob Lew and Chinese Vice Premier Wang Qishan led
the Economic Track discussions. FDIC Chairman Martin
Gruenberg participated in the meetings alongside a
high-level delegation of Cabinet members, ministers, agency
heads, and senior officials from both countries. Chairman
Gruenberg discussed the importance of a well-developed
deposit insurance framework and bank resolution regime
for financial stability. In October 2013, Chairman Gruenberg
visited China to meet with Chinese officials to discuss
effective deposit insurance and bank resolution systems,
and how the FDIC expects to resolve U.S. SIFIs under
the OLA of the Dodd-Frank Act. While there, Chairman
Gruenberg signed an MOU with the People’s Bank of China
(PBOC) designed to extend their effective international
working relationship in the areas of deposit insurance and
resolution. The purpose of the MOU is to develop and
expand the interaction between the FDIC and the PBOC
and to demonstrate a shared commitment to cooperation
among banking agencies. The MOU also seeks to enhance
cooperation in analyzing cross-border financial institution
recovery and resolution issues, and planning for potential
recovery and resolution scenarios, including appropriate
simulations, contingency planning, and other work designed
to improve preparations to manage troubled institutions
with operations in the United States and the People’s
Republic of China. In November 2013, a senior government
delegation which included representatives from the Chinese
State Council, visited the FDIC for a series of discussions
with FDIC management, subject-matter experts, and
academics about the operations of the FDIC, the benefits of
an effective deposit insurance system and bank resolution
regime, and advice on China’s plans to implement a deposit
insurance system.

Financial Services Volunteer Corps (FSVC)
The FDIC placed two staff members on long-term
assignments with the FSVC during 2013 as part of
a continuing written agreement between the two
organizations. FDIC personnel provided a variety
of consulting and training services focused on risk
management supervision in Angola, Egypt, and Tanzania.
SME credit analysis, credit risk ratings, corporate
governance best practices, risk management organization
and policy, and financial education teaching aids were
among the projects completed for the benefit of central

banks, training institutes, financial business associations,
and commercial banking organizations. Over the past
several years, the FDIC has assisted the FSVC with a wide
variety of programs and projects funded in large part by
the U.S. Agency for International Development to help
strengthen regulatory frameworks and banking systems in
developing countries.

EFFECTIVE MANAGEMENT OF
STRATEGIC RESOURCES
The FDIC recognizes that it must effectively manage
its human, financial, and technological resources to
successfully carry out its mission and meet the performance
goals and targets set forth in its annual performance
plan. The FDIC must align these strategic resources
with its mission and goals and deploy them where they
are most needed to enhance its operational effectiveness
and minimize potential financial risks to the DIF. Major
accomplishments in improving the FDIC’s operational
efficiency and effectiveness during 2013 follow.

Human Capital Management
The FDIC’s human capital management programs
are designed to recruit, develop, reward, and retain
a highly skilled, cross-trained, diverse, and resultsoriented workforce. In 2013, FDIC workforce planning
initiatives shifted emphasis to restructuring the portion
of the workforce that will address the requirements of
Dodd-Frank, especially as it relates to the oversight of SIFIs.
Workforce planning also more acutely addressed the need
to start winding down bank closure activities, based on the
decrease in the number of financial institution failures and
institutions in at-risk categories.

Strategic Workforce Planning and Readiness
In August 2010, the FDIC established its Office of
Complex Financial Institutions (OCFI) in response to the
requirements of the Dodd-Frank Act to supervise and be
prepared to resolve SIFIs. In 2011 and 2012, the FDIC
recruited complex financial institution specialists who had
developed their skills in other public and private sector
organizations to staff the risk management supervision
section of the OCFI and redeployed current FDIC
employees with the requisite skills from other parts of the
agency. In 2013, the FDIC reorganized these staff from

the supervision section of OCFI into the Division of Risk
Management Supervision (RMS), where the vast majority of
bank supervisory expertise resides. This allows the FDIC
to integrate all financial institution risk supervision into
one organization that can deploy and train staff as needed
for both SIFIs and smaller banks. It also allows OCFI to
concentrate on policy and rule development as we continue
to implement Dodd-Frank.
In 2013, the FDIC also addressed workforce planning at
several levels within the agency. Given the number of
senior executives in key leadership positions who are, or
in the next few years will become, eligible to retire from
the federal government, in 2013 the FDIC embarked on
a succession planning effort focused on the Division and
Office Director level. The FDIC is defining the attributes,
skills, and experience needed in each of these positions,
drafting a plan for developing these attributes and skills in
executive managers at the next lower levels, and identifying
potential candidates at those levels.
In addition, as the number of financial institution failures
continued to decline in 2013, the FDIC’s workforce planning
efforts turned to determining the staffing needs of the
agency during “normal” times and beginning to release
some of the temporary staff as their term appointments
expire. Although post-closure activity often continues for
five to seven years after a bank fails, that activity should
slow considerably over the next few years. The FDIC is in
the process of extending term appointments only for the
most critical staff still needed to monitor and process those
actions. The FDIC is also filling vacancies for permanent
staff, principally from among the ranks of these experienced
term employees.
Finally, in 2013, the FDIC also refined its processes for
implementing its “Pathways Programs” as a source of
entry-level employees to maintain a fully-trained staff.
By utilizing the intern program and the recent graduates
program, as well as the normal hiring process, the FDIC
has been able to recruit a well-educated and highly skilled
workforce that can successfully complete the rigorous
three- to four-year training program that leads to a
commission as a bank examiner or resolutions specialist.
By maintaining a steady pipeline of new examiner trainees,
the FDIC intends to keep its future workforce in a steady
state of readiness.

MANAGEMENT’S DISCUSSION AND ANALYSIS 43

ANNUAL REPORT 2013
The FDIC utilizes the Corporate Employee Program (CEP)
to sponsor the development of newly hired Financial
Institution Specialists (FISs) for entry-level positions.
The Program encompasses major FDIC divisions where
newly hired FISs are trained to become a highly effective
workforce. During their first year rotation within the
Program, FISs gain experience and knowledge in the
Division of Depositor and Consumer Protection (DCP),
the Division of Risk Management Supervision (RMS), the
Division of Resolutions and Receiverships (DRR), and
the Division of Insurance and Research (DIR). At the
conclusion of this rotation period, FISs are placed within
RMS, DCP, or DRR, where they continue their career path
to become commissioned examiners or resolutions and
receiverships specialists.
The Corporate Employee Program is an essential part of
the FDIC’s ability to provide continual cross-divisional staff
mobility. As a result, the FDIC is capable of responding
rapidly to shifting priorities and changes in workload while
achieving its corporate mission. Since the CEP’s inception
in 2005, 1,254 individuals have joined the FDIC through
this multi-discipline program and approximately 540
have become commissioned examiners after successfully
completing the program’s requirements.
The FDIC also continues to sponsor the Financial
Management Scholars Program (FMSP) that was launched
in May 2011 as an additional hiring source for CEP.
Participants in the FMSP are summer interns who have
completed their junior year of college. The level of FMSP
participants increased significantly in 2012 and 2013.
This program allows the FDIC to recruit and hire highly
talented and well-qualified students into the CEP earlier
than the agency has been able to in the past, and serves as
an additional venue to recruit talent. For 2014, the FDIC
will continue to augment its workforce by fully utilizing the
capacity of the CEP, including the FMSP.

Employee Learning and Development
The FDIC provides its employees with a broad array of
learning and development opportunities throughout their
career to grow both in technical proficiency and leadership
capacity, supporting career progression and succession
management. In 2013, the FDIC focused on developing and

44 MANAGEMENT’S DISCUSSION AND ANALYSIS

implementing comprehensive curricula for its business lines
to incorporate lessons learned from the financial crisis and
prepare employees to meet new challenges. Such training,
which includes both classroom and online instruction
for maximum flexibility, is a critical part of workforce
and succession planning as more experienced employees
become eligible for retirement.
The FDIC also offers a holistic leadership development
program that combines core courses, electives, and other
enrichment opportunities to develop employees at all
levels. From new employees to new managers, the FDIC
provides employees with targeted leadership development
opportunities that are aligned with key leadership
competencies. The FDIC is also expanding the use of
strategic simulations within its leadership development
program to support corporate readiness and preparedness.
In addition to extensive internally developed and
administered courses, the FDIC also offers its employees
with funds and/or time to participate in external offerings
in support of their career development. The FDIC offers
learning and development opportunities in support of the
FDIC mission for employees at all levels and stages of their
career. In 2013, FDIC employees completed approximately
39,000 sessions in the classroom and online, through
internal and external courses.

Continuity of Operations
In accordance with guidance in Executive Order 12656,
Assignment of Emergency Preparedness Responsibilities;
National Security Presidential Directive-51/Homeland
Security Presidential Directive-20, National Continuity
Policy; and other pertinent Federal Executive Branch
continuity guidance, in 2013, the FDIC implemented a new
Continuity of Operations Plan that addresses two central
priorities:
♦♦ Reduce the potential for loss of life and safeguard the
FDIC workforce.
♦♦ Minimize and mitigate disruptions to FDIC operations
to enable continuous performance of essential FDIC
functions.
The FDIC’s Continuity of Operations Plan meets these
central priorities by:

♦♦ Ensuring continuity facilities are prepared to carry out
essential actions.
♦♦ Facilitating succession to key positions by enunciating
clear policies and procedures.
♦♦ Identifying, safeguarding, and ensuring the availability
of all essential records that support FDIC essential
functions.
♦♦ Protecting facilities, equipment, essential records, and
other assets.
♦♦ Facilitating a timely and orderly transition from
emergency operations to ordinary operations and
resumption of full service to the public.
♦♦ Ensuring and validating readiness through an effective
continuity test, training, and exercise program.
As a result of these efforts, the FDIC has the enhanced
ability to maintain a comprehensive and effective continuity
capability to support the preservation of our form of
government under the Constitution and the continuing
performance of Nation Essential Functions under all
conditions.

♦♦ Internal operational risks associated with both large-scale
IT system development efforts and smaller-scale IT
applications developed by individual Divisions and
Offices.
♦♦ Coordination risks arising from new organizational units
created to manage the range of new functions assigned to
the FDIC by the Dodd-Frank Act.
♦♦ Risks posed to the FDIC and to the financial services
industry by concerted attempts to penetrate, compromise,
and disrupt the information systems that are essential to
effective operation.

Employee Engagement
The FDIC continually evaluates its human capital programs
and strategies to ensure that it remains an employer of
choice and that all of its employees are fully engaged
and aligned with the mission. The FDIC uses the Federal
Employee Viewpoint Survey mandated by Congress
to solicit information from employees and takes an
agency-wide approach to address key issues identified
in the survey. In December 2013, the FDIC received an
award from the Partnership for Public Service for being

Corporate Risk Management
During 2013, the Office of Corporate Risk Management
(OCRM) worked with Divisions and Offices to develop
common agency-wide processes for identifying, managing,
and mitigating risks to the FDIC. The Office supported
both the Enterprise Risk Committee and the Executive
Management Committee in reviewing material risks across
the FDIC, including:
♦♦ Risks to the financial system posed by the current
very low level of interest rates, and from the potential
disruptions which could arise from sudden and sharp
increases in rates.
♦♦ Risks to the deposit insurance system arising from new
products and services with characteristics very different
from traditional time and demand deposits.
♦♦ Risks posed by the analytical models used by both the
financial services industry and the FDIC in identifying and
managing risk.

Chairman Martin J. Gruenberg and Arleas Upton Kea,
Director of the Division of Administration, accepts
the award from Max Stier, President and CEO of the
Partnership for Public Service.

MANAGEMENT’S DISCUSSION AND ANALYSIS 45

ANNUAL REPORT 2013
ranked number one among mid-sized federal agencies on
the Best Places to Work in the Federal Government® list.
Effective leadership is the primary factor driving employee
satisfaction and commitment in the federal workplace,
according to a report by the Partnership for Public Service.
The FDIC’s Workplace Excellence (WE) Program played
an important role in helping the FDIC achieve this
ranking. The WE Program is composed of a nationallevel WE Steering Committee and Division/Office WE
Councils that are focused on maintaining, enhancing,
and institutionalizing a positive workplace environment
throughout the FDIC. In addition to the WE Program,
the FDIC-NTEU Labor-Management Forum serves as
a mechanism for the union and employees to have
pre-decisional input on workplace matters. The WE
Program and Labor Management Forum enhances
communication, provides additional opportunities for
employee input and engagement, and improves employee
empowerment.

Information Technology Management
The FDIC continues to heavily leverage Information
Technology (IT) to achieve its mission and has improved
both the structure of IT leadership and the protection of
sensitive digital information from cyber threats in 2013.

IT Leadership Structural Changes
Because the importance of digital information to FDIC
operations continues to grow, an assessment of IT
leadership structure was completed, and corresponding
improvements were implemented. First, the assessment
concluded that the requirements of the Chief Information
Officer (CIO) role have grown to require a full-time
incumbent in addition to a full time incumbent in the role
of IT division director. The new CIO role, which reports
directly to the Chairman, was separated from the IT division
director role and is responsible for strategic alignment of
IT resources to securely produce objectively measurable
business value. The IT division director, in turn, reports
to the CIO and manages IT operations and development.
Second, the assessment concluded that the information
security and privacy functions continue to grow in
importance and warranted separation under the CIO from

46 MANAGEMENT’S DISCUSSION AND ANALYSIS

the IT division. Both of these changes will help to elevate
and integrate IT and information security management
commensurate with their increasing importance in
achieving the FDIC’s mission.

Sensitive Digital Information Protection
The FDIC continued to enhance its security posture under
a new cross-divisional leadership team to combat the
increased number and sophistication of security threats.
Several specific projects were completed during the
year including an independent assessment of the FDIC’s
IT security, employee training improvements, and the
introduction of simulation exercises to routinely identify
potential enhancements to the FDIC security profile.
An independent assessment of the FDIC’s IT security
was completed and improvements were initiated in
response to the assessment’s findings. The assessment
confirmed the overall high quality of the FDIC’s security
mechanisms but also identified refinements that could be
efficiently implemented, ranging from improvements to
access controls to enhancements of incident monitoring
tools. Several of the recommendations have already been
implemented and the remainder will be completed in 2014.
The new cross-divisional leadership team has also overseen
improvements to employee security training during the year.
Specifically, better monitoring of employee completion of
general security training was implemented and exercises to
help employees identify fraudulent emails were increased.
Also, educational presentations to the leadership team
were completed throughout the year to raise awareness
and understanding of types of threats and preventative
measures, both at the FDIC and at financial institutions.
Simulation exercises contributed significantly to identifying
areas to improve in current policy and procedure relative
to varying threat scenarios. For example, in November
simulations of a successful fraud perpetration on the FDIC
data center were completed that helped identify needed
changes to incident response procedures. These changes
are now being implemented. Additional simulations are
planned for 2014 and on an ongoing basis to continually
evaluate the efficacy of FDIC security and privacy
procedures.

II.

Financial
Highlights

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

DEPOSIT INSURANCE FUND
PERFORMANCE
The FDIC administers the Deposit Insurance Fund (DIF)
and the FSLIC Resolution Fund (FRF), which fulfills
the obligations of the former Federal Savings and Loan
Insurance Corporation (FSLIC) and the former Resolution
Trust Corporation (RTC). The following summarizes the
condition of the DIF. (See the accompanying graphs on
FDIC-Insured Deposits and Insurance Fund Reserve Ratios
on the following page.)
For 2013, the DIF’s comprehensive income totaled $14.2
billion compared to comprehensive income of $21.1 billion
during 2012. This $6.9 billion year-over-year decrease was
primarily due to a $6.0 billion decrease in other revenue
(which is attributable to the 2012 transfer of fees from
TLGP) and a $2.7 billion decrease in assessments; partially
offset by a $1.5 billion decrease in provision for insurance
losses and $156 million net increase from the sale of
Citigroup trust preferred securities (TruPS).

Assessment revenue was $9.7 billion for 2013. The decrease
of $2.7 billion, from $12.4 billion in 2012, was primarily
due to lower assessment rates, resulting from continued
improvements in banks’ CAMELS ratings and financial
condition. In addition, in 2013, the DIF refunded $5.9 billion
in prepaid assessments to the 5,625 insured depository
institutions that had remaining balances. This final payment
marked the end of the prepaid assessment program,
which began with the collection of $45.7 billion in prepaid
assessments on December 30, 2009.
The provision for insurance losses was negative $5.7
billion for 2013, compared to negative $4.2 billion for 2012.
The negative provision for 2013 primarily resulted from
a reduction of $1.0 billion in the contingent liability for
anticipated failures due to the improvement in the financial
condition of troubled institutions and a decrease of $4.8
billion in the estimated losses for institutions that failed in
prior years.
During 2013, to facilitate a sale of the TruPS, the FDIC
exchanged the Citigroup TruPS for $2.420 billion (principal
amount) of Citigroup subordinated notes. The exchange
resulted in an increase of $156 million to the DIF’s 2013
comprehensive income. Subsequently, the subordinated
notes were sold to the institutional fixed income market for
the principal amount of $2.420 billion.

FINANCIAL HIGHLIGHTS 47

ANNUAL REPORT 2013
ESTIMATED DIF INSURED DEPOSITS
8,000
7,000

Dollars in Billions

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

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

DEPOSIT INSURANCE FUND RESERVE RATIOS

Fund Balances as a Percent of Insured Deposits

0.8

0.6

0.4

0.2

0.0

-0.2

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

48 FINANCIAL HIGHLIGHTS

9-13

DEPOSIT INSURANCE FUND SELECTED STATISTICS
Dollars in Millions
 

For the years ended December 31
2013 

2012

2011

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

$10,459

 

$18,522

 

$16,342

 

1,609

 

1,778

 

1,625

 

(5,655)

 

(4,377)

 

(4,541)

 

Net Income

14,505

 

21,121

 

19,257

 

Comprehensive Income

14,233

 

21,131

 

19,179

 

Insurance Fund Balance

$47,191

 

$32,958

 

$11,827

 

0.79

%

0.44

%

0.17

%

6,812

 

7,183

 

7,357

 

467

 

651

 

813

 

$152,687

 

$232,701

 

$319,432

 

Fund as a Percentage of Insured Deposits (reserve ratio)
Selected Statistics
Total DIF-Member Institutions1
Problem Institutions
Total Assets of Problem Institutions
Institution Failures
Total Assets of Failed Institutions in Year2
Number of Active Failed Institution Receiverships
1
2

24

 

51

 

92

 

$6,044

 

$11,617

 

$34,923

 

479

 

463

 

426

 

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

CORPORATE OPERATING BUDGET
The FDIC segregates its corporate operating budget and
expenses into two discrete components: ongoing operations
and receivership funding. The receivership funding
component represents expenses resulting from financial
institution failures and is, therefore, largely driven by
external forces, while the ongoing operations component
accounts for all other operating expenses and tends to be
more controllable and estimable. Corporate operating
expenses totaled $2.3 billion in 2013, including $1.6 billion
in ongoing operations and $0.7 billion in receivership
funding. This represented approximately 91 percent of the
approved budget for ongoing operations and 75 percent of
the approved budget for receivership funding for the year.6
The Board of Directors approved a 2014 Corporate
Operating Budget of approximately $2.4 billion, consisting

of $1.8 billion for ongoing operations and $0.6 billion
for receivership funding. The level of approved ongoing
operations budget for 2014 is approximately $9 million (0.5
percent) higher than the 2013 ongoing operations budget,
while the approved receivership funding budget is roughly
$300 million (33 percent) lower than the 2013 receivership
funding budget.
As in prior years, the 2014 budget was formulated primarily
on the basis of an analysis of projected workload for each of
the FDIC’s three major business lines and its major program
support functions. The most significant factor contributing
to the decrease in the Corporate Operating Budget is the
improving health of the industry and the resultant reduction
in failure-related workload. Although savings in this area
are being realized, the 2014 receivership funding budget
allows for resources for contractor support as well as

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

6

FINANCIAL HIGHLIGHTS 49

ANNUAL REPORT 2013
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. Proposed IT
projects are carefully reviewed to ensure that they are
consistent with the FDIC’s enterprise architecture. The
project approval and monitoring processes also enable the
FDIC to be aware of risks to the major capital investment

projects and facilitate appropriate, timely intervention to
address these risks throughout the development process.
An investment portfolio performance review is provided to
the FDIC’s Board of Directors quarterly.
The FDIC undertook significant capital investments
during the 2004-2013 period, the largest of which was the
expansion of its Virginia Square office facility. Most other
projects involved the development and implementation
of major IT systems. Investment spending totaled $280
million during this period, peaking at $108 million in
2004. Spending for investment projects in 2013 totaled
approximately $19 million. For 2014, investment spending
is estimated at $23 million.

INVESTMENT SPENDING 2004–2013
Dollars in Millions
$120

$100

$80

$60

$40

$20

$0
2004

50 FINANCIAL HIGHLIGHTS

2005

2006

2007

2008

2009

2010

2011

2012

2013

III.

Performance
Results
Summary

SUMMARY OF 2013 PERFORMANCE
RESULTS BY PROGRAM
The FDIC successfully achieved 30 of the 31 annual
performance targets established in its 2013 Annual
Performance Plan. One target regarding the survey of the
unbanked and underbanked was deferred. There were no

instances in which 2013 performance had a material adverse
effect on the successful achievement of the FDIC’s mission
or its strategic goals and objectives regarding its major
program responsibilities.
Additional key accomplishments are noted below.

Program Area

Performance Results

Insurance

♦♦ Updated the FDIC Board of Directors on loss, income, and reserve ratio projections
for the Deposit Insurance Fund at the April and October meetings.
♦♦ Briefed the FDIC Board of Directors in April and October on progress in meeting
the goals of the Restoration Plan. Based upon current fund projections, no changes
to assessment rate schedules were necessary.
♦♦ Completed reviews of the recent accuracy of the contingent loss reserves.
♦♦ Researched and analyzed emerging risks and trends in the banking sector, financial
markets, and the overall economy to identify issues affecting the banking industry
and the Deposit Insurance Fund.
♦♦ Provided policy research and analysis to FDIC leadership in support of the
implementation of financial industry regulation, as well as support for testimony
and speeches.
♦♦ Published economic and banking information and analyses through the FDIC
Quarterly, FDIC Quarterly Banking Profile (QBP), FDIC State Profiles, and the
Center for Financial Research Working Papers.
♦♦ Operated the Electronic Deposit Insurance Estimator (EDIE), which had 458,635
user sessions in 2013.

PERFORMANCE RESULTS SUMMARY 51

ANNUAL REPORT 2013
Program Area

Performance Results

Supervision and
Consumer Protection

♦♦ Participated in the examinations of selected financial institutions, for which the
FDIC is not the primary federal regulator, to assess risk to the DIF and carry out
back-up authorities.
♦♦ Developed processes for reviewing Section 165(d) and IDI plan submissions for
Third Wave Companies.
♦♦ Released a template for annual stress test reporting and documentation for large
institutions.
♦♦ Worked with other federal banking regulators and the Basel Committee on Banking
Supervision to develop proposals to strengthen capital and liquidity requirements.
♦♦ Held an Advisory Committee on Community Banking Meeting focused on IT and
cybersecurity issues affecting community banks, including IT examinations and the
evolving payment system.
♦♦ Developed a community bank cybersecurity exercise.

Receivership
Management

♦♦ Terminated at least 75 percent of new receiverships that are not subject to lossshare agreements, structured sales, or other legal impediments within three years
of the date of failure.
♦♦ Made final decisions for 87 percent of all investigated claim areas that were within
18 months of the institution’s failure date.

52 PERFORMANCE RESULTS SUMMARY

2013 BUDGET AND EXPENDITURES
BY PROGRAM
(Excluding Investments)
The FDIC budget for 2013 totaled $2.7 billion. Budget
amounts were allocated as follows: $240 million, or
9 percent, to Corporate General and Administrative
expenditures; $286 million, or 11 percent, to the Insurance
program; $1.0 billion, or 38 percent, to the Supervision and
Consumer Protection program; and $1.1 billion, or
42 percent, to the Receivership Management program.

Actual expenditures for the year totaled $2.3 billion.
Actual expenditures amounts were allocated as follows:
$182 million, or 8 percent, to Corporate General and
Administrative expenditures; $276 million, or 12 percent, to
the Insurance program; $919 million, or 40 percent, to the
Supervision and Consumer Protection program; and $910
million, or 40 percent, to the Receivership Management
program.

2013 BUDGET AND EXPENDITURES
(including Allocated Support)
Dollars in Millions
$1,200
Budget

Expenditures

$900

$600

$300

$0
Insurance
Program

Supervision and
Consumer Protection
Program

Receivership
Management
Program

General and
Administrative

PERFORMANCE RESULTS SUMMARY 53

ANNUAL REPORT 2013
PERFORMANCE RESULTS BY PROGRAM AND STRATEGIC GOAL
2013 INSURANCE PROGRAM RESULTS
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
#
1

Annual
Performance Goal

Indicator

Target

Results
Achieved.
See pg. 38.

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

Achieved.
See pg. 38.

Depositors do not incur any losses on
insured deposits.

Achieved.
See pg. 38.

No appropriated funds are required to pay
insured depositors.

Achieved.
See pg. 38.

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

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

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

Achieved.
See pg. 51.

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

Achieved.
See pg. 51.

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

Updated fund balance
projections and
recommended changes
to assessment rates.

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

Achieved.
See pg. 51.

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

Achieved.
See pg. 51.

Demonstrated progress in
achieving the goals of the
Restoration Plan.

3

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

Insured depositor losses
resulting from a financial
institution failure.

2

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

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

Achieved.
See pg. 51.

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

54 PERFORMANCE RESULTS SUMMARY

2013 INSURANCE PROGRAM RESULTS (continued)
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

#

Annual
Performance Goal

Indicator

Target

Results

5

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

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.

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

Achieved.
See pgs. 40-42.

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

Achieved.
See pgs. 40-41.

Provision of technical
assistance to foreign
counterparts.

4

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

Achieved.
See pg. 42.

Timeliness of responses
to deposit insurance
coverage inquiries.

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

Achieved.
See pg. 36.

Initiatives to increase
public awareness of
deposit insurance
coverage changes.

Conduct at least 15 telephone or in-person
seminars for bankers on deposit insurance
coverage.

Achieved.
See pg. 36.

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

PERFORMANCE RESULTS SUMMARY 55

ANNUAL REPORT 2013
2013 SUPERVISION AND CONSUMER PROTECTION PROGRAM RESULTS
Strategic Goal: FDIC-insured institutions are safe and sound.
#

Annual
Performance Goal

Indicator

Target

Results

Conduct on-site risk
management examinations
to assess the overall
financial condition,
management practices and
policies, and compliance
with applicable laws and
regulations of FDICsupervised depository
institutions. When
problems are identified,
promptly implement
appropriate corrective
programs, and follow up
to ensure that identified
problems are corrected.

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

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

Achieved
See pg. 19.

Implement appropriate
corrective program where
violations are identified.

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

Achieved
See pg. 20.

2

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

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

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

Achieved.
See pg. 19.

3

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

Completion of review of
comments and impact
analyses of changes to
regulatory capital rules.

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

Achieved.
See pgs. 23-24.

Issuance by the federal
banking agencies of
final regulatory capital
rules to implement
internationally agreed
upon enhancements
to regulatory capital
standards and remove
references to credit
ratings consistent with
DFA.

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

Achieved.
See pgs. 23-24.

Timely completion of
statutory and regulatory
requirements under Title I
of DFA.

Complete, in collaboration with the Federal
Reserve Board and in accordance with
statutory and regulatory time frames, all
required actions associated with the review
of Section 165(d) resolution plans submitted
under Title I of DFA.

Achieved.
See pgs. 15-16.

Input from Systemic
Resolution Advisory
Committee.

Hold at least one meeting of the Systemic
Resolution Advisory Committee to obtain
feedback on resolving systemically important
financial companies.

Achieved.
See pg. 18.

1

4

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

56 PERFORMANCE RESULTS SUMMARY

2013 SUPERVISION AND CONSUMER PROTECTION PROGRAM RESULTS (continued)
Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.
#
5

Annual
Performance Goal

Indicator

Target

Results
Achieved.
See pg. 19.

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

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

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

Implementation of
corrective programs.

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

6

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

Timely responses to
written consumer
complaints and inquiries.

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

Achieved.
See pg. 35.

7

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

Completion of planned
initiatives.

Conduct the third biennial FDIC National
Survey of Unbanked and Underbanked
Households (conducted jointly with the U.S.
Census Bureau).

Achieved.
See pg. 31.

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

Deferred.
See pg. 31.

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

Achieved.
See pgs. 30-31.

Achieved.
See pgs. 20-21.

PERFORMANCE RESULTS SUMMARY 57

ANNUAL REPORT 2013
2013 RECEIVERSHIP MANAGEMENT PROGRAM RESULTS
Strategic Goal: Resolutions are orderly and receiverships are managed effectively.
#

Annual
Performance Goal

Indicator

Target

Results

1

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

Scope of qualified and
interested bidders
solicited.

Contact all known qualified and interested
bidders.

Achieved.
See pg. 38.

2

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

Percentage of the assets
marketed for each failed
institution.

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

Achieved.
See pg. 38.

3

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

Timely termination of new
receiverships.

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

Achieved.
See pg. 52.

4

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

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

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

Achieved.
See pg. 52.

58 PERFORMANCE RESULTS SUMMARY

PRIOR YEARS’ PERFORMANCE RESULTS
Refer to the respective full Annual Report of prior years for more information on performance results for those years. Minor
wording changes may have been made to reflect current goals and targets. (Shaded areas indicate no such target existed for
that respective year.)
INSURANCE PROGRAM RESULTS
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goals and Targets

2012

2011

2010

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

♦♦ Depositors do not incur any losses on insured deposits.

Achieved.

Achieved.

Achieved.

♦♦ No appropriated funds are required to pay insured depositors.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

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

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

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

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

♦♦ Conduct a nationwide conference on the future of community banking during
the first quarter of 2012.

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

Achieved.

Achieved.

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

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

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

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

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

Achieved.

♦♦ Provide updated fund projections to the FDIC Board of Directors by June 30,

Achieved.

2011, and December 31, 2011.

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

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

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

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

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

Achieved.

Achieved.

Achieved.

Achieved.
Achieved.

PERFORMANCE RESULTS SUMMARY 59

ANNUAL REPORT 2013
INSURANCE PROGRAM RESULTS (continued)
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goals and Targets

2012

2011

2010

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

♦♦ Provide updated fund projections to the FDIC Board of Directors by June 30,

Achieved.

2010, and December 31, 2010.

♦♦ Recommend deposit insurance assessment rates for the DIF to the FDIC Board

Achieved.

as necessary.

Achieved.

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

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

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

Achieved.

Achieved.

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; and in supporting
robust international deposit insurance and banking systems.

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

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

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

Achieved.
Achieved.

Achieved.

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

Achieved.

deposit insurers.

♦♦ Foster strong relationships with international banking regulators and

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

♦♦ Develop methodology and lead the International Association of Deposit

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

60 PERFORMANCE RESULTS SUMMARY

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

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

2012

2011

2010

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

Achieved.

conducted on schedule.

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

Achieved.

Achieved.

Achieved.

Achieved.

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

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

3.	 Complete the transfer of personnel and supervisory responsibility for statechartered thrifts from the Office of Thrift Supervision to the FDIC in accordance
with approved plans and statutory requirements.

♦♦ Complete the transfer of supervisory responsibility for state-chartered thrifts by

Achieved.

July 21, 2011.

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

Achieved.

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

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

♦♦ One hundred percent of required on-site visits are conducted within six months

Achieved.

of completion of the prior examination to confirm that the institution is fulfilling
the requirements of the corrective program.

♦♦ One hundred percent of follow-up examinations are conducted within 12

Achieved.

months of completion of the prior examination to confirm that identified
problems have been corrected.

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

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

Achieved.

Achieved.

Achieved

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

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

Not
Achieved.

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

Not
Achieved.

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

PERFORMANCE RESULTS SUMMARY 61

ANNUAL REPORT 2013
SUPERVISION AND CONSUMER PROTECTION PROGRAM RESULTS (Continued)
Strategic Goal: FDIC-supervised institutions are safe and sound.
Annual Performance Goals and Targets
♦♦ Complete by July 31, 2012, a final rule on the Market Risk Amendment,

including finalizing alternatives to the use of credit ratings in accordance with
DFA requirements.

2012

2011

2010

Achieved.

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

Achieved.

organizations.

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

Deferred.

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

Deferred.

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

Deferred.

requirements.

♦♦ Complete by December 31, 2011, the final rule on the Market Risk

Amendment (includes finalizing alternatives to the use of credit ratings in
accordance with DFA requirements).

Deferred.

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

Deferred.

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

♦♦ Complete by December 31, 2010, the rulemaking for implementing the

Deferred.

Standardized Approach for an appropriate subset of U.S. banks.

♦♦ Complete by December 31, 2010, the rulemaking for amending the floors for

Not
Achieved.

banks that calculate their risk-based capital requirements under the Advanced
Approaches Capital rule to ensure capital requirements meet safety-andsoundness objectives.

♦♦ Complete by December 31, 2010, the rulemaking for implementing revisions

Deferred.

to the Market Risk Amendment of 1996.

♦♦ Complete by December 31, 2010, the rulemaking for implementing revisions

Deferred.

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

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

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

regulations and related policy guidance on proprietary trading and other
investment restrictions (also known as the Volcker Rule).

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

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

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

regulations and related policy guidance on capital and margin and other
requirements for OTC derivatives.

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

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

62 PERFORMANCE RESULTS SUMMARY

Achieved.

Achieved.

Achieved.

Achieved.

SUPERVISION AND CONSUMER PROTECTION PROGRAM RESULTS (Continued)
Strategic Goal: FDIC-supervised institutions are safe and sound.
Annual Performance Goals and Targets
♦♦ Take all steps necessary to facilitate timely issuance of implementing

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

♦♦ Monitor risk within and across large, complex firms to assess the potential

need for, and obtain the information that would be required to carry out, if
necessary, an FDIC resolution of the institution.

2012

2011

2010

Achieved.

Achieved.

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

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

♦♦ Complete, with the FRB and in accordance with prescribed time frames, the

review of holding company and IDI resolution plans submitted under Section
165(d) of DFA.

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

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

Achieved.

Achieved.

Achieved.

Achieved.

9.	 Facilitate more effective regulatory compliance so as to reduce regulatory burden
on the banking industry, where appropriate, while maintaining the independence
and integrity of the FDIC’s risk management and consumer compliance
supervisory programs.

♦♦ Issue by March 31, 2011, a revised corporate directive on the issuance of

Financial Institution Letters (FILs) that includes a requirement that all FILs
contain an informative section as to their applicability to smaller institutions
(total assets under $1 billion).

Achieved.

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

information requests to the industry and submit a report to FDIC management
with recommendations on improving efficiency and ease of use, including
a scheduled plan for implementing these revisions. Carry out approved
recommendations in accordance with the plan.

Achieved.

PERFORMANCE RESULTS SUMMARY 63

ANNUAL REPORT 2013
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

2012

2011

2010

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

♦♦ Conduct 100 percent of required examinations within the time frames

Achieved.

established by FDIC policy.

Achieved.

♦♦ One hundred percent of required examinations are conducted on schedule.
2.	 Take prompt and effective supervisory action to monitor and address problems
identified during compliance examinations of FDIC-supervised institutions that
received an overall 3, 4, or 5 rating for compliance with consumer protection and
fair lending laws. Ensure that each institution is fulfilling the requirements of any
corrective program that has been implemented and that the actions taken are
effectively addressing the underlying concerns identified during the examination.

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

Achieved.

♦♦ One hundred percent of follow-up examinations or visitations are conducted

Achieved.

within 12 months from the date of a formal enforcement action to confirm
compliance with the prescribed enforcement action.

♦♦ For all institutions that are assigned a compliance rating of 3, 4, or 5, conduct
follow-up examinations or on-site visits within 12 months to ensure that each
institution is fulfilling the requirements of any corrective programs that have
been implemented and that the actions taken are effectively addressing the
underlying concerns identified during the examination.

Achieved.

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

♦♦ Complete by July 21, 2011, the transfer of supervisory responsibility from the

Achieved.

FDIC to the CFPB.

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

Achieved.

in accordance with established time frames.

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

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

Achieved.

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

♦♦ Respond to 95 percent of written consumer complaints and inquiries within

time frames established by policy, with all complaints and inquiries receiving at
least an initial acknowledgment within two weeks.

Achieved.

Achieved.

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

♦♦ Launch the FDIC Model Safe Accounts Pilot, begin data collection on the
accounts from banks, and start reporting on results of the pilot.

64 PERFORMANCE RESULTS SUMMARY

Achieved.

Achieved.

SUPERVISION AND CONSUMER PROTECTION PROGRAM RESULTS (Continued)
Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.
Annual Performance Goals and Targets

2012

2011

2010

♦♦ Continue to promote the results of the FDIC Small-Dollar Loan Pilot and

research opportunities for bringing small-dollar lending programs to scale,
including exploring a test of employer-based lending using the federal
workforce.

Achieved.

♦♦ Engage in efforts to support safe mortgage lending in low- and moderate-

Achieved.

income communities.

♦♦ Facilitate completion of final recommendation on the initiatives identified in

Achieved.

the Advisory Committee’s strategic plan.

♦♦ 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.

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

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

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

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

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

Achieved.

Achieved.
Achieved.

PERFORMANCE RESULTS SUMMARY 65

ANNUAL REPORT 2013
RECEIVERSHIP MANAGEMENT PROGRAM RESULTS
Strategic Goal: Resolutions are orderly and receiverships are managed effectively.
Annual Performance Goals and Targets

2012

2011

2010

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

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

♦♦ Contact all known qualified and interested bidders.
2.	 Value, manage, and market assets of failed institutions and their subsidiaries in a
timely manner to maximize net return.

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

♦♦ Implement enhanced reporting capabilities from the Automated Procurement

Achieved.

System.

♦♦ Ensure that all newly designated oversight managers and technical

Achieved.

monitors receive training in advance of performing contract administration
responsibilities.

♦♦ Optimize the effectiveness of oversight managers and technical monitors by

Achieved.

restructuring work assignments, providing enhanced technical support, and
improving supervision.

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

♦♦ Terminate within three years of the date of failure, at least 75 percent of new

receiverships that are not subject to loss-share agreements, structured sales, or
other legal impediments.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

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

♦♦ For 80 percent of all claim areas, a decision is made to close or pursue

professional liability claims within 18 months of the failure date of an insured
depository institution.

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

♦♦ Complete reviews of 100 percent of the loss-share and LLC agreements active
as of December 31, 2011, and December 31, 2010, to ensure full compliance
with the terms and conditions of the agreements.

♦♦ Review the final report and implement an action plan to address the report’s

finding and recommendations for 80 percent of the loss-share reviews and 70
percent of the LLC reviews.

Achieved.

Achieved.

Achieved.

♦♦ Review the final report and implement an action plan to address the report’s

finding and recommendations for 75 percent of the loss-share reviews and 50
percent of the LLC reviews, including all reviews of agreements totaling more
than $1.0 billion (gross book value).

66 PERFORMANCE RESULTS SUMMARY

Achieved.

I  V.

Financial
Section

FINANCIAL SECTION

67

ANNUAL REPORT 2013
DEPOSIT INSURANCE FUND (DIF)
FEDERAL DEPOSIT INSURANCE CORPORATION
DEPOSIT INSURANCE FUND BALANCE SHEET AT DECEMBER 31
Dollars in Thousands
2013

2012

Assets
Cash and cash equivalents

$3,543,270

$3,100,361

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

38,510,500

34,868,688

Trust preferred securities (Note 10)
Assessments receivable, net (Note 8)
Interest receivable on investments and other assets, net
Receivables from resolutions, net (Note 4)
Property and equipment, net (Note 5)
Total Assets

0

2,263,983

2,227,735

1,006,852

511,428

433,592

16,344,991

23,119,554

377,223

392,880

$61,515,147

$65,185,910

$300,575

$349,620

0

1,576,417

Liabilities
Accounts payable and other liabilities
Unearned revenue - prepaid assessments (Note 8)
Refunds of prepaid assessments (Note 8)
Liabilities due to resolutions (Note 6)
Postretirement benefit liability (Note 13)

0

5,675,199

12,625,982

21,173,785

193,591

224,225

1,198,960

3,220,697

Contingent liabilities for:
	

Anticipated failure of insured institutions (Note 7)

	

Litigation losses (Note 7)

Total Liabilities

5,200

8,200

14,324,308

32,228,143

47,186,974

32,682,237

Commitments and off-balance-sheet exposure (Note 14)
Fund Balance
Accumulated Net Income
Accumulated Other Comprehensive Income
Unrealized gain on U.S. Treasury investments, net (Note 3)
Unrealized postretirement benefit loss (Note 13)
Unrealized gain on trust preferred securities (Note 10)
Total Accumulated Other Comprehensive Income
Total Fund Balance
Total Liabilities and Fund Balance
The accompanying notes are an integral part of these financial statements.

68 FINANCIAL SECTION

20,215

33,819

(16,350)

(60,448)

0

302,159

3,865

275,530

47,190,839

32,957,767

$61,515,147

$65,185,910

DEPOSIT INSURANCE FUND (DIF)
FEDERAL DEPOSIT INSURANCE CORPORATION
DEPOSIT INSURANCE FUND STATEMENT OF INCOME AND FUND BALANCE
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2013

2012

Revenue
Assessments (Note 8)
Interest on U.S. Treasury obligations
Systemic risk revenue
Other revenue (Note 9)
Gain on sale of trust preferred securities (Note 10)
Total Revenue

$9,734,173

$12,397,022

103,363

159,214

0

(161,135)

163,154

6,127,211

458,176

0

10,458,866

18,522,312

1,608,717

1,777,513

0

(161,135)

(5,659,388)

(4,222,595)

Expenses and Losses
Operating expenses (Note 11)
Systemic risk expenses
Provision for insurance losses (Note 12)

4,799

7,282

Total Expenses and Losses

Insurance and other expenses

(4,045,872)

(2,598,935)

Net Income

14,504,738

21,121,247

(13,604)

(13,878)

Other Comprehensive Income
Unrealized loss on U.S. Treasury investments, net
Unrealized postretirement benefit gain (loss) (Note 13)

44,097

(26,886)

(302,159)

50,752

(271,666)

9,988

Comprehensive Income

14,233,072

21,131,235

Fund Balance - Beginning

32,957,767

11,826,532

$47,190,839

$32,957,767

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

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

FINANCIAL SECTION 69

ANNUAL REPORT 2013
DEPOSIT INSURANCE FUND (DIF)
FEDERAL DEPOSIT INSURANCE CORPORATION
DEPOSIT INSURANCE FUND STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2013

2012

$7,111,902

$1,525,414

1,080,157

1,088,697

Operating Activities
Provided by:
Assessments
Interest on U.S. Treasury obligations
Dividends and interest on trust preferred securities

154,393

360,754

5,696,453

4,937,738

79,773

69,285

Operating expenses

(1,558,229)

(1,703,278)

Disbursements for financial institution resolutions

(3,857,214)

(8,998,978)

Refunds of prepaid assessments (Note 8)

Recoveries from financial institution resolutions
Miscellaneous receipts
Used by:

(5,850,135)

0

Temporary Liquidity Guarantee Program debt obligations

0

(117,708)

Dividends and interest on trust preferred securities transferred to U.S. Treasury

0

(182,754)

Miscellaneous disbursements

(17,228)

(15,030)

2,839,872

(3,035,860)

27,704,523

32,132,623

0

2,554,781

2,420,000

0

Purchase of property and equipment

(57,390)

(67,344)

Purchase of U.S. Treasury obligations

(32,464,096)

(33,388,751)

(2,396,963)

1,231,309

Net Cash Provided (Used) by Operating Activities
Investing Activities
Provided by:
Maturity of U.S. Treasury obligations
Sale of U.S. Treasury obligations (Note 3)
Sale of trust preferred securities (Note 10)
Used by:

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

70 FINANCIAL SECTION

442,909

(1,804,551)

3,100,361

4,904,912

$3,543,270

$3,100,361

Notes to the Financial Statements
DEPOSIT INSURANCE FUND
December 31, 2013 and 2012
1.	 OPERATIONS OF THE DEPOSIT
INSURANCE FUND

determination has been made as set forth in section 203 of
the Dodd-Frank Act).

OVERVIEW

The Dodd-Frank Act (Public Law 111-203) granted the
FDIC authority to establish a widely available program
to guarantee obligations of solvent insured depository
institutions (IDIs) or solvent depository institution
holding companies (including affiliates) upon the systemic
determination of a liquidity event during times of severe
economic distress. The program would not be funded
by the DIF but rather by fees and assessments paid by
all participants in the program. If fees are insufficient to
cover losses or expenses, the FDIC must impose a special
assessment on participants as necessary to cover the
shortfall. Any excess funds at the end of the liquidity event
program would be deposited in the General Fund of the
Treasury.

The Federal Deposit Insurance Corporation (FDIC) is the
independent deposit insurance agency created by Congress
in 1933 to maintain stability and public confidence in
the nation’s banking system. Provisions that govern the
operations of the FDIC are generally found in the Federal
Deposit Insurance (FDI) Act, as amended (12 U.S.C. 1811,
et seq). In carrying out the purposes of the FDI Act,
the FDIC, as administrator of the Deposit Insurance
Fund (DIF), insures the deposits of banks and savings
associations (insured depository institutions) from loss due
to institution failures. In cooperation with other federal and
state agencies, the FDIC promotes the safety and soundness
of insured depository institutions by identifying, monitoring
and addressing risks to the DIF. Commercial banks, savings
banks and savings associations (known as “thrifts”) are
supervised by either the FDIC, the Office of the Comptroller
of the Currency, or the Federal Reserve Board.
The FDIC is also the administrator of the FSLIC Resolution
Fund (FRF). The FRF is a resolution fund responsible for
the sale of remaining assets and satisfaction of liabilities
associated with the former Federal Savings and Loan
Insurance Corporation (FSLIC) and the former Resolution
Trust Corporation. The DIF and the FRF are maintained
separately by the FDIC to support their respective
functions.
Pursuant to the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (Dodd-Frank Act), the
FDIC is the manager of the Orderly Liquidation Fund
(OLF). Established as a separate fund in the U.S. Treasury
(Treasury), the OLF is inactive and unfunded until the FDIC
is appointed as receiver for a covered financial company (a
failing financial company, such as a bank holding company
or nonbank financial company for which a systemic risk

The Dodd-Frank Act limits the FDIC’s systemic risk
determination authority under section 13 of the FDI Act to
IDIs for which the FDIC has been appointed receiver. Prior
to this change, the authority permitted open bank assistance
and the creation of the Temporary Liquidity Guarantee
Program (TLGP) that expired on December 31, 2012
(see Note 9).
The Dodd-Frank Act also created the Financial Stability
Oversight Council (FSOC) of which the Chairman of the
FDIC is a member and expanded the FDIC’s responsibilities
to include supervisory review of resolution plans (known
as living wills) and backup examination authority for
systemically important bank holding companies and
nonbank financial companies. The living wills provide
for an entity’s rapid and orderly resolution in the event of
material financial distress or failure.

OPERATIONS OF THE DIF
The primary purposes of the DIF are to 1) insure the
deposits and protect the depositors of IDIs and 2) resolve
failed IDIs upon appointment of the FDIC as receiver in a

FINANCIAL SECTION 71

ANNUAL REPORT 2013
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 IDIs. The
FDIC has borrowing authority of $100 billion from the
Treasury and a Note Purchase Agreement with the FFB, not
to exceed $100 billion, to enhance the DIF’s ability to fund
deposit insurance.
A statutory formula, known as the Maximum Obligation
Limitation (MOL), limits the amount of obligations the
DIF can incur to the sum of its cash, 90 percent of the fair
market value of other assets, and the amount authorized to
be borrowed from the Treasury. The MOL for the DIF was
$146.0 billion and $132.9 billion as of December 31, 2013 and
2012, respectively.

OPERATIONS OF RESOLUTION ENTITIES
The FDIC is responsible for managing and disposing of
the assets of failed institutions in an orderly and efficient
manner. The assets held by receiverships, pass-through
conservatorships, and bridge institutions (collectively,
resolution entities), and the claims against them, are
accounted for separately from the DIF assets and liabilities
to ensure that proceeds from these entities are distributed
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 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

72 FINANCIAL SECTION

Accounting Standards Board, the FDIC prepares financial
statements in accordance with standards promulgated
by the Financial Accounting Standards Board (FASB).
These statements do not include reporting for assets and
liabilities of resolution entities because these entities are
legally separate and distinct, and the DIF does not have any
ownership or beneficial interests in them. Periodic and final
accounting reports of resolution entities are furnished to
courts, supervisory authorities, and others upon request.

USE OF ESTIMATES
Management makes estimates and assumptions that affect
the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these
estimates. Where it is reasonably possible that changes
in estimates will cause a material change in the financial
statements in the near term, the nature and extent of
such potential changes in estimates have been disclosed.
The more significant estimates include the assessments
receivable and associated revenue; the allowance for loss
on receivables from resolutions (including shared-loss
agreements); guarantee obligations for structured
transactions; the postretirement benefit obligation; and
the estimated losses for anticipated failures, litigation, and
representations and indemnifications.

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

INVESTMENT IN U.S. TREASURY OBLIGATIONS
The DIF funds are required to be invested in obligations
of the United States or in obligations guaranteed as to
principal and interest by the United States. The Secretary
of the Treasury must approve all such investments in excess
of $100,000 and has granted the FDIC approval to invest
the DIF funds only in U.S. Treasury obligations that are
purchased or sold exclusively through the Bureau of the
Fiscal Service’s Government Account Series program.
The DIF’s investments in U.S. Treasury obligations are
classified as available-for-sale. Securities designated as
available-for-sale are shown at fair value. Unrealized gains
and losses are reported as other comprehensive income.
Realized gains and losses are included in the Statement of

Income and Fund Balance as components of net income.
Income on securities is calculated and recorded on a daily
basis using the effective interest or straight-line method
depending on the maturity of the security.

REVENUE RECOGNITION FOR ASSESSMENTS
Assessment revenue is recognized for the quarterly period
of insurance coverage based on an estimate. The estimate
is derived from an institution’s risk-based assessment rate
and assessment base for the prior quarter adjusted for
the current quarter’s available assessment credits, certain
changes in supervisory examination ratings for larger
institutions, as well as modest assessment base growth
and average assessment rate adjustment factors. At the
subsequent quarter-end, the estimated revenue amounts are
adjusted when actual assessments for the covered period
are determined for each institution (see Note 8).

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

REPORTING ON VARIABLE INTEREST ENTITIES
FDIC receiverships engaged in structured transactions,
some of which resulted in the issuance of note obligations
that were guaranteed by the FDIC in its corporate capacity
(see Note 7, Contingent Liabilities for: FDIC Guaranteed
Debt of Structured Transactions). As the guarantor of note
obligations for several structured transactions, the FDIC
in its corporate capacity is the holder of a variable interest
in a number of variable interest entities (VIEs). The FDIC
conducts a qualitative assessment of its relationship with
each VIE as required by Accounting Standards Codification
(ASC) Topic 810, Consolidation. These assessments

are conducted to determine if the FDIC in its corporate
capacity has 1) power to direct the activities that most
significantly impact the economic performance of the VIE
and 2) an obligation to absorb losses of the VIE or the right
to receive benefits from the VIE that could potentially be
significant to the VIE. When a variable interest holder
has met both of these characteristics, the enterprise is
considered the primary beneficiary and must consolidate
the VIE. In accordance with the provisions of ASC 810, an
assessment of the terms of the legal agreement for each
VIE was conducted to determine whether any of the terms
had been activated or modified in a manner which would
cause the FDIC in its corporate capacity to be characterized
as a primary beneficiary. In making that determination,
consideration was given to which, if any, activities were
significant to each VIE. Often, the right to service collateral,
to liquidate collateral, or to unilaterally dissolve the limited
liability company (LLC) or trust was determined to be the
most significant activity. In other cases, it was determined
that the structured transactions did not include such
significant activities and that the design of the entity was the
best indicator of which party was the primary beneficiary.
The results of each analysis identified a party other than the
FDIC in its corporate capacity as the primary beneficiary.
The conclusion of these analyses was that the FDIC in
its corporate capacity has not engaged in any activity
that would cause the FDIC in its corporate capacity to
be characterized as a primary beneficiary to any VIE
with which it was involved as of December 31, 2013 and
2012. Therefore, consolidation is not required for the
2013 and 2012 DIF financial statements. In the future, the
FDIC in its corporate capacity may become the primary
beneficiary upon the activation of provisional contract
rights that extend to the Corporation if payments are made
on guarantee claims. Ongoing analyses will be required in
order to monitor consolidation implications under ASC 810.
The FDIC’s involvement with VIEs, in its corporate capacity,
is fully described in Note 7.

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

FINANCIAL SECTION 73

ANNUAL REPORT 2013
PRESENTATION OF STATEMENT OF CASH FLOWS
To enhance cash flow information for operating activities of
the DIF, in 2013, the FDIC changed the method of presenting
the DIF’s Statement of Cash Flows from the indirect method
to the direct method, which is preferable and is encouraged
by the Financial Accounting Standards Board. Accordingly,
the DIF’s 2012 Statement of Cash Flows has been
conformed to this method of presentation for comparative
purposes. For 2013 and 2012, the reconciliation of net
income to net cash from operating activities is presented in
Note 16.

DISCLOSURE ABOUT RECENT RELEVANT
ACCOUNTING PRONOUNCEMENTS
Recent accounting pronouncements have been deemed
not applicable or material to the financial statements as
presented.

74 FINANCIAL SECTION

3.	 INVESTMENT IN U.S. TREASURY
OBLIGATIONS
As of December 31, 2013 and 2012, investments in U.S.
Treasury obligations, were $38.5 billion and $34.9 billion,
respectively. As of December 31, 2013 and 2012, the DIF
held $4.6 billion and $5.3 billion, respectively, of Treasury
Inflation-Protected Securities (TIPS), which are indexed to
increases or decreases in the Consumer Price Index for All
Urban Consumers (CPI-U).
In 2012, the FDIC sold securities designated as availablefor-sale for total proceeds of $2.6 billion. The gross realized
gains and losses on these sales were $878 thousand and
$241 thousand, respectively, which resulted in a total net
gain of $637 thousand. The cost of these securities sold
was determined based on specific identification. Since
these securities were purchased on behalf of the TLGP, the
realized gain was recognized in the “Systemic risk revenue”
line item on the Statement of Income and Fund Balance
(see Note 9).

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

Maturity

Yield at
Purchase1

Face
Value

Net
Carrying
Amount

Unrealized
Holding
Gains

Unrealized
Holding
Losses

Fair
Value

U.S. Treasury notes and bonds
Within 1 year

0.23%

$14,300,000

$14,552,418

$4,167

$(31)

$14,556,554

After 1 year
through 5 years

0.70%

18,351,209

19,382,202

24,408

(14,013)

19,392,597

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

-0.86%

2,150,000

2,464,330

1,050

(1,130)

2,464,250

After 1 year
through 5 years

-0.99%

1,800,000

2,091,335

5,788

(24)

2,097,099

$36,601,209

$38,490,285

$35,413

$(15,198)2

$38,510,500

Total
1

	For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a longterm annual inflation assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.0 percent, based on figures issued by the
Congressional Budget Office and Blue Chip Economic Indicators in early 2013.

2

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

TOTAL INVESTMENT IN U.S. TREASURY OBLIGATIONS AT DECEMBER 31, 2012
Dollars in Thousands

Maturity

Yield at
Purchase1

Face
Value

Net
Carrying
Amount

Unrealized
Holding
Gains

Unrealized
Holding
Losses

Fair
Value

U.S. Treasury notes and bonds
Within 1 year

0.34%

$24,800,000

$25,228,393

$19,871

$0

$25,248,264

After 1 year
through 5 years

0.32%

4,050,000

4,341,814

4,569

0

4,346,383

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

-0.86%

1,650,000

1,813,291

0

(9,788)2

1,803,503

After 1 year
through 5 years

-0.87%

2,900,000

3,451,371

19,167

0

3,470,538

$33,400,000

$34,834,869

$43,607

$(9,788)

$34,868,688

Total
1

For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a longterm annual inflation assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.0 percent, based on figures issued by the
Congressional Budget Office and Blue Chip Economic Indicators in early 2012. 					

2

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

FINANCIAL SECTION 75

ANNUAL REPORT 2013
4.	 RECEIVABLES FROM
RESOLUTIONS, NET
RECEIVABLES FROM RESOLUTIONS,
NET AT DECEMBER 31
Dollars in Thousands
2013

2012

$106,291,226

$116,940,999

Allowance for losses

(89,946,235)

(93,821,445)

Total

$16,344,991

$23,119,554

Receivables from
closed banks

The receivables from resolutions result from payments
made by the DIF to cover obligations to insured depositors
(subrogated claims), advances to resolution entities for
working capital, and administrative expenses paid on
behalf of resolution entities. Any related allowance for
loss represents the difference between the funds advanced
and/or obligations incurred and the expected repayment.
Estimated future payments on losses incurred on assets
sold to an acquiring institution under a shared-loss
agreement (SLA) are factored into the computation of the
expected repayment. Assets held by DIF resolution entities
(including structured transaction-related assets; see Note 7)
are the main source of repayment of the DIF’s receivables
from resolutions.
As of December 31, 2013, there were 479 active
receiverships, including 24 established in 2013. As of
December 31, 2013 and 2012, DIF resolution entities held
assets with a book value of $38.4 billion and $53.5 billion,
respectively (including $27.1 billion and $36.5 billion,
respectively, of cash, investments, receivables due from
the DIF, and other receivables). Ninety-nine percent of
the current asset book value of $38.4 billion is held by
resolution entities established since the beginning of 2008.
Estimated cash recoveries from the management and
disposition of assets that are used to determine the
allowance for losses are based on asset recovery rates from
several sources including actual or pending institutionspecific asset disposition data, failed institution-specific
asset valuation data, aggregate asset valuation data on
several recently failed or troubled institutions, sampled
asset valuation data, and empirical asset recovery data
based on failures as far back as 1990. Methodologies for
determining the asset recovery rates incorporate estimating

76 FINANCIAL SECTION

future cash recoveries, net of applicable liquidation cost
estimates, and discounting based on market-based risk
factors applicable to a given asset’s type and quality. The
resulting estimated cash recoveries are then used to derive
the allowance for loss on the receivables from these
resolutions.
For failed institutions resolved using a whole bank purchase
and assumption transaction with an accompanying SLA, the
projected future shared-loss payments and recoveries on
the covered assets sold to the acquiring institution under
the agreement are considered in determining the allowance
for loss on the receivables from these resolutions. The
shared-loss cost projections are based on the covered
assets’ intrinsic value which is determined using financial
models that consider the quality, condition and type of
covered assets, current and future market conditions, risk
factors and estimated asset holding periods. For year-end
2013 financial reporting, the shared-loss cost estimates
were updated for the majority (98% or 285) of the 290
active SLAs; the remaining 5 were based on recent loss
estimates. The updated shared-loss cost projections for the
larger agreements were primarily based on new third-party
valuations estimating the cumulative loss of covered
assets. The remaining agreements were stratified by either
receivership age or geographic location. A random sample
of institutions within each stratum was selected for new
third-party loss estimations, and valuation results from the
sample institutions were aggregated and extrapolated to
institutions within the like stratum based on asset type and
performance status.
Note that estimated asset recoveries are regularly evaluated
during the year, but remain subject to uncertainties because
of potential changes in economic and market conditions.
Continuing economic uncertainties could cause the
DIF’s actual recoveries to vary significantly from current
estimates.

WHOLE BANK PURCHASE AND ASSUMPTION
TRANSACTIONS WITH SHARED-LOSS AGREEMENTS
Since the beginning of 2008, the FDIC resolved 304 failures
using whole bank purchase and assumption resolution
transactions with accompanying SLAs on total assets
of $216.6 billion purchased by the financial institution
acquirers. The acquirer typically assumes all of the

deposits and purchases essentially all of the assets of a
failed institution. The majority of the commercial and
residential loan assets are purchased under an SLA, where
the FDIC agrees to share in future losses and recoveries
experienced by the acquirer on those assets covered under
the agreement. SLAs are used by the FDIC to keep assets
in the private sector and to minimize disruptions to loan
customers.
Losses on the covered assets are shared between the
acquirer and the FDIC in its receivership capacity of the
failed institution when losses occur through the sale,
foreclosure, loan modification, or write-down of loans in
accordance with the terms of the SLA. The majority of
the agreements cover a five- to 10-year period with the
receiver covering 80 percent of the losses incurred by
the acquirer and the acquiring bank covering 20 percent.
Prior to March 26, 2010, most SLAs included a threshold
amount, above which the receiver covered 95 percent of
the losses incurred by the acquirer. As mentioned above,
the estimated shared-loss liability is accounted for by the
receiver and is included in the calculation of the DIF’s
allowance for loss against the corporate receivable from the
resolution. As shared-loss claims are asserted and proven,
DIF receiverships satisfy these shared-loss payments using
available liquidation funds and/or by drawing on amounts
due from the DIF for funding the deposits assumed by the
acquirer (see Note 6).
As of December 31, 2013, 300 receiverships have made
shared-loss payments totaling $26.4 billion. At December
31, 2013 and 2012, estimates of additional payments by
DIF receiverships over the duration of the SLAs were
$12.3 billion and $18.1 billion, respectively, on total
remaining covered assets of $78.2 billion and $103.7 billion,
respectively.

CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the DIF
to concentrations of credit risk are receivables from
resolutions. The repayment of the DIF’s receivables from
resolutions is primarily influenced by recoveries on assets
held by DIF receiverships and payments on the covered
assets under SLAs. The majority of the remaining assets
in liquidation ($11.2 billion) and current shared-loss
covered assets ($78.2 billion) which total $89.4 billion
are concentrated in commercial loans ($40.1 billion),

residential loans ($37.4 billion), securities ($2.8 billion), and
structured transaction-related assets as described in Note
7 ($7.5 billion). Most of the assets originated from failed
institutions located in California ($27.1 billion), Florida
($10.2 billion), Puerto Rico ($8.7 billion), Alabama ($6.8
billion), Illinois ($6.6 billion) and Georgia ($6.3 billion).

5.	 PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT,
NET AT DECEMBER 31
Dollars in Thousands
2013

2012

Land

$37,352

$37,352

Buildings (including building and
leasehold improvements)

314,775

313,221

Application software (includes
work-in-process)

149,115

135,059

Furniture, fixtures, and equipment

142,621

152,280

(266,640)

(245,032)

$377,223

$392,880

Accumulated depreciation
Total

The depreciation expense was $73 million and $76 million
for 2013 and 2012, respectively.

6.	 LIABILITIES DUE TO RESOLUTIONS
As of December 31, 2013 and 2012, the DIF recorded
liabilities totaling $12.6 billion and $21.1 billion,
respectively, to resolution entities representing the
agreed-upon value of assets transferred from the
receiverships, at the time of failure, to the acquirers/bridge
institutions for use in funding the deposits assumed by the
acquirers/bridge institutions. Ninety-one percent of these
liabilities are due to failures resolved under whole-bank
purchase and assumption transactions, most with an
accompanying SLA. The DIF satisfies these liabilities
either by directly sending cash to the receivership to fund
shared-loss and other expenses or by offsetting receivables
from resolutions when the receivership declares a dividend.
In addition, the DIF recorded liabilities of $29 million and
$56 million in unpaid deposit claims related to multiple
receiverships, which are offset by receivables included
in the “Receivables from resolutions, net” line item of
the Balance Sheet as of December 31, 2013 and 2012,
respectively. The DIF pays these liabilities when the claims
are approved.

FINANCIAL SECTION 77

ANNUAL REPORT 2013
7.	 CONTINGENT LIABILITIES FOR:
ANTICIPATED FAILURE OF INSURED INSTITUTIONS
The DIF records a contingent liability and a loss provision
for DIF-insured institutions that are likely to fail, absent
some favorable event such as obtaining additional capital
or merging, when the liability is probable and reasonably
estimable. The contingent liability is derived by applying
expected failure rates and loss rates to the institutions
based on supervisory ratings, balance sheet characteristics,
and projected capital levels.
The banking industry continued to improve in 2013 at a
gradual, steady pace.  According to the quarterly financial
data submitted by DIF-insured institutions, the industry
reported total net income of $154.7 billion for full-year 2013,
an increase of 9.6 percent over 2012. The downward trend
in loan loss provisions that has coincided with the ongoing
improvement in asset quality was responsible for most of
the improvement in earnings.
Losses to the DIF from failures that occurred in 2013 were
lower than the contingent liability at the end of 2012, as
the aggregate number and size of institution failures in
2013 were less than anticipated. The removal from the
contingent liability of institutions that did fail in 2013, as
well as projected favorable trends in bank supervisory
downgrade and failure rates, all contributed to a decline
by $2.0 billion to $1.2 billion in the contingent liability for
anticipated failures of insured institutions at December 31,
2013.
In addition to the recorded contingent liabilities, the
FDIC has identified risks in the financial services industry
that could result in additional losses to the DIF, should
potentially vulnerable insured institutions ultimately
fail. As a result of these risks, the FDIC believes that it is
reasonably possible that the DIF could incur additional
estimated losses of approximately $3.0 billion as of year-end
2013 as compared to $6.3 billion as of year-end 2012. The
actual losses, if any, will largely depend on future economic
and market conditions and could differ materially from
this estimate.
During 2013, 24 institutions failed with combined assets
of $5.8 billion at the date of failure. Recent trends in
supervisory ratings and market data suggest that the

78 FINANCIAL SECTION

financial performance and condition of the banking industry
should continue to improve over the coming year. However,
exposure to interest rate risk, reliance on short-term
sources of funding, and limited opportunities for earnings
growth will continue to stress the industry. Additionally,
key risks continue to weigh on the economic outlook as
well, including the impact of rising interest rates as they
return to more normal levels; fiscal challenges at federal,
state, and local levels; and global economic risks. The FDIC
continues to evaluate ongoing risks to affected institutions
in light of existing economic and financial conditions,
and the extent to which such risks may put stress on the
resources of the insurance fund.

LITIGATION LOSSES
The DIF records an estimated loss for unresolved legal
cases to the extent that those losses are considered
probable and reasonably estimable. The FDIC recorded
probable litigation losses of $5 million and $8 million for the
DIF as of December 31, 2013 and 2012, respectively, and has
determined that losses from unresolved cases totaling $125
thousand are reasonably possible for year-end 2013.

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, which included
mortgage loans and servicing rights, of IMFB and its
respective subsidiaries to OneWest Bank and its affiliates.
The sellers made certain representations customarily made
by commercial parties regarding the assets and agreed
to indemnify the acquirers for losses incurred as a result
of breaches of such representations, losses incurred as
a result of the failure to obtain contractual counterparty
consents to the sale, and third party claims arising from
pre-sale acts and omissions of the sellers or the failed
bank. The FDIC, in its corporate capacity, guaranteed the
receivership’s indemnification obligations under the sale
agreements. Until the periods for asserting claims under
these arrangements have expired and all indemnification
claims are quantified and paid, losses could continue to be
incurred by the receivership and, in turn, the DIF.

The acquirers’ rights to assert claims to recover
losses incurred as a result of breaches of loan seller
representations extend out to March 19, 2014 for the Fannie
Mae, Freddie Mac, and Ginnie Mae mortgage servicing
portfolios (unpaid principal balance of $367 million at
December 31, 2013 compared to $34.3 billion at December
31, 2012) and to March 19, 2019 for the Fannie Mae and
Ginnie Mae reverse mortgage servicing portfolios (unpaid
principal balance of $15.2 billion at December 31, 2013
compared to $16.2 billion at December 31, 2012).
On March 19, 2011, the acquirers’ rights to assert claims
to recover losses incurred as a result of other third party
claims and breaches of servicer representations expired. As
of the expiration date of this claim period, notices relating
to potential defects were received, but they require review
to determine whether a valid defect exists and, if so, the
identification and resolution of possible cure actions. It is
highly unlikely that all of these potential defects will result
in losses. Therefore, while additional potential losses
relating to servicing representations may be incurred, those
losses cannot currently be quantified.
The IndyMac receivership has paid cumulative claims
totaling $15 million through December 31, 2013 and $14
million through December 31, 2012. Additional claims
asserted, but under review, were accrued in the amount
of $7 million and $1 million as of December 31, 2013 and
December 31, 2012, respectively. Review and evaluation
is in process for approximately $32 million in reasonably
possible liabilities with respect to alleged breaches of
representations and warranties as of December 31, 2013
and 2012. Potential losses relating to origination and
servicing representations, which also cannot currently be
quantified, may also be incurred under other agreements
with investors.
As a result of existing origination and servicing
representation provisions, the IndyMac receivership and
the wholly-owned subsidiary Financial Freedom Senior
Funding Corporation have repurchased loans with an
aggregate principal balance of $308 million and $100 million
respectively. Estimated losses of up to $48 million could
be incurred on these portfolios. Because these loans have
been repurchased and are now considered receivership
or receivership subsidiary assets, the resulting estimated

losses are reflected in the “Receivables from resolutions,
net” line item on the Balance Sheet.
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 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 2013 and 2012,
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.

FINANCIAL SECTION 79

ANNUAL REPORT 2013
FDIC Guaranteed Debt of Structured Transactions
The FDIC as receiver uses three types of structured
transactions to dispose of certain performing and
non-performing residential mortgage loans, commercial
loans, construction loans, and mortgage-backed securities
held by the receiverships. The three types of structured
transactions are 1) limited liability companies (LLCs), 2)
securitizations, and 3) structured sale of guaranteed notes
(SSGNs).
LLCs
Under the LLC structure, the FDIC in its receivership
capacity contributes a pool of assets to a newly-formed
LLC and offers for sale, through a competitive bid process,
some of the equity in the LLC. The day-to-day management
of the LLC transfers to the highest bidder along with the
purchased equity interest. In many instances, the FDIC in
its corporate capacity guarantees notes issued by the LLCs.
In exchange for a guarantee, the DIF receives a guarantee
fee in either 1) a lump-sum, up-front payment based on the
estimated duration of the note or 2) a monthly payment
based on a fixed percentage multiplied by the outstanding
note balance. The terms of these guarantee agreements
generally stipulate that all cash flows received from the
entity’s collateral be used to pay, in the following order, 1)
operational expenses of the entity, 2) the FDIC’s contractual
guarantee fee, 3) the guaranteed notes (or, if applicable,
fund the related defeasance account for payoff of the notes
at maturity), and 4) the equity investors. If the FDIC is
required to perform under these guarantees, it acquires an
interest in the cash flows of the LLC equal to the amount of
guarantee payments made plus accrued interest thereon.
Once all expenses have been paid, the guaranteed notes
have been satisfied, and the FDIC has been reimbursed for
any guarantee payments, the equity holders receive any
remaining cash flows.
Since 2009, private investors have purchased a 40- to
50-percent ownership interest in the LLC structures for
$1.6 billion in cash and the LLCs issued notes of $4.4
billion to the receiverships to partially fund the purchase
of the assets. The receiverships hold the remaining 50- to
60-percent equity interest in the LLCs and, in most cases,
the guaranteed notes. The FDIC in its corporate capacity

80 FINANCIAL SECTION

guarantees the timely payment of principal and interest due
on the notes. The terms of the note guarantees extend until
the earlier of 1) payment in full of the notes or 2) two years
following the maturity date of the notes. The note with the
longest term matures in 2020. In the event of note payment
default, the FDIC as guarantor is entitled to exercise or
cause the exercise of certain rights and remedies including:
1) accelerating the payment of the unpaid principal amount
of the notes; 2) selling the assets held as collateral; or 3)
foreclosing on the equity interests of the debtor.
Securitizations and SSGNs
Securitizations and SSGNs (collectively, “trusts”) are
transactions in which certain assets or securities from
failed institutions are pooled and transferred into a trust
structure. The trusts issue 1) senior and/or subordinated
debt instruments and 2) owner trust or residual certificates
collateralized by the underlying mortgage-backed securities
or loans.
Since 2010, private investors purchased the senior
notes issued by the trusts for $6.2 billion in cash. The
receiverships hold 100 percent of the subordinated debt
instruments and owner trust or residual certificates. The
FDIC in its corporate capacity guarantees the timely
payment of principal and interest due on the senior notes,
the latest maturity of which is 2050. In exchange for the
guarantee, the DIF receives a monthly payment based
on a fixed percentage multiplied by the outstanding note
balance. These guarantee agreements generally stipulate
that all cash flows received from the entity’s collateral be
used to pay, in the following order, 1) operational expenses
of the entity, 2) the FDIC’s contractual guarantee fee,
3) interest on the guaranteed notes, 4) principal of the
guaranteed notes, and 5) the holders of the subordinated
notes and owner trust or residual certificates. If the FDIC
is required to perform under its guarantees, it acquires an
interest in the cash flows of the trust equal to the amount
of guarantee payments made plus accrued interest thereon.
Once all expenses have been paid, the guaranteed notes
have been satisfied, and the FDIC has been reimbursed for
any guarantee payments, the subordinated note holders
and owner trust or residual certificates holders receive the
remaining cash flows.

All Structured Transactions with FDIC
Guaranteed Debt

December 31, 2013 and 2012, a total of $78 million and $1.6
billion, respectively, has been deposited into these accounts.

Through December 31, 2013, the receiverships have
transferred a portfolio of loans with an unpaid principal
balance of $16.4 billion and mortgage-backed securities with
a book value of $8.8 billion to 14 LLCs and 11 trusts. The
LLCs and trusts subsequently issued notes guaranteed by
the FDIC in an original principal amount of $10.6 billion. As
of December 31, 2013 and 2012, the DIF collected guarantee
fees totaling $231 million and $218 million, respectively,
and recorded a receivable for additional guarantee fees
of $66 million and $95 million, respectively, included in
the “Interest receivable on investments and other assets,
net” line item on the Balance Sheet. All guarantee fees are
recorded as deferred revenue, included in the “Accounts
payable and other liabilities” line item, and recognized as
revenue primarily on a straight-line basis over the term
of the notes. At December 31, 2013 and 2012, the amount
of deferred revenue recorded was $66 million and $101
million, respectively. The DIF records no other structuredtransaction-related assets or liabilities on its balance sheet.

8.	ASSESSMENTS

The estimated loss to the DIF from the guarantees is
derived from an analysis of the net present value (using
a discount rate of 3.7 percent) of the expected guarantee
payments by the FDIC, reimbursements to the FDIC for
guarantee payments, and guarantee fee collections.  It is
reasonably possible that the DIF could be required to make
a guarantee payment of approximately $27 million for an
SSGN transaction at note maturity in 2020. Any guarantee
payment made would be fully reimbursed from the proceeds
of the liquidation of the SSGN’s underlying collateral. For
all of the remaining transactions, the cash flows from the
LLC or trust assets provide sufficient coverage to fully pay
the debts. To date, the FDIC in its corporate capacity has
not provided, and does not intend to provide, any form of
financial or other type of support to a trust or LLC that it
was not previously contractually required to provide.
As of December 31, 2013 and 2012, the maximum loss
exposure was $99 million and $2.2 billion for LLCs and $2.8
billion and $3.2 billion for trusts, respectively, representing
the sum of all outstanding debt guaranteed by the FDIC in
its corporate capacity. Some transactions have established
defeasance accounts to pay off the notes at maturity. As of

The framework for the FDIC deposit insurance assessment
system is mandated by section 7 of the FDI Act and the
provisions for implementation are contained in part 327 of
title 12 of the Code of Federal Regulations. The FDI Act
requires a risk-based assessment system and payment of
assessments by all IDIs.
In response to the Dodd-Frank Act, the FDIC implemented
several changes to the assessment system and developed
a comprehensive, long-term fund management plan. The
plan is designed to restore and maintain a positive fund
balance for the DIF even during a banking crisis and
achieve moderate, steady assessment rates throughout any
economic cycle. Summarized below are actions taken to
implement assessment system changes and provisions of
the comprehensive plan.
♦♦ The FDIC adopted a Restoration Plan to ensure that
the ratio of the DIF fund balance to estimated insured
deposits (reserve ratio) reaches 1.35 percent by
September 30, 2020. The FDIC will update, at least
semiannually, its loss and income projections for the fund
and, if needed, increase or decrease assessment rates,
following notice-and-comment rulemaking, if required.
♦♦ The FDIC adopted a final rule which suspends dividends
indefinitely, and, in lieu of dividends, adopts lower
assessment rate schedules when the reserve ratio reaches
1.15 percent, 2 percent, and 2.5 percent.
♦♦ The FDIC adopted a final rule which amends and clarifies
some definitions of higher-risk assets as used in deposit
insurance pricing for large and highly complex IDIs by
1) revising the definitions of certain higher-risk assets,
specifically leveraged loans and subprime consumer
loans, 2) clarifying when an asset must be identified as
higher risk, and 3) clarifying the way securitizations are
identified as higher risk. The final rule became effective
on April 1, 2013.
♦♦ The Federal Deposit Insurance Act (FDI Act) requires that
the FDIC Board of Directors designate a reserve ratio for
the DIF and publish the designated reserve ratio (DRR)

FINANCIAL SECTION 81

ANNUAL REPORT 2013
before the beginning of each calendar year. Accordingly,
in October 2013, the FDIC adopted a final rule maintaining
the DRR at 2 percent for 2014. The DRR is an integral
part of the FDIC’s comprehensive, long-term management
plan for the DIF and is viewed as a long-range, minimum
target for the reserve ratio.

ASSESSMENT REVENUE
Annual assessment rates averaged approximately 7.8 cents
per $100 and 10.1 cents per $100 of the assessment base
for 2013 and 2012, respectively. The assessment base is
generally defined as the average consolidated total assets
minus the average tangible equity (measured as Tier 1
capital) of the IDI during the assessment period.
In December 2009, a majority of IDIs prepaid $45.7 billion
of estimated quarterly risk-based assessments to address
the DIF’s liquidity need to pay for projected failures and to
ensure that the deposit insurance system remained industryfunded. For each interim quarter, an institution’s risk-based
deposit insurance assessment was offset by the available
amount of prepaid assessments. The final offset of prepaid
assessments occurred for the period ending March 31,
2013, and in June 2013, as required by regulation, the DIF
refunded $5.9 billion of unused prepaid assessments to IDIs.
The “Assessments receivable, net” line item on the Balance
Sheet of $2.2 billion and $1.0 billion as of December 31, 2013
and 2012, respectively, represents the estimated premiums
due from IDIs for the fourth quarter of 2013 and 2012,
respectively. The actual deposit insurance assessments for
the fourth quarter of 2013 will be billed and collected at the
end of the first quarter of 2014. During 2013 and 2012, $9.7
billion and $12.4 billion, respectively, were recognized as
assessment revenue from institutions.

RESERVE RATIO
As of December 31, 2013 and 2012, the DIF reserve ratio
was 0.79 percent and 0.44 percent, respectively, of estimated
insured deposits.

ASSESSMENTS RELATED TO FICO
Assessments continue to be levied on institutions for
payments of the interest on obligations issued by the
Financing Corporation (FICO). The FICO was established

82 FINANCIAL SECTION

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 2013
and 2012, approximately $792 million and $797 million,
respectively, was collected and remitted to the FICO.

9.	 OTHER REVENUE
OTHER REVENUE
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2013
Temporary Liquidity Guarantee
Program revenue
Dividends and interest on
Citigroup trust preferred
securities (Note 10)
Guarantee fees for structured
transactions (Note 7)
Other
Total

2012

$0

$5,885,330

124,726

177,831

33,051

57,206

5,377

6,844

$163,154

$6,127,211

TEMPORARY LIQUIDITY GUARANTEE PROGRAM
(TLGP) REVENUE
Pursuant to a systemic risk determination in October 2008,
the FDIC established the TLGP. In exchange for guarantees
issued under the TLGP, the DIF received fees that were set
aside, as deferred revenue, for potential TLGP losses. As
losses occurred, the DIF recognized the losses as systemic
risk expenses and offset the losses by recognizing an
equivalent portion of the deferred revenue as systemic risk
revenue.
In accordance with FDIC policy, the DIF recognized
revenue when guarantee fees held were determined to be in
excess of amounts needed to cover potential losses, and, for
all remaining TLGP assets held as deferred revenue, upon
expiration of the TLGP on December 31, 2012. The DIF
recognized revenue of $5.9 billion in 2012.

10.	 GAIN ON SALE OF TRUST
PREFERRED SECURITIES
Pursuant to a systemic risk determination, the Treasury,
the FDIC, and the Federal Reserve Bank of New York
executed terms of a guarantee agreement on January 15,
2009 with Citigroup to provide loss protection on a pool of
approximately $301.0 billion of assets that remained on the
balance sheet of Citigroup. In consideration for its portion
of the shared-loss guarantee at inception, the FDIC received
$3.025 billion of Citigroup’s preferred stock. All shares
of the preferred stock were subsequently converted to
Citigroup Capital XXXIII trust preferred securities (TruPS)
with a liquidation amount of $1,000 per security and a
distribution rate of 8 percent per annum payable quarterly.
On December 23, 2009, Citigroup terminated the guarantee
agreement, citing improvements in its financial condition.
The FDIC incurred no losses as a result of the guarantee
and retained $2.225 billion (liquidation amount) of the
$3.025 billion in TruPS as consideration for the period of
guarantee coverage. The DIF recorded the TruPS at their
fair value and recognized revenue of $1.962 billion upon
termination of the agreement. In lieu of the FDIC returning
the remaining $800 million (liquidation amount) of TruPS
to Citigroup, the Treasury agreed to return $800 million in
TruPS on behalf of the FDIC from its portion of Citigroup
TruPS holdings received as a result of the shared-loss
agreement. The FDIC held $800 million of TruPS as security
for guaranteed debt instruments issued by Citigroup and
its affiliates under the TLGP. Pursuant to the agreement
between the Treasury and the FDIC, the FDIC transferred
the $800 million in TruPS (plus related dividends and
interest of $183 million) to the Treasury on December 28,
2012, upon maturity of Citigroup’s last outstanding debt
instruments.
To facilitate a sale of the retained TruPS, the FDIC
exchanged the TruPS on September 9, 2013 for $2.420
billion (principal amount) of Citigroup marketable
subordinated notes.  The exchange resulted in a realized
gain to the DIF of $458 million reported in the “Gain on sale
of trust preferred securities” line item on the Statement
of Income and Fund Balance.  FDIC reclassified the $458
million out of accumulated other comprehensive income to
“Gain on sale of trust preferred securities”, representing the

sum of unrealized gains recorded as of December 31, 2012
($302 million) and holding gains arising during the current
period ($156 million).  The resulting net effect on the DIF
Statement of Income and Fund Balance was a $156 million
increase to the 2013 comprehensive income.
On September 10, 2013, the subordinated notes were sold
to the institutional fixed income market for the principal
amount of $2.420 billion. The FDIC received $1.6 million
for one day of accrued interest on the subordinated notes,
which is included in the “Other revenue” line item on the
Statement of Income and Fund Balance (see Note 9). Also
included in the “Other revenue” line item is $123.1 million
for dividends and interest earned on the TruPS in 2013 prior
to their disposition (see Note 9).

11.	 OPERATING EXPENSES
Operating expenses were $1.6 billion and $1.8 billion for
December 31, 2013 and 2012, respectively. The chart below
lists the major components of operating expenses.
OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2013
Salaries and benefits

2012

$1,292,551

$1,300,697

326,040

337,379

Travel

96,056

106,897

Buildings and leased space

91,469

91,631

Software/Hardware
maintenance

56,297

63,108

Depreciation of property and
equipment

72,828

76,365

Other

29,505

21,137

1,964,746

1,997,214

(356,029)

(219,701)

$1,608,717

$1,777,513

Outside services

Subtotal
Less: Services billed to
resolution entities
Total

12.	 PROVISION FOR INSURANCE
LOSSES
The provision for insurance losses was negative $5.7
billion for 2013, compared to negative $4.2 billion for 2012.
The negative provision for 2013 primarily resulted from
a reduction of $1.0 billion in the contingent liability for

FINANCIAL SECTION 83

ANNUAL REPORT 2013
anticipated failures due to the improvement in the financial
condition of troubled institutions and a decrease of $4.8
billion in the estimated losses for institutions that failed in
prior years.
As described in Note 4, the estimated recoveries from assets
held by receiverships and estimated payments related
to assets sold by receiverships to acquiring institutions
under shared-loss agreements are used to derive the
loss allowance on the receivables from resolutions.
Consequently, the $4.8 billion reduction in the estimated
losses from failures was primarily attributable to three
components. The first component of this change was a $2.8
billion decrease in the receiverships’ shared-loss liability
that resulted from lower loss estimates in the underlying
commercial and residential loans due to improvements in
regional economies. The second factor was unanticipated
recoveries of $1.3 billion in professional liability claims,
litigation settlements and tax refunds by the receiverships,
which are not recognized until the cash is received since
there are significant uncertainties surrounding their
recovery. Lastly, the remainder is primarily due to asset
recoveries that exceeded projections and higher valuations
on receivership assets.

13.	 EMPLOYEE BENEFITS
PENSION BENEFITS AND SAVINGS PLANS
Eligible FDIC employees (permanent and term employees
with appointments exceeding one year) are covered by the
federal government retirement plans, either the Civil Service
Retirement System (CSRS) or the Federal Employees
Retirement System (FERS). Although the DIF contributes
a portion of pension benefits for eligible employees, it does
not account for the assets of either retirement system. The
DIF also does not have actuarial data for accumulated
plan benefits or the unfunded liability relative to eligible
employees. These amounts are reported on and accounted
for by the U.S. Office of Personnel Management (OPM).
Eligible FDIC employees also may participate in a FDICsponsored tax-deferred 401(k) savings plan with matching
contributions up to 5 percent. Under the Federal Thrift
Savings Plan (TSP), the FDIC provides FERS employees

84 FINANCIAL SECTION

with an automatic contribution of 1 percent of pay and an
additional matching contribution up to 4 percent of pay.
CSRS employees also can contribute to the TSP, but they do
not receive agency matching contributions.
PENSION BENEFITS AND
SAVINGS PLANS EXPENSES
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2013

2012

Civil Service Retirement
System

$5,430

$5,960

Federal Employees Retirement
System (Basic Benefit)

99,553

97,517

FDIC Savings Plan

37,816

37,700

Federal Thrift Savings Plan

35,686

34,555

$178,485

$175,732

Total

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The DIF has no postretirement health insurance liability
since all eligible retirees are covered by the Federal
Employees Health Benefits (FEHB) program. The FEHB is
administered and accounted for by the OPM. In addition,
OPM pays the employer share of the retiree’s health
insurance premiums.
The FDIC provides certain life and dental insurance
coverage for its eligible retirees, the retirees’ beneficiaries,
and covered dependents. Retirees eligible for life and
dental insurance coverage are those who have qualified
due to 1) immediate enrollment upon appointment or five
years of participation in the plan and 2) eligibility for an
immediate annuity. The life insurance program provides
basic coverage at no cost to retirees and allows converting
optional coverage to direct-pay plans. For the dental
coverage, retirees are responsible for a portion of the dental
premium.
The FDIC has elected not to fund the postretirement life
and dental benefit liabilities. As a result, the DIF recognized
the underfunded status (the difference between the
accumulated postretirement benefit obligation and the plan
assets at fair value) as a liability. Since there are no plan
assets, the plan’s benefit liability is equal to the accumulated

postretirement benefit obligation. At December 31, 2013
and 2012, the liability was $194 million and $224 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 $16 million and $60
million at December 31, 2013 and 2012, 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 2013
and 2012 were $18 million and $14 million, respectively,
which are included in the current and prior year’s operating
expenses on the Statement of Income and Fund Balance.
The changes in the actuarial losses and prior service costs
for 2013 and 2012 of $44 million and negative $27 million,
respectively, are reported as other comprehensive income
in the “Unrealized postretirement benefit gain (loss)” line
item on the Statement of Income and Fund Balance. Key
actuarial assumptions used in the accounting for the
plan include the discount rate of 4.75 percent, the rate
of compensation increase of 4.0 percent, and the dental
coverage trend rate of 4.5 percent. The discount rate of 4.75
percent is based upon rates of return on high-quality fixed
income investments whose cash flows match the timing and
amount of expected benefit payments.

14.	 COMMITMENTS AND OFFBALANCE-SHEET EXPOSURE
COMMITMENTS:
Leased Space
The FDIC’s lease commitments total $193 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 $52 million and
$54 million for 2013 and 2012, respectively.
LEASED SPACE COMMITMENTS
Dollars in Thousands
2014

2015

2016

2017

2018

$48,013 $39,879 $36,208 $31,586 $20,123

2019/
Thereafter
$17,687

OFF-BALANCE-SHEET EXPOSURE:
Deposit Insurance
Estimates of insured deposits are derived primarily from
quarterly financial data submitted by IDIs to the FDIC and
represent the accounting loss that would be realized if
all IDIs were to fail and the acquired assets provided no
recoveries. As of December 31, 2013 and 2012, estimated
insured deposits for the DIF were $6.0 trillion and $7.4
trillion, respectively.

FINANCIAL SECTION 85

ANNUAL REPORT 2013
15.	 DISCLOSURES ABOUT THE FAIR
VALUE OF FINANCIAL INSTRUMENTS
Financial assets recognized and measured at fair value
on a recurring basis at each reporting date include cash

equivalents (see Note 2) and the investment in U.S. Treasury
obligations (see Note 3). The following tables present
the DIF’s financial assets measured at fair value as of
December 31, 2013 and 2012.

ASSETS MEASURED AT FAIR VALUE AT DECEMBER 31, 2013
Dollars in Thousands
Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total Assets
at Fair Value

Assets
$3,534,305

Cash equivalents1

$3,534,305

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

38,510,500

38,510,500

$42,044,805

$0

$0

$42,044,805

1

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

2

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

ASSETS MEASURED AT FAIR VALUE AT DECEMBER 31, 2012
Dollars in Thousands
Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total Assets
at Fair Value

Assets
Cash equivalents1

$3,091,778

$3,091,778

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

34,868,688

Trust preferred securities
Total Assets
1

34,868,688
$2,263,983

$37,960,466

$2,263,983

2,263,983
$0

$40,224,449

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

2	

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

86 FINANCIAL SECTION

Some of the DIF’s financial assets and liabilities are not
recognized at fair value but are recorded at amounts that
approximate fair value due to their short maturities and/
or comparability with current interest rates. Such items
include interest receivable on investments, assessments
receivable, other short-term receivables, refunds of prepaid
assessments, accounts payable, and other liabilities.
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.
At December 31, 2012, the fair value of the TruPS in
the amount of $2.264 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 included market yields on U.S. dollar interest
rate swaps and discount rates for default, call, and liquidity
risks that were derived from traded Citigroup securities and
modeled pricing relationships.

FINANCIAL SECTION 87

ANNUAL REPORT 2013
16.	 INFORMATION RELATING TO THE
STATEMENT OF CASH FLOWS
RECONCILIATION OF NET INCOME TO NET CASH FROM OPERATING ACTIVITIES
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2013

2012

$14,504,738

$21,121,247

1,139,456

854,195

(35,300)

(98,050)

Operating Activities
Net Income:
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Amortization of U.S. Treasury obligations
Treasury Inflation-Protected Securities inflation adjustment
Gain on sale of trust preferred securities
Depreciation on property and equipment
Loss on retirement of property and equipment
Provision for insurance losses
Unrealized gain (loss) on postretirement benefits

(458,176)

0

72,829

76,365

220

14

(5,659,388)

(4,222,595)

44,097

(26,886)

(1,220,883)

(724,605)

(75,014)

51,181

10,406,392

6,371,418

Change in Assets and Liabilities:
(Increase) in assessments receivable, net
(Increase) Decrease in interest receivable and other assets
Decrease in receivables from resolutions
Decrease in receivables - systemic risk

0

1,948,151

(Decrease) in accounts payable and other liabilities

(49,045)

(24,543)

(Decrease) Increase in postretirement benefit liability

(30,635)

36,258

0

(2,216)

(8,547,803)

(11,616,727)

0

(117,027)

(1,576,417)

(15,823,411)

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

17.	 SUBSEQUENT EVENTS
Subsequent events have been evaluated through March 6,
2014, the date the financial statements are available to
be issued.

88 FINANCIAL SECTION

0

(6,513,828)

(5,675,199)

5,675,199

$2,839,872

$(3,035,860)

2014 FAILURES THROUGH MARCH 6, 2014
Through March 6, 2014, five insured institutions failed in
2014 with total losses to the DIF estimated to be $92 million.

FSLIC RESOLUTION FUND (FRF)
FEDERAL DEPOSIT INSURANCE CORPORATION
FSLIC RESOLUTION FUND BALANCE SHEET AT DECEMBER 31
Dollars in Thousands
2013

2012

Assets
Cash and cash equivalents (Note 1)
Receivables from thrift resolutions and other assets, net (Note 3)
Receivables from U.S. Treasury for goodwill litigation (Note 4)
Total Assets

$871,612

$3,594,007

1,183

5,456

356,455

356,455

$1,229,250

$3,955,918

$790

$2,442

Liabilities
Accounts payable and other liabilities
Contingent liabilities for goodwill litigation (Note 4)
Total Liabilities

356,455

356,455

357,245

358,897

Resolution Equity (Note 5)
Contributed capital

125,332,156

128,056,656

Accumulated deficit

(124,460,151)

(124,459,635)

Total Resolution Equity

872,005

3,597,021

$1,229,250

$3,955,918

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

FINANCIAL SECTION 89

ANNUAL REPORT 2013
FSLIC RESOLUTION FUND (FRF)
FEDERAL DEPOSIT INSURANCE CORPORATION
FSLIC RESOLUTION FUND STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2013

2012

Revenue
Interest on U.S. Treasury obligations
Other revenue

$1,196

$2,458

1,953

2,549

3,149

5,007

Operating expenses

2,350

4,165

Provision for losses

(1,255)

(1,408)

500

181,000

Total Revenue
Expenses and Losses

Goodwill litigation expenses (Note 4)

2,070

258

Total Expenses and Losses

Other expenses

3,665

184,015

Net Loss

(516)

(179,008)

(124,459,635)

(124,280,627)

$(124,460,151)

$(124,459,635)

Accumulated Deficit - Beginning
Accumulated Deficit - Ending
The accompanying notes are an integral part of these financial statements.

90 FINANCIAL SECTION

FSLIC RESOLUTION FUND (FRF)
FEDERAL DEPOSIT INSURANCE CORPORATION
FSLIC RESOLUTION FUND STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2013

2012

Operating Activities
Provided by:
Interest on U.S. Treasury obligations
Recoveries from financial institution resolutions
Recovery of tax benefits
Miscellaneous receipts

$1,196

$2,458

5,148

19,074

130

44,445

52

365

(3,921)

(5,718)

(500)

(181,000)

Used by:
Operating expenses
Payments for goodwill litigation (Note 4)
Miscellaneous disbursements

0

(27)

2,105

(120,403)

500

181,000

(2,600,000)

0

(125,000)

0

Net Cash (Used) Provided by Financing Activities

(2,724,500)

181,000

Net (Decrease) Increase in Cash and Cash Equivalents

(2,722,395)

60,597

Cash and Cash Equivalents - Beginning

3,594,007

3,533,410

Cash and Cash Equivalents - Ending

$871,612

$3,594,007

Net Cash Provided (Used) by Operating Activities
Financing Activities
Provided by:
U.S. Treasury payments for goodwill litigation (Note 4)
Used by:
Return of U.S. Treasury funds (Note 5)
Payment to Resolution Funding Corporation (Note 5)

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

FINANCIAL SECTION 91

ANNUAL REPORT 2013
Notes to the Financial Statements
FSLIC RESOLUTION FUND
December 31, 2013 and 2012
1.	 OPERATIONS/DISSOLUTION OF
THE FSLIC RESOLUTION FUND
OVERVIEW
The Federal Deposit Insurance Corporation (FDIC) is the
independent deposit insurance agency created by Congress
in 1933 to maintain stability and public confidence in
the nation’s banking system. Provisions that govern the
operations of the FDIC are generally found in the Federal
Deposit Insurance (FDI) Act, as amended (12 U.S.C. 1811,
et seq). In carrying out the purposes of the FDI Act,
the FDIC, as administrator of the Deposit Insurance
Fund (DIF), insures the deposits of banks and savings
associations (insured depository institutions). In
cooperation with other federal and state agencies, the FDIC
promotes the safety and soundness of insured depository
institutions by identifying, monitoring and addressing risks
to the DIF. Commercial banks, savings banks and savings
associations (known as “thrifts”) are supervised by either
the FDIC, the Office of the Comptroller of the Currency, or
the Federal Reserve Board. In addition, the FDIC, through
administration of the FSLIC Resolution Fund (FRF), is
responsible for the sale of remaining assets and satisfaction
of liabilities associated with the former Federal Savings
and Loan Insurance Corporation (FSLIC) and the former
Resolution Trust Corporation (RTC). The DIF and the FRF
are maintained separately by the FDIC to support their
respective functions.
The U.S. Congress created the FSLIC through the enactment
of the National Housing Act of 1934. The Financial
Institutions Reform, Recovery, and Enforcement Act of
1989 (FIRREA) abolished the insolvent FSLIC, created the
FRF, and transferred the assets and liabilities of the FSLIC
to the FRF—except those assets and liabilities transferred
to the newly created RTC—effective on August 9, 1989.
Further, the FIRREA established the Resolution Funding
Corporation (REFCORP) to provide part of the initial funds
used by the RTC for thrift resolutions.

92 FINANCIAL SECTION

The RTC Completion Act of 1993 terminated the RTC as of
December 31, 1995. All remaining assets and liabilities of
the RTC were transferred to the FRF on January 1, 1996.
Today, the FRF consists of two distinct pools of assets and
liabilities: one composed of the assets and liabilities of the
FSLIC transferred to the FRF upon the dissolution of the
FSLIC (FRF-FSLIC), and the other composed of the RTC
assets and liabilities (FRF-RTC). The assets of one pool are
not available to satisfy obligations of the other.

OPERATIONS/DISSOLUTION OF THE FRF
The FRF will continue operations until all of its assets
are sold or otherwise liquidated and all of its liabilities
are satisfied. Any funds remaining in the FRF-FSLIC
will be paid to the U.S. Treasury. Any remaining funds
of the FRF-RTC will be distributed to the REFCORP to
pay the interest on the REFCORP bonds. In addition, the
FRF-FSLIC has available until expended $602 million in
appropriations to facilitate, if required, efforts to wind up
the resolution activity of the FRF-FSLIC.
The FDIC has conducted an extensive review and
cataloging of FRF’s remaining assets and liabilities. Some
of the issues and items that remain open in FRF are 1)
criminal restitution orders (generally have from 1 to 17
years remaining to enforce); 2) collections of settlements
and judgments obtained against officers and directors and
other professionals responsible for causing or contributing
to thrift losses (generally have up to 7 years remaining to
enforce, unless the judgments are renewed or are covered
by the Federal Debt Collections Procedures Act, which will
result in significantly longer periods for collection for some
judgments); 3) a few assistance agreements entered into by
the former FSLIC (FRF could continue to receive or refund
overpayments of tax benefits sharing in future years); 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, criminal restitution orders, and professional
liability claims; however, any associated recoveries are not
reflected in FRF’s financial statements given the significant
uncertainties surrounding the ultimate outcome.

USE OF ESTIMATES

After evaluating FRF’s remaining assets and liabilities in
2013, the FDIC returned $2.6 billion to the U.S. Treasury on
behalf of FRF-FSLIC and paid $125 million to REFCORP
on behalf of FRF-RTC (see Note 5). More transfers are
expected to continue as remaining assets wind down and
liabilities are satisfied.

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

RECEIVERSHIP OPERATIONS

CASH EQUIVALENTS

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.

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

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

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

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.

PRESENTATION OF STATEMENT OF CASH FLOWS
To enhance cash flow information for operating activities
of the FRF, in 2013, the FDIC changed the method of
presenting the FRF’s Statement of Cash Flows from the
indirect method to the direct method, which is preferable
and is encouraged by the Financial Accounting Standards
Board. Accordingly, the FRF’s 2012 Statement of Cash
Flows has been conformed to this method of presentation
for comparative purposes. For 2013 and 2012, the
reconciliation of net income to net cash from operating
activities is presented in Note 7.

DISCLOSURE ABOUT RECENT RELEVANT
ACCOUNTING PRONOUNCEMENTS
Accounting Standards Update No. 2013-07, Presentation of
Financial Statements - Liquidation Basis of Accounting,
modifies Accounting Standards Codification Topic 205,
Presentation of Financial Statements, to require an entity
to prepare its financial statements using the liquidation

FINANCIAL SECTION 93

ANNUAL REPORT 2013
basis of accounting when liquidation is imminent. The
amendments are effective during annual reporting periods
beginning after December 15, 2013. As the remaining issues
of the FRF continue to wind down (see Note 1), the FDIC
will evaluate the applicability of this standard to the FRF.
At this time, the FDIC has no approved liquidation plan for
the final dissolution of the FRF.
Other recent accounting pronouncements have been
deemed not applicable or material to the financial
statements as presented.

3.	 RECEIVABLES FROM THRIFT
RESOLUTIONS AND OTHER
ASSETS, NET
RECEIVABLES FROM THRIFT RESOLUTIONS
The receivables from thrift resolutions include payments
made by the FRF to cover obligations to insured depositors,
advances to receiverships for working capital, and
administrative expenses paid on behalf of receiverships.
Any related allowance for loss represents the difference
between the funds advanced and/or obligations incurred
and the expected repayment. Assets held by the FDIC in its
receivership capacity for the former RTC are a significant
source of repayment of the FRF’s receivables from thrift
resolutions. As of December 31, 2013, only one of the
850 FRF receiverships remains active and is expected to
terminate in 2014.
The FRF receiverships held assets with a book value of
$2 million and $13 million as of December 31, 2013 and
2012, respectively (which primarily consist of cash held for
non-FRF, third party creditors).

OTHER ASSETS
Other assets primarily consist of assets that were acquired
from terminated receiverships.

RECEIVABLES FROM THRIFT RESOLUTIONS
AND OTHER ASSETS, NET AT DECEMBER 31
Dollars in Thousands
2013
Receivables from closed thrifts
Allowance for losses
Receivables from
Thrift Resolutions, Net
Other assets, net
Total

2012

$35

$869,917

0

(867,208)

35

2,709

1,148

2,747

$1,183

$5,456

4.	 CONTINGENT LIABILITIES FOR:
GOODWILL LITIGATION
In United States v. Winstar Corp., 518 U.S. 839 (1996),
the Supreme Court held that when it became impossible
following the enactment of FIRREA in 1989 for the federal
government to perform certain agreements to count
goodwill toward regulatory capital, the plaintiffs were
entitled to recover damages from the United States.
On July 22, 1998, the Department of Justice’s (DOJ’s)
Office of Legal Counsel (OLC) concluded that the FRF is
legally available to satisfy all judgments and settlements
in the goodwill litigation involving supervisory action
or assistance agreements. OLC determined that
nonperformance of these agreements was a contingent
liability that was transferred to the FRF on August 9, 1989,
upon the dissolution of 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 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

94 FINANCIAL SECTION

goodwill litigation. This appropriation is to remain available
until expended. Because an appropriation is available
to pay such judgments and settlements, any estimated
liability for goodwill litigation should have a corresponding
receivable from the U.S. Treasury and therefore have no net
impact on the financial condition of the FRF.
The FRF paid $500 thousand and $181 million
to the plaintiffs in one goodwill case in 2013 and
2012, respectively. The $500 thousand represents a
reimbursement for a tax liability of the plaintiffs as a result
of the $181 million settlement received in 2012. The FRF
received appropriations from the U.S. Treasury to fund
these payments.
As of December 31, 2013, one case is active and pending
against the United States based on alleged breaches of
the agreements stated above. For this case, a contingent
liability and an offsetting receivable of $356 million was
recorded as of December 31, 2013 and 2012. This case is
currently before the lower court pending remand following
appeal. It is reasonably possible that for this case the FRF
could incur additional estimated losses of $63 million,
representing additional damages contended by the plaintiff.
For a case that was fully adjudicated, an estimated loss of
$8 million, which represents estimated tax liabilities, is also
reasonably possible.
For the second of the two cases active at year-end 2012,
the United States’ Motion for Costs was denied by the trial
court and the United States did not seek further review of
this denial. This case is now concluded.
In addition, the FRF-FSLIC pays the goodwill litigation
expenses incurred by the DOJ, the entity that defends these
lawsuits against the United States, based on a Memorandum
of Understanding (MOU) dated October 2, 1998, between
the FDIC and the DOJ. FRF-FSLIC pays in advance the
estimated goodwill litigation expenses. Any unused funds
are carried over and applied toward the next fiscal year
(FY) charges. In 2013, FRF-FSLIC did not provide any
additional funding to the DOJ because the unused funds
from prior fiscal years were sufficient to cover estimated FY
2014 expenses.

GUARINI LITIGATION
Paralleling the goodwill cases were similar cases alleging
that the government breached agreements regarding tax
benefits associated with certain FSLIC-assisted acquisitions.
These agreements allegedly contained the promise of
tax deductions for losses incurred on the sale of certain
thrift assets purchased by plaintiffs from the FSLIC, even
though the FSLIC provided the plaintiffs with tax-exempt
reimbursement. A provision in the Omnibus Budget
Reconciliation Act of 1993 (popularly referred to as the
“Guarini legislation”) eliminated the tax deductions for
these losses.
All eight of the original Guarini cases have been settled.
However, a case settled in 2006 further obligates the
FRF-FSLIC as a guarantor for all tax liabilities in the event
the settlement amount is determined by tax authorities to
be taxable. The maximum potential exposure under this
guarantee is approximately $81 million. However, the FDIC
believes that it is very unlikely the settlement will be subject
to taxation. The Internal Revenue Service concluded an
examination of the affected entity’s 2006 return without an
assertion of taxation for an issue covered by the guarantee.
The 2006 return was subsequently amended, and the
amended return is under further administrative review.
As of December 31, 2013, no liability has been recorded.
The FRF does not expect to fund any payment under this
guarantee.

GUARANTEES
On May 21, 2012, the FDIC, in its capacity as manager of
the FRF, entered into an agreement with Fannie Mae for
the release of $13 million of credit enhancement reserves
to the FRF in exchange for indemnifying Fannie Mae for
all future losses incurred on 76 multi-family mortgage
loans.  The former RTC supplied Fannie Mae with the
credit enhancement reserves in the form of cash collateral
to cover future losses on these mortgage loans through
2020.  The maximum exposure on this indemnification is the
current unpaid principal balance of the remaining 60 multifamily loans totaling $7 million.  Based on a contingent
liability assessment of this portfolio, the majority of the
loans are at least 65% amortized, and all are scheduled to

FINANCIAL SECTION 95

ANNUAL REPORT 2013
mature within two to seven years. Since all of the loans are
currently in performing status and no losses have occurred
since 2001, future payments on this indemnification are
not expected.  As a result, the FRF has not recorded a
contingent liability for this indemnification as of December
31, 2013.

5.	 RESOLUTION EQUITY
As stated in the Overview section of Note 1, the FRF is
comprised of two distinct pools: the FRF-FSLIC and the
FRF-RTC. The FRF-FSLIC consists of the assets and

liabilities of the former FSLIC. The FRF-RTC consists of the
assets and liabilities of the former RTC. Pursuant to legal
restrictions, the two pools are maintained separately and
the assets of one pool are not available to satisfy obligations
of the other.
The following table shows the contributed capital,
accumulated deficit, and resulting resolution equity for
each pool.

RESOLUTION EQUITY AT DECEMBER 31, 2013
Dollars in Thousands
FRF-FSLIC
Less: Payment to REFCORP

FRF
Consolidated

$46,307,319

Contributed capital - beginning

FRF-RTC
$81,749,337

$128,056,656

0

Add: U.S. Treasury payment for goodwill litigation

(125,000)

(125,000)

(2,600,000)

Less: Return of U.S. Treasury funds

0

(2,600,000)

500

0

500

Contributed capital - ending

43,707,819

81,624,337

125,332,156

Accumulated deficit

(42,879,951)

(81,580,200)

(124,460,151)

$827,868

$44,137

$872,005

Total

RESOLUTION EQUITY AT DECEMBER 31, 2012
Dollars in Thousands
FRF-FSLIC
Contributed capital - beginning

FRF
Consolidated

FRF-RTC

$46,126,319

$81,749,337

$127,875,656

181,000

0

181,000

Contributed capital - ending

46,307,319

81,749,337

128,056,656

Accumulated deficit

(42,882,341)

(81,577,294)

(124,459,635)

Total

$3,424,978

$172,043

$3,597,021

Add: U.S. Treasury payment for goodwill litigation

96 FINANCIAL SECTION

CONTRIBUTED CAPITAL

ACCUMULATED DEFICIT

The FRF-FSLIC and the former RTC received $43.5 billion
and $60.1 billion from the U.S. Treasury, respectively,
to fund losses from thrift resolutions prior to July 1,
1995. Additionally, the FRF-FSLIC issued $670 million in
capital certificates to the Financing Corporation (a mixedownership government corporation established to function
solely as a financing vehicle for the FSLIC) and the RTC
issued $31.3 billion of these instruments to the REFCORP.
FIRREA prohibited the payment of dividends on any of
these capital certificates.

The accumulated deficit represents the cumulative excess
of expenses and losses over revenue for activity related
to the FRF-FSLIC and the FRF-RTC. Approximately
$29.8 billion and $87.9 billion were brought forward
from the former FSLIC and the former RTC on August 9,
1989, and January 1, 1996, respectively. The FRF-FSLIC
accumulated deficit has increased by $13.1 billion, whereas
the FRF-RTC accumulated deficit has decreased by $6.3
billion, since their dissolution dates.

FRF-FSLIC received $500 thousand and $181 million in U.S.
Treasury payments for goodwill litigation in 2013 and 2012,
respectively. Furthermore, $356 million was accrued for as
receivables as of December 31, 2013 and 2012, respectively.
Through December 31, 2013, the FRF has received or
established a receivable for a total of $2.2 billion of
goodwill appropriations, the effect of which increases
contributed capital.
Through December 31, 2013, the FRF-RTC has returned
$4.6 billion to the U.S. Treasury and made payments of $5.1
billion to the REFCORP. The most recent payment to the
REFCORP was in July of 2013 for $125 million. In addition,
the FDIC returned $2.6 billion to the U.S. Treasury on behalf
of the FRF-FSLIC in 2013. These actions serve to reduce
contributed capital.

6.	 DISCLOSURES ABOUT THE FAIR
VALUE OF FINANCIAL INSTRUMENTS
At December 31, 2013 and 2012, the FRF’s financial assets
measured at fair value on a recurring basis are cash
equivalents of $826 million and $3.4 billion, respectively.
Cash equivalents are Special U.S. Treasury Certificates
with overnight maturities valued at prevailing interest
rates established by the Bureau of the Fiscal Service.
The valuation is considered a Level 1 measurement in the
fair value hierarchy, representing quoted prices in active
markets for identical assets.
Some of the FRF’s financial assets and liabilities are not
recognized at fair value but are recorded at amounts that
approximate fair value due to their short maturities and/
or comparability with current interest rates. Such items
include other short-term receivables and accounts payable
and other liabilities.

FINANCIAL SECTION 97

ANNUAL REPORT 2013
7.	 INFORMATION RELATING TO THE
STATEMENT OF CASH FLOWS
RECONCILIATION OF NET LOSS TO NET CASH FROM OPERATING ACTIVITIES
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2013

2012

$(516)

$(179,008)

(1,255)

(1,408)

5,528

61,115

(1,652)

(1,102)

$2,105

$(120,403)

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

8.	 SUBSEQUENT EVENTS
Subsequent events have been evaluated through March 6,
2014, the date the financial statements are available to be
issued, and management determined that there are no items
to disclose.

98 FINANCIAL SECTION

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GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)

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GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)

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GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)

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ANNUAL REPORT 2013
Appendix I

MANAGEMENT’S RESPONSE

106 FINANCIAL SECTION

MANAGEMENT’S RESPONSE (continued)

FINANCIAL SECTION 107

THIS PAGE INTENTIONALLY LEFT BLANK.

V.

Corporate
Management
Control

The FDIC uses several means to maintain comprehensive
internal controls, ensure the overall effectiveness and
efficiency of operations, and otherwise comply as necessary
with the following federal standards, among others:
♦♦ Chief Financial Officers’ Act (CFO Act)
♦♦ Federal Managers’ Financial Integrity Act (FMFIA)
♦♦ Federal Financial Management Improvement Act
(FFMIA)
♦♦ Government Performance and Results Act (GPRA)
♦♦ Federal Information Security Management Act (FISMA)
♦♦ OMB Circular A-123
♦♦ GAO’s Standards for Internal Control in the Federal
Government
As a foundation for these efforts, the DOF Corporate
Management Control Branch oversees a corporate-wide
program of relevant activities by establishing policies and
working with management in each division and office in
the FDIC. The FDIC has made a concerted effort to ensure
that financial, reputational, and operational risks have been
identified and that corresponding control needs are being
incorporated into day-to-day operations. The program also
requires that comprehensive procedures be documented,
employees be thoroughly trained, and supervisors be held
accountable for performance and results. Compliance
monitoring is carried out through periodic management
reviews and by the distribution of various activity reports
to all levels of management. Conscientious attention is
also paid to the implementation of audit recommendations
made by the FDIC Office of the Inspector General, the GAO,

the Treasury Department’s Special Inspector General for
the TARP program, and other providers of external/audit
scrutiny. The FDIC has received unmodified/unqualified
opinions on its financial statement audits for 22 consecutive
years, and these and other positive results reflect the
effectiveness of the overall management control program.
The year 2013 was a continuation of our efforts over
the past few years. Considerable energy was devoted
to ensuring that the FDIC’s processes and systems of
control have kept pace with the workload, and that the
FDIC’s foundation of controls throughout the FDIC
remained strong. Enhanced metrics, process mapping,
and monitoring activities were put in action, particularly
regarding the continuing effort to reduce hiring timeframes.
In 2014, among other things, program evaluation activities
will focus on human resources, process mapping, the
continuation of activities associated with the Dodd-Frank
Act, and closing of the Jacksonville temporary satellite
office. Continued emphasis and management scrutiny also
will be applied to the accuracy and integrity of transactions,
the expansion of performance metrics, and oversight of
systems development efforts in general.

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, 2012, through
September 30, 2013.

CORPORATE MANAGEMENT CONTROL 109

ANNUAL REPORT 2013
TABLE 1:
MANAGEMENT REPORT ON FINAL ACTION ON AUDITS WITH DISALLOWED COSTS
FOR FISCAL YEAR 2013
Dollars in Thousands
 

Number of
Reports

Audit Reports

Disallowed
Costs

A.

Management decisions – final action not taken at beginning of period

2

$3,794

B.

Management decisions made during the period

1

$741

C.

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

3

$4,535

D.

Final action taken during the period:

(a) Collections & offsets

1

$741

(b) Other

0

$0

2. Write-offs

1

$34

2

$774

1

$3,760

1. Recoveries:

3. Total of 1 & 2
E.

Audit reports needing final action at the end of the period

*

Total may not foot due to rounding.

*

TABLE 2:
MANAGEMENT REPORT ON FINAL ACTION ON AUDITS WITH RECOMMENDATIONS TO PUT
FUNDS TO BETTER USE FOR FISCAL YEAR 2013
Dollars in Thousands
 

Audit Reports

Number of
Reports

Funds Put To
Better Use

A.

Management decisions – final action not taken at beginning of period

0

$0

B.

Management decisions made during the period

0

$0

C.

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

0

$0

D.

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

0

$0

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

0

$0

3. Total of 1 and 2

0

$0

Audit reports needing final action at the end of the period

0

$0

E.

110 CORPORATE MANAGEMENT CONTROL

TABLE 3:
AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS
OVER ONE YEAR OLD FOR FISCAL YEAR 2013
MANAGEMENT ACTION IN PROCESS
Report No.
and Issue Date
AUD-12-009
04/05/2012

OIG Audit Finding

Management Action

The OIG recommended that the FDIC should
review the manner in which management
fees are calculated under structured asset
sale agreements and determine whether it is
in the FDIC’s best interest for management
fees to be paid on nonaccrual and
capitalized interest. Based on the results of
this review, revisit prior management fees
billed by ST Residential, LLC, to ensure
they were allowable and clarify the terms
of future structured asset sale agreements
to more clearly define the manner in which
management fees are calculated.

The FDIC will review Corus Construction
Venture’s (CCV) monthly reports in
determining principal balances and the
calculation of management fees. If the FDIC’s
review determines improper management
fee amounts, the FDIC will disallow the
amounts and request reimbursement;
send CCV notification that clarifies how
management fees are to be calculated going
forward; and ensure that future asset sale
agreements include a clear description of how
management fees are calculated.

The FDIC should disallow $6,258,151 in
servicing expenses that were deducted
from the collections of funds received
from the liquidation of assets during the
period covered by the audit. (Questioned
Costs of $3,754,891, which is 60 percent of
$6,258,151.)

The FDIC engaged a Compliance
Monitoring Contractor (CMC) to conduct a
comprehensive review of servicing expenses
(as part of its quarterly compliance review)
to determine the amount to be disallowed.
Upon completion of the CMC review, the
FDIC will request a reimbursement of the
disallowed amounts.

Disallowed
Costs
$0

Completed: 11/04/2013
$3,754,891

Completed: 11/04/2013
The FDIC should request that ST Residential
discontinue the practice of deducting
expenses from the collection of funds
received from the liquidation of assets
pertaining to the Managing Member’s
Servicing Obligation and Overhead expenses.

The FDIC will issue written notification to
ST Residential to discontinue the practice of
deducting expenses from the collection of
funds for servicing obligation and overhead
expenses and to comply with the transaction
documents.
Completed: 11/04/2013

The FDIC should request that FDIC’s CMC(s)
assess whether unallowable expenses
pertaining to services provided by real
estate development firms and travel, meals,
and entertainment were deducted from
the collection of funds received from
the liquidation of assets subsequent to
September 30, 2010. If such expenses had
been deducted, they should be disallowed.

The FDIC engaged a CMC to conduct a
comprehensive review of servicing expenses
to determine the amount to be disallowed.
Upon completion of the CMC review, the
FDIC will request a reimbursement for all
disallowed amounts.

The FDIC should disallow $8,929 in
management fees paid to the Managing
Member. (Questioned Costs of $5,357, which
is 60 percent of $8,929.)

The specific request is that ST Residential
reimburse CCV the disallowed amount of
$8,929. The FDIC will receive 60 percent of
the amount reimbursed to CCV.

Completed: 11/04/2013
$5,357

Completed: 11/04/2013

CORPORATE MANAGEMENT CONTROL 111

THIS PAGE INTENTIONALLY LEFT BLANK.

V  I.

Appendices

A. KEY STATISTICS
FDIC EXPENDITURES 2004–2013
Dollars in Millions
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
2004

2005

2006

2007

The FDIC’s Strategic Plan and Annual Performance Plan
provide the basis for annual planning and budgeting
for needed resources. The 2013 aggregate budget (for
corporate, receivership, and investment spending) was $2.7
billion, while actual expenditures for the year were $2.3
billion, about $0.2 billion less than 2012 expenditures.

2008

2009

2010

2011

2012

2013

Over the past decade the FDIC’s expenditures have varied in
response to workload. Earlier in the decade, expenditures
rose, largely due to increasing resolution and receivership
activity. To a lesser extent increased expenses resulted
from supervision-related costs associated with the oversight
of more troubled institutions. More recently, these
increases have been subsiding.

APPENDICES 113

ANNUAL REPORT 2013
FDIC ACTIONS ON FINANCIAL INSTITUTIONS APPLICATIONS 2011–2013
2013

2012

2011

Deposit Insurance

10

6

10

Approved1

10

6

10

0

0

0

New Branches

499

570

442

Approved

499

570

442

0

0

0

256

238

206

256

238

206

0

0

0

474

674

876

474

671

875

Denied

Denied
Mergers
Approved
Denied
Requests for Consent to Serve

2

Approved
	

Section 19

4

10

24

Section 32

470

661

851

0

3

1

Section 19

0

1

0

Section 32

0

2

1

22

26

21

22

26

21

0

0

0

81

97

84

81

95

83

Denied

Notices of Change in Control
Letters of Intent Not to Disapprove
Disapproved
Brokered Deposit Waivers
Approved
Denied
Savings Association Activities3
Approved
Denied

0

2

1

8

21

30

8

21

30

0

0

0

10

7

9

10

7

9

0

0

0

7

8

6

Non-Objection

7

8

6

Objection

0

0

0

State Bank Activities/Investments4
Approved
Denied
Conversion of Mutual Institutions

Includes deposit insurance application filed on behalf of (1) newly organized institutions, (2) existing uninsured financial services companies seeking
establishment as an insured institution, and (3) interim institutions established to facilitate merger or conversion transactions, and applications to
facilitate the establishment of thrift holding companies.
2	
Under Section 19 of the Federal Deposit Insurance (FDI) Act, an insured institution must receive FDIC approval before employing a person
convicted of dishonesty or breach of trust. Under Section 32, the FDIC must approve any change of directors or senior executive officers at a state
nonmember bank that is not in compliance with capital requirements or is otherwise in troubled condition.
3	
Amendments to Part 303 of the FDIC Rules and Regulations changed FDIC oversight responsibility in October 1998. In 1998, Part 303 changed
the Delegations of Authority to act upon applications.
4	
Section 24 of the FDI Act, in general, precludes a federally insured state bank from engaging in an activity not permissible for a national bank and
requires notices to be filed with the FDIC.
1	

114 APPENDICES

COMPLIANCE, ENFORCEMENT, AND OTHER RELATED LEGAL ACTIONS 2011–2013
2013
Total Number of Actions Initiated by the FDIC

2012

2011

414

557

557

0

0

0

Termination of Insurance
Involuntary Termination
	

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

Voluntary Termination

	

	

Sec. 8a By Order Upon Request

0

0

0

	

Sec. 8p No Deposits

7

3

7

	

Sec. 8q Deposits Assumed

4

4

2

Notices of Charges Issued

2

0

7

Orders to Pay Restitution

11

9

N/A

Consent Orders

70

120

183

Notices of Intention to Remove/Prohibit

14

8

11

Consent Orders

99

108

100

0

0

1

0

1

0

Sec. 8b Cease-and-Desist Actions

Sec. 8e Removal/Prohibition of Director or Officer

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

Sec. 7a Call Report Penalties

	

Sec. 8i Civil Money Penalties

81

164

193

	

Sec. 8i Civil Money Penalty Notices of Assessment

13

5

5

16

16

29

86

119

10

2

0

1

0

0

0

0

0

0

0

0

0

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
1

98

126

84

123,134

139,102

125,460

9

0

8

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

APPENDICES 115

ANNUAL REPORT 2013
ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND,
DECEMBER 31, 1934, THROUGH DECEMBER 31, 2013 1
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions2

Insurance Fund as
a Percentage of

Year

Insurance
Coverage2

Total Domestic
Deposits

Est. Insured
Deposits

Percentage
of Insured
Deposits

Deposit
Insurance
Fund

Total
Domestic
Deposits

2013

$250,000

$9,825,300

$6,011,310

61.2

$47,190.8

0.48

0.79

2012

250,000

9,474,582

7,406,522

78.2

32,957.8

0.35

0.44

2011

250,000

8,782,134

6,974,690

79.4

11,826.5

0.13

0.17

2010

250,000

7,887,733

6,302,329

79.9

(7,352.2)

(0.09)

(0.12)

2009

250,000

7,705,353

5,407,773

70.2

(20,861.8)

(0.27)

(0.39)

2008

100,000

7,505,408

4,750,783

63.3

17,276.3

0.23

0.36

2007

100,000

6,921,678

4,292,211

62.0

52,413.0

0.76

1.22

2006

100,000

6,640,097

4,153,808

62.6

50,165.3

0.76

1.21

2005

100,000

6,229,823

3,891,000

62.5

48,596.6

0.78

1.25

2004

100,000

5,724,775

3,622,213

63.3

47,506.8

0.83

1.31

2003

100,000

5,224,030

3,452,606

66.1

46,022.3

0.88

1.33

2002

100,000

4,916,200

3,383,720

68.8

43,797.0

0.89

1.29

2001

100,000

4,565,068

3,216,585

70.5

41,373.8

0.91

1.29

2000

100,000

4,211,895

3,055,108

72.5

41,733.8

0.99

1.37

1999

100,000

3,885,826

2,869,208

73.8

39,694.9

1.02

1.38

1998

100,000

3,817,150

2,850,452

74.7

39,452.1

1.03

1.38

1997

100,000

3,602,189

2,746,477

76.2

37,660.8

1.05

1.37

1996

100,000

3,454,556

2,690,439

77.9

35,742.8

1.03

1.33

1995

100,000

3,318,595

2,663,873

80.3

28,811.5

0.87

1.08

1994

100,000

3,184,410

2,588,619

81.3

23,784.5

0.75

0.92

1993

100,000

3,220,302

2,602,781

80.8

14,277.3

0.44

0.55

1992

100,000

3,275,530

2,677,709

81.7

178.4

0.01

0.01

1991

100,000

3,331,312

2,733,387

82.1

(6,934.0)

(0.21)

(0.25)

1990

100,000

3,415,464

2,784,838

81.5

4,062.7

0.12

0.15

1989

100,000

3,412,503

2,755,471

80.7

13,209.5

0.39

0.48

1988

100,000

2,337,080

1,756,771

75.2

14,061.1

0.60

0.80

1987

100,000

2,198,648

1,657,291

75.4

18,301.8

0.83

1.10

1986

100,000

2,162,687

1,636,915

75.7

18,253.3

0.84

1.12

1985

100,000

1,975,030

1,510,496

76.5

17,956.9

0.91

1.19

1984

100,000

1,805,334

1,393,421

77.2

16,529.4

0.92

1.19

1983

100,000

1,690,576

1,268,332

75.0

15,429.1

0.91

1.22

1982

100,000

1,544,697

1,134,221

73.4

13,770.9

0.89

1.21

1981

100,000

1,409,322

988,898

70.2

12,246.1

0.87

1.24

1980

100,000

1,324,463

948,717

71.6

11,019.5

0.83

1.16

1979

40,000

1,226,943

808,555

65.9

9,792.7

0.80

1.21

116 APPENDICES

Est. Insured
Deposits

ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND,
DECEMBER 31, 1934, THROUGH DECEMBER 31, 2013 1 (continued)
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions2

Year

Insurance
Coverage2

Total Domestic
Deposits

Est. Insured
Deposits

Insurance Fund as
a Percentage of
Percentage
of Insured
Deposits

Deposit
Insurance
Fund

Total
Domestic
Deposits

Est. Insured
Deposits

1978

40,000

1,145,835

760,706

66.4

8,796.0

0.77

1.16

1977

40,000

1,050,435

692,533

65.9

7,992.8

0.76

1.15

1976

40,000

941,923

628,263

66.7

7,268.8

0.77

1.16

1975

40,000

875,985

569,101

65.0

6,716.0

0.77

1.18

1974

40,000

833,277

520,309

62.4

6,124.2

0.73

1.18

1973

20,000

766,509

465,600

60.7

5,615.3

0.73

1.21

1972

20,000

697,480

419,756

60.2

5,158.7

0.74

1.23

1971

20,000

610,685

374,568

61.3

4,739.9

0.78

1.27

1970

20,000

545,198

349,581

64.1

4,379.6

0.80

1.25

1969

20,000

495,858

313,085

63.1

4,051.1

0.82

1.29

1968

15,000

491,513

296,701

60.4

3,749.2

0.76

1.26

1967

15,000

448,709

261,149

58.2

3,485.5

0.78

1.33

1966

15,000

401,096

234,150

58.4

3,252.0

0.81

1.39

1965

10,000

377,400

209,690

55.6

3,036.3

0.80

1.45

1964

10,000

348,981

191,787

55.0

2,844.7

0.82

1.48

1963

10,000

313,304

177,381

56.6

2,667.9

0.85

1.50

1962

10,000

297,548

170,210

57.2

2,502.0

0.84

1.47

1961

10,000

281,304

160,309

57.0

2,353.8

0.84

1.47

1960

10,000

260,495

149,684

57.5

2,222.2

0.85

1.48

1959

10,000

247,589

142,131

57.4

2,089.8

0.84

1.47

1958

10,000

242,445

137,698

56.8

1,965.4

0.81

1.43

1957

10,000

225,507

127,055

56.3

1,850.5

0.82

1.46

1956

10,000

219,393

121,008

55.2

1,742.1

0.79

1.44

1955

10,000

212,226

116,380

54.8

1,639.6

0.77

1.41

1954

10,000

203,195

110,973

54.6

1,542.7

0.76

1.39

1953

10,000

193,466

105,610

54.6

1,450.7

0.75

1.37

1952

10,000

188,142

101,841

54.1

1,363.5

0.72

1.34

1951

10,000

178,540

96,713

54.2

1,282.2

0.72

1.33

1950

10,000

167,818

91,359

54.4

1,243.9

0.74

1.36

1949

5,000

156,786

76,589

48.8

1,203.9

0.77

1.57

1948

5,000

153,454

75,320

49.1

1,065.9

0.69

1.42

1947

5,000

154,096

76,254

49.5

1,006.1

0.65

1.32

1946

5,000

148,458

73,759

49.7

1,058.5

0.71

1.44

1945

5,000

157,174

67,021

42.6

929.2

0.59

1.39

1944

5,000

134,662

56,398

41.9

804.3

0.60

1.43

APPENDICES 117

ANNUAL REPORT 2013
ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND,
DECEMBER 31, 1934, THROUGH DECEMBER 31, 2013 1 (continued)
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions2

Year

Insurance
Coverage2

Total Domestic
Deposits

Est. Insured
Deposits

Insurance Fund as
a Percentage of
Percentage
of Insured
Deposits

Deposit
Insurance
Fund

Total
Domestic
Deposits

Est. Insured
Deposits

1943

5,000

111,650

48,440

43.4

703.1

0.63

1.45

1942

5,000

89,869

32,837

36.5

616.9

0.69

1.88

1941

5,000

71,209

28,249

39.7

553.5

0.78

1.96

1940

5,000

65,288

26,638

40.8

496.0

0.76

1.86

1939

5,000

57,485

24,650

42.9

452.7

0.79

1.84

1938

5,000

50,791

23,121

45.5

420.5

0.83

1.82

1937

5,000

48,228

22,557

46.8

383.1

0.79

1.70

1936

5,000

50,281

22,330

44.4

343.4

0.68

1.54

1935

5,000

45,125

20,158

44.7

306.0

0.68

1.52

1934

5,000

40,060

18,075

45.1

291.7

0.73

1.61

Prior to 1989, figures are for the Bank Insurance Fund (BIF) only and exclude insured branches of foreign banks. For 1989 to 2005, figures represent
sum of the BIF and Savings Association Insurance Fund (SAIF) amounts; for 2006 to 2013, figures are for DIF. Amounts for 1989-2013 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.

1

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

2

118 APPENDICES

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS,
SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2013
Dollars in Millions
Income

Expenses and Losses

Year

Total

Assessment
Income

Assessment
Credits

Investment
and Other

Total

$201,686.7

$137,510.7

$11,392.9

$75,568.9

2013

10,458.9

9,734.2

0.0

724.7

Effective
Assessment
Rate1

Total

Provision
for
Ins. Losses

$154,785.2 $120,599.0
0.0776%

(4,045.9)

(5,659.4)

Admin.
and
Operating
Expenses2

Interest
& Other Ins.
Expenses

Funding
Transfer
from the
FSLIC
Resolution
Fund

$24,743.1

$9,443.1

$139.5

$47,041.0

1,608.7

4.8

0

14,504.8

Net
Income/
(Loss)

2012

18,522.3

12,397.2

0.2

6,125.3

0.1012

(2,599.0)

(4,222.6)

1,777.5

(153.9)

0

21,121.3

2011

16,342.0

13,499.5

0.9

2,843.4

0.1115

(2,915.4)

(4,413.6)

1,625.4

(127.2)

0

19,257.4

2010

13,379.9

13,611.2

0.8

(230.5)

0.1772

75.0

(847.8)

1,592.6

(669.8)

0

13,304.9

2009

24,706.4

17,865.4

148.0

6,989.0

0.2330

60,709.0

57,711.8

1,271.1

1,726.1

0

(36,002.6)

2008

7,306.3

4,410.4

1,445.9

4,341.8

0.0418

44,339.5

41,838.8

1,033.5

1,467.2

0

(37,033.2)

2007

3,196.2

3,730.9

3,088.0

2,553.3

0.0093

1,090.9

95.0

992.6

3.3

0

2,105.3

2006

2,643.5

31.9

0.0

2,611.6

0.0005

904.3

(52.1)

950.6

5.8

0

1,739.2

2005

2,420.5

60.9

0.0

2,359.6

0.0010

809.3

(160.2)

965.7

3.8

0

1,611.2

2004

2,240.3

104.2

0.0

2,136.1

0.0019

607.6

(353.4)

941.3

19.7

0

1,632.7

2003

2,173.6

94.8

0.0

2,078.8

0.0019

(67.7)

(1,010.5)

935.5

7.3

0

2,241.3

2002

2,384.7

107.8

0.0

2,276.9

0.0023

719.6

(243.0)

945.1

17.5

0

1,665.1

2001

2,730.1

83.2

0.0

2,646.9

0.0019

3,123.4

2,199.3

887.9

36.2

0

(393.3)

2000

2,570.1

64.3

0.0

2,505.8

0.0016

945.2

28.0

883.9

33.3

0

1,624.9

1999

2,416.7

48.4

0.0

2,368.3

0.0013

2,047.0

1,199.7

823.4

23.9

0

369.7

1998

2,584.6

37.0

0.0

2,547.6

0.0010

817.5

(5.7)

782.6

40.6

0

1,767.1

1997

2,165.5

38.6

0.0

2,126.9

0.0011

247.3

(505.7)

677.2

75.8

0

1,918.2

1996

7,156.8

5,294.2

0.0

1,862.6

0.1622

353.6

(417.2)

568.3

202.5

0

6,803.2

1995

5,229.2

3,877.0

0.0

1,352.2

0.1238

202.2

(354.2)

510.6

45.8

0

5,027.0

1994

7,682.1

6,722.7

0.0

959.4

0.2192

(1,825.1)

(2,459.4)

443.2

191.1

0

9,507.2

1993

7,354.5

6,682.0

0.0

672.5

0.2157

(6,744.4)

(7,660.4)

418.5

497.5

0

14,098.9

1992

6,479.3

5,758.6

0.0

720.7

0.1815

(596.8)

(2,274.7)

614.8

1,063.1

35.4

7,111.5

1991

5,886.5

5,254.0

0.0

632.5

0.1613

16,925.3

15,496.2

326.1

1,103.0

42.4

(10,996.4)

1990

3,855.3

2,872.3

0.0

983.0

0.0868

13,059.3

12,133.1

275.6

650.6

56.1

(9,147.9)

1989

3,494.8

1,885.0

0.0

1,609.8

0.0816

4,352.2

3,811.3

219.9

321.0

5.6

(851.8)

3

1988

3,347.7

1,773.0

0.0

1,574.7

0.0825

7,588.4

6,298.3

223.9

1,066.2

0

(4,240.7)

1987

3,319.4

1,696.0

0.0

1,623.4

0.0833

3,270.9

2,996.9

204.9

69.1

0

48.5

1986

3,260.1

1,516.9

0.0

1,743.2

0.0787

2,963.7

2,827.7

180.3

(44.3)

0

296.4

1985

3,385.5

1,433.5

0.0

1,952.0

0.0815

1,957.9

1,569.0

179.2

209.7

0

1,427.6

1984

3,099.5

1,321.5

0.0

1,778.0

0.0800

1,999.2

1,633.4

151.2

214.6

0

1,100.3

1983

2,628.1

1,214.9

164.0

1,577.2

0.0714

969.9

675.1

135.7

159.1

0

1,658.2

1982

2,524.6

1,108.9

96.2

1,511.9

0.0769

999.8

126.4

129.9

743.5

0

1,524.8

1981

2,074.7

1,039.0

117.1

1,152.8

0.0714

848.1

320.4

127.2

400.5

0

1,226.6

APPENDICES 119

ANNUAL REPORT 2013
INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS,
SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2013 (continued)
Dollars in Millions
Income

Expenses and Losses

Assessment
Income

Assessment
Credits

Investment
and Other

Effective
Assessment
Rate1

Provision
for
Ins. Losses

Total

Admin.
and
Operating
Expenses2

Interest
& Other Ins.
Expenses

Funding
Transfer
from the
FSLIC
Resolution
Fund

Net
Income/
(Loss)

Year

Total

1980

1,310.4

951.9

521.1

879.6

0.0370

83.6

(38.1)

118.2

3.5

0

1,226.8

1979

1,090.4

881.0

524.6

734.0

0.0333

93.7

(17.2)

106.8

4.1

0

996.7

1978

952.1

810.1

443.1

585.1

0.0385

148.9

36.5

103.3

9.1

0

803.2

1977

837.8

731.3

411.9

518.4

0.0370

113.6

20.8

89.3

3.5

0

724.2

1976

764.9

676.1

379.6

468.4

0.0370

212.3

28.0

180.44

3.9

0

552.6

1975

689.3

641.3

362.4

410.4

0.0357

97.5

27.6

67.7

2.2

0

591.8

1974

668.1

587.4

285.4

366.1

0.0435

159.2

97.9

59.2

2.1

0

508.9

1973

561.0

529.4

283.4

315.0

0.0385

108.2

52.5

54.4

1.3

0

452.8

1972

467.0

468.8

280.3

278.5

0.0333

65.7

10.1

49.6

6.05

0

401.3

1971

415.3

417.2

241.4

239.5

0.0345

60.3

13.4

46.9

0.0

0

355.0

1970

382.7

369.3

210.0

223.4

0.0357

46.0

3.8

42.2

0.0

0

336.7

1969

335.8

364.2

220.2

191.8

0.0333

34.5

1.0

33.5

0.0

0

301.3

1968

295.0

334.5

202.1

162.6

0.0333

29.1

0.1

29.0

0.0

0

265.9

1967

263.0

303.1

182.4

142.3

0.0333

27.3

2.9

24.4

0.0

0

235.7

1966

241.0

284.3

172.6

129.3

0.0323

19.9

0.1

19.8

0.0

0

221.1

1965

214.6

260.5

158.3

112.4

0.0323

22.9

5.2

17.7

0.0

0

191.7

1964

197.1

238.2

145.2

104.1

0.0323

18.4

2.9

15.5

0.0

0

178.7

1963

181.9

220.6

136.4

97.7

0.0313

15.1

0.7

14.4

0.0

0

166.8

1962

161.1

203.4

126.9

84.6

0.0313

13.8

0.1

13.7

0.0

0

147.3

1961

147.3

188.9

115.5

73.9

0.0323

14.8

1.6

13.2

0.0

0

132.5

1960

144.6

180.4

100.8

65.0

0.0370

12.5

0.1

12.4

0.0

0

132.1

1959

136.5

178.2

99.6

57.9

0.0370

12.1

0.2

11.9

0.0

0

124.4

1958

126.8

166.8

93.0

53.0

0.0370

11.6

0.0

11.6

0.0

0

115.2

1957

117.3

159.3

90.2

48.2

0.0357

9.7

0.1

9.6

0.0

0

107.6

1956

111.9

155.5

87.3

43.7

0.0370

9.4

0.3

9.1

0.0

0

102.5

1955

105.8

151.5

85.4

39.7

0.0370

9.0

0.3

8.7

0.0

0

96.8

1954

99.7

144.2

81.8

37.3

0.0357

7.8

0.1

7.7

0.0

0

91.9

1953

94.2

138.7

78.5

34.0

0.0357

7.3

0.1

7.2

0.0

0

86.9

1952

88.6

131.0

73.7

31.3

0.0370

7.8

0.8

7.0

0.0

0

80.8

1951

83.5

124.3

70.0

29.2

0.0370

6.6

0.0

6.6

0.0

0

76.9

1950

84.8

122.9

68.7

30.6

0.0370

7.8

1.4

6.4

0.0

0

77.0

1949

151.1

122.7

0.0

28.4

0.0833

6.4

0.3

6.1

0.0

0

144.7

1948

145.6

119.3

0.0

26.3

0.0833

7.0

0.7

6.3

1947

157.5

114.4

0.0

43.1

0.0833

9.9

0.1

9.8

120 APPENDICES

6

0.0

0

138.6

0.0

0

147.6

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS,
SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2013 (continued)
Dollars in Millions
Income

Year

Expenses and Losses

Assessment
Income

Total

Assessment
Credits

Investment
and Other

Effective
Assessment
Rate1

Provision
for
Ins. Losses

Total

Admin.
and
Operating
Expenses2

Interest
& Other Ins.
Expenses

Funding
Transfer
from the
FSLIC
Resolution
Fund

Net
Income/
(Loss)

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

51.2

40.7

0.0

10.5

0.0833

16.4

7.2

9.2

0.0

0

34.8

1938

47.7

38.3

0.0

9.4

0.0833

11.3

2.5

8.8

0.0

0

36.4

1937

48.2

38.8

0.0

9.4

0.0833

12.2

3.7

8.5

0.0

0

36.0

1936

43.8

35.6

0.0

8.2

0.0833

10.9

2.6

8.3

0.0

0

32.9

1935

20.8

11.5

0.0

9.3

0.0833

11.3

2.8

8.5

0.0

0

9.5

1933-34

7.0

0.0

0.0

7.0

10.0

0.2

9.8

0.0

0

(3.0)

N/A

1	

Figures represent only BIF-insured institutions prior to 1990, BIF- and SAIF-insured institutions from 1990 through 2005, and DIF-insured institutions
beginning in 2006. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. The effective
assessment rate is calculated from annual assessment income (net of assessment credits), excluding transfers to the Financing Corporation (FICO),
Resolution Funding Corporation (REFCORP) and FSLIC Resolution Fund, divided by the four quarter average assessment base. The effective
rates from 1950 through 1984 varied from the statutory rate of 0.0833 percent due to assessment credits provided in those years. The statutory
rate increased to 0.12 percent in 1990 and to a minimum of 0.15 percent in 1991. The effective rates in 1991 and 1992 varied because the FDIC
exercised new authority to increase assessments above the statutory minimum rate when needed. Beginning in 1993, the effective rate was based
on a risk-related premium system under which institutions paid assessments in the range of 0.23 percent to 0.31 percent. In May 1995, the BIF
reached the mandatory recapitalization level of 1.25 percent. As a result, BIF assessment rates were reduced to a range of 0.04 percent to 0.31
percent of assessable deposits, effective June 1995, and assessments totaling $1.5 billion were refunded in September 1995. Assessment rates
for the BIF were lowered again to a range of 0 to 0.27 percent of assessable deposits, effective the start of 1996. In 1996, the SAIF collected a
one-time special assessment of $4.5 billion. Subsequently, assessment rates for the SAIF were lowered to the same range as the BIF, effective
October 1996. This range of rates remained unchanged for both funds through 2006. As part of the implementation of the Federal Deposit
Insurance Reform Act of 2005, assessment rates were increased to a range of 0.05 percent to 0.43 percent of assessable deposits effective at the
start of 2007, but many institutions received a one-time assessment credit ($4.7 billion in total) to offset the new assessments. For the first quarter
of 2009, assessment rates were increased to a range of 0.12 to 0.50 percent of assessable deposits. From the second quarter of 2009 through
the first quarter of 2011, initial assessment rates ranged between 0.12 and 0.45 percent of assessable deposits. Initial rates are subject to further
adjustments. Beginning in the second quarter of 2011, the assessment base changed to average total consolidated assets less average tangible
equity (with certain adjustments for banker’s banks and custodial banks), as required by the Dodd-Frank Act. The FDIC implemented a new
assessment rate schedule at the same time to conform to the larger assessment base. Initial assessment rates were lowered to a range of 0.05 to
0.35 percent of the new base. The annualized assessment rates averaged approximately 17.6 cents per $100 of assessable deposits for the first
quarter of 2011 and 11.1 cents per $100 of the new base for the last three quarters of 2011 (which is the figure shown in the table). The effective
assessment rate for 2012 and 2013 is based on full year accrued assessment income divided by a four-quarter average of the new assessment base.
On June 30, 2009, a special assessment was imposed on all insured banks and thrifts, which amounted in aggregate to approximately $5.4 billion.
For 8,106 institutions, with $9.3 trillion in assets, the special assessment was 5 basis points of each institution’s assets minus tier one capital; 89
other institutions, with assets of $4.0 trillion, had their special assessment capped at 10 basis points of their second quarter assessment base.

2	

These expenses, which are presented as operating expenses in the Statement of Income and Fund Balance, pertain to the FDIC in its corporate
capacity only and do not include costs that are charged to the failed bank receiverships that are managed by the FDIC. The receivership expenses
are presented as part of the “Receivables from Resolutions, net” line on the Balance Sheet. The narrative and graph presented on page 113 of this
report shows the aggregate (corporate and receivership) expenditures of the FDIC.	

3

	Includes $210 million for the cumulative effect of an accounting change for certain postretirement benefits.

4	

Includes a $106 million net loss on government securities.

5

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

6

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

APPENDICES 121

ANNUAL REPORT 2013
NUMBER, ASSETS, DEPOSITS, LOSSES, AND LOSS TO FUNDS OF INSURED THRIFTS
TAKEN OVER OR CLOSED BECAUSE OF FINANCIAL DIFFICULTIES, 1989 THROUGH 1995 1
Dollars in Thousands
Year

Number
of
Thrifts

Assets

Deposits

Estimated
Receivership
Loss2

Loss to
Funds3

Total

748

$393,986,574

$317,501,978

$75,977,713

$81,580,200

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

3,286,907

3,832,145

1991

144

78,898,904

65,173,122

9,235,967

9,734,263

1990

213

129,662,498

98,963,962

16,062,552

19,257,446

1989

318

134,519,630

113,168,009

47,085,028

48,648,785

4

1

Beginning in 1989 through July 1, 1995, all thrift closings were the responsibility of the Resolution Trust Corporation (RTC). Since the RTC was
terminated on December 31, 1995, and all assets and liabilities transferred to the FSLIC Resolution Fund (FRF), all the results of the thrift closing
activity from 1989 through 1995 are now reflected on FRF’s books. Year is the year of failure, not the year of resolution.

2

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

3

The Loss to Funds represents the total resolution cost of the failed thrifts in the FRF-RTC fund, which includes corporate revenue and expense items
such as interest expense on Federal Financing Bank debt, interest expense on escrowed funds, and interest revenue on advances to receiverships,
in addition to the estimated losses for receiverships.

4

Total for 1989 excludes nine failures of the former FSLIC.

122 APPENDICES

FDIC- INSURED INSTITUTIONS CLOSED DURING 2013
Dollars in Thousands
Codes for Bank Class:
NM	 =	 State-chartered bank that is not a member
of the Federal Reserve System
N	 =	 National Bank

Name and Location

Bank
Class

Number
of
Deposit
Accounts

Total
Assets1

SB	 =	 Savings Bank
SI	 =	 Stock and Mutual
Savings Bank

Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

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

Date of
Closing
or
Acquisition

Receiver/Assuming
Bank and Location

Purchase and Assumption - All Deposits
Sunrise Bank
Valdosta, GA

NM

2,469

$60,793

$57,775

$60,695

$16,119

05/10/13

Synovus Bank
Columbus, GA

Community
South Bank
Parsons, TN

NM

18,041

$386,908

$377,672

$367,166

$72,494

08/23/13

CB&S Bank, Inc.
Russellville, AL

Whole Bank Purchase and Assumption - All Deposits
Westside
Community Bank
University Place, WA

NM

3,258

$91,935

$91,879

$94,131

$26,534

01/11/13

Sunwest Bank
Irvine, CA

1st Regents Bank
Andover, MN

NM

1,376

$49,626

$49,147

$48,853

$16,466

01/18/13

First Minnesota
Bank
Minnetoka, MN

Covenant Bank
Chicago, IL

NM

3,673

$58,422

$54,202

$55,140

$21,756

02/15/13

Liberty Bank and
Trust Company
New Orleans, LA

Frontier Bank
LaGrange, GA

NM

13,271

$258,840

$224,108

$215,689

$58,265

03/08/13

HeritageBank
of the South
Albany, GA

Gold Canyon Bank
Gold Canyon, AZ

SM

1,370

$42,125

$41,728

$43,172

$11,080

04/05/13

First Scottsdale
Bank, National
Association
Scottsdale, AZ

Chipola Community
Bank
Marianna, FL

NM

1,567

$37,471

$37,067

$37,490

$10,348

04/19/13

First Federal
Bank of Florida
Lake City, FL

First Federal Bank
Lexington, KY

SA

5,017

$92,982

$87,196

$89,003

$10,477

04/19/13

Your Community
Bank
New Albany, IN

Heritage Bank
of North Florida
Orange Park, FL

NM

2,692

$103,960

$106,348

$105,923

$26,495

04/19/13

FirstAtlantic Bank
Jacksonville, FL

Douglas County
Bank
Douglasville, GA

NM

15,310

$317,288

$315,326

$308,912

$91,392

04/26/13

Hamilton State Bank
Hoschton, GA

APPENDICES 123

ANNUAL REPORT 2013
FDIC- INSURED INSTITUTIONS CLOSED DURING 2013 (continued)
Dollars in Thousands
Codes for Bank Class:
NM	 =	 State-chartered bank that is not a member
of the Federal Reserve System
N	 =	 National Bank

Bank
Class

Number
of
Deposit
Accounts

Parkway Bank
Lenoir, NC

NM

Pisgah Community
Bank
Asheville, NC

SB	 =	 Savings Bank
SI	 =	 Stock and Mutual
Savings Bank
Insured
Deposit Funding
and Other
Disbursements

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

Date of
Closing
or
Acquisition

Total
Assets1

Total
Deposits1

6,035

$109,642

$104,709

$108,519

$18,623

04/26/13

CertusBank,
National
Association
Easley, SC

NM

587

$21,880

$21,246

$22,975

$9,708

05/10/13

Capital Bank,
National
Association
Rockville, MD

Central Arizona Bank
Scottsdale, AZ

NM

1,006

$31,550

$30,822

$28,922

$8,645

05/14/13

Western
State Bank
Devils Lake, ND

Banks of Wisconsin
d/b/a
Bank of Kenosha
Kenosha, WI

NM

7,008

$134,024

$127,590

$127,946

$19,763

05/31/13

North Shore
Bank, FSB
Brookfield, WI

1st Commerce Bank
North Las Vegas, NV

NM

242

$20,152

$19,579

$21,891

$9,880

06/06/13

Plaza Bank
Irvine, CA

N

16,725

$437,282

$373,366

$376,858

$27,106

06/07/13

First Tennessee
Bank, National
Association
Memphis, TN

First Community
Bank of
Southwest Florida
Fort Myers, FL

NM

9,715

$247,315

$243,618

$239,309

$27,077

08/02/13

C1 Bank
Saint Petersburg, FL

Bank of Wausau
Wausau, WI

NM

1,465

$43,564

$40,663

$44,292

$13,500

08/09/13

Nicolet
National Bank
Green Bay, WI

Sunrise Bank
of Arizona
Phoenix, AZ

NM

5,430

$202,179

$196,924

$188,521

$17,049

08/23/13

First Fidelity
Bank, National
Association
Oklahoma City, OK

N

89,508

$3,085,764

$2,338,335

$2,225,494

$637,523

09/13/13

PlainsCapital Bank
Dallas, TX

NM

2,491

$24,724

$24,591

$25,405

$5,074

10/30/13

First Federal
Bank of Florida
Lake City, FL

Name and Location

Mountain
National Bank
Sevierville, TN

First National Bank
Edinburg, TX
Bank of Jackson
County
Graceville, FL

124 APPENDICES

Receiver/Assuming
Bank and Location

FDIC- INSURED INSTITUTIONS CLOSED DURING 2013 (continued)
Dollars in Thousands
Codes for Bank Class:
NM	 =	 State-chartered bank that is not a member
of the Federal Reserve System
N	 =	 National Bank

Name and Location

Bank
Class

Texas Community
Bank, National
Association
The Woodlands, TX

Number
of
Deposit
Accounts

SB	 =	 Savings Bank
SI	 =	 Stock and Mutual
Savings Bank

Total
Assets1

Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

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

Date of
Closing
or
Acquisition

Receiver/Assuming
Bank and Location

N

2,160

$159,257

$142,640

$118,657

$10,765

12/13/13

Spirit of Texas
Bank, SSB
College Station, TX

NM

1,049

$26,368

$25,715

$38,002

$7,800

9/13/13

Federal Deposit
Insurance
Corporation

Insured Deposit Payoff
The Community’s
Bank
Bridgeport, CT
1	

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

2	

Estimated losses are as of 12/31/13. Estimated losses are routinely adjusted with updated information from new appraisals and asset sales,
which ultimately affect the asset values and projected recoveries. Represents the estimated loss to the DIF from deposit insurance obligations.

APPENDICES 125

ANNUAL REPORT 2013
RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS
FOR THE PROTECTION OF DEPOSITORS, 1934 - 2013
Dollars in Thousands
Bank and Thrift Failures1

Total
Deposits3

Total
Assets3

2,584

Year2

Number
of Banks/
Thrifts

$931,664,951

Insured Deposit
Funding
and Other
Disbursements

$700,668,975

$577,938,885

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

$399,685,827

$59,761,118

$118,491,940

2013

24

6,044,051

5,132,246

4,992,965

0

3,819,026

1,173,939

2012

51

11,617,348

11,009,630

11,074,800

1,201,587

7,069,516

2,803,697

2011

92

34,922,997

31,071,862

31,782,065

2,617,454

21,479,949

7,571,752

2010

4

157

92,084,987

78,290,185

82,240,983

51,181,613

10,097,143

20,962,227

2009

4

140

169,709,160

137,783,121

136,331,221

88,529,446

14,462,095

33,339,680

20084

25

371,945,480

234,321,715

205,495,557

183,834,032

2,229,312

19,432,213

2007

3

2,614,928

2,424,187

1,918,810

1,369,413

380,982

168,415

2006

0

0

0

0

0

0

0

2005

0

0

0

0

0

0

0

2004

4

170,099

156,733

138,971

134,978

76

3,917

2003

3

947,317

901,978

883,772

812,933

8,192

62,647

2002

11

2,872,720

2,512,834

2,127,249

1,704,030

7,655

415,564

2001

4

1,821,760

1,661,214

1,605,612

1,128,577

184,384

292,651

2000

7

410,160

342,584

297,313

265,175

0

32,138

1999

8

1,592,189

1,320,573

1,307,442

711,758

5,674

590,010

1998

3

290,238

260,675

292,691

58,248

11,752

222,691

1997

1

27,923

27,511

25,546

20,520

0

5,026

1996

6

232,634

230,390

201,533

140,918

0

60,615

1995

6

802,124

776,387

609,043

524,571

0

84,472

1994

13

1,463,874

1,397,018

1,224,769

1,045,718

0

179,051

1993

41

3,828,939

3,509,341

3,841,658

3,209,012

0

632,646

1992

120

45,357,237

39,921,310

14,541,316

10,866,760

543

3,674,013

1991

124

64,556,512

52,972,034

21,499,567

15,500,130

4,819

5,994,618

1990

168

16,923,462

15,124,454

10,812,484

8,040,995

0

2,771,489

1989

206

28,930,572

24,152,468

11,443,281

5,247,995

0

6,195,286

1988

200

38,402,475

26,524,014

10,432,655

5,055,158

0

5,377,497

1987

184

6,928,889

6,599,180

4,876,994

3,014,502

0

1,862,492

1986

138

7,356,544

6,638,903

4,632,121

2,949,583

0

1,682,538

1985

116

3,090,897

2,889,801

2,154,955

1,506,776

0

648,179

1984

78

2,962,179

2,665,797

2,165,036

1,641,157

0

523,879

1983

44

3,580,132

2,832,184

3,042,392

1,973,037

0

1,069,355

1982

32

1,213,316

1,056,483

545,612

419,825

0

125,787

1981

7

108,749

100,154

114,944

105,956

0

8,988

1980

10

239,316

219,890

152,355

121,675

0

30,680

1934 - 1979

558

8,615,743

5,842,119

5,133,173

4,752,295

0

380,878

126 APPENDICES

RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS
FOR THE PROTECTION OF DEPOSITORS, 1934 - 2013 (continued)
Dollars in Thousands
Assistance Transactions

Total
Deposits3

Insured Deposit
Funding
and Other
Disbursements

$3,317,099,253

$1,442,173,417

0

0

0

0

2011

0

2010
5

Number
of Banks/
Thrifts

Total
Assets3

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

154

$11,630,356

$6,199,875

$0

$5,430,481

2013
2012

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

2009

8

1,917,482,183

1,090,318,282

0

0

0

0

20085

5

1,306,041,994

280,806,966

0

0

0

0

2007

0

0

0

0

0

0

0

2006

0

0

0

0

0

0

0

2005

0

0

0

0

0

0

0

2004

0

0

0

0

0

0

0

2003

0

0

0

0

0

0

0

2002

0

0

0

0

0

0

0

2001

0

0

0

0

0

0

0

2000

0

0

0

0

0

0

0

1999

0

0

0

0

0

0

0

1998

0

0

0

0

0

0

0

1997

0

0

0

0

0

0

0

1996

0

0

0

0

0

0

0

1995

0

0

0

0

0

0

0

1994

0

0

0

0

0

0

0

1993

0

0

0

0

0

0

0

1992

2

33,831

33,117

1,486

1,236

0

250

1991

3

78,524

75,720

6,117

3,093

0

3,024

1990

1

14,206

14,628

4,935

2,597

0

2,338

Year2

1989

1

4,438

6,396

2,548

252

0

2,296

1988

80

15,493,939

11,793,702

1,730,351

189,709

0

1,540,642

1987

19

2,478,124

2,275,642

160,877

713

0

160,164

1986

7

712,558

585,248

158,848

65,669

0

93,179

1985

4

5,886,381

5,580,359

765,732

406,676

0

359,056

1984

2

40,470,332

29,088,247

5,531,179

4,414,904

0

1,116,275

1983

4

3,611,549

3,011,406

764,690

427,007

0

337,683

APPENDICES 127

ANNUAL REPORT 2013
RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS
FOR THE PROTECTION OF DEPOSITORS, 1934 - 2013 (continued)
Dollars in Thousands
Assistance Transactions
Insured Deposit
Funding
and Other
Disbursements

Year2

Number
of Banks/
Thrifts

1982

10

10,509,286

9,118,382

1,729,538

686,754

0

1,042,784

1981

3

4,838,612

3,914,268

774,055

1,265

0

772,790

1980

1

7,953,042

5,001,755

0

0

0

0

1934 - 1979

4

1,490,254

549,299

0

0

0

0

Total
Assets3

Total
Deposits3

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

1	

Institutions for which the FDIC is appointed receiver, including deposit payoff, insured deposit transfer, and deposit assumption cases.

2	

For 1990 through 2005, amounts represent the sum of BIF and SAIF failures (excluding those handled by the RTC); prior to 1990, figures are only
for the BIF. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. For 2006 to 2013, figures are
for the DIF.

3	

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

4	

Includes amounts related to transaction account coverage under the Transaction Account Guarantee Program (TAG). The estimated losses as of
12/31/13 for TAG accounts in 2010, 2009, and 2008 are $490 million, $1,408 million, and $15 million, respectively.

5	

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

128 APPENDICES

B. OVERVIEW OF THE INDUSTRY
The 6,812 FDIC-insured commercial banks and savings
institutions that filed financial results for full year 2013
reported net income of $154.7 billion, an increase of 9.6
percent compared to 2012. This is the fourth consecutive
year that industry earnings have registered a year-overyear increase. The improvement in earnings was primarily
attributable to lower expenses for loan-loss provisions,
reduced noninterest expenses, and increased noninterest
income. More than half of all institutions—54.2 percent—
reported year-over-year increases in net income, and the
percentage of institutions with negative net income for the
year fell to 7.8 percent, down from 11 percent a year earlier.
The average return on assets (ROA) was 1.07 percent, up
from 1.00 percent in 2012. This is the highest annual ROA
for the industry since 2006. However, fewer than half of
insured institutions—45.3 percent—had higher ROAs in
2013 than in 2012. Insured institutions set aside $32.1
billion in provisions for loan and lease losses during 2013,
a decline of $25.7 billion (44.4 percent) compared to 2012.
This is the smallest annual loss provision since 2006. The
industry’s total noninterest expenses fell by $4.5 billion
(1.1 percent), as itemized litigation expenses declined by
$4.5 billion. Noninterest income rose by $3.2 billion (1.3
percent), as trading revenue was $4.3 billion (23.7 percent)
higher, servicing fee income was up by $3.9 billion (27.5
percent), and income from trust activities rose by $2.2
billion (7.7 percent). Noninterest income from changes in
the fair values of financial instruments accounted for under
a fair value option was $6.5 billion lower than in 2012.
Realized gains on securities were $5.2 billion (53.7 percent)
lower, as higher interest rates in 2013 reduced the market
values of banks’ securities portfolios.
A challenging interest-rate environment contributed to a
decline in the industry’s net interest income in 2013. Net
interest income registered a third consecutive annual
decline, falling by $3.7 billion (0.9 percent), as interest
income declined more rapidly than interest expense. Total
interest income was $16 billion (3.3 percent) lower than in
2012, even though average interest-earning asset balances
were $487.3 billion (4 percent) higher, as older, higher-yield

assets matured and were replaced by lower-yielding current
investments. The average net interest margin fell from 3.42
percent in 2012 to 3.26 percent, the lowest annual average
since 2008.
Indicators of asset quality continued to improve in
2013. In the twelve months ended December 31, total
noncurrent loans and leases—those that were 90 days
or more past due or in nonaccrual status—declined
by $69.7 billion (25.2 percent). Loans secured by real
estate properties accounted for the largest share of the
reduction in noncurrent loans ($64.9 billion). Noncurrent
1-4 family residential real estate loans fell by $44.5 billion
(23.2 percent), noncurrent nonfarm nonresidential real
estate loans declined by $9.5 billion (31.1 percent), and
noncurrent real estate construction loans fell by $8.6
billion (50.6 percent). Noncurrent balances in all other
major loan categories declined, led by loans to commercial
and industrial (C&I) borrowers (down $3.3 billion, or 24.8
percent).
Net charge-offs of loans and leases (NCOs) totaled $53.2
billion in 2013, a decline of $29 billion (35.3 percent)
compared to 2012. Real estate loans secured by 1-4 family
residential properties registered the largest year-over-year
decline, with NCOs falling by $15.9 billion (51.7 percent).
Net charge-offs of credit card loans were $3.2 billion
(12.5 percent) lower, while net charge-offs of nonfarm
nonresidential real estate loans declined by $3 billion
(51.4 percent), and NCOs of real estate construction and
development loans were $2.8 billion (73 percent) lower than
in 2012. NCOs in all other major loan categories also posted
significant declines. At the end of 2013, there were 467
institutions on the FDIC’s “Problem List,” down from 651
“problem” institutions a year earlier.
Asset growth remained modest in 2013. During the
12 months ended December 31, total assets of insured
institutions increased by $272.1 billion (1.9 percent). Loans
and leases accounted for more than half of the increase
in total assets, rising by $197.3 billion (2.6 percent). C&I
loans increased by $101.5 billion (6.8 percent), nonfarm
nonresidential real estate loans rose by $36.1 billion
(3.4 percent), and auto loans increased by $33.2 billion

APPENDICES 129

ANNUAL REPORT 2013
(10.4 percent). In contrast, home equity lines of credit fell
by $44 billion (7.9 percent), and other real estate loans
secured by 1-4 family residential properties declined by
$63.5 billion (3.4 percent).
Growth in deposits outpaced the increase in total assets. In
the 12 months ended December 31, total deposits of insured
institutions increased by $374.7 billion (3.5 percent).
Deposits in domestic offices rose by $343.9 billion,

130 APPENDICES

(3.6 percent), while foreign office deposits increased by
$30.7 billion (2.2 percent). Much of the increase in
domestic deposits occurred in balances in largedenomination accounts. Deposits in accounts with
denominations greater than $250,000 increased by
$269.4 billion, (5.9 percent). Nondeposit liabilities declined
by $128.2 billion (6.4 percent), while equity capital rose by
$29.8 billion (1.8 percent).

C. MORE ABOUT THE FDIC
FDIC BOARD OF DIRECTORS

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

Martin J. Gruenberg

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

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

APPENDICES 131

ANNUAL REPORT 2013
Mr. Gruenberg holds a J.D. from Case Western Reserve Law
School and an A.B. from Princeton University, Woodrow
Wilson School of Public and International Affairs.

Thomas M. Hoenig

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

Jeremiah O. Norton

Jeremiah O. Norton was sworn in on April 16, 2012, as a
member of the FDIC Board of Directors for the remainder
of a term expiring July 15, 2013.
Prior to joining the FDIC’s Board, Mr. Norton was an
Executive Director at J.P. Morgan Securities LLC, in New
York, New York.
Mr. Norton was in government for a number of years
before joining the FDIC Board, most recently as the Deputy
Assistant Secretary for Financial Institutions Policy at
the U.S. Treasury Department. Mr. Norton also was a
Legislative Assistant and professional staff member for U.S.
Representative Edward R. Royce.
Mr. Norton received a J.D. from the Georgetown University
Law Center and an A.B. in economics from Duke University.

132 APPENDICES

Thomas J. Curry

Thomas J. Curry was sworn in as the 30th Comptroller of
the Currency on April 9, 2012.
The Comptroller of the Currency is the administrator of
national banks and federal savings associations, and chief
officer of the Office of the Comptroller of the Currency
(OCC). The OCC supervises more than 2,000 national
banks and federal savings associations and about 50 federal
branches and agencies of foreign banks in the United States.
These institutions comprise nearly two-thirds of the assets
of the commercial banking system. The Comptroller also is
a Director of NeighborWorks® America.
On April 1, 2013, Mr. Curry was named Chairman of the
Federal Financial Institutions Examination Council (FFIEC)
for a two-year term. Comptroller Curry is the 21st FFIEC
Chairman.
Prior to becoming Comptroller of the Currency, Mr. Curry
served as a Director of the FDIC Board since January 2004,
and as the Chairman of the NeighborWorks® America
Board of Directors. 
Prior to joining the FDIC’s Board of Directors, Mr.
Curry served five Massachusetts Governors as the
Commonwealth’s Commissioner of Banks from 1990 to 1991
and from 1995 to 2003. He served as Acting Commissioner
from February 1994 to June 1995. He previously served
as First Deputy Commissioner and Assistant General
Counsel within the Massachusetts Division of Banks. He
entered state government in 1982 as an attorney with the
Massachusetts’ Secretary of State’s Office.
Mr. Curry served as the Chairman of the Conference of State
Bank Supervisors from 2000 to 2001, and served two terms
on the State Liaison Committee of the Federal Financial
Institutions Examination Council, including a term as
Committee Chairman.
He is a graduate of Manhattan College (summa cum laude),
where he was elected to Phi Beta Kappa. He received his
law degree from the New England School of Law.

Richard Cordray

Richard Cordray serves as the first Director of the
Consumer Financial Protection Bureau. He previously led
the Bureau’s Enforcement Division.
Prior to joining the Bureau, Mr. Cordray served on the
front lines of consumer protection as Ohio’s Attorney
General. Mr. Cordray recovered more than $2 billion for
Ohio’s retirees, investors, and business owners, and took
major steps to help protect its consumers from fraudulent
foreclosures and financial predators. In 2010, his office
responded to a record number of consumer complaints, but
Mr. Cordray went further and opened that process for the
first time to small businesses and nonprofit organizations
to ensure protections for even more Ohioans. To recognize
his work on behalf of consumers as Attorney General, the
Better Business Bureau presented Mr. Cordray with an
award for promoting an ethical marketplace.
Mr. Cordray also served as Ohio Treasurer and Franklin
County Treasurer, two elected positions in which he led
state and county banking, investment, debt, and financing
activities. As Ohio Treasurer, he resurrected a defunct
economic development program that provides low-interest

loan assistance to small businesses to create jobs,
re-launched the original concept as GrowNOW, and pumped
hundreds of millions of dollars into access for credit to
small businesses. Mr. Cordray simultaneously created a
Bankers Advisory Council to share ideas about the program
with community bankers across Ohio.
Earlier in his career, Mr. Cordray was an adjunct professor
at the Ohio State University College of Law, served as a
State Representative for the 33rd Ohio House District, was
the first Solicitor General in Ohio’s history, and was a sole
practitioner and Counsel to Kirkland & Ellis. Mr. Cordray
has argued seven cases before the United States Supreme
Court, by special appointment of both the Clinton and
Bush Justice Departments. He is a graduate of Michigan
State University, Oxford University, and the University of
Chicago Law School. Mr. Cordray was Editor-in-Chief of the
University of Chicago Law Review and later clerked for U.S.
Supreme Court Justices Byron White and Anthony Kennedy.
Mr. Cordray lives in Grove City, Ohio, with his wife
Peggy—a Professor at Capital University Law School in
Columbus—and twin children Danny and Holly.

APPENDICES 133

134 APPENDICES
DIVISION OF DEPOSITOR
AND CONSUMER PROTECTION

OFFICE OF
COMMUNICATIONS

Mark E. Pearce
Director

Doreen R. Eberley
Director

SPECIAL ADVISOR FOR
SUPERVISORY MATTERS

Stephen A. Quick

Arthur J. Murton
Director

OFFICE OF COMPLEX
FINANCIAL INSTITUTIONS

Michele A. Heller

WRITER-EDITOR

Fred W. Gibson
Acting Inspector General

Bret D. Edwards
Director

DIVISION OF RESOLUTION
AND RECEIVERSHIPS

Martin D. Henning
Acting Chief Information
and Privacy Officer

CHIEF INFORMATION OFFICER
AND CHIEF PRIVACY OFFICER

Robert D. Harris

OFFICE OF INSPECTOR GENERAL

Jason C. Cave

INTERNAL OMBUDSMAN

David S. Hoelscher

CHIEF RISK OFFICER

Richard J. Osterman, Jr.
Acting General Counsel

LEGAL DIVISION

Christopher J. Farrow
Chief Information
Security Officer

INFORMATION SECURITY
AND PRIVACY STAFF

Russell G. Pittman
Director

DIVISION OF INFORMATION
TECHOLOGY

Eric J. Spitler
Director

Kymberly K. Copa

Andrew S. Gray
SENIOR ADVISOR
INTERNATIONAL
RESOLUTION POLICY

OFFICE OF
LEGISLATIVE AFFAIRS

DEPUTY TO THE CHAIRMAN

DEPUTY TO THE CHAIRMAN
FOR COMMUNICATIONS

Diane Ellis
Director

DIVISION OF INSURANCE
AND RESEARCH

Cottrell L. Webster
Ombudsman

OFFICE OF
THE OMBUDSMAN

E. Melodee Brooks
Acting Director

Barbara A. Ryan

OFFICE OF MINORITY AND
WOMEN INCLUSION

CFPB
Board Member

Richard Cordray

Steven O. App

OCC
Board Member

Thomas J. Curry

DEPUTY TO THE CHAIRMAN
AND CHIEF OPERATING OFFICER,
CHIEF OF STAFF

FDIC
Chairman

Martin J. Gruenberg

DEPUTY TO THE CHAIRMAN
AND CHIEF FINANCIAL OFFICER

FDIC
Board Member

Jeremiah O. Norton

DIVISION OF RISK
MANAGEMENT SUPERVISION

Suzannah L. Susser
Acting Director

CORPORATE UNIVERSITY

Arleas Upton Kea
Director

DIVISION OF
ADMINISTRATION

Craig R. Jarvill
Director

DIVISION OF FINANCE

FDIC
Vice Chairman, Board Member

Thomas M. Hoenig

BOARD OF DIRECTORS

FEDERAL DEPOSIT INSURANCE CORPORATION

FDIC ORGANIZATION CHART/OFFICIALS

ANNUAL REPORT 2013

CORPORATE STAFFING
STAFFING TRENDS 2004-2013
9,000

6,000

3,000

0
2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

5,078

4,514

4,476

4,532

4,988

6,557

8,150

7,973

7,476

7,254

FDIC Year–End Staffing
Note: 2008-2013 staffing totals reflect year-end full time equivalent staff. Prior to 2008, staffing totals reflect total employees on-board.

APPENDICES 135

ANNUAL REPORT 2013
NUMBER OF EMPLOYEES BY DIVISION/OFFICE 2013 AND 2012 (YEAR-END) 1
Total
Division or Office:

Washington

Regional/Field

2013

2012

2013

2012

2013

2012

2,814

2,763

207

169

2,608

2,593

858

848

126

119

732

729

1,284

1,428

166

165

1,118

1,263

Legal Division

678

716

388

384

290

332

Division of Administration

396

403

247

248

149

156

Division of Information Technology3

340

358

264

280

76

78

Corporate University

195

194

184

176

11

18

Division of Insurance and Research3

187

195

143

145

44

51

Division of Finance

176

176

174

174

2

2

117

126

75

81

42

46

Office of Complex Financial Institutions

74

148

62

87

12

61

Executive Offices

20

20

20

20

0

0

117

102

107

89

10

13

7,254

7,476

2,161

2,135

5,093

5,341

Division of Risk Management Supervision2
Division of Depositor and Consumer Protection
Division of Resolutions and Receiverships

Office of Inspector General
2

4

Executive Support Offices

3,5

Total

The FDIC reports staffing totals using a full-time equivalent methodology, which is based on an employee’s scheduled work hours.
Division/Office staffing has been rounded to the nearest whole FTE. Totals may not foot due to rounding.
2
	In March 2013, 99 positions were moved from the Office of Complex Financial Institutions to the Division of Risk Management
Supervision.
3	
In September 2013, the Office of the International Agency was merged into the Division of Insurance and Research and the Office of the
Information Security Privacy Staff (ISPS) was split from the Division of Information Technology.
4	
Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, Chief
Information Officer, and External Affairs.
5
	Includes the Offices of the Legislative Affairs, Communications, Ombudsman, Information Security and Privacy Staff, Minority and
Women Inclusion, and Corporate Risk Management.
1	

136 APPENDICES

SOURCES OF INFORMATION

Public Information Center

FDIC Website

3501 Fairfax Drive
Room E-1021
Arlington, VA 22226

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

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

Phone:	 877-275-3342 (877-ASK-FDIC),
	703-562-2200
Fax:	703-562-2296
FDIC Online Catalog: https://vcart.velocitypayment.com/
fdic/
E-mail:	 publicinfo@fdic.gov
Publications such as FDIC Quarterly and Consumer News,
and a variety of deposit insurance and consumer pamphlets
are available at www.fdic.gov or may be ordered in hard
copy through the FDIC online catalog. Other information,
press releases, speeches and congressional testimony,
directives to financial institutions, policy manuals, and FDIC
documents are available on request through the Public
Information Center. Hours of operation are 9:00 a.m. to 4:00
p.m., Eastern Time, Monday – Friday.

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

APPENDICES 137

ANNUAL REPORT 2013
REGIONAL AND AREA OFFICES
Atlanta Regional Office	

Chicago Regional Office

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

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

Alabama	Illinois
Florida	Indiana
Georgia	Kentucky
North Carolina	
Michigan
South Carolina	
Ohio
Virginia	Wisconsin
West Virginia

Dallas Regional Office	

Memphis Area Office

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

6060 Primacy Parkway
Suite 300
Memphis, Tennessee 38119
(901) 685-1603

Colorado	Arkansas
New Mexico	
Louisiana
Oklahoma	Mississippi
Texas	Tennessee

Kansas City Regional Office	

New York Regional Office

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

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

Iowa	Delaware
Kansas	
District of Columbia
Minnesota	Maryland
Missouri	
New Jersey
Nebraska	
New York
North Dakota	
Pennsylvania
South Dakota	
Puerto Rico
	
Virgin Islands

138 APPENDICES

Boston Area Office	

San Francisco Regional Office

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

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

Connecticut	Alaska
Maine	Arizona
Massachusetts	California
New Hampshire	
Guam
Rhode Island	
Hawaii
Vermont	Idaho
	Montana
	Nevada
	Oregon
	Utah
	Washington
	Wyoming

APPENDICES 139

ANNUAL REPORT 2013
D. 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) identifies the management and
performance challenges facing the FDIC and provides its
assessment to the FDIC for inclusion in the FDIC’s annual
performance and accountability report. In doing so, we
keep in mind the FDIC’s overall program and operational
responsibilities; financial industry, economic, and
technological conditions and trends; areas of congressional
interest and concern; relevant laws and regulations; the
Chairman’s priorities and corresponding corporate goals;
and ongoing activities to address the issues involved. The
OIG believes that the FDIC faces challenges in the areas
listed below, as it continues to operate in a post-crisis
environment.

Carrying Out Systemic Resolution Responsibilities
The Dodd-Frank Wall Street Reform and Consumer
Protection Act (the Dodd-Frank Act) created a
comprehensive new regulatory and resolution framework
designed to avoid the severe consequences of financial
instability. Title I of the Dodd-Frank Act provides tools for
regulators to impose enhanced supervision and prudential
standards on systemically important financial institutions
(SIFIs). Title II provides the FDIC with a new orderly
liquidation authority for SIFIs, subject to a systemic risk
determination by statutorily-designated regulators.
The FDIC has made significant progress over the past
three years toward implementing its systemic resolution
authorities under the Dodd-Frank Act. Among other things,
the FDIC has issued a joint regulation and met established
time frames for completing reviews of resolution plans
submitted by covered financial companies, entered into
agreements with certain foreign regulatory authorities to
promote cross-border cooperation, and developed a singlepoint-of-entry resolution strategy as a preferred approach
for the orderly liquidation of covered financial companies
under certain circumstances.
While these accomplishments are notable, challenges
remain in establishing a robust corporate-wide capability

140 APPENDICES

for this critical responsibility. In the coming months, the
FDIC will be working to enhance its strategic planning
efforts, strengthen coordination among the various FDIC
divisions involved in the resolution activities, and build out
the Office of Complex Financial Institutions’ infrastructure
to support systemic resolution activities.

Strengthening IT Security and Governance
Key to achieving the FDIC’s mission of maintaining stability
and public confidence in the nation’s financial system is
safeguarding the sensitive information, including personally
identifiable information that the FDIC collects and manages
in its role as federal deposit insurer and regulator of
state non-member financial institutions. Further, as an
employer, an acquirer of services, and a receiver for failed
institutions, the FDIC obtains considerable amounts of
sensitive information from its employees, contractors,
and failed institutions. Increasingly sophisticated security
risks and global connectivity have resulted in both internal
and external risks to that sensitive information. Internal
risks include errors and fraudulent or malevolent acts by
employees or contractors working within the organization.
External threats include a growing number of cyber-based
attacks that can come from a variety of sources, such as
hackers, criminals, foreign nations, terrorists, and other
adversarial groups. Such threats underscore the importance
of a strong, enterprise-wide information security program.
During 2013, the FDIC Chairman announced significant
changes to the FDIC’s information security governance
structure. These changes were intended to address current
and emerging risks in the IT and information security
environments. Among these changes, in April, the FDIC
established the IT/Cyber Security Oversight Group to
provide a senior-level forum for assessing cybersecurity
threats and developments impacting the FDIC and the
banking industry. In July 2013, the Chairman separated the
roles and responsibilities of the Chief Information Officer
(CIO) and Director, Division of Information Technology.
Both positions had previously been held by the same
individual. The position of CIO now reports directly to the
FDIC Chairman. The CIO has broad strategic responsibility
of IT governance, investments, program management, and
information security. The CIO also serves as the FDIC’s
Chief Privacy Officer. Finally, the Chief Information
Security Officer (CISO) and related staff, who had formerly

reported to the Director of the Division of Information
Technology, now report to the CIO. The purpose of this
realignment was to ensure that the CISO has the ability to
provide an independent perspective on security matters
to the CIO and that the CIO has the authority and primary
responsibility to implement an agency-wide information
security program.
During 2014, a challenging priority for the FDIC will be
to continue to adapt to these organizational changes
as the new roles and responsibilities become ingrained
in a changing environment and to ensure effective
communication and collaboration among all parties
involved in ensuring a robust and secure IT operating
environment.

Maintaining Effective Supervision and
Preserving Community Banking
The FDIC’s supervision program promotes the safety
and soundness of FDIC-supervised IDIs. The FDIC is the
primary federal regulator for 4,316 FDIC-insured, statechartered institutions that are not members of the Federal
Reserve Board. As such, the FDIC is the lead federal
regulator for the majority of community banks. As the
FDIC continues to operate in a post-crisis environment,
it must continue to apply lessons learned over the past
years of turmoil. One key lesson is the need for earlier
regulatory response when risks are building. For example,
banks may be tempted to take additional risks or to loosen
underwriting standards. Some banks are also introducing
new products or lines of business or seeking new sources
for non-interest income, all of which can lead to interest
rate risk, credit risk, operational risk, and reputational risk.
Additionally, with technological changes, increased use of
technology service providers, new delivery channels, and
cyber-threats, the FDIC’s IT examination program needs to
be proactive and bankers need to ensure a strong control
environment and sound governance practices in their
institutions. If the FDIC determines that an institution’s
condition is less than satisfactory, it may take a variety
of supervisory actions, including informal and formal
enforcement actions against the institution or its directors
and officers and others associated with the institution,
to address identified deficiencies and, in some cases,
ultimately ban individuals from banking.

The Chairman has made it clear that one of the FDIC’s
most important priorities is the future of community
banks and the critical role they play in the financial system
and the U.S. economy as a whole. The FDIC undertook
a comprehensive review of the U.S. community banking
sector covering 27 years of data. Additionally, the FDIC
has reviewed its examination, rulemaking, and guidance
processes with a goal of identifying ways to make the
supervisory process more efficient, consistent, and
transparent—while maintaining safe and sound banking
practices. Supplementing these activities were roundtable
discussions with community bankers from around the
country, and ongoing discussions with the FDIC’s Advisory
Committee on Community Banking. In response to
concerns raised, the FDIC implemented a number of
enhancements to its supervisory and rulemaking processes.
For example, it restructured the pre-exam process. It is
taking steps to improve communication with banks under
its supervision by using Web-based tools. Finally, it has
instituted a number of outreach and technical assistance
initiatives for community bankers, which it expects
to continue.
A strong examination program, vigilant supervisory
activities, effective enforcement actions and lessons learned
in light of the recent crisis will be critical to the future
of community banks. These actions will also ensure
stability and continued confidence in the financial system
going forward.

Carrying Out Ongoing Resolution
and Receivership Workload
In the recent financial crisis, the FDIC made extensive use
of loss-share agreements (LSA) to facilitate the prompt
transfer of failed bank assets to private management. In
a loss share transaction, the FDIC as receiver agrees to
share losses on certain assets with the acquirer. Under a
typical LSA structure, the FDIC would assume 80 percent
of future losses on troubled assets, with the acquiring
institution assuming the remaining 20 percent. This partial
indemnification against loss would induce risk-averse
acquirers to take on these troubled assets under private
management, and thus keep them out of a governmentcontrolled receivership. It also provided an incentive for
the acquirer to maximize net recoveries on those assets,

APPENDICES 141

ANNUAL REPORT 2013
– consistent with the fiduciary responsibility of the FDIC.
Almost 65 percent of the bank failures since the beginning
of 2008 through 2012 were resolved through whole-bank
purchase and assumption transactions with LSAs.
As another resolution strategy, the FDIC employed
structured transactions to minimize the FDIC’s holding and
asset management expenses for the assets by transferring
the management responsibility to private-sector asset
management experts. As receiver, the FDIC had completed
34 structured transactions through August 2013 involving
42,900 assets with a total unpaid principal balance of $26
billion. To ensure the FDIC receives the highest return on
the assets and the managing members treat failed bank
borrowers fairly, the FDIC must continue to monitor the
managing member’s compliance with the transaction
agreements by reviewing regular reports, measuring
actual performance against performance projections in
the consolidated business plans, conducting regular site
visitations, and thoroughly investigating borrower or
guarantor complaints with regard to the servicing and
dispositions of their loans by the managing members.
As the crisis continues to diminish, some of these
agreements will be winding down. We have recommended
that the FDIC develop a strategy for mitigating the impact
of impending portfolio sales and LSA terminations on
the Deposit Insurance Fund (DIF) and that it ensure that
procedures, processes, and resources are sufficient to
address the volume of terminations and potential requests
for asset sales. Given the dollar value and risks associated
with the structured transactions, the FDIC needs to ensure
continuous monitoring and effective oversight in the
interest of receiving a high return on assets.

Ensuring the Continued Strength of
the Insurance Fund
Insuring deposits remains at the heart of the FDIC’s
commitment to maintain stability and public confidence
in the nation’s financial system. To maintain sufficient
DIF balances, the FDIC collects risk-based insurance
premiums from insured institutions and invests deposit
insurance funds.
In the aftermath of the financial crisis, FDIC-insured
institutions continue to make gradual but steady progress.
Continuing to replenish the DIF in a post-crisis environment

142 APPENDICES

is a critical activity for the FDIC. The DIF balance had
dropped below negative $20 billion during the worst time of
the crisis. At year-end 2013, the balance was $47.2 billion,
reflecting 16 consecutive quarters of positive growth.
Assessment revenue and a decline in loss provisions for
anticipated bank failures have been the impetus for the
increase in the fund balance.
While the fund is considerably stronger than it has been,
the FDIC must continue to monitor the emerging risks that
can threaten fund solvency in the interest of continuing to
provide the insurance coverage that depositors have come
to rely upon. Given the volatility of the global markets and
financial systems, new risks can emerge without warning
and threaten the safety and soundness of U.S. financial
institutions and the viability of the DIF. The FDIC must be
prepared for such a possibility.

Promoting Consumer Protections
and Economic Inclusion
The FDIC carries out its consumer protection role by
providing consumers with access to information about
their rights and disclosures that are required by federal
laws and regulations. Importantly, it also examines the
banks where the FDIC is the primary federal regulator
to determine the institutions’ compliance with laws and
regulations governing consumer protection, fair lending,
and community investment. The FDIC also coordinates
with the Consumer Financial Protection Board (CFPB),
created under the Dodd-Frank Act, on consumer issues of
mutual interest.
The FDIC continues to work with the Congress and
others to ensure that the banking system remains sound
and that the broader financial system is positioned to
meet the credit needs of consumers and the economy,
especially the needs of creditworthy households that may
experience distress. A challenging priority articulated by
the Chairman is to continue to increase access to financial
services for the unbanked and underbanked in the United
States. Efforts in this regard include the FDIC’s biennial
survey conducted jointly with the Census Bureau to assess
the overall population’s access to insured institutions.
Additionally, the FDIC’s Advisory Committee on Economic
Inclusion, composed of bankers, community and consumer
organizations, and academics, explores strategies to

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

Implementing Workforce Changes and
Budget Reductions
As the number of financial institution failures continues to
decline, the FDIC is reshaping its workforce and adjusting
its budget and human resources as it seeks a balanced
approach to managing costs while achieving mission
responsibilities. The FDIC closed two temporary offices
charged with managing receivership activities and asset
sales: the West Coast Office and the Midwest Office in
January 2012, and September 2012, respectively. It plans to
close the East Coast Office in April 2014.
The Board of Directors approved a $2.4 billion Corporate
Operating Budget for 2014, 11 percent lower than the 2013
budget. In conjunction with its approval of the 2014 budget,

the Board also approved an authorized 2014 staffing level
of 7,199 positions, down from 8,053 currently authorized, a
net reduction of 854 positions. This is the third consecutive
reduction in the FDIC’s annual operating budget, and the
2014 budget is the lowest annual budget since 2008.
As conditions improve throughout the industry and the
economy, the FDIC and staff are adjusting to a new work
environment and workplace. For all employees, in light of
a post-crisis, transitioning workplace, the FDIC will seek to
sustain its emphasis on fostering employee engagement and
morale. Its diversity and inclusion initiatives, along with its
new Workplace Excellence Program are positive steps in
that direction and should continue to yield positive results.

Ensuring Effective Enterprise Risk Management
A key component of corporate governance at the FDIC
is the Board of Directors. The Board will likely face
challenges in leading the organization, accomplishing the
Chairman’s priority initiatives, and coordinating with the
other regulatory agencies on issues of mutual concern and
shared responsibility. Enterprise risk management is a
related aspect of governance at the FDIC. Notwithstanding
a stronger economy and financial services industry, the
FDIC’s enterprise risk management framework and related
activities need to be attuned to emerging risks, both internal
and external to the FDIC that can threaten corporate
success. Individuals at every working level throughout
the FDIC need to understand current and emerging risks
and be ready to take necessary steps to mitigate those
risks as changes occur and challenging scenarios present
themselves.

APPENDICES 143

THIS PAGE INTENTIONALLY LEFT BLANK.

2013

Federal Deposit
Insurance Corporation

This Annual Report was produced by talented and dedicated
staff. To these individuals, we would like to offer our sincere
thanks and appreciation. Special recognition is given to the
following for their contributions:
♦	 Jannie F. Eaddy
♦	 Brian D. Aaron
♦	 Barbara A. Glasby
♦	 Financial Reporting Section
♦	 Division and Offices’ Points-of-Contact

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550 17th Street, N.W.
Washington, DC 20429-9990
WWW.FDIC.GOV
FDIC-003-2014