Office of Thrift Supervision 

Mission Statement 

To supervise savings associations and their holding companies in order to maintain their 

safety and soundness and compliance with consumer laws and to encourage a competitive 

industry that meets America’s financial services needs. 

Program Summary by Account Dollars in Thousands 

FY 2006 FY 2007 FY 2008

Obligated Estimated Estimated $ Change % Change 

Supervision of the Thrift Industry $199,497 $232,500 $238,313 $5,813 2.50%

Total Resources $199,497 $232,500 $238,313 $5,813 2.50%

FY 2007 Priorities 

OTS’s FY 2007 Priorities are set forth below: 

• Examine, supervise, and regulate 853 savings associations with total assets of 

$1.63 trillion, 

• Examine and regulate 481 registered holding company enterprises with total 

assets of $7.7 trillion, 

• Tailor examinations to the risk profile of the institution and streamline the 

examination of smaller institutions, 

• Conduct safety and soundness examinations of savings associations every 12-18 

months that also incorporate an assessment of compliance with consumer 

protection laws and regulations, 

• Promote the reduction of regulatory burden, 

• Coordinate supervisory and policy development activities with relevant domestic 

and foreign financial regulators, 

• Abate money laundering and terrorist financing by examining savings 

associations for compliance with the Bank Secrecy Act, the USA PATRIOT Act, 

and other anti-money laundering laws, 

• Promote the benefits of the thrift charter and the important role of communitybased thrifts, 

• Continue efforts to implement the international Basel II risk-based capital 

framework, and 

• Address succession planning.
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 4 

1C – Industry Outlook .................................................................................................... 9 

Section 2 – Budget Adjustments and Appropriations Language ............................... 10

2.2 – Operating Levels Table........................................................................................ 10 

2B – Appropriations Language..................................................................................... 10 

2C – Legislative Proposals............................................................................................ 10 

Section 3 – Budget and Performance Plan ................................................................... 11

3.1 – Resource Detail Table.......................................................................................... 11 

3A – Supervision of the Thrift Industry........................................................................ 11 

3.2.1 – Supervision of the Thrift Industry Budget and Performance Plan.................... 13 

Section 4 – Supporting Materials.................................................................................. 16

4.1 – Human Resources Table ...................................................................................... 16 

4A – Human Capital Strategy Description ................................................................... 16 

4.2 – Summary of IT Resources Table ......................................................................... 18 

4B – Information Technology Strategy ........................................................................ 19 

4.3 – PART Evaluation Table....................................................................................... 20 

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Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

Established by Congress as a bureau of the Department of the Treasury on August 9, 

1989, the Office of Thrift Supervision (OTS) charters, examines, supervises, and 

regulates federal savings associations insured by the Federal Deposit Insurance 

Corporation (FDIC). OTS’s primary statutory authority is the Home Owners’ Loan 

Act originally enacted in 1933. OTS also examines, supervises, and regulates statechartered savings associations insured by the FDIC and provides for the registration, 

examination, and regulation of savings and loan holding companies (SLHCs) and other 

affiliates. 

The thrift charter has several unique characteristics including nationwide branching under 

a single charter; a holding company structure offering a single regulator for the holding 

company and its subsidiary depository institution; and preemption authority. OTS is the 

only federal-banking agency that both charters depository institutions and supervises their 

holding companies. The holding companies are diverse, ranging from large, 

multinational corporations to small companies with few assets other than their thrift

charter. 

The thrift industry is strong and operating safely. As of September 2006, OTS regulated 

853 savings associations with total assets of $1.63 trillion. Savings associations operate 

in a safe and sound manner with 93 percent achieving an overall composite CAMELS 

rating of 1 or 2. The CAMELS rating reflects OTS’s evaluation of an institution’s 

Capital, Asset Quality, Management, Earnings, Liquidity, and Sensitivity to market risk. 

The industry’s capital position remains strong with over 99 percent of savings 

associations meeting the well-capitalized standards. 

As of September 2006, OTS supervised 481 holding company enterprises with 

approximately $7.7 trillion in consolidated assets. Over half of all savings associations 

and 78 percent of total savings association assets are owned by OTS-regulated holding 

companies. 

OTS is headquartered in Washington, D.C. with four regional offices located in Jersey 

City, Atlanta, Dallas, and San Francisco. The headquarters office develops nationwide 

policies and programs for the agency and coordinates the operations of OTS. The 

regional offices examine and supervise institutions and process most applications. 

Approximately 75 percent of OTS’s staff of 965 employees work in regional offices. 

The President, with Senate confirmation, appoints OTS’s Director for a 5-year term. 

OTS’s Director also serves as a member of the Board of Directors of the Federal Deposit 

Insurance Corporation (FDIC), a member of the Federal Financial Institutions 

Examination Council (FFIEC), and a director of NeighborWorks® America. 

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OTS Strategic Goals and Vision 

For this year’s budget submission, OTS used the four strategic goals outlined in its 2003-

2008 Strategic Plan. 

• A safe and sound thrift industry, 

• A flexible legal and regulatory framework that enables the thrift industry to 

provide a full competitive array of financial services, 

• Fair access to financial services and fair treatment of thrift customers, and 

• A professional and motivated workforce that provides exceptional service to its 

customers and supports achievement of OTS business goals.

OTS’s Strategic Plan will be updated during FY 2007 to incorporate revised strategies 

and goals. OTS adopted the following vision statement as its initial step for the new 

plan: 

To perform, and to be recognized, as the premier regulator of financial institutions and 

holding companies. 

OTS Strategic Priorities 

OTS’s FY 2007 budget of $232.5 million supports OTS’s strategic and performance 

goals that provide for proactive supervision of the industry, reduced regulatory burden, 

and improved credit availability. The FY 2007 budget enables OTS to tailor supervisory 

examinations to the risk profile of the institutions, while effectively allocating resources 

to oversee and assess the safety and soundness and consumer compliance record of the 

thrift industry. 

OTS’s budget supports the supervision program. OTS receives no appropriated funds 

from Congress; the income of the bureau is derived principally from assessments on 

savings associations and savings and loan holding companies. 

OTS’s FY 2007 budget finances OTS’s efforts to address these key strategic issues and 

challenges: 

• Comprehensive and Risk-Focused Examinations, 

• Interest Rate and Credit Risks, 

• Compliance Risks, Financial Crimes, and Data Breaches, 

• Disaster and Emergency Preparedness, 

• Global Financial Services, 

• Regulatory Burden Reduction, 

• Promotion of the Thrift Charter, and 

• Succession Planning and Management of OTS Resources. 

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1B – Program History and Future Outlook 

OTS examines savings associations every 12-18 months for safety and soundness and 

compliance with consumer protection laws and regulations. During these exams, the 

association’s ability to identify, measure, monitor, and control risk is evaluated, including 

the risk posed by other entities within the corporate structure. When weaknesses are 

identified, supervisory action is taken. 

The following activities highlight FY 2006 OTS accomplishments and strategic FY 2007 

challenges. 

Comprehensive Examination Approach 

OTS conducts a comprehensive examination combining safety and soundness and 

compliance reviews to eliminate multiple reviews of the same area for different purposes. 

OTS examination teams issue one report of examination that covers both compliance and 

safety and soundness. This approach allows OTS to comprehensively assess an 

institution’s risk management programs, business strategy, and operations. OTS is also 

able to evaluate compliance management programs and compliance with the Bank 

Secrecy Act, Fair Lending, and other requirements on a more frequent basis. 

OTS is more efficient and has reduced regulatory burden due to its comprehensive 

examination approach. It issues one information request package at the start of each 

examination and examines lending portfolios from both compliance and safety and 

soundness perspectives at the same time. OTS also prepares one comprehensive 

examination report that details all examination findings. Over time, OTS expects this 

comprehensive approach will reduce savings association cost and burden while 

promoting efficient, risk-focused examinations. The majority of OTS-regulated 

institutions indicate a favorable response to the comprehensive examination approach.

To maintain its rigorous staff accreditation standards, OTS requires that its examiners: 1) 

undergo formal, informal, and independent training, 2) pass proficiency tests, 3) receive 

on-the-job training to become proficient in both disciplines and 4) serve as examiner-incharge of at least two comprehensive examinations prior to accreditation. OTS also 

recognizes that there are very complex and highly technical issues that arise in 

connection with our comprehensive examination approach. For this reason, OTS 

continues to maintain compliance, lending, capital markets, trust, and information 

technology specialists to assist examiners in addressing these matters. 

Interest Rate and Credit Risks

As community-based lenders, thrifts remain focused on residential mortgage lending, 

with 55 percent of assets invested in 1-4 family mortgage loans as of September 30, 

2006. Direct loans to consumers, including single-family mortgages, made up 60 percent 

of thrift assets. Given this concentration, thrift asset quality is dependent on stable real 

estate values and consumers’ continued employment and ability to service their debt. 

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The thrift industry’s current sound financial condition permits it to address potential 

credit quality problems from a position of strength. Due to the resilience of the housing 

market, single-family residential loan delinquencies and charge-offs remained at low 

levels through much of 2006. 

OTS closely monitors interest rate risk due to the thrift industry’s natural concentration in 

longer-term mortgage loans, which are generally funded with shorter-term deposits and 

borrowings. OTS maintains an interest rate risk sensitivity model that stress-tests savings 

association portfolios to evaluate potential exposure to changing interest rates. OTS 

remains cautious of the potential impact of a rapid increase in market interest rates and

will remain vigilant in monitoring savings associations for adverse trends. On November 

6, 2006, OTS announced that it is enhancing its state of the art Net Portfolio Value (NPV) 

Model. The Enhanced NPV Model will expand OTS’s off-site interest rate risk 

monitoring capability and improve the efficiency and effectiveness of on-site 

examinations. It will also improve the agency’s unique ability to provide OTS regulated 

institutions with quarterly estimates of their interest rate risk exposures.

Alternative or nontraditional mortgage lending products present a unique hybrid of credit 

and interest rate risks. Credit risk in mortgage lending, typically managed by sound 

underwriting criteria, is more complex with nontraditional lending products. Aggressive 

pricing and variable underwriting standards may heighten risks. On September 29, 2006, 

the federal financial regulatory agencies issued final guidance to address the risks posed 

by these types of loans, recommending that management recognize these products require 

strong risk management standards, capital levels commensurate with the risk, and a loan 

loss allowance reflective of the portfolio collectibility. OTS expects its institutions to 

approach innovation in the mortgage market with caution and due diligence. 

OTS sponsored a National Housing Forum on December 11, 2006. The forum provided 

an opportunity for industry, government, and community leaders to discuss the national 

outlook for housing, including the challenges of lending in today’s housing market and 

key consumer protection issues. Speakers included the Secretary of the Treasury, the 

Chairman of the House Financial Services Committee, the Ranking Member of the House 

Financial Services Committee, and the Director of OTS. 

Compliance Risks

An OTS-regulated institution is required to have an effective compliance management

program that is commensurate with its size, complexity, and risk profile. OTS 

examiners assess whether an institution is ensuring the privacy and security of consumer 

financial information, guarding against money laundering and terrorist financing, and 

ensuring fair and equal access to credit for all Americans. 

OTS examines for Bank Secrecy (BSA), the USA PATRIOT Act, and other Anti-money 

Laundering (AML) compliance. Between January 2005 and September 2006, OTS 

conducted 1,272 BSA examinations and cited over 262 institutions for violations. Most 

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violations were remedied during the examination process and resulted in no further 

action. The others resulted in OTS initiating 40 formal and informal enforcement actions.

The Federal Financial Institutions Examination Council (FFIEC) released the revised

BSA/AML Examination Manual on July 28, 2006. The revised manual reflects the 

ongoing commitment of the federal banking agencies and the Financial Crimes 

Enforcement Network (FinCEN) to provide current and consistent guidance on risk-based 

policies, procedures, and processes for banking organizations to comply with the BSA 

and safeguard operations from money laundering and terrorist financing. The manual 

was updated to further clarify supervisory expectations and incorporate regulatory 

changes since the manual’s 2005 release. 

OTS hosted a teleconference on July 31, 2006, that provided informative briefings by 

senior OTS staff on BSA/AML compliance issues, including best practices, avoiding 

common violations, and the consequences of noncompliance. There were over 1,400 

registrants for the event. The teleconference provided a valuable opportunity for 

compliance officers, risk managers, auditors, attorneys, and senior bank and thrift 

managers to interact directly with OTS experts. 

Data security is reviewed at thrifts and third party technology service providers. The 

Gramm-Leach-Bliley Act requires that all financial institutions establish a program to 

protect their customer’s personal information. OTS, with the other financial banking 

agencies, issued guidance regarding data security, security breach notification 

requirements, and electronic authentication. A major focus of OTS’s compliance 

program is to ensure that its institutions keep credit information confidential, fight 

identity theft, and ensure the accuracy of consumers’ credit reports. 

Compliance reviews help to ensure fair and equal access to credit for all Americans. 

Thrifts provide services that encourage home ownership and affordable housing and 

contribute to economic growth. Thrifts hold over $1 trillion in housing-related loans and 

securities. On November 24, 2006, OTS published a Notice of Proposed Rulemaking 

(NPR) to revise its Community Reinvestment Act (CRA) rule to align with the rules 

adopted by the other federal banking agencies. The alignment would best serve the 

interests of insured depository institutions and their communities by providing for 

consistency in regulation and compliance. The vast majority of OTS institutions are in 

compliance with the Community Reinvestment Act. 

Emergency and Disaster Preparedness 

OTS is actively involved in initiatives to address emergency and disaster preparedness. 

The 2005 hurricane devastation in the Gulf Coast states demonstrates how quickly 

external factors can reprioritize the support that OTS and the thrift industry must provide 

to preserve the integrity of financial systems and promote a prosperous economy. The 

needs and issues resulting from the 2005 hurricanes are unprecedented and will take a 

long time to resolve. To assist affected savings associations and their customers, OTS 

provides a toll-free hotline number on its internet site for hurricane-related questions and 

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information from government sponsored enterprises and trade groups, community service 

groups, and information from state agencies. 

During June 2006, the FFIEC member agencies and the Conference of State Bank 

Supervisors jointly issued "Lessons Learned From Hurricane Katrina: Preparing Your 

Institution for a Catastrophic Event." The document shares experiences and lessons 

learned by financial institutions affected by Hurricane Katrina and provides institutions 

with helpful insights for planning and improving disaster recovery and business 

continuity plans. 

For the past 20 years, OTS, in conjunction with the other FFIEC agencies, has issued 

guidance to the industry with regard to Disaster Recovery and Business Continuity 

Planning. During examinations, OTS reviews each institution’s plans for continuity of 

operations and emergency preparedness. OTS participates on the Financial and Banking 

Information Infrastructure Committee to improve the reliability and security of the 

financial industry’s infrastructure. In March 2006, OTS, along with the other FFIEC 

agencies, issued an Interagency Advisory on Influenza Pandemic Preparedness to alert 

institutions to the unique challenges a pandemic event could pose and to update their 

business continuity plans appropriately. 

Global Financial Services

OTS’s Complex and International Organization program oversees OTS’s global services. 

The European Union (EU) seeks to ensure that financial conglomerates domiciled outside 

EU member countries are subject to an equivalent level of supervision by foreign 

supervisors and to enhance coordination among relevant supervisors. OTS is the 

supervisor for U.S. thrift holding companies, including a number of financial 

conglomerates active in the EU. OTS was the first regulatory authority to be designated a 

consolidated coordinating regulator of a holding company with operations in the EU. 

The EU designation was received in December 2004 for OTS’s oversight of GE Capital 

Services and in September 2006 for Ameriprise. The equivalency designation process is 

currently underway for the American International Group, Inc. (AIG). The supervision 

and examination of GE, AIG, and Ameriprise are managed by a group solely dedicated to 

that task in Supervision.

OTS executed supervisory information sharing agreements with Australia, Canada, 

France, Germany, the United Kingdom, the Netherlands and Poland. OTS is also a 

signatory to an existing framework agreement for sharing supervisory information 

between the EU and U.S. Federal banking agencies. OTS is discussing supervisory 

information sharing agreements with banking and insurance authorities in China, Mexico, 

Brazil, and France. 

The federal banking agencies are continuing efforts to implement the international Basel 

II risk-based capital framework. They collaborated on the Basel IA and Basel II 

proposed capital rules and are evaluating issues to ensure that the new framework results 

in a safe and sound capital allocation and fair competition among all financial 

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institutions. OTS is supportive of the Basel IA efforts to increase risk sensitivity in the 

existing Basel I capital rules and to mitigate competitive inequities that may arise with 

the implementation of Basel II. OTS believes that Basel II warrants close scrutiny and

refinement as the process continues. OTS is a leader among the four federal banking 

agencies in developing capital modifications to Basel I for the considerable majority of

financial institutions that will not adopt Basel II. 

Regulatory Burden Reduction

Under the Economic Growth and Regulatory Paperwork Reduction Act, enacted by 

Congress in 1996, federal banking agencies are required to review all of their regulations 

at least once every 10 years. The agencies must complete the first review under this law 

by 2006. In 2003, the agencies began a joint effort to categorize the regulations, publish 

the categories for comment, report to Congress on any significant issues raised by the 

comments, and eliminate unnecessary regulations. The review was completed in 2006. 

OTS and the other banking agencies published notices categorizing and identifying over 

125 regulations for comment and received more than 1,000 comment letters with 

suggestions for change. Banker and consumer group outreach sessions were held around 

the country and the OTS Director provided Congressional testimony. Along with the 

other federal banking agencies, OTS simplified application and reporting requirements, 

streamlined examination processes, and made changes to its regulations and internal 

procedures to reduce burden. Every new regulation, process, or procedure now includes 

a discussion among the Federal Financial Institutions Examination Council (FFIEC) 

principals about burden and how to accomplish regulatory objectives while minimizing 

regulatory burden. 

The federal banking agencies identified burdens that would require legislative changes to 

the underlying statutes before changes could be made to the regulations. These changes 

were presented to Congress as a list of consensus items that the national bank and thrift 

industries support. Congress passed the “Financial Services Regulatory Relief Act of 

2006” on September 30, 2006, and President Bush signed it into law on October 13. This 

law provides regulatory burden relief for the financial services, banking, and thrift 

industries. The law allows regulators to adjust exam cycles of healthy institutions for 

greater efficiency, modernizes record keeping requirements for regulators, and requires 

the federal banking agencies to propose within six months a simple, uniform privacy 

notice to comply with the Gramm-Leach-Bliley Act of 1999. 

Promotion of Thrift Charter

During 2006 strategic planning meetings, OTS management decided to actively promote 

the features of the thrift charter. The charter provides advantages in the delivery of 

financial services and continues to flourish as institutions change and adapt their business 

strategies and focus. OTS has a unique supervisory role in that it monitors and regulates 

all aspects of an institution’s operations and holding company affiliate activities. OTS 

regularly attends financial services industry conferences and has developed a booth that 

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highlights aspects of its oversight program and details aspects of the thrift charter that set 

it apart from other charter options.

Staffing and Succession Planning

Fifty-five percent of OTS’s current staff will reach retirement eligibility by 2010 yearend. OTS is actively addressing succession planning and the corresponding training 

needs. Over 80 new examiners were hired in 2006. 

1C – Industry Outlook 

Due to favorable economic conditions, a stable industry, and the regulatory oversight that 

OTS provides, the thrift industry is operating in a safe and sound manner and performing 

extremely well. Net income for the industry was $4.29 billion during the quarter ending 

September 30 2006, the second highest on record, just below the record $4.32 billion 

earned in the fourth quarter of 2005. In addition, thrift asset quality remains strong and 

the overall level of credit quality in the industry remains good. The number of problem 

thrifts decreased from 6 to 5 from September 2005 to September 2006. Assets of 

problem thrifts decreased from $1.9 billion to $180 million during this same time period. 

Problem thrifts are defined as those with a composite examination rating of 4 or 5. 

Financial services consolidation has reduced the overall number of savings institutions, 

but industry asset growth remains strong. OTS expects this trend to continue. While 

industry consolidation can create pressure on assessment revenue, thrift asset growth and 

new charter interest has mitigated this affect. OTS has worked closely with the industry 

to maintain the profitability, integrity, and viability of the thrift charter, as the industry 

continues to adapt to the evolving nature of the financial services business and the 

demands of its customers. 

T h rift A s s e ts C ontinue to G ro w D e s p ite Indus try

C ons o lid a tio n

8 5 3

1 ,6 6 9 1 .6 3

0 .7 8

0

2 0 0

4 0 0

6 0 0

8 0 0

1 ,0 0 0

1 ,2 0 0

1 ,4 0 0

1 ,6 0 0

1 ,8 0 0

19931994199519961997199819992000200120022003200420052006

0 .0

0 .2

0 .4

0 .6

0 .8

1 .0

1 .2

1 .4

1 .6

1 .8

N o o f th rift in s titu tio n s

T h rift A s s e ts in B illio n s

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Section 2 – Budget Adjustments and Appropriations Language 

2.2 – Operating Levels Table 

Dollars in Thousands

FY 2006

Obligated

FY 2007 

Estimated

FY 2008 

Estimated

FTE 918 1,046 1,046

Object Classification:

11.1 Full-Time Permanent Positions..................................... $105,997 $115,224 $118,105

11.1 Other than Full-Time Permanent Positions.............. 1,001 2,217 2,272

11.5 Other Personnel Compensation................................... 0 0 0

11.8 Special Personal Services Payments..................... 0 0 0

11.9 Personnel Compensation (Total)............................. $106,998 $117,441 $120,377

12.0 Personnel Benefits...................................................................... 55,799 67,085 68,762

13.0 Benefits to Former Personnel............................................... 217 300 308

21.0 Travel.................................................................................. 12,925 13,984 14,334

22.0 Transportation of Things........................................... 213 241 247

23.1 Rental Payments to GSA................................................ 0 0 0

23.2 Rent Payments to Others............................................... 3,605 3,944 4,043

23.3 Communications, Utilities, & Misc...................................................... 3,133 3,582 3,672

24.0 Printing and Reproduction.......................................................... 241 216 221

25.1 Advisory & Assistance Services.................................................... 1,081 2,161 2,215

25.2 Other Services.................................................................... 3,303 5,623 5,764

25.3 Purchase of Goods/Serv. from Govt. Accts...... 3,229 3,923 4,021

25.4 Operation & Maintenance of Facilities................... 3,251 5,220 5,351

25.5 Research & Development Contracts................................ 0 0 0

25.6 Medical Care............................................................................. 0 0 0

25.7 Operation & Maintenance of Equipment...................... 134 328 336

25.8 Subsistence & Support of Persons.................................... 0 0 0

26.0 Supplies and Materials.................................................... 1,214 1,669 1,711

31.0 Equipment.......................................................................... 2,767 5,544 5,683

32.0 Lands and Structures................................................... 1,343 1,239 1,270

33.0 Investments & Loans.................................................... 0 0 0

41.0 Grants, Subsidies........................................................... 0 0 0

42.0 Insurance Claims & Indemn................................................. 44 0 0

43.0 Interest and Dividends...................................................... 0 0 0

44.0 Refunds.............................................................................. 0 0 0

Total Budget Authority................................................ $199,497 $232,500 $238,313

Budget Activities:

Supervision of the thrift industry $199,497 $232,500 $238,313

Total Budget Authority................................................ $199,497 $232,500 $238,313

2B – Appropriations Language 

OTS receives no appropriated funds from Congress. 

2C – Legislative Proposals 

OTS currently has no legislative proposals. 

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Section 3 – Budget and Performance Plan

3.1 – Resource Detail Table 

Dollars in Thousands

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Revenue:

Supervision

Assessments 212,290 218,100 223,553 2.50%

Rental Income 4,818 5,070 5,197 2.50%

Interest 8,841 8,500 8,713 2.50%

Fees & Other 10,599 7,330 7,513 2.50%

Total Revenue $236,548 $239,000 $244,976 2.50%

Expenses:

Supervision

Compensation & Benefits $163,014 $184,825 $189,446 2.50%

Travel & Transportation 13,138 14,225 14,581 2.50%

Facilities 10,848 14,310 14,668 2.50%

Other Services & Supplies 12,497 19,140 19,619 2.50%

Total Expenses 918 $199,497 1,046 $232,500 1,046 $238,313 0.00% 2.50%

Net Results $37,051 $6,500 $6,663 2.50%

Description Estimated

% Change

FY 2007

to FY 2008

FY 2008

Estimated

FY 2006

Obligated

FY 2007

3A – Supervision of the Thrift Industry ($232,500,000): OTS’s budget supports its 

supervision program. OTS receives no appropriated funds from Congress; the income of 

the bureau is derived principally from assessments on savings associations and savings 

and loan holding companies. OTS’s four strategic goals guide the annual budget activity. 

Strategic Goal 1: A safe and sound thrift industry. 

Through the examination process, OTS assesses the financial condition and risk profile of 

savings associations, including their ownership structure, and identifies and addresses 

unsafe and unsound practices and violations of law and regulation. Through the off-site 

monitoring process, OTS regularly monitors the financial performance of individual 

savings associations and the industry. Such monitoring enables early identification of 

emerging trends or problems. 

Strategic Goal 2: A flexible legal and regulatory framework that enables the thrift 

industry to provide a full competitive array of financial services.

OTS strives to reduce the regulatory burden on savings associations while maintaining 

effective supervision. To achieve this goal, OTS is improving the application process, 

limiting assessment rate increases and reviewing statutes and regulations of other 

governmental entities that may be burdensome. OTS reduced the amount of on-site 

examination time, redesigned regulations to make them easier to understand, and 

eliminated unnecessary restrictions. OTS tailors examinations to the risk profile of the 

individual institutions. This ensures that the examination process is responsive and 

enables the thrift industry to provide competitive financial services. 

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OTS strives to manage operations to ensure that assessment rate increases do not exceed 

the inflation rate. Without compromising responsibilities, the assessment rate increases 

have not exceeded the inflation rate for the past four years. 

Strategic Goal 3: Fair access to financial services and fair treatment of thrift customers.

OTS’s Community Affairs Program supports the thrift industry's efforts to meet the 

convenience and needs of the communities they are chartered to serve; fulfill their CRA 

obligations; and provide safe and sound loans, investments and financial services for low 

and moderate income individuals, communities and other areas of greatest need. OTS's 

Community Affairs staff works with savings associations, community-based 

organizations, government officials and others to promote partnerships and other 

initiatives with savings associations at the local level to address and respond to 

community and economic development needs. In addition, OTS promotes industry 

adoption of comprehensive compliance management programs and encourages 

associations to strategically develop the diverse opportunities presented by the 

communities they are chartered to serve. 

Strategic Goal 4: A professional and motivated workforce that provides exceptional 

service to its customers and supports achievement of OTS business goals.

OTS strives to maintain a workforce that is professional and well trained to regulate the 

thrift industry and to deal with the public in a professional, informed, and responsive 

manner. OTS will continue to cross-train its examiners to fully accredit them in both the 

safety and soundness and compliance disciplines. OTS provides the public with 

statistical reports, securities filings of OTS registrants, chartering records and other 

public information. OTS assists savings association customers with inquiries and 

complaints concerning savings associations. 

In line with the President’s Management Agenda, OTS is committed to the effective,

efficient, and economic management of its resources. OTS analyzes new enterprise 

initiatives for best value.

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3.2.1 – Supervision of the Thrift Industry Budget and Performance Plan 

Dollars in Thousands

Supervision of the Thrift Industry

Budget Activity

Includes Strategic Objectives E1B and F3C

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources

 Other Resources 178,713 187,434 199,497 232,500 238,313

Total Operating Level $178,713 $187,434 $199,497 $232,500 $238,313

Human Resources

 Other FTE 886 885 918 1,046 1,046

Total FTE (reimbursable) 886 885 918 1,046 1,046

Supervision of the Thrift Industry Budget 

Activity

Includes Strategic Objectives E1B and F3C

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 0% 0% 0% 0% 0%

Actual 0% 0% 0%

Difference between the inflation rate and the 

OTS assessment rate increase (%) (E) 

Met Yes Yes Yes

Target 90% 90% 90% 90% 90%

Actual 94% 93% 94%

Percent of safety and soundness exams started 

as scheduled (%) (Ot) 

Met Yes Yes Yes

Target 95% 95% 95% 95% 95%

Actual 99.4% 99.5% 99.9%

Percent of thrifts that are well capitalized (%) 

(Oe)

Met Yes Yes Yes

Target 90% 90% 90% 90% 90%

Actual 94% 94% 93%

Percent of thrifts with compliance examination 

ratings of 1 or 2 (%) (Oe)

Met Yes Yes Yes

Target 90% 90% 90% 90% 90%

Actual 93% 94% 93%

Percent of thrifts with composite CAMELS 

ratings of 1 or 2 (%) (Oe)

Met Yes Yes Yes

Target Baseline $14.33 $14.33

Actual $13.46

Total OTS costs relative to every $100,000 in 

savings association assets regulated ($) (E) 

Met Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

As highlighted in the charts, OTS met all of its performance measures in 2006. 

Following is a brief description of each performance measure: 

Percent of safety and soundness exams started as scheduled 

OTS examines savings associations every 12-18 months for safety and soundness, 

compliance and consumer protection laws. OTS performs safety and soundness 

examinations of its regulated savings associations consistent with the requirements in the 

Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) as amended 

by the Riegle Community Development and Regulatory Improvement Act of 1994. 

When safety and soundness or compliance issues are identified during its risk-focused 

examinations, OTS acts promptly to ensure association management and directors 

institute corrective actions to address supervisory concerns. OTS staff often meets with 

the savings association’s board of directors after delivery of the Report of Examination to 

discuss findings and recommendations. 

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Total OTS Costs Relative to Every $100,000 in Savings Association Assets Regulated 

Beginning in FY 2006, OTS included a performance measure that reflects the efficiency 

of its operations while meeting the increasing supervisory demands of a growing and 

more complex thrift industry. This measure supports OTS’s ongoing efforts to efficiently 

use agency resources. The efficiency measure is impacted by the relative size of the 

savings associations regulated. Approximately 60 percent of all savings associations 

have total assets of less than $250 million and are generally community-based 

organizations that provide retail financial services in their local markets. The measure 

does not include over $7 trillion in assets of holding company enterprises regulated by 

OTS. 

Percent of thrifts with composite CAMELS ratings of 1 or 2. 

On December 9, 1996, the Federal Financial Institutions Examination Council (FFIEC) 

adopted the CAMELS rating system as the internal rating system to be used by the 

federal and state regulators for assessing the safety and soundness of financial institutions 

on a uniform basis. The CAMELS rating system puts increased emphasis on the quality 

of risk management practices. “CAMELS” stands for Capital adequacy, Asset quality, 

Management, Earnings, Liquidity and Sensitivity to market risk. OTS assigns a 

composite CAMELS rating to savings associations at each examination. OTS adjusts the 

level of supervisory resources devoted to an association based on the composite rating. 

The CAMELS rating is based upon a scale of 1 through 5 in increasing order of 

supervisory concern. 

Percent of thrifts with compliance examination ratings of 1 or 2. 

A uniform, interagency compliance rating system was first approved by the FFIEC in 

1980. The FFIEC rating system was designed to reflect, in a comprehensive and uniform

fashion, the nature and extent of a savings association’s compliance with consumer 

protection statutes, regulations and requirements. The Compliance Rating System is 

based upon a scale of 1 through 5 in increasing order of supervisory concern. 

OTS began to combine safety and soundness and compliance examinations in 2002 to 

attain exam efficiencies and to improve risk assessment. Using comprehensive exam

procedures, compliance with consumer protection laws is reviewed at more frequent 

intervals, which has improved the quality of the examination process. 

Percent of thrifts that are well capitalized. 

Capital absorbs losses, promotes public confidence and provides protection to depositors 

and the FDIC insurance fund. It provides a financial cushion that can allow a savings 

association to continue operating during periods of loss or other adverse conditions. The 

Federal Deposit Insurance Act established a system of prompt corrective action (PCA) 

that classifies insured depository institutions into five categories (well-capitalized; 

adequately capitalized; undercapitalized, significantly undercapitalized; and critically 

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undercapitalized) based on their relative capital levels. The purpose of PCA is to resolve 

the problems of insured depository institutions at the least possible long-term cost to the 

deposit insurance fund. 

Difference between the inflation rate and the OTS assessment rate increase. 

Without compromising responsibilities and the risk-based examination approach, OTS 

strives to efficiently manage its operations and budget to ensure that assessment rate 

increases do not exceed the inflation rate. However, if OTS believes that events require 

more personnel or other expenditures, OTS may increase assessments to raise the 

required resources. Annually, OTS analyzes its operating costs and compares them to the 

assessments it charges savings associations and holding companies in order to achieve a 

structure that keeps assessment rates as low as possible while providing OTS with the 

resources necessary for effective supervision. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

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Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 885 918 1,046

Increases:

Reason #1

Continued recruitment priority in 

the examiner ranks for 

succession palnning as well as 

to address increasing holding 

company needs.

Subtotal, Increases 33 128 0

Decreases:

Subtotal, Decreases 0 0 0

Year-end Actual/Estimated FTEs 918 1,046 1,046

Net Change from prior year SOY to budget year EOY 33 128 0

4A – Human Capital Strategy Description 

Human capital represents OTS’s primary resource to meet its strategic objectives. 

Sustaining and nurturing human capital resources requires a blend of competitive 

compensation, strategic and innovative training, and a supportive work environment. 

OTS developed its Human Capital Strategic Plan in response to the President’s 

Management Agenda. The Plan follows the Department of the Treasury’s Human 

Capital Strategic Plan for Fiscal Years 2004-2008 and incorporates strategies and 

practices to ensure that OTS has sufficient staff with the right skills to accomplish its 

mission presently and in the future. The Plan consists of four main strategic goals: 

Organizational Effectiveness, Recruitment and Diversity, Employee Retention and 

Satisfaction, and Technology Skills. 

Fifty-five percent of OTS’s current staff will reach retirement eligibility by year-end 

2010. OTS is developing a revitalized succession planning program to analyze specific 

positions and categories of positions, identify internal and external pools of available and 

projected candidates, and design professional development programs to match these 

needs. Over 80 new examiners were hired during 2006. OTS’s compensation program 

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enables OTS to attract, retain, and reward staff comparable to the other federal banking 

agencies. 

OTS is working to cross train its examination staff to create a work force capable of 

performing multiple examination types (e.g., safety and soundness examinations and 

compliance examinations), as well as designing training programs to meet the challenges 

OTS faces with anticipated retirements as part of its overall succession planning program.

To meet the needs of a thriving thrift industry, OTS seeks qualified experienced and entry 

level candidates with diverse backgrounds. OTS is developing recruiting materials, 

attending job fairs including events targeting minority and women’s groups, and working 

to provide both centralized and regional recruitment support to meet its various 

recruitment needs.

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4.2 – Summary of IT Resources Table 

Dollars in Millions

Information Technology Investments(in $ Millions) FY 2006 FY 2007 Major IT Investments

Budget 

Activity/Funding

Source

Operating

Plan Obligations

Operating

Plan

Estimated 

Budget

Total - Major $0.0 $0.0 $0.0 $0.0 Non-Major IT InvestmentsAdministrative - Mixed Supervision $1.0 $0.8 $0.9 8.5% $0.9 -3.1% Examinations Supervision 1.8 1.7 2.2 30.2% 1.9 -11.1% Thrift Financial Data Supervision 2.8 2.5 2.8 12.8% 3.9 38.6% TFR Validation Supervision 1.6 1.5 1.8 20.5% 1.6 -12.8% Industry Structure and Tracking Supervision 1.8 1.7 2.0 19.3% 1.6 -20.7% CIO Planning Supervision 1.8 1.9 2.5 36.7% 2.5 0.7% Total - Non-Major $10.7 $10.0 $12.2 22.0% $12.4 1.5% Infrastructure InvestmentsTreasury Consolidated Infrastructure $3.6 $2.9 $4.0 37.5% $4.4 10.6% Treasury Consolidated Telecommunications 1.4 1.1 1.5 41.4% 1.1 -27.5% Treasury Consolidated Office Automation 2.7 2.7 3.1 15.9% 2.8 -11.1% Treasury Consolidated Security 0.6 0.5 0.6 17.5% 1.8 194.8% Total - Infrastructure Investments $8.2 $7.2 $9.2 28.6% $10.1 9.4% Enterprise Architecture $0.2 $0.2 $0.2 8.5% $0.2 -3.1% TOTAL IT INVESTMENTS $19.1 $17.4 $21.6 24.6% $22.7 4.9% 

FY 2005 % Change

from FY05

Obligations to

FY06

% Change

from FY06 to

FY07

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4B – Information Technology Strategy 

The OTS Information Technology Investment Review Board (IRB) provides overall 

direction and vision for how OTS’s information technology should contribute to OTS’s 

goals and objectives. It serves as the forum for senior OTS executives to make decisions 

regarding IT expenditures and investments. 

OTS’s Chief Information Officer is responsible for the policy, oversight and 

improvement of all information systems, information management and data 

communications used by OTS to carry out its mission; he serves as the Executive 

Director of the IRB. OTS’s Director serves as the IRB Chair.

The IRB meetings are incorporated into the Regional Managers meetings to ensure that 

all senior staff participates in the discussion of the IT program, its budget, projects, 

strategies, and priorities. Projects are evaluated annually during the budget cycle and can 

be terminated or funded for further development. 

OTS successfully implemented the Personal Identity Verification (PIV) process in 2006 

to comply with the PIV-1 requirements of Homeland Security Presidential Directive 12 

(HSPD-12). In FY 2007, OTS will work with Treasury’s team to implement a new 

identity management program and to issue new smartcard badges. 

OTS continues to implement encryption and information protection controls across its 

environment. During 2005, OTS implemented the use of an encrypted folder to store 

sensitive documents on all client machines. In the fall of 2006, OTS implemented full 

disk encryption on all regional client machines. During FY 2007, OTS plans to address 

and conform with new OMB standards for two-factor authentication and the encryption 

of all mobile media including notebook computers, personal digital assistants, diskettes, 

compact discs, DVDs, flash memory devices, or other mobile media leaving physical 

government locations. 

OTS is working to develop a security program that adequately addresses the National 

Institute of Standards and Technology (NIST) requirements while being manageable for a 

small agency. OTS strengthened its IT Security program during FY 2006 and hired five 

new security professionals who are dedicated to addressing operational and regulatory 

security requirements. OTS also separated Operational Security into a distinct team to 

address day-to-day security concerns and activities. During FY 2007, OTS will strive to 

improve the Federal Information Security Management Act (FISMA) posture by 

implementing new processes compliant with the NIST standards and by recertifying its 

national systems. 

OTS has no major IT investments planned for FY 2007.

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4.3 – PART Evaluation Table 

PART Name: Thrift Supervision

 Goal: Increase the reliability of the U.S. financial system (F3)

ting: Effective

jor Findings

MB Recommendations

ctions Taken

ctions Planned or Underway

2. Based on feedback received over the past two years, the vast majority of the industry prefers the efficiency and effectiveness of a 

joint examination. OTS eliminated much of the redundancy of two separate exams. OTS will fulfill its statutory examination

responsibilities with less FTEs as a result of this change.

2. The program developed new goals that are outcome-oriented and program measurements which are clear.

3. The program is efficiently and effectively managed.

1. The program purpose is clear.

1. OCC and OTS worked together throughout the strategic and performance planning efforts to ensure that their strategic goals were

closely aligned. The banking regulatory agencies share their strategic and performance plans with each other and meet quarterly to

discuss strategic and performance planning.

1. Federal banking regulatory agencies, including the OTS, the OCC, the NCUA, and the FDIC, work together

to align outcome goals and related measures to allow for greater comparison of program performance in the 

industry.

2. The OTS evaluates the efficiency and effectiveness of a single examination for both Safety and Soundness 

and Compliance functions.

3. The OTS take steps to examine long-term systemic risks in the industry.

3. OTS will continue to examine and address systemic risks.

3. During the 2004 strategic planning process, systemic risks were examined and addressed in the Plan.

1. OTS will continue to work with the OCC to ensure that strategic goals are closely aligned. OTS will continue 

to share its strategic and performance plans with the other banking regulatory agencies and meet to discuss 

strategic and performance planning.

2. OTS will continue to perform a joint examination.

Strategic

Ra

OMB Ma

O

OTS A

OTS A

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

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