OTS - 0 
OTS - 1 

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 Budget Activity 

Dollars in Thousands 

Appropriation FY 2008 FY 2009 FY 2010

Office of Thrift Supervision Obligated Estimated Estimated $ Change % Change

 Supervision of the Thrift Industry $245,699 $246,706 $181,000 ($65,706) -26.63%

Total Appropriated Resources $245,699 $246,706 $181,000 ($65,706) -26.63%

Total FTE 1,029 1,095 847 (248) -22.65%

Note: FY 2010 data provided for informational purposes only. The budget information presented below is for FY 2009. 

FY 2009 Priorities 

OTS’s FY 2009 Priorities are set forth below: 

• Comprehensive Risk Focused Examinations that Focus on Core Risk Areas: 

o Interest Rate Risk and Credit Risks, 

o Compliance Risks, Anti-Money Laundering and Financial Crimes, 

• Strengthening Thrift Industry Guidance including: 

o Regulations on Prohibitions Relating to Unfair or Deceptive Acts 

and Practices, 

o Loss Mitigation Strategies to Prevent Mortgage Foreclosures when 

Appropriate, 

• Disaster and Emergency Preparedness, 

• Global Financial Services, 

• Regulatory Burden, 

• Communicating the Benefits of the Thrift Charter, and 

• Succession Planning and Management of OTS Resources. 
OTS - 2 

Table of Contents 

Office of Thrift Supervision ............................................................................................. 1

Section 1 – Purpose ........................................................................................................... 3

1A – Description of Bureau Vision and Priorities.......................................................... 3 

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

1C – Industry Outlook .................................................................................................. 10 

Section 2 – Budget Adjustments and Appropriation Language................................. 12

2.2 – Operating Levels Table........................................................................................ 12 

2.3 – Resource Detail Table.......................................................................................... 13 

2B – Appropriations Language and Explanation of Changes....................................... 13 

Section 3 – Budget and Performance Plan ................................................................... 14

3.1 – Budget by Strategic Outcome .............................................................................. 14 

3A – Supervision of the Thrift Industry........................................................................ 14 

3.2.1 – Supervision of the Thrift Industry Budget and Performance Plan.................... 16 

Section 4 – Supporting Materials .................................................................................. 19

4A – Human Capital Strategy Description ................................................................... 19 

4.1 – Summary of IT Resources Table ......................................................................... 20 

4B – Information Technology Strategy ........................................................................ 21 

4.2 – Program Evaluation Table ................................................................................... 23 
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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 state-chartered 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 institutions; and preemption authority. 

OTS is the only federal banking agency that both charters depository institutions and 

supervises their holding companies. The thrift charter continues to flourish as 

institutions change and adapt their business strategies and focuses. OTS-supervised 

holding companies are diverse, ranging from large, multinational corporations to 

small companies with few assets other than their thrift charter. 

As of September 30, 2007, OTS oversaw 831 thrifts with total assets of $1.57 

trillion; OTS also supervised 470 holding company enterprises with 

approximately $8.5 trillion in U.S. consolidated assets. 

As of September 2008, OTS regulated 818 thrifts at the end of the fiscal year with 

total assets of $1.18 trillion; OTS also supervised 469 holding company 

enterprises with approximately $8.1 trillion in U.S. consolidated assets. 

Capital measures for the thrift industry continued to be strong, stable and well in 

excess of minimum requirements; 97.8% of all OTS-regulated thrifts, holding 

99.3% of industry assets, exceeded “well-capitalized” regulatory standards. 

OTS Vision, Strategic Goals and Priorities - OTS’s vision is to perform and be 

recognized as the premier regulator of financial institutions and their holding 

companies. The FY 2009 budget submission is guided by the four strategic goals 

outlined in OTS’s 2007-2012 Strategic Plan. 

• A safe and sound thrift industry. 

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

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

provide a full competitive array of financial services. 

• A professional, highly motivated, and diverse workforce that effectively uses 

OTS resources to provide exceptional service to its customers. 
OTS - 4 

OTS’s FY 2009 budget of $246.706 million supports OTS’s efforts to address 

these key strategic issues and challenges: 

• Examine, supervise, and regulate thrifts and their holding companies. 

• Assess the risk profile of the institution when planning examinations and focus 

the examination based on the institution’s risk, size, and complexity.

• Provide regulatory guidance to thrifts and their holding companies. 

• Encourage thrifts to pursue loss mitigation strategies to prevent mortgage 

foreclosures when appropriate. 

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

months that incorporate an assessment of compliance with consumer protection 

laws and regulations. 

• Promote the reduction of regulatory burden. 

• Coordinate supervisory and policy development activities with 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. 

• Communicate the benefits of the thrift charter and the important role of 

community-based thrifts including minority based institutions. 

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

framework. 

• Address succession planning. 

1B – Program History and Future Outlook 

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

Atlanta, Chicago, Dallas, Jersey City 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 70 percent of OTS’s staff works in the 

OTS 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. 

The following activities highlight OTS’s 2008 accomplishments and 2009 

strategic priorities. 

Comprehensive and Risk Focused Examinations that Focus on Core Risk Areas - 

OTS conducts comprehensive examinations combining safety and soundness and 

compliance reviews to eliminate multiple reviews of the same area for different 
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purposes. OTS’s 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 with a top-down, risk-focused approach that promotes 

comprehensive compliance management, including the establishment of adequate 

internal controls to ensure regulatory compliance and to prevent predatory 

practices. 

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

examination approach. OTS issues one information request package prior to the 

start of each examination and examines lending portfolios from the compliance 

and safety and soundness perspectives. This comprehensive approach reduces 

savings association cost and burden while promoting an efficient, risk-focused 

examination report that details all exam findings. The majority of OTS-regulated 

institutions are in favor of 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 

examination disciplines, and 4) serve as examiner-in-charge of at least two 

comprehensive examinations prior to accreditation. OTS continually works to 

provide specialized training and rigorous accreditation and professional 

development programs to ensure OTS is capably equipped to supervise a dynamic 

and growing industry. 

Interest Rate Risk and Credit Risks - 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’s enhanced 

Net Portfolio Value (NPV) Model provides an accurate estimate of each 

institution’s interest rate risk profile. More importantly, the NPV model gives 

OTS the ability to value a much wider range of financial instruments and the 

capability to produce a series of reports that focus on areas such as net interest 

income, liquidity, and value-at-risk. The enhanced NPV Model solidifies OTS’s 

position as an industry leader in the high quality measurement of interest rate risk.

Alternative or nontraditional mortgage lending products present a unique 

intersection of credit and interest rate risks. In 2006 the federal financial 

regulatory agencies; the FDIC, Board of Governors of the Federal Reserve 

System (FRB), National Credit Union Administration (NCUA), OCC, and OTS 

issued guidance to address the risks posed by these types of loans. On May 22, 

2008, the agencies issued final illustrations for helping consumers understand 

certain hybrid adjustable rate mortgage (ARM) products. OTS maintains a staff 

of specialists in capital markets, accounting, mortgage banking, alternative 

mortgage products, and credit cards to assist in identifying, assessing and 

mitigating interest rate and credit risks. 
OTS - 6 

In addition to these risk mitigation and monitoring programs, the thrift industry’s 

relatively high capital ratio in the aggregate acts as a further mitigating factor 

helping the industry address potential credit quality problems from a position of 

strength. OTS has been and will continue to work with the industry to remain 

focused on appropriate capital levels commensurate with the risk profile. 

Compliance Risks, Anti-Money Laundering, and Financial Crimes - OTS 

compliance examination procedures direct institutions to identify, monitor and 

mitigate their compliance risks to ensure compliance with the broad range of 

consumer protection laws and regulations. OTS examiners regularly assess thrift 

institutions’ compliance programs during comprehensive examinations. For 

example, OTS’s compliance program is structured to ensure that thrifts maintain 

systems and controls to fight identity theft, and ensure the accuracy of consumers’ 

credit reports. OTS reviews data security at thrifts and third party technology 

service providers. (The Gramm-Leach-Bliley Act requires that all financial 

institutions establish a program to protect their customers’ personal information). 

As outlined in OTS’s 2007-2012 Strategic Plan, a primary strategy for meeting 

the goal of a safe and sound thrift industry includes effective examination for 

potential money laundering, terrorist financing and Bank Secrecy Act (BSA) 

compliance issues in OTS-supervised institutions. OTS continues to examine for 

compliance with BSA, the USA Patriot Act, and other anti-money laundering 

provisions. The examination process consists of on-site examinations that are 

conducted every 12-18 months, supplemented by off-site monitoring and followup to address identified supervisory issues. OTS has expanded supervisory 

resources in this area by hiring additional, experienced compliance examiners and 

compliance specialists. Further, to enhance examiner expertise, the second 

Advanced BSA/AML Specialists Conference hosted by the federal banking 

agencies in October 2008 focused on emerging money laundering and terrorist 

financing risks. 

OTS has worked with the other federal banking agencies, the Financial Crimes 

Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), 

and the Conference of State Bank Supervisors (CSBS) to ensure examination 

consistency and to provide guidance to financial institutions for developing 

policies and programs to comply with anti-money laundering requirements. 

FinCEN sponsors the Bank Secrecy Act Advisory Group (BSAAG), which has 

established several committees to discuss BSA compliance issues among 

regulators, the banking industry, and law enforcement. OTS’ staff serve on 

several of these committees. OTS is also working with the other federal banking 

agencies to develop an examiner risk scoping tool to enhance BSA examination 

efficiencies. 

Strengthening Thrift Industry Guidance including Regulations on Prohibitions 

Relating to Unfair or Deceptive Acts and Practices - In the past, OTS has 
OTS - 7 

exercised its rulemaking authority in the area of unfair or deceptive acts and 

practices to parallel the Federal Trade Commission’s (FTC’s) rules. In 1985 the 

FTC issued its Credit Practices Rule and OTS’s predecessor agency, the Federal 

Home Loan Bank Board (FHLBB), issued a similar rule. The Credit Practices 

Rule prohibits creditors from using contract provisions considered to be unfair to 

consumers, requires creditors to advise consumers who co-sign obligations about 

their potential liability, and prohibits late charges in some situations. 

OTS has supplemented its Credit Practices Rule with other regulations. These 

rules and regulations are unique among the federal banking agencies in the way 

they protect consumers. For example, OTS has a long-standing Advertising Rule, 

which prohibits savings associations from making any representation that is 

inaccurate or that misrepresents its services, contracts, investments, or financial 

condition. In addition, OTS has imposed consumer protections, not mandated by 

federal law, for home loans made by federal savings associations. These 

protections address the regulation of late charges, prepayment penalties, and 

adjustments to the interest rate, payment, or term to maturity. OTS issued a 

Nondiscrimination Rule that exceeded the federal fair lending laws by prohibiting 

additional forms of discrimination. 

In August 2007, OTS sought to strengthen its unfair or deceptive acts and 

practices (UDAP) rules and requested public comment on a broad array of issues 

and practices including practices related to the marketing, originating and 

servicing of credit cards. The OTS, FRB, and the NCUA joined together in May 

2008, to issue a proposed UDAP rule that focused on credit cards and overdraft 

protection programs. The UDAP rule was finalized on December 18, 2008. For 

credit cards, the rule addressed unfair practices in the areas of providing 

reasonable time periods for making payments, payment allocations, interest rate 

increases on outstanding balances, security deposits and fees charged to an 

account for the issuance of credit, and deceptive offers of credit. For overdraft 

protection services on deposit accounts, the rule addressed a consumer’s ability to 

opt out of overdraft services and unfair fees for debit holds. 

Loss Mitigation Strategies to Prevent Mortgage Foreclosures when Appropriate - 

OTS published its first Mortgage Metrics Report in July 2008. This report 

presented key performance data on first lien residential mortgages serviced by 

thrift institutions or their affiliates, and focused on delinquencies, loss mitigation 

actions, and foreclosures. On September 12, 2008, the OTS and Comptroller of 

the Currency (OCC) jointly issued the second Mortgage Metrics Report which 

included data thru June 2008. The combined report covers more than 90 percent 

of first lien mortgages held or serviced by federally regulated banks and thrifts. 

The combined portfolio in the report represents 34.7 million loans worth $6.1 

trillion. The Mortgage Metrics Report provides an additional tool to help 

examiners assess emerging trends, identify anomalies, compare thrift institutions 

to the rest of the industry, evaluate asset quality and loan-loss reserve needs, and 
OTS - 8 

evaluate the effectiveness of loss mitigation actions. The September 12th report 

showed that: 

• Actions by thrifts and national banks to prevent home mortgage foreclosures 

increased faster than new foreclosures. 

• New loan modifications increased by more than 80 percent from January to 

June and increased by 56 percent from the first quarter to the second quarter. 

• More than 9 out of 10 mortgages remain current. 

• New loss mitigation actions increased more quickly than new foreclosures 

during the second quarter. 

Disaster and Emergency Preparedness - OTS is actively involved in initiatives to 

address emergency and disaster preparedness. In October 2007, OTS urged thrifts 

in areas affected by the Southern California wildfires to consider all reasonable 

steps to meet customers’ financial needs while maintaining standards of safety 

and soundness. OTS emphasized that thrifts in affected areas could:

• Consider temporarily waiving charges for late payments and penalties for 

early withdrawal of savings. 

• Reassess the credit needs of their communities and offer prudent loans to help 

rebuild. 

• Restructure borrowers’ debt obligations, when appropriate, by adjusting 

payment terms. 

• Solicit state and federal guarantees and other means to help mitigate excessive 

credit risks. 

• Consider all available programs offered by the Federal Home Loan Banks. 

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 plan 

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. 

Global Financial Services - The Holding Company and International Division 

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. 

International Basel II Risk-Based Capital Framework - In late 2007, the FDIC, 

FRB, OCC, and OTS approved a final rule regarding the advanced approaches for 

computing large banks risk-based capital requirements. The rule became 
OTS - 9 

effective in April 2008, and while it remains unclear when banks are expected to 

begin the multi-year transition process to full implementation, the federal banking 

agencies are continuing preparatory efforts towards that end. 

On July 2, 2008, the Director of OTS approved an interagency notice of proposed 

rulemaking along with the FDIC, FRB and OCC that would, if finalized, offer 

savings institutions the option of adopting a less complex approach for calculating 

risk-based capital requirements under the Basel II capital framework. This 

"standardized" approach would be available to all banking organizations except 

those that meet the definition of a core banking organization (generally over $250 

billion in assets or $10 billion in foreign exposures). Although the standardized 

approach is a less complex alternative than the advanced approach, it is more risksensitive and more complex than the existing risk-based capital rules. The 

existing rules will also remain in effect as an available option for all but the 

largest organizations. 

Regulatory Burden - 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. 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 first review was 

completed in 2006 as required under this law. 

The federal banking agencies identified burdens that would require legislative 

changes to the underlying statutes before making changes 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 it was 

signed into law on October 13, 2006. 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 and 

modernizes record keeping requirements for regulators. 

Communicating the Benefits of the Thrift Charter - The thrift charter provides 

advantages in the delivery of financial services, primarily for community-based 

lenders. 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 is used to highlight aspects of its oversight program; the booth also 

details aspects of the thrift charter that set it apart from other charter options. 

Succession Planning and Management of OTS Resources

Thirty-five percent of OTS’s current staff will be eligible to retire by year-end 

2010. Thus, OTS faces the challenge of competing for, training, and retaining its 

human resources to build the workforce required for the future. To meet this 
OTS - 10 

need, OTS has successfully recruited 165 new examination staff members since 

2006. The current retention rate for these individuals is 93%. 

To achieve full accreditation and gain expertise, examiners engage in a multi-year 

training program, pass proficiency tests, participate in on-the-job instruction and 

developmental assignments, and serve as Examiner-In-Charge on at least two 

comprehensive examinations. During FY 2008, classroom training addressed the 

needs of pre-accredited examiners in their various stages of advancement. 

Courses included New Thrift Regulator School, Loan Analysis School, 

Information Technology Risks and Controls, Real Estate Appraisal Review and 

compliance courses. OTS also offered courses and seminars in advanced 

examiner topics, management and leadership topics, ethics and information 

security. OTS’s blend of regulatory and non-regulatory training and development 

keep OTS’s employee competencies current and relevant to industry needs. 

During FY 2008, nine examiners were accredited, increasing the accredited 

examiner staff to 414. 

OTS receives no appropriated funds from Congress; its revenue is derived 

principally from assessments on savings associations and savings and loan 

holding companies. While the FY 2009 projected assessment revenue is 

consistent with FY 2008 levels, OTS continues to monitor the impact of recent 

thrift failures and ongoing industry consolidation, driven in part by the current 

financial crisis. The bureau has experienced surpluses in recent years which led to 

an increase in the agency’s cash reserves, in excess of $200 million. Existing 

reserves will be sufficient to cover any FY 2009 shortfall. In addition, OTS is 

limiting new hires and prudently managing other expenses to adjust to any 

revenue reductions. With efficient operations and demonstrated prudent use of 

funds, OTS will be able to continue supervising savings associations and holding 

companies while maintaining the safety and soundness of the thrift industry for 

years to come. 

1C – Industry Outlook 

The United States economy is currently undergoing significant financial distress 

and the thrifts and banks engaged in home mortgage financing are feeling a 

disproportionate impact from the current economic crisis. In response to the 

decline in the housing market, OTS has urged thrifts to bolster reserves for 

potential loan losses by significantly adding to their loan loss provisions. OTS is 

also encouraging thrifts to strike the appropriate balance between working with 

distressed borrowers to restructure loans to prevent avoidable foreclosures and 

ensuring sufficient recoveries to avoid further erosions in capital. 

During the six months that ended in September 2008, thrifts set aside $21.9 

billion in loan loss provisions, substantially increasing their reserves to 1.93%, a 

significant increase from .78% one year ago. The increase in reserves contributed 
OTS - 11 

to a net loss of $3.99 billion for the quarter ending September 30, 2008, but has 

strengthened the industry’s ability to withstand foreseeable current and future 

challenges. 

Capital levels for the industry remain stable and in excess of minimum 

requirements. At the end of September 2008, 97.8 percent of the thrift industry, 

holding 99.4 percent of industry assets, exceeded well-capitalized standards and 

only six thrifts were less than adequately capitalized. Thrifts are also 

participating in the Treasury’s Capital Purchase Program (CPP), the initial 

component of the Troubled Asset Relief Program. Thrifts submit their CPP 

applications to the OTS, which reviews them and forwards them to Treasury with 

OTS’s recommendation. 

The thrift industry continues to remain focused on residential mortgage lending, 

with 45.8 percent of assets invested in one-to-four family mortgage loans as of the 

end of FY 2008. The volume of mortgage refinancing, as a percentage of total 

originations, remains strong as borrowers continue to convert adjustable rate 

mortgages to fixed rate mortgages. 

OTS has worked closely with the industry to maintain the integrity and viability 

of the thrift charter uniquely focused on consumer and community lending as the 

industry continues to adapt to the evolving nature of the financial services 

business and the demands of its customers. 
OTS - 12 

Section 2 – Budget Adjustments and Appropriation Language 

2.2 – Operating Levels Table 

Bureau: Office of Thrift Supervision FY 2008 

Obligated

FY 2009 

Estimated

FY 2010 

Estimated

% Change 

FY 2009 

to FY 2010

 

FTE 1,029 1,095 847 -22.65%

Object Classification: 

11.1 - Full-time permanent 114,509 127,329 104,000 -18.32%

11.3 - Other than full-time permanent 1,696 0 0 0.00%

11.5 - Other personnel compensation 28 54 0 -100.00%

11.8 - Special personal services payments 8,259 504 0 -100.00%

12 - Personnel benefits 54,779 60,585 33,000 -45.53%

13 - Benefits for former personnel 231 214 0 -100.00%

21 - Travel and transportation of persons 17,258 19,094 15,000 -21.44%

22 - Transportation of things 200 382 1,000 161.78%

23.2 - Rental payments to others 4,070 4,430 3,000 -32.28%

23.3 - Comm, utilities, and misc charges 3,754 5,168 5,000 -3.25%

24 - Printing and reproduction 254 223 0 -100.00%

25.1 - Advisory and assistance services 5,249 3,243 2,000 -38.33%

25.2 - Other services 6,037 5,303 4,000 -24.57%

25.3 - Other purchases of goods and services from 

Govt. accounts 

4,340 5,289 4,000 -24.37%

25.4 - Operation and maintenance of facilities 10,198 5,380 4,000 -25.65%

25.7 - Operation and maintenance of equip 221 417 1 -99.76%

25.8 - Subsistence and support of persons 0 75 0 -100.00%

26 - Supplies and materials 2,071 2,904 2,000 -31.13%

31 - Equipment 10,323 4,871 3,000 -38.41%

32 - Land and structures 2,222 1,241 999 -19.50%

Total Budget Authority $245,699 $246,706 $181,000 -26.63%

 

Budget Activities: 

Supervision of the Thrift Industry 245,699 246,706 181,000 -26.63%

Total Budget Authority $245,699 $246,706 $181,000 -26.63%

 
OTS - 13 

2.3 – Resource Detail Table 

% Change

FY 2008 FY 2009 FY 2010 FY 2009

Description Actual Estimated Estimated to FY 2010

(Dollars in Thousands)

Summary of Revenue and Expenses:

Revenue:

Supervision

Assessments $245,175 $227,750 $170,000 -25.4%

Rental Income 5,020 $5,100 $5,000 -2.0%

Interest 8,818 $9,000 $4,000 -55.6%

Fees & Other 8,304 $7,000 $2,000 -71.4%

Total Revenue $267,317 $248,850 $181,000 -27.3%

Expenses:

Supervision

Compensation & Benefits $179,501 $188,686 $137,000 -27.4%

Travel & Transportation 17,316 $19,476 $16,000 -17.8%

Facilities 16,669 $10,839 $4,000 -63.1%

Other Services & Supplies $32,213 $27,705 $24,000 -13.4%

Total Expenses $245,699 $246,706 $181,000 -26.6%

Net Results $21,618 $2,144 $0 0.0%

2B – Appropriations Language and Explanation of Changes 

OTS receives no appropriated funds from Congress. 

 
OTS - 14 

Section 3 – Budget and Performance Plan

This table lists all FY 2010 resources by strategic goal, objective and outcome 

outlined in the FY 2007-2012 Treasury Department Strategic Plan. The Treasury 

Strategic Plan is a corporate level plan for the Department that provides a 

description of what the agency intends to accomplish over the next five years. 

For detailed information about the FY 2007-2012 Treasury Strategic Plan, please 

go to: http://www.treasury.gov/offices/management/budget/strategic_plan.shtml

3.1 – Budget by Strategic Outcome 

Dollars in Thousands 

Treasury Strategic Goal FY 2009 FY 2010 Percent

 Treasury Strategic Objective President's Budget Baseline Change

 Treasury Strategic Outcome AMOUNT AMOUNT AMOUNT 

 Economic competitiveness 24,670 18,100 -26.6%

 Fin. & econ. crises 222,036 162,900 -26.6%

Total $246,706 $181,000 -26.6%

3A – Supervision of the Thrift Industry ($246,706,000 from reimbursable 

programs): 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, increased supervisory 

action, including additional field visits, accelerating the normal 12-18 month 

exam cycle, and/or enforcement action is taken. 

OTS receives no appropriated funds from Congress; the revenue of the bureau is 

derived principally from assessments on savings associations and savings and 

loan holding companies. Other sources of income include fees, rents, and interest 

on investments. OTS has received unqualified opinions on its financial 

statements since being formed in 1989. 

OTS’s four strategic goals guide the annual budget activity: 

Strategic Goal 1: A safe and sound thrift industry. 

Through the examination process, OTS strives to anticipate, identify, understand, 

address and communicate to savings associations and their holding companies the 

safety and soundness risks posed by their operations, as well as noncompliance 

with safety and soundness and holding company regulations and guidance. OTS 

maintains a high level of communication with the industry, administers 

educational programs, and shares information on industry best practices and 

emerging risks. Each association’s compliance with the requirements of the Bank 

Secrecy Act, the USA Patriot Act, and other anti-money laundering and antiterrorism statutory and regulatory requirements is determined on an on-going 
OTS - 15 

basis. OTS also incorporates applicable lessons learned from recent natural 

disasters and emergencies. Problem thrift situations are resolved in a timely 

fashion, and when possible, without loss to the deposit insurance fund. 

Strategic Goal 2: 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 Community Reinvestment Act (CRA) obligations; and provide safe and 

sound loans, investments and financial services for low and moderate income 

individuals, communities and areas of greatest need. OTS's Community Affairs 

staff works with savings associations, community-based organizations, 

government officials and others to promote partnerships and 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. 

OTS continues to take a lead role in addressing predatory and abusive lending 

practices, customer privacy, information security, and identity theft requirements. 

OTS also reinforces the importance of fair and honest treatment of consumers 

through appropriate supervisory and enforcement actions. OTS uses the 

application process to ensure savings associations have management programs 

that are responsive to the credit needs of their communities. 

Strategic Goal 3: A flexible legal and regulatory framework that enables the 

thrift industry to provide a full competitive array of financial services.

OTS strives to increase efficiencies in regulating savings associations while 

maintaining effective supervision to ensure safety and soundness and consumer 

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

limiting assessment rate increases, and reviewing statutes and regulations that 

may be duplicative or unnecessary. OTS conducts consolidated examinations that 

combine safety and soundness with compliance reviews to improve efficiency and 

reduce the amount of on-site examination time. OTS’s regulations have been 

redesigned to make them easier to understand and to eliminate unnecessary 

restrictions that do not improve safety and soundness or protect consumers. OTS 

tailors examinations to the risk profile of each individual institution. These 

changes ensure that the examination process is responsive and enables the thrift 

industry to provide competitive financial services. 

Strategic Goal 4: A professional, highly motivated and diverse workforce that 

effectively uses OTS resources to provide exceptional service to its customers.
OTS - 16 

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 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. 

OTS has developed a long-range staffing plan and a national training and 

development program to ensure that core programs are sufficiently staffed with 

properly trained and experienced personnel. OTS continues to foster an 

environment built on fairness, trust, respect, teamwork, communication, 

creativity, diversity, and empowerment. OTS has developed proactive initiatives 

focused on the retention of employees including mentoring, employee feedback, 

employee outreach, incentives, and recognition programs. 

3.2.1 – Supervision of the Thrift Industry Budget and Performance Plan 

Supervision of the Thrift Industry Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

Resource Level Obligated Obligated Obligated Estimated Estimated

 Appropriated Resources $0 $0 $0 $0 $0

 Reimbursable Resources $199,497 $218,129 $245,699 $246,706 $181,000

Total Resources $199,497 $218,129 $245,699 $246,706 $181,000

Budget Activity Total $199,497 $218,129 $245,699 $246,706 $181,000

Supervision of the Thrift Industry 

Budget Activity

 Measure FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

Actual Actual Actual Target Target

Total OTS costs relative to every 

$100,000 in savings association assets 

regulated ($) (E) 

13.46 13.90 15.10 23.04 20.00

Percent of safety and soundness exams 

started as scheduled (%) (Ot) 

 93 95 94 94 94

Percent of thrifts that are well 

capitalized (%) (Oe) 

 99 99 99 99 99

Percent of thrifts with compliance 

examination ratings of 1 or 2 (%) (Oe) 

 94 93 97 97 97

Percent of thrifts with composite 

CAMELS ratings of 1 or 2 (%) (Oe) 

 94 93 93 93 93

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

Description of Performance - OTS met all of its performance measure targets for 

FY 2008 except for “Total OTS Cost per $100,000 in Savings Association Assets 

Regulated,” which missed by only one-tenth of one percent (.1%). OTS is 

presently repositioning its resources to meet the requirements of supervising a 

smaller asset base. The FY 2009 Performance Budget describes the goals, 

strategies, and priorities that will guide OTS’s operations. The FY 2009 budget 

enables OTS to continue tailoring supervisory examinations to the risk profile of 
OTS - 17 

the institutions, while effectively allocating resources to oversee and assess the 

safety and soundness and consumer compliance record of the thrift industry. 

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 (Capital adequacy, Asset quality, Management, Earnings, 

Liquidity and Sensitivity to market risk) 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. 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 - The FFIEC first 

approved a uniform, interagency compliance rating system in 1980. The rating 

system reflects, 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 elected to combine safety and soundness and compliance examinations 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. Capital 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 (wellcapitalized; adequately capitalized; undercapitalized, significantly 

undercapitalized; and critically 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. 

Percent of safety and soundness exams started as scheduled - OTS examines 

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

compliance with consumer protection laws. OTS performs safety and soundness 

examinations of its regulated savings associations consistent with statutory 

authority. When OTS identifies safety and soundness or compliance issues during 

its risk-focused examinations, it acts promptly to ensure association management 

and directors institute corrective actions to address supervisory concerns. OTS 
OTS - 18 

staff often meets with the savings association’s board of directors after delivery of 

the Report of Examination to discuss findings and recommendations. 

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 the assets of the holding 

company enterprises regulated by OTS. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treasury.gov/offices/management/dcfo/accountability-reports/2008-

par.shtml
OTS - 19 

Section 4 – Supporting Materials 

4A – Human Capital Strategy Description 

Human capital represents OTS’s primary resource for meeting its strategic 

objectives. Sustaining and nurturing human capital resources requires a blend of 

career building opportunities, competitive compensation, strategic and innovative 

training, and a diverse, supportive work environment. 

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

Management Agenda. The Plan incorporates practical strategies to ensure that 

OTS has sufficient staff with the right skills to accomplish its mission. The Plan 

consists of four main strategic goals: Organizational Effectiveness, Recruitment 

and Diversity, Employee Retention and Satisfaction, and Technology Skills. 

Thirty-five percent of OTS’s current staff will reach retirement eligibility by yearend 2010. Over the past two years OTS successfully recruited 165 new 

examination staff members; in addition several key specialty positions were filled. 

OTS’s compensation program continues to enable OTS to attract, retain, and 

reward staff comparable to the other federal banking agencies. 

OTS continuously trains its examination staff to create a work force capable of 

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

information technology and FFIEC service provider examinations). OTS designs 

training programs to meet the challenges OTS faces with anticipated retirements 

as part of its overall succession planning program. 

To meet the needs of the thrift industry, OTS seeks qualified and experienced as 

well as 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. 
OTS - 20 

4.1 – Summary of IT Resources Table Dollars in Thousands 

Information Technology Investments

FY 2007 FY 2009

Major IT Investments / Funding Source

Budget 

Activity

& Earlier

Enacted 1/

FY 2008

Enacted

President's

Budget

FY 2010

Requested

Major IT Investments $0.0 $0.0 $0.0 0.0 0.0 0Non-Major IT InvestmentsAdministrative - Mixed Supervision $0.8750 $0.8970 $0.9190 2.4% $0.9420 2.5Examinations Supervision $1.9250 $1.9730 $2.0220 2.4% $2.0730 2.5Thrift Financial Data Supervision $3.8750 $3.9720 $4.0710 2.4% $4.1730 2.5TFR Validation Supervision $1.5750 $1.6140 $1.6550 2.5% $1.6960 2.5Industry Structure and Tracking Supervision $1.5750 $1.6140 $1.6550 2.5% $1.6960 2.5CIO Planning Supervision $2.5490 $2.6130 $2.6790 2.5% $2.7460 2.5Total Non-Major IT Investments $12.4 $12.7 $13.0 2.4% $13.3 2.5Infrastructure InvestmentsTreasury Consolidated Data Center & Services $5.0130 $5.1390 $5.2670 2.4% $5.3990 2.5Treasury Consolidated Telecommunications $1.7340 $1.7770 $1.8220 2.5% $1.8670 2.5Treasury Consolidated End User Services $3.3690 $3.4530 $3.5390 2.4% $3.6280 2.5Treasury Consolidated Security $0.0000 $0.0000 $0.0000 0.0% $0.0000 0.0Total Infrastructure Investments $10.1160 $10.3690 $10.6280 2.4% $10.8940 2.5

Enterprise Architecture $0.1 $0.2 $0.2 2.7% 0.188 2.2Total IT Investments $22.6 $23.2 $23.8 2.4% $24.4 2.5

% Change

from FY08 to

FY09

% Chang

from FY09 

FY1
OTS - 0 

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 as well as the information management 

and data communications used by OTS to carry out its mission. OTS’s Chief 

Information Officer 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. 

Information Technology projects completed during FY 2008 include: 

• Conversion to a New Payroll System - Effective August 17, 2008, OTS 

converted from the current in-house payroll/personnel processing system to 

the Department of Agriculture’s National Finance Center’s (NFC) payroll 

and the Department of the Treasury’s HR Connect System. This migration 

was a complex project; OTS, NFC, and Treasury teams managed the payroll 

migration and collaborated in a rigorous examination of the OTS 

requirements and processes. Detailed system testing was conducted prior to 

the “go live” date to ensure the accuracy of individual employees’ payroll 

data. 

• Security Monitoring - OTS implemented automated internal security 

controls to address risks, analyze threats, and respond to incidents. OTS 

implemented the Computer Incident Response Capability which performs 

incident response, reporting, management, and mitigation. Lessons Learned 

are developed for each incident. 

• Privacy - OTS continues to actively manage privacy concerns. Two 

employees achieved the Certified Information Privacy 

Professional/Government credential. This credential is recognized as a 

measure of an individual’s ability to assess privacy concerns. OTS 

evaluated all systems for privacy considerations using the Privacy Threshold 

Assessment tool. OTS has seven systems that require a Privacy Impact 

Assessment. These assessments are underway and, when complete, will be 

posted on OTS’s web site. OTS chairs the Department of the Treasury’s 

Personally Identifiable Information Risk Management Group. 

• Training - OTS achieved 100 percent employee compliance on both the 

Annual Security Awareness and Annual Privacy Awareness training courses 

in FY 2008. 
OTS - 22 

4B – Information Technology Strategy 

IT Projects planned to begin in FY 2009 include: 

• Developing a new Business Resumption Program – OTS will begin 

developing an enhanced Business Resumption Program for its Mission 

Essential Functions. The purpose of this program is to raise our continuity 

of operation plan to the next level. 

• A business impact analysis will be performed across OTS systems 

based on the Mission Essential Function analysis. 

• Recovery strategies will be developed based on Recovery Point 

Objective and Recovery Time Objective needs. 

• IT Contingency Plans will be updated for all OTS systems; and, 

• Recovery strategies will be tested based on Business Resumption 

Program goals. 

 

• Enhancing the Consumer Complaint Systems – During FY 2008, OTS 

initiated major improvements to its consumer complaint handling process. 

These improvements included establishing a new call center, assigning 

additional staff, and initiating the development of a new consumer 

complaint system. During 2009, OTS will deliver the new consumer 

complaint system along with other technology solutions. OTS will establish 

a new Call Log System that will improve efficiency and reduce errors in 

handling calls. The new system will track calls and generate reports that 

will provide management with information on the volume of calls and 

length of time needed to process and respond to calls. 

 Replacing the Legal Tracking System - In 2009 OTS will begin to replace 

the Regional Legal Tracking system (RLT), a legacy application currently 

used by OTS’s Chief Counsel’s Office. Replacement of the RLT is 

necessary to accommodate retirement of the obsolete Alpha servers. OTS 

will evaluate commercial off-the-shelf case management products for 

possible purchase, consider the modification of an existing OTS system, and 

consider the development of a new system using Microsoft SharePoint. 

 Training – During FY 2009 OTS employees will be required to complete 

on-line records management training. 

OTS has no major IT investments planned for FY 2009. 
OTS - 23 

4.2 – Program Evaluation Table 

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

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

Program Name: Thrift Supervision

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

 

OMB Major Findings

OMB Recommendations

OTS Actions Taken

OTS Actions Planned or Underway

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

3. During the 2007 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.

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

Compliance functions.

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