FEDERAL DEPOSIT INSURANCE CORPORATION
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FEDERAL DEPOSIT INSURANCE CORPORATION
ANNUAL REPORT 2012

2 FEDERAL DEPOSIT INSURANCE CORPORATION

Federal Deposit Insurance Corporation

550 17th Street NW, Washington, DC 20429 Office of the Chairman

May 31, 2013

Dear Sir,

In accordance with:

♦ the provisions of section 17(a) of the Federal Deposit Insurance Act,

♦	 the Chief Financial Officers Act of 1990, Public Law 101-576, 

♦	 the Government Performance and Results Act of 1993 (as amended) and the GPRA Modernization Act of 2010,

♦	 the provisions of Section 5 (as amended) of the Inspector General Act of 1978, and

♦	 the Reports Consolidation Act of 2000,

the Federal Deposit Insurance Corporation (FDIC) is pleased to submit its 2012 Annual Report (also referred to as the 

Performance and Accountability Report), which includes the audited financial statements of the Deposit Insurance Fund 

(DIF) and the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund (FRF). 

In accordance with the Reports Consolidation Act of 2000, the FDIC assessed the reliability of the performance data 

contained in this report. No material inadequacies were found, and the data are considered to be complete and reliable. 

Based on internal management evaluations, and in conjunction with the results of independent financial statement audits, 

the FDIC can provide reasonable assurance that the objectives of Section 2 (internal controls) and Section 4 (financial 

management systems) of the Federal Managers’ Financial Integrity Act of 1982 have been achieved, and that the FDIC 

has no material weaknesses. Additionally, the U.S. Government Accountability Office did not identify any significant 

deficiencies in the FDIC’s internal controls for 2012. We are committed to maintaining effective internal controls 

corporate-wide in 2013. 

Sincerely,

Martin J. Gruenberg

Chairman

The President of the United States

The President of the United States Senate

The Speaker of the United States House of Representatives
ANNUAL REPORT 2012 3

Table of Contents

Message from the Chairman........................................................................................................5

Message from the Chief Financial Officer..................................................................................11

I. Management’s Discussion and Analysis ................................................................................13

The Year in Review ...............................................................................................................13

Overview.................................................................................................................................................................................... 13

Insurance ................................................................................................................................................................................... 13

Activities Related to Systemically Important Financial Institutions.................................................................................. 16

Supervision and Consumer Protection .................................................................................................................................. 18

Resolutions and Receiverships .............................................................................................................................................. 30

International Outreach ............................................................................................................................................................ 33

Effective Management of Strategic Resources......................................................................................................... 36

II. Financial Highlights...............................................................................................................41

Deposit Insurance Fund Performance ....................................................................................................................................... 41

Corporate Operating Budget......................................................................................................................................................... 43

Investment Spending ..................................................................................................................................................................... 44

III. Performance Results Summary .............................................................................................45

Summary of 2012 Performance Results by Program................................................................................................................. 45

2012 Budget and Expenditures by Program .............................................................................................................................. 47

Performance Results by Program and Strategic Goal............................................................................................................... 48

Prior Years’ Performance Results ................................................................................................................................................ 55

IV. Financial Statements and Notes ...........................................................................................63

Deposit Insurance Fund (DIF) ..................................................................................................................................................... 64

FSLIC Resolution Fund (FRF)...................................................................................................................................................... 85

Government Accountability Office’s Audit Opinion .................................................................................................................. 94

Management’s Response ............................................................................................................................................................. 102

Overview of the Industry............................................................................................................................................................. 104

V. Corporate Management Control ........................................................................................107

Management Report on Final Actions ....................................................................................................................................... 108

VI. Appendices.........................................................................................................................111

A. Key Statistics............................................................................................................................................................................ 111

B. More About the FDIC.............................................................................................................................................................. 128

C. Office of Inspector General’s Assessment of the Management and Performance Challenges Facing the FDIC ........ 136
INSURING DEPOSITS • EXAMINING INSTITUTIONS • 

MANAGING RECEIVERSHIPS • EDUCATING CONSUMERS

In its unique role as deposit insurer of banks and savings associations, and 

in cooperation with the other state and federal regulatory agencies, the 

FDIC promotes the safety and soundness of the U.S. financial system and 

insured depository institutions by identifying, monitoring, and addressing 

risks to the Deposit Insurance Fund (DIF).

The FDIC promotes public understanding and the development of sound 

public policy by providing timely and accurate financial and economic 

information and analyses. It minimizes disruptive effects from the failure 

of financial institutions. It assures fairness in the sale of financial products 

and the provision of financial services.

The FDIC’s long and continuing tradition of excellence in public service 

is supported and sustained by a highly skilled and diverse workforce that 

continuously monitors and responds rapidly and successfully to changes in 

the financial environment. 

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

I am pleased to present the Federal 

Deposit Insurance Corporation’s (FDIC) 

2012 Annual Report. 

In 2012, we saw the continuation of the 

gradual but steady recovery of FDIC-insured 

institutions. Capital has increased and 

banks have bolstered their liquidity. Loan 

growth has shown improvement, and banks 

continued to strengthen their balance sheets. 

Revenue growth surpassed reductions in 

loss provisions as the principal contributor 

to earnings, although much of that growth 

came from loan sales. 

At year-end, domestic and international 

issues still presented challenges for the 

economy and the banking industry, but the 

underlying trends were positive. Indeed, 

bank performance indicators improved 

during 2012, particularly earnings and 

credit quality of loans on the books of 

FDIC-insured institutions. Much of the 

improvement in earnings over the last 

few years was driven by lower loan-loss 

provisions, reflecting improved credit 

quality. Going forward, industry earnings 

will depend on increased lending, consistent 

with sound underwriting. 

Although challenges to the recovery remain, 

the FDIC is well positioned to carry out 

its mission of maintaining stability and 

public confidence in the nation’s financial 

system by insuring deposits, examining and 

supervising financial institutions for safety 

and soundness and consumer protection, 

and managing receiverships. At the end of 

2012, the FDIC insured a record $7.4 trillion 

of deposits in over half a billion accounts at 

more than 7,000 institutions. 

Our current top priorities include:

♦ continuing implementation of FDIC’s 

systemic resolution responsibilities 

under the Dodd-Frank Wall 

Street Reform and Consumer 

Protection Act (Dodd-Frank 

Act), including resolution 

planning and promoting 

cross border cooperation and 

coordination with respect 

to an orderly resolution of a 

globally active, systemically 

important financial institution;

♦ following up on the FDIC’s 

Community Banking 

Initiatives, including pursuing 

additional research relating 

to the continued viability 

of community banks, and 

continuing our review of examination 

and rulemaking processes with the 

goal of identifying additional ways to 

make the supervisory process more 

efficient, consistent, and transparent, 

consistent with safe and sound banking 

practices; and

♦ continuing our economic inclusion 

initiatives to expand access to mainstream 

financial services for all people in the 

United States.

A great strength of our agency is a highly 

dedicated and motivated workforce. The 

FDIC’s employees understand the agency’s 

mission and how it relates to what they 

do. For the second year in a row, the FDIC 

took the top spot in the Best Places to Work 

in the Federal Government rankings, this 

year in the new category for mid-sized 

federal agencies. We are very proud of this 

recognition. All of us at the FDIC share 

the responsibility for cultivating a highperformance environment with a deep sense 

of mission among our workforce. 

Message Frm
ANNUAL REPORT 2012

6 FEDERAL DEPOSIT INSURANCE CORPORATION

Strengthening 

Deposit Insu

Fund and Reso

Failed Ba

The FDIC has made significant 

progress in rebuilding the DIF. In 

2010, the FDIC Board approved 

a comprehensive, long-term plan 

for fund management based on 

Dodd-Frank Act requirements and 

on an FDIC historical analysis of DIF 

losses. After returning to a positive 

balance of $11.8 billion at the end of 

2011, from negative $7.4 billion a year 

earlier, the DIF balance rose to $33.0 

billion at the end of 2012. Assessment 

revenue, fewer bank failures, and 

fees transferred to the DIF from 

the Temporary Liquidity Guarantee 

Program, were the main drivers of 

fund growth in 2012. 

The number of both failed and 

problem institutions continued to 

decline in 2012. Failed institutions 

peaked in 2010 at 157, and declined to 

92 in 2011 and 51 in 2012. Similarly, 

problem banks peaked at 888 in 

March 2011 and declined to 651 by the 

fourth quarter of 2012. Although both 

trends are positive, they still represent 

highly elevated levels of failed and 

troubled banks. As a result, the FDIC 

continues to devote considerable 

resources to managing receiverships, 

examining problem institutions, 

and implementing provisions of the 

Dodd-Frank Act.

Nonetheless, as the banking industry 

continues to stabilize, the FDIC will 

require fewer resources. The FDIC’s 

authorized workforce for 2012 was 

8,713 full-time equivalent positions 

compared with 9,269 the year before. 

The 2012 Corporate Operating Budget 

was $3.3 billion, a decrease of $0.6 

billion (15 percent) from 2011. 

For 2013, the Board reduced the 

budget by 18 percent to $2.7 billion 

and reduced authorized staffing 

by 8 percent to 8,026 positions in 

anticipation of a further drop in bank 

failure activity in the years ahead. The 

FDIC also announced plans to close 

the last of three temporary satellite 

offices that were set up to handle 

crisis-related workload. The Irvine 

(California) office closed in January 

2012, and the Schaumburg (Illinois) 

office closed in September 2012. The 

Jacksonville (Florida) office is now 

scheduled to close in 2014. Contingent 

resources are included in the budget, 

however, to ensure readiness should 

economic conditions unexpectedly 

deteriorate.

During 2012, the FDIC continued 

using successful resolution strategies 

instituted in 2009 to protect insured 

depositors of failed institutions at 

the least cost to the DIF. The FDIC 

actively marketed failing institutions, 

and the large majority of those 

institutions were sold to other 

financial institutions. These strategies 

protected insured depositors and 

preserved banking relationships 

in many communities, providing 

depositors and customers with 

uninterrupted access to essential 

banking services. 

Implementing t

FDIC’s New Au

Under the DoddFrnk Act 

Financial R

The Dodd-Frank Act included 

far-reaching changes to make 

financial regulation more effective in 

addressing systemic risks and gave 

the FDIC the authority to resolve 

systemically important financial 

institutions (SIFIs).

For SIFIs, the Title II – Orderly 

Liquidation Authority (OLA) of the 

Dodd-Frank Act provides the FDIC 

authority to resolve a parent holding 

company, and any financial affiliate, 

as well as other nonbank SIFIs. The 

FDIC has been working for the past 

two years to develop the strategic and 

operational capability to carry out this 

new authority. 

During 2012, the FDIC developed 

internal plans for resolving a failing 

SIFI premised on utilizing the 

new Title II OLA authorities of the 

Dodd-Frank Act. If the FDIC is 

appointed as receiver of such an 

institution, it will be required to carry 

out an orderly liquidation in a manner 

that mitigates systemic risk, imposes 

losses on shareholders and creditors, 

replaces culpable management, and 

ensures, as required by the statute, 

that taxpayers bear no losses. 

The FDIC also engaged with our 

counterparts overseas on crossborder protocols for resolving failing 

SIFIs. As part of our bilateral efforts 

in this area, the FDIC and the Bank 

of England, in conjunction with 

the prudential regulators in our 

jurisdictions, have been working to 

develop contingency plans for the 

failure of Global SIFIs (G-SIFIs) that 

have operations in both the U.S. and 

the U.K. Of the 28 G-SIFIs designated 

by the Financial Stability Board of the 

G-20 countries, four are headquartered 

in the U.K., and another eight are 

headquartered in the U.S. As part of 

this effort, the FDIC and the Bank of 

England jointly released a paper in 

December 2012 discussing resolution 

strategies for G-SIFIs. In addition to 

the close working relationship with 

the U.K., the FDIC and the European 

Commission (E.C.) established a joint 

Working Group in 2012 comprised of 

6 mesage 
ANNUAL REPORT 2012 7

senior staff to discuss resolution and 

deposit guarantee issues common 

to our respective jurisdictions. We 

expect that these meetings will 

enhance close coordination on 

resolution related matters between 

the FDIC and the E.C., as well as 

European Union Member States.

In addition, the Dodd-Frank Act 

requires bank holding companies with 

more than $50 billion in assets and 

other financial companies, designated 

by the Financial Stability Oversight 

Council (FSOC) for heightened 

prudential supervision by the Board 

of Governors of the Federal Reserve 

System, to develop their own 

resolution plans, otherwise known as 

“living wills.” These firms are required 

to demonstrate how they could be 

resolved under the bankruptcy code 

without disruption to the financial 

system and the economy. Bankruptcy 

remains the preferred resolution 

option for these firms. Only when 

bankruptcy is not a viable option 

would the FDIC’s OLA under Title II of 

the Dodd-Frank Act be considered.

The FDIC Board has adopted two 

rules regarding resolution plans. 

The first rule, jointly issued with 

the Federal Reserve Board in 2011, 

requires SIFIs to develop, maintain, 

and periodically submit resolution 

plans or “living wills” to the Federal 

Reserve Board and the FDIC. The 

second rule requires any FDIC-insured 

depository institution with assets over 

$50 billion to develop, maintain, and 

periodically submit plans for rapid and 

orderly resolution under the Federal 

Deposit Insurance Act in the event of 

material financial distress or failure.

Eleven institutions submitted plans in 

2012 under the rulemaking. The FDIC 

and the Federal Reserve Board are 

jointly reviewing the plans as required 

by the statute. 

Along with the other U.S. banking 

agencies, the FDIC participated in 

an intensive international effort to 

strengthen bank capital standards 

that resulted in the Basel III capital 

agreement. In broad terms, the new 

standards aim to improve the quality 

and increase the required level of bank 

capital. The FDIC Board has proposed 

implementing rules for Basel III and is 

now reviewing public comments.

Ongoing resolution planning, regular 

dialogue with potential SIFIs, stronger 

capital standards, and international 

cooperation are critical to the 

FDIC’s implementation of its new 

responsibilities under the Dodd-Frank 

Act. The FDIC’s Systemic Resolution 

Advisory Committee continues to 

advise the FDIC on a variety of issues 

including the effects on financial 

stability and economic conditions 

resulting from the failure of a SIFI, 

the ways in which specific resolution 

strategies would affect stakeholders 

and their customers, and the tools 

available to the FDIC to wind down 

the operations of a failed organization.

Communi

Banking Init

Community banks play a crucial role 

in the American financial system. 

Community banks account for about 

14 percent of the banking assets in 

our nation, but they provide nearly 

46 percent of all the small loans that 

FDIC-insured depository institutions 

make to businesses and farms.

The FDIC is the lead federal regulator 

for the majority of community banks, 

and the insurer of all. As such, the 

FDIC has an ongoing responsibility 

to better understand the challenges 

facing community banks, and to share 

that knowledge with bankers and the 

general public.

In early 2012, the FDIC announced a 

series of initiatives focusing on the 

challenges and opportunities facing 

community banks. The first was a 

national conference in early 2012 on 

the Future of Community Banking. 

During the year, we held a series of 

roundtables with community bankers 

in each of the FDIC’s six regions. Our 

most senior executives and I attended 

these roundtables to hear firsthand the 

concerns of bankers and to discuss 

what the FDIC could do in response.

We also issued a comprehensive 

study of the evolution of community 

banking in the United States over the 

past 25 years. The FDIC Community 

Banking Study is an important 

initial step in understanding the 

current state of the industry. It also 

will provide a platform for future 

research and analysis by the FDIC 

and other interested parties. Key 

areas that the study covered include: 

the definition of a community bank, 

structural changes among community 

and non-community banks, the 

geography of community banking, 

the performance of community banks 

compared to non-community banks, 

the performance of community bank 

lending specialty groups, and capital 

formation at community banks. The 

study is the most comprehensive 

analysis of the financial performance 

and structural change in the 

community banking industry over the 

past 25 years.

We reviewed the FDIC’s bank 

examination process for both 

risk management and compliance 

supervision. We also looked at the 

rulemakings and guidance process, 

mesage f 
ANNUAL REPORT 2012

8 FEDERAL DEPOSIT INSURANCE CORPORATION

in an effort to make it more efficient 

and transparent while maintaining 

supervisory standards. The FDIC 

solicited input from community 

bankers and incorporated that 

feedback into specific actions 

we took in response. Based on 

feedback received, the FDIC 

began implementing a number of 

enhancements to our supervisory 

and rulemaking processes in 

2012, including revamping the 

pre-exam process to better scope 

examinations and taking steps to 

improve communication by using 

web-based tools to provide critical 

information regarding new or 

changing rules and regulations as 

well as comment deadlines. The 

FDIC has also instituted a number 

of new outreach and technical 

assistance efforts, including increased 

direct communication between 

examinations, increased opportunities 

for attendance at training workshops 

and symposiums, and current and 

planned conference calls and training 

videos on complex subjects of interest. 

The FDIC’s review of examination 

and rulemaking processes will be 

an ongoing effort, and we plan to 

pursue additional enhancements and 

modifications to our processes.

Finally, our Advisory Committee on 

Community Banking is a permanent 

forum for discussing critical issues. 

The Committee, which is composed 

of 15 community bank CEOs from 

around the country, is a valuable 

source of information and input on 

a wide variety of topics, including 

the latest examination policies 

and procedures, capital and other 

supervisory issues, credit and 

lending practices, deposit insurance 

assessments and coverage, and 

regulatory compliance issues.

Our community banking initiative 

will remain an ongoing priority that 

includes outreach programs, research, 

and improvements in the examination 

process.

Protec

Consumers

Expandin

to Banking Ser

Deposit insurance provides security 

and peace of mind for customers 

depositing their money into financial 

institutions. However, accessing 

insured institutions has proven elusive 

for millions of people across the U.S. 

In September 2012, the FDIC released 

the results of the second biennial 

survey of unbanked and underbanked 

households, conducted jointly with the 

U.S. Bureau of the Census. The survey 

was conducted in mid-2011. It found 

that one in four U.S. households (28 

percent) do not have bank accounts 

or are underbanked, a slight increase 

from the 2009 survey.

A separate survey of banks, conducted 

by the FDIC and released in 2012, 

found that four in 10 banks develop 

products and services specifically 

for unbanked and underbanked 

consumers, while eight in 10 provide 

free counseling. Nearly two-thirds 

said they charged no maintenance 

fees on basic checking accounts but 

some banks have account opening 

requirements that can be challenging 

for underserved populations, such as 

initial deposits of $100 or more.

At the national policy level, the 

FDIC’s Advisory Committee on 

Economic Inclusion—composed of 

bankers, community and consumer 

organizations, and academics—

explored strategies to bring 

the unbanked into the financial 

mainstream. The Committee has 

pursued a number of initiatives since it 

was formed in 2007. One of its initial 

projects—the Small-Dollar Loan Pilot 

Program—demonstrated that banks 

can offer safe, affordable, small-dollar 

loans as an alternative to high-priced 

sources of emergency credit, such as 

payday loans or fee-based overdrafts.

In 2012, the Committee completed 

another pilot program, Model Safe 

Accounts, that evaluated how 

banks can offer safe, low-cost 

transaction and savings accounts 

that are responsive to the needs 

of underserved consumers. Nine 

financial institutions participated in 

the pilot, which featured electronic 

and card-based accounts. The 

results indicated that Safe Accounts 

performed on par with, or better 

than, other transaction and savings 

accounts offered by the pilot 

banks. A large portion of account 

holders remained banked during 

the year, suggesting that consumers 

can maintain successful banking 

relationships using Safe Accounts. 

Most of the pilot institutions reported 

that the cost of offering Safe Accounts 

was roughly the same, if not lower, 

because the pilot accounts do not have 

paper check-related costs.

The Committee also looked at the 

role that technology and innovation, 

particularly mobile banking, can play 

in expanding access to mainstream 

financial services. The Committee 

formed a Mobile Financial Services 

Subcommittee to examine ways 

in which the FDIC can support 

the ongoing development of 

mobile financial services in ways 

that facilitate broader access to 

mainstream financial services. The 

Committee will continue to meet 

during 2013, and mobile banking 

8 mesage 
ANNUAL REPORT 2012 9

will continue to be a focus of the 

Committee and the FDIC.

At the local level, the FDIC’s Alliance 

for Economic Inclusion has organized 

coalitions of financial institutions, 

community organizations, local 

government officials, and other 

partners in communities across 

the country to bring unbanked and 

underbanked households into the 

financial mainstream. The effort 

includes better access to basic retail 

financial services, such as checking 

and savings accounts, affordable 

remittance products, small-dollar 

loans, targeted financial education 

programs, and asset-building 

programs. These partnerships are 

currently operating in 16 communities 

nationwide, with two new 

partnerships formed in 2012.

Conclu

The banking industry made 

measurable progress in 2012, with 

stronger earnings, better asset quality, 

and fewer bank failures and problem 

institutions. Still, we remain mindful 

that challenges remain. 

The FDIC’s workforce remains 

committed to carrying out our 

mission. I am very grateful to the 

dedicated professionals of the FDIC 

for their work during the financial 

crisis to maintain the stability of and 

public confidence in the financial 

system, and have full confidence 

that this commitment to our mission 

will continue as the banking system 

recovers.

Sincerely,

Martin J. Gruenberg
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Message from the Chief Financial Officer

I am pleased to present the Federal Deposit 

Insurance Corporation’s (FDIC) 2012 

Annual Report (also referred to as the

Performance and Accountability Report). 

The report covers financial and program 

performance information and summarizes 

our successes for the year. The FDIC 

takes pride in providing timely, reliable, 

and meaningful information to its 

many stakeholders. 

For 21 consecutive years, the U.S. 

Government Accountability Office (GAO) 

has issued unmodified (unqualified) audit 

opinions for the two funds administered by 

the FDIC: the Deposit Insurance Fund (DIF) 

and the Federal Savings and Loan Insurance 

Corporation (FSLIC) Resolution Fund (FRF). 

We take pride in our responsibility and 

demonstrate discipline and accountability 

as stewards of these funds. We remain 

proactive in execution of sound financial 

management and in providing reliable 

financial data. 

During 2012, the DIF continued to recover 

from the recent crisis. The DIF balance 

increased from $11.8 billion at the end of 

2011, to $33.0 billion at the end of 2012. 

The increase in the DIF balance was due in 

part to the decrease in the number of bank 

failures, from 92 in 2011 to 51 in 2012. Other 

factors contributing to the increase include 

assessment income and net fees transferred 

from the Temporary Liquidity Guarantee 

Program (TLGP). The FDIC expects that 

the rate at which troubled banks fail will 

continue to decline and the DIF balance will 

continue to grow.

Financial Results

For 2012, the DIF’s comprehensive 

income totaled $21.1 billion compared to 

comprehensive income of $19.2 billion 

during 2011. This $1.9 billion year-overyear increase was primarily due to a 

$3.3 billion increase in revenue from 

excess Debt Guarantee Program (DGP) 

fees previously held as systemic risk 

deferred revenue, partially offset by 

a $1.1 billion decrease in assessments 

and a $191 million increase in the 

provision for insurance losses.

As the TLGP expired at year-end, the 

DIF recognized revenue of $5.9 billion 

in 2012, representing the remaining 

deferred revenue not absorbed by the 

TLGP for losses. Through the end of 

the debt issuance period, the FDIC collected 

$10.4 billion in fees and surcharges under 

the DGP. In addition, the FDIC collected 

Transaction Account Guarantee Program 

(TAG) fees of $1.2 billion for unlimited 

coverage for noninterest-bearing transaction 

accounts held by insured depository 

institutions (IDIs) on all deposit amounts 

exceeding the fully insured limit of $250,000. 

Since inception of the program, the TLGP 

incurred estimated losses of $153 million 

and $2.1 billion on DGP and TAG Program 

claims, respectively. Over the duration of 

the TLGP, $8.5 billion in TLGP assets were 

transferred to the DIF. In addition, during 

2009, surcharges of $872 million were 

collected and deposited into the DIF.

Assessment revenue was $12.4 billion for 

2012. The decrease of $1.1 billion, from 

$13.5 billion in 2011, was primarily due to 

lower average assessment rates in 2012, 

resulting from improvement in the financial 

condition of the banking industry.

The provision for insurance losses was 

negative $4.2 billion for 2012, compared to 

negative $4.4 billion for 2011. The negative 

provision for 2012 primarily resulted from a 

reduction in the contingent loss reserve due 

mesage frome 
ANNUAL REPORT 2012

to the improvement in the financial 

condition of institutions that were 

previously identified to fail, and a 

reduction in the estimated losses for 

institutions that have failed in the 

current and prior years.

While the number of bank failures 

over the last two years, 143, was 

fewer than at the height of the recent 

banking crisis, with 157 failures in 

2010, we will maintain our focus 

on risks to the insurance fund 

going forward. In addition, we will 

continue to employ sound financial 

management techniques, emphasize 

the importance of a strong enterprisewide risk management and internal 

control program, and continue to 

implement the changes under the 

Dodd-Frank Act.

Sincerely,

Steven O. App

12 mesage from
Management’s 

Discussion and 

Analysis

I.

The Year in Review

Overvi

Much of our work during 2012 

focused on a number of key areas, 

all mission-based. First was moving 

forward on implementing our new 

responsibilities under the Dodd-Frank 

Act. This effort included continuing 

implementation of FDIC’s systemic 

resolution responsibilities under the 

Dodd-Frank Act, including resolution 

planning and promoting cross border 

cooperation and cooperation with 

respect to any orderly resolution of a 

globally active, systemically important 

financial institution. We commenced 

a Community Banking Initiative to 

further the understanding of the future 

of community banking, which included 

outreach, research, and efforts to 

streamline examinations without 

compromising safe and sound banking 

practices. As always, our mission 

to maintain stability and public 

confidence in the nation’s financial 

system guided our work. The sections 

below fill in the details and highlight 

some of our accomplishments during 

the year.

Insura

The FDIC insures bank and savings 

association deposits. As insurer, the 

FDIC must continually evaluate and 

effectively manage how changes in 

the economy, the financial markets, 

and the banking system, affect the 

adequacy and the viability of the 

Deposit Insurance Fund (DIF).

Long-Term Comprehensive 

Fund Management Plan 

In 2010 and 2011, the FDIC developed 

a comprehensive, long-term 

management plan designed to reduce 

the effects of cyclicality and achieve 

moderate, steady assessment rates 

throughout economic and credit 

cycles, while also maintaining a 

positive fund balance even during a 

banking crisis. The plan is designed 

to ensure that the reserve ratio will 

reach 1.35 percent by September 30, 

2020, as required by the Dodd-Frank 

Act.1 The plan includes a reduction 

in rates that the FDIC Board has 

adopted to become effective once the 

reserve ratio reaches 1.15 percent. 

To increase the probability that the 

fund reserve ratio will reach a level 

sufficient to withstand a future crisis, 

the FDIC Board has—pursuant to 

the plan—suspended dividends 

indefinitely. The plan prescribes 

progressively lower assessment rates 

that will become effective when the 

reserve ratio exceeds 2.0 percent and 

2.5 percent. These lower assessment 

rates serve almost the same function 

as dividends, but provide more stable 

and predictable effective assessment 

rates.

Under provisions in the Federal 

Deposit Insurance Act that require 

the FDIC Board to set the Designated 

Reserve Ratio (DRR) for the DIF 

annually, the FDIC Board voted 

in December 2012 to maintain the 

2.0 percent DRR for 2013. Using 

historical fund loss and simulated 

income data from 1950 to 2010, FDIC 

analysis showed the reserve ratio 

would have had to exceed 2.0 percent 

before the onset of the two crises 

that occurred since the late 1980s, to 

1 The Act also requires that the FDIC offset the effect on institutions with less than $10 billion in assets of increasing the reserve 

ratio from 1.15 percent to 1.35 percent. The FDIC will promulgate a rulemaking that implements this requirement at a later 

date to better take into account prevailing industry conditions at the time of the offset.

Managmensc
ANNUAL REPORT 2012

have maintained both a positive fund 

balance and stable assessment rates 

throughout both crises. The analysis 

assumes a moderate, long-term 

average industry assessment rate, 

consistent with the rates set forth in 

the plan. The 2.0 percent DRR should 

not be viewed as a cap on the fund. 

The FDIC views the 2.0 percent DRR 

as a long-term goal and the minimum 

level needed to withstand future crises 

of the magnitude of past crises. 

State of the Deposit 

Insurance Fund 

Estimated losses to the DIF were 

$2.7 billion from failures occurring in 

2012, and were lower than losses from 

failures in each of the previous four 

years. The fund balance continued 

to grow through the fourth quarter of 

2012, with 12 consecutive quarters of 

positive growth. Assessment revenue, 

fewer anticipated bank failures, 

and the transfer of fees previously 

set aside for debt guaranteed under 

the Temporary Liquidity Guarantee 

Program (TLGP) have driven the 

increase in the fund balance. The fund 

reserve ratio rose to 0.35 percent at 

September 30, 2012, from 0.17 percent 

at the beginning of the year. 

Assessment System for Large 

and Highly Complex Institution

On October 9, 2012, the FDIC Board 

approved a final rule to amend the 

assessment system for large and 

highly complex institutions. The rule 

amends definitions adopted in the 

February 2011 large bank pricing rule 

used to identify concentrations in 

higher-risk assets. This rule, which 

went into effect on April 1, 2013, 

amends the definitions of leveraged 

loans and subprime loans, which are 

areas of significant potential risk. 

The revised definition of leveraged 

loans, renamed higher-risk C&I 

(commercial and industrial) loans 

and securities, focuses on large loans 

to the riskiest borrowers—those that 

are highly leveraged as the result of 

loans to finance a buyout, acquisition, 

or capital distribution. The revised 

definition of subprime consumer 

loans, renamed higher-risk consumer 

loans, focuses on the most important 

characteristic—the probability of 

default. The final rule resulted from 

concerns raised by the industry about 

the cost and burden of reporting under 

the definitions in the February 2011 

rule. Nonetheless, the new definitions 

better reflect the risk that institutions 

pose to the DIF.

Temporary Liquidity 

Guarantee Progra

On October 14, 2008, as part of a 

coordinated response by the U.S. 

government to the disruption in the 

financial system and the collapse of 

credit markets, the FDIC implemented 

the Temporary Liquidity Guarantee 

Program (TLGP). By calming market 

fears and encouraging lending, 

the TLGP helped bring stability to 

financial markets and the banking 

industry during the crisis period. The 

TLGP consisted of two components: 

(1) the Transaction Account Guarantee 

Program (TAG), an FDIC guarantee in 

full of noninterest-bearing transaction 

accounts; and (2) the Debt Guarantee 

Program (DGP), an FDIC guarantee of 

certain newly issued senior unsecured 

debt. 

The TAG Program initially guaranteed 

in full all domestic noninterestbearing transaction deposits held at 

participating banks and thrifts through 

December 31, 2009. The deadline 

was extended twice and expired on 

December 31, 2010.

The TAG Program brought stability 

and confidence to banks and their 

business customers by removing the 

risk of loss from deposit accounts 

that are commonly used to meet 

payroll and other business transaction 

purposes. Deposits provide the 

primary source of funding for most 

banks, and they are particularly 

important for smaller institutions. 

The temporary coverage allowed 

institutions, particularly smaller ones, 

to retain these accounts and maintain 

the ability to make loans within their 

communities. 

Under the DGP, the FDIC initially 

guaranteed in full, through maturity or 

June 30, 2012, whichever came first, 

the senior unsecured debt issued by a 

participating entity between October 

14, 2008, and June 30, 2009. In 2009, 

the issuance period was extended 

through October 31, 2009. The FDIC’s 

guarantee on each debt instrument 

was also extended in 2009 to the 

earlier of the stated maturity date of 

the debt or December 31, 2012. 

The DGP enabled financial institutions 

to meet their financing needs during 

a period of record high credit spreads 

and aided the successful return of 

the credit market to near normalcy, 

despite the recession and slow 

economic recovery. This improvement 

in the credit markets was reflected 

in the increasing ability of banks 

and their holding companies to issue 

longer-term debt over the course 

of the DGP issuance period. At 

the inception of the program, firms 

heavily relied upon the DGP to roll 

over short-term liabilities because 

of the fragility of the credit markets 

and investors’ continued aversion to 

risk. By providing the ability to issue 

debt guaranteed by the FDIC, the 

DGP allowed institutions to extend 

maturities and obtain more stable 

unsecured funding.

14 Managme
Program Statistics

Over the course of the DGP’s 

existence, 122 entities issued TLGP 

debt. At its peak, the DGP guaranteed 

$345.8 billion of debt outstanding (see 

the chart above). The DGP guarantee 

on all TLGP debt that had not already 

matured, expired on December 31, 

2012. Therefore, at the end of 2012, no 

debt guaranteed by the DGP remained.

The FDIC collected $10.4 billion in 

fees and surcharges under the DGP. 

As of December 31, 2012, the FDIC 

paid $153 million in losses resulting 

from six participating entities 

defaulting on debt issued under the 

DGP. The majority of these losses 

($113 million) arose from banks 

with outstanding DGP notes that 

failed in 2011 and were placed into 

receivership. 

The FDIC collected $1.2 billion in fees 

under the TAG Program. Cumulative 

estimated TAG Program losses on 

failures as of December 31, 2012, 

totaled $2.1 billion. 

Overall, TLGP fees exceeded the 

losses from the program. From 

inception of the TLGP, it was the 

FDIC’s policy to recognize revenue to 

the DIF for any deferred revenue not 

absorbed by losses upon expiration of 

the TLGP guarantee period (December 

31, 2012) or earlier, for any portion of 

guarantee fees determined in excess 

of amounts needed to cover potential 

losses. In total, $9.3 billion in TLGP 

fees and surcharges were deposited 

into the DIF. 

Temporary Unlimited Coverage 

for Noninterest-Bearing 

Transaction Accounts under the 

Dodd-Frank Act Ends

The Dodd-Frank Act provided 

temporary unlimited deposit insurance 

coverage for noninterest-bearing 

transaction accounts from December 

31, 2010, through December 31, 

2012, regardless of the balance in the 

account and the ownership capacity 

of the funds. This coverage essentially 

replaced the TAG Program, which 

expired on December 31, 2010, 

and was available to all depositors, 

including consumers, businesses, 

and government entities. The 

coverage was separate from, and in 

addition to, the standard insurance 

coverage provided for a depositor’s 

other accounts held at an FDICinsured bank. 

Outstandig

12-09 2-10 4-10 6-10 8-10 10-10 12-10 2-11 4-11 6-11 8-11 10-11 12-11 2-12 4-12 6-12 8-12 10-12 12-12

Dollars in Bilions

350

200

250

300

150

100

50

0

Managmenis
ANNUAL REPORT 2012

James Wigand, 

Director of the Office 

of Complex Financial 

Institutions, outlines 

the FDIC’s resolution 

strategy for systemically 

important financial 

institutions during a 

committee meeting.

A noninterest-bearing transaction account is 

a deposit account in which interest is neither 

accrued nor paid, depositors are permitted 

to make transfers and withdrawals, and the 

bank does not reserve the right to require 

advance notice of an intended withdrawal. 

Similar to the TAG Program, the temporary 

unlimited coverage also included trust 

accounts established by an attorney or 

law firm on behalf of clients, commonly 

known as IOLTAs, or functionally equivalent 

accounts. Money market deposit accounts 

and negotiable order of withdrawal accounts 

were not eligible for this temporary 

unlimited insurance coverage, regardless 

of the interest rate and even if no interest 

was paid.

As of September 30, 2012, insured 

institutions had $1.5 trillion above the 

basic coverage limit of $250,000 per 

account in domestic noninterest-bearing 

transaction accounts. This amount was fully 

insured through the end of 2012 under the 

Dodd-Frank Act. 

The provision of the Dodd-Frank Act 

extending unlimited FDIC coverage to 

noninterest-bearing transaction accounts 

through 2012, like the original TAG Program, 

served as a source of stability to both banks 

and their business customers in the wake of 

the financial crisis and economic downturn.

Activities

Systemically Imp

Financial I

Risk Monitoring Activities 

for Systemically Important 

Financial Institutions

The Dodd-Frank Act expanded the 

FDIC’s responsibilities for overseeing and 

monitoring the largest, most complex 

banking organizations and large systemically 

important financial institutions designated 

by the FSOC for Federal Reserve Board 

supervision. In 2012, the FDIC’s complex 

financial institution program activities 

included ongoing reviews of selected 

banking organizations with more than $100 

billion in assets as well as certain nonbank 

financial companies. In addition, the FDIC 

continued to work closely with other federal 

regulators to gain a better understanding 

of the risk measurement and management 

practices of these institutions, and assess the 

potential risks they pose to financial stability.

Title I Resolution Plans

In 2012, according to the “living will” rules 

promulgated by the FDIC and Federal 

Reserve, under Title I of the Dodd-Frank 

Act, Section 165(d), covered companies 

with nonbank assets over $250 billion or 

insured depository institution (IDI) assets 

over $50 billion, were required to submit 

plans for a nonsystemic resolution under 

the bankruptcy code. By July 2012, the 

FDIC and Board of Governors of the Federal 

Reserve System received the first set of plans 

from these companies and began the process 

of reviewing the plans for completeness 

and sufficiency. These plans are intended 

to provide information about each firm’s 

critical operations and core business lines 

and to identify key obstacles to an orderly 

resolution in bankruptcy. The first set 

16 Managme
of companies filing resolution plans will 

submit revised plans by July 2013. Covered 

companies with nonbank assets over $100 

billion will submit their first resolution 

plans by July 2013, and all other covered 

companies must submit their first resolution 

plans by December 2013.

Title II Resolution 

Strategy Development

Title II of the Dodd-Frank Act authorizes 

the FDIC to resolve certain systemically 

important bank holding companies and 

other financial companies (other than IDIs 

which the FDIC resolves under provisions 

of the Federal Deposit Insurance Act and 

insurance companies, which are resolved 

under applicable state law), if their failure 

would have serious adverse consequences 

on U.S. financial stability. During 2012, the 

FDIC reviewed the characteristics of each 

domestic company and studied the systemic 

effects and channels of contagion of 

previous financial downturns and consulted 

with external practitioners and experts on 

key resolution components and options. 

As a result of these activities, the FDIC 

developed a baseline conceptual approach 

that could be used across a spectrum of 

large financial institutions. Throughout 2012, 

the FDIC discussed this concept at outreach 

events with other domestic government 

agencies, the Systemic Resolution Advisory 

Committee, industry groups, the academic 

community, and international financial 

regulators.

Systemic Resolution 

Advisory Committee

In 2011, the FDIC Board approved the 

creation of the Systemic Resolution Advisory 

Committee. During 2012, the Committee 

continued to provide important advice to the 

FDIC regarding systemic resolutions. The 

Committee advises the FDIC on a variety 

of issues including the effects on financial 

stability and economic conditions resulting 

from the failure of a SIFI, the ways in which 

specific resolution strategies would affect 

stakeholders and their customers, the tools 

available to the FDIC to wind down the 

operations of a failed organization, and 

the tools needed to assist in cross-border 

relations with foreign regulators and 

governments when a systemic company has 

international operations. Members of the 

Committee have a wide range of experience 

including managing complex firms; 

administering bankruptcies; and working 

in the legal system, accounting field, and 

academia.

Coordinating Interagency 

Resolution Planning

In 2012, the FDIC conducted events to 

promote interagency information-sharing 

and cooperative resolution planning. 

Coordinating with the other federal 

regulators, these events covered a variety of 

topics, including the following: 

♦ QFC Tabletop – focused on issues 

arising from derivative instruments, and 

other financial contracts considered as 

Then-Acting 

Chairman Gruenberg 

(center) discusses 

the FDIC’s progress 

on implementing 

the Dodd-Frank Act 

during a meeting 

of the Systemic 

Resolution Advisory 

Committee. 

Also pictured 

are (from left) 

William H. 

Donaldson, 

Chairman, Donaldson 

Enterprises; 

Paul A. Volcker, 

former Chairman 

of the Board of 

Governors, Federal 

Reserve System; 

John S. Reed, 

Chairman of the 

Massachusetts 

Institute of 

Technology's 

Corporation; and 

Thomas Curry, 

FDIC Director.

MANAGEMENT DISCUSSION AND ANALYSIS 17
ANNUAL REPORT 2012

“Qualified Financial Contracts,” held 

by a hypothetical company subject 

to resolution under Title II. 

♦ Funding Tabletop – covered 

the operational implementation 

of funding a potential global 

systemically important financial 

institution (G-SIFI) resolution, 

subject to Title II of the Dodd-Frank 

Act.

♦ Three Keys Tabletop – explored the 

logistical and practical components 

involved in making the decision to 

“turn the keys,” and place a SIFI into 

a Title II receivership.

♦ Systemic Risk Committee (SRC) 

Tabletop on Hedge Funds and 

Systemic Risk – focused on whether 

there is sufficient actionable 

information available to FSOC 

members to determine the systemic 

impact associated with the failure of 

a large derivatives counterparty that 

is not a G-SIFI, e.g., a large domestic 

hedge fund. 

♦ Central Counterparty (CCP) 

Informational Lecture – explained 

the nature of central counterparties, 

their primary concerns and 

rule-based requirements, and 

potential resolution considerations; 

this lecture was a prelude to a 

facilitated discussion on CCPs and 

Title II.

The FDIC also conducted an 

interagency simulation “Getting to 

Title II Implementation” in November 

2012 that involved evaluating 

the required steps and possible 

alternatives when making a decision 

to implement a Title II resolution for 

a failing SIFI. The simulation tested 

the intra- and inter-agency decisionmaking process leading up to a Title 

II resolution, identified issues and 

resolution alternatives, and improved 

interagency communication and 

coordination in the context of Title II.

Financial Stability 

Oversight Council 

The Financial Stability Oversight 

Council (FSOC) was created by 

the Dodd-Frank Act in July 2010 

to monitor and mitigate systemic 

risk largely through filling gaps in 

regulatory oversight. The FSOC is 

composed of ten voting members, 

including the FDIC, and five 

non-voting members. 

FSOC responsibilities include the 

following:

♦ Identifying risks to financial stability, 

responding to emerging threats in 

the system, and promoting market 

discipline.

♦ Designating whether a nonbank 

financial company should be 

supervised by the Board of 

Governors of the Federal Reserve 

System and subject to heightened 

prudential standards.

♦ Designating financial market utilities 

(FMUs) and payment, clearing, or 

settlement activities that are, or 

are likely to become, systemically 

important.

♦ Facilitating regulatory coordination 

and information-sharing regarding 

policy development, rulemaking, 

supervisory information, and 

reporting requirements. 

♦ Issuing specialized studies and 

reports.

♦ Producing annual financial stability 

reports and requiring each voting 

member to submit a signed 

statement indicating whether the 

member believes that the FSOC 

is taking all reasonable actions to 

mitigate systemic risk.

During 2012, the FSOC issued a 

final rule on designating nonbank 

financial companies for supervision 

by the Board of Governors of the 

Federal Reserve System and subject 

to enhanced prudential standards.

Additionally, several nonbank 

financial companies were moved 

to the advanced stage of review for 

potential designation as systemically 

important financial companies. The 

FSOC also designated eight companies 

as systemically important FMUs, 

which may subject them to additional 

risk management standards. Also 

during 2012, the FSOC released its 

second annual report, and reports 

regarding contingent capital and use 

of prompt corrective action at credit 

unions. Moreover, in November 

2012, the FSOC published options for 

money market mutual fund reform 

for a 60-day comment period, which 

was extended for 30 days. Generally, 

at each meeting, the FSOC discusses 

various risk issues, and in 2012, 

addressed U.S. fiscal issues, the status 

of Eurozone economies, mortgage 

servicing and foreclosure issues, 

energy prices, reforms in the tri-party 

repurchase agreement market, the 

status of the investigation regarding 

potential manipulation of LIBOR, and 

implications of Superstorm Sandy, 

among other items.

Supervisio

Consumer Pro

Supervision and consumer protection 

are cornerstones of the FDIC’s efforts 

to maintain the stability and public 

confidence in, the nation’s financial 

system. The FDIC’s supervision 

program promotes the safety and 

soundness of FDIC-supervised IDIs, 

protects consumers’ rights, and 

promotes community investment 

initiatives.

18 Managme
Examination Program 

The FDIC’s strong bank examination 

program is the core of its supervisory 

program. As of December 31, 2012, 

the FDIC was the primary federal 

regulator for 4,472 FDIC-insured, 

state-chartered institutions that were 

not members of the Federal Reserve 

System (generally referred to as 

“state nonmember” institutions). 

Through risk management (safety and 

soundness), consumer compliance 

and the Community Reinvestment 

Act (CRA), and other specialty 

examinations, the FDIC assesses 

an institution’s operating condition, 

management practices and policies, 

and compliance with applicable laws 

and regulations. The FDIC also 

educates bankers and consumers 

on matters of interest and addresses 

consumer questions and concerns.

As of December 31, 2012, the FDIC 

conducted 2,563 statutorily required 

risk management (safety and 

soundness) examinations, including 

a review of Bank Secrecy Act (BSA) 

compliance, and all required follow-up 

examinations for FDIC-supervised 

problem institutions, within prescribed 

time frames. The FDIC also 

conducted 1,665 statutorily required 

CRA/compliance examinations (1,044 

joint CRA/compliance examinations, 

611 compliance-only examinations, 

and 10 CRA-only examinations) 

and 5,673 specialty examinations. 

As of December 31, 2012, all CRA/

compliance examinations were 

conducted within the time frame 

established by policy. The table on 

this page compares the number of 

examinations, by type, conducted 

from 2010 through 2012. 

Risk Management

As of December 31, 2012, there were 

651 insured institutions with total 

assets of $232.7 billion designated 

as problem institutions for safety 

and soundness purposes (defined 

as those institutions having a 

composite CAMELS2 rating of “4” 

or “5”), compared to the 813 problem 

institutions with total assets of $319.4 

billion on December 31, 2011. This 

constituted a 20 percent decline in 

the number of problem institutions 

and a 27 percent decrease in problem 

institution assets. In 2012, 256 

institutions with aggregate assets of 

$94.1 billion were removed from the 

list of problem financial institutions, 

while 94 institutions with aggregate 

assets of $34.3 billion were added to 

the list. Tennessee Commerce Bank, 

located in Franklin, Tennessee, was 

the largest failure in 2012, with $1.0 

billion in assets. The FDIC is the 

primary federal regulator for 433 of 

the 651 problem institutions, with total 

assets of $138.7 billion. 

During 2012, the FDIC issued the 

following formal and informal 

corrective actions to address safety 

and soundness concerns: 104 Consent 

Orders and 224 Memoranda of 

Understanding (MOUs). Of these 

actions, 19 Consent Orders and 15 

MOUs were issued, based in whole or 

in part, on apparent violations of 

the BSA.

FDIC Examinations 2010 – 20

2012 2011 2010

Risk Management (Safety and Soundness)

 State Nonmember Banks 2,310 2,477 2,488

 Savings Banks 249 227 225

 Savings Associations 1 3 0

 National Banks 1 1 3

 State Member Banks 2 4 4

Subtotal─Risk Management Examinations 2,563 2,712 2,720

CRA/Compliance Examinatio

 Compliance/Community Reinvestment Act 1,044 825 914

 Compliance-only 611 921 854

 CRA-only 10 11 12

Subtotal─CRA/Compliance Examinations 1,665 1,757 1,780

Specialty Examinations

 Trust Departments 446 466 465

 Data Processing Facilities 2,642 2,802 2,811

 Bank Secrecy Act 2,585 2,734 2,813

Subtotal─Specialty Examinations 5,673 6,002 6,089

Total 9,901 10,471 10,589

2 The CAMELS composite rating represents the adequacy of Capital, the quality of Assets, the capability of Management, 

the quality and level of Earnings, the adequacy of Liquidity, and the Sensitivity to market risk, and ranges from “1” (strongest) 

to “5” (weakest).

Managmenis
ANNUAL REPORT 2012

Compliance

As of December 31, 2012, 29 insured 

state nonmember institutions, 

about 1 percent of all supervised 

institutions, having total assets of 

$54.0 billion were rated “4” or “5” for 

consumer compliance purposes. As 

of December 31, 2012, all follow-up 

examinations for problem institutions 

were performed on schedule. 

Overall, banks demonstrated strong 

consumer compliance programs. 

The most significant consumer 

protection issue that emerged from 

the 2012 compliance examinations 

involved banks’ failure to adequately 

monitor third-party vendors. As a 

result, we found violations involving 

unfair or deceptive acts or practices, 

resulting in consumer restitution 

and civil money penalties. The 

violations involved a variety of issues 

including failure to disclose material 

information about new products being 

offered, deceptive marketing and sales 

practices, and misrepresentations 

about the costs of products. 

During 2012, the FDIC issued the 

following formal and informal 

corrective actions to address 

compliance concerns: 23 Consent 

Orders, 92 MOUs, and 109 Civil 

Money Penalties (CMPs). In certain 

cases, the Consent Orders issued 

by the FDIC contain requirements 

for institutions to pay restitution in 

the form of refunds to consumers 

for different violations of laws. 

During 2012, over $294 million was 

refunded to consumers by institutions 

subject to Consent Orders. These 

refunds primarily related to unfair or 

deceptive practices by institutions, 

mainly related to different credit card 

programs, as discussed above. 

In the case of CMPs, institutions 

pay penalties to the U.S. Treasury. 

Approximately 85 percent of the 

CMPs involved repeated errors in the 

submission of required data under 

the Home Mortgage Disclosure Act 

(HMDA) or statutorily mandated 

penalties for violations of the 

regulations entitled Loans in Areas 

Having Special Flood Hazards. The 

average CMP for HMDA and Flood 

Insurance violations was $8,700. 

Bank Secrecy Act/

Anti-Money Laundering 

The FDIC pursued a number of BSA, 

Anti-Money Laundering (AML), and 

Counter-Terrorist Financing (CTF) 

initiatives in 2012. 

The FDIC conducted a Basic 

International AML and CTF training 

session in May 2012, for 22 financial 

sector supervisors and regulatory staff 

from Bangladesh, Djibouti, Ethiopia, 

India, and Niger. Also, two Advanced 

International AML and CTF training 

sessions were held in October and 

December 2012 for 47 participants 

from Bahrain, Indonesia, Kuwait, 

Malaysia, Oman, Qatar, Philippines, 

Thailand, and Yemen. The training 

focused on AML/CTF controls, the 

AML examination process, customer 

due diligence, suspicious activity 

monitoring, and foreign correspondent 

banking. The session also included 

presentations from the Federal Bureau 

of Investigation, the Financial Crimes 

Enforcement Network (FinCEN), and 

the Department of Homeland Security. 

Topics addressed by invited speakers 

included combating terrorist financing, 

trade-based money laundering, 

bulk cash smuggling and related 

investigations, law enforcement’s 

use of BSA reporting by financial 

institutions, and the role of financial 

intelligence units in detecting and 

investigating illegal activities. The 

basic training session concentrated on 

core areas of AML risk (e.g., customer 

due diligence, suspicious activity 

reporting, private banking, wire 

transfers, and foreign correspondent 

banking), while the advanced 

class focused more on effective 

implementation of AML examination 

processes, such as expectations for 

enhanced due diligence.

Minority Depository 

Institution Activities

The preservation of Minority 

Depository Institutions (MDIs) 

remains a high priority for the 

FDIC. In 2012, the FDIC appointed 

a dedicated permanent executive 

to lead the National Minority 

Depository Institution and Community 

Development Financial Institution 

programs. The FDIC is developing 

a more comprehensive approach to 

preserving the number of minority 

financial institutions, preserving the 

minority character in cases of merger 

or acquisition, and promoting and 

encouraging the creation of new MDIs.

In 2012, the FDIC continued to seek 

ways to improve communication and 

interaction with MDIs and to respond 

to the concerns of minority bankers. 

Many of the MDIs took advantage 

of FDIC technical assistance on 

a number of bank supervision, 

compliance, and resolution and 

receivership issues, including but not 

limited to, the following: 

♦ Overview of the MDI program

♦ Commercial real estate appraisal 

guidelines, monitoring and stress 

testing

♦ Allowance for loan and lease losses 

methodology

♦ Guidance on third party risk

♦ Interest rate risk monitoring systems

20 Managme
♦ Liquidity funds management

♦ FDIC overdraft guidance 

♦ Achieving compliance with 

outstanding corrective programs

♦ Regulatory guidance on 

implementing pre-paid card 

programs

♦ Financial education for unbanked 

and underbanked customers, 

including the Money Smart Program

♦ Bank Secrecy Act, Anti-Money 

Laundering, currency transaction 

reporting, financial recordkeeping, 

and the USA Patriot Act

♦ Application process for a variety of 

regulatory applications including 

branch activity and change in 

control

♦ Flood insurance and the Real Estate 

Settlement Procedures Act

♦ Bidding on failed financial 

institutions

♦ Purchasing assets from FDIC 

receiverships

The FDIC continued to offer the 

benefit of having an examiner 

or a member of regional office 

management return to FDICsupervised MDIs from 90 to 120 

days after an examination, to 

help management understand 

and implement examination 

recommendations, or to discuss 

other issues of interest. Several 

MDIs took advantage of this initiative 

in 2012. Also, the FDIC regional 

offices held outreach training 

efforts and educational programs 

for MDIs through conference calls 

and banker roundtables with MDIs 

in the geographic regions. Topics 

of discussion for these sessions 

included both compliance and 

risk management, and additional 

discussions included the economy, 

overall banking conditions, proposed 

Basel III capital rules, asset 

disposition, accounting, and other 

bank examination issues.

Capital Rulemaking 

and Guidance

Market Risk Final Rule

In June 2012, the FDIC and the 

federal banking agencies published a 

final rule that revises the risk-based 

capital treatment for trading assets 

and liabilities for certain banking 

organizations. This final rule applies 

to a banking organization with 

aggregate trading assets and liabilities 

equal to 10 percent of total assets, 

or $1 billion or more. Additionally, 

the final rule includes alternative 

standards of creditworthiness for the 

use of credit ratings consistent with 

Section 939A of the Dodd-Frank Act. 

The final rule became effective on 

January 1, 2013.

Regulatory Capital Rules Notices 

of Proposed Rulemaking

Also in June 2012, the FDIC and the 

federal banking agencies published 

several Notices of Proposed 

Rulemaking (NPRs):

♦ Basel III NPR – published 

consistent with agreements 

reached by the Basel Committee 

on Banking Supervision (BCBS), 

would apply to all insured banks 

and savings associations, top-tier 

bank holding companies domiciled 

in the United States with more 

than $500 million in assets, and 

savings and loan holding companies 

that are domiciled in the United 

States. The NPR would implement 

a new common equity tier 1 

minimum capital requirement, a 

higher minimum tier 1 risk-based 

capital requirement, and, for 

banking organizations subject to 

the advanced approaches capital 

rules, a supplementary leverage 

ratio that incorporates a broader 

set of exposures. Additionally, 

the Basel III NPR would apply 

limits on a banking organization’s 

capital distributions and certain 

discretionary bonus payments if 

the banking organization does not 

hold a specified “buffer” of common 

equity tier 1 capital, in addition to 

the minimum risk-based capital 

requirements. Lastly, the NPR 

would revise the federal banking 

agencies’ prompt corrective action 

framework by incorporating the new 

regulatory capital minimums.

♦ Advanced Approaches NPR – would 

revise the advanced approaches 

risk-based capital rules consistent 

with Basel III and other changes 

to the Basel Committee’s capital 

standards. The NPR also revised 

the advanced approaches risk-based 

capital rules to be consistent with 

Section 939A and Section 171 of the 

Dodd-Frank Act. Additionally in this 

NPR, the Office of the Comptroller 

of the Currency (OCC) and the 

FDIC propose that the market risk 

capital rules apply to federal and 

state savings associations, and the 

Board of Governors of the Federal 

Reserve System proposes that the 

advanced approaches and market 

risk capital rules apply to top-tier 

savings and loan holding companies 

domiciled in the United States, if 

stated thresholds for trading activity 

are met. Generally, the advanced 

approaches rules would apply to 

such institutions with $250 billion or 

more in consolidated assets or $10 

billion or more in foreign exposure, 

and the market risk rule would 

apply to savings and loan holding 

Managmenis
ANNUAL REPORT 2012

companies with significant 

trading activity.

♦ Standardized Approach NPR –

would revise and harmonize rules 

for calculating risk-weighted assets 

to enhance risk sensitivity and 

address weaknesses identified 

over recent years. The NPR also 

proposes alternatives to credit 

ratings consistent with section 

939A of the Dodd-Frank Act. The 

revisions include methods for 

determining risk-weighted assets for 

residential mortgages, securitization 

exposures, and counterparty credit 

risk. The NPR also would introduce 

disclosure requirements that would 

apply to U.S. banking organizations 

with $50 billion or more in total 

assets. The Standardized Approach 

NPR would apply to the same set of 

institutions as the Basel III NPR. 

The agencies extended the comment 

period from September 7, 2012, to 

October 22, 2012, to allow interested 

parties more time to review and 

evaluate the proposals, and prepare 

written comments. The agencies 

received over 2,300 comment 

letters. The majority of the comment 

letters addressed the Basel III and 

Standardized Approach NPRs, and 

most were submitted by community 

banks. Final rulemaking on the capital 

NPRs is expected in 2013. 

Stress Testing Guidance 

and Rulemaking 

In June 2011, the FDIC along with the 

other federal banking agencies, issued 

proposed guidance on stress testing 

by banking organizations with more 

than $10 billion in total consolidated 

assets. After consideration of 

comments received, the FDIC issued 

a final rule in October 2012 that 

implements requirements of Section 

165(i) of the Dodd-Frank Act. The 

rule reinforces the need to establish an 

effective stress testing framework as 

an ongoing risk management practice 

that supports a banking organization’s 

forward-looking assessment of 

its risks. The rule delayed the 

implementation of the annual stress 

requirements for institutions with 

total consolidated assets between 

$10 and $50 billion until September 

30, 2013, to ensure these institutions 

have sufficient time to develop highquality stress testing programs. The 

FDIC reserved the authority to allow 

covered institutions above $50 billion 

to delay implementation of the rule on 

a case-by-case basis.

In May 2012, the FDIC, jointly 

with the other federal banking 

regulators, issued a public statement 

to clarify that stress testing 

expectations applicable to large 

banking organizations do not apply 

to institutions with $10 billion or 

less in total assets. Instead, the 

agencies noted that community 

banks are subject to the stress testing 

expectations contained in existing 

guidance covering interest rate risk 

management, commercial real estate 

concentrations, and funding and 

liquidity management.

Other Rulemaking Under 

the Dodd Frank Act

The Dodd Frank Act required and 

the Corporation’s 2012 Annual 

Performance Plan established goals 

for the completion of rules and/or 

policy guidance on five topics that 

were not successfully completed 

during 2012: proprietary trading 

and other investment restrictions 

(the “Volcker Rule”); restrictions 

on Federal assistance to swaps 

entities; capital, margin, and other 

requirements for OTC derivatives; 

credit risk retention requirements 

for securitizations; and enhanced 

compensation structure and incentive 

compensation requirements. The 

bank regulatory agencies and other 

financial regulatory agencies were 

tasked to issue these rules and policy 

guidance on an interagency basis.

They worked diligently throughout the 

year to complete final rules on each of 

these topics and made considerable 

progress. In each case, NPRs have 

been issued (one in 2011), and 

extensive comments were received.

Working groups have been carefully 

reviewing the comments received.

Completion of final rules was delayed, 

however, by the complex issues raised 

in the comments and the agencies’ 

desire to give careful and thorough 

consideration to those comments. The 

agencies hope to issue final rules on all 

or most of these topics in 2013. More 

detail is provided below on the OTC 

Derivatives and Volcker Rule NPRs.

OTC Derivatives Margin 

and Capital NPR

In April 2011, the FDIC, along with 

the other federal banking agencies, 

the Farm Credit Administration, and 

the Federal Housing Finance Agency 

(FHFA), published a proposed rule to 

enhance the stability of the financial 

system by preventing certain large 

financial firms from entering into 

uncollateralized derivatives exposure 

with each other. This proposed rule 

would implement certain requirements 

contained in Sections 731 and Section 

764 of the Dodd-Frank Act, which 

direct the federal banking agencies 

to jointly adopt rules requiring 

dealers and major participants in 

derivatives covered by Title VII to 

collect both initial and variation 

margin. In October 2012, the agencies 

reopened the comment period for 

22 Managme
the proposed rule to allow interested 

parties additional time to analyze and 

comment on the proposed margin 

rule, in light of the consultative 

document on margin requirements 

for non-centrally-cleared derivatives, 

recently published for comment 

by the BCBS, and the International 

Organization of Securities 

Commissions. The comment period 

closed on November 26, 2012. Final 

rulemaking is expected in 2013.

Volcker Rule NPR 

On November 7, 2011, the FDIC, 

along with the other federal banking 

agencies, and the Securities and 

Exchange Commission, published a 

joint NPR to implement the provisions 

of Section 619 of the Dodd-Frank Act, 

which restricts the ability of banking 

entities to engage in proprietary 

trading, and limits investments 

in hedge funds and private equity 

funds. In January 2012, the agencies 

extended the comment period 

until February 13, 2012, due to the 

complexity of the issues involved 

and to facilitate coordination of the 

rulemaking. The agencies received 

approximately 300 substantive 

comment letters, with approximately 

16,400 form comment letters in 

response to the NPR. In April 2012, 

the agencies issued guidance on the 

statutory conformance period that will 

extend through July 21, 2014. Final 

rulemaking is expected in 2013.

Investment Securities Rules 

and Guidanc

Investments in Corporate 

Debt Securities by Savings 

Associations 

In July 2012, the FDIC issued a 

final rule that prohibits any insured 

savings associations from acquiring 

or retaining a corporate debt security, 

when the security’s issuer does not 

have adequate capacity to meet all 

financial commitments under the 

security for the security’s projected 

life. The final rule was issued to 

comply with Section 939A of the 

Dodd-Frank Act. Insured savings 

associations must comply with the 

rule by January 1, 2013. The rule 

was accompanied by guidance that 

sets forth due diligence standards for 

determining the credit quality of a 

corporate debt security. 

Guidance on Revised Standards 

of Creditworthiness for 

Investment Securities

In November 2012, the FDIC issued 

a Financial Institution Letter 

(FIL) to remind FDIC-supervised 

institutions of recent regulatory 

changes regarding the permissibility 

of certain investment activities. 

Under FDIC regulations, insured 

state banks generally are prohibited 

from engaging in an investment 

activity that is not permissible for a 

national bank under OCC regulations, 

including the requirements of the 

OCC final rule titled, Alternatives to 

the Use of External Credit Ratings 

in the Regulations of the OCC. 

The FDIC’s rule on corporate debt 

securities investments by federal 

and state savings associations is 

consistent with the OCC’s final rule 

and related guidance on due diligence 

considerations and creditworthiness 

standards for investment securities. 

Depositor and Consumer 

Protection Rulemaking and 

Guidanc

Guidance on Military 

Homeowners with Permanent 

Change of Station Orders

In June 2012, the FDIC issued 

interagency guidance jointly with 

the Consumer Financial Protection 

Bureau (CFPB), the Board of 

Governors of the Federal Reserve 

System, the OCC, and the National 

Credit Union Administration (NCUA) 

to address unique circumstances 

involving some military homeowners 

who received Permanent Change of 

Station (PCS) orders. The guidance 

highlights concerns about practices 

that have the potential to mislead or 

otherwise cause harm to homeowners 

with PCS orders, and reminds 

mortgage servicers to ensure that 

appropriate risk management policies, 

procedures, and training are in place.

Deposit Insurance 

Assessment Fees

In July 2012, the FDIC issued an 

FIL addressing complaints received 

that certain IDIs are charging 

customers an “FDIC fee” or similarly 

described fee for deposit insurance. 

The FIL discourages institutions 

from specifically designating that a 

customer’s fee is for deposit insurance, 

or from stating or implying that the 

FDIC is charging such a fee, due to 

the potential to reveal information 

that could be used to determine an 

IDI’s confidential supervisory ratings, 

mislead customers into believing that 

the FDIC charges IDI customers or 

requires IDIs to charges customers, 

or both.

Examination Procedures

In August 2012, the FDIC published 

examination procedures for reviewing 

an institution’s compliance with 

the Secure and Fair Enforcement 

for Mortgage Licensing Act (SAFE 

Act) and regulations. The SAFE Act 

was enacted on July 30, 2008, and 

mandated a nationwide licensing and 

registration system for mortgage loan 

originators (MLOs). The procedures 

Managmenis
ANNUAL REPORT 2012

focus on the federal residential MLO 

registration requirements, and an 

institution’s obligation to implement 

appropriate policies and procedures, 

and conduct annual independent 

compliance testing.

Other Rulemaking and 

Guidance Issue

During 2012, the FDIC issued and 

participated in the issuance of other 

rulemaking and guidance in several 

areas as described below.

Appraisal Requirements for 

Higher-Risk Mortgages

On August 15, 2012, the FDIC jointly 

with the Board of Governors of the 

Federal Reserve System, CFPB, FHFA, 

NCUA, and the OCC, issued an NPR to 

implement the appraisal requirements 

for higher-risk mortgages as stated 

in Section 1471 of the Dodd-Frank 

Act. Section 1471 adds a new 

Section 129H to the Truth in Lending 

Act. For residential mortgage loans 

secured by the consumer’s principal 

dwelling, with an annual percentage 

rate that exceeds the average prime 

offer rate by a specified percentage, 

the proposed rule would require 

creditors to (1) obtain an appraisal or 

appraisals meeting certain specified 

standards, (2) provide applicants with 

a notification regarding the use of the 

appraisals, and (3) give applicants 

a copy of the written appraisals 

used. The comment period closed on 

October 15, 2012, and the agencies 

worked to finalize the rule.

Interagency Guidance on 

Section 612 of the Dodd-Frank 

Act, Restrictions on Conversions 

of Troubled Banks

On November 26, 2012, the FDIC 

and the other federal and state 

banking agencies issued guidance 

to clarify supervisory expectations 

for regulatory conversion subject 

to Section 612 of the Dodd-Frank 

Act. This section prohibits charter 

conversions by certain institutions 

that are subject to a formal corrective 

program or an MOU with respect 

to a significant supervisory matter. 

Institutions may request an exception 

to the conversion prohibition as 

described in the statute. The agencies 

expect that exceptions will be rare and 

generally would occur only when an 

enforcement action’s provisions have 

been substantially addressed.

Regulatory Relief

During 2012, the FDIC issued nine 

FILs that provide guidance to help 

financial institutions and facilitate 

recovery in areas damaged by 

hurricanes, wildfires, tornadoes, 

flooding, and other natural disasters. 

In these FILs, the FDIC encouraged 

banks to work constructively with 

borrowers experiencing financial 

difficulties as a result of natural 

disasters, and clarified that prudent 

extensions or modifications of 

loan terms in such circumstances 

can contribute to the health of 

communities and serve the long-term 

interests of lending institutions. In 

addition, the FDIC jointly with the 

other federal banking agencies, issued 

a Statement on Supervisory Practices 

Regarding Financial Institutions and 

Borrowers Affected by Hurricane Sandy

to provide regulatory assistance 

to affected financial institutions.

On October 16, 2012, the FDIC, 

through the auspices of the Federal 

Financial Institutions Examination 

Council (FFIEC) issued a statement 

encouraging financial institutions to 

work with agricultural customers 

impacted by the significant drought 

conditions affecting the Midwest 

and southern states. The statement 

encourages banks to continue making 

credit available to agricultural 

borrowers and to provide prudent loan 

modifications when appropriate. 

Other Policy Matters

Interagency Guidance on 

Leveraged Lending

On March 26, 2012, the FDIC and 

the other federal banking agencies 

proposed revisions to the 2001 

interagency guidance on leveraged 

financing. The proposal’s purpose 

is to update the existing guidance 

and clarify regulatory expectations 

in light of significant growth in 

the leveraged lending market, and 

incorporate lessons learned from the 

recent financial crisis. The proposal 

describes expectations for the sound 

risk management of leveraged lending 

activities, including well-defined 

underwriting standards, effective 

management information systems, a 

prudent credit limit and concentration 

framework, and strong pipeline 

management policies. The banking 

agencies are considering revisions to 

the proposal based on the 16 public 

comments that were received by the 

June 8, 2012, due date. 

Banker Teleconferences

In 2012, the FDIC hosted a series of 

banker teleconferences to maintain 

open lines of communication and 

update supervised institutions about 

compliance and consumer protection 

related rulemakings, guidance, and 

emerging issues. Participants included 

bank directors, officers, staff, and 

other banking industry professionals. 

Five teleconferences were held 

in 2012. The topics discussed 

included: Regulations Z’s Mortgage 

Loan Originator Compensation 

24 Managme
Rule, Third-Party Compliance Risk 

Management, Significant MortgageRelated Proposed Regulations (which 

were the subject of two calls), and 

Fair Lending.

Promoting Economic Inclusion

The FDIC is strongly committed to 

promoting consumer access to a broad 

array of banking products to meet 

consumer financial needs. To promote 

financial access to responsible and 

sustainable products offered by IDIs, 

the FDIC: 

♦ conducts research on the unbanked 

and underbanked,

♦ engages in research and 

development on models of products 

meeting the needs of lower-income 

consumers,

♦ supports partnerships to promote 

consumer access and use of banking 

services, 

♦ advances financial education and 

literacy, and

♦ facilitates partnerships to support 

community and small business 

development.

Advisory Committee on 

Economic Inclusion 

The Advisory Committee on Economic 

Inclusion (ComE-IN) was originally 

established by former Chairman 

Sheila C. Bair and the FDIC Board 

of Directors pursuant to the Federal 

Advisory Committee Act in November 

2006. The ComEIN provides the FDIC 

with advice and recommendations 

on important initiatives focused on 

expanding access to banking services 

by underserved populations. This may 

include reviewing basic retail financial 

services such as check 

cashing, money orders, remittances, 

stored value cards, short-term loans, 

savings accounts, and other services 

that promote asset accumulation by 

individuals and financial stability. 

During 2012, the Committee met on 

three occasions and discussed the 

FDIC’s research initiatives on the 

Banks’ Efforts to Serve the Unbanked 

and Underbanked, the FDIC’s National 

Survey of Unbanked and Underbanked 

Households, mobile financial services, 

model SAFE accounts, and prepaid 

card products.

Survey of Banks’ Efforts to Serve 

the Unbanked and Underbanked 

Section 7 of the Federal Deposit 

Insurance Reform Conforming 

Amendments Act of 2005 (Reform Act) 

mandates that the FDIC survey IDIs 

every two years to assess their efforts 

to bring individuals and families into 

the conventional finance system. 

In 2011, the FDIC conducted its 

second nationwide survey of 

FDIC-IDIs to assess efforts to 

serve unbanked and underbanked 

individuals and families. The 2011 

survey focused on banks’ basic 

transaction and savings account 

programs, auxiliary product and 

service offerings, and financial 

education and outreach efforts. 

Analysis of the survey results was 

completed in 2012, and the final 

results were released to the public in 

December 2012. The findings from 

the report, 2011 FDIC Survey of 

Banks’ Efforts to Serve Unbanked 

and Underbanked, informs financial 

institutions, community organizations, 

and other stakeholders interested 

in expanding financial products 

and services, to unbanked and 

underbanked consumers.

Partnership to Promote 

Consumer Access: Alliance 

for Economic Inclusion 

The goal of the FDIC’s Alliance for 

Economic Inclusion (AEI) initiative 

is to collaborate with financial 

institutions; community organizations; 

local, state, and federal agencies; 

and other partners in select markets 

to launch broad-based coalitions to 

bring unbanked and underbanked 

consumers into the financial 

mainstream. 

During 2012, the FDIC expanded 

the geographic reach of the AEI 

program. Initially in 14 markets, 

the FDIC launched AEI initiatives 

in two additional markets: the 

Appalachian region of West Virginia 

and Northeastern Oklahoma. The 

West Virginia effort resulted in 30 

organizations joining the AEI as 

of year-end; and the Northeastern 

Oklahoma effort resulted in 

participation from 49 representatives 

from 33 organizations. 

In addition to the new alliances, FDIC 

continued in 2012 to support existing 

AEIs. As a result:

♦ More than 110 banks and 

organizations joined AEI 

nationwide, bringing the total 

number of AEI members to 1,360.

♦ At least 133,578 consumers opened 

a bank account as a result of AEI 

efforts. Combined, more than 

536,000 bank accounts have been 

opened through the AEI program. 

♦ Approximately 116,413 consumers 

received financial education through 

the AEI, bringing the total number of 

consumers educated to 380,000. 

The FDIC also provided program 

guidance and technical assistance 

Managmenis
ANNUAL REPORT 2012

in the expansion of 70 Bank On

programs. Bank On initiatives are 

designed to reduce barriers to banking 

and increase access to the financial 

mainstream. 

Advancing Financial Education 

The FDIC expanded its financial 

education efforts during 2012 through 

a strategy that included providing 

access to timely and high-quality 

financial education products, sharing 

best practices, and working through 

partnerships to reach consumers. 

Money Smart for Small Business

The FDIC joined with the Small 

Business Administration (SBA) on 

April 24, 2012, to launch the new 

Money Smart for Small Business 

curriculum. The ten modules in this 

instructor-led curriculum provide 

introductory training for new and 

aspiring entrepreneurs on the basics of 

organizing and managing a business. 

Money Smart for Small Business is a 

tool for bank-community partnerships. 

The curriculum is intended to be 

delivered by stakeholders experienced 

with small business lending or 

development. Since the release of 

the curriculum, more than 10,000 

copies have been distributed, and 

11 partnerships were developed 

with organizations that can use or 

otherwise promote the curriculum to 

key stakeholders.

Money Smart for Consumers

The FDIC’s award-winning Money 

Smart curriculum has reached more 

than 3 million consumers since 

its launch in 2001. During 2012, 

the FDIC reached approximately 

250,000 consumers. The existing 

suite of Money Smart products for 

consumers was enhanced with two 

new resources:

♦ Money Smart Computer-Based 

Instruction (CBI) offers key 

elements of the eight modules of 

the instructor-led Money Smart

for Young Adults curriculum and 

eleven modules of the instructor-led 

Money Smart for Adults curriculum. 

The CBI features an interactive 

game-based design. Approximately 

29,000 users accessed the CBI 

during the eight months from its 

release date through year-end.

♦ Money Smart for Elementary 

School Students is designed to 

introduce key personal finance 

concepts to children ages 5 to 

8. Since its release in May 2012, 

more than 35,000 copies have been 

downloaded.

Through training and technical 

assistance, the FDIC emphasizes 

the importance of pairing education 

with access to appropriate banking 

products and services. During 2012, 

more than 1,300 practitioners attended 

the 52 train-the-trainer sessions. 

Approximately 1,200 organizations 

are members of the Money Smart

Alliance, and the FDIC worked with 

many other organizations to promote 

financial education, such as the 

Corporate Adopt a School program, 

which has reached approximately 

2,492 students at underserved schools 

with financial education training.

Leading Community 

Development

In 2012, the FDIC undertook over 662 

community development, technical 

assistance, and outreach activities 

and events designed to facilitate 

understanding and connection 

between financial institutions and 

other community stakeholders. The 

FDIC collaborated with the OCC, 

Federal Reserve Banks, and other 

stakeholders to conduct 57 CRA 

roundtables to provide market-specific 

training for bankers on enhancing 

CRA performance, thereby building 

the capacity of financial institutions 

to more effectively meet community 

and small business development 

needs. The FDIC also conducted 21 

workshops for nonprofit stakeholders 

on effectively engaging with financial 

institutions to promote community 

development.

Community Banking Initiatives

As the lead federal regulator for the 

majority of community banks, the 

FDIC continues to make community 

banking a main priority. Though 

they tend to be small relative to the 

largest U.S. banks, community banks 

specialize in activities that are crucial 

to the functioning of the economy. 

Community banks make many of 

the loans to small businesses that, 

in turn, create new jobs. They also 

provide financial services to business 

and household customers that may 

not be well served by other financial 

providers. The FDIC’s community 

banking initiatives completed in 2012 

include the following:

♦ Future of Community Banking 

Conference – On February 16, 2012, 

the FDIC held a community banking 

conference that brought together 

community bankers, regulators, 

academics, and various community 

bank stakeholders to examine 

the unique role community banks 

perform in our nation’s economy 

and the challenges and opportunities 

they face. Then-Acting FDIC 

Chairman Gruenberg opened and 

closed the conference, which 

also featured keynote remarks 

by Shelley Moore Capito, U.S. 

Congresswoman for West Virginia’s 

2nd District; Ben S. Bernanke, 

Chairman, Board of Governors of 

26 Managme
the Federal Reserve System; and Thomas 

J. Curry, Director, FDIC. The conference 

explored the evolution and characteristics 

of community banks, current challenges 

and opportunities for community 

banks, perspectives of community bank 

customers, and lessons learned and 

successful strategies for the community 

bank of the future.

♦ Community Bank Roundtable 

Discussions – From March to October 

of 2012, the FDIC conducted roundtable 

discussions in each of the six FDIC 

regions with about 70 to 100 attendees, 

including community bankers, state 

banking commissioners, state bank trade 

association representatives, the FDIC’s 

senior executives for supervision, and two 

members of the FDIC’s Board of Directors 

(including the FDIC’s then-Acting 

Chairman). Each meeting addressed 

financial and operational challenges and 

opportunities facing community banks and 

the regulatory interaction process. The 

insights provided during the discussions 

added to other components of the 

community banking initiatives.

♦ Community Banking Study – On 

December 17, 2012, the FDIC released 

a study of community banking in the 

United States. The goal of this study 

was to analyze and document what has 

happened to community banks since 1985. 

The study set out to explore some basic 

research questions about community 

banks, including trends in consolidation, 

overall financial performance, geographic 

footprint, business model variations, 

efficiency and economies of scale, and 

access to capital. The FDIC assembled a 

comprehensive database using detailed 

financial data from bank Call Reports and 

Thrift Financial Reports, standardizing 

the data to conduct analysis across the 

industry beginning in 1984. Financial data 

have also been linked to the Summary 

of Deposits data (and Branch Office 

Survey data for thrifts) that provide a 

detailed record of banking office location 

and deposit gathering trends dating 

back to 1987. The result is an assembly 

of the most complete record of the 

history of the financial performance and 

structural change in the banking industry 

over the past two and a half decades. 

This data-driven approach results in 

a foundational study that provides a 

platform for future analysis by the FDIC 

and other researchers with an interest in 

community banking.

♦ Targeted Community Banking Research – 

The FDIC continues to conduct specialized 

studies and research to more deeply 

explore certain issues and questions about 

community banks. On December 18, 2012, 

the FDIC released two targeted research 

papers: “Community Bank Efficiency and

Economies of Scale” and “What Factors 

Explain Differences in Return on Assets 

Among Community Banks?” These papers 

delve deeper in explaining community 

bank performance, based on efficiency 

ratio trends and other bank-specific 

factors.

♦ Review of Examination and Rulemaking 

Processes – In 2012, the FDIC reviewed the 

FDIC thenActing Chairman 

Martin J. Gruenberg 

opens the Future of 

Community Banking 

Conference on 

February 16, in 

Arlington, Virginia.

Managmenis
ANNUAL REPORT 2012

processes for examining community banks 

and releasing rulemakings and guidance. 

The FDIC solicited input from community 

bankers and incorporated that feedback 

into various improvements. Also, the 

FDIC’s extensive communication and 

technical support efforts for community 

bankers included an educational outreach 

effort to explain key technical points of 

the proposed capital rules that included 

six regional banker meetings, a national 

teleconference call, educational material 

posted to the FDIC’s website, and an 

online tool to help bankers measure the 

potential impact of the proposed capital 

rules.

In addition, the FDIC’s Community Bank 

Advisory Committee continued to provide 

timely information and input to the FDIC 

on a variety of community bank policy and 

operational issues throughout 2012. The 

Committee held three meetings in 2012 

and provided input on a number of key 

issues and initiatives, including the FDIC’s 

community bank study and research project, 

proposed improvements to the FDIC’s 

regulatory and supervisory processes, the 

status of the Transaction Account Guarantee 

Program (TAG), the FDIC’s preliminary plan 

to review its regulations under the Economic 

Growth and Regulatory Paperwork 

Reduction Act, as well as the potential 

effects of various regulatory and legislative 

developments on community banks. 

Looking forward, the FDIC will continue 

to make the Community Banking Initiative 

a high priority by following up on the 

Community Banking Study, pursuing 

additional research relating to the continued 

viability of community banks, and continuing 

our review of examination and rulemaking 

processes with the goal of identifying 

additional ways to make the supervisory 

process more efficient, consistent, and 

transparent, consistent with safe and sound 

banking practices.

Center for Financial Research

The Center for Financial Research (CFR) 

was founded by the Corporation in 2004 to 

encourage and support innovative research 

on topics that are important to the 

FDIC’s role as deposit insurer and 

bank supervisor. During 2012, the CFR 

co-sponsored two major 

research conferences.

Members of the 

FDIC Advisory 

Committee on 

Community Banking.

28 Managme
The CFR organized and sponsored 

the 22nd Annual Derivatives 

Securities and Risk Management 

Conference jointly with Cornell 

University’s Johnson Graduate School 

of Management and the University 

of Houston’s Bauer College of 

Business. The conference was held 

in March 2012 at the Seidman Center 

and attracted over 100 researchers 

from around the world. Conference 

presentations included systemic risk, 

asset price dynamics, asset pricing, 

and credit spreads. 

The CFR also organized and 

sponsored the 12th Annual Bank 

Research Conference jointly with 

the Journal for Financial Services 

Research (JFSR), in September 2012. 

The conference theme, “Performance 

of Financial Services in the Current 

Environment,” focused on the financial 

services industry and included over 

20 presentations attended by over 

120 participants. Experts discussed 

a range of topics including systemic 

risk and bank lending, liquidity, and 

capital issues. 

In addition to conferences, workshops 

and symposia, three CFR working 

papers were completed and made 

public on topics including bank 

bailouts, executive compensation, and 

tightening loan contracts.

Information Technology, 

Cyber Fraud, and 

Financial Crimes 

In 2012, the FDIC, jointly with the U.S. 

Department of Justice, began planning 

a Financial Crimes Conference to be 

held in June 2013 that will focus on 

all types of financial fraud, and how 

the law enforcement community and 

regulators can respond effectively to 

fraud. Other major accomplishments 

during 2012 in promoting information 

technology (IT) security and 

combating cyber fraud and other 

financial crimes included the 

following: 

♦ Issued an updated FFIEC 

Technology Service Provider 

booklet. This booklet replaces the 

March 2003 version. 

♦ Published the Federal Regulatory 

Agencies’ Administrative Guidelines: 

Implementation of the Interagency 

Programs for the Supervision of 

Technology Service Providers.

♦ Published a Supervisory Insights 

Journal article on mobile payments.

♦ Issued revised guidance describing 

potential risks associated with 

relationships with third-party 

entities that process payments for 

telemarketers, online businesses, 

and other merchants.

♦ Hosted the FFIEC IT Conference 

that addressed technology and 

operational issues facing the 

financial federal regulatory agencies.

♦ Assisted financial institutions in 

identifying and shutting down 

“phishing” websites. The term 

“phishing”—as in “fishing” for 

confidential information—refers to 

scams to fraudulently obtain and use 

an individual’s personal or financial 

information. 

♦ Issued six Consumer Alerts 

pertaining to emails and telephone 

calls fraudulently claiming to be 

from the FDIC.

The FDIC conducts IT and operations 

examinations of financial institutions 

and technology service providers 

(TSP). These examinations 

ensure that institutions and TSPs 

have implemented adequate risk 

management practices for the 

confidentiality, integrity, and 

availability of sensitive, material, 

and critical information assets. The 

result of an IT examination is a 

FFIEC Uniform Rating System for 

Information Technology rating. In 

2012, the FDIC conducted 2,642 IT and 

operations examinations at financial 

institutions and TSPs. Further, as part 

of its ongoing supervision process, the 

FDIC monitors significant events, such 

as data breaches and natural disasters 

that may affect financial institution 

operations or customers.

Consumer Complaints 

and Inquiries 

The FDIC investigates consumer 

complaints concerning FDICsupervised institutions and answers 

inquiries from the public about 

consumer protection laws and banking 

practices. As of December 31, 2012, 

the FDIC received 10,564 written 

complaints, of which 5,088 involved 

complaints against state nonmember 

institutions. The FDIC responded to 

over 98 percent of these complaints 

within time frames established by 

corporate policy, and acknowledged 

100 percent of all consumer 

complaints and inquiries within 

14 days. The FDIC also responded to 

1,793 written inquiries, of which 403 

involved state nonmember institutions. 

In addition, the FDIC responded 

to 5,209 telephone calls from the 

public and members of the banking 

community, of which 2,721 concerned 

state nonmember institutions.

Coordination with the 

Consumer Financial 

Protection Bureau

In 2012 the prudential regulators and 

the Consumer Financial Protection 

Bureau (CFPB) signed an MOU to 

coordinate supervisory matters for 

Managmenis
ANNUAL REPORT 2012

institutions with assets over $10 billion 

and their affiliates. The CFPB was 

charged with developing regulations 

to implement the mortgage reforms 

and other aspects of regulatory reform 

in the Dodd-Frank Act. As required 

by the statute, the FDIC coordinated 

with the CFPB on the regulations for 

which it is solely responsible. The 

FDIC also worked with the CFPB and 

other banking agencies to develop and 

implement joint regulations.

As of December 31, 2012, the FDIC 

received 1,369 complaints involving 

FDIC-supervised banks under the 

jurisdiction of the CFPB. Under the 

agreement between the FDIC and the 

CFPB, the FDIC investigated 497 of 

the 1,369 complaints and referred the 

remaining 872 to the CFPB.

Public Awareness of Deposit 

Insurance Coverage

The FDIC provides a significant 

amount of education for consumers 

and the banking industry on the rules 

for deposit insurance coverage. An 

important part of the FDIC’s deposit 

insurance mission is ensuring that 

bankers and consumers have access 

to accurate information about the 

FDIC’s rules for deposit insurance 

coverage. The FDIC has an extensive 

deposit insurance education program 

consisting of seminars for bankers, 

electronic tools for estimating deposit 

insurance coverage, and written and 

electronic information targeted to 

both bankers and consumers. 

The FDIC continued its efforts to 

educate bankers and consumers about 

the rules and requirements for FDIC 

insurance coverage. During 2012, 

the FDIC conducted 15 telephone 

seminars for bankers on deposit 

insurance coverage, reaching an 

estimated 27,734 bankers participating 

at approximately 7,924 bank locations 

throughout the country. The FDIC 

also updated its deposit insurance 

coverage publications and educational 

tools for consumers and bankers, 

including brochures, resource guides, 

videos, and the Electronic Deposit 

Insurance Estimator (EDIE). 

In 2012, the FDIC received and 

answered approximately 97,453 

telephone deposit insurance-related 

inquiries from consumers and bankers. 

The FDIC Call Center addressed 

50,845 of these inquiries, and deposit 

insurance coverage subject-matter 

experts handled the other 46,608. In 

addition to telephone inquiries about 

deposit insurance coverage, the 

FDIC received 2,619 written inquiries 

from consumers and bankers. Of 

these inquiries, 99 percent received 

responses within two weeks, as 

required by corporate policy.

Resoluti

Receive

The FDIC has the unique mission 

of protecting depositors of insured 

banks and savings associations. No 

depositor has ever experienced a loss 

on the insured amount of his or her 

deposit in an FDIC-insured institution 

due to a failure. Upon closure of an 

institution, typically by its chartering 

authority—the state for statechartered institutions, and the Office 

of the Comptroller of the Currency 

(OCC) for national banks and federal 

savings associations—the FDIC is 

appointed receiver, and the FDIC is 

responsible for resolving the failed 

institutions. 

The FDIC uses a variety of business 

practices to resolve a failed institution. 

These practices are typically 

associated with either the resolution 

process or the receivership process. 

Depending on the characteristics 

of the institution, the FDIC may 

recommend several of these methods 

to ensure the prompt and smooth 

payment of deposit insurance to 

insured depositors, to minimize the 

impact on the DIF, and to speed 

dividend payments to uninsured 

depositors and other creditors of the 

failed institution. 

The resolution process involves 

evaluating and marketing a failing 

institution, soliciting and accepting 

bids for the sale of the institution, 

determining which bid is least costly 

to the DIF, and working with the 

acquiring institution through the 

closing process.

To minimize disruption to the local 

community, the resolution process 

must be performed as quickly and 

smoothly as possible. There are three 

basic resolution methods used by 

the FDIC: purchase and assumption 

transactions, deposit payoffs, and 

Deposit Insurance National Bank 

(DINB) assumptions. 

The purchase and assumption (P&A) 

transaction is the most common 

resolution method. In a P&A 

transaction, a healthy institution 

purchases certain assets and 

assumes certain liabilities of the 

failed institution. A variety of P&A 

transactions can be used. Since each 

failing bank situation is different, 

P&A transactions provide flexibility 

to structure deals that result in the 

highest value for the failed institution. 

For each possible P&A transaction, 

the acquirer may either acquire all 

or only the insured portion of the 

deposits. Loss sharing may be offered 

by the receiver in connection with 

a P&A transaction. In a loss-share 

transaction, the FDIC as receiver 

agrees to share losses on certain 

30 Managme
assets with the acquirer. The FDIC 

usually agrees to absorb a significant 

portion (for example, 80 percent) of 

future losses on assets that have been 

designated as “shared loss assets” for 

a specific period of time (for example, 

five to ten years). The economic 

rationale for these transactions is 

that keeping shared loss assets in the 

banking sector can produce a better 

net recovery than would the FDIC’s 

immediate liquidation of these assets.

Deposit payoffs are only executed 

if a bid for a P&A transaction does 

not meet the least-cost test or if no 

bids are received, in which case the 

FDIC, in its corporate capacity, makes 

sure that the customers of the failed 

institution receive the full amount of 

their insured deposits. 

The Banking Act of 1933 authorizes 

the FDIC to establish a DINB to 

assume the insured deposits of a 

failed bank. A DINB is a new national 

bank with limited life and powers 

that allows failed-bank customers 

a brief period of time to move their 

deposit account(s) to other insured 

institutions. Though infrequently 

used, a DINB allows for a failed 

bank to be liquidated in an orderly 

fashion, minimizing disruption to local 

communities and financial markets. 

The receivership process involves 

performing the closing functions at 

the failed institution, liquidating any 

remaining failed institution assets, 

and distributing any proceeds of the 

liquidation to the FDIC and other 

creditors of the receivership. In its 

role as receiver, the FDIC has used a 

wide variety of strategies and tools 

to manage and sell retained assets. 

These include, but are not limited 

to asset sale and/or management 

agreements, structured transactions, 

and securitizations. 

Financial Institution Failures 

During 2012, there were 51 institution 

failures, compared to 92 failures in 

2011. For the institutions that failed, 

the FDIC successfully contacted all 

known qualified and interested 

bidders to market these institutions. 

The FDIC also made insured funds 

available to all depositors within 

one business day of the failure if it 

occurred on a Friday and within two 

business days if the failure occurred 

on any other day of the week. There 

were no losses on insured deposits, 

and no appropriated funds were 

required to pay insured deposits.

Asset Management and Sales

As part of its resolution process, 

the FDIC makes every effort to sell 

as many assets as possible to an 

assuming institution. Assets that are 

retained by the receivership are 

evaluated. For 95 percent of the failed 

institutions, at least 90 percent of the 

book value of marketable assets is 

marketed for sale within 90 days of an 

institution’s failure for cash sales and 

within 120 days for structured sales. 

Structured sales for 2012 totaled 

$456 million in unpaid principal 

balances from commercial real estate 

and residential loans acquired from 

various receiverships. Cash sales 

of assets for the year totaled 

$1.1 billion in book value. In addition 

to structured and cash sales, FDIC 

also uses securitizations to dispose of 

bank assets. In 2012, securitization 

sales totaled $449 million.

As a result of our marketing and 

collection efforts, the book value of 

assets in inventory decreased by $3.9 

billion (19 percent) in 2012. 

Assets in Inventory by As

Dollars in Million

Asset Type 12/31/12 12/31/1

Securities $1,179 $1,225

Consumer Loans 99 31

Commercial Loans 604 585

Real Estate Mortgages 1,265 2,208

Other Assets/Judgments 1,134 1,396

Owned Assets 417 1,007

Net Investments in Subsidiaries 179 290

Structured and Securitized Assets 12,120 14,171

Total $16,997 $20,913

Failure Activity 201

Dollars In Billion

2012 2011 2010

Total Institutions 51 92 157

Total Assets of Failed Institutions1 $11.6 $34.9 $92.1

Total Deposits of Failed Institutions1 $11.0 $31.1 $78.3

Estimated Loss to the DIF $2.7 $8.8 $20.8

1 Total assets and total deposits data are based on the last Call Report filed by the institution

 prior to failure.

Managmenis
ANNUAL REPORT 2012

Receivership Management 

Activities

The FDIC, as receiver, manages failed 

banks and their subsidiaries with the 

goal of expeditiously winding up their 

affairs. The oversight and prompt 

termination of receiverships help 

to preserve value for the uninsured 

depositors and other creditors by 

reducing overhead and other holding 

costs. Once the assets of a failed 

institution have been sold and the 

final distribution of any proceeds 

is made, the FDIC terminates the 

receivership. In 2012, the number 

of receiverships under management 

increased by 8 percent, as a result of 

new failures. The chart below shows 

overall receivership activity for the 

FDIC in 2012.

Minority and Women Outreach

The FDIC relies on contractors to help 

meet its mission. In 2012, the FDIC 

awarded 1,326 contracts. Of these, 388 

contracts (29 percent) were awarded 

to Minority- and Women-Owned 

Businesses (MWOBs). The total 

value of contracts awarded was 

$1.0 billion, of which $308 million 

(30 percent), were awarded to 

MWOBs, compared to 29 percent for 

all of 2011. In addition, engagements 

of Minority- and Women-Owned Law 

Firms (MWOLFs) were 18 percent of 

all engagements; total payments of 

$15.3 million to MWOLFs were 

14 percent of all payments to outside 

counsel, compared to 17 percent for 

all of 2011. 

In 2012, the FDIC exhibited at 23 

procurement-specific trade shows to 

provide participants with the FDIC’s 

general contracting procedures, prime 

contractors’ contact information, and 

possible upcoming solicitations.

Prime contractors were reminded 

of the FDIC’s emphasis on MWOB 

participation and were encouraged 

to subcontract or partner with 

MWOBs. The FDIC also exhibited 

at 12 non-procurement events where 

contracting information was provided. 

In addition, the FDIC’s Legal Division 

was represented at trade shows where 

information was provided to MWOLFs 

about outside counsel opportunities 

and how to enter into co-counsel 

arrangements with majority firms.

FDIC personnel also met with MWOBs 

and MWOLFs in one-on-one meetings 

to discuss contracting opportunities 

at the FDIC. The FDIC continued 

to encourage MWOBs to register in 

the FDIC’s Contractor Resource List, 

which is used to develop source lists 

for solicitations. Any firm interested 

in doing business with the FDIC can 

register for the Contractor Resource 

List through the FDIC’s website. 

In 2012, the FDIC’s Office of 

Minority and Women Inclusion 

(OMWI) participated with the other 

Dodd-Frank Act agency OMWIs in 

seven roundtable meetings nationwide 

with financial services industry 

groups, trade associations, and other 

consumer advocacy groups, to obtain 

input, guidance, and recommendations 

about strategies to implement 

standards for assessing regulated 

entities under Section 342 of the 

Dodd-Frank Act.

In 2012, the FDIC successfully closed 

three structured transaction sales. 

These three auctions combined to 

attract 19 entities that placed bids. 

Eight bidders had an MWOB firm as a 

member. The winning bidder for one 

of the transactions included an MWOB 

firm in the investor group. The FDIC 

continued outreach efforts to small 

investors and minority-owned and 

women-owned investors, and held five 

nationwide workshops on FDIC’s loan 

and Owned Real Estate (ORE) sales 

programs, and the structured loan 

sales program. The workshops were 

held in Chicago, Dallas, Los Angeles, 

Nashville, and New York, with more 

than 450 participants.

In 2013, the FDIC will continue to 

encourage and foster diversity and 

inclusion of MWOBs in procurement 

activities and outside counsel 

engagements, as well as promote 

strong commitment to diversity 

inclusion within its workforce, and 

with all financial institutions and law 

firms that do business with the FDIC. 

Protecting Insured Depositors 

The FDIC’s ability to attract healthy 

institutions to assume deposits and 

purchase assets of failed banks and 

savings associations at the time of 

failure minimizes the disruption 

to customers and allows assets to 

be returned to the private sector 

immediately. Assets remaining after 

Receiversh

Active Receiverships as of 12/31/111 431

New Receiverships 51

Receiverships Terminated 16

Active Receiverships as of 12/31/121 466

1 Includes five FSLIC Resolution Fund receiverships at year-end 2011 and three at year-end 2012.

32 Managme
resolution are liquidated by the 

FDIC in an orderly manner, and the 

proceeds are used to pay creditors, 

including depositors whose accounts 

exceeded the insurance limit. During 

2012, the FDIC paid dividends of $8 

million to depositors whose accounts 

exceeded the insurance limit. 

Professional Liability and 

Financial Crimes Recoveries

FDIC staff works to identify potential 

claims against directors, officers, 

fidelity bond insurance carriers, 

appraisers, attorneys, accountants, 

mortgage loan brokers, title 

insurance companies, securities 

underwriters, securities issuers, 

and other professionals who may 

have contributed to the failure of 

an IDI. Once a claim is determined 

to be meritorious and cost-effective 

to pursue, the FDIC initiates legal 

action against the appropriate parties. 

During 2012, the FDIC recovered 

$337 million from professional liability 

claims and settlements. The FDIC also 

authorized lawsuits related to 48 failed 

institutions against 369 individuals 

for director and officer liability and 

authorized 21 other lawsuits for 

fidelity bond, liability insurance, 

attorney malpractice, appraiser 

malpractice, and securities law 

violations for residential mortgagebacked securities. There were 165 

residential mortgage malpractice 

and fraud lawsuits pending as of 

year-end 2012. Also, by year-end 

2012, the FDIC’s caseload included 88 

professional liability lawsuits (up from 

52 at year-end 2011) and 1,343 open 

investigations (down from 1,811 at 

year-end 2011).

In addition, as part of the sentencing 

process for those convicted of criminal 

wrongdoing against institutions 

that later failed, a court may order 

a defendant to pay restitution or 

to forfeit funds or property to the 

receivership. The FDIC, working 

with the U.S. Department of Justice, 

collected $4.6 million from criminal 

restitution and forfeiture orders 

during 2012. As of year-end 2012, 

there were 4,860 active restitution and 

forfeiture orders (down from 5,192 

at year-end 2011). This includes 156 

orders held by the FSLIC Resolution 

Fund, i.e., orders arising out of failed 

financial institutions that were in 

receivership or conservatorship by the 

Federal Savings and Loan Insurance 

Corporation or the Resolution Trust 

Corporation.

Internation

Outre

Throughout 2012, the FDIC played 

a leading role among international 

standard-setting, regulatory, 

supervisory, and multi-lateral 

organizations by supporting the global 

development of effective deposit 

insurance and bank supervision 

systems, maintaining public 

confidence and financial stability, and 

promoting effective resolution regimes 

as integral components of the financial 

safety net. Among the key institutions 

the FDIC collaborated with were 

the Association of Supervisors of 

Banks of the Americas (ASBA), 

the Basel Committee on Banking 

Supervision (BCBS), the European 

Forum of Deposit Insurers, the 

Financial Stability Board (FSB), the 

Financial Stability Institute (FSI), the 

International Association of Deposit 

Insurers (IADI), the International 

Monetary Fund (IMF), the 

International Information Technology 

Supervisors Group, and the World 

Bank. 

Key to the international collaboration 

was the ongoing dialogue among 

then-Acting FDIC Chairman Martin J. 

Gruenberg, other senior FDIC leaders, 

and a number of senior financial 

regulators from the United Kingdom 

(U.K.) about the implementation 

of the Dodd-Frank Act, Basel III, 

and how changes in U.S., U.K., and 

European Union financial regulations 

affect global information sharing, 

crisis management, and recovery 

and resolution activities. In light of 

the large number of cross-border 

operations of large, complex financial 

institutions, the primary areas of 

discussion and collaboration were the 

FDIC’s Orderly Liquidation Authority 

under Title II of the Dodd-Frank Act, 

and the importance of cross-border 

coordination in the event a SIFI begins 

to experience financial distress. 

During 2012, the FDIC participated 

in both Governors and Heads of 

Supervision and BCBS meetings. The 

FDIC supported work streams, task 

forces, and policy development group 

meetings to address BCBS work on the 

implementation of Basel III. The FDIC 

also helped monitor new leverage ratio 

and liquidity standards, and determine 

surcharges on global systemically 

important banks. Additionally, the 

FDIC participated in BCBS initiatives 

related to standards implementation, 

operational risk, accounting, review 

of the trading book, and credit ratings 

and securitization. The major issues 

addressed by these work streams 

included the recalibration of risk 

weights for securitization exposures, 

the comprehensive review of capital 

charges for trading positions, and the 

review of BCBS members’ domestic 

rule-making processes surrounding 

Basel II, Basel II.5, and Basel III.

Managmenis
ANNUAL REPORT 2012

International Association 

of Deposit Insurers 

Under the leadership of then-Acting 

FDIC Chairman Gruenberg, IADI 

celebrated its tenth anniversary in 

October 2012. Chairman Gruenberg 

served as the President of IADI and 

the Chair of its Executive Council 

from November 2007 to October 2012. 

Worth noting is the remarkable impact 

IADI has made during its relatively 

short history, contributing not only to 

the security of individual depositors 

but also to global financial stability. 

Since its founding in 2002, IADI has 

grown from 26 founding members to 

84 participants, including 64 members, 

8 associates and 12 partners, and 

is strongly represented on every 

continent. IADI is now recognized as 

the standard-setting body for deposit 

insurance by all the major public 

international financial institutions, 

including the FSB, the Group of 20 

(G-20), the BCBS, the IMF, and the 

World Bank.

Under the FDIC’s leadership, IADI 

has made significant progress in 

advancing the 2009 IADI and BCBS 

Core Principles for Effective 

Deposit Insurance Systems (Core 

Principles). In February 2011, the 

FSB approved the Core Principles

and the Core Principles Assessment 

Methodology for inclusion in its 

Compendium of Key Standards for 

Sound Financial Systems. The Core 

Principles are officially recognized 

by both the IMF and World Bank and 

are now accepted for use in their 

Financial Sector Assessment Program 

(FSAP). This represents an important 

milestone in the acceptance of the 

role of effective systems of deposit 

insurance in maintaining financial 

stability. The FDIC has also worked 

with senior officials at the World 

Bank and IMF, and formalized IADI 

collaboration and support of the 

deposit insurance review portion of 

the FSAP reviews. Core Principles

working group meetings, regional 

workshops, and training sessions 

were held in Washington, DC; Kuala 

Lumpur, Malaysia; Bogota, Colombia; 

and Nairobi, Kenya, during 2012. 

Financial Stability Board 

In February 2012, the FSB issued 

its Thematic Review on Deposit 

Insurance Systems Peer Review 

Report. The recommendations 

included a request for IADI to 

update its guidance that pre-dated 

the financial crisis and to develop 

additional guidance to address areas 

where the Core Principles may need 

more precision to achieve effective 

compliance, or to better reflect 

leading practices. The FDIC, in 

partnership with the Canadian Deposit 

Insurance Corporation, has taken a 

leadership role in responding to these 

recommendations with a set of six 

focused papers. Prepared under the 

auspices of the IADI Research and 

Guidance Committee Guidance Group, 

two of these papers were presented 

during the October 2012 IADI 

Executive Council meeting in London, 

England; the remaining four papers 

will be presented to the Executive 

Council in 2013. IADI and the BCBS 

will use the papers to enhance 

the guidance supporting the Core 

Principles and the accompanying Core 

Principles Assessment Methodology.

In November 2011, the G-20 endorsed 

the FSB’s Key Attributes of Effective 

Resolution Regimes for Financial 

Institutions (Key Attributes). The 

Key Attributes set out the core 

elements that the FSB considers 

necessary for an effective resolution 

regime and includes the ability to 

manage the failure of large, complex, 

and internationally active financial 

institutions in a way that minimizes 

systemic disruption and avoids the 

exposure of taxpayers to the risk 

of loss. During 2012, a number of 

initiatives were launched by the FSB 

related to operationalizing the Key 

Attributes. In January 2012, a special 

working group under the auspices 

of the Resolutions Steering Group 

was formed to draft an assessment 

methodology for the Key Attributes. 

The FDIC is actively participating in 

this effort alongside IADI, a number 

of FSB member jurisdictions, and 

international organizations such as 

the World Bank and the European 

Commission, and has participated 

extensively in drafting team meetings 

in Basel, Switzerland. In the second 

half of 2012, the FDIC participated 

in the drafting of a consultative 

document, entitled “Recovery and 

Resolution Planning: Making the Key 

Attributes Requirements Operational.” 

The document was released for public 

comment. The FDIC also hosted 

meetings for the Legal Entity Identifier 

Working Group, and co-hosted a series 

of Crisis Management Group meetings 

for the five U.S.-based G-SIFIs at the 

Seidman Center in Arlington, Virginia, 

and the Federal Reserve Bank of 

New York. FDIC representatives also 

participated in Crisis Management 

Group meetings hosted by foreign 

regulatory authorities in a number of 

jurisdictions.

In mid-2012, then-acting Chairman 

Gruenberg was appointed to chair a 

Thematic Peer Review on Resolution 

Regimes under the auspices of 

the FSB’s Standing Committee on 

Standards Implementation (SCSI). 

This Peer Review was tasked with 

34 Managme
conducting a survey of the existing 

regulatory and legislative landscape; 

identifying gaps in implementation 

of the Key Attributes; and providing 

guidance to the Key Attributes

assessment methodology drafting 

team. A questionnaire was developed 

and sent to FSB member jurisdictions 

over the summer, with jurisdictions 

providing responses to the Peer 

Review Team in the fall. The Peer 

Review Team, comprising 20 members 

from multiple G-20 jurisdictions and 

multinational bodies, will develop a 

report for the SCSI in early 2013 on its 

findings.

Association of Supervisors 

of Banks of the Americas 

With the goal of contributing to sound 

banking supervision and resilient 

financial systems in the Americas, 

the FDIC has been a member of 

ASBA since its founding in 1999. In 

recognition of the FDIC’s leadership 

in ASBA, the General Assembly 

elected the FDIC’s Director of Risk 

Management Supervision, Sandra 

Thompson, to serve a two-year term 

as Vice Chairman. Director Thompson 

was named Acting Chairman of 

ASBA until November 2012, upon the 

resignation of ASBA’s Chairman. In 

these capacities, Director Thompson 

presided over meetings of the 

technical committee, the assembly, 

and the board. 

The FDIC led three ASBA technical 

assistance training missions in 2012, 

including a Financial Institution 

Analysis training program in Quito, 

Ecuador; a Credit Risk Management 

training program in Asuncion, 

Paraguay; and a Supervision of 

Operational Risk training program in 

Miami, Florida. The FDIC continued 

to provide subject-matter experts as 

instructors and speakers to support 

ASBA-sponsored training programs, 

seminars, and conferences. In 

addition, the FDIC participated in 

the ASBA working group on the 

Liquidity Coverage Ratio and Net 

Stable Funding Ratio Overview 

and established the FDIC-ASBA 

secondment program. Two ASBA 

members from the Central Bank of 

Barbados and the Superintendencia de 

Bancos de Guatemala were hosted by 

the FDIC under the inaugural program 

for eight weeks during the fall of 2012.

Supporting best practices through 

ASBA, the FDIC chaired the Basel 

III Liquidity Working Group and 

participated in several ASBA Working 

Groups concerning enterprise risk 

management, effective consumer 

protection frameworks, and corporate 

governance. The FDIC also led an 

internal review of ASBA’s Secretary 

General’s office in Mexico City Mexico, 

led the development of the 2013–2018 

ASBA Strategic and Business Plans, 

developed the first handbook for the 

Board of Directors, and approved the 

external audit program. 

Foreign Visitors Program

The FDIC continued its global role 

in supporting the development 

of effective deposit insurance 

and banking supervision systems 

through the provision of training, 

consultations, and briefings to foreign 

bank supervisors, deposit insurance 

authorities, international financial 

institutions, partner U.S. agencies, 

and other governmental officials. In 

2012, the FDIC hosted 80 visits with 

over 565 visitors from approximately 

42 jurisdictions. Many of these visits 

were multi-day study tours, enabling 

delegations to receive in-depth 

consultations on a wide range of 

deposit insurance issues. Officials 

from the Polish Bank Working Group, 

the Deposit Insurance of Vietnam, the 

National Bank of Ethiopia, the Deposit 

Protection Agency of the Kyrgyz 

Republic, and the Central Bank of 

Kenya benefited from these extended 

visits.

During 2012, the FDIC provided 

subject-matter experts to participate 

in seven FSI seminars around the 

world. The topics included riskfocused supervision, financial stability 

and stress testing, liquidity risk, Basel 

III, risk management, and regulating 

and supervising systemic banks. 

Additionally, 199 students from 13 

countries attended FDIC examiner 

training classes through the FDIC’s 

Corporate University. 

The FDIC continued its strong 

relationship with Chinese public 

institutions in 2012. The FDIC 

participated in the Fourth U.S.-China 

Strategic and Economic Dialogue 

on May 3, 2012, in Beijing, China, 

along with counterparts from all of 

the U.S. financial sector regulatory 

agencies, in a delegation led by the 

U.S. Treasury Secretary. The U.S. 

delegation met with counterparts 

from the Chinese regulatory agencies 

to discuss regulatory reforms and 

progress towards rebalancing their 

respective economies. The FDIC 

met separately with the People’s 

Bank of China (PBoC) concerning 

revisions to the current FDIC-PBoC 

Technical Assistance Memorandum 

of Understanding, and also about 

progress toward implementing 

a deposit insurance scheme in 

China. The FDIC held meetings 

with the China Banking Regulatory 

Commission (CBRC) to discuss 

further cooperation on SIFI-related 

matters. The U.S.-CBRC Bank 

Supervisors Bilateral Meeting, hosted 

by the FDIC, was held on October 

Managmenis
ANNUAL REPORT 2012

15, 2012. This meeting involved the 

three U.S. banking agencies and the 

CBRC in discussions on a wide range 

of supervisory issues. In addition, 

the China delegation met with 

representatives from the FDIC’s Legal 

Division and Division of Resolutions 

and Receiverships to obtain guidance 

on drafting rules for bank resolution in 

China. The FDIC subsequently hosted 

a delegation from the CBRC, providing 

an overview of information technology 

(IT) examination, supervision and 

resolution processes, and the roles 

and responsibilities of the FDIC in the 

U.S. bank regulatory system. 

Financial Services 

Volunteer Corps 

June 1, 2012, marked the five-year 

anniversary of the secondment 

program agreed upon by the Financial 

Services Volunteer Corps (FSVC) and 

the FDIC to place one or more FDIC 

employees full-time in the FSVC’s 

Washington, DC, office on an annual 

basis. The FDIC provided support 

to several FSVC projects including 

participation in the U.S. Agency for 

International Development’s Partners 

for Financial Stability project in the 

Balkan region. The purpose of this 

consultation was to develop strategies 

for resolving problem loans in 

response to the Eurozone crisis. 

FSVC support also included multiple 

FDIC-led training sessions with the 

Bank of Albania (the central bank). 

Follow-up consultations with the 

Albanian Deposit Insurance Agency, 

Bank of Albania, and the Ministry of 

Finance regarding bank liquidation 

processes, training sessions for 

examiners, an assessment of the 

legal framework, operational 

capabilities to manage a failure, 

and the implementation of an 

automated bank reporting and pay-out 

system were also completed. FDIC 

subject-matter experts also advised 

Albanian Financial Supervisory 

Authority leadership on the effective 

use of communications to foster 

relationships with foreign regulators 

and Albanian institutions, and 

public outreach and media relations 

strategies. 

FDIC secondees also provided a study 

tour in New York for members of the 

Egyptian Banking Institute; traveled 

to Cairo to support the Egyptian 

Financial Supervisory Authority’s 

Institute for Financial Services in its 

assessment and development of a 

strategic plan for financial inclusion; 

and conducted a one-week training 

program on IT risk supervision 

for the National Bank of Serbia in 

partnership with the World Bank. In 

Tunisia, FDIC secondees advised an 

association of banking and financial 

experts on techniques used by U.S. 

regulators for collecting data and best 

practices of financial institutions for 

improving the quality and timeliness 

of data. Finally, the FDIC continued 

to lead the research and development 

of a strategy for targeting technical 

assistance for low-income countries in 

Sub-Saharan Africa. 

Effective Ma

of Strategic

The FDIC recognizes that it must 

effectively manage its human, 

financial, and technological resources 

to successfully carry out its mission 

and meet the performance goals 

and targets set forth in its annual 

performance plan. The FDIC must 

align these strategic resources with 

its mission and goals and deploy 

them where they are most needed to 

enhance its operational effectiveness 

and minimize potential financial risks 

to the DIF. Major accomplishments 

in improving the FDIC’s operational 

efficiency and effectiveness during 

2012 follow. 

Human Capital Managemen

The FDIC’s human capital 

management programs are designed 

to recruit, develop, reward, and retain 

a highly skilled, cross-trained, diverse, 

and results-oriented workforce. In 

2012, the FDIC stepped up workforce 

planning and development initiatives 

that emphasized hiring the additional 

skill sets needed to address 

requirements of the Dodd-Frank Act, 

especially as it related to the oversight 

of SIFIs. Workforce planning also 

addressed the need to start winding 

down bank closure activities in the 

next few years, based on the decrease 

in the number of financial institution 

failures and institutions in at-risk 

categories. The FDIC also deployed 

a number of strategies to more fully 

engage all employees in advancing 

its mission.

Succession Management

The FDIC provides its employees 

with comprehensive learning and 

development opportunities, including 

technical and general skills training, 

and leadership development. In 

addition to extensive internally 

developed and administered courses, 

the FDIC also offers its employees 

with funds and/or time to participate 

in external offerings in support of 

their career development. Through 

training and educational programs, 

the FDIC provides its employees 

with the knowledge and skills to 

successfully accomplish their work 

and to grow professionally. In 2012, 

the FDIC kicked-off several initiatives 

related to advanced or specialized 

training for mission critical areas. 

Such training is a critical part of 

workforce and succession planning as 

36 Managme
more experienced employees become 

eligible for retirement.

The FDIC also continues to expand 

leadership development opportunities 

to all employees. Its curriculum 

takes a holistic approach, aligning 

its core and elective curriculum with 

key leadership competencies. By 

developing employees across the 

span of their careers, the FDIC builds 

a culture of leadership and further 

promotes a leadership succession 

strategy. In 2012, the FDIC delivered 

19 sessions of core leadership courses 

and 22 sessions of electives. It also 

supported participation in four 

external leadership development 

programs.

Strategic Workforce Planning 

and Readiness

The FDIC used various employment 

strategies in 2012 to meet the need 

for additional human resources 

resulting from the number of failed 

financial institutions and the volume 

of additional examinations. Among 

these strategies, the FDIC recruited 

complex financial institution 

specialists who had developed their 

skills in other public and private 

sector organizations, recruited loan 

review specialists and compliance 

analysts from the private sector, and 

redeployed current FDIC employees 

with the requisite skills from other 

parts of the Agency. 

When the Office of Thrift Supervision 

(OTS) closed on July 21, 2011, the 

FDIC received 95 of its employees, 

all of whom were integrated into 

the FDIC with full FDIC benefits as 

of the one-year anniversary of the 

Dodd-Frank Act. Thirty-eight of 

the 95 employees were under the 

OTS’s Schedule A hiring authority, 

and therefore not in the competitive 

service. The FDIC determined that 

the equitable treatment provisions 

of the Dodd-Frank Act required that 

these employees be transferred to the 

competitive service; these transfers 

were effective May 9, 2012. 

During 2012, the orderly closing of 

the FDIC’s temporary satellite offices 

began based on projections of a 

drop in the number of bank failures 

expected in 2013 and beyond. These 

offices had been established to 

bring resources to bear in especially 

hard-hit areas in 2009 and 2010, 

as the number of failed financial 

institutions increased. Almost all of 

the employees in these new offices 

were hired on a nonpermanent basis 

to handle the temporary increase in 

bank closing and asset management 

activities expected over several 

years, beginning in 2009. The use of 

nonpermanent appointments allows 

the FDIC staff to return to a normal 

size once the crisis is over without 

the disruptions that reductions in 

permanent staff would cause.

The West Coast Temporary Satellite 

Office, which opened in Irvine, 

California, in early spring of 2009, 

closed on January 13, 2012, with 

265 employees. The East Coast 

Temporary Satellite Office, which 

opened in Jacksonville, Florida, in the 

fall of 2009, is slated to close in 2014. 

As of December 31, 2012, that office 

had 391 employees. The third satellite 

office, which opened for the Midwest 

in 2010 in Schaumburg, Illinois, 

closed on September 28, 2012, with 

130 employees. During the financial 

crisis, the FDIC also increased 

resolutions and receiverships staff 

in the Dallas Regional Office. For all 

offices that closed, the FDIC provided 

transition services to the separated 

nonpermanent FDIC employees. In 

addition, a number of these employees 

were hired as permanent staff to 

complete the FDIC’s core staffing 

requirements. 

The FDIC continued to build 

workforce flexibility and readiness 

by hiring through the Corporate 

Employee Program (CEP). The CEP 

is a multi-year development program 

designed to cross-train new employees 

in the FDIC’s major business lines. In 

2012, 121 new business line employees 

entered this multi-discipline program 

(1,133 hired since program inception 

in 2005). The CEP continued to 

provide a foundation across the full 

spectrum of the FDIC’s business 

lines, allowing for greater flexibility 

to respond to changes in the financial 

services industry and to meet the 

FDIC’s human capital needs. As in 

years past, the program continued 

to provide the FDIC flexibility as 

program participants were called upon 

to assist with both bank examination 

and bank closing activities based 

on the skills they obtained through 

their program requirements and 

experiences. As anticipated, 

participants are also successfully 

earning their commissioned bank 

examiner and resolutions and 

receiverships credentials, having 

completed their three to four years 

of specialized training in field offices 

across the country. The FDIC had 

approximately 362 commissioned 

participants by the end of 2012. These 

individuals are well-prepared to lead 

examination and resolutions and 

receiverships activities on behalf of 

the FDIC.

In 2011, the FDIC piloted the 

Financial Management Scholars 

(FMS) Program, a ten week summer 

internship program for college 

students between their junior and 

Managmenis
ANNUAL REPORT 2012

senior years of college. The FMS was 

implemented in 2012 and is another 

recruiting strategy to bring talent 

into the FDIC and the CEP. The FMS 

participants completed a one-week 

orientation session, worked in the field 

in one of the three key business lines 

(Depositor and Consumer Protection, 

Resolutions and Receiverships, and 

Risk Management Supervision), 

completed a capstone program, and 

participated in mini-recruiting event 

assessments. In 2012, there were 50 

FMS participants participating in 34 

locations. The FDIC extended 36 job 

offers and received acceptances from 

35 FMS participants. These successful 

FMS participants will join CEP 

classes in 2013 as Financial Institution 

Specialists.

Corporate Risk Management

In 2011, the FDIC Board authorized 

the creation of an Office of Corporate 

Risk Management (OCRM) and 

recruited a Chief Risk Officer (CRO) 

for the agency. During 2012, the CRO 

recruited a Deputy Director and a 

small staff made up of Senior Risk 

Officers to work with other Divisions 

and Offices to assess, manage, and 

mitigate risks to the FDIC in the 

following major areas:

♦ Open bank risks associated with the 

FDIC’s role as principal regulator of 

certain financial institutions and the 

provider of deposit insurance to all 

insured depository institutions; 

♦ Closed bank risks associated 

with the FDIC management of 

risks associated with assets in 

receivership, including loss share 

arrangements and limited liability 

corporations; 

♦ Systemically important financial 

institution risks associated with 

large complex institutions where 

the FDIC is not the primary 

federal regulator but would have 

responsibility in the event of failure;

♦ Economic and financial risks 

created for the FDIC and its insured 

institutions created by changes in 

the macroeconomic and financial 

environment; 

♦ Policy and regulatory risks arising 

through legislative activities and 

those created by FDIC’s own policy 

initiatives; 

♦ Internal structure and process risks 

associated with carrying out ongoing 

FDIC operations, including human 

resource management, internal 

controls, and audit work carried out 

by both OIG and GAO; and 

♦ Reputational risks associated with 

all of the activities of the FDIC as 

they are perceived by a range of 

external factors.

In addition to completing an initial risk 

inventory for the FDIC, OCRM worked 

with the newly created Enterprise 

Risk Committee and Risk Analysis 

Committee to discuss external and 

internal risks facing the FDIC. These 

efforts supported the preparation of 

quarterly reports to the Board on the 

risk profile of the institution.

Employee Engagement

The FDIC continually evaluates its 

human capital programs and strategies 

to ensure that it remains an employer 

of choice and that all of its employees 

are fully engaged and aligned with 

the mission. The FDIC uses the 

Federal Employee Viewpoint Survey 

mandated by Congress to solicit 

information from employees and takes 

an agency-wide approach to address 

key issues identified in the survey. On 

December 13, 2012, the FDIC received 

an award from the Partnership for 

Public Service for being ranked 

number one among the mid-sized 

federal agencies on the Best Places to 

Work in the Federal Government® 

list. Effective leadership was the 

primary factor driving employee 

satisfaction and commitment in the 

federal workplace, according to a 

report by the Partnership for Public 

Service.

The Culture Change Initiative, 

2008–2012, played an important role in 

helping the FDIC achieve this ranking. 

The new Workplace Excellence (WE) 

Program builds upon the success 

of the Culture Change Initiative by 

institutionalizing a National WE 

Steering Committee and separate 

Division/Office WE Councils. In 

addition to the WE Program, the 

new FDIC-NTEU Labor-Management 

Forum serves as a mechanism for 

the union and employees to have 

pre-decisional input on workplace 

matters. The WE Program and 

Labor Management Forum enhances 

communication, provides additional 

opportunities for employee input, and 

improves employee empowerment.

Employee Learning and 

Development 

The FDIC has a strong commitment 

to the learning and development of 

all employees. Through its learning 

and development programs, the 

FDIC creates opportunity, enriches 

career development, and cultivates 

future leaders. New employees can 

more quickly and thoroughly assume 

their job functions and assist with 

examination and resolution activities 

through the use of innovative learning 

solutions. To prepare new and 

existing employees for the challenges 

ahead, the FDIC delivered just-intime training to quickly address 

new business needs and completed 

38 Managme
comprehensive needs assessments to inform 

its long-term strategy.

In support of business requirements, 

the FDIC delivered various sessions 

of resolution-related training based on 

new responsibilities acquired under the 

Dodd-Frank Act. To prepare for the 

resolution of the most complex financial 

institutions, the FDIC also used facilitated 

discussions, table top exercises, and 

simulations with other federal agencies to 

share information, identify challenges, and 

build interagency relationships. 

In addition to conducting just-in-time 

training and events to meet immediate 

needs, the FDIC is focused on assessing 

long-term needs and developing 

comprehensive curricula accordingly. 

Based on the results of needs assessments 

for the Office of Complex Financial 

Institutions, the Division of Resolutions 

and Receiverships, and the Division 

of Risk Management Supervision, the 

FDIC developed multi-year frameworks 

to supplement existing learning and 

development. The FDIC will implement the 

priority components of the business line 

curricula next year.

In support of knowledge and succession 

management, the FDIC is focused on 

capturing, maintaining, and documenting 

best practices and lessons learned from 

bank closing activity over the past two 

years. Capturing this information now 

is strategically important to ensure 

corporate readiness, while at the same time 

maintaining effectiveness as experienced 

employees retire and the temporary 

positions created to support the closing 

activity expire.

In 2012, the FDIC provided its employees 

with approximately 160 instructor-led 

courses and 1,800 web-based courses to 

support various mission requirements. 

There were approximately 9,292 completions 

of instructor-led courses and 36,570 

completions of web-based courses.

In 2012, the FDIC was recognized as 

a LearningElite organization by Chief 

Learning Officer magazine. The 

LearningElite program is a robust peerreviewed ranking and benchmarking 

program that recognizes those organizations 

that employ exemplary workforce 

development strategies to deliver significant 

business results. 

Information Technology Management

The FDIC understands that information 

technology (IT) is a critical, transformative 

resource for the successful accomplishment 

of agency business objectives. The FDIC 

relies on the strategic capabilities that IT 

provides to ensure and enhance mission 

achievement. This year, introduction of 

new technologies coupled with changes 

to maintenance contracts have allowed 

the FDIC to identify $15 million in budget 

reductions in IT equipment and services 

areas from 2012 to 2013.

Chairman Martin 

J. Gruenberg and 

Arleas Upton Kea, 

Director of 

the Division of 

Administration, 

accepting the award 

for the number one 

ranking among 

mid-sized federal 

agencies for Best 

Places to Work 

in the Federal 

Government.

Managmenis
ANNUAL REPORT 2012

IT Governance 

The FDIC has strengthened agency 

governance of IT investments 

and projects by adopting new 

guidelines for project scope, cost, 

schedule, and reporting. The FDIC 

also implemented the Office of 

Management and Budget’s Federal 

Chief Information Officer’s Tech Stat 

concept, a face-to-face, evidencebased review by agency executives of 

IT projects, identify issues affecting 

progress, and take the necessary 

corrective actions. The FDIC has also 

improved the risk management and 

cost estimation project disciplines, 

training project management staff 

across the organization. Also, in 2012, 

the FDIC worked on an update to the 

Business Technology Strategic Plan 

that highlights strategic initiatives for 

document management, research and 

analytics, and mobility. 

Support for Regulatory Reform

Business application development 

and enhancement continued in 2012 

to support implementation of the 

requirements of the Dodd-Frank 

Act. The FDIC implemented 

new applications to deliver full 

functionality required to comply with 

Section 165(d) of the Dodd-Frank Act. 

While not mandated by the statute, 

the FDIC has also implemented 

an enhanced tool to facilitate the 

electronic review of a bank’s loan 

portfolio and streamline the loan 

review process. The Examination Tool 

Suite-Automated Loan Examination 

Reporting Tool (ETS-ALERT), will be 

used by the FDIC, all 50 states banking 

supervision organizations, and the 

Federal Reserve. 

Cyber Security

The FDIC recognizes that cyber 

threats are one of the most serious 

security challenges facing the 

nation, and that collaboration with 

other federal agencies is vital to 

strengthening the FDIC’s security 

position. In 2012, the FDIC was 

actively involved with the Federal 

Chief Information Officer Council’s 

Privacy Committee, including 

serving as co-chair of the interagency Best Practices Subcommittee 

and as a member of three other 

subcommittees: Innovation and 

Technology, Development and 

Education, and International. In 

addition, the FDIC initiated the first 

Interagency Data Loss Prevention 

(DLP) Working Group, composed of 

representatives from 15 agencies, as 

a forum for discussions of DLP best 

practices, federal requirements, and 

lessons learned, as well as a platform 

for industry presentations on DLP 

techniques and tools. 

The FDIC has undertaken several 

initiatives to augment external 

cyber resources. In 2012, the FDIC 

participated with the Office of the 

National Director of Intelligence in 

initiating the new Federal Senior 

Intelligence Coordinator Advisory 

Board and associated workgroups to 

gather additional counter-intelligence 

on new threats. The FDIC has 

established informal informationsharing relationships with the 

Federal Bureau of Investigation’s 

(FBI) cybercrime squads in the FBI’s 

Washington, DC office, where real-time 

cybercrime information is exchanged. 

The FDIC also serves as an active 

participant in industry informationsharing organizations, including the 

Financial Services - Information 

Sharing and Analysis Center, a 

financial services-focused association 

that gathers reliable and timely 

information from financial services 

providers; commercial security firms; 

federal, state, and local government 

agencies; law enforcement; and 

other trusted resources; to quickly 

disseminate physical and cyber threat 

alerts and other critical information to 

participating organizations.

Internally, the FDIC continued to 

focus on enhancing its security 

posture to combat the increased 

number and sophistication of cyberattacks. The FDIC established a 

Security Operations Center that 

provides continuous event-monitoring 

and risk analysis to prevent and detect 

intrusion through use of an array 

of tools.

Privacy Program

The FDIC has a well-established 

privacy program that works to 

maintain privacy awareness and 

promote transparency and public 

trust. During the last year, the FDIC 

conducted unannounced privacy 

assessments of various regional and 

field offices to ensure that confidential 

and proprietary documents and media 

are properly safeguarded, and that 

individual and agency privacy data 

are protected. These assessments 

provide the FDIC with its own internal 

mechanism to identify weaknesses and 

potential mitigating circumstances, 

and to track progress in correcting 

vulnerabilities.

40 Managme
In its role as deposit insurer of 

financial institutions, the FDIC 

promotes the safety and soundness of 

insured depository institutions (IDIs). 

The following financial highlights 

address the performance of the 

deposit insurance funds, and discuss 

the corporate operating budget and 

investment spending.

Deposit Insu

Fund Perform

The FDIC administers the Deposit 

Insurance Fund (DIF) and the FSLIC 

Resolution Fund (FRF), which 

fulfills the obligations of the former 

Federal Savings and Loan Insurance 

Corporation (FSLIC) and the former 

Resolution Trust Corporation 

(RTC). The following summarizes 

the condition of the DIF. (See the 

accompanying graphs on FDICInsured Deposits and Insurance Fund 

Reserve Ratios on the following page.)

For 2012, the DIF’s comprehensive 

income totaled $21.1 billion compared 

to comprehensive income of $19.2 

billion during 2011. This $1.9 billion 

year-over-year increase was primarily 

due to a $3.3 billion increase in 

revenue from excess Debt Guarantee 

Program (DGP) fees previously held 

as systemic risk deferred revenue, 

partially offset by a $1.1 billion 

decrease in assessments and a $191 

million increase in the provision for 

insurance losses.

As the TLGP expired at year-end, the 

DIF recognized revenue of $5.9 billion 

in 2012, representing the remaining 

deferred revenue not absorbed by 

the TLGP for losses. Through the 

end of the debt issuance period, 

the FDIC collected $10.4 billion 

in fees and surcharges under the 

DGP. In addition, the FDIC collected 

Transaction Account Guarantee 

Program (TAG) fees of $1.2 billion for 

unlimited coverage for noninterestbearing transaction accounts held 

by IDIs on all deposit amounts 

exceeding the fully insured limit 

of $250,000. Since inception of the 

program, the TLGP incurred estimated 

losses of $153 million and $2.1 billion 

on DGP and TAG Program claims, 

respectively. Over the duration of the 

TLGP, $8.5 billion in TLGP assets were 

transferred to the DIF. In addition, 

during 2009, surcharges of $872 

million were collected and deposited 

into the DIF.

Assessment revenue was $12.4 

billion for 2012. The decrease of $1.1 

billion, from $13.5 billion in 2011, 

was primarily due to lower average 

assessment rates in 2012, resulting 

from improvement in the financial 

condition of the banking industry.

The provision for insurance losses 

was negative $4.2 billion for 2012, 

compared to negative $4.4 billion for 

2011. The negative provision for 2012 

primarily resulted from a reduction in 

the contingent loss reserve due to the 

improvement in the financial condition 

of institutions that were previously 

identified to fail, and a reduction in 

the estimated losses for institutions 

that have failed in the current and 

prior years.

Financial II. Highlights

Financiig
ANNUAL REPORT 2012

3-09

Dollars in Billions

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

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

ESTIMATED DIF INSURED DEPOSITS

SOURCE: Commercial Bank Call and Thrift Financial Reports

Note: Beginning in the fourth quarter of 2010, estimated insured deposits include the entire balance of noninterest-bearing 

transaction accounts.

3-09

Fund Balances as a Percent of Insured Deposits

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

0.3

0.4

0.2

0.1

0.0

-0.1

-0.2

-0.3

-0.4

DEPOSIT INSURANCE FUND RESERVE RATIOS

42 Financ
Corporate

Operating 

The FDIC segregates its corporate 

operating budget and expenses into 

two discrete components: ongoing 

operations and receivership funding. 

The receivership funding component 

represents expenses resulting from 

financial institution failures and is, 

therefore, largely driven by external 

forces, while the ongoing operations 

component accounts for all other 

operating expenses and tends to be 

more controllable and estimable. 

Corporate Operating expenses totaled 

$2.5 billion in 2012, including $1.6 

billion in ongoing operations and 

$0.9 billion in receivership funding. 

This represented approximately 92 

percent of the approved budget for 

ongoing operations and 57 percent of 

the approved budget for receivership 

funding for the year.3

The FDIC Board of Directors approved 

a 2013 Corporate Operating Budget of 

approximately $2.7 billion, consisting 

of $1.8 billion for ongoing operations 

and $0.9 billion for receivership 

funding. The level of approved 

ongoing operations budget for 2013 

is approximately $2.0 million (0.1 

percent) higher than the actual 2012 

ongoing operations budget, while the 

approved receivership funding budget 

is roughly $600 million (40 percent) 

lower than the 2012 receivership 

funding budget. 

As in prior years, the 2013 budget was 

formulated primarily on the basis of 

an analysis of projected workload 

for each of the Corporation’s three 

major business lines and its major 

program support functions. The most 

significant factor contributing to the 

decrease in the Corporate Operating 

Budget is the improving health of the 

industry and the resultant reduction 

in failure related workload. Although 

savings in this area are being realized, 

the 2013 receivership funding budget 

allows for resources for contractor 

support as well as nonpermanent 

staffing for the Division of Resolutions 

and Receiverships, the Legal Division, 

and other organizations, should 

workload in these areas require

an immediate response.

Deposit Insurance Fund Selec

Dollars in Million

For the years ended December 31

2012  2011  2010

Financial Result

Revenue $18,522 $16,342 $13,380 

Operating Expenses 1,778 1,625 1,593 

Insurance and Other Expenses (includes provision for loss) (4,377) (4,541) (1,518) 

Net Income (Loss) 21,121 19,257 13,305

Comprehensive Income (Loss) 21,131 19,179 13,510

Insurance Fund Balance $32,958 $11,827 $(7,352) 

Fund as a Percentage of Insured Deposits (reserve ratio) 0.35 %* 0.17 % (0.12) %

Selected Statistics

Total DIF-Member Institutions1 7,181* 7,357 7,657 

Problem Institutions 651 813 884 

Total Assets of Problem Institutions $232,701 $319,432 $390,017 

Institution Failures 51 92 157 

Total Assets of Failed Institutions in Year2 $11,617 $34,923 $92,085 

Number of Active Failed Institution Receiverships 463 426 336 

* Figures are as of September 30, 2012.

1 Includes commercial banks and savings institutions, but does not include U.S. insured branches of foreign banks.

2 Total asset data are based upon the last Call Report filed by the institution prior to failure.

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

are classified.

FinanciHi
ANNUAL REPORT 2012

Investment Spe

The FDIC instituted a separate 

Investment Budget in 2003. It has 

a disciplined process for reviewing 

proposed new investment projects 

and managing the construction and 

implementation of approved projects. 

Proposed IT projects are carefully 

reviewed to ensure that they are 

consistent with the FDIC’s enterprise 

architecture. The project approval 

and monitoring processes also enable 

the FDIC to be aware of risks to the 

major capital investment projects 

and facilitate appropriate, timely 

intervention to address these risks 

throughout the development process. 

An investment portfolio performance 

review is provided to the FDIC’s Board 

of Directors quarterly.

The FDIC made significant capital 

investments during the 2003–2012 

period, the largest of which was the 

expansion of its Virginia Square office 

facility. Most other projects involved 

the development and implementation 

of major IT systems. Investment 

spending totaled $288 million during 

this period, peaking at $108 million 

in 2004. Spending for investment 

projects in 2012 totaled approximately 

$14 million. For 2013, investment 

spending is estimated at $28 million. 

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

$120

$100

$80

$60

$40

$20

$0

Investment Sp

Dollars in Millions

44 Financ
Summary of 201

Performan

Results by 

The FDIC successfully achieved 

43 of the 45 annual performance 

targets established in its 2012 Annual 

Performance Plan. Two targets 

involving capital standards were not 

achieved. There were no instances 

in which 2012 performance had 

a material adverse effect on the 

successful achievement 

of the FDIC’s mission or its strategic 

goals and objectives regarding its 

major program responsibilities.

Additional key accomplishments are 

noted below.

Program Area Performance Results

Insurance ♦ Updated the FDIC Board of Directors on loss, income, and reserve ratio projections for 

the Deposit Insurance Fund at the April and October meetings. 

♦ Briefed the FDIC Board of Directors in April and October on progress in meeting the 

goals of the Restoration Plan. Based upon current fund projections, no changes to 

assessment rate schedules were necessary. 

♦ Completed reviews of the recent accuracy of the contingent loss reserves. 

♦ Provided analysis to the FDIC Chairman in August 2012, with recommendations for 

follow-up, of possible refinements to the deposit insurance pricing methodology for 

banks with assets under $10 billion.

♦ Researched and analyzed emerging risks and trends in the banking sector, financial 

markets, and the overall economy to identify issues affecting the banking industry and 

the Deposit Insurance Fund. 

♦ Provided policy research and analysis to FDIC leadership in support of the 

implementation of financial industry regulation, as well as support for testimony and 

speeches. 

♦ Published economic and banking information and analyses through the FDIC Quarterly, 

FDIC Quarterly Banking Profile (QBP), FDIC State Profiles, and the Center for Financial 

Research Working Papers.

♦ Operated the Electronic Deposit Insurance Estimator (EDIE), which had 435,192 user 

sessions in 2012. 

Performance 

Results 

Summary

III.

Perform R
ANNUAL REPORT 2012

Program Area Performance Results

Supervision and 

Consumer Protection

♦ Conducted 2,585 Bank Secrecy Act examinations, including required follow-up 

examinations and visitations.

♦ Worked with other federal banking regulators and the Basel Committee on Banking 

Supervision to develop proposals to strengthen capital and liquidity requirements.

♦ Among other releases, issued FILs on effective credit risk management practices for 

purchased loan participants and the inappropriate practice of directors and officers 

copying and removing financial institution and supervisory records from the institution 

in anticipation of litigation or enforcement activity against them.

Receivership 

Management

♦ Completed on-site field work for reviews of 100 percent of the loss share and Limited 

Liability Corporation (LLC) agreements active as of December 31, 2011, to ensure 

full compliance with the terms and conditions of the agreements. Reviewed the final 

review reports and implemented an action plan to address the reports’ findings and 

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

LLC reviews.

♦ Terminated at least 75 percent of new receiverships that are not subject to loss-share 

agreements, structured sales, or other legal impediments within three years of the date 

of failure.

♦ Made final decisions for 85 percent of all investigated claim areas that were within 18 

months of the institution’s failure date.

46 Perfor
2012 Budget

Expenditu

Program

(Excluding Investments)

The FDIC budget for 2012 totaled 

$3.3 billion. Budget amounts were 

allocated as follows: $227 million, or 

7 percent, to Corporate General and 

Administrative expenditures; $245 

million, or 7 percent, to the Insurance 

program; $1.0 billion, or 32 percent, 

to the Supervision and Consumer 

Protection program; and $1.8 billion, 

or 54 percent, to the Receivership 

Management program. 

Actual expenditures for the year 

totaled $2.5 billion, and expenditures 

amounts were allocated as follows: 

$174 million, or 7 percent, to 

Corporate General and Administrative 

expenditures; $290 million, or 12 

percent, to the Insurance program; 

$906 million, or 36 percent, to 

the Supervision and Consumer 

Protection program; and $1.1 billion, 

or 45 percent, to the Receivership 

Management program. 

2012 dget a

Dollars in Millions

Insurance

Program

Supervision and

Consumer Protection

Program

Receivership

Management

Program

General and

Administrative

$3,000

Budget Expenditures

$2,500

$2,000

$1,500

$1,000

$500

$0

Perform R
ANNUAL REPORT 2012

Performance Results by Program a

2012 Insurance Program Re

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

#

Annual 

Performance Goal Indicator Target Results

1 Respond promptly to 

all financial institution 

closings and related 

emerging issues.

Number of business 

days after an institution 

failure that depositors 

have access to insured 

funds either through 

transfer of deposits to 

the successor insured 

depository institution or 

depositor payout.

Insured depositor 

losses resulting from 

a financial institution 

failure.

Depositors have access to insured funds 

within one business day if the failure 

occurs on a Friday.

Depositors have access to insured funds 

within two business days if the failure 

occurs on any other day of the week.

Depositors do not incur any losses on 

insured deposits.

No appropriated funds are required to 

pay insured depositors.

Achieved.

See pg. 31.

Achieved.

See pg. 31.

Achieved.

See pg. 31.

Achieved.

See pg. 31.

2 Deepen the FDIC’s 

understanding of the 

future of community 

banking.

Completion and 

publication of research.

Conduct a nationwide conference on the 

future of community banking during the 

first quarter of 2012.

Publish by December 31, 2012, 

a research study on the future of 

community banks, focusing on their 

evolution, characteristics, performance, 

challenges, and role in supporting local 

communities.

Achieved.

See pgs. 26-27. 

Achieved.

See pg. 27.

3 Disseminate data and 

analyses on issues 

and risks affecting 

the financial services 

industry to bankers, 

supervisors, the public, 

and other stakeholders 

on an ongoing basis.

Scope and timeliness 

of information 

dissemination on 

identified or potential 

issues and risks.

Disseminate results of research and 

analyses in a timely manner through 

regular publications, ad hoc reports, and 

other means.

Undertake industry outreach activities to 

inform bankers and other stakeholders 

about current trends, concerns, and 

other available FDIC resources.

Achieved.

See pg. 45.

Achieved.

See pg. 45.

48 Perfor
2012 Insurance Program Results (conti

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

#

Annual 

Performance Goal Indicator Target Results

4 Adjust assessment rates, 

as necessary, to achieve a 

DIF reserve ratio of at least 

1.35 percent of estimated 

insured deposits by 

September 30, 2020.

Updated fund balance 

projections and 

recommended changes to 

assessment rates.

Demonstrated progress in 

achieving the goals of the 

Restoration Plan.

Analysis of possible 

refinements to the 

deposit insurance pricing 

methodology.

Provide updated fund balance projections 

to the FDIC Board of Directors by June 30, 

2012, and December 31, 2012.

Recommend changes to deposit insurance 

assessment rates to the FDIC Board of 

Directors as necessary.

Provide progress reports to the FDIC 

Board of Directors by June 30, 2012, and 

December 31, 2012.

Provide to the Chairman by September 1, 

2012, an analysis, with recommendations 

where appropriate, of refinements to the 

deposit insurance pricing methodology for 

banks with assets under $10 billion.

Achieved.

See pg. 45.

Achieved.

See pg. 45.

Achieved.

See pg. 45.

Achieved.

See pg. 45.

5 Expand and strengthen 

the FDIC’s participation 

and leadership role 

in supporting robust 

international deposit 

insurance and banking 

systems.

Scope of information 

sharing and assistance 

available to international 

governmental bank 

regulatory and deposit 

insurance entities.

Maintain open dialogue with counterparts in 

strategically important countries as well as 

international financial institutions and partner 

U.S. agencies.

Foster strong relationships with international 

banking regulators and associations that 

promote sound banking supervision and 

regulation, failure resolutions, and deposit 

insurance practices.

Target capacity building based on the 

assessment methodology of the BCBS and 

IADI Core Principles for an Effective Deposit 

Insurance System.

Lead and support the Association of 

Supervisors of Banks of the America’s 

efforts to promote sound banking principles 

throughout the Western Hemisphere.

Achieved.

See pgs. 35-36.

Achieved.

See pgs. 33, 35.

Achieved.

See pg. 34.

Achieved.

See pg. 35.

6 Provide educational 

information to insured 

depository institutions and 

their customers to help 

them understand the rules 

for determining the amount 

of insurance coverage on 

deposit accounts.

Timeliness of responses 

to deposit insurance 

coverage inquiries.

Initiatives to increase 

public awareness of 

deposit insurance 

coverage changes.

Respond within two weeks to 95 percent of 

written inquiries from consumers and bankers 

about FDIC deposit insurance coverage.

Conduct at least 12 telephone or in-person 

seminars for bankers on deposit insurance 

coverage.

Achieved.

See pg. 29.

Achieved.

See pg. 30.

Perform R
ANNUAL REPORT 2012

2012 Supervision and Consumer Protection Pr

Strategic Goal: FDIC-insured institutions are safe and sound.

#

Annual 

Performance Goal Indicator Target Results

1 Conduct on-site risk 

management examinations 

to assess the overall 

financial condition, 

management practices and 

policies, and compliance 

with applicable laws and 

regulations of FDICsupervised depository 

institutions.

Percentage of required 

examinations conducted in 

accordance with statutory 

requirements and FDIC 

policy.

Conduct all required risk management 

examinations within the time frames 

prescribed by statute and FDIC policy.

Achieved.

See pg. 19.

2 For all institutions that 

are assigned a composite 

Uniform Financial 

Institutions Rating of 3, 

4, or 5, conduct on-site 

visits within six months 

after implementation of a 

corrective program. Ensure 

during these visits and 

subsequent examinations 

that the institution is 

fulfilling the requirements 

of the corrective program 

that has been implemented 

and that the actions taken 

are effectively addressing 

the underlying concerns 

identified during the 

examination.

Percentage of follow-up 

examinations and on-site 

visits of 3-, 4-, or 5-rated 

institutions conducted 

within required time 

frames.

Conduct 100 percent of required on-site 

visits within six months after implementation 

of a corrective program.

Achieved.

See pg. 19.

3 Assist in protecting the 

infrastructure of the U.S. 

banking system against 

terrorist financing, money 

laundering, and other 

financial crimes.

Percentage of required 

examinations conducted in 

accordance with statutory 

requirements and FDIC 

policy. 

Conduct all Bank Secrecy Act examinations 

within the time frames prescribed by statute 

and FDIC policy.

Achieved.

See pg. 19.

4 More closely align 

regulatory capital standards 

with risk and ensure that 

capital is maintained at 

prudential levels.

Issuance by the federal 

banking agencies of 

rules implementing 

alternative standards of 

creditworthiness for credit 

rating in risk-based capital 

rules.

Issuance by the federal 

banking agencies of 

rules to implement 

internationally agreed 

upon enhancements 

to regulatory capital 

standards.

Complete by December 31, 2012, final 

rules addressing alternative standards of 

creditworthiness for credit ratings in the riskbased capital rules.

Complete by December 31, 2012, a final rule 

for the Basel III capital standards.

Complete by July 31, 2012, a final rule on 

the Market Risk Amendment, including 

finalizing alternatives to the use of credit 

ratings in accordance with DFA requirements.

Not Achieved.

See pgs. 21-22.

Not Achieved.

See pgs. 21-22.

Achieved.

See pg. 21.

50 Perfor
2012 Supervision and Consumer Protection Program Result

Strategic Goal: FDIC-insured institutions are safe and sound.

#

Annual 

Performance Goal Indicator Target Results

5 Identify and address risks 

in financial institutions 

designated as systemically 

important.

Issuance of rules and 

policy guidance (with 

other financial regulatory 

agencies) to implement 

provisions of DFA 

applicable to systemically 

important institutions and 

markets.

Establishment of institution 

monitoring and resolution 

planning programs for 

systemically important 

institutions.

Completed reviews of 

resolution plans.

Take all steps necessary to facilitate timely 

issuance of implementing regulations and 

related policy guidance on proprietary 

trading and other investment restrictions 

(also known as the Volcker Rule).

Take all steps necessary to facilitate timely 

issuance of implementing regulations and 

related policy guidance on restrictions on 

federal assistance to swap entities.

Take all steps necessary to facilitate timely 

issuance of implementing regulations and 

related policy guidance on capital and 

margin and other requirements for OTC 

derivatives.

Take all steps necessary to facilitate timely 

issuance of implementing regulations 

and related policy guidance on credit risk 

retention requirements for securitizations.

Take all steps necessary to facilitate timely 

issuance of implementing regulations 

and related policy guidance on enhanced 

compensation structure and incentive 

compensation requirements.

Monitor risk within and across large, complex 

firms to assess the potential need for, 

and obtain the information that would be 

required to carry out, if necessary, an FDIC 

resolution of the institution.

Establish by June 30, 2012, with the FRB, 

policies and procedures for collecting, 

processing, and reviewing for completeness 

and sufficiency holding company and insured 

depository institution (IDI) resolution plans 

submitted under Section 165(d) of DFA.

Complete, with the FRB and in accordance 

with prescribed time frames, the review of 

holding company and IDI resolution plans 

submitted under Section 165(d) of DFA.

Achieved.

See pgs. 22-23.

Achieved.

See pg. 22.

Achieved.

See pgs. 22-23.

Achieved.

See pg. 22.

Achieved.

See pg. 22.

Achieved.

See pgs. 16-17.

Achieved.

See pgs. 16-17.

Achieved.

See pgs. 16-17.

Perform R
ANNUAL REPORT 2012

2012 Supervision and Consumer Protection Program Result

Strategic Goal: Consumers’ rights are protected and 

FDIC-supervised institutions invest in their communities.

#

Annual 

Performance Goal Indicator Target Results

6 Conduct on-site CRA and 

compliance examinations 

to assess compliance 

with applicable laws and 

regulations by FDICsupervised depository 

institutions.

Percentage of 

examinations conducted in 

accordance with the time 

frames prescribed by FDIC 

policy.

Conduct 100 percent of required 

examinations within the time frames 

established by FDIC policy.

Achieved.

See pg. 19. 

7 Take prompt and effective 

supervisory action 

to address problems 

identified during 

compliance examinations 

of FDIC-supervised 

institutions that receive 

a composite 3, 4, or 5 

rating for compliance with 

consumer protection and 

fair lending laws. Ensure 

that each institution is 

fulfilling the requirements 

of any corrective program 

that has been implemented 

and that the actions taken 

are effectively addressing 

the underlying concerns 

identified during the 

examination.

Percentage of follow-up 

examinations or on-site 

visits of 3-, 4-, and 5-rated 

institutions conducted 

within required time 

frames.

Conduct follow-up examinations or on-site 

visits for any unfavorably rated (3, 4, or 5) 

institution within 12 months of completion of 

the prior examination. 

Achieved.

See pgs. 19-20.

8 Establish an effective 

working relationship 

with the new Consumer 

Financial Protection Bureau 

(CFPB).

Transfer of complaint 

processing responsibilities.

Complete the transfer of consumer compliant 

processing responsibilities within the purview 

of the CFPB within approved time frames.

Achieved.

See pgs. 29-30.

9 Effectively investigate 

and respond to written 

consumer complaints 

and inquiries about 

FDIC-supervised financial 

institutions.

Timely responses to written 

consumer complaints and 

inquiries.

Respond to 95 percent of written consumer 

complaints and inquiries within time frames 

established by policy, with all complaints 

and inquiries receiving at least an initial 

acknowledgement within two weeks.

Achieved.

See pg. 29.

52 Perfor
2012 Supervision and Consumer Protection Program Result

Strategic Goal: Consumers’ rights are protected and 

FDIC-supervised institutions invest in their communities.

#

Annual 

Performance Goal Indicator Target Results

10 Promote economic 

inclusion and access to 

responsible financial 

services through 

supervisory, research, 

policy, and consumer/

community affairs 

initiatives.

Completion of planned 

initiatives.

Complete and publish results of the second 

biennial National Survey of Unbanked and 

Underbanked Households and Banks’ Efforts

to Serve the Unbanked and Underbanked.

Plan and hold meetings of the Advisory 

Committee on Economic Inclusion to gain 

feedback and advice on FDIC efforts to 

promote inclusion.

Coordinate 25 CRA community forums 

nationwide to facilitate community 

development opportunities for financial 

institutions.

Achieved.

See pg. 25.

Achieved.

See pg. 25.

Achieved.

See pg. 26.

Perform R
ANNUAL REPORT 2012

2012 Receivership Management Pr

Strategic Goal: Resolutions are orderly and receiverships are managed effectively.

# Annual Performance Goal Indicator Target Results

1 Market failing institutions 

to all known qualified 

and interested potential 

bidders.

Scope of qualified and 

interested bidders 

solicited.

Contact all known qualified and interested 

bidders.

Achieved.

See pg. 31.

2 Value, manage, and market 

assets of failed institutions 

and their subsidiaries in a 

timely manner to maximize 

net return.

Percentage of the assets 

marketed for each failed 

institution.

For at least 95 percent of insured institution 

failures, market at least 90 percent of the 

book value of the institution’s marketable 

assets within 90 days of the failure date (for 

cash sales) or 120 days of the failure date (for 

structured sales).

Achieved.

See pg. 31.

3 Manage the receivership 

estate and its subsidiaries 

toward an orderly 

termination.

Timely termination of new 

receiverships.

Terminate at least 75 percent of new 

receiverships that are not subject to lossshare agreements, structured sales, or other 

legal impediments, within three years of the 

date of failure.

Achieved.

See pg. 46.

4 Complete reviews of all 

loss-share and Limited 

Liability Corporation (LLC) 

agreements to ensure full 

compliance with the terms 

and conditions of the 

agreements.

Percentage of reviews 

of loss-share and LLC 

agreements completed 

and action plans 

implemented.

Complete reviews of 100 percent of the 

loss-share and LLC agreements active 

as of December 31, 2011, to ensure full 

compliance with the terms and conditions of 

the agreements.

Review the final report and implement an 

action plan to address the report’s finding 

and recommendations for 80 percent of the 

loss-share reviews and 70 percent of the LLC 

reviews.

Achieved.

See pg. 46.

Achieved.

See pg. 46.

5 Conduct investigations into 

all potential professional 

liability claim areas for all 

failed insured depository 

institutions, and decide 

as promptly as possible 

to close or pursue each 

claim, considering the 

size and complexity of the 

institution.

Percentage of investigated 

claim areas for which a 

decision has been made to 

close or pursue the claim.

For 80 percent of all claim areas, make a 

decision to close or pursue professional 

liability claims within 18 months of the failure 

of an insured depository institution.

Achieved.

See pg. 46.

54 Perfor
Prior Years’ Perform

Refer to the respective full Annual Report of prior years for more information on performance results for those years. 

Minor wording changes may have been made to reflect current goals and targets. (Shaded areas indicate no such target 

existed for that respective year.)

Insurance Program Re

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

Annual Performance Goals and Targets 2011 2010 2009

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

issues.

♦ Depositors have access to insured funds within one business day if the failure 

occurs on a Friday. Achieved. Achieved. Achieved.

♦ Depositors have access to insured funds within two business days if the 

failure occurs on any other day of the week. Achieved. Achieved. Achieved.

♦ There are no depositor losses on insured deposits. Achieved. Achieved. Achieved.

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

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

♦ Assess the insurance risks in large (all for 2008–2009) insured depository 

institutions and adopt appropriate strategies. Achieved.

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

and analysis. Achieved.

♦ Identify and analyze existing and emerging areas of risk, including nontraditional and subprime mortgage lending, declines in housing market 

values, mortgage-related derivatives/collateralized debt obligations (CDOs), 

hedge fund ownership of insured institutions, commercial real estate lending, 

international risk, and other financial innovations.

Achieved.

3. Disseminate data and analyses on issues and risks affecting the financial services 

industry to bankers, supervisors, the public, and other stakeholders on an 

ongoing basis.

♦ Disseminate results of research and analyses in a timely manner through 

regular publications, ad hoc reports, and other means. Achieved. Achieved. Achieved.

♦ Industry outreach activities are undertaken to inform bankers and other 

stakeholders about current trends, concerns, and other available FDIC 

resources.

Achieved. Achieved. Achieved.

4. Effectively administer temporary financial stability programs.

♦ Provide liquidity to the banking system by guaranteeing noninterest-bearing 

transaction deposit account and new senior unsecured debt issued by 

eligible institutions under the TLGP.

Achieved.

♦ Implement an orderly phase-out of new guarantees under the program when 

the period for issuance of new debt expires.

Achieved.

♦ Substantially complete by September 30, 2009, the review of and 

recommendations to the Department of Treasury on CPP applications from 

FDIC-supervised institutions.

Achieved.

♦ Expeditiously implement procedures for the LLP, including the guarantee 

to be provided for debt issued by Public Private Investment Funds, and 

provide information to financial institutions and private investors potentially 

interested in participating.

Achieved.

♦ Expeditiously implement procedures to review the use of CPP funds, TLGP 

guarantees, and other resources made available under financial stability 

programs during examinations of participating FDIC-supervised institutions.

Achieved.

Perform R
ANNUAL REPORT 2012

Insurance Program Results (conti

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

Annual Performance Goals and Targets 2011 2010 2009

5. Set assessment rates to restore the insurance fund reserve ratio to the statutory 

minimum of 1.35 percent of estimated insured deposits by September 30, 2020.

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

2011, and December 31, 2011.

Achieved.

♦ Recommend changes to deposit insurance assessment rates for the DIF to 

the FDIC Board as necessary.

Achieved.

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

2011.

Achieved.

6. Set assessment rates to restore the insurance fund reserve ratio to the statutory 

minimum of at least 1.15% of estimated insured deposits by year-end 2016, in 

accordance with the Amended Restoration Plan.

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

2010, and December 31, 2010.

Achieved.

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

Board, as necessary.

Achieved.

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

2010.

Achieved.

7. Maintain and improve the deposit insurance system.

♦ Adopt and implement revisions to the pricing regulations that provide for 

greater risk differentiation among insured depository institutions reflecting 

both the probability of default and loss in the event of default.

Achieved.

♦ Revise the guidelines and enhance the additional risk measures used to 

adjust assessment rates for large institutions.

Achieved.

♦ Ensure/enhance the effectiveness of the reserving methodology by applying 

sophisticated analytical techniques to review variances between projected 

losses and actual losses, and by adjusting the methodology accordingly.

Achieved.

♦ Set assessment rates to maintain the insurance fund reserve ratio between 

1.15 and 1.50 percent of estimated insured deposits. Restore to 1.15 

percent by year-end 2015.

Achieved.

♦ Monitor progress in achieving the restoration plan. Achieved.

8. Provide educational information to insured depository institutions and their 

customers to help them understand the rules for determining the amount of 

insurance coverage on deposit accounts.

♦ Conduct at least three sets of deposit insurance seminars/teleconferences 

(per quarter in 2009) for bankers.

Achieved.

♦ Respond within two weeks to 95 percent of written inquiries from consumers 

and bankers about FDIC deposit insurance coverage.

Achieved.

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

insurance coverage.

Achieved. Achieved.

♦ Enter into deposit insurance education partnerships with consumer 

organizations to educate consumers.

Achieved.

56 Perfor
Insurance Program Results (conti

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

Annual Performance Goals and Targets 2011 2010 2009

♦ Expand avenues for publicizing deposits insurance rules and resources to 

consumers through a variety of media.

Achieved.

9. Expand and strengthen the FDIC’s participation and leadership role in 

providing technical guidance, training, consulting services, and information to 

international governmental banking and deposit insurance organizations; and in 

supporting robust international deposit insurance and banking systems.

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

deposit insurers.

Achieved. Achieved. Achieved.

♦ Foster strong relationships with international banking regulators and 

associations that promote sound banking supervision and regulation, failure 

resolutions, and deposit insurance practices. 

Achieved. Achieved. Achieved.

♦ Develop methodology and lead the International Association of Deposit 

Insurers training on the methodology for assessing compliance with 

implementation of the Core Principles for Effective Deposit Insurance 

Systems.

Achieved. Achieved.

Perform R
ANNUAL REPORT 2012

Supervision and Consumer Protection Pr

Strategic Goal: FDIC-supervised institutions are safe and sound.

Annual Performance Goals and Targets 2011 2010 2009

1. Conduct on-site risk management examinations to assess the overall financial 

condition, management practices and policies, and compliance with applicable 

laws and regulations of FDIC-supervised depository institutions.

♦ One hundred percent of required risk management examinations are 

conducted on schedule. Achieved. Achieved.

♦ Conduct 100 percent of required risk management examinations within the 

time frames prescribed by statute and FDIC policy. Achieved.

2. For all institutions that are assigned a composite Uniform Financial Institutions 

Rating of 3, 4, or 5, conduct on-site visits within six months after implementation 

of a corrective program. Ensure during these visits and subsequent 

examinations that the institution is fulfilling the requirements of the corrective 

program that has been implemented and that the actions taken are effectively 

addressing the underlying concerns identified during the examination.

♦ Conduct 100 percent of required on-site visits within six months after 

implementation of a corrective program. Achieved.

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

with approved plans and statutory requirements.

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

by July 21, 2011. Achieved.

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

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

4. Take prompt and effective supervisory action to address unresolved problems 

identified during the FDIC examination of FDIC-supervised institutions that 

receive a composite Uniform Financial Institutions Rating of “3”, “4”, or “5” 

(problem institution). Monitor FDIC-supervised insured depository institutions’ 

compliance with formal and informal enforcement actions.

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

months of completion of the prior examination to confirm that the institution 

is fulfilling the requirements of the corrective program.

Achieved.

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

months of completion of the prior examination to confirm that identified 

problems have been corrected.

Achieved. Achieved.

5. Assist in protecting the infrastructure of the U.S. banking system against terrorist 

financing, money laundering, and other financial crimes.

♦ Conduct 100 percent of required Bank Secrecy Act examinations within the 

time frames prescribed by statute and FDIC policy. Achieved. Achieved Achieved.

6. More closely align regulatory capital with risks and ensure that capital is 

maintained at prudential levels. 

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

banking organizations. Achieved.

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

Rulemaking (NPR) for the new definition of capital, the July 2009 

enhancements to resecuritizations risk weights, and securitization disclosures.

Deferred.

58 Perfor
Supervision and Consumer Protection Program Result

Strategic Goal: FDIC-supervised institutions are safe and sound.

Annual Performance Goals and Targets 2011 2010 2009

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

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

requirements. Deferred.

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

Amendment (includes finalizing alternatives to the use of credit ratings in 

accordance with DFA requirements).

Deferred.

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

♦ Conduct analyses of early results of the performance of new capital rules in 

light of recent financial turmoil as information becomes available. Achieved.

♦ Workings domestically and internationally, develop improvements to 

regulatory capital requirements based on the experience of the recent 

financial market turmoil.

Achieved.

7. More closely align regulatory capital with risk and ensure that capital is 

maintained at prudential levels.

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

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

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

for banks that calculate their risk-based capital requirements under the 

Advanced Approaches Capital rule to ensure capital requirements meet 

safety-and-soundness objectives.

Not 

Achieved.

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

to the Market Risk Amendment of 1996. Deferred.

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

revisions to regulatory capital charges for resecuritizations and asset-backed 

commercial paper liquidity facilities.

Deferred.

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

important.

♦ Establish an ongoing FDIC monitoring program for all covered financial 

institutions. Achieved.

♦ Complete rulemaking to establish (with the Board of Governors of the 

Federal Reserve System) criteria for resolution plans to be submitted by 

systemically important institutions.

Achieved.

9. Facilitate more effective regulatory compliance so as to reduce regulatory 

burden on the banking industry, where appropriate, while maintaining the 

independence and integrity of the FDIC’s risk management and consumer 

compliance supervisory programs.

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

Financial Institution Letters (FILs) that includes a requirement that all FILs 

contain an informative section as to their applicability to smaller institutions 

(total assets under $1 billion).

Achieved.

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

and information requests to the industry and submit a report to FDIC 

management with recommendations on improving efficiency and ease of 

use, including a scheduled plan for implementing these revisions. Carry out 

approved recommendations in accordance with the plan.

Achieved.

Perform R
ANNUAL REPORT 2012

Supervision and Consumer Protection Program Result

Strategic Goal: Consumers’ rights are protected and 

FDIC-supervised institutions invest in their communities.

Annual Performance Goals and Targets 2011 2010 2009

1. Conduct on-site CRA and compliance examinations to assess compliance with 

applicable laws and regulations by FDIC-supervised depository institution.

♦ Conduct 100 percent of required examinations within the time frames 

established by FDIC policy. Achieved.

♦ One hundred percent of required examinations are conducted on schedule. Achieved. Achieved.

2. Take prompt and effective supervisory action to monitor and address problems 

identified during compliance examinations of FDIC-supervised institutions 

that received an overall “3”, “4”, or “5” rating for compliance with consumer 

protection and fair lending laws.

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

within 12 months from the date of a formal enforcement action to confirm 

compliance with the prescribed enforcement action.

Achieved. Not 

Achieved.

♦ For all institutions that are assigned a compliance rating of 3, 4, or 5, conduct 

follow-up examinations or on-site visits within 12 months to ensure that each 

institution is fulfilling the requirements of any corrective programs that have 

been implemented and that the actions taken are effectively addressing the 

underlying concerns identified during the examination.

Achieved.

3. Complete the transfer of personnel and supervisory responsibility for compliance 

examinations of FDIC supervised institutions with more than $10 billion in assets 

and their affiliates from the FDIC to the new Consumer Financial Protection 

Bureau (CFPB) in accordance with statutory requirements.

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

FDIC to the CFPB. Achieved.

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

in accordance with established time frames. Achieved.

4. Scrutinize evolving consumer products, analyze their current or potential impact 

on consumers, and identify potentially harmful or illegal practices. Promptly 

institute a supervisory response program across FDIC-supervised institutions 

when such practices are identified.

♦ Proactively identify and respond to harmful or illegal practices associated 

with evolving consumer products. Achieved.

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

development.

♦ Conduct 50 technical assistance (examination support) efforts or banker/

community outreach activities related to CRA, fair lending, and community 

development.

Achieved.

♦ Evaluate the Money Smart initiative and curricula for necessary updates 

and enhancements, such as games for young people, information on elder 

financial abuse, and additional language versions, if needed.

Achieved.

♦ Initiate the longitudinal survey project to measure the effectiveness of the 

Money Smart for Young Adults curriculum. Achieved

♦ Provide technical assistance, support, and consumer outreach activities in all 

six FDIC regions to at least eight local NeighborWorks® America affiliates or 

local coalitions that are providing foreclosure mitigation counseling in high 

need areas.

Achieved.

60 Perfor
Supervision and Consumer Protection Program Result

Strategic Goal: Consumers’ rights are protected and 

FDIC-supervised institutions invest in their communities.

Annual Performance Goals and Targets 2011 2010 2009

6. Continue to expand the FDIC’s national leadership role in development and 

implementation of programs and strategies to encourage and promote broader 

economic inclusion within the nation’s banking system.

♦ Expand the number of AEI coalitions by two. Achieved.

♦ Analyze quarterly data submitted by participating institutions to identify early 

trends and potential best practices. Achieved.

7. Educate consumers about their rights and responsibilities under consumer 

protection laws and regulations.

♦ Expand the use of media, such as the Internet, videos, and MP3 downloads, 

to disseminate information to the public on their rights and responsibilities as 

consumers.

Achieved.

8. Effectively investigate and respond to written consumer complaints and inquiries 

about FDIC-supervised financial institutions.

♦ Responses are provided to 95 percent of written consumer complaints and 

inquiries within time frames established by policy, with all complaints and 

inquiries receiving at least an initial acknowledgment within two weeks.

Achieved. Achieved. Achieved.

9. Establish, in consultation with the FDIC’s Advisory Committee on Economic 

Inclusion and other regulatory agencies, national objectives and methods for 

reducing the number of unbanked and underbanked individuals.

♦ Launch the FDIC Model Safe Accounts Pilot, begin data collection on the 

accounts from banks, and start reporting on results of the pilot. Achieved.

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

research opportunities for bringing small-dollar lending programs to scale, 

including exploring a test of employer-based lending using the federal 

workforce.

Achieved.

♦ Engage in efforts to support safe mortgage lending in low- and moderateincome communities. Achieved.

♦ Facilitate completion of final recommendation on the initiatives identified in 

the Advisory Committee’s strategic plan. Achieved.

♦ Implement, or establish plans to implement, Advisory Committee 

recommendations approved by the FDIC for further action, including new 

research, demonstration and pilot projects, and new and revised supervisory 

and public policies.

Achieved.

Perform R
ANNUAL REPORT 2012

Receivership Management Pr

Strategic Goal: Recovery to creditors of receiverships is achieved.

Annual Performance Goals and Targets 2011 2010 2009

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

bidders.

♦ Contact all known qualified and interested bidders. Achieved. Achieved. Achieved.

2. Value, manage, and market assets of failed institutions and their subsidiaries in 

a timely manner to maximize net return.

♦ Ninety percent of the book value of a failed institution’s marketable assets is 

marketed within 90 days of failure. Achieved.

♦ For at least 95 percent of insured institution failures, market at least 90 

percent of the book value of the institution’s marketable assets within 90 

days of the failure date (for cash sales) or 120 days of the failure date (for 

structured sales).

Achieved. Achieved.

♦ Implement enhanced reporting capabilities from the Automated 

Procurement System. Achieved.

♦ Ensure that all newly designated oversight managers and technical 

monitors receive training in advance of performing contract administration 

responsibilities.

Achieved.

♦ Optimize the effectiveness of oversight managers and technical monitors by 

restructuring work assignments, providing enhanced technical support, and 

improving supervision.

Achieved.

♦ Identify and implement program improvements to ensure efficient 

and effective management of the contract resources used to perform 

receivership management functions.

Achieved.

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

termination.

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

new receiverships that are not subject to loss-share agreements, structured 

sales, or other legal impediments.

Achieved. Achieved. Achieved.

4. Conduct investigations into all potential professional liability claim areas for 

all failed insured depository institutions, and decide as promptly as possible 

to close or pursue each claim, considering the size and complexity of the 

institution.

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

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

depository institution.

Achieved. Achieved. Achieved.

5. Complete reviews of all loss-share and Limited Liability Corporation (LLC) 

agreements to ensure full compliance with the terms and conditions of the 

agreements.

♦ Complete on-site field work for reviews of 100 percent of the loss-share and 

LLC agreements active as of December 31, 2010, to ensure full compliance 

with the terms and conditions of the agreements.

Achieved.

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

finding and recommendations for 75 percent of the loss-share reviews and 

50 percent of the LLC reviews, including all reviews of agreements totaling 

more than $1.0 billion (gross book value).

Achieved.

62 Perfor
Financial 

Statements 

and Notes

IV.

Finacita
ANNUAL REPORT 2012

Deposit Ins

Federal Deposit Insurance Cor

Deposit Insurance Fund Balance Sheet

Dollars in Thousand

2012 2011

Asset

 Cash and cash equivalents $3,100,361 $3,277,839 

 Cash and investments - restricted - systemic risk (Note 16) 

 (Includes cash/cash equivalents of $0 at December 31, 2012

 and $1,627,073 at December 31, 2011)

0 4,827,319 

 Investment in U.S. Treasury obligations, net (Note 3) 34,868,688 33,863,245 

 Trust preferred securities (Note 5) 2,263,983 2,213,231 

 Assessments receivable, net (Note 9) 1,006,852 282,247 

 Receivables and other assets - systemic risk (Note 16) 0 1,948,151 

 Interest receivable on investments and other assets, net 433,592 488,179 

 Receivables from resolutions, net (Note 4) 23,119,554 28,548,396 

 Property and equipment, net (Note 6) 392,880 401,915 

Total Assets $65,185,910 $75,850,522 

Liabilities

 Accounts payable and other liabilities $349,620 $374,164 

 Unearned revenue - prepaid assessments (Note 9) 1,576,417 17,399,828 

 Refunds of prepaid assessments (Note 9) 5,675,199 0 

 Liabilities due to resolutions (Note 7) 21,173,785 32,790,512 

 Debt Guarantee Program liabilities - systemic risk (Note 16) 0 117,027 

 Deferred revenue - systemic risk (Note 16) 0 6,639,954 

 Postretirement benefit liability (Note 13) 224,225 187,968 

 Contingent liabilities for:

 Anticipated failure of insured institutions (Note 8) 3,220,697 6,511,321 

 Systemic risk (Note 16) 0 2,216 

 Litigation losses (Note 8) 8,200 1,000 

Total Liabilities 32,228,143 64,023,990 

 Commitments and off-balance-sheet exposure (Note 14)

Fund Balance

 Accumulated Net Income 32,682,237 11,560,990 

Accumulated Other Comprehensive Inco

 Unrealized gain on U.S. Treasury investments, net (Note 3) 33,819 47,697 

 Unrealized postretirement benefit loss (Note 13) (60,448) (33,562)

 Unrealized gain on trust preferred securities (Note 5) 302,159 251,407 

Total Accumulated Other Comprehensive Income 275,530 265,542 

Total Fund Balance 32,957,767 11,826,532 

Total Liabilities and Fund Balance $65,185,910 $75,850,522 

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

64 Finac
Deposit Ins

Federal Deposit Insurance Cor

Deposit Insurance Fund Statement of Income 

for the Years Ended 

Dollars in Thousand

2012 2011

Revenu

 Assessments (Note 9) $12,397,022 $13,498,587 

 Interest on U.S. Treasury obligations 159,214 127,621 

 Systemic risk revenue (Note 16) (161,135) (131,141)

 Other revenue (Note 10) 6,127,211 2,846,929 

Total Revenue 18,522,312 16,341,996 

Expenses and Loss

 Operating expenses (Note 11) 1,777,513 1,625,351 

 Systemic risk expenses (Note 16) (161,135) (131,141)

 Provision for insurance losses (Note 12) (4,222,595) (4,413,629)

 Insurance and other expenses 7,282 3,996 

Total Expenses and Losses (2,598,935) (2,915,423)

Net Income 21,121,247 19,257,419 

Other Comprehensive Incom

 Unrealized (loss) gain on U.S. Treasury investments, net (13,878) 20,999 

 Unrealized postretirement benefit loss (Note 13) (26,886) (15,059)

 Unrealized gain (loss) on trust preferred securities (Note 5) 50,752 (84,587)

Total Other Comprehensive Income (Loss) 9,988 (78,647)

Comprehensive Income 21,131,235 19,178,772 

Fund Balance - Beginning 11,826,532 (7,352,240)

Fund Balance - Ending $32,957,767 $11,826,532 

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

Finacita
ANNUAL REPORT 2012

Deposit Ins

Federal Deposit Insurance Cor

Deposit Insurance Fund Statement of Cash Flows for the Yea

Dollars in Thousand

2012 2011

Operating Activiti

Net Income: $21,121,247 $19,257,419 

Adjustments to reconcile net income to net cash (used by) 

operating activities:

Amortization of U.S. Treasury obligations 854,195 388,895 

Treasury Inflation-Protected Securities inflation adjustment (98,050) (25,307)

Depreciation on property and equipment 76,365 77,720 

Loss on retirement of property and equipment 14 1,326 

Provision for insurance losses (4,222,595) (4,413,629)

Unrealized Loss on postretirement benefits (26,886) (15,059)

Change in Operating Assets and Liabilities (Net of Provision for Lo

(Increase) in assessments receivable, net (724,605) (64,354)

Decrease (Increase) in interest receivable and other assets 51,181 (227,962)

Decrease (Increase) in receivables from resolutions 6,371,418 (5,802,003)

Decrease in receivables - systemic risk 1,948,151 321,271 

(Decrease) in accounts payable and other liabilities (24,543) (140,123)

Increase in postretirement benefit liability 36,258 22,094 

(Decrease) in contingent liabilities - systemic risk (2,216) (117,777)

(Decrease) in contingent liabilities - litigation losses 0 (276,000)

(Decrease) Increase in liabilities due to resolutions (11,616,727) 2,278,635 

(Decrease) Increase in Debt Guarantee Program liabilities - systemic risk (117,027) 87,693 

(Decrease) in unearned revenue - prepaid assessments (15,823,411) (12,657,206)

(Decrease) in deferred revenue - systemic risk (6,513,828) (2,399,644)

Increase in refunds of prepaid assessments 5,675,199 0 

Net Cash (Used) by Operating Activities (3,035,860) (3,704,011)

Investing Activitie

Provided by

Maturity of U.S. Treasury obligations 32,132,623 12,976,273 

Sale of U.S. Treasury obligations 2,554,781 0 

Used by:

Purchase of property and equipment (67,344) (64,896)

Purchase of U.S. Treasury obligations (33,388,751) (36,409,429)

Net Cash Provided (Used) by Investing Activities 1,231,309 (23,498,052)

Net (Decrease) in Cash and Cash Equivalents (1,804,551) (27,202,063)

Cash and Cash Equivalents - Beginning 4,904,912 32,106,975 

Unrestricted Cash and Cash Equivalents - Ending 3,100,361 3,277,839 

Restricted Cash and Cash Equivalents - Ending 0 1,627,073 

Cash and Cash Equivalents - Ending $3,100,361 $4,904,912 

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

66 Finac
Notes to the Financial Statements

Deposit Insura

December 31, 2012 and 2011

1. Operati

the Dep

Insurance

Overview

The Federal Deposit Insurance 

Corporation (FDIC) is the independent 

deposit insurance agency created by 

Congress in 1933 to maintain stability 

and public confidence in the nation’s 

banking system. Provisions that 

govern the operations of the FDIC 

are generally found in the Federal 

Deposit Insurance (FDI) Act, as 

amended (12 U.S.C. 1811, et seq). 

In carrying out the purposes of the 

FDI Act, the FDIC, as administrator 

of the Deposit Insurance Fund 

(DIF), insures the deposits of banks 

and savings associations (insured 

depository institutions) from loss due 

to institution failures. In cooperation 

with other federal and state agencies, 

the FDIC promotes the safety and 

soundness of insured depository 

institutions by identifying, monitoring 

and addressing risks to the DIF. 

Commercial banks, savings banks 

and savings associations (known as 

“thrifts”) are supervised by either the 

FDIC, the Office of the Comptroller 

of the Currency, or the Federal 

Reserve Board. 

The FDIC is also the administrator 

of the FSLIC Resolution Fund 

(FRF). The FRF is a resolution 

fund responsible for the sale of 

remaining assets and satisfaction of 

liabilities associated with the former 

Federal Savings and Loan Insurance 

Corporation (FSLIC) and the former 

Resolution Trust Corporation. The 

DIF and the FRF are maintained 

separately by the FDIC to support 

their respective functions. 

Pursuant to the Dodd-Frank Wall 

Street Reform and Consumer 

Protection Act of 2010 (Dodd-Frank 

Act), the FDIC is the manager of the 

Orderly Liquidation Fund (OLF). 

Established as a separate fund in the 

U.S. Treasury (Treasury), the OLF 

is inactive and unfunded until the 

FDIC is appointed as receiver for a 

covered financial company (a failing 

financial company, such as a bank 

holding company or nonbank financial 

company for which a systemic risk 

determination has been made as 

set forth in section 203 of the 

Dodd-Frank Act). 

The Dodd-Frank Act granted the 

FDIC authority to establish a widely 

available program to guarantee 

obligations of solvent insured 

depository institutions (IDIs) or 

solvent depository institution holding 

companies (including affiliates) 

upon the systemic determination of a 

liquidity event during times of severe 

economic distress. The program 

would not be funded by the DIF but 

rather by fees and assessments paid 

by all participants in the program. 

If fees are insufficient to cover losses 

or expenses, the FDIC must impose 

a special assessment on participants 

as necessary to cover the shortfall. 

Any excess funds at the end of the 

liquidity event program would be 

deposited in the General Fund of the 

Treasury. The Dodd-Frank Act limits 

the FDIC’s systemic risk determination 

authority under section 13 of the FDI 

Act to IDIs for which the FDIC has 

been appointed receiver. Prior to this 

change, the authority permitted open 

bank assistance and the creation of 

the Temporary Liquidity Guarantee 

Program (TLGP) that expired on 

December 31, 2012 (see Note 16).

The Dodd-Frank Act also created the 

Financial Stability Oversight Council 

(FSOC) of which the Chairman of 

the FDIC is a member and expanded 

the FDIC’s responsibilities to include 

supervisory review of resolution plans 

(known as living wills) and backup 

examination authority for systemically 

important bank holding companies 

and nonbank financial companies. 

The living wills provide for an entity’s 

rapid and orderly resolution in the 

event of material financial distress 

or failure.

Operations of the DIF

The primary purposes of the DIF are 

to 1) insure the deposits and protect 

the depositors of IDIs and 2) resolve 

failed IDIs upon appointment of the 

FDIC as receiver, in a manner that 

will result in the least possible cost 

to the DIF (unless a systemic risk 

determination is made). 

The DIF is primarily funded from 

deposit insurance assessments. Other 

available funding sources, if necessary, 

Finacita
ANNUAL REPORT 2012

are borrowings from the Treasury, 

the Federal Financing Bank (FFB), 

Federal Home Loan Banks, and IDIs. 

The FDIC has borrowing authority 

of $100 billion from the Treasury and 

a Note Purchase Agreement with 

the FFB, not to exceed $100 billion, 

to enhance the DIF’s ability to fund 

deposit insurance. 

A statutory formula, known as the 

Maximum Obligation Limitation 

(MOL), limits the amount of 

obligations the DIF can incur to the 

sum of its cash, 90 percent of the fair 

market value of other assets, and the 

amount authorized to be borrowed 

from the Treasury. The MOL for the 

DIF was $132.9 billion and $114.4 

billion as of December 31, 2012 

and 2011, respectively. 

Operations of 

Resolution Entities

The FDIC is responsible for 

managing and disposing of the 

assets of failed institutions in an 

orderly and efficient manner. The 

assets held by receiverships, passthrough conservatorships, and bridge 

institutions (collectively, resolution 

entities), and the claims against 

them, are accounted for separately 

from the DIF assets and liabilities 

to ensure that proceeds from these 

entities are distributed in accordance 

with applicable laws and regulations. 

Accordingly, income and expenses 

attributable to resolution entities are 

accounted for as transactions of those 

entities. Resolution entities are billed 

by the FDIC for services provided on 

their behalf.

2. Summary 

Signi

Accou

Pol

Genera

These financial statements pertain 

to the financial position, results of 

operations, and cash flows of the DIF 

and are presented in accordance with 

U.S. generally accepted accounting 

principles (GAAP). As permitted by 

the Federal Accounting Standards 

Advisory Board’s Statement of Federal 

Financial Accounting Standards 34, 

The Hierarchy of Generally Accepted 

Accounting Principles, Including 

the Application of Standards 

Issued by the Financial Accounting 

Standards Board, the FDIC prepares 

financial statements in accordance 

with standards promulgated by the 

Financial Accounting Standards 

Board (FASB). These statements 

do not include reporting for assets 

and liabilities of resolution entities 

because these entities are legally 

separate and distinct, and the 

DIF does not have any ownership 

interests in them. Periodic and final 

accountability reports of resolution 

entities are furnished to courts, 

supervisory authorities, and others 

upon request.

Use of Estimates

Management makes estimates and 

assumptions that affect the amounts 

reported in the financial statements 

and accompanying notes. Actual 

results could differ from these 

estimates. Where it is reasonably 

possible that changes in estimates 

will cause a material change in the 

financial statements in the near 

term, the nature and extent of such 

potential changes in estimates have 

been disclosed. The more significant 

estimates include the valuation of trust 

preferred securities; the assessments 

receivable and associated revenue; the 

allowance for loss on receivables from 

resolutions (including shared-loss 

agreements); guarantee obligations 

for structured transactions; refunds 

of prepaid assessments; the 

postretirement benefit obligation; and 

the estimated losses for anticipated 

failures, litigation, and representations 

and indemnifications. 

Cash Equivalents

Cash equivalents are short-term, 

highly liquid investments consisting 

primarily of U.S. Treasury Overnight 

Certificates.

Investment in U.S. Treasury 

Obligations

The DIF funds are required to be 

invested in obligations of the United 

States or in obligations guaranteed as 

to principal and interest by the United 

States. The Secretary of the Treasury 

must approve all such investments in 

excess of $100,000 and has granted 

the FDIC approval to invest the DIF 

funds only in U.S. Treasury obligations 

that are purchased or sold exclusively 

through the Bureau of the Public 

Debt’s Government Account Series 

program.

The DIF’s investments in U.S. Treasury 

obligations are classified as availablefor-sale. Securities designated as 

available-for-sale are shown at fair 

value. Unrealized gains and losses 

are reported as other comprehensive 

income. Realized gains and losses are 

included in the Statement of Income 

and Fund Balance as components of 

net income. Income on securities is 

68 Finac
calculated and recorded on a daily 

basis using the effective interest or 

straight-line method depending on the 

maturity of the security. 

Revenue Recognition for 

Assessments

Assessment revenue is recognized 

for the quarterly period of insurance 

coverage based on an estimate. 

The estimate is derived from an 

institution’s risk-based assessment 

rate and assessment base for the 

prior quarter adjusted for the current 

quarter’s available assessment credits, 

certain changes in supervisory 

examination ratings for larger 

institutions, and a modest assessment 

base growth factor. At the subsequent 

quarter-end, the estimated revenue 

amounts are adjusted when actual 

assessments for the covered period 

are determined for each institution 

(see Note 9). 

Capital Assets 

and Depreciation

The FDIC buildings are depreciated 

on a straight-line basis over a 35- to 

50-year estimated life. Leasehold 

improvements are capitalized 

and depreciated over the lesser 

of the remaining life of the lease 

or the estimated useful life of the 

improvements, if determined to be 

material. Capital assets depreciated 

on a straight-line basis over a 

five-year estimated useful life include 

mainframe equipment; furniture, 

fixtures, and general equipment; 

and internal-use software. Personal 

computer equipment is depreciated on 

a straight-line basis over a three-year 

estimated useful life.

Reporting on Variable 

Interest Entities

FDIC receiverships engaged in 

structured transactions, some of 

which resulted in the issuance of note 

obligations that were guaranteed by 

the FDIC in its corporate capacity 

(see Note 8, Contingent Liabilities for: 

FDIC Guaranteed Debt of Structured 

Transactions). As the guarantor of 

note obligations for several structured 

transactions, the FDIC in its corporate 

capacity is the holder of a variable 

interest in a number of variable 

interest entities (VIEs). The FDIC 

conducts a qualitative assessment 

of its relationship with each VIE as 

required by Accounting Standards 

Codification (ASC) Topic 810, 

Consolidation. These assessments 

are conducted to determine if the 

FDIC in its corporate capacity has 

1) power to direct the activities 

that most significantly impact the 

economic performance of the VIE 

and 2) an obligation to absorb losses 

of the VIE or the right to receive 

benefits from the VIE that could 

potentially be significant to the VIE. 

When a variable interest holder has 

met both of these characteristics, the 

enterprise is considered the primary 

beneficiary and must consolidate 

the VIE. In accordance with the 

provisions of ASC 810, an assessment 

of the terms of the legal agreement for 

each VIE was conducted to determine 

whether any of the terms had been 

activated or modified in a manner 

which would cause the FDIC in its 

corporate capacity to be characterized 

as a primary beneficiary. In making 

that determination, consideration 

was given to which, if any, activities 

were significant to each VIE. Often, 

the right to service collateral, to 

liquidate collateral, or to unilaterally 

dissolve the limited liability company 

(LLC) or trust was determined to 

be the most significant activity. In 

other cases, it was determined that 

the structured transactions did not 

include such significant activities and 

that the design of the entity was the 

best indicator of which party was the 

primary beneficiary. The results of 

each analysis identified a party other 

than the FDIC in its corporate capacity 

as the primary beneficiary. 

The conclusion of these analyses 

was that the FDIC in its corporate 

capacity has not engaged in any 

activity that would cause the FDIC 

in its corporate capacity to be 

characterized as a primary beneficiary 

to any VIE with which it was involved 

as of December 31, 2012 and 2011. 

Therefore, consolidation is not 

required for the 2012 and 2011 DIF 

financial statements. In the future, 

the FDIC in its corporate capacity 

may become the primary beneficiary 

upon the activation of provisional 

contract rights that extend to the 

Corporation if payments are made on 

guarantee claims. Ongoing analyses 

will be required in order to monitor 

consolidation implications under 

ASC 810.

The FDIC’s involvement with VIEs, 

in its corporate capacity, is fully 

described in Note 8.

Related Parties

The nature of related parties and 

a description of related-party 

transactions are discussed in Note 1 

and disclosed throughout the financial 

statements and footnotes.

Finacita
ANNUAL REPORT 2012

Disclosure about Recent 

Relevant Accounting 

Pronouncements

Recent accounting pronouncements 

have been deemed to be not applicable 

or material to the financial statements 

as presented.

3. Investment

U.S. Treasur

Obligati

As of December 31, 2012 and 

2011, investments in U.S. Treasury 

obligations, net, were $34.9 billion 

and $33.9 billion, respectively. As 

of December 31, 2012 and 2011, the 

DIF held $5.3 billion and $5.0 billion, 

respectively, of Treasury InflationProtected Securities (TIPS), which 

are indexed to increases or decreases 

in the Consumer Price Index for All 

Urban Consumers (CPI-U). During 

2012, the FDIC sold securities 

designated as available-for-sale for 

total proceeds of $2.6 billion. The 

gross realized gains and losses on 

these sales were $878 thousand and 

$241 thousand, respectively, which 

resulted in a total net gain of $637 

thousand. The cost of these securities 

sold was determined based on specific 

identification. Since these securities 

were purchased on behalf of the TLGP, 

the realized gain was recognized in the 

“Deferred revenue - systemic risk” line 

item on the Balance Sheet.

70 Finac
Total Investment in U.S. Treasury Obligations, Net at 

Dollars in Thousand

Maturity

Yield at 

Purchase1

Face 

Value

Net 

Carrying 

Amount

Unrealized 

Holding 

Gains

Unrealized 

Holding 

Losses

Fair 

Value

U.S. Treasury notes and bonds

Within 1 year 0.34% $24,800,000 $25,228,393 $19,871 $0 $25,248,264 

After 1 year 

through 5 years 

0.32% 4,050,000 4,341,814 4,569 0 4,346,383 

U.S. Treasury Inflation-Protected Securitie

Within 1 year -0.86% 1,650,000 1,813,291 0 (9,788)2 1,803,503 

After 1 year 

through 5 years 

-0.87% 2,900,000 3,451,371 19,167 0 3,470,538 

Total $33,400,000 $34,834,869 $43,607 $(9,788) $34,868,688

1 For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a 

long-term annual inflation assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.0 percent, based on figures 

issued by the Congressional Budget Office and Blue Chip Economic Indicators in early 2012. 

2 The unrealized losses occurred as a result of temporary changes in market interest rates. These unrealized losses occurred over a period of less 

than a year. The FDIC does not intend to sell the TIPS and is not likely to be required to sell them before their maturity in 2013, thus, the FDIC 

does not consider these securities to be other than temporarily impaired at December 31, 2012.

Total Investment in U.S. Treasury Obligations, Net at 

Dollars in Thousand

Maturity

Yield at

Purchase1

Face

Value

Net

Carrying

Amount

Unrealized

Holding

Gains

Unrealized

Holding

Losses

Fair

Value

U.S. Treasury notes and bonds

Within 1 year 0.27% $24,500,0002 $24,889,547 $17,842 $(93) $24,907,296 

After 1 year 

through 5 years 

0.93% 3,900,000 3,923,428 38,778 0 3,962,206 

U.S. Treasury Inflation-Protected Securitie

Within 1 year 0.51% 1,200,000 1,537,664 659 (8) 1,538,315 

After 1 year 

through 5 years 

-0.92% 3,050,000 3,464,909 0 (9,481) 3,455,428 

Total $32,650,000 $33,815,548 $57,279 $(9,582)3 $33,863,245

1 For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a 

long-term annual inflation assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 1.8 percent, based on figures 

issued by the Congressional Budget Office and Blue Chip Economic Indicators in early 2011. 

2 Includes one Treasury note totaling $1.8 billion which matured on Saturday, December 31, 2011. Settlement occurred on the next business 

day, January 3, 2012.

3 All unrealized losses occurred as a result of temporary changes in market interest rates. These unrealized losses occurred over a period of less 

than a year. Unrealized losses related to the TIPS converted to unrealized gains by January 31, 2012, and unrealized losses related to the U.S. 

Treasury notes and bonds existed on just one security that matured with no unrealized loss on January 31, 2012, and thus the FDIC does not 

consider these securities to be other than temporarily impaired at December 31, 2011.

Finacita
ANNUAL REPORT 2012

4. Receivabl

Resoluti

The receivables from resolutions 

result from payments made by the 

DIF to cover obligations to insured 

depositors (subrogated claims), 

advances to resolution entities for 

working capital, and administrative 

expenses paid on behalf of resolution 

entities. Any related allowance 

for loss represents the difference 

between the funds advanced and/

or obligations incurred and the 

expected repayment. Estimated 

future payments on losses incurred on 

assets sold to an acquiring institution 

under a shared-loss agreement (SLA) 

are factored into the computation of 

the expected repayment. Assets held 

by DIF resolution entities (including 

structured transaction-related assets; 

see Note 8) are the main source of 

repayment of the DIF’s receivables 

from resolutions. 

As of December 31, 2012, there were 

463 active receiverships, including 51 

established in 2012. As of December 

31, 2012 and 2011, DIF resolution 

entities held assets with a book value 

of $53.5 billion and $71.4 billion, 

respectively (including $36.5 billion 

and $50.5 billion, respectively, of 

cash, investments, receivables due 

from the DIF, and other receivables). 

Ninety-nine percent of the current 

asset book value of $53.5 billion is 

held by resolution entities established 

since the beginning of 2008.

Estimated cash recoveries from 

the management and disposition of 

assets that are used to determine 

the allowance for losses are based 

on asset recovery rates from several 

sources including actual or pending 

institution-specific asset disposition 

data, failed institution-specific asset 

valuation data, aggregate asset 

valuation data on several recently 

failed or troubled institutions, sampled 

asset valuation data, and empirical 

asset recovery data based on failures 

as far back as 1990. Methodologies 

for determining the asset recovery 

rates incorporate estimating future 

cash recoveries, net of applicable 

liquidation cost estimates, and 

discounting based on market-based 

risk factors applicable to a given 

asset’s type and quality. The resulting 

estimated cash recoveries are then 

used to derive the allowance for 

loss on the receivables from these 

resolutions.

For failed institutions resolved using a 

whole bank purchase and assumption 

transaction with an accompanying 

SLA, the projected future shared-loss 

payments and recoveries on the 

covered assets sold to the acquiring 

institution under the agreement 

are considered in determining the 

allowance for loss on the receivables 

from these resolutions. The 

shared-loss cost projections are based 

on the covered assets’ intrinsic value 

which is determined using financial 

models that consider the quality, 

condition and type of covered assets, 

current and future market conditions, 

risk factors and estimated asset 

holding periods. For year-end 2012 

financial reporting, the shared-loss 

cost estimates were updated for the 

majority (93% or 276) of the 298 active 

shared-loss agreements; the remaining 

22 were based on recent loss 

estimates. The updated shared-loss 

cost projections for the larger 

agreements were primarily based on 

new third-party valuations estimating 

the cumulative loss of covered 

assets. The remaining agreements 

were stratified by receivership age. A 

random sample of institutions within 

each age stratum was selected for 

new third-party loss estimations, and 

valuation results from the sample 

institutions were aggregated and 

extrapolated to institutions within the 

like age stratum based on asset type 

and performance status. 

Note that estimated asset recoveries 

are regularly evaluated during 

the year, but remain subject to 

uncertainties because of potential 

changes in economic and market 

conditions. Continuing economic 

uncertainties could cause the DIF’s 

actual recoveries to vary significantly 

from current estimates. 

Whole Bank Purchase and 

Assumption Transactions with 

Shared-Loss Agreements 

Since the beginning of 2008, the FDIC 

resolved 301 failures using whole bank 

purchase and assumption resolution 

transactions with accompanying 

SLAs on total assets of $214.6 billion 

purchased by the financial institution 

acquirers. The acquirer typically 

assumes all of the deposits and 

Receivables from Resolutions, Ne

Dollars in Thousand

2012 2011

Receivables from closed banks $116,940,999 $121,369,428 

Allowance for losses (93,821,445) (92,821,032)

Total $23,119,554 $28,548,396

72 Finac
purchases essentially all of the assets 

of a failed institution. The majority 

of the commercial and residential 

loan assets are purchased under 

an SLA, where the FDIC agrees to 

share in future losses and recoveries 

experienced by the acquirer on those 

assets covered under the agreement. 

SLAs are used by the FDIC to 

keep assets in the private sector 

and to minimize disruptions to 

loan customers.

Losses on the covered assets are 

shared between the acquirer and the 

FDIC in its receivership capacity of the 

failed institution when losses occur 

through the sale, foreclosure, loan 

modification, or write-down of loans 

in accordance with the terms of the 

SLA. The majority of the agreements 

cover a five- to 10-year period with the 

receiver covering 80 percent of the 

losses incurred by the acquirer and the 

acquiring bank covering 20 percent. 

Prior to March 26, 2010, most SLAs 

included a threshold amount, above 

which the receiver covered 95 percent 

of the losses incurred by the acquirer. 

As mentioned above, the estimated 

shared-loss liability is accounted for 

by the receiver and is included in the 

calculation of the DIF’s allowance for 

loss against the corporate receivable 

from the resolution. As shared-loss 

claims are asserted and proven, DIF 

receiverships satisfy these shared-loss 

payments using available liquidation 

funds and/or by drawing on amounts 

due from the DIF for funding the 

deposits assumed by the acquirer 

(see Note 7). 

As of December 31, 2012, 286 

receiverships have made shared-loss 

payments totaling $23.3 billion. 

In addition, DIF receiverships are 

estimated to pay an additional 

$18.1 billion over the duration of 

these SLAs on $103.7 billion in total 

remaining covered assets.

Concentration of Credit Risk

Financial instruments that potentially 

subject the DIF to concentrations 

of credit risk are receivables from 

resolutions. The repayment of the 

DIF’s receivables from resolutions 

is primarily influenced by recoveries 

on assets held by DIF receiverships 

and payments on the covered assets 

under SLAs. The majority of the 

$120.7 billion in remaining assets 

in liquidation ($17.0 billion) and 

current shared-loss covered assets 

($103.7 billion) are concentrated in 

commercial loans ($60.0 billion), 

residential loans ($43.6 billion), 

securities ($3.1 billion), and structured 

transaction-related assets as described 

in Note 8 ($12.1 billion). Most of the 

assets in these asset types originated 

from failed institutions located in 

California ($34.3 billion), Florida 

($14.1 billion), Puerto Rico ($10.9 

billion), Illinois ($10.5 billion), 

Georgia ($9.8 billion) and Alabama 

($9.0 billion).

5. Trust Pre

Secu

Pursuant to a systemic risk 

determination, the Treasury, the FDIC, 

and the Federal Reserve Bank of New 

York executed terms of a guarantee 

agreement on January 15, 2009 with 

Citigroup to provide loss protection on 

a pool of approximately $301.0 billion 

of assets that remained on the balance 

sheet of Citigroup. In consideration 

for its portion of the shared-loss 

guarantee at inception, the FDIC 

received $3.025 billion of Citigroup’s 

preferred stock. All shares of the 

preferred stock were subsequently 

converted to Citigroup Capital XXXIII 

trust preferred securities (TruPs) with 

a liquidation amount of $1,000 per 

security and a distribution rate of 8 

percent per annum payable quarterly. 

The principal amount is due in 2039. 

On December 23, 2009, Citigroup 

terminated the guarantee agreement, 

citing improvements in its financial 

condition. The FDIC incurred no 

loss from the guarantee prior to the 

termination of the agreement. In 

connection with the early termination 

of the agreement, the FDIC agreed to 

reduce its portion of the $3.025 billion 

in TruPs by $800 million. However, 

pursuant to an agreement between the 

Treasury and the FDIC, the Treasury 

agreed to return $800 million in 

TruPs on behalf of the FDIC from its 

portion of Citigroup TruPs holdings 

received as a result of the shared-loss 

agreement. The FDIC retained the 

$800 million of Citigroup TruPs as 

security in the event payments were 

required to be made by the DIF for 

guaranteed debt instruments issued 

by Citigroup and its affiliates under 

the TLGP. Because no payments 

were required prior to expiration of 

the TLGP on December 31, 2012, the 

FDIC transferred the $800 million in 

Citigroup TruPs and $183 million 

in related dividends and interest to 

the Treasury.

The remaining $2.225 billion 

(liquidation amount) of TruPs is 

classified as available-for-sale debt 

securities in accordance with FASB 

ASC Topic 320, Investments – Debt 

and Equity Securities. At December 

31, 2012, the fair value of the TruPs 

was $2.264 billion (see Note 15). An 

unrealized holding gain of $302 million 

is included in accumulated other 

comprehensive income. 

Finacita
ANNUAL REPORT 2012

6. Property

Equipmen

The depreciation expense was 

$76 million and $78 million for 2012 

and 2011, respectively.

7. Liabil

to Reso

As of December 31, 2012 and 2011, the 

DIF recorded liabilities totaling $21.1 

billion and $32.7 billion, respectively, 

to resolution entities representing 

the agreed-upon value of assets 

transferred from the receiverships, at 

the time of failure, to the acquirers/

bridge institutions for use in funding 

the deposits assumed by the acquirers/

bridge institutions. Ninety-one 

percent of these liabilities are due to 

failures resolved under whole-bank 

purchase and assumption transactions, 

most with an accompanying SLA. 

The DIF satisfies these liabilities 

either by directly sending cash to 

the receivership to fund shared-loss 

and other expenses or by offsetting 

receivables from resolutions when the 

receivership declares a dividend. 

In addition, there was $56 million and 

$80 million in unpaid deposit claims 

related to multiple receiverships 

as of December 31, 2012 and 2011, 

respectively. The DIF pays these 

liabilities when the claims are 

approved. 

8. Conting

Liabilit

Anticipated Failure of 

Insured Institutions

The DIF records a contingent liability 

and a loss provision for DIF-insured 

institutions that are likely to fail, 

absent some favorable event such 

as obtaining additional capital 

or merging, when the liability is 

probable and reasonably estimable. 

The contingent liability is derived by 

applying expected failure rates and 

loss rates to the institutions based 

on supervisory ratings, balance 

sheet characteristics, and projected 

capital levels.

Banking industry performance 

continued to recover in 2012 at a 

gradual, steady pace. According to 

the quarterly financial data submitted 

by IDIs, the industry reported total 

net income of $107.4 billion for 

the first three quarters of 2012, an 

increase of 14.9% over the first three 

quarters of 2011. Improving credit 

performance, which has led to 

lower loan loss provisions, has been 

primarily responsible for most of the 

improvement in earnings. Losses to 

the DIF from failures that occurred in 

2012 fell short of the amount reserved 

at the end of 2011, as the aggregate 

number and size of institution failures 

in 2012 were less than anticipated. 

The removal from the reserve of 

institutions that did fail in 2012, as 

well as projected favorable trends 

in bank supervisory downgrade and 

failure rates, all contributed to a 

decline by $3.3 billion to $3.2 billion in 

the contingent liability for anticipated 

failures of insured institutions at 

December 31, 2012.

In addition to these recorded 

contingent liabilities, the FDIC has 

identified risk in the financial services 

industry that could result in additional 

losses to the DIF should potentially 

vulnerable insured institutions 

ultimately fail. As a result of these 

risks, the FDIC believes that it is 

reasonably possible that the DIF could 

incur additional estimated losses of 

up to $6.3 billion for year-end 2012 as 

compared to $10.2 billion for year-end 

2011. The actual losses, if any, will 

largely depend on future economic 

and market conditions and could differ 

materially from this estimate.

During 2012, 51 institutions failed with 

combined assets at the date of failure 

of $11.8 billion. Supervisory and 

market data suggest that the financial 

performance of the banking industry 

should continue to improve over 

the coming year. However, ongoing 

asset quality problems and limited 

opportunities for earnings growth will 

continue to be sources of stress on 

the industry. In addition, two key risks 

continue to weigh on the economic 

outlook. First, uncertain prospects for 

the European economy have increased 

volatility in the global financial 

markets, which could trigger increased 

volatility in the U.S. financial markets 

and adversely affect the U.S. economy. 

Second, the outcome of continued 

Property and Equipment, Net at 

Dollars in Thousand

2012 2011

Land $37,352 $37,352 

Buildings (including leasehold improvements) 313,221 316,129 

Application software (includes work-in-process) 135,059 130,718 

Furniture, fixtures, and equipment 152,280 159,120 

Accumulated depreciation (245,032) (241,404)

Total $392,880 $401,91

74 Finac
negotiations on the federal debt limit 

and the federal budget in 2013 could 

significantly affect the U.S. economy 

and, in turn, IDIs. The FDIC continues 

to evaluate the ongoing risks to 

affected institutions in light of existing 

economic and financial conditions, 

and the extent to which such risks will 

continue to put stress on the resources 

of the insurance fund.

Litigation Losses

The DIF records an estimated loss for 

unresolved legal cases to the extent 

that those losses are considered 

probable and reasonably estimable. 

The FDIC recorded probable litigation 

losses of $8 million and $1 million for 

the DIF as of December 31, 2012 and 

2011, respectively, and has determined 

that there are no reasonably possible 

losses from unresolved cases.

Other Contingencies

IndyMac Federal 

Bank Representation 

and Indemnification 

Contingent Liability

On March 19, 2009, the FDIC as 

receiver of IndyMac Federal Bank 

(IMFB) and certain subsidiaries 

(collectively, sellers) sold substantially 

all of the assets of IMFB and the 

respective subsidiaries, including 

mortgage loans and mortgage loan 

servicing rights, to OneWest Bank 

and its affiliates. To maximize sale 

returns, the sellers made certain 

representations customarily made 

by commercial parties regarding 

the assets and agreed to indemnify 

the acquirers for losses incurred 

as a result of breaches of such 

representations, losses incurred 

as a result of the failure to obtain 

contractual counterparty consents to 

the sale, and third party claims arising 

from pre-sale acts and omissions 

of the sellers or the failed bank. 

Although the representations and 

indemnifications were made by or are 

obligations of the sellers, the FDIC, 

in its corporate capacity, guaranteed 

the receivership’s indemnification 

obligations under the sale agreements. 

The representations relate generally 

to ownership of and right to sell the 

assets; compliance with applicable 

law in the origination of the loans; 

accuracy of the servicing records; 

validity of loan documents; and 

servicing of the loans serviced for 

others. Until the periods for asserting 

claims under these arrangements 

have expired and all indemnification 

claims quantified and paid, losses 

could continue to be incurred by 

the receivership and, in turn, the 

DIF, either directly, as a result of 

the FDIC corporate guaranty of 

the receivership’s indemnification 

obligations, or indirectly, as a result of 

a reduction in the receivership’s assets 

available to pay the DIF’s claims as 

subrogee for insured accountholders. 

The acquirers’ rights to assert 

claims to recover losses incurred as 

a result of breaches of loan seller 

representations extend out to March 

19, 2019 for the Fannie Mae and 

Ginnie Mae reverse mortgage servicing 

portfolios (unpaid principal balance 

of $16.2 billion at December 31, 2012 

compared to $16.7 billion at December 

31, 2011), and March 19, 2014 for the 

Fannie Mae, Freddie Mac and Ginnie 

Mae mortgage servicing portfolios 

(unpaid principal balance of $34.3 

billion at December 31, 2012 compared 

to $38.5 billion at December 31, 2011). 

The acquirers’ rights to assert claims 

to recover losses incurred as a result 

of other third party claims (including 

due to pre-March 19, 2009 acts or 

omissions) and breaches of servicer 

representations, including liability 

with respect to the Fannie Mae, Ginnie 

Mae and Freddie Mac portfolios as 

well as the private mortgage servicing 

portfolio and whole loans (unpaid 

principal balance of $53.9 billion 

at December 31, 2012 compared to 

$62.0 billion at December 31, 2011) 

expired on March 19, 2011. As of the 

expiration date of this claim period, 

notices relating to potential defects 

were received, but they require review 

to determine whether a valid defect 

exists and, if so, the identification 

and costing of possible cure actions. 

It is highly unlikely that all of these 

potential defects will result in losses.

The IndyMac receivership has paid 

a cumulative total of $14 million in 

approved claims through December 

31, 2012 and a cumulative total of $5 

million through December 31, 2011. 

Additional claims asserted, but under 

review, were accrued in the amount 

of $1 million as of December 31, 2012 

and $2 million as of December 31, 

2011. Alleged breaches of origination 

and servicing representations exist, 

and it is probable that the IndyMac 

receivership and its subsidiary 

Financial Freedom Senior Funding 

Corporation may incur up to $80 

million in losses; these estimated 

losses have been accrued as of 

December 31, 2012. In addition, 

review and evaluation is in process 

for approximately $32 million in 

reasonably possible liabilities with 

respect to alleged breaches of 

representations and warranties. 

Potential losses relating to origination 

and servicing representations, which 

currently cannot be quantified, 

may also be incurred under other 

agreements with investors.

The FDIC believes it is likely 

that additional losses will be 

Finacita
ANNUAL REPORT 2012

incurred, however quantifying 

the contingent liability associated 

with the representations and the 

indemnification obligations is subject 

to a number of uncertainties, including 

(1) borrower prepayment speeds, 

(2) the occurrence of borrower 

defaults and resulting foreclosures 

and losses, (3) the assertion by third 

party investors of claims with respect 

to loans serviced for them, (4) the 

existence and timing of discovery 

of breaches and the assertion of 

claims for indemnification for losses 

by the acquirer, (5) the compliance 

by the acquirer with certain loss 

mitigation and other conditions 

to indemnification, (6) third party 

sources of loss recovery (such as 

title companies and insurers), (7) the 

ability of the acquirer to refute claims 

from investors without incurring 

reimbursable losses, and (8) the cost 

to cure breaches and respond to 

third party claims. The difficulty in 

assessing losses is exacerbated further 

by the inability to use historical 

default and loss rates as a metric given 

recent economic events. Because 

of these and other uncertainties that 

surround the liability associated with 

indemnifications and the quantification 

of possible losses, the FDIC has 

determined that while additional 

losses are probable, the amount is not 

estimable. 

Purchase and Assumption 

Indemnification

In connection with purchase 

and assumption agreements 

for resolutions, the FDIC in its 

receivership capacity generally 

indemnifies the purchaser of a failed 

institution’s assets and liabilities 

in the event a third party asserts a 

claim against the purchaser unrelated 

to the explicit assets purchased or 

liabilities assumed at the time of 

failure. The FDIC in its corporate 

capacity is a secondary guarantor if a 

receivership is unable to pay. These 

indemnifications generally extend for 

a term of six years after the date of 

institution failure. The FDIC is unable 

to estimate the maximum potential 

liability for these types of guarantees 

as the agreements do not specify a 

maximum amount and any payments 

are dependent upon the outcome of 

future contingent events, the nature 

and likelihood of which cannot be 

determined at this time. During 2012 

and 2011, the FDIC in its corporate 

capacity made no indemnification 

payments under such agreements, and 

no amount has been accrued in the 

accompanying financial statements 

with respect to these indemnification 

guarantees.

FDIC Guaranteed Debt of 

Structured Transactions

The FDIC as receiver uses three 

types of structured transactions to 

dispose of certain performing and 

non-performing residential mortgage 

loans, commercial loans, construction 

loans, and mortgage-backed securities 

held by the receiverships. The three 

types of structured transactions are 1) 

limited liability companies (LLCs), 2) 

securitizations, and 3) structured sale 

of guaranteed notes (SSGNs). 

LLCs

Under the LLC structure, the FDIC in 

its receivership capacity contributes 

a pool of assets to a newly-formed 

LLC and offers for sale, through a 

competitive bid process, some of the 

equity in the LLC. The day-to-day 

management of the LLC transfers 

to the highest bidder along with the 

purchased equity interest. In many 

instances, the FDIC in its corporate 

capacity guarantees notes issued by 

the LLCs. In exchange for a guarantee, 

the DIF receives a guarantee fee 

in either 1) a lump-sum, up-front 

payment based on the estimated 

duration of the note or 2) a monthly 

payment based on a fixed percentage 

multiplied by the outstanding note 

balance. The terms of these guarantee 

agreements generally stipulate that 

all cash flows received from the 

entity’s collateral be used to pay, in 

the following order, 1) operational 

expenses of the entity, 2) the FDIC’s 

contractual guarantee fee, 3) the 

guaranteed notes (or, if applicable, 

fund the related defeasance account 

for payoff of the notes at maturity), 

and 4) the equity investors. If the 

FDIC is required to perform under 

these guarantees, it acquires an 

interest in the cash flows of the LLC 

equal to the amount of guarantee 

payments made plus accrued interest 

thereon. Once all expenses have 

been paid, the guaranteed notes have 

been satisfied, and the FDIC has 

been reimbursed for any guarantee 

payments, the equity holders receive 

any remaining cash flows. 

Since 2009, private investors have 

purchased a 40- to 50-percent 

ownership interest in the LLC 

structures for $1.6 billion in cash and 

the LLCs issued notes of $4.4 billion 

to the receiverships to partially fund 

the purchase of the assets. The 

receiverships hold the remaining 50- to 

60-percent equity interest in the LLCs 

and, in most cases, the guaranteed 

notes. The FDIC in its corporate 

capacity guarantees the timely 

payment of principal and interest due 

on the notes. The terms of the note 

guarantees extend until the earlier of 

1) payment in full of the notes or 2) 

two years following the maturity date 

76 Finac
of the notes. The note with the longest 

term matures in 2020. In the event 

of note payment default, the FDIC 

as guarantor is entitled to exercise 

or cause the exercise of certain 

rights and remedies including: 1) 

accelerating the payment of the unpaid 

principal amount of the notes; 2) 

selling the assets held as collateral; or 

3) foreclosing on the equity interests 

of the debtor. 

Securitizations and SSGNs

Securitizations and SSGNs 

(collectively, “trusts”) are transactions 

in which certain assets or securities 

from failed institutions are pooled 

and transferred into a trust structure. 

The trusts issue 1) senior and/or 

subordinated debt instruments and 

2) owner trust or residual certificates 

collateralized by the underlying 

mortgage-backed securities or loans. 

Since 2010, private investors 

purchased the senior notes issued by 

the trusts for $5.7 billion in cash. The 

receiverships hold 100 percent of the 

subordinated debt instruments and 

owner trust or residual certificates. 

The FDIC in its corporate capacity 

guarantees the timely payment of 

principal and interest due on the 

senior notes, the latest maturity of 

which is 2050. In exchange for the 

guarantee, the DIF receives a monthly 

payment based on a fixed percentage 

multiplied by the outstanding note 

balance. These guarantee agreements 

generally stipulate that all cash flows 

received from the entity’s collateral 

be used to pay, in the following 

order, 1) operational expenses of 

the entity, 2) the FDIC’s contractual 

guarantee fee, 3) interest on the 

guaranteed notes, 4) principal of the 

guaranteed notes, and 5) the holders 

of the subordinated notes and owner 

trust or residual certificates. If the 

FDIC is required to perform under 

its guarantees, it acquires an interest 

in the cash flows of the trust equal to 

the amount of guarantee payments 

made plus accrued interest thereon. 

Once all expenses have been paid, the 

guaranteed notes have been satisfied, 

and the FDIC has been reimbursed 

for any guarantee payments, the 

subordinated note holders and owner 

trust or residual certificates holders 

receive the remaining cash flows. 

All Structured Transactions 

with FDIC Guaranteed Debt

Through December 31, 2012, the 

receiverships have transferred a 

portfolio of loans with an unpaid 

principal balance of $16.4 billion 

and mortgage-backed securities 

with a book value of $8.1 billion 

to 14 LLCs and 9 trusts. The LLCs 

and trusts subsequently issued 

notes guaranteed by the FDIC in an 

original principal amount of $10.1 

billion. As of December 31, 2012 and 

2011, the DIF collected guarantee 

fees totaling $218 million and $203 

million, respectively, and recorded a 

receivable for additional guarantee 

fees of $95 million and $106 million, 

respectively, included in the “Interest 

receivable on investments and other 

assets, net” line item on the Balance 

Sheet. All guarantee fees are recorded 

as deferred revenue, included in 

the “Accounts payable and other 

liabilities” line item, and recognized 

as revenue primarily on a straightline basis over the term of the notes. 

At December 31, 2012 and 2011, the 

amount of deferred revenue recorded 

was $101 million and $134 million, 

respectively. The DIF records no 

other structured-transaction-related 

assets or liabilities on its balance 

sheet.

The estimated loss to the DIF from 

the guarantees is derived from an 

analysis of the net present value (using 

a discount rate of 3 percent) of the 

expected guarantee payments by the 

FDIC, reimbursements to the FDIC for 

guarantee payments, and guarantee 

fee collections. The FDIC believes 

that it is reasonably possible that the 

DIF could incur an estimated loss for 

one transaction of $5.7 million in 2020, 

net of expected guarantee fees of $4.2 

million. This estimated loss may vary 

over time as conditions change. For 

all of the remaining transactions, the 

cash flows from the LLC or trust assets 

provide sufficient coverage to fully 

pay the debts. To date, the FDIC in its 

corporate capacity has not provided, 

and does not intend to provide, any 

form of financial or other type of 

support to a trust or LLC that it was 

not previously contractually required 

to provide.

As of December 31, 2012 and 2011, 

the maximum loss exposure was $2.2 

billion and $3.7 billion for LLCs and 

$3.2 billion and $3.9 billion for trusts, 

respectively, representing the sum of 

all outstanding debt guaranteed by 

the FDIC in its corporate capacity. 

Some transactions have established 

defeasance accounts to pay off the 

notes at maturity. As of December 31, 

2012 and 2011, a total of $1.6 billion 

and $2.2 billion, respectively, has been 

deposited into these accounts.

9. Asse

The Dodd-Frank Act provided 

for significant assessment and 

capitalization reforms for the 

DIF. In response, the FDIC 

implemented several changes to the 

assessment system and developed 

a comprehensive, long-term fund 

management plan. The plan is 

Finacita
ANNUAL REPORT 2012

designed to restore and maintain a 

positive fund balance for the DIF 

even during a banking crisis and 

achieve moderate, steady assessment 

rates throughout any economic 

cycle. Summarized below are actions 

taken to implement assessment 

system changes and provisions of the 

comprehensive plan.

Restoration Plan

In October 2010, the FDIC adopted 

a Restoration Plan to ensure that 

the ratio of the DIF fund balance to 

estimated insured deposits (reserve 

ratio) reaches 1.35 percent by 

September 30, 2020 in lieu of the 

previous target of 1.15 percent by 

the end of 2016. In addition, the Plan 

provides for the FDIC to 1) pursue 

rulemaking regarding the method that 

will be used to offset the impact of 

the increased reserve ratio on small 

institutions (less than $10 billion 

in assets) and 2) update, at least 

semiannually, its loss and income 

projections for the fund and, if needed, 

increase or decrease assessment 

rates, following notice-and-comment 

rulemaking, if required.

Designated Reserve Ratio

In December 2012, the FDIC 

adopted a final rule maintaining the 

designated reserve ratio (DRR) at 2 

percent, effective January 1, 2013. 

The DRR is an integral part of the 

FDIC’s comprehensive, long-term 

management plan for the DIF and 

is viewed as a long-range, minimum 

target for the reserve ratio.

Calculation of Assessment

In February 2011, the FDIC adopted 

a final rule, effective on April 1, 2011, 

amending part 327 of title 12 of the 

Code of Federal Regulations to 1) 

redefine the assessment base used 

for calculating deposit insurance 

assessments from adjusted domestic 

deposits to average consolidated 

total assets minus average tangible 

equity (measured as Tier 1 capital); 

2) change the assessment rate 

adjustments; 3) lower the initial base 

rate schedule and the total base 

rate schedule for all IDIs to collect 

approximately the same revenue for 

the DIF as would have been collected 

under the old assessment base; 4) 

suspend dividends indefinitely, and, 

in lieu of dividends, adopt lower 

assessment rate schedules when the 

reserve ratio reaches 1.15 percent, 

2 percent, and 2.5 percent; and 5) 

change the risk-based assessment 

system for large IDIs (generally, those 

institutions with at least $10 billion 

in total assets). Specifically, the final 

rule eliminates risk categories and the 

use of long-term debt issuer ratings 

for large institutions and combines 

CAMELS ratings and certain forwardlooking financial measures into 

two scorecards: one for most large 

institutions and another for large 

institutions that are structurally and 

operationally complex or that pose 

unique challenges and risks in case of 

failure (highly complex IDIs).

In October 2012, the FDIC adopted a 

final rule which amends and clarifies 

some definitions of higher-risk assets 

as used in the deposit insurance 

pricing scorecards for large and 

highly complex IDIs by 1) revising 

the definitions of certain higher-risk 

assets, specifically leveraged loans and 

subprime consumer loans, 2) clarifying 

when an asset must be identified 

as higher risk, and 3) clarifying the 

way securitizations are identified 

as higher risk. The goal of this final 

rule is to ensure that the assessment 

system captures the risk inherent in 

higher-risk assets without imposing an 

unnecessary reporting burden. The 

final rule will become effective on 

April 1, 2013 and provides that, until 

then, large and highly complex IDIs 

will continue to report higher-risk 

assets using existing guidance. 

Assessment Revenue

Annual assessment rates averaged 

approximately 10.1 cents per $100 

and 11.1 cents per $100 of the new 

assessment base (as described above) 

for all of 2012 and the last three 

quarters of 2011, respectively. The 

annual assessment rate averaged 

approximately 17.6 cents per $100 

of the adjusted domestic deposits 

assessment base for the first quarter 

of 2011.

In December 2009, a majority of IDIs 

prepaid $45.7 billion of estimated 

quarterly risk-based assessments 

to address the DIF’s liquidity need 

to pay for projected failures and to 

ensure that the deposit insurance 

system remained industry-funded. 

For the fourth quarter 2009 and each 

subsequent quarter, an institution’s 

risk-based deposit insurance 

assessment was offset by the available 

amount of prepaid assessments, 

thereby reducing that institution’s 

prepaid assessment balance. By 

regulation, any remaining prepaid 

assessments must be refunded to 

the institutions after collection of 

the amount due on June 30, 2013. 

The final prepaid offset will occur in 

June 2013 for the assessment period 

ending March 31, 2013. Therefore, 

at December 31, 2012, the “Unearned 

revenue – prepaid assessments” line 

item on the Balance Sheet of $1.6 

billion represents the final estimated 

prepaid offset and the “Refunds of 

prepaid assessments” line item reflects 

the estimate of $5.7 billion that will 

78 Finac
be returned to the institutions in June 

2013. Though the combined total for 

both the prepaid offset and refunds 

will remain unchanged, the estimated 

amount for each component may 

vary considerably because of the 

uncertainty inherent in projecting 

the assessment rate and base for IDIs 

beyond the customary 90-day period.

For those institutions that did not 

prepay assessments or whose prepaid 

assessments have been exhausted, 

the “Assessments receivable, net” 

line item on the Balance Sheet of 

$1.0 billion and $282 million as 

of December 31, 2012 and 2011, 

respectively, represents the estimated 

premiums due from IDIs for the fourth 

quarter of 2012 and 2011, respectively.

Reserve Ratio

As of September 30, 2012, the DIF 

reserve ratio was 0.35 percent of 

estimated insured deposits.

Assessments Related to FICO

Assessments continue to be levied 

on institutions for payments of the 

interest on obligations issued by the 

Financing Corporation (FICO). The 

FICO was established as a mixedownership government corporation 

to function solely as a financing 

vehicle for the former FSLIC. The 

annual FICO interest obligation of 

approximately $790 million is paid 

on a pro rata basis using the same 

rate for banks and thrifts. The FICO 

assessment has no financial impact 

on the DIF and is separate from 

deposit insurance assessments. The 

FDIC, as administrator of the DIF, 

acts solely as a collection agent for 

the FICO. During 2012 and 2011, 

approximately $797 million and $795 

million, respectively, was collected 

and remitted to the FICO.

10. Other Rev

Temporary Liquidity 

Guarantee Program Revenue

Pursuant to a systemic risk 

determination in October 2008, the 

FDIC established the TLGP (see Note 

16). In exchange for guarantees issued 

under the TLGP, the DIF received 

fees that were set aside, as deferred 

revenue, for potential TLGP losses. As 

losses occurred, the DIF recognized 

the losses as systemic risk expenses 

and offset the losses by recognizing 

an equivalent portion of the deferred 

revenue as systemic risk revenue. 

This accounting practice isolated 

systemic risk activities from the 

normal operating activities of the DIF.

In accordance with FDIC policy, the 

DIF recognized revenue during the 

guarantee period when guarantee 

fees held were determined to be in 

excess of amounts needed to cover 

potential losses, and, for all remaining 

TLGP assets held as deferred revenue, 

upon expiration of the TLGP on 

December 31, 2012. As a result, the 

DIF recognized total revenue of $5.9 

billion and $2.6 billion in 2012 and 

2011, respectively.

11. Operating E

Operating expenses were $1.8 billion 

and $1.6 billion for 2012 and 2011, 

respectively. The chart below lists 

the major components of operating 

expenses.

Other Revenue for the Years 

Dollars in Thousand

2012 2011

Temporary Liquidity Guarantee Program revenue 

(Note 16) $5,885,330 $2,569,579 

Dividends and interest on Citigroup trust preferred 

securities (Note 5) 177,831 178,000 

Guarantee fees for structured transactions (Note 8) 57,206 92,229 

Other 6,844 7,121 

Total $6,127,211 $2,846,929

Operating Expenses for the Years E

Dollars in Thousand

2012 2011

Salaries and benefits $1,300,697 $1,320,991 

Outside services 337,379 342,502 

Travel 106,897 115,135 

Buildings and leased space 91,631 93,630 

Software/Hardware maintenance 63,108 58,981 

Depreciation of property and equipment 76,365 77,720 

Other 21,137 46,652 

Subtotal 1,997,214 2,055,611 

Services billed to resolution entities (219,701) (430,260)

Total $1,777,513 $1,625,351

Finacita
ANNUAL REPORT 2012

12. Provisio

Insurance

Provision for insurance losses 

was negative $4.2 billion for 2012, 

compared to negative $4.4 billion for 

2011. The negative provision for 2012 

primarily resulted from a reduction 

of $1.4 billion in the contingent loss 

reserve due to the improvement in 

the financial condition of institutions 

that were previously identified to fail 

and a decrease of $2.8 billion in the 

estimated losses for institutions that 

failed in the current and prior years. 

13. Employee Be

Pension Benefits and 

Savings Plans

Eligible FDIC employees (permanent 

and term employees with 

appointments exceeding one year) are 

covered by the federal government 

retirement plans, either the Civil 

Service Retirement System (CSRS) 

or the Federal Employees Retirement 

System (FERS). Although the DIF 

contributes a portion of pension 

benefits for eligible employees, it 

does not account for the assets of 

either retirement system. The DIF 

also does not have actuarial data 

for accumulated plan benefits or the 

unfunded liability relative to eligible 

employees. These amounts are 

reported on and accounted for by the 

U.S. Office of Personnel Management 

(OPM).

Eligible FDIC employees also may 

participate in a FDIC-sponsored 

tax-deferred 401(k) savings plan 

with matching contributions up to 

5 percent. Under the Federal Thrift 

Savings Plan (TSP), the FDIC provides 

FERS employees with an automatic 

contribution of 1 percent of pay and an 

additional matching contribution up 

to 4 percent of pay. CSRS employees 

also can contribute to the TSP, but 

they do not receive agency matching 

contributions.

Postretirement Benefits 

other than Pensions

The DIF has no postretirement health 

insurance liability since all eligible 

retirees are covered by the Federal 

Employees Health Benefits (FEHB) 

program. The FEHB is administered 

and accounted for by the OPM. In 

addition, OPM pays the employer 

share of the retiree’s health insurance 

premiums.

The FDIC provides certain life 

and dental insurance coverage for 

its eligible retirees, the retirees’ 

beneficiaries, and covered dependents. 

Retirees eligible for life and dental 

insurance coverage are those who 

have qualified due to 1) immediate 

enrollment upon appointment or 

five years of participation in the plan 

and 2) eligibility for an immediate 

annuity. The life insurance program 

provides basic coverage at no cost 

to retirees and allows converting 

optional coverage to direct-pay plans. 

For the dental coverage, retirees are 

responsible for a portion of the dental 

premium.

The FDIC has elected not to fund 

the postretirement life and dental 

benefit liabilities. As a result, the 

DIF recognized the underfunded 

status (the difference between the 

accumulated postretirement benefit 

obligation and the plan assets at fair 

value) as a liability. Since there are 

no plan assets, the plan’s benefit 

liability is equal to the accumulated 

postretirement benefit obligation. 

At December 31, 2012 and 2011, 

the liability was $224 million and 

$188 million, respectively, which is 

recognized in the “Postretirement 

benefit liability” line item on the 

Balance Sheet. The cumulative 

actuarial losses (changes in 

assumptions and plan experience) 

and prior service costs (changes 

to plan provisions that increase 

benefits) were $60 million and $34 

million at December 31, 2012 and 

2011, respectively. These amounts 

are reported as accumulated other 

comprehensive income in the 

“Unrealized postretirement benefit 

loss” line item on the Balance Sheet. 

The DIF’s expenses for postretirement 

benefits for 2012 and 2011 were $14 

million and $12 million, respectively, 

which are included in the current and 

prior year’s operating expenses on 

the Statement of Income and Fund 

Balance. The changes in the actuarial 

Pension Benefits and Savings P

for the Years Ended 

Dollars in Thousand

2012 2011

Civil Service Retirement System $5,960 $6,140 

Federal Employees Retirement System (Basic Benefit) 97,517 95,846 

FDIC Savings Plan 37,700 36,645 

Federal Thrift Savings Plan 34,555 33,910 

Total $175,732 $172,541

80 Finac
losses and prior service costs for 

2012 and 2011 of $27 million and $15 

million, respectively, are reported as 

other comprehensive income in the 

“Unrealized postretirement benefit 

loss” line item on the Statement 

of Income and Fund Balance. Key 

actuarial assumptions used in the 

accounting for the plan include the 

discount rate of 3.75 percent, the 

rate of compensation increase of 4.0 

percent, and the dental coverage trend 

rate of 5.6 percent. The discount rate 

of 3.75 percent is based upon rates of 

return on high-quality fixed income 

investments whose cash flows match 

the timing and amount of expected 

benefit payments. 

14. Commitment

Off-Balance-

Expos

Commitments:

Leased Space

The FDIC’s lease commitments total 

$216 million for future years. The 

lease agreements contain escalation 

clauses resulting in adjustments, 

usually on an annual basis. The DIF 

recognized leased space expense of 

$54 million and $56 million for the 

years ended December 31, 2012 and 

2011, respectively.

Off-Balance-Sheet Exposure:

Deposit Insurance

Estimates of insured deposits are 

derived primarily from quarterly 

financial data submitted by IDIs to the 

FDIC and represent the accounting 

loss that would be realized if all 

IDIs were to fail and the acquired 

assets provided no recoveries. As of 

September 30, 2012 and December 

31, 2011, estimated insured deposits 

for the DIF were $7.3 trillion and $7.0 

trillion, respectively, including $1.5 

trillion and $1.4 trillion, respectively, 

of noninterest-bearing transaction 

deposits that exceeded the basic 

limit of $250,000 per account. Under 

the Dodd-Frank Act, noninterestbearing transaction deposits received 

unlimited deposit insurance coverage 

from December 31, 2010 through 

December 31, 2012. Upon expiration 

of this unlimited coverage on 

December 31, 2012, these deposits 

pose no further exposure to the DIF.

Leased Space Co

Dollars in Thousand

2013 2014 2015 2016 2017

2018/

Thereafter

$52,160 $46,521 $36,496 $33,509 $29,068 $18,511 

Finacita
ANNUAL REPORT 2012

15. Disclosu

the Fair Va

of Financ

Instru

Financial assets recognized 

and measured at fair value on a 

recurring basis at each reporting 

date include cash equivalents (Note 

2), the investment in U.S. Treasury 

obligations (Note 3) and trust 

preferred securities (Note 5). The 

following tables present the DIF’s 

financial assets measured at fair value 

as of December 31, 2012 and 2011.

In exchange for prior shared-loss 

guarantee coverage provided to 

Citigroup, the FDIC and the Treasury 

received TruPs (see Note 5). At 

December 31, 2012, the fair value of 

the securities in the amount of $2.264 

billion was classified as a Level 2 

measurement based on an FDICdeveloped model using observable 

market data for traded Citigroup 

securities to determine the expected 

present value of future cash flows. 

Key inputs include market yields 

on U.S. dollar interest rate swaps 

and discount rates for default, call, 

and liquidity risks that are derived 

from traded Citigroup securities and 

modeled pricing relationships. 

Some of the DIF’s financial assets and 

liabilities are not recognized at fair 

value but are recorded at amounts that 

approximate fair value due to their 

short maturities and/or comparability 

with current interest rates. Such 

items include interest receivable on 

investments, assessments receivable, 

other short-term receivables, refunds 

of prepaid assessments, accounts 

payable, and other liabilities. 

The net receivables from resolutions 

primarily include the DIF’s subrogated 

claim arising from obligations to 

insured depositors. The resolution 

entity assets that will ultimately be 

used to pay the corporate subrogated 

claim are valued using discount rates 

that include consideration of market 

risk. These discounts ultimately affect 

the DIF’s allowance for loss against 

the receivables from resolutions. 

Therefore, the corporate subrogated 

claim indirectly includes the effect of 

discounting and should not be viewed 

as being stated in terms of nominal 

cash flows.

Although the value of the corporate 

subrogated claim is influenced by 

valuation of resolution entity assets 

(see Note 4), such valuation is not 

equivalent to the valuation of the 

corporate claim. Since the corporate 

claim is unique, not intended for 

sale to the private sector, and has 

no established market, it is not 

practicable to estimate a fair value.

The FDIC believes that a sale to the 

private sector of the corporate claim 

would require indeterminate, but 

substantial, discounts for an interested 

party to profit from these assets 

because of credit and other risks. In 

addition, the timing of resolution 

entity payments to the DIF on the 

subrogated claim does not necessarily 

correspond with the timing of 

collections on resolution entity assets. 

Therefore, the effect of discounting 

used by resolution entities should not 

necessarily be viewed as producing 

an estimate of fair value for the net 

receivables from resolutions.

82 Finac
Assets Measured at Fair Value at Dece

Dollars in Thousand

Fair Value Measurements Using

Quoted Prices 

in Active 

Markets for 

Identical Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3)

Total Assets 

at Fair Value

Asset

 Cash equivalents1 $3,091,778 $3,091,778 

Available-for-Sale Debt Securitie

 Investment in U.S. Treasury obligations2 34,868,688 34,868,688 

 Trust preferred securities $2,263,983 2,263,983 

Total Assets $37,960,466 $2,263,983 $0 $40,224,449 

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

U.S. Bureau of Public Debt. 

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

Assets Measured at Fair Value at Dece

Dollars in Thousand

Fair Value Measurements Using

 

Quoted Prices 

in Active 

Markets for 

Identical Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3)

Total Assets 

at Fair Value

Asset

 Cash equivalents1 $3,266,631 $3,266,631 

Available-for-Sale Debt Securitie

 Investment in U.S. Treasury obligations2 33,863,245 33,863,245 

 Trust preferred securities $2,213,231 2,213,231 

 Trust preferred securities held for UST (Note 5) 795,769 795,769

Total Assets $37,129,876 $3,009,000 $0 $40,138,876 

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

U.S. Bureau of Public Debt. 

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

Finacita
ANNUAL REPORT 2012

16. Systemi

Transac

Pursuant to a systemic risk 

determination, the FDIC established 

the TLGP (codified in part 370 of title 

12 of the Code of Federal Regulations) 

for IDIs, designated affiliates and 

certain holding companies on October 

14, 2008, in an effort to counter the 

system-wide crisis in the nation’s 

financial sector. The DIF received 

fees in exchange for guarantees 

issued under the TLGP and set aside, 

as deferred revenue, all fees for 

potential TLGP losses. As systemic 

risk expenses were incurred, the 

DIF reduced deferred revenue and 

recognized an offsetting amount as 

systemic risk revenue. Also, DIF 

recognized systemic risk revenue 

when guarantee fees held were 

determined to be in excess of amounts 

needed to cover potential losses. As 

a result, systemic risk activities were 

isolated from the normal operating 

activities of the DIF.

At its inception, the TLGP consisted of 

two components: 1) the Transaction 

Account Guarantee Program (TAG) 

and 2) the Debt Guarantee Program 

(DGP). The TAG provided unlimited 

coverage for noninterest-bearing 

transaction accounts held by IDIs 

on all deposit amounts exceeding 

the fully insured limit of $250,000 

through December 31, 2010. During 

its existence, the FDIC collected TAG 

fees of $1.2 billion. Total subrogated 

claims arising from obligations to 

depositors with noninterest-bearing 

transaction accounts were $8.8 billion, 

with estimated losses of $2.1 billion.

The DGP permitted participating 

entities to issue FDIC-guaranteed 

senior unsecured debt through 

October 31, 2009. The FDIC’s 

guarantee for all such debt expired 

no later than December 31, 2012. 

Through the end of the debt issuance 

period, the DIF collected $8.3 billion of 

guarantee fees and received additional 

fees of $1.2 billion from participating 

entities that elected to issue senior 

unsecured non-guaranteed debt. 

During the program, guaranteed debt 

issued totaled $618.0 billion and the 

FDIC paid $153 million in claims for 

principal and interest arising from the 

default of guaranteed debt obligations 

of six debt issuers. 

The expiration of the guarantee 

period for the DGP on December 

31, 2012 marked the conclusion of 

the TLGP. As established under 

terms of the TLGP, all excess funds 

were transferred to the DIF. Since 

inception, the DIF recognized total 

“Other revenue” of $8.5 billion 

(see Note 10). In 2012, the DIF 

received $5.2 billion of cash and a net 

receivable of $693 million included 

in “Receivables from resolutions, 

net”. The net receivable represents 

estimated recoveries on payments 

under the TLGP to cover obligations. 

In 2011, the DIF received $2.6 billion 

of cash and U.S. Treasury obligations.

17. Subsequen

Subsequent events have been 

evaluated through February 14, 2013, 

the date the financial statements are 

available to be issued.

2013 Failures through 

February 14, 2013

Through February 14, 2013, two 

insured institutions failed in 2013 with 

total losses to the DIF estimated to be 

$43 million. 

TLGP Summary (Inception through Decemb

Dollars in Thousand

Collections:

Transaction Account Guarantee Program fees $1,156,332 

Debt Guarantee Program fees 9,490,993 

Interest earned on TLGP funds 42,293 

 Total TLGP Fees and Interest Earned $10,689,618 

Payments

Transaction Account Guarantee Program claims $(8,769,873)

 Less: Receipts of receivership dividends 6,016,597 

Net Transaction Account Guarantee 

Program claims

(2,753,276)

Debt Guarantee Program claims paid (153,127)

TLGP operating expenses (6,707)

 Total TLGP Claims and Expenses Paid $(2,913,110)

Cash Transferred to the DIF 7,776,508 

Estimated Recovery on TAG Claims Paid 693,248 

Excess TLGP Assets Transferred to the DIF $8,46

84 Finac
 FSLIC Resolutio

Federal Deposit Insurance Cor

FSLIC Resolution Fund Balance Shee

Dollars in Thousand

2012 2011

Asset

Cash and cash equivalents $3,594,007 $3,533,410 

Receivables from thrift resolutions and other assets, net (Note 3) 5,456 65,163 

Receivables from U.S. Treasury for goodwill litigation (Note 4) 356,455 356,455 

Total Assets $3,955,918 $3,955,028 

Liabilities

Accounts payable and other liabilities $2,442 $3,544 

Contingent liabilities for goodwill litigation (Note 4) 356,455 356,455 

Total Liabilities 358,897 359,999 

Resolution Equit  (Note

Contributed capital 128,056,656 127,875,656 

Accumulated deficit (124,459,635) (124,280,627)

Total Resolution Equity 3,597,021 3,595,029 

Total Liabilities and Resolution Equity $3,955,918 $3,955,028 

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

Finacita
ANNUAL REPORT 2012

FSLIC Resolutio

Federal Deposit Insurance Cor

FSLIC Resolution Fund Statement of Income a

for the Years Ended 

Dollars in Thousand

2012 2011

Revenu

 Interest on U.S. Treasury obligations $2,458 $1,361 

 Other revenue 2,549 3,257 

Total Revenue 5,007 4,618 

Expenses and Loss

 Operating expenses 4,165 4,660 

 Provision for losses (1,408) (8,578)

 Goodwill litigation expenses (Note 4) 181,000 82,960 

 Recovery of tax benefits 0 (18,373)

 Other expenses 258 205 

Total Expenses and Losses 184,015 60,874 

Net Loss (179,008) (56,256)

Accumulated Deficit - Beginning (124,280,627) (124,224,371)

Accumulated Deficit - Ending $(124,459,635) $(124,280,627)

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

86 Finac
FSLIC Resolutio

Federal Deposit Insurance Cor

FSLIC Resolution Fund Statement of C

for the Years Ended 

Dollars in Thousand

2012 2011

Operating Activiti

Net Loss $(179,008) $(56,256)

Adjustments to reconcile net loss to

net cash (used) by operating activities: 

Provision for losses (1,408) (8,578)

Change in Operating Assets and Liabiliti

Decrease (Increase) in receivables from thrift resolutions and other assets 61,115 (33,177)

(Decrease) Increase in accounts payable and other liabilities (1,102) 554 

Increase in contingent liabilities for goodwill litigation 0 32,960 

Net Cash (Used) by Operating Activities (120,403) (64,497)

Financing Activitie

Provided by

U.S. Treasury payments for goodwill litigation (Note 4) 181,000 50,000 

Net Cash Provided by Financing Activities 181,000 50,000 

Net Increase (Decrease) in Cash and Cash Equivalents 60,597 (14,497)

Cash and Cash Equivalents - Beginning 3,533,410 3,547,907 

Cash and Cash Equivalents - Ending $3,594,007 $3,533,410 

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

Finacita
ANNUAL REPORT 2012

Notes to the Financial Statements

FSLIC Resolut

December 31, 2012 and 2011

1. Operati

Dissol

of the FSL

Resoluti

Overview

The Federal Deposit Insurance 

Corporation (FDIC) is the independent 

deposit insurance agency created by 

Congress in 1933 to maintain stability 

and public confidence in the nation’s 

banking system. Provisions that 

govern the operations of the FDIC 

are generally found in the Federal 

Deposit Insurance (FDI) Act, as 

amended (12 U.S.C. 1811, et seq). In 

carrying out the purposes of the FDI 

Act, the FDIC, as administrator of the 

Deposit Insurance Fund (DIF), insures 

the deposits of banks and savings 

associations (insured depository 

institutions). In cooperation with 

other federal and state agencies, 

the FDIC promotes the safety and 

soundness of insured depository 

institutions by identifying, monitoring 

and addressing risks to the DIF. 

Commercial banks, savings banks 

and savings associations (known as 

“thrifts”) are supervised by either the 

FDIC, the Office of the Comptroller 

of the Currency, or the Federal 

Reserve Board. In addition, the FDIC, 

through administration of the FSLIC 

Resolution Fund (FRF), is responsible 

for the sale of remaining assets and 

satisfaction of liabilities associated 

with the former Federal Savings and 

Loan Insurance Corporation (FSLIC) 

and the former Resolution Trust 

Corporation (RTC). The DIF and the 

FRF are maintained separately by 

the FDIC to support their respective 

functions.

The U.S. Congress created the FSLIC 

through the enactment of the National 

Housing Act of 1934. The Financial 

Institutions Reform, Recovery, and 

Enforcement Act of 1989 (FIRREA) 

abolished the insolvent FSLIC, 

created the FRF, and transferred the 

assets and liabilities of the FSLIC 

to the FRF-except those assets and 

liabilities transferred to the newly 

created RTC-effective on August 9, 

1989. Further, the FIRREA established 

the Resolution Funding Corporation 

(REFCORP) to provide part of the 

initial funds used by the RTC for thrift 

resolutions.

The RTC Completion Act of 1993 

(RTC Completion Act) terminated 

the RTC as of December 31, 1995. 

All remaining assets and liabilities 

of the RTC were transferred to the 

FRF on January 1, 1996. Today, the 

FRF consists of two distinct pools of 

assets and liabilities: one composed 

of the assets and liabilities of the 

FSLIC transferred to the FRF upon the 

dissolution of the FSLIC (FRF-FSLIC), 

and the other composed of the RTC 

assets and liabilities (FRF-RTC). The 

assets of one pool are not available to 

satisfy obligations of the other.

Operations/Dissolution 

of the FRF

The FRF will continue operations until 

all of its assets are sold or otherwise 

liquidated and all of its liabilities are 

satisfied. Any funds remaining in the 

FRF-FSLIC will be paid to the U.S. 

Treasury. Any remaining funds of 

the FRF-RTC will be distributed to 

the REFCORP to pay the interest on 

the REFCORP bonds. In addition, 

the FRF-FSLIC has available 

until expended $602 million in 

appropriations to facilitate, if required, 

efforts to wind up the resolution 

activity of the FRF-FSLIC. 

The FDIC has conducted an extensive 

review and cataloging of FRF’s 

remaining assets and liabilities. 

Some of the issues and items that 

remain open in FRF are 1) criminal 

restitution orders (generally have from 

1 to 13 years remaining to enforce); 

2) collections of settlements and 

judgments obtained against officers 

and directors and other professionals 

responsible for causing or contributing 

to thrift losses (generally have from 

2 to 14 years remaining to enforce, 

unless the judgments are renewed, 

which will result in significantly 

longer periods for collection for 

some judgments); 3) a few assistance 

agreements entered into by the former 

FSLIC (FRF could continue to receive 

or refund overpayments of tax benefits 

sharing through 2014); 4) goodwill 

litigation (no final date for resolution 

has been established; see Note 4); 

and 5) affordable housing program 

monitoring (requirements can exceed 

25 years). The FRF could potentially 

realize recoveries from tax benefits 

sharing of up to approximately $40 

million; however, any associated 

recoveries are not reflected in 

88 Finac
FRF’s financial statements given the 

significant uncertainties surrounding 

the ultimate outcome. The FDIC will 

consider returning a portion of the 

FRF-FSLIC’s remaining funds of $3.4 

billion to the U.S. Treasury in 2013.

Receivership Operations

The FDIC is responsible for 

managing and disposing of the 

assets of failed institutions in an 

orderly and efficient manner. The 

assets held by receivership entities, 

and the claims against them, are 

accounted for separately from FRF 

assets and liabilities to ensure that 

receivership proceeds are distributed 

in accordance with applicable laws 

and regulations. Also, the income and 

expenses attributable to receiverships 

are accounted for as transactions of 

those receiverships. Receiverships 

are billed by the FDIC for services 

provided on their behalf.

2. Summary 

Signi

Accou

Pol

Genera

These financial statements pertain 

to the financial position, results of 

operations, and cash flows of the FRF 

and are presented in accordance with 

U.S. generally accepted accounting 

principles (GAAP). As permitted by 

the Federal Accounting Standards 

Advisory Board’s Statement of Federal 

Financial Accounting Standards 34, 

The Hierarchy of Generally Accepted 

Accounting Principles, Including 

the Application of Standards 

Issued by the Financial Accounting 

Standards Board, the FDIC prepares 

financial statements in accordance 

with standards promulgated by the 

Financial Accounting Standards 

Board (FASB). These statements 

do not include reporting for assets 

and liabilities of receivership entities 

because these entities are legally 

separate and distinct, and the 

FRF does not have any ownership 

interests in them. Periodic and final 

accountability reports of receivership 

entities are furnished to courts, 

supervisory authorities, and others 

upon request.

Use of Estimates

Management makes estimates and 

assumptions that affect the amounts 

reported in the financial statements 

and accompanying notes. Actual 

results could differ from these 

estimates. Where it is reasonably 

possible that changes in estimates 

will cause a material change in the 

financial statements in the near term, 

the nature and extent of such changes 

in estimates have been disclosed. The 

more significant estimates include the 

allowance for losses on receivables 

from thrift resolutions and the 

estimated losses for litigation.

Cash Equivalents

Cash equivalents are short-term, 

highly liquid investments consisting 

primarily of U.S. Treasury Overnight 

Certificates.

Provision for Losses

The provision for losses represents 

the change in the estimation of the 

allowance for losses related to the 

receivables from thrift resolutions and 

other assets.

Related Parties

The nature of related parties and 

a description of related party 

transactions are discussed in Note 1 

and disclosed throughout the financial 

statements and footnotes.

Disclosure about Recent 

Relevant Accounting 

Pronouncements

Recent accounting pronouncements 

have been deemed to be not applicable 

or material to the financial statements 

as presented.

3. Recei

from Th

Resoluti

Other As

Receivables from 

Thrift Resolutions

The receivables from thrift resolutions 

include payments made by the FRF 

to cover obligations to insured 

depositors, advances to receiverships 

for working capital, and administrative 

expenses paid on behalf of 

receiverships. Any related allowance 

for loss represents the difference 

between the funds advanced and/

or obligations incurred and the 

expected repayment. Assets held by 

the FDIC in its receivership capacity 

for the former RTC are a significant 

source of repayment of the FRF’s 

receivables from thrift resolutions. As 

of December 31, 2012, three of the 850 

FRF receiverships remain active until 

their liability-related impediments are 

resolved. 

The FRF receiverships held assets 

with a book value of $13 million 

and $15 million as of December 31, 

2012 and 2011, respectively (which 

primarily consist of cash held for 

non-FRF, third party creditors). 

Other Assets

Other assets decreased by $59 million 

to $3 million primarily due to the 

collection of a receivable for tax 

benefits sharing of $44 million and 

the release of the credit enhancement 

Finacita
ANNUAL REPORT 2012

reserves of $13 million (see Note 4, 

Contingent Liabilities for: Guarantees). 

The tax benefits sharing collection 

represented the FRF’s share of tax 

savings by entities that either entered 

into assistance agreements with the 

former FSLIC, or have subsequently 

purchased financial institutions that 

had prior agreements with the FSLIC. 

4. Conting

Liabili

Goodwill Litigatio

In United States v. Winstar Corp., 

518 U.S. 839 (1996), the Supreme 

Court held that when it became 

impossible following the enactment 

of FIRREA in 1989 for the federal 

government to perform certain 

agreements to count goodwill toward 

regulatory capital, the plaintiffs were 

entitled to recover damages from the 

United States. 

On July 22, 1998, the Department 

of Justice’s (DOJ’s) Office of Legal 

Counsel (OLC) concluded that the 

FRF is legally available to satisfy 

all judgments and settlements in 

the goodwill litigation involving 

supervisory action or assistance 

agreements. OLC determined that 

nonperformance of these agreements 

was a contingent liability that was 

transferred to the FRF on August 

9, 1989, upon the dissolution of 

the FSLIC. On July 23, 1998, the 

U.S. Treasury determined, based 

on OLC’s opinion, that the FRF is 

the appropriate source of funds for 

payments of any such judgments 

and settlements. The FDIC General 

Counsel concluded that, as liabilities 

transferred on August 9, 1989, these 

contingent liabilities for future 

nonperformance of prior agreements 

with respect to supervisory goodwill 

were transferred to the FRF-FSLIC, 

which is that portion of the FRF 

encompassing the obligations of the 

former FSLIC. The FRF-RTC, which 

encompasses the obligations of the 

former RTC and was created upon the 

termination of the RTC on December 

31, 1995, is not available to pay any 

settlements or judgments arising out 

of the goodwill litigation. 

The FRF can draw from an 

appropriation provided by Section 

110 of the Department of Justice 

Appropriations Act, 2000 (Public 

Law 106-113, Appendix A, Title I, 113 

Stat. 1501A-3, 1501A-20) such sums 

as may be necessary for the payment 

of judgments and compromise 

settlements in the goodwill litigation. 

This appropriation is to remain 

available until expended. Because 

an appropriation is available to pay 

such judgments and settlements, 

any estimated liability for goodwill 

litigation should have a corresponding 

receivable from the U.S. Treasury and 

therefore have no net impact on the 

financial condition of the FRF. 

For the year ended December 31, 

2012, the FRF paid $181 million as a 

result of a settlement in one goodwill 

case compared to $50 million for 

one goodwill case in 2011. The FRF 

received appropriations from the 

U.S. Treasury to fund these payments.

As of December 31, 2012, two 

remaining cases are active and 

pending against the United States 

based on alleged breaches of the 

agreements stated above. Of these 

two remaining cases, a contingent 

liability and an offsetting receivable 

of $356 million was recorded for one 

case as of December 31, 2012 and 

2011. This case is currently before 

the lower court pending remand 

following appeal. It is reasonably 

possible that for this case the FRF 

could incur additional estimated 

losses of $63 million, representing 

additional damages contended by 

the plaintiff. For the other remaining 

active case, no awards were given to 

the plaintiffs by the appellate court. 

This case is fully adjudicated but the 

Court of Federal Claims is considering 

awarding litigation costs to the 

United States. 

At December 31, 2011, there were five 

active cases. For three of the cases 

considered active at year end 2011, 

one was settled and paid during 2012 

and two were fully adjudicated with 

no award; in one of these two cases 

the Court of Federal Claims awarded 

litigation costs of $231 thousand to the 

United States, which was paid in 2012.

In addition, the FRF-FSLIC pays the 

goodwill litigation expenses incurred 

Receivables from Thrift Resolutions 

Net at Decem

Dollars in Thousand

2012 2011

Receivables from closed thrifts $869,917 $1,800,417 

Allowance for losses (867,208) (1,797,154)

Receivables from Thrift Resolutions, Net 2,709 3,2

Other assets 2,747 61,900 

Total $5,456 $ 65,163 

90 Finac
by the DOJ, the entity that defends 

these lawsuits against the United 

States, based on a Memorandum of 

Understanding (MOU) dated October 

2, 1998, between the FDIC and the 

DOJ. FRF-FSLIC pays in advance the 

estimated goodwill litigation expenses. 

Any unused funds are carried over and 

applied toward the next fiscal year 

(FY) charges. In 2012, FRF-FSLIC did 

not provide any additional funding to 

the DOJ because the unused funds 

from prior fiscal years were sufficient 

to cover estimated FY 2013 expenses. 

Guarini Litigatio

Paralleling the goodwill cases 

were similar cases alleging that the 

government breached agreements 

regarding tax benefits associated with 

certain FSLIC-assisted acquisitions. 

These agreements allegedly contained 

the promise of tax deductions for 

losses incurred on the sale of certain 

thrift assets purchased by plaintiffs 

from the FSLIC, even though the 

FSLIC provided the plaintiffs with 

tax-exempt reimbursement. A 

provision in the Omnibus Budget 

Reconciliation Act of 1993 (popularly 

referred to as the “Guarini legislation”) 

eliminated the tax deductions for 

these losses.

All eight of the original Guarini cases 

have been settled. However, a case 

settled in 2006 further obligates 

the FRF-FSLIC as a guarantor for 

all tax liabilities in the event the 

settlement amount is determined by 

tax authorities to be taxable. The 

maximum potential exposure under 

this guarantee is approximately $81 

million. However, the FDIC believes 

that it is very unlikely the settlement 

will be subject to taxation. More 

definitive information may be available 

during 2013, after the Internal Revenue 

Service (IRS) completes its Large Case 

Program audit on the affected entity’s 

2006 returns; this audit remains 

ongoing. As of December 31, 2012, no 

liability has been recorded. The FRF 

does not expect to fund any payment 

under this guarantee. 

Guarantee

On May 21, 2012, the FDIC, in its 

capacity as manager of the FRF, 

entered into an agreement with 

Fannie Mae for the release of $13 

million of credit enhancement 

reserves to the FRF in exchange for 

indemnifying Fannie Mae for all future 

losses incurred on 76 multi-family 

mortgage loans. The former RTC 

supplied Fannie Mae with the credit 

enhancement reserves in the form of 

cash collateral to cover future losses 

on these mortgage loans through 

2020. The maximum exposure on this 

indemnification is the current unpaid 

principal balance of the remaining 

73 multi-family loans totaling 

$10 million. Based on a contingent 

liability assessment of this portfolio, 

the average loan-to-value ratio is 21%, 

the majority of the loans are at least 

60% amortized, and all are scheduled 

to mature within three to eight years. 

Since all of the loans are currently in 

performing status and no losses have 

occurred since 2001, future payments 

on this indemnification are not 

expected. As a result, the FRF 

has not recorded a contingent liability 

for this indemnification as of 

December 31, 2012.

5. Resoluti

As stated in the Overview section of 

Note 1, the FRF is comprised of two 

distinct pools: the FRF-FSLIC and the 

FRF-RTC. The FRF-FSLIC consists of 

the assets and liabilities of the former 

FSLIC. The FRF-RTC consists of the 

assets and liabilities of the former 

RTC. Pursuant to legal restrictions, 

the two pools are maintained 

separately and the assets of one pool 

are not available to satisfy obligations 

of the other.

The following table shows the 

contributed capital, accumulated 

deficit, and resulting resolution equity 

for each pool.

Contributed Capital

The FRF-FSLIC and the former RTC 

received $43.5 billion and $60.1 billion 

from the U.S. Treasury, respectively, 

to fund losses from thrift resolutions 

prior to July 1, 1995. Additionally, 

the FRF-FSLIC issued $670 million in 

capital certificates to the Financing 

Corporation (a mixed-ownership 

government corporation established to 

function solely as a financing vehicle 

for the FSLIC) and the RTC issued 

Resolution Equity at December 

Dollars in Thousand

FRF-FSLIC FRF-RTC

FRF 

Consolidated

Contributed capital - beginning $46,126,319 $81,749,337 $127,875,656 

Add: U.S. Treasury payment for 

goodwill litigation

181,000 0 181,000 

Contributed capital - ending 46,307,319 81,749,337 128,056,656 

Accumulated deficit (42,882,341) (81,577,294) (124,459,635)

Total $3,424,978 $172,043 $3,597,021

Finacita
ANNUAL REPORT 2012

$31.3 billion of these instruments to 

the REFCORP. FIRREA prohibited the 

payment of dividends on any of these 

capital certificates.

FRF-FSLIC received $181 million in 

U.S. Treasury payments for goodwill 

litigation in 2012. Furthermore, $356 

million was accrued for as receivables 

as of December 31, 2012 and 2011. 

Through December 31, 2012, the 

FRF has received or established a 

receivable for a total of $2.2 billion of 

goodwill appropriations, the effect of 

which increases contributed capital.

Through December 31, 2012, the 

FRF-RTC has returned $4.6 billion to 

the U.S. Treasury and made payments 

of $5.0 billion to the REFCORP. These 

actions serve to reduce contributed 

capital. The most recent payment to 

the REFCORP was in January of 2008 

for $225 million. 

Accumulated Deficit

The accumulated deficit represents 

the cumulative excess of expenses 

and losses over revenue for activity 

related to the FRF-FSLIC and the 

FRF-RTC. Approximately $29.8 billion 

and $87.9 billion were brought forward 

from the former FSLIC and the former 

RTC on August 9, 1989, and January 

1, 1996, respectively. The FRF-FSLIC 

accumulated deficit has increased by 

$13.1 billion, whereas the FRF-RTC 

accumulated deficit has decreased 

by $6.3 billion, since their dissolution 

dates.

6. Disclosu

the Fair Va

of Financ

Instru

The following table presents the FRF’s 

financial assets measured at fair value 

on a recurring basis as of December 

31, 2012 and 2011.

Assets Measured at Fair Value at Dece

Dollars in Thousand

Fair Value Measurements Using

 

Quoted Prices 

in Active 

Markets for 

Identical Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3)

Total Assets 

at Fair Value

Asset

Cash equivalents1 $3,425,097 $3,425,097 

Total Assets $3,425,097 $0 $0 $3,425,097 

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

U.S. Bureau of Public Debt. Cash equivalents are included in the “Cash and cash equivalents” line item. 

 

Assets Measured at Fair Value at Dece

Dollars in Thousand

Fair Value Measurements Using

 

Quoted Prices 

in Active 

Markets for 

Identical Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3)

Total Assets 

at Fair Value

Asset

Cash equivalents1 $3,377,203 $3,377,203 

Credit enhancement reserves2 $14,431 14,431 

Total Assets $3,377,203 $14,431 $0 $3,391,634 

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

U.S. Bureau of Public Debt. Cash equivalents are included in the “Cash and cash equivalents” line item.

2 Credit enhancement reserves are valued by performing projected cash flow analyses using market-based assumptions.

92 Finac
Some of the FRF’s financial assets and 

liabilities are not recognized at fair 

value but are recorded at amounts that 

approximate fair value due to their 

short maturities and/or comparability 

with current interest rates. Such items 

include other short-term receivables 

and accounts payable and other 

liabilities.

The net receivable from thrift 

resolutions is influenced by the 

underlying valuation of receivership 

assets. This corporate receivable is 

unique and the estimate presented 

is not necessarily indicative of the 

amount that could be realized in a 

sale to the private sector. Such a sale 

would require indeterminate, but 

substantial, discounts for an interested 

party to profit from these assets 

because of credit and other risks. 

Consequently, it is not practicable to 

estimate its fair value.

Finacita
ANNUAL REPORT 2012

Government Accountbili

94 Finac
Government Accountbility Office’s 

Finacita
ANNUAL REPORT 2012

Government Accountbility Office’s 

96 Finac
Government Accountbility Office’s 

Finacita
ANNUAL REPORT 2012

Government Accountbility Office’s 

98 Finac
Government Accountbility Office’s 

Finacita
ANNUAL REPORT 2012

Government Accountbility Office’s 

100 Finac
Government Accountbility Office’s 

Finacitat
ANNUAL REPORT 2012

Management’s Re

Appendix I

102 Finac
Management’s Response (cont

Finacitat
ANNUAL REPORT 2012

Overview

the Ind

The 7,181 FDIC-insured commercial 

banks and savings institutions that 

filed financial results for the first 

nine months of 2012 reported net 

income of $106.9 billion, an increase 

of 15.0 percent compared to the first 

nine months of 2011. This is the 

third consecutive year that industry 

earnings have registered a year-overyear increase. The improvement in 

earnings was attributable to lower 

expenses for loan-loss provisions, 

increased noninterest income, 

higher realized gains on securities 

and other assets, and growth in net 

interest income. Two out of every 

three institutions reported year-overyear increases in net income, and 

the percentage of institutions with 

negative net income for the first nine 

months of the year fell to 10.7 percent, 

down from 15.9 percent a year earlier.

The average return on assets (ROA) 

for the first nine months was 1.02 

percent, up from 0.92 percent for 

the same period of 2011. This is the 

highest nine-month industry ROA 

since 2007. More than half of insured 

institutions (57.7 percent) had higher 

ROAs in 2012 than in 2011. Insured 

institutions set aside $43.3 billion in 

provisions for loan and lease losses 

during the first nine months of 2012, a 

decline of $14.4 billion (25.0 percent) 

compared to the same period in 

2011. The industry’s total noninterest 

income increased by $10.3 billion (5.9 

percent), as income from loan sales 

rose by $9.3 billion (201.9 percent). 

Total noninterest expenses were $9.3 

billion (3.0 percent) higher, led by a 

$6.6 billion (5.0-percent) increase in 

salary and benefit expenses.

A challenging environment of low 

short-term interest rates combined 

with a flat yield curve contributed to 

a decline in the industry’s net interest 

margin in 2012. The average margin 

fell from 3.61 percent in the first three 

quarters of 2011 to 3.46 percent for the 

first three quarters of 2012. However, 

the industry’s interest-earning assets 

grew by 4.6 percent from the end of 

September 2011 through the end of 

September 2012, helping to boost net 

interest income by $1.9 billion (0.6 

percent).

Indicators of asset quality continued to 

improve in 2012. In the twelve months 

ended September 30, total noncurrent 

loans and leases -- those that were 

90 days or more past due or in 

nonaccrual status – declined by $22.2 

billion (7.1 percent). Loans secured 

by real estate properties accounted for 

more than half ($13.0 billion) of the 

reduction in noncurrent loans. New 

accounting and reporting guidelines 

resulted in a $14.9 billion (8.1 percent) 

increase in the amount of noncurrent 

1-4 family residential real estate loan 

balances reported, but this increase 

did not represent deterioration 

in the underlying performance of 

these loans. Noncurrent real estate 

construction and development loans 

fell by $17.0 billion (45.9 percent), and 

noncurrent real estate loans secured 

by nonfarm nonresidential properties 

declined by $8.2 billion (19.6 percent). 

Noncurrent balances in all other major 

loan categories declined, led by loans 

to commercial and industrial (C&I) 

borrowers (down $5.0 billion, or 26.1 

percent). Net charge-offs of loans and 

leases (NCOs) totaled $64.4 billion 

in the first three quarters of 2012, a 

decline of $23.5 billion (26.7 percent) 

over the same period in 2011. Credit 

card NCOs registered the largest yearover-year decline, falling by $9.3 billion 

(31.4 percent). Net charge-offs of real 

estate construction and development 

loans declined by $4.0 billion (56.4 

percent), C&I NCOs were $2.8 billion 

(32.6 percent) lower than in the first 

nine months of 2011, and NCOs in 

all other major loan categories also 

posted significant declines. At the end 

of September 2012, there were 694 

institutions on the FDIC’s “Problem 

List,” down from 844 “problem” 

institutions a year earlier. 

Asset growth remained modest in 

2012, but loan balances increased, 

after three consecutive years of 

contraction. During the 12 months 

ended September 30, total assets 

of insured institutions increased by 

$411.0 billion (3.0 percent). Loans and 

leases accounted for more than half 

of the increase in total assets, rising 

by $267.8 billion (3.7 percent). C&I 

loans increased by $173.6 billion (13.5 

percent), residential mortgage loans 

rose by $33.2 billion (1.8 percent), auto 

loans increased by $19.8 billion (6.7 

percent) and real estate loans secured 

by multifamily residential properties 

were up by $10.9 billion (5.0 percent). 

In contrast, real estate construction 

and development loans fell by $44.3 

billion (17.4 percent), and home equity 

loans declined by $41.0 billion (6.7 

percent). 

Growth in deposits outpaced the 

increase in total assets. In the 12 

months ended September 30, total 

deposits of insured institutions 

increased by $504.0 billion (5.0 

percent). Deposits in domestic 

offices rose by $554.9 billion, (6.5 

percent), while foreign office 

deposits fell by $50.9 billion. Much 

104 Finac
of the increase in domestic deposits 

occurred in balances in noninterestbearing transaction accounts that 

have temporary full FDIC insurance 

coverage. These accounts increased 

by $301.8 billion (21.7 percent), 

with $276.9 billion of the increase 

consisting of balances above the 

basic FDIC coverage limit of $250,000. 

Nondeposit liabilities declined by 

$152.3 billion (6.8 percent), while 

equity capital rose by $59.2 billion (3.8 

percent).

Finacitat
THIS PAGE INTENTIONALLY LEFT BLANK.
Corporate 

Management V.

Control

The FDIC uses several means to 

maintain comprehensive internal 

controls, ensure the overall 

effectiveness and efficiency of 

operations, and otherwise comply as 

necessary with the following federal 

standards, among others:

♦ Chief Financial Officers’ Act 

(CFO Act)

♦ Federal Managers’ Financial 

Integrity Act (FMFIA)

♦ Federal Financial Management 

Improvement Act (FFMIA)

♦ Government Performance and 

Results Act (GPRA)

♦ Federal Information Security 

Management Act (FISMA)

♦ OMB Circular A-123

♦ GAO’s Standards for Internal 

Control in the Federal Government

As a foundation for these efforts, 

the Corporate Management Control 

Branch in DOF [formerly the Office of 

Enterprise Risk Management (OERM)] 

traditionally has overseen a corporatewide program of relevant activities 

by establishing policies and working 

with management in each division 

and office in the FDIC. The FDIC has 

made a concerted effort to ensure that 

operational risks have been identified 

and that corresponding control 

needs are being incorporated into 

day-to-day operations. The program 

also requires that comprehensive 

procedures be documented, 

employees be thoroughly trained, and 

supervisors be held accountable for 

performance and results. Compliance 

monitoring is carried out through 

periodic management reviews and 

by the distribution of various activity 

reports to all levels of management. 

Conscientious attention is also 

paid to the implementation of audit 

recommendations made by the FDIC 

Office of the Inspector General, the 

GAO, the Treasury Department’s 

Special Inspector General for the 

TARP program, and other providers 

of external/audit scrutiny. The FDIC 

has received unmodified/unqualified 

opinions on its financial statement 

audits for 21 consecutive years, 

and these and other positive results 

reflect the effectiveness of the overall 

management control program.

Significantly, since the beginning of 

the financial crisis, the FDIC expanded 

the range of issues receiving close 

management scrutiny to encompass 

crisis-related challenges. As the 

severity of the crisis has subsided 

over the past two years, the focus of 

controls has shifted, specifically to 

encompass downsizing activities and 

the transfer of workloads due to the 

closing of temporary offices. 

We are developing plans for 2013 and 

beyond to ensure the continuation 

of a smooth transition of operations 

as we move toward a post-crisis 

operating environment. Among other 

things, program evaluation activities 

in the coming year will focus not only 

on new responsibilities associated 

with the Dodd-Frank Act and other 

internal organizational changes, but 

on the closing of additional temporary 

Corporate Manmen
ANNUAL REPORT 2012

satellite offices and the downsizing 

of staffing in general. Continued 

emphasis and management scrutiny 

also will be applied to contracting 

oversight, the accuracy and integrity 

of transactions, the expansion of 

performance metrics, and oversight 

of systems development efforts in 

general. 

Management Re

on Final A

As required under amended Section 5 

of the Inspector General Act of 1978, 

the FDIC must report information on 

final action taken by management on 

certain audit reports. The tables 

on the following pages provide 

information on final action taken by 

management on audit reports for the 

federal fiscal year period October 1, 

2011, through September 30, 2012.

Table 1

Management Report on Final Action on Audits with D

for Fiscal Year

Dollars in Thousand

Audit Reports Number of 

Reports

Disallowed 

Costs

A. Management decisions – final action not taken at beginning of period 2 $31,476

B. Management decisions made during the period 6 $30,683

C. Total reports pending final action during the period (A and B) 8 $62,15

D.

Final action taken during the period:

1. Recoveries: 

(a) Collections & offsets 7 $37,971

(b) Other 0 $0

2. Write-offs 3 $23,460

3. Total of 1 & 2 71 $61,4312

E. Audit reports needing final action at the end of the period 23 $3,794

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

2 Amount collected in D3 included excess recoveries of $2.8 million not reflected in line E. 

3 One report had a recovery, however, one recommendation remains open; thus, the number of reports needing final action is two.

108 Corporate Ma
Table 2

Management Report on Final Action on Audits wi

to Put Funds to Better Use for Fisc

Dollars in Thousand

Audit Reports Number of 

Reports

Funds Put To 

Better Use

A. Management decisions – final action not taken at beginning of period 0 $0 

B. Management decisions made during the period 0 $0 

C. Total reports pending final action during the period (A and B) 0 $

D.

Final action taken during the period:

1. Value of recommendations implemented (completed) 0 $0

2. Value of recommendations that management concluded should not 

or could not be implemented or completed 0 $0

3. Total of 1 and 2 0 $0

E. Audit reports needing final action at the end of the period 0 $0

Table 3

Audit Reports Without Final Actions but With M

Over One Year Old for Fis

Management Action 

Report No. 

and Issue Date OIG Audit Finding Management Action Disallowed Costs

EVAL-11-006

09/30/2011

OIG recommends that the FDIC, 

FRB, and OCC agency heads 

review the matters for consideration 

presented in this report and work 

through the Financial Stability 

Oversight Council to determine 

whether the Prompt Regulatory 

Action legislation or implementing 

regulations should be modified. As 

a recap, FDIC should increase the 

minimum Prompt Corrective Action 

(PCA) capital levels, and continue to 

refine the deposit insurance system 

for banks with assets under $10 

billion to assess greater premiums 

commensurate with risk-taking.

A working group is reviewing PGA 

and other tools in consultation with 

stakeholders to identify non-capital 

indicators of potential problems and 

opportunities for early supervisory 

intervention. The working group’s 

analysis will be presented to 

Executive Management for review and 

consideration.

Expected completion date: 

March 31, 2012

FDIC will evaluate comments on 

the agencies notices of proposed 

rulemaking that would revise and 

replace the agencies’ current 

capital rules along with considering 

modifications to the PCA capital 

triggers as well as other potential 

changes designed to strengthen the 

PCA framework.

Expected completion date:

June 30, 2013

$0 

Corporate Manmen
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VI. Appendices

A. Key 

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$0

FDIC Expenditure

Dollars in Millions

The FDIC's Strategic Plan and Annual 

Performance Plan provide the basis 

for annual planning and budgeting for 

needed resources. The 2012 aggregate 

budget (for corporate, receivership, 

and investment spending) was $3.3 

billion, while actual expenditures for 

the year were $2.5 billion, about $0.3 

billion less than 2011 expenditures.

Over the past decade, the FDIC’s 

expenditures have varied in response 

to workload. During the last several 

years, expenditures have risen, 

largely due to increasing resolution 

and receivership activity. To a lesser 

extent, increased expenses have 

resulted from supervision-related 

costs associated with the oversight of 

more troubled institutions. 

Apdic
ANNUAL REPORT 2012

FDIC Actions on Financial Institutions Applicatio

2012 2011 2010

Deposit Insurance 6 10 16

Approved1 6 10 16

Denied 0 0 0

New Branches 570 442 46

Approved 570 442 459

Denied 0 0 2

Mergers 238 206 18

Approved 238 206 182

Denied 0 0 0

Requests for Consent to Serve2 674 876 83

Approved 674 875 839

 Section 19 10 24 10

 Section 32 661 851 829

Denied 3 1 0

 Section 19 1 0 0

 Section 32 2 1 0

Notices of Change in Control 26 21 3

Letters of Intent Not to Disapprove 26 21 33

Disapproved 0 0 0

Brokered Deposit Waivers 97 84 6

Approved 95 83 65

Denied 2 1 1

Savings Association Activities3 21 30 

Approved 21 30 31

Denied 0 0 0

State Bank Activities/Investments4 7 9 

Approved 7 9 3

Denied 0 0 0

Conversion of Mutual Institutions 8 6 

Non-Objection 8 6 2

Objection 0 0 0

1 Includes deposit insurance application filed on behalf of (1) newly organized institutions, (2) existing uninsured financial services companies 

seeking establishment as an insured institution, and (3) interim institutions established to facilitate merger or conversion transactions, and 

applications to facilitate the establishment of thrift holding companies.

2 Under Section 19 of the Federal Deposit Insurance (FDI) Act, an insured institution must receive FDIC approval before employing a person 

convicted of dishonesty or breach of trust. Under Section 32, the FDIC must approve any change of directors or senior executive officers at a 

state nonmember bank that is not in compliance with capital requirements or is otherwise in troubled condition. 

3 Amendments to Part 303 of the FDIC Rules and Regulations changed FDIC oversight responsibility in October 1998. In 1998, Part 303 changed 

the Delegations of Authority to act upon applications. 

4 Section 24 of the FDI Act, in general, precludes a federally insured state bank from engaging in an activity not permissible for a national bank 

and requires notices to be filed with the FDIC.

112 A
Compliance, Enforcement, and Other Related Lega

2012 2011 2010

Total Number of Actions Initiated by the FDIC 557 550 758

Termination of Insurance

 Involuntary Termination

 Sec. 8a For Violations, Unsafe/Unsound Practices or Conditions 0 0 0

 Voluntary Terminatio

 Sec. 8a By Order Upon Request 0 0 0

 Sec. 8p No Deposits 3 7 4

 Sec. 8q Deposits Assumed 4 2 1

Sec. 8b Cease-and-Desist Action

 Notices of Charges Issued1 0 7 3

 Orders to Pay Restitution 9 N/A N/A

 Consent Orders 120 183 372

Sec. 8e Removal/Prohibition of Director or Offi

 Notices of Intention to Remove/Prohibit 8 11 10

 Consent Orders 108 100 111

Sec. 8g Suspension/Removal When Charged With Crime 0 

Civil Money Penalties Issued

 Sec. 7a Call Report Penalties 1 0 0

 Sec. 8i Civil Money Penalties 164 193 212

 Sec. 8i Civil Money Penalty Notices of Assessment 5 5 8

Sec. 10c Orders of Investigation 16 29 1

Sec. 19 Waiver Orde

 Approved Section 19 Waiver Orders 119 10 24

 Denied Section 19 Waiver Orders 0 1 0

Sec. 32 Notices Disapproving Officer/Director’s Request for Review 0

Truth-in-Lending Act Reimbursement Act

 Denials of Requests for Relief 0 0 0

 Grants of Relief 0 0 0

 Banks Making Reimbursement1 126 84 64

Suspicious Activity Reports (Open and closed institutions)1 139,102 125,460 126,

Other Actions Not Listed 0

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

actions initiated.

Apdic
ANNUAL REPORT 2012

Estimated Insured Deposits and the Deposit In

December 31, 1934, through September 3

Dollars in Millions (except Insurance Coverage

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Insured 

Deposits

Deposit 

Insurance

Fund

Total

Domestic 

Deposits

Est. Insured

Deposits

2012 $250,000 $9,084,802 $7,250,693 79.8 $25,223.9 0.28 0.35 

2011 250,000 8,782,165 6,981,569 79.5 11,826.5 0.13 0.17 

2010 250,000 7,887,733 6,307,607 80.0 (7,352.2) (0.09) (0.12)

2009 250,000 7,705,353 5,407,773 70.2 (20,861.8) (0.27) (0.39)

2008 100,000 7,505,409 4,750,783 63.3 17,276.3 0.23 0.36 

2007 100,000 6,921,678 4,292,211 62.0 52,413.0 0.76 1.22 

2006 100,000 6,640,097 4,153,808 62.6 50,165.3 0.76 1.21 

2005 100,000 6,229,823 3,891,000 62.5 48,596.6 0.78 1.25 

2004 100,000 5,724,775 3,622,213 63.3 47,506.8 0.83 1.31 

2003 100,000 5,224,030 3,452,606 66.1 46,022.3 0.88 1.33 

2002 100,000 4,916,200 3,383,720 68.8 43,797.0 0.89 1.29 

2001 100,000 4,565,068 3,216,585 70.5 41,373.8 0.91 1.29 

2000 100,000 4,211,895 3,055,108 72.5 41,733.8 0.99 1.37 

1999 100,000 3,885,826 2,869,208 73.8 39,694.9 1.02 1.38 

1998 100,000 3,817,150 2,850,452 74.7 39,452.1 1.03 1.38 

1997 100,000 3,602,189 2,746,477 76.2 37,660.8 1.05 1.37 

1996 100,000 3,454,556 2,690,439 77.9 35,742.8 1.03 1.33 

1995 100,000 3,318,595 2,663,873 80.3 28,811.5 0.87 1.08 

1994 100,000 3,184,410 2,588,619 81.3 23,784.5 0.75 0.92 

1993 100,000 3,220,302 2,602,781 80.8 14,277.3 0.44 0.55 

1992 100,000 3,275,530 2,677,709 81.7 178.4 0.01 0.01 

1991 100,000 3,331,312 2,733,387 82.1 (6,934.0) (0.21) (0.25)

1990 100,000 3,415,464 2,784,838 81.5 4,062.7 0.12 0.15 

1989 100,000 3,412,503 2,755,471 80.7 13,209.5 0.39 0.48 

1988 100,000 2,337,080 1,756,771 75.2 14,061.1 0.60 0.80 

1987 100,000 2,198,648 1,657,291 75.4 18,301.8 0.83 1.10 

1986 100,000 2,162,687 1,636,915 75.7 18,253.3 0.84 1.12 

1985 100,000 1,975,030 1,510,496 76.5 17,956.9 0.91 1.19 

1984 100,000 1,805,334 1,393,421 77.2 16,529.4 0.92 1.19 

1983 100,000 1,690,576 1,268,332 75.0 15,429.1 0.91 1.22 

1982 100,000 1,544,697 1,134,221 73.4 13,770.9 0.89 1.21 

1981 100,000 1,409,322 988,898 70.2 12,246.1 0.87 1.24 

1980 100,000 1,324,463 948,717 71.6 11,019.5 0.83 1.16 

1979 40,000 1,226,943 808,555 65.9 9,792.7 0.80 1.21 

1978 40,000 1,145,835 760,706 66.4 8,796.0 0.77 1.16 

114 A
Estimated Insured Deposits and the Deposit In

December 31, 1934, through September 30, 20121 (co

Dollars in Millions (except Insurance Coverage

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Insured 

Deposits

Deposit 

Insurance

Fund

Total

Domestic 

Deposits

Est. Insured

Deposits

1977 40,000 1,050,435 692,533 65.9 7,992.8 0.76 1.15 

1976 40,000 941,923 628,263 66.7 7,268.8 0.77 1.16 

1975 40,000 875,985 569,101 65.0 6,716.0 0.77 1.18 

1974 40,000 833,277 520,309 62.4 6,124.2 0.73 1.18 

1973 20,000 766,509 465,600 60.7 5,615.3 0.73 1.21 

1972 20,000 697,480 419,756 60.2 5,158.7 0.74 1.23 

1971 20,000 610,685 374,568 61.3 4,739.9 0.78 1.27 

1970 20,000 545,198 349,581 64.1 4,379.6 0.80 1.25 

1969 20,000 495,858 313,085 63.1 4,051.1 0.82 1.29 

1968 15,000 491,513 296,701 60.4 3,749.2 0.76 1.26 

1967 15,000 448,709 261,149 58.2 3,485.5 0.78 1.33 

1966 15,000 401,096 234,150 58.4 3,252.0 0.81 1.39 

1965 10,000 377,400 209,690 55.6 3,036.3 0.80 1.45 

1964 10,000 348,981 191,787 55.0 2,844.7 0.82 1.48 

1963 10,000 313,304 177,381 56.6 2,667.9 0.85 1.50 

1962 10,000 297,548 170,210 57.2 2,502.0 0.84 1.47 

1961 10,000 281,304 160,309 57.0 2,353.8 0.84 1.47 

1960 10,000 260,495 149,684 57.5 2,222.2 0.85 1.48 

1959 10,000 247,589 142,131 57.4 2,089.8 0.84 1.47 

1958 10,000 242,445 137,698 56.8 1,965.4 0.81 1.43 

1957 10,000 225,507 127,055 56.3 1,850.5 0.82 1.46 

1956 10,000 219,393 121,008 55.2 1,742.1 0.79 1.44 

1955 10,000 212,226 116,380 54.8 1,639.6 0.77 1.41 

1954 10,000 203,195 110,973 54.6 1,542.7 0.76 1.39 

1953 10,000 193,466 105,610 54.6 1,450.7 0.75 1.37 

1952 10,000 188,142 101,841 54.1 1,363.5 0.72 1.34 

1951 10,000 178,540 96,713 54.2 1,282.2 0.72 1.33 

1950 10,000 167,818 91,359 54.4 1,243.9 0.74 1.36 

1949 5,000 156,786 76,589 48.8 1,203.9 0.77 1.57 

1948 5,000 153,454 75,320 49.1 1,065.9 0.69 1.42 

1947 5,000 154,096 76,254 49.5 1,006.1 0.65 1.32 

1946 5,000 148,458 73,759 49.7 1,058.5 0.71 1.44 

1945 5,000 157,174 67,021 42.6 929.2 0.59 1.39 

1944 5,000 134,662 56,398 41.9 804.3 0.60 1.43 

1943 5,000 111,650 48,440 43.4 703.1 0.63 1.45 

Apdic
ANNUAL REPORT 2012

Estimated Insured Deposits and the Deposit In

December 31, 1934, through September 30, 20121 (co

Dollars in Millions (except Insurance Coverage

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Insured 

Deposits

Deposit 

Insurance

Fund

Total

Domestic 

Deposits

Est. Insured

Deposits

1942 5,000 89,869 32,837 36.5 616.9 0.69 1.88 

1941 5,000 71,209 28,249 39.7 553.5 0.78 1.96 

1940 5,000 65,288 26,638 40.8 496.0 0.76 1.86 

1939 5,000 57,485 24,650 42.9 452.7 0.79 1.84 

1938 5,000 50,791 23,121 45.5 420.5 0.83 1.82 

1937 5,000 48,228 22,557 46.8 383.1 0.79 1.70 

1936 5,000 50,281 22,330 44.4 343.4 0.68 1.54 

1935 5,000 45,125 20,158 44.7 306.0 0.68 1.52 

1934 5,000 40,060 18,075 45.1 291.7 0.73 1.61 

1 For 2012, figures are as of September 30, all prior years are as of December 31. Prior to 1989, figures are for the Bank Insurance Fund 

(BIF) only and exclude insured branches of foreign banks. For 1989 to 2005, figures represent sum of the BIF and Savings Association 

Insurance Fund (SAIF) amounts; for 2006 to 2012, figures are for DIF. Amounts for 1989 - 2012 include insured branches of foreign banks. 

Prior to year-end 1991, insured deposits were estimated using percentages determined from June Call and Thrift Financial Reports.

2 The year-end 2008 coverage limit and estimated insured deposits do not reflect the temporary increase to $250,000 then in effect under 

the Emergency Economic Stabilization Act of 2008. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) 

made this coverage limit permanent. The year-end 2009 coverage limit and estimated insured deposits reflect the $250,000 coverage 

limit. The Dodd-Frank Act also temporarily provided unlimited coverage for non-interest bearing transaction accounts for two years 

beginning December 31, 2010. Coverage for certain retirement accounts increased to $250,000 in 2006. Initial coverage limit was $2,500 

from January 1 to June 30, 1934.

116 A
Income and Expenses, Deposit Insurance Fund, from Beginn

September 11, 1933, through December 

Dollars in Million

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment

Credits

Investment

and Other

Effective

Assessment 

Rate1 Total

Provision

for 

Ins. Losses

Admin.

 and 

Operating 

Expenses2

Interest

& Other Ins. 

Expenses

Funding 

Transfer 

from the 

FSLIC 

Resolution 

Fund

Net Income/

(Loss)

Total $191,227.8 $127,776.5 $11,392.9 $74,844.2 $158,831.1 $126,258.4 $23,134.4 $9,438.3 $139.5 $32,536.2 

2012 18,522.3 12,397.2 0.2 6,125.3 0.1013% (2,599.0) (4,222.6) 1,777.5 (153.9) 0 21,121.3 

2011 16,342.0 13,499.5 0.9 2,843.4 0.1110% (2,915.4) (4,413.6) 1,625.4 (127.2) 0 19,257.4 

2010 13,379.9 13,611.2 0.8 (230.5) 0.1772% 75.0 (847.8) 1,592.6 (669.8) 0 13,304.9 

2009 24,706.4 17,865.4 148.0 6,989.0 0.2330% 60,709.0 57,711.8 1,271.1 1,726.1 0 (36,002.6)

2008 7,306.3 4,410.4 1,445.9 4,341.8 0.0418% 44,339.5 41,838.8 1,033.5 1,467.2 0 (37,033.2)

2007 3,196.2 3,730.9 3,088.0 2,553.3 0.0093% 1,090.9 95.0 992.6 3.3 0 2,105.3 

2006 2,643.5 31.9 0.0 2,611.6 0.0005% 904.3 (52.1) 950.6 5.8 0 1,739.2 

2005 2,420.5 60.9 0.0 2,359.6 0.0010% 809.3 (160.2) 965.7 3.8 0 1,611.2 

2004 2,240.3 104.2 0.0 2,136.1 0.0019% 607.6 (353.4) 941.3 19.7 0 1,632.7 

2003 2,173.6 94.8 0.0 2,078.8 0.0019% (67.7) (1,010.5) 935.5 7.3 0 2,241.3 

2002 2,384.7 107.8 0.0 2,276.9 0.0023% 719.6 (243.0) 945.1 17.5 0 1,665.1 

2001 2,730.1 83.2 0.0 2,646.9 0.0019% 3,123.4 2,199.3 887.9 36.2 0 (393.3)

2000 2,570.1 64.3 0.0 2,505.8 0.0016% 945.2 28.0 883.9 33.3 0 1,624.9 

1999 2,416.7 48.4 0.0 2,368.3 0.0013% 2,047.0 1,199.7 823.4 23.9 0 369.7 

1998 2,584.6 37.0 0.0 2,547.6 0.0010% 817.5 (5.7) 782.6 40.6 0 1,767.1 

1997 2,165.5 38.6 0.0 2,126.9 0.0011% 247.3 (505.7) 677.2 75.8 0 1,918.2 

1996 7,156.8 5,294.2 0.0 1,862.6 0.1622% 353.6 (417.2) 568.3 202.5 0 6,803.2 

1995 5,229.2 3,877.0 0.0 1,352.2 0.1238% 202.2 (354.2) 510.6 45.8 0 5,027.0 

1994 7,682.1 6,722.7 0.0 959.4 0.2192% (1,825.1) (2,459.4) 443.2 191.1 0 9,507.2 

1993 7,354.5 6,682.0 0.0 672.5 0.2157% (6,744.4) (7,660.4) 418.5 497.5 0 14,098.9 

1992 6,479.3 5,758.6 0.0 720.7 0.1815% (596.8) (2,274.7) 614.83 1,063.1 35.4 7,111.5 

1991 5,886.5 5,254.0 0.0 632.5 0.1613% 16,925.3 15,496.2 326.1 1,103.0 42.4 (10,996.4)

1990 3,855.3 2,872.3 0.0 983.0 0.0868% 13,059.3 12,133.1 275.6 650.6 56.1 (9,147.9)

1989 3,494.8 1,885.0 0.0 1,609.8 0.0816% 4,352.2 3,811.3 219.9 321.0 5.6 (851.8)

1988 3,347.7 1,773.0 0.0 1,574.7 0.0825% 7,588.4 6,298.3 223.9 1,066.2 0 (4,240.7)

1987 3,319.4 1,696.0 0.0 1,623.4 0.0833% 3,270.9 2,996.9 204.9 69.1 0 48.5 

1986 3,260.1 1,516.9 0.0 1,743.2 0.0787% 2,963.7 2,827.7 180.3 (44.3) 0 296.4 

1985 3,385.5 1,433.5 0.0 1,952.0 0.0815% 1,957.9 1,569.0 179.2 209.7 0 1,427.6 

1984 3,099.5 1,321.5 0.0 1,778.0 0.0800% 1,999.2 1,633.4 151.2 214.6 0 1,100.3 

1983 2,628.1 1,214.9 164.0 1,577.2 0.0714% 969.9 675.1 135.7 159.1 0 1,658.2 

1982 2,524.6 1,108.9 96.2 1,511.9 0.0769% 999.8 126.4 129.9 743.5 0 1,524.8 

1981 2,074.7 1,039.0 117.1 1,152.8 0.0714% 848.1 320.4 127.2 400.5 0 1,226.6 

1980 1,310.4 951.9 521.1 879.6 0.0370% 83.6 (38.1) 118.2 3.5 0 1,226.8 

Apdic
ANNUAL REPORT 2012

Income and Expenses, Deposit Insurance Fund, from Beginn

September 11, 1933, through December 31, 2012 (co

Dollars in Million

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment

Credits

Investment

and Other

Effective

Assessment 

Rate1 Total

Provision

for 

Ins. Losses

Admin.

 and 

Operating 

Expenses2

Interest

& Other Ins. 

Expenses

Funding 

Transfer 

from the 

FSLIC 

Resolution 

Fund

Net Income/

(Loss)

1979 1,090.4 881.0 524.6 734.0 0.0333% 93.7 (17.2) 106.8 4.1 0 996.7 

1978 952.1 810.1 443.1 585.1 0.0385% 148.9 36.5 103.3 9.1 0 803.2 

1977 837.8 731.3 411.9 518.4 0.0370% 113.6 20.8 89.3 3.5 0 724.2 

1976 764.9 676.1 379.6 468.4 0.0370% 212.3 28.0 180.44 3.9 0 552.6 

1975 689.3 641.3 362.4 410.4 0.0357% 97.5 27.6 67.7 2.2 0 591.8 

1974 668.1 587.4 285.4 366.1 0.0435% 159.2 97.9 59.2 2.1 0 508.9 

1973 561.0 529.4 283.4 315.0 0.0385% 108.2 52.5 54.4 1.3 0 452.8 

1972 467.0 468.8 280.3 278.5 0.0333% 65.7 10.1 49.6 6.05 0 401.3 

1971 415.3 417.2 241.4 239.5 0.0345% 60.3 13.4 46.9 0.0 0 355.0 

1970 382.7 369.3 210.0 223.4 0.0357% 46.0 3.8 42.2 0.0 0 336.7 

1969 335.8 364.2 220.2 191.8 0.0333% 34.5 1.0 33.5 0.0 0 301.3 

1968 295.0 334.5 202.1 162.6 0.0333% 29.1 0.1 29.0 0.0 0 265.9 

1967 263.0 303.1 182.4 142.3 0.0333% 27.3 2.9 24.4 0.0 0 235.7 

1966 241.0 284.3 172.6 129.3 0.0323% 19.9 0.1 19.8 0.0 0 221.1 

1965 214.6 260.5 158.3 112.4 0.0323% 22.9 5.2 17.7 0.0 0 191.7 

1964 197.1 238.2 145.2 104.1 0.0323% 18.4 2.9 15.5 0.0 0 178.7 

1963 181.9 220.6 136.4 97.7 0.0313% 15.1 0.7 14.4 0.0 0 166.8 

1962 161.1 203.4 126.9 84.6 0.0313% 13.8 0.1 13.7 0.0 0 147.3 

1961 147.3 188.9 115.5 73.9 0.0323% 14.8 1.6 13.2 0.0 0 132.5 

1960 144.6 180.4 100.8 65.0 0.0370% 12.5 0.1 12.4 0.0 0 132.1 

1959 136.5 178.2 99.6 57.9 0.0370% 12.1 0.2 11.9 0.0 0 124.4 

1958 126.8 166.8 93.0 53.0 0.0370% 11.6 0.0 11.6 0.0 0 115.2 

1957 117.3 159.3 90.2 48.2 0.0357% 9.7 0.1 9.6 0.0 0 107.6 

1956 111.9 155.5 87.3 43.7 0.0370% 9.4 0.3 9.1 0.0 0 102.5 

1955 105.8 151.5 85.4 39.7 0.0370% 9.0 0.3 8.7 0.0 0 96.8 

1954 99.7 144.2 81.8 37.3 0.0357% 7.8 0.1 7.7 0.0 0 91.9 

1953 94.2 138.7 78.5 34.0 0.0357% 7.3 0.1 7.2 0.0 0 86.9 

1952 88.6 131.0 73.7 31.3 0.0370% 7.8 0.8 7.0 0.0 0 80.8 

1951 83.5 124.3 70.0 29.2 0.0370% 6.6 0.0 6.6 0.0 0 76.9 

1950 84.8 122.9 68.7 30.6 0.0370% 7.8 1.4 6.4 0.0 0 77.0 

1949 151.1 122.7 0.0 28.4 0.0833% 6.4 0.3 6.1 0.0 0 144.7 

1948 145.6 119.3 0.0 26.3 0.0833% 7.0 0.7 6.36 0.0 0 138.6 

1947 157.5 114.4 0.0 43.1 0.0833% 9.9 0.1 9.8 0.0 0 147.6 

1946 130.7 107.0 0.0 23.7 0.0833% 10.0 0.1 9.9 0.0 0 120.7 

118 A
Income and Expenses, Deposit Insurance Fund, from Beginn

September 11, 1933, through December 31, 2012 (co

Dollars in Million

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment

Credits

Investment

and Other

Effective

Assessment 

Rate1 Total

Provision

for 

Ins. Losses

Admin.

 and 

Operating 

Expenses2

Interest

& Other Ins. 

Expenses

Funding 

Transfer 

from the 

FSLIC 

Resolution 

Fund

Net Income/

(Loss)

1945 121.0 93.7 0.0 27.3 0.0833% 9.4 0.1 9.3 0.0 0 111.6 

1944 99.3 80.9 0.0 18.4 0.0833% 9.3 0.1 9.2 0.0 0 90.0 

1943 86.6 70.0 0.0 16.6 0.0833% 9.8 0.2 9.6 0.0 0 76.8 

1942 69.1 56.5 0.0 12.6 0.0833% 10.1 0.5 9.6 0.0 0 59.0 

1941 62.0 51.4 0.0 10.6 0.0833% 10.1 0.6 9.5 0.0 0 51.9 

1940 55.9 46.2 0.0 9.7 0.0833% 12.9 3.5 9.4 0.0 0 43.0 

1939 51.2 40.7 0.0 10.5 0.0833% 16.4 7.2 9.2 0.0 0 34.8 

1938 47.7 38.3 0.0 9.4 0.0833% 11.3 2.5 8.8 0.0 0 36.4 

1937 48.2 38.8 0.0 9.4 0.0833% 12.2 3.7 8.5 0.0 0 36.0 

1936 43.8 35.6 0.0 8.2 0.0833% 10.9 2.6 8.3 0.0 0 32.9 

1935 20.8 11.5 0.0 9.3 0.0833% 11.3 2.8 8.5 0.0 0 9.5 

1933-34 7.0 0.0 0.0 7.0 N/A 10.0 0.2 9.8 0.0 0 (3.0)

1 Figures represent only BIF-insured institutions prior to 1990, BIF- and SAIF-insured institutions from 1990 through 2005, and DIF-insured institutions beginning 

in 2006. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. The effective assessment rate is calculated 

from annual assessment income (net of assessment credits), excluding transfers to the Financing Corporation (FICO), Resolution Funding Corporation 

(REFCORP) and FSLIC Resolution Fund, divided by the four quarter average assessment base. The effective rates from 1950 through 1984 varied from the 

statutory rate of 0.0833 percent due to assessment credits provided in those years. The statutory rate increased to 0.12 percent in 1990 and to a minimum 

of 0.15 percent in 1991. The effective rates in 1991 and 1992 varied because the FDIC exercised new authority to increase assessments above the statutory 

minimum rate when needed. Beginning in 1993, the effective rate was based on a risk-related premium system under which institutions paid assessments in 

the range of 0.23 percent to 0.31 percent. In May 1995, the BIF reached the mandatory recapitalization level of 1.25 percent. As a result, BIF assessment 

rates were reduced to a range of 0.04 percent to 0.31 percent of assessable deposits, effective June 1995, and assessments totaling $1.5 billion were refunded 

in September 1995. Assessment rates for the BIF were lowered again to a range of 0 to 0.27 percent of assessable deposits, effective the start of 1996. In 

1996, the SAIF collected a one-time special assessment of $4.5 billion. Subsequently, assessment rates for the SAIF were lowered to the same range as the 

BIF, effective October 1996. This range of rates remained unchanged for both funds through 2006. As part of the implementation of the Federal Deposit 

Insurance Reform Act of 2005, assessment rates were increased to a range of 0.05 percent to 0.43 percent of assessable deposits effective at the start of 2007, 

but many institutions received a one-time assessment credit ($4.7 billion in total) to offset the new assessments. For the first quarter of 2009, assessment rates 

were increased to a range of 0.12 to 0.50 percent of assessable deposits. From the second quarter of 2009 through the first quarter of 2011, initial assessment 

rates ranged between 0.12 and 0.45 percent of assessable deposits. Initial rates are subject to further adjustments. Beginning in the second quarter of 2011, 

the assessment base changed to average total consolidated assets less average tangible equity (with certain adjustments for banker’s banks and custodial 

banks), as required by the Dodd-Frank Act. The FDIC implemented a new assessment rate schedule at the same time to conform to the larger assessment 

base. Initial assessment rates were lowered to a range of 0.05 to 0.35 percent of the new base. The annualized assessment rates averaged approximately 

17.6 cents per $100 of assessable deposits for the first quarter of 2011 and 11.1 cents per $100 of the new base for the last three quarters of 2011 (which is 

the figure shown in the table). The effective assessment rate for 2012 was based on full year accrued assessment income, actual assessment base figures for 

the first three quarters of 2012, and an estimate for the assessment base for fourth quarter 2012. On June 30, 2009, a special assessment was imposed on all 

insured banks and thrifts, which amounted in aggregate to approximately $5.4 billion. For 8,106 institutions, with $9.3 trillion in assets, the special assessment 

was 5 basis points of each institution’s assets minus tier one capital; 89 other institutions, with assets of $4.0 trillion, had their special assessment capped at 10 

basis points of their second quarter assessment base.

2 These expenses, which are presented as operating expenses in the Statement of Income and Fund Balance, pertain to the FDIC in its corporate capacity only 

and do not include costs that are charged to the failed bank receiverships that are managed by the FDIC. The receivership expenses are presented as part of 

the “Receivables from Resolutions, net” line on the Balance Sheet. The narrative and graph presented in the “Corporate Planning and Budget” section of this 

report (page 111) show the aggregate (corporate and receivership) expenditures of the FDIC.

3 Includes $210 million for the cumulative effect of an accounting change for certain postretirement benefits (1992).

4 Includes a $106 million net loss on government securities (1976).

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

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

Apdic
ANNUAL REPORT 2012

Number, Assets, Deposits, Losses, and Loss to Funds of

Taken Over or Closed Because of Financial Difficultie

Dollars in Thousand

Year Total Assets Deposits

Estimated

Receivership

Loss2

Loss to

Funds3

Total 748 $393,986,574 $317,501,978 $75,977,702 $81,577,294 

1995 2 423,819 414,692 28,192 27,750 

1994 2 136,815 127,508 11,472 14,599 

1993 10 6,147,962 4,881,461 267,595 65,212 

1992 59 44,196,946 34,773,224 3,286,957 3,832,195 

1991 144 78,898,904 65,173,122 9,235,906 9,734,202 

1990 213 129,662,498 98,963,962 16,062,552 19,257,446 

19894 318 134,519,630 113,168,009 47,085,028 48,645,890

1 Beginning in 1989 through July 1, 1995, all thrift closings were the responsibility of the Resolution Trust Corporation (RTC). Since the RTC 

was terminated on December 31, 1995, and all assets and liabilities transferred to the FSLIC Resolution Fund (FRF), all the results of the 

thrift closing activity from 1989 through 1995 are now reflected on FRF’s books. Year is the year of failure, not the year of resolution.

2 The estimated losses represent the projected loss at the fund level from receiverships for unreimbursed subrogated claims of the FRF and 

unpaid advances to receiverships from the FRF. 

3 The Loss to Funds represents the total resolution cost of the failed thrifts in the FRF-RTC fund, which includes corporate revenue and 

expense items such as interest expense on Federal Financing Bank debt, interest expense on escrowed funds, and interest revenue on 

advances to receiverships, in addition to the estimated losses for receiverships. 

4 Total for 1989 excludes nine failures of the former FSLIC.

120 A
FDIC-Insured Institutions Closed Duri

Dollars in Thousand

Codes for Bank Class:

NM = State-chartered bank that is not a member 

of the Federal Reserve System 

N = National Bank

SB = Savings Bank

SI = Stock and Mutual 

Savings Bank

SM = State-chartered bank that is a 

member of the Federal Reserve 

System

SA = Savings Association

Name and Location

Bank

Class

Number

of

Deposit

Accounts

Total

Assets1

Total

Deposits1

Insured 

Deposit Funding 

and Other 

Disbursements

Estimated 

Loss to 

the DIF2

Date of 

Closing

 or 

Acquisition

Receiver/Assuming 

Bank and Location

Purchase and Assumption – All Depos

Fort Lee Federal 

Savings Bank, FSB

Fort Lee, NJ

SA 882 $48,861 $47,786 $48,938 $18,311 04/20/12 Alma Bank

Astoria, NY

Montgomery Bank & Trust

Ailey, GA

NM 7,153 $153,208 $164,181 $171,459 $75,228 07/06/12 Ameris Bank

Moultrie, GA

Second Federal SLA 

of Chicago

Chicago, IL

SA 13,801 $190,891 $171,627 $195,896 $76,851 07/20/12 Hinsdale Bank 

& Trust Company

Hinsdale, IL

Whole Bank Purchase and Assumption – All Depo

American Eagle 

Savings Bank

Boothwyn, PA

SA 1,467 $19,259 $17,548 $18,730 $7,027 01/20/12 Capital Bank, N.A.

Rockville, MD

Central Florida State Bank

Belleview, FL

NM 2,433 $71,485 $71,080 $71,596 $30,740 01/20/12 CenterState Bank 

of Florida, N.A.

Winter Haven, FL

The First State Bank

Stockbridge, GA

NM 32,773 $516,760 $509,065 $509,638 $219,086 01/20/12 Hamilton State Bank

Hoschton, GA

BankEast

Knoxville, TN

SM 7,795 $261,947 $259,571 $249,604 $76,798 01/27/12 U.S. Bank National 

Association

Cincinnati, OH

First Guaranty Bank & 

Trust of Jacksonville

Jacksonville, FL

NM 10,733 $397,082 $378,309 $371,225 $89,662 01/27/12 CenterState Bank 

of Florida, N.A.

Winter Haven, FL

Patriot Bank Minnesota

Forest Lake, MN

NM 4,897 $105,029 $102,833 $100,870 $42,651 01/27/12 First Resource Bank

Savage, MN

Tennessee Commerce 

Bank

Franklin, TN

NM 12,437 $1,009,154 $1,037,716 $1,056,017 $374,555 01/27/12 Republic Bank 

& Trust Company

Louisville, KY

Charter National Bank 

& Trust

Hoffman Estates, IL

N 7,053 $93,894 $89,485 $92,749 $25,974 02/10/12 Barrington Bank 

& Trust Company, N.A.

Barrington, IL

SCB Bank

Shelbyville, IN

SA 7,848 $182,561 $171,365 $169,673 $41,513 02/10/12 First Merchants Bank, N.A. 

Muncie, IN

Central Bank of Georgia

Ellaville, GA

NM 9,991 $278,860 $266,589 $262,985 $69,584 02/24/12 Ameris Bank

Moultrie, GA

Global Commerce Bank

Doraville, GA

NM 5,006 $143,678 $116,813 $118,373 $33,001 03/02/12 Metro City Bank

Doraville, GA

Apdic
ANNUAL REPORT 2012

FDIC-Insured Institutions Closed During 2012 (con

Dollars in Thousand

Codes for Bank Class:

NM = State-chartered bank that is not a member 

of the Federal Reserve System 

N = National Bank

SB = Savings Bank

SI = Stock and Mutual 

Savings Bank

SM = State-chartered bank that is a 

member of the Federal Reserve 

System

SA = Savings Association

Name and Location

Bank

Class

Number

of

Deposit

Accounts

Total

Assets1

Total

Deposits1

Insured 

Deposit Funding 

and Other 

Disbursements

Estimated 

Loss to 

the DIF2

Date of 

Closing

 or 

Acquisition

Receiver/Assuming 

Bank and Location

Covenant Bank & Trust

Rock Spring, GA

NM 2,340 $95,725 $90,632 $87,210 $38,847 03/23/12 Stearns Bank, N.A.

St. Cloud, MN

Premier Bank

Wilmette, IL

NM 3,097 $268,703 $198,953 $196,298 $64,177 03/23/12 International Bank 

of Chicago

Chicago, IL

Fidelity Bank

Dearborn, MI

NM 22,179 $818,237 $747,640 $713,322 $96,013 03/30/12 The Huntington 

National Bank

Columbus, OH

Harvest Bank of Maryland

Gaithersburg, MD

NM 3,174 $163,019 $145,534 $141,811 $28,010 04/27/12 Sonabank

McLean, VA

Inter Savings Bank, FSB 

D/B/A InterBank, FSB

Maple Grove, MN

SA 13,528 $463,840 $458,053 $456,244 $120,949 04/27/12 Great Southern Bank

Reeds Spring, MO

Palm Desert 

National Bank

Palm Desert, CA

N 2,905 $129,253 $129,023 $123,485 $30,892 04/27/12 Pacific Premier Bank

Costa Mesa, CA

Plantation Federal Bank

Pawleys Island, SC

SA 13,816 $433,512 $415,943 $420,208 $87,831 04/27/12 First Federal Bank

Charleston, SC

Security Bank, National 

Association

North Lauderdale, FL

N 2,322 $101,026 $99,067 $99,650 $18,472 05/04/12 Banesco USA

Coral Gables, FL

Alabama Trust Bank, 

National Association

Sylacauga, AL

N 2,719 $51,553 $45,149 $44,121 $14,065 05/18/12 Southern States Bank

Anniston, AL

Carolina Federal 

Savings Bank

Charleston, SC

SA 3,458 $54,373 $53,082 $54,557 $20,566 06/08/12 Bank of North Carolina

Thomasville, NC

Farmers’ and Traders’ 

State Bank

Shabbona, IL

NM 3,010 $43,077 $42,302 $39,719 $13,403 06/08/12 First State Bank

Mendota, IL

First Capital Bank

Kingfisher, OK

NM 2,422 $44,448 $44,828 $47,726 $9,883 06/08/12 F & M Bank

Edmond, OK

Waccamaw Bank

Whiteville, NC

SM 22,381 $533,114 $472,704 $462,747 $60,442 06/08/12 First Community Bank

Bluefield, VA

Putnam State Bank

Palatka, FL

NM 8,035 $169,489 $160,024 $156,122 $43,255 06/15/12 Harbor Community Bank

Indiantown, FL

Security Exchange Bank

Marietta, GA

NM 2,832 $150,962 $147,896 $148,018 $42,430 06/15/12 Fidelity Bank

Atlanta, GA

122 A
FDIC-Insured Institutions Closed During 2012 (con

Dollars in Thousand

Codes for Bank Class:

NM = State-chartered bank that is not a member 

of the Federal Reserve System 

N = National Bank

SB = Savings Bank

SI = Stock and Mutual 

Savings Bank

SM = State-chartered bank that is a 

member of the Federal Reserve 

System

SA = Savings Association

Name and Location

Bank

Class

Number

of

Deposit

Accounts

Total

Assets1

Total

Deposits1

Insured 

Deposit Funding 

and Other 

Disbursements

Estimated 

Loss to 

the DIF2

Date of 

Closing

 or 

Acquisition

Receiver/Assuming 

Bank and Location

The Farmers Bank 

of Lynchburg

Lynchburg, TN

NM 9,293 $163,859 $156,402 $153,177 $35,720 06/15/12 Clayton Bank and Trust

Knoxville, TN

Glasgow Savings Bank

Glasgow, MO

NM 2,176 $22,341 $21,809 $22,627 $3,081 07/13/12 Regional Missouri Bank

Marceline, MO

First Cherokee State Bank

Woodstock, GA

NM 9,617 $209,021 $182,114 $180,780 $40,998 07/20/12 Community 

& Southern Bank

Atlanta, GA

Georgia Trust Bank

Buford, GA

NM 2,404 $116,890 $114,748 $116,810 $24,782 07/20/12 Community 

& Southern Bank

Atlanta, GA

Heartland Bank

Leawood, KS

NM 1,965 $96,002 $89,723 $86,811 $7,161 07/20/12 Metcalf Bank

Lees Summit, MO

The Royal Palm Bank 

of Florida

Naples, FL

NM 2,303 $78,771 $78,876 $78,836 $16,406 07/20/12 First National Bank 

of the Gulf Coast

Naples, FL

Jasper Banking Company

Jasper, GA

NM 10,984 $206,672 $204,238 $198,872 $62,319 07/27/12 Stearns Bank, N.A

St. Cloud, MN

Waukegan Savings Bank

Waukegan, IL

SB 5,737 $83,679 $73,001 $73,716 $22,435 08/03/12 First Midwest Bank

Itasca, IL

First Commerical Bank

Bloomington, MN

NM 3,642 $215,867 $206,809 $198,028 $65,923 09/07/12 Republic Bank 

& Trust Company

Louisville, KY

Truman Bank

St. Louis, MO

SM 9,526 $282,338 $245,716 $237,573 $36,710 09/14/12 Simmons First 

National Bank

Pine Bluff, AR

First United Bank

Crete, IL

NM 23,002 $328,422 $316,877 $321,680 $50,686 09/28/12 Old Plank Trail 

Community Bank, N.A.

New Lenox, IL

Excel Bank

Sedalia, MO

NM 10,023 $186,113 $173,670 $170,087 $44,297 10/19/12 Simmons First 

National Bank

Pine Bluff, AR

First East Side 

Savings Bank

Tamarac, FL

SA 1,242 $65,686 $64,888 $66,403 $12,348 10/19/12 Stearns Bank, N.A.

St. Cloud, MN

GulfSouth Private Bank

Destin, FL

NM 1,896 $139,391 $131,579 $128,540 $38,932 10/19/12 SmartBank

Pigeon Forge, TN

Apdic
ANNUAL REPORT 2012

FDIC-Insured Institutions Closed During 2012 (con

Dollars in Thousand

Codes for Bank Class:

NM = State-chartered bank that is not a member 

of the Federal Reserve System 

N = National Bank

SB = Savings Bank

SI = Stock and Mutual 

Savings Bank

SM = State-chartered bank that is a 

member of the Federal Reserve 

System

SA = Savings Association

Name and Location

Bank

Class

Number

of

Deposit

Accounts

Total

Assets1

Total

Deposits1

Insured 

Deposit Funding 

and Other 

Disbursements

Estimated 

Loss to 

the DIF2

Date of 

Closing

 or 

Acquisition

Receiver/Assuming 

Bank and Location

Citizens First 

National Bank

Princeton, IL

N 59,696 $923,959 $869,440 $840,261 $47,650 11/02/12 Heartland Bank 

& Trust Company

Bloomington, IL

Heritage Bank of Florida

Lutz, FL

NM 6,664 $225,477 $223,309 $220,586 $67,786 11/02/12 Centennial Bank

Conway, AR

Hometown Community 

Bank

Braselton, GA

NM 3,158 $124,561 $108,931 $105,207 $39,125 11/16/12 CertusBank, N.A.

Easley, SC

Community Bank 

of the Ozarks

Sunrise Beach, MO

NM 2,864 $42,816 $41,881 $40,247 $12,415 12/14/12 Bank of Sullivan

Sullivan, MO

Insured Deposit Transfer/Purchase & Assumpti

Bank of the Eastern Shore

Cambridge, MD

SM 9,691 $162,460 $150,951 $166,270 $52,968 04/27/12 Federal Deposit 

Insurance Corporation

Insured Deposit Payof

Home Savings of America

Little Falls, MN

SA 12,025 $434,111 $432,223 $481,476 $83,646 02/24/12 Federal Deposit 

Insurance Corporation

New City Bank

Chicago, IL

NM 850 $71,202 $72,399 $78,269 $20,082 03/09/12 Federal Deposit 

Insurance Corporation

Nova Bank

Berwyn, PA

SB 12,390 $444,710 $395,248 $439,261 $91,238 10/26/12 Federal Deposit 

Insurance Corporation

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

2 Estimated losses are as of 12/31/12. Estimated losses are routinely adjusted with updated information from new appraisals and asset sales, 

which ultimately affect the asset values and projected recoveries. Represents the estimated loss to the DIF from deposit insurance obligations. 

This amount does not include the estimated loss allocable to the Transaction Account Guarantee and Debt Guarantee Program claims.

124 A
Recoveries and Losses by the Deposit Insurance Fund

for the Protection of Depositors, 193

Dollars in Thousand

Bank and Thrift Failures1

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3

Insured Deposit 

Funding 

and Other 

Disbursements Recoveries

Estimated 

Additional 

Recoveries

Estimated 

Losses

2,560 $925,620,900 $695,536,729 $572,325,121 $395,365,464 $54,971,765 $121,987,892

2012 51 11,617,348 11,009,630 11,034,508 499,565 7,788,019 2,746,924 

2011 92 34,922,997 31,071,862 31,686,966 2,230,090 20,693,288 8,763,588 

20104 157 92,084,987 78,290,185 82,210,860 50,082,606 10,796,927 21,331,327 

20094 140 169,709,160 137,783,121 135,926,307 86,969,627 12,869,470 36,087,210 

20084 25 371,945,480 234,321,715 205,447,245 183,261,881 2,279,073 19,906,291 

2007 3 2,614,928 2,424,187 1,917,998 1,369,413 322,914 225,671 

2006 0 0 0 0 0 0 0 

2005 0 0 0 0 0 0 0 

2004 4 170,099 156,733 138,926 134,978 31 3,917 

2003 3 947,317 901,978 883,772 812,933 8,192 62,647 

2002 11 2,872,720 2,512,834 2,127,047 1,704,030 7,556 415,461 

2001 4 1,821,760 1,661,214 1,605,249 1,128,577 184,367 292,305 

2000 7 410,160 342,584 297,313 265,175 0 32,138 

1999 8 1,592,189 1,320,573 1,307,260 711,758 5,583 589,919 

1998 3 290,238 260,675 292,691 58,248 11,644 222,799 

1997 1 27,923 27,511 25,546 20,520 0 5,026 

1996 6 232,634 230,390 201,533 140,918 0 60,615 

1995 6 802,124 776,387 609,043 524,571 0 84,472 

1994 13 1,463,874 1,397,018 1,224,769 1,045,718 0 179,051 

1993 41 3,828,939 3,509,341 3,841,658 3,209,012 0 632,646 

1992 120 45,357,237 39,921,310 14,541,102 10,866,760 309 3,674,033 

1991 124 64,556,512 52,972,034 21,499,326 15,500,130 4,392 5,994,804 

1990 168 16,923,462 15,124,454 10,812,484 8,040,995 0 2,771,489 

1989 206 28,930,572 24,152,468 11,443,281 5,247,995 0 6,195,286 

1988 200 38,402,475 26,524,014 10,432,655 5,055,158 0 5,377,497 

1987 184 6,928,889 6,599,180 4,876,994 3,014,502 0 1,862,492 

1986 138 7,356,544 6,638,903 4,632,121 2,949,583 0 1,682,538 

1985 116 3,090,897 2,889,801 2,154,955 1,506,776 0 648,179 

1984 78 2,962,179 2,665,797 2,165,036 1,641,157 0 523,879 

1983 44 3,580,132 2,832,184 3,042,392 1,973,037 0 1,069,355 

1982 32 1,213,316 1,056,483 545,612 419,825 0 125,787 

1981 7 108,749 100,154 114,944 105,956 0 8,988 

1980 10 239,316 219,890 152,355 121,675 0 30,680 

1934 - 1979 558 8,615,743 5,842,119 5,133,173 4,752,295 0 380,878 

Apdic
ANNUAL REPORT 2012

Recoveries and Losses by the Deposit Insurance Fund

for the Protection of Depositors, 1934 – 2012 (c

Dollars in Thousand

Assistance Transactions

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3

Insured Deposit 

Funding 

and Other 

Disbursements Recoveries

Estimated 

Additional 

Recoveries

Estimated 

Losses

154 $3,317,099,253 $1,442,173,417 $11,630,356 $6,199,875 $0 $5,430,481

2012 0 0 0 0 0 0 0 

2011 0 0 0 0 0 0 0 

2010 0 0 0 0 0 0 0 

20095 8 1,917,482,183 1,090,318,282 0 0 0 0 

20085 5 1,306,041,994 280,806,966 0 0 0 0 

2007 0 0 0 0 0 0 0 

2006 0 0 0 0 0 0 0 

2005 0 0 0 0 0 0 0 

2004 0 0 0 0 0 0 0 

2003 0 0 0 0 0 0 0 

2002 0 0 0 0 0 0 0 

2001 0 0 0 0 0 0 0 

2000 0 0 0 0 0 0 0 

1999 0 0 0 0 0 0 0 

1998 0 0 0 0 0 0 0 

1997 0 0 0 0 0 0 0 

1996 0 0 0 0 0 0 0 

1995 0 0 0 0 0 0 0 

1994 0 0 0 0 0 0 0 

1993 0 0 0 0 0 0 0 

1992 2 33,831 33,117 1,486 1,236 0 250 

1991 3 78,524 75,720 6,117 3,093 0 3,024 

1990 1 14,206 14,628 4,935 2,597 0 2,338 

1989 1 4,438 6,396 2,548 252 0 2,296 

1988 80 15,493,939 11,793,702 1,730,351 189,709 0 1,540,642 

1987 19 2,478,124 2,275,642 160,877 713 0 160,164 

1986 7 712,558 585,248 158,848 65,669 0 93,179 

1985 4 5,886,381 5,580,359 765,732 406,676 0 359,056 

1984 2 40,470,332 29,088,247 5,531,179 4,414,904 0 1,116,275 

1983 4 3,611,549 3,011,406 764,690 427,007 0 337,683 

126 A
Recoveries and Losses by the Deposit Insurance Fund

for the Protection of Depositors, 1934 – 2012 (c

Dollars in Thousand

Assistance Transactions

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3

Insured Deposit 

Funding 

and Other 

Disbursements Recoveries

Estimated 

Additional 

Recoveries

Estimated 

Losses

1982 10 10,509,286 9,118,382 1,729,538 686,754 0 1,042,784 

1981 3 4,838,612 3,914,268 774,055 1,265 0 772,790 

1980 1 7,953,042 5,001,755 0 0 0 0 

1934 - 1979 4 1,490,254 549,299 0 0 0 0 

1 Institutions closed by the FDIC, including deposit payoff, insured deposit transfer, and deposit assumption cases.

2 For 1990 through 2005, amounts represent the sum of BIF and SAIF failures (excluding those handled by the RTC); prior to 1990, figures are only 

for the BIF. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. For 2006 to 2012, figures 

are for the DIF.

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

4 Includes amounts related to transaction account coverage under the Transaction Account Guarantee Program (TAG). The estimated losses as of 

12/31/10 for TAG accounts in 2010, 2009, and 2008 are $519 million, $1,526 million, and $15 million, respectively.

5 Includes institutions where assistance was provided under a systemic risk determination. Any costs that exceed the amounts estimated under the 

least cost resolution requirement would be recovered through a special assessment on all FDIC-insured institutions.

Apdic
ANNUAL REPORT 2012

B. More About th

FDIC Board of Dir

Martin J. Gruenberg 

Martin J. Gruenberg is the 20th Chairman of 

the FDIC, receiving Senate confirmation on 

November 15, 2012, for a five-year term. Mr. 

Gruenberg has served on the FDIC Board of 

Directors since August 22, 2005, including 

as Acting Chairman from July 9, 2011, to 

November 15, 2012, and also from November 

16, 2005, to June 26, 2006.

Mr. Gruenberg joined the FDIC Board after 

broad congressional experience in the 

financial services and regulatory areas. 

He served as Senior Counsel to Senator 

Paul S. Sarbanes (D-MD) on the staff of the 

Senate Committee on Banking, Housing, 

and Urban Affairs from 1993 to 2005. 

Mr. Gruenberg advised the Senator on issues 

of domestic and international financial 

regulation, monetary policy, and trade. He 

also served as Staff Director of the Banking 

Committee’s Subcommittee on International 

Finance and Monetary Policy, from 1987 

to 1992. Major legislation in which Mr. 

Gruenberg played an active role during 

his service on the Committee includes the 

Financial Institutions Reform, Recovery, 

and Enforcement Act of 1989 (FIRREA); 

the Federal Deposit Insurance Corporation 

Improvement Act of 1991 (FDICIA); the 

Gramm-Leach-Bliley Act; and the SarbanesOxley Act of 2002.

Mr. Gruenberg served as Chairman of the 

Executive Council and President of the 

International Association of Deposit 

Insurers (IADI) from November 2007 to 

November 2012.

Seated (left to right): 

Thomas M. Hoenig, 

Martin J. Gruenberg, 

Jeremiah O. Norton 

Standing (left to 

right): Thomas J. 

Curry, Richard Cordray

128 A
Mr. Gruenberg holds a J.D. from Case 

Western Reserve Law School and 

an A.B. from Princeton University, 

Woodrow Wilson School of Public 

and International Affairs. 

Thomas M. Hoenig

Thomas M. Hoenig was confirmed 

by the Senate as Vice Chairman of 

the FDIC on November 15, 2012. He 

joined the FDIC on April 16, 2012, as 

a member of the Board of Directors 

of the FDIC for a six-year term. He is 

also a member of the Executive Board 

of the International Association of 

Deposit Insurers.

Prior to serving on the FDIC Board, 

Mr. Hoenig was the President of the 

Federal Reserve Bank of Kansas City 

and a member of the Federal Reserve 

System’s Federal Open Market 

Committee from 1991 to 2011.

Mr. Hoenig was with the Federal 

Reserve for 38 years, beginning as an 

economist, and then as a senior officer 

in banking supervision during the 

U.S. banking crisis of the 1980s. In 

1986, he led the Kansas City Federal 

Reserve Bank’s Division of Bank 

Supervision and Structure, directing 

the oversight of more than 1,000 banks 

and bank holding companies with 

assets ranging from less than $100 

million to $20 billion. He became 

President of the Kansas City Federal 

Reserve Bank on October 1, 1991.

Mr. Hoenig is a native of Fort Madison, 

Iowa, and received a doctorate in 

economics from Iowa State University.

Jeremiah O. Norton

Jeremiah O. Norton was sworn in 

on April 16, 2012, as a member of 

the FDIC Board of Directors for 

the remainder of a term expiring 

July 15, 2013.

Prior to joining the FDIC’s Board, Mr. 

Norton was an Executive Director at 

J.P. Morgan Securities LLC, in New 

York, NY.

Mr. Norton was in government for 

a number of years before joining 

the FDIC Board, most recently as 

the Deputy Assistant Secretary for 

Financial Institutions Policy at the 

U.S. Treasury Department. Mr. Norton 

also was a Legislative Assistant and 

professional staff member for U.S. 

Representative Edward R. Royce.

Mr. Norton received a J.D. from the 

Georgetown University Law Center 

and an A.B. in economics from Duke 

University.

Thomas J. Curry

Thomas J. Curry was sworn in as the 

30th Comptroller of the Currency on 

April 9, 2012. The Comptroller of 

the Currency is the administrator of 

national banks and federal savings 

associations, and chief officer of 

the Office of the Comptroller of the 

Currency (OCC). The OCC supervises 

more than 2,000 national banks and 

federal savings associations and about 

50 federal branches and agencies 

of foreign banks in the United 

States. These institutions comprise 

nearly two-thirds of the assets of the 

commercial banking system. The 

Comptroller also is a Director of 

NeighborWorks® America.

Prior to becoming Comptroller of 

the Currency, Mr. Curry served as 

a Director of the FDIC Board since 

January 2004, and as the Chairman of 

the NeighborWorks® America Board of 

Directors.

Prior to joining the FDIC’s Board 

of Directors, Mr. Curry served five 

Massachusetts Governors as the 

Commonwealth’s Commissioner of 

Banks from 1990 to 1991 and from 

1995 to 2003. He served as Acting 

Commissioner from February 1994 

to June 1995. He previously served 

as First Deputy Commissioner and 

Assistant General Counsel within the 

Massachusetts Division of Banks. He 

entered state government in 1982 as 

an attorney with the Massachusetts’

Secretary of State’s Office.

Mr. Curry served as the Chairman 

of the Conference of State Bank 

Supervisors from 2000 to 2001, and 

served two terms on the State Liaison 

Committee of the Federal Financial 

Institutions Examination Council, 

including a term as Committee 

Chairman.

He is a graduate of Manhattan College 

(summa cum laude), where he was 

elected to Phi Beta Kappa. He 

received his law degree from the New 

England School of Law. 

Richard Cordray 

Richard Cordray serves as the first 

Director of the Consumer Financial 

Protection Bureau. He previously led 

the Bureau’s Enforcement Division.

Prior to joining the Bureau, Mr. 

Cordray served on the front lines 

of consumer protection as Ohio’s 

Attorney General. Mr. Cordray 

recovered more than $2 billion 

for Ohio’s retirees, investors, and 

business owners, and took major 

steps to help protect its consumers 

from fraudulent foreclosures and 

financial predators. In 2010, his office 

responded to a record number of 

consumer complaints, but Mr. Cordray 

went further and opened that process 

for the first time to small businesses 

and nonprofit organizations to ensure 

protections for even more Ohioans. 

Apdic
ANNUAL REPORT 2012

To recognize his work on behalf of 

consumers as Attorney General, the 

Better Business Bureau presented Mr. 

Cordray with an award for promoting 

an ethical marketplace.

Mr. Cordray also served as Ohio 

Treasurer and Franklin County 

Treasurer, two elected positions in 

which he led state and county banking, 

investment, debt, and financing 

activities. As Ohio Treasurer, he 

resurrected a defunct economic 

development program that provides 

low-interest loan assistance to small 

businesses to create jobs, re-launched 

the original concept as GrowNOW, 

and pumped hundreds of millions 

of dollars into access for credit 

to small businesses. Mr. Cordray 

simultaneously created a Bankers 

Advisory Council to share ideas about 

the program with community bankers 

across Ohio.

Earlier in his career, Mr. Cordray was 

an adjunct professor at the Ohio State 

University College of Law, served as 

a State Representative for the 33rd 

Ohio House District, was the first 

Solicitor General in Ohio’s history, and 

was a sole practitioner and Counsel 

to Kirkland & Ellis. Mr. Cordray has 

argued seven cases before the United 

States Supreme Court, by special 

appointment of both the Clinton and 

Bush Justice Departments. He is a 

graduate of Michigan State University, 

Oxford University, and the University 

of Chicago Law School. Mr. Cordray 

was Editor-in-Chief of the University 

of Chicago Law Review and later 

clerked for U.S. Supreme Court 

Justices Byron White and Anthony 

Kennedy.

Mr. Cordray lives in Grove City, Ohio, 

with his wife Peggy—a Professor 

at Capital University Law School in 

Columbus—and twin children Danny 

and Holly.

130 A
FDIC Organi

BOARD OF DIRECTORS

Martin J. Gruenberg

FDIC

Chairman

Jeremiah O. Norton

FDIC

Board Member

Thomas M. Hoenig

FDIC

Vice Chairman, Board Member

Thomas J. Curry

OCC

Board Member

Richard Cordray

CFPB

Board Member

WRITER-EDITOR

DEPUTY TO THE CHAIRMAN

CHIEF OF STAFF

Barbara A. Ryan

DEPUTY TO THE CHAIRMAN 

AND CHIEF FINANCIAL OFFICER

Steven O. App

SENIOR ADVISOR

INTERNATIONAL RESOLUTION POLICY

David S. Hoelscher

OFFICE OF 

COMMUNICATIONS

OFFICE OF INTERNATIONAL AFFAIRS

Fred S. Carns

CHIEF RISK OFFICER

Stephen A. Quick

OFFICE OF MINORITY AND 

WOMEN INCLUSION

D. Michael Collins

Director

OFFICE OF LEGISLATIVE AFFAIRS

Eric J. Spitler

Director

OFFICE OF THE OMBUDSMAN

Cottrell L. Webster

Director SENIOR ADVISOR

Ellen Lazar

Michele A. Heller

SPECIAL ADVISOR

FOR SUPERVISORY MATTERS

John D. Weier

OFFICE OF INSPECTOR GENERAL

Jon T. Rymer

INTERNAL OMBUDSMAN

Robert D. Harris

DEPUTY TO THE CHAIRMAN

FOR COMMUNICATIONS

Andrew S. Gray Kymberly K. Copa

CHIEF INFORMATION OFFICER AND 

CHIEF PRIVACY OFFICER

Russell G. Pittman

DIVISION OF RESOLUTIONS 

& RECEIVERSHIPS

Bret D. Edwards

Director

LEGAL DIVISION

Richard J. Osterman, Jr.

Acting Genral Counsel

DIVISION OF INSURANCE 

AND RESEARCH

Arthur J. Murton

Director

DIVISION OF DEPOSITOR 

AND CONSUMER PROTECTION

Mark E. Pearce

Director

OFFICE OF COMPLEX

FINANCIAL INSTITUTIONS

James R. Wigand

Director

DIVISION OF RISK 

MANAGEMENT SUPERVISION

Doreen R. Eberley

Director

DIVISION OF 

ADMINISTRATION

Arleas Upton Kea

Director

DIVISION OF FINANCE

Craig R. Jarvill

Director

DIVISION OF INFORMATION 

TECHOLOGY

Russell G. Pittman

Director

CORPORATE UNIVERSITY

Thom H. Terwilliger

Director

Apdic
ANNUAL REPORT 2012

FDIC Year–End Staffing

5,311 5,078 4,514 4,476 4,532 4,988 6,557 8,150 7,973 7,476

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

9,000

6,000

3,000

0

Cor

Staffing Tren

Note: 2008-2012 staffing totals reflect year-end full time equivalent staff. Prior to 2008, staffing totals reflect total emplyees on-board.

132 A
Number of Employees by Division/Office 2011 an

Total Washington Regional/Field

Division or Office: 2012 2011 2012 2011 2012 2011

Division of Risk Management Supervision 2,763 2,900 169 168 2,593 2,732

Division of Depositor and Consumer Protection 848 819 119 95 729 724

Division of Resolutions and Receiverships 1,428 1,811 165 139 1,263 1,672

Legal Division 716 774 384 354 332 420

Division of Administration 403 431 248 243 156 188

Division of Information Technology 358 354 280 271 78 83

Corporate University 194 176 176 163 18 13

Division of Insurance and Research 195 185 145 134 51 51

Division of Finance2 176 177 174 172 2 5

Office of Inspector General 126 117 81 77 46 40

Office of Complex Financial Institutions 148 115 87 64 61 51

Executive Offices3 20 20 20 20 0 0

Executive Support Offices 4 102 94 89 77 13 17

Total 7,476 7,973 2,135 1,977 5,341 5,996

 

1 The FDIC reports staffing totals using a full-time equivalent (FTE) methodology, which is based on an employee’s scheduled work hours. 

Division/Office staffing has been rounded to the nearest whole FTE. Totals may not foot due to rounding.

2 On January 1, 2012 the Office of the Enterprise Risk Management was merged into the Division of Finance.

3 Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, and 

External Affairs.

4 Includes the Offices of the Legislative Affairs, Communications, International Affairs, Ombudsman, Minority and Women Inclusion, and 

Corporate Risk Management.

Apdic
ANNUAL REPORT 2012

Sources of Info

FDIC Website

www.fdic.gov

A wide range of banking, consumer, 

and financial information is available 

on the FDIC’s website. This includes 

the FDIC’s Electronic Deposit 

Insurance Estimator (EDIE), which 

estimates an individual’s deposit 

insurance coverage; the Institution 

Directory, which contains financial 

profiles of FDIC-insured institutions; 

Community Reinvestment Act 

evaluations and ratings for institutions 

supervised by the FDIC; Call Reports, 

which are banks’ reports of condition 

and income; and Money Smart, a 

training program to help individuals 

outside the financial mainstream 

enhance their money management 

skills and create positive banking 

relationships. Readers also can 

access a variety of consumer 

pamphlets, FDIC press releases, 

speeches, and other updates on 

the agency’s activities, as well as 

corporate databases and customized 

reports of FDIC and banking industry 

information. 

FDIC Call Center

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

703-562-2222 

Hearing Impaired: 800-925-4618

703-562-2289

The FDIC Call Center in Washington, 

DC, is the primary telephone point 

of contact for general questions from 

the banking community, the public, 

and FDIC employees. The Call 

Center directly, or in concert with 

other FDIC subject-matter experts, 

responds to questions about deposit 

insurance and other consumer issues 

and concerns, as well as questions 

about FDIC programs and activities. 

The Call Center also refers callers 

to other federal and state agencies 

as needed. Hours of operation are 

8:00 a.m. to 8:00 p.m., Eastern Time, 

Monday – Friday, and 9:00 a.m. to 5:00 

p.m., Saturday – Sunday. Recorded 

information about deposit insurance 

and other topics is available 24 hours a 

day at the same telephone number.

As a customer service, the FDIC Call 

Center has many bilingual Spanish 

agents on staff and has access to a 

translation service able to assist with 

over 40 different languages.

Public Information Center 

3501 Fairfax Drive

Room E-1021

Arlington, VA 22226

Phone: 877-275-3342 (877-ASK-FDIC),

703-562-2200

Fax: 703-562-2296

FDIC Online Catalog:

https://vcart.velocitypayment.com/

fdic/

E-mail: publicinfo@fdic.gov

Publications such as FDIC Quarterly 

and Consumer News, and a 

variety of deposit insurance and 

consumer pamphlets are available 

at www.fdic.gov or may be ordered in 

hard copy through the FDIC online 

catalog. Other information, press 

releases, speeches and congressional 

testimony, directives to financial 

institutions, policy manuals, and 

FDIC documents are available 

on request through the Public 

Information Center. Hours of 

operation are 9:00 a.m. to 4:00 p.m., 

Eastern Time, Monday – Friday.

Office of the Ombudsman

3501 Fairfax Drive

Room E-2022

Arlington, VA 22226

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

Fax: 703-562-6057

E-mail: ombudsman@fdic.gov

The Office of the Ombudsman (OO) 

is an independent, neutral, and 

confidential resource and liaison for 

the banking industry and the general 

public. The OO responds to inquiries 

about the FDIC in a fair, impartial, 

and timely manner. It researches 

questions and fields complaints from 

bankers and bank customers. OO 

representatives are present at all 

bank closings to provide accurate 

information to bank customers, 

the media, bank employees, and 

the general public. The OO also 

recommends ways to improve FDIC 

operations, regulations, and customer 

service.

134 A
Regional and Ar

Atlanta Regional Off

10 Tenth Street, NE

Suite 800 

Atlanta, Georgia 30309 

(678) 916-2200

Alabama

Florida

Georgia

North Carolina

South Carolina

Virginia

West Virginia

Chicago Regional Offi

300 South Riverside Plaza

Suite 1700

Chicago, Illinois 60606

(312) 382-6000

Illinois

Indiana

Kentucky

Michigan

Ohio

Wisconsin

Dallas Regional Offi

1601 Bryan Street

Dallas, Texas 75201

(214) 754-0098 

Colorado

New Mexico

Oklahoma

Texas

Memphis Area Office

6060 Primacy Parkway

Suite 300

Memphis, Tennessee 38119

(901) 685-1603

Arkansas

Louisiana

Mississippi

Tennessee 

Kansas City Regional Off

1100 Walnut Street

Suite 2100

Kansas City, Missouri 64106

(816) 234-8000

Iowa

Kansas

Minnesota

Missouri

Nebraska

North Dakota

South Dakota

New York Regional Of

350 Fifth Avenue

Suite 1200

New York, New York 10118

(917) 320-2500

Delaware

District of Columbia

Maryland

New Jersey

New York

Pennsylvania

Puerto Rico

Virgin Islands

Boston Area Office

15 Braintree Hill Office Park

Suite 100

Braintree, Massachusetts 02184

(781) 794-5500

Connecticut

Maine

Massachusetts

New Hampshire

Rhode Island

Vermont

San Francisco Regional Offi

25 Jessie Street at Ecker Square

Suite 2300

San Francisco, California 94105

(415) 546-0160

Alaska

Arizona

California

Guam

Hawaii

Idaho

Montana

Nevada

Oregon

Utah 

Washington

Wyoming

Apdic
ANNUAL REPORT 2012

C. Office of I

General’s As

of the Manage

and Performa

Challenges Faci

the FDI

Under the Reports Consolidation 

Act of 2000, the Office of Inspector 

General (OIG) is required to identify 

the most significant management 

and performance challenges facing 

the Corporation and provide its 

assessment to the Corporation 

for inclusion in the FDIC’s annual 

performance and accountability 

report. The OIG conducts this 

assessment annually and identifies 

specific areas of challenge facing the 

Corporation at the time. In doing so, 

we keep in mind the Corporation’s 

overall program and operational 

responsibilities; financial industry, 

economic, and technological 

conditions and trends; areas of 

congressional interest and concern; 

relevant laws and regulations; 

the Chairman’s priorities and 

corresponding corporate goals; and 

ongoing activities to address the issues 

involved. In looking at the recent 

past and the current environment 

and anticipating—to the extent 

possible—what the future holds, the 

OIG believes that the FDIC faces 

challenges in the areas listed below. 

Implementing New Systemic 

Resolution Responsibilities

The Dodd-Frank Wall Street Reform 

and Consumer Protection Act 

(Dodd-Frank Act) has given the FDIC 

significant new authorities to help 

address the risks in systemically 

important financial companies or 

institutions (SIFIs). The FDIC’s Office 

of Complex Financial Institutions 

(OCFI) is focusing on three areas to 

carry out its new responsibilities: 

monitoring risk within and across 

these large, complex firms from the 

standpoint of resolution; conducting 

resolution planning and developing 

strategies to respond to potential 

crisis situations; and coordinating 

with regulators overseas regarding the 

significant challenges associated with 

cross-border resolution. 

Importantly, under Title I of the 

Dodd-Frank Act, bank holding 

companies with more than $50 billion 

in assets and other firms designated 

as systemic must develop their own 

resolution plans or “living wills.” The 

firms must show how they could 

be resolved under the bankruptcy 

code without disrupting the financial 

system and the economy. The first 

resolution plans were submitted in 

early July 2012 by the nine largest 

companies with nonbank assets of 

over $250 billion. The FDIC and the 

Federal Reserve Board are reviewing 

those plans for completeness and 

compliance with related rulemaking 

requirements. 

OCFI has also been developing its own 

resolution plans to be ready to resolve 

a failing systemic financial company. 

These internal FDIC resolution plans 

apply many of the same powers that 

the FDIC has long used to manage 

failed-bank receiverships to a failing 

SIFI. If the FDIC is appointed as 

receiver of such an institution, it will 

face the challenge of carrying out an 

orderly liquidation in a manner that 

maximizes the value of the company’s 

assets and ensures that creditors 

and shareholders appropriately 

bear any losses. The goal is to close 

the institution without putting the 

financial system at risk. 

The coming months will continue to 

be challenging for the FDIC and all 

of the regulatory agencies as they 

continue to carry out the mandates 

of the Dodd-Frank Act, develop rules 

to implement key sections, and fulfill 

their responsibilities as members 

of the Financial Stability Oversight 

Council (FSOC). With respect to 

the FDIC’s OCFI, in particular, it will 

need to ensure that it has the needed 

expertise and resources to build its 

capabilities, integrate its operations 

and systems within the FDIC’s 

infrastructure and established control 

environment, and supplement existing 

controls, as warranted, to ensure the 

success of the FDIC’s activities with 

respect to SIFIs. This is especially 

important, given the significance of 

OCFI’s responsibilities, the sensitivity 

of the information it is handling, 

and the potential consequences of 

any unauthorized disclosure of such 

information. 

Resolving Failed Institutions 

and Managing Receiverships

The Corporation continues to handle a 

demanding resolution and receivership 

workload. From 2008 through 2012, 

465 institutions failed with total assets 

(as of their final Call Reports) of $680 

billion. Estimated losses resulting 

from the failures total approximately 

$86.8 billion. As of December 31, 

2012, the number of institutions on 

the FDIC’s “Problem List” was 651, 

indicating the potential of more 

failures to come, albeit with far less 

frequency, and an increased asset 

disposition workload. Total assets of 

problem institutions were $233 billion 

as of year-end 2012. 

The FDIC frequently enters into 

shared-loss agreements (SLAs) with 

acquiring institutions (AIs) of failed 

bank assets. These agreements 

guarantee that the FDIC will share in 

a portion of future asset losses and 

recoveries for a specific time period. 

136 A
In return, the AI agrees to manage the 

failed bank assets consistently with 

its legacy assets, pursue residential 

loan modifications on qualified loans, 

and work to minimize losses. Since 

loss sharing began in November 2008, 

through June 30, 2012, the Corporation 

had entered into more than 290 SLAs 

involving $212.7 billion in covered 

assets. 

The FDIC has established controls 

over its SLA monitoring program, 

which help protect the FDIC’s 

interests and meet the goals of the 

program. We have pointed out that 

the FDIC should place additional 

emphasis on monitoring commercial 

loan extension decisions to ensure 

that AIs do not inappropriately reject 

loan modification requests as SLAs 

approach termination. Additionally, 

the FDIC needs to formulate a better 

strategy for mitigating the impact of 

impending portfolio sales and SLA 

terminations on the Deposit Insurance 

Fund (DIF) so that the FDIC will be 

prepared to address a potentially 

significant volume of asset sale 

requests.

As another resolution strategy, the 

FDIC has entered into 34 structured 

sales transactions involving 42,900 

assets with a total unpaid principal 

balance of about $26.0 billion. Under 

these arrangements, the FDIC retains 

a participation interest in future net 

positive cash flows derived from 

third-party management of the 

assets. Such transactions involve 

selling assets to third parties that are 

not regulated financial institutions. 

Differences in controls in place for 

regulated financial institutions, in 

contrast to private capital investors 

with unregulated systems of internal 

control that are not subject to regular 

oversight by banking supervisors, 

can present challenges. Such 

arrangements need to be closely 

monitored to ensure compliance 

with all terms and conditions of the 

agreements. Compliance with the 

agreements is important to ensure that 

the FDIC receives the cash flows to 

which it is entitled.

Other post-closing asset management 

activities will continue to require much 

FDIC attention. FDIC receiverships 

manage assets from failed institutions, 

mostly those that are not purchased 

by acquiring institutions through SLAs 

or involved in structured sales. As of 

December 31, 2012, the Division of 

Resolutions and Receiverships (DRR) 

was managing 466 active receiverships 

(including three FSLIC-related) with 

assets totaling about $17.0 billion. 

These assets include securities, 

delinquent commercial real-estate and 

single-family loans, and participation 

loans. Post-closing asset managers 

are responsible for managing many of 

these assets and rely on receivership 

assistance contractors to perform 

day-to-day asset management 

functions. Since these loans are often 

sub-performing or nonperforming, 

workout and asset disposition efforts 

can be intensive and challenging.

Maintaining the 

Viability of the Deposit 

Insurance Fund 

Insuring deposits remains at the heart 

of the FDIC’s commitment to maintain 

stability and public confidence in 

the nation’s financial system. The 

Dodd-Frank Act made permanent 

the increase in the coverage limit to 

$250,000. It also provided deposit 

insurance coverage on the entire 

balance of noninterest-bearing 

transaction accounts at all insured 

depository institutions (IDIs) until 

December 31, 2012. A priority and 

ongoing challenge for the FDIC is to 

ensure that the DIF remains viable 

to protect all insured depositors. To 

maintain sufficient DIF balances, the 

FDIC collects risk-based insurance 

premiums from insured institutions 

and invests deposit insurance funds. 

In the aftermath of the financial 

crisis, FDIC-insured institutions 

continue to make gradual but steady 

progress. Commercial banks and 

savings institutions insured by the 

FDIC reported aggregate net income 

of $37.6 billion in the third quarter of 

2012, a $2.3 billion improvement from 

the $35.2 billion in profits the industry 

reported in the third quarter of 2011. 

This is the 12th consecutive quarter 

that earnings have registered a yearover-year increase. Also noteworthy 

with respect to the viability of the 

fund was the decline in the number 

of banks on the FDIC’s “Problem 

List” from 813 in the fourth quarter 

of 2011 to 651 in the fourth quarter 

of 2012. The fourth quarter marked 

the seventh consecutive quarter that 

the number of problem banks has 

fallen. As noted earlier, total assets of 

“problem” institutions also declined 

year-over-year between 2011 and 2012 

from $319.4 billion to $233 billion. 

Eight insured institutions failed during 

the fourth quarter—the smallest 

number of failures in a quarter since 

the second quarter of 2008, when there 

were two. 

In light of such progress, the DIF 

balance has continued to increase. 

During 2012, the DIF balance 

increased by $21.2 billion, from 

$11.8 billion to $33.0 billion. Over the 

twelve consecutive quarters since the 

beginning of 2010, the fund balance 

has increased a total of $53.8 billion.

Apdic
ANNUAL REPORT 2012

While the fund is considerably 

stronger than it has been, the FDIC 

must continue to monitor the 

emerging risks that can threaten fund 

solvency in the interest of continuing 

to provide the insurance coverage 

that depositors have come to rely 

upon. Given the volatility of the global 

markets and financial systems, new 

risks can emerge without warning and 

threaten the safety and soundness 

of U.S. financial institutions and the 

viability of the DIF. The FDIC must be 

prepared for such a possibility. 

Ensuring Institution Safety 

and Soundness Through an 

Effective Examination and 

Supervision Program

The Corporation’s supervision 

program promotes the safety and 

soundness of FDIC-supervised 

IDIs. The FDIC is the primary 

federal regulator for approximately 

4,500 FDIC-insured, state-chartered 

institutions that are not members of 

the Federal Reserve Board (FRB)—

generally referred to as “state 

non-member” institutions. As such, 

the FDIC is the lead federal regulator 

for the majority of community banks. 

The Chairman has made it clear that 

one of the FDIC’s most important 

priorities is the future of community 

banks and the critical role they play 

in the financial system and the U.S. 

economy as a whole. The Corporation 

has undertaken a number of initiatives 

to further its understanding of 

the challenges and opportunities 

facing community banks, including 

a conference, a comprehensive 

study, and an assessment of both 

risk-management and compliance 

supervision practices to see if there 

are ways to make the supervisory 

processes more efficient. It will 

continue its efforts in this regard going 

forward.

Through the FDIC’s examination 

program, examiners assess the 

adequacy of the bank’s management 

and internal control systems to 

identify, measure, monitor, and 

control risks; and bank examiners 

judge the safety and soundness of a 

bank’s operations. When the FDIC 

determines that an institution’s 

condition is less than satisfactory, 

it may take a variety of supervisory 

actions, including informal and 

formal enforcement actions against 

the institution or its directors and 

officers and others associated with 

the institution, to address identified 

deficiencies and, in some cases, 

ultimately ban individuals from 

banking. Generally, the FDIC pursues 

enforcement actions for violations of 

laws, rules, or regulations; unsafe or 

unsound banking practices; breaches 

of fiduciary duty; and violations of 

final orders, conditions imposed in 

writing, or written agreements. In 

addition, the FDIC has the statutory 

authority to terminate the deposit 

insurance of any IDI for violation 

of a law, rule, regulation, condition 

imposed in writing, or written 

agreement, or for being in an unsafe 

or unsound condition or engaging in 

unsafe or unsound banking practices. 

Part of the FDIC’s overall 

responsibility and authority to 

examine banks for safety and 

soundness relates to compliance 

with the Bank Secrecy Act (BSA), 

which requires financial institutions 

to develop and implement a BSA 

compliance program to monitor 

for suspicious activity and mitigate 

associated money laundering risks 

within the financial institution. 

This includes keeping records and 

filing reports on certain financial 

transactions. An institution’s level of 

risk for potential terrorist financing 

and money laundering determines the 

necessary scope of a Bank Secrecy 

Act examination. Maintaining a 

strong examination program, vigilant 

supervisory activities, and effective 

enforcement action processes for 

all institutions and applying lessons 

learned in light of the recent crisis will 

be critical to ensuring stability and 

continued confidence in the financial 

system going forward. 

Another challenging supervisory 

issue that concerns the FDIC, and 

community banks in particular, 

relates to Basel III and recently 

proposed changes to the federal 

banking agencies’ regulatory capital 

requirements. In June 2012, the 

federal banking agencies issued 

for public comment three separate 

Notices of Proposed Rulemaking 

(NPR), proposing changes to the 

regulatory capital requirements. 

The agencies proposed the NPRs to 

address deficiencies in bank capital 

requirements that became evident 

in the recent banking crisis. The 

FDIC is reviewing the more than 

2,000 comments it has received so 

that it can address concerns about 

the costs and potential unintended 

consequences of various aspects 

of the proposals. As the primary 

federal supervisor for the majority 

of community banks, the FDIC is 

particularly focused on ensuring 

that community banks are able to 

properly analyze the capital proposals 

and assess their impact. The basic 

purpose of the Basel III framework 

is to strengthen the long-term quality 

and quantity of the capital base of 

the U.S. banking system. The FDIC’s 

challenge is to achieve that goal in a 

way that is responsive to the concerns 

expressed by community banks 

about the potential for unintended 

consequences, and the FDIC will be 

138 A
carefully considering such issues in 

the coming months. 

Protecting and Educating 

Consumers and Ensuring 

an Effective Compliance 

Program

The FDIC serves a number of key 

roles in the financial system and 

among the most important is its work 

in ensuring that banks serve their 

communities and treat consumers 

fairly. The FDIC carries out its role 

by providing consumers with access 

to information about their rights 

and disclosures that are required 

by federal laws and regulations and 

examining the banks where the FDIC 

is the primary federal regulator to 

determine the institutions’ compliance 

with laws and regulations governing 

consumer protection, fair lending, and 

community investment. During early 

2011, in response to the Dodd-Frank 

Act and in conjunction with creation 

of the Consumer Financial Protection 

Bureau (CFPB), the FDIC established 

its new Division of Depositor and 

Consumer Protection. This Division 

is responsible for the Corporation’s 

compliance examination and 

enforcement program as well as the 

depositor protection and consumer 

and community affairs activities that 

support that program. It has also 

adopted a new coordinating role with 

CFPB on consumer issues of mutual 

interest. 

Historically, turmoil in the credit and 

mortgage markets has presented 

regulators, policymakers, and the 

financial services industry with 

serious challenges. The FDIC has 

been committed to working with 

the Congress and others to ensure 

that the banking system remains 

sound and that the broader financial 

system is positioned to meet the 

credit needs of consumers and the 

economy, especially the needs of 

creditworthy households that may 

experience distress. A challenging 

priority articulated by the Chairman 

is to continue to increase access to 

financial services for the unbanked 

and underbanked in the United States. 

Successful activities in pursuit of this 

priority will continue to require effort 

on the part of the Corporation going 

forward.

Consumers today are also concerned 

about data security and financial 

privacy at their banks, and the 

FDIC needs to promote effective 

controls within the banks to 

protect consumers. Banks are 

also increasingly using third-party 

servicers to provide support for 

core information and transaction 

processing functions, and the sensitive 

information servicers handle can be 

vulnerable. The FDIC must continue 

to ensure that financial institutions 

protect the privacy and security of 

information about customers under 

applicable U.S. laws and regulations. 

New cyber threats emerge frequently, 

and financial institutions and their 

servicers face continuing challenges 

safeguarding highly sensitive 

information from unauthorized 

disclosure that can cause financial and 

personal distress or ruin.

Effectively Managing the 

FDIC Workforce and Other 

Corporate Resources

The FDIC must effectively and 

economically manage and utilize a 

number of critical strategic resources 

in order to carry out its mission 

successfully, particularly its human, 

financial, information technology 

(IT), and physical resources. These 

resources have been stretched during 

the past years of the recent crisis, and 

the Corporation will continue to face 

challenges as it returns to a steadier 

state of operations and carries out 

its mission in both headquarters 

and regional office locations. New 

responsibilities, reorganizations, and 

changes in senior leadership and in 

the makeup of the FDIC Board have 

affected the entire FDIC workforce 

over the past few years. Efforts 

to promote sound governance and 

effective stewardship of its core 

business processes and the IT 

systems supporting those processes, 

along with attention to human and 

physical resources, will be key to the 

Corporation’s success in the months 

ahead. 

As the number of financial institution 

failures continues to decline, the 

Corporation is reshaping its workforce 

and adjusting its budget and resources 

accordingly. The FDIC closed the 

West Coast Office and the Midwest 

Office in January 2012 and September 

2012, respectively, and plans to close 

the East Coast Office in 2014. In 

this connection, authorized staffing 

for DRR, in particular, has fallen 

from a peak of 2,460 in 2010 to 1,463 

proposed for 2013, which reflects a 

reduction of 393 positions from 2012 

and 997 positions over three years. 

DRR contractor funding also has fallen 

from a peak of $1.34 billion in 2010 to 

about $457 million proposed for 2013, 

a reduction of about $319 million 

from 2012 and nearly $885 million 

(66 percent) over three years. Still, the 

significant surge in failed-bank assets 

and associated contracting activities 

will continue to require effective 

and efficient contractor oversight 

management and technical monitoring 

functions.

With the number of troubled FDICsupervised institutions also on 

Apdic
ANNUAL REPORT 2012

the decline, the FDIC has reduced 

authorized nonpermanent examination 

staff as well. Risk management 

examination staffing has declined 

from a peak of 2,237 in 2011 to 1,966 

proposed for 2013, a reduction of 271 

nonpermanent positions. The number 

of compliance examination staff as 

well has begun to decline, though not 

as much—from a peak of 572 in 2012 

to 522 proposed for 2013, a reduction 

of 50 nonpermanent positions. 

To fund operations, the FDIC Board 

of Directors recently approved a 

$2.7 billion Corporate Operating 

Budget for 2013, about 18 percent 

lower than the 2012 budget. In 

conjunction with its approval of 

the 2013 budget, the Board also 

approved an authorized 2013 staffing 

level of 8,026 employees, down 

from 8,713 previously authorized, 

a net reduction of 687 positions, 

with further reductions projected in 

2014 and future years. The FDIC’s 

operating expenses are paid from 

the DIF, and consistent with sound 

corporate governance principles, the 

Corporation’s financial management 

efforts must continuously seek to 

be efficient and cost-conscious, 

particularly in a government-wide 

environment that is facing severe 

budgetary constraints. 

As conditions improve throughout 

the industry and the economy, the 

Corporation and staff are adjusting 

to a new work environment and 

workplace. The closing of the two 

temporary offices and the plans for 

closing the third can disrupt current 

workplace conditions. 

These closings can also introduce 

risks, as workload, responsibilities, 

and files are transferred and 

employees depart to take other 

positions—sometimes external to 

the FDIC. Fewer risk management 

and compliance examiners can also 

pose challenges to the successful 

accomplishment of the FDIC’s 

examination responsibilities. 

Further, the ramping up of the 

new Office of Complex Financial 

Institutions, with hiring from both 

internal and external sources will 

continue to require attention—with 

respect to on-boarding, training, 

and retaining staff with requisite 

skills for the challenging functions 

of that office. For all employees, in 

light of a transitioning workplace, 

the Corporation will seek to sustain 

its emphasis on fostering employee 

engagement and morale. Its new 

Workplace Excellence Program is a 

step in that direction. 

From an IT perspective, amidst 

the heightened activity in the 

industry and economy, the FDIC has 

engaged in in massive amounts of 

information sharing, both internally 

and with external partners. This 

is also true with respect to sharing 

of highly sensitive information 

with other members of the FSOC 

formed pursuant to the Dodd-Frank 

Act. As noted earlier with respect 

to OCFI, FDIC systems contain 

voluminous amounts of critical 

data. The Corporation needs to 

ensure the integrity, availability, 

and appropriate confidentiality of 

bank data, personally identifiable 

information, and other sensitive 

information in an environment of 

increasingly sophisticated security 

threats and global connectivity. In 

a related vein, continued attention 

to ensuring the physical security of 

all FDIC resources is also a priority. 

The FDIC needs to be sure that its 

emergency response plans provide for 

the safety and physical security of its 

personnel and ensure that its business 

continuity planning and disaster 

recovery capability keep critical 

business functions operational during 

any emergency. 

Finally, a key component of 

corporate governance at the FDIC 

is the FDIC Board of Directors. 

With the confirmations of the FDIC 

Chairman and Vice Chairman, along 

with appointments of others to 

fill Board positions over the past 

year, the Board is now operating 

at full strength. The Board will 

likely face challenges in leading 

the organization, accomplishing 

the Chairman’s priorities, and 

coordinating with the other regulatory 

agencies on issues of mutual 

concern and shared responsibility. 

Enterprise risk management is a 

related aspect of governance at the 

FDIC. Notwithstanding a stronger 

economy and financial services 

industry, the FDIC’s enterprise risk 

management activities need to be 

attuned to emerging risks, both 

internal and external to the FDIC, and 

the Corporation as a whole needs to 

be ready to take necessary steps to 

mitigate those risks as changes occur 

and challenging scenarios present 

themselves.

140 A
This Annual Report was produced by talented and dedicated 

staff. To these individuals, we would like to offer our sincere 

thanks and appreciation. Special recognition is given to the 

following for their contributions:

♦ Jannie F. Eaddy

♦	Barbara Glasby

♦	Financial Reporting Unit

♦ Division and Offices’ Points-of-Contact

2012

Federal Deposit 

Insurance Corporation
ANNUAL REPORT2012

FEDERAL DEPOSIT INSURANCE CORPORATION

550 17th Street, N.W.

Washington, DC 20429-9990

FDIC-004-2013

WWW.FDIC.GOV

FEDERAL DEPOSIT INSURANCE CORPORATION

550 17th Street, N.W.

Washington, DC 20429-9990

FDIC-004-2013

WWW.FDIC.GOV