V. Financial 

Section

FINANCIAL SECTION 73
ANNUAL REPORT 2014

74 FINANCIAL SECTION 

DEPOSIT INSURANCE FUND (DIF)

FEDERAL DEPOSIT INSURANCE CORPORATION

DEPOSIT INSURANCE FUND BALANCE SHEET AT DECEMBER 31

Dollars in Thousands

2014 2013

Assets

Cash and cash equivalents $1,914,520 $3,543,270 

Investment in U.S. Treasury obligations (Note 3) 49,805,846 38,510,500 

Assessments receivable, net (Note 8) 2,003,424 2,227,735 

Interest receivable on investments and other assets, net 651,894 511,428 

Receivables from resolutions, net (Note 4) 18,181,498 16,344,991 

Property and equipment, net (Note 5) 372,419 377,223 

Total Assets $72,929,601 $61,515,147 

Liabilities 

Accounts payable and other liabilities $291,006 $300,575 

Liabilities due to resolutions (Note 6) 7,799,279 12,625,982 

Postretirement benefit liability (Note 13) 243,419 193,591 

Contingent liabilities for: 

Anticipated failure of insured institutions (Note 7) 1,814,770 1,198,960 

Litigation losses (Note 7) 950 5,200 

Total Liabilities 10,149,424 14,324,308 

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

Fund Balance

Accumulated Net Income 62,786,786 47,186,974 

Accumulated Other Comprehensive Income

Unrealized gain on U.S. Treasury investments, net (Note 3) 51,142 20,215 

Unrealized postretirement benefit loss (Note 13) (57,751) (16,350)

Total Accumulated Other Comprehensive (Loss) Income (6,609) 3,865 

Total Fund Balance 62,780,177 47,190,839 

Total Liabilities and Fund Balance $72,929,601 $61,515,147

The accompanying notes are an integral part of these financial statements.
FINANCIAL SECTION 75

DEPOSIT INSURANCE FUND (DIF)

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

FEDERAL DEPOSIT INSURANCE CORPORATION

DEPOSIT INSURANCE FUND STATEMENT OF INCOME AND FUND BALANCE 

FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2014 2013

Revenue

Assessments (Note 8) $8,656,082 $9,734,173 

Interest on U.S. Treasury obligations 281,924 103,363 

Other revenue (Note 9) 27,059 163,154 

Gain on sale of trust preferred securities (Note 10) 0 458,176 

Total Revenue 8,965,065 10,458,866 

Expenses and Losses

Operating expenses (Note 11) 1,664,344 1,608,717 

Provision for insurance losses (Note 12) (8,305,577) (5,659,388)

Insurance and other expenses 6,486 4,799 

Total Expenses and Losses (6,634,747) (4,045,872)

Net Income 15,599,812 14,504,738 

Other Comprehensive Income

Unrealized gain (loss) on U.S. Treasury investments, net 30,927 (13,604)

Unrealized postretirement benefit (loss) gain (Note 13) (41,401) 44,097 

Unrealized loss on trust preferred securities (Note 10) 0 (302,159)

Total Other Comprehensive Loss (10,474) (271,666)

Comprehensive Income 15,589,338 14,233,072 

Fund Balance - Beginning 47,190,839 32,957,767 

Fund Balance - Ending $62,780,177 $47,190,839
ANNUAL REPORT 2014

76 FINANCIAL SECTION 

DEPOSIT INSURANCE FUND (DIF)

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

FEDERAL DEPOSIT INSURANCE CORPORATION

DEPOSIT INSURANCE FUND STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2014 2013

Operating Activities

Provided by:

Assessments $8,873,123 $7,111,902 

Interest on U.S. Treasury obligations 1,450,939 1,080,157 

Dividends and interest on trust preferred securities 0 154,393 

Recoveries from financial institution resolutions 4,099,804 5,696,453 

Miscellaneous receipts 78,558 79,773 

Used by:

Operating expenses (1,586,858) (1,558,229)

Disbursements for financial institution resolutions (1,860,014) (3,857,214)

Refunds of prepaid assessments (Note 8) 0 (5,850,135)

Miscellaneous disbursements (15,385) (17,228)

Net Cash Provided by Operating Activities 11,040,167 2,839,872 

Investing Activities

Provided by:

Maturity of U.S. Treasury obligations 17,158,275 27,704,523 

Sale of trust preferred securities (Note 10) 0 2,420,000 

Used by:

Purchase of property and equipment (55,295) (57,390)

Purchase of U.S. Treasury obligations (29,771,897) (32,464,096)

Net Cash (Used) by Investing Activities (12,668,917) (2,396,963)

Net (Decrease) Increase in Cash and Cash Equivalents (1,628,750) 442,909 

Cash and Cash Equivalents - Beginning 3,543,270 3,100,361 

Cash and Cash Equivalents - Ending $1,914,520 $3,543,270
FINANCIAL SECTION 77

Notes to the Financial Statements

DEPOSIT INSURANCE FUND 

December 31, 2014 and 2013

1. OPERATIONS OF THE DEPOSIT 

INSURANCE FUND

OVERVIEW

The Federal Deposit Insurance Corporation (FDIC) is the 

independent deposit insurance agency created by Congress 

in 1933 to maintain stability and public confidence in the 

nation’s banking system. Provisions that govern the FDIC’s 

operations are generally found in the Federal Deposit 

Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq). 

In accordance with 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 (IDIs) 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 to being the administrator of the DIF, the FDIC 

is the administrator of the FSLIC Resolution Fund (FRF). 

The FRF is a resolution fund responsible for the sale of 

the remaining assets and the satisfaction of the liabilities 

associated with the former Federal Savings and Loan 

Insurance Corporation (FSLIC) and the former Resolution 

Trust Corporation. The FDIC maintains the DIF and the 

FRF separately to support their respective functions. 

Pursuant to the Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010 (Dodd-Frank Act), 

the FDIC also manages 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 covered financial company is a failing financial company 

(for example, 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 (Public Law 111-203) granted the 

FDIC authority to establish a widely available program to 

guarantee obligations of solvent IDIs or solvent depository 

institution holding companies (including affiliates) upon the 

systemic risk 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 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.

The DIF is primarily funded from deposit insurance 

assessments. Other available funding sources, if necessary, 

are borrowings from the Treasury, the Federal Financing 

Bank (FFB), Federal Home Loan Banks, and IDIs. The 

FDIC has borrowing authority of $100 billion from the 

Treasury and a Note Purchase Agreement with the FFB, not 

to exceed $100 billion, to enhance the DIF’s ability to fund 

deposit insurance. 

A statutory formula, known as the Maximum Obligation 

Limitation (MOL), limits the amount of obligations the 
ANNUAL REPORT 2014

78 FINANCIAL SECTION 

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 

$162.0 billion and $146.0 billion as of December 31, 2014 and 

2013, respectively. 

OPERATIONS OF RESOLUTION ENTITIES

The FDIC is responsible for managing and disposing of 

the assets of failed institutions in an orderly and efficient 

manner. The assets held by receiverships, pass-through 

conservatorships, and bridge institutions (collectively, 

resolution entities), and the claims against them, are 

accounted for separately from the DIF assets and liabilities 

to ensure that proceeds from these entities are distributed 

according to applicable laws and regulations. Therefore, 

income and expenses attributable to resolution entities are 

accounted for as transactions of those entities. The FDIC 

bills resolution entities for services provided on their behalf.

2. SUMMARY OF SIGNIFICANT 

ACCOUNTING POLICIES

GENERAL

These financial statements include 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). These statements do not 

include reporting for assets and liabilities of resolution 

entities because these entities are legally separate and 

distinct, and the DIF does not have any ownership or 

beneficial interests in them. Periodic and final accounting 

reports of resolution entities are furnished to courts, 

supervisory authorities, and others upon request.

USE OF ESTIMATES

Management makes estimates and assumptions that affect 

the amounts reported in the financial statements and 

accompanying notes. Actual results could differ from these 

estimates. Where it is reasonably possible that changes 

in estimates will cause a material change in the financial 

statements in the near term, the nature and extent of 

such potential changes in estimates have been disclosed. 

The more significant estimates include the assessments 

receivable and associated revenue; the allowance for loss 

on receivables from resolutions (including shared-loss 

agreements); guarantee obligations for structured 

transactions; the postretirement benefit obligation; and 

the estimated losses for anticipated failures, litigation, and 

representations and indemnifications. 

CASH EQUIVALENTS

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight Certificates.

INVESTMENT IN U.S. TREASURY OBLIGATIONS

The FDI Act requires that the DIF funds be invested in 

obligations of the United States or in obligations guaranteed 

as to principal and interest by the United States. The 

Secretary of the Treasury must approve all such investments 

in excess of $100,000 and has granted the FDIC approval to 

invest the DIF funds only in U.S. Treasury obligations that 

are purchased or sold exclusively through the Bureau of the 

Fiscal Service’s Government Account Series program.

The DIF’s investments in U.S. Treasury obligations are 

classified as available-for-sale. Securities designated as 

available-for-sale are shown at fair value. Unrealized gains 

and losses are reported as other comprehensive income. 

Realized gains and losses are included in the Statement of 

Income and Fund Balance as components of net income. 

Income on securities is calculated and recorded daily using 

the effective interest or straight-line method depending on 

the maturity of the security. 

REVENUE RECOGNITION FOR ASSESSMENTS

Assessment revenue is recognized for the quarterly period 

of insurance coverage based on an estimate. The estimate 

is derived from an institution’s risk-based assessment rate 

and assessment base for the prior quarter adjusted for 

the current quarter’s available assessment credits, certain 

changes in supervisory examination ratings for larger 

institutions, as well as modest assessment base growth 

and average assessment rate adjustment factors. At the 

subsequent quarter-end, the estimated revenue amounts are 

adjusted when actual assessments for the covered period 

are determined for each institution (see Note 8). 

CAPITAL ASSETS AND DEPRECIATION

The FDIC buildings are depreciated on a straight-line basis 

over a 35- to 50-year estimated life. Building improvements 

are capitalized and depreciated over the estimated useful 
FINANCIAL SECTION 79

life of the improvements. Leasehold improvements 

are capitalized and depreciated over the lesser of the 

remaining life of the lease or the estimated useful life of 

the improvements, if determined to be material. Capital 

assets depreciated on a straight-line basis over a five-year 

estimated useful life include mainframe equipment; 

furniture, fixtures, and general equipment; and internal-use 

software. Computer equipment is depreciated on a straightline basis over a three-year estimated useful life.

REPORTING ON VARIABLE INTEREST ENTITIES

The 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. 

As the guarantor of note obligations for several structured 

transactions, the FDIC, in its corporate capacity, holds an 

interest in many 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 affect 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 that 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 conclusion of these analyses was that the FDIC, in its 

corporate capacity, has not engaged in any activity that 

would cause the FDIC to be characterized as a primary 

beneficiary to any VIE with which it was involved as of 

December 31, 2014 and 2013. Therefore, consolidation is 

not required for the 2014 and 2013 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 FDIC if 

payments are made on guarantee claims. Ongoing analyses 

will be required to monitor consolidation implications under 

ASC 810.

The FDIC’s involvement with VIEs is fully described in 

Note 7.

RELATED PARTIES

The nature of related parties and a description of related 

party transactions are discussed in Note 1 and disclosed 

throughout the financial statements and footnotes. 

DISCLOSURE ABOUT RECENT RELEVANT 

ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board 

issued Accounting Standards Update (ASU) 2014-09, 

Revenue from Contracts with Customers (Topic 606). 

The ASU will require an entity to recognize revenue based 

on the amount it expects to be entitled for the transfer of 

promised goods or services. For the DIF, the new standard 

is effective for annual periods beginning after December 

15, 2017. The FDIC does not expect this new ASU to have a 

material impact on the DIF.

Other recent accounting pronouncements have been 

deemed not applicable or material to the financial 

statements as presented.

3. INVESTMENT IN U.S. TREASURY 

OBLIGATIONS

Investments in U.S. Treasury obligations, totaled $49.8 

billion as of December 31, 2014, and $38.5 billion as of 

December 31, 2013. As of December 31, 2014 and 2013, 

the DIF held $2.5 billion and $4.6 billion, respectively, of 

Treasury Inflation-Protected Securities (TIPS), which are 

indexed to increases or decreases in the Consumer Price 

Index for All Urban Consumers (CPI-U).
ANNUAL REPORT 2014

80 FINANCIAL SECTION 

INVESTMENT IN U.S. TREASURY OBLIGATIONS AT DECEMBER 31, 2014

Dollars in Thousands

Maturity

Yield at 

Purchase1

Face 

Value

Net 

Carrying 

Amount

Unrealized 

Holding 

Gains

Unrealized 

Holding 

Losses

Fair

Value

U.S. Treasury notes and bonds

Within 1 year 0.28% $12,450,000 $12,861,127 $2,291 $(4,516) $12,858,902 

After 1 year 

through 5 years 

0.91% 33,901,209 34,393,283 86,212 (5,759) 34,473,736 

U.S. Treasury Inflation-Protected Securities

Within 1 year -1.03% 1,500,000 1,759,237 0 (17,120) 1,742,117 

After 1 year 

through 5 years 

-0.43% 700,000 741,057 0 (9,966) 731,091 

Total $48,551,209 $49,754,704 $88,503 $(37,361)2 $49,805,846 

1

 For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a longterm annual inflation assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.0 percent, issued by the Congressional 

Budget Office and Blue Chip Economic Indicators in early 2014.

2

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

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

does not consider these securities to be other than temporarily impaired at December 31, 2014. The aggregate related fair value of securities with 

unrealized losses was $19.0 billion as of December 31, 2014.

1

 For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a longterm annual inflation assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.0 percent, issued by the Congressional 

Budget Office and Blue Chip Economic Indicators in early 2013. 

2

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

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

does not consider these securities to be other than temporarily impaired at December 31, 2013. The aggregate related fair value of securities with 

unrealized losses was $9.0 billion as of December 31, 2013.

INVESTMENT IN U.S. TREASURY OBLIGATIONS AT DECEMBER 31, 2013

Dollars in Thousands

Maturity

Yield at 

Purchase1

Face 

Value

Net 

Carrying 

Amount

Unrealized 

Holding 

Gains

Unrealized 

Holding 

Losses

Fair

Value

U.S. Treasury notes and bonds

Within 1 year 0.23% $14,300,000 $14,552,418 $4,167 $(31) $14,556,554 

After 1 year 

through 5 years 

0.70% 18,351,209 19,382,202 24,408 (14,013) 19,392,597 

U.S. Treasury Inflation-Protected Securities

Within 1 year -0.86% 2,150,000 2,464,330 1,050 (1,130) 2,464,250 

After 1 year 

through 5 years 

-0.99% 1,800,000 2,091,335 5,788 (24) 2,097,099 

Total $36,601,209 $38,490,285 $35,413 $(15,198)2 $38,510,500
FINANCIAL SECTION 81

4. RECEIVABLES FROM

RESOLUTIONS, NET

RECEIVABLES FROM RESOLUTIONS,

NET AT DECEMBER 31

Dollars in Thousands

2014 2013

Receivables from 

closed banks

$98,360,904 $106,291,226 

Allowance for losses (80,179,406) (89,946,235)

Total $18,181,498 $16,344,991

The receivables from resolutions result from DIF payments 

to cover obligations to insured depositors (subrogated 

claims), advances to resolution entities for working capital, 

and administrative expenses paid on behalf of resolution 

entities. Any related allowance for loss represents the 

difference between the funds advanced and/or obligations 

incurred and the expected repayment. Estimated future 

payments on losses incurred on assets sold to an acquiring 

institution under a shared-loss agreement (SLA) are 

factored into the computation of the expected repayment. 

Assets held by DIF resolution entities (including structured 

transaction-related assets; see Note 7) are the main source 

of repayment of the DIF’s receivables from resolutions. 

As of December 31, 2014, the FDIC had 481 active 

receiverships, including 18 established in 2014. The DIF 

resolution entities held assets with a book value of $29.7 

billion as of December 31, 2014, and $38.4 billion as of 

December 31, 2013 (including $22.0 billion and $27.1 

billion, respectively, of cash, investments, receivables due 

from the DIF, and other receivables). Ninety-nine percent 

of the current asset book value of $29.7 billion is held by 

resolution entities established since the beginning of 2008.

Estimated cash recoveries from the management and 

disposition of assets that are used to determine the 

allowance for losses are based on asset recovery rates from 

several sources, including actual or pending institutionspecific asset disposition data, failed institution-specific 

asset valuation data, aggregate asset valuation data on 

several recently failed or troubled institutions, sampled 

asset valuation data, and empirical asset recovery 

data based on failures since 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 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 2014, the 

shared-loss cost estimates were updated for all 281 active 

SLAs. 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 updated shared-loss cost projections on the remaining 

agreements were based on a random sample of institutions 

selected for new third-party loss estimations, and valuation 

results from the sampled institutions were aggregated and 

extrapolated to the non-sampled institutions by asset type 

and performance status.

Also reflected in the allowance for loss calculation are 

end-of-agreement SLA “true-up” recoveries. True-up 

recoveries are projected to be received at expiration in 

accordance with the terms of the SLA, if actual losses at 

expiration are lower than originally estimated. 

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, 

which may cause the DIF’s actual recoveries to vary 

significantly from current estimates. 

WHOLE BANK PURCHASE AND 

ASSUMPTION TRANSACTIONS 

WITH SHARED-LOSS AGREEMENTS 

Since the beginning of 2008, the FDIC resolved 304 failures 

using whole bank purchase and assumption resolution 

transactions with accompanying SLAs on total assets 

of $216.5 billion purchased by the financial institution 
ANNUAL REPORT 2014

82 FINANCIAL SECTION 

acquirers. The acquirer typically assumes all of the 

deposits and purchases essentially all of the assets of a 

failed institution. The majority of the commercial and 

residential loan assets are purchased under an SLA, where 

the FDIC agrees to share in future losses and recoveries 

experienced by the acquirer on those assets covered 

under the agreement. The FDIC uses SLAs to keep assets 

in the private sector and to minimize disruptions to loan 

customers.

Losses on the covered assets of failed institutions 

are shared between the acquirer and the FDIC, in its 

receivership capacity, when losses occur through the sale, 

foreclosure, loan modification, or charge-off of loans under 

the terms of the SLA. The majority of the agreements cover 

commercial and single-family loans over a five- to ten-year 

shared-loss period, respectively, with the receiver covering 

80 percent of the losses incurred by the acquirer and the 

acquiring institution 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. Recoveries by the acquirer on covered 

commercial and single-family SLA losses are also shared 

over an eight- to ten-year period, respectively. Note that 

future recoveries on SLA losses are not factored into the 

DIF allowance for loss calculation because the amount and 

timing of such receipts are not determinable. 

The estimated shared-loss liability is accounted for by the 

receiver and is included in the calculation of the DIF’s 

allowance for loss against the corporate receivable from the 

resolution. As shared-loss claims are asserted and proven, 

DIF receiverships satisfy these shared-loss payments using 

available liquidation funds and/or by drawing on amounts 

due from the DIF for funding the deposits assumed by the 

acquirer (see Note 6). 

Receiverships with SLAs made cumulative shared-loss 

payments totaling $28.2 billion, (comprised of $31.8 billion 

in losses, net of $3.6 billion of recoveries) as of year-end 

2014 and $26.4 billion (comprised of $29.1 billion in losses, 

net of $2.7 billion of recoveries) as of year-end 2013. 

Estimates of additional payments, net of true-up recoveries, 

by DIF receiverships over the duration of the SLAs were 

$3.9 billion on total remaining covered assets of $54.6 billion 

at December 31, 2014, and $12.3 billion on total remaining 

covered assets of $78.2 billion as of December 31, 2013. 

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the DIF 

to concentrations of credit risk are receivables from 

resolutions. The repayment of these receivables is 

primarily influenced by recoveries on assets held by DIF 

receiverships and payments on the covered assets under 

SLAs. The majority of the remaining assets in liquidation 

($7.7 billion) and current shared-loss covered assets ($54.6 

billion), which together total $62.3 billion, are concentrated 

in commercial loans ($22.0 billion), residential loans 

($31.0 billion), and structured transaction-related assets 

as described in Note 7 ($5.2 billion). Most of the assets 

originated from failed institutions located in California 

($20.5 billion), Florida ($7.2 billion), Puerto Rico ($7.2 

billion), Alabama ($4.6 billion), Illinois ($3.8 billion), and 

Georgia ($3.6 billion).

5. PROPERTY AND EQUIPMENT, NET

PROPERTY AND EQUIPMENT, 

NET AT DECEMBER 31

Dollars in Thousands

2014 2013

Land $37,352 $37,352 

Buildings (including building and 

leasehold improvements)

326,067 314,775

Application software (includes 

work-in-process)

142,907 149,115 

Furniture, fixtures, and equipment 104,761 142,621 

Accumulated depreciation (238,668) (266,640)

Total $372,419 $377,223 

The depreciation expense was $60 million and $73 million 

for 2014 and 2013, respectively.

6. LIABILITIES DUE TO RESOLUTIONS

As of December 31, 2014 and 2013, the DIF recorded 

liabilities totaling $7.8 billion and $12.6 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 
FINANCIAL SECTION 83

satisfies these liabilities either by sending cash directly to 

the receivership to fund shared-loss and other expenses 

or by offsetting receivables from resolutions when the 

receivership declares a dividend. 

In addition, as of December 31, 2014 and 2013, the 

DIF recorded liabilities of $12 million and $29 million, 

respectively, in unpaid deposit claims related to multiple 

receiverships, which are offset by receivables included in 

the “Receivables from resolutions, net” line item on the 

Balance Sheet. The DIF pays these liabilities when the 

claims are approved. 

7. CONTINGENT LIABILITIES FOR:

ANTICIPATED FAILURE OF 

INSURED INSTITUTIONS

The DIF records a contingent liability and a loss provision 

for DIF-insured institutions that are likely to fail, absent 

some favorable event such as obtaining additional capital 

or merging, when the liability is probable and reasonably 

estimable. The contingent liability is derived by applying 

expected failure rates and loss rates to the institutions 

based on supervisory ratings, balance sheet characteristics, 

and projected capital levels.

The banking industry’s financial condition and performance 

continued to improve in 2014. According to the quarterly 

financial data submitted by DIF-insured institutions, the 

industry reported total net income of $116.0 billion for the 

first nine months of 2014, an increase of 1.1 percent over 

the comparable period one year ago. The industry’s capital 

levels also continued to improve, and noncurrent loans 

declined, as the industry’s ratio of noncurrent loans-to-total 

loans fell to its lowest level since the second quarter of 

2008.

Losses to the DIF from failures that occurred in 2014 were 

lower than the contingent liability at the end of 2013, as the 

aggregate number and size of institution failures in 2014 

were less than anticipated. However, the contingent liability 

increased from $1.2 billion at December 31, 2013 to $1.8 

billion at December 31, 2014, as the effect of an increase 

in the failure rates for certain institutions contributing to 

the contingent liability more than offset the removal of the 

liability for institutions that failed in 2014.

In addition to the recorded contingent liabilities, the 

FDIC has identified risks in the financial services industry 

that could result in additional losses to the DIF, should 

potentially vulnerable insured institutions ultimately 

fail. As a result of these risks, the FDIC believes that it is 

reasonably possible that the DIF could incur additional 

estimated losses of approximately $1.7 billion as of 

December 31, 2014, as compared to $3.0 billion as of 

year-end 2013. The actual losses, if any, will largely depend 

on future economic and market conditions and could differ 

materially from this estimate.

During 2014, 18 institutions failed with combined assets 

of $2.9 billion at the date of failure. Recent trends in 

supervisory ratings and market data suggest that the 

financial performance and condition of the banking industry 

should continue to improve over the coming year. However, 

exposure to interest rate risk, reliance on short-term 

sources of funding, and limited opportunities for revenue 

growth will continue to stress the industry. Additionally, 

key risks continue to weigh on the economic outlook as 

well, including the impact of rising interest rates as they 

return to more normal levels; fiscal challenges at federal, 

state, and local levels; and global economic risks. The FDIC 

continues to evaluate ongoing risks to affected institutions 

in light of existing economic and financial conditions, 

and the extent to which such risks may put stress on the 

resources of the insurance fund.

LITIGATION LOSSES

The DIF records an estimated loss for unresolved legal 

cases to the extent that those losses are considered 

probable and reasonably estimable. The FDIC recorded 

probable litigation losses of $950 thousand and $5 million 

for the DIF as of December 31, 2014 and 2013, respectively. 

In addition, the FDIC has determined that there are no 

reasonably possible losses from unresolved cases at 

year-end 2014, compared to $125 thousand at year-end 2013.

OTHER CONTINGENCIES

IndyMac Federal Bank Representation and 

Indemnification Contingent Liability

On March 19, 2009, the FDIC as receiver for IndyMac 

Federal Bank (IMFB) and certain subsidiaries (collectively, 

Sellers) sold substantially all of the assets, which 
ANNUAL REPORT 2014

84 FINANCIAL SECTION 

included mortgage loans and servicing rights, of IMFB 

and its respective subsidiaries to OneWest Bank and its 

affiliates (the “Acquirers”). The Sellers made certain 

representations customarily made by commercial parties in 

similar transactions. The FDIC, in its corporate capacity, 

guaranteed the receivership’s indemnification obligations 

under the sale agreements. Until the periods for asserting 

claims under these arrangements have expired and all 

indemnification claims are quantified and paid, losses could 

continue to be incurred by the receivership and, in turn, 

the DIF. 

Under the sales agreements, the Acquirers have rights 

to assert claims to recover losses incurred as a result of 

third-party claims and breaches of representations. Assets 

sold subject to representation and warranty indemnification 

total $171.6 billion. The IndyMac receivership has paid 

cumulative claims totaling $21 million through December 

31, 2014, and $15 million through December 31, 2013. 

Additional quantified claims asserted and under review have 

been accrued in the amount of $6 million and $7 million as 

of December 31, 2014 and 2013, respectively. The FDIC is 

evaluating the likelihood of additional losses for alleged 

breaches as follows:

♦ Potential losses could be incurred for failures by the 

servicer to initiate foreclosure within a prescribed 

timeframe with respect to certain government guaranteed 

loans, resulting in the refusal of the guarantor to pay 

interest otherwise payable to the investors on such loans. 

Review and evaluation is in process for approximately $32 

million as of December 31, 2014 and 2013, in reasonably 

possible losses.

♦ The Acquirers’ rights to assert additional claims as a 

result of certain third-party claims and breaches of 

representations expired on March 19, 2011 and March 19, 

2014. As of the expiration date of these notice periods, 

199 thousand claims relating to potential breaches were 

received. As of December 31, 2014, 40 thousand claims 

remain and preserve the Acquirer’s right to claim losses 

over the life of the loan. These remaining claims require 

review to determine whether a breach exists and, if so, 

if a cure will result in a loss. As a result, potential losses 

cannot be estimated.

♦ The Acquirers’ rights to assert claims to recover 

losses incurred as a result of breaches of loan seller 

representations extend to March 19, 2019 for the Fannie 

Mae and Ginnie Mae reverse mortgage servicing portfolios 

(unpaid principal balance of $14.2 billion at December 31, 

2014, compared to $15.2 billion at December 31, 2013). 

The likelihood of loss is reasonably possible. However, 

while claims filed prior to this date reserve the right to 

recover losses over the life of the loan, this exposure is 

currently not estimable.

♦ Fannie Mae has demanded repurchase of 585 loans with 

current principal balances of $93 million. These claims 

are under review to determine their validity. In addition, 

during 2014, the IMFB receivership agreed to repurchase 

264 loans totaling $44 million in principal balance; 

however, a contingent liability has not been established 

as the amount and timing of any resulting losses is 

currently not determinable. An agreement among the 

sellers, the FDIC and Fannie Mae provides for the deferral 

of repurchases claimed by Fannie Mae, and that the 

parties will negotiate in good faith to attempt to resolve 

all outstanding and projected liabilities to Fannie Mae 

sometime before March 19, 2015.

In addition to the alleged breaches discussed above, 

the FDIC believes it is likely that additional losses 

will be incurred. However quantifying the contingent 

liability associated with the liabilities to investors 

and indemnification for breaches of sale agreement 

representations is subject to a number of uncertainties, 

including market conditions, the occurrence of borrower 

defaults and resulting foreclosures and losses. Because 

of these and other uncertainties that surround the liability 

associated with the quantification of possible losses, the 

FDIC has determined that, while additional losses are 

probable, the amount is not currently 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 
FINANCIAL SECTION 85

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 2014 and 2013, 

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. 

The LLCs issued notes to the receiverships to partially fund 

the purchased assets. In many instances, the FDIC, in its 

corporate capacity, guaranteed notes issued by the LLCs. 

This guarantee covers the timely payment of principal and 

interest due on the notes. In exchange for the guarantee, 

the DIF receives a guarantee fee from the LLCs. If the FDIC 

is required to perform under the guarantee, it acquires an 

interest in the cash flows of the LLC equal to the amount 

of guarantee payments made plus accrued interest. Equity 

holders receive cash flows from the LLCs once all expenses 

have been paid, the guaranteed notes have been satisfied, 

and the FDIC has been reimbursed for any guarantee 

payments. 

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. 

Since 2009, private investors 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 held the remaining 50- to 60- 

percent equity interest in the LLCs and, in most cases, 

the guaranteed notes. At December 31, 2014, only one 

guaranteed note with an outstanding balance of $10 million 

remained, which matures in 2020. At December 31, 2013, 

there were two guaranteed notes with outstanding balances 

totaling $99 million.

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 senior and/or subordinated 

debt instruments and owner trust or residual certificates 

collateralized by the underlying mortgage-backed securities 

or loans. 

Since 2010, private investors purchased the senior 

notes issued by the trusts for $6.2 billion in cash and the 

receiverships hold the subordinated debt instruments and 

owner trust or residual certificates. In exchange for a fee, 

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. 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. The subordinated 

note holders and owner trust or residual certificates holders 

receive cash flows from the entity only after all expenses 

have been paid, the guaranteed notes have been satisfied, 

and the FDIC has been reimbursed for any guarantee 

payments. 
ANNUAL REPORT 2014

86 FINANCIAL SECTION 

All Structured Transactions 

with FDIC Guaranteed Debt

Through December 31, 2014, the receiverships have 

transferred a portfolio of loans with an unpaid principal 

balance of $16.4 billion and mortgage-backed securities 

with a book value of $8.8 billion to 14 LLCs and 11 

trusts. The LLCs and trusts subsequently issued notes 

guaranteed by the FDIC in an original principal amount of 

$10.6 billion. Since March 2013, there have been no new 

guarantee transactions. As of December 31, 2014 and 2013, 

the DIF collected guarantee fees totaling $250 million and 

$231 million, respectively, and recorded a receivable for 

additional guarantee fees of $42 million and $66 million, 

respectively, included in the “Interest receivable on 

investments and other assets, net” line item on the Balance 

Sheet. All guarantee fees are recorded as deferred revenue, 

included in the “Accounts payable and other liabilities” line 

item, and recognized as revenue primarily on a straight-line 

basis over the term of the notes. As of December 31, 2014 

and 2013, the amount of deferred revenue recorded was $42 

million and $66 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 3.3 percent) of the expected guarantee 

payments by the FDIC, reimbursements to the FDIC for 

guarantee payments, and guarantee fee collections. It is 

reasonably possible that the DIF could be required to make 

a guarantee payment of approximately $29 million for an 

SSGN transaction at note maturity in 2020. Any guarantee 

payment made would be fully reimbursed from the proceeds 

of the liquidation of the SSGN’s underlying collateral. For 

all of the remaining transactions, the estimated 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, 2014 and 2013, the maximum loss 

exposure was $10 million and $99 million for LLCs and $2.1 

billion and $2.8 billion for trusts, respectively, representing 

the sum of all outstanding debt guaranteed by the FDIC. 

8. ASSESSMENTS 

The framework for the FDIC deposit insurance assessment 

system is mandated by section 7 of the FDI Act, and the 

provisions for implementation are contained in part 327 of 

title 12 of the Code of Federal Regulations. The FDI Act 

requires a risk-based assessment system and payment of 

assessments by all IDIs.

In response to the Dodd-Frank Act, the FDIC implemented 

several changes to the assessment system and developed 

a comprehensive, long-term fund management plan. The 

plan is designed to restore and maintain a positive fund 

balance for the DIF even during a banking crisis and 

achieve moderate, steady assessment rates throughout any 

economic cycle. Summarized below are actions taken to 

implement assessment system changes and provisions of 

the comprehensive plan.

♦ The FDIC adopted a Restoration Plan to ensure that 

the ratio of the DIF fund balance to estimated insured 

deposits (reserve ratio) reaches 1.35 percent by 

September 30, 2020. The FDIC will update, at least 

semiannually, its loss and income projections for the fund 

and, if needed, increase or decrease assessment rates, 

following notice-and-comment rulemaking, if required.

♦ The FDIC adopted a final rule that suspends dividends 

indefinitely, and, in lieu of dividends, adopts lower 

assessment rate schedules when the reserve ratio reaches 

1.15 percent, 2 percent, and 2.5 percent.

♦ The FDIC adopted a final rule that amends and clarifies 

some definitions of higher-risk assets as used in deposit 

insurance pricing for large and highly complex IDIs by 

(1) revising the definitions of certain higher-risk assets, 

specifically leveraged loans and subprime consumer 

loans; (2) clarifying when an asset must be identified as 

higher risk; and (3) clarifying the way securitizations are 

identified as higher risk. The final rule became effective 

on April 1, 2013. 

♦ The Federal Deposit Insurance Act (FDI Act) requires that 

the FDIC Board of Directors designate a reserve ratio for 

the DIF and publish the designated reserve ratio (DRR) 

before the beginning of each calendar year. Accordingly, 

in October 2014, the FDIC adopted a final rule maintaining 

the DRR at 2 percent for 2015. The DRR is an integral 
FINANCIAL SECTION 87

part of the FDIC’s comprehensive, long-term management 

plan for the DIF and is viewed as a long-range, minimum 

target for the reserve ratio.

ASSESSMENT REVENUE

Annual assessment rates averaged approximately 6.8 cents 

per $100 of the assessment base and 7.8 cents per $100 

of the assessment base for 2014 and 2013, respectively. 

The assessment base is generally defined as the average 

consolidated total assets minus the average tangible 

equity (measured as Tier 1 capital) of the IDI during the 

assessment period.

In December 2009, a majority of IDIs prepaid $45.7 billion 

of estimated quarterly risk-based assessments to address 

the DIF’s liquidity need to pay for projected failures and to 

ensure that the deposit insurance system remained industryfunded. For each interim quarter, an institution’s risk-based 

deposit insurance assessment was offset by the available 

amount of prepaid assessments. The final offset of prepaid 

assessments occurred for the period ending March 31, 

2013, and in June 2013, as required by regulation, the DIF 

refunded $5.9 billion of unused prepaid assessments to IDIs. 

The “Assessments receivable, net” line item on the Balance 

Sheet of $2.0 billion and $2.2 billion represents the 

estimated premiums due from IDIs for the fourth quarter of 

2014 and 2013, respectively. The actual deposit insurance 

assessments for the fourth quarter of 2014 will be billed and 

collected at the end of the first quarter of 2015. During 2014 

and 2013, $8.7 billion and $9.7 billion, respectively, were 

recognized as assessment revenue from institutions.

RESERVE RATIO

As of September 30, 2014 and December 31, 2013, the 

DIF reserve ratio was 0.89 percent and 0.79 percent, 

respectively, of estimated insured deposits.

ASSESSMENTS RELATED TO FICO

Assessments continue to be levied on institutions for 

payments of the interest on obligations issued by the 

Financing Corporation (FICO). The FICO was established 

as a mixed-ownership government corporation to function 

solely as a financing vehicle for the former FSLIC. The 

annual FICO interest obligation of approximately $790 

million is paid on a pro rata basis using the same rate for 

banks and thrifts. The FICO assessment has no financial 

impact on the DIF and is separate from deposit insurance 

assessments. The FDIC, as administrator of the DIF, acts 

solely as a collection agent for the FICO. As of December 

31, 2014 and 2013, approximately $793 million and 

$792 million, respectively, was collected and remitted to 

the FICO.

9. OTHER REVENUE

OTHER REVENUE 

FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2014 2013

Dividends and interest on 

Citigroup trust preferred 

securities (Note 10)

$0 $124,726

Guarantee fees for structured 

transactions (Note 7)

19,662 33,051

Other 7,397 5,377

Total $27,059 $163,154

10. GAIN ON SALE OF TRUST

PREFERRED SECURITIES 

Pursuant to a systemic risk determination, the Treasury, 

the FDIC, and the Federal Reserve Bank of New York 

executed terms of a guarantee agreement on January 15, 

2009, with Citigroup to provide loss protection on a pool 

of approximately $301.0 billion of assets that remained 

on the balance sheet of Citigroup. On December 23, 2009, 

Citigroup terminated this guarantee agreement, citing 

improvements in its financial condition. The FDIC did not 

incur any losses as a result of the guarantee and retained 

$2.225 billion (liquidation amount) of the $3.025 billion in 

trust preferred securities (TruPS) received as consideration 

for the period of guarantee coverage. The DIF recorded the 

TruPS at their fair value and recognized revenue of $1.962 

billion upon termination of the agreement. 

To facilitate a sale of the retained TruPS, the FDIC 

exchanged the TruPS on September 9, 2013, for $2.420 

billion (principal amount) of Citigroup marketable 
ANNUAL REPORT 2014

88 FINANCIAL SECTION 

subordinated notes. The exchange resulted in a realized 

gain to the DIF of $458 million, reported in the “Gain on 

sale of trust preferred securities” line item on the Statement 

of Income and Fund Balance. FDIC reclassified the $458 

million out of accumulated other comprehensive income to 

“Gain on sale of trust preferred securities,” representing the 

sum of unrealized gains recorded as of December 31, 2012, 

($302 million) and holding gains arising during 2013 ($156 

million). The resulting net effect on the DIF Statement of 

Income and Fund Balance was a $156 million increase to 

the 2013 comprehensive income.

On September 10, 2013, the subordinated notes were sold 

to the institutional fixed income market for the principal 

amount of $2.420 billion, resulting in the recognition of $1.6 

million for one day of accrued interest on the subordinated 

notes, which is included in the 2013 “Other revenue” line 

item on the Statement of Income and Fund Balance (see 

Note 9). Also included in the 2013 “Other revenue” line item 

is $123.1 million for dividends and interest earned on the 

TruPS in 2013 prior to their disposition (see Note 9).

11. OPERATING EXPENSES 

Operating expenses were $1.7 billion and $1.6 billion for 

2014 and 2013, respectively. The chart below lists the major 

components of operating expenses.

OPERATING EXPENSES 

FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2014 2013

Salaries and benefits $1,252,167 $1,292,551

Outside services 263,649 326,040 

Travel 93,720 96,056 

Buildings and leased space 96,596 91,469 

Software/Hardware 

maintenance

58,844 56,297 

Depreciation of property 

and equipment

59,634 72,828 

Other 28,999 29,505 

Subtotal 1,853,609 1,964,746 

Less: Services billed to 

resolution entities

(189,265) (356,029)

Total $1,664,344 $1,608,717 

12. PROVISION FOR

INSURANCE LOSSES 

The provision for insurance losses was a negative $8.3 

billion for 2014, compared to negative $5.7 billion for 

2013. The negative provision for 2014 primarily resulted 

from a decrease of $9.1 billion in the estimated losses for 

institutions that failed in current and prior years, partially 

offset by an increase of $850 million in the contingent 

liability for anticipated failures due to the deterioration in 

the financial condition of certain troubled institutions.

As described in Note 4, the estimated recoveries from assets 

held by receiverships and estimated payments related to 

assets sold by receiverships to acquiring institutions under 

shared-loss agreements (SLAs) are used to derive the loss 

allowance on the receivables from resolutions. The $9.1 

billion reduction in the estimated losses from failures 

was primarily attributable to two components. The first 

component was unanticipated recoveries of $1.8 billion in 

litigation settlements, professional liability claims, and tax 

refunds by the receiverships. These are not recognized until 

the cash is received since significant uncertainties surround 

their recovery.

The second component of the reduction in the estimated 

losses from failures was a $6.7 billion decrease in the 

receiverships’ shared-loss liability that resulted from 

decreases in covered asset balances, lower future loss rate 

estimates, and unanticipated recoveries on SLA losses. 

Covered asset balances decreased by $23.6 billion during 

2014 with lower than anticipated losses. These lower 

than anticipated losses were due to loan amortizations 

and pay-downs, resulting from the improvement in the 

condition of real estate markets where shared-loss assets 

are concentrated, and the expiration of 83 commercial asset 

shared-loss coverage agreements in 2014, thereby ending 

the loss claim period. The reduction in future loss rate 

estimates resulted from the improvement in the real estate 

markets and the composition of the remaining covered asset 

portfolios, which primarily consist of performing single 

family assets. These assets have historically experienced 

significantly lower losses than commercial assets. Finally, 

unanticipated recoveries of approximately $958 million on 

previous shared-loss claims, which are not estimated due to 

their uncertainty, were received by the receiverships during 

2014.
FINANCIAL SECTION 89

13. EMPLOYEE BENEFITS 

PENSION BENEFITS AND SAVINGS PLANS

Eligible FDIC employees (permanent and term employees 

with appointments exceeding one year) are covered by the 

federal government retirement plans, either the Civil Service 

Retirement System (CSRS) or the Federal Employees 

Retirement System (FERS). Although the DIF contributes 

a portion of pension benefits for eligible employees, it does 

not account for the assets of either retirement system. The 

DIF also does not have actuarial data for accumulated 

plan benefits or the unfunded liability relative to eligible 

employees. The U.S. Office of Personnel Management 

(OPM) reports on and accounts for these amounts.

Eligible FDIC employees also may participate in a FDICsponsored tax-deferred 401(k) savings plan with matching 

contributions up to 5 percent. Under the Federal Thrift 

Savings Plan (TSP), the FDIC provides FERS employees 

with an automatic contribution of 1 percent of pay and an 

additional matching contribution up to 4 percent of pay. 

CSRS employees also can contribute to the TSP, but they do 

not receive agency matching contributions.

PENSION BENEFITS AND 

SAVINGS PLANS EXPENSES

FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2014 2013

Civil Service Retirement 

System

$4,698 $5,430 

Federal Employees Retirement 

System (Basic Benefit)

99,954 99,553 

FDIC Savings Plan 37,304 37,816 

Federal Thrift Savings Plan 35,144 35,686 

Total $177,100 $178,485 

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. OPM 

administers and accounts for the FEHB. 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 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, 2014 

and 2013, the liability was $243 million and $194 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 $58 million and $16 

million at December 31, 2014 and 2013, 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 2014 

and 2013 were $14 million and $18 million, respectively, 

which are included in the current and prior year’s operating 

expenses on the Statement of Income and Fund Balance. 

The changes in the actuarial losses/gains and prior service 

costs for 2014 and 2013 of negative $41 million and $44 

million, respectively, are reported as other comprehensive 

income in the “Unrealized postretirement benefit (loss) 

gain” line item on the Statement of Income and Fund 

Balance. Key actuarial assumptions used in the accounting 

for the plan include the discount rate of 4.0 percent, the 

rate of compensation increase of 3.8 percent, and the dental 

coverage trend rate of 4.9 percent. The discount rate of 4.0 

percent is based upon rates of return on high-quality fixed 

income investments whose cash flows match the timing and 

amount of expected benefit payments. 
ANNUAL REPORT 2014

90 FINANCIAL SECTION 

14. COMMITMENTS AND OFFBALANCE-SHEET EXPOSURE

COMMITMENTS:

Leased Space

The FDIC’s lease commitments total $203 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 $56 million and $52 

million for 2014 and 2013, respectively.

LEASED SPACE COMMITMENTS

Dollars in Thousands

2015 2016 2017 2018 2019

2020/

Thereafter

$46,502 $45,842 $41,387 $30,900 $26,433 $12,291

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, 2014 and December 31, 

2013, estimated insured deposits for the DIF were $6.1 

trillion and $6.0 trillion, respectively.

15. DISCLOSURES ABOUT THE

FAIR VALUE OF FINANCIAL 

INSTRUMENTS

Financial assets recognized and measured at fair value 

on a recurring basis at each reporting date include cash 

equivalents (see Note 2) and the investment in U.S. Treasury 

obligations (see Note 3). The following tables present the 

DIF’s financial assets measured at fair value as of December 

31, 2014 and 2013.

ASSETS MEASURED AT FAIR VALUE AT DECEMBER 31, 2014

Dollars in Thousands

Fair Value Measurements Using

Quoted Prices 

in Active 

Markets for

Identical Assets

(Level 1)

Significant Other

Observable 

Inputs

(Level 2)

Significant

Unobservable 

Inputs

(Level 3)

Total Assets

at Fair Value

Assets

Cash equivalents1 $1,900,105 $1,900,105 

Available-for-Sale Debt Securities

Investment in U.S. Treasury Obligations2 49,805,846 49,805,846 

Total Assets $51,705,951 $0 $0 $51,705,951 

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

Fiscal Service.

2 The investment in U.S. Treasury obligations is measured based on prevailing market yields for federal government entities.
FINANCIAL SECTION 91

ASSETS MEASURED AT FAIR VALUE AT DECEMBER 31, 2013

Dollars in Thousands

Fair Value Measurements Using

Quoted Prices 

in Active 

Markets for

Identical Assets

(Level 1)

Significant Other

Observable 

Inputs

(Level 2)

Significant

Unobservable 

Inputs

(Level 3)

Total Assets

at Fair Value

Assets

Cash equivalents1 $3,534,305 $3,534,305 

Available-for-Sale Debt Securities

Investment in U.S. Treasury Obligations2 38,510,500 38,510,500 

Total Assets $42,044,805 $0 $0 $42,044,805 

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

Fiscal Service.

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

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, and 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.
ANNUAL REPORT 2014

92 FINANCIAL SECTION 

16. INFORMATION RELATING TO THE 

STATEMENT OF CASH FLOWS

17. SUBSEQUENT EVENTS 

Subsequent events have been evaluated through February 

5, 2015, the date the financial statements are available to be 

issued.

2015 FAILURES THROUGH FEBRUARY 5, 2015

Through February 5, 2015, two insured institutions failed in 

2015 with total losses to the DIF estimated to be $10 million.

RECONCILIATION OF NET INCOME TO NET CASH FROM OPERATING ACTIVITIES 

FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2014 2013

Operating Activities

Net Income: $15,599,812 $14,504,738 

Adjustments to reconcile net income to net cash provided 

by operating activities:

Amortization of U.S. Treasury obligations 1,387,067 1,139,456 

Treasury Inflation-Protected Securities inflation adjustment (37,865) (35,300)

Gain on sale of trust preferred securities 0 (458,176)

Depreciation on property and equipment 59,634 72,829 

Loss on retirement of property and equipment 465 220 

Provision for insurance losses (8,305,577) (5,659,388)

Unrealized (loss) gain on postretirement benefits (41,401) 44,097 

Change in Assets and Liabilities:

Decrease (Increase) in assessments receivable, net 224,311 (1,220,883)

(Increase) in interest receivable and other assets (137,462) (75,014)

Decrease in receivables from resolutions 7,077,627 10,406,392 

(Decrease) in accounts payable and other liabilities (9,569) (49,045)

Increase (Decrease) in postretirement benefit liability 49,828 (30,635)

(Decrease) in liabilities due to resolutions (4,826,703) (8,547,803)

(Decrease) in unearned revenue - prepaid assessments 0 (1,576,417)

(Decrease) in refunds of prepaid assessments 0 (5,675,199)

Net Cash Provided by Operating Activities $11,040,167 $2,839,872 
FINANCIAL SECTION 93

FSLIC RESOLUTION FUND (FRF)

FEDERAL DEPOSIT INSURANCE CORPORATION

FSLIC RESOLUTION FUND BALANCE SHEET AT DECEMBER 31

Dollars in Thousands

2014 2013

Assets

Cash and cash equivalents $870,943 $871,612 

Receivables from U.S. Treasury for goodwill litigation (Note 3) 356,455 356,455 

Other assets, net 904 1,183 

Total Assets $1,228,302 $1,229,250 

Liabilities 

Accounts payable and other liabilities $370 $790 

Contingent liabilities for goodwill litigation (Note 3) 356,455 356,455 

Total Liabilities 356,825 357,245 

Resolution Equity (Note 4)

Contributed capital 125,332,156 125,332,156 

Accumulated deficit (124,460,679) (124,460,151)

Total Resolution Equity 871,477 872,005 

Total Liabilities and Resolution Equity $1,228,302 $1,229,250 

The accompanying notes are an integral part of these financial statements.
ANNUAL REPORT 2014

94 FINANCIAL SECTION 

FEDERAL DEPOSIT INSURANCE CORPORATION

FSLIC RESOLUTION FUND STATEMENT OF INCOME AND ACCUMULATED DEFICIT 

FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2014 2013

Revenue

Interest on U.S. Treasury obligations $229 $1,196 

Other revenue 948 1,953 

Total Revenue 1,177 3,149 

Expenses and Losses

Operating expenses 2,326 2,350 

Provision for losses (792) (1,255)

Goodwill litigation expenses (Note 3) 0 500 

Other expenses 171 2,070 

Total Expenses and Losses 1,705 3,665 

Net Loss (528) (516)

Accumulated Deficit - Beginning (124,460,151) (124,459,635)

Accumulated Deficit - Ending $(124,460,679) $(124,460,151)

FSLIC RESOLUTION FUND (FRF)

The accompanying notes are an integral part of these financial statements.
FINANCIAL SECTION 95

FSLIC RESOLUTION FUND (FRF)

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

FEDERAL DEPOSIT INSURANCE CORPORATION

FSLIC RESOLUTION FUND STATEMENT OF CASH FLOWS 

FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2014 2013

Operating Activities

Provided by:

Interest on U.S. Treasury obligations $229 $1,196 

Recoveries from financial institution resolutions 1,886 5,148 

Recovery of tax benefits 0 130 

Miscellaneous receipts 197 52 

Used by:

Operating expenses (2,981) (3,921)

Payments for goodwill litigation (Note 3) 0 (500)

Net Cash (Used) Provided by Operating Activities (669) 2,105 

Financing Activities

Provided by:

U.S. Treasury payments for goodwill litigation (Note 3) 0 500 

Used by:

Return of U.S. Treasury funds (Note 4) 0 (2,600,000)

Payment to Resolution Funding Corporation (Note 4) 0 (125,000)

Net Cash (Used) by Financing Activities 0 (2,724,500)

Net (Decrease) in Cash and Cash Equivalents (669) (2,722,395)

Cash and Cash Equivalents - Beginning 871,612 3,594,007

Cash and Cash Equivalents - Ending $870,943 $871,612
ANNUAL REPORT 2014

96 FINANCIAL SECTION 

Notes to the Financial Statements

FSLIC RESOLUTION FUND 

December 31, 2014 and 2013 

1. OPERATIONS/DISSOLUTION OF 

THE FSLIC RESOLUTION FUND

OVERVIEW

The Federal Deposit Insurance Corporation (FDIC) is the 

independent deposit insurance agency created by Congress 

in 1933 to maintain stability and public confidence in the 

nation’s banking system. Provisions that govern the FDIC’s 

operations are generally found in the Federal Deposit 

Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq). 

In accordance with 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 (IDIs) by identifying, 

monitoring, and addressing risks to the DIF.

In addition to being the administrator of the DIF, the FDIC 

is the administrator of the FSLIC Resolution Fund (FRF). 

As such, the FDIC 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 FDIC maintains the DIF and the FRF separately 

to support their respective functions.

The FSLIC was created 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 and created the FRF. At that 

time, the assets and liabilities of the FSLIC were transferred 

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 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 extensively reviewed and cataloged the 

FRF’s remaining assets and liabilities. Some of the issues 

and items that remain open in the FRF are (1) criminal 

restitution orders (generally have from 1 to 17 years 

remaining to enforce); (2) collections of settlements and 

judgments obtained against officers and directors and 

other professionals responsible for causing or contributing 

to thrift losses (generally have up to 7 years remaining to 

enforce, unless the judgments are renewed or are covered 

by the Federal Debt Collections Procedures Act, which 

will result in significantly longer periods for collection for 

some judgments); (3) liquidation/disposition of residual 

assets purchased by the FRF from terminated receiverships; 

(4) three remaining assistance agreements entered into 

by the former FSLIC (FRF could continue to receive or 

refund overpayments of tax benefits sharing in future 

years); (5) goodwill litigation (no final date for resolution 

has been established; see Note 3); and (6) affordable 

housing disposition program monitoring (last agreement 

expires no later than 2045; see Note 3). The FRF could 

potentially realize recoveries from tax benefits sharing, 

criminal restitution orders, and professional liability claims; 
FINANCIAL SECTION 97

however, any associated recoveries are not reflected 

in the FRF’s financial statements, given the significant 

uncertainties surrounding the ultimate outcome. 

On April 1, 2014, the FDIC concluded its role as receiver of 

FRF receiverships when the last active receivership was 

terminated. In total, 850 receiverships were liquidated 

by the FRF and the RTC. To facilitate receivership 

terminations, the FRF, in its corporate capacity, acquired 

any remaining receivership assets. These assets are 

included in the “Other Assets, net” line item on the Balance 

Sheet.

During the years of receivership activity, the assets held 

by receivership entities, and the claims against them, 

were accounted for separately from the FRF’s assets 

and liabilities to ensure that receivership proceeds were 

distributed in accordance with applicable laws and 

regulations. Also, the income and expenses attributable to 

receiverships were accounted for as transactions of those 

receiverships. The FDIC billed receiverships for services 

provided on their behalf.

2. SUMMARY OF SIGNIFICANT 

ACCOUNTING POLICIES

GENERAL

These financial statements include 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). During the years of 

receivership activity, these statements did not include 

reporting for assets and liabilities of receivership entities 

because these entities were legally separate and distinct, 

and the FRF did not have any ownership or benefical 

interest in them. 

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 valuation of other assets 

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 

estimated losses related to 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

Accounting Standards Update No. 2013-07, Presentation of 

Financial Statements - Liquidation Basis of Accounting, 

modifies Accounting Standards Codification Topic 205, 

Presentation of Financial Statements, to require an entity 

to prepare its financial statements using the liquidation 

basis of accounting when liquidation is imminent. The 

requirements became effective for annual reporting periods 

beginning after December 15, 2013. 

The FDIC has determined that the FRF does not meet the 

requirements for presenting financial statements using the 

liquidation basis of accounting. According to the standard, 

a limited-life entity should apply the liquidation basis of 

accounting only if a change in the entity’s governing plan 

has occurred since its inception. By statute, the FRF is a 

limited-life entity whose dissolution will occur upon the 

satisfaction of all liabilities and the disposition of all assets. 

No changes to this statutory plan have occurred since 

inception of the FRF.

Other recent accounting pronouncements have been 

deemed not applicable or material to the financial 

statements as presented.

3. CONTINGENT LIABILITIES FOR:

GOODWILL LITIGATION

In United States v. Winstar Corp., 518 U.S. 839 (1996), 

the Supreme Court held that when it became impossible 

following the enactment of FIRREA in 1989 for the federal 

government to perform certain agreements to count 
ANNUAL REPORT 2014

98 FINANCIAL SECTION 

goodwill toward regulatory capital, the plaintiffs were 

entitled to recover damages from the United States. The 

contingent liability associated with the nonperformance of 

these agreements was transferred to the FRF on August 9, 

1989, upon the dissolution of the FSLIC.

The FRF can draw from an appropriation provided by 

Section 110 of the Department of Justice Appropriations 

Act, 2000 (Public Law 106-113, Appendix A, Title I, 113 Stat. 

1501A-3, 1501A-20) such sums as may be necessary for the 

payment of judgments and compromise settlements in the 

goodwill litigation. This appropriation is to remain available 

until expended. Because an appropriation is available 

to pay such judgments and settlements, any estimated 

liability for goodwill litigation should have a corresponding 

receivable from the U.S. Treasury and therefore have no net 

impact on the financial condition of the FRF. 

The FRF paid $500 thousand to the plaintiffs in one 

goodwill case in 2013, representing a reimbursement for a 

tax liability of the plaintiffs as a result of the settlement they 

received in 2012. The FRF received appropriations from the 

U.S. Treasury to fund this payment.

As of December 31, 2014 and 2013, one case remains active 

and pending against the United States based on alleged 

breaches of the agreements stated above. For this case, 

a contingent liability and an offsetting receivable of $356 

million was recorded as of December 31, 2014 and 2013. 

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. Additionally, for a case that was fully 

adjudicated in 2012, an estimated loss of $8 million, which 

represents estimated tax liabilities, is also reasonably 

possible. 

In addition, the FRF-FSLIC pays the goodwill litigation 

expenses incurred by the Department of Justice (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 2014, 

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 2015 expenses. 

OTHER CONTINGENCIES

Paralleling the goodwill cases were similar cases alleging 

that the government breached agreements regarding tax 

benefits associated with certain FSLIC-assisted acquisitions. 

All eight of those cases have been settled. However, a 

case settled in 2006 further obligates the FRF-FSLIC as a 

guarantor for all tax liabilities in the event the settlement 

amount is determined by tax authorities to be taxable. 

The maximum potential exposure under this guarantee is 

approximately $81 million. However, the FDIC believes that 

it is very unlikely the settlement will be subject to taxation. 

The entity’s federal income tax return for the 2006 taxable 

year has been amended and remains subject to examination 

by the Internal Revenue Service (IRS). To date, there 

has been no assertion by the IRS of taxation for an issue 

covered by the guarantee. As of December 31, 2014, no 

liability has been recorded, and the FRF does not expect to 

fund any payment under this guarantee. 

FANNIE MAE GUARANTEE

On May 21, 2012, the FDIC, in its capacity as administrator 

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.

Based on the most current data available, as of September 

30, 2014, the maximum exposure on this indemnification 

is the current unpaid principal balance of the remaining 

58 multi-family loans totaling $5.8 million. Based on a 

contingent liability assessment of this portfolio as of 

September 30, 2014, the majority of the loans are at least 76 

percent amortized, and all are scheduled to mature within 

one to six years. Since all of the loans are performing and 

no losses have occurred since 2001, future payments on this 

indemnification are not expected. As a result, no contingent 

liability for this indemnification has been recorded as of 

December 31, 2014.
FINANCIAL SECTION 99

AFFORDABLE HOUSING 

DISPOSITION PROGRAM

Required by FIRREA under section 501, the Affordable 

Housing Disposition Program (AHDP) was established 

in 1989 to ensure the preservation of affordable housing 

for low-income households. The FDIC, in its capacity as 

administrator of the FRF-RTC, assumed responsibility 

for monitoring property owner compliance with land use 

restriction agreements (LURAs). To enforce the property 

owners’ LURA obligation, the RTC, prior to its dissolution, 

entered into Memoranda of Understanding with 28 

monitoring agencies to oversee these LURAs. The FDIC, 

through the FRF, has agreed to indemnify the monitoring 

agencies for all losses related to LURA legal enforcement 

proceedings. Since 2006, the FDIC has entered into two 

litigations against property owners and has paid $23 

thousand in legal expenses, of which $13 thousand has been 

reimbursed due to successful litigation. The maximum 

potential exposure to the FRF cannot be estimated as it 

is contingent upon future legal proceedings. However, 

loss mitigation factors include: (1) the indemnification 

may become void if the FDIC is not immediately informed 

upon receiving notice of any legal proceedings and (2) the 

FDIC is entitled to reimbursement of any legal expenses 

incurred for successful litigation against a property owner. 

AHDP guarantees will continue until the termination of 

the last of the LURAs, or 2045 (whichever occurs first). 

As of December 31, 2014, no contingent liability for this 

indemnification has been recorded. 

4. RESOLUTION EQUITY

As stated in the Overview section of Note 1, the FRF is 

composed of two distinct pools: the FRF-FSLIC and the 

FRF-RTC. The FRF-FSLIC consists of the assets and 

liabilities of the former FSLIC. The FRF-RTC consists of the 

assets and liabilities of the former RTC. Pursuant to legal 

restrictions, the two pools are maintained separately and 

the assets of one pool are not available to satisfy obligations 

of the other.

The following table shows the contributed capital, 

accumulated deficit, and resulting resolution equity for 

each pool.

RESOLUTION EQUITY AT DECEMBER 31, 2013

Dollars in Thousands

FRF-FSLIC FRF-RTC

FRF 

Consolidated

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

Less: Payment to REFCORP 0 (125,000) (125,000)

Less: Return of U.S. Treasury funds (2,600,000) 0 (2,600,000)

Add: U.S. Treasury payment for goodwill litigation 500 0 500 

Contributed capital - ending 43,707,819 81,624,337 125,332,156 

Accumulated deficit (42,879,951) (81,580,200) (124,460,151)

Total $827,868 $44,137 $872,005 

RESOLUTION EQUITY AT DECEMBER 31, 2014

Dollars in Thousands

FRF-FSLIC FRF-RTC

FRF 

Consolidated

Contributed capital - beginning $43,707,819 $81,624,337 $125,332,156

Contributed capital - ending 43,707,819 81,624,337 125,332,156

Accumulated deficit (42,879,590) (81,581,089) (124,460,679)

Total $828,229 $43,248 $871,477
ANNUAL REPORT 2014

100 FINANCIAL SECTION 

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 mixedownership government corporation established to function 

solely as a financing vehicle for the FSLIC) and the RTC 

issued $31.3 billion of these instruments to the REFCORP. 

FIRREA prohibited the payment of dividends on any of 

these capital certificates.

FRF-FSLIC received $500 thousand in U.S. Treasury 

payments for goodwill litigation in 2013. In addition, $356 

million was accrued for as receivables as of December 31, 

2014 and 2013. Through December 31, 2014, 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, 2014, the FRF-RTC had returned 

$4.6 billion to the U.S. Treasury and made payments of $5.1 

billion to the REFCORP. The most recent payment to the 

REFCORP was in July of 2013 for $125 million. In addition, 

the FDIC returned $2.6 billion to the U.S. Treasury on behalf 

of the FRF-FSLIC in 2013. These actions serve to reduce 

contributed capital.

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.

5. DISCLOSURES ABOUT THE FAIR 

VALUE OF FINANCIAL INSTRUMENTS 

At December 31, 2014 and 2013, the FRF’s financial assets 

measured at fair value on a recurring basis are cash 

equivalents of $827 million and $826 million, respectively. 

Cash equivalents are Special U.S. Treasury Certificates 

with overnight maturities valued at prevailing interest 

rates established by the Bureau of the Fiscal Service. The 

valuation is considered a Level 1 measurement in the 

fair value hierarchy, representing quoted prices in active 

markets for identical assets. 

Some of the FRF’s financial assets and liabilities are not 

recognized at fair value but are recorded at amounts that 

approximate fair value due to their short maturities and/

or comparability with current interest rates. Such items 

include receivables from U.S. Treasury for goodwill 

litigation and accounts payable and other liabilities.

Assets purchased by the FRF from terminated receiverships 

(see Note 1) and included in the “Other Assets, net” line 

item on the Balance Sheet are primarily valued using 

projected cash flow analyses; however, these valuations 

do not represent an estimate of fair value. These assets 

(ranging in age up to 25 years), could not be liquidated 

during the life of the receiverships due to restrictive clauses 

and other impediments. Because these impediments 

remain, there is no market for these assets. Consequently, it 

is not practicable to provide an estimate of fair value.
FINANCIAL SECTION 101

RECONCILIATION OF NET LOSS TO NET CASH FROM OPERATING ACTIVITIES 

FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2014 2013

Operating Activities

Net Loss: $(528) $(516)

Adjustments to reconcile net loss to net cash (used) provided 

by operating activities:

Provision for insurance losses (792) (1,255)

Change in Assets and Liabilities:

Decrease in other assets 1,071 5,528 

(Decrease) in accounts payable and other liabilities (420) (1,652)

Net Cash (Used) Provided by Operating Activities $(669) $2,105 

6. INFORMATION RELATING TO THE 

STATEMENT OF CASH FLOWS

7. SUBSEQUENT EVENTS

Subsequent events have been evaluated through 

February 5, 2015, the date the financial statements are 

available to be issued, and management determined that 

there are no items to disclose.
ANNUAL REPORT 2014

102 FINANCIAL SECTION 

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT
FINANCIAL SECTION 103

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)
ANNUAL REPORT 2014

104 FINANCIAL SECTION 

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)
FINANCIAL SECTION 105

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)
ANNUAL REPORT 2014

106 FINANCIAL SECTION 

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)
FINANCIAL SECTION 107

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)
ANNUAL REPORT 2014

108 FINANCIAL SECTION 

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)
FINANCIAL SECTION 109

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Appendix I
ANNUAL REPORT 2014

110 FINANCIAL SECTION 

MANAGEMENT’S RESPONSE TO THE AUDITOR’S REPORT

Appendix II