V. 

FINANCIAL 

SECTION 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 128 

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Federal Deposit Insurance Corporation 

Deposit Insurance Fund Balance Sheet 

As of December 31 

(Dollars in Thousands) 2021 2020 

ASSETS

 Cash and cash equivalents $ 5,562,941 $ 3,310,527

 Investment in U.S. Treasury securities (Note 3) 114,551,240 110,464,342

 Assessments receivable (Note 9) 1,710,549 1,948,516 

Interest receivable on investments and other assets, net 718,428 1,159,130

 Receivables from resolutions, net (Note 4) 885,354 1,366,736

 Property and equipment, net (Note 5) 327,127 321,080 

Operating lease right-of-use assets (Note 6) 85,238 112,453 

Total Assets $ 123,840,877 $ 118,682,784 

LIABILITIES

 Accounts payable and other liabilities $ 255,405 $ 250,617

 Operating lease liabilities (Note 6) 90,957 119,459 

Liabilities due to resolutions 800 814

 Postretirement benefit liability (Note 13) 331,599 335,977 

Contingent liabilities:

 Anticipated failure of insured institutions (Note 7) 20,876 78,952

 Litigation losses (Note 7) 200 200 

Total Liabilities 699,837 786,019

 Off-balance-sheet exposure (Note 14) 

FUND BALANCE

 Accumulated Net Income 123,372,878 116,924,738 

ACCUMULATED OTHER COMPREHENSIVE INCOME 

Unrealized (loss) gain on U.S. Treasury securities, net (Note 3) (149,115) 1,069,949 

Unrealized postretirement benefit (loss) (Note 13) (82,723) (97,922) 

Total Accumulated Other Comprehensive Income (231,838) 972,027 

Total Fund Balance 123,141,040 117,896,765 

Total Liabilities and Fund Balance $ 123,840,877 $ 118,682,784 

The accompanying notes are an integral part of these financial statements. 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 129 

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Federal Deposit Insurance Corporation 

Deposit Insurance Fund Statement of Income and Fund Balance 

For the Years Ended December 31 

(Dollars in Thousands) 

REVENUE

 Assessments (Note 9) 

Interest on U.S. Treasury securities 

 Return of unclaimed insured deposits (Note 10) 

 Other revenue 

Total Revenue 

$ 

2021 

7,080,232 

953,152 

103,439 

16,665 

8,153,488 

$ 

2020 

7,093,175 

1,683,063 

0 

20,240 

8,796,478 

EXPENSES AND LOSSES

 Operating expenses (Note 11) 

 Provision for insurance losses (Note 12) 

 Insurance and other expenses 

Total Expenses and Losses 

1,842,723 

(143,681) 

6,306 

1,705,348 

1,846,491 

(157,309) 

2,660 

1,691,842 

Net Income 6,448,140 7,104,636 

OTHER COMPREHENSIVE INCOME 

Unrealized (loss) gain on U.S. Treasury securities, net 

 Unrealized postretirement benefit gain (loss) (Note 13) 

Total Other Comprehensive Income 

(1,219,064) 

15,199 

(1,203,865) 

482,681 

(37,490) 

445,191 

Comprehensive Income 5,244,275 7,549,827 

Fund Balance - Beginning 

Fund Balance - Ending $ 

117,896,765 

123,141,040 $ 

110,346,938 

117,896,765 

The accompanying notes are an integral part of these financial statements. 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 130 

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Federal Deposit Insurance Corporation 

Deposit Insurance Fund Statement of Cash Flows 

For the Years Ended December 31 

(Dollars in Thousands) 2021 2020 

OPERATING ACTIVITIES 

Provided by:

 Assessments $ 

Interest on U.S. Treasury securities 

 Recoveries from financial institution resolutions 

 Return of unclaimed insured deposits 

 Miscellaneous receipts 

Used by: 

Operating expenses 

 Disbursements for financial institution resolutions 

 Miscellaneous disbursements 

7,318,198 

3,938,901 

594,356 

103,439 

2,284 

(1,775,301) 

(7,515) 

(14,803) 

$ 6,375,350 

3,742,956 

1,439,452 

0 

17,972 

(1,745,171) 

(320,501) 

(9,485) 

Net Cash Provided by Operating Activities 10,159,559 9,500,573 

INVESTING ACTIVITIES 

Provided by:

 Maturity of U.S. Treasury securities 

Used by: 

61,350,000 54,575,000 

 Purchase of U.S. Treasury securities (69,203,406) (66,714,039)

 Purchase of property and equipment (53,739) (41,772) 

Net Cash (Used) in Investing Activities (7,907,145) (12,180,811) 

Net Increase (Decrease) in Cash and Cash Equivalents 

Cash and Cash Equivalents - Beginning 

Cash and Cash Equivalents - Ending $ 

2,252,414 

3,310,527 

5,562,941 

(2,680,238) 

5,990,765 

$ 3,310,527 

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

NOTES TO THE FINANCIAL STATEMENTS 

December 31, 2021 and 2020 

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 depositor y 

institutions (IDIs) by identifying, monitoring, and addressing 

risks to the DIF. Federally chartered IDIs are supervised by the 

Office of the Comptroller of the Currency; state chartered IDIs 

that are members of the Federal Reserve are supervised by 

the Federal Reserve and their state supervisors; and state 

chartered IDIs that are not members of the Federal Reser ve 

are supervised by the FDIC and their state supervisors. 

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

the administrator of the Federal Savings and Loan Insurance 

Corporation (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 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 depositor y 

institution holding companies (including affiliates) upon a 

liquidity event determination during times of sever e 

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 specia l 

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 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 

supervised by the Federal Reserve Board. 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 FDIC, as administrator of the DIF, insures the deposits of 

IDIs and resolves 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 and interest earned on investments in U.S. 

Treasury securities. Other available funding sources, if 

necessary, are borrowings from the Treasury, the Federa l 

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 $222.5 billion and 

$217.2 billion as of December 31, 2021 and 2020, respectively. 

OPERATIONS OF RESOLUTION ENTITIES 

The FDIC, as receiver, is responsible for managing and 

disposing of the assets of failed institutions in an orderly and 

efficient manner. The assets held by receiverships, 

conservatorships, and bridge institutions (collectively, 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 132 

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DEPOSIT INSURANCE FUND 

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, as 

administrator of the DIF, bills resolution entities for services 

provided on their behalf. 

2. Summary of Significant Accounting Policies 

GENERAL 

The 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 

The preparation of the financial statements in conformity 

with GAAP requires management to make estimates and 

assumptions that affect the reported amounts of assets and 

liabilities, revenue and expenses, and disclosure of 

contingent liabilities. 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; the postretirement benefit 

obligation; and the estimated losses for anticipated failures. 

CASH EQUIVALENTS 

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight Certificates. 

INVESTMENT IN U.S. TREASURY SECURITIES 

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 Treasury’s Bureau 

of the Fiscal Service’s Government Account Series program. 

The DIF’s investments in U.S. Treasury securities are classified 

as available-for-sale (AFS). Securities designated as AFS are 

shown at fair value. Unrealized gains and losses arereported 

as other comprehensive income. Any 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 straight-line 

method (see Note 3). 

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 regular risk-based assessment 

rate and assessment base for the prior quarter adjusted for 

certain changes in supervisory examination ratings for larger 

institutions, 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 9). 

CAPITAL ASSETS AND DEPRECIATION 

The FDIC buildings are depreciated on a straight-line basis 

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

are capitalized and depreciated over the estimated useful life 

of the improvements. Leasehold improvements are 

capitalized and depreciated over the lesser of the remaining 

life of the lease or the estimated useful life of the 

improvements, if determined to be material. Capital assets 

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

useful life include mainframe equipment; furniture, fixtures, 

and general equipment; and internal-use software. 

Computer equipment is depreciated on a straight-line basis 

over a three-year estimated useful life (see Note 5). 

LEASES 

The Balance Sheet presents operating leases in the 

“Operating lease right-of-use assets” and “Operating lease 

liabilities” line items. Operating lease liabilities and right-ofuse (ROU) assets are recognized based on the present value of 

the future minimum lease payments over the lease term at 

the commencement date. The FDIC has elected to use its riskfree rate at the commencement date in determining the 

present value of future payments. 

The operating lease ROU asset also includes lease 

prepayments and excludes lease incentives received. The 

lease term includes options to extend or terminate the lease 

when it is reasonably certain that the FDIC will exercise that 
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NOTES TO THE FINANCIAL STATEMENTS 

option. For the DIF, the FDIC recognizes lease expense on a 

straight-line basis over the lease term. For lease 

arrangements that contain both lease and nonlease 

components, the FDIC has elected to account for them as a 

single lease component for all classes of underlying assets. 

PROVISION FOR INSURANCE LOSSES 

The provision for insurance losses primarily represents 

changes in the allowance for losses on receivables from 

resolutions and the contingent liability for anticipated failure 

of insured institutions (see Note 12). 

REPORTING ON VARIABLE INTEREST ENTITIES 

The receiverships engaged in structured transactions, some 

of which resulted in the issuance of note obligations that the 

FDIC guaranteed, in its corporate capacity. As the guarantor 

of note obligations for several structured transactions, the 

FDIC, in its corporate capacity, holds an interest in variable 

interest entities (VIEs). The FDIC conducts a qualitative 

assessment of its relationship with each VIE as required by the 

Financial Accounting Standards Board Accounting Standards 

Codification Topic 810, Consolidation. These assessments are 

conducted to determine if the FDIC, in its corporate capacity, 

has (1) the 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 tests, the enterprise is considered the primary

beneficiary and must consolidate the VIE. 

In accordance with the provisions of FASB ASC Topic 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, 

management considered which, if any, activities were 

significant to each VIE. Often, the right to service collateral, 

to liquidate collateral, or to unilaterally dissolve the VIE 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 assessments 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, 2021 and 2020. Therefore, consolidation is not 

required for the December 31, 2021 and 2020 DIF financial 

statements. 

Note 8 under FDIC Guaranteed Debt of Structured 

Transactions fully describes the FDIC’s involvement with VIEs. 

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. 

APPLICATION OF RECENT ACCOUNTING STANDARDS 

Recent accounting standards have been deemed not 

applicable or material to the financial statements as 

presented. 

3. Investment in U.S. Treasury Securities 

The “Investment in U.S. Treasury securities” line item on the Balance Sheet consisted of the following components by maturity 

(dollars in thousands). 

December 31, 2021 Net Unrealized Unrealized 

Yield at Face Carrying Holding Holding Fair 

Maturity Purchase Value Amount Gains Losses Value

U.S. Treasury notes and bonds 

Within 1 year 0.92% $ 47,400,000 $ 48,252,075 $ 169,305 $ (26,501) $ 48,394,879 

After 1 year through 5 0.47% 

years 64,775,000 66,448,280 106,617 (398,536) 66,156,361 

Total $ 112,175,000 $ 114,700,355 $ 275,922 $ (425,037) (a) $ 114,551,240 

(a) These unrealized losses occurred as a result of changes in market interest rates. 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, 2021. However, $18 million of the $425 million reported as 

total unrealized losses occurred over a period of 12 months or longer, with a fair value of $1.6 billion applied to the affected security. The aggregate related fair value of all securities 

with unrealized losses was $86.9 billion as of December 31, 2021. 
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DEPOSIT INSURANCE FUND 

December 31, 2020 

Yield at 

Maturity Purchase 

Face 

Value 

Net Unrealized Unrealized 

Carrying Holding Holding 

Amount Gains Losses 

Fair 

Value 

U.S. Treasury notes and bonds 

Within 1 year 1.23% $ 56,100,000 $ 57,122,288 $ 280,526 $ (4,521) $ 57,398,293 

After 1 year through 1.05% 

5 years 51,000,000 52,272,106 795,791 (1,848) 53,066,049 

Total $ 107,100,000 $ 109,394,394 $ 1,076,317 $ (6,369) (a) $ 110,464,342 

(a) These unrealized losses occurred over a period of less than a year as a result of temporary changes in market interest rates. 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, 2020. The aggregate 

related fair value of securities with unrealized losses was $12.8 billion as of December 31, 2020. 

4. Receivables from Resolutions, Net 

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. Assets held by resolution entities 

(including structured transaction-related assets; see Note 8) 

are the main source of repayment of the DIF’s receivables 

from resolutions. The “Receivables from resolutions, net” line 

item on the Balance Sheet consisted of the following 

components (dollars in thousands). 

December 31 December 31 

2021 2020 

Receivables from resolutions 

Allowance for losses 

$ 56,228,805 

(55,343,451) 

$ 61,340,917 

(59,974,181) 

Total $ 885,354 $ 1,366,736 

As of December 31, 2021, the FDIC, as receiver, managed 191 

active receiverships; no new receiverships were established in 

2021. The resolution entities held assets with a book value of 

$1.5 billion as of December 31, 2021, and $2.1 billion as of 

December 31, 2020 (including $1.4 billion and $1.8 billion, 

respectively, of cash, investments, receivables due from the 

DIF, and other receivables). 

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 severa l 

sources, which may include the following: actual or pending 

institution-specific asset disposition data, failed institutionspecific 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 2007. 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. 

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. 

For failed institutions resolved using a whole bank purchase 

and assumption transaction with an accompanying sharedloss agreement (SLA), the FDIC agreed to share in future losses 

and recoveries experienced by the acquirer on those assets 

covered under the agreement. The projected shared-loss 

payments on the covered assets sold to the acquiring 

institution, which were included in the receiverships’ sharedloss liabilities, were considered in calculating the DIF’s 

allowance for loss on the receivables from these resolutions. 

As shared-loss claims were asserted and proven, 

receiverships typically satisfied these shared-loss payments 

using available liquidation funds. 

The final SLA expired in November 2021. As a result, the 

related shared-loss covered assets and net estimated liability 

were zero at December 31, 2021, compared to $3.1 billion and 

$8 million, respectively, atDecember 31, 2020. The year-overyear decreases in the shared–loss covered assets and net 

estimated liability were primarily due to settlements of final 

claim certificates for expired agreements and the natural or 

early termination of SLAs, respectively. 

CONCENTRATION OF CREDIT RISK 

Financial instruments that potentially subject the DIF to 

concentrations of credit risk are receivables from resolutions. 

4 
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NOTES TO THE FINANCIAL STATEMENTS 

December 31 

2021 

December 31 

2020 

Land 

Buildings (including building and leasehold improvements) 

Application software (includes work-in-process) 

Furniture, fixtures, and equipment 

Accumulated depreciation 

$ 37,352 

349,066 

101,362 

45,221 

(205,874) 

$ 37,352 

344,002 

129,410 

58,363 

(248,047) 

Total $ 327,127 $ 321,080 

The repayment of these receivables is influenced by 

recoveries on assets held by receiverships. As of December 

31, 2021, $43 million, or 49 percent, of assets in liquidation is 

concentrated in residual certificates collateralized by 

underlying residential mortgage-backed securities or loans 

(see Note 8). 

5. Property and Equipment, Net 

Depreciation expense was $44 million and $50 million for 2021 

and 2020, respectively. The “Property and equipment, net” 

line item on the Balance Sheet consisted of the following 

components (dollars in thousands). 

6. Leases 

The FDIC has operating leases for office space, a data center , 

and certain equipment. The lease agreements generally 

contain escalation clauses resulting in adjustments, usually 

on an annual basis. Many leases contain one or more options 

to extend, with renewal terms that can extend the lease term 

from one to five years, and some leases may include options 

to terminate. The following table provides relevan t 

information regarding FDIC operating leases for the years 

ended December 31, 2021 and 2020 (dollars in thousands). 

December 31 December 31 

2021 2020 

Operating lease cost $ 39,466 $ 48,481 

Cash paid for amounts included in the measurement 

of operating leases $ 48,400 48,263 

ROU assets obtained in exchange for new operating 

lease liabilities $ 1,656 22,817 

Weighted Average 

Remaining lease term (in years) 2.75 3.35

 Discount rate 1.24% 1.38% 

The following table provides a maturity analysis of the FDIC’s 

operating lease liabilities as of December 31, 2021 (dollars in 

thousands). 

December 31 

2021 

2022 

2023 

2024 

2025 

2026 

2027/Thereafter 

$ 37,734 

26,111 

22,438 

5,594 

719 

12 

Total future minimum lease payments $ 92,608 

Less: Imputed interest (1,651) 

Total operating lease liabilities $ 90,957 

As of December 31, 2021, the FDIC has additional operating 

leases with future payments totaling $31 million for office 

space, which commence after December 31, 2021, and are not 

included in the amounts presented above. 

7. Contingent Liabilities 

ANTICIPATED FAILURE OF INSURED INSTITUTIONS 

The DIF records a contingent liability and a loss provision for 

DIF-insured institutions that are likely to fail when the liability 

is probable and reasonably estimable, absent some favorable 

event such as obtaining additional capital or merging. The 

contingent liability is derived by applying expected failure 

rates and loss rates to the institutions based on supervisor y 

ratings, balance sheet characteristics, and projected capital 

levels. 

The banking industry’s financial condition and performance 

improved in 2021 from the economic stress related to the 

COVID-19 pandemic that was first experienced in 2020. 

During 2021, no institutions failed. According to the third 

quarter 2021 financial data submitted by DIF-insur ed 

institutions, the banking industry reported net income for the 

first nine months of $216 billion, an increase of 145 percent 

from the same period a year ago. The increase in net income 

was primarily the result of negative provision expenses as 

described below. 

Provisions for credit losses for the first nine months of 2021 

were negative $30.4 billion, as compared to $129.1 billion 

over the same time period a year ago, reflecting economic 

improvements and positive credit quality metrics. The total 

5 
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DEPOSIT INSURANCE FUND 

noncurrent loan rate was 0.94 percent as of September 30, 

2021, down 23 basis points from the same quarter in 2020 and 

well below the most recent high of 5.46 percent in March 31, 

2010. 

Due to the improvement in net income as well as growth in 

low-risk assets, risk-based capital levels improved in 2021, as 

compared to the same period in 2020, with total risk-based 

capital increasing 27 basis points to 15.63 percent. 

Despite the improvement in net income, the low interest-rate 

environment continues to challenge banks. During third 

quarter 2021, the average quarterly net interest margin (NIM) 

for the banking industry rose modestly to 2.56 percent, but 

remains one of the lowest NIMs ever reported in the FDIC’s 

Quarterly Banking Profile. 

Largely because of fiscal and monetary policy, deposits 

continued to grow, increasing by $2 trillion, or 12.0 percent, 

since September 30, 2020. 

The contingent liability decreased as of December 31, 2021, 

compared to December 31, 2020. The DIF recorded 

contingent liabilities totaling $21 million and $79 million as of 

December 31, 2021 and 2020, respectively. The decrease 

largely reflects improvements in the banking industry’s 

financial condition and performance noted above. 

During 2020, due to elevated risk and uncertainty arising from 

the effects of the COVID-19 pandemic on the banking industry, 

the FDIC supplemented its methodology for calculating the 

contingent liability to capture vulnerable institutions deemed 

likely to have failure risk not identified by the standard 

approach. That supplemental methodology incorporated a 

number of factors, including lending concentrations and 

various financial metrics, and resulted in a supplementa l 

liability of $44 million as of December 31, 2020 that was 

included in estimated losses for anticipated failures. As of 

December 31, 2021, the elevated risk and uncertainty that led 

to the need for a supplemental methodology in 2020 had 

subsided with regular supervision examinations. As of 

December 31, 2021, it was determined the standard approach 

appropriately captured failure risk and that a supplementa l 

liability was not considered necessary. 

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 $68 million as of December 31, 2021, 

compared to $1.1 billion at year-end 2020. The actual losses, 

if any, will largely depend on future economic and market 

conditions and could differ materially from this estimate. 

During 2021, the economy supported banking conditions as 

Gross Domestic Product (GDP) grew to above its prepandemic peak. Although economic growth slowed in third 

quarter 2021, due to waning fiscal support to the economy 

and supply constraints to production, the economy 

continued to expand and sustain bank loan growth. The 

December 2021 Blue Chip Economic Indicators consensus 

forecast for GDP growth is 5.6 percent for full-year 2021, up 

from negative 3.4 percent in 2020 and well above its prepandemic growth rate. The labor market recovery continued, 

and the unemployment rate continued to decline. While the 

labor market has not fully recovered from deep job losses in 

2020, the labor market tightened with higher wages and 

worker shortages in many industries. Inflation increased to 

multi-decade highs during the year reflecting higher energy 

prices, supply chain issues, and strong demand. Monetar y 

policy remained accommodative with interest rates near zero 

during the year but, responding to developments in inflation 

and labor markets, the Federal Reserve began to tighten 

monetary policy in November 2021 by slowing the pace of its 

asset purchases. Although the improved economy boosted 

bank profitability, key risks for banks remain. Potential credit 

strains may emerge as pandemic support programs for 

borrowers begin to wind down and loan forbearance periods 

end. In addition, changing pandemic developments may shift 

economic conditions and interest rates, which could impact 

banking sector profitability. 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 $200 thousand for the DIF as of December 31, 2021 

and 2020, respectively. In addition, the FDIC has identified 

reasonably possible losses from unresolved cases of $1 

million and $650 thousand as of December 31, 2021 and 2020, 

respectively. 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 137 

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8. Other Contingencies 

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 

2021 and 2020, 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 TRANSACTION S 

The FDIC, as receiver, used structured transactions 

(securitizations and structured sales of guaranteed notes 

(SSGNs) or collectively, “trusts”) to dispose of residentia l 

mortgage loans, commercial loans, and mortgage-backed 

securities held by the receiverships. For these transactions, 

certain loans or securities from failed institutions were pooled 

and transferred into a trust structure. The trusts issued senior 

and/or subordinated debt instruments and owner trust or 

residual certificates collateralized by the underlying 

mortgage-backed securities or loans. 

From March 2010 through March 2013, the receiverships 

transferred a portfolio of loans with an unpaid principal 

balance of $2.4 billion and mortgage-backed securities with a 

book value of $6.4 billion to 11 trusts. Private investor s 

purchased the senior notes issued by the trusts for $6.2 billion 

in cash and the receiverships held 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 last guarantee terminated in December 2021 after the 

final repayment of the outstanding note balance. As of yearend 2020, three trusts remained with collateral balances of 

$459 million and a maximum loss exposure to the FDIC, as 

guarantor, of $46 million. 

NOTES TO THE FINANCIAL STATEMENTS 

Any estimated loss to the DIF from the guarantees was based 

on an analysis of the expected guarantee payments by the 

FDIC. The estimated cash flows from the assets of the three 

remaining trusts at year-end 2020 provided sufficient 

coverage to fully pay the debts. Through the end of the last 

guarantee, the FDIC collected $167 million in guarantee fees 

and made one guarantee payment of $4 million in 2020. 

The FDIC, in its corporate capacity, did not provide any form 

of financial or other type of support for structured 

transactions that it was not previously contractually required 

to provide. 

9. Assessments

The FDIC deposit insurance assessment system is mandated 

by section 7 of the FDI Act and governed by part 327 of title 12 

of the Code of Federal Regulations (12 CFR Part 327). The riskbased system requires the payment of quarterly 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 longterm fund management 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. The DIF reserve ratio, 

which is the ratio of the DIF balance to estimated insured 

deposits, is a key measure of fund adequacy. Summarized 

below are key longer-term provisions of the plan. 

• The FDIC Board of Directors designates a reserve ratio 

for the DIF and publishes the designated reserve ratio 

(DRR) before the beginning of each calendar year, as 

required by the FDI Act. Accordingly, in December 

2021, the FDIC published a notice maintaining the DRR 

at 2 percent for 2022. 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 

goal for the reserve ratio. 

• The FDIC suspended dividends indefinitely, and, in lieu 

of dividends, prescribes progressively lower 

assessment rates when the reserve ratio exceeds 2 

percent and 2.5 percent. 

The Dodd-Frank Act increased the minimum reserve ratio for 

the DIF to 1.35 percent, up from the previous statutor y 

minimum of 1.15 percent. This minimum was required to be 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 138 

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DEPOSIT INSURANCE FUND 

achieved by September 30, 2020, and the Dodd-Frank Act 

mandated that the FDIC offset the effect of increasing the 

minimum reserve ratio on institutions with less than $10 

billion in total assets (small banks). To implement this 

requirement, the FDIC provided for credits against quarterly 

assessments to small banks for their contribution to the 

growth in the reserve ratio from 1.15 percent to 1.35 percent. 

After the reserve ratio of the DIF exceeded 1.35 percent by 

reaching 1.36 percent as of September 30, 2018, the FDIC 

awarded small bank assessment credits of $765 million. As of 

year-end 2020, all credits have been used ($206 million in 

2020 and $559 million in 2019). 

As a result of the impact on the economy from the COVID-19 

pandemic and related stimulus programs, the FDIC took 

several actions, including initiating stimulus program offsets. 

The FDIC issued a final rule to mitigate the deposit insurance 

assessment effects of IDIs participating in certain stimulus 

programs, such as the Paycheck Protection Program. Absent 

the changes permitted by the final rule, some IDIs’ 

assessments would have increased. In accordance with the 

final rule, the FDIC applied the changes to IDI assessments 

starting in the second quarter of 2020. 

If the reserve ratio falls below 1.35 percent, or the FDIC 

projects that it will within six months, the FDIC generally must 

implement a Restoration Plan that will return the DIF to 1.35 

percent within eight years. In September 2020, the FDIC 

established a Restoration Plan when the reserve ratio fell 

below 1.35 percent, to 1.30 percent as of June 30, 2020, due 

to extraordinary insured deposit growth in the first and 

second quarters of 2020. Under the Restoration Plan, the FDIC 

will maintain the current schedule of assessment rates for all 

IDIs and closely monitor the factors affecting the reserve ratio, 

updating the plan as necessary. To determine whether the 

reserve ratio has reached the statutory minimum, the FDIC 

will rely on the reserve ratio as of September 30, 2028. 

ASSESSMENT REVENUE 

Annual assessment rates averaged approximately 3.6 cents 

and 4.0 cents per $100 of the assessment base in 2021 and 

2020, respectively. The assessment base is generally defined 

as average consolidated total assets minus average tangible 

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

assessment period. 

The “Assessments receivable” line item on the Balance Sheet 

of $1.7 billion and $1.9 billion represents the estimated 

premiums due from IDIs for the fourth quarter of 2021 and 

2020, respectively. The actual deposit insurance assessments 

for the fourth quarter of 2021 will be billed and collected at 

the end of the first quarter of 2022. The DIF recognized $7.1 

billion as assessment revenue from institutions during both 

2021 and 2020. 

PENDING LITIGATION FOR UNDERPAID ASSESSMENTS 

On January 9, 2017, the FDIC filed suit in the United States 

District Court for the District of Columbia (and amended this 

complaint on April 7, 2017), alleging that Bank of America, 

N.A. (BoA) underpaid its insurance assessments for multiple 

quarters based on the underreporting of counterparty 

exposures. In total, the FDIC alleges that BoA underpaid 

insurance assessments by $1.12 billion, including interest for 

the quarters ending March 2012 through December 2014. The 

FDIC invoiced BoA for $542 million and $583 million 

representing claims in the initial suit and the amended 

complaint, respectively. BoA has failed to pay these past due 

amounts. Pending resolution of this matter, BoA has fully 

pledged security with a third-party custodian pursuant to a 

security agreement with the FDIC. As of December 31, 2021, 

the total amount of unpaid assessments (including accrued 

interest) was $1.19 billion. For the years ending December 31, 

2021 and 2020, the impact of this litigation is not reflected in 

the financial statements of the DIF. 

RESERVE RATIO 

As of September 30, 2021 and December 31, 2020, the DIF 

reserve ratio was 1.27 percent and 1.29 percent, respectively. 

10. Return of Unclaimed Insured Deposits 

The Unclaimed Deposits Amendments Act of 1993 (UDAA), 

Public Law 103-44, amended the FDI Act effective June 28, 

1993 (codified as 12 U.S.C. § 1822 (e)). In accordance with the 

UDAA, the FDIC delivers to the appropriate states insured 

bank deposits not claimed within 18 months of the date when 

the FDIC initiates payment of insured deposits as a part of a 

bank failure, unless the appropriate state declines to accept 

custody. After receipt, states have custody of the deposits for 

10 years, during which time a state treats deposits as 

unclaimed property. At the end of the 10 years, states are 

required to transfer any remaining unclaimed deposits to the 

FDIC and those deposits become the FDIC’s property. As of 

December 31, 2021, states have returned $103 million of 

unclaimed insured deposits to the FDIC, which the DIF 

recognized as revenue. 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 139 

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NOTES TO THE FINANCIAL STATEMENTS 

11. Operating Expenses 

The “Operating expenses” line item on the Statement of 

Income and Fund Balance consisted of the following 

components (dollars in thousands). 

December 31 

2021 

December 31 

2020 

Salaries and benefits $ 

Outside services 

Travel 

Buildings and leased space 

Software/Hardware maintenance 

Depreciation of property and equipment 

Other 

1,322,457 

267,279 

9,548 

84,496 

107,265 

43,764 

24,569 

$ 1,299,792 

271,885 

24,990 

90,496 

103,341 

49,902 

26,227 

Subtotal 

Less: Expenses billed to resolution entities and others 

1,859,378 

(16,655) 

1,866,633 

(20,142) 

Total $ 1,842,723 $ 1,846,491 

12. Provision for Insurance Losses

The “Provision for insurance losses” line item on the Statement of Income and Fund Balance is impacted by the Balance Sheet 

line item activity depicted in the table below. The table primarily analyzes the changes in estimated losses for actual and 

anticipated failures (dollars in millions). 

December 31, 2021 Contingent Liabilities for: 

Provision for Receivables Allowance Anticipated 

Insurance Losses from Resolutions for Losses Failures Litigation Losses 

Balance at January 1, 2021 $ 0 $ 61,341 $ (59,974) $ (79) $ 0

Change in contingent liability for anticipated failures, net 1 (58) 58 

Adjustments to estimated losses for prior year failures (85) 85 

Disbursements for prior year failures 12 

Recoveries from resolutions (574) 

Write-offs for inactivated receiverships (4,424) 4,425

 Other (127) 121 

Balance at December 31, 2021 56,228 $ (55,343) $ (21) $ 0 

1

Represents institutions that were added or removed from the contingent liability, as well as the change in the contingent liability for institutions that remained in the liability year-overyear. 

(1) 

0 

$ (144) $ 
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DEPOSIT INSURANCE FUND 

December 31, 2020 Contingent Liabilities for: 

Provision for Receivables Allowance Anticipated Guarantee Payments 

Insurance Losses from Resolutions for Losses Failures and Litigation Losses 

Balance at January 1, 2020 $ 0 $ 63,982 $ (61,313) $ (94) $ (34) 

Estimated losses for current year failures 99 (99) 

Change in contingent liability for anticipated failures, net 1 (15) 15 

Adjustments to estimated losses for prior year failures (237) 237 

Disbursements for failures 167 

Recoveries from resolutions2 (1,564) 

Write-offs for inactivated receiverships (1,145) 1,145

 Other (99) 56 34 

Balance at December 31, 2020 61,341 $ (59,974) $ (79) $ 0 

1

Represents institutions that were added or removed from the contingent liability, as well as the change in the contingent liability for institutions that remained in the liability year-overyear. 

2

Includes $298 million of non-cash recoveries from receiverships. 

0 

(4) 

$ (157) $ 

13. Employee Benefits

PENSION BENEFITS AND SAVINGS PLANS 

Eligible FDIC employees (permanent and term employees 

with appointments exceeding one year) are covered by the 

federal government retirement plans, either the Civil Service 

Retirement System (CSRS) or the Federal Employees 

Retirement System (FERS). Although the DIF contributes a 

portion of pension benefits for eligible employees, it does not 

account for the assets of either retirement system. The DIF 

also does not have actuarial data for accumulated plan 

benefits or the unfunded liability relative to eligible 

employees. These amounts are reported on and accounted 

for by the U.S. Office of Personnel Management (OPM). 

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. Eligible FDIC employees may also participate 

in an FDIC-sponsored tax-deferred 401(k) savings plan with 

an automatic contribution of 1 percent of pay and an 

additional matching contribution up to 4 percent of pay. The 

expenses for these plans are presented in the table below 

(dollars in thousands). 

December 3

2021 

December 31 

2020 

Civil Service Retirement System 

Federal Employees Retirement System (Basic Benefit) 

Federal Thrift Savings Plan 

FDIC Savings Plan 

$ 912 

151,797 

39,266

39,978

$ 1,189 

137,989 

37,149 

39,578 

Total $ 231,953 $ 215,905 

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 administer ed 

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 for converting optional coverage to directpay 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. 

Postretirement benefit obligation, gain and loss, and expense 

information included in the Balance Sheet and Statement of 

Income and Fund Balance are summarized as follows (dollars 

in thousands). 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 141 

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Accumulated postretirement benefit obligation 

335,977 

(97,922) 

0

$ (37,490) 

2,364 

$ 16,236 

recognized in Postretirement benefit liability $ 331,599 $ 

Cumulative net actuarial (loss) recognized in 

accumulated other comprehensive income: Unrealized 

postretirement benefit (loss) $ (82,723) $ 

Amounts recognized in other comprehensive income: 

Unrealized postretirement benefit gain (loss) 

Actuarial gain (loss) $ 15,199 $ (37,490) 

Prior service credit 0 

 Total $ 15,199 

Net periodic benefit costs recognized in Operating 

expenses

 Service cost $ 6,365 $ 5,106 

Interest cost 7,128 8,766

 Net amortization out of other comprehensive

 i ncome 4,712 

 Total $ 18,205 

The year-over-year decrease in the accumulated 

postretirement benefit obligation of $4 million is primarily 

attributable to an increase in the discount rate used to 

present value expected benefit payments. The discount rate 

increased from 2.65 percent to 2.82 percent at year-end 2021 

to reflect changes in the economic environment. 

The annual postretirement contributions and benefits paid 

are included in the table below (dollars in thousands). 

December 31 December 31 

2021 2020 

December 31 December 31 

2021 2020 

Employer contributions 

Plan participants' contributions 

Benefits paid 

$ 7,384 

$ 1,148 

$ (8,532) 

$ 7,211 

$ 1,091 

$ (8,302) 

The expected contributions for the year ending December 31, 

2022, are $10 million. Expected future benefit payments for 

each of the next 10 years are presented in the following table 

(dollars in thousands). 

NOTES TO THE FINANCIAL STATEMENTS 

Assumptions used to determine the amount of the 

accumulated postretirement benefit obligation and the net 

periodic benefit costs are summarized as follows. 

Discount rate for future benefits (benefit obligation) 2.82% 

Rate of compensation increase 2.22% 2.18% 

Discount rate (benefit cost) 2.65% 3.46% 

Dental health care cost-trend rate

 Assumed for next year 3.50% 3.50% 

Ultimate 3.50% 3.50%

 Year rate will reach ultimate 2022 

2.65% 

2021 

14. 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, 2021 and December 31, 2020, estimated 

insured deposits for the DIF were $9.6 trillion and $9.1 trillion, 

respectively. 

15. Fair Value of Financial Instruments 

As of December 31, 2021 and 2020, financial assets recognized 

and measured at fair value on a recurring basis include cash 

equivalents (see Note 2) of $4 billion and $3.3 billion, 

respectively, and the investment in U.S. Treasury securities 

(see Note 3) of $114.6 billion and $110.5 billion, respectively. 

The valuation is considered a Level 1 measurement in the fair 

value hierarchy, representing quoted prices in active markets 

for identical assets. Other financial assets and liabilities, 

measured at amortized cost, are the receivables from 

resolutions, assessments receivable, interest receivable on 

investments, other short-term receivables, and accounts 

payable and other liabilities. 

December 31 December 31 

2021 2020 

2022 2023 2024 2025 2026 2027-2031 

$9,127 $9,663 $10,227 $10,742 $11,289 $62,810 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 142 

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DEPOSIT INSURANCE FUND 

16. Information Relating to the Statement of Cash Flows 

The following table presents a reconciliation of net income to 

net cash from operating activities (dollars in thousands). 

December 31 December 31 

2021 2020 

Operating Activities 

Net Income: $ 6,448,140 $ 7,104,636 

Adjustments to reconcile net income to net cash 

provided by operating activities: 

Amortization of U.S. Treasury securities 2,547,445 2,229,257 

Depreciation on property and equipment 43,764 49,902 

Retirement of property and equipment 3,929 617 

Provision for insurance losses (143,681) (157,309) 

Unrealized gain (loss) on postretirement benefits 15,199 (37,490) 

Change in Assets and Liabilities: 

Decrease (Increase) in assessments receivable 237,967 (706,548) 

Decrease (Increase) in interest receivable and other assets 441,041 (138,038) 

Decrease in receivables from resolutions 566,646 1,445,147 

Decrease (Increase) in operating lease right-of-use assets 27,215 (112,453) 

Increase in accounts payable and other liabilities 4,788 36,166 

(Decrease) Increase in operating lease liabilities (28,502) 119,459 

(Decrease) Increase in postretirement benefit liability (4,378) 46,515 

(Decrease) in guarantee payment contingent liability 0 (33,831) 

(Decrease) in liabilities due to resolutions (14) (345,457) 

Net Cash Provided by Operating Activities $ 10,159,559 $ 9,500,573 

17. Subsequent Events 

Subsequent events have been evaluated through February 

10, 2022, the date the financial statements are available to be 

issued. Based on management’s evaluation, there were no 

subsequent events requiring disclosure. 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 143 

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Federal Deposit Insurance Corporation 

FSLIC Resolution Fund Balance Sheet 

As of December 31 

(Dollars in Thousands) 2021 2020 

ASSETS

 Cash and cash equivalents 

 Other assets 

$ 907,625 

201 

$ 906,835 

612 

Total Assets $ 907,826 $ 907,447 

LIABILITIES

 Accounts payable and other liabilities $ 8 $ 17 

Total Liabilities 8 17 

RESOLUTION EQUITY (NOTE 5)

 Contributed capital 

 Accumulated deficit 

125,469,317 

(124,561,499) 

125,469,317 

(124,561,887) 

Total Resolution Equity 907,818 907,430 

Total Liabilities and Resolution Equity $ 907,826 $ 907,447 

The accompanying notes are an integral part of these financial statements. 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 144 

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Federal Deposit Insurance Corporation 

FSLIC Resolution Fund Statement of Income and Accumulated Deficit 

For the Years Ended December 31 

(Dollars in Thousands) 2021 

REVENUE

 Interest on U.S. Treasury securities $ 374 $ 3,314

2020 

 Other revenue 214 

Total Revenue 588 

EXPENSES AND LOSSES

721 

4,035 

 Operating expenses 227 320

 Losses related to thrift resolutions (27) 

Total Expenses and Losses 200 

Net Income 388 4,010 

(295) 

25 

Accumulated Deficit - Beginning (124,561,887) (124,565,897) 

Accumulated Deficit - Ending $ (124,561,499) $ (124,561,887) 

The accompanying notes are an integral part of these financial statements. 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 145 

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Federal Deposit Insurance Corporation 

FSLIC Resolution Fund Statement of Cash Flows 

For the Years Ended December 31 

(Dollars in Thousands) 2021 2020 

OPERATING ACTIVITIES 

Provided by: 

Interest on U.S. Treasury securities $ 

Recoveries from thrift resolutions 

Used by: 

Operating expenses 

374 

670 

(254) 

$ 3,314 

941 

(331) 

Net Cash Provided by Operating Activities 

FINANCING ACTIVITIES 

Used by: 

Payment to Resolution Funding Corporation (Note 5) $ 

790 

0 

3,924 

$ (20,000) 

Net Cash (Used) in Financing Activities 0 (20,000) 

Net Increase (Decrease) in Cash and Cash Equivalents 

Cash and Cash Equivalents - Beginning 

Cash and Cash Equivalents - Ending $ 

790 

906,835 

907,625 

(16,076) 

922,911 

$ 906,835 

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

NOTES TO THE FINANCIAL STATEMENTS 

December 31, 2021 and 2020 

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 depositor y 

institutions 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 Federal Savings and Loan Insurance 

Corporation (FSLIC) Resolution Fund (FRF). As such, the FDIC 

is responsible for the sale of remaining assets and 

satisfaction of liabilities associated with the former 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 by authorizing REFCORP to issue debt 

obligations. The REFCORP issued debt obligations in the 

form of long-term bonds ranging in maturity from 2019 to 

2030. 

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. 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 (FRFFSLIC), 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 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 FRFFSLIC. 

The FDIC has extensively reviewed and cataloged the FRF's 

remaining assets and liabilities. Some of the unresolved 

issues are: 

• criminal restitution orders (generally have from 1 to 

26 years remaining to enforce); 

• collections of judgments obtained against officers 

and directors and other professionals responsible 

for causing or contributing to thrift losses (generally 

have up to 10 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 of 

some judgments); 

• liquidation/disposition of residual assets purchased 

by the FRF from terminated receiverships; and 

• Affordable Housing Disposition Program monitoring 

(the last agreement expires no later than 2045; see 

Note 4). 

The FRF could realize recoveries from criminal restitution 

orders and professional liability claims. However, any 

potential 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, on 

behalf of the FRF, when the last active receivership was 
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FSLIC RESOLUTION FUND 

terminated. In total, 850 receiverships were liquidated by the 

FRF and the RTC. To facilitate receivership terminations, the 

FRF, in its corporate capacity, acquired the remaining 

receivership assets that could not be liquidated during the 

life of the receiverships due to restrictive clauses and other 

impediments. These assets are included in the “Other 

assets” 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, as administrator of the FRF, billed receiverships for 

services provided on their behalf. 

2. Summary of Significant Accounting Policies 

GENERAL 

The 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 beneficial interest in 

them. 

The FRF is a limited-life entity, however, it does not meet the 

requirements for presenting financial statements using the 

liquidation basis of accounting. According to Accounting 

Standards Codification Topic 205, Presentation of Financial 

Statements, 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. 

USE OF ESTIMATES 

The preparation of the financial statements in conformity 

with GAAP requires management to make estimates and 

assumptions that affect the reported amounts of assets and 

liabilities, revenue and expenses, and disclosure of 

contingent liabilities. 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 

estimate for the Affordable Housing Disposition Program 

indemnifications is considered significant (see Note 4). 

CASH EQUIVALENTS 

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight Certificates. 

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. 

APPLICATION OF RECENT ACCOUNTING STANDARDS 

Recent accounting standards have been deemed not 

applicable or material to the financial statements as 

presented. 

3. Goodwill Litigation 

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

Supreme Court held that when it became impossible 

following the enactment of FIRREA in 1989 for the federal 

government to perform certain agreements to count 

goodwill toward regulatory capital, the plaintiffs were 

entitled to recover damages from the United States. 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. 

All known goodwill cases have been litigated, including the 

last remaining goodwill case that was resolved in 2015. 

However, a determination regarding the continued need for 

the appropriation will be made as the FRF winds up its 

operations. 

4. Affordable Housing Disposition Program 

Required by FIRREA under section 501, the Affordable 

Housing Disposition Program (AHDP) was established in 1989 
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- -

NOTES TO THE FINANCIAL STATEMENTS 

to ensure the preservation of affordable housing for lowincome 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 34 

monitoring agencies to oversee these LURAs. As of December 

31, 2021, 23 monitoring agencies oversee these LURAs. The 

FDIC, through the FRF, has agreed to indemnify the 

monitoring agencies for all losses related to LURA legal 

enforcement proceedings. 

From 2006 through 2018, two lawsuits against property 

owners resulted in $23 thousand in legal expenses, which 

were fully reimbursed due to successful litigation. In 2019, 

new litigation against two property owners has thus far 

resulted in legal expenses of $12 thousand. 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 

LURA, or 2045 (whichever occurs first). As of December 31, 

2021 and 2020, no contingent liability for this 

indemnification has been recorded. 

5. Resolution Equity 

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

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

Contributed capital, accumulated deficit, and resolution 

equity consisted of the following components by each pool 

(dollars in thousands). 

December 31, 2021 

FRF-FSLIC FRF-RTC FRF Consolidated 

Contributed capital $ 43,864,980 $ 81,604,337 $ 125,469,317 

Accumulated deficit (42,982,564) (81,578,935) (124,561,499) 

Total Resolution Equity $ 882,416 $ 25,402 $ 907,818 

December 31, 2020 

FRF FSLIC FRF RTC FRF Consolidated 

Contributed capital -

beginning $ 43,864,980 $ 81,624,337 $ 125,489,317 

Less: Payment to REFCORP 0 (20,000) (20,000) 

Contributed capital -

ending 43,864,980 81,604,337 125,469,317 

Accumulated deficit (42,982,914) (81,578,973) (124,561,887) 

Total Resolution Equity $ 882,066 $ 25,364 $ 907,430 

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 $31.3 

billion of these instruments to the REFCORP. FIRREA 

prohibited the payment of dividends on any of these capital 

certificates. Through December 31, 2021, the FRF-FSLIC 

received a total of $2.3 billion in goodwill appropriations, the 

effect of which increased contributed capital. 

Through December 31, 2021, the FRF-RTC had returned $4.6 

billion to the U.S. Treasury and made payments of $5.2 billion 

to the REFCORP. The most recent payment to the REFCORP 

was in July of 2020 for $20 million. In addition, the FDIC 

returned $2.6 billion to the U.S. Treasury on behalf of the FRFFSLIC in 2013. These actions reduced 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. Since the dissolution dates, the FRF-FSLIC 

accumulated deficit increased by $13.2 billion, whereas the 

FRF-RTC accumulated deficit decreased by $6.3 billion. 

6. Fair Value of Financial Instruments 

At December 31, 2021 and 2020, the FRF’s financial assets 

measured at fair value on a recurring basis are cash 

equivalents (see Note 2) of $882 million. Cash equivalents are 

Special U.S. Treasury Certificates with overnight maturities 

valued at prevailing interest rates established by the U.S. 
FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 149 

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FSLIC RESOLUTION FUND 

Treasury’s 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 identica l 

assets. 

7. Information Relating to the Statement of Cash Flows 

The following table presents a reconciliation of net income to 

net cash from operating activities (dollars in thousands). 

December 31 December 31 

2021 2020 

Operating Activities 

Net Income: $ 388 $ 4,010 

Change in Assets and Liabilities: 

Decrease (Increase) in other assets 411 (87) 

(Decrease) Increase in accounts payable and 

other liabilities (9) 1 

Net Cash Provided by Operating Activities $ 790 $ 3,924 

8. Subsequent Events 

Subsequent events have been evaluated through February 

10, 2022, the date the financial statements are available to be 

issued. Based on management’s evaluation, there were no 

subsequent events requiring disclosure. 
 

 

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441 G St. N.W. 

Washington, DC 20548 

Independent Auditor’s Report 

To the Board of Directors 

The Federal Deposit Insurance Corporation 

In our audits of the 2021 and 2020 financial statements of the Deposit Insurance Fund (DIF) and 

of the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund (FRF), both of 

which the Federal Deposit Insurance Corporation (FDIC) administers,1 we found 

• the financial statements of the DIF and of the FRF as of and for the years ended 

December 31, 2021, and 2020, are presented fairly, in all material respects, in accordance 

with U.S. generally accepted accounting principles; 

• although internal controls could be improved, FDIC maintained, in all material respects, 

effective internal control over financial reporting relevant to the DIF and to the FRF as of 

December 31, 2021; and 

• with respect to the DIF and to the FRF, no reportable noncompliance for 2021 with 

provisions of applicable laws, regulations, contracts, and grant agreements we tested. 

The following sections discuss in more detail (1) our report on the financial statements and on 

internal control over financial reporting and other information included with the financial 

statements;2 (2) our report on compliance with laws, regulations, contracts, and grant 

agreements; and (3) agency comments. 

Report on the Financial Statements and on Internal Control over Financial Reporting 

Opinions on the Financial Statements 

In accordance with Section 17 of the Federal Deposit Insurance Act, as amended,3 and the 

Government Corporation Control Act,4 we have audited the financial statements of the DIF and 

of the FRF, both of which FDIC administers. The financial statements of the DIF comprise the 

balance sheets as of December 31, 2021, and 2020; the related statements of income and fund 

balance and of cash flows for the years then ended; and the related notes to the financial 

statements. The financial statements of the FRF comprise the balance sheets as of 

December 31, 2021, and 2020; the related statements of income and accumulated deficit and of 

1A third fund managed by FDIC, the Orderly Liquidation Fund, established by Section 210(n) of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376, 1506 (2010), is unfunded and did 

not have any transactions from its inception in 2010 through 2021. 

2Other information consists of information included with the financial statements, other than the auditor’s report. 

3Act of September 21, 1950, Pub. L. No. 797, § 2[17], 64 Stat. 873, 890, classified as amended at 12 U.S.C. § 1827. 

431 U.S.C. §§ 9101-9110. 

FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 150 
 

 

FINANCIAL SECTION 

cash flows for the years then ended; and the related notes to the financial statements. In our 

opinion, 

• the DIF’s financial statements present fairly, in all material respects, the DIF’s financial

position as of December 31, 2021, and 2020, and the results of its operations and its cash

flows for the years then ended, in accordance with U.S. generally accepted accounting

principles, and

• the FRF’s financial statements present fairly, in all material respects, the FRF’s financial

position as of December 31, 2021, and 2020, and the results of its operations and its cash

flows for the years then ended, in accordance with U.S. generally accepted accounting

principles.

Opinions on Internal Control over Financial Reporting 

We also have audited FDIC’s internal control over financial reporting relevant to the DIF and to 

the FRF as of December 31, 2021, based on criteria established under 31 U.S.C. § 3512(c), (d), 

commonly known as the Federal Managers’ Financial Integrity Act (FMFIA). 

In our opinion, although certain internal controls could be improved, 

• FDIC maintained, in all material respects, effective internal control over financial reporting

relevant to the DIF as of December 31, 2021, based on criteria established under FMFIA,

and

• FDIC maintained, in all material respects, effective internal control over financial reporting

relevant to the FRF as of December 31, 2021, based on criteria established under FMFIA.

As discussed below in more detail, our 2021 audit continued to identify deficiencies in FDIC’s 

controls over contract documentation and payment review processes that collectively represent 

a significant deficiency in FDIC’s internal control over financial reporting.5 We considered this 

significant deficiency in determining the nature, timing, and extent of our audit procedures on 

the DIF’s and the FRF’s 2021 financial statements. 

Although the significant deficiency in internal control did not affect our opinions on the 2021 and 

2020 financial statements of the DIF and of the FRF, misstatements may occur in unaudited 

financial information reported internally and externally by FDIC because of this significant 

deficiency. 

In addition to the significant deficiency in internal control over contract documentation and 

payment review processes, we also identified other deficiencies in FDIC’s internal control over 

financial reporting that we do not consider to be material weaknesses or significant deficiencies. 

Nonetheless, these deficiencies warrant FDIC management’s attention. We have communicated 

these matters to FDIC management and, where appropriate, will report on them separately. 

5A deficiency in internal control exists when the design or operation of a control does not allow management or 

employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, 

misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal 

control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity’s 

financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a 

deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material 

weakness, yet important enough to merit the attention by those charged with governance. 

FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 151 
 

 

FINANCIAL SECTION 

Significant Deficiency in Internal Control over Contract Documentation and Payment Review 

Processes 

During our 2021 audit, we continued to identify deficiencies in contract documentation and 

payment review processes that collectively represent a significant deficiency in FDIC’s internal 

control over financial reporting. Specifically, as in the prior year,6 FDIC did not consistently 

implement controls over contract documentation and payment review processes. FDIC 

oversight managers are responsible for verifying that contractors deliver purchased goods or 

services and perform their work according to contract terms and delivery schedules. Oversight 

managers also monitor the expenditures of funds in relation to contract dollar ceilings and 

approve invoices for payment. FDIC contracting officers, acting within the scope of their 

authority to contract on behalf of FDIC, are responsible for entering into, administering, and 

terminating contracts; making related decisions; and executing contract modifications. We 

identified several deficiencies in FDIC’s implementation of these internal controls that increased 

the risks that improper payments could occur and operating expenses and accounts payable 

could be misstated. For example: 

• We found five instances where an oversight manager approved and paid a contractor

invoice that did not agree to the terms of the contract, resulting in an improper payment.

• We found three additional instances where the oversight managers approved contract

payments without obtaining or reviewing sufficient documentation to support the invoices.

• We found three instances of ineffective controls over contract modification documentation

because of a contracting officer not implementing existing FDIC acquisition policies and

procedures. The three instances included (1) a contract modification that was signed by a

contracting officer with insufficient warrant authority; (2) a lack of contract modification

documentation for a contract ceiling increase correction; and (3) a lack of contract

modification documentation reflecting a contract’s expired status, as it was superseded by

another contract before its initial expiration date, before it was closed out.

According to GAO’s Standards for Internal Control in the Federal Government,7 agency 

management is responsible for establishing and maintaining effective internal control to serve 

as the first line of defense in safeguarding assets and preventing and detecting errors and fraud. 

Further, GAO’s Framework for Assessing the Acquisition Function for Federal Agencies,8 states 

that when financial data are not useful, relevant, timely, or reliable, the acquisition function is at 

risk of inefficient or wasteful business practices. Without adequate contract documentation and 

payment review processes, FDIC cannot reasonably assure that internal controls over contract 

payments are operating effectively, which increases the risks of improper payments and 

misstatements in the financial statements. 

6GAO, Financial Audit: Federal Deposit Insurance Corporation Funds’ 2020 and 2019 Financial Statements, GAO-21-

284R (Washington, D.C.: Feb. 18, 2021). 

7GAO, Standards for Internal Control in the Federal Government, GAO-14-704G (Washington, D.C.: September 

2014). 

8GAO, Framework for Assessing the Acquisition Function at Federal Agencies, GAO-05-218G (Washington, D.C.: 

September 2005). 

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FINANCIAL SECTION 

While these deficiencies do not individually or collectively constitute a material weakness, 

FDIC’s deficiencies related to contract documentation and payment review processes are 

important enough to merit the attention of those charged with governance of FDIC. Thus, these 

deficiencies continue to represent a significant deficiency in FDIC’s internal control over 

financial reporting as of December 31, 2021. Management commitment and attention will be 

essential to continue addressing these deficiencies and improving FDIC’s controls over contract 

documentation and payment review processes. 

As in the prior year,9 we plan to report additional details concerning the significant deficiency 

separately to FDIC management, along with recommendations for corrective actions. 

Basis for Opinions 

We conducted our audits in accordance with U.S. generally accepted government auditing 

standards. Our responsibilities under those standards are further described in the Auditor’s 

Responsibilities for the Audits of the Financial Statements and Internal Control over Financial 

Reporting section of our report. We are required to be independent of FDIC and to meet our 

other ethical responsibilities, in accordance with the relevant ethical requirements relating to our 

audits. We believe that the audit evidence we have obtained is sufficient and appropriate to 

provide a basis for our audit opinions. 

Responsibilities of Management for the Financial Statements and Internal Control over Financial 

Reporting 

FDIC management is responsible for (1) the preparation and fair presentation of these financial 

statements in accordance with U.S. generally accepted accounting principles; (2) preparing and 

presenting other information included in the annual report, and ensuring the consistency of that 

information with the audited financial statements; (3) designing, implementing, and maintaining 

effective internal control over financial reporting relevant to the preparation and fair presentation 

of financial statements that are free from material misstatement, whether due to fraud or error; 

(4) evaluating the effectiveness of internal control over financial reporting based on the criteria 

established under FMFIA; and (5) its assessment about the effectiveness of internal control over 

financial reporting as of December 31, 2021, included in the accompanying Management’s 

Report on Internal Control over Financial Reporting in appendix I. 

In preparing the financial statements, management is required to evaluate whether there are 

conditions or events, considered in the aggregate, that raise substantial doubt about the DIF’s 

and the FRF’s ability to continue as going concerns for a reasonable period of time. 

Auditor’s Responsibilities for the Audits of the Financial Statements and Internal Control over 

Financial Reporting 

Our objectives are to obtain reasonable assurance about whether the financial statements as a 

whole are free from material misstatement, whether due to fraud or error, and about whether 

effective internal control over financial reporting was maintained in all material respects, and to 

issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of 

assurance but is not absolute assurance and therefore is not a guarantee that an audit of the 

financial statements or an audit of internal control over financial reporting conducted in 

9GAO, Management Report: Improvements Needed in FDIC’s Internal Control over Contract-Payment Review 

Processes, GAO-21-420R (Washington, D.C.: May 13, 2021). 

FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 153 
FINANCIAL SECTION 

accordance with U.S. generally accepted government auditing standards will always detect a 

material misstatement or a material weakness when it exists. The risk of not detecting a material 

misstatement resulting from fraud is higher than for one resulting from error, as fraud may 

involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal 

control. Misstatements, including omissions, are considered to be material if there is a 

substantial likelihood that, individually or in the aggregate, they would influence the judgment 

made by a reasonable user based on the financial statements. 

In performing an audit of financial statements and an audit of internal control over financial 

reporting in accordance with U.S. generally accepted government auditing standards, we: 

• Exercise professional judgment and maintain professional skepticism throughout the audits.

• Identify and assess the risks of material misstatement of the financial statements, whether

due to fraud or error, and design and perform audit procedures responsive to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and

disclosures in the financial statements.

• Obtain an understanding of internal control relevant to our audit of the financial statements

in order to design audit procedures that are appropriate in the circumstances.

• Obtain an understanding of internal control relevant to our audit of internal control over

financial reporting, assess the risks that a material weakness exists, and test and evaluate

the design and operating effectiveness of internal control over financial reporting based on

the assessed risk. Our audit also considered FDIC’s process for evaluating and reporting on

internal control over financial reporting based on criteria established under FMFIA. We did

not evaluate all internal controls relevant to operating objectives as broadly established

under FMFIA, such as those controls relevant to preparing performance information and

ensuring efficient operations. We limited our internal control testing to testing controls over

financial reporting. Our internal control testing was for the purpose of expressing an opinion

on whether effective internal control over financial reporting was maintained, in all material

respects. Consequently, our audit may not identify all deficiencies in internal control over

financial reporting that are less severe than a material weakness.

• Evaluate the appropriateness of accounting policies used and the reasonableness of

significant accounting estimates made by management, as well as evaluate the overall

presentation of the financial statements.

• Perform other procedures we consider necessary in the circumstances.

• Conclude, based on the audit evidence obtained, whether there are conditions or events,

considered in the aggregate, that raise substantial doubt about the DIF’s and the FRF’s

ability to continue as going concerns for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other 

matters, the planned scope and timing of the audit, significant audit findings, and certain internal 

control-related matters that we identified during the financial statement audit. 

FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 154 
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Definition and Inherent Limitations of Internal Control over Financial Reporting 

An entity’s internal control over financial reporting is a process effected by those charged with 

governance, management, and other personnel, the objectives of which are to provide 

reasonable assurance that (1) transactions are properly recorded, processed, and summarized 

to permit the preparation of financial statements in accordance with U.S. generally accepted 

accounting principles, and assets are safeguarded against loss from unauthorized acquisition, 

use, or disposition, and (2) transactions are executed in accordance with provisions of 

applicable laws, regulations, contracts, and grant agreements, noncompliance with which could 

have a material effect on the financial statements. 

Because of its inherent limitations, internal control over financial reporting may not prevent, or 

detect and correct, misstatements due to fraud or error. We also caution that projecting any 

evaluation of effectiveness to future periods is subject to the risk that controls may become 

inadequate because of changes in conditions, or that the degree of compliance with the policies 

or procedures may deteriorate. 

Other Information 

FDIC’s other information contains a wide range of information, some of which is not directly 

related to the financial statements. This information is presented for purposes of additional 

analysis and is not a required part of the financial statements. Management is responsible for 

the other information included in the annual report. The other information comprises the 

information included in the annual report, but does not include the financial statements and our 

auditor’s report thereon. Our opinion on the DIF’s and the FRF’s financial statements does not 

cover the other information, and we do not express an opinion or any form of assurance 

thereon. 

In connection with our audit of the financial statements, our responsibility is to read the other 

information and consider whether a material inconsistency exists between the other information 

and the financial statements, or the other information otherwise appears to be materially 

misstated. If, based on the work performed, we conclude that an uncorrected material 

misstatement of the other information exists, we are required to describe it in our report. 

Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements 

In connection with our audits of the financial statements of the DIF and of the FRF, we tested 

compliance with selected provisions of applicable laws, regulations, contracts, and grant 

agreements consistent with our auditor’s responsibilities discussed below. 

Results of Our Tests for Compliance with Laws, Regulations, Contracts, and Grant Agreements 

Our tests for compliance with selected provisions of applicable laws, regulations, contracts, and 

grant agreements disclosed no instances of noncompliance for 2021 that would be reportable, 

with respect to the DIF and to the FRF, under U.S. generally accepted government auditing 

standards. However, the objective of our tests was not to provide an opinion on compliance with 

applicable laws, regulations, contracts, and grant agreements. Accordingly, we do not express 

such an opinion. 

FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 155 
 

FINANCIAL SECTION 

Basis for Results of Our Tests for Compliance with Laws, Regulations, Contracts, and Grant 

Agreements 

We performed our tests of compliance in accordance with U.S. generally accepted government 

auditing standards. Our responsibilities under those standards are further described in the 

Auditor’s Responsibilities for Tests of Compliance section below. 

Responsibilities of Management for Compliance with Laws, Regulations, Contracts, and Grant 

Agreements 

FDIC management is responsible for complying with applicable laws, regulations, contracts, and 

grant agreements. 

Auditor’s Responsibilities for Tests of Compliance with Laws, Regulations, Contracts, and Grant 

Agreements 

Our responsibility is to test compliance with selected provisions of applicable laws, regulations, 

contracts, and grant agreements that have a direct effect on the determination of material 

amounts and disclosures in the financial statements of the DIF and of the FRF and to perform 

certain other limited procedures. Accordingly, we did not test FDIC’s compliance with all 

applicable laws, regulations, contracts, and grant agreements. We caution that noncompliance 

may occur and not be detected by these tests. 

Intended Purpose of Report on Compliance with Laws, Regulations, Contracts, and Grant 

Agreements 

The purpose of this report is solely to describe the scope of our testing of compliance with 

selected provisions of applicable laws, regulations, contracts, and grant agreements, and the 

results of that testing, and not to provide an opinion on compliance. This report is an integral 

part of an audit performed in accordance with U.S. generally accepted government auditing 

standards in considering compliance. Accordingly, this report on compliance with laws, 

regulations, contracts, and grant agreements is not suitable for any other purpose. 

Agency Comments 

In commenting on a draft of this report, FDIC stated that it was pleased to receive unmodified 

opinions for the 30th consecutive year on the DIF’s and the FRF’s financial statements. In 

regard to the significant deficiency in internal control over contract documentation and payment 

review processes, FDIC stated that it has taken several measures during 2021 and will continue 

to enhance and maintain effective internal controls to prevent, detect, and mitigate the risks 

associated with contract payment review processes. FDIC added that its commitment to sound 

financial management has been and will remain a top priority. The complete text of FDIC’s 

response is reprinted in appendix II. 

M. Hannah Padilla

Director

Financial Management and Assurance

February 10, 2022 

FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT 2021 156 
FINANCIAL SECTION 

APPENDIX I 

Federal Deposit Insurance Corporation

550 17th Street NW, Washington, D.C. 20429-9990 Office of the Chairman

FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL SECTION 

APPENDIX II 

Federal Deposit I nsurance Corporation 

550 17th Street NW, Washington, D.C. 20429-9990 Deputy to the Chairman and CFO 

February 10, 2022 

Ms. M. Hannah Padilla 

Director, Financial Management and Assurance 

U.S. Government Accountability Office 

441 G Street, NW 

Washington, D.C. 20548 

Re: FDIC Management Response to the 2021 and 2020 Financial Statements Audit Report 

Dear Ms. Padilla: 

Thank you for the opportunity to review and comment on the U.S. Government Accountability Office's (GAO's) 

draft report titled, Financial Audit: Federal Deposit Insurance Corporation Funds' 2021 and 2020 Financial 

Statements, GAO-22-104601. We are pleased that the Federal Deposit Insurance Corporation (FDIC) has 

received unmodified opinions for the thirtieth consecutive year on the financial statements of its funds: the 

Deposit Insurance Fund (DIF) and the FSLIC Resolution Fund (FRF). GAO also reported that although internal 

controls can be improved, the FDIC maintained, in all material respects, effective internal control over financial 

reporting, and that there was no reportable noncompliance with provisions of applicable laws, regulations, 

contracts, and grant agreements that were tested. However, GAO did report that more work was needed to 

address FDIC’s significant deficiency in internal control over contract documentation and contract payment 

review processes. 

The FDIC has taken several measures over the 2021 audit year to resolve the issues concerning contract 

documentation and contract payment review processes. These measures included creating a contracting 

governance project team, developing new training, and reinforcing the importance of reviewing invoices prior 

to payment. The FDIC will continue to enhance and maintain effective internal controls to prevent, detect, and 

mitigate the risks associated with contract payment review processes. Our commitment to sound financial 

management has been and will remain a top priority. 

In complying with audit standards that require management to provide a written assessment about the 

effectiveness of its internal control over financial reporting, the FDIC has prepared Management's Report on 

Internal Control over Financial Reporting. The report acknowledges management's responsibility for 

establishing and maintaining internal control over financial reporting and provides the FDIC's conclusion 

regarding the effectiveness of its internal control. 

We want to thank the GAO staff for their professionalism and dedication during the audit and look forward to 

another positive and productive relationship during the 2022 audit. If you have any questions or concerns, 

please do not hesitate to contact me. 

Sincerely, 

BRET EDWARDS Digitally signed by

BRET EDWARDS 

Bret D. Edwards 

Deputy to the Chairman 

and Chief Financial Officer 

FEDERAL DEPOSIT INSURANCE CORPORATION ANNUAL REPORT