F E D E R A L 

D E P O S I T 

I N S U R A N C E 

CORPORATION

2009 ANNUAL REPORT
Mission

The Federal Deposit Insurance 

Corporation (FDIC) is an 

independent agency created by 

the Congress to maintain stability 

and public confidence in the 

nation’s financial system by:

• insuring deposits,

• examining and supervising 

financial institutions for safety 

and soundness and consumer 

protection, and

• managing receiverships.

Vision

The FDIC is a recognized leader 

in promoting sound public 

policies; addressing risks in the 

nation’s financial system; and 

carrying out its insurance, 

supervisory, consumer protection, 

and receivership management 

responsibilities.

Values

The FDIC and its employees have a tradition of 

distinguished public service. Six core values 

guide us in accomplishing our mission:

1. Integrity

We adhere to the highest ethical and 

professional standards.

2. Competence

We are a highly skilled, dedicated, and 

diverse workforce that is empowered to 

achieve outstanding results.

3. Teamwork 

We communicate and collaborate effectively 

with one another and with other regulatory 

agencies.

4. Effectiveness

We respond quickly and successfully to risks 

in insured depository institutions and the 

financial system.

5. Accountability

We are accountable to each other and to our 

stakeholders to operate in a financially 

responsible and operationally effective 

manner.

6. Fairness 

We respect individual viewpoints and treat 

one another and our stakeholders with 

impartiality, dignity, and trust.
2009

ANNUAL

REPORT
2 FDIC 2009 Annual Report

Federal Deposit Insurance Corporation 

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

June 30, 2010

Dear Sir/Madam,

In accordance with:

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

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

•	 the Government Performance and Results Act of 1993,

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

•	 the Reports Consolidation Act of 2000,

The Federal Deposit Insurance Corporation (FDIC) is pleased to submit its 2009 Annual Report (also

referred to as the Performance and Accountability Report), which includes the audited financial statements of the Deposit Insurance Fund (DIF) and the Federal Savings and Loan Insurance Corporation

Resolution Fund.

In accordance with the Reports Consolidation Act of 2000, the FDIC completed an assessment of the

reliability of the performance data contained in this report. No material inadequacies were found and the

data are considered to be complete and reliable.

Based on internal management evaluations, and in conjunction with the results of independent financial statement audits, the FDIC can provide reasonable assurance that the objectives of Section 2 (internal controls) and Section 4 (financial management systems) of the Federal Managers’ Financial Integrity

Act of 1982 have been achieved, except for a material weakness in internal controls related to estimating

losses to the DIF from resolution transactions involving loss-share agreements, which was identified

by the U.S. Government Accountability Office (GAO). GAO also identified information technology

issues that aggregated to a significant deficiency. During the fourth quarter of 2009 and in early 2010,

we increased resources in these areas and instituted improvements in our control environment which,

in conjunction with additional control enhancements to be completed in the second quarter of 2010, will

significantly reduce the risks outlined in GAO’s audit report. We are committed to maintaining effective

internal controls corporate-wide in 2010.

Sincerely,

Sheila C. Bair

Chairman

The President of the United States

The President of the United States Senate

The Speaker of the United States House of Representatives
Table of Contents 3

Message from the Chairman • Sheila C. Bair. 

Message from the Chief Financial Officer • Steven O. App. 

In Memoriam • L. William Seidman  .

I. Management’s Discussion and Analysis . 

The Year in Review. 

Insurance. 

Supervision and Consumer Protection. .

Resolutions and Receiverships  .

Effective Management of Strategic Resources. .

II. Financial Highlights. .

Deposit Insurance Fund Performance  .

Investment Spending. .

III. Performance Results Summary. .

Summary of 2009 Performance Results by Program. .

2009 Budget and Expenditures by Program  .

Performance Results by Program and Strategic Goal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Prior Years’ Performance Results. .

Program Evaluation. .

IV. Financial Statements and Notes. 

Deposit Insurance Fund (DIF) . 

FSLIC Resolution Fund (FRF). . 

Government Accountability Office’s Audit Opinion. .

Management’s Response. .

Overview of the Industry . .

V. Management Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140

Enterprise Risk Management. .

Material Weaknesses. .

Management Report on Final Actions . .

VI. Appendices . .

A. Key Statistics.

B. More About the FDIC. .

C. Office of Inspector General’s Assessment of the Management and

Performance Challenges Facing the FDIC. .

Table of Contents
4 FDIC 2009 Annual Report

Insuring Deposits. Examining Institutions. 

Managing Receiverships. Educating Consumers.

In its unique role as deposit insurer of banks and savings associations, and in cooperation with the

other state and federal regulatory agencies, the Federal Deposit Insurance Corporation (FDIC) promotes

the safety and soundness of the U.S. financial system and the insured depository institutions by identifying, monitoring, and addressing risks to the Deposit Insurance Fund (DIF).

The FDIC promotes public understanding and the development of sound public policy by providing

timely and accurate financial and economic information and analyses. It minimizes disruptive effects

from the failure of financial institutions. It assures fairness in the sale of financial products and the provision of financial services.

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

by a highly skilled and diverse workforce that continuously monitors and responds rapidly and successfully to changes in the financial environment.

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

FDIC by the Numbers:

$250,000 Deposit insurance limit

699,277 Electronic deposit insurance estimator user sessions

140 Failed banks resolved

0 Insured deposit dollars lost

8,012 Insured depository institutions

560 International representatives from 56 emerging and developing markets who received 

consultation, training, or assistance from the FDIC

4,782 Written deposit insurance inquiries

2,400,000 Money Smart consumers reached since inception

72,614 New bank accounts opened through the Alliance for Economic Inclusion

30 Banks participating in the small-dollar loan pilot program

6,557 FDIC full-time-equivalent employees
Message from the Chairman • Sheila C. Bair 5

As the first decade of the new century came

to a turbulent close, the FDIC continued to meet

the challenge of protecting deposits in over half

a billion insured accounts at over 8,000 FDICinsured institutions. Our guarantee has protected

depositors since 1933 with none ever losing so

much as a penny of insured funds. While the

recent period of historic financial turmoil has

required us to take some extraordinary actions to

carry out our mission, it was precisely for times

like these that the FDIC was established some 76

years ago.

Following the liquidity crisis that struck the

financial system in the fall of 2008, the FDIC

continued to focus its efforts in 2009 on stabilizing the liquidity of the industry through our

temporary support programs, strengthening

bank supervision, ensuring the financial capacity of the Deposit Insurance Fund (DIF), and

promptly resolving failed institutions. During

2009, the number of failed banks rose to 140, up

from 25 the previous year and the highest annual total since 1992. Meanwhile, the number of

problem institutions—those with the two lowest

supervisory ratings—rose to 702, which was the

highest year-end total since 1992. Historically,

the vast majority of problem institutions do not

fail. However, elevated numbers of problem and

failed institutions are expected to remain a nearterm challenge, even as the economy recovers,

and there is substantial residual workload from

the failures that occurred in prior years.

Accordingly, the FDIC has been adding to

the operational resources it needs to deal with

its increased workload. The FDIC workforce

grew to 6,557 full-time equivalent positions at

year-end 2009, up from 4,988 at year-end 2008.

In December 2009, the FDIC Board approved a

Message from the Chairman • Sheila C. Bair

Daniel Rosenbaum/The New York Times/Redux
6 FDIC 2009 Annual Report

2010 operating budget of almost $4 billion, a 56

percent increase from 2009, and authorized the

hiring of some 1,600 additional temporary workers, which will expand the FDIC’s total workforce by nearly 25 percent.

Stabilizing Bank Funding 

Through the TLGP

In October 2008, at the height of the financial

crisis, the FDIC introduced a Temporary Liquidity Guarantee Program (TLGP) to help stabilize

the liquidity of the industry through our temporary support programs and promote confidence

across the financial system. During 2009, the

FDIC worked to fully implement the two elements of the TLGP, extended its time frame,

and made plans for an orderly exit as financial

market conditions continued to stabilize. Under

the Debt Guarantee Program, a total of over $618

billion in guaranteed debt was issued, generating

over $10 billion in fees from participating banks.

This program had been instrumental in helping

to reduce risk premiums in the interbank lending

markets until its expiration on October 31, 2009.

The Transaction Account Guarantee Program,

which provides a full guarantee of all deposits

in noninterest-bearing transaction accounts, has

been extended through December 2010.

Balanced Supervision Under 

Adverse Banking Conditions

As supervisor for nearly 5,000 community

banks, the FDIC saw its workload rise in 2009

with the increase in the number of FDIC-supervised problem institutions. The FDIC responded

to these challenges by prioritizing examination

activities, increasing staffing levels, and making greater use of off-site monitoring and on-site

visitations between examinations. We actively

communicate with bankers through a variety

of outreach activities, including a Community

Bank Advisory Committee that was launched

this year. This Advisory Committee was formed

to provide the FDIC with advice and guidance

on a broad range of important policy issues

impacting small community banks throughout the country, as well as impacting the local

communities they serve. We have also worked

closely with other bank regulatory agencies to

issue a number of Financial Institution Letters

on risk management issues, including a statement encouraging banks to meet the borrowing

needs of creditworthy businesses and consumers. Striking this balanced approach to bank

supervision during a period of adversity for the

industry will be essential to ensuring that credit

is made available to finance the anticipated economic recovery.

Keeping the DIF Strong 

While Banks Recover

As part of a plan to replenish the liquidity of

the DIF, insured institutions pre-paid almost $46

billion of deposit insurance premiums at the end

of 2009. This amount represents approximately

what non-exempted institutions were expected to

pay for the 39-month period beginning October

1, 2009. As designed, the assessment prepayment

did not impact the industry’s earnings and capital, allowing the industry to continue rebuilding

its capital base and increasing its capacity to

lend. The prepayments increased the DIF’s total

cash and investments to approximately $66 billion as of year-end. According to current projections, this level of resources will be sufficient

to resolve insured institutions that are projected
Message from the Chairman • Sheila C. Bair 7

losses and maximize recoveries to receivership

creditors, including the DIF.

Preventing Unnecessary 

Foreclosures

Throughout the year, the FDIC remained at

the forefront of efforts to stem the sharp rise

in home foreclosures caused by unaffordable

mortgages and rising unemployment. In addition to advocating wider adoption of streamlined

and sustainable loan modifications, we required

failed-bank acquirers under loss-sharing agreements to modify qualifying at-risk mortgages by

cutting interestrates and, in some cases, deferring

principal. As 2009 ended, the FDIC worked to

expand the availability of principal write-downs

as the erosion of homeowner equity may increase

the likelihood of delinquencies and, in the case of

loss-sharing agreements, losses to the DIF.

Reviving Mortgage 

Securitization

Mortgage securitization and the “originate

to distribute” model of mortgage lending played

leading rolesin the buildup to the financial crisis.

Since the crisis, private securitization virtually

shut down as investors lost confidence in market practices that were insufficiently transparent

and ineffective in aligning their interests with

those of originators and underwriters. During

2009, the FDIC Board began considering new

standards for its existing “safe harbor” protections for securitizations by banks that are later

placed into receivership. These rules, still pending input from the public and scheduled to take

effect in 2010, will be designed to foster better

risk management by strengthening underwriting, providing better disclosure, and requiring

to fail over the next few years; as such, the DIF

will not have to borrow from the U.S. Treasury

to meet its insurance obligations.

Protecting Depositors and 

Resolving Failed Institutions

As the number of failed institutions rose to

its highest level since 1992, the FDIC instituted

strategies to protect the depositors and customers of these institutions at the least possible cost

to the DIF. The FDIC moved to an aggressive

marketing campaign for failing institutions that

successfully led to the sale of the vast majority of

these failed entities to healthier acquirers. These

strategies helped to preserve banking relationships in many communities and provide depositors and customers with uninterrupted access to

essential banking services. To this end, analysis is performed on every failing institution to

identify branches located in low- and moderateincome areas so as to minimize the impact that

any proposed resolution transaction may have on

its customers. Moreover, the FDIC’s use of lossshare arrangements, where failed bank assets

are passed to the acquirer, thus remaining in the

private sector with the FDIC sharing in losses

on the assets, is expected to save the FDIC $30

billion over the cost of liquidation. Finally, in

selling assets, the FDIC developed an innovative structured transaction program that utilizes

private sector asset management expertise while

the FDIC retains an equity interest in all of the

future cash flows. The overarching rationale

behind both the loss-share agreements and the

structured transaction asset sales initiative is

that the long-term intrinsic value of these assets

exceeds their current depressed market value.

Both of these strategies should minimize asset
8 FDIC 2009 Annual Report

Reforming the Regulatory 

Structure

In the wake of the financial crisis, Congress is

considering major legislation to overhaul financial

regulation. The FDIC testified numerous times

during the year on regulatory reform before committees in both the House and the Senate. Our

broad policy view is that Congress needs to help

restore market discipline by repudiating the doctrine that certain large, complex, and interconnected financial institutions are simply too big to

fail. Regulators need to have a clear mandate and

the necessary statutory authorities to close even

the largest banks and non-bank financial institutions when they get into trouble. We also need to

implement regulatory incentives to limit the size

and complexity of systemically important firms.

We support creating a new consumer protection authority for financial products and services

that sets consistent national standards for banks

and non-banks alike. Such an across-the-board

authority would eliminate regulatory gaps where

risks grew unchecked in the buildup to the current

crisis. We also support more stringent regulation

of derivatives markets and creation of a systemic

risk council to share data among regulators and

focus on macro-prudential risks to our financial

system. Finally, the regulatory community needs

to use the powers it already has to more effectively supervise financial institutions and markets

and limit the risky activities that undermined our

financial system.

Creating a More Effective 

International Framework

To meet the challenges of the future and to

protect insured depositors, it is vitally important

issuers to retain a financial interest in the securities while supporting profitable and sustainable

securitizations by insured banks and thrifts. The

goal is to improve industry standards in these

areas in order to avoid future losses to the DIF

and support a revival of mortgage securitization

on a sounder footing.

Protecting Consumers and 

Expanding Access to Banking 

Services

The FDIC has traditionally played a leading

role in shielding consumers from predatory practices and promoting access to mainstream financial services for all segments of the population.

We built on that tradition in 2009 by launching

www.economicinclusion.gov, a new information

portal with links to the FDIC’s many sources of

consumer information and our initiativesto reach

underserved communities. The web site provides

easy access to information on the FDIC’s Advisory Committee on Economic Inclusion, our

Alliance for Economic Inclusion, our Money 

Smart financial literacy program, and the FDIC

National Survey of Unbanked and Underbanked 

Households. This groundbreaking survey, conducted for us in 2009 by the U.S. Bureau of the

Census, revealed that one in four, or 30 million U.S. households, are either unbanked or

underbanked. We are certain that our new Economic Inclusion web site will take us one step

closer to our goal of bringing these unbanked

and underbanked populations into the financial

mainstream.
Message from the Chairman • Sheila C. Bair 9

ful for the hard-working, dedicated, can-do men

and women of the FDIC for all they have done to

respond to the demands of the crisis and help put

the nation’s economy back on the road to recovery. No matter the pressures, they will never

waver in their commitment to excellence in the

service of the American people.

Sincerely,

Sheila C. Bair

that the FDIC continue to improve its capabilities to resolve internationally active banks and

to strengthen the international framework for

responding to financial crisis in cooperation

with other regulators both within the U.S. and

overseas. During 2009, the FDIC was at the forefront of efforts to learn from the lessons of the

financial turmoil by identifying and addressing

weaknesses in responses to banks that are active

across borders. The FDIC co-chaired the Basel

Committee on Banking Supervision’s Crossborder Bank Resolution Group, which prepared a

report on needed reforms to allow for the orderly

liquidation of large, complex international banks.

These recommendations have formed an integral

part of the international effort by the G20 and

the Financial Stability Board to reform the international framework for regulation and resolution

of the largest financial firms. The FDIC continues to work closely with the Financial Stability

Board on these issues.

The FDIC: An Enduring Symbol 

of Confidence

During 2009, the FDIC was called upon to once

again carry out its unique mission as the nation’s

symbol of confidence in an economic crisis. We

successfully performed this mission by protecting

the insured deposits of the American public and

stabilizing the funding base of the industry during

a period of great economic turmoil.

The effects of the recession are likely to persist for some time, and, as a result, the FDIC

will continue to experience a heavy workload

and some unique policy challenges. But we are

prepared to meet these challenges and committed to seeing that our mission is carried out to

a successful conclusion. I am especially grate-
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Message from the Chief Financial Officer • Steven O. App 11

are stewards are fairly presented. I applaud the

hard work and dedication of the FDIC staff.

At the conclusion of 2009 and moving forward

into 2010, the DIF balance remains negative,

although there were indications by the end of

the first quarter of 2010 that the condition of the

banking industry may be stabilizing. The DIF’s

2009 financial statements reflect the impact of

a difficult banking environment, in which 140

banks failed. This total exceeds all bank failures

between 1994 and 2008, and isthe highest annual

number since 1992, when 179 failures occurred.

Financial Results for 2009 

The DIF’s comprehensive loss totaled $38.1

billion for 2009 compared to a comprehensive

loss of $35.1 billion for the previous year. As a

result, the DIF balance declined from $17.3 billion to negative $20.9 billion as of December 31,

2009. The year-over-year increase of $3.0 billion in comprehensive loss was primarily due

to a $15.9 billion increase in the provision for

insurance losses, a $4.0 billion increase in the

unrealized loss on U.S. Treasury (UST) investments, and a $1.4 billion decrease in the interest

earned on UST obligations, partially offset by

a $14.8 billion increase in assessment revenue

and a $3.1 billion increase in other revenue

(primarily from guarantee termination fees and

debt guarantee surcharges).

The provision for insurance losses was $57.7 billion in 2009. The total provision consists primarily

of the provision for future failures ($20.0 billion)

and the losses estimated at failure for the 140 resolutions occurring during 2009 ($35.6 billion).

Assessment revenue was $17.7 billion for 2009.

This is a $14.8 billion increase from 2008, and

is due to the collection of a $5.5 billion special

Message from the Chief Financial Officer • Steven O. App

I am pleased to present the Federal Deposit

Insurance Corporation’s (FDIC) 2009 Annual 

Report (also referred to as the Performance 

and Accountability Report). The report covers

financial and program performance information, and summarizes our successes for the year.

The FDIC takes pride in providing timely, reliable, and meaningful information to its many

stakeholders.

For the eighteenth consecutive year, the U.S.

Government Accountability Office (GAO) issued

unqualified audit opinions for the two funds

administered by the Corporation: the Deposit

Insurance Fund (DIF) and the Federal Savings

and Loan Insurance Corporation (FSLIC) Resolution Fund (FRF). These unqualified audit

opinions validate our efforts to ensure that the

financial statements of the funds for which we
12 FDIC 2009 Annual Report

assessment in September 2009 and significantly

higher regular assessment revenue. Major factors

contributing to the increase in regular assessment revenue included changes to the risk-based

assessment regulations, ratings downgrades of

many institutions (which pushed them into higher assessment rate categories), the decline of the

one-time assessment credit, and a larger assessment base.

Although the DIF ended the year with a

negative $20.9 billion fund balance, the DIF’s

liquidity was significantly enhanced by prepaid

assessment inflows of $45.7 billion. Cash and

marketable securities stood at $66.0 billion at

year-end, including $6.4 billion in cash and

marketable securities related to the Temporary

Liquidity Guarantee Program (TLGP). Hence,

the DIF is well positioned to fund resolution

activity in 2010 and beyond. The prepaid assessments, while increasing DIF cash upon receipt,

did not initially affect the fund balance, since

the funds collected were initially recorded as an

offsetting liability; they are subsequently recognized quarterly as revenue when earned.

In accordance with the requirements of the

Federal Managers’ Financial Integrity Act of

1982, the FDIC’s management conducted its

annual assessment and concluded that the system of internal controls, taken as a whole, complies with internal control standards prescribed

by GAO and provides reasonable assurance that

the related objectives are being met, with the

exception of a material weakness in internal

controls related to estimating losses to the DIF

from resolution transactions involving loss-share

agreements, which was identified by GAO during the course of the financial statement audit.

Separately, GAO determined that a significant

deficiency existed over information systems.

The FDIC believes that additional resources

added throughout 2009, control improvements

implemented during the fourth quarter of 2009,

and control enhancements to be completed

by the end of the second quarter of 2010, will

largely address GAO’s concerns in these areas.

The FDIC is confident about the comprehensiveness of these control enhancements and does n

expect GAO to identify repeat findings for 2010.

We will continue to enhance our control environment throughout the year.

During 2010, we will keep working toward

achieving the Corporation’s strategic goals

and objectives. These include identifying and

addressing risks to the insurance funds, continuing work on U.S. government initiatives to

strengthen the financial system, and providing

Congress, other regulatory agencies, insured

depository institutions, and the public with critical and timely information and analyses on the

financial condition of both the banking industry

and the FDIC-managed funds.

Sincerely,

Steven O. App
In Memoriam • L. William Seidman 13

In Memoriam • L. William Seidman

We at the FDIC were saddened by the May 13, 2009, passing of L. William (Bill) Seidman, former

FDIC and Resolution Trust Corporation (RTC) Chairman. Mr. Seidman, the 14th Chairman of the

FDIC, had all the attributes of an American hero. He was a dynamic, bigger-than-life figure, yet a

plain-spoken, courageous leader with a sharp intellect.

In a life filled with achievement, Mr. Seidman distinguished himself the most during his years with

the FDIC. From 1985 to 1991, he led the Corporation through its most rigorous challenges since the

Great Depression. As FDIC Chairman, he faced a tidal wave of bank failures—more than 1,100 FDICinsured institutions in total during his tenure. As the crisis grew, Mr. Seidman strengthened the FDIC’s

hand by working with Congress and the press. Under his leadership, the FDIC met this rising tide with

a series of successful innovations.

Mr. Seidman’sskillful management of the banking crisisled Congressto deliver an additional challenge:

managing the savings and loan crisis. Having played an instrumental role in developing the legislation creating the RTC, Mr. Seidman became the RTC’s first Chairman when the agency was launched on August

9, 1989. Faced with two unfolding crises, one in the banking industry and the other in the savings and loan

industry, Mr. Seidman confronted both with courage and candor.

Mr. Seidman put his lifelong interest in education into action at the FDIC. As Chairman, he expanded training and educational programs, and the FDIC Board of Directors recognized his efforts by

dedicating a new building and campus at Virginia Square in his honor. The skills and leadership he

demonstrated during the savings and loan crisis inspire us all as we navigate today’s troubled waters.

The FDIC mourns the loss of a faithful public servant.
14 FDIC 2009 Annual Report

I. Management’s Discussion and Analysis

The Year in Review

The year 2009 was another extremely busy

one for the FDIC. In addition to the normal

course of business, the Corporation continued to

manage the Temporary Liquidity Guarantee Program (TLGP). Additional resources were needed

in response to the increased workload resulting

from resolving 140 bank failures. The FDIC continued its work on high-profile policy issues and

published numerous Notices of Proposed Rulemaking (NPRs) throughout the year, seeking

comment from the public. The Corporation also

continued to focus on a strong supervisory program.The FDICcontinued expansion offinancial

education programs with the release of a portable

audio version and a Hmong language version of

Money Smart. The FDIC also sponsored and cosponsored major conferences and participated in

local and global outreach initiatives.

Highlighted in this section are the Corporation’s 2009 accomplishments in each of its

three major business lines—Insurance, Supervision and Consumer Protection, and Receivership

Management—as well as its program support

areas.

Insurance

The FDIC insures bank and savings association deposits. As insurer, the FDIC must continually evaluate and effectively manage how

changes in the economy, the financial markets,

and the banking system affect the adequacy

and the viability of the Deposit Insurance Fund

(DIF).

Temporary Liquidity Guarantee Program

On October 14, 2008, the FDIC announced

and implemented the TLGP. The TLGP consists of two components: (1) the Debt Guarantee

Program (DGP)—an FDIC guarantee of certain

newly issued senior unsecured debt; and (2)

the Transaction Account Guarantee Program

(TAGP)—an FDIC guarantee in full of noninterest-bearing transaction accounts.

Under the DGP, the FDIC initially guaranteed in full, through maturity or June 30, 2012,

whichever came first, the senior unsecured debt

issued by a participating entity between October

14, 2008, and June 30, 2009. Banks, thrifts, bank

holding companies, and certain thrift holding

companies were eligible to participate. In May

2009, the FDICBoard finalized a rule that extended for four months the period during which participating entities could issue FDIC-guaranteed

debt. All participating insured depository institutions and those other participating entities that

had issued FDIC-guaranteed debt on or before

April 1, 2009, were permitted to participate in

the extension of the DGP without further application to the FDIC. Other participating entities

were permitted to issue debt during the extended

DGP upon receiving approval from the FDIC.

In conjunction with the extension of the DGP

issuance period, the expiration of the guarantee

period was pushed back to December 31, 2012.

As a result, approved participating entities could

issue FDIC-guaranteed debt through October 31,

2009, and the FDIC’s guarantee would expire on

the stated maturity date of the debt or December

31, 2012, whichever came first.

Participating entities could issue up to a maximum of 125 percent of the par value of the entity’s

senior unsecured debt that was outstanding as of

the close of business September 30, 2008, and

that was scheduled to mature on or before June

30, 2009. All debt with a term of 30 days or less
I. Management’s Discussion and Analysis 15

15 basis points, 20 basis points, or 25 basis points

depending on the institution’s deposit insurance

assessment category.

Program Statistics

Institutions were initially required to elect

whether to participate in one or both of the programs. More than half of the over 14,000 eligible

entities elected to opt-in to the DGP, while over

7,100 banks and thrifts, or 86 percent of FDICinsured institutions, opted into the TAGP. Most

of the institutions that opted out of the DGP had

less than $1 billion in assets and issued no appreciable amount of senior unsecured debt.

During its existence, the DGP guaranteed

over $618 billion in debt issued by 120 entities.

At its peak, the DGP guaranteed almost $350

billion of debt outstanding. The amount of debt

issuance declined as markets improved throughout 2009 and, as the chart shows (see next page),

the amount of debt outstanding correspondingly

decreased as shorter-term debt matured without

being rolled over. Near the program’s end on

October 31, 2009, however, the volume of debt

outstanding increased slightly. As of December

31, 2009, the total amount of FDIC-guaranteed

debt outstanding was $309 billion.

Under the TAGP, the FDIC guaranteed an

estimated $834 billion of deposits in noninterestbearing transaction accounts as of December

31, 2009, that would not have otherwise been

insured. More than 5,800 FDIC-insured institutions reported having noninterest-bearing transaction accounts over $250,000 in value.

The DGP collected approximately $10 billion

in fees under the program. As of December 31,

2009, one participating entity (a holding company) that had issued guaranteed debt had declared

was excluded from the definition of senior unsecured debt. The FDIC charged a fee based on the

amount and term of the debt issued. Fees ranged

from 50 basis points on an annualized basis for

debt with a maturity of 180 days or less, increasing to 75 basis points on an annualized basis for

debt with a maturity of 181 to 364 days and 100

basis points on an annualized basis for debt with

maturities of 365 days or greater. In conjunction

with the program extension in 2009, the FDIC

assessed an additional surcharge on debt with a

maturity of one year or greater issued after April

1, 2009. Unlike the other TLGP fees, which were

reserved for possible TLGP losses and not generally available for DIF purposes, the amount

of any surcharge collected in connection with

the extended DGP was to be deposited into the

DIF and used by the FDIC when calculating the

reserve ratio of the Fund. The surcharge varied

depending on the type of institution issuing the

debt with insured depository institutions paying

the lowest fees.

The TAGP initially guaranteed in full all

domestic noninterest-bearing transaction deposits held at participating banks and thrifts through

December 31, 2009. This deadline was later

extended through December 31, 2010. The guarantee also covered negotiable order of withdrawal

(NOW) accounts at participating institutions—

provided the institution committed to maintain

interest rates on the accounts of no more than

0.50 percentforthe duration ofthe program—and

Interest on Lawyers Trust Accounts (IOLTAs)

and functional equivalents. Participating institutions were initially assessed a 10 basis point

surcharge on the portion of covered accounts

that were not otherwise insured. The fees for the

TAGP were increased for the extension to either
16 FDIC 2009 Annual Report

December 31, 2009, totaled $1.765 billion. Overall, TLGP fees are expected to exceed the losses

from the program. At the conclusion of the program, any remaining TLGP funds will be added

to the DIF balance. Under the conditions of the

systemic risk determination, if fees are insufficient to cover costs of the program, the difference

would be made up through a special assessment.

bankruptcy and defaulted on its debt. Subsequently, a claim for payment was filed and approved.

In early 2010, the FDIC paid off the entire principal balance, including two quarterly interest

payments. Very few losses are expected on the

remaining outstanding debt through the end of

the DGP in 2012. As of December 31, 2009, the

FDIC had collected $639 million in fees under the

TAGP.1 Estimated TAGP losses on failures as of

Average Outstanding TLGP Debt

Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

$400

350

300

250

200

150

100

50

0

Dollars in Billions

1 This figure reflects fees assessed through September 30, 2009, and collected as of December 31, 2009.
I. Management’s Discussion and Analysis 17

TAGP too quickly could unnerve uninsured

depositors and ultimately reverse the progress

made in restoring credit markets to more normal

conditions. To help transition institutions out of

the TAGP, therefore, the FDIC Board, on August

26, 2009, approved a final rule that extended the

TAGP for an additional six months, through June

30, 2010.

The final rule established higher assessment

fees for institutions participating in the extension

period. As mentioned earlier, fees were revised

from a flat-rate 10 basis points to a risk-based

system with an assessment rate of either 15, 20,

or 25 basis points depending on the institution’s

deposit insurance assessment category. The final

rule also provided an opportunity for participating entities to opt out of the TAGP extension by

November 2, 2009. Over 6,400 institutions (or 93

percent of institutions participating at year-end)

elected to continue in the TAGP.

State of the Deposit Insurance Fund and 

Changes in Assessment Rates

DepositInsuranceFund(DIF)lossesincreased

significantly during 2009, resulting in a negative

fund balance as of September 30, 2009. For the

year, continued and anticipated bank failures

resulted in a decline in the reserve ratio to negative 0.39 percent as of December 31, 2009, down

from 0.36 percent at the beginning of the year.

Changes in the Assessment Rates

The decline in the reserve ratio occurred

despite an increase in assessment rates overall

and several adjustments made to the risk-based

assessment system during the year. In the first

quarter, assessment rates increased across-theboard by 7 basis points. Rates for the first quarter

Debt Guarantee Phase-Out and 

Emergency Guarantee Facility

The DGP enabled financial institutions to

meet their financing needs during a period of

system-wide turmoil. The DGP reopened the

short- and medium-term debt markets for banks

and other eligible institutions by allowing them

to issue an array of debt instruments at a time

when banks were unable to roll over this debt

at reasonable rates and terms. By mid-2009, it

appeared that the financial markets were stabilizing. In September, the FDIC Board authorized an

NPR proposing a phase out of the DGP. Specifically, the NPR asked whether the FDIC should

close the basic DGP as scheduled but establish

a limited six-month emergency guarantee facility to address the possibility that a participating

DGP entity may be unable to replace its maturing senior unsecured debt with non-guaranteed

debt as a result of market disruptions or other

circumstances beyond the entity’s control. Few

comments were received on the proposal and

the FDIC Board voted on October 20, 2009, to

approve a final rule ending the DGP as of October 31, 2009, with only the emergency guarantee facility continuing on a case-by-case basis

through April 30, 2010. As its name implies,

the FDIC always intended the TLGP to be

temporary.

Transaction Account Guarantee Program 

Phase-Out

The TAGP was designed to eliminate potentially disruptive shifts in deposit funding and

thus preserve bank lending capacity. The program proved effective. However, because bank

failures continued to grow during 2009, the

FDIC remained concerned that terminating the
18 FDIC 2009 Annual Report

Setting the Designated Reserve Ratio

At a meeting on December 15, 2009, pursuant

to provisions in the Federal Deposit Insurance

Act that require the FDIC Board to set the Designated Reserve Ratio (DRR) for the DIF annually,

the FDIC Board set the 2010 DRR at 1.25 percent

of estimated insured deposits. The 2010 DRR of

1.25 percent is unchanged from the 2009 DRR.

Amendments to the Restoration Plan

The Federal Deposit Insurance Reform Act of

2005 requires the FDIC Board to adopt a restoration plan when the DIF reserve ratio falls below

1.15 percent or is expected to within six months.

Given the steady decline in the reserve ratio during 2008 and projections for future bank failures, the FDIC Board adopted a Restoration Plan

in October 2008 to restore the reserve ratio to at

least 1.15 percent within five years. The continued decline in the DIF balance throughout 2009,

however, necessitated several amendments to the

Restoration Plan.

On February 27, 2009, the FDIC Board first

amended the Restoration Plan by extending the

time frame for recapitalization of the DIF from

five years to seven years due to extraordinary

of 2009 ranged from 12 to 50 basis points. Institutions in the lowest risk category—Risk Category I—paid between 12 and 14 basis points.

On February 27, 2009, the FDIC Board issued

a rule incorporating adjustments to the riskbased assessment system to improve how the

system differentiates for risk. Effective April

1, 2009, the range of rates widened overall and

within Risk Category I. Initial base assessment

rates within Risk Category I now range from 12

to 16 basis points on an annual basis, while the

initial base rates for risk categories II, III, and IV

are 22, 32, and 45 basis points, respectively. An

institution’stotal base assessmentratemay be less

than or greater than its initial base rate as a result

of additional adjustments for secured liabilities

(increase), brokered deposits (increase), and/or

unsecured debt and Tier I capital (decrease). For

Risk Category I, total base assessment rates may

be as low as 7 basis points or as high as 24 basis

points. A Risk Category IV institution could have

a total base assessment rate as high as 77.5 basis

points. The initial base assessment rates, range

of possible rate adjustments, and minimum and

maximum total base rates, as of year-end, across

all risk categories are as follows:

Risk

Category

I

Risk

Category

II

Risk

Category

III

Risk

Category

IV

Initial Base Assessment Rate 12 – 16 22 32 45

Unsecured Debt Adjustment -5 – 0 -5 – 0 -5 – 0 -5 – 0

Secured Liability Adjustment 0 – 8 0 – 11 0 – 16 0 – 22.5

Brokered Deposit Adjustment 0 – 10 0 – 10 0 – 10

Total Base Assessment Rate 7 – 24 17 – 43 27 – 58 40 – 77.5
I. Management’s Discussion and Analysis 19

Actions to Meet Projected Liquidity Needs

While the Amended Restoration Plan and

higher assessment rates addressed the need to

return the reserve ratio to 1.15 percent, the FDIC

also had to consider its need for cash to pay for

projected near-term failures. In June 2008, before

the number of bank and thrift failures began to

rise significantly and the crisis worsened, total

assets held by the DIF were approximately $55

billion, consisting almost entirely of cash and

marketable securities. As the crisis continued

into 2009, the liquid assets of the DIF were used

to protect depositors of failed institutions. As of

September 30, 2009, cash and marketable securities had fallen to approximately $23 billion and

were projected to decline further as the pace of

resolutions continued to put downward pressure

on cash balances. The FDIC faced an immediate need for more liquid assets to fund near-term

failures.

To meet the projected liquidity needs for nearterm failures, the FDIC proposed a rulemaking

requiring insured institutions to prepay their

estimated quarterly risk-based assessments for

the fourth quarter of 2009, and for all of 2010,

2011, and 2012. The prepaid assessment for these

periods would be collected on December 30,

2009, along with each institution’s regular quarterly risk-based deposit insurance assessment for

the third quarter of 2009.

In order to calculate an institution’s assessments for the fourth quarter of 2009, and for all

of 2010, 2011, and 2012, the institution’s total

base assessment rate in effect on September

30, 2009, would be used. That rate would be

increased by an annualized 3 basis points for

2011 and 2012. Again, for purposes of calculating the amount that an institution prepaid on

circumstances. To meet this time frame and

help maintain public confidence in the banking system, the FDIC Board adopted an interim

rule with a request for comment that would have

imposed an emergency special assessment on

the industry of 20 basis points on the assessment

base as of June 30, 2009. The interim rule would

also have permitted the FDIC Board to impose

an emergency special assessment after June 30,

2009, of up to 10 basis points on the assessment

base, if necessary to maintain public confidence

in the federal deposit insurance system.

In response to comments, on May 22, 2009,

the FDIC Board voted to levy a special assessment of 5 basis points on each FDIC-insured

depository institution’s assets minus its Tier 1

capital, as of June 30, 2009. The special assessment was collected on September 30, 2009. The

assessment was capped at 10 basis points times

an institution’s assessment base so that no institution paid an amount higher than it would have

paid under the interim rule. The FDIC Board also

voted to allow additional special assessments in

2009 if conditions affecting the DIF warranted.

In May 2009, Congress amended the statutory

provision governing the establishment and implementation of a Restoration Plan giving the FDIC

eight years in which to bring the reserve ratio

back to 1.15 percent, absent extraordinary circumstances. As a result, on September 29, 2009, the

FDIC again adopted amendmentsto the Amended

Restoration Plan that allowed the DIF to return to

a reserve ratio of 1.15 percent within eight years.

Concurrently, the FDIC adopted a 3 basis point

increase in annual risk-based assessment rates

effective January 1, 2011. The FDIC Board also

voted not to impose any further special assessments on the industry for the remainder of 2009.
20 FDIC 2009 Annual Report

that are important to the FDIC’s role as deposit

insurer and bank supervisor. During 2009, the

CFR co-sponsored two major research conferences, a workshop, and a symposium.

The CFR organized and sponsored the 19th

Annual Derivatives Securities and Risk Management Conference jointly with Cornell University’s Johnson Graduate School of Management

and the University of Houston’s Bauer College

of Business. The conference was held in April

2009 at the Seidman Center and attracted over

100 researchers from around the world. Conference presentations included term structure modeling, price dynamics, fixed income, and options

pricing and credit risk.

The CFR also organized and sponsored the

9th Annual Bank Research Conference jointly with The Journal for Financial Services 

Research (JFSR) in September 2009. The conference theme, Governance and Compensation

in the Financial Services Industry, included 16

paper presentations and was attended by over

120 participants. Experts discussed a range of

banking and financial sector issues—including

corporate governance, bank lending behavior,

incentive structures, household finance, and the

subprime credit crisis.

The CFR held a one-day symposium on mortgage default risk which was jointly organized

with the Federal Housing Finance Agency. The

symposium attracted more than 200 industry

experts, academics, and policy makers. Discussion topics included collateral and appraisal

issues, underwriting standards, vendor model

developments, subprime and other alternative

mortgage product default modeling issues, as

well as analysis of various aspects of ongoing

loan modification programs.

December 30, 2009, an institution’s third quarter

2009 assessment base would be increased quarterly at a 5 percent annual growth rate through

the end of 2012. The proposal for the prepaid

assessment had certain attributes that made it

more attractive than imposing another special

assessment on the industry. Chief among these

was that the prepayment would not affect bank

capital and earnings at a time when these were

already under pressure. By implementing a prepaid assessment, banks would be able to book the

prepayment as an asset with a zero percent risk

weight. This asset would then be drawn down as

the bank’s regular quarterly risk-based assessment was levied. Additionally, those banks that

were likely to be severely adversely affected by

the prepayment could be exempted from the prepayment, although not from the actual quarterly

risk-based assessment.

The comments received by the FDIC were

mostly favorable—generally supporting the

notion that the industry should fund its own

needs to the extent possible. In November, the

Board finalized this rulemaking making one

substantive change. Any prepaid assessment not

exhausted after collection of the amount due on

June 30, 2013—moved up from December 31,

2014—will be returned to the institution at that

time. Moreover, if conditionsimprove before that

time, the FDIC Board may vote to return funds

to the industry sooner. The FDIC collected $45.7

billion from the prepaid assessments—enough

to fund its projected liquidity needs.

Center for Financial Research

The Center for Financial Research (CFR) was

founded by the Corporation in 2004 to encourage and support innovative research on topics
I. Management’s Discussion and Analysis 21

laborative effort culminated in the issuance of

the Core Principles for Effective Deposit Insurance Systems in June 2009. This is a significant

milestone for improving deposit insurance systems worldwide. The Core Principles were subsequently welcomed by the Financial Stability

Board (FSB) (formerly the Financial Stability

Forum) at its inaugural meeting in June.

The Financial Stability Institute (FSI) and the

BCBS partnered with IADI during IADI’s 8th

Annual Conference on September 23–24, 2009,

at the Bank for International Settlements (BIS)

in Basel, Switzerland, to present the Core Principles. More than 200 individuals representing

over 100 organizations from more than 80 jurisdictions attended the conference. Participants

included, among others, deposit insurers, financial supervisors, and central bankers. The conference was organized to further promote the Core 

Principles and contribute to their implementation

and further development. The event featured presentations by internationally recognized experts

Jaime Caruana, General Manager of the BIS;

Nout Wellink, Chairman of the BCBS and President, De Nederlandsche Bank; Josef Tosovsky,

Chairman of the FSI; William White, Chairman

of the Economic and Development Review Committee, Organization for Economic Co-operation

andDevelopment; andDavidHoelscher, Assista

Director, Monetary and Capital Markets Department, International Monetary Fund.

The FDIC’s leadership in developing and

implementing training seminars in partnership

with IADI, the European Forum of Deposit

Insurers (EFDI), and the Association of Supervisors of Banks of the Americas (ASBA) continued in 2009. The FDIC hosted and developed the

core curriculum for IADI’s executive training

The CFR hosted its annual Fall Workshop in

December, which included three days of research

paper presentations and discussions by FDIC

staff. The workshop was attended by about 30

external academics and 30 FDIC staff.

In addition to conferences, workshops and

symposia, 11 CFR working papers were completed and made public on topics including the

costs associated with FDIC bank resolutions, the

performance of the Basel II Advanced Internal

Model Approach for setting regulatory capital

requirements, new econometric methods to handle unit roots, executive compensation in bank

holding companies, bank failures and the cost of

systemic risk, the political economy associated

with the recent bailout, and the role of speculation in creating volatility in the oil markets.

International Outreach 

The FDIC demonstrated its leadership role

in promoting sound deposit insurance, bank

supervision, and bank resolution practices by

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

governmental banking and deposit insurance

organizations in many areas around the world.

The global crisis that began in the summer of

2007 and intensified in 2008 led many international authorities, including deposit insurers, to take a series of unprecedented actions to

restore public confidence and financial stability. In response to this crisis, the International

Association of Deposit Insurers (IADI), under

the leadership of its President—FDIC’s Vice

Chairman Martin Gruenberg—and the Basel

Committee on Banking Supervision (BCBS)

jointly led an effort to establish an agreed set

of deposit insurance core principles. The col-
22 FDIC 2009 Annual Report

an interim report was prepared in

December 2008. Subsequent to the

interim report, the Basel Committee asked the CBRG to expand its

analysis to review the developments

and processes of crisis management

and resolutions during the financial

crisis with specific reference to case

studies of significant actions by

relevant authorities, which included the failures of Lehman Brothers, Dexia, 

Fortis, and the Icelandic banks. 

response to this direction and building on this

initial stock take, the CBRG provided the Basel

Committee with a final report and recommendations to identify concrete and practical steps

to improve cross-border crisis management and

resolutions. The report and recommendations

have been coordinated with and seek to complement the work of the FSB by providing practicable detailed approaches to implement the FSB’s

Principles for Cross-border Cooperation on 

Crisis Management of April 2, 2009.

Throughout 2009, the FDIC has provided support to the FSB through its work on the Crossborder Crisis Management Working Group

chaired by Paul Tucker. This group has sought to

implement the high-level Principles for Crossborder Cooperation on Crisis Management of 

April 2, 2009. These principles include a commitment to cooperate by the relevant authorities, including supervisory agencies, central

banks and finance ministries, both in making

advanced preparations for dealing with financial

crises and in managing them. They also commit

national authorities from relevant countries to

meet regularly alongside core colleges to consider together the specific issues and barriers

seminar on “Claims Management: Reimbursement of Insured Depositors.” The FDIC cosponsored with EFDI a conference on “Deposit

Insurance Before and After a Systemic Crisis.”

The FDIC also delivered training in supervising

operational risk under ASBA’s training program

in Latin America.

The FDIC has also provided leadership

through its co-chairing of the BCBS’s Crossborder Bank Resolution Group (CBRG), which

published its final report and recommendations

in March 2010. The CBRG was established in

December 2007 under a mandate to analyze

existing resolution policies, allocation of responsibilities and legal frameworks of relevant countries as a foundation to a better understanding of

the potential impediments and possible improvements to cooperation in the resolution of crossborder banks. During the first half of 2008, the

CBRG collected detailed descriptions of national

laws and policies on the management and resolution of cross-border banks using an extensive

questionnaire completed by countries represented on the Group. The CBRG used the questionnaire responses to identify the most significant

potential impediments to the effective management and resolution of cross-border banks and

IADI members and FDIC staff at the executive training conference.
I. Management’s Discussion and Analysis 23

that was held at the Federal Reserve in December. The conference addressed approaches and

policies with respect to macroprudential supervision; cross-border supervisory cooperation;

regulatory reform; and consumer protection. The

FDIC has also strengthened its relationship with

China by signing an Appendix to the Supervisory Memorandum of Understanding between the

FDIC and the China Banking Regulatory Commission on May 26, 2010. The Appendix covers

issues relating cross-border contingency planning and the resolution of troubled institutions

within China and the United States.

Recognizing India’s rising economic role, the

FDIC participated in the U.S.-India Finance and

Economic Forum hosted by the Indian Ministry

of Finance in December in New Delhi, India.

The meeting brought together all financial sector regulators from the two countries to discuss

a variety of topics, including deposit insurance,

banking sector developments, capital and commodities markets, insurance, and financial education. The FDIC shared its responses during

the current economic crisis and its view on the

value of deposit insurance in a crisis, as well as

its efforts in financial education and economic

inclusion.

During 2009, FDIC staff shared its expertise

with a wide range of individuals from developing and emerging economies as well as from

developed economies, with the goal of enhancing

capacity in deposit insurance, supervision, and

resolutions. During the year, the FDIC hosted 67

individual visits with a total of more than 450 foreign visitors from over 30 countries. The FDIC’s

response to the financial crisis, U.S. regulatory

restructuring options, and resolution methods

were frequently discussed during these visits. In

to coordinate action that may arise in handling

severe stress at specific firms, to share information where necessary and possible, and to ensure

that firms develop adequate contingency plans.

The FSB principles cover practical and strategic

ex ante preparations and set out expectations

for how authorities will relate to one another

in a crisis. They draw upon recent and earlier

experiences of dealing with cross-border firms

in crisis, including the 2001 G10 Joint Taskforce

Report on the Winding Down of Large and Complex Financial Institutions, and the 2008 European Union Memorandum of Understanding on

Financial Stability. Currently this group is preparing detailed analysis of obstacles to recovery

and resolution planning, which will be presented

to the G20 in November 2010.

June marked the two-year anniversary of the

secondment program agreed upon between the

Financial Services Volunteer Corps (FSVC) and

the FDIC to place one or more FDIC staff members full-time in FSVC’s Washington, DC, office.

The projects in 2009 included an in-depth review

of bank supervisory practices at theBank of Albania; a series of commentaries and consultations

to assist the Central Bank of Egypt in creating

an appropriate and effective approach in the new

area of retail bank supervision; adapting FDIC

courses for the first time to a format streamlined

and relevant for examiners at the Reserve Bank

of Malawi, the Banque d’Algerie, and the Central

Bank of Egypt; and designing and participating in

FSVC’s first-ever training and consultations with

the Central Bank of Libya and the Central Bank

of Iraq on essential bank supervision topics.

The FDIC deepened its key relationship with

China by participating in the fourth annual U.S.-

ChinaBankingSupervisor’sBilateralConference
24 FDIC 2009 Annual Report

to impact large institutions. Given the increased

risk levels, the FDIC has expanded its presence

at the nation’s largest and most complex institutions through additional and enhanced on-site

and off-site monitoring.

The program increased its on-site presence

at the eight large complex institutions, as designated by the FDIC Board of Directors, to assess

risk, monitor liquidity, and participate in targeted reviews with the primary federal regulators.

Standardized liquidity, and reporting processes

are also in place at select large and problem institutions. Off-site monitoring has intensified with

weekly reporting on high-risk banks with total

assets of $5 billion or greater.

The Large Insured Depository Institution

(LIDI) Program remains the primary instrument for off-site monitoring of insured depository institutions with $10 billion or more in total

assets, or under this threshold at regional discretion. The LIDI Program continues to provide a

comprehensive process to standardize data capture and reporting through nationwide comprehensive quantitative and qualitative risk analysis

of large and complex institutions. As of December 31, 2009, the LIDI Program encompassed

109 institutions with total assets of over $10 trillion. In order to enhance large bank oversight,

the LIDI Program was refined to better quantify

risk to the insurance fund in all large banks. This

was accomplished, in collaboration with other

divisions and offices, through the implementation of the LIDI Scorecard. The LIDI Scorecard

is designed to weigh key risk areas and provide a

risk ranking and measurement system that compares insured institutions on the basis of both

the probability of failure and exposure to loss

at failure. The comprehensive LIDI Program is

addition, two FDIC staff members provided technical assistance through the FSVC on 15 missions

covering 12 countries. In November, FDIC staff

provided training to 32 Latin American bank

supervisors in the supervision of operational risk

in Panama as part of ASBA’s continental training program. Also, through the FDIC’s Corporate University Examiner training program and

the State Department’s Anti-Money Laundering/

Counter-Financing of Terrorism training program, the FDIC provided training to 146 students

from 20 countries. Additionally, the FDIC was

able to provide deposit insurance claims management training through the IADI Executive Training Program to 128 representatives from over 50

countries. In total, these efforts resulted in the

FDIC’s engagement with over 560 representatives

from 56 emerging or developing markets.

Complex Financial Institution Program

The FDIC’s Complex Financial Institution

(CFI) Program addresses the unique challenges

associated with the supervision, insurance, and

potential resolution of large/complex insured

institutions. The FDIC’s ability to analyze and

respond to risks in these institutions is of particular importance, as they make up a significant

share of the banking industry’s assets. The program provides for a consistent approach to largebank supervision nationwide, allows for analysis

of financial institution risks on an individual and

comparative basis, and enables a quick response

to risks identified at large institutions. The program’s objectives are achieved through extensive

cooperation with the FDIC regional offices, other

FDIC divisions and offices, and the other bank

and thrift regulators. Adverse economic and

market conditions throughout 2009 continued
I. Management’s Discussion and Analysis 25

tions, protects consumers’ rights, and promotes

community investment initiatives.

Examination Program 

The FDIC’s strong bank examination program is the core of its supervisory program.

As of December 31, 2009, the Corporation was

the primary federal regulator for 4,943 FDICinsured, state-chartered institutions that were not

members of the Federal Reserve System (generally referred to as “state non-member” institutions). Through safety and soundness, consumer

compliance and Community Reinvestment Act

(CRA), and other specialty examinations, the

FDIC assesses an institution’s operating con

dition, management practices and policies, and

essential to effective large bank supervision by

capturing information on the risks and utilizing that information to best deploy resources to

high-risk areas, determine the need for supervisory action, and support insurance assessments

and resolution planning.

Supervision and Consumer 

Protection

Supervision and consumer protection are

cornerstones of the FDIC’s efforts to ensure the

stability of and public confidence in the nation’s

financial system. The FDIC’s supervision program promotes the safety and soundness of

FDIC-supervised insured depository instituFDIC Examinations 2007–2009

2009 2008 2007

Risk Management (Safety and Soundness): 

State Non-member Banks 2,398 2,225 2,039

Savings Banks 203 186 213

Savings Associations 1 1 3

National Banks 0 2 0

State Member Banks 2 2 3

Subtotal—Safety and Soundness Examinations 2,604 2,416 2,258

CRA/Compliance Examinations:

Compliance/Community Reinvestment Act 1,435 1,509 1,241

Compliance-only 539 313 528

CRA-only 7 4 4

Subtotal—CRA/Compliance Examinations 1,981 1,826 1,773

Specialty Examinations:

Trust Departments 493 451 418

Data Processing Facilities 2,780 2,577 2,523

Subtotal—Specialty Examinations 3,273 3,028 2,941

Total 7,858 7,270 6,972
26 FDIC 2009 Annual Report

ing of “4” or “5”), compared to the 252 problem

institutions with total assets of $159.4 billion

on December 31, 2008. This constituted a 179

percent increase in the number of problem institutions and a 153 percent increase in problem

institution assets. In 2009, 179 institutions with

aggregate assets of $1.3 trillion were removed

from the list of problem financial institutions,

while 629 institutions with aggregate assets of

$1.6 trillion were added to the list. Eighty-three

institutions are in process of being downgraded

to problem status, reporting total assets of $32.2

billion. Colonial Bank, Montgomery, Alabama,

was the largest failure in 2009, with $25.0 billion

in assets (and was added to the list and resolved

in 2009). The FDIC is the primary federal regulator for 473 of the 702 problem institutions, with

total assets of $242.2 billion and $402.8 billion

respectively.

During 2009, the Corporation issued the following formal and informal corrective actions

to address safety and soundness concerns: 282

Cease and Desist Orders, 3 Temporary Cease and

Desist Orders, and 425 Memoranda of Understanding. Of these actions, 9 Cease and Desist

Orders and 22 Memoranda of Understanding

were issued based, in part, on apparent violations

of the Bank Secrecy Act.

compliance with applicable laws and regulations.

The FDIC also educates bankers and consumers

on matters of interest and addresses consumer

questions and concerns.

As of December 31, 2009, the Corporation

conducted 2,604 statutorily required risk management (safety and soundness) examinations,

including a review of Bank Secrecy Act compliance, and all required follow-up examinations for FDIC-supervised problem institutions

within prescribed time frames. The FDIC also

conducted 1,981 CRA/compliance examinations

(1,435 joint CRA/compliance examinations, 5

compliance-only examinations,2 and 7 CRA-only

examinations) and 3,273 specialty examinations.

All CRA/compliance examinations were also

conducted within the time frames established by

FDIC policy, including required follow-up examinations of problem institutions.3

 The accompanying table on page 25 compares the number

of examinations, by type, conducted from 2007

through 2009.

Risk Management

As of December 31, 2009, there were 702

insured institutions with total assets of $402.8

billion designated as problem institutions for

safety and soundness purposes (defined as those

institutions having a composite CAMELS4 rat2 Compliance-only examinations are conducted for most institutions at or near the mid-point between joint compliance/CRA examinations

under the Community Reinvestment Act of 1977, as amended by the Gramm-Leach-Bliley Act of 1999. CRA examinations of financial

institutions with aggregate assets of $250 million or less are subject to a CRA examination no more than once every five years if they receive

a CRA rating of “Outstanding” and no more than once every four years if they receive a CRA rating of “Satisfactory” on their most recent

examination.

3 The 2009 annual performance goal for compliance examinations on “3-, 4-, and 5-rated” institutions was not fully met. This annual

performance goal and the indicator have been revised for 2010 to be consistent with the goal established in years prior to 2009. The 2009

performance target was not achieved because of the inadvertent inclusion of “3-rated” institutions. The FDIC does not typically issue formal

enforcement actions for “3-rated” institutions. The 2009 performance target was fully met with respect to “4- and 5-rated” institutions.

4The CAMELS composite rating represents the adequacy of Capital, the quality of Assets, the capability of Management, the quality and

level of Earnings, the adequacy of Liquidity, and the Sensitivity to market risk, and ranges from “1” (strongest) to “5” (weakest).
I. Management’s Discussion and Analysis 27

and supervisory controls, in many cases, are still

under development at year-end. Among the initiatives are the following:

•	 Processing applications for those FDICsupervised institutions applying to the

Department of the Treasury’s Troubled Asset

Relief Program (TARP) Capital Purchase

Program (CPP). This program authorizes

the Treasury to purchase up to $250 billion

of senior preferred shares from qualifying

insured depository institutions. As of September 30, 2009, the FDIC had received over

1,700 applications requesting nearly $35 billion in TARP funding.

•	 As of December 31, 2009, the FDIC’s processing of CPP requests was 100 percent

completed. The Department of Treasury

completed the final disbursements under the

CPP program on December 31, 2009.

•	 Issuing a memorandum on February 10,

2009, to provide examiners with guidance

on reviewing compliance with CPP program

requirements. Examiners have incorporated

these procedures into their on-site reviews of

institutions participating in the CPP. Examination procedures for institutions participating in the TLGP were issued on September

24, 2009.

Joint Examination Teams 

The FDIC used joint compliance/risk management examination teams (JETs) to assess risks

associated with new, nontraditional, and/or highrisk products being offered by FDIC-supervised

institutions. The JET approach recognizes that

to fully understand the potential risks inherent

in certain products and services, the expertise of

both compliance and risk management examine

As of December 31, 2009, 327 FDIC-supervised institutions were assigned a “4” rating for

safety and soundness, and 146 institutions were

assigned a “5” rating. Of the “4-rated” institutions, 297 were examined or had examinations

in process as of December 31, 2009, and formal

or informal enforcement actions are in process or

had been finalized to address the FDIC’s examination findings. Further, 131 “5-rated” institutions were examined or had examinations in

process as of December 31, 2009.

Compliance 

As of December 31, 2009, 34 FDIC-supervised

institutions were assigned or in process of being

assigned a “4” rating and one institution was

assigned a “5” rating for compliance. In total,

18 of the “4-rated” and the one “5-rated” institutions were examined in 2009; the remaining 16

were examined prior to 2009 and involved either

appeals or referrals to other agencies. Of these

35 institutions, 1 is under informal enforcement

action, 21 are under Cease and Desist Orders and

13 are in process of enforcement actions.

During 2009, the Corporation issued the following formal and informal corrective actions to

addressCompliance concerns: 18Cease andDesist

Orders and 50 Memoranda of Understanding.

Restoring and Maintaining Public 

Confidence and Stability in the 

Financial System

The FDIC is participating with other regulators, Congress, banks, and other stakeholders in

multiple new and changing initiatives, each with

its unique challenges and risks, to address the

current crises. The initiatives are very large in

scale, and the FDIC’s corresponding governance
28 FDIC 2009 Annual Report

ing, and the Financial Crimes Enforcement Network on the role of financial intelligence units in

detecting and investigating illegal activities.

Additionally, the FDIC hosted 29 representatives from the Central Bank of Russia, sponsored by the Financial Services Volunteer Corps.

Sessions included discussion of AML topics, as

well as supervisory examination processes and

interaction with the financial intelligence unit.

Separately, the FDIC met with five Russian and

three Kazakhstani foreign officials as a part of

the U.S. Department of State’s International Visitor Leadership Program to discuss the FDIC’s

AML Supervisory Program.

Minority Depository Institution Activities

The preservation of Minority Depository

Institutions (MDIs) remains a high priority for

the FDIC. In 2009, the FDIC continued to seek

ways for improving communication and interaction with MDIs, and responding to their concerns. Technical assistance was provided to 51

MDIs in a variety of different areas including,

but not limited to, the following:

•	 Deposit insurance assessments

•	 Proper use of interest reserves

•	 Filing branch and merger applications

•	 Complying with Part 365—Real Estate

Lending Standards

•	 Preparing Call Reports

•	 Performing due diligence for loan

participations

•	 Monitoring CRE concentrations

•	 Reducing adversely classified assets

•	 Stress testing

•	 Identifying and monitoring reputation risk

•	 Maintaining adequate liquidity

•	 Risks related to the use of brokered deposits

is required. The JET approach has three primary

objectives:

•	 To enhance the effectiveness of the FDIC’s

supervisory examinations in unique

situations;

•	 To leverage the skills of examiners who have

experience with emerging and alternative

loan and deposit products; and

•	 To ensure that similar supervisory issues

identified in different areas of the country

are addressed consistently.

In 2009, the FDIC used JETs within institutions involved in significant subprime or nontraditional mortgage activities; institutions

affiliated with or utilizing third parties to conduct significant consumer lending activities,

especially in the credit card area; and institutions

for which the FDIC has received a high volume

of consumer complaints or complaints with serious allegations of improper conduct by banks.

Bank Secrecy Act/Anti-Money Laundering 

The FDIC pursued a number of Bank Secrecy Act (BSA), Counter-Financing of Terrorism

(CFT) and Anti-Money Laundering (AML) initiatives in 2009.

The FDIC conducted three training sessions

in 2009 for 57 central bank representatives from

Bangladesh, Egypt, Ghana, Indonesia, Jordan,

Kuwait, Mali, Nigeria, Pakistan, Saudi Arabia,

Thailand, United Arab Emirates, and Yemen.

The training focused on AML/CFT controls, the

AML examination process, customer due diligence, suspicious activity monitoring, and foreign correspondent banking. The sessions also

included presentations from the Federal Bureau

of Investigation on combating terrorist financ-
I. Management’s Discussion and Analysis 29

lending, liquidity and funding, mortgage foreclosure prevention programs, and accounting issues.

The FDIC held banker roundtables and/or

conference calls with MDIs in their geographic regions. Topics of discussion at roundtables

included the economy, overall banking conditions, agricultural conditions, deposit insurance assessments, accounting, and other bank

examination issues. Also, from December 2-3,

2009, the FDIC, in cooperation with the Puerto

Rico Bankers Association, hosted a compliance

school in Guayabo, PR. The event was attended

by approximately 150 bankers from nine banks.

In addition, the National MDI Coordinator

held conference calls with representatives from

several trade groups, including the Puerto Rico

Bankers Association, the NationalBankers Association, the Korean-American Bankers Association, the Asian-American Bankers Association,

the National Association of Chinese-American

Bankers, and the Hispanic Bankers Association,

to discuss the MDI program and FDIC outreach

activities.

Capital Standards

The FDIC continued to be actively involved in

domestic and international discussions intended

to address the deficiencies in regulatory capital

rules that were brought to light as a result of the

recent financial turmoil and to ensure capital

standards adequately support the safe and sound

operation of banks. This included participation

in a number of supervisory working group meetings with foreign regulatory authorities.

Internationally, the FDIC is participating in

the Basel Capital Monitoring Group that tracks

the impact on risk-based capital with the implementation of Basel II. The FDIC will continue

•	 Compliance issues

•	 Community Reinvestment Act

•	 Procedures for filing regulatory appeals

•	 Criteria for assigning CAMELS ratings

The FDIC also continued to offer the benefit

of having examiners return to FDIC-supervised

MDIs from 90 to 120 days after examinations, to

assist management in understanding and implementing examination recommendations and to

discuss other issues of interest. Seven MDIs took

advantage of this initiative in 2009. Also, the

FDIC held six regional outreach training efforts

and educational programs to MDIs, three of

which are discussed below.

In February 2009, the FDIC held a conference

call to discuss various facets of the proposed

changes to the insurance assessment criteria,

including (a) the removal of statutory constraints

on the FDIC’s ability to charge institutions for

deposit insurance under the Federal Deposit

Insurance Reform Act of 2005, (b) the temporary

increase in basic deposit insurance coverage from

$100,000 to $250,000 per depositor under the

Emergency Economic Stabilization Act of 2008,

and (c) the insurance assessments for financial

institutions based on their risk category. There

was also a discussion about the criteria for participating in the Troubled Asset Relief Program

(TARP). Seventy-eight bankers participated on

the conference call.

The FDIC hosted the fourth annual MDI

National Conference in Chicago, Illinois, from

July 8-10, 2009. The conference theme was “A

Bridge to Community Stabilization,” and over

220 bankers from MDIs attended. The breakout

sessions focused on topics of interest to bank

management, including commercial real estate
30 FDIC 2009 Annual Report

the Fundamental Review of the Trading Book,

Asset Incumbrance, External Ratings and Securitization, and Macroprudential Supervision,

will continue their work into 2010.

Domestically, the FDIC issued a number of

interagency rulemakings to align regulatory

capital more closely with risk. On November 12,

2009, the FDIC made final the interim final rule

regarding the risk weights for Residential Mortgage Loans Modified Pursuant to the Making

Home Affordable Program (MHAP) of the U.S.

Department of the Treasury.5 This rule was jointly issued with the other federal banking agencies’ support to prevent residential real estate

foreclosures and keep Americans in their homes.

The rule allows an institution to continue to risk

weight a prudently-underwritten mortgage loan

at the preferential risk weight even though it has

been restructured under the Treasury’s program.

The final rule clarified that a banking organization may retain the risk weight assigned to

a mortgage loan before the loan was modified

under the MHAP.

On August 27, 2009, in response to the

financial turmoil and the Financial Accounting

Standards Board’s revisions to accounting rules

for consolidation of variable interest entities—

Statement of Financial Accounting Standards

No. 166, Accounting for Transfers of Financial 

Assets, an Amendment of FASB Statement No. 

140 (FAS 166—now codified as ASC 860), and

Statement of Financial Accounting Standards

No. 167, Amendments to FASB Interpretation No. 

46(R) (FAS 167—now codified as ASC 810)—

the federal banking regulators issued a proposed

to compile and analyze the information on the

international impact of Basel II on regulatory

capital as it becomes available through public

and supervisory sources.

The FDIC continues to participate in international efforts to improve the quality of capital, minimize the procyclicality of risk-based

capital requirements, and ensure the amount of

capital banks hold for risky exposures is commensurate with risk (notably securitization,

re-securitization, and trading book exposures).

The FDIC actively participates in the work of

the Basel Committee on Banking Supervision’s

Policy Development Group and a number of

working groups: AIG Trading Book, Fundamental Review of the Trading Book, Definition of

Capital, Non-Risk Based Supplementary Measure (leverage ratio), Liquidity, External Ratings and Securitizations, Counterparty Credit

Risk, Asset Encumbrance, Procyclicality, and

Macroprudential Supervision. The substantive

work of these groups culminated in the publication in June 2009 of Revisions to the Basel II 

market risk framework, Guidelines for computing capital for incremental risk in the trading 

book, and Enhancements to the Basel II framework—and two consultative papers in December of 2009—Strengthening the resilience of the 

banking sector and International framework for 

liquidity risk measurement, standards and monitoring. The FDIC also participated in drafting

the request for data for the impact studies that

the Basel Committee will undertake in early

2010 to calibrate the proposals in the consultative papers. A number of these groups, including

5 On March 4, 2009, the Treasury announced guidelines under the Making Home Affordable Program (MHAP) to promote sustainable loan

modifications for homeowners at risk of losing their homes due to foreclosure.
I. Management’s Discussion and Analysis 31

Guidance Issued

During 2009, the FDIC issued and participated in the issuance of guidance in several areas as

described below:

Structured Credit Products

FDIC-supervised institutions continued to

invest in structured credit products, including

private label mortgage-backed securities and

collateralized debt obligations. By early 2009,

a growing number of these institutions experienced deterioration in financial performance as

a result of these investments. To reinforce the

federal banking agencies’ existing guidance—

Supervisory Policy Statement on Investment 

Securities and End-User Derivatives Activities

and Uniform Agreement on the Classification of 

Assets and Appraisal of Securities—the agencies

issued new guidance on April 30, 2009, titled Risk 

Management of Investments in Structured Credit 

Products. The guidance reiterates and clarifies

existing supervisory guidance on the purchase

and holding of complex structured credit products. It focuses on the various supervisory concerns related to these securities: pre-purchase

analysis, suitability determination, risk limits,

credit ratings, valuation, ongoing due diligence,

adverse classification, and capital treatment.

Qualifications for Failed Bank Acquisitions

The FDIC developed guidance for private

investors interested in acquiring the deposit

liabilities, or the deposit liabilities and assets, of

failed insured depository institutions. The FDIC

published for comment on July 9, 2009, a Proposed Statement of Policy on Qualifications for

Failed Bank Acquisitions(Proposed Policy Statement). On August 26, 2009, the FDIC’s Board of

rule for comment titled Impact of Modifications

to Generally Accepted Accounting Principles, 

Consolidation of Asset-Backed Commercial 

Paper Programs, and Other Related Issues.

The final rule was approved by the FDIC Board

on December 15, 2009. The rule discussed the

impact of the accounting changes on the agencies’ regulatory capital rules. The rule modified

the general risk-based and advanced risk-based

capital adequacy frameworks to eliminate the

exclusion of certain consolidated asset-backed

commercial paper programs from risk-weighted

assets. The rule provided a reservation of authority in the general risk-based and advanced riskbased capital adequacy frameworks to permit the

agenciesto require banking organizationsto treat

entities that are not consolidated under accounting standards as if they were consolidated for

risk-based capital purposes. The rule included

an optional four-quarter transition period to ease

the impact of the accounting change on a bank’s

risk-based capital requirements but did not delay

the impact of the accounting change on a bank’s

leverage ratio.

The FDIC, with the other federal bank regulators, commenced a number of rulemakingsin late

2009, including a revised Standardized Framework notice of proposed rulemaking (NPR)

that proposes to implement the Basel II Accord

standardized risk-based capital framework, an

NPR to revise the Market Risk Amendment that

proposes higher regulatory capital requirements

for significant trading book activities, and an

NPR that proposes implementation of the Basel

changes to risk-based capital requirements that

doubles the capital charge for re-securitizations

and requires additional disclosures for securitizations and re-securitizations.
32 FDIC 2009 Annual Report

enhances the transparency of workout transactions, and ensures that supervisory policies and

actions do not inadvertently curtail the availability of credit to sound borrowers.

Liquidity Risk Management

On July 31, 2009, the federal banking agencies and the National Credit Union Administration sought comment on a proposed Interagency 

Guidance on Funding and Liquidity Risk Management. The agencies developed the guidance

to provide sound practices for managing funding and liquidity risk and strengthening liquidity

risk management practices. The new guidance

is intended to supplement existing guidance,

including FIL-84-2008, Liquidity Risk Management, issued by the FDIC in 2008, which remains

in effect. Where appropriate, the proposed guidance conforms to the Basel Committee’s Principles for Sound Liquidity Risk Management and 

Supervision. The final guidance was published

on April 15, 2010.

Brokered Deposits

The FDIC issued a final rule on May 29,

2009, effective January 1, 2010, changing the

way it administers statutory restrictions on the

deposit interest rates paid by banks that are

less than well-capitalized. Under Part 337.6 of

the FDIC Rules and Regulations, a less than

well-capitalized insured depository institution

may not pay a rate of interest that significantly

exceeds the prevailing rate in the institution’s

market area or the prevailing rate from which the

deposit is accepted. The final rule is intended to

simplify and strengthen the administration of

this regulation.

Directors voted to adopt the Final Statement of

Policy on Qualifications for Failed Bank Acquisitions (Final Policy Statement), which was published in the Federal Register on September

2, 2009. The Final Policy Statement takes into

account commentsreceived from companies, law

firms, legislators, and other interested parties,

and changed the minimum capital commitment

from 15 percent Tier 1 leverage to 10 percent

Tier 1 common equity. Other key elements of

the Final Policy Statement include cross support

requirements, a prohibition on affiliated lending, a limitation on the sale of acquired shares in

the first three years, a prohibition on bidding by

excessively opaque and complex business structures, and minimum disclosure requirements.

The Final Policy Statement specifies that it does

not apply to investors who hold 5 percent or less

of the total voting power as long as there is no

evidence of concerted action by these investors.

In adopting the Final Policy Statement, the FDIC

sought to strike a balance between the interests

of private investors and the need to provide adequate safeguards for the insured depository institutions involved.

Commercial Real Estate Guidance

In response to deteriorating trends in commercial real estate (CRE) and other commercial

loans, the FDIC, along with the other financial

regulators, issued the Policy Statement on Prudent Commercial Real Estate Loan Workouts(the

CRE Guidance) on October 30, 2009. The CRE

Guidance updates existing guidance to assist

examiners in evaluating institutions’ efforts to

renew or restructure loans to creditworthy borrowers. It promotes supervisory consistency,
I. Management’s Discussion and Analysis 33

cent risk weight for risk-based capital purposes.

The agencies reminded institutions, however,

that they should exercise the same prudent judgment and sound risk management practices with

respect to the registered warrants as they would

with any other obligation of a state.

The FDIC also initiated an interagency interest rate risk advisory to highlight concerns about

banks taking on excessive interest rate risk in

current low interest rate environment. This advisory, which was published in January 2010, clarifies existing guidance and reminds banks not to

lose focus on their management of interest rate

risk. Banks are expected to manage interest rate

risk exposures using policies and procedures

commensurate with their complexity, business

model, risk profile, and scope of operations.

Consumer Protection and Compliance 

Guidance

In January 2009, the FDIC approved, and

issued, along with the other federal bank regulators, updated Final Interagency Questions and

Answers on the Community Reinvestment Act

(CRA) and requested comment on new proposed

guidance. In June, the FDIC joined the other

regulators in requesting comment on CRA regulatory changes to implement statutory requirements relating to student loans and activities in

cooperation with minority- and women-owned

financial institutions and low-income credit

unions. The FDIC contributed to the development and June release of guidance and examination procedures on the 2009 Identity Theft

Red Flags regulations. In July, the FDIC joined

other regulators in issuing Revised Interagency

Questions and Answers Regarding Flood Insurance, updating guidance first issued in 1987,

De Novo Institutions

On August 28, 2009, the FDIC advised the

banking industry ofsupervisory changesforstate

non-member institutions insured seven years

or less (de novo period). Under previous policy,

newly insured institutions were subject to higher

capital requirements and more frequent examination activities during the first three years of

operation. Based on supervisory experience, the

FDIC extended the de novo period from a threeyear period to seven years for examinations, capital, and other requirements. In addition, material

changesin business plansfor newly insured institutions will require prior FDIC approval during

the first seven years of operation.

Regulatory Relief

During 2009, the FDIC issued six Financial

Institution Letters that provided guidance to

help financial institutions and facilitate recovery

in areas damaged by severe storms, tornadoes,

flooding, and other natural disasters. Areas within

American Samoa, Arkansas, Georgia, Kentucky,

Minnesota, and North Dakota were affected.

Other Guidance Issued

On July 8, 2009, in response to the severe

payment situation that the state of California

was experiencing, the federal banking agencies

issued supervisory guidance for institutions

regarding the regulatory capital treatment for

registered warrants issued by the state of California as payment for certain obligations. The

agencies’ risk-based capital standards permit

a banking organization to risk weight general

obligation claims on a state at 20 percent. These

warrants, which are general obligations of the

state, would, therefore, be eligible for the 20 per-
34 FDIC 2009 Annual Report

tions’ risk profiles and ratings. These ongoing

analyses have been augmented with numerous

ad hoc reviews (such as reviews of commercial real estate lending trends, interest rate risk

exposure, allowance-for-loan and lease losses

trends, and dividend payments). Furthermore,

the FDIC replaced its former Underwriting Survey Questionnaire with a Credit and Consumer

Products/Services Survey in October 2009. The

new survey extends beyond underwriting practices and addresses new or evolving products/

strategies and consumer compliance issues and

is now completed by examiners at the conclusion

of each risk management and consumer compliance examination. Supervisory staff monitors

and analyzes this real-time examiner input and

uses the information to help determine the need

for changes in policy guidance or supervisory

strategies as appropriate.

The FDIC continues to work with the FFIEC

to issue supervisory guidance on reverse mortgage products. The FDIC began this effort as

the result of an internal review that highlighted

consumer risks associated with this product. A

2009 GAO report highlighted similar issues. In

addition, the FDIC continues to work with other

agencies to enhance the Truth in Lending examination procedures to assist examiners when

reviewing compliance with reverse mortgage

disclosure requirements.

Regulatory Reporting Revisions

The FDIC, jointly with the Office of the

Comptroller of the Currency and the Federal

Reserve Board, implemented revisions to the

Consolidated Reports of Condition and Income

(Call Reports) on a phased-in basis in March,

June, and December 2009. The revisions

and requested comment on additional proposed

guidance. In September, the FDIC alerted banks

to new statutory requirements to protect tenants

occupying foreclosed properties.

In November, the FDIC joined seven other

federal agencies in releasing a model privacy

notice form designed to make it easier for consumers to understand how financial institutions

collect and share their personal information. The

model form resulted from a multi-year consumer testing effort. In December, the FDIC joined

the other Federal Financial Institutions Examination Council (FFIEC) member agencies in

issuing for public comment, supervisory guidance on reverse mortgages, building on FDIC

analysis performed in 2008. In June, August,

and December, the FDIC issued guidance to the

institutions it supervises alerting them to significant changes in the Truth in Lending Act and the

Federal Reserve Board’s Regulation Z (which

implements that Act). In December, the FDIC

reminded institutions of the dramatically revised

Real Estate Settlement Procedures Act regulation issued by the Department of Housing and

Urban Development.

Monitoring Potential Risks from New 

Consumer Products 

The FDIC relies heavily on on-site supervisory activities to identify existing and emerging risks. In addition to on-site supervisory

activities, the FDIC uses several established

off-site processes, including Statistical CAMELS Off-site Rating (SCOR) and Growth Monitoring System (GMS), as well as more recent

comprehensive reviews (such as the Quarterly

Supervisory Risk Profile) to assess how identified risks are likely to affect insured institu-
I. Management’s Discussion and Analysis 35

and a change from annual to quarterly reporting

for small business and small farm lending data.

The agencies will collect new data pertaining to

reverse mortgages annually beginning December 31, 2010.

Promoting Economic Inclusion

The FDIC pursued a number of initiatives in

2009 to facilitate underserved populations using

mainstream banking services rather than higher

cost, non-bank alternatives and to ensure protection of consumers in the provision of these

services.

Alliance for Economic Inclusion 

The goal of the FDIC’s Alliance for Economic

Inclusion (AEI) initiative is to collaborate with

financial institutions; community organizations;

local, state, and federal agencies; and other partners in select markets to launch broad-based

coalitions to bring unbanked and underserved

consumers into the financial mainstream.

The FDIC expanded its AEI efforts during

2009 to increase measurable results in the areas

of new bank accounts, small-dollar loan products, remittance products, and delivery of financial education to more underserved consumers.

During 2009, over 60 banks and organizations

joined AEI nationwide, bringing the total number of AEI members to 967. More than 72,614

new bank accounts were opened during 2009,

bringing the total number of bank accounts

opened through the AEI to 162,692. During

2009, approximately 68,491 consumers received

financial education through the AEI, bringing the

total number of consumers educated to 142,796.

Also, 35 banks were in the process of offering or

developing small-dollar loans as part of the AEI,

focused on areas in which the banking industry

was experiencing heightened risk as a result of

market turmoil and illiquidity and weakening

economic and credit conditions. The reporting

changes included new data on real estate construction loans with interest reserves, structured financial products such as collateralized

debt obligations, commercial mortgage-backed

securities, pledged loans, and fiduciary assets

and income. Selected institutions must report

additional data on recurring fair value measurements, credit derivatives, and over-the-counter

derivative exposures.

In September 2009, the agencies updated

the reporting of data on the amount and number of deposit accounts and estimated uninsured

deposits in the Call Report schedule to reflect

the extension of the temporary increase in the

standard maximum deposit insurance amount

from $100,000 to $250,000 per depositor enacted in the Helping Families Save Their Homes

Act.

In December 2009, the agencies approved

revisions to the Call Report that were implemented in early 2010. The revisions incorporate

modifications made in response to comments

received on the agencies’ August 2009 proposal

and are subject to approval by the U.S. Office of

Management and Budget. The revisions respond

to such recent developments as a temporary

increase in the deposit insurance limit, changes

in accounting standards, and credit availability

concerns. The reporting changes that were effective March 31, 2010, include new data on otherthan-temporary impairments of debt securities,

loans to non-depository financial institutions,

and brokered time deposits; additional data on

certain time deposits and unused commitments;
36 FDIC 2009 Annual Report

demia, consumer or public advocacy organizations, and community-based groups.

The Advisory Committee met three times

during 2009. In February 2009, the meeting

topic was Strategies to Increase Access to the 

Financial Mainstream. The meeting featured an

overview of the FDIC Survey of Banks’ Efforts

to Serve the Unbanked and Underbanked and

focused on effective and innovative products and

services, policy approaches, and supervisory

and regulatory strategies to improve appropriate

engagement with the mainstream financial system, particularly for low- and moderate-income

(LMI) and underserved households.

The Advisory Committee also met in July

2009 to continue its discussion about issues and

challenges related to improving access to the

financial mainstream and to discuss innovative

ways that banks and others are encouraging savings through “game-based” strategies that make

savings fun or exciting, such as sweepstakes,

milestones, or rewards. After this meeting, a

report of the Committee’s views regarding the

issues and challenges of serving LMI and underserved consumers was posted on the FDIC web

site to spark discussion of how best to serve consumers who may be struggling, particularly in

the current economy.

On December 2, 2009, the Committee met to

discuss results of the FDIC National Unbanked 

and Underbanked Household Survey, overdraft

issues, and the strategic focus for the Committee.

As a next step, the Committee will formulate a

strategic plan that will provide a framework for

the Committee’s agenda over the next two years.

Among other things, the Strategic Plan will

include recommendations related to:

and 26 banks were offering remittance products

at the end of 2009.

The FDIC expanded the AEI initiative to two

additional markets during 2009—Detroit/South,

Michigan and Little Rock, Arkansas—bringing

the total number of active AEI markets to 14.

Additionally, the FDIC worked closely during

2009 to provide technical assistance and support

to communities in Milwaukee, Wisconsin and

northwestern Indiana interested in forming AEI

coalitions. The statewide Wisconsin Saves program agreed to lead an initiative in Milwaukee

patterned after the AEI.

The FDIC also worked closely during 2009

with the National League of Cities to provide

technical assistance to facilitate the launch of

Bank On campaigns in Seattle, WA; Savannah,

GA; Houston and San Antonio, TX; and Indianapolis, IN. The FDIC was also invited to serve

as a working committee member and advisor to

facilitate the launch of a Bank On Washington,

DC, campaign launched in April 2010.

FDIC Advisory Committee on 

Economic Inclusion

The FDIC’s Advisory Committee on Economic Inclusion was established in 2006 and

provides the FDIC with advice and recommendations on initiatives focused on expanding

access to banking services by underserved populations. This may include reviewing basic retail

financial services such as check cashing, money

orders, remittances, stored value cards, shortterm loans, savings accounts, and other services

that promote asset accumulation and financial

stability. Committee members represent a crosssection of interests from the banking industry,

state regulatory authorities, government, aca-
I. Management’s Discussion and Analysis 37

ing ways to offer small-dollar loan customers

other mainstream banking services.

There are currently 30 banks of varied sizes

and diverse locations and settings participating

in the pilot. Banks submitted data on a quarterly

basis, which the FDIC analyzed to determine

trends and best practices. The FDIC encourages innovation in program design, but most

programs generally adhere to the FDIC’s SmallDollar Loan Guidelines, issued in June 2007,

and all feature payment periods beyond a single

paycheck, annual percentage rates below 36 percent, and streamlined underwriting and prompt

loan application processing. During seven quarters of the pilot, banks cumulatively originated

about 29,000 loans with a principal balance of

more than $34 million. Bankers involved in the

pilot cite a number of common factors that contributed to the success of their loan programs,

including strong senior management and board

support; an engaged and empowered “champion”

in charge of the program; proximity to large populations of consumers with demand for smalldollar loans; and, in some rural markets, limited

competition. The delinquency ratio for loans in

the pilot tends to be almost three times higher

than for general unsecured loans to individuals.

However, charge-off rates for loans originated

under the program are the same as general unsecured loans to individuals. These statistics show

that while small-dollar loan borrowers are more

likely to have trouble paying on time, they are no

more likely to default than those in the general

population.

Only a few bankers participating in the pilot

have reported that short-term profitability is the

primary goal for their program. Rather, most

pilot banks are using the small-dollar loan prod-

•	 Determining a desirable “base” level of

household savings, and how much households actually have.

•	 Addressing desirable features of safe,

affordable savings and transaction account

products.

•	 Determining how the FDIC can enhance

efforts to promote youth financial education

programs.

•	 Reviewing CRA to ensure that programs

targeted to LMI communities are receiving

appropriate consideration.

•	 Considering ways to scale small-dollar loans,

including standardizing an affordable smalldollar loan product, providing information

about existing programs, seeking philanthropic or government guarantee funds, and

potentially using government workforces as

a test for employer-based small-dollar loans.

Affordable Small-Dollar Loan Guidelines 

and Pilot Program

Many consumers, even those who have bank

accounts, turn to high-cost payday or other

non-bank lenders to quickly obtain small loans

to cover unforeseen circumstances. To help

insured institutions better serve an underserved

and potentially profitable market while enabling

consumers to transition away from reliance on

high-cost debt, the FDIC launched a two-year

small-dollar loan pilot project in February 2008.

The pilot is designed to review affordable and

responsible small-dollar loan programs offered

by insured financial institutions and assist the

banking industry by identifying and disseminating information on replicable business models

and best practices for small-dollar loans, includ-
38 FDIC 2009 Annual Report

by government bodies or philanthropic

groups. These guarantees provide important

assurances to banks interested in providing loan funds and other support to the

programs. To encourage more institutions

to offer small-dollar loan programs, larger

pools could be created.

•	 Consider Conducting a Pilot Using 

Federal Workforces to Test Innovative 

Small-Dollar Loan Business Models. The 

dominant model in the small-dollar loan pilot

is the “high-touch” relationship building

model. Peer-to-peer technology and employer-based lending are promising technologies

to reduce handling costs, and, with employer-based models, potentially credit losses.

To the extent legally permissible, the FDIC

or other federal workforces could explore

serving as pilots for testing innovative smalldollar loan business models.

FDIC Advisory Committee on 

Community Banking

On May 29, 2009, the FDIC Board of Directors

approved establishing the FDIC Advisory Committee on Community Banking. This commituct as a cornerstone for profitable relationships,

which also creates goodwill in their community.

A few banks’ business models focus exclusively

on the goodwill aspect and generating an opportunity for positive Community Reinvestment

Act consideration. Regardless of the business

model, all of the bankers involved in the pilot

have indicated that small-dollar lending is something they believe they should be doing to serve

their communities.

Through the Advisory Committee on Economic Inclusion, the FDIC is considering pursuing several initiatives to broaden the availability

of small-dollar loans at mainstream financial

institutions, including, but not limited to, the

following:

•	 Conduct a Close-Out Symposium, 

Article, and “Branding Effort” for the 

Small-Dollar Loan Pilot. The close-out

symposium will highlight final pilot findings, summarize technology and other innovations in small-dollar loans, and address

progress on incentives to scale small-dollar

loans across the financial mainstream. The

features identified in the pilot could also be

“branded” as the ideal for affordable, feasible small-dollar loan

programs.

•	 Consider Creating Pools of 

Non-Profit Funds or Government Operating Funds to Serve 

as “Guarantees” for Acceptable 

Small-Dollar Loan Programs.

Several existing small-dollar loan

programs feature “guarantees” in

the form of loan loss reserves or

linked, low-cost deposits provided Members of the Advisory Committee on Community Banking with Chairman Sheila C. Bair.
I. Management’s Discussion and Analysis 39

Unbanked and Underbanked Households,

breaking new ground in gaining understanding

of which Americans remain outside the banking

system. The survey, conducted on behalf of the

FDIC by the U.S. Bureau of the Census, was a

supplement to the Census Bureau’s Current Population Survey during January 2009. The study,

which is the most comprehensive survey to

date of the unbanked and underbanked, reveals

that more than one quarter (25.6 percent) of all

households in the United States are unbanked

or underbanked and that those households are

disproportionately low-income and/or minority. In addition to collecting accurate estimates

of the number of unbanked and underbanked

households in the U.S., the survey was designed

to provide insights into their demographic characteristics and reasons why the households are

unbanked or underbanked. The survey represents the first time that this data has been

collected to produce estimates at the national,

regional, state, and large metropolitan statistical

area (MSA) levels. This effort is being undertaken in response to the Reform Act, which calls

for the FDIC to provide an estimate of the size

of the U.S. unbanked market and to identify

issues that cause individuals and families to be

unbanked.

Information Technology, Cyber Fraud, 

and Financial Crimes 

The FDIC issued Special Alertsin August and

October 2009 notifying financial institutions of

an alarming increase in reports of fraudulent

electronic funds transfer transactions resulting

from compromised login credentials. During

2009, the FDIC detected an increase in both the

number of such incidents and the losses resulting

tee was formed to provide the FDIC with advice

and guidance on a broad range of important

policy issues impacting small community banks

throughout the country, as well as the local communities they serve, with a focus on rural areas.

The 14-member committee represents a crosssection of community bankers from around the

nation, as well as a member from academia. The

first meeting, held on October 15, 2009, covered

the impact of the financial crisis on community

banks. Other issues addressed were regulatory

reform proposals under consideration by Congress and their effect on community banks, the

impact of FDIC supervisory proposals on these

banks, and community banks’ perspectives on

funding the FDIC’s Deposit Insurance Fund.

Survey Results of the Unbanked and 

Underbanked 

In February 2009, the FDIC transmitted to

Congress the results of the first national survey

of banks’ efforts to serve unbanked and underbanked individuals and families in their market

areas. The survey, conducted pursuant to a mandate in Section 7 of the Federal Deposit Insurance Reform Conforming Amendments Act of

2005, found that improvement may be possible

in the areas of institution focus, outreach, and

commitment to unbanked and underbanked

populations. The survey found that a majority

of banks—63 percent—offers basic financial

education materials, but fewer participate in the

types of outreach efforts that are viewed by the

industry as most effective to attract and maintain

unbanked and underbanked individuals as longterm customers.

On December 2, 2009, the FDIC released

the findings of its FDIC National Survey of
40 FDIC 2009 Annual Report

breaches and natural disasters that may impact

financial institution operations or customers.

As an additional element of its leadership role

in promoting effective bank supervision practices, the FDIC provides technical assistance,

training, and consultations to international governmental banking regulators in the area of IT

examinations. In 2009, through our secondment

program with the Financial Services Volunteer

Corps, the FDIC provided assistance in developing IT examination programs to the Central

Bank of Iraq, the Central Bank of Libya, Banque

d’Algerie, and Bank of Albania. The FDIC also

hosted a visit by the China Banking Regulatory

Commission to learn about our IT examination

programs, and the FDIC hosted an international

conference of bank regulators to discuss emerging technology risks and to compare supervisory

approaches.

Consumer Complaints and Inquiries 

The FDIC investigates consumer complaints

concerning FDIC-supervised institutions and

answers inquiries from the public about consumer protection laws and banking practices. As of

December 31, 2009, the FDIChad received 17,245

written complaints, of which 8,280 involved

complaints against state non-member institutions. The FDIC responded to over 96 percent of

these complaints within the two-week standard

established by Corporate policy. The FDIC also

responded to 2,797 written inquiries, of which

503 involved state non-member institutions. In

addition, the FDIC responded to 6,491 telephone

calls from the public and members of the banking community, 3,878 of which concerned state

non-member institutions.

from them. Other major accomplishments during 2009 in combating identity theft included the

following:

•	 Assisted financial institutions in identifying and shutting down approximately

651 “phishing” web sites. The term

“phishing”—as in fishing for confidential 

information—refers to a scam th

encompasses fraudulently obtaining and

using an individual’s personal or financial

information.

•	 Issued 219 Special Alerts to FDICsupervised institutions on reported cases of

counterfeit or fraudulent bank checks.

•	 Issued, in conjunction with the other

FFIEC agencies, frequently asked questions (FAQs) concerning “Identity Theft

Red Flags, Address Discrepancies, and

Change of Address Regulations.” These

FAQs are designed to assist financial institutions in complying with the new regulations

and examiners in assessing institutions’

compliance.

The FDIC conducts information technology

(IT) examinations at each safety and soundness examination to ensure that institutions have

implemented adequate risk management practices for the confidentiality, integrity, and availability of the institution’s sensitive, material, and

critical information assets using the FFIEC Uniform Rating System for Information Technology

(URSIT). The FDIC also participates in interagency examinations of significant technology

service providers. In 2009, the FDIC conducted

2,780 IT examinations at financial institutions

and technology service providers. The FDIC

also monitors significant events, such as data
I. Management’s Discussion and Analysis 41

seminars reached an estimated 35,000 bankers participating at approximately 10,000 bank

locations throughout the country. The FDIC also

continued to work with industry trade groups 

provide training for bank employees.

Deposit Insurance Coverage Inquiries

During 2009, the FDIC received 4,782 written

deposit insurance inquiries from consumers and

bankers. Of these inquiries, 99 percent received

responses from the FDIC within two weeks,

as required by Corporate policy. In addition to

written deposit insurance inquiries, the FDIC

received and answered 41,259 telephone inquiries from consumers and bankers during 2009.

The 46,041 total deposit insurance inquiries received in 2009 is significantly less than

the 100,933 total deposit insurance inquiries

received in 2008, when there was an unprecedented surge in deposit insurance questions following the failure of IndyMac Bank. However,

the 2009 deposit insurance inquiries represent a

130 percent increase compared to 2007, when the

FDIC received a total of 20,024 inquiries about

deposit insurance coverage.

Foreclosure Prevention

In 2009, the FDIC launched an initiative to

help consumers and the banking industry avoid

unnecessary foreclosures and stop foreclosure

“rescue” scams that promise false hope to consumers at risk of losing their homes.

The FDIC focused its foreclosure mitigation

efforts in three areas during 2009:

•	 Direct outreach to consumers with information, education, counseling, and referrals.

During 2009, the FDIC hosted or co-hosted

over 82 consumer outreach events that

Deposit Insurance Education

An important part of the FDIC’s deposit insurance mission is ensuring that bankers and consumers have accessto accurate information about

the FDIC’s rules for deposit insurance coverage.

The FDIC has an extensive deposit insurance

education program consisting of seminars for

bankers, electronic tools for estimating deposit

insurance coverage, and written and electronic

information targeted for both bankers and consumers. The FDIC also responds to thousands of

telephone and written inquiries each year from

consumers and bankers regarding FDIC deposit

insurance coverage.

Economic conditions in 2008 helped to spur a

significant interest by bank customers in learning more about FDIC deposit insurance coverage. To meet the increased public demand for

deposit insurance information, the FDIC implemented two major initiatives to help raise public awareness of the benefits and limitations of

FDIC deposit insurance coverage.

In 2009, the FDIC continued with its 2008 initiatives aimed at raising the public’s awareness

of the benefits and limitations of federal deposit

insurance. The FDIC continued its campaign

of public service announcements for television,

radio, and print media; these public service

announcements encouraged bank customers to

visit myFDICinsurance.gov to learn about FDIC

insurance coverage. In addition to our efforts

to raise public awareness, the FDIC expanded

its efforts to educate bankers about the rules and

requirementsfor FDICinsurance coverage.In the

fall of 2009, after all legislative and regulatory

changes were implemented, the FDIC conducted

a series of six nationwide telephone seminars for

bankers on deposit insurance coverage. These
42 FDIC 2009 Annual Report

The FDIC also worked collaboratively with

other key partners, both inside and outside federal

government, on post-foreclosure neighborhood

stabilization efforts. These efforts will continue in

2010.

Financial Education and Community 

Development

In 2001, the FDIC—recognizing the need

for enhanced financial education across t

country—inaugurated its award-winning Money 

Smart curriculum, which was, until 2009, available in six languages, large print and Braille versions for individuals with visual impairments,

and a computer-based instruction version. Since

its inception, over 2.4 million individuals have

participated in Money Smart classes and selfpaced computer-based instruction. Approximately 300,000 of these participants subsequently

established new banking relationships.

The FDIC significantly expanded its financial

education efforts during 2009 through a multipart strategy that included making available

timely, high-quality financial education products, expanded delivery channels, and the sharing of best practices.

Two new Money Smart products were released

in 2009. First, as part of efforts to reach underserved communities, the FDIC released a Hmong

(an Asian dialect found in Vietnam, Laos, Thailand, and Myanmar) language version of Money 

Smart, making it the seventh language in which

the curriculum is offered. Second, the FDIC

released the Money Smart Podcast Network, a 

portable audio version of Money Smart suitable

for use with virtually all MP3 players. It was

created as a tool for consumers to use to learn

on their own or for educators seeking an innoreached over 17,000 consumers. The FDIC

also released an informational toolkit and

launched a phone referral service to help

homeowners avoid scams and reach their

servicer.

•	 Industry outreach and education targeted 

to lenders, loan servicers, local governmental agencies, housing counselors, and first 

responders (faith-based organizations, advocacy organizations, social service organizations, etc.). The FDIC worked collaboratively

throughout 2009 with local foreclosure coalitions, AEI partners, and others to co-host

industry-wide events. Approximately 20 such

events were conducted during 2009.

•	 Support for capacity building initiatives to 

help expand the quantity and quality of foreclosure counseling assistance that is available within the industry. Working closely

with NeighborWorks® America and other

national and local counselor training and

intermediaries, the FDIC worked to support

industry efforts to build the capacity of housing counseling agencies.

As part of the FDIC’s foreclosure prevention

efforts, the FDIC released two new educational

brochures during 2009 (in both English and

Spanish) to help consumers avoid scams and

turn to legitimate sources of assistance. The Is 

Foreclosure Knocking at Your Door? brochure

encourages consumers to seek a loan modification. The Beware of Foreclosure Rescue Scams

brochure alerts homeowners to common scams

and directs them to legitimate sources of assistance. The demand for both brochures was

strong—over 150,000 copies were requested and

distributed.
I. Management’s Discussion and Analysis 43

new savings deposits in financial institutions.

Also, recognizing the importance of small business growth and job creation as an essential

component in America’s economic recovery, the

FDIC expanded its emphasis on facilitating small

business development, expansion and recovery

during 2009. Thisincluded hosting well-received

events to help small businesses identify supportive programs, including mainstream lending options. The FDIC also helped facilitate the

establishment of two new small business loan

pools during 2009 to originate loans to eligible

entrepreneurs and small businesses unable to

obtain traditional loans because of an elevated

risk profile (e.g., start-up businesses with insufficient cash flow or collateral). These new loan

pools were launched in Alexandria, Virginia,

and Baton Rouge, Louisiana.

Resolutions and Receiverships 

The FDIC has the unique mission of protecting depositors of insured banks and savings

associations. No depositor has ever experienced

a loss on the insured amount of his or her deposit

in an FDIC-insured institution due to a failure.

Once an institution is closed by its chartering

authority—the state for state-chartered institutions, the Office of the Comptroller of the Currency (OCC) for national banks, and the Office

of Thrift Supervision (OTS) for federal savings

associations—and the FDIC is appointed receiver, the FDIC is responsible for resolving the

failed bank or savings association.

The FDIC employs a variety of business practices to resolve a failed institution. These business practices are typically associated with the

resolution process or the receivership process.

Depending on the characteristics of the instituvative way to supplement traditional classroom

instruction. The new MP3 version received more

than 328,716 hits from 11,015 individual visitors

between its release on May 27, 2009, and yearend 2009. Showing its appeal, visitors to the web

site spent an average of 38 minutes on the site.

Additionally, to enhance the quality of existing

products, information on foreclosure prevention scams and legitimate sources of foreclosure

assistance was added to the adult instructor-led

and self-paced versions of Money Smart.

The FDIC also expanded its delivery channels

for financial education. For example, 237 new

organizations joined the FDIC’s Money Smart 

Alliance. Finally, best practices were shared

through four editions published of Money Smart 

News, which reached over 40,000 subscribers.

During 2009, the FDIC undertook over 200

community development, technical assistance,

financial education, and outreach activities and

events. These activities were designed to promote

awareness of investment opportunities to financial institutions, access to capital within communities, knowledge-sharing among the public

and private sector, and wealth-building opportunities for families. Representatives throughout the financial industry and their stakeholders

collaborated with the FDIC on a broad range of

initiatives structured to meet local and regional

needs for financial products and services, credit,

asset-building, affordable housing, small business and micro-enterprise development and

financial education.

For example, the FDIC participated in 15

local savings campaigns during the 2009 America Saves week to encourage consumers to build

wealth. The FDIC’s leadership of one such local

campaign helped facilitate nearly $10 million in
44 FDIC 2009 Annual Report

assets” for a specific period of time (for example,

five to ten years). The economic rationale for

these transactions is that retention of shared loss

assets in the banking sector can produce a better

net recovery than would the FDIC’s immediate

liquidation of these assets.

Deposit payoffs are only executed if a bid

for a P&A transaction does not meet the leastcost test or if no bids are received, in which case

the FDIC, in its corporate capacity as deposit

insurer, makes sure that the customers of the

failed institution receive the full amount of their

insured deposits.

The Banking Act of 1933 authorized the FDIC

to establish a DINB to assume the insured deposits of a failed bank. A DINB is a new national

bank with limited life and powers that allows

failed bank customers a brief period of time to

move their deposit account(s) to other insured

institutions. A DINB allows for a failed bank to

be liquidated in an orderly fashion, minimizing

disruption to local communities and financial

markets. Another resolution option, open bank

assistance transactions, generally can only be

used in the event the bank’s failure would result

in systemic risk.

The receivership process involves performing the closing functions at the failed institution, liquidating any remaining failed institution

assets, and distributing any proceeds of the liquidation to the FDIC and other creditors of the

receivership. In its role as receiver, the FDIC

has used a wide variety of strategies and tools to

manage and sell retained assets. These include,

but are not limited to asset sale and/or management agreements, partnership agreements, and

securitizations.

tion, the FDIC may recommend several of these

practices to ensure prompt and smooth payment

of deposit insurance to insured depositors, to

minimize impact on the Deposit Insurance Fund,

and to speed dividend payments to creditors of

the failed institution.

The resolution process involves valuing a

failing institution, marketing it, soliciting and

accepting bids for the sale of the institution,

determining which bid is least costly to the

insurance fund, and working with the acquiring

institution through the closing process.

In order to minimize disruption to the local

community, the resolution process must be performed quickly and as smoothly as possible.

There are three basic resolution methods: purchase and assumption transactions, deposit payoffs, and utilizing a Deposit Insurance National

Bank (DINB).

The purchase and assumption (P&A) transaction is the most common resolution method used

for failing institutions. In a P&A transaction, a

healthy institution purchases certain assets and

assumes certain liabilities of the failed institution. There are a variety of P&A transactions that

can be used. Since each failing bank situation is

different, P&A transactions provide flexibility

to structure deals that result in the highest value

for the failed institution. For each possible P&A

transaction, the acquirer may either acquire all

or only the insured portion of the deposits. Loss

sharing may be offered by the receiver in connection with a P&A transaction. In a loss sharing

transaction, the FDIC as receiver agrees to share

losses on certain loans with the acquirer. The

FDIC usually agrees to absorb a significant portion (for example, 80 percent) of future losses on

assets that have been designated as “shared loss
I. Management’s Discussion and Analysis 45

marketed to be sold within 90 days of an institution’s failure.

Structured asset sales in 2009 included

$1.3 billion of residential loans from Franklin

National Bank. This transaction involved FDICguaranteed purchase money debt, and equity

in a Limited Liability Company (LLC) shared

between the receiver and the successful bidder.

The Corus Construction Venture LLC structured asset sale consisted of $4.5 billion of condominium and office construction loans from

Corus Bank. In this transaction, the FDIC structured the purchase money debt at an initial term

leverage of one-to-one to the bidders and structured the notes to be in the form of multiple bullet maturity notes guaranteed by the FDIC.

In 2009, the book value of assets under management increased by $26.2 billion to $41.4 billion. The following chart shows beginning and

ending balances of assets by asset type.

Assets in Inventory by Asset Type

Dollars in Millions

Asset Type

Assets in 

Inventory 

01/01/09

Assets in 

Inventory 

12/31/09

Securities $467 $12,425

Consumer Loans 204 475

Commercial Loans 2,985 4,423

Real Estate Mortgages 9,808 15,613

Other Assets/Judgments 703 4,096

Owned Assets 832 3,257

Net Investments in Subsidiaries 108 1,066

Total $15,107 $41,355

Financial Institution Failures 

The FDIC experienced a significant increase

in the number and size of institution failures as

compared to previous years. During 2009, 140

financial institutions failed. For the institutions

that failed, the FDIC successfully contacted all

known qualified and interested bidders to market

these institutions. Additionally, the FDIC marketed over 80 percent of the marketable assets of

these institutions at the time of failure and made

insured funds available to all depositors within

one business day of the failure. There were no

losses on insured deposits, and no appropriated

funds were required to pay insured deposits.

The following chart provides a comparison of

failure activity over the last three years.

Failure Activity 2007–2009

Dollars in Billions

2009 2008 2007

Total Institutions 140 25 3

Total Assets of Failed 

Institutions* $169.7 $371.9 $2.6

Total Deposits of Failed 

Institutions* $137.1 $234.3 $2.4

Estimated Loss to the DIF $35.6 $19.8 $0.2

*Total Assets and Total Deposits data are based on the last Call Report filed by 

the institution prior to failure.

Asset Management and Sales

As part of its resolution process, the FDIC

makes every effort to sell as many assets as

possible to an assuming institution and generally is successful in doing this. Assets that are

passed to the receivership are evaluated, and

those that are determined to be marketable are
46 FDIC 2009 Annual Report

tion. The FDIC conducts outreach to encourage

and inform MWOBs about the procurement process and opportunities for prime and subcontract

awards. For 2010, the FDIC seeks to increase the

number of awards and dollar value of the awards

made to MWOBs in all racial, gender, and ethnic

categories in the financial services industry.

Protecting Insured Depositors 

With the increase in failure activity in 2009,

the FDIC’s focus on protecting deposits in institutions that fail was of critical importance. Confidence in the banking system hinges on deposit

insurance, and no insured deposits went unpaid

in 2009.

The FDIC’s ability to attract healthy institutions to assume deposits and purchase assets

of failed banks and savings associations at the

time of failure minimizes the disruption to customers and allows assets to be returned to the

private sector immediately. Assets remaining

after resolution are liquidated by the FDIC in an

orderly manner, and the proceeds are used to pay

creditors, including depositors whose accounts

exceeded the insurance limit. Effective October

3, 2008, through December 31, 2009, the standard

maximum deposit insurance amount increased

from $100,000 to $250,000, and this increase

was later extended to December 31, 2013. During

2009, the FDIC paid dividends of $21.0 million to

depositors whose accounts exceeded the insured

limit(s).

Professional Liability and Financial 

Crimes Recoveries

The FDIC staff works to identify potential

claims against directors, officers, accountants,

appraisers, attorneys, and other professionals

Receivership Management Activities

The FDIC, as receiver, manages failed banks

and their subsidiaries with the goal of expeditiously winding up their affairs. The oversight

and prompt termination of receiverships help to

preserve value for the uninsured depositors and

other creditors by reducing overhead and other

holding costs. Once the assets of a failed institution have been sold and the final distribution

of any proceeds is made, the FDIC terminates

the receivership estate. In 2009, the number of

receiverships under management increased by

74 percent due to the increase in failure activity.

The following chart shows overall receivership

activity for the FDIC in 2009.

Receivership Activity

Active Receiverships as of 01/01/09* 49

New Receiverships 140

Receiverships Inactivated 2

Active Receiverships as of 12/31/09* 187

*Includes eight FSLIC Resolution Fund receiverships.

Minority and Women Owned Businesses

The significant increase in the number of

financial institution failures over the last two

years has resulted in the FDIC’s increased reliance on contractors to assist in resolving receiverships created from failed financial institutions

and liquidating their assets. In 2009, the FDIC

made 1,212 contract awardstotaling $2.66 billon;

376 (31%) of those awards, valued at $862 million

(32%), were to minority and women-owned businesses (MWOBs). The FDIC promotes the inclusion of MWOBs in its procurement program,

which relies on competitive bidding by invita-
I. Management’s Discussion and Analysis 47

operational effectiveness and minimize potential

financial risks to the DIF.

Human Capital Management

The FDIC’s human capital management programs are designed to recruit, develop, reward,

and retain a highly skilled, cross-trained,

diverse, and results-oriented workforce. In 2009,

the FDIC stepped up workforce planning and

development initiatives that emphasized hiring

the additional skill sets needed to address the

greatly increased number of financial institution

failures and institutions in at-risk categories. The

Corporation also deployed a number of strategies

to more fully engage all employees in advancing

the FDIC’s mission.

Succession Management

In 2009, the Corporation significantly expanded its education and training curriculum for

employees in the business lines, support functions, and leadership development. Additionally,

learning and development was supplemented and

supported with the expansion of e-learning, job

aids, and tool kits that were made available to new

and tenured employees to facilitate work processes and overall efficiencies.

A leadership development curriculum was

launched to expand opportunities to all employees, including newly-hired employees. This new

curriculum takes a comprehensive approach,

aligning leadership development with critical

corporate goals and objectives, and promotes

desired culture. By developing employees across

the span of their careers, the Corporation builds

a culture of leadership and further promotes a

leadership succession strategy.

who may have contributed to the failure of an

insured financial institution. Once a claim is

deemed meritorious and cost-effective to pursue, the FDIC initiates legal action against the

appropriate parties. During the year, the FDIC

recovered approximately $53.5 million from

these professional liability claims/settlements.

In addition, as part of the sentencing process for

those convicted of criminal wrongdoing against

institutions that later failed, a court may order a

defendant to pay restitution or to forfeit funds or

property to the receivership. The FDIC, working in conjunction with the U.S. Department of

Justice, collected $5.5 million in criminal restitutions and forfeitures during the year. At the

end of 2009, the FDIC’s caseload was composed

of 25 professional liability lawsuits (up from 17

at year-end 2008) and 1,878 open investigations

(up from 284). There also were 3,379 active restitution and forfeiture orders (up from 638 at

year-end 2008). This includes 190 FSLIC Resolution Fund orders—i.e., orders inherited from

the Federal Savings and Loan Insurance Corporation on August 10, 1989, and orders inherited

from the Resolution Trust Corporation on January 1, 1996.

Effective Management of 

Strategic Resources

The FDIC recognizes that it must effectively

manage its human, financial, and technological

resources in order to successfully carry out its

mission and meet the performance goals and targets set forth in its annual performance plan. The

Corporation must align these strategic resources

with its mission and goals and deploy them where

they are most needed in order to enhance its
48 FDIC 2009 Annual Report

human resources resulting

from the increased number

of failed financial institutions and the volume of additional examinations. Among

these strategies, the FDIC

reemployed over 200 retired

FDIC examiners, attorneys,

resolutions and receiverships

specialists, and support personnel; hired employees of

failed institutions in temporary and term positions;

recruited mid-career examiners who had developed their

skills in other organizations;

recruited term loan review

specialists and compliance analysts from the

private sector; and redeployed current FDIC

employees with the requisite skills from other

parts of the Corporation.

As the number of failed financial institutions

proliferated in 2009, the FDIC Board authorized

the opening of two temporary satellite offices on both the west coast and the east coast to

bring resources in areas hit especially hard. The

West Coast Temporary Satellite Office opened

in Irvine, California, in early spring and as of

year-end had over 400 employees with a target

of over 500. The East Coast Temporary Satellite

Office opened in Jacksonville, Florida, in the

fall. Although the Corporation is still recruiting

for this office, eventually it too will have over

500 employees. The Corporation also increased

resolutions and receiverships staff in the Dallas

regional office. Almost all of the new employees

in these new offices have been hired on a nonpermanent basisto handle the temporary increase

Also in 2009, the Corporation completed a

pilot Corporate Executive Development Program. This comprehensive 18-month succession

program provided a formalized process to identify and develop high-performing, high-potential

supervisors and senior technical specialists. Pilot

results are being evaluated and will be leveraged

in future succession management strategies and

decisions.

Additionally, the Corporation formalized its

Master of Business Administration (MBA) program for Corporate Managers and Executive

Managers, in conjunction with a major university.

The evaluation results of the pilot MBA program

were overwhelmingly positive, and participants

provided explicit examples of direct application

to their jobs and improved strategic thinking.

Strategic Workforce Planning and Readiness

The FDIC utilized a number of employment

strategies in 2009 to meet the need for additional

Senior leaders meet with CEDP participants to discuss their first year (l to r): Rich Brown, Rex Taylor,

Maureen Sweeney, Laura Lapin, Kathy Norcross, Mickey Collins, Steve Mosier, Rus Pittman, Erica

Bovenzi, Andrew Stirling, Bob Mooney, and Ira Kitmacher. Executive advisors and host supervisors not

shown: Glen Bjorklund, Jim LaPierre, and Lisa Roy.
I. Management’s Discussion and Analysis 49

the Federal Human Capital Survey mandated by

Congress. A corporate Culture Change Initiative

was instituted in 2008 to address issues resulting

from the survey.

The Culture Change Initiative has continued

to gain momentum, and progress is occurring

toward completion of goals identified in the Culture Change Strategic Plan. The 2008 employee

survey results showed marked improvement in

the areas of opportunity, while maintaining or

improving on areas of strength. The Corporation

worked with the National Treasury Employees’

Union to develop a new pay-for-performance system that is perceived to be more transparent and

fair to employees. The new system was implemented in 2009. Also in 2009, the Corporation

delivered training to its Corporate Managers on

trust. It offered leadership enrichment activities

that provided continual learning. Culture Change

dialogue sessions were held across the country,

with approximately 5,500 employees participating. Analysisindicates a positive response to these

events and a willingness to engage in the change

process. The question-and-answer mailbox and

quarterly all-employee teleconferences with the

Chairman continued so that employees could provide input, make suggestions, and ask questions.

The next phase of the Initiative was started

in September 2009 with the selection of a new

Program Manager. The Internal Ombudsman

Program, initiated as part of the Culture Change

Initiative, continued, providing another avenue

for following up on employee issues. The Culture Change Council is being reconstituted, with

at least six former Council and Team members

returning to ensure continuity and up to six new

members being selected. Best practices in public

and private sector organizations on sustaining

in bank closing and asset management activities

expected over the next two to four years. To staff

these offices and meet other needs brought on by

the financial crisis, the Corporation hired nearly

1,800 additional employees in 2009. The use of

term appointments will allow the FDIC staff to

return to an adjusted normal size once the crisis

is over without the disruptions that reductions in

permanent staff would cause.

The FDIC continued its efforts to build workforce flexibility and readiness by increasing its

entry-level hiring into the Corporate Employee

Program (CEP). The CEP is a multi-year development program designed to cross-train new

employees in the FDIC’s major business lines.

In 2009, 206 new business line employees (736

since program inception) entered the multidisciplined program. At its largest participant

capacity since inception, the CEP continues to

provide a foundation across the full spectrum

of the Corporation’s business lines, allowing for

greater flexibility to respond to changes in the

financial services industry and in meeting the

Corporation’s staff needs. As in years past, the

program continues to provide the FDIC those

flexibilities as program participants were called

upon to assist with both bank examination and

bank closing activities based on the skills they

obtained through their program requirements

and experiences.

Employee Engagement

The FDIC continually evaluates its human

capital programs and strategies to ensure that

the Corporation remains an employer of choice

and that all of its employees are fully engaged

and aligned with its mission. The FDIC’s annual

employee survey incorporates and expands on
50 FDIC 2009 Annual Report

To provide additional flexibility in employee

learning and growth, the FDIC assisted in meeting the challenge of increased activity by locating training facilities within satellite offices in

Jacksonville and Irvine. This helped to ensure

that necessary training could be provided locally, reducing the need for employee travel.

In 2009, the Corporation provided its employees with over 100 instructor-led courses and 600

web-based courses in support of varied mission

requirements. There were over 7,000 instances

of completed instructor-led courses and 18,000

instances of completed web-based courses.

Information Technology Management

Information technology (IT) resources are one

of the most valuable assets available to the FDIC

in fulfilling its corporate mission. In today’s rapidly changing business environment, technology

is frequently the foundation for achieving many

FDIC business goals, especially those addressing efficiency and effectiveness in an industry

where timely and accurate communication and

data are paramount for supervising institutions,

resolving institution failures, and monitoring

associated risks in the marketplace.

During 2009, the FDIC was faced with many

challenges stemming from the economic downturn and its historic impact on the financial

industry. To help meet those challenges, the FDIC

continued to leverage innovative, timely, reliable,

and secure IT products and services to meet priority business drivers and adapt to a myriad of

new financial programs.

Enterprise Architecture

The overall vision of the FDIC’s enterprise

architecture is to provide an efficient, agile, flexculture and organizational change were studied

in 2009 and will be summarized, with recommendations made on sustaining the FDIC’s Culture Change Initiative.

Employee Learning and Growth 

The FDIC offers a range of learning and

growth opportunities to meet the varied needs

of its employees. It uses innovative solutions

to prepare new and existing employees for the

challenges ahead. By streamlining existing

courses, promoting blended learning, and creating online just-in-time toolkits and job aids,

the FDIC has allowed new employees to more

quickly and thoroughly assume their job functions. In order to meet the 2009 learning needs of

new employees, the FDIC responded with flexible course scheduling and additional instructorled and 

computer-based courses, including t

new Continuing Professional Education Centre,

which allows employees to more easily maintain their Certified Public Accountant accreditation and other certifications, despite increased

workloads.

The Corporation dealt with new challenges in

2009 and supported employees by providing justin-time training to address specific issues, such

as managing and selling an ever increasing number of loans acquired from failed institutions. To

better prepare employees to perform this task,

the FDIC undertook a multi-pronged approach

that consisted of online presentations, online

job aids, online simulations, and instructor-led

courses. The Corporation focused its efforts on

providing multiple points of access to learning

delivered quickly and with the least disruption to

ongoing work activities.
I. Management’s Discussion and Analysis 51

chosen as recipients of the “Excellence Award for

Open Source Business Use in Government” in

the category of “Safe Computing Environment”

at the 2009 Government Open Source Conference. The award recognized government employees or teams for significant accomplishments in

Open Source Technology that meet governme

business or mission requirements.

Securing the FDIC Through Strong 

Privacy Initiatives

The FDIC continued to strengthen privacy by

providing a risk-based, enterprise-wide Privacy

Program that maintains and builds public trust,

and is based on sound privacy practices in compliance with applicable laws. In 2009, the FDIC

experienced a significant increase in bank closing activities. As a result, the FDIC performed a

number of Corporate-wide initiatives to increase

the identification, protection, and control of personally identifiable information.

ible and cost-effective environment that supports

the corporate strategic goals and objectives for

the FDIC and its customers. During 2009, modernization of the infrastructure continued. Also

a roadmap of the security architecture was developed with functionality based on global industry standards, which will facilitate the sharing

of information and resources, while protecting

access to sensitive and privacy information.

Improving Application Systems 

In 2009, the FDIC enhanced several application systems that support the FDIC’s business,

including the:

•	 Assessment Information Management

System—used to calculate, collect, and

account for the quarterly assessment premiums paid by insured financial institutions;

•	 Central Data Repository—used in the collection and management of call report data from

the U.S. financial institutions;

•	 New Financial Environment—state-of-theart financial system; and

•	 Risk Related Premium System—provides

core business functionality related to deposit

insurance risk premium calculations for individual financial institutions.

Security Outreach, Education, 

and Awareness 

The FDIC worked collectively with the U.S.

Department of Agriculture and the Department

of Education’s Office of Federal Student Aid on

the OpenFISMA (Federal Information Security

Management Act) Interagency Initiative. This

initiative developed a system to track vulnerabilities that affect the security of systems and applications. The FDIC and these departments were
52 FDIC 2009 Annual Report

II. Financial Highlights

Deposit Insurance Fund 

Performance 

The FDIC administers the Deposit Insurance Fund (DIF) and the FSLIC Resolution Fund

(FRF), which fulfills the obligations of the former Federal Savings and Loan Insurance Corporation (FSLIC) and the former Resolution Trust

Corporation (RTC). The following summarizes

the condition of the DIF. (See the accompanying

graphs on FDIC-Insured Deposits and Insurance

Fund Reserve Ratios.)

The DIF’s comprehensive loss totaled $38.1

billion for 2009 compared to a comprehensive

loss of $35.1 billion for the previous year. As a

result, the DIF balance declined from $17.3 billion to negative $20.9 billion as of December 31,

2009. The year-over-year increase of $3.0 billion

in comprehensive loss was primarily due to a

$15.9 billion increase in the provision for insurance losses, a $4.0 billion increase in the unrealized loss on U.S. Treasury (UST) investments,

and a $1.4 billion decrease in the interest earned

on UST obligations, partially offset by a $14.8

billion increase in assessment revenue and a $3.1

billion increase in other revenue (primarily from

guarantee termination fees and debt guarantee

surcharges).

The provision for insurance losses was $57.7

billion in 2009. The total provision consists primarily of the provision for future failures ($20.0

billion) and the losses estimated at failure for the

140 resolutions occurring during 2009 ($35.6

billion).

Assessment revenue was $17.7 billion for

2009. This is a $14.8 billion increase from

2008, and is due to the collection of a $5.5 billion special assessment in September 2009 and

significantly higher regular assessment revenue.

Source: Commercial Bank Call and Thrift Financial Reports

Estimated DIF Insured Deposits 

Dollars in Billions

$6,000

5,000

4,000

3,000

2,000

1,000

0

Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09

Deposit Insurance Fund Reserve Ratios

Fund Balances as a Percent of Insured Deposits

–0.50

–0.40

–0.30

–0.20

–0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09
II. Financial Highlights 53

marketable securities related to the Temporary

Liquidity Guarantee Program (TLGP). Hence,

the DIF is well positioned to fund resolution

activity in 2010 and beyond. The prepaid assessments, while increasing DIF cash upon receipt,

did not initially affect the fund balance, since

the funds collected were initially recorded as an

offsetting liability; they are subsequently recognized quarterly as revenue when earned.

Corporate Operating Budget

The FDIC segregates its corporate operating budget and expenses into two discrete comMajor factors contributing to the increase in

regular assessment revenue included changes to

the risk-based assessment regulations, ratings

downgrades of many institutions (which pushed

them into higher assessment rate categories), the

decline of the one-time assessment credit, and a

larger assessment base.

Although the DIF ended the year with a

negative $20.9 billion fund balance, the DIF’s

liquidity was significantly enhanced by prepaid assessment inflows of $45.7 billion. Cash

and marketable securities stood at $66.0 billion

at year-end, including $6.4 billion in cash and

Deposit Insurance Fund Selected Statistics

Dollars in Millions

For the years ended December 31

2009 2008 2007

Financial Results

Revenue $24,706 $7,306 $3,196

Operating Expenses 1,271 1,033 993

Insurance and Other Expenses (includes provision for loss) 59,438 43,306 98

Net (Loss) Income (36,003) (37,033) 2,105

Comprehensive (Loss) Income (38,138) (35,137) 2,248

Insurance Fund Balance ($20,862) $17,276 $52,413

Fund as a Percentage of Insured Deposits (reserve ratio) (0.39)% 0.36% 1.22%

Selected Statistics

Total DIF-Member Institutions* 8,012 8,305 8,534

Problem Institutions 702 252 76

Total Assets of Problem Institutions $402,782 $159,405 $22,189

Institution Failures 140 25 3

Total Assets of Failed Institutions in Year** $169,709 $371,945 $2,615

Number of Active Failed Institution Receiverships 179 41 22

*Commercial banks and savings institutions. Does not include U.S. insured branches of foreign banks.

**Total Assets data are based upon the last Call Report filed by the institution prior to failure.
54 FDIC 2009 Annual Report

three major business lines and its major program

support functions. The most significant factor contributing to the proposed increase in the

ongoing operations component is the projected

increase in the Corporation’s supervisory workload in 2010 and the planned staffing increases

in the Division of Supervision and Consumer

Protection (DSC) to address that workload. The

2010 ongoing operations budget also includes

increased funds for additional resolutions staff,

travel, office space, and equipment for these

additional staff. Under this budget, the Corporation will focus largely on its core mission responsibilities in 2010 and will not devote significant

resources to new discretionary activities. In

addition, the 2010 receivership funding budget

allows for substantially increased resources for

contractor support as well as non-permanent

increases in authorized staffing for the Division

of Resolutions and Receiverships, the Legal Division, and other organizations should workload

requirements in these areas require an immediate response.

Investment Spending

The FDIC instituted a separate Investment

Budget in 2003. It has a disciplined process for

reviewing proposed new investment projects and

managing the construction and implementation

of approved projects. All of the projects in the

current investment portfolio are major IT system

initiatives. Proposed IT projects are carefully

reviewed to ensure that they are consistent with

the Corporation’s enterprise architecture. The

project approval and monitoring processes also

enable the FDIC to be aware of risks to the major

capital investment projects and facilitate appropriate, timely intervention to address these risks

ponents: ongoing operations and receivership

funding. The receivership funding component

represents expenses resulting from financial

institution failures and is, therefore, largely driven by external forces, while the ongoing operations component accounts for all other operating

expenses and tends to be more controllable and

estimable. Corporate Operating expenses totaled

$2.33 billion in 2009, including $1.24 billion in

ongoing operations and $1.10 billion for receivership funding (numbers do not sum due to rounding). This represented approximately 98 percent

of the approved budget for ongoing operations

and 84 percent of the approved budget for receivership funding for the year. (The numbers above

will not agree with the DIF and FRF financial

statements due to differences in how items are

classified.)

Given the recent challenges facing the industry, as evidenced in the overall CAMELS deterioration and an up-tick in financial institution

failure activity, the FDIC is determined to ensure

that it is adequately prepared to effectively fulfill

its mission in 2010. Consequently, in December

2009, the Board of Directors approved a 2010

Corporate Operating Budget of approximately

$3.99 billion, consisting of $1.49 billion for

ongoing operations and $2.50 billion for receivership funding. The level of approved ongoing

operations budget is approximately $254 million

(20.5 percent) higher than actual 2009 ongoing

operations expenses, while the approved receivership funding budget is $1.40 billion (127.8 percent) higher than the $1.10 billion of actual 2009

receivership funding expenses.

As in prior years, the 2010 budget was formulated primarily on the basis of an analysis of

projected workload for each of the Corporation’s
II. Financial Highlights 55

throughout the development process. An investment portfolio performance review is provided

to the FDIC’s Board of Directors quarterly.

The Corporation undertook significant capital investments during the 2003–2009 period,

the largest of which was the expansion of its

Virginia Square office facility. Other projects

involved the development and implementation of

major IT systems. Investment spending totaled

$266 million during this period, peaking at $108

million in 2004. Spending for investment projects in 2009 totaled approximately $6.1 million.

In 2010, investment spending is estimated to

total $1.1 million.

Investment Spending 2003−2009

Dollars in Millions

$120

100

80

60

40

20

0

2003 2004 2005 2006 2007 2008 2009

$27

$108

$62

$25

$12

$26

$6
56 FDIC 2009 Annual Report

III. Performance Results Summary

Summary of 2009 Performance 

Results by Program

The FDIC successfully achieved 45 of the 46

annual performance targets established in its

2009 Annual Performance Plan. The one goal

that was not achieved involved the inadvertent

inclusion of “3-rated” institutions in the requirement for follow-up within 12 months. There were

no instances in which 2009 performance had a

material adverse effect on successful achievement of the FDIC’s mission or its strategic goals

and objectives regarding its major program

responsibilities.

Key accomplishments by program are highlighted in the table below.

Program Area Performance Results

Insurance •	 Uniformly raised deposit insurance assessment rates effective January 1, 2009, by 7 basis points.

•	 In February 2009, extended the Restoration Plan to 7 years due to the extraordinary circumstances facing the banking industry. In May, Congress revised the law to require the reserve ratio to be restored to 1.15 percent within 8 years 

absent extraordinary circumstances. In September, the Board amended the amended Plan to extend the restoration 

period to 8 years. 

•	 Finalized improvements to the risk-based pricing system, including adding various financial ratios to the large bank

method used to determine premium rates for large institutions and adjusting all institutions’ premium rates for unsecured debt and for significant reliance on brokered deposits or secured liabilities. Also widened the range of rates

paid by institutions in each risk category.

•	 Imposed a special assessment of 5 basis points on each institution’s assets less Tier I capital effective June 30, 2009.

•	 Extended period to issue guaranteed debt through the TLGP to October 31, 2009, extended term of guarantee from

June 30, 2012, to December 31, 2012, and imposed surcharges on any debt issued April 1, 2009, or later. 

•	 Issued a final rule extending the Transaction Account Guarantee Program component of the TLGP from December 31,

2009, to December 31, 2010, and gave participating institutions a one-time opportunity to opt out. Raised fees and 

made them risk-based depending upon an institution’s deposit insurance risk category. 

•	 Conducted semiannual reviews of the Contingent Loss Reserve (CLR) methodology through an analysis of the variance between projected and actual losses. As a result, substantive changes were made during late 2008 and into 

2009 to improve the accuracy of the CLR calculation. 

•	 Established a Designated Reserve Ratio of 1.25 percent for 2010, in accordance with the provisions of the deposit

insurance reform legislation. 

•	 Researched and analyzed emerging risks and trends in the banking sector, financial markets, and the overall economy to identify issues affecting the banking industry and the Deposit Insurance Fund.

•	 Provided policy research and analysis in support of legislative efforts to reform financial industry regulation, as well as

support for testimony and speeches. 

•	 Published economic and banking information and analyses, through the FDIC Quarterly, FDIC Quarterly Banking Profile 

(QBP), FDIC State Profiles, and the Center for Financial Research Working Papers.

•	 Conducted numerous outreach activities to bankers, trade groups, community groups, other regulators, and foreign

visitors addressing economic and banking risk analysis.

•	 Completed risk assessments and LIDI Scorecards for all large insured depository institutions and followed up on all

identified concerns through off-site review and analysis.

•	 Increased on-site presence at large complex institutions to assess risk, monitor liquidity, and participate in targeted

reviews with the primary federal regulators.

•	 Continued to develop the Legacy Loans Program to be prepared to offer this program to support the credit needs of

the economy.

•	 Answered 99 percent of inquiries from consumers and bankers about FDIC deposit insurance coverage within 14

days.
III. Performance Results Summary 57

Program Area Performance Results

Insurance 

(continued)

•	 Continued and expanded the FDIC’s public education campaign to increase awareness of FDIC deposit insurance

coverage.

•	 Conducted 25 deposit insurance seminars for bankers, including 6 national teleconferences, on FDIC deposit insurance coverage. These seminars reached more than 35,000 bankers. 

•	 Worked with several national consumer organizations to secure commitments to feature FDIC deposit insurance

information on their websites and in newsletters, and to disseminate such information at their conferences and 

events.

•	 Electronic Deposit Insurance Estimator user sessions for 2009 totaled 699,277.

•	 Expanded avenues for publicizing deposit insurance rules and resources by:

o Enhancing the FDIC’s Electronic Deposit Insurance Estimator (EDIE) to incorporate new functionality that allows 

users to (1) confirm whether their bank is FDIC-insured while within the EDIE application, and (2) calculate insurance coverage for deposits held by revocable trusts with more than five beneficiaries/over $1.25 million at one

institution. 

o	 Producing updated versions of two videos on deposit insurance coverage: (1) a 30-minute video for consumers

and new bank employees and (2) a 95-minute seminar for bankers who answer coverage questions for depositors. 

o Producing two consumer brochures on deposit insurance coverage.

These resources are available in multiple languages. The videos are available on the FDIC’s web site and YouTube channel, and are downloadable for multi-media applications.

Supervision 

and Consumer 

Protection

•	 Conducted 2,604 risk management (safety and soundness) examinations, including required follow-up examinations

of problem institutions, within prescribed time frames.

•	 Conducted 1,981 compliance and Community Reinvestment Act examinations, including required follow-up examinations of problem institutions, within prescribed time frames.

•	 Conducted 2,698 Bank Secrecy Act examinations, including required follow-up examinations and visitations.

•	 Conducted 2,780 IT examinations of financial institutions and technology service providers.

•	 Worked with other federal banking regulators and the Basel Committee on Banking Supervision to develop proposals

to strengthen capital and liquidity requirements.

•	 Published a final rule amending the annual audit, audit committee, and related reporting requirements applicable to

insured depository institutions with $500 million or more in total assets.

•	 Published Notice of Proposed Rulemaking for the Secure and Fair Enforcement for Mortgage Licensing Act of 2008

and posted the draft final guidance to the FDIC web site to implement provisions applicable to mortgage loan originators employed by insured depositories. Staff continued rule writing and other preparatory activities related to

implementing these new regulations.

•	 Published the Supervisory Insights journal to contribute to and promote sound principles and best practices for bank 

supervision.

•	 Among other releases, issued Financial Institution Letters (FILs) providing guidance on: (1) managing commercial real

estate concentrations; (2) liquidity risk management; (3) the use of volatile funding sources by financial institutions in

weakened condition; (4) enhanced supervisory procedures for newly insured FDIC-supervised depository institutions; 

and (5) reminding institutions that if, for risk management purposes, they decide to reduce or suspend home equity 

lines of credit, they must comply with certain legal requirements. In addition, six disaster-related FILs were issued.

•	 Issued industry notification of two interagency releases regarding conducting Cross-Border Funds Transfers and

Examination Procedures for compliance with the Unlawful Internet Gambling Enforcement Act.

•	 Issued updated interagency guidance on the Community Reinvestment Act (CRA), and requested comment on new

proposed guidance. Issued an interagency proposal to amend the CRA regulation to implement statutory requirements relating to student loans and activities in cooperation with minority- and women-owned financial institutions

and low-income credit unions. 
58 FDIC 2009 Annual Report

Program Area Performance Results

Supervision 

and Consumer 

Protection

(continued)

•	 Released interagency guidance on the 2009 Identity Theft Red Flags regulations; issued updated guidance on flood

insurance mandatory purchase requirements and requested comment on additional proposed guidance; joined 

seven other federal agencies in releasing a model privacy notice form based on extensive consumer testing; requested comment on supervisory guidance on reverse mortgages. 

•	 Consumer research function supported supervision activities on fair lending, enforcement actions, the unbanked

and underbanked survey, and supported efforts of the Advisory Committee on Economic Inclusion (ComE-In) policy

initiatives of the Corporation.

•	 Alerted banks to new statutory requirements to protect tenants occupying foreclosed properties; issued three FILs

notifying institutions of significant changes to the Truth in Lending Act and the Federal Reserve Board’s Regulation Z

(which implements that Act); and reminded institutions of the dramatically revised Real Estate Settlement Procedures 

Act regulation issued by the Department of Housing and Urban Development. 

•	 Expanded the AEI initiative to two additional markets, bringing the total number of active AEI markets to 14. Additionally, FDIC worked closely during 2009 to provide technical assistance and support to several communities in 

forming coalitions patterned after the AEI. 

•	 Hosted or co-hosted over 104 events to help consumers and the banking industry avoid unnecessary foreclosures

and stop foreclosure “rescue” scams that promise false hope to consumers at risk of losing their homes. 

•	 Conducted over 200 outreach and technical assistance events for bankers and community groups to promote awareness of community investment opportunities, access to capital, knowledge-sharing between the public and private 

sectors, and wealth-building opportunities for families.

•	 Continued to disseminate the award-winning Money Smart financial education curriculum in seven languages,

including releasing a Hmong language version and the Money Smart Podcast Network, a portable audio version of 

Money Smart suitable for use with virtually all MP3 players. Over 200 financial education-related outreach activities

were conducted in 2009 and 50 new Money Smart Alliance added. Financial education best practices were shared 

through four published editions of Money Smart News, which reached over 40,000 subscribers. 

•	 In 2007, the FDIC released findings from a longitudinal evaluation of the Money Smart curriculum on adults. The 

FDIC initiated in the fourth quarter of 2009, a multi-year project that is designed to measure the effectiveness of the

Money Smart for Young Adults curriculum. This survey project is intended to provide research data that will be useful 

for educators and others involved in youth financial education, as well as inform the FDIC’s curriculum development

efforts. Progress during 2009 included background research and outreach to external stakeholders who we hope will

participate.

•	 Responded to 96 percent of consumer complaints about FDIC-supervised banks within time frames required by

policy, and acknowledged 100 percent of all consumer complaints and inquiries within 14 days.

•	 Implemented an initiative to make the award-winning FDIC Consumer News available to the public in an audio format 

on FDIC.gov and YouTube. Also converted the FDIC’s consumer video on identity theft, Don’t Be An On-line Victim, to a 

YouTube-compatible format and placed the video on the FDIC’s YouTube channel. All video and audio files are available for download to multimedia applications in various formats including MP3, WAV, and MP4.

Receivership 

Management

•	 Successfully closed 140 failed institutions and ensured customers had access to insured deposits within one business

day.

•	 Adopted a final rule requiring the largest insured depository institutions to adopt mechanisms that would, in the

event of the institution’s failure: (1) provide the FDIC with standard deposit account and other customer information;

and (2) allow the placement and release of holds on liability accounts, including deposits. 

•	 Achieved a primary goal of the Investigations Unit to make a decision to either close or to pursue professional liability

claims on 80 percent of all investigative claim areas within 18 months of an institution’s failure date.

•	 Identified and implemented program improvements to ensure efficient and effective management of the contract

resources used to perform receivership management functions. 

•	 Marketed at least 90 percent of the book value of a failed institution’s marketable assets within 90 days of the institution’s failure.

•	 Terminated at least 75 percent of new receiverships within three years of the date of failure.
III. Performance Results Summary 59

Protection program; and $1.42 billion, or 56 percent, to the Receivership Management program.

Actual expenditures for the year totaled $2.33

billion. Excluding $140 million, or 6 percent, for

Corporate General and Administrative expenditures, actual expenditures were allocated to programs as follows: $233 million, or 10 percent, to

the Insurance program; $723 million, or 31 percent, to the Supervision and Consumer Protection program; and $1.24 billion, or 53 percent, to

the Receivership Management program.

2009 Budget and Expenditures 

by Program 

(Excluding Investments)

The FDIC budget for 2009 totaled $2.56 billion. Excluding $185 million, or 7 percent, for

Corporate General and Administrative expenditures, budget amounts were allocated to corporate programs as follows: $178 million, or 7

percent, to the Insurance program; $776 million,

or 30 percent, to the Supervision and Consumer

2009 Budget and Expenditures (Support Allocated)

Dollars in Millions

$1,600

1,400

1,200

1,000

800

600

400

200

0 

Insurance

Program

Supervision and

Consumer Protection

Program

Receivership

Management

Program

General and

Administrative

Budget

Expenditures
60 FDIC 2009 Annual Report

Performance Results by Program and Strategic Goal

2009 Insurance Program Results

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

# Annual Performance Goal Indicator Target Results

1 Respond promptly to all 

financial institution closings

and related emerging issues.

Number of business days after institution 

failure that depositors have access to insured 

funds either through transfer of deposits to 

the successor insured depository institution 

or depositor payout.

Insured depositor losses resulting from a 

financial institution failure.

Depositors have access to insured funds within 

one business day if the failure occurs on a 

Friday.

Depositors have access to insured funds within 

two business days if the failure occurs on any 

other day of the week.

There are no depositor losses on insured 

deposits.

No appropriated funds are required to pay 

insured depositors.

Achieved.

See pgs. 45, 58.

Achieved.

See pg. 45.

Achieved.

See pg. 45.

Achieved.

See pg. 45.

2 Identify and address risks to 

the DIF.

Insurance risks posed by insured depository 

institutions.

Concerns referred for examination or other 

action.

Emerging risks to the DIF.

Assess the insurance risks in large insured 

depository institutions and adopt appropriate 

strategies.

Identify and follow up on all material issues 

raised through off-site review and analysis.

Identify and analyze existing and emerging

areas of risk.

Achieved.

See pg. 24.

Achieved.

See pg. 24.

Achieved.

See pgs. 24, 56.

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

industry to bankers, supervisors, the public, and other 

stakeholders.

Scope and timeliness of information dissemination on identified or potential issues and

risks.

Results of research and analyses are disseminated in a timely manner through regular publications, ad hoc reports, and other means.

Industry outreach activities are undertaken to 

inform bankers and other stakeholders about 

current trends, concerns, and other available 

FDIC resources.

Achieved.

See pg. 56.

Achieved.

See pg. 56.
III. Performance Results Summary 61

# Annual Performance Goal Indicator Target Results

4 Effectively administer temporary financial stability

programs.

Administration of the Temporary Liquidity 

Guarantee Program (TLGP).

Administration of the Capital Purchase 

Program (CPP).

Implementation of the Legacy Loans Program 

(LLP).

Oversight of the use of financial stability

resources by FDIC-supervised institutions.

Provide liquidity to the banking system by 

guaranteeing noninterest-bearing transaction 

deposit accounts and new senior unsecured 

debt issued by eligible institutions under the 

TLGP.

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

issuance of new debt expires.

Substantially complete by September 30, 2009, 

the review of and recommendations to the 

Department of the Treasury on CPP applications 

from FDIC-supervised institutions.

Expeditiously implement procedures for the 

LLP, including the guarantee to be provided for 

debt issued by Public Private Investment Funds, 

and provide information to financial institutions

and private investors potentially interested in 

participating.

Expeditiously implement procedures to review 

the use of CPP funds, TLGP guarantees, and

other resources made available under financial

stability programs during examinations of participating FDIC-supervised institutions.

Achieved.

See pgs. 14-17.

Achieved.

See pg. 17.

Achieved.

See pg. 27.

Achieved.

See pg. 56.

Achieved.

See pg. 27.

5 Maintain and improve the 

deposit insurance system.

Enhance the risk-based pricing system.

Loss reserves.

Fund adequacy.

Adopt and implement revisions to the pricing 

regulations that provide for greater risk differentiation among insured depository institutions 

reflecting both the probability of default and

loss in the event of default.

Revise the guidelines and enhance the additional risk measures used to adjust assessment 

rates for large institutions.

Enhance the effectiveness of the reserving

methodology by applying sophisticated analyti- cal techniques to review variances between 

projected losses and actual losses, and by 

adjusting the methodology accordingly.

Set assessment rates to restore the insurance 

fund reserve ratio to at least 1.15 percent of 

estimated insured deposits by year-end 2015.

Monitor progress in achieving the restoration 

plan.

Achieved.

See pg. 18.

Achieved.

See pg. 56.

Achieved.

See pg. 56.

Achieved.

See pgs. 18-19.

Achieved.

See pg. 19.
62 FDIC 2009 Annual Report

# Annual Performance Goal Indicator Target Results

6 Provide educational information to insured depository 

institutions and their customers to help them understand 

the rules for determining the 

amount of insurance coverage on deposit accounts.

Timeliness of responses to insurance coverage 

inquiries.

Public education campaign to increase 

awareness of deposit insurance changes and 

expected 2010 changes.

Respond to 90 percent of written inquiries from 

consumers and bankers about FDIC deposit 

insurance coverage within two weeks.

Conduct at least three sets of Deposit Insurance Seminars/teleconferences per quarter for 

bankers.

Enter into deposit insurance educational partnerships with consumer organizations to educate consumers.

Expand avenues for publicizing deposit insurance rules and resources to consumers through 

a variety of media.

Achieved.

See pg. 40.

Achieved.

See pg. 57.

Achieved.

See pg. 57.

Achieved.

See pg. 57.

7 Expand and strengthen the 

FDIC’s leadership role in providing technical guidance, 

training, consulting services 

and information to international governmental banking and deposit insurance 

organizations.

Scope of information sharing and assistance 

available to international governmental bank 

regulatory and deposit insurance entities.

Undertake outreach activities to inform and 

train foreign bank regulators and deposit 

insurers.

Foster strong relationships with international 

banking regulators and associations that promote sound banking supervision and regulation, failure resolution, and deposit insurance 

practices.

Achieved.

See pg. 21.

Achieved.

See pgs. 21-24.

2009 Supervision and Consumer Protection Program Results

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

# Annual Performance Goal Indicator Target Results

1 Conduct on-site risk management examinations to assess 

the overall financial condition, management practices and

policies, and compliance with applicable laws and regulations of FDIC-supervised depository institutions.

Percentage of required 

examinations conducted in 

accordance with statutory 

requirements and FDIC policy.

One hundred percent of required 

risk management examinations 

are conducted on schedule.

Achieved.

See pg. 26.

2 Take prompt and effective supervisory action to address

issues identified during the FDIC examination of FDICsupervised institutions that receive a composite Uniform 

Financial Institutions Rating of “3”, “4”, or “5” (problem 

institution). Monitor FDIC-supervised insured depository 

institutions’ compliance with formal and informal enforcement actions.

Percentage of follow-up examinations of 3-, 4-, and 5-rated 

institutions conducted within 

required time frames.

One hundred percent of followup examinations are conducted 

within 12 months of completion of the prior examination to 

confirm that identified problems

have been corrected.

Achieved.

See pg. 26.

3 Assist in protecting the infrastructure of the U.S. banking 

system against terrorist financing, money laundering, and

other financial crimes.

Percentage of required 

examinations conducted in 

accordance with statutory 

requirements and FDIC policy. 

One hundred percent of required 

Bank Secrecy Act examinations 

are conducted on schedule.

Achieved.

See pg. 26.
III. Performance Results Summary 63

# Annual Performance Goal Indicator Target Results

4 More closely align regulatory capital with risk and ensure 

that capital is maintained at prudential levels.

Preliminary results of new capital requirements.

Improvements to capital 

requirements.

Conduct analyses of early results 

of the performance of new capital 

rules in light of recent financial

turmoil as information becomes 

available.

Working domestically and internationally, develop improvements to regulatory capital 

requirements based on the 

experience of the recent financial

market turmoil.

Achieved.

See pgs. 29-31.

Achieved.

See pgs. 29-31.

Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.

5 Conduct on-site CRA and compliance examinations to 

assess compliance with applicable laws and regulations by 

FDIC-supervised depository institutions.

Percentage of examinations 

conducted in accordance with 

statutory requirements and 

FDIC policy.

One hundred percent of required 

examinations are conducted on 

schedule.

Achieved.

See pg. 26.

6 Take prompt and effective supervisory action to monitor

and address problems identified during compliance examinations of FDIC-supervised institutions that receive an 

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

protection and fair lending laws.

Percentage of follow-up examinations or visitations of 3-, 4-, 

and 5-rated institutions conducted within required time 

frames.

One hundred percent of followup examinations or visitations 

are conducted within 12 months 

from the date of an enforcement 

action to confirm compliance

with the prescribed enforcement 

action.

Not Achieved.

See pg. 26.

7 Scrutinize evolving consumer products, analyze their

current or potential impact on consumers and identify 

potentially harmful or illegal practices. Promptly institute 

a supervisory response program across FDIC-supervised 

institutions when such practices are identified.

Establishment of supervisory 

response programs to address 

potential risks posed by new 

consumer products.

Proactively identify and respond 

to harmful or illegal practices 

associated with evolving consumer products. 

Achieved.

See pg. 34.

8 Educate consumers about their rights and responsibilities 

under consumer protection laws and regulations.

Communications tools used to 

educate consumers.

Expand use of media, such as the 

Internet, videos, and MP3 downloads, to disseminate information 

to the public on their rights and 

responsibilities as consumers.

Achieved.

See pgs. 42-43.

9 Effectively investigate and respond to consumer complaints about FDIC-supervised financial institutions.Timely responses to written 

complaints and inquiries.

Responses are provided to 95 

percent of written complaints 

and inquiries within time frames 

established by policy, with all 

complaints and inquiries receiving at least an initial acknowledgment within two weeks.

Achieved.

See pg. 40.
64 FDIC 2009 Annual Report

# Annual Performance Goal Indicator Target Results

10 Provide effective outreach related to CRA, fair lending, and

community development. 

Number of outreach activities 

conducted, including technical 

assistance activities.

Expanded access to high quality financial education through

the Money Smart curriculum. 

Support for expanded foreclosure prevention efforts for consumers at risk of foreclosure 

(in partnership with NeighborWorks® America and other 

organizations).

Conduct 50 technical assistance 

(examination support) efforts

or banker/community out- reach activities related to CRA, 

fair lending, and community 

development.

Evaluate the Money Smart initiatives and curricula for necessary 

updates and enhancements, such 

as games for young people, information on elder financial abuse,

and additional language versions, 

if needed.

Initiate a longitudinal survey 

project to measure the effectiveness of the Money Smart for Young 

Adults curriculum.

Provide technical assistance, 

support, and consumer outreach 

activities in all six FDIC regions 

to at least eight local NeighborWorks® America affiliates or local

coalitions that are providing foreclosure mitigation counseling in 

high need areas.

Achieved.

See pg. 43.

Achieved.

See pgs. 42-43. 

Achieved.

See pg. 58.

Achieved.

See pgs. 41-42.

11 Continue to expand the FDIC’s national leadership role in 

developing and implementing programs and strategies 

to encourage and promote broader economic inclusion 

within the nation’s banking system.

Degree of success achieved in 

bringing the unbanked/underserved into the financial mainstream through the Alliance for 

Economic Inclusion (AEI).

Results of pilot small-dollar 

lending program conducted 

by participating financial

institutions.

Expand the number of AEI coalitions by two.

Analyze quarterly data submitted

by participating institutions to 

identify trends and best practices.

Achieved.

See pg. 36.

Achieved.

See pgs. 37-38.
III. Performance Results Summary 65

2009 Receivership Management Program Results

Strategic Goal: Recovery to creditors of receiverships is achieved.

# Annual Performance Goal Indicator Target Results

1 Market failing institutions to all known qualified and interested potential bidders.Scope of qualified and interested bidders solicited.Contact all known qualified and

interested bidders.

Achieved.

See pg. 45.

2 Value, manage, and market assets of failed institutions 

and their subsidiaries in a timely manner to maximize net

return.

Percentage of failed institution’s assets marketed.Ninety percent of the book value 

of a failed institution’s marketable 

assets is marketed within 90 days 

of failure.

Achieved.

See pgs. 45, 58.

Enhancements to contract 

management program.

Identify and implement program 

improvements to ensure efficient

and effective management of the

contract resources used to perform receivership management 

functions.

Achieved.

See pg. 58.

3 Manage the receivership estate and its subsidiaries toward 

an orderly termination.

Timely termination of new 

receiverships.

Terminate at least 75 percent of 

new receiverships within three 

years of the date of failure.

Achieved.

See pg. 58.

4 Conduct investigations into all potential professional 

liability claim areas for all failed insured depository institutions, and decide as promptly as possible to close or 

pursue each claim, considering the size and complexity of

the institution.

Percentage of investigated 

claim areas for which a decision has been made to close or 

pursue the claim.

For 80 percent of all claim areas, a 

decision is made to close or pursue claims within 18 months of 

the failure date.

Achieved.

See pg. 58.
66 FDIC 2009 Annual Report

Prior Years’ Performance Results

Refer to the respective full Annual Report of prior years for more information on performance results for those years. Minor wording changes may have been made to reflect current goals and targets. (Shaded areas indicate no such target existed for that respective 

year.)

Insurance Program Results

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

Annual Performance Goals and Targets 2008 2007 2006

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

•	 Depositors have access to insured funds within one business day if the failure occurs on a

Friday.

Achieved. Achieved. Not Applicable.

No Failures.

•	 Depositors have access to insured funds within two business days if the failure occurs on

any other day of the week.

Achieved. Achieved. Not Applicable. 

No Failures.

•	 Complete rulemaking/review comments received in response to the Advance Notice of

Proposed Rulemaking on Large-Bank Deposit Insurance Determination Modernization.

Achieved. Achieved. Achieved.

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

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

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

•	 Assess the insurance risks in all insured depository institutions and adopt appropriate

strategies.

Achieved. Achieved. Achieved.

•	 Identify and follow up on all material issues raised through off-site review and analysis. Achieved. Achieved. Achieved.

•	 Identify and analyze existing and emerging areas of risk, including non-traditional and subprime mortgage lending, declines in housing market values, mortgage-related derivatives/

collateralized debt obligations (CDOs), hedge fund ownership of insured institutions, commercial real estate lending, international risk, and other financial innovations.

Achieved. Achieved.

•	 Address potential risks from cross-border banking instability through coordinated review of

critical issues and, where appropriate, negotiate agreements with key authorities.

Achieved. Achieved.

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

bankers, supervisors, the public and other stakeholders.

•	 Disseminate results of research and analyses in a timely manner through regular publications, ad hoc reports and other means.Achieved. Achieved. Achieved.

•	 Undertake industry outreach activities to inform bankers and other stakeholders about current trends, concerns and other available FDIC resources.Achieved. Achieved. Achieved.
III. Performance Results Summary 67

Annual Performance Goals and Targets 2008 2007 2006

4. Maintain and improve the deposit insurance system.

•	 Implement the new deposit insurance pricing system. Achieved.

•	 Review the effectiveness of the new pricing regulations that were adopted to implement

the reform legislation.

Achieved.

•	 Complete and issue guidance on the pricing of deposit insurance for large banks. Achieved.

•	 Enhance the additional risk measures used to adjust assessment rates for large institutions. Achieved.

•	 Publish an ANPR seeking comment on a permanent dividend system. Achieved.

•	 Develop and implement an assessment credit and dividends system and a new deposit

insurance pricing system.

Achieved.

•	 Develop a final rule on a permanent dividend system. Achieved.

•	 Implement deposit insurance reform legislation in accordance with statutorily prescribed

time frames.

Achieved.

•	 Ensure/enhance the effectiveness of the reserving methodology by applying sophisticated

analytical techniques to review variances between projected losses and actual losses, and 

by adjusting the methodology accordingly.

Achieved. Achieved. Achieved.

•	 Set assessment rates to maintain the insurance fund reserve ratio between 1.15 and 1.50

percent of estimated insured deposits.

Not Achieved. Achieved. Achieved.

5. Provide educational information to insured depository institutions and their customers to 

help them understand the rules for determining the amount of insurance coverage on deposit 

accounts.

•	 Publish a comprehensive and authoritative resource guide for bankers, attorneys, financial

advisors and similar professionals on the FDIC’s rules and requirements for deposit insurance coverage of revocable and irrevocable trust accounts. 

Achieved.

•	 Conduct at least three sets of Deposit Insurance Seminar Series for bankers. Achieved.

•	 Conduct a series of national teleconferences for insured financial institutions to address

current questions and issues relating to FDIC insurance coverage of deposit accounts.

Achieved.

•	 Conduct outreach events and activities to support a deposit insurance education program

that features FDIC 75th anniversary theme.

Achieved.

•	 Update Insuring Your Deposits (basic deposit insurance brochure for consumers), Your 

Insured Deposit (comprehensive deposit insurance brochure), and EDIE (Electronic Deposit 

Insurance Estimator) on the FDIC’s web site to reflect changes resulting from enactment of

deposit insurance legislation.

Achieved.

•	 Assess the feasibility of (and if feasible, define the requirements for) a consolidated Electronic Deposit Insurance Estimator (EDIE) application for bankers and consumers (to be 

developed in 2009).

Achieved.

•	 Develop and make available to the public an updated Spanish language version of EDIE

reflecting deposit insurance reform.

Achieved.

•	 Develop and make available to the public a Spanish language version of the FDIC’s

30-minute video on deposit insurance coverage.

Achieved.

•	 Respond to 90 percent of inquiries from consumers and bankers about FDIC deposit

insurance coverage within time frames established by policy.

Achieved. Achieved. Achieved.

•	 Respond to 90 percent of written inquiries within time frames established by policy. Achieved.
68 FDIC 2009 Annual Report

Supervision and Consumer Protection Program Results

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

Annual Performance Goals and Targets 2008 2007 2006

1. Conduct on-site risk management examinations to assess the overall financial condition, management practices and policies, and compliance with applicable laws and regulations of FDICsupervised depository institutions.

•	 One hundred percent of required risk management examinations are conducted on

schedule.

Achieved. Achieved. Achieved.

2. Take prompt and effective supervisory action to address problems identified during the FDIC

examination of FDIC-supervised institutions that receive a composite Uniform Financial Institutions Rating of “4” or “5” (problem institution). Monitor FDIC-supervised insured depository institutions’ compliance with formal and informal enforcement actions.

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

completion of the prior examination.

Achieved. Achieved. Achieved.

3. Assist in protecting the infrastructure of the U.S. banking system against terrorist financing,

money laundering and other financial crimes.

•	 One hundred percent of required Bank Secrecy Act (BSA) examinations are conducted on

schedule.

Achieved.

4. Increase regulatory knowledge to keep abreast of current issues related to money laundering 

and terrorist financing.

•	 An additional 10 percent (at least 10 percent for year 2006) of BSA/AML subject-matter

experts nationwide are certified under the Association of Certified Anti-Money Laundering

Specialists certification program.

Achieved. Achieved.

Annual Performance Goals and Targets 2008 2007 2006

6. Expand and strengthen the FDIC’s participation and leadership role in providing technical guidance, training, consulting services and information to international governmental banking and 

deposit insurance organizations.

•	 Undertake outreach activities to inform and train foreign bank regulators and deposit

insurers. 

Achieved. Achieved.

•	 Foster strong relationships with international banking regulators and associations that promote sound banking supervision and regulations, failure resolution and deposit insurance 

practices. 

Achieved. Achieved.
III. Performance Results Summary 69

Annual Performance Goals and Targets 2008 2007 2006

5. More closely align regulatory capital with risk in large or multinational banks while maintaining 

capital at prudential levels. 

•	 Develop options for refining Basel II that are responsive to lessons learned from the 2007-

2008 market turmoil.

Achieved.

•	 Further develop the Basel II framework to ensure that it does not result in a substantial

reduction in risk-based capital requirements or significant competitive inequities among

different classes of banks. Consider alternative approaches for implementing the Basel

Capital Accord.

Achieved.

•	 Conduct analysis of early results of the new capital regime as information becomes

available.

Achieved.

•	 Promote international cooperation on the adoption of supplemental capital measures in

countries that will be operating under Basel II.

Achieved.

•	 Publish a Notice of Proposed Rulemaking. Achieved.

•	 Participate in the continuing analysis of the projected results of the new capital regime. Achieved. Achieved.

6. More closely align regulatory capital with risk in banks not subject to Basel II capital rules while 

maintaining capital at prudential levels.

•	 Finalize a regulatory capital framework based on the Basel II“Standardized Approach” as an

option for U.S. banks not required to use the new advanced approaches.

Achieved.

•	 Complete rulemaking on Basel IA. Not 

Applicable.

•	 Develop a Notice of Proposed Rulemaking for public issuance. Achieved.

7. Ensure that FDIC-supervised institutions that plan to operate under the new Basel II Capital 

Accord are well-positioned to respond to the new capital requirements.

•	 Perform on-site examinations or off-site analyses of all FDIC-supervised banks that have

indicated a possible intention to operate under Basel II to ensure that they are effectively

working toward meeting required qualification standards.

Not 

Applicable.

Achieved. Achieved.

8. Reduce regulatory burden on the banking industry while maintaining appropriate consumer 

protection and safety and soundness safeguards.

•	 Complete and evaluate options for refining the current risk-focused approach used in the

conduct of BSA/AML examinations to reduce the burden they impose on FDIC-supervised 

institutions.

Achieved.

•	 Applicable provisions of the Financial Services Regulatory Relief Act of 2006 (FSRRA) are

implemented in accordance with statutory requirements.

Partially 

Achieved.

•	 Support is provided to the Government Accountability Office (GAO), as requested, for studies required under FSRRA.Achieved.

•	 State AML assessments of Money Service Businesses (MSB) are incorporated into FDIC risk

management examinations in states where MSB AML regulatory programs are consistent 

with FDIC risk management standards.

Partially 

Achieved.
70 FDIC 2009 Annual Report

Annual Performance Goals and Targets 2008 2007 2006

Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.

1. Conduct CRA and compliance examinations in accordance with the FDIC’s examination 

frequency policy.

•	 One hundred percent of required examinations are conducted within time frames established by FDIC policy.Achieved. Achieved. Achieved.

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

compliance examinations of FDIC-supervised institutions that received a “4” or “5” rating for com- pliance with consumer protection and fair lending laws.

•	 One hundred percent of follow-up examinations or related activities are conducted within

12 months from the date of a formal enforcement action to confirm that the institution is in

compliance with the enforcement action.

Achieved. Achieved. Achieved.

3. Determine the need for changes in current FDIC practices for following up on significant violations of consumer compliance laws and regulations identified during examinations of banks for

compliance with consumer protection and fair lending laws.

•	 Complete a review of the effectiveness of the 2007 instructions issued on the handling of

repeat instances of significant violations identified during compliance examinations.

Achieved.

•	 An analysis is completed for all institutions on the prevalence and scope of repeat instances

of significant violations from the previous compliance examination.

Achieved.

•	 A determination is made regarding the need for changes to current FDIC and FFIEC guidance on follow-up supervisory action on significant violations identified during compliance

examinations based on the substance and level of risk posed to consumers by these repeat 

violations.

Achieved.

4. Scrutinize evolving consumer products, analyze their current or potential impact on consumers and identify potentially harmful or illegal practices. Promptly institute a supervisory response 

program across FDIC-supervised institutions when such practices are identified.

•	 Revise the FDIC’s system for identifying, reviewing, and addressing potentially harmful or

illegal practices associated with evolving consumer products.

Achieved.

•	 Develop and implement new supervisory response programs across all FDIC-supervised

institutions to address potential risks posed by new consumer products.

Achieved.
III. Performance Results Summary 71

Annual Performance Goals and Targets 2008 2007 2006

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

•	 Conduct 125 technical assistance (examination support) efforts or banker/community outreach activities related to the CRA, fair lending, and community development.Achieved. Achieved. Achieved.

•	 Release a “Young Adult” version of the Money Smart curriculum. Achieved.

•	 Distribute at least 10,000 copies of the “Young Adult” version of Money Smart. Achieved.

•	 Analysis of survey results is disseminated within six months of completion of the survey

through regular publications, ad hoc reports and other means.

Achieved.

•	 Provide technical assistance, support and consumer outreach activities in all six FDIC

regions to at least eight local NeighborWorks® America affiliates or local coalitions that are

providing foreclosure mitigation counseling in high need areas. 

Achieved.

•	 200,000 additional individuals are taught using the Money Smart curriculum. Achieved. Achieved.

•	 120 school systems and government entities are contacted to make them aware of the

availability of Money Smart as a tool to teach financial education to high school students.

Achieved.

•	 A review of existing risk management and compliance/CRA examination guidelines and

practices is completed to ensure that they encourage and support the efforts of insured

financial institutions to foster economic inclusion, consistent with safe and sound banking

practices.

Achieved.

•	 A pilot project is conducted with banks near military installations to provide small-dollar

loan alternatives to high-cost payday lending.

Not Achieved.

•	 Strategies are developed and implemented to encourage FDIC-supervised institutions to

offer small-denomination loan programs.

Achieved.

•	 Research is conducted and findings disseminated on programs and strategies to encourage

and promote broader economic inclusion within the nation’s banking system.

Achieved.

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

of programs and strategies to encourage and promote broader economic inclusion within the 

nation’s banking system.

•	 Analyze quarterly data submitted by participating institutions to identify early trends and

potential best practices.

Achieved.

•	 Open 27,000 new bank accounts. Achieved.

•	 Initiate new small-dollar loan products in 32 financial institutions. Achieved.

•	 Initiate remittance products in 32 financial institutions. Achieved.

•	 Reach 18,000 consumers through financial education initiatives. Achieved.

7. Effectively investigate and respond to consumer complaints about FDIC-supervised financial institutions.

•	 Responses are provided to 90 percent of written complaints and inquiries within time

frames established by policy.

Achieved. Achieved. Achieved.
72 FDIC 2009 Annual Report

Receivership Management Program Results

Strategic Goal: Recovery to creditors of receivership is achieved.

Annual Performance Goals and Targets 2008 2007 2006

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

•	 Contact all known qualified and interested bidders. Achieved. Achieved. Not Applicable. 

No Failures.

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

to maximize net return.

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

within 90 days of failure.

Achieved. Achieved. Not Applicable. 

No Failures.

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

•	 Terminate all receiverships within 90 days of the resolution of all impediments. Achieved. Achieved. Achieved.

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

depository institutions and decide as promptly as possible to close or pursue each claim, 

considering the size and complexity of the institution.

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

18 months of the failure date.

Achieved. Not Appli- cable. No 

claims within 

the 18-month 

period.

Not Applicable. 

No Failures.
III. Performance Results Summary 73

as necessary, and briefed the Chairman on at

least a monthly basis. In many cases, enhancements to operating procedures and automated

systems of support were made as a direct result

of this heightened management attention. Significantly, all identified program needs have been

coordinated with those persons responsible for

planning, budgeting, staffing and ensuring the

adequacy of infrastructure support.

These and other actions were taken in addition to evaluations that are part of the Corporation’s ongoing efforts to seek continuous

improvements in its programs and operations.

Some of these 2009 initiatives included: reviews

of financial management and controls governing

receiverships; scrutiny of our increased volume

of procurement card and convenience check

activity; coordination with the FDIC’s OIG on

Material Loss Reviews to identify any needed

improvements in the Corporation’s bank examination programs; improved monitoring of the

performance and availability of the FDIC’s critical automated systems; and the identification of

operations where backlogs could present problems if not properly monitored.

It is anticipated that program evaluation energies in 2010 will again focus on progress in

the above six initiatives, as well as on controls

associated with financial reporting throughout

the Corporation, systems development efforts,

and key operations supporting the Corporate

response to the financial crisis.

Program Evaluation

Program evaluations are designed to improve

the operational effectiveness of the FDIC’s

programs and ensure that objectives are met.

These evaluations are often led by the Office

of Enterprise Risk Management and are generally interdivisional, collaborative efforts involving management and staff from the affected

program(s).

The Corporation’s 2009 Annual Performance

Plan contained several objectives aimed at ensuring that the FDIC would continue to address key

corporate issues, including continuing work on

the Temporary Liquidity Guarantee Program,

issues relating to contract oversight management, anticipated increases in bank failures and

continuous improvements to the FDIC’s core

business functions.

During 2009, in direct response to challenges

associated with the financial crisis, the FDIC

created six internal organizations and working groups to address areas of increased risk

to ensure that both the FDIC’s core businesses

and new responsibilities were being managed as

effectively as possible. The six initiatives were

tied to: 1) Legacy Loans; 2) Systemic Resolution

Authority; 3) Temporary Liquidity Guarantee

Program; 4) Loss Sharing Agreements; 5) Contract Management Oversight; and 6) Resource

Management. Each team identified key issues

and risks associated with their area of challenge,

developed action plans and performance metrics
74 FDIC 2009 Annual Report

IV. Financial Statements and Notes

Deposit Insurance Fund Balance Sheet at December 31

Dollars in Thousands

2009 2008

Assets

Cash and cash equivalents $ 54,092,423 $ 1,011,430 

Cash and cash equivalents—restricted—systemic risk (Note 16) 6,430,589 2,377,387 

Investment in U.S. Treasury obligations, net (Note 3) 5,486,799 27,859,080 

Assessments receivable, net (Note 9) 280,510 1,018,486 

Receivables and other assets—systemic risk (Note 16) 3,298,819 1,138,132 

Trust preferred securities (Note 5) 1,961,824 0 

Interest receivable on investments and other assets, net 220,588 405,453 

Receivables from resolutions, net (Note 4) 38,408,622 15,765,465 

Property and equipment, net (Note 6) 388,817 368,761 

Total Assets $ 110,568,991 $ 49,944,194 

Liabilities 

Accounts payable and other liabilities $ 273,338 $ 132,597 

Unearned revenue—prepaid assessments (Note 9) 42,727,101 0 

Liabilities due to resolutions (Note 7) 34,711,726 4,724,462 

Deferred revenue—systemic risk (Note 16) 7,847,447 2,077,880 

Postretirement benefit liability (Note 13) 144,952 114,124 

Contingent liabilities for:

Anticipated failure of insured institutions (Note 8) 44,014,258 23,981,204 

Systemic risk (Note 16) 1,411,966 1,437,638 

Litigation losses (Note 8) 300,000 200,000 

Total Liabilities 131,430,788 32,667,905 

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

Fund Balance

Accumulated Net (Loss) Income (21,001,312) 15,001,272 

Unrealized Gain on U.S. Treasury investments, net (Note 3) 142,127 2,250,052 

Unrealized postretirement benefit (Loss) Gain (Note 13) (2,612) 24,965 

Total Fund Balance (20,861,797) 17,276,289 

Total Liabilities and Fund Balance $ 110,568,991 $ 49,944,194

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

Deposit Insurance Fund (DIF)
IV. Financial Statements and Notes 75

Deposit Insurance Fund Statement of Income and Fund Balance 

for the Years Ended December 31

Dollars in Thousands

2009 2008

Revenue

Interest on U.S. Treasury obligations $ 704,464 $ 2,072,317

Assessments (Note 9) 17,717,374 2,964,518

Systemic risk revenue (Note 16) 1,721,626 1,463,537

Realized gain on sale of securities (Note 3) 1,389,285 774,935

Other revenue (Note 10) 3,173,611 31,017

Total Revenue 24,706,360 7,306,324

Expenses and Losses

Operating expenses (Note 11) 1,271,099 1,033,490

Systemic risk expenses (Note 16) 1,721,626 1,463,537

Provision for insurance losses (Note 12) 57,711,772 41,838,835

Insurance and other expenses 4,447 3,693

Total Expenses and Losses 60,708,944 44,339,555

Net Loss (36,002,584) (37,033,231)

Unrealized (Loss) Gain on U.S. Treasury investments, net (Note 3) (2,107,925) 1,891,144

Unrealized postretirement benefit (Loss) Gain (Note 13) (27,577) 5,340

Comprehensive Loss (38,138,086) (35,136,747)

Fund Balance—Beginning 17,276,289 52,413,036

Fund Balance—Ending $ (20,861,797) $ 17,276,289

The accompanying notes are an integral part of these financial statements.
76 FDIC 2009 Annual Report

Deposit Insurance Fund Statement of Cash Flows for the Years Ended December 31

Dollars in Thousands

2009 2008

Operating Activities

Net Loss $ (36,002,584) $ (37,033,231)

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

operating activities:

Amortization of U.S. Treasury obligations 210,905 457,289

Treasury inflation-protected securities inflation adjustment 10,837 (271,623)

Gain on sale of U.S. Treasury obligations (1,389,285) (774,935)

Depreciation on property and equipment 70,488 55,434

Loss on retirement of property and equipment 924 447

Provision for insurance losses 57,711,772 41,838,835

Unrealized (Loss) Gain on postretirement benefits (27,577) 5,340

Guarantee termination fee from Citigroup (1,961,824) 0

Systemic risk expenses 0 (2,352)

Change in Operating Assets and Liabilities:

Decrease (Increase) in assessments receivable, net 737,976 (773,905)

Decrease in interest receivable and other assets 192,750 402,225

(Increase) in receivables from resolutions (60,229,760) (32,955,471)

(Increase) in receivable—systemic risk (2,160,688) (21,285)

Increase (Decrease) in accounts payable and other liabilities 140,740 (18,838)

Increase (Decrease) in postretirement benefit liability 30,828 (2,034)

(Decrease) in contingent liabilities—systemic risk (25,672) 0

Increase in liabilities due to resolutions 29,987,265 4,724,462

Increase in unearned revenue—prepaid assessments 42,727,101 0

Increase in deferred revenue—systemic risk 5,769,567 2,377,387

Net Cash Provided by (Used by) Operating Activities 35,793,763 (21,992,255)
IV. Financial Statements and Notes 77

Deposit Insurance Fund Statement of Cash Flows (continued)

Dollars in Thousands

2009 2008

Investing Activities

Provided by:

Maturity of U.S. Treasury obligations, held-to-maturity 0 3,304,350

Maturity of U.S. Treasury obligations, available-for-sale 6,382,027 3,930,226

Sale of U.S. Treasury obligations 15,049,873 13,974,732

Used by:

Purchase of property and equipment (91,468) (72,783)

Net Cash Provided by Investing Activities 21,340,432 21,136,525

Net Increase (Decrease) in Cash and Cash Equivalents 57,134,195 (855,730)

Cash and Cash Equivalents—Beginning 3,388,817 4,244,547

Unrestricted Cash and Cash Equivalents—Ending 54,092,423 1,011,430

Restricted Cash and Cash Equivalents—Ending 6,430,589 2,377,387

Cash and Cash Equivalents—Ending $ 60,523,012 $ 3,388,817

The accompanying notes are an integral part of these financial statements.
78 FDIC 2009 Annual Report

Notes to the Financial Statem

Deposit Insurance

December 31, 2009 and 20

1. Legislation and Operations of 

the Deposit Insurance Fund

Overview

The Federal Deposit Insurance Corporati

(FDIC) is the independent deposit insurance

agency created by Congress in 1933 to maintain

stability and public confidence in the nation’s

banking system. Provisions that govern the

operations of the FDIC are generally found in the

Federal Deposit Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq.). In carrying out the

purposes of the FDI Act, as amended, the FDIC

insures the deposits of banks and savings associ

ations (insured depository institutions), and in

cooperation with other federal and state agencies

promotes the safety and soundness of insured

depository institutions by identifying, monitoring and addressing risks to the Deposit Insurance Fund (DIF). An active institution’s primary

federal supervisor is generally determined by

the institution’s charter type. Commercial and

savings banks are supervised by the FDIC, the

Office of the Comptroller of the Currency, or the

Federal Reserve Board, while savings associations (known as “thrifts”) are supervised by the

Office of Thrift Supervision.

The FDIC is the administrator of the DIF. The

DIF is responsible for protecting insured bank

and thrift depositors from loss due to institution failures. The FDIC is required by 12 U.S.C.

1823(c) to resolve troubled institutions in a manner that will result in the least possible cost to

the deposit insurance fund unless a systemic risk

determination is made that compliance with the

least-cost test would have serious adverse effects

on economic conditions or financial stability and

any action or assistance taken under the systemic

risk determination would avoid or mitigate such

adverse effects. A systemic risk determination

can only be invoked by the Secretary of the U.S.

Treasury, in consultation with the President,

and upon the written recommendation of twothirds of both the FDIC Board of Directors and

the Board of Governors of the Federal Reserve

System. The systemic risk provision requires the

FDIC to recover any related losses to the DIF

through one or more special assessments from

all insured depository institutions and, with the

concurrence of the U.S. Treasury (Treasury),

depository institution holding companies (see

Note 16).

The FDIC is also the administrator of the

FSLIC Resolution Fund (FRF). The FRF is

a resolution fund responsible for the sale of

remaining assets and satisfaction of liabilities

associated with the former Federal Savings and

Loan Insurance Corporation (FSLIC) and the

Resolution Trust Corporation. The DIF and the

FRF are maintained separately to carry out their

respective mandates.

Recent Legislation

Helping Families Save Their Homes Act of 

2009 (Public Law 111-22) was enacted on May

20, 2009. This legislation provides for: 1) extending the FDIC’s deposit insurance coverage from

$100,000 to $250,000 until 2013, 2) extending

FDIC’s authority to borrow from the Treasury

in amounts necessary to carry out the increased

insurance coverage, notwithstanding the amount

limitations contained in Sections 14(a) and 15(c)
IV. Financial Statements and Notes 79

of the FDI Act, 3) repealing the prohibition

against the FDIC taking the increased insurance

coverage into account for purposes of setting

assessments, 4) extending the generally applicable time limit from 5 years to 8 years for an FDIC

Restoration Plan to rebuild the reserve ratio of

the DIF, 5) permanently increasing the FDIC’s

authority to borrow from the Treasury from $30

billion to $100 billion and, if necessary, up to

$500 billion through 2010, and 6) allowing FDIC

to charge systemic risk special assessments by

rulemaking on both insured depository institutions and, with Treasury concurrence, depository institution holding companies.

The Emergency Economic Stabilization Act 

of 2008 (EESA), legislation to help stabilize

the financial markets, was enacted on October

3, 2008. The legislation requires that Treasury

consult with the FDIC and other federal agencies

in the establishment of the troubled asset relief

program (known as TARP).

Operations of the DIF

The primary purpose of the DIF isto: 1) insure

the deposits and protect the depositors of DIFinsured institutions and 2) resolve DIF-insured

failed institutions upon appointment of FDIC as

receiver in a manner that will result in the least

possible cost to the DIF (unless a systemic risk

determination is made).

The DIF is primarily funded from deposit

insurance assessments and interest earned on

investments in U.S. Treasury obligations. Additional funding sources, if necessary, are borrowings from the Treasury, Federal Financing Bank

(FFB), Federal Home Loan Banks, and insured

depository institutions. The FDIC has borrowing authority of $100 billion from the Treasury,

and if necessary, up to $500 billion through 2010.

Additionally, FDIC has a Note Purchase Agreement with the FFB not to exceed $100 billion to

enhance DIF’s ability to fund deposit insurance

obligations.

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

$118.2 billion and $69.0 billion as of December

31, 2009 and 2008, respectively. In connection

with the temporary increase in the basic deposit insurance coverage limit from $100,000 to

$250,000, the FDIC may borrow from the Treasury to carry out the increase in the maximum

deposit insurance amount without regard to the

MOL or the $100 billion limit.

Operations of Resolution Entities

The FDIC is responsible for managing and

disposing of the assets of failed institutions in an

orderly and efficient manner. The assets held by

receiverships, pass-through conservatorships and

bridge institutions (collectively, resolution entities), and the claims against them, are accounted

for separately from DIF assets and liabilities to

ensure that proceeds from these entities are distributed in accordance with applicable laws and

regulations. Accordingly, income and expenses

attributable to resolution entities are accounted for

as transactions of those entities. All are billed by

the FDIC for services provided on their behalf.
80 FDIC 2009 Annual Report

2. Summary of Significant 

Accounting Policies

General

These financial statements pertain to the

financial position, results of operations, and cash

flows of the DIF and are presented in accordance with U.S. generally accepted accounting

principles (GAAP). As permitted by the Federal

Accounting Standards Advisory Board’s Statement of Federal Financial Accounting Standards 34, The Hierarchy of Generally Accepted 

Accounting Principles, Including the Application 

of Standards Issued by the Financial Accounting 

Standards Board, the FDIC prepares financial

statements in conformity with standards promulgated by the Financial Accounting Standards

Board (FASB). These statements do not include

reporting for assets and liabilities of resolution

entities because these entities are legally separate and distinct, and the DIF does not have any

ownership interests in them. Periodic and final

accountability reports of resolution entities are

furnished to courts, supervisory authorities, and

others upon request.

Use of Estimates

Management makes estimates and assumptions that affect the amounts reported in the

financial statements and accompanying notes.

Actual results could differ from these estimates.

Where it is reasonably possible that changes in

estimates will cause a material change in the

financial statements in the near term, the nature

and extent of such changes in estimates have

been disclosed. The more significant estimates

include the assessments receivable and associ

ated revenue; the allowance for loss on receivables from resolutions (including loss-share

agreements); the estimated losses for: anticipated

failures, litigation, and representations and warranties; guarantee obligations for: the Temporary

Liquidity Guarantee Program and debt of limited liability companies; valuation of trust preferred securities; and the postretirement benefit

obligation.

Cash Equivalents

Cash equivalents are short-term, highly liquid

investments consisting primarily of U.S. Treasury Overnight Certificates. The majority of

cash equivalents held by the DIF at December

31, 2009, resulted from the collection of $45.7

billion in prepaid assessments on December 30,

2009 for all quarterly assessment periodsthrough

December 31, 2012 (see Note 9).

Investment in U.S. Treasury Obligations

DIF funds are required to be invested in

obligations of the United States or in obligations guaranteed as to principal and interest by

the United States; the Secretary of the Treasury

must approve all such investments in excess of

$100,000. The Secretary has granted approval

to invest DIF funds only in U.S. Treasury obligations that are purchased or sold exclusively

through the Bureau of the Public Debt’s Government Account Series (GAS) program.

DIF’s investments in U.S. Treasury obligations are classified as available-for-sale. Securities designated as available-for-sale are shown

at fair value. Unrealized gains and losses are

reported as other comprehensive income. Realized gains and losses are included in the Statement of Income and Fund Balance as components

of Net Income. Income on securities is calculated
IV. Financial Statements and Notes 81

and recorded on a daily basis using the effective

interest method.

Revenue Recognition for Assessments

Assessment revenue is recognized for the

quarterly period of insurance coverage based

on an estimate. The estimate is derived from

an institution’s risk-based assessment rate and

assessment base for the prior quarter adjusted for

the current quarter’s available assessment credits, any changes in supervisory examination and

debt issuer ratings for larger institutions, and a

modest deposit insurance growth factor. At the

subsequent quarter-end, the estimated revenue

amounts are adjusted when actual assessments

for the covered period are determined for each

institution. (See Note 9 for additional information on assessments.)

Capital Assets and Depreciation

The FDIC buildings are depreciated on a

straight-line basis over a 35 to 50 year estimated

life. Leasehold improvements are capitalized

and depreciated over the lesser of the remaining

life of the lease or the estimated useful life of

the improvements, if determined to be material.

Capital assets depreciated on a straight-line basis

over a five-year estimated useful life include

mainframe equipment; furniture, fixtures, and

general equipment; and internal-use software.

Personal computer equipment is depreciated on

a straight-line basis over a three-year estimated

useful life.

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.

Reclassifications

Certain reclassifications have been made in

the 2008 financial statements to conform to the

presentation used in 2009.

Disclosure about Recent Accounting 

Pronouncements

•	 FASB Accounting Standards Codification

(ASC) 105, Generally Accepted Accounting Principles (formerly SFAS No. 168, The 

FASB Accounting Standards Codification 

and the Hierarchy of Generally Accepted 

Accounting Principles—a replacement of 

FASB Statement No. 162, issued in June

2009), became effective for financial statements covering periods ending after September 15, 2009. On July 1, 2009, the FASB ASC

was launched and became the sole source

of authoritative accounting principles applicable to the FDIC.

	 All existing standards that were used to

create the Codification have become superseded. As a result, references to generally

accepted accounting principles in these

Notes will consist of the numbers used in the

Codification and, if appropriate, the former

pronouncement number. The Codification’s

purpose was not to create new accounting or

reporting guidance, but to organize and simplify authoritative GAAP literature. Consequently, there will be no change to the DIF’s

financial statements due to the implementation of this Codification.

•	 	Statement of Financial Accounting Standards

(SFAS) No. 167, Amendments to FASB Interpretation No. 46(R), was issued by the FASB

in June 2009, and subsequently codifi
82 FDIC 2009 Annual Report

upon issuance of Accounting Standards

Update No. 2009-17, Consolidations (ASC 

810) - Improvements to Financial Reporting 

by Enterprises Involved with Variable Interest Entities. SFAS 167, effective for reporting

periods beginning after November 15, 2009,

modifies the former quantitative approach

for determining the primary beneficiary of a

variable interest entity (VIE) to a qualitative

assessment. An enterprise must determine

qualitatively whether it has (1) the power

to direct the activities of the VIE that most

significantly impact the entity’s economic

performance and (2) the obligation to absorb

losses of the VIE or the right to receive benefits from the VIE that could potentially be

significant to the VIE. If an enterprise has

both of these characteristics, the enterprise

is considered the primary beneficiary and

must consolidate the VIE. Management is

currently reviewing the possible impact, if

any, of SFAS 167 (now codified in ASC 810)

on DIF’s accounting and financial reporting

requirements for 2010.

•	 SFAS No. 166, Accounting for Transfers of 

Financial Assets—an amendment of FASB 

Statement No. 140, was issued by the FASB

in June 2009. Subsequently, the FASB issued

Accounting Standards Update No. 2009-16,

Transfers and Servicing (ASC 860) - Accounting for Transfers of Financial Assets, to 

formally incorporate the provisions of SFAS

No. 166 into the Codification. SFAS 166

removes the concept of a qualifying specialpurpose entity from GAAP, changes the

requirements for derecognizing financial

assets, and requires additional disclosures

about a transferor’s continuing involvement

in transferred financial assets. The FASB’s

objective is to improve the information that a

reporting entity provides in its financial statements about a transfer of financial assets; the

effects of a transfer on its financial position,

financial performance, and cash flows; and a

transferor’s continuing involvement, if any, in

transferred financial assets.

	 The provisions of SFAS 166 (now codified

in ASC 860) become effective for the DIF for

all transfers of financial assets occurring on

or after January 1, 2010.

•	 SFAS No. 165, Subsequent Events, was

issued in May 2009 and subsequently codified in FASB ASC 855, Subsequent Events.

ASC 855 represents the inclusion of guidance

on subsequent events in the accounting literature. Historically, management had relied

on auditing literature for guidance on assessing and disclosing subsequent events. ASC

855 now requires the disclosure of the date

through which an entity has evaluated subsequent events and the basis for that date—that

is, whether that date represents the date the

financial statements were issued or were

available to be issued. These new provisions,

effective for the DIF as of December 31,

2009, do not have a significant impact on the

financial statements.

•	 FASB Staff Position (FSP) FAS 115-2 and

FAS 124-2, Recognition and Presentation of 

Other-Than-Temporary Impairments, was

issued in April 2009 and subsequently codified in FASB ASC 320, Investments-Debt 

and Equity Securities. It modifies the other-
IV. Financial Statements and Notes 83

than-temporary impairment (OTTI) guidance

for debt securities. An OTTI is considered to

have occurred if 1) an entity has the intent to

sell an impaired security, 2) it is more likely

than not that it will be required to sell the

security before its anticipated recovery, or 3)

an entity does not expect to recover the entire

amortized cost basis when there is no intent

or likely requirement to sell the security.

	 In addition, the FSP requires that an OTTI

loss should be recognized in earnings or

other comprehensive income. If the entity

has the intent to sell the security or it is more

likely than not that it will be required to sell

the security, the entire impairment (amortized cost basis over fair value) will be recognized in earnings. However, if an entity’s

management asserts that it does not have the

intent to sell a debt security and it is more

likely than not that it will not have to sell

the security before recovery of its cost basis,

then an entity must separate the impairment

loss into two components: 1) the amount

related to credit loss, which is recorded

in earnings, and 2) the remainder of the

impairment loss, which is recorded in other

comprehensive income. The provisions of

the FSP, now codified in ASC 320, became

effective for the DIF as of June 30, 2009.

•	 Other recent accounting pronouncements

have been deemed to be not applicable

or material to the financial statements as

presented.

3. Investment in U.S. Treasury

Obligations, Net

As of December 31, 2009 and 2008, investments in U.S. Treasury obligations, net, were

$5.5 billion and $27.9 billion, respectively. As of

December 31, 2009 and 2008, the DIF held $2.1

billion and $2.7 billion, respectively, of Treas

ury inflation-protected securities (TIPS). These

securities are indexed to increases or decreases

in the Consumer Price Index for All Urban Consumers (CPI-U).

For the year ended December 31, 2009, available-for-sale securities were sold for total proceeds of $15.2 billion. The gross realized gains

on these sales totaled $1.4 billion. To determine

gross realized gains, the cost of securities sold is

based on specific identification. Net unrealized

holding losses on available-for-sale securities of

$2.1 billion are included in other comprehensive

loss.
84 FDIC 2009 Annual Report

Total Investment in U.S. Treasury Obligations, Net at December 31, 2009

Dollars in Thousands

Maturity 

Yield at

Purchase (a)

Face

Value

Net

Carrying

Amount

Unrealized

Holding

Gains

Unrealized

Holding

Losses

Fair

Value

U.S. Treasury notes and bonds

Within 1 year 5.04% $ 3,058,000 $ 3,062,038 $ 48,602 $ 0 $ 3,110,640

After 1 year through 5 years 4.15% 300,000 302,755 11,648 0 314,403

U.S. Treasury inflation-protected securities

After 1 year through 5 years 3.14% 1,968,744 1,979,879 81,877 0 2,061,756

Total $ 5,326,744 $ 5,344,672 $ 142,127 $ 0 $ 5,486,799

(a) For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a long-term annual inflation assumption

as measured by the CPI-U. The long-term CPI-U consensus forecast is 1.1 percent, based on figures issued by the Congressional Budget Office and Blue Chip Economic Indicators in 

early 2009. 

Total Investment in U.S. Treasury Obligations, Net at December 31, 2008

Dollars in Thousands

Maturity (a) 

Yield at

Purchase (b)

Face

Value

Net

Carrying

Amount

Unrealized

Holding

Gains

Unrealized

Holding

Losses (c)

Fair

Value

U.S. Treasury notes and bonds

Within 1 year 4.25% $ 6,192,000 $ 6,350,921 $ 130,365 $ 0 $ 6,481,286

After 1 year through 5 years 4.72% 9,503,000 9,451,649 1,030,931 0 10,482,580

After 5 years through 10 years 4.79% 6,130,000 7,090,289 1,142,753 0 8,233,042

U.S. Treasury inflation-protected securities

Within 1 year 3.82% 726,550 726,561 0 (5,627) 720,934

After 1 year through 5 years 3.14% 1,973,057 1,989,608 0 (48,370) 1,941,238

Total $ 24,524,607 $ 25,609,028 $ 2,304,049 $ (53,997) $ 27,859,080

(a) For purposes of this table, all callable securities are assumed to mature on their first call dates. Their yields at purchase are reported as their yield to first call date. Callable U.S.

Treasury bonds may be called five years prior to the respective bonds’ stated maturity on their semi-annual coupon payment dates upon 120 days notice.

(b) For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a long-term annual inflation

assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.2 percent, based on figures issued by the Congressional Budget Office and Blue Chip Economic 

Indicators in early 2008.

(c) The unrealized losses on the U.S. Treasury inflation-protected securities (TIPS) is attributable to the two-month delay in adjusting TIPS’ principal for changes in the November

and December Consumer Price Index for all Urban Consumers. As the losses occurred over a period less than a year and the December 31, 2008, unrealized losses converted to

unrealized gains by February 28, 2009, the FDIC does not consider these securities to be other than temporarily impaired at December 31, 2008.
IV. Financial Statements and Notes 85

4. Receivables From Resolutions, 

Net

Receivables From Resolutions, Net 

at December 31

Dollars in Thousands

2009 2008

Receivables from 

closed banks $ 98,647,508 $ 27,389,467

Receivables from 

operating banks 0 9,406,278

Allowance for losses (60,238,886) (21,030,280)

Total $ 38,408,622 $ 15,765,465

The receivables from resolutions include payments made by the DIF to cover obligations to

insured depositors (subrogated claims), advances

to resolution entities for working capital, and

administrative expenses paid on behalf of resolution entities. Any related allowance for lossrepresents the difference between the funds advanced

and/or obligations incurred and the expected

repayment. Estimated future payments on losses

incurred on assets sold to an acquiring institution under a loss-sharing agreement are factored

into the computation of the expected repayment.

Assets held by DIF resolution entities are the

main source of repayment of the DIF’s receivables from resolutions.

As of December 31, 2009, there were 179 active

receiverships which includes 140 established in

2009. As of December 31, 2009 and 2008, DIF

resolution entities held assets with a book value

of $49.3 billion and $45.8 billion, respectively

(including cash, investments, and miscellaneous

receivables of $7.7 billion and $5.1 billion, respectively). Ninety-nine percent of the current asset

book value of $49.3 billion is held by resolution

entities established in 2008 and 2009.

Estimated cash recoveries from the management and disposition of assets that are used to

determine the allowance for losses were based on

asset recovery rates from several sources including: actual or pending institution-specific asset

disposition data; failed institution-specific asset

valuation data; aggregate asset valuation data on

several recently failed or troubled institutions; and

empirical asset recovery data based on failures as

far back as 1990. Methodologies for determining

the asset recovery rates incorporate estimating

future cash recoveries, net of applicable liquidation cost estimates, and discounting based on market-based risk factors applicable to a given asset’s

type and quality. The resulting estimated cash

recoveries are then used to derive the allowance

for loss on the receivables from these resolutions.

For failed institutions resolved using a whole

bank purchase and assumption transaction with

an accompanying loss-share agreement, the projected future loss-share payments andmonitoring

costs on the covered assets sold to the acquiring

institution under the agreement are considered in

determining the allowance for loss on the receivables from these resolutions. The loss-share cost

projections are based on the intrinsic value of the

covered assets. The intrinsic value is determined

using economic models that consider the quality and type of covered assets, current and future

market conditions, risk factors and estimated

asset holding periods.

Estimated asset recoveries are regularly

evaluated during the year, but remain subject

to uncertainties because of potential changes

in economic and market conditions. Continuing

economic uncertainties could cause the DIF’s
86 FDIC 2009 Annual Report

actual recoveries to vary significantly from current estimates.

Whole Bank Purchase and Assumption 

Transactions with Loss-sharing Agreements

The FDIC resolved 90 of the 140 failures in

2009 using a Whole Bank Purchase and Assumption resolution transaction with an accompanying

Loss-Share Agreement on assets purchased by

the acquirer. The acquiring institution assumes

all of the deposits and purchases essentially all

of the assets of a failed institution. The majority

of the commercial and residential assets are purchased under a loss-share agreement, where the

FDIC agreesto share in future losses experienced

by the acquirer on those assets covered under the

agreement. Loss-share agreements are used by

the FDIC to keep assets in the private sector and

minimize disruptions to loan customers.

Losses on the covered assets will be shared

between the acquirer and the FDIC in its capacity as receiver of the failed institution when losses

occur through the sale, foreclosure, loan modification, orthe write-down ofloansin accordance with

the terms of the loss-share agreement. The agreement typically covers a 5 to 10 year period with the

receiver covering 80 percent of the losses incurred

by the acquirer up to a stated threshold amount

(which varies by agreement) and the acquiring

bank covering 20 percent. Any losses above the

stated threshold amount will be reimbursed by the

receiver at 95 percent of the losses booked by the

acquirer. The estimated liability for loss-sharing is

accounted for by the receiver and is considered in

the determination of the DIF’s allowance for loss

against the corporate receivable from the resolution. As loss-share claims are asserted and proven,

DIF receiverships will satisfy these loss-share

payments using available liquidation funds and/or

amounts due from the DIF for funding the deposits

assumed by the acquirer (see Note 7).

Through December 31, 2009, 93 DIF receiverships are estimated to pay approximately $22.2

billion over the length of these loss-share agreements on approximately $126.4 billion in total

covered assets at the inception date of these

agreements. To date, 37 receiverships have made

loss-share payments totaling $892.2 million.

Financial instruments that potentially subject the DIF to concentrations of credit risk are

receivables from resolutions. The repayment of

DIF’s receivables from resolutions is primarily

influenced by recoveries on assets held by DIF

receiverships and payments on the covered assets

under loss-sharing agreements. The majority of

the $165.5 billion in remaining assets in liquidation ($41.4 billion) and current loss-share covered

assets($124.1 billion) are concentrated in commercial loans ($71.7 billion), residential loans ($70.3

billion), and securities ($14.7 billion). Most of the

assets in these asset types originated from failed

institutions located in California ($55.6 billion),

Florida ($15.7 billion), Alabama ($15.6 billion),

Texas ($11.3 billion), and Illinois ($7.3 billion).

5. Trust Preferred Securities

On January 15, 2009, subject to a systemic

risk determination, the Treasury, the FDIC and

the Federal Reserve Bank of New York executed

terms of a guarantee agreement with Citigroup to

provide protection against the possibility of unusually large losses on an asset pool of approximately

$301.0 billion of loans and securities backed by

residential and commercial real estate and other

such assetsthat would remain on the balance sheet
IV. Financial Statements and Notes 87

of Citigroup. The term of the loss-share guarantee

was 10 years for residential assets and 5 years for

non-residential assets. The FDIC exposure from

this guarantee was capped at $10 billion.

In consideration for its portion of the lossshare guarantee at inception, the FDIC received

3,025 shares of Citigroup’s designated cumulative perpetual preferred stock (Series G) with a

liquidation preference at the time of $1,000,000

per share for a total of $3.025 billion paying dividends at a rate of 8 percent annually. On July

30, 2009, all shares of preferred stock initially

received were exchanged for 3,025,000 of Citigroup Capital XXXIII trust preferred securities

(TruPs) with a liquidation amount of $1,000 per

security. The principal amount is due in 2039.

The equivalent exchange of $3.025 billion pays

a quarterly distribution at a rate of 8 percent

annually. The Treasury initially received $4.034

billion in preferred stock for its loss-share protection and received an equivalent, aggregate

amount of $4.034 billion in trust preferred securities at the time of the exchange for TruPs.

On December 23, 2009, Citigroup terminated

the loss-sharing agreement citing improvements

in its financial condition and in financial market stability. The FDIC incurred no loss from

the guarantee prior to termination of the agreement. In connection with the early termination

of the guarantee program, the Treasury and the

FDIC agreed that Citigroup would reduce the

combined $7.1 billion liquidation amount of the

TruPs by $1.8 billion. Pursuant to an agreement

between the Treasury and the FDIC, TruPs held

by the Treasury were reduced by $1.8 billion and

the FDIC initially retained all TruPs holdings of

$3.025 billion. The FDIC will transfer an aggregate liquidation amount of $800 million in TruPs

to the Treasury, plus any related interest, less any

payments made or required to be made by the

FDIC for guaranteed debt instruments issued by

Citigroup or any of its affiliates under the Temporary Liquidity Guarantee Program (TLGP; see

Note 16). This transfer will occur within 5 days

of the date on which no Citigroup debt remains

outstanding under the TLGP. The fair value of

the TruPs and related interest are recorded as

systemic risk assets described in Note 16.

The remaining $2.225 billion (par value) of

TruPs held by the FDIC are classified as available-for-sale debt securities in accordance with

FASB ASC Topic 320, Investments—Debt and 

Equity Securities. Upon termination of the guarantee agreement, the DIF recognized revenue of

$1.962 billion for the fair value of the TruPs. (See

Note 10, Other Revenue and Note 15, Disclosures 

About the Fair Value of Financial Instruments).

6. Property and Equipment, Net

Property and Equipment, Net 

at December 31

Dollars in Thousands

2009 2008

Land $ 37,352 $ 37,352

Buildings (including leasehold improvements) 295,265 281,401

Application software 

(including work-in-process) 179,479 173,872

Furniture, fixtures, and

equipment 117,430 84,574

Accumulated depreciation (240,709) (208,438)

Total $ 388,817 $ 368,761

The depreciation expense was $70 million

and $55 million for 2009 and 2008, respectively.
88 FDIC 2009 Annual Report

7. Liabilities Due to Resolutions

As of December 31, 2009, the DIF recorded

liabilities totaling $34.7 billion to resolution

entities representing the agreed-upon value of

assets transferred from the receiverships, at the

time of failure, to the acquirers/bridge institutions for use in funding the deposits assumed

by the acquirers/bridge institutions. Ninetyseven percent of these liabilities are due to failures resolved under a whole bank purchase and

assumption transaction, most with an accompanying loss-share agreement. The DIF satisfies

these liabilities either by directly sending cash

to the receiverships to fund loss-share and other

expenses or by offsetting receivables from resolutions when a receivership declares a dividend.

Inherent in these liabilities are $470 million in

unreimbursed deposit claims subrogated by the

DIF on behalf of the Temporary Liquidity Guarantee Program (see Note 16).

In addition, there were $150 million in unpaid

brokered deposit claims related to multiple

receiverships. The DIF pays these liabilities

when the claims are approved.

8. Contingent Liabilities for:

Anticipated Failure of Insured 

Institutions

The DIF records a contingent liability and a

loss provision for DIF-insured institutions that are

likely to fail, absent some favorable event such as

obtaining additional capital or merging, when the

liability is probable and reasonably estimable. The

contingent liability is derived by applying expected failure rates and loss rates to institutions based

on supervisory ratings, balance sheet characteristics, and projected capital levels.

During the year, the conditions of the banking industry continued to deteriorate. The difficult economic and credit environment continued

to challenge the soundness of many DIF-insured

institutions.The ongoingweaknessin housing and

commercial real estate markets led to asset quality problems and volatility in financial markets,

which hurt the banking industry performance and

weakened many institutions with significant portfolios of residential and commercial mortgages.

The impact of the economic deterioration in the

banking industry caused a significant increase in

the contingent loss reserve. As of December 31,

2009 and 2008, the contingent liabilitiesfor anticipated failure of insured institutions were $44.0

billion and $24.0 billion, respectively.

In addition to these recorded contingent liabilities, the FDIC has identified risk in the financial

services industry that could result in an additional loss 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 up to approximately $24 billion.

The actual losses, if any, will largely depend

on future economic and market conditions and

could differ materially from this estimate.

During 2009, 140 banks with combined assets

of $171.2 billion failed. It is uncertain how long

and how deep the current downturn will be.

Supervisory and market data suggest that the

banking industry will continue to experience

elevated levels of stress over the coming year.

The FDIC continues to evaluate the ongoing

risks to affected institutions in light of the existing economic and financial conditions, and the

extent to which such risks will continue to put

stress on the resources of the insurance fund.
IV. Financial Statements and Notes 89

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 $300 million and $200 million for the DIF as

of December 31, 2009 and 2008, respectively,

and has determined that there are no reasonably

possible losses from unresolved cases.

Other Contingencies

Representations and Warranties

In an effort to maximize the return from the

sale of assets from bank and thrift resolutions,

FDIC as receiver offered representations and

warranties, and guarantees on certain loan and

servicing rightssales. Although these representations and warranties were offered by the receiver, DIF guaranteed the obligations under these

agreements. In general, the guarantees, representations, and warranties relate to the completeness

and accuracy of loan documentation, the quality

of the underwriting standards used, the accuracy

of the delinquency status, and the conformity

of the loans with characteristics of the pool in

which they were sold at the time of sale.

As a result of loans and servicing rights sold

in connection with the asset disposition of IndyMac Federal Bank, the unpaid principal balance

for loans subject to representations and warranties increased by $184 billion to $195 billion as

of December 31, 2009. Since the receiverships

are the primary guarantors and they have sufficient funds to pay asserted claims, the DIF did

not record contingent liabilities from any of the

outstanding claims asserted in connection with

representations and warranties at December 31,

2009 and 2008.

In addition, until the contracts offering the

representations and warranties and guarantees

have expired, future losses could be incurred,

some as late as 2032. Consequently, the FDIC

believes it is possible that losses may be incurred

by the DIF from the universe of outstanding

contracts with unasserted representation and

warranty claims. However, because of the uncertainties surrounding the timing of when claims

may be asserted, the FDIC is unable to reasonably estimate a range of loss to the DIF from

outstanding contracts with unasserted representation and warranty claims.

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 and when a

receiver 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 2009 and 2008, the FDIC in its Corporate

capacity has not made any indemnification payments under such agreements and no amount
90 FDIC 2009 Annual Report

assets, net” and “Accounts payable and other liabilities” line items, respectively. Guarantee fees

are recognized as revenue on a straight-line basis

over the term of the notes.

The source of payment for the LLC-issued

debt is the collections from the LLC assets. If

cash flow collections from the LLC assets are

insufficient to cover the payments on the notes

in accordance with priority of payments, then the

FDIC as guarantor is required to make a guarantee payment for any shortfall. The estimated

loss of the guarantees to the DIF is based on the

discounted present value of the expected guarantee payments by the FDIC, reimbursements to

the FDIC for guarantee payments, and guarantee fee collections. Under both a base case and a

more stressful modeling scenario, the cash flows

from the LLC assets provide sufficient coverage

to fully pay the debts by their maturity dates.

Therefore, the estimated loss to the DIF from

these guarantees is zero.

As of December 31, 2009, the maximum estimated guarantee exposure equals the total outstanding debt of $2.1 billion.

9. Assessments

The FDI Act, as amended, requires a riskbased assessment system. The Act allows the

FDIC discretion in defining risk and, by regulation, the FDIC has established several assessment risk categories based upon supervisory and

capital evaluations. On March 4, 2009, the Board

issued a final rule on Assessments to: 1) make

it fairer and more sensitive to risk, 2) improve

the way the risk-based assessment system differentiates risk among insured institutions,

and 3) increase deposit insurance assessment

has been accrued in the accompanying financial

statements with respect to these indemnification

guarantees.

FDIC Guaranteed Debt of Limited Liability 

Companies

During 2009, the FDIC in its corporate capacity offered guarantees on loans issued by newlyformed limited liability companies (LLCs) that

were created to dispose of certain residential

mortgage loans, construction loans, and other

assets of two receiverships. The receiverships

transferred a portfolio of assets with an unpaid

principal balance of $5.8 billion to the LLCs. Private investors purchased a 40–50 percent ownership interest in the LLCs for $615 million in

cash and the LLCs issued notes of $2.1 billion to

the receiverships to partially fund the purchase

of the assets. The receiverships hold the remaining 50–60 percent equity interest in the LLCs.

In exchange for the guarantees, the DIF expects

to receive estimated fees totaling $71.4 million,

which equals one percent per annum over the

estimated life of the notes.

The term of the guarantees extends until the

earliest of 1) payment in full of the notes or 2) two

years following the maturity date of the notes (12

years). In the event of note payment default by

an LLC, the FDIC in its corporate capacity can

take one or more of the following remedies: 1)

accelerate the payment of the unpaid principal

amount of the notes; 2) sell the assets held as collateral; and 3) foreclose on the equity interests of

the debtor.

The DIF has recorded a receivable for the

estimated guarantee fees of $71.4 million and an

offsetting deferred revenue liability, included in

the “Interest receivable on investments and other
IV. Financial Statements and Notes 91

•	 On May 22, 2009, the FDIC adopted a final

rule imposing a 5 basis point special assessment on each insured depository institution’s

total assets minus Tier 1 capital as reported

in its report of condition as of June 30, 2009.

The special assessment of $5.5 billion was

collected on September 30, 2009, at the

same time the regular quarterly risk-based

assessment for the second quarter 2009 was

collected.

•	 On November 17, 2009, the FDIC issued a

Final Rule, Prepaid Assessments, to address

the DIF’s liquidity needs to pay for projected

near-term failures and to ensure that the

deposit insurance system remains industryfunded. Pursuant to the Rule, on December

30, 2009, a majority of insured depository

institutions prepaid estimated quarterly

risk-based assessments of $45.7 billion for

the period October 2009 through December

2012. The prepaid amount was based on

maintaining assessment rates at their current

levels through the end of 2010 and adopting a

uniform 3 basis point increase in assessment

rates effective January 1, 2011. An institution’s quarterly risk-based deposit insurance assessments thereafter will be offset

by the amount prepaid until that amount is

exhausted or until June 30, 2013, when any

amount remaining would be returned to the

institution.

	 Prepaid assessments were mandatory

for all institutions, but the FDIC exercised

its discretion as supervisor and insurer to

exempt an institution from the prepayment

requirement if the FDIC determined that

the prepayment would adversely affect the

safety and soundness of the institution. In

rates to raise assessment revenue to help meet

the requirements of the Restoration Plan. The

assessment rate averaged approximately 23.32

cents and 4.18 cents per $100 of the assessment

base, as defined in part 327.5(b) of FDIC Rules

and Regulations, for 2009 and 2008, respectively. (The assessment rate would have been 16.19

cents if the special assessment imposed on June

30, 2009 was excluded from the 2009 assessment

income.)

In compliance with provisions of the FDI Act,

as amended, and implementing regulations, the

FDIC is required to:

•	 annually establish and publish a designated

reserve ratio (DRR) within the statutory

range from 1.15 to 1.50 percent of estimated

insured deposits. As of December 31, 2009,

the DIF reserve ratio was (0.39) percent of

estimated insured deposits and the FDIC has

set the DRR at 1.25 percent for 2010;

•	 adopt a DIF restoration plan to return the

reserve ratio to 1.15 percent generally within

eight years, if the reserve ratio falls below

1.15 percent or is expected to fall below 1.15

percent within six months (see paragraph

titled, Amended Restoration Plan);

•	 annually determine if a dividend should be

paid, based on the statutory requirement generally to declare dividends for one-half of the

amount between 1.35 and 1.50 percent and

all amounts exceeding 1.50 percent.

Assessment Revenue

During 2009, the FDIC implemented actions

to supplement DIF’s revenue through a special

assessment and liquidity through prepaid assessments from insured depository institutions:
92 FDIC 2009 Annual Report

addition, institutions were allowed to request

exemption from payment under certain

circumstances.

Forthose institutionsthat prepaid assessments,

the DIF recognized revenue of $3.0 billion for the

fourth quarter insurance period. The remaining

prepaid amount of $42.7 billion is included in the

“Unearned revenue—prepaid assessments” line

item on the Balance Sheet. For those institutions

that did not prepay assessments, the “Assessments Receivable, net” line item of $281 million represents the estimated gross premiums

due from insured depository institutions for the

fourth quarter of the year. The actual deposit

insurance assessment for the fourth quarter was

billed and collected at the end of the first quarter of 2010. During 2009 and 2008, $17.7 billion

and $3.0 billion, respectively, were recognized as

assessment revenue from institutions.

The FDI Act, as amended, granted a one-time

assessment credit of approximately $4.7 billion

to certain eligible insured depository institutions (or their successors) based on the assessment base of the institution as of December 31,

1996, as compared to the combined aggregate

assessment base of all eligible institutions. Of

the credits granted, $2.7 million remained as of

December 31, 2009.

Amended Restoration Plan

A Federal Register notice for Amendment of 

FDIC Restoration Plan was issued on October

2, 2009, amending DIF’s Restoration Plan which

was originally adopted on October 7, 2008 and

subsequently amended on February 27, 2009.

The Amended Restoration Plan addresses the

need to return the DIF to its mandated minimum

reserve ratio of 1.15 percent of estimated insured

deposits. The Restoration Plan provided for the

following: 1) the period of the Plan was extended

to eight years; 2) current assessment rates will be

maintained through December 31, 2010, with a

uniform increase in risk-based assessment rates

of 3 basis points effective January 1, 2011; and 3)

at least semi-annually hereafter, the FDIC will

update its loss and income projections for the

Fund and, if necessary, will increase assessment

rates prior to the end of the eight-year period, to

return the reserve ratio to 1.15 percent.

Assessments Related to FICO

Assessments continue to be levied on institutions for payments of the interest on obligations

issued by the Financing Corporation (FICO).

The FICO was established as a mixed-ownership government corporation to function solely

as a financing vehicle for the former FSLIC. The

annual FICO interest obligation of approximately $790 million is paid on a pro rata basis using

the same rate for banks and thrifts. The FICO

assessment has no financial impact on the DIF

and is separate from deposit insurance assessments. The FDIC, as administrator of the DIF,

acts solely as a collection agent for the FICO.

During 2009 and 2008, approximately $784 million and $791 million, respectively, was collected

and remitted to the FICO.
IV. Financial Statements and Notes 93

10. Other Revenue

Other Revenue 

for the Years Ended December 31

Dollars in Thousands

2009 2008

Guarantee termination

fees $ 2,053,825 $ 0

Debt guarantee 

surcharges 871,746 0

Dividends and interest on 

Citigroup trust preferred 

securities 231,227 0

Other 16,813 31,017

Total $ 3,173,611 $ 31,017

Guarantee Termination Fees

Bank of America

In January 2009, the FDIC, Treasury, and the

Federal Reserve Bank of New York (federal parties) signed a Summary of Terms (Term Sheet)

with Bank of America to guarantee or lend

against a pool of up to $118.0 billion of financial

instruments consisting of securities backed by

residential and commercial real estate loans and

corporate debt and related derivatives. In May

2009, prior to completing definitive documentation, Bank of America notified the federal parties of its desire to terminate negotiations with

respect to the guarantee contemplated in the Term

Sheet. All parties agreed that Bank of America

received value for entering into the Term Sheet

and that the federal parties should be compensated for out-of-pocket expenses and a fee equal to

the amount Bank of America would have paid for

the guarantee from the date of the signing of the

Term Sheet through the termination date. Under

the terms of the settlement, the federal parties

received a total of $425 million. Of this amount,

the FDIC received and recognized revenue of

$92 million for the DIF. No losses were borne by

the FDIC prior to the settlement.

Citigroup

In connection with the termination of the lossshare agreement with Citigroup, the DIF recognized revenue of $1.962 billion for the fair value of

the trust preferred securities received as consideration for the guarantee as agreed to in the termination and recorded $231 million in dividends and

interest from Citigroup (see Note 5).

Surcharges on FDIC-Guaranteed Debt

On June 3, 2009, the FDIC published a final

rule in the Federal Register amending the Temporary Liquidity Guarantee Program (TLGP) to

provide a limited extension of the Debt Guarantee Program (DGP) for insured depository institutions and other participating entities (see Note

16). The amendment also imposed surcharges

on FDIC-guaranteed debt issued after March 31,

2009, with a maturity of one year or more. The

DGP extensions, coupled with the surcharges,

were designed to facilitate an orderly transition period for all participants to return to the

non-guaranteed debt market and to reduce the

potential for market disruptions at the end of the

program. Unlike other TLGP fees, which are

reserved for projected TLGP losses, the amount

of surcharges collected were deposited into the

DIF. During 2009, the DIF collected surcharges

in the amount of $872 million.
94 FDIC 2009 Annual Report

11. Operating Expenses

Operating expenses were $1.3 billion for 2009,

compared to $1 billion for 2008. The chart below

lists the major components of operating expenses.

Operating Expenses 

for the Years Ended December 31

Dollars in Thousands

2009 2008

Salaries and benefits $ 901,836 $ 702,040

Outside services 244,479 159,170

Travel 97,744 67,592

Buildings and leased 

space 65,286 53,630

Software/Hardware 

maintenance 40,678 29,312

Depreciation of property and equipment 70,488 55,434

Other 37,563 32,198

Services reimbursed 

by TLGP (3,613) (2,352)

Services billed to resolution entities (183,362) (63,534)

Total $ 1,271,099 $ 1,033,490

12. Provision for Insurance Losses

Provision for insurance losses was $57.7 billion for 2009 and $41.8 billion for 2008. The following chart lists the major components of the

provision for insurance losses.

Provision for Insurance Losses 

for the Years Ended December 31

Dollars in Thousands

2009 2008

Valuation Adjustments

Closed banks 

and thrifts $ 37,586,603 $ 17,974,530

Other assets (7,885) 7,377

Total Valuation 

Adjustments 37,578,718 17,981,907

Contingent Liabilities 

Adjustments:

Anticipated failure of 

insured institutions 20,033,054 23,856,928

Litigation 100,000 0

Total Contingent 

Liabilities Adjustments 20,133,054 23,856,928

Total $ 57,711,772 $ 41,838,835

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).
IV. Financial Statements and Notes 95

Eligible FDIC employees also may participate

in a FDIC-sponsored tax-deferred 401(k) savings plan with matching contributions up to five

percent. Under the Federal Thrift Savings Plan

(TSP), the FDIC provides FERS employees with

an automatic contribution of 1 percent of pay and

an additional matching contribution up to 4 percent of pay. CSRS employees also can contribute

to the TSP. However, CSRS employees do not

receive agency matching contributions.

Pension Benefits and 

Savings Plans Expenses 

for the Years Ended December 31

Dollars in Thousands

2009 2008

Civil Service Retire- ment System $ 6,401 $ 6,204

Federal Employees 

Retirement System 

(Basic Benefit) 56,451 44,073

FDIC Savings Plan 25,449 21,786

Federal Thrift Savings 

Plan 20,503 16,659

Total $ 108,804 $ 88,722

Postretirement Benefits Other Than 

Pensions

The DIF has no postretirement health insurance liability, since all eligible retirees are covered by the Federal Employees Health Benefit

(FEHB) program. FEHB is administered and

accounted for by the OPM. In addition, OPM

pays the employer share of the retiree’s health

insurance premiums.

The FDIC provides certain life and dental

insurance coverage for its eligible retirees, the

retirees’ beneficiaries, and covered dependents.

Retirees eligible for life and dental insurance

coverage are those who have qualified due to: 1)

immediate enrollment upon appointment or five

years of participation in the plan and 2) eligibility for an immediate annuity. The life insurance

program provides basic coverage at no cost to

retirees and allows converting optional coverages to direct-pay plans. For the dental coverage,

retirees are responsible for a portion of the dental

premium.

The FDIC has elected not to fund the postretirement life and dental benefit liabilities. As a

result, the DIF recognized the underfunded status (difference between the accumulated postretirement benefit obligation and the plan assets at

fair value) as a liability. Since there are no plan

assets, the plan’s benefit liability is equal to the

accumulated postretirement benefit obligation.

At December 31, 2009 and 2008, the liability was

$145.0 million and $114.1 million, respectively,

which is recognized in the “Postretirement benefit liability” line item on the Balance Sheet. The

cumulative actuarial gains/losses (changes in

assumptions and plan experience) and prior service costs/credits (changes to plan provisions that

increase or decrease benefits) were ($2.6) million and $25.0 million at December 31, 2009 and

2008, respectively. These amounts are reported

as accumulated other comprehensive income

in the “Unrealized postretirement benefit (loss)

gain” line item on the Balance Sheet.

The DIF’s expenses for postretirement benefits for 2009 and 2008 were $7.7 million each

year, which are included in the current and prior

year’s operating expenses on the Statement of

Income and Fund Balance. The changes in the

actuarial gains/losses and prior service costs/

credits for 2009 and 2008 of ($27.6) million and
96 FDIC 2009 Annual Report

$5.3 million, respectively, are reported as other

comprehensive income in the “Unrealized postretirement benefit (loss) gain” line item. Key

actuarial assumptions used in the accounting for

the plan include the discount rate of 5.25 percent,

the rate of compensation increase of 4.10 percent,

and the dental coverage trend rate of 7.0 percent.

The discount rate of 5.25 percent is based upon

rates of return on high-quality fixed income

investments whose cash flows match the timing

and amount of expected benefit payments.

14. Commitments and 

Off-Balance-Sheet Exposure

Commitments:

Leased Space

The FDIC’s lease commitments total $158

million for future years. The lease agreements

contain escalation clauses resulting in adjustments, usually on an annual basis. The DIF recognized leased space expense of $29 million and

$21 million for the years ended December 31,

2009 and 2008, respectively.

Leased Space Commitments

Dollars in Thousands

2010 2011 2012 2013 2014

2015/

Thereafter

$ 37,630 $ 37,553 $ 30,982 $ 21,182 $ 17,995 $ 13,041

Off-Balance-Sheet Exposure:

Deposit Insurance

As of December 31, 2009, the estimated

insured deposits for DIF were $5.4 trillion. This

estimate is derived primarily from quarterly

financial data submitted by insured depository

institutions to the FDIC. This estimate represents the accounting loss that would be realized

if all insured depository institutions were to fail

and the acquired assets provided no recoveries.
IV. Financial Statements and Notes 97

15. Disclosures About the Fair Value of Financial Instruments

Financial assets recognized and measured at fair value on a recurring basis at each reporting date

include cash equivalents (Note 2), the investment in U.S. Treasury obligations (Note 3) and trust preferred securities (Note 5). The following tables present the DIF’s financial assets measured at fair value

as of December 31, 2009 and 2008.

Assets Measured at Fair Value at December 31, 2009

Dollars in Thousands

Fair Value Measurement Using

Quoted Prices in 

Active Markets for 

Identical Assets

(Level 1)

Significant Other 

Observable 

Inputs

(Level 2)

Significant 

Unobservable 

Inputs

(Level 3)

Total Assets 

at Fair Value

Assets

Cash and cash equivalents 

(Special U.S. Treasuries)1 $ 54,092,423 $ 54,092,423

Investment in U.S. Treasury 

Obligations (Available-for-Sale)2 5,486,799 5,486,799

Trust preferred securities 

(Available-for-Sale) $ 1,961,824 1,961,824

Trust preferred securities held for 

UST (Note 16) 705,375 705,375

Total Assets $ 59,579,222 $ 0 $ 2,667,199 $ 62,246,421

1

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

U.S. Bureau of Public Debt.

2

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

Assets Measured at Fair Value at December 31, 2008

Dollars in Thousands

Fair Value Measurement Using

Quoted Prices in 

Active Markets for 

Identical Assets

(Level 1)

Significant Other 

Observable 

Inputs

(Level 2)

Significant 

Unobservable 

Inputs

(Level 3)

Total Assets 

at Fair Value

Assets

Cash and cash equivalents 

(Special U.S. Treasuries)1 $ 1,011,430 $ 0 $ 0 $ 1,011,430

Investment in U.S. Treasury 

Obligations (Available-for-Sale)2 27,859,080 0 0 27,859,080

Total Assets $ 28,870,510 $ 0 $ 0 $ 28,870,510

1

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

U.S. Bureau of Public Debt.

2

 The investment in U.S. Treasury obligations is measured based on prevailing market yields for federal government entities.
98 FDIC 2009 Annual Report

In exchange for prior loss-share guarantee

coverage provided to Citigroup as described in

Note 5, the FDIC and the Treasury received trust

preferred securities. The fair value of the trust

preferred securities was derived from a proprietary valuation model developed by the Treasury

to estimate the value of financial instruments

obtained as consideration for actions taken to

stabilize the financial system under the Troubled

Asset Relief Program pursuant to the Emergency

Economic Stabilization Act of 2008. The model

establishes the fair value of the TruPs based on

the discounted present value of expected cash

flows. Key inputs include assumptions about

default probabilities, dividend deferral probabilities and call options. The FDIC independently

performed benchmark procedures to ensure the

reasonableness of the model outputs.

Some of the DIF’s financial assets and liabilities are not recognized at fair value but are recorded at amounts that approximate fair value due to

their short maturities and/or comparability with

current interest rates. Such items include interest

receivable on investments, assessment receivables, other short-term receivables, accounts payable and other liabilities.

The net receivables from resolutions primarily

include the DIF’s subrogated claim arising from

obligations to insured depositors. The resolution

entity assets that will ultimately be used to pay

the corporate subrogated claim are valued using

discount rates that include consideration of market risk. These discounts ultimately affect the

DIF’s allowance for loss against the net receivables from resolutions. Therefore, the corporate

subrogated claim indirectly includes the effect of

discounting and should not be viewed as being

stated in terms of nominal cash flows.

Although the value of the corporate subrogated claim is influenced by valuation of resolution

entity assets (see Note 4), such valuation is not

equivalent to the valuation of the corporate claim.

Since the corporate claim is unique, not intended

for sale to the private sector, and has no established market, it is not practicable to estimate a

fair value.

The FDIC believes that a sale to the private

sector of the corporate claim would require

indeterminate, but substantial, discounts for

an interested party to profit from these assets

because of credit and other risks. In addition,

the timing of resolution entity payments to the

DIF on the subrogated claim does not necessarily correspond with the timing of collections on

resolution entity assets. Therefore, the effect of

discounting used by resolution entities should

not necessarily be viewed as producing an estimate of fair value for the net receivables from

resolutions.

There is no readily available marketfor guarantees associated with systemic risk (see Note 16).

16. Systemic Risk Transactions

Pursuant to systemic risk determinations,

the FDIC established the Temporary Liquidity

Guarantee Program (TLGP) for insured depository institutions, designated affiliates and certain

holding companies during 2008, and provided

loss-share guarantee assistance to Citigroup

on a pool of covered assets in 2009, which was

subsequently terminated as described in Note 5.

The FDIC received consideration in exchange for

guarantees issued under the TLGP and guarantee assistance provided to Citigroup.
IV. Financial Statements and Notes 99

At inception of the guarantees, the DIF recognized a liability for the non-contingent fair value

of the obligation the FDIC has undertaken to

stand ready to perform over the term of the guarantees. As required by FASB ASC 460, Guarantees, this non-contingent liability was measured

at the amount of consideration received in

exchange for issuing the guarantee. As systemic

risk expenses are incurred (including contingent

liabilities and valuation allowances), the DIF will

reduce deferred revenue and recognize an offsetting amount as systemic risk revenue. Revenue

recognition will also occur during the term of the

guarantee if a supportable and documented analysis has determined that the consideration and

any related interest/dividend income received

exceeds the projected systemic risk losses. Any

deferred revenue not absorbed by losses during

the guarantee period will be recognized as revenue to the DIF.

Temporary Liquidity Guarantee Program

The FDIC established the TLGP on October

14, 2008 in an effort to counter the system-wide

crisis in the nation’s financial sector. The TLGP

consists of two components: (1) the Debt Guarantee Program (DGP), and (2) the Transaction

Account Guarantee Program (TAG). On November 26, 2008, a final rule for the program was

published in the Federal Register and codified in

part 370 of title 12 of the Code of Federal Regulations (12 CFR Part 370).

Debt Guarantee Program

The Debt Guarantee Program initially permitted participating entities to issue FDIC-guaranteed senior unsecured debt between October

14, 2008 and June 30, 2009, with the FDIC’s

guarantee for such debt to expire on the earlier

of the maturity of the debt (or the conversion

date, for mandatory convertible debt issued on

or after February 27, 2009) or June 30, 2012. To

reduce market disruption at the conclusion of the

DGP and to facilitate the orderly phase-out of the

program, the FDIC issued a final rule on June 3,

2009, that extended the period during which participating entities could issue FDIC-guaranteed

debt, through October 31, 2009. Concurrently,

the FDIC extended the expiration of the guarantee period from June 30, 2012 to December 31,

2012. Upon the expiration of the extended DGP,

the final rule grants existing participating entities access to a limited six-month emergency

FDIC guarantee facility expiring on April 30,

2010. The FDIC’s guarantee for all debt expires

on the earliest of the mandatory convertible

debt, the stated date of maturity, or December

31, 2012.

Fees for participation in the DGP are reserved

for possible TLGP losses. Since inception, the

FDIC has recorded $8.3 billion of guarantee fees

and fees of $1.2 billion from participating entities that elected to issue senior unsecured nonguaranteed debt. During 2009, the total amount

collected under the DGP was $7.1 billion, comprised of $6.1 billion for guaranteed debt and

$1.0 billion for non-guaranteed debt. The fees

are included in the “Cash and cash equivalents—

restricted—systemic risk” line item and recognized as “Deferred revenue-systemic risk” on

the Balance Sheet.

Additionally, as described in Note 5, the FDIC

holds $800 million (par value) of Citigroup trust

preferred securities (and any related interest) as

security in the event payments are required to be

made by the FDIC for guaranteed debt instru-
100 FDIC 2009 Annual Report

ments issued by Citigroup or any of its affiliates

under the TLGP. At December 31, 2009, the fair

value of these securities totaled $705.4 million,

and was determined using the valuation methodology described in Note 15 for other trust preferred securities held by the DIF. Because these

TruPs are held on behalf of the Treasury, the

decline in value has no impact on the fund balance of the DIF.

The FDIC’s payment obligation under the

DGP will be triggered by a payment default. In

the event of default, the FDIC will continue to

make scheduled principal and interest payments

under the terms of the debt instrument through

its maturity, or in the case of mandatory convertible debt, through the mandatory conversion date. The debtholder or representative must

assign to the FDIC the right to receive any and

all distributions on the guaranteed debt from any

insolvency proceeding, including the proceeds

of any receivership or bankruptcy estate, to the

extent of payments made under the guarantee.

Since inception of the program, $618 billion

in total guaranteed debt has been issued. To

date, one debt issuer has defaulted on guaranteed debt of $2.0 million. Eighty-four financial

entities (54 insured depository institutions and

30 affiliates and holding companies) had $309

billion in guaranteed debt outstanding at yearend 2009. At December 31, 2009, the contingent

liability for this guarantee was $87.9 million and

is included in the “Contingent liability for Systemic Risk” line item. The FDIC believes that it

is reasonably possible that additional estimated

losses of approximately $2.5 billion could occur

under the DGP.

Transaction Account Guarantee Program

The Transaction Account Guarantee Program

provides unlimited coverage for non-interest bearing transaction accounts held by insured depository

institutions on all deposit amounts exceeding the

fully insured limit (generally $250,000). In August

2009, the FDIC extended the expiration date of the

TAG program from December 31, 2009 to June 30,

2010. During 2009, the FDIC collected TAG fees of

$639.2 million which are earmarked for TLGP possible losses and payments.

Upon the failure of a participating insured depository institution, payment of guaranteed claims of

depositors with non-interest bearing transaction

accounts are funded with TLGP restricted cash. The

FDIC will be subrogated to these claims of depositors against the failed entity, and dividend payments

by the receivership are deposited back into TLGP

restricted accounts.

At December 31, 2009, the “Receivables and

other assets—systemic risk” line item includes

$187.5 million of estimated TAG fees due from

insured depository institutions. Thisreceivable was

collected at the end of the first quarter of 2010.

The contingent liability resulting from the

anticipated failure of insured institutions participating in the TAG was $1.3 billion at December

31, 2009. For the 2009 failures, estimated losses

of $1.7 billion were recorded for the non-interest

bearing transaction accounts. The provision for

anticipated failures and the loss recorded at resolution are both recorded as “Systemic risk expenses” with a corresponding amount of guarantee

fees recognized as “Systemic risk revenue.” The

FDIC believes that it is reasonably possible that

additional estimated losses of approximately $721

million could occur under the TAG.
IV. Financial Statements and Notes 101

As of December 31, 2009, the maximum estimated exposure under the TAG is $834 billion. 

However, 525 institutions elected to exit the TAG 

program after December 31, 2009. The reported 

TAG deposits associated with these institutions 

at December 31, 2009, totaled $568 billion. Consequently, the maximum exposure under the 

TAG as of January 1, 2010, is estimated to be 

$266 billion.

Systemic Risk Activity at December 31, 2009

Dollars in Thousands

Cash and cash 

equivalents—

restricted—

systemic risk 

Receivables 

and other 

assets—

systemic risk

Deferred 

revenue—

systemic risk

Contingent 

liability—

systemic risk

Revenue/

Expenses—

systemic risk

Balance at 01-01-09 $ 2,377,387 $ 1,138,132 $ (2,077,880) $ (1,437,638)

Guaranteed and non-guaranteed debt fees collected 7,066,423 (1,026,870) (6,039,553)

TAG fees collected 639,176 (89,977) (549,199)

Receivable for TAG fees 187,541 (187,541)

Receivable for TAG accounts at failed institutions 4,124,849

TruPs and accrued interest held for UST 801,422 (801,422)

Market value adjustment on TruPs held for UST (94,624) 94,624 

Estimated losses for TAG accounts at failed institutions (1,741,653) 1,741,653 $ 1,741,653

Provision for TLGP losses in future failures (25,672) 25,672 (25,672)

Default of guaranteed debt issued by a failed bank (16) 16 2,033

Overnight investment interest collected 6,085 (6,085)

TLGP operating expenses 3,612 3,612 

Reimbursement to DIF for TLGP operating expenses 

incurred

(3,658,466)

Totals $ 6,430,589 $ 3,298,820(a) $ (7,847,447) $ (1,411,966) $ 1,721,626 

(a) Total may not equal the line item due to rounding
102 FDIC 2009 Annual Report

17. Subsequent Events

Subsequent events have been evaluated

through June 14, 2010, the date the financial

statements are available to be issued.

FDIC Guaranteed Debt of Limited 

Liability Companies

During 2010, the FDIC in its corporate capacity offered guarantees on $997.4 million in

purchase money notes issued by newly-formed

limited liability companies (LLCs). The terms

of the guarantees expire no later than the final

note maturing in 2020. The LLCs were created

to dispose of $4.6 billion of performing and

non-performing commercial and residential real

estate loans as well as related assets purchased

from multiple receiverships (multibank structured transactions). Private investors purchased

40-50 percent ownership interests in the LLCs,

with the receiverships holding the remaining

50-60 percent equity interest. In exchange for the

guarantees, the DIF expects to receive estimated

fees totaling $29.0 million. Based upon modeling scenarios, the cash flows from the assets of

each LLC provide sufficient coverage to defease

the debts by their maturity dates. Therefore, the

estimated loss to the DIF from these guarantees

is zero.

During 2010, FDIC-guaranteed notesissued by

three LLCs to receiverships during 2009 and 2010

were sold to private investors. The timely payment of principal due on the notes will continue to

be fully guaranteed by the FDIC (see Note 8).

FDIC Guaranteed Debt of Notes

On March 12, 2010, the FDIC issued $1.8 billion of notes backed by approximately $3.6 billion of residential mortgage-backed securities

(RMBS) from seven failed bank receiverships.

The underlying securities were sold to a statutory trust, which subsequently issued two series of

senior notes. The notes mature in 2038 and 2048

and are backed by the RMBS. Investors included banks, investment funds, insurance funds,

and pension funds. The $1.8 billion in proceeds

will go to the seven failed bank receiverships

and eventually be used to pay creditors, including the DIF. This will maximize recoveries for

the receiverships and recover substantial funds

for the DIF. The FDIC, in its corporate capacity, will fully and unconditionally guarantee the

timely payment of principal and interest due and

payable on the senior notes. In exchange for the

guarantees, the DIF expects to receive monthly

payments based on the outstanding principal balance of the senior notes.

Amendment of the TLGP to Extend the 

Transaction Account Guarantee Program 

(TAG)

An Interim Rule with request for comments, 

issued on April 19, 2010, amends the TLGP to

extend the expiration date for the TAG from June

30, 2010 to December 31, 2010, and grants the

FDIC discretion to extend the program to December 31, 2011, without additional rulemaking, if

economic conditions warrant such an extension.

Assessment rates for institutions participating

in the TAG remain unchanged under the interim rule. Additionally, the interim rule would:

1) require TAG assessment reporting based on

average daily account balances; 2) reduce the

maximum interest rate for qualifying negotiable

order of withdrawal (NOW) accounts guaranteed pursuant to the TAG to 0.25 percent from
IV. Financial Statements and Notes 103

0.50 percent; 3) provide an irrevocable, one-time

opportunity for institutions currently participating in the TAG to opt-out of the program, effective on July 1, 2010; and 4) establish conforming

disclosure requirements for institutions that optout of and those that continue to participate in

the extended program.

Proposed Revision of the Deposit 

Insurance Assessment System

On April 13, 2010, the FDIC Board of Directors approved for issuance a Notice of Proposed

Rulemaking on Assessments (NPR) to revise the

assessmentsystem applicable to large banks. The

NPR would eliminate risk categories and the use

of long-term debt issuer ratings, and replace the

financial ratios currently used with a scorecard

consisting of well-defined financial measures

that are more forward looking and better suited

for large institutions. Additionally, the proposal

would alter the assessment rates applicable to all

insured depository institutions to ensure that the

revenue collected under the proposed assessment

system would approximately equal that under the

existing assessment system.

2010 Failures Through June 14, 2010

Through June 14, 2010, 82 insured institutions failed with total losses to the DIF estimated

to be $16.8 billion.
104 FDIC 2009 Annual Report

FSLIC Resolution Fund (FRF)

FSLIC Resolution Fund Balance Sheet at December 31

Dollars in Thousands

2009 2008

Assets

Cash and cash equivalents (Note 2) $ 3,470,125 $ 3,467,227

Receivables from thrift resolutions and other assets, net (Note 3) 32,338 34,952

Receivables from U.S. Treasury for goodwill judgments (Note 4) 405,412 142,305

Total Assets $ 3,907,875 $ 3,644,484

Liabilities 

Accounts payable and other liabilities $ 2,972 $ 8,066

Contingent liabilities for litigation losses and other (Note 4) 405,412 142,305

Total Liabilities 408,384 150,371

Resolution Equity (Note 5)

Contributed capital 127,847,696 127,442,179

Accumulated deficit (124,348,205) (123,948,066)

Total Resolution Equity 3,499,491 3,494,113 

Total Liabilities and Resolution Equity $ 3,907,875 $ 3,644,484

The accompanying notes are an integral part of these financial statements.
IV. Financial Statements and Notes 105

FSLIC Resolution Fund Statement of Income and Accumulated Deficit 

for the Years Ended December 31

Dollars in Thousands

2009 2008

Revenue

Interest on U.S. Treasury obligations $ 3,167 $ 56,128

Other revenue 5,276 7,040

Total Revenue 8,443 63,168

Expenses and Losses

Operating expenses 4,905 3,188

Provision for losses 2,051 (891)

Goodwill/Guarini litigation expenses (Note 4) 408,997 254,247

Recovery of tax benefits (10,279) (26,846)

Other expenses 2,908 11,623

Total Expenses and Losses 408,582 241,321

Net Loss (400,139) (178,153)

Accumulated Deficit—Beginning (123,948,066) (123,769,913)

Accumulated Deficit—Ending $ (124,348,205) $ (123,948,066)

The accompanying notes are an integral part of these financial statements.
106 FDIC 2009 Annual Report

FSLIC Resolution Fund Statement of Cash Flows for the Years Ended December 31 

Dollars in Thousands

2009 2008

Operating Activities

Net Loss $ (400,139) $ (178,153)

Adjustments to reconcile net loss to net cash used by operating 

activities:

Provision for losses 2,051 (891)

Change In Operating Assets and Liabilities:

Decrease in receivables from thrift resolutions and other assets 563 751

(Decrease)/Increase in accounts payable and other liabilities (5,094) 3,791

Increase in contingent liabilities for litigation losses and other 263,107 106,954

Net Cash Used by Operating Activities (139,512) (67,548)

Financing Activities

Provided by:

U.S. Treasury payments for goodwill litigation (Note 4) 142,410 142,642

Used by:

Payments to Resolution Funding Corporation (Note 5) 0 (225,000)

Net Cash Provided/(Used) by Financing Activities 142,410 (82,358)

Net Increase/(Decrease) in Cash and Cash Equivalents 2,898 (149,906)

Cash and Cash Equivalents—Beginning 3,467,227 3,617,133

Cash and Cash Equivalents—Ending $ 3,470,125 $ 3,467,227 

The accompanying notes are an integral part of these financial statements.
IV. Financial Statements and Notes 107

Notes to the Financial Statem

FSLIC Resolut

December 31, 2009 and 20

1. Legislative History and 

Operations/Dissolution of the 

FSLIC Resolution Fund

Legislative History

The Federal Deposit Insurance Corporation (FDIC) is the independent deposit insurance agency created by Congress in 1933 to

maintain stability and public confidence in the

nation’s banking system. Provisions that govern

the operations of the FDIC are generally found

in the Federal Deposit Insurance (FDI) Act, as

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

out the purposes of the FDI Act, as amended, the

FDIC insures the deposits of banks and savings

associations, and in cooperation with other federal and state agencies promotes the safety and

soundness of insured depository institutions by

identifying, monitoring and addressing risks to

the deposit insurance fund established in the FDI

Act, as amended. In addition, FDIC is charged

with responsibility for the sale of remaining

assets and satisfaction of liabilities associated

with the former Federal Savings and Loan Insurance Corporation (FSLIC) and the Resolution

Trust Corporation (RTC).

The U.S. Congress created the FSLIC

through the enactment of the National Housing

Act of 1934. The Financial Institutions Reform,

Recovery, and Enforcement Act of 1989 (FIRREA) abolished the insolvent FSLIC, created the

FSLIC Resolution Fund (FRF), and transferred

the assets and liabilities of the FSLIC to the FRFexcept those assets and liabilities transferred to

the RTC-effective on August 9, 1989. Further,

the FIRREA established the Resolution Funding Corporation (REFCORP) to provide part

of the initial funds used by the RTC for thrift

resolutions.

The RTC Completion Act of 1993 (RTC Completion Act) terminated the RTC as of December

31, 1995. All remaining assets and liabilities of

the RTC were transferred to the FRF on January

1, 1996. Today, the FRF consists of two distinct

pools of assets and liabilities: one composed of

the assets and liabilities of the FSLIC transferred

to the FRF upon the dissolution of the FSLIC

(FRF-FSLIC), and the other composed of the

RTC assets and liabilities(FRF-RTC). The assets

of one pool are not available to satisfy obligations of the other.

The FDIC is the administrator of the FRF and

the Deposit Insurance Fund. These funds are

maintained separately to carry out their respective mandates.

Operations/Dissolution of the FRF

The FRF will continue operations until all of

its assets are sold or otherwise liquidated and all

of its liabilities are satisfied. Any funds remaining in the FRF-FSLIC will be paid to the U.S.

Treasury. Any remaining funds of the FRF-RTC

will be distributed to the REFCORP to pay the

interest on the REFCORP bonds. In addition,

the FRF-FSLIC has available until expended

$602.2 million in appropriations to facilitate, if

required, efforts to wind up the resolution activity of the FRF-FSLIC.

The FDIC has conducted an extensive review

and cataloging of FRF’s remaining assets and

liabilities. Some of the issues and items that

remain open in FRF are: 1) criminal restituti
108 FDIC 2009 Annual Report

orders (generally have from 3 to 8 years remaining to enforce); 2) collections of settlements and

judgments obtained against officers and directors and other professionals responsible for

causing or contributing to thrift losses (generally have up to 10 years remaining to enforce);

3) numerous assistance agreements entered into

by the former FSLIC (FRF could continue to

receive tax benefits sharing through year 2013);

4) goodwill litigation (no final date for resolution

has been established; see Note 4); and 5) affordable housing program monitoring (requirements

can exceed 25 years). The FRF could potentially

realize substantial recoveries from the tax benefits sharing of up to approximately $231 million; however, any associated recoveries are not

reflected in FRF’s financial statements given the

significant uncertainties surrounding the ultimate outcome.

Receivership Operations

The FDIC is responsible for managing and

disposing of the assets of failed institutions in

an orderly and efficient manner. The assets held

by receivership entities, and the claims against

them, are accounted for separately from FRF

assets and liabilities to ensure that receivership

proceeds are distributed in accordance with

applicable laws and regulations. Also, the income

and expenses attributable to receiverships are

accounted for as transactions of those receiverships. Receiverships are billed by the FDIC for

services provided on their behalf.

2. Summary of Significant 

Accounting Policies

General

These financial statements pertain to the

financial position, results of operations, and cash

flows of the FRF and are presented in accordance with U.S. generally accepted accounting

principles (GAAP). As permitted by the Federal

Accounting Standards Advisory Board’s Statement of Federal Financial Accounting Standards 34, The Hierarchy of Generally Accepted 

Accounting Principles, Including the Application 

of Standards Issued by the Financial Accounting 

Standards Board, the FDIC prepares financial

statements in conformity with standards promulgated by the Financial Accounting Standards

Board (FASB). These statements do not include

reporting for assets and liabilities of resolution

entities because these entities are legally separate and distinct, and the FRF does not have any

ownership interests in them. Periodic and final

accountability reports of resolution entities are

furnished to courts, supervisory authorities, and

others upon request.

Use of Estimates

Management makes estimates and assumptionsthat affect the amountsreported in the financial statements and accompanying notes. Actual

results could differ from these estimates. Where

it is reasonably possible that changes in estimates

will cause a material change in the financial

statements in the near term, the nature and extent

of such changes in estimates have been disclosed.

The more significant estimatesinclude allowance

for losses on receivables from thrift resolutions

and the estimated losses for litigation.
IV. Financial Statements and Notes 109

Cash Equivalents

Cash equivalents are short-term, highly liquid

investments consisting primarily of U.S. Treasury Overnight Certificates.

Provision for Losses

The provision for losses represents the change

in the valuation of the receivables from thrift

resolutions and other assets.

Disclosure about Recent Accounting 

Pronouncements

•	 Financial Accounting Standards Board

(FASB) Accounting Standards Codification

(ASC) 105, Generally Accepted Accounting Principles (formerly SFAS No. 168, The 

FASB Accounting Standards Codification 

and the Hierarchy of Generally Accepted 

Accounting Principles—a replacement of 

FASB Statement No. 162, issued in June

2009) became effective for financial statements covering periods ending after September 15, 2009. The FDIC follows accounting

standards set by the FASB. On July 1, 2009,

the FASB ASC was launched and became the

sole source of authoritative accounting principles applicable to the FDIC.

	 All existing standards that were used to

create the Codification have become superseded. As a result, references to generally

accepted accounting principles in these

Notes will consist of the numbers used in the

Codification and, if applicable, the former

pronouncement number. The Codification’s

purpose was not to create new accounting

or reporting guidance, but to organize and

simplify authoritative GAAP literature. Consequently, there will be no change to FRF’s

financial statements due to the implementation of this Statement.

•	 SFAS No. 167, Amendments to FASB Interpretation No. 46(R), was issued by the FASB

in June 2009, and subsequently codified

upon issuance of Accounting Standards

Update No. 2009-17, Consolidations (ASC

810)—Improvements to Financial Reporting 

by Enterprises Involved with Variable Interest Entities. SFAS 167, effective for reporting

periods beginning after November 15, 2009,

modifies the former quantitative approach

for determining the primary beneficiary of a

variable interest entity (VIE) to a qualitative

assessment. An enterprise must determine

qualitatively whether it has (1) the power

to direct the activities of the VIE that most

significantly impact the entity’s economic

performance and (2) the obligation to absorb

losses of the VIE or the right to receive benefits from the VIE that could potentially be

significant to the VIE. If an enterprise has

both of these characteristics, the enterprise

is considered the primary beneficiary and

must consolidate the VIE. Management is

currently reviewing the possible impact, if

any, of SFAS 167 (now codified in ASC 810)

on FRF’s accounting and financial reporting

requirements for 2010.

•	 SFAS No. 166, Accounting for Transfers of 

Financial Assets—an amendment of FASB 

Statement No. 140, was issued by the FASB

in June 2009. Subsequently, the FASB issued

Accounting Standards Update No. 2009-16,

Transfers and Servicing (ASC 860)—Accounting for Transfers of Financial Assets, to 
110 FDIC 2009 Annual Report

formally incorporate the provisions of SFAS

No. 166 into the Codification. SFAS 166

removes the concept of a qualifying specialpurpose entity from GAAP, changes the

requirements for derecognizing financial

assets, and requires additional disclosures

about a transferor’s continuing involvement

in transferred financial assets. The FASB’s

objective is to improve the information that a

reporting entity provides in its financial statements about a transfer of financial assets; the

effects of a transfer on its financial position,

financial performance, and cash flows; and a

transferor’s continuing involvement, if any, in

transferred financial assets.

	 The provisions of SFAS 166 (now codified

in ASC 860) become effective for the FRF

for all transfers of financial assets occurring

on or after January 1, 2010.

•	 SFAS No. 165, Subsequent Events, was

issued in May 2009 and subsequently codified in FASB ASC 855, Subsequent Events.

ASC 855 represents the inclusion of guidance

on subsequent events in the accounting literature. Historically, management had relied

on auditing literature for guidance on assessing and disclosing subsequent events. ASC

855 now requires the disclosure of the date

through which an entity has evaluated subsequent events and the basis for that date—that

is, whether that date represents the date the

financial statements were issued or were 

available to be issued. These new provisions,

effective for the FRF as of December 31,

2009, do not have a significant impact on the

financial statements.

Other recent accounting pronouncements

have been deemed to be not applicable to the

financial statements as presented.

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.

3. Receivables From Thrift 

Resolutions and Other Assets, 

Net

Receivables From Thrift Resolutions

The receivablesfrom thrift resolutionsinclude

payments made by the FRF to cover obligations

to insured depositors, advances to receiverships

for working capital, and administrative expenses

paid on behalf ofreceiverships.Any related allowance for loss represents the difference between

the funds advanced and/or obligations incurred

and the expected repayment. Assets held by the

FDIC in its receivership capacity for the former

RTC are a significant source of repayment of the

FRF’s receivables from thrift resolutions. As of

December 31, 2009, 8 of the 850 FRF receiverships remain active primarily due to unresolved

litigation, including goodwill matters.

The FRF receiverships held assets with a

book value of $20 million as of December 31,

2009 and 2008, (which primarily consist of cash,

investments, and miscellaneous receivables).

The estimated cash recoveries from the management and disposition of these assets are used to

derive the allowance for losses. The FRF receivership assets are valued by discounting projected

cash flows, net of liquidation costs using current
IV. Financial Statements and Notes 111

market-based risk factors applicable to a given

asset’s type and quality. These estimated asset

recoveries are regularly evaluated, but remain

subject to uncertainties because of potential

changes in economic and market conditions.

Such uncertainties could cause the FRF’s actual

recoveries to vary from current estimates.

Other Assets

Other assets primarily include credit enhancement reserves valued at $21.3 million and $21.2

million as of December 31, 2009 and 2008,

respectively. The credit enhancement reserves

resulted from swap transactions where the former RTC received mortgage-backed securities in

exchange for single-family mortgage loans. The

RTC supplied credit enhancement reserves for

the mortgage loans in the form of cash collateral

to cover future credit losses over the remaining

life of the loans. These reserves may cover future

credit losses through 2020.

Receivables From Thrift Resolutions 

and Other Assets, Net at December 31

Dollars in Thousands

2009 2008

Receivables from 

closed thrifts $ 5,744,509 $ 5,725,450

Allowance for losses (5,736,737) (5,717,740)

Receivables from Thrift 

Resolutions, Net 7,772 7,710

Other assets 24,566 27,242

Total $ 32,338 $ 34,952

4. Contingent Liabilities for:

Litigation Losses

The FRF records an estimated loss for unresolved legal cases to the extent those losses are

considered probable and reasonably estimable.

As of December 31, 2009 and 2008, respectively,

$405.4 million and $142.3 million were recorded

as probable losses. Additionally, at December 31,

2009, the FDIC has determined that there are no

losses from unresolved legal cases considered to

be reasonably possible.

In December 2008, FDIC concluded a 131⁄2

year old legal case (FDIC v. Hurwitz) arising from

the December 30, 1988 failure of United Savings

Association of Texas. In August 2005, the District Court ordered sanctions against the FDIC in

the amount of $72 million. However, in August

2008, the Fifth Circuit Court of Appeals reversed

$57 million of the sanctions, but remanded the

remaining $15 million to the District Court to

determine what portion should be paid. Subsequently, in November 2008, an agreement was

reached between the parties, whereby the FDIC

would pay $10 million to settle the case. On

December 17, 2008, the settlement agreement

was fully executed and the settlement funds were

paid. The $10 million payment is recognized in

the “Other expenses” line item.

Additional Contingency

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
112 FDIC 2009 Annual Report

pending at the appellate or trial court level, as

well as the unique circumstances of each case.

The FDIC believes that it is probable that

additional amounts, possibly substantial, may

be paid from the FRF-FSLIC as a result of judgments and settlements in the goodwill litigation. Based on representations from the DOJ,

the FDIC is unable to estimate a range of loss

to the FRF-FSLIC from the goodwill litigation.

However, 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. 1501A3, 1501A-20) such sums as may be necessary for

the payment of judgments and compromise settlements in the goodwill litigation. This appropriation is to remain available until expended.

Because an appropriation is available to pay

such judgments and settlements, any liability for

goodwill litigation should have a corresponding

receivable from the U.S. Treasury and therefore

have no net impact on the financial condition of

the FRF-FSLIC.

The FRF paid $142.4 million as a result of

judgments and settlementsin four goodwill cases

for the year ended December 31, 2009, compared

to $142.6 million for four goodwill cases for the

year ended December 31, 2008. As described

above, the FRF received appropriations from the

U.S. Treasury to fund these payments. Based on

recent court decisions, the FRF accrued a $405.4

million contingent liability and offsetting receivable from the U.S. Treasury for judgments in six

cases. During 2009, four of the six cases were

fully adjudicated but not paid as of year end.

In addition, the FRF-FSLIC pays the goodwill

litigation expenses incurred by DOJ based on a

Memorandum of Understanding (MOU) dated

toward regulatory capital, the plaintiffs were

entitled to recover damages from the United

States. Approximately eight remaining cases

are pending against the United States based on

alleged breaches of these agreements.

On July 22, 1998, the Department of Justice’s (DOJ’s) Office of Legal Counsel (OLC)

concluded that the FRF is legally available to

satisfy all judgments and settlements in the

goodwill litigation involving supervisory action

or assistance agreements. OLC determined that

nonperformance of these agreements was a

contingent liability that was transferred to the

FRF on August 9, 1989, upon the dissolution of

the FSLIC. On July 23, 1998, the U.S. Treasury

determined, based on OLC’s opinion, that the

FRF is the appropriate source of funds for payments of any such judgments and settlements.

The FDIC General Counsel concluded that, as

liabilities transferred on August 9, 1989, these

contingent liabilities for future nonperformance

of prior agreements with respect to supervisory

goodwill were transferred to the FRF-FSLIC,

which is that portion of the FRF encompassing

the obligations of the former FSLIC. The FRFRTC, which encompasses the obligations of the

former RTC and was created upon the termination of the RTC on December 31, 1995, is not

available to pay any settlements or judgments

arising out of the goodwill litigation.

The goodwill lawsuits are against the United

States and as such are defended by the DOJ. On

January 26, 2010, the DOJ again informed the

FDIC that it is “unable at this time to provide a

reasonable estimate of the likely aggregate contingent liability resulting from the Winstar-related cases.” This uncertainty arises, in part, from

the existence of significant unresolved issues
IV. Financial Statements and Notes 113

Representations and Warranties

As part of the RTC’s efforts to maximize the

return from the sale of assets from thrift resolutions, representations and warranties, and guarantees were offered on certain loan sales. The

majority of loans subject to these agreements

have been paid off, refinanced, or the period for

filing claims has expired. The FDIC’s estimate

of maximum potential exposure to the FRF is

$13.2 million. No claims in connection with representations and warranties have been asserted

since 1998 on the remaining open agreements.

Because of the age of the remaining portfolio and

lack of claim activity, the FDIC does not expect

new claims to be asserted in the future. Consequently, the financial statements at December

31, 2009 and 2008, do not include a liability for

these agreements.

5. Resolution Equity

As stated in the Legislative History section

of Note 1, the FRF is comprised of two distinct

pools: the FRF-FSLIC and the FRF-RTC. The

FRF-FSLIC consists of the assets and liabilities

of the former FSLIC. The FRF-RTC consists

of the assets and liabilities of the former RTC.

Pursuant to legal restrictions, the two pools are

maintained separately and the assets of one pool

are not available to satisfy obligations of the

other.

The following table shows the contributed

capital, accumulated deficit, and resulting resolution equity for each pool.

October 2, 1998, between the FDIC and DOJ.

Under the terms of the MOU, the FRF-FSLIC

paid $3.5 million and $4.3 million to DOJ for

fiscal years (FY) 2010 and 2009, respectively.

As in prior years, DOJ carried over and applied

all unused funds toward current FY charges.

At December 31, 2009, DOJ had an additional

$3.3 million in unused FY 2009 funds that were

applied against FY 2010 charges of $6.8 million.

Guarini Litigation

Paralleling the goodwill cases are similar

cases alleging that the government breached

agreements regarding tax benefits associated

with certain FSLIC-assisted acquisitions. These

agreements allegedly contained the promise of

tax deductions for losses incurred on the sale of

certain thrift assets purchased by plaintiffs from

the FSLIC, even though the FSLIC provided the

plaintiffs with tax-exempt reimbursement. A

provision in the Omnibus Budget Reconciliation

Act of 1993 (popularly referred to as the “Guarini legislation”) eliminated the tax deductions for

these losses.

All eight of the original Guarini cases have

been settled. However, a case settled in 2006

further obligates the FRF-FSLIC as a guarantor

for all tax liabilities in the event the settlement

amount is determined by tax authorities to be taxable. The maximum potential exposure under this

guarantee is approximately $81 million. However,

the FDIC believesthat it is very unlikely the settlement will be subject to taxation. More definitive

information may be available during 2010, after

the IRS completes its Large Case Program audit

on the institution’s 2006 returns. The FRF is not

expected to fund any payment under this guarantee and no liability has been recorded.
114 FDIC 2009 Annual Report

Accumulated Deficit

The accumulated deficit represents the cumulative excess of

expenses 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.TheFRF-FSLIC

accumulated deficit has increased

by $13.0 billion, whereas the FRFRTC accumulated deficit has decreased by $6.3

billion, since their dissolution dates.

6. Employee Benefits

Pension Benefits

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 FRF

contributes a portion of pension benefits for

eligible employees, it does not account for the

assets of either retirement system. The FRF 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. The FRF’s pension-related

expenses were $42 thousand and $169 thousand

for 2009 and 2008, respectively.

Resolution Equity at December 31, 2009

Dollars in Thousands

FRF-FSLIC FRF-RTC

FRF 

Consolidated

Contributed capital—beginning $ 45,692,842 $ 81,749,337 $ 127,442,179

Add: U.S. Treasury payments/

receivable for goodwill litigation 405,517 0 405,517

Less: REFCORP payments 0 0 0

Contributed capital—ending 46,098,359 81,749,337 127,847,696

Accumulated deficit (42,764,230) (81,583,975) (124,348,205)

Total $ 3,334,129 $ 165,362 $ 3,499,491

Contributed Capital

The FRF-FSLIC and the former RTC received

$43.5 billion and $60.1 billion from the U.S.

Treasury, respectively, to fund losses from thrift

resolutions prior to July 1, 1995. Additionally, the

FRF-FSLIC issued $670 million in capital certificates to the Financing Corporation (a mixedownership government corporation established

to function solely as a financing vehicle for the

FSLIC) and the RTC issued $31.3 billion of these

instruments to the REFCORP. FIRREA prohibited the payment of dividends on any of these

capital certificates.

Through December 31, 2009, the FRF-RTC

has returned $4.556 billion to the U.S. Treasury

and made payments of $5.022 billion to the REFCORP. These actions serve to reduce contributed

capital.

FRF-FSLIC received $142.4 million in U.S.

Treasury payments for goodwill litigation in

2009. Furthermore, $405.4 million and $142.3

million were accrued for as receivables at yearend 2009 and 2008, respectively. The effect of

this activity was an increase in contributed capital of $405.5 million in 2009.
IV. Financial Statements and Notes 115

7. Disclosures About the Fair Value of Financial Instruments

The financial asset recognized and measured at fair value on a recurring basis at each reporting date 

is cash equivalents. The following tables present the FRF’s financial asset measured at fair value as of 

December 31, 2009 and 2008.

Postretirement Benefits Other Than Pensions

The FRF no longer records a liability for the 

postretirement benefits of life and dental insurance (a long-term liability), due to the expected 

dissolution of the FRF. The liability is recorded 

by the DIF. However, the FRF does continue to 

pay its proportionate share of the yearly claim 

expenses associated with these benefits. 

Assets Measured at Fair Value at December 31, 2009

Dollars in Thousands

Fair Value Measurement Using

Quoted Prices in 

Active Markets 

for Identical 

Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3)

Total Assets 

at Fair Value

Assets

Cash equivalents 

(Special U.S. Treasuries)1 $ 3,470,125 $ 0 $ 0 $ 3,470,125

1

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

Bureau of Public Debt.

Assets Measured at Fair Value at December 31, 2008

Dollars in Thousands

Fair Value Measurement Using

Quoted Prices in 

Active Markets 

for Identical 

Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3)

Total Assets 

at Fair Value

Assets

Cash equivalents 

(Special U.S. Treasuries)1 $ 3,467,227 $ 0 $ 0 $ 3,467,227

1

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

Bureau of Public Debt.
116 FDIC 2009 Annual Report

Some of the FRF’s financial assets and liabilities are not recognized at fair value but are 

recorded at amounts that approximate fair value 

due to their short maturities and/or comparability with current interest rates. Such items include 

other short-term receivables and accounts payable and other liabilities.

The net receivable from thrift resolutions is 

influenced by the underlying valuation of receivership assets. This corporate receivable is unique 

and the estimate presented is not necessarily 

indicative of the amount that could be realized 

in a sale to the private sector. Such a sale would 

require indeterminate, but substantial, discounts 

for an interested party to profit from these assets 

because of credit and other risks. Consequently, 

it is not practicable to estimate its fair value.

Other assets primarily consist of credit 

enhancement reserves, which are valued by 

performing projected cash flow analyses using 

market-based assumptions (see Note 3).
117

Government Accountability Office’s Audit Opinion
118 FDIC 2009 Annual Report
119
120 FDIC 2009 Annual Report
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122 FDIC 2009 Annual Report
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124 FDIC 2009 Annual Report
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126 FDIC 2009 Annual Report
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128 FDIC 2009 Annual Report
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130 FDIC 2009 Annual Report
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132 FDIC 2009 Annual Report
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134 FDIC 2009 Annual Report

Management’s Response

Appendix I
135
136 FDIC 2009 Annual Report

Management’s Report on Internal Control over Financial Reporting

The Federal Deposit Insurance Corporation’s (FDIC’s) internal control over financial reporting is a

process effected by those charged with governance, management, and other personnel, designed to

provide reasonable assurance regarding the preparation of reliable financial statements in accordance

with U.S. generally accepted accounting principles (GAAP), and compliance with applicable laws

and regulations. The objective of the FDIC’s internal control over financial reporting is to reasonably

assure that (1) transactions are properly recorded, processed and summarized to permit the preparation of financial statements in accordance with GAAP, and assets are safeguarded against loss from

unauthorized acquisition, use, or disposition; and (2) transactions are executed in accordance with the

laws and regulations that could have a direct and material effect on the financial statements.

Management is responsible for establishing and maintaining effective internal control over financial reporting. Management assessed the effectiveness of the FDIC’s internal control over financial

reporting as of December 31, 2009, through its enterprise risk management program that seeks to

comply with the spirit of the following standards, among others: Federal Managers’ Financial Integrity Act (FMFIA); Chief Financial Officers Act (CFO Act); Government Performance and Results

Act (GPRA); Federal Information Security Management Act (FISMA); and OMB Circular A-123. In

addition, other standards that the FDIC considers are the framework set forth by the Committee of

Sponsoring Organizations of the Treadway Commission’s Internal Control-Integrated Framework

and the U.S. Government Accountability Office’s (GAO’s) Standards for Internal Control in the Federal Government.

Based on our evaluation, FDIC management concluded that as of December 31, 2009, the Corporation

generally maintained effective internal controls, with the exception of a material weakness related

to its process for estimating losses on loss-sharing arrangements. Therefore, the Corporation did not

maintain, in all material respects, effective internal control over financial reporting.

Federal Deposit Insurance Corporation

June 14, 2010
137

Overview of the Industry

Total net income for the 8,012 FDIC-insured

commercial banks and savings institutions that

reported financial results as of December 31,

2009, was $12.5 billion for the year, up from $4.5

billion in 2008, but well below the $100 billion

that insured institutions earned in 2007. The

average return on assets (ROA), a basic yardstick

of earnings performance, was 0.09 percent, compared to 0.03 percent in 2008. These are the two

lowest annual ROAs for the industry in the past

22 years. Most of the year-over-year improvement in industry profitability occurred at the

largest institutions. Almost two out of every

three insured institutions (63.2 percent) reported

a lower ROA in 2009 than in 2008, and 29.5 percent of all institutions reported a net loss for the

year. This is the highest percentage of unprofitable institutions in the 26 years for which data

are available.

Historically high expenses for credit-quality

problems were the principal cause of earnings

weakness. Insured institutions set aside $247.7

billion in loan-loss provisions during 2009, compared to $177 billion a year earlier. Total loss

provisions in 2009 represented 38 percent of

the industry’s net operating revenue (net interest income plus total noninterest income) for the

year, the largest proportion in any year since the

creation of the FDIC.

Despite the burden of increased loan loss

expenses and the weakness of the U.S. economy,

the industry was considerably resilient in generating revenue during the year. Net operating

revenue totaled $656.3 billion, an increase of

$90.9 billion (16.1 percent) over 2008. Net interest income was $38.1 billion (10.7 percent) higher than a year earlier, while noninterest income

increased by $52.8 billion (25.4 percent).

The improvement in net interest income was

attributable to higher net interest margins(NIMs),

as the industry’s total interest-earning assets

declined by $477.2 billion (4.1 percent) in 2009.

The average NIM rose to 3.47 percent in 2009, up

from 3.16 percent a year earlier. This is the highest annual NIM for the industry since 2005 and

the first time in seven years that it has increased.

Much of the year-over-year improvement in NIMs

occurred at larger institutions, which benefitted

from a sharp decline in average funding costs.

More than half of all institutions (53.8 percent)

reported lower NIMs compared to 2008.

Growth in noninterest income was led by

increased trading revenue, which totaled $24.8

billion, compared to trading losses of $1.8 billion

a year earlier. Servicing fees also posted strong

growth, rising to $30.8 billion in 2009 from

$13.6 billion in 2008. Income from securitization activities was a notable area of noninterest

income weakness in 2009. Securitization income

totaled only $4.8 billion, down from $15.3 billion

the previous year.

Higher asset values contributed to a $14 billion reduction in realized losses on securities

and other assets in 2009. In 2008, insured institutions reported $15.4 billion in realized losses;

in 2009, realized losses totaled only $1.4 billion.

Improvement in asset values was also evident in a

$12.6 billion (38.6 percent) decline in charges for

goodwill impairment and other intangible asset

expenses. These charges, which reached $32.7

billion in 2008, fell to $20.1 billion in 2009.

Despite lower goodwill impairment costs,

total noninterest expenses increased by $16.2

billion (4.4 percent) in 2009. Deposit insurance
138 FDIC 2009 Annual Report

premiums paid by insured institutions totaled

$17.8 billion, an increase of $14.8 billion over

2008. Expenses for salaries and employee benefits were $11.4 billion (7.5 percent) higher than

in 2008.

As was the case in 2008, failures significantly affected earnings reported for the full year

because losses incurred by failed institutions

were not included in the year-to-date income

reported by surviving institutions as of December 31. During 2009, 119 failed institutions filed

financial reportsfor one or more quarters prior to

their failure. Together, these institutions reported

more than $8.2 billion in net losses that are not

included in full-year earnings for the industry.

Similarly, for institutions that change ownership

or are merged into other institutions, purchase

accounting rules stipulate that the income and

expenses that have been booked by acquired

institutions are to be reset to zero as of the date

of acquisition. Previously accrued income and

expenses become adjustments to assets, equity

capital, and reserves, and are not included in the

subsequent reporting of year-to-date income and

expense. If the 2009 losses reported by failed

institutions had been included, the industry’s net

income for the year would have been less than

$5 billion.

The industry’s troubled loans continued to

increase in 2009. At the end of December, the

amount of loans and leases that were noncurrent (90 days or more past due or in nonaccrual

status) was $391.3 billion, compared to $233.6

billion at the end of 2008. Noncurrent loans and

leases represented 5.37 percent of all loans and

leases, the highest percentage in the 26 years that

insured institutions have reported noncurrent

loan data. Residential mortgage loans accounted for more than half (51.2 percent) of the total

increase in noncurrent loans in 2009, rising by

$80.7 billion. Noncurrent real estate construction and development (C&D) loans rose by $20.3

billion, noncurrent loans to commercial and

industrial (C&I) borrowers increased by $16.7

billion, and noncurrent real estate loans secured

by nonfarm nonresidential properties increased

by $24.3 billion.

Net charge-offs of loans and leases totaled

$186.8 billion in 2009, compared to $100.4 billion

in 2008. The full-year net charge-off rate of 2.49

percent was the highest annual rate since 1934.

Net charge-offs of credit card loans totaled $37.5

billion for the year, net charge-offs of residential mortgage loans were $33.9 billion, C&I loan

charge-offs totaled $31.8 billion, and net chargeoffs of real estate C&D loans were $27.3 billion.

Total assets of insured institutions registered

a historic decline in 2009, as weak loan demand,

tighter loan underwriting standards, increased

loan charge-offs, and deleveraging by institutions seeking to boost their regulatory capital ratios all contributed to a contraction in the

industry’s balance sheet. Assets fell by $731.7

billion (5.3 percent) during the year, the largest

annual percentage decline since the inception of

the FDIC. The reduction in assets was led by a

$640.9 billion (8.3 percent) decline in net loans

and leases. C&I loan balances declined by $273.2

billion (18.3 percent), residential mortgage loans

fell by $128.5 billion (6.3 percent), and real estate

C&D loans declined by $139.4 billion (23.6 percent). Real estate loans secured by nonfarm non

residential properties (up $25.2 billion, or 2.4

percent) was the only major loan category that

had meaningful growth in 2009.
139

In contrast to the reduction in industry assets,

deposit balances increased by $191.1 billion (2.1

percent) during the year. Nondeposit liabilitiesfell

by $1 trillion (31.3 percent). At year-end, deposits

funded 70.4 percent of total industry assets, the

highest proportion since March 31, 1996.

The number of insured institutions on the

FDIC’s “Problem List” rose from 252 institutions with assets of $159 billion to 702 institutions with assets of $402.8 billion in 2009. This

is the largest number and asset total of “problem”

institutions since the middle of 1993. At yearend, more than 95 percent of all insured institutions, representing more than 98 percent of total

industry assets, met or exceeded the regulatory

threshold defining “well-capitalized” for purposes of prompt corrective action.
140 FDIC 2009 Annual Report

V. Management Control

Enterprise Risk Management

The Office of Enterprise Risk Management,

under the auspices of the Chief Financial Officer

organization, is responsible for corporate oversight of internal control and enterprise risk management (ERM). This includes ensuring that the

FDIC’s operations and programs are effective and

efficient and that internal controls are sufficient

to minimize exposure to waste and mismanagement. The FDIC recognizes the importance of

a strong risk management and internal control

program and has adopted a more proactive and

enterprise-wide approach to managing risk.

This approach focuses on the identification and

mitigation of risk consistently and effectively

throughout the Corporation, with emphasis on

those areas/issues most directly related to the

FDIC’s overall mission. As an independent government corporation, the FDIC has different

requirements than appropriated federal government agencies; nevertheless, its ERM program

seeks to comply with the spirit of the following

standards, among others:

•	 Federal Managers’ Financial Integrity Act

(FMFIA);

•	 Chief Financial Officers Act (CFO Act);

•	 Government Performance and Results Act

(GPRA);

•	 Federal Information Security Management

Act (FISMA); and

•	 OMB Circular A-123.

The CFO Act extends to the FDIC the FMFIA

requirements for establishing, evaluating and

reporting on internal controls. The FMFIA

requires agencies to annually provide a statement of assurance regarding the effectiveness

of management, administrative and accounting

controls, and financial management systems.

The FDIC has developed and implemented

management, administrative, and financial systems controls that reasonably ensure that:

•	 Programs are efficiently and effectively carried out in accordance with applicable laws

and management policies;

•	 Programs and resources are safeguarded

against waste, fraud, and mismanagement;

•	 Obligations and costs comply with applicable

laws; and

•	 Reliable, complete, and timely data are maintained for decision-making and reporting

purposes.

The FDIC’s control standards incorporate

the Government Accountability Office’s (GAO) 

Standards for Internal Control in the Federal 

Government. Good internal control systems

are essential for ensuring the proper conduct of

FDIC business and the accomplishment of management objectives by serving as checks and balances against undesirable actions or outcomes.

As part of the Corporation’s continued commitment to establish and maintain effective and

efficient internal controls, FDIC management

routinely conducts reviews of internal control

systems. The results of these reviews, as well

as consideration of the results of audits, evaluations, and reviews conducted by the GAO, the

Office of Inspector General (OIG) and other outside entities, are used as a basis for the FDIC’s

reporting on the condition of the Corporation’s

internal control activities.
V. Management Control 141

and going undetected is such that there is a reasonable possibility that they could have led to

material misstatements to DIF’s financial statements that would not have been timely detected

and corrected.

Corrective Actions and Target Completion 

Dates

Several corrective actions were in process or

have been completed prior to release of this publication. Remaining actions include:

•	 Implement revised guidance and procedures

over the least cost test analysis, including,

improving the review checklists for peer

review—June 2010

•	 Require a monthly review of a sample of

completed analyses—July 2010.

•	 Implement a process to improve the documentation and approval of the changes to

the least cost test model and loss-share

worksheet—June 2010

•	 Implement an independent review of the

LLR templates—June 2010

Additionally, FDIC management will continue to focus on high priority areas, including the

six Program Management Office organizations,

IT systems security, resolution of bank failures,

and privacy, among others.

Management Report on 

Final Actions

As required under amended Section 5 of the

Inspector General Act of 1978, the FDIC must

report information on final action taken by management on certain audit reports. For the federal fiscal year period October 1, 2008, through

Material Weaknesses

Material weaknesses are control shortcomings in operations or systems that, among other

things, severely impair or threaten the organization’s ability to accomplish its mission or to

prepare timely, accurate financial statements or

reports. The shortcomings are of sufficient magnitude that the Corporation is obliged to report

them to external stakeholders.

To determine the existence of material weaknesses, the FDIC has assessed the results of

management evaluations and external audits of

the Corporation’s risk management and internal control systems conducted in 2009, as well

as management actions taken to address issues

identified in these audits and evaluations. At the

end of the 2009 audit, GAO identified a material

weakness in loss-share estimation processes and

a significant deficiency in the information technology (IT) security area. The FDIC is addressing the control issues raised by GAO, related to

its 2009 financial statement audits.

Description of Material Weakness

GAO identified deficiencies in controls over

FDIC’s process for deriving and reporting estimates of losses to the DIF from resolution transactions involving loss-sharing arrangements.

These deficiencies resulted in errors in the draft

2009 DIF financial statements that went undetected by FDIC and that necessitated adjustments

in finalizing the financial statements. Although

the net effect of these errors, less than 0.4 percent of net receivables, was ultimately not material in relation to the financial statements taken

as a whole, the nature of the control deficiencies

identified that resulted in these errors occurring
142 FDIC 2009 Annual Report

Table 3: Audit Reports Without Final Actions But With Management Decisions 

Over One Year Old for FY 2009

Report No. and 

Issue Date OIG Audit Finding Management Action

Disallowed 

Costs

1. AUD-08-006 

03-12-2008

The OIG recommended that the FDIC should

update Circular 1380.3, Safeguarding FDIC Information Technology (IT) Hardware, to reflect the

FDIC’s current business environment for managing its laptop computer inventory and to define

policy for the disposal of hard drives.

The FDIC is completing the update and approval 

process for Circular 1380.3, Safeguarding FDIC 

Information Technology (IT) Hardware. 

Completed: November 2009

$0 

2. EM-08-002 

03-05-2008

The OIG recommended that the FDIC should

revise Circular 1610.2, Security Policy and Procedures for FDIC Contractors and Subcontractors, to 

enhance the current process for conducting contractor employee background investigations. 

The revisions to Circular 1610.2, Security Policy and 

Procedures for FDIC Contractors and Subcontractors, have been completed, and DOA has been 

asked to delay further review due to work being 

done by the Legal Division to develop security 

guidelines for contractors. 

Completed: February 2010

$0 

3. EVAL-08-002 

12-06-2007

The OIG recommended that the FDIC should

revise the FDIC Business Continuity Plans (BCP) 

and pandemic preparedness plans to more specifically describe the role telework plays in those

plans. The OIG also recommended that the FDIC

modify FDIC Form 2121.5, Employee/Supervisor Telework Program Agreement, for regular or 

recurring telework situations to include identifying any sensitive data that may be used during 

telework to assist management in making the 

decision to approve or disapprove a telework 

request.

The FDIC is in the process of finalizing multiple

changes to the Business Continuity Plan and 

coordinating across multiple Divisions and Offices

to effect these changes. Additionally, the FDIC is

completing the changes to Circular 2121.1, Federal Program Circular and Telework Form 2121.5, 

Employee/Supervisor Telework Program Agreement. These documents have been circulated for 

review and comment. 

Completed: March 2010

$0

4. EVAL-08-005 

09-24-2008

The OIG recommended that the FDIC should

improve the facilities’ infrastructure for monitoring energy management and sustainability 

efforts by: a) Installing or upgrading building

energy management systems, and b) Installing 

sub-metering capabilities to monitor specific uses

of energy.

Several of the electrical sub-meters installed in 

March 2009 were found to be defective, resulting in 

erroneous energy consumption data. The defective 

electrical sub-meters are in the process of being 

repaired/replaced. 

Completed: December 2009

$0

September 30, 2009, there were no audit reports

in the following categories:

Table 1: Management Report on Final Action

on Audits with Disallowed Costs

Table 2: Management Report on Final Action

on Audits with Recommendations to Put

Funds to Better Use

The following table provides information on

audit reports over one year old:
This page intentionally left blank.
144 FDIC 2009 Annual Report

A. Key Statistics

The FDIC’s Strategic Plan and Annual Performance Plan provide the basis for annual planning and

budgeting for needed resources. The 2009 aggregate budget (for corporate, receivership, and investment spending) was $2.57 billion, while actual expenditures for the year were $2.34 billion, about $1.11

billion more than 2008 expenditures.

Over the past decade, the FDIC’s expenditures have varied in response to workload. During the last

two years, expenditures have risen, largely due to increasing resolution and receivership activity. To

a lesser extent, increased expenses have resulted from supervision-related costs associated with the

oversight of more troubled institutions.

VI. Appendices

FDIC Expenditures 2000–2009

Dollars in Millions

$2,500

2,000

1,500

1,000

500

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
VI. Appendices 145

Estimated Insured Deposits and the Deposit Insurance Fund,

December 31, 1934, through December 31, 20091

Dollars in Millions (except Insurance Coverage)

Deposits in Insured 

Institutions

Insurance Fund as a 

Percentage of 

Year 

Insurance 

Coverage2 

Total 

Domestic 

Deposits

Est. Insured 

Deposits3 

Percentage 

of Insured 

Deposits 

Deposit 

Insurance

Fund 

Total

Domestic 

Deposits

Est. Insured 

Deposits 

2009 $250,000 7,705,342 5,391,876 70.0 (20,861.8) (0.27) (0.39)

2008 100,000 7,505,360 4,756,809 63.4 17,276.3 0.23 0.36 

2007 100,000 6,921,686 4,292,163 62.0 52,413.0 0.76 1.22 

2006 100,000 6,640,105 4,153,786 62.6 50,165.3 0.76 1.21 

2005 100,000 6,229,764 3,890,941 62.5 48,596.6 0.78 1.25 

2004 100,000 5,724,621 3,622,059 63.3 47,506.8 0.83 1.31 

2003 100,000 5,223,922 3,452,497 66.1 46,022.3 0.88 1.33 

2002 100,000 4,916,078 3,383,598 68.8 43,797.0 0.89 1.29 

2001 100,000 4,564,064 3,215,581 70.5 41,373.8 0.91 1.29 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1980 100,000 1,324,463 948,717 71.6 11,019.5 0.83 1.16 
146 FDIC 2009 Annual Report

Estimated Insured Deposits and the Deposit Insurance Fund,

December 31, 1934, through December 31, 20091

 (continued)

Dollars in Millions (except Insurance Coverage)

Deposits in Insured 

Institutions

Insurance Fund as a 

Percentage of 

Year 

Insurance 

Coverage2 

Total 

Domestic 

Deposits

Est. Insured 

Deposits3 

Percentage 

of Insured 

Deposits 

Deposit 

Insurance

Fund 

Total

Domestic 

Deposits

Est. Insured 

Deposits 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1950 10,000 167,818 91,359 54.4 1,243.9 0.74 1.36
VI. Appendices 147

Estimated Insured Deposits and the Deposit Insurance Fund,

December 31, 1934, through December 31, 20091

 (continued)

Dollars in Millions (except Insurance Coverage)

Deposits in Insured 

Institutions

Insurance Fund as a 

Percentage of 

Year 

Insurance 

Coverage2 

Total 

Domestic 

Deposits

Est. Insured 

Deposits3 

Percentage 

of Insured 

Deposits 

Deposit 

Insurance

Fund 

Total

Domestic 

Deposits

Est. Insured 

Deposits 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1

 Prior to 1989, figures are for BIF only and exclude insured branches of foreign banks. For 1989 to 2005, figures represent sum of BIF and SAIF amounts; for 

2006 to 2008, figures are for DIF. Amounts from 1989 to 2008 include insured branches of foreign banks. 

2

 Coverage for certain retirement accounts increased to $250,000 in 2006. Coverage limits do not reflect temporary increases authorized by the Emergency 

Economic Stabilization Act of 2008. Initial coverage limit was $2,500 from January 1 to June 30, 1934. 

3

 Prior to year-end 1991, insured deposits were estimated using percentages determined from June Call and Thrift Financial reports.
148 FDIC 2009 Annual Report

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations, 

September 11, 1933, through December 31, 2009 

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income 

Assessment 

Credits

Investment 

and Other 

Sources 

Effective 

Assessment 

Rate1 Total 

Provision 

for Losses

Admin. 

and Oper. 

Expenses2 

Interest & 

Other Ins. 

Expenses 

Funding 

Transfer 

from the 

FSLIC 

Resolution 

Fund

Net Income 

(Loss) 

Total $142,396.6 $88,268.6 $11,391.0 $66,107.8 $164,264.5 $135,742.4 $18,138.9 $10,389.2 $139.5 ($21,728.4)

2009 24,706.4 $17,865.4 $148.0 6,989.0 0.2332% 60,709.0 $57,711.8 $1,271.1 $1,726.1 0 (36,002.6)

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

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

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

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

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

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

2002 1,795.9 107.8 0.0 2,276.9 0.0023% 719.6 (243.0) 945.1 17.5 0 1,076.3 

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

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

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

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

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

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

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

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

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

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

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

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

1989 3,496.6 1,885.0 0.0 1,611.6 0.0816% 4,352.2 3,811.3 219.9 321.0 5.6 (850.0) 

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

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

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

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

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

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

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

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

1980 1,310.4 951.9 521.1 879.6 0.0370% 83.6 (38.1) 118.2 3.5 0 1,226.8 
VI. Appendices 149

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations, 

September 11, 1933, through December 31, 2009 (continued)

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income 

Assessment 

Credits

Investment 

and Other 

Sources 

Effective 

Assessment 

Rate1 Total 

Provision 

for Losses

Admin. 

and Oper. 

Expenses2

Interest & 

Other Ins. 

Expenses 

Funding 

Transfer 

from the 

FSLIC 

Resolution 

Fund

Net Income 

(Loss) 

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

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

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

1976 764.9 676.1 379.6 468.4 0.0370% 212.3 28.0 180.4 4 3.9 0 552.6 

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

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

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

1972 467.0 468.8 280.3 278.5 0.0333% 59.7 10.1 49.6 6.0 5 0 407.3 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1950 84.8 122.9 68.7 30.6 0.0370% 7.8 1.4 6.4 0.0 0 77.0 
150 FDIC 2009 Annual Report

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations, 

September 11, 1933, through December 31, 2009 (continued)

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income 

Assessment 

Credits

Investment 

and Other 

Sources 

Effective 

Assessment 

Rate1 Total 

Provision 

for Losses

Admin. 

and Oper. 

Expenses2

Interest & 

Other Ins. 

Expenses 

Funding 

Transfer 

from the 

FSLIC 

Resolution 

Fund

Net Income 

(Loss) 

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

1948 145.6 119.3 0.0 26.3 0.0833% 7.0 0.7 6.3 6 0.0 0 138.6 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1

 Figures represent only BIF insured institutions prior to 1990, BIF and SAIF insured institutions from 1990 through 2005, and DIF insured institutions beginning in 2006. After 1995, all thrift 

closings became the responsibility of the FDIC and amounts are reflected in the SAIF. The effective assessment rate is calculated from annual assessment income (net of assessment credits) 

excluding transfers to the Financing Corporation (FICO), Resolution Funding Corporation (REFCORP) and the FSLIC Resolution Fund, divided by the four quarter average assessment base. 

The effective rates from 1950 through 1984 varied from the statutory rate of 0.0833 percent due to assessment credits provided in those years. The statutory rate increased to 0.12 percent 

in 1990 and to a minimum of 0.15 percent in 1991. The effective rates in 1991 and 1992 varied because the FDIC exercised new authority to increase assessments above the statutory 

minimum rate when needed. Beginning in 1993, the effective rate was based on a risk-related premium system under which institutions paid assessments in the range of 0.23 percent to 

0.31 percent. In May 1995, the BIF reached the mandatory recapitalization level of 1.25 percent. As a result, BIF assessment rates were reduced to a range of 0.04 percent to 0.31 percent of 

assessable deposits, effective June 1995, and assessments totaling $1.5 billion were refunded in September 1995. Assessment rates for BIF were lowered again to a range of 0 to 0.27 percent 

of assessable deposits, effective the start of 1996. In 1996, the SAIF collected a one-time special assessment of $4.5 billion. Subsequently, assessment rates for SAIF were lowered to the same 

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

2005, assessment rates were increased to a range of 0.05 percent to 0.43 percent of assessable deposits effective at the start of 2007, but many institutions received a one-time assessment 

credit ($4.7 billion in total) to offset the new assessments.

2

 These expenses, which are presented as operating expenses in the Statements of Income and Fund Balance, pertain to the FDIC in its Corporate capacity only and do not include costs 

that are charged to the failed bank receiverships that are managed by the FDIC. The receivership expenses are presented as part of the “Receivables from Bank Resolutions, net” line on the 

Balance Sheets. The narrative and graph presented in the “Corporate Planning and Budget” section of this report (next page) show the aggregate (corporate and receivership) expenditures 

of the FDIC.

3

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

4

 Includes $105.6 million net loss on government securities.

5

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

6

 Includes the aggregate amount of $80.6 million of interest paid on capital stock between 1933 and 1948
VI. Appendices 151

Number, Assets, Deposits, Losses, and Loss To Funds of Insured Thrifts Taken Over or Closed 

Because of Financial Difficulties, 1989 Through 19951

Dollars in Thousands

Year Total Assets Deposits 

Estimated 

Receivership Loss2 Loss to Funds3

Total 748 $393,986,574 $317,501,978 $75,315,686 $81,583,975 

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

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

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

1992 59 44,196,946 34,773,224 3,234,851 3,780,088 

1991 144 78,898,904 65,173,122 8,624,734 9,123,030 

1990 213 129,662,498 98,963,962 16,063,792 19,258,686 

19894 318 134,519,630 113,168,009 47,085,050 49,314,610 

1

 Beginning in 1989 through July 1, 1995, all thrift closings were the responsibility of the Resolution Trust Corporation (RTC). Since the RTC was terminated on December 31, 

1995, and all assets and liabilities transferred to the FSLIC Resolution Fund (FRF), all the results of the thrift closing activity from 1989 through 1995 are now reflected on 

FRF’s books. Year is the year of failure, not the year of resolution. 

2

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

receiverships from the FRF. 

3

 The Loss to Funds represents the total resolution cost of the failed thrifts in the FRF-RTC fund, which includes corporate revenue and expense items such as interest 

expense on Federal Financing Bank debt, interest expense on escrowed funds, and interest revenue on advances to receiverships, in addition to the estimated losses for 

receiverships. 

4

 Total for 1989 excludes nine failures of the former FSLIC. 
152 FDIC 2009 Annual Report

Fdic-Insured Institutions Closed During 2

Dollars in Thousands 

Name and Location

Bank 

Class

Number 

of 

Deposit 

Accounts

Total 

Assets2

Total 

Deposits2

FDIC 

Disbursements3Estimated 

Loss1

Date of 

Closing or 

Acquisition

Receiver/Assuming

Bank and Location

Purchase and Assumption—Insured Deposits

Bank of Clark County

Vancouver, WA

NM 5,059 $441,085 $377,506 $389,930 $143,563 01/16/09 Umpqua Bank

Roseburg, OR

1st Centennial Bank

Redlands, CA

NM 8,453 $797,959 $678,570 $629,958 $156,663 01/23/09 First California Bank

Westlake Village, CA

Silverton Bank, NA

Atlanta, GA

N 1,368 $4,157,246 $3,314,928 $2,579,148 $484,909 05/01/09 Federal Deposit Insurance 

Corporation

Independent Bankers Bank

Springfield, IL

SM 604 $585,508 $511,473 $143,739 $35,088 12/18/09 Federal Deposit Insurance 

Corporation

Insured Deposits Transfer

Omni National Bank

Atlanta, GA

N 8,723 $979,585 $813,205 $839,583 $341,281 03/27/09 SunTrust Bank

Atlanta, GA

Whole Bank Purchase and Assumption—All Deposits

BankUnited, FSB

Coral Gables, FL

SB 246,732 $13,111,463 $8,775,985 $2,698,688 $5,568,945 05/21/09 BankUnited

Coral Gables, FL

National Bank of Commerce

Berkeley, IL

N 8,191 $419,741 $395,868 $141,800 $87,638 01/16/09 Republic Bank of Chicago

Oak Brook, IL

Suburban Federal Savings Bank

Crofton, MD

SB 14,900 $347,408 $301,847 $49,000 $109,329 01/30/09 Bank of Essex

Tappahannock, VA

County Bank

Merced, CA

SM 84,185 $1,711,552 $1,324,635 $20,000 $131,778 02/06/09 Westamerica Bank

San Rafael, CA

Alliance Bank

Culver City, CA

NM 9,213 $1,113,361 $951,106 $71,989 $207,769 02/06/09 California Bank & Trust

San Diego, CA

Pinnacle Bank

Beaverton, OR

NM 1,444 $71,921 $64,168 $10,000 $14,336 02/13/09 Washington Trust Bank

Spokane, WA

Heritage Community Bank

Glenwood, IL

NM 11,764 $235,154 $225,735 $23,520 $39,235 02/27/09 MB Financial Bank, N.A.

Glenwood, IL

Freedom Bank of Georgia

Commerce, GA

NM 5,081 $172,454 $159,048 $13,385 $40,057 03/06/09 Northeast Georgia Bank

Lavonia, GA

Colorado National Bank

Colorado Springs, CO

N 4,799 $123,508 $85,150 $6,700 $16,097 03/20/09 Herring Bank

Amarillo, TX

Teambank, N.A.

Paola, KS

N 36,698 $669,830 $532,520 $75,713 $105,699 03/20/09 Great Southern Bank

Springfield, MO

Cape Fear Bank

Wilmington, NC

NM 10,867 $492,418 $402,820 $118,791 $125,365 04/10/09 First FS&LA of Charleston

Charleston, SC
VI. Appendices 153

Fdic-Insured Institutions Closed During 2009 (continu

Dollars in Thousands 

Name and Location

Bank 

Class

Number 

of 

Deposit 

Accounts

Total 

Assets2

Total 

Deposits2

FDIC 

Disbursements3Estimated 

Loss1

Date of 

Closing or 

Acquisition

Receiver/Assuming

Bank and Location

Great Basin Bank of Nevada

Elko, NV

NM 13,178 $238,940 $220,834 $20,810 $19,592 04/17/09 Nevada State Bank

Las Vegas, NV

American Sterling Bank

Sugar Creek, MO

SB 10,222 $166,456 $170,946 $21,800 $46,043 04/17/09 Metcalf Bank

Lee’s Summit, MO

Strategic Capital Bank

Champaign, IL

NM 1,713 $546,576 $479,384 $61,000 $145,291 05/22/09 Midland States Bank

Effingham, IL

Citizens National Bank

Macomb, IL

N 13,607 $438,560 $393,635 $201,244 $25,999 05/22/09 Morton Community Bank

Morton, IL

Bank of Lincolnwood

Lincolnwood, IL

NM 8,003 $212,718 $209,285 $87,587 $66,854 06/05/09 Republic Bank of Chicago

Oak Brook, IL

Cooperative Bank

Wilmington, NC

NM 29,001 $966,778 $768,479 $51,699 $270,651 06/19/09 First Bank

Troy, NC

The First National Bank of 

Anthony

Anthony, KS

N 9,326 $156,954 $142,551 $12,622 $32,532 06/19/09 Bank of Kansas

South Hutchinson, KS

Southern Community Bank

Fayetteville, GA

NM 13,372 $371,695 $297,962 $99,190 $103,941 06/19/09 United Community Bank

Blairsville, GA

Neighborhood Community 

Bank

Newnan, GA

SM 7,067 $212,616 $190,070 $46,720 $70,663 06/26/09 CharterBank

West Point, GA

Horizon Bank

Pine City, MN

NM 4,823 $84,763 $69,254 $10,532 $22,825 06/26/09 Stearns Bank, N.A.

St. Cloud, MN

MetroPacific Bank

Irvine, CA

NM 709 $75,316 $70,078 $38,367 $31,887 06/26/09 Sunwest Bank

Tustin, CA

Mirae Bank

Los Angeles, CA

NM 6,385 $480,619 $409,951 $10,500 $59,962 06/26/09 Wilshire State Bank

Los Angeles, CA

The Elizabeth State Bank

Elizabeth, IL

NM 4,761 $55,027 $48,131 $5,495 $12,274 07/02/09 Galena State Bank and

Trust

Galena, IL

Founders Bank

Worth, IL

NM 48,969 $889,172 $832,160 $77,038 $129,972 07/02/09 The PrivateBank and Trust 

Company

Chicago, IL

Rock River Bank

Oregon, IL

NM 4,633 $74,808 $74,893 $12,043 $24,880 07/02/09 The Harvard State Bank

Harvard, IL

The John Warner Bank

Clinton, IL

NM 6,487 $69,609 $65,179 $7,515 $13,180 07/02/09 State Bank of Lincoln

Lincoln, IL

First State Bank of Winchester

Winchester, IL

NM 3,362 $30,073 $30,806 $2,410 $7,492 07/02/09 The First National Bank of 

Beardstown

Beardstown, IL

First National Bank of Danville

Danville, IL

N 12,698 $148,218 $140,185 $19,400 $22,233 07/02/09 First Financial Bank, N.A.

Terre Haute, IN
154 FDIC 2009 Annual Report

Fdic-Insured Institutions Closed During 2009 (continu

Dollars in Thousands 

Name and Location

Bank 

Class

Number 

of 

Deposit 

Accounts

Total 

Assets2

Total 

Deposits2

FDIC 

Disbursements3Estimated 

Loss1

Date of 

Closing or 

Acquisition

Receiver/Assuming

Bank and Location

Millennium State Bank of Texas 

Dallas, TX

NM 1,646 $118,601 $115,478 $54,860 $51,863 07/02/09 State Bank of Texas

Irving, TX

Temecula Valley Bank

Temecula, CA

NM 22,684 $1,396,622 $1,276,287 $263,324 $382,418 07/17/09 First-Citizens Bank and

Trust Company

Raleigh, NC

Vineyard Bank, N.A.

Corona, CA

N 37,539 $1,638,378 $1,526,186 $165,552 $572,830 07/17/09 California Bank & Trust

San Diego, CA

First Piedmont Bank

Winder, GA

NM 3,705 $114,113 $108,499 $6,750 $31,994 07/17/09 First American Bank and 

Trust Company

Athens, GA

Security Bank of Bibb County

Macon, GA

NM 35,441 $943,744 $831,437 $347,100 $370,351 07/24/09 State Bank and Trust 

Company

Pinehurst, GA

Security Bank of Gwinnett

County

Suwanee, GA

NM 3,646 $259,182 $256,578 $71,540 $135,047 07/24/09 State Bank and Trust 

Company

Pinehurst, GA

Security Bank of Houston 

County

Perry, GA

NM 16,221 $371,624 $313,155 $12,500 $44,695 07/24/09 State Bank and Trust 

Company

Pinehurst, GA

Security Bank of Jones County

Gray, GA

NM 12,294 $432,712 $375,238 $11,800 $62,196 07/24/09 State Bank and Trust 

Company

Pinehurst, GA

Security Bank of North Fulton

Alpharetta, GA

NM 3,398 $190,564 $179,523 $16,567 $41,321 07/24/09 State Bank and Trust 

Company

Pinehurst, GA

Security Bank of North Metro

Woodstock, GA

NM 2,802 $184,184 $182,413 $33,081 $72,116 07/24/09 State Bank and Trust 

Company

Pinehurst, GA

Waterford Village Bank

Clarence, NY

NM 1,873 $55,707 $56,145 $6,600 $12.154 07/24/09 Evans Bank, NA

Angola, NY

Community First Bank

Prineville, OR

SM 11,345 $199,508 $180,691 $46,969 $60,410 08/07/09 Home Federal Bank 

Nampa, ID

First State Bank of Altus

Altus, OK

NM 7,901 $90,867 $98,161 $36,825 $18,030 07/31/09 Herring Bank

Amarillo, TX

Mutual Bank

Harvey, IL

NM 34,851 $1,595,657 $1,546,525 $348,400 $656,151 07/31/09 United Central Bank

Garland, TX

Peoples Community Bank

West Chester, OH

SB 37,951 $606,153 $538,787 $37,300 $135,480 07/31/09 First Financial Bank, N.A.

Hamilton, OH

First Bankamericano

Elizabeth, NJ

NM 7,085 $163,372 $155,463 $16,340 $16,139 07/31/09 Crown Bank

Brick, NJ
VI. Appendices 155

Fdic-Insured Institutions Closed During 2009 (continu

Dollars in Thousands 

Name and Location

Bank 

Class

Number 

of 

Deposit 

Accounts

Total 

Assets2

Total 

Deposits2

FDIC 

Disbursements3Estimated 

Loss1

Date of 

Closing or 

Acquisition

Receiver/Assuming

Bank and Location

Community National Bank of 

Sarasota County

Venice, FL

N 5,807 $92,528 $92,352 $15,375 $26,456 08/07/09 Stearns Bank, N.A.

St. Cloud, MN

First State Bank of Sarasota

Sarasota, FL

NM 12,193 $447,667 $394,701 $54,896 $124,608 08/07/09 Stearns Bank, N.A.

St. Cloud, MN

Community Bank of Arizona

Phoenix, AZ

NM 2,022 $158,517 $143,834 $24,566 $27,892 08/14/09 MidFirst Bank

Oklahoma City, OK

Colonial Bank

Montgomery, AL

NM 756,514 $25,455,112 $20,020,047 $3,983,800 $3,810,331 08/14/09 Branch Banking and Trust 

(BB&T)

Winston-Salem, NC

Guaranty Bank

Austin, TX

SB 577,832 $13,464,352 $11,984,112 $2,454,739 $2,737,425 08/21/09 BBVA Compass

Birmingham, AL

Capital South Bank

Birmingham, AL

SM 18,031 $586,586 $539,422 $80,191 $162,355 08/21/09 Iberiabank 

Lafeyette, LA

ebank

Atlanta, GA

SB 3,914 $144,688 $131,510 $21,298 $68,164 08/21/09 Stearns Bank, N.A.

St. Cloud, MN

First Coweta Bank

Newnan, GA

NM 6,015 $163,755 $154,903 $152,856 $50,082 08/21/09 United Bank

Zebulon, GA

Bradford Bank

Baltimore, MD

SB 18,354 $451,888 $382,159 $37,338 $92,252 08/28/09 Manufacturers and Traders 

Trust Company

Buffalo, NY

Affinity Bank

Ventura, CA

NM 19,710 $1,211,431 $905,593 $124,371 $266,609 08/28/09 Pacific Western Bank

San Diego, CA

Mainstreet Bank

Forest Lake, MN

NM 21,832 $458,533 $432,818 $46,414 $97,859 08/28/09 Central Bank

Stillwater, MN

First Bank of Kansas City

Kansas City, MO

NM 701 $15,723 $14,479 $16,489 $7,244 09/04/09 Great American Bank

De Soto, KS

InBank

Oak Forest, IL

NM 9,941 $209,848 $209,211 $58,588 $53,690 09/04/09 MB Financial Bank, N.A.

Chicago, IL

First State Bank—Flagstaff

Flagstaff, AZ

SM 4,516 $107,235 $95,734 $99,504 $47,358 09/04/09 Sunwest Bank

Tustin, CA

Vantus Bank

Sioux City, IA

SB 43,421 $503,643 $394,369 $133,300 $99,458 09/04/09 Great Southern Bank

Springfield, MO

Brickwell Community Bank

Woodbury, MN

NM 1,657 $72,576 $64,981 $4,783 $27,074 09/11/09 CorTrust Bank, NA

Mitchell, SD

Venture Bank

Lacey, WA

NM 37,005 $968,385 $917,729 $188,485 $239,762 09/11/09 First-Citizens Bank & Trust

Raleigh, NC

Irwin Union Bank & Trust Co.

Columbus, IN

SM 62,735 $2,839,747 $2,254,025 $850,000 $608,072 09/18/09 First Financial Bank, NA

Hamilton, OH
156 FDIC 2009 Annual Report

Fdic-Insured Institutions Closed During 2009 (continu

Dollars in Thousands 

Name and Location

Bank 

Class

Number 

of 

Deposit 

Accounts

Total 

Assets2

Total 

Deposits2

FDIC 

Disbursements3Estimated 

Loss1

Date of 

Closing or 

Acquisition

Receiver/Assuming

Bank and Location

Irwin Union, FSB

Louisville, KY

SB 9,356 $518,151 $462,611 $113,200 $125,763 09/18/09 First Financial Bank, NA

Hamilton, OH

Georgian Bank

Atlanta, GA

NM 12,548 $2,230,230 $1,960,123 $543,754 $804,828 09/25/09 First Citizens Bank & Trust,

Inc.

Columbia, SC

Southern Colorado National 

Bank

Pueblo, CO

N 1,206 $37,142 $29,568 $4,619 $9,889 10/02/09 Legacy Bank

Wiley, CO

Jennings State Bank

Spring Grove, MN

NM 4,966 $52,347 $50,801 $9,653 $18,159 10/02/09 Central Bank

Stillwater, MN

San Joaquin Bank

Bakersfield, CA

SM 10,068 $766,359 $626,359 $49,252 $94,572 10/16/09 Citizens Business Bank

Ontario, CA

American United Bank

Lawrenceville, GA

NM 1,950 $110,094 $102,386 $17,100 $45,210 10/23/09 Ameris Bank

Moultrie, GA

First DuPage Bank

Westomont, IL

SM 5,851 $262,093 $253,992 $22,423 $63,667 10/23/09 First Midwest Bank

Itasca, IL

Flagship National Bank

Bradenton, FL

N 6,069 $177,563 $170,118 $34,200 $63,623 10/23/09 First Federal Bank of Florida

Lake City, FL

Partners Bank

Naples, FL

SB 1,503 $65,498 $64,798 $34,034 $32,770 10/23/09 Stonegate Bank

Fort Lauderdale, FL

Bank of Elmwood

Racine, WI

SM 15,958 $327,444 $272,782 $112,248 $88,364 10/23/09 Tri City National Bank

Oak Creek, WI

Riverview Community Bank

Ostego, MN

NM 3,398 $99,057 $75,012 $9,148 $23,899 10/23/09 Central Bank

Stillwater, MN

California National Bank

Los Angeles, CA

N 216,381 $7,781,100 $6,145,207 $105,700 $956,535 10/30/09 U.S. Bank, NA

Minneapolis, MN

San Diego National Bank

San Diego, CA

N 74,941 $3,594,544 $2,891,544 $119,813 $353,117 10/30/09 U.S. Bank, NA

Minneapolis, MN

Bank USA, N.A.

Phoenix, AZ

N 1,810 $213,205 $170,685 $3,700 $19,947 10/30/09 U.S. Bank, NA

Minneapolis, MN

Community Bank of Lemont

Lemont, IL

NM 2,871 $81,843 $80,688 $6,096 $24,095 10/30/09 U.S. Bank, NA

Minneapolis, MN

North Houston Bank

Houston, TX

NM 11,645 $325,474 $307,166 $17,500 $42,670 10/30/09 U.S. Bank, NA

Minneapolis, MN

Pacific National Bank

San Francisco, CA

N 48,770 $2,319,263 $1,757,986 $79,000 $223,360 10/30/09 U.S. Bank, NA

Minneapolis, MN

Park National Bank

Chicago, IL

N 174,506 $4,680,881 $3,716,626 $0 $628,737 10/30/09 U.S. Bank, NA

Minneapolis, MN
VI. Appendices 157

Fdic-Insured Institutions Closed During 2009 (continu

Dollars in Thousands 

Name and Location

Bank 

Class

Number 

of 

Deposit 

Accounts

Total 

Assets2

Total 

Deposits2

FDIC 

Disbursements3Estimated 

Loss1

Date of 

Closing or 

Acquisition

Receiver/Assuming

Bank and Location

Citizens National Bank

Teague, TX

N 3,781 $118,236 $97,590 $6,300 $24,717 10/30/09 U.S. Bank, NA

Minneapolis, MN

Madisonville State Bank

Madisonville, TX

NM 8,410 $256,330 $224,653 $8,215 $27,452 10/30/09 U.S. Bank, NA

Minneapolis, MN

Prosperan Bank

Oakdale, MN

NM 8,204 $197,442 $182,794 $35,106 $53,196 11/06/09 Alerus Financial, N.A.

Grand Forks, ND

Home Federal Savings Bank

Detroit, MI

SB 2,477 $12,994 $12,730 $6,270 $7,902 11/06/09 Liberty Bank and Trust 

Company

New Orleans, LA

United Security Bank

Sparta, GA

NM 4,807 $153,639 $149,616 $31,757 $64,949 11/06/09 Ameris Bank

Moultrie, GA

Gateway Bank of St. Louis

Saint Louis, MO

NM 1,818 $26,882 $27,534 $10,054 $11,729 11/06/09 Central Bank of Kansas City

Kansas City, MO

United Commercial Bank

San Francisco, CA

NM 290,762 $10,895,336 $6,937,677 $849,926 $1,451,767 11/06/09 East West Bank

Pasadena, CA

Century Bank, FSB

Sarasota, FL

SB 27,349 $755,923 $659,742 $106,444 $282,096 11/13/09 Iberiabank

Lafayette, LA

Orion Bank

Naples, FL

SM 30,766 $2,612,515 $2,169,446 $496,404 $630,873 11/13/09 Iberiabank

Lafayette, LA

Pacific Coast, N.B.

San Clemente, CA

N 2,338 $131,418 $128,867 $29,096 $30,637 11/13/09 Sunwest Bank

Tustin, CA

Commerce Bank of Southwest 

Florida

Fort Myers, FL

NM 2,005 $70,997 $72,821 $2,575 $28,241 11/20/09 Central Bank

Stillwater, MN

The Buckhead Community Bank

Atlanta, GA

NM 17,403 $856,236 $813,668 $63,705 $241,187 12/04/09 State Bank and Trust 

Company

Macon, GA

The Tattnall Bank

Reidsville, GA

NM 3,434 $49,612 $47,100 $14,703 $17,184 12/04/09 HeritageBank of the South

Albany, GA

Benchmark Bank

Aurora, IL

NM 5,234 $173,062 $182,760 $42,969 $69,948 12/04/09 MB Financial Bank, N.A.

Chicago, IL

Amtrust Bank

Cleveland, OH

SB 460,174 $11,438,990 $8,558,609 $3,035,000 $2,340,668 12/04/09 New York Community Bank

Westbury, NY

Greater Atlantic Bank

Reston, VA

SB 8,008 $203,262 $179,248 $29,800 $37,602 12/04/09 Sonabank

McLean, VA

First Security National Bank

Norcross, GA

N 3,994 $127,455 $121,645 $17,638 $30,125 12/04/09 State Bank and Trust 

Company

Macon, GA
158 FDIC 2009 Annual Report

Fdic-Insured Institutions Closed During 2009 (continu

Dollars in Thousands 

Name and Location

Bank 

Class

Number 

of 

Deposit 

Accounts

Total 

Assets2

Total 

Deposits2

FDIC 

Disbursements3Estimated 

Loss1

Date of 

Closing or 

Acquisition

Receiver/Assuming

Bank and Location

Republic Federal Bank, N.A.

Miami, FL

N 7,318 $433,011 $352,695 $167,564 $109,371 12/11/09 1st United Bank

Boca Raton, FL

Valley Capital Bank, N.A.

Mesa, AZ

N 758 $40,270 $41,312 $0 $9,844 12/11/09 Enterprise Bank & Trust

Clayton, MO

SolutionsBank

Overland Park, KS

SM 10,137 $511,103 $421,271 $21,156 $112,521 12/11/09 Arvest Bank

Fayetteville, AR

Imperial Capital Bank

La Jolla, CA

NM 35,400 $4,046,888 $2,822,300 $726,843 $487,912 12/18/09 City National Bank

Los Angeles, CA

New South Federal Savings 

Bank

Irondale, AL

SB 20,968 $1,464,127 $1,163,916 $86,350 $223,592 12/18/09 Beal Bank

Plano, TX

Peoples First Community Bank

Panama City, FL

SB 81,612 $1,795,420 $1,684,443 $294,000 $484,327 12/18/09 Hancock Bank

Gulfport, MS

First Federal Bank of California, 

FSB

Santa Monica, CA

SB 135,555 $6,143,903 $4,538,607 $0 $158,115 12/18/09 OneWest Bank, FSB

Pasadena, CA

Purchase and Assumption—All Deposits

Ocala National Bank

Ocala, FL

N 10,663 $219,424 $204,663 $215,695 $93,239 01/30/09 CenterState Bank of Florida

Winter Haven, FL

FirstBank Financial Services

McDonough, GA

NM 6,245 $317,237 $279,308 $299,078 $126,255 02/06/09 Regions Bank

Birmingham, AL

Corn Belt Bank and Trust 

Company

Pittsfield, IL

NM 4,520 $260,201 $233,788 $234,458 $79,498 02/13/09 The Carlinville National 

Bank

Carlinville, IL

Riverside Bank of the Gulf Coast

Cape Coral, FL

SM 24,518 $523,673 $422,708 $462,057 $203,865 02/13/09 TIB Bank

Naples, FL

Sherman County Bank

Loup City, NE

NM 5,009 $135,431 $90,647 $114,150 $43,442 02/13/09 Heritage Bank

Wood River, NE

Silver Falls Bank

Silverton, OR

NM 4,476 $134,206 $115,976 $118,660 $52,539 02/20/09 Citizens Bank

Corvallis, OR

Security Savings Bank

Henderson, NV

NM 3,927 $238,307 $174,872 $180,418 $69,679 02/27/09 Bank of Nevada

Las Vegas, NV

American Southern Bank

Kennesaw, GA

NM 1,024 $105,950 $105,940 $108,784 $36,285 04/24/09 Bank of North Georgia

Alpharetta, GA

First Bank of Idaho, FSB

Ketchum, ID

SB 15,195 $490,656 $370,580 $438,920 $171,135 04/24/09 U.S. Bank, NA

Minneapolis, MN

Michigan Heritage Bank

Farmington Hills, MI

SM 3,159 $167,710 $149,065 $144,922 $55,953 04/24/09 Level One Bank

Farmington Hills, MI
VI. Appendices 159

Fdic-Insured Institutions Closed During 2009 (continu

Dollars in Thousands 

Name and Location

Bank 

Class

Number 

of 

Deposit 

Accounts

Total 

Assets2

Total 

Deposits2

FDIC 

Disbursements3Estimated 

Loss1

Date of 

Closing or 

Acquisition

Receiver/Assuming

Bank and Location

America West Bank

Layton, UT

NM 1,909 $281,564 $286,040 $300,259 $125,477 05/01/09 Cache Valley Bank

Logan, UT

Citizens Community Bank

Ridgewood, NJ

NM 1,099 $40,657 $40,664 $40,082 $17,931 05/01/09 North Jersey Community 

Bank

Englewood Cliffs, NJ

Westsound Bank

Bremerton, WA

NM 11,814 $334,608 $304,464 $283,655 $107,122 05/08/09 Kitsap Bank

Port Orchard, WA

Bank of Wyoming

Thermopolis, WY

NM 2,866 $70,188 $66,598 $64,882 $30,480 07/10/09 Central Bank & Trust

Lander, WY

BankFirst

Sioux Falls, SD

SM 4,185 $210,844 $232,203 $218,222 $77,943 07/17/09 Alerus Financial, N.A.

Grand Forks, ND

Integrity Bank

Jupiter, FL

NM 2,293 $105,298 $98,511 $93,134 $38,351 07/31/09 Stonegate Bank

Fort Lauderdale, FL

Union Bank, N.A.

Gilbert, AZ

N 2,526 $119,529 $110,362 $110,785 $52,996 08/14/09 MidFirst Bank

Oklahoma City, OK

Dwelling House Savings & Loan

Pittsburgh, PA

SB 4,285 $12,947 $12,984 $12,690 $9,722 08/14/09 PNC Bank, N.A.

Pittsburgh, PA

Corus Bank, NA

Chicago, IL

N 154,011 $7,003,321 $7,060,693 $4,047,049 $946,457 09/11/09 MB Financial Bank, NA

Chicago, IL

Warren Bank

Warren, MI

SM 12,104 $504,816 $467,767 $464,729 $240,075 10/02/09 The Huntington National 

Bank

Columbus, OH

Hillcrest Bank Florida

Naples, FL

NM 1,535 $82,774 $83,254 $85,334 $31,448 10/23/09 Stonegate Bank

Fort Lauderdale, FL

Insured Deposit Payoffs

New Frontier Bank

Greeley, CO

NM 30,791 $1,774,588 $1,496,347 $1,667,720 $860,709 04/10/09 Federal Deposit Insurance 

Corporation

Citizens State Bank

New Baltimore, MI

NM 16,262 $168,551 $157,149 $111,826 $30,660 12/18/09 Federal Deposit Insurance 

Corporation 

Community Bank of Nevada

Las Vegas, NV

SM $25,906 $1,397,798 $1,372,744 $1,306,797 $742,411 08/14/09 Deposit Insurance Bank 

of Las Vegas

Magnetbank

Salt Lake City, UT

NM 25 $300,674 $282,578 $277,788 $155,393 01/30/09 Federal Deposit Insurance 

Corporation

FirstCity Bank

Stockbridge, GA

NM 3,621 $285,015 $259,056 $290,553 $122,641 03/20/09 Federal Deposit Insurance 

Corporation

First Bank of Beverly Hills

Calabasas, CA

NM 1,203 $1,260,354 $866,492 $1,076,009 $352,190 04/24/09 Federal Deposit Insurance 

Corporation
160 FDIC 2009 Annual Report

Fdic-Insured Institutions Closed During 2009 (continu

Dollars in Thousands 

Name and Location

Bank 

Class

Number 

of 

Deposit 

Accounts

Total 

Assets2

Total 

Deposits2

FDIC 

Disbursements3Estimated 

Loss1

Date of 

Closing or 

Acquisition

Receiver/Assuming

Bank and Location

Community Bank of West 

Georgia

Villa Rica, GA

SM 4,140 $201,222 $189,398 $196,961 $86,224 06/26/09 Federal Deposit Insurance 

Corporation

Platinum Community Bank

Rolling Meadows, IL

SB 2,946 $147,961 $110,186 $272,361 $95,683 09/04/09 Federal Deposit Insurance 

Corporation

Rockbridge Commerical Bank

Atlanta, GA

NM 2,175 $294,024 $291,707 $259,576 $99,449 12/18/09 Federal Deposit Insurance 

Corporation

Codes for Bank Class:

NM = State-chartered bank that is not a member of the Federal Reserve System

N = National Bank

SB = Savings Bank

SM = State-chartered bank that is a member of the Federal Reserve System

SA = Savings Association 1

 Estimated losses are as of 12/31/09. Estimated losses are routinely adjusted with updated information from new appraisals and asset sales, which ultimately affect the 

asset values and projected recoveries.

2

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

3

 Represents corporate cash disbursements.
VI. Appendices 161

Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the 

Protection of Depositors, 1934–2009 

Bank and Thrift Failures3

Dollars in Thousands

Year1

Number 

of Banks/

Thrifts Total Assets Total Deposits

Insured Deposit 

Funding 

and Other 

Disbursements Recoveries

Estimated 

Additional 

Recoveries

Estimated 

Losses

2,260 $786,995,568 $574,449,063 $434,150,618 $309,778,647 $34,030,548 $90,341,423 

20094 140 169,709,160 137,067,132 134,805,303 64,484,333 32,946,066 37,374,904 

20084 25 371,945,480 234,321,715 194,075,587 173,798,116 445,081 19,832,390 

2007 3 2,614,928 2,424,187 1,909,546 1,338,239 360,572 210,735 

2006 0 0 0 0 0 0 0 

2005 0 0 0 0 0 0 0 

2004 4 170,099 156,733 138,895 134,978 0 3,917 

2003 3 947,317 901,978 883,772 812,933 8,192 62,647

2002 11 2,872,720 2,512,834 2,068,519 1,630,631 66,228 371,660 

2001 4 1,821,760 1,661,214 1,605,147 1,113,270 181,417 310,460 

2000 7 410,160 342,584 297,313 265,175 0 32,138 

1999 8 1,592,189 1,320,573 1,307,045 685,154 7,409 614,482 

1998 3 290,238 260,675 286,678 52,248 11,799 222,631 

1997 1 27,923 27,511 25,546 20,520 0 5,026 

1996 6 232,634 230,390 201,533 140,918 0 60,615 

1995 6 802,124 776,387 609,043 524,571 0 84,472 

1994 13 1,463,874 1,397,018 1,224,769 1,045,718 0 179,051 

1993 41 3,828,939 3,509,341 3,841,658 3,209,012 0 632,646 

1992 120 45,357,237 39,921,310 14,173,886 10,499,860 3 3,674,023 

1991 124 64,556,512 52,972,034 21,190,376 15,194,017 3,781 5,992,578 

1990 168 16,923,462 15,124,454 10,812,484 8,040,995 0 2,771,489 

1989 206 28,930,572 24,152,468 11,443,281 5,247,995 0 6,195,286 

1988 200 38,402,475 26,524,014 10,432,655 5,055,158 0 5,377,497

1987 184 6,928,889 6,599,180 4,876,994 3,014,502 0 1,862,492 

1986 138 7,356,544 6,638,903 4,632,121 2,949,583 0 1,682,538 

1985 116 3,090,897 2,889,801 2,154,955 1,506,776 0 648,179 
162 FDIC 2009 Annual Report

Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the 

Protection of Depositors, 1934–2009 (continued)

Bank and Thrift Failures3 (continued)

Dollars in Thousands

Year1

Number 

of Banks/

Thrifts Total Assets Total Deposits

Insured Deposit 

Funding 

and Other 

Disbursements Recoveries

Estimated 

Additional 

Recoveries

Estimated 

Losses

1984 78 2,962,179 2,665,797 2,165,036 1,641,157 0 523,879 

1983 44 3,580,132 2,832,184 3,042,392 1,973,037 0 1,069,355 

1982 32 1,213,316 1,056,483 545,612 419,825 0 125,787 

1981 7 108,749 100,154 114,944 105,956 0 8,988 

1980 10 239,316 219,890 152,355 121,675 0 30,680 

1934 

–1979 558 8,615,743 5,842,119 5,133,173 4,752,295 0 380,878

Assistance Transactions

Dollars in Thousands

154 $3,317,099,253 $1,442,173,417 $11,630,356 $6,199,875 $0 $5,430,481 

20092 8 1,917,482,183 1,090,318,282 0 0 0 0

20082 5 1,306,041,994 280,806,966 0 0 0 0 

2007 0 0 0 0 0 0 0 

2006 0 0 0 0 0 0 0 

2005 0 0 0 0 0 0 0 

2004 0 0 0 0 0 0 0 

2003 0 0 0 0 0 0 0 

2002 0 0 0 0 0 0 0 

2001 0 0 0 0 0 0 0 

2000 0 0 0 0 0 0 0 

1999 0 0 0 0 0 0 0 

1998 0 0 0 0 0 0 0 

1997 0 0 0 0 0 0 0 

1996 0 0 0 0 0 0 0 

1995 0 0 0 0 0 0 0 

1994 0 0 0 0 0 0 0 
VI. Appendices 163

Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the 

Protection of Depositors, 1934–2009 (continued)

Assistance Transactions (continued)

Dollars in Thousands

Year1

Number 

of Banks/

Thrifts Total Assets Total Deposits Disbursements Recoveries

Estimated 

Additional 

Recoveries

Estimated 

Losses

1993 0 0 0 0 0 0 0 

1992 2 33,831 33,117 1,486 1,236 0 250 

1991 3 78,524 75,720 6,117 3,093 0 3,024 

1990 1 14,206 14,628 4,935 2,597 0 2,338 

1989 1 4,438 6,396 2,548 252 0 2,296 

1988 80 15,493,939 11,793,702 1,730,351 189,709 0 1,540,642 

1987 19 2,478,124 2,275,642 160,877 713 0 160,164 

1986 7 712,558 585,248 158,848 65,669 0 93,179 

1985 4 5,886,381 5,580,359 765,732 406,676 0 359,056 

1984 2 40,470,332 29,088,247 5,531,179 4,414,904 0 1,116,275 

1983 4 3,611,549 3,011,406 764,690 427,007 0 337,683 

1982 10 10,509,286 9,118,382 1,729,538 686,754 0 1,042,784 

1981 3 4,838,612 3,914,268 774,055 1,265 0 772,790 

1980 1 7,953,042 5,001,755 0 0 0 0 

1934 

–1979 4 1,490,254 549,299 0 0 0 0 

1

 For 1990 through 2005, amounts represent the sum of BIF and SAIF failures (excluding those handled by the RTC); prior to 1990, figures are only for BIF. 

After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. For 2006 to 2009, figures are for DIF. Assets and 

deposit data are based on the last Call or TFR Report filed before failure.

2

 Includes institutions where assistance was provided under a systemic risk determination. Any costs that exceed the amounts estimated under the least 

cost resolution requirement would be recovered through a special assessment on all FDIC-insured institutions.

3

 Institutions closed by the FDIC, including deposit payoff, insured deposit transfer, and deposit assumption cases.

4

 Includes transaction account coverage under the Transaction Account Guarantee Program.
164 FDIC 2009 Annual Report

FDIC Actions on Financial Institutions Applications 2007–2009

2009 2008 2007

Deposit Insurance 19 123 215

Approved* 19 123 215

Denied 0 0 0

New Branches 521 1,012 1,480

Approved 521 1,012 1,480

Denied 0 0 0

Mergers 190 275 306

Approved 190 275 306

Denied 0 0 0

Requests for Consent to Serve1 503 283 177

Approved 503 283 177

Section 19 20 8 24

Section 32 483 275 153

Denied 0 0 0

Section 19 0 0 0

Section 32 0 0 0

Notices of Change in Control 18 28 17

Letters of Intent Not to Disapprove 18 28 15

Disapproved 0 0 2

Broker Deposit Waivers 35 38 22

Approved 34 38 22

Denied 1 0 0

Savings Association Activities2 39 45 54

Approved 39 45 54

Denied 0 0 0

State Bank Activities/Investments3 2 11 21

Approved 2 11 21

Denied 0 0 0

Conversion of Mutual Institutions 6 10 10

Non-Objection 6 10 10

Objection 0 0 0

* Of the 19 reported in 2009, 11 are de novo applications. There were 101 and 191 de novo applications approved in 2008 and 2007, respectively. 1

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

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

state non-member bank that is not in compliance with capital requirements or is otherwise in troubled condition. 

2

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

the Delegations of Authority to act upon applications. 

3

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

and requires notices to be filed with the FDIC.
VI. Appendices 165

Compliance, Enforcement, and Other Related Legal Actions 2007–2009

2009 2008 2007

Total Number of Actions Initiated by the FDIC 551 273 205

Termination of Insurance

Involuntary Termination

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

Voluntary Termination

Sec. 8a By Order Upon Request 0 1 0

Sec. 8p No Deposits 4 2 2

Sec. 8q Deposits Assumed 2 1 4

Sec. 8b Cease-and-Desist Actions

Notices of Charges Issued1,3 3 1 3

Consent Orders 302 97 48

Sec. 8e Removal/Prohibition of Director or Officer

Notices of Intention to Remove/Prohibit 2 4 1

Consent Orders 64 62 40

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

Civil Money Penalties Issued

Sec. 7a Call Report Penalties 1 0 0

Sec. 8i Civil Money Penalties 154 98 96

Sec. 10c Orders of Investigation 10 2 7

Sec. 19 Denials of Service After Criminal Conviction 0 0 0

Sec. 32 Notices Disapproving Office/Director’s Request for 

Review 0 0 0

Truth-in-Lending Act Reimbursement Actions

Denials of Requests for Relief 0 1 0

Grants of Relief 0 0 0

Banks Making Reimbursement1 94 94 91

Suspicious Activity Reports (Open and closed institutions)1 128,973 133,153 137,548

Other Actions Not Listed2 12 5 7

1

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

initiated.

2

 Other Actions Not Listed includes two Section 19 Waiver grants and three Other Formal Actions.

3

 Correction for 2008
166 FDIC 2009 Annual Report

B. More About the FDIC

FDIC Board of Directors

Sheila C. Bair

Sheila C. Bair was sworn in as the 19th Chairman of the Federal Deposit Insurance Corporation (FDIC) on June 26, 2006. She was appointed Chairman for a fiveyear term, and as a member of the FDIC Board of Directors through July 2013.

Chairman Bair has an extensive background in banking and finance in a career

that has taken her from Capitol Hill, to academia, to the highest levels of government. Before joining the FDIC in 2006, she was the Dean’s Professor of Financial

Regulatory Policy for the Isenberg School of Management at the University of

Massachusetts-Amherst since 2002. While there, she also served on the FDIC’s

Advisory Committee on Banking Policy.

Other career experience includes serving as Assistant Secretary for Financial

Institutions at the U.S. Department of the Treasury (2001 to 2002), Senior Vice

President for Government Relations of the New York Stock Exchange (1995 to 2000), a Commissioner and Acting Chairman of the Commodity Futures Trading Commission (1991 to 1995), and Research Director, Deputy

Counsel and Counsel to Senate Majority Leader Robert Dole (1981 to 1988).

As FDIC Chairman, Ms. Bair has presided over a tumultuous period in the nation’s financial sector. Her innovations have transformed the agency with programs that provide temporary liquidity guarantees, increases in

deposit insurance limits, and systematic loan modifications to troubled borrowers. Ms. Bair’s work at the FDIC

has also focused on consumer protection and economic inclusion. She has championed the creation of an Advisory Committee on Economic Inclusion, seminal research on small-dollar loan programs, and the formation of

broad-based alliances in nine regional markets to bring underserved populations into the financial mainstream.

Since becoming FDIC Chairman, Ms. Bair has received a number of prestigious honors. Among them, in

2009 she was named one of Time Magazine’s “Time 100” most influential people; awarded the John F. Kennedy

Profile in Courage Award; and received the Hubert H. Humphrey Civil Rights Award. In 2008, Chairman Bair

topped The Wall Street Journal’s annual 50 “Women to Watch List.” That same year, Forbes Magazine named 

Ms. Bair as the second most powerful woman in the world after Germany’s Chancellor Angela Merkel.

Chairman Bair has also received several honors for her published work on financial issues, including her

educational writings on money and finance for children, and for professional achievement. Among the honors

she has received are: Distinguished Achievement Award, Association of Education Publishers (2005); Personal

Service Feature of the Year, and Author of the Month Awards, Highlights Magazine for Children (2002, 2003

and 2004); and The Treasury Medal (2002). Her first children’s book, Rock, Brock and the Savings Shock, was

published in 2006 and her second, Isabel’s Car Wash, in 2008.

Chairman Bair received a bachelor’s degree from Kansas University and a J.D. from Kansas University

School of Law. She is married to Scott P. Cooper and has two children.
VI. Appendices 167

Martin J. Gruenberg

Martin J. Gruenberg was sworn in as Vice Chairman of the FDIC Board of

Directors on August 22, 2005. Upon the resignation of Chairman Donald Powell,

he served as Acting Chairman from November 15, 2005, to June 26, 2006. On

November 2, 2007, Mr. Gruenberg was named Chairman of the Executive Council

and President of the International Association of Deposit Insurers (IADI).

Mr. Gruenberg joined the FDIC Board after broad congressional experience in

the financialservices and regulatory areas. He served as Senior Counsel to Senator

Paul S. Sarbanes (D-MD) on the staff of the Senate Committee on Banking, Housing, and Urban Affairs from 1993 to 2005. Mr. Gruenberg advised the Senator

on issues of domestic and international financial regulation, monetary policy and

trade. He also served as Staff Director of the Banking Committee’s Subcommittee

on International Finance and Monetary Policy from 1987 to 1992. Major legislation in which Mr. Gruenbe

played an active role during his service on the Committee includes the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), the Federal Deposit Insurance Corporation Improvement Act of

1991 (FDICIA), the Gramm-Leach-Bliley Act, and the Sarbanes-Oxley Act of 2002.

Mr. Gruenberg holds a J.D. from Case Western Reserve Law School and an A.B. from Princeton University,

Woodrow Wilson School of Public and International Affairs.

Thomas J. Curry

Thomas J. Curry took office on January 12, 2004, as a member of the Board of

Directors of the Federal Deposit Insurance Corporation for a six-year term. Mr.

Curry serves as Chairman of the FDIC’s Assessment Appeals Committee and

Case Review Committee.

Mr. Curry also serves as the Chairman of the NeighborWorks® America Board

of Directors. NeighborWorks® America is a national non-profit organization chartered by Congress to provide financial support, technical assistance, and training

for community-based neighborhood revitalization efforts.

Prior to joining the FDIC’s Board of Directors, Mr. Curry served five Massachusetts Governors as the Commonwealth’s Commissioner of Banks from 1990 to

1991 and from 1995 to 2003. He served as Acting Commissioner from February

1994 to June 1995. He previously served as First Deputy Commissioner and Assistant General Counsel within

the Massachusetts Division of Banks. He entered state government in 1982 as an attorney with the Massachusetts’ Secretary of State’s Office.

Director Curry served as the Chairman of the Conference of State Bank Supervisors from 2000 to 2001. He

served two terms on the State Liaison Committee of the Federal Financial Institutions Examination Council,

including a term as Committee chairman.

He is a graduate of Manhattan College (summa cum laude), where he was elected to Phi Beta Kappa. He

received his law degree from the New England School of Law.
168 FDIC 2009 Annual Report

John C. Dugan

John C. Dugan was sworn in as the 29th Comptroller of the Currency on August

4, 2005. In addition to serving as a director of the FDIC, Comptroller Dugan also

serves as chairman of the Joint Forum, a group of senior financial sector regulators from the United States, Canada, Europe, Japan, and Australia, and as a director of the Federal Financial Institutions Examination Council and NeighborWorks®

America.

Prior to his appointment as Comptroller, Mr. Dugan was a partner at the law

firm of Covington & Burling, where he chaired the firm’s Financial Institutions

Group. He specialized in banking and financial institution regulation. He also

served as outside counsel to the ABA Securities Association.

He served at the Department of Treasury from 1989 to 1993 and was appointed

assistant secretary for domestic finance in 1992. In 1991, he oversaw a comprehensive study of the banking

industry that formed the basis for the financial modernization legislation proposed by the administration of the

first President Bush. From 1985 to 1989, Mr. Dugan was minority counsel and minority general counsel for the

U.S. Senate Committee on Banking, Housing, and Urban Affairs.

Among his professional and volunteer activities before becoming Comptroller, he served as a director of

Minbanc, a charitable organization whose mission is to enhance professional and educational opportunities for

minorities in the banking industry. He was also a member of the American Bar Association’s committee on

banking law, the Federal Bar Association’s section of financial institutions and the economy, and the District

of Columbia Bar Association’s section of corporations, finance, and securities laws.

A graduate of the University of Michigan in 1977 with an A.B. in English literature, Mr. Dugan also earned

his J.D. from Harvard Law School in 1981.

John E. Bowman

John E. Bowman became Acting Director of the Office of Thrift Supervision

(OTS) in March 2009. Mr. Bowman joined the OTS in June of 1999 as Deputy

Chief Counsel for Business Transactions. In May 2004, he was appointed Chief

Counsel and in April 2007, he was appointed Deputy Director and Chief Counsel.

Before joining the OTS, Mr. Bowman was a partner with the law firm of Brown &

Wood LLP in its Washington, DC, office, where he specialized in government and

corporate finance, securities and financial services regulation.

Before entering private practice, Mr. Bowman served for many years as Assistant General Counsel for Banking and Finance at the U.S. Department of the Treasury. While at Treasury, he provided counsel to the Treasury Under Secretary

for Domestic Finance, the Assistant Secretaries for Financial Institutions Policy,

Financial Markets and Economic Policy, and the Fiscal Assistant Secretary on a broad range of issues from

financial services legislation to the financing of the federal debt.

During his government career, Mr. Bowman has been the recipient of numerous awards and honors, including the Presidential Rank Award and the Secretary of the Treasury’s Distinguished Service Award.
VI. Appendices 169

Office of the

Chairman

Sheila C. Bair

Chairman

Vice Chairman

Martin J. Gruenberg

Deputy to the  Chairman

for Resolution and Legal Policy

Michael H. Krimminger

Deputy to the Chairman

Jason C. Cave

Deputy to the Chairman and

Chief Financial Officer

Steven O. App

Board of Directors

Sheila C. Bair

Martin J. Gruenberg

Thomas J. Curry

John C. Dugan

John E. Bowman

Chief Information Officer/

Chief Privacy Officer

Michael E. Bartell

Office of Inspector General

Jon T. Rymer

Inspector General

Chief of Staff

Jesse O. Villareal, Jr.

Office of Public Affairs

Andrew S. Gray

Director

Division of

Supervision and

Consumer Protection

Sandra L. Thompson

Director

Division of Insurance

and Research

Arthur J. Murton

Director

Division of Resolutions

and Receiverships

Mitchell L. Glassman

Director

Office of

International Affairs

Fred S. Carns

Director

General Counsel

Michael Bradeld

Deputy to the Chairman

for External Affairs

Paul M. Nash

Office of

Legislative Affairs

Vacant

Director

Office of the

Ombudsman

Cottrell L. Webster

Ombudsman

Office of Diversity and

Economic Opportunity

D. Michael Collins

Director

Legal Division

Michael Bradeld

General Counsel

Corporate

University

Thom H. Terwilliger

Chief Learning Ocer

Office of Enterprise

Risk Management

James H. Angel, Jr.

Director

Division of

Administration

Arleas Upton Kea

Director

Division of Information

Technology

Michael E. Bartell

Director

Division of Finance

Bret D. Edwards

Director

FDIC Organization Chart/Officials

As of December 31, 200
170 FDIC 2009 Annual Report

Note: In 2008, the Corporation adopted the Full-Time Equivalent methodology reflective of an employee’s scheduled work hours. 

Prior to 2008, staffing totals reflect total employees on board.

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Staffing Trends 2000–2009

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

6,452 6,167 5,430 5,311 5,078 4,514 4,476 4,532 4,988 6,557

FDIC Year-End Staffing

Corporate Staffing
VI. Appendices 171

Number of Employees by Division/Office 2008–2009 (Year-End)1

Total Washington Regional/Field

2009 2008 2009 2008 2009 2008

Division of Supervision and Consumer Protection 3,168 2,733 222 207 2,946 2,526

Division of Resolutions and Receiverships 1,158 391 78 60 1,080 331

Legal Division 625 472 302 275 323 197

Division of Administration 373 316 217 209 156 107

Corporate University 350 240 52 47 298 193

Division of Information Technology 298 283 227 221 71 62

Division of Insurance and Research 193 182 150 145 43 36

Division of Finance 155 159 145 148 10 11

Office of Inspector General 120 111 84 81 36 30

Executive Offices2 53 48 53 48 0 0

Office of Diversity and Economic Opportunity 29 31 29 31 0 0

Office of the Ombudsman 22 11 11 8 11 3

Office of Enterprise Risk Management 13 12 13 12 0 0

Total 6,557 4,988 1,584 1,493 4,973 3,496

1

 The FDIC reports staffing totals using a Full-Time Equivalent methodology, which is based on an employee’s scheduled work hours. Totals may not foot due to rounding.

2

 Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, Chief Information Officer, Legislative Affairs, Public Affairs, 

International Affairs, and External Affairs.
172 FDIC 2009 Annual Report

Sources of Information

FDIC Web Site

www.fdic.gov

A wide range of banking, consumer and financial information is available on the FDIC’s web site.

This includes the FDIC’s Electronic Deposit Insurance Estimator (EDIE), which estimates an individual’s deposit insurance coverage; the Institution Directory—financial profiles of FDIC-insured

institutions; Community Reinvestment Act evaluations and ratings for institutions supervised by the

FDIC; Call Reports—banks’ reports of condition and income; and Money Smart, a training program to

help individuals outside the financial mainstream enhance their money management skills and create

positive banking relationships. Readers also can access a variety of consumer pamphlets, FDIC press

releases, speeches, and other updates on the agency’s activities, as well as corporate databases and

customized reports of FDIC and banking industry information.

FDIC Call Center

Phone: 877-275-3342 (877-ASK-FDIC)

703-562-2222

Hearing Impaired: 800-925-4618 (Toll Free), 

703-562-2289 (Local)

The FDIC Call Center in Washington, DC, is the primary telephone point of contact for general questions from the banking community, the public, and FDIC employees. The Call Center directly, or in

concert with other FDIC subject-matter experts, responds to questions about deposit insurance and

other consumer issues and concerns, as well as questions about FDIC programs and activities. The

Call Center also makes referrals to other federal and state agencies as needed. Hours of operation are

8:00 a.m. to 8:00 p.m. Eastern Time, Monday–Friday, and 9:00 a.m. to 5:00 p.m. Saturday–Sunday.

Recorded information about deposit insurance and other topics is available 24 hours a day at the same

telephone number.

As a customer service, the FDIC Call Center has many bilingual Spanish agents on staff and has

access to a translation service able to assist with over 40 different languages.
VI. Appendices 173

Public Information Center

3501 Fairfax Drive

Room E-1021

Arlington, VA 22226

Phone: 877-275-3342 (877-ASK-FDIC), 

or 703-562-2200

Fax: 703-562-2296

E-mail: publicinfo@fdic.gov

FDIC publications, press releases, speeches and congressional testimony, directives to financial institutions, policy manuals, and other documents are available on request or by subscription through the

Public Information Center. These documents include the Quarterly Banking Profile, FDIC Consumer 

News, and a variety of deposit insurance and consumer pamphlets.

Office of the Ombudsman

3501 Fairfax Drive

Room E-2022

Arlington, VA 22226

Phone: 877-275-3342 (877-ASK-FDIC)

Fax: 703-562-6057

E-mail: ombudsman@fdic.gov

The Office of the Ombudsman (OO) is an independent, neutral, and confidential resource and liaison

for the banking industry and the general public. The OO responds to inquiries about the FDIC in a fair,

impartial, and timely manner. It researches questions and complaints primarily from bankers. The OO

also recommends ways to improve FDIC operations, regulations, and customer service.
174 FDIC 2009 Annual Report

Regional and Area Offices

Atlanta Regional Office

10 Tenth Street, NE

Suite 800

Atlanta, Georgia 303

(678) 916-2200

Alabama

Florida

Georgia

North Carolina

South Carolina

Virginia

West Virginia

Dallas Regional Office

1601 Bryan Street

Dallas, Texas 75201

(214) 754-0098

Colorado

New Mexico

Oklahoma

Texas

Memphis Area Office

5100 Poplar Avenue

Suite 1900

Memphis, Tennessee 38137

(901) 685-1603

Arkansas

Louisiana

Mississippi

Tennessee

Kansas City Regional Office

2345 Grand Boulevard

Suite 1200

Kansas City, Missouri 64108

(816) 234-8000

Iowa

Kansas

Minnesota

Missouri

Nebraska

North Dakota

South Dakota

Chicago Regional Office

300 South Riverdale Plaza

Chicago, Illinois 60606

(312) 382-6000

Illinois

Indiana

Kentucky

Michigan

Ohio

Wisconsin
VI. Appendices 175

San Francisco Regional Office

25 Ecker Street

Suite 2300

San Francisco, California 94105

(415) 546-0160

Alaska

Arizona

California

Guam

Hawaii

Idaho

Montana

Nevada

Oregon

Utah

Washington

Wyoming

New York Regional Office

350 Fifth Avenue

Suite 1200

New York, New York 10118

(917) 320-2500

Delaware

District of Columbia

Maryland

New Jersey

New York

Pennsylvania

Puerto Rico

Virgin Islands

Boston Area Office

15 Braintree Hill Office Park

Suite 100

Braintree, Massachusetts 02184

(781) 794-5500

Connecticut

Maine

Massachusetts

New Hampshire

Rhode Island

Vermont
176 FDIC 2009 Annual Report

C. Office of Inspector General’s 

Assessment of the Management 

and Performance Challenges 

Facing the FDIC

2009 Management and Performance 

Challenges

Under the Reports Consolidation Act, the

OIG is required to identify the most significant

management and performance challenges facing

the Corporation and provide its assessment to

the Corporation for inclusion in its annual performance and accountability report. The OIG

conducts this assessment yearly and identifies

a number of specific areas of challenge facing

the Corporation at the time. In identifying the

challenges, we consider the Corporation’s overall program and operational responsibilities;

financial industry, economic, and technological

conditions and trends; areas of congressional

interest and concern; relevant laws and regulations; the Chairman’s priorities and corresponding corporate goals; and the ongoing activities to

address the issues involved. Taking time annually to reexamine the corporate mission and priorities as the OIG identifies the challenges helps in

planning our work and directing OIG resources

to key areas of risk.

Unprecedented events and turmoil in the economy and financial services industry over the past

year and a half have impacted every facet of the

FDIC’s mission and operations and continue to

pose challenges. In looking at the recent past and

the current environment and anticipating to the

extent possible what the future holds, the Office

of Inspector General (OIG) believes the FDIC

faces challenges in the areas listed below. While

the Corporation’s most pressing priority has been

its continuing efforts to restore and maintain

public confidence and stability, challenges have

persisted in other areas as well. We would note

in particular that the Corporation is devoting

significant attention to carrying out its massive

resolution and receivership workload, brought on

by 140 financial institution failures over the past

year, in contrast to 25 failures during 2008 and

3 in 2007. Further, the Chairman has indicated

that the FDIC anticipates failures during 2010 to

exceed the level in 2009. At the same time, as

we pointed out last year, the FDIC faces challenges in maintaining the viability of the Deposit

Insurance Fund (DIF), enhancing its supervision

of financial institutions, protecting consumers,

and managing its growing internal and contractor workforce and other corporate resources. The

Corporation will continue to face daunting challenges as it carries out its longstanding mission,

responds to emerging issues, and plays a key part

in shaping the future of bank regulation.

Restoring and Maintaining Public Confidence 

and Stability in the Financial System

Importantly, and integral to maintaining confidence and stability in the financial system, notwithstanding the 140 failures of 2009, the FDIC

stood behind its deposit insurance commitment,

and no depositor lost a single penny of insured

deposits. Additionally, over the past year, the

FDIC played a key role, along with other regulators, the Congress, the Department of the Treas

ury, financial institutions, and other stakeholders

in a number of temporary financial stability programs that were formed to address crisis conditions. These included the Temporary Liquidity

Guarantee Program, Troubled Asset Relief Program, and loan modification programs, to name a
VI. Appendices 177

to address the fundamental causes of the recent

crisis. These entities make up a significant share

of the banking industry’s assets. Although the

FDIC is not the primary federal regulator for

these institutions, it holds significant responsibility as deposit insurer for all. The FDIC has

expanded its own presence at such institutions

through additional and enhanced on-site and

off-site monitoring and oversight. As of the end

of December 2009, its Large Insured Depository Institution program covered 109 institutions

with total assets of more than $10 trillion. Early

identification and remediation of issues that pose

risks to the overall financial system will continue to be a challenging task.

In a related vein, the FDIC has also endorsed

a resolution mechanism that can effectively

address failed financial firms regardless of their

size and complexity and assure that shareholders

and creditors absorb losses without cost to the

taxpayers. Such a mechanism would maintain

financial market stability and minimize systemic

consequences for the national and international

economy. The Corporation may face challenges

as it advocates for changes to the supervision

and resolution of systemically important financial firms.

As the debate continues over these and other

aspects of regulatory reform in the months

ahead, the FDIC’s continuous coordination and

cooperation with the other federal regulators and

parties throughout the banking and financial services industries will be critical. The FDIC, along

with other regulators, will continue to be subject

to increased scrutiny and possible corresponding

regulatory reform proposals that may have a substantial impact on the regulatory entities and the

programs and activities they currently operate.

few. Some of these have wound down, others are

ongoing. The fulfillment of the FDIC’s insurance

commitment and the successful implementation

of programs designed to ensure the flow of credit,

strengthen the financial system, and provide aid

to homeowners and small businesses have gone

a long way in helping to restore confidence and

stability in the financial system. Going forward,

the Corporation will need to continue to remain

poised to address new challenges. For example,

emerging problems in the commercial real estate

(CRE) sector will likely require attention. While

residential real estate markets suffered first during the recent crisis, problems on the commercial

side came about later. Sales of commercial real

estate slowed dramatically in 2008 and 2009, as

vacancy rates and rental rates declined significantly. CRE price declines have also been larger

on average than declines in home values, with

CRE price indices down by over 40 percent from

their fall 2007 high point. The sharp decline is

attributable in part to higher required rates of

return on the part of investors and deterioration

in the availability of credit for commercial real

estate financing. Banks will likely increasingly

feel the repercussions of stress in the CRE sector

in the months ahead, and the FDIC will need to

closely monitor the impact of such problems on

the institutions it regulates and insures.

Over the past year, the FDIC has also been a

proponent of certain changes to the financial regulatory system to further stabilize and shore up

confidence in the financial services industry. In

that connection, the FDIC Chairman believes we

need to move away from the concept of “too big

to fail” and create a system of macro-prudential

supervision for systemically important financial firms and other large/complex institutions
178 FDIC 2009 Annual Report

ing 187 active receiverships, with assets totaling

about $41 billion.

Ofspecial note, the FDIC isretaining large volumes of assets as part of purchase and assumption

agreements with institutions that are assuming

the insured deposits of failed institutions. A number of the purchase and assumption agreements

include shared-loss arrangements with other parties that involve pools of assets worth billions of

dollars and that can extend up to 10 years. From

a dollar standpoint, the FDIC’s exposure is staggering: as of December 31, 2009, the Corporation

was party to 93 shared loss agreements related to

closed institutions, with initial covered assets of

$126.4 billion. Because the assuming institutions

are servicing the assets and the FDIC is reimbursing a substantial portion of the related losses and

expenses, there is significant risk to the Corporation. Additionally, the FDIC is increasingly using

structured sales transactions to sell assets to third

parties that are not required to be regulated financial institutions. Such arrangements need to be

closely monitored to ensure compliance with all

terms and conditions of the agreements at a time

when the FDIC’s control environment is continuing to evolve.

It takes a substantial level of human resources

to handle the mounting resolution and receivership workload, and effectively administering such

a complex workforce will be challenging. DRR

staffing grew from approximately 400 employees

at the start of 2009 to the year-end staffing level

of 1,158 full-time equivalents. The FDIC Board of

Directors approved a further increase in the Division’sstaffing to 2,310 for 2010. Most of these new

employees have been hired on non-permanent

appointments with terms of up to 5 years. Additionally, over $1.8 billion will be available for

Resolving Failed Institutions and 

Managing Receiverships

A fundamental part of the FDIC mission

and perhaps the Corporation’s most significant

current challenge is efficiently handling the

resolutions of failing FDIC-insured institutions

and providing prompt, responsive, and effective administration of failing and failed financial institutions in its receivership capacity. The

resolution process involves the complex process

of valuing a failing federally insured depository

institution, marketing it, soliciting and accepting

bids for the sale of the institution, considering

the least costly resolution method, determining which bid to accept, and working with the

acquiring institution through the closing process. The receivership process, also demanding,

involves performing the closing function at the

failed bank; liquidating any remaining assets;

and distributing any proceeds to the FDIC, the

bank customers, general creditors, and those

with approved claims.

The Corporation is now facing a resolution

and receivership workload of huge proportion.

One hundred forty institutions failed during

2009, with total assets at failure of $171.2 billion and total estimated losses to the Deposit

Insurance Fund of approximately $35.6 billion.

During 2009, the number of institutions on the

FDIC’s “Problem List” also rose to its highest level in 16 years. As of December 31, 2009,

there were 702 insured institutions on the “Problem List,” indicating a probability of more failures to come and an increased asset disposition

workload. Total assets of problem institutions

increased to $402.8 billion as of year-end 2009.

As of the end of December 2009, the Division

of Resolutions and Receiverships was manag-
VI. Appendices 179

ly manner those receiverships not subject to lossshare agreements, structured sales, or other legal

impediments.

Ensuring the Viability of the Deposit 

Insurance Fund (DIF)

A critical priority for the FDIC is to ensure that

the DIF remains viable to protect insured depositors in the event of an institution’s failure. The

basic maximum insurance amount under current

law is $250,000 through year-end 2013. Estimated

insured deposits based on the current limit rose to

$5.4 trillion as of December 31, 2009.

The DIF has suffered from the failures of the

past.Estimated lossesfromfailuresin 2008 totaled

$19.8 billion and from failures in 2009 totaled

$35.6 billion. To maintain sufficient DIF balances, the FDIC collects risk-based insurance premiums from insured institutions and invests deposit

insurance funds. In September 2009, the FDIC’s

DIF balance—or the net worth of the fund—fell

below zero for the first time since the third quarter

of 1992. The fund balance of negative $20.9 billion as of December 31, 2009, reflects a $44 billion contingent loss reserve that has been set aside

to cover estimated losses over the next year. Just

as banks reserve for loan losses, the FDIC has to

set aside reserves for anticipated closings over the

next year. Combining the fund balance with this

contingent loss reserve showed total DIF reserves

with a positive balance of $23.1 billion.

The FDIC Board of Directors closely monitors the viability of the DIF. In February 2009,

the FDIC Board took action to ensure the continued strength of the fund by imposing a one-time

emergency special assessment on institutions as

of June 30, 2009. On two occasions, the Board

also set assessment rates that generally increase

contracting for receivership-related services during 2010, and by the end of 2009, DRR already

employed over 1,500 contractor personnel. The

significant surge in failed-bank assets and associated contracting activities will require effective

and efficient contractor oversight management

and technical monitoring functions. Bringing on

so many contractors and new employees in a short

period of time can strain personnel and administrative resources in such areas as employee background checks, which, if not timely and properly

executed can compromise the integrity of FDIC

programs and operations.

As the Corporation’s workforce responds to

institution failures and carries out its resolution

and receivership responsibilities, it will face

a number of challenges. It needs to ensure that

related processes, negotiations, and decisions

regarding the future status of the failed or failing institutions are marked by fairness, transparency, and integrity. It will be challenged in

timely marketing failing institutions to qualified

and interested potential bidders, selling assets,

and maximizing potential values of failed bank

franchises. Over time, these tasks may be even

more difficult, given concentrations of assets

in the same geographic area, a decreasing pool

of interested buyers, and an inventory of less

attractive or hard-to-sell assets. It is also possible

that individuals or entities that may have been

involved in previous institution failures could try

to reenter the FDIC’s asset purchase and management arena. Appropriate safeguards must be

in place to ensure the Corporation knows the

backgrounds of its bidders and acquirers to prevent those parties from profiting at the expense

of the Corporation. Finally, in order to minimize

costs, it will be important to terminate in a time-
180 FDIC 2009 Annual Report

the amount that institutions pay each quarter

for insurance and also made adjustments that

expand the range of assessment rates. The Corporation had adopted a restoration plan in October 2008 to increase the reserve ratio to the 1.15

percent designated threshold within five years.

In February 2009, the Board voted to extend the

restoration plan horizon to seven years and in

September 2009 extended the time frame to eight

years. As of December 31, 2009, the reserve ratio

was negative 0.39 percent.

To further bolster the DIF’s cash position,

the FDIC Board approved a measure on November 12, 2009, to require insured institutions to

prepay 13 quarters’ worth of deposit insurance

premiums—about $45.7 billion—at the end of

2009. The intent of this measure was to provide

the FDIC with the funds needed to carry on with

the task of resolving failed institutions in 2010,

but without accelerating the impact of assessments on the industry’s earnings and capital. The

Corporation will face challenges going forward

in its ongoing efforts to replenish the DIF and

implement a deposit insurance premium system

that differentiates based on risk to the fund.

The Corporation will also be continuing to

play a leadership role in its work with global partners on such matters as Basel II to ensure strong

regulatory capitalstandardsto protect the international financial system from problems that might

arise when a major bank or series of banks fail.

Ensuring Institution Safety and Soundness 

Through an Effective Examination and 

Supervision Program

The Corporation’s bank supervision program

promotes the safety and soundness of FDIC-supervised insured depository institutions. As of

December 31, 2009, the FDIC was the primary

federal regulator for about 5,000 FDIC-insured,

state-chartered institutions that were not members of the Federal Reserve System (generally

referred to as “state non-member” institutions).

The examination of the banks that it regulates is

a core FDIC supervisory function. The Corporation also has back-up examination authority to

protect the interests of the deposit insurance fund

for about 3,000 national banks, state-chartered

banks that are members of the Federal Reserve

System, and savings associations.

In the current environment, efforts to continue to ensure safety and soundness and carry out

the examination function will be challenging in

a number of ways. Of particular importance for

2010 is that the Corporation needs to continue

to assess the implications of the recent financial

and economic crisis and integrate lessonslearned

and any needed changes to the examination program into the supervisory process. At the same

time, it needs to continue to carry out scheduled

examinations to ensure the safety and soundness

of the thousands of institutions that it regulates.

The Corporation has developed a comprehensive

“forward-looking supervision” training program

for its examiners designed to build on lessons

learned over the past year or so and will need to

put that training into practice going forward.

Asin the past, the Corporation needsto ensure

it has sufficient resources to keep pace with its

rigorous examination schedule and the needed

expertise to address complex transactions and

new financial instruments that may affect an

institution’s safety and soundness. In light of the

many changes in financial institution operations

over the past year or so, the FDIC’s examination

workforce may need to review and comment
VI. Appendices 181

be effective to ensure institutions are promptly

complying with any supervisory enforcement

actions—informal or formal—resulting from the

FDIC’s risk-management examination process.

In some cases, to maintain the integrity of the

banking system, the Corporation will also need

to aggressively pursue prompt actions against

bank boards or senior officers who may have

contributed to an institution’s failure.

The rapid changes in the banking industry, increase in electronic and on-line banking,

growing sophistication of fraud schemes, and the

mere complexity of financial transactions and

financial instruments all create potential risks

at FDIC-insured institutions and their service

providers. These risks could negatively impact

the FDIC and the integrity of the U.S. financial system and contribute to institution failures if existing checks and balances falter or are

intentionally bypassed. The FDIC must seek to

minimize the extent to which the institutions it

supervises are involved in or victims of financial

crimes and other abuse. It needs to continue to

focus on Bank Secrecy Act examinations to prevent banks and other financial service providers

from being used as intermediaries for, or to hide

the transfer or deposit of money derived from,

criminal activity. FDIC examiners need to be

alert to the possibility of other fraudulent activity in financial institutions, and make full use of

reports, information, and other resources available to them to help detect such fraud.

Protecting and Educating Consumers and 

Ensuring an Effective Compliance Program

The FDIC’s efforts to ensure that banks serve

their communities and treat consumers fairly

continue to be a priority. The FDIC carries out its

on a number of new issues when they assign

examination ratings. With respect to risk management examinations, senior DSC management

and examiners will need to continue to adopt the

“forward-looking” supervisory approach, carefully assess the institution’s overall risks, and

base ratings not on current financial condition

alone, but rather on consideration of possible

future risks. These risks should be identified by

rigorous and effective on-site and off-site review

mechanisms and accurate metrics that identify

risks embedded in the balance sheets and operations of the insured depository institutions so

that steps can be taken to mitigate their impact

on the institutions.

The Corporation’s supervision workload is

further compounded by the increased number

of problem institutions that exist, as referenced

earlier—that is, institutions assigned a composite rating of 4 or 5 under the Uniform Financial

Institutions Rating System by its primary federal

regulator or by the FDIC if it disagrees with the

primary federal regulator’s rating. Problem institutions are subject to close supervision with more

frequent examinations, visitations, and off-site

reviews. They are also subject to enforcement

actions requiring corrective actions designed

to resolve the bank’s deteriorating condition. In

light of recent failures, such scrutiny is of paramount importance.

In all cases, examiners need to continue to

bring any identified problemsto the bank’s Board

and management’s attention, assign appropriate

ratings, and make actionable recommendations

to address areas of concern. In doing so they

will continue to need the full support of senior

FDIC management. Subsequently, the FDIC’s

corrective action and follow-up processes must
182 FDIC 2009 Annual Report

personal savings, responsible financial management, and the benefits and limitations of deposit

insurance. It will continue educational and outreach endeavors to disseminate updated information to all consumers, including the unbanked

and underbanked, going forward so that taxpayers have the needed knowledge for responsible

financial management and informed decisionmaking.

With respect to consumer protections in the

context of possible regulatory reform, the FDIC

supports the establishment of a single primary

federal consumer-products regulator. In the

FDIC’s view, such an entity should regulate providers of consumer credit, savings, payment, and

other financial products and services. It should

have sole rulemaking authority for consumer

financial protection statutes and should have

supervisory and enforcement authority over all

non-bank providers of consumer credit and backup supervisory authority over insured depository institutions. As with other regulatory reform

initiatives, the FDIC may face challenges as it

seeks to make this concept a reality in the coming months.

Effectively Managing the FDIC Workforce 

and Other Corporate Resources

The FDIC’s human, financial, IT, and physical resources have been stretched over the past

year and the Corporation will continue to face

challenges during 2010 in promoting sound governance and effective stewardship ofits core business processes and resources. Of particular note,

FDIC staffing levels are increasing dramatically.

The Board approved a 2010 FDIC staffing level

of 8,653, reflecting an increase from 7,010 positions in 2009. These staff—mostly temporary,

consumer protection role by educating consumers, providing them with access to information

about theirrights and disclosuresthat are required

by federal laws and regulations, and examining the banks where the FDIC is the primary

federal regulator to determine the institutions’

compliance with laws and regulations governing consumer protection, unfair or deceptive

acts and practices, fair lending, and community

investment. The FDIC’s compliance program,

including examinations, visitations, and followup supervisory attention on violations and other

program deficiencies, is critical to ensuring that

consumers and businesses obtain the benefits

and protections afforded them by law. Proactively identifying and assessing potential risks associated with new and existing consumer products

will continue to challenge the FDIC.

The FDIC will continue to conduct Community Reinvestment Act (CRA) examinations in

accordance with the CRA, a 1977 law intended

to encourage insured banks and thrifts to help

meet the credit needs of the communities in

which they are chartered to do business, including low- and moderate-income neighborhoods,

consistent with safe and sound operations. The

Corporation needs to maximize the benefits of

the interactions between its compliance and risk

management functions in the interest of maintaining healthy, viable institutions that serve

their communities well.

The FDIC will continue to address its mounting workload of responding to public inquiries

from consumers regarding deposit insurance

coverage and other concerns stemming from the

financial distress they have experienced. Also,

the Corporation will continue to emphasize

financial literacy to promote the importance of
VI. Appendices 183

poration’sfinancial management efforts must continuously seek to be efficient and cost-conscious.

Amidst the turmoil in the industry and economy, the FDIC is engaging in massive amounts

of information sharing—both internally and

with external partners. Its information technology resources need to ensure the integrity, availability, and appropriate confidentiality of bank

data, personally identifiable information, and

other sensitive information in an environment

of increasingly sophisticated security threats

and global connectivity. Continued attention

to ensuring the physical security of all FDIC

resources is also critical.

The FDIC’s numerous enterprise risk management activities need to consistently identify,

analyze, and mitigate operational risks on an

integrated, corporate-wide basis. Such risks need

to be communicated throughout the Corporation

and the relationship between internal and external risks and related risk mitigation activities

should be understood by all involved. To further

enhance risk monitoring efforts, the Corporation

has established six new Program Management

Offices to address risks associated with such

activities as shared loss agreements, contracting

oversight for new programs and resolution activities, the systemic resolution authority program,

and human resource management concerns.

These new offices and the contractors engaged

to assist them will require additional oversight

mechanisms to help ensure their success.

**********

The FDIC OIG is committed to its mission of

assisting and augmenting the FDIC’s contribution

to stability and public confidence in the nation’s

financial system. Now more than ever, we have a

and including a number of rehired annuitan

—will perform bank examinations and other

supervisory activities to address bank failures,

and, as mentioned previously, an increasing

number will be devoted to managing and selling

assets retained by the FDIC when a failed bank is

sold. The FDIC has opened two new temporary

Satellite Offices (East Coast and West Coast)

and will open a third in the Midwest for resolving failed financial institutions and managing the

resulting receiverships. As referenced earlier, the

Corporation’s contracting level has also grown

significantly, especially with respect to resolution and receivership work.

Opening new offices, rapidly hiring and

training many new staff, expanding contracting activity, and training those with contract

oversight responsibilities are all placing heavy

demands on the Corporation’s personnel and

administrative staff and operations. When conditions improve throughout the industry and the

economy, a number of employees will need to

be released and staffing levels will return to a

pre-crisis level, which may cause additional disruption to ongoing operations and the working

environment. Among other challenges, pre- and

post-employment checks for new employees and

contractors will need to ensure the highest standards of ethical conduct, and for all employees,

the Corporation will seek to sustain its emphasis

on fostering employee engagement and morale.

To support these increases in FDIC and contractor resources, the Board approved a nearly

$4.0 billion 2010 Corporate Operating Budget,

approximately $1.4 billion higher than for 2009.

The FDIC’s operating expenses are largely paid

from the insurance fund, and consistent with

sound corporate governance principles, the Cor-
184 FDIC 2009 Annual Report

crucial role to play to help ensure economy, efficiency, effectiveness, integrity, and transparency

of programs and associated activities, and to

protect against fraud, waste, and abuse that can

undermine the FDIC’s success. Our management

and performance challenges evaluation is based

primarily on the FDIC’s operating environment

and available information as of the end of 2009,

unless otherwise noted. We will continue to

communicate and coordinate closely with the

Corporation, the Congress, and other financial

regulatory OIGs as we address these issues and

challenges. Results of OIG work will be posted

at www.fdicig.gov.
2009

Federal Deposit Insurance Corporation

This Annual Report was produced by talented 

and dedicated staff. To these individuals, we 

would like to offer our sincere thanks and 

appreciation. Special recognition is given to the 

following individuals for their contributions.

• Jannie F. Eaddy

• Barbara Glasby

• David Kornreich

• Mia Jordan

• Robert Nolan

• Patricia Hughes
F E D E R A L 

D E P O S I T 

I N S U R A N C E 

CORPORATION

550 17th Street, NW

Washington, DC 20429-9990

FDIC-003-2010