2011

A N N U A L R E P O R T

71

financials

4. financial statements and note
Financia 

72

DepositInsu

Federal Deposit Insurance Corporation

Deposit Insurance Fund Balance Sheet at December 

Dolars

2011 2010

Assets

Cash and cash equivalents $3,277,839 $27,076,606 

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

(Includes cash/cash equivalents of $1,627,073 at December 31, 2011 

and $5,030,369 at December 31, 2010)

4,827,319 6,646,968 

 Investment in U.S. Treasury obligations, net (Note 3) 33,863,245 12,371,268 

 Trust preferred securities (Note 5) 2,213,231 2,297,818 

 Assessments receivable, net (Note 9) 282,247 217,893 

 Receivables and other assets - systemic risk (Note 16) 1,948,151 2,269,422 

 Interest receivable on investments and other assets, net 488,179 259,683 

 Receivables from resolutions, net (Note 4) 28,548,396 29,532,545 

 Property and equipment, net (Note 6) 401,915 416,065 

Total Assets $75,850,522 $81,088,268 

Liabilities 

 Accounts payable and other liabilities $374,164 $514,287 

 Unearned revenue - prepaid assessments (Note 9) 17,399,828 30,057,033 

 Liabilities due to resolutions (Note 7) 32,790,512 30,511,877 

 Debt Guarantee Program liabilities - systemic risk (Note 16) 117,027 29,334 

 Deferred revenue - systemic risk (Note 16) 6,639,954 9,054,541 

 Postretirement benefit liability (Note 13) 187,968 165,874 

Contingent liabilities for: 

 Anticipated failure of insured institutions (Note 8) 6,511,321 17,687,569 

 Systemic risk (Note 16) 2,216 119,993 

 Litigation losses (Note 8) 1,000 300,000 

Total Liabilities 64,023,990 88,440,508 

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

Fund Balance

 Accumulated Net Income (Loss) 11,560,990 (7,696,428)

Accumulated Other Comprehensive Income

 Unrealized gain on U.S. Treasury investments, net (Note 3) 47,697 26,698 

 Unrealized postretirement benefit loss (Note 13) (33,562) (18,503)

 Unrealized gain on trust preferred securities (Note 5) 251,407 335,993 

Total Accumulated Other Comprehensive Income 265,542 344,188

Total Fund Balance 11,826,532 (7,352,240)

Total Liabilities and Fund Balance $75,850,522 $81,088,268 

The accompanying notes are an integral part of these financial statements.
2011

A N N U A L R E P O R T

73

financials

Federal Deposit Insurance Corporatio

Deposit Insurance Fund Statement of Income and Fund Balance for the Years Ended Decembe

Dolars

2011 2010

Revenue

 Assessments (Note 9) $13,498,587 $13,610,436 

 Interest on U.S. Treasury obligations 127,621 204,871 

 Systemic risk revenue (Note 16) (131,141) (672,818)

 Other revenue (Note 10) 2,846,929 237,425 

Total Revenue 16,341,996 13,379,914 

Expenses and Losses

 Operating expenses (Note 11) 1,625,351 1,592,641 

 Systemic risk expenses (Note 16) (131,141) (672,818)

 Provision for insurance losses (Note 12) (4,413,629) (847,843)

 Insurance and other expenses 3,996 3,050 

Total Expenses and Losses (2,915,423) 75,030

Net Income 19,257,419 13,304,884 

Other Comprehensive Income

 Unrealized gain (loss) on U.S. Treasury investments, net 20,999 (115,429)

 Unrealized postretirement benefit loss (Note 13) (15,059) (15,891)

 Unrealized (loss) gain on trust preferred securities (Note 5) (84,587) 335,993 

Total Other Comprehensive (Loss) Income (78,647) 204,673

Comprehensive Income 19,178,772 13,509,557 

Fund Balance - Beginning (7,352,240) (20,861,797)

Fund Balance - Ending $11,826,532 $(7,352,240

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

DepositInsu
Financia 

74

Federal Deposit Insurance Corporatio

Deposit Insurance Fund Statement of Cash Flows for the Years Ended Decembe

Dolars

2011 2010

Operating Activities

Net Income: $19,257,419 $13,304,884 

Adjustments to reconcile net income to net cash (used by) operating activities:

Amortization of U.S. Treasury obligations 388,895 (5,149)

Treasury Inflation-Protected Securities inflation adjustment (25,307) (23,051)

Depreciation on property and equipment 77,720 68,790 

Loss on retirement of property and equipment 1,326 620 

Provision for insurance losses (4,413,629) (847,843)

Unrealized Loss on postretirement benefits (15,059) (15,891)

Change in Operating Assets and Liabilities:

(Increase) Decrease in assessments receivable, net (64,354) 62,617 

(Increase) in interest receivable and other assets (227,962) (34,194)

(Increase) in receivables from resolutions (5,802,003) (16,607,671)

Decrease in receivables - systemic risk 321,271 1,029,397 

(Decrease) Increase in accounts payable and other liabilities (140,123) 240,949 

Increase in postretirement benefit liability 22,094 20,922 

(Decrease) in contingent liabilities - systemic risk (117,777) (1,289,957)

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

Increase (Decrease) in liabilities due to resolutions 2,278,635 (4,199,849)

Increase in Debt Guarantee Program liabilities - systemic risk 87,693 27,318 

(Decrease) in unearned revenue - prepaid assessments (12,657,206) (12,670,068)

(Decrease) Increase in deferred revenue - systemic risk (2,399,644) 1,203,936 

Net Cash (Used by) Operating Activities (3,704,011) (19,734,24

Investing Activities

Provided by:

Maturity of U.S. Treasury obligations 12,976,273 21,558,000 

Used by:

Purchase of property and equipment (64,896) (96,659)

Purchase of U.S. Treasury obligations (36,409,429) (30,143,138)

Net Cash (Used by) Investing Activities (23,498,052) (8,681,797

Net (Decrease) in Cash and Cash Equivalents (27,202,063) (28,416,03

Cash and Cash Equivalents - Beginning 32,106,975 60,523,012

Unrestricted Cash and Cash Equivalents - Ending 3,277,839 27,076,6

Restricted Cash and Cash Equivalents - Ending 1,627,073 5,030,36

Cash and Cash Equivalents - Ending $4,904,912 $32,106,97

DepositInsu

The accompanying notes are an integral part of these financial statements.
2011

A N N U A L R E P O R T

75

financials

1. Legislation and Operations of the 

Deposit Insurance Fu

Ove

The Federal Deposit Insurance Corporation (FDIC) 

is the independent deposit insurance agency created 

by Congress in 1933 to maintain stability and public 

confidence in the nation’s banking system. Provisions that 

govern the operations of the FDIC are generally found 

in the Federal Deposit Insurance (FDI) Act, as amended 

(12 U.S.C. 1811, et seq). In carrying out the purposes of 

the FDI Act, the FDIC, as administrator of the Deposit 

Insurance Fund (DIF), insures the deposits of banks and 

savings associations (insured depository institutions). 

In cooperation with other federal and state agencies, 

the FDIC promotes the safety and soundness of insured 

depository institutions by identifying, monitoring and 

addressing risks to the DIF. Commercial banks, savings 

banks and savings associations (known as “thrifts”) 

are supervised by either the FDIC, the Office of the 

Comptroller of the Currency, or the Federal Reserve Board. 

The FDIC, through administration of the DIF, is 

responsible for protecting insured bank and thrift 

depositors from loss due to institution failures. The 

FDIC is required by section 13 of the FDI Act to resolve 

troubled institutions in a manner that will result in the 

least possible cost to the DIF. This section permits an 

exception if a systemic risk determination demonstrates 

that compliance with the least-cost test would have 

serious adverse effects on economic conditions or 

financial stability and that any action or assistance 

pursued under the systemic risk determination would 

avoid or mitigate such adverse effects. A systemic risk 

determination under this statutory provision can only be 

triggered by the Secretary of the Treasury, in consultation 

with the President, and upon the written recommendation 

of two-thirds of both the FDIC Board of Directors and 

the Board of Governors of the Federal Reserve System. 

Until passage of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank Act) on July 21, 

2010 (see “Recent Legislation” below), a systemic risk 

determination would have permitted open bank assistance 

to an individual insured depository institution (IDI). As 

explained below, such open bank assistance is no longer 

available. The systemic risk provision requires the FDIC 

to recover any related losses to the DIF through one or 

more special assessments from all IDIs and, with the 

concurrence of the Secretary of the 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 former Resolution Trust Corporation. The DIF 

and the FRF are maintained separately by the FDIC to 

support their respective functions.

Pursuant to the enactment of the Dodd-Frank Act, the 

FDIC is the manager of the Orderly Liquidation Fund 

(OLF). Established as a separate fund in the U.S. Treasury 

(Treasury), the OLF is inactive and unfunded until the 

FDIC is appointed as receiver for a covered financial 

company (a failing financial company, such as a bank 

holding company or nonbank financial company for 

which a systemic risk determination has been made as 

set forth in section 203 of the Dodd-Frank Act). At the 

commencement of an orderly liquidation of a covered 

Nots to the

Deposit

December 31, 2011 and 2010
Financia 

76

financial company, the FDIC may borrow funds required 

by the receivership from the Treasury, up to the Maximum 

Obligation Limitation for each covered financial 

company and in accordance with an Orderly Liquidation 

and Repayment Plan. Borrowings will be repaid to the 

Treasury with the proceeds of asset sales. If such proceeds 

are insufficient, any remaining shortfall must be recovered 

from assessments imposed on financial companies as 

specified in the Dodd-Frank Act.

Recent L

The Dodd-Frank Act (Public Law 111-203) provides 

comprehensive reform of the supervision and regulation 

of the financial services industry. Under this legislation, 

the FDIC’s responsibilities include 1) liquidating failing 

systemically important financial firms in an orderly 

manner as manager of the newly created OLF; 2) issuing 

regulations, jointly with the Federal Reserve Board (FRB), 

requiring that nonbank financial companies supervised 

by the FRB and bank holding companies with assets equal 

to or exceeding $50 billion provide the FRB, the FDIC, 

and the Financial Stability Oversight Council (FSOC) a 

plan for their rapid and orderly resolution in the event of 

material financial distress or failure; 3) serving as a voting 

member of the FSOC; 4) undertaking backup examination 

authority for nonbank financial companies supervised by 

the FRB and bank holding companies with at least $50 

billion in assets; 5) bringing backup enforcement actions 

against depository institution holding companies if their 

conduct or threatened conduct poses a risk of loss to the 

DIF; and 6) providing federal oversight of state-chartered 

thrifts, beginning upon the transfer of such authority 

from the Office of Thrift Supervision (which occurred on 

July 21, 2011). 

The Dodd-Frank Act limits the systemic risk 

determination authority under section 13 of the FDI Act 

to IDIs for which the FDIC has been appointed receiver. 

As amended by the Dodd-Frank Act, the FDI Act now 

requires that any action taken or assistance provided 

pursuant to a systemic risk determination must be for 

the purpose of winding up the IDI in receivership. Under 

Title XI of the Dodd-Frank Act, the FDIC is granted 

new authority to establish a widely available program 

to guarantee obligations of solvent IDIs or solvent 

depository institution holding companies (including 

affiliates) upon the systemic determination of a liquidity 

event during times of severe economic distress. This 

program would not be funded by the DIF but rather 

by fees and assessments paid by all participants in 

the program. If fees are insufficient to cover losses or 

expenses, the FDIC must impose a special assessment on 

participants as necessary to cover the shortfall. Any excess 

funds at the end of the liquidity event program would be 

deposited in the General Fund of the Treasury. 

The Dodd-Frank Act also made changes related to the 

FDIC’s deposit insurance mandate. These changes include 

a permanent increase in the standard deposit insurance 

amount to $250,000 (retroactive to January 1, 2008) and 

unlimited deposit insurance coverage for noninterestbearing transaction accounts for two years, from 

December 31, 2010, to the end of 2012. Additionally, the 

legislation changed the assessment base from a depositsbased formula to one based on assets and established new 

reserve ratio requirements (see Note 9). 

Operations

The primary purposes of the DIF are to 1) insure the 

deposits and protect the depositors of IDIs and 2) resolve 

failed IDIs upon appointment of the FDIC as receiver, in 

a manner that will result in the least possible cost to the 

DIF (unless a systemic risk determination is made). 

The DIF is primarily funded from deposit insurance 

assessments. Other available funding sources, if necessary, 

are borrowings from the Treasury, the Federal Financing 

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

FDIC has borrowing authority of $100 billion from the 

Treasury and a Note Purchase Agreement with the FFB, 

not to exceed $100 billion, to enhance the DIF’s ability 

to fund both deposit insurance and Temporary Liquidity 

Guarantee Program (TLGP) obligations. 
2011

A N N U A L R E P O R T

77

financials

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 $114.4 billion and $106.3 billion as of December 31, 

2011 and 2010, respectively. 

Operations of

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. Resolution entities are billed by the FDIC 

for services provided on their behalf.

2. Summary of Significant Accounting Polic

Ge

These financial statements pertain to the financial 

position, results of operations, and cash flows of the 

DIF and are presented in conformity 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

Management makes estimates and assumptions that 

affect the amounts reported in the financial statements 

and accompanying notes. Actual results could differ 

from these estimates. Where it is reasonably possible 

that changes in estimates will cause a material change 

in the financial statements in the near term, the nature 

and extent of such potential changes in estimates have 

been disclosed. The more significant estimates include 

the assessments receivable and associated revenue; 

the allowance for loss on receivables from resolutions 

(including shared-loss agreements); liabilities due to 

resolutions; the estimated losses for anticipated failures, 

litigation, and representations and warranties; guarantee 

obligations for the TLGP and structured transactions; 

the valuation of trust preferred securities; and the 

postretirement benefit obligation. 

Cash 

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight Certificates.

Invesment in U.S

DIF funds are required to be invested in obligations of the 

United States or in obligations guaranteed as to principal 

and interest by the United States. The Secretary of the 

Treasury must approve all such investments in excess of 

$100,000 and has granted the FDIC approval to invest 

DIF funds only in U.S. Treasury obligations that are 

purchased or sold exclusively through the Bureau of the 

Public Debt’s Government Account Series program.

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

classified as 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 
Financia 

78

Income and Fund Balance as components of net income. 

Income on securities is calculated and recorded on a daily 

basis using the effective interest or straight-line method 

depending on the maturity of the security. 

Revenue Recognitio

Assessment revenue is recognized for the quarterly period 

of insurance coverage based on an estimate. The estimate 

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

and assessment base for the prior quarter adjusted for 

the current quarter’s available assessment credits, certain 

changes in supervisory examination ratings for larger 

institutions, and a modest assessment base growth factor. 

At the subsequent quarter-end, the estimated revenue 

amounts are adjusted when actual assessments for the 

covered period are determined for each institution 

(see Note 9). 

Capital Asse

The FDIC buildings are depreciated on a straight-line 

basis over a 35- to 50-year estimated life. Leasehold 

improvements are capitalized and depreciated over the 

lesser of the remaining life of the lease or the estimated 

useful life of the improvements, if determined to be 

material. Capital assets depreciated on a straight-line basis 

over a five-year estimated useful life include mainframe 

equipment; furniture, fixtures, and general equipment; 

and internal-use software. Personal computer equipment 

is depreciated on a straight-line basis over a three-year 

estimated useful life.

Reporting on Var

FDIC receiverships engaged in structured transactions, 

some of which resulted in the issuance of note obligations 

that were guaranteed by the FDIC in its corporate capacity 

(see Note 8, Contingent Liabilities for: FDIC Guaranteed 

Debt of Structured Transactions). As the guarantor of 

note obligations for several structured transactions, 

the FDIC in its corporate capacity is the holder of a 

variable interest in a number of variable interest entities 

(VIEs). The FDIC conducts a qualitative assessment of 

its relationship with each VIE as required by Accounting 

Standards Codification (ASC) Topic 810, Consolidation, 

modified by Accounting Standards Update (ASU) No. 

2009-17, Improvements to Financial Reporting by Enterprises 

Involved with Variable Interest Entities. These assessments 

are conducted to determine if the FDIC in its corporate 

capacity has 1) power to direct the activities that most 

significantly impact the economic performance of the 

VIE and 2) an obligation to absorb losses of the VIE or 

the right to receive benefits from the VIE that could 

potentially be significant to the VIE. When a variable 

interest holder has met both of these characteristics, 

the enterprise is considered the primary beneficiary 

and must consolidate the VIE. In accordance with the 

provisions of ASC 810, an assessment of the terms of the 

legal agreement for each VIE was conducted to determine 

whether any of the terms had been activated or modified 

in a manner which would cause the FDIC in its corporate 

capacity to be characterized as a primary beneficiary. In 

making that determination, consideration was given to 

which, if any, activities were significant to each VIE. Often, 

the right to service collateral, to liquidate collateral, or to 

unilaterally dissolve the limited liability company (LLC) 

or trust was determined to be the most significant activity. 

In other cases, it was determined that the structured 

transactions did not include such significant activities 

and that the design of the entity was the best indicator of 

which party was the primary beneficiary. The results of 

each analysis identified a party other than the FDIC in its 

corporate capacity as the primary beneficiary. 

The conclusion of these analyses was that the FDIC in 

its corporate capacity has not engaged in any activity 

that would cause the FDIC in its corporate capacity to 

be characterized as a primary beneficiary to any VIE with 

which it was involved at December 31, 2011 and 2010. 

Therefore, consolidation is not required for the 2011 and 

2010 DIF financial statements. In the future, the FDIC in 

its corporate capacity may become the primary beneficiary 

upon the activation of provisional contract rights that 
2011

A N N U A L R E P O R T

79

financials

extend to the Corporation if payments are made on 

guarantee claims. Ongoing analyses will be required in 

order to monitor consolidation implications under 

ASC 810.

The FDIC’s involvement with VIEs, in its corporate 

capacity, is fully described in Note 8.

Relate

The nature of related parties and a description of relatedparty transactions are discussed in Note 1 and disclosed 

throughout the financial statements and footnotes.

Disclosure abo

Accounting 

Recent accounting pronouncements have been deemed 

to be not applicable or material to the financial statements 

as presented.

Rec

Reclassifications have been made in 2010 financial 

statements to conform to the presentation used in 2011.

3. Investment in U.S. Treasury Obligations, 

As of December 31, 2011 and 2010, investments in U.S. 

Treasury obligations, net, were $33.9 billion and $12.4 

billion, respectively. As of December 31, 2011 and 2010, 

the DIF held $5.0 billion and $2.0 billion, respectively, of 

Treasury Inflation-Protected Securities (TIPS), which are 

indexed to increases or decreases in the Consumer Price 

Index for All Urban Consumers (CPI-U).
Financia 

80

(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 1.8 percent, based on figures issued by the Congressional Budget 

Office and Blue Chip Economic Indicators in early 2011. 

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

January 3, 2012. 

(c) All unrealized losses occurred as a result of temporary changes in market interest rates. These unrealized losses occurred over a period of less than a year. 

Unrealized losses related to the TIPS have converted to unrealized gains by January 31, 2012, and unrealized losses related to the U.S. Treasury notes and 

bonds existed on just one security that matured with no unrealized loss on January 31, 2012, and thus the FDIC does not consider these securities to be other 

than temporarily impaired at December 31, 2011.

Total Investment in U.S. Treasury Obligations, Net at December 31, 20

Dolars

Ma

yiel

purchasea

Ne

Car

Amou

unrea

hol

g

unrea

hol

loses

U.S. Treasury notes and bon

Within 1 year 0.27% $24,500,000b $24,889,547 $17,842 $(93) $24,907,296

After 1 year 

through 5 years 0.93% 3,900,000 3,923,428 38,778 0 3,962,206

U.S. Treasury Inflation-Protected Securiti

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

After 1 year 

through 5 years -0.92% 3,050,000 3,464,909 0 (9,481) 3,455,428

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

Total Investment in U.S. Treasury Obligations, Net at December 31, 2

Dolars

Mat

yiel

purchasea

Ne

Car

Amou

unrea

hol

g

unrea

hol

loses 

U.S. Treasury notes and bon

Within 1 year 0.73% $3,000,000 $3,052,503 $2,048 $(31) $3,054,520 

U.S. Treasury Inflation-Protected Securiti

Within 1 year 3.47% 1,375,955 1,375,967 1,391 0 1,377,358 

After 1 year 

through 5 years 2.41% 615,840 621,412 22,381 0 643,793 

U.S. Treasury bil

Within 1 year 0.19% 7,300,000 7,294,688 909 0 7,295,597 

Total $12,291,795 $12,344,570 $26,729 $(31)b $12,371,268 

(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 1.8 percent, based on figures issued by the Congressional 

Budget Office and Blue Chip Economic Indicators in early 2010. 

(b) All unrealized losses occurred as a result of temporary changes in market interest rates. The unrealized loss on one security occurred over a period of 

less than a year and converted to an unrealized gain by January 31, 2011, and thus the FDIC does not consider the security to be other than temporarily 

impaired at December 31, 2010.
2011

A N N U A L R E P O R T

81

financials

4. Receivables from Resolutions, Net

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 

loss represents the difference between the funds advanced 

and/or obligations incurred and the expected repayment. 

Estimated future payments on losses incurred on assets 

sold to an acquiring institution under a shared-loss 

agreement (SLA) are factored into the computation of 

the expected repayment. Assets held by DIF resolution 

entities (including structured transaction-related assets; 

see Note 8) are the main source of repayment of the DIF’s 

receivables from resolutions. 

As of December 31, 2011, there were 426 active 

receiverships, including 92 established in 2011. As of 

December 31, 2011 and 2010, DIF resolution entities 

held assets with a book value of $71.4 billion and $80.4 

billion, respectively (including $50.5 billion and $53.4 

billion, respectively of cash, investments, receivables due 

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

of the current asset book value of $71.4 billion is held by 

resolution entities established since 2008.

Estimated cash recoveries from the management and 

disposition of assets that are used to determine the 

allowance for losses are based on asset recovery rates from 

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

asset valuation data, aggregate asset valuation data on 

several recently failed or troubled institutions, sampled 

asset valuation data, and empirical asset recovery data 

based on failures as far back as 1990. Methodologies 

for determining the asset recovery rates incorporate 

estimating future cash recoveries, net of applicable 

liquidation cost estimates, and discounting based on 

market-based risk factors applicable to a given asset’s 

type and quality. The resulting estimated cash recoveries 

are then used to derive the allowance for loss on the 

receivables from these resolutions.

For failed institutions resolved using a whole bank 

purchase and assumption transaction with an 

accompanying SLA, the projected future shared-loss 

payments, recoveries, and monitoring 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 

shared-loss cost projections are based on the covered 

assets’ intrinsic value which is determined using financial 

models that consider the quality, condition and type of 

covered assets, current and future market conditions, 

risk factors and estimated asset holding periods. For 

year-end 2011 financial reporting, the shared-loss cost 

estimates were updated for the majority (85% or 235) of 

the 278 active shared-loss agreements; the remaining 43 

were already based on recent loss estimates. The updated 

shared-loss cost projections for the larger agreements were 

primarily based on new third-party valuations estimating 

the cumulative loss of covered assets. The remaining 

agreements were stratified by receivership age. A random 

sample of banks within each age stratum was selected for 

new third-party loss estimations, and valuation results 

from the sample banks were aggregated and extrapolated 

to banks within the like age stratum based on asset type 

and performance status. 

Receivables from Resolutions, 

Net at December 3

Dolars

2011 2010

Receivables from 

closed banks $121,369,428 $115,896,763 

Allowance for losses (92,821,032) (86,364,218)

Total $28,548,396 $29,532,545
Financia 

82

Note that estimated asset recoveries are regularly 

evaluated during the year, but remain subject to 

uncertainties because of potential changes in economic 

and market conditions. Continuing economic 

uncertainties could cause the DIF’s actual recoveries to 

vary significantly from current estimates. 

Whole Bank Purch

Transactions with 

Since the beginning of 2008, the FDIC resolved 281 

failures using whole bank purchase and assumption 

resolution transactions with accompanying SLAs on 

assets purchased by the financial institution acquirer. 

The acquirer typically assumes all of the deposits 

and purchases essentially all of the assets of a failed 

institution. The majority of the commercial and 

residential loan assets are purchased under an SLA, 

where the FDIC agrees to share in future losses and 

recoveries experienced by the acquirer on those assets 

covered under the agreement. SLAs are used by the FDIC 

to keep assets in the private sector and to minimize 

disruptions to loan customers.

Losses on the covered assets are shared between the 

acquirer and the FDIC in its receivership capacity of the 

failed institution when losses occur through the sale, 

foreclosure, loan modification, or write-down of loans 

in accordance with the terms of the SLA. The majority 

of the agreements cover a five- to 10-year period with the 

receiver covering 80 percent of the losses incurred by the 

acquirer and the acquiring bank covering 20 percent. 

Prior to March 26, 2010, most SLAs included a threshold 

amount, above which the receiver covered 95 percent of 

the losses incurred by the acquirer. As mentioned above, 

the estimated shared-loss liability is accounted for by 

the receiver and is included in the calculation of the 

DIF’s allowance for loss against the corporate receivable 

from the resolution. As shared-loss claims are asserted 

and proven, DIF receiverships satisfy these shared-loss 

payments using available liquidation funds and/or by 

drawing on amounts due from the DIF for funding the 

deposits assumed by the acquirer (see Note 7). 

As of December 31, 2011, 249 receiverships have made 

shared-loss payments totaling $16.2 billion. In addition, 

DIF receiverships are estimated to pay an additional 

amount of $26.6 billion over the duration of these SLAs 

on $135.0 billion in total remaining covered assets.

Concentration

Financial instruments that potentially subject the DIF 

to concentrations of credit risk are receivables from 

resolutions. The repayment of the DIF’s receivables 

from resolutions is primarily influenced by recoveries 

on assets held by DIF receiverships and payments on the 

covered assets under SLAs. The majority of the $155.9 

billion in remaining assets in liquidation ($20.9 billion) 

and current shared-loss covered assets ($135.0 billion) 

are concentrated in commercial loans ($83.1 billion), 

residential loans ($52.5 billion), securities ($3.4 billion), 

and structured transaction-related assets as described 

in Note 8 ($14.2 billion). Most of the assets in these 

asset types originated from failed institutions located in 

California ($43.7 billion), Florida ($18.1 billion), Illinois 

($13.2 billion), Puerto Rico ($13.1 billion), Georgia ($12.8 

billion) and Alabama ($12.7 billion).

5. Trust Preferred Securitie

Pursuant to a systemic risk determination, the Treasury, 

the FDIC, and the Federal Reserve Bank of New York 

executed terms of a guarantee agreement on January 15, 

2009 with Citigroup to provide loss protection on a pool 

of approximately $301.0 billion of assets that remained 

on the balance sheet of Citigroup. In consideration for 

its portion of the shared-loss guarantee at inception, the 

FDIC received $3.025 billion of Citigroup’s preferred 

stock. All shares of the preferred stock were subsequently 

converted to Citigroup Capital XXXIII trust preferred 

securities (TruPs) with a liquidation amount of $1,000 per 

security and a distribution rate of 8 percent per annum 

payable quarterly. The principal amount is due in 2039. 
2011

A N N U A L R E P O R T

83

financials

On December 23, 2009, Citigroup terminated the 

guarantee agreement, citing improvements in its financial 

condition. The FDIC incurred no loss from the guarantee 

prior to the termination of the agreement. In connection 

with the early termination of the agreement, the FDIC 

agreed to reduce its portion of the $3.025 billion in TruPs 

by $800 million. However, pursuant to an agreement 

between the Treasury and the FDIC, the Treasury agreed 

to return $800 million in TruPs on behalf of the FDIC 

from its portion of Citigroup TruPs holdings received 

as a result of the shared-loss agreement. The FDIC has 

retained the $800 million of Citigroup TruPs as security 

in the event payments are required to be made by the DIF 

for guaranteed debt instruments issued by Citigroup and 

its affiliates under the TLGP (see Note 16). 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 under the TLGP 

within five days of the date on which no Citigroup debt 

remains outstanding under the TLGP. The fair value of 

these TruPs and related interest are recorded as systemic 

risk assets (see Note 16).

The remaining $2.225 billion (liquidation amount) of 

TruPs held by the FDIC is classified as available-for-sale 

debt securities in accordance with FASB ASC Topic 320, 

Investments – Debt and Equity Securities. At December 31, 

2011, the fair value of the TruPs was $2.213 billion (see 

Note 15). An unrealized holding gain of $251 million is 

included in accumulated other comprehensive income. 

6. Property and Equipment, Net

Property and Equipment, Net at December

Dolars

2011 2010

Land $37,352 $37,352 

Buildings 

(including leasehold 

improvements) 316,129 312,173

Application software 

(includes work-inprocess) 130,718 122,736

Furniture, fixtures, 

and equipment 159,120 144,661

Accumulated 

depreciation (241,404) (200,857)

Total $401,915 $416,065

The depreciation expense was $78 million and $69 million 

for 2011 and 2010, respectively.

7. Liabilities Due to Resolutions

As of December 31, 2011 and 2010, the DIF recorded 

liabilities totaling $32.7 billion and $30.4 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. Ninety-one percent of these liabilities are 

due to failures resolved under whole-bank purchase and 

assumption transactions, most with an accompanying 

SLA. The DIF satisfies these liabilities either by directly 

sending cash to the receivership to fund shared-loss 

and other expenses or by offsetting receivables from 

resolutions when the receivership declares a dividend. 

In addition, there was $80 million in unpaid deposit 

claims related to multiple receiverships as of December 

31, 2011 and 2010. The DIF pays these liabilities when the 

claims are approved. 
Financia 

84

8. Contingent Liabilities fo

Anticipated Failure

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. 

The banking industry continued recovering in 2011. The 

industry recorded total net income of $119.5 billion for 

all of 2011, an increase of nearly 40 percent from 2010 net 

income. The improvement in industry earnings continued 

to be driven by declining loan loss provisions, with fullyear provisions at their lowest level in four years. At the 

same time, the pace of U.S. economic growth slowed, 

unemployment remained at historically high levels, and 

real estate markets exhibited ongoing weaknesses in 

many parts of the country. These factors have slowed the 

improvement in asset quality and contributed to keeping 

the number of problem institutions and failures well 

above historic norms. Notwithstanding these challenges, 

the losses to the DIF from failures that occurred in 2011 

fell short of the amount reserved at the end of 2010, as the 

aggregate number and size of institution failures in 2011 

were less than anticipated. The removal from the reserve of 

banks that did fail in 2011, as well as projected favorable 

trends in bank supervisory downgrade and failure rates 

and the smaller size of institutions that remain troubled, 

all contributed to a decline by $11.2 billion to $6.5 billion 

in the contingent liability for anticipated failures of 

insured institutions at the end of 2011.

In addition to these recorded contingent liabilities, the 

FDIC has identified risk in the financial services industry 

that could result in additional losses to the DIF should 

potentially vulnerable insured institutions ultimately 

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

reasonably possible that the DIF could incur additional 

estimated losses of up to $10.2 billion for year-end 2011 

as compared to $24.5 billion for year-end 2010. The 

actual losses, if any, will largely depend on future 

economic and market conditions and could differ 

materially from this estimate.

During 2011, 92 banks failed with combined assets at the 

date of failure of $36.6 billion. Supervisory and market data 

suggest that while the financial performance of the banking 

industry should continue to improve over the coming year, 

ongoing asset quality problems and limited opportunities 

for earnings growth will continue to result in an elevated 

level of stress for the industry. 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.

Litigat

The DIF records an estimated loss for unresolved legal 

cases to the extent that those losses are considered 

probable and reasonably estimable. During 2011, the 

contingent liability declined by $299 million to $1 

million due primarily to a payment of $276 million for 

a judgment of one legal case for which an allowance was 

previously recorded. As of December 31, 2011 and 2010, 

the FDIC has determined that there are no reasonably 

possible losses from unresolved cases.

Other C

IndyMac Federal Bank Representation and Indemnification Contingent Liability

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

Federal Bank (IMFB) and certain subsidiaries (collectively, 

sellers) sold substantially all of the assets of IMFB and 

the respective subsidiaries, including mortgage loans 

and mortgage loan servicing rights, to OneWest Bank 

and its affiliates. To maximize sale returns, the sellers 
2011

A N N U A L R E P O R T

85

financials

made certain representations customarily made by 

commercial parties regarding the assets and agreed to 

indemnify the acquirers for losses incurred as a result 

of breaches of such representations, losses incurred as a 

result of the failure to obtain contractual counterparty 

consents to the sale, and third party claims arising from 

pre-sale acts and omissions of the sellers or the failed 

bank. Although the representations and indemnifications 

were made by or are obligations of the sellers, the FDIC, 

in its corporate capacity, guaranteed the receivership’s 

indemnification obligations under the sale agreements. 

The representations relate generally to ownership of and 

right to sell the assets; compliance with applicable law 

in the origination of the loans; accuracy of the servicing 

records; validity of loan documents; and servicing of the 

loans serviced for others. Until the periods for asserting 

claims under these arrangements have expired and all 

indemnification claims quantified and paid, losses could 

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

the DIF, either directly, as a result of the FDIC corporate 

guaranty of the receivership’s indemnification obligations, 

or indirectly, as a result of a reduction in the receivership’s 

assets available to pay the DIF’s claims as subrogee for 

insured accountholders. The acquirers’ rights to assert 

claims to recover losses incurred as a result of breaches of 

loan seller representations extend out to March 19, 2019 

for the Fannie Mae and Ginnie Mae reverse mortgage 

servicing portfolios (unpaid principal balance of $16.7 

billion at December 31, 2011 compared to $21.7 billion 

at December 31, 2010), and March 19, 2014 for the 

Fannie Mae, Freddie Mac and Ginnie Mae mortgage 

servicing portfolios (unpaid principal balance of $38.5 

billion at December 31, 2011 compared to $45.3 billion 

at December 31, 2010). The acquirers’ rights to assert 

claims to recover losses incurred as a result of other third 

party claims (including due to pre-March 19, 2009 acts 

or omissions) and breaches of servicer representations, 

including liability with respect to the Fannie Mae, Ginnie 

Mae and Freddie Mac portfolios as well as the private 

mortgage servicing portfolio and whole loans (unpaid 

principal balance of $62.0 billion at December 31, 2011 

compared to $74.2 billion at December 31, 2010) expired 

on March 19, 2011. As of the expiration date of this claim 

period, notices relating to potential defects were received, 

but they require review to determine whether a valid defect 

exists and, if so, the identification and costing of possible 

cure actions. It is highly unlikely that all of these potential 

defects will result in losses.

As of December 31, 2011, the IndyMac receivership has 

paid $5 million in approved claims and has accrued an 

additional $2 million liability for claims asserted but 

unpaid. Alleged breaches of origination and servicing 

representations exist, and review and evaluation is in 

process for approximately $275 to $345 million in 

reasonably possible liabilities. In addition, potential losses 

relating to origination and servicing representations, 

which currently cannot be determined, may be incurred 

under other agreements with investors. 

The FDIC believes it is likely that additional losses 

will be incurred, however quantifying the contingent 

liability associated with the representations and the 

indemnification obligations is subject to a number of 

uncertainties, including (1) borrower prepayment speeds; 

(2) the occurrence of borrower defaults and resulting 

foreclosures and losses; (3) the assertion by third party 

investors of claims with respect to loans serviced for them; 

(4) the existence and timing of discovery of breaches 

and the assertion of claims for indemnification for 

losses by the acquirer; (5) the compliance by the acquirer 

with certain loss mitigation and other conditions to 

indemnification; (6) third party sources of loss recovery 

(such as title companies and insurers); (7) the ability of the 

acquirer to refute claims from investors without incurring 

reimbursable losses; and (8) the cost to cure breaches and 

respond to third party claims. Because of these and other 

uncertainties that surround the liability associated with 

indemnifications and the quantification of possible losses, 

the FDIC has determined that, while additional losses are 

probable, the amount is not estimable. 
Financia 

86

Purchase and Assumption Indemnification

In connection with purchase and assumption 

agreements for resolutions, the FDIC in its receivership 

capacity generally indemnifies the purchaser of a failed 

institution’s assets and liabilities in the event a third 

party asserts a claim against the purchaser unrelated to 

the explicit assets purchased or liabilities assumed at the 

time of failure. The FDIC in its corporate capacity is a 

secondary guarantor if a receivership is unable to pay. 

These indemnifications generally extend for a term of 

six years after the date of institution failure. The FDIC is 

unable to estimate the maximum potential liability for 

these types of guarantees as the agreements do not specify 

a maximum amount and any payments are dependent 

upon the outcome of future contingent events, the nature 

and likelihood of which cannot be determined at this 

time. During 2011 and 2010, the FDIC in its corporate 

capacity made no indemnification payments under such 

agreements, and no amount has been accrued in the 

accompanying financial statements with respect to these 

indemnification guarantees.

FDIC Guaranteed Debt of 

Structured Transactions

The FDIC as receiver uses three types of structured 

transactions to dispose of certain performing and nonperforming residential mortgage loans, commercial loans, 

construction loans, and mortgage-backed securities 

held by the receiverships. The three types of structured 

transactions are 1) limited liability companies (LLCs), 2) 

securitizations, and 3) structured sale of guaranteed 

notes (SSGNs). 

LLCs

Under the LLC structure, the FDIC in its receivership 

capacity contributes a pool of assets to a newly-formed 

LLC and offers for sale, through a competitive bid 

process, some of the equity in the LLC. The day-to-day 

management of the LLC is transferred to the highest 

bidder along with the purchased equity interest. In many 

instances, the FDIC in its corporate capacity guarantees 

notes issued by the LLCs. In exchange for a guarantee, 

the DIF receives a guarantee fee in either 1) a lump-sum, 

up-front payment based on the estimated duration of the 

note or 2) a monthly payment based on a fixed percentage 

multiplied by the outstanding note balance. The terms 

of these guarantee agreements generally stipulate that 

all cash flows received from the entity’s collateral be used 

to pay, in the following order, 1) operational expenses 

of the entity, 2) the FDIC’s contractual guarantee fee, 3) 

the guaranteed notes (or, if applicable, fund the related 

defeasance account for payoff of the notes at maturity), 

and 4) the equity investors. If the FDIC is required to 

perform under these guarantees, it acquires an interest 

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

guarantee payments made plus accrued interest thereon. 

Once all expenses have been paid, the guaranteed notes 

have been satisfied, and the FDIC has been reimbursed for 

any guarantee payments, the equity holders receive any 

remaining cash flows. 

Since 2009, private investors purchased a 40- to 50-percent 

ownership interest in the LLC structures for $1.6 billion 

in cash and the LLCs issued notes of $4.4 billion to the 

receiverships to partially fund the purchase of the assets. 

The receiverships hold the remaining 50- to 60-percent 

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

guaranteed notes. The FDIC in its corporate capacity 

guarantees the timely payment of principal and interest 

due on the notes. The terms of the note guarantees extend 

until the earlier of 1) payment in full of the notes or 2) 

two years following the maturity date of the notes. The 

note with the longest term matures in 2020. In the event 

of note payment default, the FDIC as guarantor is entitled 

to exercise or cause the exercise of certain rights and 

remedies including: 1) accelerating the payment of the 

unpaid principal amount of the notes; 2) selling the assets 

held as collateral; or 3) foreclosing on the equity interests 

of the debtor.
2011

A N N U A L R E P O R T

87

financials

Securitizations and SSGNs

Securitizations and SSGNs (collectively, “trusts”) are 

transactions in which certain assets or securities from 

failed institutions are pooled and transferred into a trust 

structure. The trusts issue 1) senior and/or subordinated 

debt instruments and 2) owner trust or residual 

certificates collateralized by the underlying mortgagebacked securities or loans. 

Since 2010, private investors purchased the senior 

notes issued by the trusts for $5.3 billion in cash. The 

receiverships hold 100 percent of the subordinated debt 

instruments and owner trust or residual certificates. The 

FDIC in its corporate capacity guarantees the timely 

payment of principal and interest due on the senior notes, 

the latest maturity of which is 2050. In exchange for the 

guarantee, the DIF receives a monthly payment based on 

a fixed percentage multiplied by the outstanding note 

balance. These guarantee agreements generally stipulate 

that all cash flows received from the entity’s collateral 

be used to pay, in the following order, 1) operational 

expenses of the entity, 2) the FDIC’s contractual guarantee 

fee, 3) interest on the guaranteed notes, 4) principal of the 

guaranteed notes, and 5) the holders of the subordinated 

notes and owner trust or residual certificates. If the FDIC 

is required to perform under its guarantees, it acquires an 

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

of guarantee payments made plus accrued interest 

thereon. Once all expenses have been paid, the guaranteed 

notes have been satisfied, and the FDIC has been 

reimbursed for any guarantee payments, the subordinated 

note holders and owner trust or residual certificates 

holders receive the remaining cash flows. 

All Structured Transactions with FDIC 

Guaranteed Debt

Through December 31, 2011, the receiverships have 

transferred a portfolio of loans with an unpaid principal 

balance of $16.4 billion and mortgage-backed securities 

with a book value of $7.7 billion to 14 LLCs and 8 

trusts. The LLCs and trusts subsequently issued notes 

guaranteed by the FDIC in an original principal amount 

of $9.7 billion. To date, the DIF has collected guarantee 

fees totaling $203 million and recorded a receivable for 

additional guarantee fees of $106 million, included in 

the “Interest receivable on investments and other assets, 

net” line item on the Balance Sheet. All guarantee fees are 

recorded as deferred revenue, included in the “Accounts 

payable and other liabilities” line item, and recognized as 

revenue primarily on a straight-line basis over the term of 

the notes. At December 31, 2011, the amount of deferred 

revenue recorded was $134 million. The DIF records no 

other structured-transaction-related assets or liabilities on 

its balance sheet.

The estimated loss to the DIF from the guarantees is 

derived from an analysis of the 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 or trust assets provide sufficient coverage to fully pay 

the debts. Therefore, the estimated loss to the DIF from 

these guarantees is zero. To date, the FDIC in its corporate 

capacity has not provided, and does not intend to provide, 

any form of financial or other type of support to a trust 

or LLC that it was not previously contractually required 

to provide.

As of December 31, 2011, the maximum loss exposure 

is $3.7 billion for LLCs and $3.9 billion for trusts, 

representing the sum of all outstanding debt guaranteed 

by the FDIC in its corporate capacity. Some transactions 

have established defeasance accounts to pay off the notes 

at maturity. A total of $2.2 billion has been deposited into 

these accounts.

9. Assessments 

The Dodd-Frank Act, enacted on July 21, 2010, provides 

for significant assessment and capitalization reforms 

for the DIF. In response, the FDIC implemented several 

changes to the assessment system and developed a 

comprehensive, long-term fund management plan. The 
Financia 

88

plan is designed to restore and maintain a positive fund 

balance for the DIF even during a banking crisis and 

achieve moderate, steady assessment rates throughout any 

economic cycle. Summarized below are actions taken to 

implement assessment system changes and provisions of 

the comprehensive plan.

New Resto

In October 2010, the FDIC adopted a new Restoration 

Plan to ensure that the ratio of the DIF fund balance to 

estimated insured deposits (reserve ratio) reaches 1.35 

percent by September 30, 2020. The new Plan provides 

for the following: 1) the period of the Restoration Plan 

is extended from the end of 2016 to September 30, 2020; 

2) institutions may continue to use assessment credits 

without additional restriction during the term of the 

Restoration Plan; 3) the FDIC will pursue rulemaking 

regarding the method that will be used to offset the effect 

on small institutions (less than $10 billion in assets) 

of requiring that the reserve ratio reach 1.35 percent 

by September 30, 2020, rather than 1.15 percent by the 

end of 2016; and 4) at least semiannually, the FDIC will 

update its loss and income projections for the fund and, 

if needed, increase or decrease assessment rates, following 

notice-and-comment rulemaking, if required.

Designated R

In December 2011, the FDIC adopted a final rule 

maintaining the designated reserve ratio (DRR) at 2 

percent, effective January 1, 2012. The FDIC views the 2 

percent DRR as maintaining the DIF at a level that can 

withstand substantial losses, consistent with the FDIC’s 

comprehensive, long-term fund management plan.

Calculatio

In February 2011, the FDIC adopted a final rule, 

effective on April 1, 2011, amending part 327 of title 12 

of the Code of Federal Regulations to 1) redefine the 

assessment base used for calculating deposit insurance 

assessments from adjusted domestic deposits to average 

consolidated total assets minus average tangible equity 

(measured as Tier 1 capital); 2) change the assessment 

rate adjustments; 3) lower the initial base rate schedule 

and the total base rate schedule for all IDIs to collect 

approximately the same revenue for the DIF as would 

have been collected under the old assessment base; 4) 

suspend dividends indefinitely, and, in lieu of dividends, 

adopt lower assessment rate schedules when the reserve 

ratio reaches 1.15 percent, 2 percent, and 2.5 percent; and 

5) change the risk-based assessment system for large IDIs 

(generally, those institutions with at least $10 billion in 

total assets). Specifically, the final rule eliminates risk 

categories and the use of long-term debt issuer ratings 

for large institutions and combines CAMELS ratings 

and certain forward-looking financial measures into two 

scorecards: one for most large institutions and another for 

large institutions that are structurally and operationally 

complex or that pose unique challenges and risks in case 

of failure (highly complex institutions).

Assessment

Annual assessment rates averaged approximately 

17.6 cents per $100 and 17.7 cents per $100 of the 

assessment base for the first quarter of 2011 and all 

of 2010, respectively. Beginning in the second quarter 

of 2011, the assessment base changed to average total 

consolidated assets less average tangible equity (with 

certain adjustments for banker’s banks and custodial 

banks), as required by the Dodd-Frank Act. The FDIC 

implemented a new assessment rate schedule at the same 

time to conform to the larger assessment base. The annual 

assessment rate averaged approximately 11.1 cents per 

$100 of the assessment base for the last three quarters 

of 2011.

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

of estimated quarterly risk-based assessments to address 

the DIF’s liquidity need to pay for projected near-term 

failures and to ensure that the deposit insurance system 

remained industry-funded. The prepaid assessments 

cover the insurance period from October 2009 through 
2011

A N N U A L R E P O R T

89

financials

December 2012. An institution’s quarterly risk-based 

deposit insurance assessment thereafter is offset by the 

amount prepaid until the amount is exhausted or until 

June 30, 2013, when any amount remaining is to be 

returned to the institution. At December 31, 2011, the 

remaining prepaid amount of $17.4 billion is included in 

the “Unearned revenue - prepaid assessments” line item on 

the Balance Sheet.

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.

Reserve

As of December 31, 2011, the DIF reserve ratio was 0.17 

percent of estimated insured deposits.

Assessments Rel

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 

2011 and 2010, approximately $795 million and $796 

million, respectively, was collected and remitted to 

the FICO.

10. Other Revenue

Other Revenue for the Years Ended Decembe

Dolars

2011 2010

Temporary Liquidity 

Guarantee Program 

revenue (Note 16) $2,569,579 $0

Dividends and 

interest on 

Citigroup trust 

preferred securities 178,000 177,675 

Guarantee fees 

for structured 

transactions 92,229 44,557 

Other 7,121 15,193 

Total $2,846,929 $237,425

Temporary Liquidi

Program R

Pursuant to a systemic risk determination in October 

2008, the FDIC established the TLGP (see Note 16). In 

exchange for guarantees issued under the TLGP, the 

FDIC received fees that were set aside, as deferred revenue, 

for potential TLGP losses. As losses occur, the FDIC 

recognizes the loss as a systemic risk expense and offsets 

the loss by recognizing an equivalent portion of the 

deferred revenue as systemic risk revenue. This accounting 

practice isolates systemic risk activities from the normal 

operating activities of the DIF.

From inception of the TLGP, it has been FDIC’s policy 

to recognize revenue to the DIF for any deferred revenue 

not absorbed by losses upon expiration of the TLGP 

guarantee period (December 31, 2012) or earlier for any 

portion of guarantee fees determined in excess of amounts 

needed to cover potential losses. During 2011, the DIF 

recognized revenue of $2.6 billion for fees held as deferred 

revenue (see Note 16). In the unforeseen event a debt 

default occurs greater than the remaining amount held 

as deferred revenue, to the extent needed, any amount 
Financia 

90

previously recognized as revenue to the DIF will be 

returned to the TLGP.

11. Operating Expenses

Operating expenses were $1.6 billion for both 2011 and 

2010. The chart below lists the major components of 

operating expenses.

Operating Expenses for the Years En

December 3

Dolars

2011 2010

Salaries and benefits $1,320,991 $1,184,523 

Outside services 342,502 360,880 

Travel 115,135 111,110 

Buildings and 

leased space 93,630 85,137 

Software/Hardware 

maintenance 58,981 50,575 

Depreciation 

of property and 

equipment 77,720 68,790 

Other 46,652 35,142 

Subtotal 2,055,611 1,896,157 

Services billed to 

resolution entities (430,260) (303,516)

Total $1,625,351 $1,592,641

12. Provision for Insurance Losse

Provision for insurance losses was negative $4.4 billion 

for 2011, compared to negative $848 million for 2010. 

The negative provision for 2011 primarily resulted from 

a reduction in the contingent loss reserve due to the 

improvement in the financial condition of institutions 

that were previously identified to fail and a reduction 

in the estimated losses for institutions that have failed 

in prior years. The following chart lists the major 

components of the provision for insurance losses.

Provision for Insurance Losses for the Year

Ended December 

Dolars

2011 2010

Valuation Adjustments

Closed banks 

and thrifts $6,786,643 $25,483,252 

Other assets (1,024) (4,406)

Total Valuation 

Adjustments 6,785,619 25,478,846 

Contingent Liabilities Adjustments

Anticipated failure of 

insured institutions (11,176,248) (26,326,689)

Litigation (23,000) 0 

Total Contingent 

Liabilities Adjustments (11,199,248) (26,326,689)

Total $(4,413,629) $(847,843)
2011

A N N U A L R E P O R T

91

financials

13. Employee Benefit

Pension Bene

Eligible FDIC employees (permanent and term employees 

with appointments exceeding one year) are covered by 

the federal government retirement plans, either the 

Civil Service Retirement System (CSRS) or the Federal 

Employees Retirement System (FERS). Although the 

DIF contributes a portion of pension benefits for eligible 

employees, it does not account for the assets of either 

retirement system. The DIF also does not have actuarial 

data for accumulated plan benefits or the unfunded 

liability relative to eligible employees. These amounts 

are reported on and accounted for by the U.S. Office of 

Personnel Management (OPM).

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

contributions up to 5 percent. Under the Federal Thrift 

Savings Plan (TSP), the FDIC provides FERS employees 

with an automatic contribution of 1 percent of pay and an 

additional matching contribution up to 4 percent of pay. 

CSRS employees also can contribute to the TSP, but they 

do not receive agency matching contributions.

Pension Benefits and Savings Plans Expenses f

the Years Ended December

Dolars

2011 2010

Civil Service 

Retirement System $6,140 $6,387 

Federal Employees 

Retirement System 

(Basic Benefit) 95,846 78,666 

FDIC Savings Plan 36,645 30,825 

Federal Thrift 

Savings Plan 33,910 28,679 

Total $172,541 $144,557

Postretirem

Than

The DIF has no postretirement health insurance liability 

since all eligible retirees are covered by the Federal 

Employees Health Benefits (FEHB) program. The FEHB is 

administered and accounted for by the OPM. In addition, 

OPM pays the employer share of the retiree’s health 

insurance premiums.

The FDIC provides certain life and dental insurance 

coverage for its eligible retirees, the retirees’ beneficiaries, 

and covered dependents. Retirees eligible for life and 

dental insurance coverage are those who have qualified 

due to 1) immediate enrollment upon appointment or 

five years of participation in the plan and 2) eligibility 

for an immediate annuity. The life insurance program 

provides basic coverage at no cost to retirees and allows 

converting optional coverage to direct-pay plans. For the 

dental coverage, retirees are responsible for a portion of 

the dental premium.

The FDIC has elected not to fund the postretirement 

life and dental benefit liabilities. As a result, the DIF 

recognized the underfunded status (the difference 

between the accumulated postretirement benefit 

obligation and the plan assets at fair value) as a liability. 

Since there are no plan assets, the plan’s benefit liability 

is equal to the accumulated postretirement benefit 

obligation. At December 31, 2011 and 2010, the liability 

was $188 million and $166 million, respectively, which is 

recognized in the “Postretirement benefit liability” line 

item on the Balance Sheet. The cumulative actuarial losses 

(changes in assumptions and plan experience) and prior 

service costs (changes to plan provisions that increase 

benefits) were $34 million and $19 million at December 

31, 2011 and 2010, respectively. These amounts are 

reported as accumulated other comprehensive income in 

the “Unrealized postretirement benefit loss” line item on 

the Balance Sheet. 
Financia 

92

The DIF’s expenses for postretirement benefits for 2011 

and 2010 were $12 million and $9 million, respectively, 

which are included in the current and prior year’s 

operating expenses on the Statement of Income and Fund 

Balance. The changes in the actuarial losses and prior 

service costs for 2011 and 2010 of $15 million and $16 

million, respectively, are reported as other comprehensive 

income in the “Unrealized postretirement benefit 

loss” line item. Key actuarial assumptions used in the 

accounting for the plan include the discount rate of 4.5 

percent, the rate of compensation increase of 4.1 percent, 

and the dental coverage trend rate of 6.0 percent. 

The discount rate of 4.5 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 an

Off-Balance-Sheet Exposu

Commitm

Leased Space

The FDIC’s lease commitments total $199 million for 

future years. The lease agreements contain escalation 

clauses resulting in adjustments, usually on an annual 

basis. The DIF recognized leased space expense of $56 

million and $45 million for the years ended December 31, 

2011 and 2010, respectively.

Leased Space Commitments

Dolars

2012 2013 2014 2015 2016

2017/

Ther

$52,773 $44,950 $32,294 $25,807 $22,679 $20,918 

Off-Balance-Sh

Deposit Insurance

As of December 31, 2011, estimated insured deposits 

for the DIF were $7.0 trillion. This estimate is derived 

primarily from quarterly financial data submitted by IDIs 

to the FDIC. This estimate represents the accounting 

loss that would be realized if all IDIs were to fail and the 

acquired assets provided no recoveries. Included in this 

estimate was approximately $1.4 trillion of noninterestbearing transaction deposits that exceeded the basic 

coverage limit of $250,000 per account, which received 

coverage under the Dodd-Frank Act beginning on 

December 31, 2010 to the end of 2012.
2011

A N N U A L R E P O R T

93

financials

15. Disclosures About the Fair Value of

Financial Instrumen

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, 2011 and 2010.

Assets Measured at Fair Value at December 31, 20

Dolars

Fair Value Measurements Using

Quoted

in A

Mark

Identi

(Level 

Si

Other

Inp

(Level 

Si

Unob

Inp

 (Level 

Total

at Fai

Assets

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

Available-for-Sale Debt Securities

Investment in U.S. 

Treasury obligations2 33,863,245 33,863,245 

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

Trust preferred securities held for 

UST (Note 16) 795,769 795,769

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

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

of Public Debt.

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

94

In exchange for prior shared-loss guarantee coverage 

provided to Citigroup, the FDIC and the Treasury received 

TruPs (see Note 5). At December 31, 2011, the fair value 

of the securities in the amount of $3.009 billion was 

classified as a Level 2 measurement based on an FDICdeveloped model using observable market data for traded 

Citigroup securities to determine the expected present 

value of future cash flows. Key inputs include market 

yields on U.S. dollar interest rate swaps and discount 

rates for default, call, and liquidity risks that are derived 

from traded Citigroup securities and modeled 

pricing relationships. 

(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, 20

Dolars

Fair Value Measurements Using

Quoted

in A

Mark

Identi

(Level 

Si

Other

Inp

(Level 

Si

Unob

Inp

 (Level 

Total

at Fai

Assets

Cash equivalents1 $27,083,918 $27,083,918

Available-for-Sale Debt Securities

Investment in U.S. 

Treasury obligations2 12,371,268 12,371,268

Trust preferred securities $2,297,818 2,297,818

Trust preferred securities held for 

UST (Note 16) 826,182 826,182

Total Assets $39,455,186 $3,124,000 $0 $42,579,186 
2011

A N N U A L R E P O R T

95

financials

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

recognized at fair value but are recorded at amounts that 

approximate fair value due to their short maturities and/

or comparability with current interest rates. Such items 

include interest receivable on investments, assessments 

receivable, other short-term receivables, accounts payable, 

and other liabilities. 

The net receivables from resolutions primarily include 

the DIF’s subrogated claim arising from obligations to 

insured depositors. The resolution entity assets that will 

ultimately be used to pay the corporate subrogated claim 

are valued using discount rates that include consideration 

of market risk. These discounts ultimately affect the DIF’s 

allowance for loss against the receivables from resolutions. 

Therefore, the corporate subrogated claim indirectly 

includes the effect of discounting and should not be 

viewed as being stated in terms of nominal cash flows.

Although the value of the corporate subrogated claim is 

influenced by valuation of resolution entity assets (see 

Note 4), such valuation is not equivalent to the valuation 

of the corporate claim. Since the corporate claim is 

unique, not intended for sale to the private sector, and has 

no established market, it is not practicable to estimate a 

fair value.

The FDIC believes that a sale to the private sector of 

the corporate claim would require indeterminate, but 

substantial, discounts for an interested party to profit 

from these assets because of credit and other risks. In 

addition, the timing of resolution entity payments to 

the DIF on the subrogated claim does not necessarily 

correspond with the timing of collections on resolution 

entity assets. Therefore, the effect of discounting used 

by resolution entities should not necessarily be viewed as 

producing an estimate of fair value for the net receivables 

from resolutions.

There is no readily available market for guarantees 

associated with systemic risk (see Note 16).

16. Systemic Risk Transaction

Pursuant to a systemic risk determination, the FDIC 

established the TLGP for IDIs, designated affiliates and 

certain holding companies on October 14, 2008, in an 

effort to counter the system-wide crisis in the nation’s 

financial sector. The program is codified in part 370 of 

title 12 of the Code of Federal Regulations.

The FDIC received fees in exchange for guarantees issued 

under the TLGP and set aside, as deferred revenue, all fees 

for potential TLGP losses. At inception of the guarantees, 

the DIF recognized a liability for the non-contingent fair 

value of the obligation the FDIC assumed over the term 

of the guarantees. In accordance with 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, the DIF will reduce deferred revenue and 

recognize an offsetting amount as systemic risk revenue. 

Not later than the end of the guarantee period (December 

31, 2012), any deferred revenue not absorbed by losses 

during the guarantee period will be recognized as revenue 

to the DIF.

At its inception, the TLGP consisted of two components: 

1) the Transaction Account Guarantee Program (TAG) 

and 2) the Debt Guarantee Program (DGP). The TAG 

provided unlimited coverage for noninterest-bearing 

transaction accounts held by IDIs on all deposit amounts 

exceeding the fully insured limit of $250,000 through 

December 31, 2010. During its existence, the FDIC 

collected TAG fees of $1.2 billion. Total subrogated claims 

arising from obligations to depositors with noninterestbearing transaction accounts were $8.8 billion, with 

estimated losses of $2.2 billion.

The DGP permitted participating entities to issue FDICguaranteed senior unsecured debt through October 31, 

2009. The FDIC’s guarantee for all such debt expires 

on the earliest of the conversion date for mandatory 

convertible debt, the stated date of maturity, or December 

31, 2012. Through the end of the debt issuance period, 
Financia 

96

the DIF collected $8.3 billion of guarantee fees and fees 

of $1.2 billion from participating entities that elected to 

issue senior unsecured non-guaranteed debt. The fees 

are included in the “Cash and investments - restricted 

- systemic risk” line item and recognized as “Deferred 

revenue - systemic risk” on the Balance Sheet. 

Additionally, the FDIC holds $800 million (liquidation 

amount) of Citigroup TruPs on behalf of the Treasury 

(and any related interest) as security in the event payments 

are required to be made by the DIF for guaranteed debt 

instruments issued by Citigroup or any of its affiliates 

under the TLGP (see Note 5). At December 31, 2011, the 

fair value of these securities totaled $796 million, and was 

determined using the valuation methodology described in 

Note 15 for other Citigroup TruPs held by the DIF. There 

is an offsetting liability in the “Deferred revenue -systemic 

risk” line item, representing amounts to be transferred 

to the Treasury or, if necessary, paid for guaranteed debt 

instruments issued by Citigroup or its affiliates under 

the TLGP. Consequently, there is no impact on the fund 

balance of the DIF. 

The FDIC’s payment obligation under the DGP is 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, $618.0 billion in total 

guaranteed debt has been issued. Through December 

31, 2011, the FDIC has paid $35 million in claims for 

principal and/or interest arising from the default of 

guaranteed debt obligations of six debt issuers. Fiftynine financial entities (33 IDIs and 26 affiliates and 

holding companies) had $167.4 billion in guaranteed 

debt outstanding at December 31, 2011. This compares 

to $267.1 billion in guaranteed debt outstanding at 

December 31, 2010. Reported outstanding debt is derived 

from data submitted by debt issuers. 

At December 31, 2011, the DIF recognized a liability of 

$117 million for debt guarantee obligations that were 

paid in early 2012 as scheduled under the terms of the 

debt instruments. This liability is presented in the “Debt 

Guarantee Program liabilities – systemic risk” line item. 

The DIF has also recorded a contingent liability of $2 

million in the “Contingent liability for systemic risk” line 

item for probable additional guaranteed debt obligations. 

The FDIC believes that it is also reasonably possible that 

additional estimated losses of approximately $93 million 

could be incurred under the DGP. 

The DIF may recognize revenue before the end of the 

guarantee period for the portion of guarantee fees that 

was determined to exceed amounts needed to cover 

potential losses. During 2011, the DIF recognized revenue 

of $2.6 billion for a portion of DGP guarantee fees 

previously held as systemic risk deferred revenue (see Note 

10). The $2.6 billion relates to fees on debt guarantees that 

have expired. In addition, the DIF transferred an equal 

amount of “Cash and investments - restricted - systemic 

risk” to the DIF’s cash and investments. In the unforeseen 

event a debt default occurs greater than the remaining 

amount held as deferred revenue, to the extent needed, 

any amount previously recognized as revenue to the DIF 

will be returned to the TLGP.

Because of uncertainties surrounding the outlook for the 

economy and financial markets, there remains a possibility 

that the TLGP could incur a loss that would absorb some 

or all of the remaining guarantee fees. Therefore, it is 

appropriate to continue the practice of deferring revenue 

recognition for the remaining $5.7 billion of “Deferred 

revenue - systemic risk” (which excludes the liability of 

$925 million to Treasury for the fair value and related 

interest of the Citigroup TruPs). 
2011

A N N U A L R E P O R T

financials

Systemic Risk Activity at December 31, 201

Dolars

Cash

inv

- restri

system

Rece

and 

asse

syste

Defer

revenue

syste

Debt G

Prog

liab

syste

Cont

liab

syste

Revenu

Expense

syste

Balance at 01-01-11 $6,646,968 $2,269,422 $(9,054,541) $(29,334) $(119,993)

TAG fees collected 41,419 (50,235) 8,816 

DGP assessments collected 3 (3)

Receivable for TAG fees

Receivable for TAG 

accounts at failed 

institutions (424,628)

Dividends and overnight 

interest on TruPs held 

for UST 64,029 (64,029)

Fair value adjustment on 

TruPs held for UST (30,413) 30,413

Estimated losses for 

TAG accounts at failed 

institutions 119,976 (119,976) $(119,976)

Realized losses not yet paid 117,027 (87,693) 87,693 

Provision for DGP losses (147,111) 117,777 (117,777)

Guaranteed debt 

obligations paid (27,433) 27,433 27,433 

Transfer of excess TLGP 

funds to the DIF (2,569,579) 2,569,579

U.S. investment 

interest collected 66,640 (66,640)

Interest receivable on U.S. 

Treasury obligations 55,880 (55,880)

Amortization of U.S. 

Treasury obligations (71,262) 71,262

Accrued interest purchased (43,983) 43,983

Unrealized gain on U.S. 

Treasury obligations 439 (439)

TLGP operating expenses 152 (8,514)

Receipts of 

receivership's dividends 728,227

Totals $4,827,319 $1,948,151 $(6,639,954) $(117,027) $(2,216) $(131,141)

(1) As of December 31, 2011, the fair value of investments in U.S. Treasury obligations held by TLGP was $3.1 billion. An unrealized gain of $439 thousand is 

reported in the “Deferred revenue - systemic risk” line item. 97
Financia 

98

17. Subsequent Event

Subsequent events have been evaluated through 

April 11, 2012, the date the financial statements are 

available to be issued.

2012 Failures through Apr

Through April 11, 2012, 16 insured institutions 

failed in 2012 with total losses to the DIF estimated to 

be $1.3 billion. 
2011

A N N U A L R E P O R T

99

financials

FSLIC eso

Federal Deposit Insurance Corporatio

FSLIC Resolution Fund Balance Sheet at December 3

Dolars

2011 2010

Assets

Cash and cash equivalents $3,533,410 $3,547,907

Receivables from thrift resolutions and other 

assets, net (Note 3) 65,163 23,408 

Receivables from U.S. Treasury for goodwill 

litigation (Note 4) 356,455 323,495 

Total Assets $3,955,028 $3,894,810 

Liabilities

Accounts payable and other liabilities $3,544 $2,990 

Contingent liabilities for goodwill 

litigation (Note 4) 356,455 323,495 

Total Liabilities 359,999 326,485 

Resolution Equity (Note 5)

Contributed capital 127,875,656 127,792,696 

Accumulated deficit (124,280,627) (124,224,371)

Total Resolution Equity 3,595,029 3,568,325

Total Liabilities and Resolution Equity $3,955,028 $3,894,810

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

100

Federal Deposit Insurance Corporatio

FSLIC Resolution Fund Statement of Income and Accumulated Deficit for the Years Ended Decembe

Dolars

2011 2010

Revenue

 Interest on U.S. Treasury obligations $1,361 $3,876 

 Other revenue 3,257 9,393 

Total Revenue 4,618 13,269 

Expenses and Losses

 Operating expenses 4,660 3,832 

 Provision for losses (8,578) (945)

 Goodwill litigation expenses (Note 4) 82,960 (53,266)

 Recovery of tax benefits (18,373) (63,256)

 Other expenses 205 3,070 

Total Expenses and Losses 60,874 (110,565

Net (Loss) Income (56,256) 123,834 

Accumulated Deficit - Beginning (124,224,371) (124,348,205

Accumulated Deficit - Ending $(124,280,627) $(124,224,37

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

FSLIC esol
2011

A N N U A L R E P O R T

101

financials

FSLIC esol

Federal Deposit Insurance Corporatio

FSLIC Resolution Fund Statement of Cash Flows for the Years Ended December

Dolars

2011 2010

Operating Activities

Net (Loss) Income $(56,256) $123,834 

Adjustments to reconcile net income (loss) to net cash (used) provided by operating activities:

Provision for losses (8,578) (945)

 Change in Operating Assets and Liabilities: 

(Increase) Decrease in receivables from thrift 

resolutions and other assets (33,177) 9,875 

Increase in accounts payable and other liabilities 554 18 

Increase (Decrease) in contingent liabilities for 

goodwill litigation 32,960 (81,917)

Net Cash (Used) Provided by Operating Activities (64,497) 50,8

Financing Activities

 Provided by:

U.S. Treasury payments for goodwill 

litigation (Note 4) 50,000 26,917 

Net Cash Provided by Financing Activities 50,000 26,917

Net (Decrease) Increase in Cash and

Cash Equivalents (14,497) 77,782

Cash and Cash Equivalents - Beginning 3,547,907 3,470,125

Cash and Cash Equivalents - Ending $3,533,410 $3,547,90

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

102

Nots to the

FSLIC 

December 31, 2011 and 2010 

1. Legislative History and Operations/Dissolution

of the FSLIC Resolution

Legislat

The Federal Deposit Insurance Corporation (FDIC) 

is the independent deposit insurance agency created 

by Congress in 1933 to maintain stability and public 

confidence in the nation’s banking system. Provisions that 

govern the operations of the FDIC are generally found 

in the Federal Deposit Insurance (FDI) Act, as amended 

(12 U.S.C. 1811, et seq). In carrying out the purposes of 

the FDI Act, the FDIC, as administrator of the Deposit 

Insurance Fund (DIF), insures the deposits of banks and 

savings associations (insured depository institutions). 

In cooperation with other federal and state agencies, 

the FDIC promotes the safety and soundness of insured 

depository institutions by identifying, monitoring and 

addressing risks to the DIF. Commercial banks, savings 

banks and savings associations (known as “thrifts”) 

are supervised by either the FDIC, the Office of the 

Comptroller of the Currency, or the Federal Reserve 

Board. In addition, the FDIC, through administration 

of the FSLIC Resolution Fund (FRF), is responsible 

for the sale of remaining assets and satisfaction of 

liabilities associated with the former Federal Savings and 

Loan Insurance Corporation (FSLIC) and the former 

Resolution Trust Corporation (RTC). The DIF and the 

FRF are maintained separately by the FDIC to support 

their respective mandates.

The U.S. Congress created the FSLIC through the 

enactment of the National Housing Act of 1934. The 

Financial Institutions Reform, Recovery, and Enforcement 

Act of 1989 (FIRREA) abolished the insolvent FSLIC, 

created the FRF, and transferred the assets and liabilities 

of the FSLIC to the FRF-except those assets and liabilities 

transferred to the RTC-effective on August 9, 1989. 

Further, the FIRREA established the Resolution Funding 

Corporation (REFCORP) to provide part of the initial 

funds used by the RTC for thrift resolutions.

The RTC Completion Act of 1993 (RTC Completion 

Act) terminated the RTC as of December 31, 1995. 

All remaining assets and liabilities of the RTC were 

transferred to the FRF on January 1, 1996. Today, the 

FRF consists of two distinct pools of assets and liabilities: 

one composed of the assets and liabilities of the FSLIC 

transferred to the FRF upon the dissolution of the FSLIC 

(FRF-FSLIC), and the other composed of the RTC assets 

and liabilities (FRF-RTC). The assets of one pool are not 

available to satisfy obligations of the other.

Operations/Diss

The FRF will continue operations until all of its assets 

are sold or otherwise liquidated and all of its liabilities 

are satisfied. Any funds remaining in the FRF-FSLIC will 

be paid to the U.S. Treasury. Any remaining funds of the 

FRF-RTC will be distributed to the REFCORP to pay 

the interest on the REFCORP bonds. In addition, the 

FRF-FSLIC has available until expended $602 million in 

appropriations to facilitate, if required, efforts to wind up 

the resolution activity of the FRF-FSLIC. 

The FDIC has conducted an extensive review and 

cataloging of FRF’s remaining assets and liabilities. 

Some of the issues and items that remain open in FRF 

are 1) criminal restitution orders (generally have from 

1 to 12 years remaining to enforce); 2) collections of 

settlements and judgments obtained against officers 

and directors and other professionals responsible for 
2011

A N N U A L R E P O R T

103

financials

causing or contributing to thrift losses (generally have 

from 2 months to 7 years remaining to enforce, unless the 

judgments are renewed, which will result in significantly 

longer periods for collection for some judgments); 3) a few 

assistance agreements entered into by the former FSLIC 

(FRF could continue to receive or refund overpayments of 

tax benefits sharing through 2014); 4) goodwill litigation 

(no final date for resolution has been established; see 

Note 4); and 5) affordable housing program monitoring 

(requirements can exceed 25 years). The FRF could 

potentially realize recoveries from tax benefits sharing of 

up to approximately $36 million; however, any associated 

recoveries are not reflected in FRF’s financial statements 

given the significant uncertainties surrounding the 

ultimate outcome.

Receivers

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 Polic

Ge

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 receivership entities because these entities 

are legally separate and distinct, and the FRF does not 

have any ownership interests in them. Periodic and 

final accountability reports of receivership entities are 

furnished to courts, supervisory authorities, and others 

upon request.

Use of

Management makes estimates and assumptions that 

affect the amounts reported in the financial statements 

and accompanying notes. Actual results could differ 

from these estimates. Where it is reasonably possible that 

changes in estimates will cause a material change in the 

financial statements in the near term, the nature and 

extent of such changes in estimates have been disclosed. 

The more significant estimates include the allowance 

for losses on receivables from thrift resolutions and the 

estimated losses for litigation.

Cash 

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight 

Certificates.

Provisio

The provision for losses represents the change in the 

estimation of the allowance for losses related to the 

receivables from thrift resolutions and other assets.

Relate

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.
Financia 

104

Disclosure abo

Accounting 

Recent accounting pronouncements have been deemed to 

be not applicable or material to the financial statements as 

presented.

3. Receivables From Thrift Resolutions and Other

Assets, Net

Receivables From

The receivables from thrift resolutions include payments 

made by the FRF to cover obligations to insured 

depositors, advances to receiverships for working 

capital, and administrative expenses paid on behalf of 

receiverships. Any related allowance for loss represents the 

difference between the funds advanced and/or obligations 

incurred and the expected repayment. Assets held by the 

FDIC in its receivership capacity for the former RTC are 

a significant source of repayment of the FRF’s receivables 

from thrift resolutions. As of December 31, 2011, five 

of the 850 FRF receiverships remain active until their 

goodwill litigation or liability-related impediments are 

resolved. During 2011, the receivables from closed thrifts 

and related allowance for losses decreased by $4.0 billion 

due to three receiverships that were terminated during 

the year. 

The FRF receiverships held assets with a book value of 

$15 million and $18 million as of December 31, 2011 

and 2010, respectively (which primarily consist of cash, 

investments, and miscellaneous receivables). At December 

31, 2011, $12 million of the $15 million in assets in the 

FRF receiverships was cash held for non-FRF, third 

party creditors. 

Othe

Other assets include credit enhancement reserves valued 

at $14 million and $17 million as of December 31, 2011 

and 2010, 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 cash reserves, which 

may cover future credit losses through 2020, are valued by 

estimating credit losses on the underlying loan portfolio 

and then discounting cash flow projections using marketbased rates.

Most of the remaining amount in other assets is a 

receivable of $44 million for recoveries from tax benefit 

sharing as of December 31, 2011. Recoveries from tax 

benefit sharing represents receipts based on the realization 

of tax savings from entities that either entered into 

assistance agreements with the former FSLIC, or have 

subsequently purchased financial institutions that had 

prior agreements with the FSLIC. In 2011, the FRF 

refunded $26 million in tax benefit sharing recoveries that 

were received in a prior year.

Receivables From Thrift Resolutions and Other

Assets, Net at December 3

Dolars

2011 2010

Receivables from 

closed thrifts $1,800,417 $5,763,949 

Allowance for losses (1,797,154) (5,762,186)

Receivables from Thrift 

Resolutions, Net 3,263 1,763 

Other assets 61,900 21,645 

Total $65,163 $23,408
2011

A N N U A L R E P O R T

105

financials

4. Contingent Liabilities fo

Goodwill

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

Supreme Court held that when it became impossible 

following the enactment of FIRREA in 1989 for the federal 

government to perform certain agreements to count 

goodwill toward regulatory capital, the plaintiffs were 

entitled to recover damages from the United States. 

On July 22, 1998, the Department of Justice’s (DOJ’s) 

Office of Legal Counsel (OLC) concluded that the FRF is 

legally available to satisfy all judgments and settlements 

in the goodwill litigation involving supervisory action 

or assistance agreements. OLC determined that 

nonperformance of these agreements was a contingent 

liability that was transferred to the FRF on August 9, 1989, 

upon the dissolution of the FSLIC. On July 23, 1998, the 

U.S. Treasury determined, based on OLC’s opinion, that 

the FRF is the appropriate source of funds for payments 

of any such judgments and settlements. The FDIC 

General Counsel concluded that, as liabilities transferred 

on August 9, 1989, these contingent liabilities for future 

nonperformance of prior agreements with respect to 

supervisory goodwill were transferred to the FRF-FSLIC, 

which is that portion of the FRF encompassing the 

obligations of the former FSLIC. The FRF-RTC, which 

encompasses the obligations of the former RTC and was 

created upon the termination of the RTC on December 31, 

1995, is not available to pay any settlements or judgments 

arising out of the goodwill litigation. 

The FRF can draw from an appropriation provided by 

Section 110 of the Department of Justice Appropriations 

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

113 Stat. 1501A-3, 1501A-20) such sums as may be 

necessary for the payment of judgments and compromise 

settlements in the goodwill litigation. This appropriation 

is to remain available until expended. Because an 

appropriation is available to pay such judgments and 

settlements, any estimated liability for goodwill litigation 

should have a corresponding receivable from the U.S. 

Treasury and therefore have no net impact on the financial 

condition of the FRF-FSLIC. 

For the year ended December 31, 2011, the FRF paid $50 

million as a result of a settlement in one goodwill case 

compared to $27 million for four goodwill cases in 2010. 

The FRF received appropriations from the U.S. Treasury 

to fund these payments.

As of December 31, 2011, five remaining cases are pending 

against the United States based on alleged breaches 

of the agreements stated above. Of the five remaining 

cases, a contingent liability and an offsetting receivable 

of $356 million and $323 million was recorded for one 

case as of December 31, 2011 and 2010, respectively. This 

case is currently before the lower court pending remand 

following appeal and is still considered active.

The FDIC believes that it is reasonably possible that the 

FRF could incur additional estimated losses for two of the 

five remaining cases of up to $268 million. The plaintiff 

in one case was awarded $205 million by the Court of 

Federal Claims, and this case is currently on appeal. The 

remaining $63 million is additional damages contended 

by the plaintiff to the $356 million contingent liability for 

the one case mentioned in the previous paragraph. For 

the three remaining active cases, the FDIC is unable to 

estimate a range of loss to the FRF-FSLIC. No awards were 

given to the plaintiffs in these three cases by the appellate 

courts. Two cases are currently on appeal, and the other 

case is fully adjudicated but the Court of Federal Claims is 

considering awarding litigation costs to the United States.

In addition, the FRF-FSLIC pays the goodwill litigation 

expenses incurred by the DOJ, the entity that defends 

these lawsuits against the United States, based on a 

Memorandum of Understanding (MOU) dated October 

2, 1998, between the FDIC and the DOJ. FRF-FSLIC pays 

in advance the estimated goodwill litigation expenses. 

Any unused funds are carried over and applied toward 

the next fiscal year (FY) charges. In 2011, FRF-FSLIC did 
Financia 

106

not provide any additional funding to the DOJ because 

the unused funds from FY 2011 were sufficient to cover 

estimated FY 2012 expenses of $2.6 million. 

Guari

Paralleling the goodwill cases were similar cases alleging 

that the government breached agreements regarding 

tax benefits associated with certain FSLIC-assisted 

acquisitions. These agreements allegedly contained the 

promise of tax deductions for losses incurred on the sale 

of certain thrift assets purchased by plaintiffs from the 

FSLIC, even though the FSLIC provided the plaintiffs with 

tax-exempt reimbursement. A provision in the Omnibus 

Budget Reconciliation Act of 1993 (popularly referred to 

as the “Guarini legislation”) eliminated the tax deductions 

for these losses.

All eight of the original Guarini cases have been settled. 

However, a case settled in 2006 further obligates the FRFFSLIC as a guarantor for all tax liabilities in the event the 

settlement amount is determined by tax authorities to 

be taxable. The maximum potential exposure under this 

guarantee is approximately $81 million. However, the 

FDIC believes that it is very unlikely the settlement will be 

subject to taxation. More definitive information may be 

available during 2012, after the Internal Revenue Service 

(IRS) completes its Large Case Program audit on the 

affected entity’s 2006 returns; this audit remains ongoing. 

As of December 31, 2011, no liability has been recorded. 

The FRF does not expect to fund any payment under 

this guarantee. 

Representa

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 zero. 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, 2011 and 2010, 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.

Resolution Equity at December 31, 20

Dolars

FRF-FSLIC FRF-RTC

FRF

Consol

Contributed 

capital - 

beginning $46,043,359 $81,749,337 $127,792,696 

Add: U.S. 

Treasury 

payments/

receivable 

for goodwill 

litigation 82,960 0 82,960 

Contributed 

capital - 

ending 46,126,319 81,749,337 127,875,656 

Accumulated 

deficit (42,702,916) (81,577,711) (124,280,627)

Total $3,423,403 $171,626 $3,595,029
2011

A N N U A L R E P O R T

107

financials

Contribu

The FRF-FSLIC and the former RTC received $43.5 billion 

and $60.1 billion from the U.S. Treasury, respectively, 

to fund losses from thrift resolutions prior to July 1, 

1995. Additionally, the FRF-FSLIC issued $670 million 

in capital certificates to the Financing Corporation (a 

mixed-ownership government corporation established to 

function solely as a financing vehicle for the FSLIC) and 

the RTC issued $31.3 billion of these instruments to the 

REFCORP. FIRREA prohibited the payment of dividends 

on any of these capital certificates.

Through December 31, 2011, the FRF-RTC has returned 

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

of $5.0 billion to the REFCORP. These actions serve to 

reduce contributed capital. The most recent payment to 

the REFCORP was in January of 2008 for $225 million. 

FRF-FSLIC received $50 million in U.S. Treasury 

payments for goodwill litigation in 2011. Furthermore, 

$356 million and $323 million were accrued for as 

receivables at year-end 2011 and 2010, respectively. The 

effect of this activity was an increase in contributed capital 

of $83 million in 2011.

Accumula

The accumulated deficit represents the cumulative excess 

of expenses and losses over revenue for activity related to 

the FRF-FSLIC and the FRF-RTC. Approximately $29.8 

billion and $87.9 billion were brought forward from the 

former FSLIC and the former RTC on August 9, 1989, and 

January 1, 1996, respectively. The FRF-FSLIC accumulated 

deficit has increased by $12.9 billion, whereas the FRFRTC accumulated deficit has decreased by $6.3 billion, 

since their dissolution dates.

6. Disclosures About the Fair Value of

Financial Instrument

The financial assets recognized and measured at fair 

value on a recurring basis at each reporting date are 

cash equivalents and credit enhancement reserves. 

The following table presents the FRF’s financial assets 

measured at fair value as of December 31, 2011 and 2010.

Assets Measured at Fair Value at December 31, 20

Dolars

Fair Value Measurements Using

Quoted 

acti

for Iden

(Level 

Sign

Observ

(Level 

Si

Unob

Inp

(Level 

Total

at Fai

Assets

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

Credit enhancement 

reserves2 $14,431 14,431 

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

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

Public Debt. Cash equivalents are included in the “Cash and cash equivalents” line item.

(2) Credit enhancement reserves are valued by performing projected cash flow analyses using market-based assumptions (see Note 3).
Financia 

108

Assets Measured at Fair Value at December 31, 20

Dolars

Fair Value Measurements Using

Quoted 

acti

for Iden

(Level 

Sign

Observ

(Level 

Si

Unob

Inp

(Level 

Total

at Fai

Assets

Cash equivalents1 $3,397,440 $3,397,440 

Credit enhancement 

reserves2 $17,378 17,378 

Total Assets $3,397,440 $17,378 $0 $3,414,818 

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

Public Debt. Cash equivalents are included in the “Cash and cash equivalents” line item.

(2) Credit enhancement reserves are valued by performing projected cash flow analyses using market-based assumptions (see Note 3).

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.
2011

A N N U A L R E P O R T

109

financials

Government Accountabilit
Financia 

110

Government Accountability Office’s A
2011

A N N U A L R E P O R T

111

financials
Financia 

112

Government Accountability Office’s A
2011

A N N U A L R E P O R T

113

financials
Financia 

114

Government Accountability Office’s A
2011

A N N U A L R E P O R T

115

financials
Financia 

116

Government Accountability Office’s A
2011

A N N U A L R E P O R T

117

financials
Financia 

118

app

manageme
2011

A N N U A L R E P O R T

119

financials

management’s respons
Financia 

120

Overview o

The 7,357 FDIC-insured commercial banks and savings 

institutions that filed financial results at year-end 2011 

reported net income of $119.5 billion for the year, an 

increase of $34.0 billion compared with full year 2010.

This is the highest annual earnings total since 2006, when 

insured institutions reported $145.2 billion in net income.

The year-over-year improvement was made possible by 

large reductions in provisions for loan and lease losses, 

reflecting an improving trend in credit quality. The 

improvement in earnings was fairly widespread; more than 

two out of every three insured institutions – 66.9 percent – 

reported higher net income than in 2010. Fewer than one 

in seven institutions – 15.5 percent – reported a net loss for 

the year, the lowest proportion since 2007. Reduced loss 

provisioning expenses made up for a year-over-year decline 

in the industry’s revenues. Net operating revenue (the sum 

of net interest income and total noninterest income) was 

$12.8 billion lower than in 2010.

The average return on assets (ROA) rose to 0.88 percent 

from 0.65 percent a year earlier. This is the highest full 

year ROA for the industry since 2006. More than 59 

percent of insured institutions had higher ROAs in 2011 

than in 2010. Insured institutions set aside $76.9 billion 

in provisions for loan and lease losses during 2011, a 

reduction of $81.1 billion (51.3 percent) compared to 2010.

The industry’s total noninterest income declined by $5.3 

billion (2.3 percent), as income from asset servicing fell 

by $8.0 billion (48.6 percent), gains on loan sales dropped 

by $4.8 billion (43.0 percent), and income from service 

charges on deposit accounts declined by $2.2 billion 

(5.9 percent). These declines were partially offset by a 

$2.2 billion (9.5 percent) increase in trading income. Net 

interest income was $7.5 billion (1.7 percent) lower than 

in 2010. Total noninterest expenses were $19.8 billion (5.1 

percent) higher.

A problematic interest-rate environment characterized 

by historically low short-term interest rates contributed 

to a decline in the industry’s net interest margin. The 

average margin fell from 3.76 percent in 2010 to 3.60 

percent in 2011. Narrower spreads between the yields on 

interest-earning assets and the costs of funding those 

assets combined with weak growth in earning assets to 

produce the year-over-year decline in net interest income.

The greatest margin declines occurred at the largest banks, 

where much of the growth in interest-earning assets 

consisted of low-yield investments, such as balances with 

Federal Reserve banks.

An improving trend in asset quality indicators that began 

in the second half of 2010 continued through the end of 

2011. For the twelve months ended December 31, total 

noncurrent loans and leases – those that were 90 days 

or more past due or in nonaccrual status – fell by $53.5 

billion (14.9 percent). All major loan categories registered 

improvements, with loans secured by real estate properties 

accounting for more than two-thirds (68 percent) of the 

total decline in noncurrent loan balances. Noncurrent 

real estate construction and development loans declined 

by $19.3 billion, while balances of loans to commercial 

and industrial (C&I) borrowers that were noncurrent fell 

by $11.7 billion. Noncurrent real estate loans secured by 

nonfarm nonresidential properties declined by $6.1 billion, 

and noncurrent residential mortgage balances dropped by 

$5.6 billion. Net charge-offs of loans and leases (NCOs) 

totaled $113.0 billion in 2011, a $74.7 billion decline from 

2010. This is the fourth consecutive year that industry 

charge-offs exceeded $100 billion. Credit card loan NCOs 

had the largest year-over-year decline, falling by $27.9 

billion. NCOs of real estate construction loans were $11.8 

billion lower, C&I NCOs were down by $9.8 billion, and 

residential mortgage NCOs fell by $8.3 billion. At the 

end of 2011, there were 813 institutions on the FDIC’s 

“Problem List,” down from 884 “problem” institutions at 

the beginning of the year.
2011

A N N U A L R E P O R T

121

financials

Asset growth picked up in 2011, funded by strong deposit 

inflows. During the 12 months ended December 31, total 

assets of insured institutions increased by $564.4 billion 

(4.2 percent). Cash and balances due from depository 

institutions (including balances with Federal Reserve 

banks) accounted for $298.4 billion (52.9 percent) of 

the growth in assets. Securities portfolios rose by $182.6 

billion (6.8 percent). Net loans and leases increased 

by $130.8 billion, as C&I loan balances rose by $160.9 

billion (13.6 percent). Balances fell in most other major 

loan categories in 2011. The largest declines occurred in 

real estate construction and development loans, where 

balances fell by $81.4 billion (25.3 percent), and in home 

equity lines of credit, which declined by $33.5 billion (5.3 

percent). Banks reduced their reserves for loan losses by 

$40.5 billion (17.5 percent) during 2011, while increasing 

their equity capital by $68.0 billion (4.6 percent). 

Growth in deposits outpaced the increase in total assets in 

2011. Deposits in domestic offices of insured institutions 

increased by $881.9 billion (11.2 percent), while deposits 

in foreign offices fell by $121.4 billion (7.8 percent). A 

large portion of the increase in domestic deposits occurred 

in noninterest-bearing transaction accounts with balances 

greater than $250,000 that are fully insured until the end 

of 2012. Balances in these accounts increased by $569.1 

billion (56 percent) during the year. Nondeposit liabilities 

fell by $255.6 billion (10.7 percent), as banks reduced 

their Federal Home Loan Bank advances by $59.1 billion 

(15.3 percent), Fed funds purchased declined by $72.5 

billion (60.9 percent), securities sold under repurchase 

agreements dropped by $30.3 billion (6.6 percent), 

and other secured borrowings fell by $76.4 billion 

(19.6 percent).