V. FINANCIAL SECTION

89

V.

Financial 

Section
90 FEDERAL DEPOSIT INSURANCE CORPORATION

FEDERAL DEPOSIT INSURANCE CORPORATION 

DEPOSIT INSURANCE FUND BALANCE SHEET AT DECEMBER 31

Dollars in Thousands

2015 2014

Assets

Cash and cash equivalents $876,344 $1,914,520

Investment in U.S. Treasury obligations (Note 3) 62,496,959 49,805,846

Assessments receivable, net (Note 9) 2,172,472 2,003,424

Interest receivable on investments and other assets, net 417,871 651,894

Receivables from resolutions, net (Note 4) 11,578,079 18,181,498

Property and equipment, net (Note 5) 378,250 372,419

Total Assets $77,919,975 $72,929,601

Liabilities

Accounts payable and other liabilities $272,571 $291,006

Liabilities due to resolutions (Note 6) 4,419,195 7,799,279

Postretirement benefit liability (Note 12) 233,000 243,419

Contingent liabilities:

Anticipated failure of insured institutions (Note 7) 394,588 1,814,770

Litigation losses (Note 7) 386 950

Total Liabilities 5,319,740 10,149,424

Commitments and off-balance-sheet exposure (Note 13)

Fund Balance

Accumulated Net Income 72,643,474 62,786,786

Accumulated Other Comprehensive Income

Unrealized (loss) gain on U.S. Treasury investments, net (Note 3) (9,191) 51,142

Unrealized postretirement benefit loss (Note 12) (34,048) (57,751)

Total Accumulated Other Comprehensive Income (Loss) (43,239) (6,609)

Total Fund Balance 72,600,235 62,780,177

Total Liabilities and Fund Balance $77,919,975 $72,929,601

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

DEPOSIT INSURANCE FUND (DIF)
FINANCIAL SECTION 91

FEDERAL DEPOSIT INSURANCE CORPORATION 

DEPOSIT INSURANCE FUND STATEMENT OF INCOME AND 

FUND BALANCE FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2015 2014

Revenue

Assessments (Note 9) $8,846,843 $8,656,082

Interest on U.S. Treasury obligations 422,782 281,924

Other revenue 33,913 27,059

Total Revenue 9,303,538 8,965,065

Expenses and Losses

Operating expenses (Note 10) 1,687,234 1,664,344

Provision for insurance losses (Note 11) (2,251,320) (8,305,577)

Insurance and other expenses 10,936 6,486

Total Expenses and Losses (553,150) (6,634,747)

Net Income 9,856,688 15,599,812

Other Comprehensive Income

Unrealized (loss) gain on U.S. Treasury investments, net (60,333) 30,927

Unrealized postretirement benefit gain (loss) (Note 12) 23,703 (41,401)

Total Other Comprehensive Income (Loss) (36,630) (10,474)

Comprehensive Income 9,820,058 15,589,338

Fund Balance - Beginning 62,780,177 47,190,839

Fund Balance - Ending $72,600,235 $62,780,177

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

DEPOSIT INSURANCE FUND (DIF)
92 FEDERAL DEPOSIT INSURANCE CORPORATION

FEDERAL DEPOSIT INSURANCE CORPORATION 

DEPOSIT INSURANCE FUND STATEMENT OF CASH FLOWS 

FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2015 2014

Operating Activities

Provided by:

Assessments $8,677,795 $8,873,123

Interest on U.S. Treasury obligations 2,064,836 1,450,939

Recoveries from financial institution resolutions 6,329,454 4,099,804

Miscellaneous receipts 147,001 78,558

Used by:

Operating expenses (1,631,297) (1,586,858)

Disbursements for financial institution resolutions (2,282,721) (1,860,014)

Miscellaneous disbursements (107,478) (15,385)

Net Cash Provided by Operating Activities 13,197,590 11,040,167

Investing Activities

Provided by:

Maturity of U.S. Treasury obligations 19,590,780 17,158,275

Used by:

Purchase of U.S. Treasury obligations (33,766,067) (29,771,897)

Purchase of property and equipment (60,479) (55,295)

Net Cash (Used) by Investing Activities (14,235,766) (12,668,917)

Net (Decrease) in Cash and Cash Equivalents (1,038,176) (1,628,750)

Cash and Cash Equivalents - Beginning 1,914,520 3,543,270

Cash and Cash Equivalents - Ending $876,344 $1,914,520

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

DEPOSIT INSURANCE FUND (DIF)
FINANCIAL SECTION 93

NOTES TO THE 

FINANCIAL STATEMENTS

DEPOSIT INSURANCE FUND

December 31, 2015 and 2014

1. OPERATIONS OF THE 

DEPOSIT INSURANCE FUND

OVERVIEW

The Federal Deposit Insurance Corporation (FDIC) 

is the independent deposit insurance agency created 

by Congress in 1933 to maintain stability and public 

confidence in the nation’s banking system. Provisions 

that govern the FDIC’s operations are generally 

found in the Federal Deposit Insurance (FDI) Act, 

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

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

Deposit Insurance Fund (DIF), insures the deposits 

of banks and savings associations (insured depository 

institutions). In cooperation with other federal and 

state agencies, the FDIC promotes the safety and 

soundness of insured depository institutions (IDIs) by 

identifying, monitoring, and addressing risks to the 

DIF. Commercial banks, savings banks and savings 

associations (known as “thrifts”) are supervised by 

either the FDIC, the Office of the Comptroller of the 

Currency, or the Federal Reserve Board.

In addition to being the administrator of the 

DIF, the FDIC is the administrator of the FSLIC 

Resolution Fund (FRF). The FRF is a resolution 

fund responsible for the sale of the remaining assets 

and the satisfaction of the liabilities associated with 

the former Federal Savings and Loan Insurance 

Corporation (FSLIC) and the former Resolution Trust 

Corporation. The FDIC maintains the DIF and the 

FRF separately to support their respective functions.

Pursuant to the Dodd-Frank Wall Street Reform 

and Consumer Protection Act of 2010 (Dodd-Frank 

Act), the FDIC also manages the Orderly Liquidation 

Fund (OLF). Established as a separate fund in the 

U.S. Treasury (Treasury), the OLF is inactive and 

unfunded until the FDIC is appointed as receiver 

for a covered financial company. A covered financial 

company is a failing financial company (for example, 

a bank holding company or nonbank financial 

company) for which a systemic risk determination 

has been made as set forth in section 203 of the 

Dodd-Frank Act.

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

the FDIC authority to establish a widely available 

program to guarantee obligations of solvent IDIs or 

solvent depository institution holding companies 

(including affiliates) upon the systemic risk 

determination of a liquidity event during times of 

severe economic distress. The program would not be 

funded by the DIF but rather by fees and assessments 

paid by all participants in the program. If fees are 

insufficient to cover losses or expenses, the FDIC 

must impose a special assessment on participants as 

necessary to cover the shortfall. Any excess funds 

at the end of the liquidity event program would be 

deposited in the General Fund of the Treasury.

The Dodd-Frank Act also created the Financial 

Stability Oversight Council (FSOC) of which the 

Chairman of the FDIC is a member and expanded 

the FDIC’s responsibilities to include supervisory 

review of resolution plans (known as living wills) 

and backup examination authority for systemically 

important bank holding companies and nonbank 

financial companies. The living wills provide for an 

entity’s rapid and orderly resolution in the event of 

material financial distress or failure.

OPERATIONS OF THE DIF

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

deposits and protect the depositors of IDIs and (2) 

resolve failed IDIs upon appointment of the FDIC 

as receiver in a manner that will result in the least 

possible cost to the DIF.
94 FEDERAL DEPOSIT INSURANCE CORPORATION

The DIF is primarily funded from deposit insurance 

assessments. Other available funding sources, if 

necessary, are borrowings from the Treasury, the 

Federal Financing Bank (FFB), Federal Home Loan 

Banks, and IDIs. The FDIC has borrowing authority 

of $100 billion from the Treasury and a Note 

Purchase Agreement with the FFB, not to exceed 

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

deposit insurance.

A statutory formula, known as the Maximum 

Obligation Limitation (MOL), limits the amount of 

obligations the 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 $171.0 billion 

and $162.0 billion as of December 31, 2015 and 

2014, respectively.

OPERATIONS OF RESOLUTION ENTITIES

The FDIC is responsible for managing and disposing 

of the assets of failed institutions in an orderly and 

efficient manner. The assets held by receiverships, 

pass-through conservatorships, and bridge institutions 

(collectively, resolution entities), and the claims 

against them, are accounted for separately from the 

DIF assets and liabilities to ensure that proceeds from 

these entities are distributed according to applicable 

laws and regulations. Therefore, income and expenses 

attributable to resolution entities are accounted 

for as transactions of those entities. The FDIC 

bills resolution entities for services provided on 

their behalf.

2. SUMMARY OF SIGNIFICANT 

ACCOUNTING POLICIES

GENERAL

The financial statements include the financial 

position, results of operations, and cash flows of 

the DIF and are presented in accordance with U.S. 

generally accepted accounting principles (GAAP). 

These statements do not include reporting for assets 

and liabilities of resolution entities because these 

entities are legally separate and distinct, and the DIF 

does not have any ownership or beneficial interests 

in them. Periodic and final accounting reports of 

resolution entities are furnished to courts, supervisory 

authorities, and others upon request.

USE OF ESTIMATES

The preparation of the financial statements in 

conformity with GAAP requires management to make 

estimates and assumptions that affect the reported 

amounts of assets and liabilities, revenue and expenses, 

and disclosure of contingent liabilities. Actual 

results could differ from these estimates. Where it 

is reasonably possible that changes in estimates will 

cause a material change in the financial statements 

in the near term, the nature and extent of such 

potential changes in estimates have been disclosed. 

The more significant estimates include the assessments 

receivable and associated revenue; the allowance 

for loss on receivables from resolutions (which

considers the impact of shared-loss agreements); the 

guarantee obligations for structured transactions; the 

postretirement benefit obligation; and the estimated 

losses for anticipated failures and representations and 

indemnifications.

CASH EQUIVALENTS

Cash equivalents are short-term, highly liquid 

investments consisting primarily of U.S. Treasury 

Overnight Certificates.

INVESTMENT IN U.S. TREASURY 

OBLIGATIONS

The FDI Act requires that the DIF funds be invested 

in obligations of the United States or in obligations 

guaranteed as to principal and interest by the United 

States. The Secretary of the Treasury must approve 

all such investments in excess of $100,000 and has 

granted the FDIC approval to invest the DIF funds 

only in U.S. Treasury obligations that are purchased 

or sold exclusively through the Bureau of the Fiscal 

Service’s Government Account Series program.
FINANCIAL SECTION 95

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

classified as available-for-sale. Securities designated as 

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

gains and losses are reported as other comprehensive 

income. Realized gains and losses are included 

in the Statement of Income and Fund Balance as 

components of net income. Income on securities 

is calculated and recorded daily using the effective 

interest or straight-line method depending on the 

maturity of the security (see Note 3).

REVENUE RECOGNITION 

FOR ASSESSMENTS

Assessment revenue is recognized for the quarterly 

period of insurance coverage based on an estimate. 

The estimate is derived from an institution’s risk-based 

assessment rate and assessment base for the prior 

quarter adjusted for the current quarter’s available 

assessment credits, certain changes in supervisory 

examination ratings for larger institutions, as well 

as modest assessment base growth and average 

assessment rate adjustment factors. At the subsequent 

quarter-end, the estimated revenue amounts are 

adjusted when actual assessments for the covered 

period are determined for each institution 

(see Note 9).

CAPITAL ASSETS AND DEPRECIATION

The FDIC buildings are depreciated on a straight-line 

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

improvements are capitalized and depreciated over the 

estimated useful life of the improvements. Leasehold 

improvements are capitalized and depreciated 

over the lesser of the remaining life of the lease or 

the estimated useful life of the improvements, if 

determined to be material. Capital assets depreciated 

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

useful life include mainframe equipment; furniture, 

fixtures, and general equipment; and internal-use 

software. Computer equipment is depreciated on a 

straight-line basis over a three-year estimated useful 

life (see Note 5).

PROVISION FOR INSURANCE LOSSES

The provision for insurance losses primarily represents 

changes in the allowance for losses on receivables 

from closed banks and the contingent liability 

for anticipated failures of insured institutions 

(see Note 11).

REPORTING ON VARIABLE 

INTEREST ENTITIES

The FDIC receiverships engaged in structured 

transactions, some of which resulted in the issuance 

of note obligations that were guaranteed by the 

FDIC, in its corporate capacity. As the guarantor of 

note obligations for several structured transactions, 

the FDIC, in its corporate capacity, holds an 

interest in many variable interest entities (VIEs). 

The FDIC conducts a qualitative assessment of 

its relationship with each VIE as required by the 

Financial Accounting Standards Board (FASB) 

Accounting Standards Codification (ASC) Topic 

810, Consolidation. These assessments are conducted 

to determine if the FDIC, in its corporate capacity, 

has (1) power to direct the activities that most 

significantly affect the economic performance of the 

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

VIE or the right to receive benefits from the VIE 

that could potentially be significant to the VIE. 

When a variable interest holder has met both of 

these characteristics, the enterprise is considered the 

primary beneficiary and must consolidate the VIE.

In accordance with the provisions of FASB ASC Topic 

810, an assessment of the terms of the legal agreement 

for each VIE was conducted to determine whether 

any of the terms had been activated or modified in a 

manner that would cause the FDIC, in its corporate 

capacity, to be characterized as a primary beneficiary. 

In making that determination, 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 VIE 

was determined to be the most significant activity. 

In other cases, it was determined that the structured 
96 FEDERAL DEPOSIT INSURANCE CORPORATION

transactions did not include such significant activities 

and that the design of the entity was the best indicator 

of which party was the primary beneficiary.

The conclusion of these analyses was that the 

FDIC, in its corporate capacity, has not engaged 

in any activity that would cause the FDIC to be 

characterized as a primary beneficiary to any VIE 

with which it was involved as of December 31, 2015 

and 2014. Therefore, consolidation is not required 

for the 2015 and 2014 DIF financial statements. In 

the future, the FDIC, in its corporate capacity, may 

become the primary beneficiary upon the activation 

of provisional contract rights that extend to the FDIC 

if payments are made on guarantee claims. Ongoing 

analyses will be required to monitor consolidation 

implications under FASB ASC Topic 810.

The FDIC’s involvement with VIEs is fully described 

in Note 8 under FDIC Guaranteed Debt of 

Structured Transactions.

RELATED PARTIES

The nature of related parties and a description of 

related party transactions are discussed in Note 1 

and disclosed throughout the financial statements 

and footnotes.

DISCLOSURE ABOUT RECENT RELEVANT 

ACCOUNTING PRONOUNCEMENTS

In February 2015, the FASB issued Accounting 

Standards Update (ASU) No. 2015-02, Amendments 

to the Consolidation Analysis. Effective for periods 

beginning after December 15, 2016, the ASU amends 

an entity’s consolidation analysis for determining 

whether it should consolidate a legal entity. The 

FDIC, in its corporate capacity, has determined that 

the ASU does not impact its consolidation analysis of 

structured transactions.

In April 2015, the FASB issued ASU 2015-05, 

Intangibles – Goodwill and Other – Internal-Use 

Software (Subtopic 350-40): Customer’s Accounting for 

Fees Paid in a Cloud Computing Arrangement. The 

guidance clarifies circumstances under which a cloud 

computing arrangement would be considered a license 

of internal-use software or a service contract. The 

ASU, which is effective for the DIF beginning on 

January 1, 2016, is not expected to have a material 

effect on the DIF’s financial condition or results of 

operations.

In May 2014, the FASB issued ASU 2014-09, 

Revenue from Contracts with Customers (Topic 606). 

The ASU will require an entity to recognize revenue 

based on the amount it expects to be entitled for the 

transfer of promised goods or services. In August 

2015, the FASB issued ASU No. 2015-14, Revenue 

from Contracts with Customers (Topic 606): Deferral of 

Effective Date, deferring the original effective date of 

the new revenue standard by one year. For the DIF, 

the deferral results in the new revenue standard being 

effective for annual periods beginning after December 

15, 2018. The FDIC does not expect the new ASU to 

have a material effect on the DIF.

Other recent accounting pronouncements have been 

deemed not applicable or material to the financial 

statements as presented.

3. INVESTMENT IN U.S.

TREASURY OBLIGATIONS

The “Investment in U.S. Treasury obligations” line 

item on the Balance Sheet consisted of the following 

components by maturity (in thousands).
FINANCIAL SECTION 97

Maturity

Yield at 

Purchase1

Face 

Value

Net 

Carrying 

Amount

Unrealized 

Holding 

Gains

Unrealized 

Holding 

Losses

Fair

Value

U.S. Treasury notes and bonds

Within 1 year 0.54% $21,495,000 $21,816,062 $2,518 $(17,526) $21,801,054

After 1 year 

through 5 years 1.19% 39,881,209 39,951,893 55,159 (43,912) 39,963,140

Subtotal $61,376,209 $61,767,955 $57,677 $(61,438) $61,764,194

U.S. Treasury Inflation-Protected Securities

Within 1 year -0.80% $300,000 $324,100 $0 $(2,101) $321,999

After 1 year 

through 5 years -0.14% 400,000 414,095 0 (3,329) 410,766

Subtotal $700,000 $738,195 $0 $(5,430) $732,765

Total $62,076,209 $62,506,150 $57,677 $(66,868)2 $62,496,959

1

 The Treasury Inflation-Protected Securities (TIPS) are indexed to increases or decreases in the Consumer Price Index for All Urban Consumers (CPI-U). 

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 2015.

2

 These unrealized losses occurred over a period of less than a year as a result of temporary changes in market interest rates. The FDIC does not 

intend to sell the securities and is not likely to be required to sell them before their maturity date, thus, the FDIC does not consider these securities 

to be other than temporarily impaired at December 31, 2015. The aggregate related fair value of securities with unrealized losses was $38.7 billion 

as of December 31, 2015.

Maturity

Yield at 

Purchase1

Face 

Value

Net 

Carrying 

Amount

Unrealized 

Holding 

Gains

Unrealized 

Holding 

Losses

Fair

Value

U.S. Treasury notes and bonds

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

After 1 year 

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

Subtotal $46,351,209 $47,254,410 $88,503 $(10,275) $47,332,638

U.S. Treasury Inflation-Protected Securities

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

After 1 year 

through 5 years -0.43% 700,000 741,057 0 (9,966) 731,091

Subtotal $2,200,000 $2,500,294 $0 $(27,086) $2,473,208

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

1

 The Treasury Inflation-Protected Securities (TIPS) are indexed to increases or decreases in the Consumer Price Index for All Urban Consumers (CPI-U). 

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

Congressional Budget Office and Blue Chip Economic Indicators in early 2014.

2

 These unrealized losses occurred over a period of less than a year as a result of temporary changes in market interest rates. The FDIC does not 

intend to sell the securities and is not likely to be required to sell them before their maturity date, thus, the FDIC does not consider these securities to 

be other than temporarily impaired at December 31, 2014. The aggregate related fair value of securities with unrealized losses was $19.0 billion as of 

December 31, 2014.

December 31, 2015

December 31, 2014
98 FEDERAL DEPOSIT INSURANCE CORPORATION

4. RECEIVABLES FROM 

RESOLUTIONS, NET

The receivables from resolutions result from DIF 

payments to cover obligations to insured depositors 

(subrogated claims), advances to resolution entities 

for working capital, and administrative expenses 

paid on behalf of resolution entities. Any related 

allowance for loss represents the difference between 

the funds advanced and/or obligations incurred and 

the expected repayment. 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. The “Receivables 

from resolutions, net” line item on the Balance Sheet 

consisted of the following components (in thousands).

December 31

2015

December 31 

2014

Receivables from 

closed banks $88,858,877 $98,360,904

Allowance for losses (77,280,798) (80,179,406)

Total $11,578,079 $18,181,498

As of December 31, 2015, the FDIC had 446 active 

receiverships, including eight established in 2015. 

The DIF resolution entities held assets with a book 

value of $20.8 billion as of December 31, 2015, and 

$29.7 billion as of December 31, 2014 (including 

$16.0 billion and $22.0 billion, respectively, of cash, 

investments, receivables due from the DIF, and other 

receivables). Ninety-nine percent of the current asset 

book value of $20.8 billion is held by resolution 

entities established since the beginning of 2008.

Estimated cash recoveries from the management and 

disposition of assets that are used to determine the 

allowance for losses are based on asset recovery rates 

from several sources, including actual or pending 

institution-specific asset disposition data, failed 

institution-specific asset valuation data, aggregate 

asset valuation data on several recently failed or 

troubled institutions, sampled asset valuation data, 

and empirical asset recovery data based on failures 

since 1990. Methodologies for determining the asset 

recovery rates incorporate estimating future cash 

recoveries, net of applicable liquidation cost estimates, 

and discounting based on market-based risk factors 

applicable to a given asset’s type and quality. The 

resulting estimated cash recoveries are then used to 

derive the allowance for loss on the receivables from 

these resolutions.

For failed institutions resolved using a whole bank 

purchase and assumption transaction with an 

accompanying SLA, the projected future shared-loss 

payments on the covered residential and commercial 

loan 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 

2015, the shared-loss cost estimates were updated for 

all 215 receiverships with active SLAs. The updated 

shared-loss cost projections for the larger residential 

shared-loss agreements were primarily based on new 

third-party valuations estimating the cumulative 

loss of covered assets. The updated shared-loss cost 

projections on the remaining residential sharedloss agreements were based on a stratified random 

sample of institutions selected for new third-party 

loss estimations, and valuation results from the 

sampled institutions were aggregated and extrapolated 

to the non-sampled institutions by asset type and 

performance status.

In 2015, the FDIC eliminated the use of third-party 

valuations for the remaining commercial covered 

assets. Instead, loss rates were based on the FDIC’s 

historical loss experience that also factors in the 

time period based on the life of the agreement. In 

addition, for all shared-loss agreements, the rate used 

for discounting the cash flows was changed in 2015 

to the Treasury spot rate curve instead of the 3-year 

Constant Maturity Treasury rate. These changes were 
FINANCIAL SECTION 99

made to address the shift to a predominantly singlefamily asset mix and did not have a material impact 

on the shared-loss liability.

Also reflected in the allowance for loss calculation are 

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

recoveries are projected to be received at expiration in 

accordance with the terms of the SLA, if actual losses 

at expiration are lower than originally estimated.

Note that estimated asset recoveries are regularly 

evaluated during the year, but remain subject 

to uncertainties because of potential changes in 

economic and market conditions, which may cause 

the DIF’s actual recoveries to vary significantly from 

current estimates.

WHOLE BANK PURCHASE AND 

ASSUMPTION TRANSACTIONS 

WITH SHARED-LOSS AGREEMENTS

Since the beginning of 2008 through 2013, the 

FDIC resolved 304 failures using whole bank 

purchase and assumption resolution transactions with 

accompanying SLAs on total assets of $216.5 billion 

purchased by the financial institution acquirers. 

The acquirer typically assumed all of the deposits 

and purchased essentially all of the assets of a failed 

institution. The majority of the commercial and 

residential loan assets were purchased under an SLA, 

where the FDIC agreed to share in future losses and 

recoveries experienced by the acquirer on those assets 

covered under the agreement.

Losses on the covered assets of failed institutions are 

shared between the acquirer and the FDIC, in its 

receivership capacity, when losses occur through the 

sale, foreclosure, loan modification, or charge-off of 

loans under the terms of the SLA. The majority of the 

agreements cover commercial and single-family loans 

over a five- to ten-year shared-loss period, respectively, 

with the receiver covering 80 percent of the losses 

incurred by the acquirer and the acquiring institution 

covering 20 percent. Prior to March 26, 2010, most 

SLAs included a threshold amount, above which the 

receiver covered 95 percent of the losses incurred by 

the acquirer. Recoveries by the acquirer on covered 

commercial and single-family SLA losses are also 

shared over an eight- to ten-year period, respectively. 

Note that future recoveries on SLA losses are not 

factored into the DIF allowance for loss calculation 

because the amount and timing of such receipts are 

not determinable.

The estimated shared-loss liability is accounted for 

by the receiver and is included in the calculation of 

the DIF’s allowance for loss against the corporate 

receivable from the resolution. As shared-loss claims 

are asserted and proven, DIF receiverships satisfy these 

shared-loss payments using available liquidation funds 

and/or by drawing on amounts due from the DIF 

for funding the deposits assumed by the acquirer 

(see Note 6).

Shared-loss transactions are summarized as follows 

(in thousands).

December 31 

2015

December 31

2014

Payments for shared-loss 

agreements to date $33,475,276 $31,790,385

Recoveries from 

shared-loss agreements 

to date (4,468,296) (3,620,038)

Net shared-loss payments 

made to date $29,006,980 $28,170,347

Projected shared-loss 

payments, net of 

“true-up” recoveries $1,560,124 $3,942,689

Total remaining sharedloss covered assets $31,478,451 $54,589,505

The $23.1 billion reduction in the remaining sharedloss covered assets from 2014 to 2015 is primarily due 

to the liquidation of covered assets from active SLAs, 

expiration of loss coverage for 113 commercial loan 

SLAs, and early termination of 66 SLAs during 2015.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the DIF 

to concentrations of credit risk are receivables from 

resolutions. The repayment of these receivables is 

primarily influenced by recoveries on assets held by 

DIF receiverships and payments on the covered assets 
100 FEDERAL DEPOSIT INSURANCE CORPORATION

under SLAs. The majority of the remaining assets 

in liquidation ($4.8 billion) and current shared-loss 

covered assets ($31.5 billion), which together total 

$36.3 billion, are concentrated in commercial loans 

($5.8 billion), residential loans ($25.7 billion), and 

structured transaction-related assets ($3.5 billion) as 

described in Note 8. Most of the assets originated 

from failed institutions located in California ($13.8 

billion), Puerto Rico ($5.2 billion), Florida ($4.2 

billion), Ohio ($2.8 billion), Texas ($1.9 billion), and 

Alabama ($1.7 billion).

5. PROPERTY AND

EQUIPMENT, NET

Depreciation expense was $52 million and $60 

million for 2015 and 2014, respectively. The 

“Property and equipment, net” line item on the 

Balance Sheet consisted of the following components 

(in thousands).

December 31

2015

December 31 

2014

Land $37,352 $37,352

Buildings (including 

building and leasehold 

improvements) 342,267 326,067

Application software 

(includes work-in-process) 132,280 142,907

Furniture, fixtures, and 

equipment 73,432 104,761

Accumulated depreciation (207,081) (238,668)

Total $378,250 $372,419

6. LIABILITIES DUE 

TO RESOLUTIONS

As of December 31, 2015 and 2014, the DIF 

recorded liabilities totaling $4.4 billion and $7.8 

billion, respectively, to resolution entities representing 

the agreed-upon value of assets transferred from the 

receiverships, at the time of failure, to the acquirers/

bridge institutions for use in funding the deposits 

assumed by the acquirers/bridge institutions. Eightyseven 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 sending cash 

directly to a receivership to fund shared-loss and other 

expenses or by offsetting receivables from resolutions 

when a receivership declares a dividend.

7. CONTINGENT LIABILITIES

ANTICIPATED FAILURE OF 

INSURED INSTITUTIONS

The DIF records a contingent liability and a loss 

provision for DIF-insured institutions that are 

likely to fail when the liability is probable and 

reasonably estimable, absent some favorable event 

such as obtaining additional capital or merging. The 

contingent liability is derived by applying expected 

failure rates and loss rates to the institutions based on 

supervisory ratings, balance sheet characteristics, and 

projected capital levels.

The banking industry’s financial condition and 

performance continued to improve in 2015. 

According to the quarterly financial data submitted 

by DIF-insured institutions, the industry reported 

total net income of $123.4 billion for the first nine 

months of 2015, an increase of 6.2 percent over 

the comparable period one year ago. The industry’s 

capital levels also continued to improve, and 

noncurrent loans declined, as the industry’s ratio of 

noncurrent loans-to-total loans fell to its lowest level 

since year-end 2007.

Losses to the DIF from failures that occurred in 2015 

were lower than the contingent liability at the end of 

2014, as the aggregate number and cost of institution 

failures were less than anticipated. The removal of the 

liability from institutions that failed in 2015, as well 

as favorable trends in bank supervisory downgrade 

and failure rates, all contributed to a decline in the 

contingent liability from $1.8 billion at December 31, 

2014 to $395 million at December 31, 2015.
FINANCIAL SECTION 101

In addition to the recorded contingent liabilities, the 

FDIC has identified risks in the financial services 

industry that could result in additional losses to 

the DIF, should potentially vulnerable insured 

institutions ultimately fail. As a result of these risks, 

the FDIC believes that it is reasonably possible that 

the DIF could incur additional estimated losses of 

approximately $800 million as of December 31, 

2015, as compared to $1.7 billion as of year-end 

2014. The actual losses, if any, will largely depend 

on future economic and market conditions and could 

differ materially from this estimate.

During 2015, eight institutions failed with combined 

assets of $5.7 billion at the date of failure. Recent 

trends in supervisory ratings and market data suggest 

that the financial performance and condition of the 

banking industry should continue to improve over the 

coming year. However, exposure to interest rate risk, 

credit risk, reliance on short-term sources of funding, 

and limited opportunities for revenue growth will 

continue to stress the industry. Additionally, key 

risks continue to weigh on the economic outlook as 

well, including the impact of rising interest rates as 

they return to more normal levels; fiscal challenges at 

federal, state, and local levels; and global economic 

risks. The FDIC continues to evaluate ongoing risks 

to affected institutions in light of existing economic 

and financial conditions, and the extent to which 

such risks may put stress on the resources of the 

insurance fund.

LITIGATION LOSSES

The DIF records an estimated loss for unresolved legal 

cases to the extent that those losses are considered 

probable and reasonably estimable. The FDIC 

recorded probable litigation losses of $386 thousand 

and $950 thousand for the DIF as of December 31, 

2015 and 2014, respectively. In addition, the FDIC 

has determined that there are $555 thousand of 

reasonably possible losses from unresolved cases 

as of December 31, 2015, compared to none at 

year-end 2014.

8. OTHER CONTINGENCIES

INDYMAC FEDERAL BANK 

REPRESENTATION AND 

INDEMNIFICATION 

CONTINGENT LIABILITY

On March 19, 2009, the FDIC as receiver for 

IndyMac Federal Bank (IMFB) and certain 

subsidiaries (collectively, Sellers) sold substantially 

all of the assets, which included mortgage loans 

and servicing rights, to OneWest Bank (following a 

merger is now known as CIT Bank) and its affiliates 

(collectively, Acquirers). The Sellers made certain 

representations customarily made by commercial 

parties in similar transactions. Under the sale 

agreements, the Acquirers have rights to assert 

claims to recover losses incurred as a result of thirdparty claims and breaches of representations. The 

FDIC, in its corporate capacity, guaranteed the 

Sellers’ indemnification obligations under the sale 

agreements. Until all indemnification claims are 

asserted, quantified and paid, losses could continue to 

be incurred by the receivership and in turn, the DIF.

The unpaid principal balances of loans in the servicing 

portfolios sold subject to representation and warranty 

indemnification totaled $171.6 billion at the time of 

sale. The IndyMac receivership has paid cumulative 

claims totaling $21 million through December 31, 

2015 and 2014. Quantified claims asserted and 

under review have been accrued in the amount of 

$1 million and $6 million as of December 31, 2015 

and 2014, respectively.

Fannie Mae has demanded the repurchase of $87 

million of conventional and reverse mortgage loans. 

However, the Sellers do not anticipate repurchasing 

any mortgage loans from Fannie Mae. Instead, 

the Sellers and the Acquirers are negotiating the 

terms of a financial settlement for the Fannie Mae 

portfolio. It is anticipated this settlement would 

resolve indemnification obligations of the Sellers 

to the Acquirers and Fannie Mae. As a result, it is 

probable the Sellers will incur losses. The impact 
102 FEDERAL DEPOSIT INSURANCE CORPORATION

of this receivership estimated loss is reflected in the 

“Receivables from resolutions, net” line item on the 

Balance Sheet.

The FDIC is evaluating the likelihood of additional 

losses that may arise as a result of indemnification 

claims based upon breaches or third party claims. 

As the Acquirers or Government Sponsored Entities 

(GSEs) – Fannie Mae, Freddie Mac and Ginnie Mae 

incur or expect to incur losses, they will assert claims. 

These claims will be reviewed to determine whether 

there is a basis for indemnification or reimbursement 

and, if so, whether any Acquirer may have liability for 

any portion of the claimed loss as a result of its acts or 

omissions. While many loans are subject to notices of 

alleged breaches and a number of third party claims 

have been asserted, not all breach allegations or third 

party claims will result in a loss and certain losses may 

be allocable to the Acquirers. As a result, potential 

losses, and the Sellers’ share of such losses, cannot be 

estimated. However, it is probable that future losses 

will be incurred given the following:

• The Acquirers’ ability to submit breach notices was 

subject to contractual bar dates that have passed. 

In addition, their entitlement to reimbursement 

for certain third party claims is dependent upon 

those claims having been submitted prior to other 

contractual dates, some of which have also passed. 

However, the Acquirers retain the right to assert 

indemnification claims for losses over the life of 

those loans for which breach notices were timely 

submitted.

• The Acquirers’ retain the right to seek 

reimbursement for losses incurred as a result 

of claims alleging breaches of loan seller 

representations asserted by Fannie Mae or Ginnie 

Mae on or prior to March 19, 2019, for their 

reverse mortgage servicing portfolios (unpaid 

principal balance of $12.9 billion at December 31, 

2015, compared to $14.2 billion at December 31, 

2014).

• The GSEs have the right to assert certain claims 

directly against the Sellers for the mortgage servicing 

portfolios without regard to any contractual claims 

bar date.

• Potential losses could be incurred for failures by 

the Sellers to initiate and pursue foreclosure within 

prescribed timeframes for certain government 

guaranteed loans, resulting in the refusal of the 

guarantor to pay interest owed to the investors. 

Fannie Mae has asserted a claim for $64 million 

of interest curtailments with respect to reverse 

loans. Any amounts paid to Fannie Mae will be 

allocated between the Sellers and the Acquirers. A 

review of the causes of this claimed loss as well as 

an allocation of this loss between the Sellers and the 

Acquirers is in the initial stages.

For all these reasons, the FDIC believes it is likely 

that additional losses will be incurred. However, 

quantifying the contingent liability associated with 

the liabilities to investors and the Acquirers is subject 

to a number of uncertainties, including market 

conditions, the occurrence of borrower defaults and 

resulting foreclosures and losses, and the allocation 

of liability between the Sellers and the Acquirers. 

Because of the uncertainties the FDIC has determined 

that, while additional losses are probable, the amount 

is not currently estimable.

PURCHASE AND ASSUMPTION 

INDEMNIFICATION

In connection with purchase and assumption 

agreements for resolutions, the FDIC, in its 

receivership capacity, generally indemnifies the 

purchaser of a failed institution’s assets and liabilities 

in the event a third party asserts a claim against the 

purchaser unrelated to the explicit assets purchased or 

liabilities assumed at the time of failure. The 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 
FINANCIAL SECTION 103

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 2015 and 2014, the FDIC, 

in its corporate capacity, made no indemnification 

payments under such agreements, and no amount 

has been accrued in the accompanying financial 

statements with respect to these indemnification 

guarantees.

FDIC GUARANTEED DEBT OF 

STRUCTURED TRANSACTIONS

The FDIC, as receiver, uses three types of structured 

transactions to dispose of certain performing and 

non-performing residential mortgage loans, 

commercial loans, construction loans, and mortgagebacked securities held by the receiverships. The three 

types of structured transactions are limited liability 

companies (LLCs), securitizations, and structured sale 

of guaranteed notes (SSGNs).

Under the LLC structure, the FDIC, in its 

receivership capacity, contributed a pool of assets to 

a newly formed LLC and offered for sale, through 

a competitive bid process, some of the equity in the 

LLC. Since 2009, private investors purchased a 40- to 

50-percent ownership interest in the LLC structures 

for $1.6 billion in cash. The LLCs issued notes of 

$4.4 billion to the receiverships to partially fund the 

purchase of the assets; these notes were guaranteed by 

the FDIC, in its corporate capacity. As of December 

31, 2015, no guaranteed LLC notes remain. The $10 

million outstanding guaranteed LLC note balance as 

of December 31, 2014 was fully paid during 2015.

Securitizations and SSGNs (collectively, trusts) are 

transactions in which certain assets or securities 

from failed institutions are pooled and transferred 

into a trust structure. The trusts issue senior and/

or subordinated debt instruments and owner trust or 

residual certificates collateralized by the underlying 

mortgage-backed securities or loans.

Since 2010, private investors purchased the senior 

notes issued by the trusts for $6.2 billion in cash 

and the receiverships hold the subordinated debt 

instruments and owner trust or residual certificates. 

In exchange for a fee, the FDIC, in its corporate 

capacity, guarantees the timely payment of principal 

and interest due on the senior notes, the latest 

maturity of which is 2050. If the FDIC is required to 

perform under its guarantees, it acquires an interest 

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

guarantee payments made plus accrued interest. The 

subordinated note holders and owner trust or residual 

certificate holders receive cash flows from the entity 

only after all expenses have been paid, the guaranteed 

notes have been satisfied, and the FDIC has been 

reimbursed for any guarantee payments.

All Structured Transactions with 

FDIC Guaranteed Debt

Through December 31, 2015, the receiverships 

have transferred a portfolio of loans with an unpaid 

principal balance of $16.4 billion and mortgagebacked securities with a book value of $8.8 billion 

to 14 LLCs and 11 trusts. The LLCs and trusts 

subsequently issued notes guaranteed by the FDIC 

in an original principal amount of $10.6 billion. 

Since March 2013, there have been no new guarantee 

transactions. As of December 31, 2015 and 2014, 

the DIF collected guarantee fees totaling $265 

million and $250 million, respectively, and recorded 

a receivable for additional guarantee fees of $26 

million and $42 million, respectively, included in the 

“Interest receivable on investments and other assets, 

net” line item on the Balance Sheet. All guarantee 

fees are recorded as deferred revenue, included in 

the “Accounts payable and other liabilities” line item 

on the Balance Sheet, and recognized as revenue 

primarily on a straight-line basis over the term of 

the notes. As of December 31, 2015 and 2014, the 

amount of deferred revenue recorded was $26 million 

and $42 million, respectively. The DIF records no 

other structured transaction-related assets or liabilities 

on its balance sheet.
104 FEDERAL DEPOSIT INSURANCE CORPORATION

The estimated loss to the DIF from the guarantees 

is derived from an analysis of the net present value 

(using a discount rate of 3.7 percent) of the expected 

guarantee payments by the FDIC, reimbursements 

to the FDIC for guarantee payments, and guarantee 

fee collections. As of December 31, 2015, it is 

reasonably possible that the DIF could be required 

to make guarantee payments totaling $25 million 

for an SSGN transaction beginning in November 

2019 through note maturity in December 2020, 

compared to $29 million estimated as of December 

31, 2014. Any guarantee payment made would be 

fully reimbursed from the proceeds of the liquidation 

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

remaining transactions, the estimated cash flows from 

the trust assets provide sufficient coverage to fully 

pay the debts. To date, the FDIC, in its corporate 

capacity, has not provided, and does not intend to 

provide, any form of financial or other type of support 

for structured transactions that it was not previously 

contractually required to provide.

As of December 31, 2015 and 2014, the maximum 

loss exposure was zero and $10 million for LLCs and 

$1.6 billion and $2.1 billion for trusts, respectively, 

representing the sum of all outstanding debt 

guaranteed by the FDIC.

9. ASSESSMENTS

The FDIC deposit insurance assessment system is 

mandated by section 7 of the FDI Act and governed 

by part 327 of title 12 of the Code of Federal 

Regulations. The risk-based system requires the 

payment of quarterly assessments by all IDIs.

In response to the Dodd-Frank Act, the FDIC 

implemented several changes to the assessment system 

and developed a comprehensive, long-term fund 

management plan. The 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 

reforms of the assessment system and provisions of the 

comprehensive plan.

• The FDIC adopted a Restoration Plan to ensure 

that the ratio of the DIF fund balance to estimated 

insured deposits (reserve ratio) reaches 1.35 percent 

by September 30, 2020, in lieu of the previous 

target of 1.15 percent by the end of 2016. The 

FDIC updates, at least semiannually, its loss and 

income projections for the fund and, if needed, 

increases or decreases assessment rates, following 

notice-and-comment rulemaking, if required.

• The FDIC Board of Directors designates a reserve 

ratio for the DIF and publishes the designated 

reserve ratio (DRR) before the beginning of 

each calendar year, as required by the FDI Act. 

Accordingly, in October 2015, the FDIC adopted 

a final rule maintaining the DRR at 2 percent for 

2016. The DRR is an integral part of the FDIC’s 

comprehensive, long-term management plan for the 

DIF and is viewed as a long-range, minimum target 

for the reserve ratio.

• The FDIC adopted a final rule that suspends 

dividends indefinitely, and, in lieu of dividends, 

adopts lower assessment rate schedules when the 

reserve ratio reaches 1.15 percent, 2 percent, and 

2.5 percent.

When the reserve ratio reaches 1.15 percent, lower 

regular assessment rates for all IDIs will go into effect. 

Additionally, upon reaching 1.15 percent, the DoddFrank Act requires that the FDIC offset the effect 

of increasing the minimum reserve ratio from 1.15 

percent to 1.35 percent on IDIs with less than $10 

billion in total consolidated assets. To implement the 

requirement, the FDIC issued a proposed rulemaking 

on October 22, 2015, to add a surcharge to the 

regular quarterly assessments of IDIs with $10 billion 

or more in assets. Under the proposed rule:

• The surcharge would generally equal an annual rate 

of 4.5 basis points applied to the assessment base 

(with certain adjustments), begin in the quarter 

after the reserve ratio first reaches or exceeds 

1.15 percent, and continue for an estimated 

eight quarters.

• The FDIC would provide assessment credits to 

IDIs with total assets of less than $10 billion for 
FINANCIAL SECTION 105

the portion of their assessments that contributed 

to the growth in the reserve ratio between 1.15 

percent and 1.35 percent to ensure that the effect 

of reaching 1.35 percent is fully borne by the 

larger institutions. Assessment credits would be 

available as an offset to an institution’s future regular 

assessment premiums.

• The FDIC would impose a shortfall assessment 

on the larger institutions in order to achieve the 

minimum reserve ratio of 1.35 percent by the 

September 30, 2020 statutory deadline, in the event 

the reserve ratio is greater than 1.15 percent but has 

not reached 1.35 percent by the end of 2018.

ASSESSMENT REVENUE

Annual assessment rates averaged approximately 6.6 

cents per $100 of the assessment base for 2015 and 

2014, respectively. The assessment base is generally 

defined as the average consolidated total assets minus 

the average tangible equity (measured as Tier 1 

capital) of the IDI during the assessment period.

The “Assessments receivable, net” line item on 

the Balance Sheet of $2.2 billion and $2.0 billion 

represents the estimated premiums due from IDIs for 

the fourth quarter of 2015 and 2014, respectively. 

The actual deposit insurance assessments for the 

fourth quarter of 2015 will be billed and collected at 

the end of the first quarter of 2016. During 2015 and 

2014, $8.8 billion and $8.7 billion, respectively, were 

recognized as assessment revenue from institutions.

RESERVE RATIO

As of September 30, 2015 and December 31, 2014, 

the DIF reserve ratio was 1.09 percent and 1.01 

percent, respectively, of estimated insured deposits.

ASSESSMENTS RELATED TO FICO

Assessments continue to be levied on institutions 

for payments of the interest on obligations issued 

by the Financing Corporation (FICO). The FICO 

was established as a mixed-ownership government 

corporation to function solely as a financing vehicle 

for the former FSLIC. The annual FICO interest 

obligation of approximately $790 million is paid on 

a pro rata basis using the same rate for banks and 

thrifts. The FICO assessment has no financial impact 

on the DIF and is separate from deposit insurance 

assessments. The FDIC, as administrator of the DIF, 

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

December 31, 2015 and 2014, approximately $798 

million and $793 million, respectively, was collected 

and remitted to the FICO.

10. OPERATING EXPENSES

The “Operating expenses” line item on the Statement 

of Income and Fund Balance consisted of the 

following components (in thousands).

December 31

2015

December 31

2014

Salaries and benefits $1,248,146 $1,252,167

Outside services 280,050 263,649

Travel 97,819 93,720

Buildings and leased space 90,945 96,596

Software/Hardware 

maintenance 62,604 58,844

Depreciation of property 

and equipment 52,233 59,634

Other 28,314 28,999

Subtotal 1,860,111 1,853,609

Less: Expenses billed to 

resolution entities (172,877) (189,265)

Total $1,687,234 $1,664,344

11. PROVISION FOR 

INSURANCE LOSSES

The provision for insurance losses was a negative $2.3 

billion for 2015, compared to negative $8.3 billion 

for 2014. The negative provision for 2015 primarily 

resulted from a decrease of $2.2 billion in the 

estimated losses for institutions that failed in current 

and prior years.
106 FEDERAL DEPOSIT INSURANCE CORPORATION

As described in Note 4, the estimated recoveries 

from assets held by receiverships and estimated 

payments related to assets sold by receiverships to 

acquiring institutions under shared-loss agreements 

(SLAs) are used to derive the loss allowance on 

the receivables from resolutions. The $2.2 billion 

decrease in the estimated losses from failures was 

primarily attributable to four components. The first 

component was unanticipated recoveries of $1.0 

billion in litigation settlements, professional liability 

claims, and tax refunds by the receiverships. These are 

typically not recognized until the cash is received since 

significant uncertainties surround their recovery.

The second component of the reduction in the 

estimated losses from failures was a $1.4 billion 

decrease in the receiverships’ shared-loss liability. 

In 2015, covered asset balances decreased by $23.1 

billion as a result of loan amortizations and paydowns, as well as the expiration of 113 commercial 

shared-loss agreements and the early termination of 66 

shared-loss agreements. Actual losses on this portion 

of covered assets were less than estimated at year-end 

2014. The composition of the remaining covered 

asset portfolio primarily consists of performing single 

family assets, which have historically experienced 

significantly lower losses than commercial assets.

The remaining components consisted of an increase 

in the estimated losses from failures of $715 million 

that resulted from an increase in receivership legal and 

representation and warranty liabilities and projected 

future receivership expenses, as well as an adjustment 

of $501 million for lower-than-anticipated loss 

estimates at time of failure for all current year 

failures. The net effect of these two components was 

an increase of $214 million to estimated losses from 

failures.

12. EMPLOYEE BENEFITS

PENSION BENEFITS AND SAVINGS PLANS

Eligible FDIC employees (permanent and term 

employees with appointments exceeding one year) are 

covered by the federal government retirement plans, 

either the Civil Service Retirement System (CSRS) or 

the Federal Employees Retirement System (FERS). 

Although the DIF contributes a portion of pension 

benefits for eligible employees, it does not account 

for the assets of either retirement system. The DIF 

also does not have actuarial data for accumulated 

plan benefits or the unfunded liability relative to 

eligible employees. These amounts are reported on 

and accounted for by the U.S. Office of Personnel 

Management (OPM).

Under the Federal Thrift Savings Plan (TSP), the 

FDIC provides FERS employees with an automatic 

contribution of 1 percent of pay and an additional 

matching contribution up to 4 percent of pay. CSRS 

employees also can contribute to the TSP, but they 

do not receive agency matching contributions. 

Eligible FDIC employees may also participate in an 

FDIC-sponsored tax-deferred 401(k) savings plan 

with matching contributions up to 5 percent. The 

expenses for these plans are presented in the table 

below (in thousands).

December 31

2015

December 31

2014

Civil Service 

Retirement System $3,949 $4,698

Federal Employees 

Retirement System 

(Basic Benefit) 108,056 99,954

Federal Thrift Savings 

Plan 35,140 35,144

FDIC Savings Plan 39,767 37,304

Total $186,912 $177,100

POSTRETIREMENT BENEFITS 

OTHER THAN PENSIONS

The DIF has no postretirement health insurance 

liability since all eligible retirees are covered by the 

Federal Employees Health Benefits (FEHB) program. 

The FEHB is administered and accounted for by the 

OPM. In addition, OPM pays the employer share of 

the retiree’s health insurance premiums.
FINANCIAL SECTION 107

The FDIC provides certain life and dental insurance 

coverage for its eligible retirees, the retirees’ 

beneficiaries, and covered dependents. Retirees 

eligible for life and dental insurance coverage are those 

who have qualified due to (1) immediate enrollment 

upon appointment or five years of participation in 

the plan and (2) eligibility for an immediate annuity. 

The life insurance program provides basic coverage 

at no cost to retirees and allows converting optional 

coverage to direct-pay plans. For the dental coverage, 

retirees are responsible for a portion of the premium.

The FDIC has elected not to fund the postretirement 

life and dental benefit liabilities. As a result, 

the DIF recognized the underfunded status (the 

difference between the accumulated postretirement 

benefit obligation and the plan assets at fair value) 

as a liability. Since there are no plan assets, the 

plan’s benefit liability is equal to the accumulated 

postretirement benefit obligation.

Postretirement benefit obligation, gain and loss, and 

expense information included in the Balance Sheet 

and Statement of Income and Fund Balance are 

summarized as follows (in thousands).

December 31 

2015

December 31

2014

Accumulated postretirement benefit obligation recognized in 

Postretirement benefit liability $233,000 $243,419

Amounts recognized in accumulated other comprehensive income: 

Unrealized postretirement benefit loss

Cumulative net actuarial loss $(31,938) $(55,131)

Prior service cost (2,110) (2,620)

Total $(34,048) $(57,751)

Amounts recognized in other comprehensive income: 

Unrealized postretirement benefit gain (loss)

Actuarial gain (loss) $23,193 $(41,527)

Prior service credit 510 126

Total $23,703 $(41,401)

Net amortization out of other comprehensive income 

included in net periodic benefit cost $3,842 $126
108 FEDERAL DEPOSIT INSURANCE CORPORATION

Expected amortization of accumulated other 

comprehensive income into net periodic benefit 

cost is summarized as follows (in thousands).

December 31, 2016

Prior service costs $575

Net actuarial loss 992

Total $1,567

The annual postretirement contributions and benefits 

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

December 31 

2015

December 31 

2014

Employer contributions $6,064 $5,579

Plan participants’ 

contributions $728 $655

Benefits paid $(6,792) $(6,234)

The expected contributions for the period ending 

December 31, 2016, are $7.1 million. Expected 

future benefit payments for each of the next 10 years 

are presented in the following table (in thousands).

2016 2017 2018 2019 2020

2021-

2025

$6,388 $6,954 $7,488 $8,006 $8,563 $51,276

Assumptions used to determine the amount of the 

accumulated postretirement benefit obligation and the 

net periodic benefit costs are summarized as follows 

(in thousands).

December 31 

2015

December 31 

2014

Discount rate for 

future benefits 

(benefit obligation) 4.29% 4.00%

Rate of compensation 

increase 3.70% 3.80%

Discount rate 

(benefit cost) 4.00% 4.75%

Dental health care 

cost-trend rate

Assumed for next year 4.70% 4.90%

Ultimate 4.50% 4.50%

Year rate will 

reach ultimate 2017 2016

13. COMMITMENTS AND OFFBALANCE-SHEET EXPOSURE

COMMITMENTS:

Leased Space

The DIF leased space expense totaled $47 million and 

$56 million for 2015 and 2014, respectively. The 

FDIC’s lease commitments total $206 million for 

future years. The lease agreements contain escalation 

clauses resulting in adjustments, usually on an annual 

basis. Future minimum lease commitments are as 

follows (in thousands).

2016 2017 2018 2019 2020

2021/

Thereafter

$50,097 $45,510 $32,196 $27,558 $14,151 $36,245

OFF-BALANCE-SHEET EXPOSURE:

Deposit Insurance

Estimates of insured deposits are derived primarily 

from quarterly financial data submitted by IDIs to the 

FDIC and represent the accounting loss that would be 

realized if all IDIs were to fail and the acquired assets 

provided no recoveries. As of September 30, 2015 

and December 31, 2014, estimated insured deposits 

for the DIF were $6.4 trillion and $6.2 trillion, 

respectively.

14. DISCLOSURES ABOUT THE

FAIR VALUE OF FINANCIAL 

INSTRUMENTS

Financial assets recognized and measured at 

fair value on a recurring basis at each reporting date 

include cash equivalents (see Note 2) and 

the investment in U.S. Treasury obligations 

(see Note 3). The DIF’s financial assets measured 

at fair value consisted of the following components 

(in thousands).
FINANCIAL SECTION 109

Quoted Prices 

in Active 

Markets for Identical 

Assets

(Level 1)

Significant 

Other

Observable 

Inputs

(Level 2)

Significant

Unobservable 

Inputs

(Level 3)

Total 

Assets

at Fair 

Value

Assets

Cash equivalents1 $ 861,712 $ 861,712

Available-for-Sale Debt Securities

Investment in U.S. Treasury Obligations2 62,496,959 62,496,959

Total Assets $63,358,671 $0 $0 $63,358,671

1

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

the Fiscal Service.

2

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

December 31, 2015

Quoted Prices 

in Active 

Markets for Identical 

Assets

(Level 1)

Significant 

Other

Observable 

Inputs

(Level 2)

Significant

Unobservable 

Inputs

(Level 3)

Total 

Assets

at Fair 

Value

Assets

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

Available-for-Sale Debt Securities

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

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

1

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

the Fiscal Service.

2

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

December 31, 2014

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 assessments receivable, 

interest receivable on investments, other short-term 

receivables, and accounts payable and other liabilities.

The net receivables from resolutions primarily include 

the DIF’s subrogated claim arising from obligations 

to insured depositors. The resolution entity assets 

that will ultimately be used to pay the corporate 

subrogated claim are valued using discount rates that 

include consideration of market risk. These discounts 

ultimately affect the DIF’s allowance for loss against 

the receivables from resolutions. Therefore, the 

corporate subrogated claim indirectly includes the 

effect of discounting and should not be viewed as 

being stated in terms of nominal cash flows.

Although the value of the corporate subrogated claim 

is influenced by the 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 
110 FEDERAL DEPOSIT INSURANCE CORPORATION

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.

15. INFORMATION RELATING 

TO THE STATEMENT OF 

CASH FLOWS

The following table presents a reconciliation of 

net income to net cash from operating activities 

(in thousands).

16. SUBSEQUENT EVENTS 

Subsequent events have been evaluated through 

February 4, 2016, the date the financial statements are 

available to be issued, and management determined 

that there are no items to disclose.

December 31

2015

December 31

2014

Operating Activities

Net Income: $9,856,688 $15,599,812

Adjustments to reconcile net income to net cash provided

by operating activities:

Amortization of U.S. Treasury obligations 1,411,376 1,387,067

Treasury Inflation-Protected Securities inflation adjustment 12,465 (37,865)

Depreciation on property and equipment 52,233 59,634

Loss on retirement of property and equipment 2,415 465

Provision for insurance losses (2,251,320) (8,305,577)

Unrealized gain (loss) on postretirement benefits 23,703 (41,401)

Change in Assets and Liabilities:

(Increase) Decrease in assessments receivable, net (169,048) 224,311

Decrease (Increase) in interest receivable and other assets 242,128 (137,462)

Decrease in receivables from resolutions 7,425,888 7,077,627

(Decrease) in accounts payable and other liabilities (18,435) (9,569)

(Decrease) Increase in postretirement benefit liability (10,419) 49,828

(Decrease) in liabilities due to resolutions (3,380,084) (4,826,703)

Net Cash Provided by Operating Activities $13,197,590 $11,040,167
FINANCIAL SECTION 111

FEDERAL DEPOSIT INSURANCE CORPORATION

FSLIC RESOLUTION FUND BALANCE SHEET AT DECEMBER 31

Dollars in Thousands

2015 2014

Assets

Cash and cash equivalents $871,037 $870,943 

Receivables from U.S. Treasury for goodwill litigation (Note 3) 0 356,455 

Other assets, net 760 904 

Total Assets $871,797 $1,228,302 

Liabilities 

Accounts payable and other liabilities $624 $370 

Contingent liabilities for goodwill litigation (Note 3) 0 356,455 

Total Liabilities 624 356,825 

Resolution Equity (Note 4)

Contributed capital 125,489,317 125,332,156 

Accumulated deficit (124,618,144) (124,460,679)

Total Resolution Equity 871,173 871,477 

Total Liabilities and Resolution Equity $871,797 $1,228,302 

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

FSLIC RESOLUTION FUND (FRF)
112 FEDERAL DEPOSIT INSURANCE CORPORATION

FEDERAL DEPOSIT INSURANCE CORPORATION

FSLIC RESOLUTION FUND STATEMENT OF INCOME AND 

ACCUMULATED DEFICIT FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2015 2014

Revenue

Interest on U.S. Treasury obligations $298 $229

Other revenue 2,309 948

Total Revenue 2,607 1,177 

Expenses and Losses

Operating expenses 3,064 2,326

Provision for losses (260) (792)

Goodwill litigation expenses (Note 3) 157,161 0

Other expenses 107 171

Total Expenses and Losses 160,072 1,705

Net Loss (157,465) (528)

Accumulated Deficit - Beginning (124,460,679) (124,460,151)

Accumulated Deficit - Ending $(124,618,144) $(124,460,679)

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

FSLIC RESOLUTION FUND (FRF)
FINANCIAL SECTION 113

FEDERAL DEPOSIT INSURANCE CORPORATION

FSLIC RESOLUTION FUND STATEMENT OF CASH FLOWS 

FOR THE YEARS ENDED DECEMBER 31

Dollars in Thousands

2015 2014

Operating Activities

Provided by:

Interest on U.S. Treasury obligations $298 $229

Recoveries from financial institution resolutions 2,555 1,886

Miscellaneous receipts 24 197

Used by:

Operating expenses (2,783) (2,981)

Payments for goodwill litigation (Note 3) (513,616) 0

Net Cash (Used) by Operating Activities (513,522) (669)

Financing Activities

Provided by:

U.S. Treasury payments for goodwill litigation (Note 3) 513,616 0

Net Cash Provided by Financing Activities 513,616 0

Net Increase (Decrease) in Cash and Cash Equivalents 94 (669)

Cash and Cash Equivalents - Beginning 870,943 871,612

Cash and Cash Equivalents - Ending $871,037 $870,943

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

FSLIC RESOLUTION FUND (FRF)
114 FEDERAL DEPOSIT INSURANCE CORPORATION

NOTES TO THE 

FINANCIAL STATEMENTS

FSLIC RESOLUTION FUND

December 31, 2015 and 2014

1. OPERATIONS/DISSOLUTION OF 

THE FSLIC RESOLUTION FUND

OVERVIEW

The Federal Deposit Insurance Corporation (FDIC) 

is the independent deposit insurance agency created 

by Congress in 1933 to maintain stability and public 

confidence in the nation’s banking system. Provisions 

that govern the FDIC’s operations are generally 

found in the Federal Deposit Insurance (FDI) Act, 

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

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

Deposit Insurance Fund (DIF), insures the deposits 

of banks and savings associations (insured depository 

institutions). In cooperation with other federal and 

state agencies, the FDIC promotes the safety and 

soundness of insured depository institutions (IDIs) 

by identifying, monitoring, and addressing risks to 

the DIF.

In addition to being the administrator of the DIF, the 

FDIC is the administrator of the FSLIC Resolution 

Fund (FRF). As such, the FDIC is responsible for the 

sale of remaining assets and satisfaction of liabilities 

associated with the former Federal Savings and Loan 

Insurance Corporation (FSLIC) and the former 

Resolution Trust Corporation (RTC). The FDIC 

maintains the DIF and the FRF separately to support 

their respective functions.

The FSLIC was created through the enactment of 

the National Housing Act of 1934. The Financial 

Institutions Reform, Recovery, and Enforcement Act 

of 1989 (FIRREA) abolished the insolvent FSLIC and 

created the FRF. At that time, the assets and liabilities 

of the FSLIC were transferred to the FRF – except 

those assets and liabilities transferred to the newly 

created RTC – effective on August 9, 1989. Further, 

the FIRREA established the Resolution Funding 

Corporation (REFCORP) to provide part of the 

initial funds used by the RTC for thrift resolutions.

The RTC Completion Act of 1993 terminated the 

RTC as of December 31, 1995. All remaining assets 

and liabilities of the RTC were transferred to the FRF 

on January 1, 1996. Today, the FRF consists of two 

distinct pools of assets and liabilities: one composed 

of the assets and liabilities of the FSLIC transferred 

to the FRF upon the dissolution of the FSLIC (FRFFSLIC), and the other composed of the RTC assets 

and liabilities (FRF-RTC). The assets of one pool are 

not available to satisfy obligations of the other.

OPERATIONS/DISSOLUTION OF THE FRF

The FRF will continue operations until all of its assets 

are sold or otherwise liquidated and all of its liabilities 

are satisfied. Any funds remaining in the FRF-FSLIC 

will be paid to the U.S. Treasury. Any remaining 

funds of the FRF-RTC will be distributed to the 

REFCORP to pay the interest on the REFCORP 

bonds. In addition, the FRF-FSLIC has available 

until expended $602 million in appropriations to 

facilitate, if required, efforts to wind up the resolution 

activity of the FRF-FSLIC.

The FDIC has extensively reviewed and cataloged 

the FRF’s remaining assets and liabilities. Some of 

the unresolved issues are:

• criminal restitution orders (generally have from 1 to 

17 years remaining to enforce);

• collections of settlements and judgments obtained 

against officers and directors and other professionals 

responsible for causing or contributing to thrift 
FINANCIAL SECTION 115

losses (generally have up to 7 years remaining to 

enforce, unless the judgments are renewed or are 

covered by the Federal Debt Collections Procedures 

Act, which will result in significantly longer periods 

for collection of some judgments);

• liquidation/disposition of residual assets purchased 

by the FRF from terminated receiverships;

• three remaining issues related to assistance 

agreements entered into by the former FSLIC (FRF 

could continue to receive or refund overpayments of 

tax benefits sharing in future years);

• goodwill litigation (reimbursement of a potential tax 

liability; see Note 3); and

• affordable housing disposition program monitoring 

(the last agreement expires no later than 2045; see 

Note 3).

The FRF could realize recoveries from tax benefits 

sharing, criminal restitution orders, and professional 

liability claims. However, any potential recoveries are 

not reflected in the FRF’s financial statements, given 

the significant uncertainties surrounding the ultimate 

outcome.

On April 1, 2014, the FDIC concluded its role 

as receiver of FRF receiverships when the last 

active receivership was terminated. In total, 850 

receiverships were liquidated by the FRF and the 

RTC. To facilitate receivership terminations, the 

FRF, in its corporate capacity, acquired the remaining 

receivership assets. These assets are included in the 

“Other assets, net” line item on the Balance Sheet.

During the years of receivership activity, the assets 

held by receivership entities, and the claims against 

them, were accounted for separately from the FRF’s 

assets and liabilities to ensure that receivership 

proceeds were distributed in accordance with 

applicable laws and regulations. Also, the income and 

expenses attributable to receiverships were accounted 

for as transactions of those receiverships. The FDIC 

billed receiverships for services provided on their 

behalf.

2. SUMMARY OF SIGNIFICANT 

ACCOUNTING POLICIES

GENERAL

The financial statements include the financial 

position, results of operations, and cash flows of 

the FRF and are presented in accordance with U.S. 

generally accepted accounting principles (GAAP). 

During the years of receivership activity, these 

statements did not include reporting for assets and 

liabilities of receivership entities because these entities 

were legally separate and distinct, and the FRF did 

not have any ownership or beneficial interest in them.

The FRF is a limited-life entity, however, it does 

not meet the requirements for presenting financial 

statements using the liquidation basis of accounting. 

According to Accounting Standards Codification 

Topic 205, Presentation of Financial Statements, a 

limited-life entity should apply the liquidation basis of 

accounting only if a change in the entity’s governing 

plan has occurred since its inception. By statute, the 

FRF is a limited-life entity whose dissolution will 

occur upon the satisfaction of all liabilities and the 

disposition of all assets. No changes to this statutory 

plan have occurred since inception of the FRF.

USE OF ESTIMATES

The preparation of the financial statements in 

conformity with GAAP requires management to make 

estimates and assumptions that affect the reported 

amounts of assets and liabilities, revenue and expenses, 

and disclosure of contingent liabilities. Actual 

results could differ from these estimates. Where it 

is reasonably possible that changes in estimates will 

cause a material change in the financial statements in 

the near term, the nature and extent of such potential 

changes in estimates have been disclosed. The more 

significant estimates include the valuation of other 

assets and the estimated losses for litigation.
116 FEDERAL DEPOSIT INSURANCE CORPORATION

CASH EQUIVALENTS

Cash equivalents are short-term, highly liquid 

investments consisting primarily of U.S. Treasury 

Overnight Certificates.

PROVISION FOR LOSSES

The provision for losses represents the change in the 

estimated losses related to other assets.

RELATED PARTIES

The nature of related parties and a description of 

related party transactions are discussed in Note 1 

and disclosed throughout the financial statements 

and footnotes.

DISCLOSURE ABOUT RECENT RELEVANT 

ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements have been 

deemed not applicable or material to the financial 

statements as presented.

3. CONTINGENT LIABILITIES

GOODWILL LITIGATION

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

(1996), the Supreme Court held that when it became 

impossible following the enactment of FIRREA in 

1989 for the federal government to perform certain 

agreements to count goodwill toward regulatory 

capital, the plaintiffs were entitled to recover 

damages from the United States. The contingent 

liability associated with the nonperformance of these 

agreements was transferred to the FRF on August 9, 

1989, upon the dissolution of the FSLIC.

The FRF can draw from an appropriation provided 

by Section 110 of the Department of Justice 

Appropriations Act, 2000 (Public Law 106-113, 

Appendix A, Title I, 113 Stat. 1501A-3, 1501A20) 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 will have a corresponding 

receivable from the U.S. Treasury and therefore have 

no net impact on the financial condition of the FRF.

In December 2015, the FRF paid $513.6 million 

to resolve the remaining active goodwill case using 

appropriations received from the U.S. Treasury. 

During 2015, the United States Court of Federal 

Claims awarded the plaintiff additional mitigation 

damages and estimated tax liabilities. These awards 

were in addition to the previous award of $356.4 

million, for which the FRF had recorded a contingent 

liability and offsetting receivable as of December 31, 

2014. For another case fully adjudicated in 2012, 

an estimated loss of $8 million for the court-ordered 

reimbursement of potential tax liabilities to the 

plaintiff is reasonably possible.

In addition, the FRF-FSLIC pays the goodwill 

litigation expenses incurred by the Department of 

Justice (DOJ), the entity that defends these lawsuits 

against the United States, based on a Memorandum 

of Understanding (MOU) dated October 2, 1998, 

between the FDIC and the DOJ. The 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. The 

FRF-FSLIC did not provide any additional funding to 

the DOJ in either 2015 or 2014 because the unused 

funds from prior fiscal years were sufficient to cover 

estimated expenses.

OTHER CONTINGENCIES

Paralleling the goodwill cases were similar cases 

alleging that the government breached agreements 

regarding tax benefits associated with certain FSLICassisted acquisitions. All eight of those cases have 

been settled. However, a case settled in 2006 further 

obligates the FRF-FSLIC as a guarantor for all tax 

liabilities in the event the settlement amount is 

determined by tax authorities to be taxable. The 

maximum potential exposure under this guarantee 

is approximately $100 million. However, the FDIC 

believes that it is very unlikely the settlement will be 
FINANCIAL SECTION 117

subject to taxation. The entity’s federal income tax 

return for the 2006 taxable year has been amended 

and remains subject to examination by the Internal 

Revenue Service (IRS). To date, there has been no 

assertion by the IRS of taxation for an issue covered 

by the guarantee. As of December 31, 2015 and 

2014, no contingent liability has been recorded, and 

the FRF does not expect to fund any payment under 

this guarantee.

FANNIE MAE GUARANTEE

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

administrator of the FRF, entered into an agreement 

with Fannie Mae for the release of $13 million of 

credit enhancement reserves to the FRF in exchange 

for indemnifying Fannie Mae from all future losses 

incurred on 76 multi-family mortgage loans. The 

former RTC supplied Fannie Mae with the credit 

enhancement reserves in the form of cash collateral to 

cover future losses on these mortgage loans through 

2020. Based on the most current data available, as 

of September 30, 2015, the maximum exposure on 

this indemnification is the current unpaid principal 

balance of the remaining 45 multi-family loans 

totaling $3.7 million. Based on a contingent liability 

assessment of this portfolio as of September 30, 

2015, the majority of the loans are at least 81 percent 

amortized, and all are scheduled to mature within one 

to five years. Since all of the loans are performing and 

no losses have occurred since 2001, future payments 

on this indemnification are not expected. No 

contingent liability for this indemnification has been 

recorded as of December 31, 2015 and 2014.

AFFORDABLE HOUSING 

DISPOSITION PROGRAM

Required by FIRREA under section 501, the 

Affordable Housing Disposition Program (AHDP) 

was established in 1989 to ensure the preservation 

of affordable housing for low-income households. 

The FDIC, in its capacity as administrator of the 

FRF-RTC, assumed responsibility for monitoring 

property owner compliance with land use restriction 

agreements (LURAs). To enforce the property owners’ 

LURA obligation, the RTC, prior to its dissolution, 

entered into Memoranda of Understanding with 28 

monitoring agencies to oversee these LURAs. The 

FDIC, through the FRF, has agreed to indemnify the 

monitoring agencies for all losses related to LURA 

legal enforcement proceedings.

Since 2006, the FDIC entered into two litigations 

against property owners and paid $23 thousand 

in legal expenses, which was fully reimbursed due 

to successful litigation. The maximum potential 

exposure to the FRF cannot be estimated as it 

is contingent upon future legal proceedings. 

However, loss mitigation factors include: (1) the 

indemnification may become void if the FDIC is 

not immediately informed upon receiving notice of 

any legal proceedings and (2) the FDIC is entitled 

to reimbursement of any legal expenses incurred for 

successful litigation against a property owner. AHDP 

guarantees will continue until the termination of the 

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

December 31, 2015 and 2014, no contingent liability 

for this indemnification has been recorded.

4. RESOLUTION EQUITY

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

is composed of two distinct pools: the FRF-FSLIC 

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

assets and liabilities of the former FSLIC. The FRFRTC consists of the assets and liabilities of the former 

RTC. Pursuant to legal restrictions, the two pools are 

maintained separately and the assets of one pool are 

not available to satisfy obligations of the other.

Contributed capital, accumulated deficit, and 

resolution equity consisted of the following 

components by each pool (in thousands).
118 FEDERAL DEPOSIT INSURANCE CORPORATION

CONTRIBUTED CAPITAL

The FRF-FSLIC and the former RTC received $43.5 

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

respectively, to fund losses from thrift resolutions 

prior to July 1, 1995. Additionally, the FRFFSLIC 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.

The FRF-FSLIC received $513.6 million in U.S. 

Treasury payments for goodwill litigation in 2015, 

of which $356.4 million was accrued as a receivable 

at year-end 2014. The $157.2 million difference 

increased contributed capital in 2015. Through 

December 31, 2015, the FRF received a total of $2.3 

billion in goodwill appropriations, the effect of which 

increased contributed capital.

Through December 31, 2015, the FRF-RTC had 

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

payments of $5.1 billion to the REFCORP. The 

most recent payment to the REFCORP was in July 

of 2013 for $125 million. In addition, the FDIC 

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

of the FRF-FSLIC in 2013. These actions reduced 

contributed capital.

ACCUMULATED DEFICIT

The accumulated deficit represents the cumulative 

excess of expenses and losses over revenue for activity 

related to the FRF-FSLIC and the FRF-RTC. 

Approximately $29.8 billion and $87.9 billion were 

brought forward from the former FSLIC and the 

former RTC on August 9, 1989, and January 1, 1996, 

respectively. Since the dissolution dates, the FRFFSLIC accumulated deficit increased by $13.3 billion, 

whereas the FRF-RTC accumulated deficit decreased 

by $6.3 billion.

5. DISCLOSURES ABOUT THE

FAIR VALUE OF FINANCIAL 

INSTRUMENTS

At December 31, 2015 and 2014, the FRF’s financial 

assets measured at fair value on a recurring basis are 

cash equivalents of $828 million and $827 million, 

respectively. Cash equivalents are Special U.S. 

Treasury Certificates with overnight maturities valued 

at prevailing interest rates established by the Bureau 

FRF-FSLIC FRF-RTC

FRF 

Consolidated

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

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

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

Total Resolution Equity $828,229 $43,248 $871,477

FRF-FSLIC FRF-RTC

FRF 

Consolidated

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

Add: U.S.Treasury payment in excess of prior year receivable 157,161 0 157,161

Contributed capital - ending 43,864,980 81,624,337 125,489,317

Accumulated deficit (43,036,684) (81,581,460) (124,618,144)

Total Resolution Equity $828,296 $42,877 $871,173

December 31, 2015

December 31, 2014
FINANCIAL SECTION 119

of the Fiscal Service. The valuation is considered 

a Level 1 measurement in the fair value hierarchy, 

representing quoted prices in active markets for 

identical assets.

Some of the FRF’s financial assets and liabilities 

are not recognized at fair value but are recorded at 

amounts that approximate fair value due to their short 

maturities and/or comparability with current interest 

rates. Such items include receivables from the U.S. 

Treasury for goodwill litigation and accounts payable 

and other liabilities.

Assets purchased by the FRF from terminated 

receiverships (see Note 1) and included in the 

“Other assets, net” line item on the Balance Sheet are 

primarily valued using projected cash flow analyses; 

however, these valuations do not represent an estimate 

of fair value. These assets (ranging in age between 21 

to 26 years), could not be liquidated during the life of 

the receiverships due to restrictive clauses and other 

impediments. Because these impediments remain, 

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

not practicable to provide an estimate of fair value.

6. INFORMATION RELATING 

TO THE STATEMENT OF 

CASH FLOWS

The following table presents a reconciliation of 

net loss to net cash from operating activities 

(in thousands)

December 31 

2015

December 31

2014

Operating Activities

Net Loss: $(157,465) $(528)

Adjustments to reconcile net loss to net cash (used)

by operating activities:

Provision for losses (260) (792)

Change in Assets and Liabilities:

Decrease in other assets 404 1,071

Increase (Decrease) in accounts payable and other liabilities 254 (420)

(Decrease) in contingent liabilities for goodwill litigation (356,455) 0

Net Cash (Used) by Operating Activities $(513,522) $(669)

7. SUBSEQUENT EVENTS 

Subsequent events have been evaluated through 

February 4, 2016, the date the financial statements are 

available to be issued, and management determined 

that there are no items to disclose.
120 FEDERAL DEPOSIT INSURANCE CORPORATION

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT
FINANCIAL SECTION 121

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT 

(continued)
122 FEDERAL DEPOSIT INSURANCE CORPORATION

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT 

(continued)
FINANCIAL SECTION 123

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT 

(continued)
124 FEDERAL DEPOSIT INSURANCE CORPORATION

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT 

(continued)
FINANCIAL SECTION 125

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT 

(continued)
126 FEDERAL DEPOSIT INSURANCE CORPORATION

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT 

(continued)
FINANCIAL SECTION 127

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER 

FINANCIAL REPORTING

Appendix I
128 FEDERAL DEPOSIT INSURANCE CORPORATION

MANAGEMENT’S RESPONSE TO THE AUDITOR’S REPORT

Appendix II