2016

ANNUAL 

REPORT

FEDERAL DEPOSIT INSURANCE CORPORATION
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2016

ANNUAL 

REPORT

FEDERAL DEPOSIT INSURANCE CORPORATION
ANNUAL REPORT

2

FEDERAL DEPOSIT INSURANCE CORPORATION

550 17th Street NW, Washington, DC 20429 OFFICE OF THE CHAIRMAN

February 15, 2017

Dear Sir,

In accordance with:

♦ the provisions of Section 17(a) of the Federal Deposit Insurance Act,

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

♦ the Government Performance and Results Act of 1993 (as amended) and the GPRA 

Modernization Act of 2010,

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

♦ the Reports Consolidation Act of 2000, and

♦ the provisions of the Fraud Reduction and Data Analytics Act of 2015,

the Federal Deposit Insurance Corporation (FDIC) is pleased to submit its 2016 Annual Report (also referred 

to as the Performance and Accountability Report), which includes the audited financial statements of the Deposit 

Insurance Fund and the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund. 

In accordance with the Reports Consolidation Act of 2000, the FDIC assessed the reliability of the performance 

data contained in this report. No material inadequacies were found, and the data are considered to be complete 

and reliable. 

Based on internal management evaluations, and in conjunction with the results of independent financial statement 

audits, the FDIC can provide reasonable assurance that the objectives of Section 2 (internal controls) and Section 

4 (financial management systems) of the Federal Managers’ Financial Integrity Act of 1982 have been achieved, 

and that the FDIC has no material weaknesses. However, the U.S. Government Accountability Office did identify 

information technology issues that aggregate to a significant deficiency. The FDIC has efforts underway to address 

this deficiency. We are committed to maintaining effective internal controls corporate-wide in 2017. 

Sincerely,

Martin J. Gruenberg

Chairman

The President of the United States

The President of the United States Senate

The Speaker of the United States House of Representatives
2016

ANNUAL REPORT 2016 3

TABLE OF CONTENTS

Message from the Chairman..............................................................................................................................5

Message from the Chief Financial Officer .......................................................................................................15

I. Management’s Discussion and Analysis................................................................................................17

The Year in Review..................................................................................................................................19

Overview...........................................................................................................................................19

Implementation of Key Regulations .................................................................................................19

Deposit Insurance..............................................................................................................................22

Supervision .......................................................................................................................................24

Community Banking Initiative..........................................................................................................33

Activities Related to Systemically Important Financial Institutions ....................................................37

Depositor and Consumer Protection .................................................................................................43

Receivership Management .................................................................................................................51

Minority and Women Inclusion ........................................................................................................53

International Outreach .....................................................................................................................55

Effective Management of Strategic Resources.....................................................................................58

II. Performance Results Summary.............................................................................................................63

Summary of 2016 Performance Results by Program ..........................................................................65

Performance Results by Program and Strategic Goal ..........................................................................67

Prior Years’ Performance Results ........................................................................................................73

III. Financial Highlights ................................................................................................................................81

Deposit Insurance Fund Performance................................................................................................83

IV. Budget and Spending..............................................................................................................................87

FDIC Operating Budget....................................................................................................................89

2016 Budget and Expenditures by Program.......................................................................................90

Investment Spending .........................................................................................................................91

V. Financial Section.....................................................................................................................................93

Deposit Insurance Fund (DIF) ..........................................................................................................94

FSLIC Resolution Fund (FRF)........................................................................................................111

Government Accountability Office Auditor’s Report........................................................................119

Management’s Report on Internal Control Over Financial Reporting..............................................126

Management’s Response to the Auditor’s Report..............................................................................127

VI. Corporate Management Control ...........................................................................................................129

Fraud Reduction and Data Analytics Act of 2015............................................................................131

Management Report on Final Actions .............................................................................................132

VII. Appendices............................................................................................................................................137

A. Key Statistics..............................................................................................................................139

B. More About the FDIC...............................................................................................................152

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

Challenges Facing the FDIC......................................................................................................161

D. Acronyms ..................................................................................................................................172
In its unique role as deposit insurer of banks and savings associations, and in 

cooperation with the other state and federal regulatory agencies, the FDIC 

promotes the safety and soundness of the U.S. financial system and insured 

depository institutions by identifying, monitoring, and addressing risks to 

the Deposit Insurance Fund.

The FDIC promotes public understanding and the development of sound 

public policy by providing timely and accurate financial and economic 

information and analyses. It minimizes disruptive effects from the failure 

of financial institutions and assures fairness in the sale of financial products 

and the provision of financial services.

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

is supported and sustained by a highly skilled and diverse workforce that 

continuously monitors and responds rapidly and successfully to changes in 

the financial environment. 

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

INSURING DEPOSITS ♦ EXAMINING AND SUPERVISING INSTITUTIONS ♦

MAKING LARGE AND COMPLEX FINANCIAL INSTITUTIONS RESOLVABLE ♦

MANAGING RECEIVERSHIPS ♦ EDUCATING CONSUMERS
2016

 5

For 83 years, the FDIC has carried out its mission 

of maintaining public confidence and stability in the 

U.S. financial 

system. The 

FDIC does this 

by insuring 

deposits; 

supervising 

and examining 

financial 

institutions 

for safety, 

soundness, 

and consumer 

protection; 

and managing 

receiverships 

when banks fail.

At the end of September 2016, the FDIC insured 

deposits of $6.8 trillion in almost 600 million 

accounts at nearly 6,000 institutions, supervised 

3,827 institutions, and managed 404 active 

receiverships having total assets of $3.759 billion.

The U.S. economy and the banking industry 

continued to improve in 2016. After experiencing the 

most severe financial crisis and economic downturn 

since the 1930s, the United States is now well into the 

recovery. The economy is expanding, although the 

pace of economic growth has been weaker than the 

long-term trend, and bank profitability remains lower 

than pre-crisis levels. Still, the industry has been 

strengthening balance sheets by building capital and 

enhancing liquidity. 

Stronger balance sheets indicate ample capacity for 

FDIC-insured institutions to continue to support the 

economic recovery. During the 12 months ended 

September 30, loan balances at banks increased by 

$591 billion, the largest 12-month dollar gain since 

the year ending June 2008. Moreover, that growth 

was broad-based, with all major loan categories 

posting increases, and more than three-quarters of 

all institutions reporting larger loan balances. Loan 

growth was strongest at community banks, which 

posted a 9.4 percent gain versus 6.8 percent for the 

industry overall. Rising loan demand and a recent 

pickup in the pace of economic activity are creating 

favorable conditions for FDIC-insured institutions, 

although the global economic outlook remains 

uncertain and poses a potential downside risk for the 

U.S. economy and financial system. 

The number of both failed and problem institutions 

declined again in 2016, and the Deposit Insurance 

Fund (DIF) balance, which was almost $21 billion in 

the red during the financial crisis, was $83.2 billion in 

the black at year-end.

The FDIC is working to wind down the receiverships 

of failed institutions, address emerging supervisory 

challenges and cybersecurity threats, and support the 

formation of new banks. This shift is indicative of the 

move from a post-crisis recovery environment to one 

of expanding economic growth and financial activity. 

Following is an overview of the FDIC’s important 

accomplishments over the past year, as well as the 

strategic challenges we face. 

REBUILDING THE DIF AND 

RESOLVING FAILED BANKS

Under a restoration plan that reflects Dodd-Frank Act 

requirements to rebuild the DIF, the fund balance 

has increased every quarter since the end of 2009, 

when it reached an all-time low. In 2016, the DIF 

balance increased to $83.2 billion, owing primarily 

to assessment income, as well as lower than estimated 

losses for past bank failures. On September 30, 2016, 

the reserve ratio—the ratio of the DIF balance to 

estimated insured deposits—was 1.18 percent, the 

highest level in more than eight years. 

The Dodd-Frank Act raised the minimum reserve 

ratio of the DIF from 1.15 percent to 1.35 percent, 

MESSAGE FROM THE CHAIRMAN

MESSAGE FROM THE CHAIRMAN
ANNUAL REPORT

6 MESSAGE FROM THE CHAIRMAN

and requires that the reserve ratio reach that level 

by September 30, 2020. The Dodd-Frank Act also 

makes banks with $10 billion or more in total assets 

responsible for the increase. 

To ensure that the reserve ratio reaches 1.35 percent 

by the statutory deadline, the FDIC adopted a rule 

in March 2016 that imposes a temporary surcharge 

on banks with at least $10 billion in assets. The 

surcharge is 4.5 cents per $100 of each bank’s 

assessment base per annum, after making certain 

adjustments. The rule became effective on July 1 of 

this year. As a result, the FDIC expects the reserve 

ratio to reach 1.35 percent in approximately two 

years, well ahead of the statutory deadline. 

The FDIC also has worked to ensure that the costs 

of maintaining a strong Deposit Insurance Fund 

are better allocated across the industry. In early 

2011, the FDIC adopted a rule that reduces regular 

assessment rates for all banks when the reserve ratio 

reaches 1.15 percent. In April of this year, the FDIC 

reaffirmed that decision with a rule that revises the 

FDIC’s methodology for determining risk-based 

assessments to better reflect risks and to help ensure 

that banks that take on greater risks pay more for 

deposit insurance than their less risky counterparts. 

The rule went into effect on July 1 of this year, after 

the reserve ratio surpassed 1.15 percent, and resulted 

in lower assessment rates for approximately 93 percent 

of banks with less than $10 billion in assets. 

Bank failures in 2016 totaled five, down dramatically 

from a peak of 157 in 2010, while the number of 

banks on the problem bank list (banks rated 4 or 5 

on the CAMELS rating scale) fell to 132 at the end of 

September 2016 from a high of 888 in March 2011. 

The United States continues to approach pre-crisis 

levels for failed banks and problem banks. 

During 2016, the FDIC successfully used various 

resolution strategies to protect insured depositors of 

failed institutions at the least cost to the DIF. The 

FDIC actively marketed failing institutions and sold 

them to other financial institutions. These strategies 

protected insured depositors and preserved banking 

relationships in many communities, providing 

depositors and customers with uninterrupted access 

to essential banking services. 

MANAGING FDIC RESOURCES

As the banking industry continues to recover, 

the FDIC requires fewer resources. The agency’s 

authorized workforce for 2016 was 6,533 full-time 

equivalent positions compared with 6,886 the year 

before. The 2016 FDIC Operating Budget was 

$2.21 billion, a decrease of 4.7 percent from 2015.

The FDIC remains committed to fulfilling its mission 

while prudently managing costs. We reduced our 

budget for 2017 from the prior year by 2.4 percent 

to $2.16 billion and reduced authorized staffing by 

approximately 2.6 percent to 6,363 positions, in 

anticipation of a further drop in bank failure activity 

in the years ahead. This is the seventh consecutive 

reduction in the FDIC’s annual operating budget. 

However, contingent resources are included in 

the budget to ensure readiness should economic 

conditions unexpectedly deteriorate.

FOCUSING ON INTEREST-RATE 

RISK AND CREDIT RISK

While the banking industry continues to improve, 

evidence of growing interest-rate risk and credit risk 

merit attention. In an effort to alleviate the impact 

of low interest rates and increase net interest margins, 

banks have been investing in longer-term assets and 

increasing the mismatch between asset and liability 

maturities. Lending in higher-risk loan categories has 

been growing as well. The recent Shared National 

Credits review of large syndicated loans noted that 

credit risk in the portfolio remains elevated. Such risk 

stems from the “high inherent risk in the leveraged 

loan portfolio and growing credit risk in the oil and 

gas (O&G) portfolio,” the Shared National Credits 

report, issued in July 2016, said. 

At the same time risk profiles have been rising, 

banks have not seen corresponding growth in

overall revenue.
2016

MESSAGE FROM THE CHAIRMAN 7

These examples of increasing interest-rate risk and 

credit risk are noteworthy as it is during this phase of 

the credit cycle when underwriting and investment 

decisions are made that may lead to losses in the 

future. Addressing these risks before losses materialize 

will benefit banks and contribute to the stability 

and resilience of the industry. We will continue to 

focus our supervisory attention on these risk areas 

going forward.

STRENGTHENING BANK RESILIENCE 

AND PUBLIC CONFIDENCE

During the financial crisis, a number of large banking 

organizations failed, or experienced serious difficulties, 

in part because of severe liquidity problems. In May 

2016, the FDIC and other banking agencies proposed 

a rule that would reduce the vulnerability of large 

banking organizations to liquidity risk. The Net 

Stable Funding Ratio Rule would require certain large 

banks to maintain sufficient levels of stable funding, 

including capital, long-term debt, and other stable 

sources over a one-year window, to account for the 

liquidity risks arising from their assets, derivatives, 

and off-balance-sheet activities. 

In addition, the FDIC with four other federal agencies 

established margin requirements for non-cleared 

swaps.  The margin rule, applicable to dealers and 

major participants in swaps, was finalized in October 

2015 and began to be phased in starting in September 

2016.  The margin requirements promote financial 

stability and help ensure the safety and soundness of 

banks engaging in significant swap activity.

At the same time, the FDIC must be prepared to 

provide depositors with prompt access to their funds 

in the event of a large bank failure. This is essential to 

maintaining public confidence in the banking system. 

For the typical bank resolved by the FDIC, insured 

deposits are available the next business day. However, 

for a bank with a large number of deposit accounts, 

payment might be delayed if the bank’s records are 

unclear or incomplete. 

To address this type of scenario, the FDIC in 

November issued a final rule requiring depository 

institutions with more than two million deposit 

accounts to improve the quality of their deposit 

data and make certain changes to their information 

systems. This rule bolsters the FDIC’s ability to 

provide depositors at banks with a large number 

of deposit accounts the same rapid access to their 

insured funds in the case of a failure as the FDIC 

does in smaller resolutions. We will work closely 

with institutions as they develop new capabilities, and 

intend to issue functional design assistance for system 

programming prior to the effective date to aid in 

this process.

ADDRESSING CYBERSECURITY RISK

The rapidly evolving nature of cybersecurity 

risks reinforces the need for regulators, financial 

institutions, and critical technology service providers 

to have appropriate procedures to effectively respond 

to cybersecurity risk. The FDIC collaborates 

with other federal agencies, law enforcement, and 

a number of government groups and industry 

coordinating councils to analyze and respond to 

emerging cyber threats, security breaches, and other 

harmful or disruptive technology-related incidents. 

In October 2016, the FDIC, the Board of Governors 

of the Federal Reserve System, and the Office of 

the Comptroller of the Currency (OCC) issued an 

Advance Notice of Proposed Rulemaking inviting 

comment on a proposed set of enhanced cybersecurity 

risk-management and resilience standards that would 

apply to large and interconnected entities under their 

supervision. The standards would apply to services 

provided by third parties to these firms as well. 

Feedback on the notice will inform development of a 

proposed rule.

Throughout the year, the FDIC added to the 

cybersecurity risk-management resources it provides 

to the industry. 

♦ We produced a new video, “Vendor Management 

– Outsourcing Technology Services,” to 
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8 MESSAGE FROM THE CHAIRMAN

help community bank directors and senior 

management develop a comprehensive vendormanagement program and understand their 

responsibilities and regulatory requirements when 

outsourcing technology services. 

♦ We enhanced our “Cyber Challenge: A 

Community Bank Cyber Exercise,” a tool that 

can help start an important dialogue between 

bank management and staff about operational 

risk and techniques to mitigate it.

♦ We co-authored updates to the FFIEC 

Information Technology Examination Handbook. 

The new version, published in September 2016, 

outlines a framework for assessing security 

risks in information systems and evaluating an 

information security program’s integration into 

overall risk management. Other updates to the 

handbook focus on risks associated with mobile 

financial services.

♦ Finally, in conjunction with National Consumer 

Protection Week, we launched an expanded 

cybersecurity awareness website that provides 

access to a wide range of presentations, 

brochures, and tips to help consumers 

understand and avoid cybersecurity risks. 

The FDIC monitors cybersecurity issues on a 

regular basis through on-site bank examinations. 

In July 2016, we introduced the Information 

Technology Risk Examination (InTREx) program 

to enhance our ability to identify, assess, and 

validate information technology and operations 

risks in financial institutions. The program also 

gathers data about information technology that the 

FDIC can use to improve industry-wide safety and 

soundness. The InTREx program will allow the 

FDIC to provide more granular ratings with respect 

to information technology, which can help financial 

institutions address the most important examination 

recommendations first.

Information security is critical to the FDIC’s ability 

to carry out its mission of maintaining stability and 

public confidence in the nation’s financial system. 

This year, the FDIC also implemented policies and 

technologies to strengthen its own cybersecurity 

posture. 

For example, the FDIC: 

♦ expanded our use of multi-factor authentication 

for securely downloading assessment invoices and 

official FDIC correspondence, and performing 

other secure file exchanges;

♦ discontinued individuals’ ability to copy 

information to removable media such as CDs, 

DVDs, external hard drives, and thumb drives;

♦ signed a memorandum of understanding to 

migrate to an intrusion prevention, detection, 

and monitoring system from the Department 

of Homeland Security that will help detect and 

block outside cyber threats;

♦ launched an Insider Threat and 

Counterintelligence Program as part of 

the FDIC’s efforts to safeguard employees, 

information, operations, and facilities; 

♦ implemented new controls to limit printing 

of sensitive information and better monitor 

information printed in the highest risk areas; and 

♦ engaged an independent, third-party firm to 

conduct an end-to-end assessment of the FDIC 

IT security and privacy programs. 

These actions are in addition to protections that were 

already in place, such as:

♦ encryption of some of our most sensitive 

information; 

♦ encrypted laptop hard drives; and 

♦ a Data Loss Prevention program that monitors 

information in emails, information being 

transferred to websites, and information printed.  

The FDIC requires employees to take annual security 

and privacy training so they are aware of our security 

standards. This is also supplemented by periodic 

phishing tests to help ensure employees stay watchful 

to possible outside threats.
2016

MESSAGE FROM THE CHAIRMAN 9

Information security will remain a top priority at the 

FDIC. We will continue to enhance our security 

controls in light of the changing threat landscape. 

REVIEWING REGULATION

The Economic Growth and Regulatory Paperwork 

Reduction Act of 1996 (EGRPRA) requires that 

regulations adopted by the Federal Financial 

Institutions Examination Council (FFIEC) and the 

federal banking agencies, including the FDIC, be 

reviewed by the agencies at least once every 10 years. 

The current cycle began in late 2014, and a report to 

Congress with findings and recommendations will 

be issued by the agencies soon. The purpose of this 

review is to identify and eliminate, as appropriate, 

outdated or otherwise unnecessary regulatory 

requirements that are imposed on insured depository 

institutions, while, at the same time, ensuring that 

safety and soundness and consumer compliance 

standards are maintained. 

The regulatory review process is one we take very 

seriously. Over the course of the review, the federal 

banking agencies hosted six public outreach meetings 

nationwide to hear firsthand from insured depository 

institutions, trade associations, consumer and 

community groups, and other interested parties. 

The agencies received numerous oral and written 

comments from panelists and the public at these 

outreach meetings. In addition, the agencies sought 

comment through the issuance of four Federal Register

notices, which garnered more than 230 comment 

letters. The agencies have summarized and reviewed 

these comments, and considered appropriate changes 

to reduce regulatory burdens on institutions. The 

FDIC recognizes that regulatory burden does not 

result solely from statutes and regulations, so we also 

explored opportunities to improve the transparency 

and clarity of our supervisory policies and procedures, 

especially as they apply to community banks. 

Together with the other federal banking agencies 

on the FFIEC, we have already taken significant 

steps to reduce the regulatory burden on supervised 

institutions. For example, the agencies finalized 

revisions to streamline the Call Report and proposed 

a new, streamlined Call Report for institutions that 

do not have a foreign office and hold total assets of 

less than $1 billion. This new Call Report would 

take effect March 31, 2017, would be optional for 

eligible small institutions, would reduce the length of 

the Call Report for eligible small institutions from 85 

pages to 61 pages, and would remove approximately 

40 percent of the data items currently required by the 

Call Report for all institutions with domestic 

offices only. 

In addition to streamlining the Call Report, in 

December of this year, the agencies finalized a rule 

to increase the number of small banks and savings 

associations eligible for an 18-month examination 

cycle rather than a 12-month cycle. As a result, 

approximately 4,800 well-capitalized and wellmanaged banks and savings associations are now 

eligible for the expanded examination cycle. 

The federal banking agencies also are jointly 

developing simplifications to the regulatory capital 

rules, including modifications of high volatility 

commercial real estate (HVCRE) and select other 

revisions to the agencies’ generally applicable capital 

rules, and would seek industry comment on these 

changes through the notice and comment process. 

In addition, the agencies are developing a proposal 

to increase the threshold for requiring an appraisal 

on commercial real estate loans to reduce regulatory 

burden in a manner consistent with safety and 

soundness.

The FFIEC agencies also revisited and issued revised 

guidance on the Community Reinvestment Act 

(CRA) this year. In July, the FFIEC issued the revised 

guidance which aims to:

♦ Improve consistency of examinations across and 

within the agencies, 

♦ Clarify the activities considered to meet the test 

for qualifying economic development activities, 

♦ Distinguish between community development 

services and retail products tailored to meet 

the needs of low- and moderate-income 

individuals, and
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10 MESSAGE FROM THE CHAIRMAN

♦ Provide examples of the types of activities that are 

eligible for CRA consideration.

We are also working jointly with the other federal 

banking agencies on flood insurance guidance, 

amendments to the rules implementing Depository 

Institution Management Interlocks Act, and guidance 

on Regulation O.

The FDIC has also taken independent action this 

year to reduce regulatory burden. For example, a 

particular interest to the FDIC is the impact of our 

regulations on new banks. In 2016, we reduced the 

period of enhanced supervision for newly insured 

depository institutions (i.e., de novo banks) from 

seven years to three. We also issued updated guidance 

on the deposit insurance application process and 

identified subject matter experts in each of the 

Regional Offices to assist with deposit insurance 

applications.

We also implemented an electronic pre-examination 

planning tool for both risk-management and 

compliance examinations that allows examiners to 

tailor request lists to ensure that only those items 

that are necessary for the examination process are 

requested from each institution, minimizing the 

burden for supervised institutions and reducing 

on-site examination hours.

In 2016, we also enhanced our information 

technology (IT) examination procedures to require 

less pre-examination information from bankers. The 

revised IT Officer’s Questionnaire that is completed 

by bankers prior to an examination, asks 65 percent 

fewer questions, reducing the amount of time needed 

to prepare for an examination. We also established 

a process to allow for our institutions to submit 

audit reports electronically, eliminating the need for 

institutions to mail hard copies. 

In addition, we issued a Financial Institution Letter 

(FIL) to supervised institutions, clarifying our 

treatment of requests from S-corporation institutions 

to pay dividends to their shareholders to cover taxes 

on their pass-through share of bank earnings. We 

told banks that, unless there are significant safety and 

soundness concerns, we will generally approve 

those requests.

COMMUNITY BANKING INITIATIVE

Community banks are critically important to our 

economy and the banking system. Community 

banks account for 13 percent of the banking assets in 

the United States, but also account for 43 percent of 

the small loans to businesses and farms made by all 

banks, making them key partners in supporting local 

economic development and job creation. Because the 

FDIC is the primary federal supervisor of the majority 

of community banks in the United States, community 

banking will continue to be an important focus of 

FDIC supervision, technical assistance, and research.

In 2016, the FDIC hosted a conference that brought 

together community bankers, regulators, researchers, 

and others to discuss the community banking model, 

regulatory developments affecting community banks, 

management of technology challenges, and ownership 

structure and succession planning. We also hosted 

a Joint Mutual Forum with the OCC to promote 

and support the operations of mutual depository 

institutions and discuss industry trends, the economic 

outlook, technology challenges, and regulatory 

compliance topics. The community banking sector 

continues to demonstrate resilience and innovation in 

meeting new challenges and competing in an evolving 

financial marketplace.

The FDIC’s Community Banking Initiative includes 

an extensive technical assistance program for bank 

directors, officers, and employees. We continue to 

expand and enhance our series of online videos to 

help community bankers better understand their 

responsibilities. New or updated videos in 2016 

address corporate governance, vendor management, 

outsourcing technology services, interest-rate risk, 

mortgage rules, and flood insurance. We also 

distributed a Community Bank Resource Kit, which 

includes a variety of useful tools for community 

bankers, to FDIC-supervised institutions. 

In addition, this year, we launched an online resource, 

the Affordable Mortgage Lending Center, which 
2016

MESSAGE FROM THE CHAIRMAN 11

community bankers can use to understand and 

compare the mortgage-lending products and services 

offered by federal and state housing finance agencies, 

the Federal Home Loan Banks, and governmentsponsored enterprises. 

Further, in 2016, the FDIC launched a new survey 

regarding banks’ small business lending practices. 

This survey is designed to provide information on 

the general characteristics of banks’ small business 

borrowers, the types of credit offered to small 

businesses, and the relative importance of commercial 

lending for banks of different sizes and business 

models. It is important to understand how banks 

of all sizes are lending to small businesses, which is 

crucial to job creation. I look forward to seeing the 

results of the survey in 2017.

Finally, the FDIC’s Advisory Committee on 

Community Banking is an ongoing forum for 

discussing current issues and receiving valuable 

feedback from the industry. The committee, which 

met three times during 2016 with the FDIC Board, 

is composed of 15 community bank CEOs from 

around the country. It is a valuable resource for 

input on a wide variety of topics, including 

examination policies and procedures, capital and 

other supervisory issues, credit and lending practices, 

deposit insurance assessments and coverage, and 

regulatory compliance issues.

Supporting De Novo Banks

De novo institutions fill important gaps in local 

banking markets, provide credit and services to 

communities that may be overlooked by larger 

institutions, and help to preserve the vitality of the 

community banking sector. The FDIC is committed 

to working with, and providing support to, any 

group with an interest in starting a de novo bank, and 

welcomes applications for deposit insurance. 

The current environment, with low interest rates 

and narrow net interest margins, is challenging 

for the formation of new banks. Nevertheless, we 

have seen tentative signs of an uptick in de novo

formations, including increased interest from 

prospective organizing groups in filing applications 

for new insured depository institutions. To encourage 

this interest and help organizing groups navigate 

the application process, this year the FDIC hosted 

outreach meetings throughout the country to discuss 

FDIC requirements for new bank applications and 

highlight strategies for successful business models, 

supplemented its Deposit Insurance Q&As, and 

issued for public comment a handbook to guide 

organizing groups through the application process. 

In April, the FDIC reduced from seven years to three 

years the period of enhanced supervisory monitoring 

of state nonmember de novo institutions. The sevenyear period was established during the financial crisis 

in response to the disproportionate number of de 

novo institutions that were experiencing difficulties 

or failing. In the current environment, and in light 

of strengthened, forward-looking supervision, it is 

appropriate to return to the three-year period.

RESOLUTION OF SYSTEMICALLY 

IMPORTANT FINANCIAL INSTITUTIONS 

The FDIC continues to make progress toward 

developing strategies to facilitate the orderly failure 

of large, complex, systemically important financial 

institutions without taxpayer support and market 

breakdowns. 

Living Wills

In 2016, the FDIC remained committed to carrying 

out the statutory mandate that systemically important 

financial institutions (SIFIs) demonstrate a clear path 

to an orderly failure under bankruptcy at no cost to 

taxpayers. Under the Dodd-Frank Act, bankruptcy is 

the statutory first option for resolving a SIFI, and the 

largest bank holding companies and certain non-bank 

financial companies are required to prepare resolution 

plans, also referred to as “living wills.” These living 

wills must demonstrate that the firm could be resolved 

under bankruptcy without severe adverse 
ANNUAL REPORT

12 MESSAGE FROM THE CHAIRMAN

consequences for the financial system or the 

U.S. economy. 

The FDIC and the Federal Reserve Board are charged 

with reviewing and assessing each firm’s resolution 

plan. In 2016, we reviewed the resolution plans 

submitted by the eight U.S. SIFIs in 2015 and 

provided firm-specific feedback on the plans. The 

agencies jointly determined that five of those plans 

were not credible or would not facilitate an orderly 

resolution under the Bankruptcy Code. The agencies 

issued joint notices of deficiencies in July 2016 to 

the five firms detailing the deficiencies in their plans 

and the actions the firms must take to address them. 

Each firm was required to remedy its deficiencies 

by October 1, 2016, or risk being subject to more 

stringent prudential requirements or to restrictions on 

activities, growth, or operations. 

The agencies received and reviewed those 

submissions, and determined that four of the firms 

had satisfactorily remediated their deficiencies. The 

agencies jointly determined that one firm did not 

adequately remedy two of the firm’s three deficiencies. 

In light of the nature of the deficiencies and the 

resolvability risks posed by the firm’s failure to remedy 

them, the agencies jointly determined to impose 

restrictions on the growth of international and nonbank activities of the firm and its subsidiaries. The 

firm is expected to file a revised submission addressing 

the remaining deficiencies by March 31, 2017 or risk 

facing limits to the size of the firm’s non-bank and 

broker-dealer assets.

All eight SIFIs must submit their next plan in 

July 2017, in which they must address identified 

shortcomings and additional guidance from the 

agencies.

With the release of the joint findings, the agencies 

took a number of important steps to make the 

resolution planning process more transparent to the 

public and the market. This is important because 

it allows for the development of realistic market 

expectations about how the resolution of a SIFI might 

proceed. To this end, the Federal Reserve Board as 

the holding company supervisor released to the public 

decision letters regarding the 2015 submissions and 

remediation of the 2016 joint deficiencies, which 

included the actions the eight U.S. firms are required 

to take. Further, the agencies released the assessment 

framework under which the Federal Reserve Board 

and the FDIC review each firm’s plan and the 

guidance provided by the agencies to the firms to 

assist them with the development of their 2017 plans.

These actions have provided transparency to 

both firms and the public regarding the agencies’ 

assessment framework, the important changes firms 

have made to their structure and operations to 

improve resolvability, and the agencies’ expectations 

for further improvement in these plans. Our 

expectation is that these collaborative efforts will 

continue, and that the agencies will continue to 

prioritize transparency for firms and the public. 

Overall, theliving will process has proved to be an 

important means for identifying and implementing 

measures to enhance SIFIs’ resolvability.  We have 

seen firms make significant changes, including 

restructurings, operational continuity planning, 

and options for separating assets, business lines, and 

entities from a failing company. Firms also have 

improved their management information systems 

capabilities, financial resource measurement and 

process development, and resolution planning 

governance, all of which are key elements for 

enhancing resolvability. 

Orderly Liquidation Authority

Given the challenges and the uncertainty surrounding 

any particular failure scenario, Title II of the DoddFrank Act provides the Orderly Liquidation Authority, 

which is a public-sector special resolution regime, as 

a backstop to the bankruptcy process for institutions 

whose failure or distress would pose significant risks to 

U.S. financial stability. 

The Orderly Liquidation Authority is the mechanism 

for ensuring that policymakers will not be faced with 

the same poor choices they faced in 2008. Its tools 

are intended to enable the FDIC to carry out the 

process of winding down and liquidating the firm 
2016

MESSAGE FROM THE CHAIRMAN 13

in an orderly way, while ensuring that shareholders, 

creditors, and culpable management are held 

accountable and taxpayers do not bear losses. In the 

years since enactment of Dodd-Frank, the FDIC 

has made significant progress in developing the 

operational capabilities to carry out a resolution if 

needed. 

As in the United States, the other leading jurisdictions 

of the world have enacted expanded authorities for 

the resolution of SIFIs. The FDIC has worked closely 

with all the major financial jurisdictions, including 

the United Kingdom, the European Banking Union, 

Switzerland, and Japan. 

In 2016, the FDIC hosted a Trilateral Principals 

Level Exercise involving the United States, the United 

Kingdom, and the European Banking Union. The 

purpose of the exercise was to identify issues and 

address obstacles to cross-border resolution. U.S. 

participants included senior officials from the 

Treasury Department, the Board of Governors of 

the Federal Reserve System, the OCC, the Securities 

and Exchange Commission, the Commodity Futures 

Trading Commission, and the Federal Reserve 

Bank of New York. Participants from Europe 

included senior officials from HM Treasury, the 

Bank of England, the U.K. Prudential Regulation 

Authority, the Single Resolution Board, the 

European Commission, and the European Central 

Bank. Deepening our relationships with key foreign 

jurisdictions is an ongoing priority for the FDIC’s 

work on systemic resolution, and includes not only 

this exercise, but also our continuing engagement in 

cross-border Working Groups, Crisis Management 

Groups, and Resolution Colleges. 

In September, the FDIC Board and senior staff 

from across the agency took part in an operational 

exercise designed to test and enhance our policies 

and protocols for the liquidation and wind down of 

a systemically important financial institution. The 

2016 operational exercise followed a similar event 

held in 2015, and highlighted the agency’s significant 

ongoing progress in this vital area. 

EXPANDING ACCESS TO 

BANKING SERVICES AND 

PROTECTING CONSUMERS

Expanding access to mainstream banking services 

helps strengthen confidence in the nation’s financial 

system, a fundamental component of the FDIC’s 

mission. This year, we released the 2015 FDIC 

National Survey of Unbanked and Underbanked 

Households, a biennial survey conducted with the 

U.S. Census Bureau that provides detailed national, 

state, and local data to inform economic inclusion 

efforts. There were positive indications for consumers: 

The unbanked rate fell to 7 percent in 2015, down 

from 8.2 percent in 2011. The decline occurred 

broadly, across population segments, and outpaces 

what one would expect even in light of improving 

economic conditions. 

The survey also made significant findings about 

the role of mobile banking in economic inclusion. 

Underbanked households are more likely to own a 

smartphone, more likely to use it to access their bank 

account, and more likely to use it as their primary 

means of managing their account than fully banked 

households. These findings echo a report released 

at a meeting of the FDIC’s Advisory Committee 

on Economic Inclusion this year, which found that 

mobile financial services may help banks address many 

of the core financial service needs of underserved 

consumers, including more timely information about 

balances and transactions and more control over their 

financial lives. 

The FDIC is committed to ensuring that all U.S. 

households have access to safe and affordable 

banking services. In 2016 we provided information 

and technical assistance on safe and affordable 

transaction and savings accounts, otherwise known 

as SAFE Accounts, to local initiatives in more than 

28 communities in 23 states.  We also partnered 

with the Cities for Financial Empowerment Fund 

and the Bank On programs to provide outreach to 

representatives of more than 300 community-based 

organizations and more than 230 bankers at 14 
ANNUAL REPORT

14 MESSAGE FROM THE CHAIRMAN

outreach events across the country.  Bringing these 

groups together creates opportunities to identify 

strategies to reach unbanked populations by lowering 

the barriers to accessing banking services.

As of the end of 2016, nearly nine out of every 10 

people in the United States lives in a county with 

a full-service branch of a bank that offers a SAFE 

transaction account.  The Model SAFE account 

can be accessed through a convenient card without 

overdraft or insufficient funds fees, while including 

low initial and monthly maintenance costs and 

transparent disclosures.

We also continued our efforts to provide and promote 

effective financial education for young people. For 

example, through our Youth Savings Pilot Program, 

we have been able to study the financial education 

programs offered by 21 banks in partnership with 

local schools over a two-year period. These programs 

tie financial education with the opportunity to open 

a safe, low-cost savings account at bank branches, 

some of which are located in the schools and run by 

students. Many of these programs employ the FDIC’s 

Money Smart for Young People financial education 

curriculum, as well as the Model SAFE account 

template. A recent symposium brought together 

representatives from banks, non-profits, and school 

partners to discuss lessons learned from the pilot. We 

gathered these insights for a report we plan to publish 

in early 2017 that will offer a roadmap for banks and 

schools that are teaming up to link financial education 

with opportunities to save.

Our Money Smart program is one example of our 

ongoing efforts to collaborate with other federal 

agencies to develop and promote financial education. 

For example, Money Smart for Older Adults, a resource 

developed jointly by the FDIC and the Consumer 

Financial Protection Bureau, was enhanced this 

year to help people age 62 and older guard against 

financial exploitation and make informed financial 

decisions. 

We also partnered with the U.S. Small Business 

Administration to make enhancements to Money 

Smart for Small Business, a resource that provides 

practical guidance for starting and managing a 

business. In response to feedback from the small 

business community, three new modules were added: 

managing cash flow, planning for a healthy business, 

and determining if owning a business is a good 

fit. The Strategic Alliance Memorandum between 

the FDIC and SBA ensures this collaboration will 

continue through 2018.

Money Smart for Young People, a curriculum that 

involves educators, parents/caregivers, and young 

people in the learning process and is available in 

English and Spanish, continues to be well received. 

There have been more than 39,000 downloads of the 

curriculum since its launch in 2015. We also have 

begun to identify how our Money Smart resources can 

be helpful to workforce development organizations in 

providing financial education to young people.

CONCLUSION

During 2016, the U.S. banking industry continued its 

recovery from the recent financial crisis. The industry 

benefited from stronger balance sheets, fewer problem 

banks and bank closings, increased lending activity, 

and a larger balance in the DIF. At the same time, 

it remains important for bankers and supervisors to 

heed the lessons of the recent crisis by maintaining a 

steady focus on risk management. 

In 2017, the FDIC will continue to work to fulfill its 

mission of maintaining public confidence and stability 

in the nation’s financial system. 

The workforce of the FDIC remains committed to the 

agency’s mission. I am very grateful to the dedicated 

professionals of the FDIC for their commitment to 

public service and for the high level at which they 

carry out their important responsibilities. 

Sincerely,

Martin J. Gruenberg
2016

MESSAGE FROM THE CHIEF FINANCIAL OFFICER 15

I am pleased to present 

the FDIC’s 2016 Annual 

Report (also referred to 

as the Performance and 

Accountability Report). 

The report covers financial 

and program performance 

information, and 

summarizes our successes 

for the year. The FDIC 

takes pride in providing 

timely, reliable, and meaningful information to its 

many stakeholders. 

For 25 consecutive years, the U.S. Government 

Accountability Office (GAO) has issued unmodified 

(unqualified) audit opinions for the two funds 

administered by the FDIC: the Deposit Insurance 

Fund (DIF) and the Federal Savings and Loan 

Insurance Corporation (FSLIC) Resolution Fund 

(FRF). We take pride in our responsibility and 

demonstrate discipline and accountability as stewards 

of these funds. We remain proactive in the execution 

of sound financial management and in providing 

reliable financial data.

The DIF balance (the net worth of the Fund) rose 

to a record $83.2 billion as of December 31, 2016, 

an increase of $10.6 billion over the year-end 2015 

balance of $72.6 billion.  The Fund balance increase 

was primarily due to assessment revenue, interest on 

U.S. Treasury securities, and reductions in estimated 

losses for current and prior year bank failures. 

FINANCIAL AND PROGRAM 

RESULTS FOR 2016

For 2016, DIF comprehensive income totaled $10.6 

billion compared to comprehensive income of $9.8 

billion during 2015.  The $741 million year-over-year 

increase was primarily due to a $1.2 billion increase 

in assessment revenue ($10.0 billion in 2016 as 

compared to $8.8 billion in 2015) and a $248 million 

increase in interest revenue ($671 million in 2016 as 

compared to $423 million in 2015).  These amounts 

were partially offset by a $683 million lower negative 

provision for insurance losses (negative $1.6 billion in 

2016 as compared to negative $2.3 billion in 2015).

In 2016, the FDIC continued its efforts to reduce 

operating costs and prudently manage the funds 

that it administers. The FDIC Operating Budget 

for 2016 totaled approximately $2.21 billion, 

which represented a decrease of $108 million (5 

percent) from 2015. Actual 2016 spending totaled 

approximately $1.95 billion. On December 13, 

2016, the FDIC Board of Directors approved a 2017 

FDIC Operating Budget totaling $2.16 billion, 

down $53 million (2 percent) from the 2016 budget. 

Including 2017, the annual operating budget has 

declined for seven consecutive years, consistent with a 

steadily declining workload.

The FDIC continues to reduce staffing levels, as 

conditions in the banking industry improve and 

the FDIC requires fewer resources. The FDIC’s 

authorized full-time equivalent staffing dropped in 

2016 from 6,886 to 6,533, a 5 percent reduction. 

In 2017, we project further reductions in the overall 

MESSAGE FROM 

THE CHIEF FINANCIAL OFFICER
ANNUAL REPORT

16

workforce. However, we will maintain a workforce 

capable of handling our supervision, insurance, and 

bank failure functions.

In 2016, five banks failed, down from eight in 2015. 

Even though the number of bank failures is relatively 

low, we will continue to prudently manage the risks 

to the DIF, including interest rate, fiscal, and global 

economic risks. We will remain focused on sound 

financial management techniques, and maintain our 

enterprise-wide risk management and internal control 

program.

Sincerely,

Steven O. App
17

2016

MANAGEMENT’S 

DISCUSSION AND 

ANALYSIS

I.
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2016

 19

THE YEAR IN REVIEW

OVERVIEW

The FDIC continued to fulfill its mission-critical 

responsibilities during 2016. Insuring deposits, 

examining and supervising financial institutions, and 

managing receiverships are the core responsibilities of 

the FDIC. The agency adopted and issued final rules 

on key regulations under the Dodd-Frank Wall Street 

Reform and Consumer Protection Act (Dodd-Frank 

Act) and engaged in several community banking and 

community development initiatives. Cybersecurity 

remained a high priority for the FDIC in 2016; the 

agency worked to strengthen cybersecurity oversight, 

help financial institutions mitigate increasing risks, 

and respond to cyber threats. The sections below 

highlight these and other accomplishments during 

the year.

IMPLEMENTATION OF 

KEY REGULATIONS 

Alternatives to Credit Ratings in the FDIC’s 

International Banking Regulations

In June 2016, the FDIC issued a Notice of Proposed 

Rulemaking (NPR) to conform the FDIC’s 

international banking regulations (Part 347) to the 

requirements of Section 939A of the Dodd-Frank 

Act, which directs each federal agency to review and 

modify regulations that reference credit ratings. The 

NPR would replace references to credit ratings in Part 

347’s definition of “investment grade” with a standard 

of creditworthiness that has been adopted in other 

federal regulations. The NPR would also amend the 

FDIC’s asset pledge requirement for insured U.S. 

branches of foreign banks by revising the eligibility 

criteria for the types of assets that may be pledged to 

the FDIC.

Banking Activities and Investments

In September 2016, the FDIC, OCC, and FRB 

submitted to Congress and the Financial Stability 

Oversight Council (FSOC), a study required under 

Section 620 of the Dodd-Frank Act of investments 

and activities that a banking entity may engage in 

under federal and state law. The study considers 

the types of activities in which banking entities may 

engage and investments they may make, associated 

risks, and risk mitigation activities undertaken 

by the banking entities with regard to those risks. 

In addition, each of the federal banking agencies 

provided recommendations and considerations for 

future regulatory action or supervisory guidance. 

Minimum Reserve Ratio

In March 2016, the FDIC approved a final rule to 

implement Section 334 of the Dodd-Frank Act, 

which increased the minimum reserve ratio of the 

Deposit Insurance Fund from 1.15 percent to 1.35 

percent, requires that the reserve ratio reach that level 

by September 30, 2020, and mandates that the FDIC 

offset the effect of the increase on insured depository 

institutions (IDIs) with assets of less than $10 billion. 

The final rule imposes surcharges on IDIs with $10 

billion or more in assets and provides credits to IDIs 

with assets below $10 billion for the portion of their 

regular assessments that contribute to growth in the 

reserve ratio between 1.15 percent and 1.35 percent. 

This rule is discussed in greater detail in the section on 

Deposit Insurance. 

FDIC Chairman Martin J. Gruenberg talks with an attendee at 

FDIC’s Community Banking Conference, one of several FDIC 

community banking initiatives.

MANAGEMENT’S DISCUSSION AND ANALYSIS
ANNUAL REPORT

20 MANAGEMENT’S DISCUSSION AND ANALYSIS

Volcker Rule Frequently Asked Questions

The “Volcker Rule” is a provision of the Dodd-Frank 

Act that contains restrictions and prohibitions on 

the ability of banks and their affiliates to engage 

in proprietary trading and have interests in, or 

relationships with, a hedge fund or a private equity 

fund. Banking entities that are subject to the 

rule are permitted to retain investments in certain 

collateralized debt obligations (CDOs) backed 

primarily by trust preferred securities. In March 

2016, the FDIC, Office of the Comptroller of the 

Currency (OCC), Federal Reserve Board (FRB), 

Securities and Exchange Commission (SEC), and 

Commodity Futures Trading Commission (CFTC) 

updated their Frequently Asked Questions (FAQs) 

about the Volcker Rule to clarify the capital treatment 

of permitted investments in those CDOs. 

External Audits of Internationally 

Active U.S. Financial Institutions

In January 2016, the FDIC, OCC, and FRB issued 

an advisory to indicate their support for the principles 

and expectations set forth in the Basel Committee 

on Banking Supervision’s (BCBS) March 2014 

guidance on “external audits of banks.” The advisory 

also explains the agencies’ supervisory expectations 

regarding how internationally active U.S. financial 

institutions should address differences between the 

standards and practices followed in the United States 

and the principles and expectations in the BCBS 

external audit guidance. For purposes of the advisory, 

internationally active U.S. financial institutions 

include insured depository institutions with 

consolidated total assets of $250 billion or more or 

consolidated total on-balance-sheet foreign exposure 

of $10 billion or more.

Expanded Eligibility of 

18-Month Examination Cycle

In December 2016, the FDIC, OCC, and FRB 

jointly finalized the interim final rule that increased 

the number of small banks and savings associations 

eligible for an 18-month examination cycle rather 

than a 12-month cycle. Under the final rules, 

qualifying well-capitalized and well-managed banks 

and savings associations with less than $1 billion in 

total assets are eligible for an 18-month examination 

cycle. Previously, only banks and savings associations 

with less than $500 million in total assets could be 

eligible for the expanded examination cycle. The 

examination cycle changes also apply to qualifying 

well-capitalized and well-managed U.S. branches and 

agencies of foreign banks with less than $1 billion in 

total assets. 

The final rules increase the number of institutions 

that may qualify for an 18-month examination cycle 

by more than 600 to approximately 4,800 banks 

and savings associations. In addition, the final rules 

increase the number of U.S. branches and agencies 

of foreign banks that may qualify for an 18-month 

examination cycle by 30 branches and agencies, to a 

total of 89.

Use of Evaluations in Certain Real 

Estate-Related Financial Transactions

In March 2016, the FDIC, OCC, and FRB issued an 

advisory to clarify expectations for the use of property 

evaluations by banking institutions. The advisory 

responds to questions about the use of evaluations and 

appraisals that were raised during outreach meetings 

held by the agencies pursuant to the Economic 

Growth and Regulatory Paperwork Reduction Act. 

Among other things, the advisory states that regardless 

of the approach or method used to estimate the 

market value of real property, an evaluation report 

should contain sufficient information and analysis 

to support the value conclusion and the institution’s 

decision to engage in the transaction.

Issuance of Prepaid Cards

In March 2016, the FDIC, OCC, FRB, National 

Credit Union Administration (NCUA), and the 

Financial Crimes Enforcement Network (FinCEN) 

developed and issued guidance to clarify the 

requirements for customer identification programs 

(CIPs) and regulatory expectations for depository 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 21

institutions that issue certain prepaid cards. The 

guidance addresses the establishment of a formal 

account relationship and when the depository 

institution is responsible for collecting CIP 

information. 

Funds Transfer Pricing Related to Funding 

and Contingent Liquidity Risk

In March 2016, the FDIC, OCC, and FRB issued 

joint guidance on Funds Transfer Pricing (FTP) 

to banks with assets of $250 billion or more. The 

guidance describes four key principles that should 

comprise an FTP framework and includes examples 

for implementing these principles. 

Net Stable Funding Ratio

In May 2016, the FDIC, OCC, and FRB jointly 

issued a proposed rule that would implement a 

liquidity requirement consistent with the net stable 

funding ratio agreed to by the Basel Committee 

on Banking Supervision and complementary to 

the Liquidity Coverage Ratio rule issued by the 

agencies in 2014. The proposal would require 

large, internationally active banking organizations 

to maintain a minimum level of stable funding 

over a one-year time horizon. This measure would 

reduce the likelihood that disruptions to a banking 

organization’s regular sources of funding would 

compromise its liquidity position. The proposal also 

would promote improvements in the measurement 

and management of liquidity risk and enhance 

financial stability. The comment period closed on 

August 5, 2016, and the agencies are collaborating on 

a final rulemaking.

Margin and Capital Requirements 

for Covered Swaps 

In August 2016, the FDIC, OCC, FRB, Federal 

Housing Finance Agency, and Farm Credit 

Administration issued a final rule that exempts certain 

commercial and financial end users from margin 

requirements for certain swaps not cleared through 

a clearinghouse. Specifically, the final rule exempts 

non-cleared swaps of small banks, savings associations, 

Farm Credit System institutions, and credit unions 

with $10 billion or less in total assets. This exemption 

parallels an exemption from a mandate in the DoddFrank Act to clear standardized swaps. 

New Accounting Standard on Financial 

Instruments – Credit Losses

In June 2016, the FDIC, OCC, FRB, and NCUA 

issued a joint statement on the new accounting 

standard released by the Financial Accounting 

Standards Board (FASB) regarding Financial 

Instruments – Credit Losses. The statement 

summarizes key elements of the new standard, 

which introduces the current expected credit losses 

methodology for estimating allowances for credit 

losses. It also provides initial supervisory views 

regarding the implementation of the new 

accounting standard.

Qualified Master Netting Agreements 

In October 2016, the FDIC issued a final rule that 

changes the regulatory capital and liquidity coverage 

ratio (LCR) rules to ensure consistency with new 

International Swaps and Derivatives Association 

(ISDA) Resolution Stay Protocols. The protocols 

impose a stay on cross-default and early termination 

rights within standard ISDA derivatives contracts. 

The final rule also revised the definition of “qualifying 

master netting agreement” and other related 

definitions, under the regulatory capital rules and 

the LCR, to reflect the recent changes to the ISDA 

Master Agreement. The FDIC action followed earlier 

rulemakings by the OCC and FRB. 

Fact Sheet on Foreign Correspondent Banking 

In August 2016, the U.S. Department of the Treasury 

issued a Fact Sheet developed jointly with the FDIC, 

OCC, FRB, and NCUA that outlines the agencies’ 

anti-money laundering and economic sanctions 

positions with respect to foreign correspondent 

banking. The Fact Sheet summarizes the U.S. 

regulators’ existing expectations regarding foreign 

correspondent banking relationships, the supervisory 
ANNUAL REPORT

22 MANAGEMENT’S DISCUSSION AND ANALYSIS

examination process, and instances in which 

enforcement actions might be taken.

Enhanced Cyber Risk Management Standards

In October 2016, the FDIC, OCC, and FRB issued 

a joint Advance Notice of Proposed Rulemaking 

(ANPR) seeking comment on enhanced cybersecurity 

risk-management and resilience standards that would 

apply to large and interconnected entities under 

their supervision. The standards also would apply 

to services provided by third parties to these firms. 

The agencies are considering applying the enhanced 

standards to depository institutions and depository 

institution holding companies with total consolidated 

assets of $50 billion or more, the U.S. operations 

of foreign banking organizations with total U.S. 

assets of $50 billion or more, and financial market 

infrastructure companies and nonbank financial 

companies supervised by the FRB. The standards 

would be tiered, with an additional set of higher 

standards for systems that provide critical functionality 

to the financial sector. For these sector-critical 

systems, the agencies are considering requiring firms 

to mitigate substantially the risk of a disruption or 

failure due to a cyber event. The comment period 

will close on February 17, 2017, and the agencies will 

collaborate in the review of comments received. 

Recordkeeping for Deposit Accounts 

In November 2016, the FDIC approved a rule 

establishing recordkeeping requirements for FDICinsured institutions with a large number of deposit 

accounts to facilitate rapid payment of insured deposits 

to customers if the institutions were to fail. The FDIC 

anticipates that the rule will become effective on April 

1, 2017. The FDIC will work closely with institutions 

as they develop new capabilities, and intends to issue 

functional design assistance for system programming 

prior to the effective date to aid in this process.

Proposed Guidelines for Appeals of 

Material Supervisory Determinations

In July 2016, the FDIC published for public 

comment a proposal to amend its Guidelines for 

Appeals of Material Supervisory Determinations. 

The amendments were proposed to give institutions 

additional avenues of redress with respect to 

supervisory determinations and to make the FDIC’s 

appeals process more consistent with those of the 

other federal banking agencies. The comment period 

ended on October 3, 2016. The comments have been 

reviewed by the FDIC, and final action is anticipated 

in early 2017.

DEPOSIT INSURANCE

As insurer of bank and savings association deposits, 

the FDIC must continually evaluate and effectively 

manage how changes in the economy, the financial 

markets, and the banking system affect the adequacy 

and the viability of the Deposit Insurance Fund (DIF).

Long-Term Comprehensive 

Fund Management Plan 

In 2010 and 2011, the FDIC developed a 

comprehensive, long-term DIF management plan 

designed to reduce the effects of cyclicality and 

achieve moderate, steady assessment rates throughout 

economic and credit cycles, while also maintaining 

a positive fund balance, even during a banking 

crisis. That plan complements the Restoration Plan, 

originally adopted in 2008 and subsequently revised, 

designed to ensure that the reserve ratio (the ratio of 

the fund balance to estimated insured deposits) reaches 

1.35 percent by September 30, 2020, as required by 

the Dodd-Frank Act. The plan includes a reduction 

in assessment rates to take effect when the reserve ratio 

reaches 1.15 percent, which occurred in the second 

quarter of 2016 (as discussed in the Deposit Insurance 

Fund Reserve Ratio section). 

Under the long-term DIF management plan, to 

increase the probability that the fund reserve ratio 

will reach a level sufficient to withstand a future crisis, 

the FDIC Board set the Designated Reserve Ratio 

(DRR) of the DIF at 2.0 percent. In September 2016, 

the Board voted to maintain the 2.0 percent ratio 

for 2017. The FDIC views the 2.0 percent DRR as 

a long-term goal and the minimum level needed to 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 23

withstand future crises of the magnitude of past crises. 

Additionally, as part of the long-term DIF 

management plan, the FDIC has suspended dividends 

indefinitely when the fund reserve ratio exceeds 1.5 

percent. Instead, the plan prescribes progressively 

lower assessment rates that will become effective when 

the reserve ratio exceeds 2.0 percent and 2.5 percent. 

These lower assessment rates serve much the same 

function as dividends, but provide more stable and 

predictable effective assessment rates over time.

State of the Deposit Insurance Fund 

Estimated losses to the DIF from bank failures that 

occurred in 2016 totaled $47 million. The fund 

balance continued to grow through 2016, as it has 

every quarter after the end of 2009. Assessment 

revenue was the primary contributor to the increase in 

the fund balance in 2016. The fund reserve ratio rose 

to 1.18 percent at September 30, 2016, from 1.09 

percent a year earlier. 

Deposit Insurance Fund Reserve Ratio

On June 30, 2016, the DIF reserve ratio rose to 1.17 

percent from 1.13 percent on March 31, 2016. FDIC 

regulations provide for three major changes to deposit 

insurance assessments the quarter after the reserve 

ratio first reaches or exceeds 1.15 percent. Beginning 

the third quarter of 2016: 

♦ the range of initial regular assessment rates for all 

institutions declined (from 5-35 basis points to 

3-30 basis points) based on final rules approved 

by the FDIC Board on February 7, 2011, and 

April 26, 2016; 

♦ surcharges on insured depository institutions 

with total consolidated assets of $10 billion or 

more (large banks) began, pursuant to a final 

rule approved by the Board on March 15, 2016 

(discussed in the Minimum Reserve Ratio section 

below); and 

♦ a revised method to calculate risk-based 

assessment rates for established small banks went 

into effect, pursuant to the final rule approved by 

the FDIC Board on April 26, 2016, (discussed in 

the Deposit Insurance Assessment System section).

Minimum Reserve Ratio

Section 334 of the Dodd-Frank Act, which increased 

the minimum reserve ratio of the DIF from 1.15 

percent to 1.35 percent, requires that the reserve ratio 

reach that level by September 30, 2020. Section 

334 also mandates that the FDIC “offset the effect 

of [the increase in the minimum reserve ratio] on 

insured depository institutions (IDIs) with total 

consolidated assets of less than $10 billion.” In 

March 2016, the FDIC approved a final rule to 

implement these requirements. The final rule imposes 

surcharges on the quarterly assessments of IDIs with 

total consolidated assets of $10 billion or more. 

The surcharges will continue through the quarter 

in which the reserve ratio first reaches or exceeds 

1.35 percent. The surcharge equals an annual rate 

of 4.5 basis points applied to an institution’s regular 

quarterly deposit insurance assessment base after 

subtracting $10 billion, with certain exceptions for 

banks with affiliated insured depository institutions. 

The FDIC expects that eight quarterly surcharges will 

be needed for the reserve ratio to reach 1.35 percent. 

If, contrary to the FDIC’s expectations, the reserve 

ratio does not reach 1.35 percent by December 

31, 2018 (but is still at least 1.15 percent), under 

the final rule the FDIC will impose a shortfall 

assessment on IDIs with total consolidated assets 

of $10 billion or more on March 31, 2019. 

Because the Dodd-Frank Act requires that the FDIC 

offset the effect of the increase in the reserve ratio 

from 1.15 percent to 1.35 percent on IDIs with 

total consolidated assets of less than $10 billion, 

the final rule exempts these smaller banks from 

the surcharges and provides assessment credits to 

these institutions for the portion of their regular 

assessments that contribute to growth in the reserve 

ratio between 1.15 percent and 1.35 percent. Credits 

will be automatically applied to these small banks’ 

assessments when the reserve ratio is at or above 

1.38 percent. 
ANNUAL REPORT

24 MANAGEMENT’S DISCUSSION AND ANALYSIS

Deposit Insurance Assessment System

In April 2016, the FDIC approved a final rule to 

improve the risk-based deposit insurance assessment 

system applicable to established small banks to reflect 

risk more accurately. The final rule incorporates data 

from the recent financial crisis and bases assessment 

rates for all established small banks (generally, those 

with less than $10 billion in total assets that have been 

federally insured for at least five years) in a statistical 

model that estimates a bank’s probability of failure 

within three years. The revisions went into effect the 

third quarter of 2016. The final rule maintains the 

previously adopted ranges of assessment rates that 

apply once the DIF reserve ratio reaches 1.15 percent, 

2 percent, and 2.5 percent, and was implemented 

so that aggregate assessment revenue collected from 

established small banks under the final rule was 

approximately the same as would have been collected 

under the small bank pricing method being replaced.

SUPERVISION 

Supervision and consumer protection are cornerstones 

of the FDIC’s efforts to ensure the stability of, and 

public confidence in, the nation’s financial system. 

The FDIC’s supervision program promotes the 

safety and soundness of FDIC-supervised financial 

institutions, protects consumers’ rights, and promotes 

community investment initiatives. 

Examination Program 

The FDIC’s strong bank examination program is the 

core of its supervisory program. As of December 31, 

2016, the FDIC was the primary federal regulator 

(PFR) for 3,790 FDIC-insured, state-chartered 

institutions that were not members of the Federal 

Reserve System [generally referred to as “state 

nonmember” (SNM) institutions]. Through risk 

management (safety and soundness), consumer 

compliance and the Community Reinvestment 

Act (CRA), and other specialty examinations, the 

FDIC assesses an institution’s operating condition, 

management practices and policies, and compliance 

with applicable laws and regulations. 

As of December 31, 2016, the FDIC conducted 

1,727 statutorily required risk management 

examinations and all required follow-up examinations 

for FDIC-supervised problem institutions within 

prescribed time frames. The FDIC also conducted 

1,311 statutorily required CRA/compliance 

examinations (709 joint CRA/compliance 

examinations, 594 compliance-only examinations, 

and 8 CRA-only examinations). In addition, the 

FDIC performed 3,854 specialty examinations 

(which include reviews for Bank Secrecy Act (BSA) 

compliance within prescribed time frames).

The table on page 25 compares the number of 

examinations by type, conducted from 2014 

through 2016.

Risk Management

All risk management examinations have been 

conducted in accordance with statutorily-established 

timeframes. As of September 30, 2016, 132 insured 

institutions with total assets of $24.9 billion were 

designated as problem institutions for safety and 

soundness purposes (defined as those institutions 

having a composite CAMELS1

 rating of 4 or 5), 

compared to the 203 problem institutions with total 

assets of $51.1 billion on September 30, 2015. This 

is a 35 percent decline in the number of problem 

institutions and a 51 percent decrease in problem 

institution assets. For the 12 months ending 

September 30, 2016, 82 institutions with aggregate 

assets of $27.1 billion were removed from the list of 

problem financial institutions, while 11 institutions 

with aggregate assets of $2.3 billion were added to 

the list. The FDIC is the PFR for 91 of the 132 

problem institutions, with total assets of $15.7 billion. 

In 2016, the FDIC’s Division of Risk Management 

Supervision initiated 170 formal enforcement actions 

1

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

and level of Earnings, the adequacy of Liquidity, and the Sensitivity to market risk, and ranges from “1” (strongest) to “5” (weakest).
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 25

and 121 informal enforcement actions. Enforcement 

actions against institutions included, but were not 

limited to, 23 actions under Section 8(b) of the FDI 

Act (22 consent orders and 1 notice of charges), and 

121 MOUs. Of these enforcement actions against 

institutions, 20 consent orders, and 22 MOUs were 

based, in whole or in part, on apparent violations 

of BSA and anti-money laundering (AML) laws 

and regulations. In addition, enforcement actions 

were also initiated against individuals. These actions 

included, but were not limited to, 95 removal and 

prohibition actions under Section 8(e) of the FDI 

Act (87 consent orders and 8 notices of intention to 

remove/prohibit), 3 actions under Section 8(b) of 

the FDI Act (1 notice of charges to pay restitution 

and 2 personal cease and desist orders), and 28 civil 

money penalties (CMPs) (25 orders to pay and 

3 notices of assessment).

The FDIC has heightened its focus on forwardlooking supervision aimed at ensuring that risks are 

mitigated before they lead to financial deterioration. 

Compliance

As of December 31, 2016, 50 insured SNM 

institutions, about 1 percent of all supervised 

institutions, with total assets of $72 billion, were 

problem institutions for compliance, CRA, or 

both. All of the problem institutions for compliance 

were rated “4” for compliance purposes, with none 

rated “5.” For CRA purposes, the majority were 

rated “Needs to Improve,” and only four were rated 

“Substantial Noncompliance.” As of December 

31, 2016, all follow-up examinations for problem 

institutions were performed on schedule.

As of December 31, 2016, the FDIC conducted 

all required compliance and CRA examinations 

FDIC EXAMINATIONS 2014-2016

2016 2015 2014

Risk Management (Safety and Soundness): 

State Nonmember Banks 1,563 1,665 1,881

Savings Banks 164 206 206

State Member Banks 0 0 0

Savings Associations 0 0 0

National Banks 0 0 0

Subtotal – Risk Management Examinations 1,727 1,871 2,087

CRA/Compliance Examinations:

Compliance/Community Reinvestment Act 709 859 1,019

Compliance-only 594 478 376

CRA-only 8 10 11

Subtotal – CRA/Compliance Examinations 1,311 1,347 1,406

Specialty Examinations:

Trust Departments 351 365 428

Information Technology and Operations 1,742 1,886 2,113

Bank Secrecy Act 1,761 1,906 2,126

Subtotal – Specialty Examinations 3,854 4,157 4,667

TOTAL 6,892 7,375 8,160
ANNUAL REPORT

26 MANAGEMENT’S DISCUSSION AND ANALYSIS

and, when violations were identified, completed 

follow-up visits and implemented appropriate 

enforcement actions in accordance with FDIC policy. 

In completing these activities, the FDIC substantially 

met its internally established time standards for 

the issuance of final examination reports and 

enforcement actions.

Overall, banks demonstrated strong consumer 

compliance programs. The most significant 

consumer protection issue that emerged from the 

2016 compliance examinations involved banks’ 

failure to adequately monitor third-party vendors. 

For example, the FDIC found violations involving 

unfair or deceptive acts or practices relating to issues 

such as failure to disclose material information 

about product features and limitations, deceptive 

marketing and sales practices, and misrepresentations 

about the costs of products. As a result, the FDIC 

issued orders requiring the payment of CMPs.

As of December 31, 2016, the FDIC’s Division 

of Depositor and Consumer Protection initiated 

15 formal enforcement actions and 23 informal 

enforcement actions to address compliance concerns 

(see chart on page 140). This included 4 consent 

orders, 2 removal and prohibition orders addressing 

safety and soundness concerns and breaching 

fiduciary duty, 9 CMPs, and 23 MOUs. Restitution 

orders are formal actions that require institutions 

to pay restitution in the form of consumer refunds 

for different violations of law. As of December 31, 

2016, there were no restitution orders that required 

institutions to refund consumers. The CMPs totaled 

over $332,654.

Large Bank Supervision Program

The FDIC also established the Large Bank 

Supervision Program within the Division of Risk 

Management Supervision to address the growing 

complexity of large banking organizations with 

assets exceeding $10 billion and not assigned to the 

CFI Program. This group is responsible for both 

supervisory oversight and ongoing monitoring, and 

resolution planning, while supporting the insurance 

business line. For SNM banks over $10 billion, the 

FDIC generally applies a continuous examination 

program, whereby dedicated staff conducts ongoing 

onsite supervisory examinations and institution 

monitoring. At institutions where the FDIC is not 

the primary federal regulator, FDIC has dedicated 

onsite examination staff at select banks, working 

closely with other financial institution regulatory 

authorities to identify emerging risks and assess the 

overall risk profile of large institutions. 

The Large Insured Depository Institution (LIDI) 

Program remains the primary instrument for off-site 

monitoring of IDIs with $10 billion or more in total 

assets. The LIDI Program provides a comprehensive 

process to standardize data capture and reporting 

through nationwide quantitative and qualitative risk 

analysis of large and complex institutions. In 2016, 

the LIDI Program covered 92 institutions with total 

assets of $5.4 trillion. The comprehensive LIDI 

Program supports effective large bank supervision 

because it aids the Division in using individual 

institution information to deploy resources most 

effectively to high-risk areas, determine the need for 

supervisory action, and support insurance assessments 

and resolution planning. 

The Shared National Credit (SNC) Program is an 

interagency initiative administered jointly by the 

FDIC, OCC, and FRB to ensure consistency in the 

regulatory review of large, syndicated credits, as well 

as identify risk in this market, which comprises a 

large volume of domestic commercial lending. In 

2016, outstanding credit commitments identified 

in the SNC Program totaled $4.1 trillion. The 

FDIC, OCC, and FRB issued a joint press release 

detailing the results of the review in July 2016. The 

latest review showed the level of adversely rated 

assets remained higher than in previous periods of 

economic expansion, raising the concern that future 

losses and problem loans could rise considerably 

in the next credit cycle. The elevated level of risk 

observed during the recent SNC examination 

stems from the high inherent risk in the leveraged 

loan portfolio and growing credit risk in the oil 

and gas portfolio. Notwithstanding the riskiness 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 27

of the existing portfolio, the agencies noted 

improved underwriting and risk management 

practices related to the most recent leveraged loan 

originations, as underwriters continued to better 

align practices with regulatory expectations, and 

as investor risk appetite moderated away from 

transactions at the lower end of the credit spectrum.

Information Technology, Cyber Fraud, 

and Financial Crimes 

To address the specialized nature of technologyand operations-related supervision, cyber risks, and 

controls in the banking industry, the FDIC routinely 

conducts information technology (IT) and operations 

examinations at FDIC-supervised institutions. 

IT Examinations

The FDIC conducts regular IT and operations 

risk examinations at all FDIC-supervised financial 

institutions and assigns an examination rating based 

on the Federal Financial Institutions Examination 

Council’s (FFIEC’s) Uniform Rating System for 

Information Technology (URSIT). The URSIT rating 

is incorporated into the Management component 

of the Safety and Soundness rating in Reports 

of Examination. In 2016, the FDIC conducted 

1,742 IT and operations examinations at financial 

institutions and technology service providers (TSPs). 

In 2016, the FDIC continued to enhance its IT 

supervision and improve its programs to fight cyber 

fraud and financial crimes more generally. This year, 

the FDIC released updated IT and operations risk 

examination procedures that are more efficient and 

risk-focused, include a cybersecurity preparedness 

assessment, and provide more detailed examination 

results to institutions. This enhanced Information 

Technology Risk Examination program, or InTREx, 

helps ensure that financial institution management 

promptly identifies and effectively addresses IT and 

cybersecurity risks. The InTREx work program and 

training was completed on June 24, 2016, and fully 

implemented by September 30, 2016.

Supervision for Technology Service Providers 

The FDIC and other banking agencies also conduct 

IT and operations risk examinations of TSPs, that 

support financial institutions. During 2016, the 

FDIC, OCC, and FRB piloted the newly developed 

Interconnectivity Horizontal Review Program with 

three of the largest TSPs. The program focused on the 

IT risks of large and complex supervised institutions 

and TSPs. This new program will help strengthen the 

FDIC’s supervision of TSPs that present the most risk 

to the banking industry.

Other Activities

The FDIC continues to provide resources to raise 

awareness of cyber risks and to encourage practices 

that help protect the financial institutions it 

supervises. For example, in 2016, the FDIC hosted 

an industry webinar titled “Cybersecurity Resources 

to Help Your Customers Protect Themselves,” and 

made available brochures with tips on how to conduct 

business safely online. Financial institutions can 

reprint these brochures for their retail banking and 

business customers. 

Additionally, the FDIC monitors cybersecurity 

issues in the banking industry through regulatory 

and intelligence reports. The FDIC works with the 

Financial and Banking Information Infrastructure 

Committee, the Financial Services Sector 

Coordinating Council for Critical Infrastructure 

Protection, Homeland Security, the Financial Services 

Information Sharing and Analysis Center (FSISAC), other regulatory agencies, law enforcement, 

and others to share information regarding 

emerging issues and to coordinate responses. 

During 2016, the FDIC served as chair of the 

Cybersecurity and Critical Infrastructure Working 

Group (CCIWG) of the FFIEC Task Force on 

Supervision. The CCIWG serves as a forum to 

address policy related to cybersecurity and critical 

infrastructure, enables members to communicate 

and collaborate on activities to support and 

strengthen the resilience of the financial services 
ANNUAL REPORT

28 MANAGEMENT’S DISCUSSION AND ANALYSIS

sector, and provides input to FFIEC principal 

members regarding cybersecurity matters.

Major interagency accomplishments as a member of 

the FFIEC included the following:

♦ Collaborated with the FRB and OCC to develop 

a Cybersecurity Evaluation Tool to be used 

during TSP examinations, and piloted the tool 

during the first quarter of 2016.

♦ Served as the event manager for a conference 

of IT supervisors from more than 20 countries. 

Participants provided updates and national 

perspectives on three IT supervision themes: 

FinTech, cybersecurity, and supervision of 

third-party providers.

♦ Conducted a workshop to consider the 

value and merits of cyber insurance as a risk 

transfer vehicle.

♦ Published a joint statement on safeguarding 

the cybersecurity of interbank messaging and 

wholesale payment networks. 

♦ Issued an appendix to the Retail Payment 

Systems booklet of the FFIEC Information 

Technology Examination Handbook entitled 

“Mobile Financial Services.” The booklet is 

part of the IT Examination Handbook series. 

The appendix contains guidance on the risks 

associated with mobile financial services and 

emphasizes an enterprise-wide risk management 

approach to effectively manage and mitigate 

those risks.

♦ Revised the Information Security booklet 

of the FFIEC IT Examination Handbook to 

provide an overview of information security 

operations, including the need for effective threat 

identification, assessment and monitoring, and 

incident identification, assessment, and response.

♦ Hosted two industry webinars in recognition of 

October as National Cybersecurity Awareness 

Month. The first webinar, Mobile Financial 

Services, Appendix E of the Retail Payment System 

Booklet, provided information about the risks 

associated with mobile financial services and risk 

management approaches, and answered related 

questions from participants. The second webinar, 

Executive Leadership of Cybersecurity: Threat 

Intelligence and Getting the Most Out of Your 

FS-ISAC Membership, provided insight on how 

financial institutions can strengthen their use of 

cyber intelligence.

♦ Improved information sharing on technology 

risks among the IT examination workforces 

of the FFIEC member agencies through 

discussions at the March 2016 annual 

Supervisory Strategy Meeting.

Enhancing the FDIC’s IT Security 

Information security is critical to the FDIC’s ability 

to carry out its mission of maintaining stability 

and public confidence in the nation’s financial 

system. In 2016, the FDIC implemented policies 

and technologies to strengthen its own cybersecurity 

posture by initiating an aggressive 60-day plan to 

improve information security and an FDIC IT Action 

Plan to lay the foundation for modernizing the 

agency’s IT services to ensure scalability and resilience. 

Steps taken included:

♦ completely revised the Data Breach Management 

Guide to incorporate policy guidance 

promulgated in the Office of Management and 

Budget Memorandum (M-16-03);

♦ phased in a new incident tracking system that 

automates, centralizes, and greatly enhances 

management and oversight of incident response 

and breach-related activities;

♦ discontinued individuals’ ability to copy 

information to removable media such as CD’s, 

DVDs, external hard drives, and thumb drives;

♦ implemented new controls to limit printing 

of sensitive information and better monitor 

information printed in the highest risk areas;

♦ signed a memorandum of understanding to 

migrate to an intrusion prevention, detection, 

and monitoring system from the Department 

of Homeland Security that will help detect and 

block outside cyber threats;
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 29

♦ initiated efforts to implement Digital Rights 

Management software to protect the most 

sensitive FDIC data; and

♦ engaged an independent, third-party firm to 

conduct an end-to-end assessment of the FDIC’s 

information security and privacy programs. This 

assessment encompassed key areas of the FDIC’s 

information security program including network 

security, software security, host security, data 

protection, etc.

These actions are in addition to protections that were 

already in place, such as:

♦ encryption of some of our most sensitive 

information; 

♦ encrypted laptop hard drives; and 

♦ a Data Loss Prevention program that monitors 

information in emails, information being 

transferred to websites, and information printed.  

The FDIC requires employees to take annual security 

and privacy training so they are aware of FDIC 

security standards. This is supplemented by periodic 

phishing tests to help ensure employees stay watchful 

to possible outside threats.

The FDIC will remain alert and continue to adjust 

security controls in light of the changing threat 

landscape.

Access Control Program and Personal Identity 

Verification Card Implementation

The FDIC’s Access Control Program (ACP) was 

established to ensure the agency’s compliance with the 

Homeland Security Presidential Directive 12 (HSPD12): Policy for a Common Identification Standard for 

Federal Employees and Contractors. HSPD-12 requires 

the use of Personal Identity Verification (PIV) cards—

smart card credentials containing data that allow 

the cardholder to be granted access to facilities and 

information systems—to assure appropriate levels of 

security and offer enhanced protection by requiring 

multifactor authentication (MFA). MFA requires two 

or more of the following verification mechanisms to 

access a user’s work station or network:

♦ something one knows (e.g., password, personal 

identification number, secret question/answer),

♦ something one has (e.g., PIV card, security 

token, cell phone), or

♦ something one is (e.g., biometrics such as 

fingerprints, retina pattern). 

In 2016, the FDIC expanded use of MFA for securely 

downloading assessment invoices and official FDIC 

correspondence, and performing other secure file 

exchanges.

This year, the FDIC successfully issued PIV 

cards to more than 5,300 eligible employees and 

contractors by partnering with the General Services 

Administration (GSA) USAccess program. In order to 

track and manage the rollout of the PIV card issuance 

effectively, the agency developed an Inventory 

Executive Dashboard by division, region, and office. 

By year-end 2016, approximately 94 percent of 

eligible FDIC employees and contractors have been 

issued a PIV card.

The FDIC also enforced the use of PIV cards to access 

the FDIC network (i.e., logical access). As of yearend 2016, PIV-based authentication is required to 

access the FDIC network across the agency. ACP’s 

global communications and organizational change 

management efforts have resulted in approximately 

90 percent of FDIC staff and contractors using their 

cards for logical access. 

Insider Threat Program

During 2016, in support of the National Insider 

Threat Policy, the FDIC established an Insider 

Threat and Counterintelligence Program (ITCIP) 

to strengthen and develop new processes and 

technologies to combat insider threats. 

An insider threat is a concern or risk posed to the 

FDIC that involves an individual who misuses or 

betrays, wittingly or unwittingly, his or her authorized 

access to FDIC resources. This individual may have 

access to sensitive, personally identifiable information 

and/or privileged access to critical infrastructure and/

or business sensitive information (e.g., bank data). 
ANNUAL REPORT

30 MANAGEMENT’S DISCUSSION AND ANALYSIS

The ITCIP blends both physical and logical safeguards 

to minimize the risk, likelihood, and impact of an 

executed insider threat.

An ITCIP Working Group was established to focus 

on detecting, identifying, assessing, mitigating, and 

preventing insider threat or external threat activity 

through the centralized and integrated analysis of 

threat information. An ITCIP Executive Committee 

also was established to support planning and provide 

oversight in the implementation of the program.

Further, the FDIC designated a senior Executive as 

the Senior Agency Official principally responsible for 

establishing a process to gather, integrate, centrally 

analyze, and respond to relevant information 

indicative of a potential insider threat.

Bank Secrecy Act/Anti-Money Laundering 

In 2016, the Financial Action Task Force (FATF) 

completed a mutual evaluation of the U.S. antimoney laundering (AML) regime. The FDIC 

provided input through on-site discussions regarding 

the U.S. banking industry’s AML supervision and 

enforcement and provided comments on final 

documents addressing the U.S. banking industry’s 

compliance with the FATF AML standards.

Examiner Development

The FDIC has undertaken a multi-year project to 

expand and strengthen its examiner development 

programs for specialty examinations, such as 

information technology, BSA/AML, trust, capital 

markets, accounting, and anti-fraud. Due to the 

increased complexity of institutions, specialty skills 

are becoming paramount in risk assessment. In 

addition, this initiative is an important component of 

succession planning; proactively addressing knowledge 

transfer will enable the FDIC to mitigate the impact 

of the future retirement of senior technical experts. 

The goal of this project is to standardize nationwide 

the skills needed to examine banks of varying levels 

of risk and complexity in each specialty area, and 

then to develop on-the-job training programs to 

provide opportunities for examiners to develop higher 

level competencies in these specialty areas. This 

initiative will:

♦ offer a road map to assist employees in 

career planning;

♦ identify the skills needed for career development 

and potential advancement;

♦ provide tools to support career development;

♦ deliver structured training programs that 

include assignments designed to develop higher 

level competencies;

♦ enhance the value of a subject matter expert 

designation by creating a consistent definition 

and application; and 

♦ provide more observable, objective, and 

measurable criteria for job descriptions in 

specialty areas. 

In 2016, the FDIC validated competency models 

in the BSA/AML, trust, and capital markets 

areas, began developing specialty on-the-job 

training programs in BSA/AML and trust, 

and made progress in developing information 

technology and accounting competency models.

Minority Depository Institution Activities 

The preservation of minority depository institutions 

(MDIs) remains a high priority for the FDIC. In 

2016, the FDIC continued to support MDI and 

Community Development Financial Institution 

(CDFI) industry-led strategies for success. These 

strategies include: increased collaboration between 

MDI and CDFI bankers; partnering to share costs, 

raise capital, or pool loans; and making innovative 

use of federal programs. The FDIC supports this 

effort by providing technical assistance to MDI and 

CDFI bankers.

In 2016, the FDIC sponsored a discussion between 

trade groups representing MDIs and CDFIs and 

representatives of potential bank partners, focusing on 

CRA partnerships. In addition, the FDIC provided 

technical assistance to a group seeking to develop a 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 31

private equity fund to invest in MDIs. The FDIC’s 

assistance addressed how the proposed structure might 

be considered under the Basel Capital Rules as well as 

the CRA. Both community banks and larger insured 

financial institutions have valuable incentives under 

the CRA to undertake ventures with MDIs, including 

capital investment and loan participations.

In 2016, the FDIC, OCC, and FRB co-hosted 

a webinar on strategic planning attended by 

approximately 50 MDIs, and began planning the 

2017 Interagency MDI and CDFI Bank Conference, 

which the agencies will co-sponsor. The conference 

will be held in Los Angeles where there is a significant 

concentration of MDIs. The conference will feature 

an interactive panel with FDIC Chairman Martin J. 

Gruenberg, a Federal Reserve Board Governor, and 

Comptroller of the Currency Thomas J. Curry. 

The FDIC continued its efforts to improve 

communication and interaction with MDIs and to 

respond to the concerns of minority bankers. The 

FDIC maintains active outreach with MDI trade 

groups and offers to arrange annual meetings between 

FDIC regional management and each MDI’s board 

of directors to discuss issues of interest. The FDIC 

routinely contacts MDIs to offer return visits and 

technical assistance following the conclusion of 

FDIC safety and soundness, compliance, CRA, and 

specialty examinations to assist bank management 

in understanding and implementing examination 

recommendations. These return visits, normally 

conducted 90 to 120 days after the examination, 

are intended to provide useful recommendations or 

feedback for improving operations, not to identify 

new issues. The FDIC’s website encourages and 

provides contact information for any MDI to request 

technical assistance at any time. 

In 2016, the FDIC provided 135 individual 

technical assistance sessions on approximately 66 risk 

management and compliance topics, including:

♦ accounting;

♦ Bank Secrecy Act and Anti-Money Laundering;

♦ Basel III Capital Rules;

♦ brokered deposits/waivers;

♦ capital planning;

♦ commercial real estate concentrations;

♦ Community Reinvestment Act;

♦ funding and liquidity;

♦ high volatility commercial real estate;

♦ information technology risk management 

and cybersecurity;

♦ interest-rate risk;

♦ loan underwriting and administration; 

♦ mortgage lending rules;

♦ strategic planning; and

♦ third-party risk management.

The FDIC’s regional offices also held outreach, 

training, and educational programs for MDIs through 

conference calls and regional banker roundtables. In 

2016, topics of discussion for these sessions included 

many of those listed above, as well as the FDIC’s 

National MDI Program, the FDIC’s Community 

Banking Initiative, and the availability of Technical 

Assistance Videos on corporate governance, strategic 

planning, director responsibilities, community 

banking initiatives, compliance guidance, 

concentration risk management, and bank merger 

and acquisition.

Mutual Institutions

In August 2016, the FDIC and OCC co-hosted the 

Joint Agency Mutual Forum, which was open to all 

mutual banking institutions regardless of charter 

type. Mutually-owned related institutions represent 

about 9 percent of all FDIC-insured institutions and 

are among the oldest form of depository institution. 

Attended by approximately 125 participants, the 

forum provided an opportunity for the mutual 

bankers to learn about current trends and engage in 

a dialogue on the strengths of and challenges facing 

mutual institutions. The forum featured presentations 

and banker panels covering topics of interest relating 

to the mutual industry, including an economic 

outlook, strategic planning, cyber challenges, 
ANNUAL REPORT

32 MANAGEMENT’S DISCUSSION AND ANALYSIS

regulatory compliance update, and an opportunity 

for each agency to hold an agency-specific session 

to address other current matters and respond to 

banker inquiries. 

Cyber Fraud and Financial Crimes

The Cyber Fraud and Financial Crimes Section 

leads the FDIC’s efforts to protect the banking 

industry from criminal financial activities. These 

efforts include managing the FDIC’s background 

investigations for banking applications, leading 

financial crimes-related training programs, and 

assisting financial institutions in identifying and 

shutting down “phishing” websites that attempt 

to obtain fraudulently and use an individual’s 

confidential personal or financial information. 

This Section serves a leading role in education and 

outreach, including through the development of 

webinars and informational publications. During 

2016, the Cyber Fraud and Financial Crimes 

Section hosted a banking industry webinar (titled 

“Cybersecurity Resources to Help Your Customers 

Protect Themselves”) held in conjunction with 

National Consumer Protection Week, and authored 

a special edition of the FDIC’s Consumer News

focused on consumer cybersecurity awareness. The 

Department of Homeland Security shared the 

Consumer News edition with more than 58,000 

partners during October 2016 in observation of 

National Cybersecurity Awareness Month. 

Supervision Policy

Brokered Deposits

In June 2016, the FDIC finalized updates to its 

FAQs regarding brokered deposits. The FAQs were 

updated in response to numerous questions regarding 

brokered deposit determinations. The FAQs address 

supervisory expectations for identifying, accepting, 

and reporting broked deposits. The answers are 

based on Section 29 of the FDI Act and Section 

337.6 of the FDIC Rules and Regulations, as well 

as explanations provided to the industry through 

published advisory opinions and the FDIC’s Study 

on Core Deposits and Brokered Deposits, issued in 

July 2011. 

Applications for Deposit Insurance

In April 2016, the FDIC issued guidance in the form 

of supplemental “Questions and Answers” (Q&As) 

to aid applicants in developing applications for 

deposit insurance. The supplemental Q&As provide 

additional transparency to the application process 

and supplement guidance previously issued in 

November 2014.

Prudent Risk Management of Oil 

and Gas Exposures

In July 2016, the FDIC issued guidance to remind 

FDIC-supervised institutions with direct or indirect 

oil and gas exposures to maintain sound underwriting 

standards, strong credit administration practices, and 

effective risk management strategies. When oil and 

gas related borrowers experience financial difficulties, 

the FDIC encourages financial institutions to work 

constructively with borrowers to strengthen the credits 

and to mitigate losses where possible. 

Third-Party Lending

In July 2016, the FDIC issued a request for public 

comment on proposed guidance for third-party 

lending. The proposed guidance sets forth safety and 

soundness and consumer compliance measures FDICsupervised institutions should follow when lending 

through a business relationship with a third party. 

The proposed guidance is intended to supplement the 

FDIC’s existing Guidance for Managing Third-Party 

Risk, which is applicable to a number of third-party 

arrangements, including lending through a third 

party. Public comments are being evaluated as part of 

the process of developing the final guidance. 

FDIC Examination Findings

In July 2016, the FDIC issued guidance to emphasize 

the importance of open communication regarding 

supervisory findings. An open dialogue with bank 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 33

management is critical to ensuring the supervisory 

process is effective in promoting an institution’s strong 

financial condition and safe and sound operation. 

The FDIC encourages bank management to provide 

feedback on FDIC supervisory activities and engage 

FDIC personnel in discussions to ensure a full 

understanding of the FDIC’s supervisory findings and 

recommendations. If an institution disagrees with 

examination findings, there are several informal and 

formal avenues available to raise its concerns.

Regulatory Relief 

During 2016, the FDIC issued 11 financial 

institution letters providing guidance to help 

financial institutions and to facilitate recovery in areas 

affected by tornadoes, flooding, wild fires, landslides, 

mudslides, and other severe events. In these letters, 

the FDIC encouraged banks to work constructively 

with borrowers experiencing financial difficulties as 

a result of natural disasters. The letters also clarified 

that prudent extensions or modifications of loan terms 

in such circumstances can contribute to the health 

of communities and serve the long-term interests of 

lending institutions. 

COMMUNITY BANKING INITIATIVE

Community banks provide traditional, relationshipbased banking services in their local communities. As 

defined in recent FDIC research, community banks 

made up almost 93 percent of all FDIC-insured 

institutions at mid-year 2016. While they hold just 

13 percent of banking industry assets, community 

banks are of critical importance to the U.S. economy 

and local communities across the nation. Community 

banks hold 43 percent of the industry’s small loans 

to farms and businesses, making them the lifeline to 

entrepreneurs and small enterprises of all types. They 

also hold the majority of bank deposits in U.S. rural 

counties and micropolitan counties with populations 

up to 50,000. In fact, as of June 2016, community 

banks held more than 75 percent of deposits in 

more than 1,200 U.S. counties. In more than 600 of 

these counties, the only banking offices available to 

consumers were those operated by community banks.

The FDIC is the primary federal supervisor for 

the majority of community banks, in addition to 

being the insurer of deposits held by all U.S. banks 

and thrifts. Accordingly, the FDIC has a particular 

responsibility for the safety and soundness of 

community banks, as well as a particular interest 

in and a commitment to the role they play in the 

banking system and the challenges and opportunities 

they face. In 2012, the FDIC launched a Community 

Banking Initiative focused on publishing new research 

on issues of importance to community banks and 

providing resources that will be useful to their 

efforts to manage risks, enhance the expertise of 

their staff, and better understand changes in the 

regulatory environment.

Community Banking Research

The FDIC continues to pursue an agenda of research 

and outreach focused on community banking issues. 

Since the 2012 publication of the FDIC Community 

Banking Study, FDIC researchers have published 

10 additional studies on topics ranging from small 

business financing to the factors that have driven 

industry consolidation over the past 30 years. The 

Community Bank Performance section of the 

FDIC Quarterly Banking Profile (QBP), first 

introduced in 2014, continues to provide a detailed 

statistical picture of the community banking sector 

that can be accessed by analysts, other regulators, and 

bankers themselves. The most recent report shows 

that net income at community banks continued to 

grow at a healthy annual rate through the first three 

quarters of 2016, while total loans and leases at these 

institutions grew at a rate that was 2.9 percentage 

points higher than the rate for noncommunity banks.

Community Banking Conference

In April 2016, the FDIC hosted a community 

banking conference entitled “Strategies for LongTerm Success.” About 250 community bankers and 

industry participants took part in a daylong discussion 

about what the future holds for community banks in 

the United States. In addition to addresses by FDIC 

Chairman Martin J. Gruenberg and Vice Chairman 
ANNUAL REPORT

34 MANAGEMENT’S DISCUSSION AND ANALYSIS

Thomas M. Hoenig, the conference featured four 

expert panels that covered, in turn, the community 

banking model, regulatory developments, managing 

technology challenges, and ownership structure and 

succession planning. 

De Novo Banks

The FDIC is committed to working with, and 

providing support to, any group with interest in 

starting a community bank. In his remarks at the 

Community Banking Conference, FDIC Chairman 

Gruenberg discussed the FDIC’s efforts to facilitate 

the formation of de novo banks. The FDIC has:

♦ Designated professional staff in each regional 

office to serve as subject matter experts for 

deposit insurance applications. These individuals 

are points of contact to FDIC staff, other 

banking agencies, industry professionals, and 

prospective organizing groups. These specialists 

serve as an important industry resource to address 

the FDIC’s processes, generally, and to respond 

to specific questions. 

♦ Reduced from seven years to three years the 

period of enhanced supervisory monitoring 

of newly insured depository institutions. The 

FDIC had established the seven-year period 

during the financial crisis in response to the 

disproportionate number of newly insured 

institutions that were experiencing difficulties or 

failing. In the current environment, and in light 

of strengthened, forward-looking supervision, the 

FDIC determined it was appropriate to return to 

the three-year period.

As an outgrowth from the conference, the FDIC 

expanded on existing initiatives to facilitate the 

formation of de novos and undertook two new 

initiatives to support the long-term success of 

community banks. 

During the fall, the FDIC held de novo outreach 

meetings in San Francisco, New York, and Atlanta to 

ensure that interested parties and industry participants 

are well informed about the FDIC’s application 

process and the tools and resources available to 

assist organizing groups. Each of the outreach 

meetings addressed FDIC requirements for new bank 

applications, and highlighted strategies for successful 

formation. Based on a recommendation from 

the FDIC’s Advisory Committee on Community 

Banking, the FDIC incorporated into each outreach 

meeting a roundtable discussion with Chief Executive 

Officers (CEOs) of successful de novo institutions. 

These CEO discussions were a highlight of each 

outreach meeting, as the CEOs provided the 

attendees with practical advice based on their personal 

experiences. Similar outreach meetings will be held in 

the remaining three regions during 2017. 

In December 2016, the FDIC issued for public 

comment a publication entitled Applying for Deposit 

Insurance – A Handbook for Organizers of De Novo 

Institutions that is intended to help organizers become 

familiar with the deposit insurance application process 

and describe the path to obtaining deposit insurance. 

The handbook incorporates information on topics 

raised during the de novo outreach meetings, including 

advice from the CEO panels.

Continuing Community Banking 

Initiative Activities

To learn more about how educators and bankers can 

partner in developing the next generation of bankers, 

the FDIC hosted a roundtable discussion with 

more than a dozen institutions of higher education 

FDIC Chairman Martin J. Gruenberg gave the opening and closing 

remarks at the Community Banking Conference in April 2016.
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 35

and other industry representatives. The roundtable 

explored community banking educational programs 

and discussed challenges and best practices of these 

programs with the goal of exploring strategies for the 

industry’s long-term success.

Community Bank Advisory Committee

The FDIC’s Advisory Committee on Community 

Banking is an ongoing forum for discussing current 

issues and receiving valuable feedback from the industry. 

The committee, which met three times during 2016, 

is composed of 13 community bank CEOs from 

around the country. It is a valuable resource for input 

on a wide variety of topics, including examination 

policies and procedures, capital and other supervisory 

issues, credit and lending practices, deposit insurance 

assessments and coverage, and regulatory compliance 

issues. To learn more about how community banks 

could attract the next generation of customers, the 

FDIC conducted a panel discussion with millennial 

FDIC employees at the July 2016 meeting. The 

employees discussed how community banks can 

successfully address millennial preferences.

Community Bank Resource Kit

In preparation for the Community Banking 

Conference, the FDIC developed a Community 

Bank Resource Kit for distribution to the conference 

attendees. The Resource Kit contains: a copy of the 

FDIC’s Pocket Guide for Directors; Supervisory Insights

articles related to corporate governance, interest-rate 

risk, and cybersecurity; two cybersecurity brochures 

that banks may reprint and share with their customers 

to enhance cybersecurity savvy; a copy of the FDIC’s 

Cyber Challenge exercise; and several pamphlets 

that provide information about the FDIC resources 

available to bank management and board members. 

The Community Bank Resource Kit was subsequently 

distributed to all FDIC-supervised institutions. 

Technical Assistance Program

As part of the Community Banking Initiative, the 

FDIC continued to provide an extensive technical 

assistance program for bank directors, officers, and 

employees to improve communication generally and 

provide technical training on a range of topics. The 

technical assistance program includes Directors’ 

College events held across the country, industry 

teleconferences, and a video program.

In 2016, the FDIC hosted Directors’ College 

events in each of its six regions. These events 

were typically conducted jointly with state trade 

associations and addressed issues such as corporate 

governance, regulatory capital, community banking, 

concentrations management, consumer protection, 

the Bank Secrecy Act, and interest-rate risk, 

among others. 

In addition, the FDIC hosted 12 industry 

teleconferences or webinars on a range of topics 

of interest to community bankers, including 

cybersecurity, overdraft protection rules, mobile 

financial services, commercial real estate, and the 

Real Estate Settlement Procedures Act. In addition, 

the FDIC offered 11 deposit insurance coverage 

seminars for bank officers and employees in 2016. 

These free seminars, which were offered nationwide, 

particularly benefitted smaller institutions that have 

limited training resources. The FDIC also released 

three deposit insurance seminar training videos on the 

FDIC’s website and YouTube channel.

The FDIC offers a series of banker events, intended 

to maintain open lines of communication to keep 

bank management and staff up-to-date on important 

banking regulatory and emerging issues in the 

At the April 2016 Community Banking Conference, FDIC Chief Economist 

Richard Brown (second from left) summarizes findings of a recent 

FDIC study.
ANNUAL REPORT

36 MANAGEMENT’S DISCUSSION AND ANALYSIS

compliance and consumer protection area. In 

2016, the FDIC offered three interagency webinars 

focused on the following topics: requirements and 

best practices regarding bank overdraft programs; 

interagency Community Reinvestment Act questions 

and answers; and Military Lending Act regulations.

The FDIC released six videos as part of its Technical 

Assistance Video Program, which offers in-depth 

technical training for bank directors, officers, and 

employees to view at their convenience. Updated 

videos were published relating to interest-rate risk 

(two videos), corporate governance, the ability-torepay/qualified mortgages rule, and flood insurance. 

During 2016, the FDIC released a new video on 

outsourcing technology services. 

Economic Growth and Regulatory 

Paperwork Reduction Act

During 2016, the FDIC, along with the other 

federal banking agencies and the FFIEC, continued 

a cooperative, three-year effort to review all of their 

regulations. The purpose of the regulatory review, 

which is mandated no less frequently than once every 

10 years by the Economic Growth and Regulatory 

Paperwork Reduction Act of 1996 (EGRPRA), is to 

identify and eliminate, as appropriate, outdated or 

otherwise unnecessary regulatory requirements that 

are imposed on insured depository institutions.

To facilitate the review, the agencies categorized their 

regulations into 12 separate groups. Over the course 

of two years, the groups of regulations were published 

for comment, through a series of Federal Register

notices, providing industry participants, consumer 

and community groups, and other interested parties 

an opportunity to respond and identify regulatory 

requirements they believe are no longer needed or 

should be modified. The agencies also held six public 

outreach meetings across the country to provide 

an opportunity for individual bankers, consumer 

and community group representatives, and other 

interested persons to present their views directly to 

agency senior management and staff of the FFIEC 

and the federal banking agencies on any of the 

regulations subject to EGRPRA review. 

The agencies received 234 comment letters directly 

in response to the Federal Register notices and also 

received a number of additional oral and written 

comments from panelists and the public at the 

outreach meetings. The agencies have reviewed these 

comments and comments received during outreach 

meetings and will summarize the significant issues 

raised and the relative merits of such issues in a report 

that will be issued through the FFIEC to Congress. 

In addition, due in part to feedback received during 

the EGRPRA review, the FDIC and the other FFIEC 

member entities are undertaking a community 

bank Call Report burden-reduction initiative. The 

objective of this initiative, which comprises actions 

in five areas, is to streamline and simplify regulatory 

reporting requirements for community banks. 

As an initial step, the banking agencies, under the 

auspices of the FFIEC, published proposed Call 

Report revisions in September 2015. The agencies 

began implementing these revisions, which include a 

limited set of burden-reducing changes, in the third 

quarter of 2016. 

As a second action, the banking agencies accelerated 

the start of a statutorily mandated review of the 

existing Call Report data items, which otherwise 

would have commenced in 2017. In support of 

this review, users of Call Report data at the FFIEC 

member entities are participating in a series of nine 

surveys of groups of Call Report schedules conducted 

over the 19-month period from mid-July 2015 until 

early February 2017. Users participating in these 

surveys have been asked to explain fully the need for 

each Call Report item they deem essential. 

A third action for the FFIEC members is to 

understand better, through industry dialogue, the 

aspects of community banks’ Call Report preparation 

processes that are significant sources of reporting 

burden. This outreach effort included on-site visits 

to nine community banks during the third quarter 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 37

of 2015. In the first quarter of 2016, two bank 

trade groups organized conference call meetings 

with small groups of community bankers in which 

representatives from the FFIEC members participated. 

During these bank visits and conference call meetings, 

the bankers explained how they prepare their Call 

Reports, identified which schedules or data items take 

a significant amount of time or manual processes to 

complete, and described the reasons for this. 

Fourth, building on the outcomes of the preceding 

two actions, the FFIEC and its member entities 

developed a separate, shorter, and more streamlined 

Call Report to be completed by eligible small 

institutions, as well as certain burden-reducing 

revisions to two other existing versions of the Call 

Report. The banking agencies, under the auspices 

of the FFIEC, published the proposal on August 15, 

2016, with a proposed effective date of March 31, 

2017. After considering the comments received, the 

FDIC and the other FFIEC members made certain 

modifications to the proposal. The FFIEC notified 

institutions about the outcome of the proposal on 

December 30, 2016. 

Finally, the FFIEC and the agencies will offer periodic 

banker training by teleconference and webinar to 

explain upcoming reporting changes and provide 

guidance on Call Report requirements that bankers 

find challenging.

The FDIC also streamlined and clarified certain 

regulations through the Office of Thrift Supervision 

(OTS) rule integration process. Under Section 316(b) 

of the Dodd-Frank Act, rules transferred from the 

former OTS to the FDIC and other successor agencies 

remain in effect “until modified, terminated, set aside, 

or superseded in accordance with applicable law’’ by 

the relevant successor agency, by a court of competent 

jurisdiction, or by operation of law. When the 

FDIC republished the transferred OTS regulations 

as new FDIC regulations applicable to state savings 

associations, the FDIC stated in the Federal Register 

notice that its staff would evaluate the transferred 

OTS rules and might later recommend incorporating 

the transferred OTS regulations into other FDIC 

rules, amending them, or rescinding them. This 

process began in 2013 and continues, involving 

publication in the Federal Register of a series of NPRs 

and final rules. In 2016, the FDIC issued an NPR to 

remove one transferred OTS rule, Minimum Security 

Procedures, and to make technical amendments to 

related FDIC rules for applicability to state savings 

associations. The FDIC removed a former OTS rule, 

Frequency of Safety and Soundness Examination, 

because it became unnecessary after FDIC rules 

were amended to bring insured state savings 

associations within its scope. Finally, in November 

2016, the FDIC’s Board approved the issuance of 

an NPR that proposes the removal of another OTS 

rule, Consumer Protection in Sales of Insurance, and 

corresponding revisions to the FDIC’s rule at 12 CFR 

Part 343 to ensure that Part 343 applies to FDICsupervised state banks and savings associations.

ACTIVITIES RELATED TO SYSTEMICALLY 

IMPORTANT FINANCIAL INSTITUTIONS

The FDIC is committed to addressing the unique 

challenges associated with the supervision, insurance 

with respect to the related insured depository 

institutions, and potential resolution of large and 

complex financial institutions. The FDIC’s ability to 

analyze and respond to risks in these institutions is 

particularly important, as they comprise a significant 

share of banking industry assets and deposits. The 

FDIC’s programs provide for a consistent approach to 

large and complex bank supervision nationwide, allow 

for the identification and analysis of industry-wide 

and institution-specific risks and emerging issues, 

and enable a quick response to these risks. The FDIC 

has segregated these activities in two groups to both 

ensure that supervisory attention is risk-focused and 

tailored to the risks presented by the nation’s largest 

banks and meet the FDIC’s responsibilities under the 

FDI Act and the Dodd-Frank Act. 

Complex Financial Institutions Program

The Dodd-Frank Act expanded the FDIC’s 

responsibilities pertaining to systemically important 
ANNUAL REPORT

38 MANAGEMENT’S DISCUSSION AND ANALYSIS

financial institutions (SIFIs) and nonbank financial 

companies designated by the FSOC.  The FDIC’s 

Complex Financial Institution (CFI) program within 

the Division of Risk Management Supervision 

(RMS) performs ongoing risk monitoring of SIFIs 

and FSOC-designated nonbank financial companies, 

provides backup supervision of the firms’ related 

insured depository institutions (IDIs), and evaluates 

the firms’ required resolution plans.  The CFI program 

also performs certain analyses that support the FDIC’s 

role as an FSOC member. 

Resolution Plans – Living Wills

Title I of the Dodd-Frank Act requires that certain 

large banking organizations and nonbank financial 

companies designated by the FSOC for supervision 

by the FRB periodically submit resolution plans to 

the FRB and the FDIC. Each Title I resolution plan, 

commonly known as a living will, must describe the 

company’s strategy for rapid and orderly resolution 

under the U.S. Bankruptcy Code in the event of 

material financial distress or failure of the company. 

Large Bank Holding Companies with Substantial 

Nonbank Assets 

Companies subject to the rule are divided into three 

groups: companies with $250 billion or more in 

nonbank assets, companies with nonbank assets 

between $100 billion and $250 billion, and all other 

companies with total consolidated assets of $50 billion 

or more. Companies in the first and second group 

were required to submit their resolution plans by 

July 1, 2015. These firms included Bank of America 

Corporation, Bank of New York Mellon Corporation, 

JP Morgan Chase & Co., State Street Corporation, 

Wells Fargo & Company, Goldman Sachs Group, 

Inc., Morgan Stanley, and Citigroup, Inc. 

In April 2016, the FDIC and FRB jointly announced 

determinations and provided firm-specific feedback 

on the resolution plans submitted in July 2015. 

The agencies also made public the Resolution Plan 

Assessment Framework, which explains the resolution 

plan requirement, provides further information on 

the determinations, and demonstrates the agencies’ 

processes for reviewing the plans. Additionally, the 

agencies released new guidance for the July 2017 

submissions.

Regarding the July 2015 submissions, the FDIC and 

FRB jointly determined that each of the resolution 

plans of Bank of America Corporation, Bank of 

New York Mellon Corporation, JP Morgan Chase 

& Co., State Street Corporation, and Wells Fargo & 

Company was not credible or would not facilitate an 

orderly resolution under the U.S. Bankruptcy Code, 

the statutory standard established in the Dodd-Frank 

Act. The agencies issued joint notices of deficiencies 

to these five firms detailing the deficiencies in 

their plans and the actions the firms must take to 

address them. Each firm was required remediate its 

deficiencies by October 1, 2016. Failure to remedy 

the deficiencies could subject the firms to more 

stringent capital, leverage, or liquidity requirements, 

or restrictions on the growth, activities, or operations 

of the firms as provided in the statute. 

The agencies jointly identified weaknesses in the 

2015 resolution plans of Goldman Sachs Group, 

Inc. and Morgan Stanley that the firms must address, 

but did not make joint determinations regarding the 

plans and their deficiencies. The FDIC determined 

that the plan submitted by Goldman Sachs Group, 

Inc. was not credible or would not facilitate an 

orderly resolution under the U.S. Bankruptcy Code, 

and identified deficiencies. The FRB identified a 

deficiency in Morgan Stanley’s plan and found that 

the plan was not credible or would not facilitate an 

orderly resolution under the U.S. Bankruptcy Code.

Neither agency found that Citigroup, Inc.’s 2015 

resolution plan was not credible or would not 

facilitate an orderly resolution under the U.S. 

Bankruptcy Code, although the agencies did identify 

shortcomings that the firm must address. 

All of the banking organizations that received 

feedback in April provided updates to their plans in 

October 2016. The FDIC and the FRB determined 

in December that Bank of America Corporation, 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 39

Bank of New York Mellon Corporation, JP Morgan 

Chase & Co., and State Street Corporation adequately 

remediated the deficiencies cited in their 2015 

resolution plans. 

The agencies jointly determined that Wells Fargo 

& Company did not adequately remedy two of the 

firm’s three deficiencies. In light of the nature of the 

deficiencies and the resolvability risks posed by the 

firm’s failure to remedy them, the agencies imposed 

restrictions on the growth of international and 

nonbank activities of Wells Fargo & Company and 

its subsidiaries. The firm is expected to file a revised 

submission addressing the remaining deficiencies 

by March 31, 2017. If, after reviewing the March 

submission, the agencies jointly determine that the 

deficiencies have not been adequately remedied, the 

agencies will limit the size of the firm’s nonbank and 

broker-dealer assets to levels in place on September 

30, 2016. If Wells Fargo & Company has not 

adequately remedied the deficiencies within two years, 

the statute provides that the agencies, in consultation 

with the FSOC, may jointly require the firm to divest 

certain assets or operations to facilitate an orderly 

resolution of the firm in bankruptcy.

Four foreign banking organizations (FBOs) also filed 

resolution plans in July 2015. The FDIC and FRB 

are currently reviewing those plans. 

Other Large Bank Holding Company Filers 

In December 2015, the third group of filers 

represented by 122 firms with total consolidated assets 

of $50 billion or more submitted resolution plans 

to the agencies. Of these, 34 resolution plans were 

either full or tailored plans that were required to take 

into account guidance provided by the agencies. The 

FDIC and FRB are jointly developing letters with 

feedback to these firms and guidance for their next 

resolution plan submissions on December 31, 2017.

The remaining 88 resolution plans were streamlined 

plans that required the firms to focus on material 

changes to their 2014 resolution plans, actions taken 

to strengthen the effectiveness of those plans, and, 

where applicable, actions to ensure any subsidiary 

insured depository institution would be adequately 

protected from the risk arising from the activities 

of nonbank affiliates of the firm. In May 2016, 

the agencies notified 84 firms that they would be 

permitted to file streamlined resolution plans for yearends 2016 through 2018.

In December 2016, the agencies received 86 

resolution plans from new filers or filers of 

streamlined plans. These plans include four full or 

tailored plans and 82 streamlined plans. 

Nonbank Firms 

Nonbank financial firms designated as systemically 

important by FSOC also are required to submit 

resolution plans for review by the FDIC and FRB. 

During December 2015, three nonbank firms—

American International Group, Inc. (AIG), General 

Electric Capital Corporation, Inc. (GECC), and 

Prudential, Inc.— submitted their resolution plans 

for review. On June 28, 2016, GECC’s systemically 

important financial institution designation was 

rescinded, and the joint review of its plan ceased. 

The agencies are expected to provide feedback on the 

remaining plans in early 2017.

In August 2016, the FDIC and FRB, in order to 

afford adequate time for the agencies to provide 

thorough feedback to the firms, and for the firms 

to develop responsive submissions, jointly in letters 

to AIG and Prudential, Inc., stated the agencies’ 

decision to extend their 2016 annual resolution 

plan submission date to December 31, 2017, and 

indicated that their 2016 resolution plan requirement 

would be satisfied by the submission of the 2017 

resolution plan. 

MetLife, which was designated as systemically 

important on December 18, 2014, challenged its 

designation in federal court and won a ruling on 

March 30, 2016, that rescinded its designation. The 

Department of Justice on behalf of the FSOC has 

appealed that decision. The U.S. Court of Appeals 

heard oral arguments in October 2016. MetLife will 

not be required to submit a resolution plan unless its 

designation is reinstated.
ANNUAL REPORT

40 MANAGEMENT’S DISCUSSION AND ANALYSIS

Extended Deadline for Submissions 

for Certain Organizations’ Plans 

In April 2016, the FDIC and FRB jointly announced 

determinations and provided firm-specific feedback 

on the 2015 resolution plans of eight systemically 

important, domestic banking institutions. The 

deadline for the next full plan submission for all eight 

domestic SIFIs is extended to July 1, 2017.

In July 2016, the FDIC and FRB jointly granted oneyear filing extensions to four FBOs. These FBOs will 

be required to submit their next resolution plans on 

July 1, 2017.

In August 2016, the FDIC and FRB jointly granted 

one-year filing extensions to 36 domestic bank 

holding companies and foreign banking organizations, 

as well as two nonbank financial companies designated 

by the FSOC. These firms will be required to submit 

their next resolution plans on December 31, 2017. 

Insured Depository Institution 

Resolution Plans

Part 360.10 of the FDIC Rules and Regulations 

requires an IDI with total assets of $50 billion or 

more to periodically submit to the FDIC a plan for its 

resolution in the event of its failure (IDI Rule). The 

IDI Rule requires each IDI meeting the criteria to 

submit a resolution plan that should allow the FDIC, 

as receiver, to resolve the IDI under Sections 11 and 

13 of the Federal Deposit Insurance Act (FDI Act) 

in an orderly manner that enables prompt access to 

insured deposits, maximizes the return from the sale 

or disposition of the failed IDI’s assets, and minimizes 

losses realized by creditors. The resolution plan must 

also describe how a selected strategy will be least costly 

to the Deposit Insurance Fund. 

In September 2015, the FDIC received 10 IDI 

resolution plans and in December 2015, an additional 

26 resolution plans. The FDIC’s review of these 

plans focused on the insolvency scenario, strategy 

and funding, readiness, corporate governance, and 

the guidance that the FDIC issued in December 

2014 for resolution plans required by the IDI Rule. 

Under the guidance, a covered IDI must provide a 

fully developed discussion and analysis of a range of 

realistic resolution strategies. To assist IDIs in writing 

their plans, the guidance includes direction regarding 

the elements that should be discussed in a fully 

developed resolution strategy and the cost analysis, 

clarification regarding assumptions made in the plan, 

and a list of significant obstacles to an orderly and 

least costly resolution that IDIs should address. The 

guidance applies to the resolution plans of the IDIs 

covered by the IDI Rule, as well as any new IDI 

meeting the threshold, commencing with the 2015 

resolution plan submissions.

In August 2016, the FDIC extended the deadline 

for 10 IDI resolution plans from September 1, 2016 

to October 1, 2017, and extended the deadline for 

26 IDI resolution plans from December 31, 2016 

to December 31, 2017. The FDIC is developing 

letters to these firms with feedback on their plans and 

guidance for their next resolution plan submissions.

In December 2016, the FDIC received two IDI plans 

from banks that are new filers. 

Orderly Liquidation Authority – 

Resolution Strategy Development

Under the Dodd-Frank Act, failed or failing financial 

companies are expected to file for reorganization or 

liquidation under the U.S. Bankruptcy Code, just as 

any failed or failing nonfinancial company would file. 

If resolution under the Bankruptcy Code would result 

in serious adverse effects to U.S. financial stability, the 

Orderly Liquidation Authority (OLA) set out in Title 

II of the Dodd-Frank Act provides a backup authority 

to the bankruptcy process. There are strict parameters 

on its use, however, and it can only be invoked 

under a statutorily prescribed recommendation and 

determination process, coupled with an expedited 

judicial review process.

The FDIC has been developing resolution strategies 

to carry out its orderly liquidation authorities. Firmspecific resolution strategies are under development 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 41

and are informed by the Title I plan submissions. In 

addition, preliminary work has begun to develop 

resolution strategies for the nonbank resolution plan 

filers and financial market utilities, particularly central 

counterparties (CCPs). 

In September 2016, the FDIC conducted a second 

operational exercise to validate the steps involved in 

carrying out a Title II resolution.  The first operational 

exercise conducted in December of 2015, focused 

on the initial appointment of the FDIC as receiver 

of a SIFI and the stabilization phase immediately 

following appointment.  This year’s exercise covered 

the operation of the bridge financial company and 

the wind down and liquidation of the firm.  Both 

operational exercises validated the systemic resolution 

framework and identified areas for further work. 

Monitoring and Measuring 

Systemic Risks 

The FDIC monitors risks related to SIFIs both 

at the firm level and industry wide, to inform 

supervisory planning and response, policy and 

guidance considerations, and resolution planning 

efforts. As part of this monitoring, the FDIC 

analyzes each company’s risk profile, governance 

and risk management capabilities, structure and 

interdependencies, business operation and activities, 

management information system capabilities, 

and recovery and resolution capabilities. 

The FDIC continues to work closely with other 

Federal regulators to analyze institution-specific and 

industry-wide conditions and trends, emerging risks 

and outliers, risk management, and the potential risk 

posed to financial stability by SIFIs and nonbank 

financial companies. To support risk monitoring that 

informs supervisory and resolution planning efforts, 

the FDIC has developed systems and reports that 

make extensive use of structured and unstructured 

data. SIFI monitoring reports are prepared on a 

routine and ad-hoc basis and cover a variety of aspects 

that include risk components, business lines and 

activity, market trends, and product analysis. 

Additionally, the FDIC has implemented and 

continues to expand upon various monitoring 

systems, including the Systemic Monitoring System 

(SMS). The SMS provides an individual risk profile 

and assessment for each SIFI by evaluating the 

level and change in metrics that serve as important 

barometers of overall risk. The SMS supports the 

identification of emerging risks within individual 

firms and the prioritization of supervisory and 

monitoring activities. The SMS also serves as an early 

warning system of financial vulnerability by gauging 

a firm’s proximity and speed to resolution event. 

Information from FDIC-prepared reports and systems 

are used to prioritize activities relating to SIFIs 

and to coordinate and communicate with the FRB 

and OCC. 

The FDIC also has conducted semi-annual 

“Day of Risk” meetings to present, discuss, and 

prioritize the review of emerging risks. For each 

major risk, executive management discussed the 

nature of the risk, exposures of SIFIs, and planned 

supervisory efforts.

Backup Supervision Activities for IDIs of 

Systemically Important Financial Institutions

Risk monitoring is enhanced by the FDIC’s backup 

supervision activities. In its backup supervisory role, 

as outlined in Sections 8 and 10 of the FDI Act, 

the FDIC has expanded resources and developed 

and implemented policies and procedures to guide 

backup supervisory activities. These activities include 

performing analyses of industry conditions and 

trends, insurance pricing support, participating in 

supervisory activities with other regulatory agencies, 

and exercising examination and enforcement 

authorities when necessary. At institutions for which 

the FDIC is not the primary federal regulator, staff 

works closely with other regulatory authorities to 

identify emerging risk and assess the overall risk 

profile of large and complex institutions. The FDIC, 

OCC, and FRB operate under a Memorandum 

of Understanding that establishes guidelines for 

coordination and cooperation to carry out their 
ANNUAL REPORT

42 MANAGEMENT’S DISCUSSION AND ANALYSIS

respective responsibilities, including the FDIC’s role 

as insurer. Under this agreement, the FDIC has 

assigned dedicated staff to IDI subsidiaries of 

systemically important financial institutions to 

enhance risk-identification capabilities and facilitate 

the communication of supervisory information. 

These individuals work with the staff of the FRB 

and OCC in monitoring risk at their assigned 

institutions. In 2016, staff from the FDIC’s Division 

of Risk Management Supervision participated in 

102 targeted examination activities with the FRB and 

53 targeted examination activities with the OCC. 

The reviews included, but were not limited to, 

engagement in Comprehensive Capital Analysis 

and Reviews, Dodd-Frank Act Stress Testing, 

quantitative model reviews, swaps margin model 

reviews, credit risk-related reviews, and the Shared 

National Credit Reviews.

Cross-Border Efforts

Advance planning and cross-border coordination 

for the resolution of Global-SIFIs (G-SIFIs) is 

essential to minimizing disruptions to global financial 

markets. Recognizing that the resolution of a G-SIFI 

creates complex international legal and operational 

concerns, the FDIC continues to work with foreign 

regulators to establish frameworks for effective crossborder cooperation. 

In October 2016, the FDIC hosted the second in 

an ongoing series of planned exercises to enhance 

coordination on cross-border resolution. The exercise 

was the culmination of planning since late 2015 and 

built on ongoing work by the international authorities 

in the area of cross-border resolution, including 

a staff-level exercise conducted earlier in July 

2016. The exercise also coincided with the annual 

international meetings in Washington, DC, sponsored 

by the World Bank and International Monetary Fund. 

Participants in the exercise included senior financial 

officials representing authorities in the United States, 

United Kingdom, and Europe, including the U.S. 

Department of Treasury, FRB, OCC, SEC, CFTC, 

Federal Reserve Bank of New York, HM Treasury, 

Bank of England (BOE), U.K. Prudential Regulation 

Authority, the Single Resolution Board, European 

Commission, and European Central Bank. 

The FDIC serves as a co-chair for all of the crossborder crisis management groups (CMGs) of 

supervisors and resolution authorities for the United 

States. In addition, the FDIC participates as a host 

authority in CMGs for foreign G-SIFIs. The FDIC 

and the European Commission continued their 

engagement through the joint Working Group, 

which is composed of senior executives at the FDIC 

and European Commission who meet to focus on 

both resolution and deposit insurance issues. In 

2016, the Working Group discussed cross-border 

bank resolution and resolution of CCPs, among 

other topics. FDIC staff also participated in the 

Joint EU-US Financial Regulatory Forum (formerly 

the Financial Markets Regulatory Dialogue) with 

representatives of the European Commission and 

other participating European Union authorities, 

including the Single Resolution Board and the 

European Banking Authority, and staffs of the 

Treasury Department, FRB, SEC, CFTC, and other 

participating U.S. agencies.

The FDIC continued to advance its working 

relationships with other jurisdictions that regulate 

G-SIFIs, including those in Switzerland, Japan, and 

Germany. In 2016, the FDIC had significant stafflevel engagements with these countries to discuss 

cross-border issues and potential impediments that 

could affect the resolution of a G-SIFI. 

Systemic Resolution Advisory Committee

The FDIC created the Systemic Resolution 

Advisory Committee (SRAC) in 2011 to receive 

advice and recommendations on a broad range 

of issues regarding the resolution of systemically 

important financial companies pursuant to the 

Dodd-Frank Act. Over the years, the SRAC has 

provided important advice to the FDIC regarding 

systemic resolutions and advised the FDIC on 

a variety of issues, including the following:
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 43

♦ the effects on financial stability and economic 

conditions resulting from the failure of a SIFI;

♦ the ways in which specific resolution strategies 

would affect stakeholders and their customers; 

♦ the tools available to the FDIC to wind down the 

operations of a failed organization; and

♦ the tools needed to assist in cross-border relations 

with foreign regulators and governments 

when a systemically important company has 

international operations. 

Members of the SRAC have a wide range of 

experience, including managing complex firms, 

administering bankruptcies, and working in the 

legal system, accounting field, and academia. The 

SRAC met on April 14, 2016, and worked through 

an agenda that addressed the status of Title I Living 

Wills, an update on Title II Orderly Liquidation 

Authority, and developments in the European Union. 

The SRAC heard from Dr. Elke König, the first Chair 

of the European Union’s Single Resolution Board, on 

developments within the EU and efforts to collaborate 

with the United States. and other jurisdictions. 

Financial Stability Oversight Council 

The FSOC was created by the Dodd-Frank Act in 

July 2010 to promote the financial stability of the 

United States. It is composed of 10 voting members, 

including the Chairperson of the FDIC, and five 

non-voting members. 

The FSOC’s responsibilities include the following:

♦ identifying risks to financial stability, responding 

to emerging threats in the financial system, and 

promoting market discipline;

♦ identifying and assessing threats that institutions 

may pose to financial stability and, if appropriate, 

designating a nonbank financial company to be 

supervised by the FRB and subject to heightened 

prudential standards;

♦ designating financial market utilities and 

payment, clearing, or settlement activities 

that are, or are likely to become, systemically 

important;

♦ facilitating regulatory coordination and 

information-sharing regarding policy 

development, rulemaking, supervisory 

information, and reporting requirements;

♦ monitoring domestic and international financial 

regulatory proposals and advising Congress 

and making recommendations to enhance the 

integrity, efficiency, competitiveness, and stability 

of U.S. financial markets; and

♦ producing annual reports describing, among 

other things, the Council’s activities and potential 

emerging threats to financial stability.

In 2016, the FSOC issued its sixth annual report. 

Generally, at each of its meetings, the FSOC discusses 

various risk issues. In 2016, the FSOC meetings 

addressed, among other topics, U.S. fiscal issues, 

interest-rate risk, credit risk, the FRB and European 

bank stress tests, the United Kingdom’s vote to leave 

the European Union (i.e., Brexit), cybersecurity, 

nonbank financial company designations, and 

housing reform.

DEPOSITOR AND 

CONSUMER PROTECTION

A major component of the FDIC’s mission is to 

ensure that financial institutions treat consumers 

and depositors fairly and operate in compliance with 

federal consumer protection, anti-discrimination, 

and community reinvestment laws. The FDIC 

also promotes economic inclusion to build and 

strengthen positive connections between insured 

financial institutions and consumers, depositors, 

small businesses and communities. 

Guidance

Loans in Areas Having Special Flood Hazards

In April 2016, the FDIC, OCC, FRB, NCUA, and 

Farm Credit Administration jointly issued interagency 
ANNUAL REPORT

44 MANAGEMENT’S DISCUSSION AND ANALYSIS

examination procedures pertaining to force placement 

of flood insurance, escrowing of flood insurance 

premiums and fees, exemptions to the mandatory 

flood insurance purchase requirement for detached 

structures, and civil money penalties.

Uniform Interagency Consumer 

Compliance Rating System

In 2016, the FFIEC finalized changes to the Uniform 

Interagency Consumer Compliance Rating System 

to reflect regulatory, supervisory, technological, and 

market changes since the system was established. 

The Consumer Compliance Rating System is a 

supervisory policy for evaluating financial institutions’ 

adherence to consumer compliance requirements. 

The revisions are designed to align the rating system 

more fully with the FFIEC agencies’ current riskbased, tailored examination approaches. The FFIEC 

new rating system will apply to all exams starting after 

March 31, 2017. 

Interagency Guidance on 

Deposit-Reconciliation Practices

In May 2016, the FDIC, OCC, FRB, NCUA, and 

Consumer Financial Protection Bureau (CFPB) issued 

guidance to alert financial institutions to supervisory 

expectations regarding deposit-reconciliation practices 

that may be detrimental to customers. This guidance 

addresses a set of situations in which customers 

make deposits to accounts and the dollar amount 

that the financial institution credits to that account 

differs from the total of the items deposited. Such 

discrepancies may arise in a variety of situations, 

including inaccuracies on the deposit slip, encoding 

errors, or poor image-capture. The result may be 

a detriment to the customer and a benefit to the 

financial institution if not appropriately reconciled.

Community Reinvestment Act

In July 2016, the FDIC, OCC, and FRB (i.e., the 

federal bank regulatory agencies with responsibility 

for CRA rulemaking) published final revisions to 

“Interagency Questions and Answers Regarding 

Community Reinvestment.” The Q&A provides 

additional guidance to financial institutions and the 

public regarding the agencies’ CRA regulations in 

the following areas: availability and effectiveness of 

retail banking services; innovative or flexible lending 

practices; community development-related issues; and 

responsiveness and innovativeness of an institution’s 

loans, qualified investments, and community 

development services.

Privacy of Consumer Financial Information 

In October 2016, the FDIC released revised 

interagency examination procedures for privacy 

of consumer financial information that reflect 

the statutory amendments made by the Fixing 

America’s Surface Transportation Act (FAST Act) 

to the Gramm-Leach-Bliley Act annual privacy 

notice requirements. The procedures contain new 

guidance on an exception to the annual privacy 

notice requirement.

Military Lending Act

In October 2016, the FDIC released revised 

interagency examination procedures that reflect the 

Department of Defense’s 2015 amendments to the 

implementing regulations of the Military Lending 

Act of 2006 (MLA) and its August 2016 interpretive 

rule that provides guidance on compliance with the 

MLA rule. The FDIC also provided accompanying 

guidance on its initial supervisory expectations 

in connection with its examinations of financial 

institutions for compliance with the MLA rule.

Promoting Economic Inclusion

The FDIC is strongly committed to promoting 

consumer access to a broad array of banking products 

to meet consumer financial needs. To promote 

financial access to responsible and sustainable 

products offered by IDIs, the FDIC:

♦ conducts research on the unbanked 

and underbanked;
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 45

♦ engages in research and development on 

models of products meeting the needs of 

lower-income consumers;

♦ supports partnerships to promote consumer 

access and use of banking services;

♦ advances financial education and literacy; and

♦ facilitates partnerships to support community 

and small business development.

Advisory Committee on Economic Inclusion 

The Advisory Committee on Economic Inclusion 

(ComE-IN) provides the FDIC with advice and 

recommendations on important initiatives focused on 

expanding access to mainstream banking services to 

underserved populations. This may include reviewing 

basic retail financial services such as low-cost, safe 

transaction accounts, affordable small-dollar loans, 

savings accounts, and other services that promote 

individual asset accumulation and financial stability. 

In May 2016, ComE-IN met to discuss payment 

system modernization, banks’ efforts to serve the 

unbanked and underbanked, new savings accounts 

designed to assist individuals with disabilities, and 

next steps planned to explore the potential of mobile 

financial services to further economic inclusion.

FDIC National Survey of Unbanked and 

Underbanked Households and Related Research

As part of its ongoing commitment to expanding 

economic inclusion in the United States, the FDIC 

works to fill the research and data gap regarding 

household participation in mainstream banking and 

the use of nonbank financial services. In addition, 

Section 7 of the Federal Deposit Insurance Reform 

Conforming Amendments Act of 2005 mandates that 

the FDIC regularly report on underserved populations 

and bank efforts to bring individuals and families 

into the conventional banking system. In response, 

the FDIC regularly conducts and reports on surveys 

of households and banks to inform the public and 

enhance the understanding of financial institutions, 

policymakers, regulators, researchers, academics, 

and others.

During 2016, the FDIC prepared a report on 

the 2015 FDIC National Survey of Unbanked and 

Underbanked Households, in partnership with the U.S. 

Census Bureau. The survey focused on basic checking 

and savings account ownership, but it also explored 

household use of alternative financial services to better 

understand the extent to which families are meeting 

their financial needs outside of mainstream financial 

institutions. In addition, the survey incorporated 

questions designed to assess the typical monthly 

financial services consumption patterns and to better 

understand households’ use of bank and nonbank 

consumer credit instruments. A full report was issued 

by the FDIC to the public on October 20, 2016. 

Those results are available on economicinclusion.gov. 

In 2016, the FDIC also published two qualitative 

research projects to develop further understanding of 

this area. In the first, the FDIC studied the economic 

inclusion potential of mobile financial services. The 

findings confirmed and provided more detailed 

insights into the opportunity of mobile financial 

services to improve the sustainability of banking 

relationships. As a follow-up to this report, the FDIC 

requested comments on opportunities to demonstrate 

empirically the benefits of mobile financial services. 

In the second project, the FDIC interviewed bankers 

At the 16th Annual Bank Research Conference, FDIC Chairman 

Martin J. Gruenberg presented findings from the 2015 National Survey 

of Unbanked and Underbanked Households.
ANNUAL REPORT

46 MANAGEMENT’S DISCUSSION AND ANALYSIS

and other stakeholders to understand better the 

programs, products, and strategies that banks are 

finding useful for attracting and retaining unbanked 

households as customers. In addition to summarizing 

findings from these interviews, the paper suggests 

several implications that banks and their partners can 

use to enhance these efforts.

Community and Small Business Development 

and Affordable Mortgage Lending 

In 2016, the FDIC provided technical assistance 

to banks and community organizations through 

61 outreach events designed to increase shared 

knowledge and support collaboration between 

financial institutions and other community, housing, 

and small business development resources and 

to improve knowledge about the Community 

Reinvestment Act. 

The FDIC’s work particularly emphasized sharing 

information to support bank efforts to provide 

prudent access to responsible, affordable mortgage 

credit. In 2016, the FDIC released the Affordable 

Mortgage Lending Guide and launched the Affordable 

Mortgage Lending Center, an online resource. These 

resources are designed to provide a comprehensive 

overview of the programs and services available to 

community banks to support affordable mortgage 

lending, particularly to low- and moderate-income 

borrowers. By year-end 2016, the Guide had already 

been downloaded more than 3,500 times, and 

more than 20,000 visitors have viewed the online 

Affordable Mortgage Lending Center. 

Also in 2016, the FDIC, other federal regulators, 

and federal and state housing agencies hosted 10 

affordable mortgage lending forums to offer technical 

assistance to help expand access to mortgage credit 

for low-or moderate-income (LMI) households. 

During these events, banks and program managers 

shared experiences with federal mortgage guarantee 

and secondary market programs and state and local 

down payment assistance and counseling programs. 

They offered details of their work so that audiences 

could gain a better understanding of how to address 

challenges and identify opportunities for expanding 

participation in these programs.

In addition, the FDIC sponsored sessions with 

interagency partners covering basic and advanced 

CRA training for banks. The agencies also offered 

CRA basics for community-based organizations 

as well as seminars on establishing effective 

bank-community collaborations for community 

development in more than 45 communities. The 

FDIC had a particular focus on encouraging 

community development initiatives in rural 

communities, including workshops that highlighted 

housing needs and programs, economic development 

programs, and community development financial 

institution collaborations, including those serving 

Native American communities.

Advancing Financial Education 

Financial education helps consumers understand 

and use bank products effectively and sustain 

a banking relationship over time. The FDIC 

continued to be a leader in developing high-quality, 

free financial education resources and pursuing 

collaborations to use those tools to educate the 

public. The FDIC’s work during 2016 dealt 

primarily with young people, consistent with the 

Financial Literacy and Education Commission 

focus on Starting Early for Financial Success.

Money Smart for Young People

Money Smart for Young People, a standards-aligned 

curriculum designed to involve teachers, students, 

and parents/caregivers in the learning process about 

money, was downloaded more than 39,000 times 

since its launch. In addition, 189 educators from 26 

school districts received professional development 

training to assist them in using Money Smart for Young 

People as part of a small pilot project. The FDIC used 

stakeholder input to enhance the curriculum, such as 

by making it available to download on a lesson-bylesson basis. 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 47

Money Smart for Older Adults

The FDIC also worked with the CFPB to launch an 

enhanced version of Money Smart for Older Adults, a 

free financial education curriculum first released in 

2013 to help prevent elder financial exploitation. The 

2016 enhancements include technical updates and 

revisions to the material based on input from trainers. 

The newly updated resource includes an expanded 

discussion on common types of elder financial 

exploitation such as tax, charity, debt collection, 

and grandchild imposter scams. The resource also 

incorporates federal resources that can be helpful on 

topics such as how to research an investment advisor.

Money Smart for Small Business

The FDIC continues to strengthen collaboration with 

the Small Business Administration (SBA) and other 

small business resources beyond training. In 2016, 

each of the six FDIC regional Community Affairs 

teams sponsored regional events for banks, the SBA, 

and the SBA Resource Partner Network (comprised 

of SCORE, Small Business Development Centers, 

Women’s Business Centers, and Veteran’s Business 

Outreach Centers) to convene and collaborate or 

provide technical assistance to small business leaders. 

Moreover, new training resources were released to 

encourage expanded use of Money Smart for Small 

Business, and the group of training providers identified 

as Money Smart for Small Business Alliance members 

continued to grow, reaching 143 at year-end. 

Youth Savings Pilot Program

The FDIC continues to collaborate with the CFPB 

to promote youth financial capability by giving 

teachers trusted resources to teach financial education, 

empowering parents and caregivers to discuss financial 

topics with their children, and emphasizing hands-on 

activities. To promote hands-on learning, the FDIC 

completed a report on the two-year Youth Savings 

Pilot Program in 2016. The pilot was designed 

to identify and highlight promising approaches 

to linking financial education to opportunities 

for school-aged children to open safe, low-cost 

savings accounts. The report, which draws from 

the experiences of 21 participating banks, describes 

three model approaches that have been used to build 

financial education programs and can be a resource for 

banks, schools, and others. Lessons learned from the 

pilot also were presented at the October 20 meeting of 

ComE-IN. In addition, FDIC hosted a symposium 

on October 21 to bring together representatives 

of the banks, schools, and non-profit partners that 

participated in the Youth Savings Pilot to discuss 

lessons learned and promising practices. 

The FDIC also developed and began to implement 

strategies to improve financial education and access to 

mainstream financial services for youth participating 

in youth employment programs funded through the 

Workforce Innovation and Opportunity Act (WIOA). 

For workforce providers and their partners teaching 

financial education, FDIC developed a tool to map 

Money Smart to WIOA’s financial education element, 

and drafted a Money Smart supplement to prepare 

youth to open their first accounts. The FDIC also led 

three webinars in collaboration with the Department 

of Labor to increase awareness of Money Smart among 

organizations that receive federal funding for youth 

employment. In addition, FDIC participated in three 

regional events in collaboration with the Department 

of Labor and FRB to strengthen the capacity of 

workforce development organizations to work with 

financial institutions on financial capability initiatives. 

Financial Education Webinars for Teachers

In 2016, the FDIC enhanced its Teacher Online 

Resource Center, a repository of resources from the 

FDIC and CFPB, to help teachers provide youth 

financial education. Five new videos that overview 

the key features of the curriculum were added. 

There were more than 27,000 visits to the site during 

the year. The FDIC continued to collaborate with 

strategic partners to increase awareness of the FDIC’s 

free resources. For example, more than 600 people 

participated in four conference call/webinars held in 

collaboration with the Jump$tart Coalition to make 

educators feel more comfortable using the curriculum. 
ANNUAL REPORT

48 MANAGEMENT’S DISCUSSION AND ANALYSIS

Partnerships for Access to 

Mainstream Banking 

The FDIC supports broadening access to mainstream 

banking for consumers and small business through 

work with the Alliances for Economic Inclusion 

(AEI), Bank On initiatives, local and state 

governments, and in collaboration with federal 

partners and many local and national organizations. 

The FDIC also collaborates with other financial 

regulatory agencies to provide information and 

technical assistance on community development to 

banks and community leaders across the country.  

Local collaborations are many and diverse. The FDIC 

sponsored or co-sponsored more than 125 events 

during 2016 that provided opportunities for partners 

to collaborate on increasing access to bank accounts 

and credit services, opportunities to build savings and 

improve credit histories, and initiatives to strengthen 

significantly the financial capability of community 

service providers who directly serve LMI consumers 

and very small businesses.

During 2016, the FDIC helped convene financial 

institutions, community organizations, local, state, 

and federal agencies, and other partners to support 

coalitions that bring unbanked and underbanked 

consumers and owners of small businesses into 

the financial mainstream through a wide range 

of partnership organizations. In the 14 AEI 

communities and in other areas, the FDIC helped 

committees and working groups of bankers and 

community leaders develop responses to the financial 

capability and services needs in their communities. To 

integrate financial capability into community services 

more effectively, the FDIC supported seminars and 

training sessions for community service providers and 

asset building organizations, workshops for financial 

coaches and counselors, promotion of savings 

opportunities for LMI people and communities, 

initiatives to expand access to savings accounts 

for all ages, outreach to bring larger numbers of 

people to expanded tax preparation assistance sites, 

and education for business owners to help them 

become bankable. 

The FDIC also provided information and technical 

assistance in the development of safe and affordable 

transaction and savings accounts and worked to 

connect unbanked consumers to those accounts. The 

FDIC provided technical assistance to local Bank 

On initiatives and asset-building coalition activities 

designed to reduce barriers to banking and increase 

access to the financial mainstream in more than 

28 communities and in 23 states. For example, the 

FDIC collaborated with the Cities for Financial 

Empowerment Fund to support its national efforts 

to work with local government and other partners 

to increase the access of LMI consumers to safe and 

affordable financial products and services. During 

2016, in collaboration with Cities for Financial 

Empowerment and local coalitions, the FDIC 

worked in seven Bank On cities to convene 14 forums 

and roundtables designed to advance strategies to 

expand access to safe deposit accounts. The FDIC 

also supported efforts to link consumers to financial 

education and savings through activities organized for 

designated Money Smart or “financial fitness” weeks 

or months, involving hundreds of consumer outreach 

events. Moreover, working with the national, local, 

state, and targeted (i.e., youth, military, and minority 

consumer-focused) America Saves campaigns, the 

FDIC continued to link banking companies to active 

efforts for engaging consumers with setting savings 

goals at tax time and year-round. 

The FDIC designed strategies to reach two particular 

segments of the population that the National Survey 

of Unbanked and Underbanked Consumers revealed 

are disproportionately unbanked and underbanked: 

people with disabilities and low- and moderateincome young people. The Advisory Committee 

on Economic Inclusion was engaged in discussions 

of financial education and outreach initiatives 

to promote economic inclusion of people with 

disabilities. The FDIC discussed its efforts to work 

with federal, nonprofit, and bank partners on the 

tax-advantaged savings accounts (known as ABLE 

Accounts), being launched by state governments. 

The FDIC also expanded efforts with local 

partners through 14 community events to bring 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 49

banks and organizations representing people with 

disabilities together at the state and local level. 

Youth benefiting from employment programs under 

the WIOA, who are generally low- or moderateincome, are required to be offered financial education. 

To support grantees of the Department of Labor 

and local initiatives, the FDIC developed trainthe-trainer resources and delivered webinars to 

enhance the capability of youth-serving employment 

organizations. Workforce development organizations, 

banks, the FRB and other partners convened in two 

communities to expand opportunities for young 

people to become financially capable and banked. 

Consumer Complaints and Inquiries

The FDIC helps consumers by receiving, 

investigating, and responding to consumer complaints 

about FDIC-supervised institutions and answering 

inquiries about banking laws and regulations, FDIC 

operations, and other related topics. In addition, the 

FDIC provides analytical reports and information 

on complaint data for internal and external use, and 

conducts outreach activities to educate consumers. 

The FDIC recognizes that consumer complaints and 

inquiries play an important role in the development 

of strong public and supervisory policy. Assessing 

and resolving these matters helps the agency identify 

trends or problems affecting consumer rights, 

understand the public perception of consumer 

protection issues, formulate policy that aids 

consumers, and foster confidence in the banking 

system by educating consumers about the protection 

they receive under certain consumer protection laws 

and regulations.

Consumer Complaints by Product and Issue

The FDIC receives complaints and inquiries by 

telephone, fax, U.S. mail, email, and online through 

the FDIC’s website. In 2016, the FDIC handled 

19,251 written and telephonic complaints and 

inquiries. Of this total, 10,884 related to FDICsupervised institutions. The FDIC responded 

to nearly 98 percent of these complaints within 

time frames established by corporate policy, and 

acknowledged 100 percent of all consumer complaints 

and inquiries within 14 days. As part of the 

complaint and inquiry handling process, the FDIC 

works with the other federal financial regulatory 

agencies to ensure that complaints and inquiries are 

forwarded to the appropriate agencies for response.

The FDIC carefully analyzes the products and issues 

involved in complaints about FDIC-supervised 

institutions. The number of complaints received 

about a specific bank product and issue can serve as a 

red flag to prompt further review of practices that may 

raise consumer protection or supervisory concerns. 

In 2016, the four most frequently identified consumer 

product complaints and inquiries about FDICsupervised institutions concerned credit cards 

(24 percent), consumer loans (14 percent), residential 

real estate (12 percent), and checking accounts 

(11 percent). Credit card complaints and inquiries 

most frequently described issues with collection 

practices and billing disputes, while the issues most 

commonly cited in correspondence about consumer 

loans were concerns with the reporting of erroneous 

information. Complaints and inquiries on residential 

real estate related to repossession/foreclosure and loan 

modification. The largest share of correspondence 

about checking accounts cited discrepancies in 

deposit accounts and refusal to cash checks or 

provide services. 

The FDIC also investigated 84 Fair Lending 

complaints alleging discrimination during 2016. The 

number of discrimination complaints investigated 

has fluctuated over the past several years but averaged 

approximately 84 complaints per year between 2011 

and 2016. Over this period, nearly 45 percent of 

the complaints investigated alleged discrimination 

based on the race, color, national origin, or ethnicity 

of the applicant or borrower; 24 percent related to 

discrimination allegations based on age; nearly 9 

percent involved the sex of the borrower or applicant; 

and roughly 5 percent concerned disability.
ANNUAL REPORT

50 MANAGEMENT’S DISCUSSION AND ANALYSIS

Consumer refunds generally involve the financial 

institution offering a voluntary credit to the 

consumer’s account, often as a direct result of 

complaint investigations and identification of a 

banking error or violation of law. In 2016, consumers 

received more than $531,349 in refunds from 

financial institutions as a result of the assistance 

provided by the FDIC’s Consumer Affairs Program.

Public Awareness of Deposit 

Insurance Coverage

An important part of the FDIC’s deposit insurance 

mission is to ensure that bankers and consumers have 

access to accurate information about the FDIC's 

rules for deposit insurance coverage. The FDIC has 

an extensive deposit insurance education program 

consisting of seminars for bankers, electronic tools for 

estimating deposit insurance coverage, and written 

and electronic information targeted to both bankers 

and consumers. 

The FDIC continued its efforts to educate bankers 

and consumers about the rules and requirements for 

FDIC insurance coverage during 2016. For example, 

as of December 31, 2016, the FDIC conducted six 

telephone seminars for bankers on deposit insurance 

coverage, reaching an estimated 5,282 bankers 

participating at approximately 1,509 bank sites 

throughout the country. The FDIC also created 

deposit insurance training videos that are available on 

the FDIC’s website and YouTube channel.

As of December 31, 2016, the FDIC received and 

answered approximately 90,412 telephone inquiries 

from consumers and bankers regarding deposit 

insurance-related inquiries. The FDIC Call Center 

addressed 40,374 of these inquiries, and deposit 

insurance subject matter experts handled the other 

50,038. In addition to telephone inquiries about 

deposit insurance coverage, the FDIC received 1,966 

written inquiries from consumers and bankers. Of 

these inquiries, 99 percent received responses within 

two weeks, as required by corporate policy.

Center for Financial Research 

The FDIC’s Center for Financial Research (CFR) 

encourages and supports innovative research on topics 

that are important to the FDIC’s roles as deposit 

insurer and bank supervisor. Research from CFR 

staff was accepted during the year for publication in 

leading banking, finance, and economics journals, 

and was presented at banking and finance seminars 

at major conferences, regulatory institutions, and 

universities. 

In 2016, the CFR and the Journal of Financial 

Services Research jointly sponsored the 16th Annual 

During the height of the financial crisis, more than three million copies of Bank Research Conference. The conference 

the brochure “Your Insured Deposits” were distributed across the nation.

FDIC Division of Insurance Director Diane Ellis opens the 16th Annual 

Bank Reserch Conference.
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 51

organizers received more than 550 submissions for the 

20 available presentation slots. Douglas Diamond, 

the Merton H. Miller Distinguished Service Professor 

of Finance at the University of Chicago, was the 

keynote speaker. CFR researchers also produced a 

number of new working papers in 2016. In addition, 

the CFR is administering the Small Business Lending 

Survey. Analysis and results of this survey will be 

made available in 2017.

RECEIVERSHIP MANAGEMENT

The FDIC has the unique mission of protecting 

depositors of insured banks and savings associations. 

No depositor has ever experienced a loss on the 

insured amount of his or her deposits in an FDICinsured institution due to a failure. When an 

institution closes, its chartering authority—the state 

for state-chartered institutions and the OCC for 

national banks and federal savings associations—

typically appoints the FDIC receiver, responsible for 

resolving the failed institution.

The FDIC employs a variety of strategies and 

business practices to resolve a failed institution. 

These strategies and practices are typically associated 

with either the resolution process or the receivership 

process. Depending on the characteristics of 

the institution, the FDIC may utilize several of 

these methods to ensure the prompt and smooth 

payment of deposit insurance to insured depositors, 

to minimize the impact on the DIF, and to speed 

dividend payments to uninsured depositors and other 

creditors of the failed institution.

The resolution process involves evaluating and 

marketing a failing institution, soliciting and 

accepting bids for the sale of the institution, 

determining which bid (if any) is least costly to the 

DIF, and working with the acquiring institution 

through the closing process.

To minimize disruption to the local community, 

the resolution process must be performed as quickly 

and efficiently as possible. The FDIC uses two 

basic resolution methods: purchase and assumption 

transactions and deposit payoffs.

The purchase and assumption (P&A) transaction 

is the most commonly used resolution method. 

Typically, in a P&A transaction, a healthy institution 

purchases certain assets and assumes certain liabilities 

of the failed institution. However, a variety of P&A 

transactions can be used. Because each failing bank 

situation is different, P&A transactions provide 

flexibility to structure deals that result in obtaining 

the highest value for the failed institution. For each 

possible P&A transaction, the acquirer may acquire 

either all of the failing institution’s deposits or only 

the insured portion of the deposits. 

From 2008 through 2013, loss sharing was offered by 

the FDIC in connection with P&A transactions. In 

a loss-share transaction, the FDIC, as receiver, agrees 

to share losses on certain assets with the acquirer, 

absorbing a significant portion (typically 80 percent) 

of future losses on assets that have been designated 

as “shared-loss assets” for a specific period of time 

(e.g., five to 10 years). The economic rationale 

for these transactions is that keeping assets in the 

banking sector and resolving them over an extended 

period of time can produce a better net recovery 

than the FDIC’s immediate liquidation of these 

assets. However, in recent years, as the markets have 

improved and begun to function more normally with 

both capital and liquidity returning to the banking 

industry, acquirers have become more comfortable 

with bidding on failing bank franchises without the 

protection of loss share. 

The FDIC continues to monitor compliance 

with shared-loss agreements by validating the 

appropriateness of loss-share claims; reviewing 

acquiring institutions’ efforts to maximize recoveries; 

ensuring consistent application of policies and 

procedures across both shared-loss and legacy 

portfolios; and confirming that the acquirers have 

sufficient internal controls, including adequate staff, 

reporting, and recordkeeping systems. At year-end 

2016, there were 148 receiverships with active 

shared-loss agreements and $20.8 billion in total 

shared-loss covered assets remained.
ANNUAL REPORT

52 MANAGEMENT’S DISCUSSION AND ANALYSIS

Deposit payoffs are only executed if all bids received 

for a P&A transaction (if any) are more costly to 

the DIF than liquidation. In the instance where no 

acceptable bids are received, the FDIC in its corporate 

capacity, makes sure that the customers of the failed 

institution receive the full amount of their insured 

deposits “as soon as possible.” 

The receivership process involves performing 

the closing functions at the failed institution; 

liquidating any remaining failed institution assets; 

and distributing any proceeds of the liquidation to 

the FDIC, uninsured depositors, and other creditors 

of the receivership. In its role as receiver, the FDIC 

uses a wide variety of strategies and tools to manage 

and sell retained assets. These include, but are not 

limited to, asset sales, securitizations, and structured 

transactions.

Financial Institution Failures

During 2016, there were five institution failures 

compared to eight failures in 2015. 

In all five transactions, the FDIC successfully 

contacted all known, qualified, and interested bidders 

to market these institutions, and also made insured 

funds available to all depositors within one business 

day of the failure. There were no losses on insured 

deposits, and no appropriated funds were required to 

pay insured deposits.

The following chart provides a comparison of failure 

activity over the past three years. 

FAILURE ACTIVITY 2014–2016

Dollars in Billions

2016 2015 2014

Total Institutions 5 8 18

Total Assets of 

Failed Institutions* $0.3 $6.7 $2.9

Total Deposits of 

Failed Institutions* $0.3 $4.9 $2.7

Estimated Loss to the DIF $0.05 $0.9 $0.4

*Total assets and total deposits data are based on the last quarterly 

Call Report or Thrift Financial Report (TFR) filed by the institution prior 

to failure.

Asset Management and Sales

As part of its resolution process, the FDIC tries to 

sell as many assets-in-liquidation as possible to an 

assuming institution. Assets that are retained by 

the receivership are promptly valued and liquidated 

in order to maximize the return to the receivership 

estate. For 95 percent of failed institutions, at least 

90 percent of the book value of marketable assets is 

marketed for sale within 90 days of an institution’s 

failure for cash sales and within 120 days for 

structured sales.

Cash sales of assets for banks that failed in 2016 

totaled $28.0 million in book value. 

As a result of the FDIC’s marketing and collection 

efforts, the book value of assets in inventory decreased 

by $1.5 billion (31 percent) in 2016.

The following chart shows the assets-in-liquidation 

inventory of these assets by asset type.

ASSETS-IN-LIQUIDATION INVENTORY 

BY ASSET TYPE

Dollars in Millions

Asset Type 12/31/16 12/31/15 12/31/14

Securities $183 $393 $470

Consumer Loans 8 22 36

Commercial Loans 19 62 123

Real Estate Mortgages 85 173 697

Other Assets/

Judgments 268 398 957

Owned Assets 40 113 120

Net Investments 

in Subsidiaries 100 122 123

Structured and 

Securitized Assets 2,614 3,524 5,150

TOTAL $3,317 $4,807 $7,676

Receivership Management Activities

The FDIC, as receiver, manages failed banks and their 

subsidiaries with the goal of expeditiously winding up 

their affairs. The oversight and prompt termination 

of receiverships help to preserve value for the 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 53

uninsured depositors and other creditors by reducing 

overhead and other holding costs. Once the assets of 

a failed institution have been sold and its liabilities 

extinguished, the final distribution of any proceeds is 

made, and the FDIC terminates the receivership. In 

2016, the number of receiverships under management 

decreased by 68 (15 percent) to 378. The significant 

increase in termination activity from 2015 was driven 

by the early termination of shared-loss agreements.

The following chart shows overall receivership activity 

for the FDIC in 2016.

RECEIVERSHIP ACTIVITY

Active Receiverships as of 12/31/15 446

New Receiverships 5

Receiverships Terminated 73

Active Receiverships as of 12/31/16 378

Protecting Insured Depositors 

The FDIC’s ability to attract healthy institutions 

to assume deposits and purchase assets of failed 

banks and savings associations at the time of failure 

minimizes the disruption to customers and allows 

assets to be returned to the private sector immediately. 

Assets remaining after resolution are liquidated by 

the FDIC in an orderly manner, and the proceeds 

are used to pay receivership creditors, including 

depositors whose accounts exceeded the insurance 

limit. During 2016, the FDIC paid dividends of 

$1.0 million to depositors whose accounts exceeded 

the insurance limit.

Professional Liability and 

Financial Crimes Recoveries 

The FDIC works to identify potential claims against 

directors, officers, securities underwriters and issuers, 

fidelity bond insurance carriers, appraisers, attorneys, 

accountants, mortgage loan brokers, title insurance 

companies, and other professionals who may have 

caused losses to an insured depository institution. 

Once a claim is determined to be meritorious and 

is expected to be cost-effective, the FDIC pursues 

those claims against the appropriate parties. 

During 2016, the FDIC recovered $463 million from 

professional liability claims and settlements. The 

FDIC also authorized lawsuits related to one failed 

institutions against six individuals for director and 

officer liability, and authorized another lawsuit for 

fidelity bond, liability insurance, attorney malpractice, 

appraiser malpractice, and securities law violations 

for residential mortgage-backed securities. As of 

December 31, 2016, the FDIC’s caseload included 

28 professional liability lawsuits (down from 50 at 

year-end 2015), 42 residential mortgage malpractice 

and fraud lawsuits (down from 87), and 173 open 

investigations (down from 264). The FDIC seeks 

to complete professional liability investigations and 

make decisions expeditiously on whether to pursue 

potential professional liability claims. During 2016, 

it completed investigations and made decisions on 91 

percent of the investigations related to failures that 

reached the 18-month point after the institution’s 

failure date, exceeding its annual performance target.

As part of the sentencing process for those convicted 

of criminal wrongdoing against an insured institution 

that later failed, a court may order a defendant to 

pay restitution or to forfeit funds or property to the 

receivership. The FDIC, working with the U.S. 

Department of Justice, collected $7.1 million from 

criminal restitution and forfeiture orders through 

December 31, 2016. Also as of that date, there were 

3,991 active restitution and forfeiture orders (up from 

3,831 at year-end 2015). This includes 111 orders 

held by the Federal Savings and Loan Insurance 

Corporation (FSLIC) Resolution Fund, (i.e., orders 

arising out of failed financial institutions that were in 

receivership or conservatorship by the FSLIC or the 

Resolution Trust Corporation).

MINORITY AND WOMEN INCLUSION

Consistent with the provisions of the Dodd-Frank 

Act, the FDIC continues to enhance its longstanding 

commitment to promote diversity and inclusion in 
ANNUAL REPORT

54 MANAGEMENT’S DISCUSSION AND ANALYSIS

employment opportunities and all business areas 

of the agency. The Office of Minority and Women 

Inclusion supports the FDIC’s mission through 

outreach efforts to ensure the fair inclusion and 

utilization of minority- and women-owned businesses, 

law firms, and investors in contracting and investment 

opportunities.

The FDIC relies on contractors to help meet 

its mission. In 2016, the FDIC awarded 287 

(24 percent) contracts to minority- and womenowned businesses (MWOBs) out of a total of 

1,181 issued. The FDIC awarded contracts with a 

combined value of $509 million in 2016, of which 

18 percent ($94 million) were awarded to MWOBs, 

compared to 25 percent for all of 2015. The FDIC 

paid $112 million of its total contract payments 

(27 percent) to MWOBs, under 461 active contracts. 

Referrals to minority- and women-owned law firms 

(MWOLFs) accounted for 44 percent of all legal 

referrals in 2016. Total payments to MWOLFs 

were $11 million in 2016 which is 14 percent of all 

payments to outside counsel, compared to 12 percent 

for all of 2015. 

In 2016, the FDIC participated in five minority bar 

association conferences and two stakeholder events in 

support of maximizing the participation of MWOLFs 

in FDIC legal contracting. Pursuant to Section 342 

of the Dodd-Frank Act, which requires an assessment 

of legal contractors’ internal workforce diversity 

practices, the Legal Division refined and continued 

to implement a system of compliance reviews of 

the top ten billing law firms (both majority-owned 

and MWOLFs). In addition, the FDIC advised 

the National Association of Credit Unions, the 

Federal Home Loan Bank Board, and State Farm 

Life Insurance Company on developing MWOLF 

outreach programs that mirror the FDIC’s.

In 2016, the FDIC participated in a total of 38 

business expos, one-on-one matchmaking sessions, 

and panel presentations. At these events, FDIC 

staff provided information and responded to 

inquiries regarding FDIC business opportunities 

for minorities and women. In addition to targeting 

MWOBs and MWOLFs, these efforts also targeted 

veteran-owned and small, disadvantaged businesses. 

Vendors were provided with the FDIC’s general 

contracting procedures, prime contractors’ contact 

information, and forecasts of possible upcoming 

solicitations. Also, vendors were encouraged 

to register through the FDIC’s Contractor 

Resource List (a principal database for vendors 

interested in doing business with the FDIC).

During 2016, the FDIC’s Office of Minority and 

Women Inclusion (OMWI) and the Division of 

Resolutions and Receiverships (DRR) collaborated 

to present three FDIC-sponsored asset purchaser 

workshops that were marketed extensively to 

minority- and women-owned investors and companies 

interested in learning about DRR’s sales processes. 

DRR speakers with strong backgrounds in their 

respective programs provided details on the various 

tools used by DRR to market assets and presented 

information to attendees on how to participate in the 

transactions and bid on assets offered for sale.

The asset purchaser workshops were held in San 

Juan, PR, Memphis, TN, and Jackson, TN. The 

events were attended by 76 prospective investors and 

included a special focus on owned real estate (ORE) 

investment opportunities to support a DRR auction 

of real estate properties scheduled after the outreach 

workshop. A segment regarding contracting services 

was also part of the event. Information regarding 

the Minority and Women Outreach Program can be 

found on the FDIC’s website at www.fdic.gov/mwop.

In addition, OMWI worked closely with the 

OMWIs of the OCC, FRB, CFPB, NCUA, and 

SEC to implement further Section 342(b)(2)(C) of 

the Dodd-Frank Act, which requires the agencies to 

develop standards to assess the diversity policies and 

practices of the entities they regulate. After finalizing 

of the Interagency Policy Statement Establishing Joint 

Standards for Assessing the Diversity Policies and 

Practices of Entities Regulated by the Agencies, the 

OMWI agencies received approval from the Office 

of Management and Budget (OMB) on February 

18, 2016, as required by the Paperwork Reduction 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 55

Act of 1995, to collect information from their 

regulated entities. Regulated entities were notified of 

the collection approval through the Federal Register

on July 13, 2016, and they may now submit selfassessments of their diversity policies and practices to 

the OMWI Director of their primary federal financial 

regulator. 

To facilitate uniform and systematic collection of 

information, OMWI developed and sought public 

comment on a diversity self-assessment template for 

regulated entities to use as they voluntarily assess 

their diversity policies and practices. When the 

comment period closed, OMWI requested approval 

to use the template from OMB. In the meantime, 

some regulated entities began submitting voluntary 

self-assessments to the FDIC OMWI Director in 

October 2016. The FDIC plans to use self-assessment 

information provided by its regulated entities to 

monitor progress and trends in the financial services 

industry, and to identify and publicize promising 

diversity policies and practices. 

INTERNATIONAL OUTREACH 

In 2016, the FDIC continued to play a leading role 

in supporting and promoting the global development 

of effective deposit insurance, bank supervision, 

and resolution regimes as integral components of 

the financial safety net. The FDIC worked with 

several standard-setting, regulatory, supervisory, and 

multi-lateral organizations, such as the Association of 

Supervisors of Banks of the Americas (ASBA), BCBS, 

Financial Services Volunteer Corps (FSVC), Financial 

Stability Board (FSB), International Association of 

Deposit Insurers (IADI), International Monetary 

Fund (IMF), and World Bank. FDIC staff also: 

facilitated training for several hundred participants 

from counterpart agencies around the world; 

participated in technical assistance missions to several 

countries; and conducted secondment programs to 

further the international community’s understanding 

and implementation of best practices in deposit 

insurance, bank supervision, and failure resolutions.

International Association of Deposit Insurers 

The IADI contributes to global financial stability by 

promoting international cooperation in the field of 

deposit insurance; providing guidance for establishing 

new, and enhancing existing, deposit insurance 

systems; and encouraging wide international contact 

among deposit insurers and other interested parties. 

IADI is now recognized as the standard-setting body 

for deposit insurance by major international financial 

institutions, including the FSB, BCBS, IMF, World 

Bank, and the European Community. Since its 

founding in 2002, IADI has grown from 26 members 

to 83 deposit insurers from nearly 80 jurisdictions. 

FDIC Chairman Martin J. Gruenberg served as the 

President of IADI and Chair of its Executive Council 

from November 2007 to October 2012. In October 

2015, FDIC Vice Chairman Thomas M. Hoenig was 

elected to a two-year term to serve as President of 

IADI and Chair of its Executive Council. 

IADI and the BCBS jointly issued the Core Principles 

for Effective Deposit Insurance Systems in 2009 and 

completed the accompanying Compliance Assessment 

Methodology for the Core Principles in 2010 (together, 

the Core Principles). The FSB later included the Core 

Principles as part of its Compendium of Key Standards 

for Sound Financial Systems. During the fall of 2014, 

IADI’s Executive Council and the FSB approved a 

revised set of Core Principles that replaced the original 

(2009) version. 

Subsequently, an IADI drafting team, led by FDIC 

staff, revised the Handbook for the Assessment of 

Compliance with the Core Principles. The handbook, 

which was approved by IADI in early 2016, is 

designed as a “how-to” guide, providing additional 

guidance on assessing a jurisdiction’s compliance with 

the Core Principles and includes lessons learned from 

collaboration with IMF and World Bank Financial 

Sector Assessment Program (FSAP) review teams, 

IADI Core Principles Regional Workshops, and 

IADI Self-Assessment Technical Assistance Program 

(SATAP) reviews. 
ANNUAL REPORT

56 MANAGEMENT’S DISCUSSION AND ANALYSIS

The IMF and World Bank use the Core Principles

and handbook in the context of the FSAP reviews, 

to assess the effectiveness of jurisdictions’ deposit 

insurance systems and practices. This represents an 

important milestone in the growing global acceptance 

of the role of effective deposit insurance systems 

in maintaining financial stability. IADI, under 

FDIC leadership of the Training and Conference 

Committee, has trained more than 300 staff members 

from more than 74 jurisdictions in conducting selfassessments for compliance with the Core Principles. 

FDIC executives and subject-matter experts partnered 

with IADI to develop and deliver several international 

programs in 2016. In April 2016, for example, 

Vice Chairman Thomas M. Hoenig joined global 

bank resolution and deposit insurance leaders at a 

conference jointly hosted by IADI’s North American, 

Latin American, and Caribbean Regional Committees 

entitled the “First Americas Deposit Insurance 

Forum.” The conference explored key issues related to 

safety net relationships and resolution. In addition, 

as IADI President and Chair of its Executive Council, 

the Vice Chairman led IADI’s 15th Annual General 

Meeting and Conference in October 2016, in Seoul, 

Korea. In supporting the Vice Chairman in this 

role, FDIC staff provides strategic guidance and 

leadership to multiple IADI standing committees, 

subcommittees, and working groups.

Association of Supervisors 

of Banks of the Americas 

The FDIC has been a member of ASBA since its 

founding in 1999 and supports ASBA’s mission of 

promoting sound bank supervision and regulation 

throughout the Western Hemisphere. ASBA 

represents bank supervisors from 36 jurisdictions. 

The FDIC strives to lead the development of strong 

supervisory policies in this hemisphere through 

actively engaging with the ASBA Board, chairing 

ASBA’s Training and Technical Committee, and 

providing leadership in many of the Association’s 

research and guidance working groups. 

In 2016, senior FDIC staff chaired the ASBA Training 

and Technical Committee, which is responsible for 

designing and implementing ASBA’s training strategy 

that advances the adoption of sound bank supervision 

policies and practices among members. ASBA’s 

training program reaches more than 600 members 

annually, with FDIC support, both as chair and 

training provider. 

Basel Committee on Banking Supervision 

The FDIC supported the development of sound 

regulatory policy through effective participation in the 

BCBS and its relevant groups, subgroups, and task 

forces. Major work areas for the BCBS include those 

conducted by the:

♦ Policy Development Group (PDG) and its:

• Coherence and Calibration Task Force

• Working Group on Capital

• Trading Book Group

• Leverage Ratio Group

• Working Group on Liquidity

• Risk Measurement Group

• Ratings and Securitization Work Stream

• Task Force on Standardized Approaches

• Task Force on Interest Rate Risk in the 

Banking Book

• Task Force on Scope of Regulatory 

Consolidation

• Research Task Force

• Quantitative Impact Study Working Group

♦ Supervision and Implementation Group and its:

• Working Group on Operational Risk

• Standards Implementation Group – 

Banking Book

• Standards Implementation Group – 

Trading Book

• Task Force on Supervisory Colleges

• Task Force on Pillar 2

♦ Macroprudential Supervision Group

♦ Accounting Experts Group and its:

• Audit Subgroup
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 57

♦ Anti-Money Laundering Expert Group

♦ Task Force on Simplicity and Comparability

♦ Task Force on Sovereign Exposures

♦ Working Group on Margining Requirements

♦ Over-the-Counter (OTC) Derivatives Regulators’ 

Forum

♦ OTC Derivatives Supervisor Group

♦ OTC Derivatives Assessment Team 

♦ Joint Central Counterparties Task Force

♦ Task Force on Securitization Markets

International Derivatives Work 

For many years, the FDIC has been actively engaged, 

in cooperation with market, prudential, and financial 

stability authorities, in policy development and 

regulatory activities in the derivatives markets. The 

FDIC also participates in the work of Derivatives 

Regulators’ Forum and the OTC Derivatives 

Supervisors Group.

International Capacity Building

The FDIC’s international efforts supporting the 

development of effective deposit insurance systems, 

bank supervisory practices, and bank resolution 

strategies continued to grow in 2016. FDIC staff 

contributed to international capacity building by 

providing study tours, secondments, and technical 

assistance to foreign counterparts. These engagements 

resulted in an enhanced dialogue between the FDIC 

and foreign counterparts in significant areas such as 

bank supervision and regulatory developments post 

crisis, the legal framework and operations for bank 

resolutions, and optimal funding strategies for 

deposit insurers.

FDIC management and staff hosted study tours 

for 267 individuals representing 28 jurisdictions 

during the year.  In addition, the FDIC’s Corporate 

University provided training in bank supervision 

and information technology to 78 foreign delegates 

from 16 jurisdictions.  In 2015, the FDIC launched a 

new training program for foreign regulatory officials, 

FDIC 101: An Introduction to Deposit Insurance, Bank 

Supervision, and Resolutions (FDIC 101), designed 

to provide a structured and comprehensive view of 

how the FDIC executes its key business functions.  

The FDIC held two sessions of FDIC 101 in 2016, 

which were attended by 62 students representing 31 

jurisdictions and the World Bank.

The FDIC contributes to global and domestic 

bank supervision, deposit insurance, and resolution 

initiatives by providing staff to support long-term 

projects and technical assistance missions led by the 

IMF, U.S. Treasury Department, FSVC, and World 

Bank. The FDIC continued longstanding programs 

for staffing details with the Treasury Department’s 

Office of International Banking and Securities 

Markets and secondments with FSVC to assist other 

Participants in the FDIC 101 class held in October 2016.
ANNUAL REPORT

58 MANAGEMENT’S DISCUSSION AND ANALYSIS

countries with financial regulation development. 

While at Treasury, FDIC detailees lend expertise in 

supervision, resolutions, deposit insurance, policymaking, and regulation for international banking. 

FSVC programs are often funded by other U.S. 

government offices and included project work on antimoney laundering during the year. 

The FDIC also completed short-term technical 

assistance missions to Greece and Kosovo to provide 

consultative assistance. The FDIC partnered with 

the World Bank to provide technical assistance to 

the Indonesia Deposit Insurance Corporation and 

with the Association of Supervisors of Banks of the 

Americas to provide training in deposit insurance and 

resolution systems to ASBA member countries.

The FDIC expands and strengthens international 

engagement by providing secondment opportunities 

to foreign officials to engage in long-term consultation 

with FDIC subject matter experts in areas related to 

bank supervision, deposit insurance, and resolutions. 

In 2016, two officials from the Deposit Insurance 

Corporation of Japan and the Korea Deposit 

Insurance Corporation concluded their secondments 

to the FDIC, and two new secondees from these 

agencies joined the FDIC, each for one-year 

assignments. Singapore also began a secondment with 

the FDIC in 2016.

Key International Engagements

The FDIC continued to advance policy making 

priorities and strengthen its relationships with key 

jurisdictions worldwide through its participation 

in a number of interagency dialogues in 2016. 

Jurisdictions participating in these dialogues included 

China, India, and member countries of the North 

American Free Trade Agreement (NAFTA).

EFFECTIVE MANAGEMENT OF 

STRATEGIC RESOURCES

The FDIC recognizes that it must effectively manage 

its human, financial, and technological resources 

to carry out its mission successfully and meet the 

performance goals and targets set forth in its annual 

performance plan. The FDIC must align these 

strategic resources with its mission and goals and 

deploy them where they are most needed to enhance 

its operational effectiveness and minimize potential 

financial risks to the DIF. Following are the FDIC’s 

major accomplishments in improving operational 

efficiency and effectiveness during 2016. 

Human Capital Management 

The FDIC’s human capital management programs 

are designed to attract, train and develop, reward, 

and retain a highly skilled, diverse, and resultsoriented workforce. In 2016, the FDIC workforce 

planning initiatives emphasized the need to plan for 

employees to fulfill current and future capabilities 

and leadership needs. This focus ensures that the 

FDIC has a workforce positioned to meet today’s core 

responsibilities and prepared to fulfill its mission in 

the years ahead. 

Strategic Workforce Planning and Readiness 

During 2016, the FDIC continued to develop and 

implement the Workforce Development Initiative, 

an integrated strategy to address workforce challenges 

and opportunities. The effort is focused on four 

broad objectives: 

1. attract and develop talented employees across 

the agency; 

2. enhance the capabilities of employees through 

training and diverse work experiences; 

3. encourage employees to engage in active career 

development planning and seek leadership roles 

in the FDIC; and 

4. build on and strengthen the FDIC’s operations 

to support these efforts. 

In 2016, the FDIC continued to develop the 

infrastructure, governance, programs, and processes 

to help meet its long-term workforce and leadership 

needs. The FDIC is committed to building and 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 59

expanding its talent pipeline to ensure succession 

challenges are met. To that end, the agency expanded 

its succession planning review process in 2016 

to include all managers. The effort began with a 

survey to assess the level of aspiration among current 

managers. More than two-thirds of current managers 

reported that they were interested in seeking higherlevel positions at the FDIC, demonstrating their 

ongoing interest in leadership development. Senior 

FDIC leaders from across the agency then convened 

to discuss leadership needs and strategies to address 

them, including efforts to develop the pipeline of the 

FDIC’s aspiring leadership pool. 

As a result of the succession planning review process, 

FDIC managers received recommendations to 

participate in diverse programs to enhance their 

leadership capabilities, including the Leadership 

Mentoring Program, external educational 

opportunities through Harvard’s Kennedy School 

of Government, executive coaching, and enriched 

management training. 

The FDIC also continued to focus on ensuring the 

availability of a workforce equipped to meet today’s 

responsibilities, while simultaneously preparing 

for future capability needs. The FDIC furthered 

development of a Career Paths initiative, targeted 

at non-supervisory employees at all levels, to 

promote the acquisition of cross-organizational skills 

and knowledge. Additional support is provided 

to employees seeking professional development 

opportunities through expanded career management 

services. 

The FDIC’s strategic workforce planning initiatives 

require a long-term and sustained focus to identify 

future workforce and leadership needs, assess current 

capabilities, support aspiration to management and 

leadership roles, and develop and source the talent 

to meet emerging workforce needs. Through further 

development of its human capital strategies, the FDIC 

will work to ensure that the future FDIC workforce 

is as prepared, capable, and dedicated as the one it 

has today.

Corporate Employee Program 

The FDIC’s Corporate Employee Program (CEP) 

sponsors the development of newly hired Financial 

Institution Specialists (FISs) in entry-level positions. 

The CEP encompasses major FDIC divisions where 

FISs are trained to become part of a highly effective 

workforce. During the first-year rotation within the 

program, FISs gain experience and knowledge in the 

core business of the FDIC, including the Division 

of Depositor and Consumer Protection (DCP), the 

Division of Risk Management Supervision (RMS), 

the Division of Resolutions and Receiverships 

(DRR), and the Division of Insurance (DIR). At 

the conclusion of the rotation period, FISs are placed 

within RMS, DCP, or DRR, where they continue 

FDIC’s Workplace Development Initiative Ambassadors meet at headquarters, joining a nationwide outreach effort.
ANNUAL REPORT

60 MANAGEMENT’S DISCUSSION AND ANALYSIS

their career path to become commissioned examiners 

or resolutions and receiverships specialists.

The CEP is an essential part of the FDIC’s ability 

to provide continual cross-divisional staff mobility. 

Since the CEP’s inception in 2005, 1,600 individuals 

have joined the FDIC through this multi-discipline 

program, and more than 770 have become 

commissioned examiners after successfully completing 

the program’s requirements.

The FDIC continues to sponsor the Financial 

Management Scholars Program (FMSP), an 

additional hiring source for the CEP. Participants 

in the FMSP complete an internship with the 

FDIC the summer following the conclusion of 

their junior year in college. The program serves 

as an additional venue to recruit talent.

Employee Learning and Development 

The FDIC is committed to the learning and 

development of its employees throughout their 

careers to enrich technical proficiency and leadership 

capacity, supporting career progression and succession 

management. In 2016, the FDIC focused on 

developing and implementing comprehensive 

curricula for its business lines to prepare employees to 

meet new challenges. Such training, which includes 

both classroom and online instruction for maximum 

flexibility, is a critical part of workforce and succession 

planning as more experienced employees become 

eligible for retirement.

The FDIC also offers a comprehensive leadership 

development program that combines core courses, 

electives, and other enrichment opportunities to 

develop employees at all levels. From new employees 

to new executives, the FDIC provides employees 

with targeted leadership development opportunities 

that align with key leadership competencies. In 

addition to a broad array of internally developed 

and administered courses, the FDIC also provides its 

employees with funds and/or time to participate in 

external training to support their career development. 

Corporate Risk Management 

During 2016, the Office of Corporate Risk 

Management (OCRM) worked with divisions and 

offices to advance common agency-wide processes 

for identifying, managing, and mitigating risks 

to the FDIC. OCRM assisted and supported the 

Enterprise Risk Committee, Executive Management 

Committee, External Risk Forum, and Management 

Risk Roundtable in reviewing risks across the agency. 

OCRM monitors material risks and mitigation 

activities, including the following:

♦ Risks posed by national and international 

economic, regulatory, and technological trends 

and developments that could potentially affect 

consumers, depositors, and the safety and 

soundness of the financial services industry.

♦ Risks to the agency’s ability to conduct its 

mission essential functions under all threats and 

conditions, as described in its Continuity of 

Operations Plan and Business Continuity Plan.

♦ Risks to the financial system posed by the 

extended current low level of interest rates.

♦ Risks posed by the analytical models used by 

the FDIC in identifying and managing risk. 

During 2016, OCRM and FDIC model owners 

developed tailored validation programs for all 

corporate models and began a series of model 

validations to assure soundness and mitigate 

model risk.

♦ Risks associated with governance and 

development of large-scale IT projects. 

♦ Risks posed to the agency and to the financial 

services industry by concerted attempts to 

penetrate, compromise, and disrupt the 

information systems that are essential to their 

effective operation. 

Employee Engagement 

The FDIC continually evaluates its human capital 

programs and strategies to ensure that the agency 

remains an employer of choice and that all of its 
2016

MANAGEMENT’S DISCUSSION AND ANALYSIS 61

employees are fully engaged and aligned with the 

mission. The FDIC uses the Federal Employee 

Viewpoint Survey mandated by Congress to solicit 

information from employees, and takes an agencywide approach to address key issues identified in the 

survey. In December 2016, the FDIC received an 

award from the Partnership for Public Service for 

being ranked number one among mid-sized federal 

agencies on the Best Places to Work in the Federal 

Government® list. Effective leadership is the primary 

factor driving employee satisfaction and commitment 

in the federal workplace, according to a report by the 

Partnership for Public Service. 

The FDIC’s Workplace Excellence (WE) program 

plays an important role in helping the FDIC engage 

employees. The WE program is composed of a 

national-level WE Steering Committee and Division/

Office WE Councils that are focused on maintaining, 

enhancing, and institutionalizing a positive workplace 

environment throughout the agency. In addition 

to the WE program, the FDIC-National Treasury 

Employees Union Labor Management Forum serves 

as a mechanism for the union and employees to have 

pre-decisional input on workplace matters. The WE 

program and Labor Management Forum enhances 

communication, provides additional opportunities 

for employee input and engagement, and improves 

employee empowerment.

Photo credit: Audrey Lew Photography

Director of the Division of Administration Arleas Upton Kea and Deputy 

to the Chairman and Chief Operating Officer Barbara A. Ryan accept 

the award for Best Places to Work in the Federal Government for midsized federal agencies from Max Stier, President and CEO of Partnership 

for Public Service.
THIS PAGE INTENTIONALLY LEFT BLANK
63

2016

PERFORMANCE 

RESULTS 

SUMMARY

II.
THIS PAGE INTENTIONALLY LEFT BLANK
2016

 65

SUMMARY OF 2016 PERFORMANCE RESULTS BY PROGRAM

The FDIC successfully achieved all of the 37 annual 

performance targets established in its 2016 Annual 

Performance Plan. There were no instances in which 

2016 performance had a material adverse effect on 

the successful achievement of the FDIC’s mission or 

its strategic goals and objectives regarding its major 

program responsibilities.

Additional key accomplishments are noted below.

Program Area Performance Results

Insurance ♦ Updated the FDIC Board of Directors on loss, income, and reserve ratio 

projections for the Deposit Insurance Fund (DIF) at the March and September 

meetings. 

♦ Briefed the FDIC Board of Directors in March and September on progress in 

meeting the goals of the Restoration Plan. 

♦ Published a final rule, which was adopted by the FDIC Board of Directors, 

to increase the reserve ratio of the DIF from 1.15 percent to 1.35 percent by 

September 30, 2020, by imposing a surcharge on insured depository institutions 

with assets of $10 billion or more. 

♦ Published a revenue-neutral final rule, which was adopted by the FDIC Board of 

Directors, to improve the risk-based deposit insurance assessment system applicable 

to established small banks to more accurately reflect risk.

♦ Completed reviews of the recent accuracy of the contingent loss reserves. 

♦ Researched and analyzed emerging risks and trends in the banking sector, financial 

markets, and the overall economy to identify issues affecting the banking industry 

and the DIF. 

♦ Provided policy research and analysis to FDIC leadership in support of the 

implementation of financial industry regulation, as well as support for testimony 

and speeches. 

♦ Published economic and banking information and analyses through the FDIC

Quarterly, FDIC Quarterly Banking Profile (QBP), FDIC State Profiles, and the 

Center for Financial Research Working Papers.

♦ Operated the Electronic Deposit Insurance Estimator (EDIE), which had 691,375 

user sessions in 2016. 

PERFORMANCE RESULTS SUMMARY
ANNUAL REPORT

66 PERFORMANCE RESULTS SUMMARY

Program Area Performance Results

Supervision ♦ A total of 395 institutions were assigned a composite CAMELS rating of 2 and had 

Matters Requiring Board Attention (MRBAs) identified in the examination reports. 

To ensure that MRBAs are being appropriately addressed at these institutions, the 

FDIC timely reviews progress reports and follows up with bank management as 

needed. More specifically, within six months of issuing the examination reports, 

the FDIC conducted appropriate follow up and review of these MRBAs at 381 

(96 percent) of these institutions. Follow up and review of the MRBAs at the 

remaining 14 institutions (4 percent) occurred more than six months after issuing 

the examination reports primarily due to delayed responses from some banks as 

well as the need for additional information in order to complete a full review. 

♦ Participated in the examinations of selected financial institutions, for which the 

FDIC is not the primary federal regulator, to assess risk to the DIF. 

♦ Implemented the strategy outlined in the work plan approved by the Advisory 

Committee on Economic Inclusion to support the expanded availability of 

SAFE accounts and the responsible use of technology, to expand banking services 

to the underbanked.

♦ Published an edition of Supervisory Insights that included information on strategic 

planning in an evolving earnings environment, new requirements related to 

investments in securitizations as a result of the Dodd-Frank Act, and recently 

released regulations and supervisory guidance.

Receivership Management ♦ Terminated at least 75 percent of new receiverships that are not subject to lossshare agreements, structured sales, or other legal impediments, within three years 

of the date of failure.

♦ Continued to enhance the FDIC’s ability to administer deposit insurance claims 

at large insured deposit institutions.

♦ Evaluated within 120 days all termination offers from Limited Liability 

Corporation (LLC) managing members to determine whether to pursue dissolution 

of those LLCs that are determined to be in the best overall economic interest of 

the participating receiverships.
2016

PERFORMANCE RESULTS SUMMARY 67

PERFORMANCE RESULTS BY PROGRAM AND STRATEGIC GOAL

2016 INSURANCE PROGRAM RESULTS

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

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Respond promptly to all 

insured financial institution 

closings and related 

emerging issues.

Number of business 

days after an institution 

failure that depositors 

have access to insured 

funds.

Insured depositor 

losses resulting from 

a financial institution 

failure.

Depositors have access to insured 

funds within one business day if the 

failure occurs on a Friday.

Depositors have access to insured 

funds within two business days if 

the failure occurs on any other day 

of the week.

Depositors do not incur any losses on 

insured deposits.

No appropriated funds are required to 

pay insured depositors.

ACHIEVED.

SEE PG. 52. 

ACHIEVED.

SEE PG. 52.

ACHIEVED.

SEE PG. 52.

ACHIEVED.

SEE PG. 52.

2 Disseminate data and 

analyses on issues and 

risks affecting the financial 

services industry to bankers, 

supervisors, the public, and 

other stakeholders on an 

ongoing basis.

Scope and timeliness 

of information 

dissemination on 

identified or potential 

issues and risks.

Disseminate results of research and 

analyses in a timely manner through 

regular publications, ad hoc reports, 

and other means.

Undertake industry outreach 

activities to inform bankers and other 

stakeholders about current trends, 

concerns, and other available FDIC 

resources.

ACHIEVED. 

SEE PG. 65.

ACHIEVED. 

SEE PG. 65.

3 Adjust assessment rates, as 

necessary, to achieve a DIF 

reserve ratio of at least 1.35 

percent of estimated insured 

deposits by September 30, 

2020.

Updated fund balance 

projections and 

recommended changes 

to assessment rates.

Demonstrated progress 

in achieving the goals of 

the Restoration Plan.

Provide updated fund balance 

projections to the FDIC Board of 

Directors by June 30, 2016, and 

December 31, 2016.

Recommend changes to deposit 

insurance assessment rates to the 

FDIC Board of Directors as necessary.

Provide progress reports to the FDIC 

Board of Directors by June 30, 2016, 

and December 31, 2016.

ACHIEVED. 

SEE PG. 65.

ACHIEVED. 

SEE PG. 65.

ACHIEVED. 

SEE PG. 65.
ANNUAL REPORT

68 PERFORMANCE RESULTS SUMMARY

2016 INSURANCE PROGRAM RESULTS (continued)

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

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

4 Expand and strengthen the 

FDIC’s participation and 

leadership role in supporting 

robust and effective deposit 

insurance programs, 

resolution strategies, and 

banking systems worldwide. 

Activities to expand 

and strengthen 

engagement with 

foreign jurisdictions 

and advance the FDIC’s 

global leadership and 

participation.

Provision of technical 

assistance to foreign 

counterparts.

Foster strong relationships with 

international banking regulators, 

deposit insurers, and other relevant 

authorities by engaging with 

strategically important jurisdictions 

and organizations on key international 

financial safety net issues.

Continue to play leadership roles 

within key international organizations 

and associations and promote sound 

deposit insurance, bank supervision, 

and resolution practices.

Promote continued enhancement of 

international standards and expertise 

in financial regulatory practices and 

stability through the provision of 

technical assistance and training to 

global financial system authorities.

Develop and foster closer relationships 

with bank supervisors in the reviews 

through the provision of technical 

assistance and by leading governance 

efforts in the Association of 

Supervisors of Banks of the Americas 

(ASBA).

ACHIEVED.

SEE PGS. 55-58.

ACHIEVED.

SEE PGS. 56-58.

ACHIEVED. 

SEE PGS. 55-56.

ACHIEVED. 

SEE PGS. 56-57.

5 Market failing institutions 

to all known qualified and 

interested potential bidders.

Scope of qualified 

and interested bidders 

solicited.

Contact all known qualified and 

interested bidders. 

ACHIEVED

SEE PG. 52.

6 Provide educational 

information to insured 

depository institutions and 

their customers to help 

them understand the rules 

for determining the amount 

of insurance coverage on 

deposit accounts.

Timeliness of responses 

to deposit insurance 

coverage inquiries.

Initiatives to increase 

public awareness of 

deposit insurance 

coverage changes.

Respond within two weeks to 95 

percent of written inquiries from 

consumers and bankers about FDIC 

deposit insurance coverage.

Conduct at least four telephone or 

in-person seminars for bankers on 

deposit insurance coverage.

ACHIEVED.

SEE PG. 50.

ACHIEVED.

SEE PG. 50.
2016

PERFORMANCE RESULTS SUMMARY 69

2016 SUPERVISION PROGRAM RESULTS

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

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Conduct on-site risk 

management examinations 

to assess the overall financial 

condition, management 

practices and policies, and 

compliance with applicable 

laws and regulations of 

FDIC-supervised depository 

institutions. When 

problems are identified, 

promptly implement 

appropriate corrective 

programs, and follow up 

to ensure that identified 

problems are corrected.

Percentage of required 

examinations conducted 

in accordance with 

statutory requirements 

and FDIC policy.

Follow-up actions on 

identified problems.

Conduct all required risk 

management examinations within the 

time frames prescribed by statute and 

FDIC policy.

For at least 90 percent of institutions 

that are assigned a composite 

CAMELS rating of 2 and for which 

the examination report identifies 

“Matters Requiring Board Attention” 

(MRBAs), review progress reports 

and follow up with the institution 

within six months of the issuance of 

the examination report to ensure that 

all MRBAs are being addressed.

ACHIEVED.

SEE PG. 24.

ACHIEVED.

SEE PG. 66. 

2 Assist in protecting the 

infrastructure of the U.S. 

banking system against 

terrorist financing, money 

laundering, and other 

financial crimes.

Percentage of required 

examinations conducted 

in accordance with 

statutory requirements 

and FDIC policy. 

Conduct all Bank Secrecy Act 

examinations within the time 

frames prescribed by statute and 

FDIC policy.

ACHIEVED.

SEE PG. 24.

3 More closely align regulatory 

capital standards with risk 

and ensure that capital is 

maintained at prudential 

levels.

U.S. implementation of 

internationally agreed 

regulatory standards.

Publish in 2016, a Notice of 

(proposed) Rulemaking on the Basel 

III Net Stable Funding Ratio.

ACHIEVED.

SEE PG. 21.

4 Implement strategies 

to promote enhanced 

information security, 

cybersecurity, and business 

continuity within the 

banking industry.

Enhancements to IT 

supervision program.

Establish a horizontal review program 

that focuses on the IT risks in large 

and complex supervised institutions 

and Technology Service Providers 

(TSPs).

Complete by June 30, 2016, 

examiner training and implement 

by September 30, 2016, the new 

IT examination work program 

to enhance focus on information 

security, cybersecurity, and business 

continuity.

ACHIEVED. 

SEE PG. 27.

ACHIEVED.

SEE PG. 27. 
ANNUAL REPORT

70 PERFORMANCE RESULTS SUMMARY

2016 SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Consumers’ rights are protected and FDIC-supervised 

institutions invest in their communities.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Conduct on-site CRA 

and consumer compliance 

examinations to assess 

compliance with applicable 

laws and regulations by 

FDIC-supervised depository 

institutions. When 

violations are identified, 

promptly implement 

appropriate corrective 

programs and follow up 

to ensure that identified 

problems are corrected.

Percentage of 

examinations conducted 

in accordance with the 

time frames prescribed 

by FDIC policy.

Implementation of 

corrective programs.

Conduct all required examinations 

within the time frames established by 

FDIC policy.

Conduct visits and/or follow-up 

examinations in accordance with 

established FDIC policies to ensure 

that the requirements of any required 

corrective program have been 

implemented and are effectively 

addressing identified violations.

ACHIEVED.

SEE PGS. 25-26. 

ACHIEVED.

SEE PGS. 25-26.

2 Effectively investigate and 

respond to written consumer 

complaints and inquiries 

about FDIC-supervised 

financial institutions.

Timely responses to 

written consumer 

complaints and inquiries.

Respond to 95 percent of written 

consumer complaints and inquiries 

within time frames established by 

policy, with all complaints and 

inquiries receiving at least an initial 

acknowledgement within two weeks.

ACHIEVED.

SEE PG. 49.

3 Promote economic inclusion 

and access to responsible 

financial services through 

supervisory, research, policy, 

and consumer/community 

affairs initiatives.

Completion of planned 

initiatives.

Publish the results of the 2015 FDIC 

National Survey of Unbanked and 

Underbanked Households.

Promote broader awareness of the 

availability of low-cost transaction 

accounts consistent with the FDIC’s 

Model SAFE transaction account 

template. 

Complete and present to the 

Advisory Committee on Economic 

Inclusions (ComE-IN) a report on 

the pilot Youth Savings Program 

(YSP) conducted jointly with 

the CFPB. 

ACHIEVED.

SEE PGS. 45-46.

ACHIEVED. 

SEE PG. 48.

ACHIEVED.

SEE PG. 47.
2016

PERFORMANCE RESULTS SUMMARY 71

2016 SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Large and complex financial institutions are resolvable in an orderly manner under bankruptcy.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Identify and address risks 

in large, complex financial 

institutions, including those 

designated as systemically 

important.

Completion of 

statutory and regulatory 

requirements under Title 

I of the DFA and Section 

360.10 of the FDIC 

Rules and Regulations.

Risk monitoring of 

large, complex financial 

institutions, bank 

holding companies and 

designated nonbanking 

firms.

In collaboration with the FRB 

continue to review all resolution plans 

subject to the requirements of Section 

165(d) of the DFA to ensure their 

conformance to statutory and other 

regulatory requirements. Identify 

potential impediments in those plans 

to resolution under the Bankruptcy 

Code.

Continue to review all resolution 

plans subject to the requirements of 

Section 360.10 of the IDI rule to 

ensure their conformance to statutory 

and other regulatory time frames. 

Identify potential impediments 

to resolvability under the Federal 

Deposit Insurance (FDI) Act.

Conduct ongoing risk analysis 

and monitoring of large, complex 

financial institutions to understand 

and assess their structure, business 

activities, risk profiles, and resolution 

and recovery plans.

ACHIEVED.

SEE PGS. 38-39.

ACHIEVED.

SEE PG. 40.

ACHIEVED.

SEE PG. 39.
ANNUAL REPORT

72 PERFORMANCE RESULTS SUMMARY

2016 RECEIVERSHIP MANAGEMENT 

PROGRAM RESULTS

Strategic Goal: Resolutions are orderly and receiverships are managed effectively.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Value, manage, and market 

assets of failed institutions 

and their subsidiaries in a 

timely manner to maximize 

net return.

Percentage of the assets 

marketed for each failed 

institution.

For at least 95 percent of insured 

institution failures, market at least 

90 percent of the book value of the 

institution’s marketable assets within 

90 days of the failure date (for cash 

sales) or 120 days of failure date (for 

structured sales).

ACHIEVED

SEE PG. 52.

2 Manage the receivership 

estate and its subsidiaries 

toward an orderly 

termination.

Timely termination of 

new receiverships.

Terminate at least 75 percent of new 

receiverships that are not subject to 

loss-share agreements, structured 

sales, or other legal impediments, 

within three years of the date of 

failure.

ACHIEVED.

SEE PG. 66.

3 Conduct investigations into 

all potential professional 

liability claim areas for all 

failed insured depository 

institutions, and decide 

as promptly as possible, 

to close or pursue each 

claim, considering the 

size and complexity of the 

institution.

Percentage of 

investigated claim areas 

for which a decision has 

been made to close or 

pursue the claim.

For 80 percent of all claim areas, 

make a decision to close or pursue 

professional liability claims within 18 

months of the failure of an insured 

depository institution.

ACHIEVED.

SEE PG. 53.

4 Ensure the FDIC’s 

operational readiness to 

administer the resolution of 

large, financial institutions, 

including those designated 

as systemically important.

Establishment of 

resolution plans and 

strategies.

Meetings of the Systemic 

Resolution Advisory 

Committee (SRAC).

Enhanced cross-border 

coordination and 

cooperation in resolution 

planning.

Refine plans to ensure the FDIC’s 

operational readiness to administer 

the resolution of large financial 

institutions including those 

designated as systemically important.

Hold a meeting of the Systemic 

Resolution Advisory Committee in 

early 2016 to obtain feedback on 

resolving SIFIs.

Continue to deepen and strengthen 

bilateral working relationships with 

key foreign jurisdictions. 

ACHIEVED.

SEE PGS. 40-41.

ACHIEVED.

SEE PGS. 42-43.

ACHIEVED.

SEE PG. 42.
2016

PERFORMANCE RESULTS SUMMARY 73

PRIOR YEARS’ PERFORMANCE RESULTS

Refer to the respective full Annual Report of prior years, located on the FDIC’s website for more information on 

performance results for those years. Shaded areas indicate no such target existed for that respective year.

INSURANCE PROGRAM RESULTS

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

Annual Performance Goals and Targets 2015 2014 2013

1. Respond promptly to all financial institution closings and related 

emerging issues.

♦ Depositors have access to insured funds within one business day 

if the failure occurs on a Friday. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Depositors have access to insured funds within two business days 

if the failure occurs on any other day of the week. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Depositors do not incur any losses on insured deposits. ACHIEVED. ACHIEVED. ACHIEVED.

♦ No appropriated funds are required to pay insured depositors. ACHIEVED. ACHIEVED. ACHIEVED.

2. Disseminate data and analyses on issues and risks affecting the 

financial services industry to bankers, supervisors, the public, 

and other stakeholders on an ongoing basis.

♦ Disseminate results of research and analyses in a timely manner 

through regular publications, ad hoc reports, and other means. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Undertake industry outreach activities to inform bankers and 

other stakeholders about current trends, concerns, and other 

available FDIC resources.

ACHIEVED. ACHIEVED. ACHIEVED.

3. Adjust assessment rates, as necessary, to achieve a DIF reserve 

ratio of at least 1.35 percent of estimated insured deposits by 

September 30, 2020.

♦ Provide updated fund balance projections to the FDIC 

Board of Directors by June 30, 2015, and December 31, 2015. ACHIEVED.

♦ Provide updated fund balance projections to the FDIC 

Board of Directors by June 30, 2014, and December 31, 2014. ACHIEVED.

♦ Provide updated fund balance projections to the FDIC 

Board of Directors by June 30, 2013, and December 31, 2013. ACHIEVED.

♦ Provide progress reports to the FDIC Board of Directors 

by June 30, 2015, and December 31, 2015. ACHIEVED.

♦ Provide progress reports to the FDIC Board of Directors 

by June 30, 2014, and December 31, 2014. ACHIEVED.

♦ Provide progress reports to the FDIC Board of Directors 

by June 30, 2013, and December 31, 2013. ACHIEVED.

♦ Recommend changes to deposit insurance assessment rates 

to the FDIC Board of Directors as necessary. ACHIEVED. ACHIEVED. ACHIEVED.
ANNUAL REPORT

74 PERFORMANCE RESULTS SUMMARY

INSURANCE PROGRAM RESULTS (continued)

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

Annual Performance Goals and Targets 2015 2014 2013

4. Expand and strengthen the FDIC’s participation and leadership role in 

supporting robust and effective deposit insurance programs, resolution 

strategies, and banking systems worldwide.

♦ Maintain open dialogue with counterparts in strategically important 

jurisdictions, international financial organizations and institutions, 

and partner U.S. agencies; and actively participate in bilateral 

interagency regulatory dialogues.

ACHIEVED.

♦ Maintain a leadership position in the International Association of 

Deposit Insurers (IADI) by conducting workshops and performing 

assessments of deposit insurance systems based on the methodology 

for assessment of compliance with the IADI Core Principles for 

Effective Deposit Insurance Systems (Core Principles), developing and 

conducting training on priority topics identified by IADI members, 

and actively participating in IADI’s Executive Council and Standing 

Committees.

ACHIEVED. ACHIEVED.

♦ Maintain open dialogue with the Association of Supervisors of Banks 

of the Americas (ASBA) to develop and foster relationships with bank 

supervisors in the region by providing assistance when necessary. 

ACHIEVED.

♦ Engage with authorities responsible for resolutions and resolutions 

planning in priority foreign jurisdictions and contribute to the 

resolution-related agenda of the Financial Stability Board (FSB) 

through active participation in the FSB’s Resolution Steering 

Group (ReSG).

ACHIEVED.

♦ Support visits, study tours, secondments, and longer-term technical 

assistance and training programs for representatives for foreign 

jurisdictions to strengthen their deposit insurance organizations, 

central banks, bank supervisors, and resolution authorities.

ACHIEVED.

♦ Maintain open dialogue with counterparts in strategically important 

countries as well as international financial institutions and partner 

U.S. agencies.

ACHIEVED.

♦ Engage with authorities responsible for resolutions and resolutions 

planning in priority foreign jurisdictions. ACHIEVED. 

♦ Contribute to the resolution-related agenda of the Financial Stability 

Board (FSB) through active participation in the FSB’s Resolution 

Steering Group and its working groups. 

ACHIEVED. 

♦ Actively participate in bilateral interagency regulatory dialogues. ACHIEVED. 

♦ Support visits, study tours, and longer-term technical assistance 

and training programs for foreign jurisdictions to strengthen their 

deposit insurance organizations, central banks, bank supervisors, and 

resolution authorities. 

ACHIEVED.
2016

PERFORMANCE RESULTS SUMMARY 75

INSURANCE PROGRAM RESULTS (continued)

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

Annual Performance Goals and Targets 2015 2014 2013

5. Expand and strengthen the FDIC’s participation and leadership role in 

supporting robust international deposit insurance and banking systems. 

♦ Maintain open dialogue with counterparts in strategically important 

countries as well as international financial institutions and partner 

U.S. agencies.

ACHIEVED.

♦ Conduct workshops and assessments of deposit insurance systems 

based on the methodology for assessment of compliance with the 

Basel Committee on Bank Supervision (BCBS) and the International 

Association of Depositor Insurers (IADI) Core Principles for Effective 

Deposit Insurance Systems.

ACHIEVED.

♦ Support visits, study tours, and longer-term technical assistance and 

training programs for foreign jurisdictions to strengthen their deposit 

insurance organizations, central banks, and bank supervisors.

ACHIEVED.

6. Provide educational information to insured depository institutions and 

their customers to help them understand the rules for determining the 

amount of insurance coverage on deposit accounts.

♦ Respond within two weeks to 95 percent of written inquiries from 

consumers and bankers about FDIC deposit insurance coverage. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Conduct at least 4 telephone or in-person seminars for bankers on 

deposit insurance coverage. ACHIEVED.

♦ Complete and post on the FDIC website videos for bankers and 

consumers on deposit insurance coverage. ACHIEVED.

♦ Conduct at least 12 telephone or in-person seminars for bankers on 

deposit insurance coverage. ACHIEVED.

♦ Conduct at least 15 telephone or in-person seminars for bankers on 

deposit insurance coverage. ACHIEVED.
ANNUAL REPORT

76 PERFORMANCE RESULTS SUMMARY

SUPERVISION PROGRAM RESULTS

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

Annual Performance Goals and Targets 2015 2014 2013

1. Conduct on-site risk management examinations to assess the 

overall financial condition, management practices and policies, and 

compliance with applicable laws and regulations of FDIC-supervised 

depository institutions. When problems are identified, promptly 

implement appropriate corrective programs, and follow up to ensure 

that identified problems are corrected. 

♦ Conduct all required risk management examinations within the time 

frames prescribed by statute and FDIC policy. ACHIEVED. ACHIEVED. ACHIEVED. 

♦ For at least 90 percent of institutions that are assigned a composite 

CAMELS rating of 2 and for which the examination report identifies 

“Matters Requiring Board Attention” (MRBAs), review progress 

reports and follow up with the institution within six months of the 

issuance of the examination report to ensure that all MRBAs are 

being addressed.

ACHIEVED.

♦ Implement formal or informal enforcement actions within 60 days for 

at least 90 percent of all institutions that are newly downgraded to a 

composite Uniform Financial Institutions Rating of 3, 4, or 5.

SUBSTANTIALLY 

ACHIEVED. 

SUBSTANTIALLY 

ACHIEVED.1

2. Assist in protecting the infrastructure of the U.S. banking system 

against terrorist financing, money laundering, and other financial 

crimes.

♦ Conduct all Bank Secrecy Act examinations within the time frames 

prescribed by statute and FDIC policy. ACHIEVED. ACHIEVED. ACHIEVED.

3. More closely align regulatory capital standards with risk and ensure 

that capital is maintained at prudential levels. 

♦ Publish by December 31, 2015, an interagency Notice of Proposed 

Rulemaking on implementation of the Basel III Net Stable Funding 

Ratio.

NOT

ACHIEVED.

♦ Finalize Basel III reporting instructions in time to ensure that 

institutions that are using the advanced approaches can implement 

Basel III in the first quarter of 2014 and that all IDIs can implement 

the standardized approach in the first quarter of 2015. 

ACHIEVED.

♦ Publish a final Basel Liquidity Coverage Rule, in collaboration with 

other regulators by December 31, 2014. ACHIEVED. 

♦ Publish a final rule implementing the Basel III capital accord in 

collaboration with other regulators, by December 31, 2014. ACHIEVED. 

♦ Finalize, in collaboration with other regulators, an enhanced U.S. 

supplementary leverage ratio standard by December 31, 2014. ACHIEVED. 

1 Erroneously reported as “Achieved” in the 2013 Annual Report. 
2016

PERFORMANCE RESULTS SUMMARY 77

SUPERVISION PROGRAM RESULTS (continued)

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

Annual Performance Goals and Targets 2015 2014 2013

♦ Complete by June 30, 2013, the review of comments and impact 

analysis of June 2012 proposed interagency changes to regulatory 

capital rules.

ACHIEVED.

♦ Issue by December 31, 2013, final regulatory capital rules. ACHIEVED.

4. Implement strategies to promote enhanced information security, 

cybersecurity, and business continuity within the banking industry.

♦ Enhance the technical expertise of the IT supervisory workforce. ACHIEVED.

♦ Working with FFIEC counterparts, update and strengthen IT 

guidance to the industry on cybersecurity preparedness. ACHIEVED.

♦ Working with the FFIEC counterparts, update and strengthen IT 

examination work programs for institutions and technology service 

providers (TSPs) to evaluate cybersecurity preparedness and cyber 

resiliency.

ACHIEVED.

♦ Improve information sharing on identified technology risks among the 

IT examination workforces of FFIEC member agencies. ACHIEVED.

5. Identify and address risks in financial institutions designated as 

systemically important.

♦ Conduct ongoing risk analysis and monitoring of SIFIs to understand 

their structure, business activities and risk profiles, and their resolution 

and recovery capabilities. 

ACHIEVED.

♦ Complete, in collaboration with the Federal Reserve Board and in 

accordance with statutory and regulatory time frames, all required 

actions associated with the review of resolution plans submitted by 

financial companies subject to the requirements of Section 165(d) of 

the Dodd-Frank Act.

ACHIEVED. 

♦ Hold at least one meeting of the Systemic Resolution Advisory 

Committee to obtain feedback on resolving SIFIs. ACHIEVED. 

♦ Complete, in collaboration with the Federal Reserve Board and in 

accordance with statutory and regulatory time frames, all required 

actions associated with the review of Section 165(d) resolution plans 

submitted under Title 1 of DFA.

ACHIEVED.

♦ Hold at least one meeting of the Systemic Resolution Advisory 

Committee to obtain feedback on resolving systemically important 

financial companies. 

ACHIEVED.

6. Implement strategies to promote enhanced cybersecurity within the 

banking industry. 

♦ In coordination with the FFIEC, implement recommendations to 

enhance the FDIC’s supervision of the IT risks at insured depository 

institutions and their technology service providers. 

ACHIEVED.
ANNUAL REPORT

78 PERFORMANCE RESULTS SUMMARY

SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.

Annual Performance Goals and Targets 2015 2014 2013

1. Conduct on-site CRA and consumer compliance examinations to assess 

compliance with applicable laws and regulations by FDIC-supervised 

depository institutions. When violations are identified, promptly 

implement appropriate corrective programs and follow up to ensure 

that identified problems are corrected. 

♦ Conduct all required examinations within the time frames established 

by FDIC policy. ACHIEVED.

♦ Conduct 100 percent of required examinations within the time frames 

established by FDIC policy.

SUBSTANTIALLY 

ACHIEVED. 

ACHIEVED.

♦ Conduct visits and/or follow-up examinations in accordance 

with established FDIC policies to ensure that the requirements of 

any required corrective program have been implemented and are 

effectively addressing identified violations. 

ACHIEVED. ACHIEVED.

♦ Conduct visits and/or follow-up examinations in accordance with 

established FDIC policies and ensure that the requirements of 

any required corrective program have been implemented and are 

effectively addressing identified violations.

ACHIEVED.

2. Effectively investigate and respond to written consumer complaints and 

inquiries about FDIC-supervised financial institutions.

♦ Respond to 95 percent of written consumer complaints and inquiries 

within time frames established by policy, with all complaints 

and inquiries receiving at least an initial acknowledgment within 

two weeks.

ACHIEVED. ACHIEVED. ACHIEVED.

3. Promote economic inclusion and access to responsible financial 

services through supervisory, research, policy, and consumer/

community affairs initiatives.

♦ Revise, test, and administer the 2015 FDIC National Survey of 

Unbanked and Underbanked Households. ACHIEVED.

♦ Support the Advisory Committee on Economic Inclusion in 

expanding the availability and awareness of low-cost transaction 

accounts, consistent with the FDIC’s SAFE account template.

ACHIEVED.

♦ In partnership with the Consumer Financial Protection Bureau, 

enhance financial capability among school-age children through 

(1) development and delivery of tailored financial education materials; 

(2) resources and outreach targeted to youth, parents, and teachers; 

and (3) implementation of a pilot youth savings program.

ACHIEVED.

♦ Publish the results of the 2013 FDIC National Survey of 

Unbanked and Underbanked Households (conducted jointly 

with the U.S. Census Bureau). 

ACHIEVED.
2016

PERFORMANCE RESULTS SUMMARY 79

SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.

Annual Performance Goals and Targets 2015 2014 2013

♦ Implement the strategy outlined in the work plan approved by the 

Advisory Committee on Economic Inclusion to support the expanded 

availability of Safe accounts and the responsible use of technology, to 

expand banking services to the underbanked.

ACHIEVED.

♦ Facilitate opportunities for banks and community stakeholders to 

address issues concerning access to financial services, community 

development, and financial education. 

ACHIEVED. 

♦ Conduct the third biennial FDIC National Survey of Unbanked 

and Underbanked Households (conducted jointly with the 

U.S. Census Bureau).

ACHIEVED.

♦ Initiate work on the Survey of Banks’ Efforts to Serve the Unbanked 

and Underbanked. DEFERRED.

♦ Implement the strategy outlined in the work plan approved by 

the Advisory Committee on Economic Inclusion to support 

the responsible use of technology to expand banking services to 

the unbanked.

ACHIEVED.

Strategic Goal: Large and complex financial institutions are resolvable in an orderly manner under bankruptcy.

1. Identify and address risks in large and complex financial institutions 

designated as systemically important.

♦ Conduct ongoing risk analysis and monitoring of large, complex 

financial institutions to understand and assess their structure, business 

activities, risk profiles, and resolution and recovery plans.

ACHIEVED. 

♦ Complete, in collaboration with the FRB and in accordance 

with statutory and regulatory time frames, a review of resolution 

plans submitted by individual financial companies subject to the 

requirements of section 165 (d) of DFA and Part 360.10 of the FDIC 

Rules and Regulations.

ACHIEVED.
ANNUAL REPORT

80

RECEIVERSHIP MANAGEMENT PROGRAM RESULTS

Strategic Goal: Resolutions are orderly and receiverships are managed effectively.

Annual Performance Goals and Targets 2015 2014 2013

1. Market failing institutions to all known qualified and interested 

potential bidders.

♦ Contact all known qualified and interested bidders. ACHIEVED. ACHIEVED. ACHIEVED.

2. Value, manage, and market assets of failed institutions and their 

subsidiaries in a timely manner to maximize net return.

♦ For at least 95 percent of insured institution failures, market at least 

90 percent of the book value of the institution’s marketable assets 

within 90 days of the failure date (for cash sales) or 120 days of the 

failure date (for structured sales).

ACHIEVED. ACHIEVED. ACHIEVED.

3. Manage the receivership estate and its subsidiaries toward an 

orderly termination.

♦ Terminate at least 75 percent of new receiverships that are not subject 

to loss-share agreements, structured sales, or other legal impediments, 

within three years of the date of failure. 

ACHIEVED. ACHIEVED. ACHIEVED.

4. Conduct investigations into all potential professional liability claim 

areas for all failed insured depository institutions, and decide as 

promptly as possible to close or pursue each claim, considering the 

size and complexity of the institution.

♦ For 80 percent of all claim areas, make a decision to close or pursue 

professional liability claims within 18 months of the failure date of an 

insured depository institution.

ACHIEVED. ACHIEVED. ACHIEVED.

5. Ensure the FDIC’s operational readiness to resolve a large, complex 

financial institution using the orderly liquidation authority in Title II 

of the DFA

♦ Update and refine firm-specific resolutions plans and strategies 

and develop operational procedures for the administration of a 

Title II receivership.

ACHIEVED. 

♦ Prepare for an early 2016 meeting of the Systemic Resolution 

Advisory Committee to obtain feedback on resolving SIFIs. ACHIEVED. 

♦ Continue to deepen and strengthen bilateral working relationships 

with key foreign jurisdictions. ACHIEVED. 

PERFORMANCE RESULTS SUMMARY
81

2016

FINANCIAL 

HIGHLIGHTS

III.
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2016

 83

In its role as deposit insurer of financial institutions, 

the FDIC promotes the safety and soundness of 

IDIs. The following financial highlights address the 

performance of the Deposit Insurance Fund.

DEPOSIT INSURANCE FUND 

PERFORMANCE

The DIF balance was $83.2 billion at year-end 2016, 

an increase of $10.6 billion from $72.6 billion at yearend 2015. The DIF’s comprehensive income totaled 

$10.6 billion for 2016 compared to comprehensive 

income of $9.8 billion during 2015. The $741 

million year-over-year increase was primarily due 

to a $1.2 billion increase in assessment revenue and 

a $248 million increase in interest revenue, partially 

offset by a $683 million lower negative provision for 

insurance losses.

Assessment revenue was $10.0 billion for 2016, as 

compared to $8.8 billion for 2015. The combination 

of assessment surcharges on larger institutions and 

lower regular assessment rates for all IDIs resulted in 

the net increase in assessment revenue of $1.2 billion.

The DIF’s interest revenue on U.S. Treasury securities 

for 2016 was $671 million compared to interest 

revenue of $423 million in 2015. The $248 million 

year-over-year increase reflects not only a larger 

investment portfolio balance, but also new, higheryielding investments. The DIF’s cash and U.S. 

Treasury investment portfolio balance was $74.8 

billion at year-end 2016, an increase of $11.4 billion 

from the year-end 2015 balance of $63.4 billion that 

was primarily due to assessment collections of $9.5 

billion and recoveries from resolutions of $3.6 billion, 

less operating expenses paid of $1.7 billion and 

resolution disbursements of $503 million.

The provision for insurance losses was negative 

$1.6 billion for 2016, compared to negative $2.3 

billion for 2015. The negative provision for 2016 

primarily resulted from a decrease of $1.7 billion 

in the estimated losses for institutions that failed 

in current and prior years, partially offset by an 

increase of $97 million in the contingent liability 

for anticipated failures. The $1.7 billion decrease 

in the estimated losses from failures was primarily 

attributable to (1) unanticipated recoveries of $545 

million in litigation settlements, professional liability 

claims, and tax refunds by the receiverships; (2) a 

$584 million decrease in the receiverships’ sharedloss liability; (3) a $406 million decrease in projected 

future receivership expenses and receivership legal 

and representation and warranty liabilities; and 

(4) a $231 million decrease resulting from greaterthan-anticipated collections from receiverships’ asset 

sales and updated estimated recovery rates applied 

to the remaining assets in liquidation. For the 

receiverships’ shared-loss liability, the decrease in 2016 

was primarily due to both the early termination of 

numerous shared-loss agreements (SLAs) during the 

period, which resulted in lower-than-anticipated losses 

on covered assets, and the unanticipated recoveries 

from SLAs where the commercial loss coverage has 

expired but the recovery period remains active.

FINANCIAL HIGHLIGHTS
ANNUAL REPORT

84 FINANCIAL HIGHLIGHTS

ESTIMATED DIF INSURED DEPOSITS

DEPOSIT INSURANCE FUND RESERVE RATIOS

Dollars in Billions

3-11 6-11 9-11 12-11 3-12 6-12 9-12 12-12 3-13 6-13 9-13 12-13 3-14 6-14 9-14 12-14 3-15 6-15 9-15 12-15 3-16 6-16 9-16

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

3-11 6-11 9-11 12-11 3-12 6-12 9-12 12-12 6-133-13 9-13 12-13 6-143-14 12-149-14 6-153-15 9-15 12-15 9-166-163-16

Fund Balance as a Percent of Estimated Insured Deposits

0.4

0.6

0.8

1.2

1.0

0.2

0.0

-0.2

SOURCE: Commercial Bank Call and Thrift Financial Reports

Note: Beginning in fourth quarter 2010 through fourth quarter 2012, estimated insured deposits include the entire balance of 

noninterest-bearing transaction accounts.
2016

FINANCIAL HIGHLIGHTS 85

 DEPOSIT INSURANCE FUND SELECTED STATISTICS

Dollars in Millions

For the years ended December 31

2016 2015 2014

Financial Results

Revenue $10,674 $9,304 $8,965 

Operating Expenses 1,715 1,687 1,664 

Insurance and Other Expenses (includes provision for losses) (1,564) (2,240) (8,299)

Net Income 10,524 9,857 15,600 

Comprehensive Income 10,561 9,820 15,589 

Insurance Fund Balance $83,162 $72,600 $62,780 

Fund as a Percentage of Insured Deposits (reserve ratio) 1.18%3 1.11% 1.01%

Selected Statistics

Total DIF-Member Institutions1 5,9803 6,182 6,509 

Problem Institutions 1323 183 291 

Total Assets of Problem Institutions $24,9173 $46,780 $86,712 

Institution Failures 5 8 18 

Total Assets of Failed Institutions in Year2 $277 $6,706 $2,914 

Number of Active Failed Institution Receiverships 378 446 481 

1

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

2

 Total Assets data are based upon the last Call Report filed by the institution prior to failure.

3 As of September 30, 2016.
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87

2016

BUDGET AND 

SPENDING

IV.
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2016

BUDGET AND SPENDING 89

FDIC OPERATING BUDGET

The FDIC segregates its operating budget and 

expenses into two discrete components: ongoing 

operations and receivership funding. The receivership 

funding component represents expenses resulting 

from financial institution failures and is, therefore, 

largely driven by external forces, while the ongoing 

operations component accounts for all other 

operating expenses and tends to be more controllable 

and estimable. FDIC operating expenses totaled 

$1.9 billion in 2016, including $1.7 billion in 

ongoing operations and $260 million in receivership 

funding. This represented approximately 93 percent 

of the approved budget for ongoing operations and 

65 percent of the approved budget for receivership 

funding for the year.3

The approved 2017 FDIC Operating Budget of 

approximately $2.2 billion is segregated into three 

components, consisting of $1.8 billion for ongoing 

operations, $300 million for receivership funding, 

and $37 million for the Office of Inspector General 

(OIG). The level of approved ongoing operations 

budget for 2017 is approximately $45 million 

(3 percent) higher than the 2016 ongoing operations 

budget excluding the OIG, while the approved 

receivership funding budget is $100 million 

(25 percent) lower than the 2016 receivership 

funding budget.

As in prior years, the 2017 budget was formulated 

primarily on the basis of an analysis of projected 

workload for each of the Corporation’s three major 

business lines and its program support functions. The 

most significant factor contributing to the decrease in 

the FDIC Operating Budget is the improving health 

of the industry and the resultant reduction in failure 

related workload. Although savings in this area are 

being realized, the 2017 receivership funding budget 

provides resources for contractor support as well as 

non-permanent staffing for DRR, the Legal Division, 

and other organizations should workload in these 

areas require an immediate response.

FDIC EXPENDITURES 2007–2016

Dollars in Millions

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$0

3

 The numbers in this paragraph will not agree with the DIF and FRF financial statements because of differences in how items 

are classified.
ANNUAL REPORT

90 BUDGET AND SPENDING

The FDIC’s Strategic Plan and Annual Performance 

Plan provide the basis for annual planning and 

budgeting for needed resources. The 2016 aggregate 

budget (for corporate, receivership, and investment 

spending) was $2.2 billion, while actual expenditures 

for the year were under $2.0 billion, about $0.1 

billion less than 2015 expenditures.

Over the past decade the FDIC’s expenditures have 

varied in response to workload. During the last 

several years, expenditures have fallen, largely due to 

decreasing resolution and receivership activity. To a 

lesser extent decreased expenses have resulted from 

supervision-related costs associated with the oversight 

of fewer troubled institutions. 

2016 BUDGET AND EXPENDITURES BY PROGRAM

(including Allocated Support)

Dollars in Millions

Receivership

Management

Program

Insurance

Program

Supervision

and Consumer

Protection 

Program

General and

Administrative

$1,200

Budget

$900

$600

$300

$0

Expenditures

2016 BUDGET AND EXPENDITURES 

BY PROGRAM

(Excluding Investments)

The FDIC budget for 2016 totaled $2.2 billion. 

Budget amounts were allocated as follows: $1.1 billion 

or 49 percent, to the Supervision and Consumer 

Protection program; $575 million or 26 percent, to 

the Receivership Management program; $331 million, 

or 15 percent, to the Insurance program; and $221 

million, or 10 percent, to Corporate General and 

Administrative expenditures.

Actual expenditures for the year totaled $1.9 

billion. Actual expenditures amounts were allocated 

as follows: $995 million, or 51 percent, to the 

Supervision and Consumer Protection program; 

$468 million, or 24 percent, to the Receivership 

Management program; $292 million, or 15 percent, 

to the Insurance program; and $195 million, or 10 

percent, to Corporate General and Administrative 

expenditures. 
2016

BUDGET AND SPENDING 91

INVESTMENT SPENDING

The FDIC instituted a separate Investment Budget 

in 2003 to provide enhanced governance of major 

multi-year development efforts. The FDIC has a 

disciplined process for reviewing proposed new 

investment projects and managing the construction 

and implementation of approved projects. Proposed 

IT projects are carefully reviewed to ensure that 

they are consistent with the Corporation’s enterprise 

architecture. The project approval and monitoring 

processes also enable the FDIC to be aware of risks 

to the major capital investment projects and facilitate 

appropriate, timely intervention to address these risks 

throughout the development process. An investment 

portfolio performance review is provided to the 

FDIC’s Board of Directors on a quarterly basis. 

From 2007-2016 investment spending totaled $130 

million, and is estimated at $11 million for 2017. 

INVESTMENT SPENDING 2007 - 2016

Dollars in Millions

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

$25

$15

$5

$10

$20

$30

$0
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93

2016

FINANCIAL 

SECTION

V.
ANNUAL REPORT

94 FINANCIAL SECTION

DEPOSIT INSURANCE FUND (DIF)

Federal Deposit Insurance Corporation

Deposit Insurance Fund Balance Sheet 

As of December 31

(Dollars in Thousands) 2016 2015

ASSETS

 Cash and cash equivalents $ 1,332,966 $ 876,344

 Investment in U.S. Treasury securities (Note 3) 73,511,953 62,496,959

 Assessments receivable, net (Note 9) 2,666,267 2,172,472

 Interest receivable on investments and other assets, net 526,195 417,871

 Receivables from resolutions, net (Note 4) 7,790,403 11,578,079

 Property and equipment, net (Note 5) 357,575 378,250

Total Assets $ 86,185,359 $ 77,919,975

LIABILITIES

 Accounts payable and other liabilities $ 238,322 $ 272,571

 Liabilities due to resolutions (Note 6) 2,073,375 4,419,195

 Postretirement benefit liability (Note 12) 232,201 233,000

 Contingent liabilities:

 Anticipated failure of insured institutions (Note 7) 477,357 394,588

 Litigation losses and other (Notes 7 and 8) 2,589 386

Total Liabilities 3,023,844 5,319,740

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

FUND BALANCE

 Accumulated Net Income 83,166,991 72,643,474

ACCUMULATED OTHER COMPREHENSIVE INCOME

 Unrealized gain (loss) on U.S. Treasury securities, net (Note 3) 20,271 (9,191)

 Unrealized postretirement benefit loss (Note 12) (25,747) (34,048)

Total Accumulated Other Comprehensive Income (Loss) (5,476) (43,239)

Total Fund Balance 83,161,515 72,600,235

Total Liabilities and Fund Balance $ 86,185,359 $ 77,919,975

The accompanying notes are an integral part of these financial statements.
2016

FINANCIAL SECTION 95

DEPOSIT INSURANCE FUND (DIF)

Federal Deposit Insurance Corporation

Deposit Insurance Fund Statement of Income and Fund Balance 

For the Years Ended December 31

(Dollars in Thousands) 2016 2015

REVENUE

 Assessments (Note 9) $ 9,986,615 $ 8,846,843

 Interest on U.S. Treasury securities 671,377 422,782

 Other revenue 16,095 33,913

Total Revenue 10,674,087 9,303,538

EXPENSES AND LOSSES

 Operating expenses (Note 10) 1,715,011 1,687,234

 Provision for insurance losses (Note 11) (1,567,950) (2,251,320)

 Insurance and other expenses 3,509 10,936

Total Expenses and Losses 150,570 (553,150)

Net Income 10,523,517 9,856,688

OTHER COMPREHENSIVE INCOME

 Unrealized gain (loss) on U.S. Treasury securities, net 29,462 (60,333)

 Unrealized postretirement benefit gain (Note 12) 8,301 23,703

Total Other Comprehensive Income (Loss) 37,763 (36,630)

Comprehensive Income 10,561,280 9,820,058

Fund Balance - Beginning 72,600,235 62,780,177

Fund Balance - Ending $ 83,161,515 $ 72,600,235

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

96 FINANCIAL SECTION

DEPOSIT INSURANCE FUND (DIF)

Federal Deposit Insurance Corporation

Deposit Insurance Fund Statement of Cash Flows

For the Years Ended December 31

(Dollars in Thousands) 2016 2015

OPERATING ACTIVITIES

Provided by:

 Assessments $ 9,488,215 $ 8,677,795

 Interest on U.S. Treasury securities 1,523,215 2,064,836

 Recoveries from financial institution resolutions 3,601,149 6,329,454

 Miscellaneous receipts 16,057 147,001

Used by:

 Operating expenses (1,671,768) (1,631,297)

 Disbursements for financial institution resolutions (502,716) (2,282,721)

 Miscellaneous disbursements (8,998) (107,478)

Net Cash Provided by Operating Activities 12,445,154 13,197,590

INVESTING ACTIVITIES

Provided by:

 Maturity of U.S. Treasury securities 26,517,122 19,590,780

Used by:

 Purchase of U.S. Treasury securities (38,474,320) (33,766,067)

 Purchase of property and equipment (31,334) (60,479)

Net Cash (Used) by Investing Activities (11,988,532) (14,235,766)

Net Increase (Decrease) in Cash and Cash Equivalents 456,622 (1,038,176)

Cash and Cash Equivalents - Beginning 876,344 1,914,520

Cash and Cash Equivalents - Ending $ 1,332,966 $ 876,344

The accompanying notes are an integral part of these financial statements.
2016

FINANCIAL SECTION 97

DEPOSIT INSURANCE FUND

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2016 and 2015 

1 

1. Operations of the Deposit Insurance Fund 

OVERVIEW 

The Federal Deposit Insurance Corporation (FDIC) is the 

independent deposit insurance agency created by Congress 

in 1933 to maintain stability and public confidence in the 

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

operations are generally found in the Federal Deposit 

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

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

the Deposit Insurance Fund (DIF), insures the deposits of 

banks and savings associations (insured depository 

institutions). In cooperation with other federal and state 

agencies, the FDIC promotes the safety and soundness of 

insured depository institutions (IDIs) by identifying, 

monitoring, and addressing risks to the DIF. Commercial 

banks, savings banks and savings associations (known as 

“thrifts”) are supervised by either the FDIC, the Office of the 

Comptroller of the Currency, or the Federal Reserve Board. 

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

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

FRF is a resolution fund responsible for the sale of the 

remaining assets and the satisfaction of the liabilities 

associated with the former Federal Savings and Loan 

Insurance Corporation (FSLIC) and the former Resolution 

Trust Corporation. The FDIC maintains the DIF and the FRF 

separately to support their respective functions. 

Pursuant to the Dodd-Frank Wall Street Reform and 

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

FDIC also manages the Orderly Liquidation Fund (OLF). 

Established as a separate fund in the U.S. Treasury 

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

is appointed as receiver for a covered financial company. A 

covered financial company is a failing financial company 

(for example, a bank holding company or nonbank financial 

company) for which a systemic risk determination has been 

made as set forth in section 203 of the Dodd-Frank Act. 

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

authority to establish a widely available program to 

guarantee obligations of solvent IDIs or solvent depository 

institution holding companies (including affiliates) upon the 

systemic risk determination of a liquidity event during times 

of severe economic distress. The program would not be 

funded by the DIF but rather by fees and assessments paid 

by all participants in the program. If fees are insufficient to 

cover losses or expenses, the FDIC must impose a special 

assessment on participants as necessary to cover the 

shortfall. Any excess funds at the end of the liquidity event 

program would be deposited in the General Fund of the 

Treasury. 

The Dodd-Frank Act also created the Financial Stability 

Oversight Council (FSOC) of which the Chairman of the 

FDIC is a member and expanded the FDIC’s responsibilities 

to include supervisory review of resolution plans (known as 

living wills) and backup examination authority for 

systemically important bank holding companies and 

nonbank financial companies. The living wills provide for 

an entity’s rapid and orderly resolution in the event of 

material financial distress or failure. 

OPERATIONS OF THE DIF 

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

deposits and protect the depositors of IDIs and (2) resolve 

failed IDIs upon appointment of the FDIC as receiver in a 

manner that will result in the least possible cost to the DIF. 

The DIF is primarily funded from deposit insurance 

assessments. Other available funding sources, if necessary, 

are borrowings from the Treasury, the Federal Financing 

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

has borrowing authority of $100 billion from the Treasury 

and a Note Purchase Agreement with the FFB, not to 

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

deposit insurance. 

A statutory formula, known as the Maximum Obligation 

Limitation (MOL), limits the amount of obligations the 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 

$182.1 billion and $171.0 billion as of December 31, 2016 

and 2015, 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, 
ANNUAL REPORT

98 FINANCIAL SECTION

DEPOSIT INSURANCE FUND 

2

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 SECURITIES 

The FDI Act requires that the DIF funds be invested in 

obligations of the United States or in obligations 

guaranteed as to principal and interest by the United 

States. The Secretary of the Treasury must approve all such 

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

approval to invest the DIF funds only in U.S. Treasury 

obligations that are purchased or sold exclusively through 

the Bureau of the Fiscal Service’s Government Account 

Series program. 

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

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

as AFS are shown at fair value. Unrealized gains and losses 

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 regular 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. 

Beginning July 1, 2016, the estimate includes a surcharge 

for institutions with greater than $10 billion in total 

consolidated assets (see Note 9). At the subsequent 

quarter-end, the estimated revenue amounts are adjusted 

when actual assessments for the covered period are 

determined for each institution. 

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 
2016

FINANCIAL SECTION 99

 NOTES TO THE FINANCIAL STATEMENTS 

3 

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 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, 2016 and 2015. Therefore, consolidation is 

not required for the 2016 and 2015 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 January 2016, the FASB issued Accounting Standards 

Update (ASU) 2016-01, Financial Instruments—Overall 

(Subtopic 825-10): Recognition and Measurement of 

Financial Assets and Financial Liabilities. The ASU addresses 

certain aspects of recognition, measurement, presentation, 

and disclosure of financial instruments through targeted 

changes to existing guidance. The FDIC has determined 

that the ASU, which is effective for the DIF beginning on 

January 1, 2019, will not have a material effect on the 

financial position of the DIF or its results of operations. 

In February 2016, the FASB issued ASU 2016-02, Leases 

(Topic 842). The new guidance requires that substantially 

all leases will be reported on the balance sheet through the 

recognition of a right-of-use asset and a corresponding 

lease liability. The ASU also requires lessees and lessors to 

expand qualitative and quantitative disclosures and key 

information regarding their leasing arrangements. The 

standard is effective for the DIF on January 1, 2020, with 

early adoption allowed. The FDIC does not expect the ASU 

to have a material effect on the DIF’s financial position or 

its results of operations. The FDIC will continue analyzing 

the full impact of the ASU. 

In June 2016, the FASB issued ASU 2016-13, Financial 

Instruments—Credit Losses (Topic 326): Measurement of 

Credit Losses on Financial Instruments. The ASU will replace 

the incurred loss impairment model with a new expected 

credit loss model for financial assets measured at amortized 

cost and for off-balance-sheet credit exposures. The 

guidance also amends the AFS debt securities impairment 

model by requiring the use of an allowance to record 

estimated credit losses (and subsequent recoveries) related 

to AFS debt securities. The ASU is effective for the DIF on 

January 1, 2021. The FDIC is assessing the effect the ASU 

will have on the DIF’s financial position and results of 

operations. 

Other recent accounting pronouncements have been 

deemed not applicable or material to the financial 

statements as presented. 

3. Investment in U.S. Treasury Securities 

The “Investment in U.S. Treasury securities” line item on the 

Balance Sheet consisted of the following components by 

maturity (in millions). 
ANNUAL REPORT

100 FINANCIAL SECTION

DEPOSIT INSURANCE FUND 

4

December 31, 2016

Net Unrealized Unrealized

Yield at Face Carrying Holding Holding Fair

Maturity Purchasea Value Amount Gains Losses Value

Within 1 year 0.87% $ 32,031 b $ 32,365 $ 25 $ (5) $ 32,385

After 1 year 

through 5 years 1.38% 40,525 40,707 92 (94) 40,705

Subtotal $ 72,556 $ 73,072 $ 117 $ (99) $ 73,090

After 1 year 

through 5 years 

-0.14% 400 420 2 0 422

Subtotal $ 400 $ 420 $ 2 $ 0 $ 422

Total $ 72,956 $ 73,492 $ 119 $ (99) c $ 73,512

U.S. Treasury notes and bonds

U.S. Treasury Inflation-Protected Securities

(a) 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 2.0 percent, based on figures issued by the 

Congressional Budget Office and Blue Chip Economic Indicators in early 2016. 

(b) Includes two Treasury notes totaling $3.4 billion which matured on Saturday, 

December 31, 2016. Settlements occurred the next business day, January 3, 2017. 

 

(c) 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, 2016. The aggregate related fair value of securities with unrealized losses 

was $31.4 billion as of December 31, 2016. 

December 31, 2015

Maturity 

Yield at 

Purchasea

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 $ 21,816 $ 3 $ (18) $ 21,801 

After 1 year 

through 5 years 1.19% 39,881 39,952 55 (44) 39,963 

Subtotal $ 61,376 $ 61,768 $ 58 $ (62) $ 61,764 

U.S. Treasury Inflation-Protected Securities

Within 1 year -0.80% $ 300 $ 324 $ 0 $ (2) $ 322 

After 1 year 

through 5 years 

-0.14% 400 414 0 (3) 411 

Subtotal $ 700 $ 738 $ 0 $ (5) $ 733 

Total $ 62,076 $ 62,506 $ 58 $ (67) b $ 62,497 

(a) 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.

(b) 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. 

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 December 31

2016 2015

Receivables from closed banks $ 80,314,038 $ 88,858,877

Allowance for losses (72,523,635) (77,280,798)

Total $ 7,790,403 $ 11,578,079

As of December 31, 2016, the FDIC had 378 active 

receiverships, including five established in 2016. The DIF 

resolution entities held assets with a book value of $14.9 

billion as of December 31, 2016, and $20.8 billion as of 

December 31, 2015 (including $11.6 billion and $16.0 

billion, respectively, of cash, investments, receivables due 

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

of the current asset book value of $14.9 billion is held by 

resolution entities established since the beginning of 2008. 

Estimated cash recoveries from the management and 

disposition of assets that are used to determine the 

allowance for losses are based on asset recovery rates from 

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

asset valuation data, aggregate asset valuation data on 

several recently failed or troubled institutions, sampled 

asset valuation data, and empirical asset recovery data 

based on failures since 1990. Methodologies for 

determining the asset recovery rates incorporate estimating 

future cash recoveries, net of applicable liquidation cost 

estimates, and discounting based on market-based risk 

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

resulting estimated cash recoveries are then used to derive 

the allowance for loss on the receivables from these 

resolutions. 
2016

FINANCIAL SECTION 101

 NOTES TO THE FINANCIAL STATEMENTS 

5 

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 2016, the shared-loss cost estimates 

were updated for all 148 receiverships with active SLAs. 

The updated shared-loss cost projections for the larger 

residential shared-loss agreements were primarily based on 

third-party valuations estimating the cumulative loss of 

covered assets. The updated shared-loss cost projections 

on the remaining residential shared-loss agreements were 

based on a stratified random sample of institutions selected 

for 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. For the remaining commercial covered 

assets, shared-loss cost projections were based on the 

FDIC’s historical loss experience that also factors in the time 

period based on the life of the agreement. 

Also reflected in the allowance for loss calculation are endof-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 December 31

2016 2015

Payments for shared-loss agreements to date $ 34,149,990 $ 33,475,276

Recoveries from shared-loss agreements to date (5,161,366) (4,468,296)

Net shared-loss payments made to date $ 28,988,624 $ 29,006,980

Projected shared-loss payments, net of "true-up" recoveries $ 966,063 $ 1,560,124

Total remaining shared-loss covered assets $ 20,807,196 $ 31,478,451

The $10.7 billion reduction in the remaining shared-loss 

covered assets from 2015 to 2016 is primarily due to the 

liquidation of covered assets from active SLAs, expiration of 

loss coverage for 42 commercial loan SLAs, and early 

termination of SLAs impacting 67 receiverships during 

2016. 

CONCENTRATION OF CREDIT RISK 

Financial instruments that potentially subject the DIF to 

concentrations of credit risk are receivables from 

resolutions. The repayment of these receivables is primarily 

influenced by recoveries on assets held by DIF receiverships 

and payments on the covered assets under SLAs. The 

majority of the remaining assets in liquidation ($3.3 billion) 

and current shared-loss covered assets ($20.8 billion), which 

together total $24.1 billion, are concentrated in commercial 

loans ($1.0 billion), residential loans ($19.8 billion), and 

structured transaction-related assets ($2.6 billion) as 
ANNUAL REPORT

102 FINANCIAL SECTION

DEPOSIT INSURANCE FUND 

described in Note 8. Most of the assets originated from 

failed institutions located in California ($11.7 billion), Florida 

($2.6 billion), Puerto Rico ($2.5 billion), Ohio ($2.3 billion), 

Texas ($1.5 billion), and Illinois ($0.7 billion).

5. Property and Equipment, Net

Depreciation expense was $50 million and $52 million for 

2016 and 2015, respectively. The “Property and equipment, 

net” line item on the Balance Sheet consisted of the 

following components (in thousands). 

December 31 December 31

2016 2015

Land $ 37,352 $ 37,352

Buildings (including building and leasehold improvements) 348,008 342,267

Application software (includes work-in-process) 127,113 132,280

Furniture, fixtures, and equipment 69,624 73,432

Accumulated depreciation (224,522) (207,081)

Total $ 357,575 $ 378,250

6. Liabilities Due to Resolutions

As of December 31, 2016 and 2015, the DIF recorded 

liabilities totaling $2.1 billion and $4.4 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. Seventy-eight 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

were generally positive in 2016. According to the quarterly 

financial data submitted by DIF-insured institutions, the 

industry’s capital levels continued to improve, and the 

percentage of total loans that were noncurrent at 

September 30 fell to its lowest level since year-end 2007. 

The industry reported total net income of $128 billion for 

the first nine months of 2016, an increase of 3.8 percent 

over the comparable period one year ago. 

Losses to the DIF from failures that occurred in 2016 were 

lower than the contingent liability at the end of 2015, as the 

aggregate number and cost of institution failures were less 

than anticipated. However, the contingent liability 

increased from $395 million at December 31, 2015 to $477 

million at December 31, 2016, due to the deterioration in 

the financial condition of certain troubled institutions. 

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 $919 million as of December 31, 

2016, as compared to $800 million as of year-end 

2015. The actual losses, if any, will largely depend on future 

economic and market conditions and could differ materially 

from this estimate. 

During 2016, five institutions failed with combined assets of 

$265 million 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, the operating environment remains 

challenging for banks. Interest rates have been 

exceptionally low for an extended period, and there are 

signs of growing credit and liquidity risk. Revenue growth 

has been modest and margins continue to narrow despite 

banks’ investments in longer-term assets to mitigate the 

effect of low rates. Additionally, key risks to the U.S. 

economic outlook include the effect of increases in interest 

rates on economic growth; weakness in energy and 

commodity prices; and slowing growth in several advanced 

and emerging market economies. The FDIC continues to 

evaluate ongoing risks to affected institutions in light of 

existing economic and financial conditions, and the extent 

to which such risks may put stress on the resources of the 

insurance fund. 

LITIGATION LOSSES 

The DIF records an estimated loss for unresolved legal 

cases to the extent that those losses are considered 

probable and reasonably estimable. The FDIC recorded 

probable litigation losses of $200 thousand and $386 
2016

FINANCIAL SECTION 103

 NOTES TO THE FINANCIAL STATEMENTS 

7 

thousand for the DIF as of December 31, 2016 and 2015, 

respectively. In addition, the FDIC has determined that 

there are $1 million of reasonably possible losses from 

unresolved cases as of year-end 2016, compared to $555 

thousand at year-end 2015. 

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 third-party 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 $30 million and $21 million through December 31, 

2016 and 2015, respectively. Quantified claims asserted 

and under review have been accrued in the amount of $18

million and $1 million as of December 31, 2016 and 2015, 

respectively. 

The Sellers and Acquirers have been conducting 

negotiations with Fannie Mae regarding the terms of a 

financial settlement to address indemnification obligations 

for conventional and reverse mortgage loan portfolios. The 

settlement for the conventional mortgage loans in the 

Fannie Mae portfolio has been concluded, but negotiations 

for the reverse mortgage portfolio continue. The 

receivership’s payment for settlement of the conventional 

loans and the estimated loss for the reverse mortgage 

loans are 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 $11.7 billion at December 31, 

2016, compared to $12.9 billion at December 31, 

2015). 

 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, 
ANNUAL REPORT

104 FINANCIAL SECTION

DEPOSIT INSURANCE FUND 

8

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 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 2016 and 2015, 

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 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, 

2016 and 2015, no guaranteed LLC notes remain.

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, 2016, the receiverships have 

transferred a portfolio of loans with an unpaid principal 

balance of $16.4 billion and mortgage-backed securities 

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

The LLCs and trusts subsequently issued notes guaranteed 

by the FDIC in an original principal amount of $10.6 billion. 

Since March 2013, there have been no new guarantee 

transactions. As of December 31, 2016 and 2015, the DIF 

collected guarantee fees totaling $275 million and $265 

million, respectively, and recorded a receivable for 

additional guarantee fees of $14 million and $26 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, 2016 and 2015, the amount of deferred 

revenue recorded was $14 million and $26 million, 

respectively. Except as discussed below, the DIF records no 

other structured transaction-related assets or liabilities on 

its balance sheet. 

Any estimated loss to the DIF from the guarantees is based 

on an analysis of the expected guarantee payments by the 

FDIC, reimbursements to the FDIC for guarantee payments, 

and guarantee fee collections. As of December 31, 2016, 

the FDIC recorded a contingent liability for guarantee 

payments totaling $2 million for an SSGN transaction 

beginning in November 2019 up to note maturity in 

December 2020, and an offsetting receivable due to 

expected reimbursements. The contingent liability and 

related receivable are included in the “Contingent liabilities: 

Litigation losses and other” and “Interest receivable on 

investments and other assets, net” line items, respectively, 

on the Balance Sheet. For the same SSGN transaction, as of 

December 31, 2016, it is reasonably possible that the DIF 

would be required to make a final guarantee payment of 

$28 million at note maturity, as compared to payments of 
2016

FINANCIAL SECTION 105

 NOTES TO THE FINANCIAL STATEMENTS 

9 

$25 million through note maturity as of December 31, 2015. 

The FDIC expects that all guarantee payments 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, 2016 and 2015, the maximum loss 

exposure was zero for LLCs and $1.1 billion and $1.6 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 (12 CFR Part 

327). 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, amended its 

Restoration Plan (which is required when the ratio of the 

DIF balance to estimated insured deposits (reserve ratio) is 

below the statutorily mandated minimum), 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 requirements of the Dodd-Frank Act and 

provisions of the comprehensive, long-term fund 

management plan. 

 The FDIC amended the Restoration Plan, which is 

intended to ensure that the reserve ratio reaches 

1.35 percent by September 30, 2020, as required 

by the Dodd-Frank Act, in lieu of the previous 

statutory minimum 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 September 2016, the FDIC 

adopted a final rule maintaining the DRR at 2 

percent for 2017. 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. 

As of June 30, 2016, the reserve ratio of the DIF reached 

1.17 percent. As a result of the ratio exceeding 1.15 

percent, assessment rates were modified as follows, 

beginning with the quarter ending September 30, 2016. 

 Lower regular assessment rates became effective 

for all IDIs pursuant to final rules published in 

February 2011 and May 2016. 

 A new risk-based method for calculating 

assessment rates became effective for institutions 

with less than $10 billion in total assets (small 

banks) pursuant to the final rule published in May 

2016. The revised method is designed to be 

revenue-neutral, but helps ensure that banks that 

take on greater risks pay more for deposit 

insurance. 

Additionally, the Dodd-Frank Act requires that the FDIC 

offset the effect of increasing the minimum reserve ratio 

from 1.15 percent to 1.35 percent on small banks. To 

implement this requirement, the FDIC imposed a surcharge 

to the regular quarterly assessments of IDIs with $10 billion 

or more in assets (larger institutions), beginning with the 

quarter ending September 30, 2016. Pursuant to a final rule 

published in March 2016: 

 The surcharge generally equals an annual rate of 

4.5 basis points applied to a larger institution’s 

regular quarterly assessment base (with certain 

adjustments). The FDIC projects that surcharges 

will last eight quarters. 

 The FDIC will impose a shortfall assessment on 

larger institutions to achieve the minimum reserve 

ratio of 1.35 percent by the September 30, 2020 

statutory deadline, if the reserve ratio has not 

reached 1.35 percent by the end of 2018. 

 The FDIC will provide assessment credits to small 

banks for the portion of their assessments that 

contribute to the growth in the reserve ratio 

between 1.15 percent and 1.35 percent to ensure 
ANNUAL REPORT

106 FINANCIAL SECTION

DEPOSIT INSURANCE FUND 

10

that the effect of reaching 1.35 percent is fully 

borne by the larger institutions. The assessment 

credits will be determined and allocated as soon 

as practicable after the reserve ratio reaches 1.35 

percent. In each quarter that the reserve ratio is at 

least 1.38 percent, the credits will be used to fully 

offset a small institution’s quarterly insurance 

assessment, until credits are exhausted. 

ASSESSMENT REVENUE 

Annual assessment rates averaged approximately 6.6 cents 

per $100 of the assessment base through June 30, 2016. 

Annual assessment rates averaged approximately 7.4 cents 

per $100 for the second half of 2016, reflecting both lower 

regular assessment rates for all IDIs and assessment 

surcharges on larger institutions. While the assessment 

rate schedule applicable to all IDIs decreased, some IDIs’

rates increased because of the small bank pricing method 

change and/or the deterioration of their financial condition. 

Annual assessment rates averaged approximately 6.5 cents 

per $100 of the assessment base during 2015. The 

assessment base is generally defined as average 

consolidated total assets minus average tangible equity 

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

period. 

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

Sheet of $2.7 billion and $2.2 billion represents the 

estimated premiums due from IDIs for the fourth quarter of 

2016 and 2015, respectively. The actual deposit insurance 

assessments for the fourth quarter of 2016 will be billed 

and collected at the end of the first quarter of 2017. During 

2016 and 2015, $10.0 billion and $8.8 billion, respectively, 

were recognized as assessment revenue from institutions, 

including $2.4 billion in surcharges from large IDIs in 2016. 

RESERVE RATIO 

As of September 30, 2016 and December 31, 2015, the DIF 

reserve ratio was 1.18 percent and 1.11 percent, 

respectively. 

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, 2016 and 2015, approximately $794 million and $798 

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 December 31

2016 2015

Salaries and benefits $ 1,235,244 $ 1,248,146

Outside services 265,492 280,050

Travel 92,126 97,819

Buildings and leased space 93,518 90,945

Software/Hardware maintenance 64,757 62,604

Depreciation of property and equipment 50,403 52,233

Other 26,191 28,314

Subtotal 1,827,731 1,860,111

Less: Expenses billed to resolution 

entities and others (112,720) (172,877)

Total $ 1,715,011 $ 1,687,234

11. Provision for Insurance Losses 

The provision for insurance losses was a negative $1.6 

billion for 2016, compared to negative $2.3 billion for 2015. 

The negative provision for 2016 primarily resulted from a 

decrease of $1.7 billion in the estimated losses for 

institutions that failed in current and prior years, partially 

offset by an increase of $97 million in the contingent 

liability for anticipated failures. 

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 $1.7 billion decrease in the estimated 

losses from failures was primarily attributable to four 

components. The first component was unanticipated 

recoveries of $545 million 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 was a decrease of $584 million in 

the receiverships’ shared-loss liability primarily due to both 

the early termination of numerous SLAs during the period, 

which resulted in lower-than-anticipated losses on covered 

assets, and the unanticipated recoveries from SLAs where 

the commercial loss coverage has expired but the recovery 

period remains active. The third component was a $406 
2016

FINANCIAL SECTION 107

 NOTES TO THE FINANCIAL STATEMENTS 

11

million decrease in the estimated losses from failures that 

resulted from a reduction in projected future receivership 

expenses and legal and representation and warranty 

liabilities. The final component was a $231 million decrease 

resulting from greater-than-anticipated collections from 

receiverships’ asset sales and updated estimated recovery 

rates applied to the remaining assets in liquidation. 

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 December 31

2016 2015

Civil Service Retirement System $ 3,230 $ 3,949

Federal Employees Retirement System (Basic Benefit) 111,368 108,056

Federal Thrift Savings Plan 34,966 35,140

FDIC Savings Plan 37,499 39,767

Total $ 187,063 $ 186,912

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. 

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 December 31

2016 2015

Accumulated postretirement benefit 

obligation recognized in Postretirement 

benefit liability $ 232,201 $ 233,000

Amounts recognized in accumulated other 

comprehensive income: Unrealized 

postretirement benefit loss

Cumulative net actuarial loss $ (24,212) $ (31,938)

Prior service cost (1,535) (2,110)

 Total $ (25,747) $ (34,048)

Amounts recognized in other comprehensive 

income: Unrealized postretirement benefit 

gain

Actuarial gain $ 7,726 $ 23,193

Prior service credit 575 510

 Total $ 8,301 $ 23,703

Net amortization out of other comprehensive 

income included in net periodic benefit cost $ 1,567 $ 3,842
ANNUAL REPORT

108 FINANCIAL SECTION

DEPOSIT INSURANCE FUND 

12

Expected amortization of accumulated other 

comprehensive income into net periodic benefit cost is 

summarized as follows (in thousands). 

December 31, 2017

Prior service costs $ 575

Net actuarial loss 79

Total $ 654

The annual postretirement contributions and benefits paid 

are included in the table below (in thousands). 

December 31 December 31

2016 2015

Employer contributions $ 6,388 $ 6,064 

Plan participants' contributions $ 739 $ 728

Benefits paid $ (7,126) $ (6,792) 

The expected contributions for the period ending 

December 31, 2017, are $7.5 million. Expected future 

benefit payments for each of the next 10 years are 

presented in the following table (in thousands). 

2017 2018 2019 2020 2021 2022-2026

$6,720 $7,195 $7,686 $8,226 $8,780 $53,075

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 December 31

2016 2015

Discount rate for future benefits (benefit obligation) 4.67% 4.29%

Rate of compensation increase 3.90% 3.70%

Discount rate (benefit cost) 4.29% 4.00%

Dental health care cost-trend rate

 Assumed for next year 4.50% 4.70%

 Ultimate 4.50% 4.50%

 Year rate will reach ultimate 2017 2017

13. Commitments and Off-Balance-Sheet Exposure 

COMMITMENTS: 

Leased Space 

The DIF leased space expense totaled $48 million and $47

million for 2016 and 2015, respectively. The FDIC’s lease 

commitments total $165 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). 

2017 2018 2019 2020 2021 2022/Thereafter

$43,715 $34,262 $30,681 $16,283 $11,632 $28,337

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, 2016 and December 31, 

2015, estimated insured deposits for the DIF were $6.8 

trillion and $6.5 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 securities (see Note 3). The DIF’s financial assets 

measured at fair value consisted of the following 

components (in millions). 

December 31, 2016

Quoted Prices 

in Active 

Markets for 

Identical Assets

Significant 

Other 

Observable 

Inputs

Significant 

Unobservable 

Inputs

(Level 1) (Level 2) (Level 3)

Assets

 Cash equivalents1 $ 1,326 $ 1,326

Available-for-Sale Debt Securities

Investment in U.S. Treasury 

securities2 73,512 73,512

Total Assets $ 74,838 $ 0 $ 0 $ 74,838

Total 

Assets at 

Fair Value

 (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 securities is measured based on prevailing market 

yields for federal government entities. 
2016

FINANCIAL SECTION 109

 NOTES TO THE FINANCIAL STATEMENTS 

13

December 31, 2015

Quoted Prices 

in Active 

Markets for 

Identical 

Significant 

Other 

Observable 

Inputs

Significant 

Unobservable 

Inputs

(Level 1) (Level 2) (Level 3)

Assets

 Cash equivalents1 $ 862 $ 862

Available-for-Sale Debt Securities

Investment in U.S. Treasury 

securities2 62,497 62,497

Total Assets $ 63,359 $ 0 $ 0 $ 63,359

Total 

Assets at 

Fair Value

 (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 securities is measured based on prevailing market 

yields for federal government entities. 

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

recognized at fair value but are recorded at amounts that 

approximate fair value due to their short maturities and/or 

comparability with current interest rates. Such items 

include 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 

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). 

December 31 December 31

2016 2015

Operating Activities

Net Income: $ 10,523,517 $ 9,856,688

Adjustments to reconcile net income to net cash provided

 by operating activities:

Amortization of U.S. Treasury securities 977,245 1,411,376

Treasury Inflation-Protected Securities inflation adjustment (5,578) 12,465

Depreciation on property and equipment 50,403 52,233

Loss on retirement of property and equipment 1,607 2,415

Provision for insurance losses (1,567,950) (2,251,320)

Unrealized gain on postretirement benefits 8,301 23,703

Change in Assets and Liabilities:

 (Increase) in assessments receivable (493,795) (169,048)

 (Increase) Decrease in interest receivable and other assets (107,749) 242,128

 Decrease in receivables from resolutions 5,437,632 7,425,888

 (Decrease) in accounts payable and other liabilities (34,249) (18,435)

(Decrease) in postretirement benefit liability (799) (10,419)

Increase in contingent liabilities - litigation losses and other 2,389 0

(Decrease) in liabilities due to resolutions (2,345,820) (3,380,084)

Net Cash Provided by Operating Activities $ 12,445,154 $ 13,197,590

 

16. Subsequent Events 

Subsequent events have been evaluated through February 

8, 2017, the date the financial statements are available to 

be issued. 

FDIC v. BANK OF AMERICA, N.A. 

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

District Court for the District of Columbia alleging that Bank 

of America, N.A. (BoA) underpaid its insurance assessment 

from the second quarter of 2013 through the fourth quarter 

of 2014 by approximately $542 million, inclusive of interest. 

During this period, the FDIC alleges that BoA understated 

its counterparty exposure which resulted in the significant 

underpayment of insurance assessments. The FDIC 

reserved its right to amend the complaint to include 

additional monies believed to be owed for periods prior to 

this time frame. As of December 31, 2016 and 2015, the 

impacts of this pending litigation are not reflected in the 

financial statements of the DIF. 
ANNUAL REPORT

110 FINANCIAL SECTION

DEPOSIT INSURANCE FUND 

14

2017 FAILURES THROUGH FEBRUARY 8, 2017 

Through February 8, 2017, two insured institutions failed in 

2017 with total losses to the DIF estimated to be $80 

million. 
2016

FINANCIAL SECTION 111

FSLIC RESOLUTION FUND (FRF)

Federal Deposit Insurance Corporation

FSLIC Resolution Fund Balance Sheet 

As of December 31

(Dollars in Thousands) 2016 2015

ASSETS

 Cash and cash equivalents $ 874,174 $ 871,037

 Other assets, net 4,391 760

Total Assets $ 878,565 $ 871,797

LIABILITIES

 Accounts payable and other liabilities $ 26 $ 624

Total Liabilities 26 624

RESOLUTION EQUITY (NOTE 5)

 Contributed capital 125,489,317 125,489,317

 Accumulated deficit (124,610,778) (124,618,144)

Total Resolution Equity 878,539 871,173

Total Liabilities and Resolution Equity $ 878,565 $ 871,797

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

112 FINANCIAL SECTION

FSLIC RESOLUTION FUND (FRF)

Federal Deposit Insurance Corporation

FSLIC Resolution Fund Statement of Income and Accumulated Deficit

For the Years Ended December 31

(Dollars in Thousands) 2016 2015

REVENUE

 Interest on U.S. Treasury securities $ 2,070 $ 298

 Other revenue 3,278 2,309

Total Revenue 5,348 2,607

EXPENSES AND LOSSES

 Operating expenses 2,725 3,064

 Goodwill litigation expenses (Note 3) 0 157,161

 Losses related to thrift resolutions (Note 6) (993) (153)

 Recovery of tax benefits (3,750) 0

Total Expenses and Losses (2,018) 160,072

Net Income (Loss) 7,366 (157,465)

Accumulated Deficit - Beginning (124,618,144) (124,460,679)

Accumulated Deficit - Ending $ (124,610,778) $ (124,618,144)

 

The accompanying notes are an integral part of these financial statements.
2016

FINANCIAL SECTION 113

FSLIC RESOLUTION FUND (FRF)

Federal Deposit Insurance Corporation

FSLIC Resolution Fund Statement of Cash Flows

For the Years Ended December 31

(Dollars in Thousands) 2016 2015

OPERATING ACTIVITIES

Provided by:

Interest on U.S. Treasury securities $ 2,070 $ 298

Recoveries from thrift resolutions 2,270 2,555

Department of Justice's return of unused goodwill legal expense funds (Note 3) 2,162 0

Miscellaneous receipts 0 24

Used by:

Operating expenses (3,363) (2,783)

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

Miscellaneous disbursements (2) 0

Net Cash Provided (Used) by Operating Activities 3,137 (513,522)

FINANCING ACTIVITIES

Provided by:

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

Net Cash Provided by Financing Activities 0 513,616

Net Increase in Cash and Cash Equivalents 3,137 94

Cash and Cash Equivalents - Beginning 871,037 870,943

Cash and Cash Equivalents - Ending $ 874,174 $ 871,037

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

114 FINANCIAL SECTION

FSLIC RESOLUTION FUND 

NOTES TO THE FINANCIAL STATEMENTS 

December 31, 2016 and 2015

1 

1. Operations/Dissolution of the FSLIC Resolution Fund 

OVERVIEW 

The Federal Deposit Insurance Corporation (FDIC) is the 

independent deposit insurance agency created by Congress 

in 1933 to maintain stability and public confidence in the 

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

operations are generally found in the Federal Deposit 

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

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

the Deposit Insurance Fund (DIF), insures the deposits of 

banks and savings associations (insured depository 

institutions). In cooperation with other federal and state 

agencies, the FDIC promotes the safety and soundness of 

insured depository institutions (IDIs) by identifying, 

monitoring, and addressing risks to the DIF. 

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

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

such, the FDIC is responsible for the sale of remaining assets 

and satisfaction of liabilities associated with the former 

Federal Savings and Loan Insurance Corporation (FSLIC) and 

the former Resolution Trust Corporation (RTC). The FDIC 

maintains the DIF and the FRF separately to support their 

respective functions. 

The FSLIC was created through the enactment of the 

National Housing Act of 1934. The Financial Institutions 

Reform, Recovery, and Enforcement Act of 1989 (FIRREA) 

abolished the insolvent FSLIC and created the FRF. At that 

time, the assets and liabilities of the FSLIC were transferred 

to the FRF – except those assets and liabilities transferred to 

the newly created RTC – effective on August 9, 1989. 

Further, the FIRREA established the Resolution Funding 

Corporation (REFCORP) to provide part of the initial funds 

used by the RTC for thrift resolutions. 

The RTC Completion Act of 1993 terminated the RTC as of 

December 31, 1995. All remaining assets and liabilities of 

the RTC were transferred to the FRF on January 1, 1996. 

Today, the FRF consists of two distinct pools of assets and 

liabilities: one composed of the assets and liabilities of the 

FSLIC transferred to the FRF upon the dissolution of the 

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

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

available to satisfy obligations of the other. 

OPERATIONS/DISSOLUTION OF THE FRF 

The FRF will continue operations until all of its assets are 

sold or otherwise liquidated and all of its liabilities are 

satisfied. Any funds remaining in the FRF-FSLIC will be paid 

to the U.S. Treasury. Any remaining funds of the FRF-RTC 

will be distributed to the REFCORP to pay the interest on the 

REFCORP bonds. In addition, the FRF-FSLIC has available 

until expended $602 million in appropriations to facilitate, if 

required, efforts to wind up the resolution activity of the 

FRF-FSLIC. 

The FDIC has extensively reviewed and cataloged the FRF's 

remaining assets and liabilities. Some of the unresolved 

issues are: 

 criminal restitution orders (generally have from 1 to 

21 years remaining to enforce); 

 collections of judgments obtained against officers 

and directors and other professionals responsible 

for causing or contributing to thrift losses 

(generally have up to 10 years remaining to 

enforce, unless the judgments are renewed or are 

covered by the Federal Debt Collections Procedures 

Act, which will result in significantly longer periods 

for collection of some judgments); 

 liquidation/disposition of residual assets purchased 

by the FRF from terminated receiverships; 

 two 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 4). 

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. 
2016

FINANCIAL SECTION 115

FSLIC RESOLUTION FUND 

2 

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 

valuation estimate for other assets is considered significant. 

CASH EQUIVALENTS 

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight Certificates. 

RELATED PARTIES 

The nature of related parties and a description of related 

party transactions are discussed in Note 1 and disclosed 

throughout the financial statements and footnotes. 

DISCLOSURE ABOUT RECENT RELEVANT ACCOUNTING 

PRONOUNCEMENTS 

In June 2016, the Financial Accounting Standards Board 

issued Accounting Standards Update (ASU) 2016-13, 

Financial Instruments – Credit Losses (Topic 326): 

Measurement of Credit Losses on Financial Instruments. The 

ASU will replace the incurred loss impairment model with a 

new expected credit loss model for financial assets measured 

at amortized cost and for off-balance-sheet credit exposures. 

The ASU is effective for the FRF on January 1, 2021. The 

FDIC is assessing the effect the ASU will have on the FRF’s 

financial position and results of operations. 

Other recent accounting pronouncements have been 

deemed not applicable or material to the financial 

statements as presented. 

RECLASSIFICATION 

Reclassifications have been made in 2015 financial 

statements to conform to the presentation used in 2016.

3. Goodwill Litigation 

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

Supreme Court held that when it became impossible 

following the enactment of FIRREA in 1989 for the federal 

government to perform certain agreements to count 

goodwill toward regulatory capital, the plaintiffs were 

entitled to recover damages from the United States. The 

contingent liability associated with the nonperformance of 

these agreements was transferred to the FRF on August 9, 

1989, upon the dissolution of the FSLIC. 

The FRF can draw from an appropriation provided by Section 

110 of the Department of Justice Appropriations Act, 2000 

(Public Law 106-113, Appendix A, Title I, 113 Stat. 1501A-3, 

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

of judgments and compromise settlements in the goodwill 

litigation. This appropriation is to remain available until 

expended. 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. 
ANNUAL REPORT

116 FINANCIAL SECTION

 

NOTES TO THE FINANCIAL STATEMENTS

3 

In 2015, the FRF paid $513.6 million to resolve the remaining 

active goodwill case using appropriations from the U.S. 

Treasury. 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. 

The FRF-FSLIC paid goodwill litigation expenses incurred by 

the Department of Justice (DOJ), the entity that defended 

these lawsuits against the United States, based on a 

Memorandum of Understanding (MOU) dated October 2, 

1998, between the FDIC and the DOJ. These expenses were 

paid in advance by the FRF-FSLIC and any unused funds 

were carried over by the DOJ and applied toward the next 

fiscal year charges. In September 2016, the DOJ returned $2

million of unused funds to the FRF-FSLIC and retained $250 

thousand to cover future administrative expenses. The 

returned funds were recognized in the “Other revenue” line 

item on the Statement of Income and Accumulated Deficit. 

4. Guarantees 

TAX LIABILITY INDEMNIFICATION 

Similar to the goodwill cases discussed in Note 3, there were 

additional cases alleging that the government breached 

agreements regarding tax benefits associated with certain 

FSLIC-assisted acquisitions. All eight of those cases have 

been settled. A case settled in 2006 obligated the FRF-FSLIC 

as a guarantor for potential tax liabilities. The Internal 

Revenue Service (IRS) audited the relevant tax return and 

during the audit did not raise concerns of taxability for the 

settlement receipts covered under the indemnification 

agreement. The normal audit period for the IRS to propose 

adjustments expired in 2016 and the FDIC has no 

expectation of any further audit or related exposure 

concerning this matter. 

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, 

2016, the maximum exposure on this indemnification is the 

current unpaid principal balance of the remaining 33 multifamily loans totaling $2 million. Based on a contingent 

liability assessment of this portfolio as of September 30, 

2016, the majority of the loans are at least 86 percent 

amortized, and all are scheduled to mature within one to 

four 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, 

2016 and 2015. 

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, 2016 and 2015, no contingent liability 

for this indemnification has been recorded. 

5. Resolution Equity 

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

composed of two distinct pools: the FRF-FSLIC and the FRFRTC. The FRF-FSLIC consists of the assets and liabilities of 

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

liabilities of the former RTC. Pursuant to legal restrictions, 

the two pools are maintained separately and the assets of 

one pool are not available to satisfy obligations of the other. 

Contributed capital, accumulated deficit, and resolution 

equity consisted of the following components by each pool 

(in thousands). 
2016

FINANCIAL SECTION 117

FSLIC RESOLUTION FUND 

4 

December 31, 2016

FRF-FSLIC FRF-RTC

FRF 

Consolidated

Contributed capital - 

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

Contributed 

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

Accumulated deficit (43,029,200) (81,581,578) (124,610,778)

Total Resolution 

Equity $ 835,780 $ 42,759 $ 878,539 

December 31, 2015

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 

CONTRIBUTED CAPITAL

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

$60.1 billion from the U.S. Treasury, respectively, to fund 

losses from thrift resolutions prior to July 1, 1995. 

Additionally, the FRF-FSLIC issued $670 million in capital 

certificates to the Financing Corporation (a mixed-ownership 

government corporation established to function solely as a 

financing vehicle for the FSLIC) and the RTC issued $31.3 

billion of these instruments to the REFCORP. FIRREA 

prohibited the payment of dividends on any of these capital 

certificates. 

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, 2016, the FRF received a total 

of $2.3 billion in goodwill appropriations, the effect of which 

increased contributed capital. 

Through December 31, 2016, 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 FRF-FSLIC 

accumulated deficit increased by $13.2 billion, whereas the 

FRF-RTC accumulated deficit decreased by $6.3 billion. 

6. Losses Related to Thrift Resolutions 

Losses related to thrift resolutions represent changes in the 

estimated losses on assets acquired from terminated 

receiverships, as well as expenses for the disposition and 

administration of these assets. 

These losses were a negative $993 thousand for 2016 

compared to negative $153 thousand for 2015. The 2016 

balance primarily resulted from a $1 million reduction in the 

estimated losses due to better-than-anticipated recoveries 

upon disposition of an asset during 2016. 

7. Disclosures about the Fair Value of Financial 

Instruments

At December 31, 2016 and 2015, the FRF’s financial assets 

measured at fair value on a recurring basis are cash 

equivalents of $831 million and $828 million, respectively. 

Cash equivalents are Special U.S. Treasury Certificates with 

overnight maturities valued at prevailing interest rates 

established by the Bureau of the Fiscal Service. The 

valuation is considered a Level 1 measurement in the fair 

value hierarchy, representing quoted prices in active markets 

for identical assets. 

Accounts payable and other 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 

interest rates. 

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 22 to 27 years) could not be liquidated during 

the life of the receiverships due to restrictive clauses and 

other impediments. Because these impediments remain, 
ANNUAL REPORT

118 FINANCIAL SECTION

 

NOTES TO THE FINANCIAL STATEMENTS

5 

there is no market for these assets. Consequently, it is not 

practicable to provide an estimate of fair value. 

8. Information Relating to the Statement of Cash Flows 

The following table presents a reconciliation of net 

income/(loss) to net cash from operating activities (in 

thousands). 

December 31 December 31

2016 2015

Operating Activities

Net Income (Loss): $ 7,366 $ (157,465)

Adjustments to reconcile 

net income (loss) to net 

cash provided (used) by 

operating activities:

Losses related to thrift 

resolutions (only includes 

provision for losses) 0 (260)

Change in Assets and 

Liabilities:

(Increase) Decrease in 

other assets (3,631) 404

(Decrease) Increase in 

accounts payable and 

other liabilities (598) 254

(Decrease) in contingent 

liabilities for goodwill 

litigation 0 (356,455)

Net Cash Provided (Used) 

by Operating Activities $ 3,137 $ (513,522)

9. Subsequent Events

Subsequent events have been evaluated through February 8, 

2017, the date the financial statements are available to be 

issued, and management determined that there are no items 

to disclose. 
2016

FINANCIAL SECTION 119

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT

441 G St. N.W.

Washington, DC 20548

Independent Auditor’s Report

To the Board of Directors

The Federal Deposit Insurance Corporation

In our audits of the 2016 and 2015 financial statements of the Deposit Insurance Fund (DIF) and 

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

which are administered by the Federal Deposit Insurance Corporation (FDIC),1 we found

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

December 31, 2016, and 2015, are presented fairly, in all material respects, in accordance 

with U.S. generally accepted accounting principles;

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

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

December 31, 2016; and

• with respect to the DIF and to the FRF, no reportable noncompliance for 2016 with 

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

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

internal control over financial reporting and other information2 included with the financial 

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

agreements; and (3) agency comments. 

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

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

Government Corporation Control Act,

4 we have audited the financial statements of the DIF and 

of the FRF, both of which are administered by FDIC. The financial statements for the DIF 

comprise the balance sheets as of December 31, 2016, and 2015; the related statements of 

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

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

of December 31, 2016, and 2015; the related statements of income and accumulated deficit and 

of cash flows for the years then ended; and the related notes to the financial statements. We 

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

FRF as of December 31, 2016, based on criteria established under 31 U.S.C. § 3512(c), (d), 

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

 

1

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

Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376, 1506 (July 21, 2010), is unfunded 

and did not have any transactions from its inception in 2010 through 2016. 

2

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

3

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

4

31 U.S.C. §§ 9101-9110. 
ANNUAL REPORT

120 FINANCIAL SECTION

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

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

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

provide a basis for our audit opinions.

Management’s Responsibility 

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

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

presenting other information included in documents containing the audited financial statements 

and auditor’s report, and ensuring the consistency of that information with the audited financial 

statements; (3) maintaining effective internal control over financial reporting, including the 

design, implementation, and maintenance of internal control relevant to the preparation and fair 

presentation of financial statements that are free from material misstatement, whether due to 

fraud or error; (4) evaluating the effectiveness of internal control over financial reporting based 

on the criteria established under FMFIA; and (5) providing its assessment about the 

effectiveness of internal control over financial reporting as of December 31, 2016, included in 

the accompanying Management’s Report on Internal Control over Financial Reporting in 

appendix I.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements and opinions on FDIC’s 

internal control over financial reporting relevant to the DIF and to the FRF based on our audits. 

U.S. generally accepted government auditing standards require that we plan and perform the 

audits to obtain reasonable assurance about whether the financial statements are free from 

material misstatement, and whether effective internal control over financial reporting was 

maintained in all material respects. We are also responsible for applying certain limited 

procedures to other information included with the financial statements.

An audit of financial statements involves performing procedures to obtain audit evidence about 

the amounts and disclosures in the financial statements. The procedures selected depend on 

the auditor’s judgment, including the auditor’s assessment of the risks of material misstatement 

of the financial statements, whether due to fraud or error. In making those risk assessments, the 

auditor considers internal control relevant to the entity’s preparation and fair presentation of the 

financial statements in order to design audit procedures that are appropriate in the 

circumstances. An audit of financial statements also involves evaluating the appropriateness of 

the accounting policies used and the reasonableness of significant accounting estimates made 

by management, as well as evaluating the overall presentation of the financial statements. 

An audit of internal control over financial reporting involves performing procedures to obtain 

evidence about whether a material weakness exists.5 The procedures selected depend on the 

auditor’s judgment, including the assessment of the risk that a material weakness exists. An 

audit of internal control over financial reporting also includes obtaining an understanding of 

internal control over financial reporting, evaluating the design and operating effectiveness of 

internal control over financial reporting based on the assessed risk, and testing relevant internal 

 

5

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such 

that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be 

prevented, or detected and corrected, on a timely basis. A deficiency in internal control exists when the design or 

operation of a control does not allow management or employees, in the normal course of performing their assigned 

functions, to prevent, or detect and correct, misstatements on a timely basis. 
2016

FINANCIAL SECTION 121

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

control over financial reporting. Our audit of internal control also considered the entity’s process 

for evaluating and reporting on internal control over financial reporting based on criteria 

established under FMFIA. Our audits also included performing such other procedures as we 

considered necessary in the circumstances.

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

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

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

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

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

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

financial reporting that are less severe than a material weakness. 

Definition and Inherent Limitations of Internal Control over Financial Reporting 

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

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

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

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

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

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

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

have a material effect on the financial statements. 

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

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

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

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

or procedures may deteriorate.

Opinions on Financial Statements

In our opinion: 

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

position as of December 31, 2016, and 2015, and the results of its operations and its cash 

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

principles.

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

position as of December 31, 2016, and 2015, and the results of its operations and its cash 

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

principles. 

Opinions on Internal Control over Financial Reporting

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

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

relevant to the DIF as of December 31, 2016, based on criteria established under FMFIA. 
ANNUAL REPORT

122 FINANCIAL SECTION

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

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

relevant to the FRF as of December 31, 2016, based on criteria established under FMFIA.

As discussed in greater detail later in this report, our 2016 audit identified deficiencies in FDIC’s 

information systems controls that collectively represent a significant deficiency in FDIC’s internal 

control over financial reporting.

6

Although the significant deficiency in internal control did not affect our opinions on the 2016 

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

information reported by the DIF and the FRF and not be prevented or detected and corrected on 

a timely basis because of this significant deficiency. 

In addition to the significant deficiency in information systems controls, we identified other 

deficiencies in FDIC’s internal control over financial reporting that we do not consider to be 

material weaknesses or significant deficiencies. Nonetheless, these deficiencies warrant FDIC 

management’s attention. We have communicated these matters to FDIC management and, 

where appropriate, will report on them separately.

Significant Deficiency in Information Systems Controls

During our 2016 audit, we identified new deficiencies in information systems controls that along 

with unresolved control deficiencies from prior audits, collectively represent a significant 

deficiency in FDIC’s internal control over financial reporting. Specifically, the deficiencies relate 

to general information systems controls in the areas of access and configuration management

controls. 

FDIC did not sufficiently implement controls to limit or detect access to computer resources. 

Specifically, FDIC did not have sufficient boundary protection controls on its network to fully 

isolate sensitive financial systems from other parts of its network. According to FDIC, a plan to 

fully isolate sensitive systems on a secure network segment had been made, but 

implementation of the plan had been delayed because of other competing priorities. Until it 

appropriately isolates its sensitive financial systems, FDIC faces increased risk that 

unauthorized or malicious attempts to communicate with its financial systems could go 

undetected.

FDIC did not consistently implement configuration management controls. Configuration 

management controls are intended to prevent unauthorized changes to information system 

resources and provide reasonable assurance that systems are configured and operating 

securely and as intended. Effective configuration management depends on the maintenance of 

a complete, accurate inventory of information system components. However, we identified 

deficiencies in FDIC’s implementation of these controls, placing its information and systems at 

increased risk of modification, loss, or disclosure. Specifically, see the following: 

• Although FDIC used multiple data sources to keep track of its inventory of network assets, it 

did not have a single, authoritative, complete, and accurate inventory of all network assets in 

its environment. This occurred because FDIC had not established a process to reasonably 

assure that a complete, accurate inventory was developed and maintained. Until FDIC 

develops and implements a process to maintain a complete, accurate inventory of its 

 

6

A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a 

material weakness, yet important enough to merit the attention of those charged with governance.
2016

FINANCIAL SECTION 123

network assets, its ability to identify potential vulnerabilities in unidentified assets may be

limited, posing unnecessary risks to information systems. 

• FDIC did not consistently scan its servers for vulnerabilities. FDIC policy states that servers 

are scanned for vulnerabilities weekly, vulnerability reports are produced monthly, and 

systems may not go unscanned for more than 2 consecutive months. However, FDIC had 

not scanned 51 servers in one of its general support systems during the 3-month time period

(July, August, and September 2016) that we reviewed. According to FDIC officials, this 

occurred because FDIC did not have an authoritative or complete inventory of its network 

assets and also because its legacy scanning and discovery tool failed to identify all servers. 

Officials also stated that the scanning and discovery tool has been replaced. In addition, the 

FDIC Office of Inspector General (OIG) has identified similar concerns. In its November 

2016 report on the effectiveness of FDIC’s information security program in accordance with 

the requirements of the Federal Information Security Modernization Act of 2014,7 the OIG 

reported that at the time of its audit, FDIC was not performing vulnerability scans for more 

than 900 production servers within another of its general support systems.

8 Without 

regularly scanning all servers, FDIC cannot reasonably assure that vulnerabilities in its 

servers are identified and corrected in a timely manner, increasing the risk that FDIC’s 

systems and information may be compromised. 

During 2016, FDIC made progress addressing previously reported control deficiencies related to 

its information systems. Key corrective actions included improving controls for authorizing users’ 

access to financial applications and for logging and monitoring financial applications to detect 

potentially malicious activity. However, other previously reported control deficiencies in FDIC’s 

information security continued to exist. For example, FDIC (1) had not fully implemented 

agency-wide configuration baselines and (2) did not always effectively monitor changes to 

critical server files.9

The cumulative effect of the control risks created by FDIC’s new and previously reported 

information security control deficiencies, while not collectively considered a material weakness, 

is important enough to merit the attention of those charged with governance of FDIC and 

therefore represents a significant deficiency in FDIC’s internal control over financial reporting as 

of December 31, 2016. Continued and consistent management commitment and attention will 

be essential to addressing existing deficiencies and continually improving FDIC’s information 

system controls. Until FDIC takes the necessary steps to address these new and previously 

reported control deficiencies, its sensitive financial information and resources will remain at 

increased risk of inadvertent or deliberate misuse, improper modification, unauthorized 

disclosure, or destruction.

 

7

Pub. L. No. 113-283, 128 Stat. 3073 (Dec. 18, 2014), codified as amended at 44 U.S.C. §§ 3551-3558.

8

Federal Deposit Insurance Corporation, Office of Inspector General, Audit of the FDIC’s Information Security 

Program—2016, AUD-17-001 (Arlington, Va.: November 2016). 

9

GAO, Information Security: FDIC Implemented Controls over Financial Systems, but Further Improvements Are 

Needed, GAO-16-605 (Washington, D.C.: June 29, 2016). 

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)
ANNUAL REPORT

124 FINANCIAL SECTION

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

Other Matters

Other Information

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

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

analysis and is not a required part of the financial statements. We read the other information 

included with the financial statements in order to identify material inconsistencies, if any, with 

the audited financial statements. Our audit was conducted for the purpose of forming opinions 

on the DIF and the FRF financial statements. We did not audit and do not express an opinion or 

provide any assurance on the other information. 

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

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

which are administered by FDIC, we tested compliance with selected provisions of applicable 

laws, regulations, contracts, and grant agreements consistent with our auditor’s responsibility 

discussed below. We caution that noncompliance may occur and not be detected by these 

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

government auditing standards.

Management’s Responsibility

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

grant agreements.

Auditor’s Responsibility

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

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

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

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

applicable laws, regulations, contracts, and grant agreements. 

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

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

grant agreements disclosed no instances of noncompliance for 2016 that would be reportable, 

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

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

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

such an opinion. 

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

Agreements

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

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

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

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

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

regulations, contracts, and grant agreements is not suitable for any other purpose.
2016

FINANCIAL SECTION 125

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

Agency Comments 

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

opinions on the DIF’s and the FRF’s financial statements, and noted that we reported that FDIC 

had effective internal control over financial reporting and that there was no reportable 

noncompliance with tested provisions of applicable laws, regulations, contracts, and grant 

agreements. 

FDIC also noted that we reported deficiencies in FDIC’s information systems controls that 

collectively represent a significant deficiency. FDIC stated that it will work to improve its internal 

control environment and will focus additional management attention to address and remediate 

the identified information system control deficiencies, recognizing the essential role a strong 

internal control program plays in achieving an agency’s mission. Further, FDIC stated that 

dedication to sound financial management has been and will remain a top priority. The complete 

text of FDIC’s response is reprinted in appendix II.

James R. Dalkin

Director

Financial Management and Assurance

February 8, 2017
ANNUAL REPORT

126 FINANCIAL SECTION

MANAGEMENT’S REPORT ON INTERNAL CONTROL 

OVER FINANCIAL REPORTING

Appendix I
2016

FINANCIAL SECTION 127

MANAGEMENT’S RESPONSE TO THE AUDITOR’S REPORT

Appendix II
THIS PAGE INTENTIONALLY LEFT BLANK
129

2016

CORPORATE 

MANAGEMENT 

CONTROL

VI.
THIS PAGE INTENTIONALLY LEFT BLANK
2016

CORPORATE MANAGEMENT CONTROL 131

The FDIC uses several means to maintain 

comprehensive internal controls, ensure the overall 

effectiveness and efficiency of operations, and 

otherwise comply as necessary with the following 

federal standards, among others:

♦ Chief Financial Officers’ Act (CFO Act)

♦ Federal Managers’ Financial Integrity Act 

(FMFIA)

♦ Federal Financial Management Improvement Act 

(FFMIA)

♦ Government Performance and Results Act 

(GPRA)

♦ Federal Information Security Management Act 

(FISMA)

♦ OMB Circular A-123

♦ GAO’s Standards for Internal Control in the 

Federal Government

As a foundation for these efforts, the Division of 

Finance Corporate Management Control Branch 

oversees a corporate-wide program of relevant 

activities by establishing policies and working with 

management in each division and office in the FDIC. 

The FDIC has made a concerted effort to ensure that 

financial, reputational, and operational risks have been 

identified and that corresponding control needs are 

being incorporated into day-to-day operations. The 

program also requires that comprehensive procedures 

be documented, employees be thoroughly trained, 

and supervisors be held accountable for performance 

and results. Compliance monitoring is carried out 

through periodic management reviews and by the 

distribution of various activity reports to all levels of 

management. Conscientious attention is also paid to 

the implementation of audit recommendations made 

by the FDIC Office of Inspector General, the 

GAO, and other providers of external/audit scrutiny. 

The FDIC has received unmodified/unqualified 

opinions on its financial statement audits for 25 

consecutive years, and these and other positive results 

reflect the effectiveness of the overall management 

control program.

In 2016, efforts were focused on failed bank data; 

the Identity, Credential and Access Control Program; 

systems development associated with the Capital 

Investment Review Committee; the Workforce 

Development Initiative; and systems security. 

Considerable energy was devoted to ensuring that the 

FDIC’s processes and systems of control have kept 

pace with the workload, and that the foundation of 

controls throughout the FDIC remained strong. 

During 2017, among other things, program 

evaluation activities will focus on data mining, 

continuity of operations, process mapping, process 

improvements, internal controls of outsourced service 

providers, continuation of efforts on failed bank 

data, and systems security. Continued emphasis 

and management scrutiny also will be applied to the 

accuracy and integrity of transactions and oversight of 

systems development efforts in general. 

FRAUD REDUCTION AND DATA 

ANALYTICS ACT OF 2015

The Fraud Reduction and Data Analytics Act of 

2015 was signed into law on June 30, 2016. The law 

is intended to improve federal agency financial and 

administrative controls and procedures to assess and 

mitigate fraud risks, and to improve federal agencies’ 

development and use of data analytics for the purpose 

of identifying, preventing, and responding to fraud, 

including improper payments. 

The FDIC’s enterprise risk management and internal 

control program considers the potential for fraud and 

incorporates elements of Principle 8 – Assess Fraud 

Risk, of the GAO Standards of Internal Control in 

the Federal Government. The FDIC implemented 

a Fraud Risk Assessment Framework as a basis for 

identifying potential financial fraud risks and schemes, 

ensuring that preventive and detective controls are 

present and working as intended. Examples of fraud 

risks are contractor payments, wire transfers, travel 

card purchases, and theft of cash receipts. 
ANNUAL REPORT

132 CORPORATE MANAGEMENT CONTROL 

As part of the Framework, potential fraud areas are 

identified and key controls are evaluated/implemented 

as proactive measures to fraud prevention. Although 

no system of internal control provides absolute 

assurance, the FDIC’s system of internal control 

can provide reasonable assurance that key controls 

are adequate and working as intended. Monitoring 

activities include supervisory approvals, management 

reports, and exception reporting.

FDIC management performs due diligence in areas 

of suspected or alleged fraud. At the conclusion of 

due diligence, the matter is either dropped or referred 

to the Office of Inspector General for investigation. 

During 2016, there has been no systemic fraud 

identified within the FDIC. 

MANAGEMENT REPORT ON 

FINAL ACTIONS

As required under amended Section 5 of the 

Inspector General Act of 1978, the FDIC must report 

information on final action taken by management 

on certain audit reports. The tables on the following 

pages provide information on final action taken 

by management on audit reports for the federal 

fiscal year period October 1, 2015, through 

September 30, 2016.

TABLE 2: 

MANAGEMENT REPORT ON FINAL ACTION ON AUDITS WITH RECOMMENDATIONS 

TO PUT FUNDS TO BETTER USE FOR FISCAL YEAR 2016

Dollars in Thousands

(There were no audit reports in this category.)

TABLE 1: 

MANAGEMENT REPORT ON FINAL ACTION ON AUDITS 

WITH DISALLOWED COSTS FOR FISCAL YEAR 2016

Dollars in Thousands

Audit Reports Number of 

Reports

Disallowed 

Costs 

A. Management decisions – final action not taken at beginning of period 0 $0

B. Management decisions made during the period 1 $55

C. Total reports pending final action during the period (A and B) 1 $55

D. 1. Recoveries: 

(a) Collections & offsets 0 $0

(b) Other 0 $0

2. Write-offs 0 $0

3. Total of 1 & 2 0 $0

E. Audit reports needing final action at the end of the period 1 $55
2016

CORPORATE MANAGEMENT CONTROL 133

TABLE 3: 

AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS 

OVER ONE YEAR OLD FOR FISCAL YEAR 2016

Report No. and 

Issue Date OIG Audit Finding Management Action Disallowed Costs

AUD-14-002

11/21/2013

The Director, Division of Administration 

(DOA) should coordinate with Division 

of Information Technology (DIT) 

and FDIC division and office officials, 

as appropriate, to address potential 

gaps that may exist between the 12-

hour timeframe required to restore 

mission essential functions following 

an emergency and the 72-hour recovery 

time objective for restoring missioncritical applications.

The Chief Information Officer 

Organization will prepare a briefing for 

the Board by June 16, 2017 on the status 

of the Continuity of Operations (COOP) 

effort and a Board Case by end of third 

quarter 2017 that lays out the approach 

for meeting the COOP objectives and 

how it addresses the risk associated 

with meeting the FEMA Category II 

requirements. 

Due Date: 10/11/2017

$0

AUD-15-003

03/30/2015

The Director, RMS should review and 

update, as appropriate, supervisory 

guidance and associated training related 

to newly insured banks to address the 

lessons learned and issues described 

in this report, including the need 

for: a) thorough and timely (at least 

quarterly) monitoring of changes and 

deviations in bank business plans; 

b) prompt communication to bank 

management regarding issues involving 

the adequacy of business plans; c) clear 

expectations regarding the timing, type, 

and documentation of supervisory 

monitoring activities pertaining to 

business plan compliance; and d) 

proactive supervisory action when banks 

materially deviate from their approved 

business plans without regulatory 

approval.

RMS is finalizing new de novo supervision 

guidance. The Regional Director memo, 

which outlines supervisory expectations, 

including monitoring of business plan 

changes, is in final processing and expected 

to be issued by December 31, 2016.

Due Date: 3/31/2017

$0
ANNUAL REPORT

134 CORPORATE MANAGEMENT CONTROL 

TABLE 3: 

AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS 

OVER ONE YEAR OLD FOR FISCAL YEAR 2016 

(continued)

Report No. and 

Issue Date OIG Audit Finding Management Action Disallowed Costs

AUD-15-007

09/03/2015

The Director, RMS, should update 

guidance for placing an institution on 

a targeted examination schedule to 

define dates to be used for purposes of 

complying with FDI Act examination 

frequency requirements.

The Director, RMS, should issue or 

revise policy guidance to document the 

requirements and responsibilities of 

Regional Accountants for developing 

and communicating a comprehensive 

analysis and related conclusions for 

complex and/or unique accounting 

transactions, or for escalating such 

analysis to the Washington Office Policy 

staff, as appropriate.

RMS is presently updating and 

consolidating its supervisory policies 

and procedures for large banks. As 

part of that effort, RMS will provide 

technical instructions for determining 

the examination “as of” date for an 

initial examination activity under the 

continuous examination program and for 

recording that information in its inventory 

systems to document compliance with the 

examination frequency requirements of 

Section 10(d) of the FDI Act. RMS will 

complete this action by March 31, 2017.

Due Date: 3/31/2017

RMS recently held a conference call 

with Regional Accountants to discuss 

updates to existing guidance. RMS has 

also reached out to the OCC and FRB for 

information on those agencies’ handling of 

complex accounting questions. Additional 

time will be needed in order for the update 

to the responsibilities of the Regional 

Accountant to be consistent with the 

ongoing Accounting SME Project, which 

is an integral part of the communication 

channel for handling complex accounting 

questions. The timeline for the Accounting 

SME Project has been tentatively extended 

through March 31, 2017.

Due Date: 3/31/2017

$0

$0
2016

CORPORATE MANAGEMENT CONTROL 135

TABLE 3: 

AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS 

OVER ONE YEAR OLD FOR FISCAL YEAR 2016 

(continued)

Report No. and 

Issue Date OIG Audit Finding Management Action Disallowed Costs

AUD-15-008

09/16/2015

The Directors, RMS and DCP, should 

coordinate to review and clarify, 

as appropriate, existing policy and 

guidance pertaining to the provision and 

termination of banking services to ensure 

it adequately addresses banking products 

other than deposit accounts, such as 

credit products.

The Directors, RMS and DCP, should 

coordinate to assess the effectiveness 

of the FDIC’s supervisory policy and 

approach with respect to the issues and 

risks discussed in this report after a 

reasonable period of time is allowed for 

implementation.

The Directors, RMS and DCP, should 

coordinate with the Legal Division 

to review and clarify, as appropriate, 

existing supervisory policy and guidance 

to ensure it adequately defines moral 

suasion in terms of the types and 

circumstances under which it is used to 

address supervisory concerns, whether 

it is subject to sufficient scrutiny and 

oversight, and whether meaningful 

remedies exist should moral suasion be 

misused.

Additional time is required to approve 

and issue several RMS Regional Director 

Memorandums, which will include the 

following topics: delegations of authority, 

communications with bankers, matters 

requiring board attention and other 

supervisory recommendations, large bank 

operating procedures, processing requests 

for review (bank appeals), and third-party 

lending.

Due Date: 3/31/2017

RMS’ Internal Control and Review section 

will conduct horizontal and regional 

office reviews to assess compliance with 

the FDIC’s actions to address the issues 

discussed in the report. The FDIC will 

also continue to report to the Board on 

deposit account terminations; highlight 

supervisory guidance in outreach events; 

and monitor inquiries and comments from 

the Office of the Ombudsman.

Due Date: 6/30/2017

Additional time is required to approve 

and issue several RMS Regional Director 

Memorandums, which will include the 

following topics: delegations of authority, 

communications with bankers, matters 

requiring board attention and other 

supervisory recommendations, large bank 

operating procedures, processing requests 

for review (bank appeals), and third-party 

lending.

Due Date: 3/31/2017

$0

$0

$0
THIS PAGE INTENTIONALLY LEFT BLANK
137

2016

VII.

APPENDICES
THIS PAGE INTENTIONALLY LEFT BLANK
2016

APPENDICES 139

A. KEY STATISTICS

FDIC ACTIONS ON FINANCIAL INSTITUTIONS APPLICATIONS 

2014–2016

2016 2015 2014

Deposit Insurance 7 5 2

Approved1 7 5 2

Denied 0 0 0

New Branches 507 548 520

Approved 507 548 520

Denied 0 0 0

Mergers 245 270 251

Approved 245 270 251

Denied 0 0 0

Requests for Consent to Serve2 167 240 327

Approved 164 239 327

Section 19 9 7 7

Section 32 155 232 320

Denied 3 1 0

Section 19 0 0 0

Section 32 3 1 0

Notices of Change in Control 14 20 15

Letters of Intent Not to Disapprove 14 20 15

Disapproved 0 0 0

Brokered Deposit Waivers 14 20 46

Approved 13 20 46

Denied 1 0 0

Savings Association Activities 0 1 4

Approved 0 1 4

Denied 0 0 0

State Bank Activities/Investments3 5 10 14

Approved 5 10 14

Denied 0 0 0

Conversion of Mutual Institutions 5 4 4

Non-Objection 5 4 4

Objection 0 0 0

1

 Includes deposit insurance application filed on behalf of (1) newly organized institutions, (2) existing uninsured financial services companies seeking 

establishment as an insured institution, and (3) interim institutions established to facilitate merger or conversion transactions, and applications to 

facilitate the establishment of thrift holding companies.

2

 Under Section 19 of the Federal Deposit Insurance (FDI) Act, an insured institution must receive FDIC approval before employing a person convicted 

of dishonesty or breach of trust. Under Section 32, the FDIC must approve any change of directors or senior executive officers at a state nonmember 

bank that is not in compliance with capital requirements or is otherwise in troubled condition. 

3

 Section 24 of the FDI Act, in general, prohibits a federally-insured state bank from engaging in an activity not permissible for a national bank and 

requires notices to be filed with the FDIC.
ANNUAL REPORT

140 APPENDICES

COMBINED RISK AND CONSUMER ENFORCEMENT ACTIONS 

2014–2016

2016 2015 2014

Total Number of Actions Initiated by the FDIC 259 268 320

Termination of Insurance 0 11 3

Involuntary Termination 0 0 0

Sec. 8a For Violations, Unsafe/Unsound Practices or Conditions 0 0 0

Voluntary Termination 5 11 3

Sec. 8a By Order Upon Request 0 0 0

Sec. 8p No Deposits 5 6 3

Sec. 8q Deposits Assumed 0 5 0

Sec. 8b Cease-and-Desist Actions 30 48 57

Notices of Charges Issued 2 3 1

Orders to Pay Restitution 0 9 7

Consent Orders 26 36 48

Personal Cease and Desist Orders 2 0 1

Sec. 8e Removal/Prohibition of Director or Officer 97 88 101

Notices of Intention to Remove/Prohibit 8 4 4

Consent Orders 89 84 97

Sec. 8g Suspension/Removal When Charged With Crime 0 0 2

Civil Money Penalties Issued 37 45 66

Sec. 7a Call Report Penalties 0 0 0

Sec. 8i Civil Money Penalties 34 36 62

Sec. 8i Civil Money Penalty Notices of Assessment 3 9 4

Sec. 10c Orders of Investigation 10 19 16

Sec. 19 Waiver Orders 72 51 69

Approved Section 19 Waiver Orders 72 51 68

Denied Section 19 Waiver Orders 0 0 1

Sec. 32 Notices Disapproving Officer/Director’s Request for Review 1 0 0

Truth-in-Lending Act Reimbursement Actions 83 64 69

Denials of Requests for Relief 0 0 0

Grants of Relief 0 0 0

Banks Making Reimbursement* 83 64 69

Suspicious Activity Reports (Open and closed institutions)* 222,836 189,505 164,777

Other Actions Not Listed 7 6 6

* These actions do not constitute the initiation of a formal enforcement action and, therefore, are not included in the total 

number of actions initiated.
2016

APPENDICES 141

ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND, 

DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20161

Dollars in Millions (except Insurance Coverage)

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Domestic 

Deposits

Deposit 

Insurance

Fund

Total Domestic 

Deposits

Est. Insured

Deposits

2016 $250,000 $11,505,053 $6,822,885 59.3 80,704.0 0.70 1.18 

2015 250,000 10,950,090 6,528,125 59.6 72,600.2 0.66 1.11 

2014 250,000 10,408,187 6,201,915 59.6 62,780.2 0.60 1.01 

2013 250,000 9,825,479 5,999,191 61.1 47,190.8 0.48 0.79 

2012 250,000 9,474,720 7,402,053 78.1 32,957.8 0.35 0.45 

2011 250,000 8,782,292 6,973,483 79.4 11,826.5 0.13 0.17 

2010 250,000 7,887,858 6,301,542 79.9 (7,352.2) (0.09) (0.12)

2009 250,000 7,705,353 5,407,773 70.2 (20,861.8) (0.27) (0.39)

2008 100,000 7,505,408 4,750,783 63.3 17,276.3 0.23 0.36 

2007 100,000 6,921,678 4,292,211 62.0 52,413.0 0.76 1.22 

2006 100,000 6,640,097 4,153,808 62.6 50,165.3 0.76 1.21 

2005 100,000 6,229,753 3,890,930 62.5 48,596.6 0.78 1.25 

2004 100,000 5,724,621 3,622,059 63.3 47,506.8 0.83 1.31 

2003 100,000 5,223,922 3,452,497 66.1 46,022.3 0.88 1.33 

2002 100,000 4,916,078 3,383,598 68.8 43,797.0 0.89 1.29 

2001 100,000 4,564,064 3,215,581 70.5 41,373.8 0.91 1.29 

2000 100,000 4,211,895 3,055,108 72.5 41,733.8 0.99 1.37 

1999 100,000 3,885,826 2,869,208 73.8 39,694.9 1.02 1.38 

1998 100,000 3,817,150 2,850,452 74.7 39,452.1 1.03 1.38 

1997 100,000 3,602,189 2,746,477 76.2 37,660.8 1.05 1.37 

1996 100,000 3,454,556 2,690,439 77.9 35,742.8 1.03 1.33 

1995 100,000 3,318,595 2,663,873 80.3 28,811.5 0.87 1.08 

1994 100,000 3,184,410 2,588,619 81.3 23,784.5 0.75 0.92 

1993 100,000 3,220,302 2,602,781 80.8 14,277.3 0.44 0.55 

1992 100,000 3,275,530 2,677,709 81.7 178.4 0.01 0.01 

1991 100,000 3,331,312 2,733,387 82.1 (6,934.0) (0.21) (0.25)

1990 100,000 3,415,464 2,784,838 81.5 4,062.7 0.12 0.15 

1989 100,000 3,412,503 2,755,471 80.7 13,209.5 0.39 0.48 

1988 100,000 2,337,080 1,756,771 75.2 14,061.1 0.60 0.80 

1987 100,000 2,198,648 1,657,291 75.4 18,301.8 0.83 1.10 

1986 100,000 2,162,687 1,636,915 75.7 18,253.3 0.84 1.12 

1985 100,000 1,975,030 1,510,496 76.5 17,956.9 0.91 1.19 

1984 100,000 1,805,334 1,393,421 77.2 16,529.4 0.92 1.19 
ANNUAL REPORT

142 APPENDICES

ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND, 

DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20161 (continued)

Dollars in Millions (except Insurance Coverage) 

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Domestic 

Deposits

Deposit 

Insurance

Fund

Total

Domestic 

Deposits

Est. Insured

Deposits

1983 100,000 1,690,576 1,268,332 75.0 15,429.1 0.91 1.22 

1982 100,000 1,544,697 1,134,221 73.4 13,770.9 0.89 1.21 

1981 100,000 1,409,322 988,898 70.2 12,246.1 0.87 1.24 

1980 100,000 1,324,463 948,717 71.6 11,019.5 0.83 1.16 

1979 40,000 1,226,943 808,555 65.9 9,792.7 0.80 1.21 

1978 40,000 1,145,835 760,706 66.4 8,796.0 0.77 1.16 

1977 40,000 1,050,435 692,533 65.9 7,992.8 0.76 1.15 

1976 40,000 941,923 628,263 66.7 7,268.8 0.77 1.16 

1975 40,000 875,985 569,101 65.0 6,716.0 0.77 1.18 

1974 40,000 833,277 520,309 62.4 6,124.2 0.73 1.18 

1973 20,000 766,509 465,600 60.7 5,615.3 0.73 1.21 

1972 20,000 697,480 419,756 60.2 5,158.7 0.74 1.23 

1971 20,000 610,685 374,568 61.3 4,739.9 0.78 1.27 

1970 20,000 545,198 349,581 64.1 4,379.6 0.80 1.25 

1969 20,000 495,858 313,085 63.1 4,051.1 0.82 1.29 

1968 15,000 491,513 296,701 60.4 3,749.2 0.76 1.26 

1967 15,000 448,709 261,149 58.2 3,485.5 0.78 1.33 

1966 15,000 401,096 234,150 58.4 3,252.0 0.81 1.39 

1965 10,000 377,400 209,690 55.6 3,036.3 0.80 1.45 

1964 10,000 348,981 191,787 55.0 2,844.7 0.82 1.48 

1963 10,000 313,304 177,381 56.6 2,667.9 0.85 1.50 

1962 10,000 297,548 170,210 57.2 2,502.0 0.84 1.47 

1961 10,000 281,304 160,309 57.0 2,353.8 0.84 1.47 

1960 10,000 260,495 149,684 57.5 2,222.2 0.85 1.48 

1959 10,000 247,589 142,131 57.4 2,089.8 0.84 1.47 

1958 10,000 242,445 137,698 56.8 1,965.4 0.81 1.43 

1957 10,000 225,507 127,055 56.3 1,850.5 0.82 1.46 

1956 10,000 219,393 121,008 55.2 1,742.1 0.79 1.44 

1955 10,000 212,226 116,380 54.8 1,639.6 0.77 1.41 

1954 10,000 203,195 110,973 54.6 1,542.7 0.76 1.39 

1953 10,000 193,466 105,610 54.6 1,450.7 0.75 1.37 

1952 10,000 188,142 101,841 54.1 1,363.5 0.72 1.34 

1951 10,000 178,540 96,713 54.2 1,282.2 0.72 1.33 
2016

APPENDICES 143

ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND, 

DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20161 (continued)

Dollars in Millions (except Insurance Coverage) 

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Domestic 

Deposits

Deposit 

Insurance

Fund

Total

Domestic 

Deposits

Est. Insured

Deposits

1950 10,000 167,818 91,359 54.4 1,243.9 0.74 1.36 

1949 5,000 156,786 76,589 48.8 1,203.9 0.77 1.57 

1948 5,000 153,454 75,320 49.1 1,065.9 0.69 1.42 

1947 5,000 154,096 76,254 49.5 1,006.1 0.65 1.32 

1946 5,000 148,458 73,759 49.7 1,058.5 0.71 1.44 

1945 5,000 157,174 67,021 42.6 929.2 0.59 1.39 

1944 5,000 134,662 56,398 41.9 804.3 0.60 1.43 

1943 5,000 111,650 48,440 43.4 703.1 0.63 1.45 

1942 5,000 89,869 32,837 36.5 616.9 0.69 1.88 

1941 5,000 71,209 28,249 39.7 553.5 0.78 1.96 

1940 5,000 65,288 26,638 40.8 496.0 0.76 1.86 

1939 5,000 57,485 24,650 42.9 452.7 0.79 1.84 

1938 5,000 50,791 23,121 45.5 420.5 0.83 1.82 

1937 5,000 48,228 22,557 46.8 383.1 0.79 1.70 

1936 5,000 50,281 22,330 44.4 343.4 0.68 1.54 

1935 5,000 45,125 20,158 44.7 306.0 0.68 1.52 

1934 5,000 40,060 18,075 45.1 291.7 0.73 1.61 

1 For 2016, figures are as of September 30; all other prior years are as of December 31. Prior to 1989, figures are for the Bank Insurance Fund (BIF) 

only and exclude insured branches of foreign banks. For 1989 to 2005, figures represent the sum of the BIF and Savings Association Insurance Fund 

(SAIF) amounts; for 2006 to 2016, figures are for DIF. Amounts for 1989-2016 include insured branches of foreign banks. Prior to year-end 1991, 

insured deposits were estimated using percentages determined from June Call and Thrift Financial Reports.

2

 The year-end 2008 coverage limit and estimated insured deposits do not reflect the temporary increase to $250,000 then in effect under the 

Emergency Economic Stabilization Act of 2008. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) Act made this 

coverage limit permanent. The year-end 2009 coverage limit and estimated insured deposits reflect the $250,000 coverage limit. The Dodd-Frank Act 

also temporarily provided unlimited coverage for non-interest bearing transaction accounts for two years beginning December 31, 2010. Coverage for 

certain retirement accounts increased to $250,000 in 2006. Initial coverage limit was $2,500 from January 1 to June 30, 1934.
ANNUAL REPORT

144 APPENDICES

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS, 

SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2016 

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment 

Credits

Investment 

and Other

Effective

Assessment 

Rate1 Total

Provision 

for 

Ins. Losses

Admin.

and 

Operating 

Expenses2

Interest

& Other 

Ins. 

Expenses

Funding 

Transfer

from the 

FSLIC 

Resolution Fund

Net 

Income/

(Loss)

Total $230,629.4 $165,000.2 $11,392.9 $77,022.1 $147,747.9 $108,474.3 $29,809.6 $9,464.0 $139.5 $83,021.0

2016 10,674.1 9,986.6 0.0 687.5 0.0699% 150.6 (1,567.9) 1,715.0 3.5 0 10,523.5 

2015 9,303.5 8,846.8 0.0 456.7 0.0647% (553.2) (2,251.3) 1,687.2 10.9 0 9,856.7 

2014 8,965.1 8,656.1 0.0 309.0 0.0663% (6,634.7) (8,305.5) 1,664.3 6.5 0 15,599.8 

2013 10,458.9 9,734.2 0.0 724.7 0.0775% (4,045.9) (5,659.4) 1,608.7 4.8 0 14,504.8 

2012 18,522.3 12,397.2 0.2 6,125.3 0.1012% (2,599.0) (4,222.6) 1,777.5 (153.9) 0 21,121.3 

2011 16,342.0 13,499.5 0.9 2,843.4 0.1115% (2,915.4) (4,413.6) 1,625.4 (127.2) 0 19,257.4 

2010 13,379.9 13,611.2 0.8 (230.5) 0.1772% 75.0 (847.8) 1,592.6 (669.8) 0 13,304.9 

2009 24,706.4 17,865.4 148.0 6,989.0 0.2330% 60,709.0 57,711.8 1,271.1 1,726.1 0 (36,002.6)

2008 7,306.3 4,410.4 1,445.9 4,341.8 0.0418% 44,339.5 41,838.8 1,033.5 1,467.2 0 (37,033.2)

2007 3,196.2 3,730.9 3,088.0 2,553.3 0.0093% 1,090.9 95.0 992.6 3.3 0 2,105.3 

2006 2,643.5 31.9 0.0 2,611.6 0.0005% 904.3 (52.1) 950.6 5.8 0 1,739.2 

2005 2,420.5 60.9 0.0 2,359.6 0.0010% 809.3 (160.2) 965.7 3.8 0 1,611.2 

2004 2,240.3 104.2 0.0 2,136.1 0.0019% 607.6 (353.4) 941.3 19.7 0 1,632.7 

2003 2,173.6 94.8 0.0 2,078.8 0.0019% (67.7) (1,010.5) 935.5 7.3 0 2,241.3 

2002 2,384.7 107.8 0.0 2,276.9 0.0023% 719.6 (243.0) 945.1 17.5 0 1,665.1 

2001 2,730.1 83.2 0.0 2,646.9 0.0019% 3,123.4 2,199.3 887.9 36.2 0 (393.3)

2000 2,570.1 64.3 0.0 2,505.8 0.0016% 945.2 28.0 883.9 33.3 0 1,624.9 

1999 2,416.7 48.4 0.0 2,368.3 0.0013% 2,047.0 1,199.7 823.4 23.9 0 369.7 

1998 2,584.6 37.0 0.0 2,547.6 0.0010% 817.5 (5.7) 782.6 40.6 0 1,767.1 

1997 2,165.5 38.6 0.0 2,126.9 0.0011% 247.3 (505.7) 677.2 75.8 0 1,918.2 

1996 7,156.8 5,294.2 0.0 1,862.6 0.1622% 353.6 (417.2) 568.3 202.5 0 6,803.2 

1995 5,229.2 3,877.0 0.0 1,352.2 0.1238% 202.2 (354.2) 510.6 45.8 0 5,027.0 

1994 7,682.1 6,722.7 0.0 959.4 0.2192% (1,825.1) (2,459.4) 443.2 191.1 0 9,507.2 

1993 7,354.5 6,682.0 0.0 672.5 0.2157% (6,744.4) (7,660.4) 418.5 497.5 0 14,098.9 

1992 6,479.3 5,758.6 0.0 720.7 0.1815% (596.8) (2,274.7) 614.83 1,063.1 35.4 7,111.5 

1991 5,886.5 5,254.0 0.0 632.5 0.1613% 16,925.3 15,496.2 326.1 1,103.0 42.4 (10,996.4)

1990 3,855.3 2,872.3 0.0 983.0 0.0868% 13,059.3 12,133.1 275.6 650.6 56.1 (9,147.9)

1989 3,494.8 1,885.0 0.0 1,609.8 0.0816% 4,352.2 3,811.3 219.9 321.0 5.6 (851.8)

1988 3,347.7 1,773.0 0.0 1,574.7 0.0825% 7,588.4 6,298.3 223.9 1,066.2 0 (4,240.7)

1987 3,319.4 1,696.0 0.0 1,623.4 0.0833% 3,270.9 2,996.9 204.9 69.1 0 48.5 

1986 3,260.1 1,516.9 0.0 1,743.2 0.0787% 2,963.7 2,827.7 180.3 (44.3) 0 296.4 

1985 3,385.5 1,433.5 0.0 1,952.0 0.0815% 1,957.9 1,569.0 179.2 209.7 0 1,427.6 

1984 3,099.5 1,321.5 0.0 1,778.0 0.0800% 1,999.2 1,633.4 151.2 214.6 0 1,100.3 

1983 2,628.1 1,214.9 164.0 1,577.2 0.0714% 969.9 675.1 135.7 159.1 0 1,658.2 

1982 2,524.6 1,108.9 96.2 1,511.9 0.0769% 999.8 126.4 129.9 743.5 0 1,524.8 

1981 2,074.7 1,039.0 117.1 1,152.8 0.0714% 848.1 320.4 127.2 400.5 0 1,226.6 

1980 1,310.4 951.9 521.1 879.6 0.0370% 83.6 (38.1) 118.2 3.5 0 1,226.8 
2016

APPENDICES 145

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS, 

SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2016 (continued)

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment 

Credits

Investment 

and Other

Effective

Assessment 

Rate1 Total

Provision 

for 

Ins. Losses

Admin.

and 

Operating 

Expenses2

Interest

& Other 

Ins. 

Expenses

Funding 

Transfer

from the 

FSLIC 

Resolution Fund

Net 

Income/

(Loss)

1979 1,090.4 881.0 524.6 734.0 0.0333% 93.7 (17.2) 106.8 4.1 0 996.7 

1978 952.1 810.1 443.1 585.1 0.0385% 148.9 36.5 103.3 9.1 0 803.2 

1977 837.8 731.3 411.9 518.4 0.0370% 113.6 20.8 89.3 3.5 0 724.2 

1976 764.9 676.1 379.6 468.4 0.0370% 212.3 28.0 180.44 3.9 0 552.6 

1975 689.3 641.3 362.4 410.4 0.0357% 97.5 27.6 67.7 2.2 0 591.8 

1974 668.1 587.4 285.4 366.1 0.0435% 159.2 97.9 59.2 2.1 0 508.9 

1973 561.0 529.4 283.4 315.0 0.0385% 108.2 52.5 54.4 1.3 0 452.8 

1972 467.0 468.8 280.3 278.5 0.0333% 65.7 10.1 49.6 6.05 0 401.3 

1971 415.3 417.2 241.4 239.5 0.0345% 60.3 13.4 46.9 0.0 0 355.0 

1970 382.7 369.3 210.0 223.4 0.0357% 46.0 3.8 42.2 0.0 0 336.7 

1969 335.8 364.2 220.2 191.8 0.0333% 34.5 1.0 33.5 0.0 0 301.3 

1968 295.0 334.5 202.1 162.6 0.0333% 29.1 0.1 29.0 0.0 0 265.9 

1967 263.0 303.1 182.4 142.3 0.0333% 27.3 2.9 24.4 0.0 0 235.7 

1966 241.0 284.3 172.6 129.3 0.0323% 19.9 0.1 19.8 0.0 0 221.1 

1965 214.6 260.5 158.3 112.4 0.0323% 22.9 5.2 17.7 0.0 0 191.7 

1964 197.1 238.2 145.2 104.1 0.0323% 18.4 2.9 15.5 0.0 0 178.7 

1963 181.9 220.6 136.4 97.7 0.0313% 15.1 0.7 14.4 0.0 0 166.8 

1962 161.1 203.4 126.9 84.6 0.0313% 13.8 0.1 13.7 0.0 0 147.3 

1961 147.3 188.9 115.5 73.9 0.0323% 14.8 1.6 13.2 0.0 0 132.5 

1960 144.6 180.4 100.8 65.0 0.0370% 12.5 0.1 12.4 0.0 0 132.1 

1959 136.5 178.2 99.6 57.9 0.0370% 12.1 0.2 11.9 0.0 0 124.4 

1958 126.8 166.8 93.0 53.0 0.0370% 11.6 0.0 11.6 0.0 0 115.2 

1957 117.3 159.3 90.2 48.2 0.0357% 9.7 0.1 9.6 0.0 0 107.6 

1956 111.9 155.5 87.3 43.7 0.0370% 9.4 0.3 9.1 0.0 0 102.5 

1955 105.8 151.5 85.4 39.7 0.0370% 9.0 0.3 8.7 0.0 0 96.8 

1954 99.7 144.2 81.8 37.3 0.0357% 7.8 0.1 7.7 0.0 0 91.9 

1953 94.2 138.7 78.5 34.0 0.0357% 7.3 0.1 7.2 0.0 0 86.9 

1952 88.6 131.0 73.7 31.3 0.0370% 7.8 0.8 7.0 0.0 0 80.8 

1951 83.5 124.3 70.0 29.2 0.0370% 6.6 0.0 6.6 0.0 0 76.9 

1950 84.8 122.9 68.7 30.6 0.0370% 7.8 1.4 6.4 0.0 0 77.0 

1949 151.1 122.7 0.0 28.4 0.0833% 6.4 0.3 6.1 0.0 0 144.7 

1948 145.6 119.3 0.0 26.3 0.0833% 7.0 0.7 6.36 0.0 0 138.6 

1947 157.5 114.4 0.0 43.1 0.0833% 9.9 0.1 9.8 0.0 0 147.6 

1946 130.7 107.0 0.0 23.7 0.0833% 10.0 0.1 9.9 0.0 0 120.7 

1945 121.0 93.7 0.0 27.3 0.0833% 9.4 0.1 9.3 0.0 0 111.6 

1944 99.3 80.9 0.0 18.4 0.0833% 9.3 0.1 9.2 0.0 0 90.0 

1943 86.6 70.0 0.0 16.6 0.0833% 9.8 0.2 9.6 0.0 0 76.8 

1942 69.1 56.5 0.0 12.6 0.0833% 10.1 0.5 9.6 0.0 0 59.0 
ANNUAL REPORT

146 APPENDICES

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS, 

SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2016 (continued)

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment 

Credits

Investment 

and Other

Effective

Assessment 

Rate1 Total

Provision 

for 

Ins. Losses

Admin.

and 

Operating 

Expenses2

Interest

& Other 

Ins. 

Expenses

Funding 

Transfer

from the 

FSLIC 

Resolution Fund

Net 

Income/

(Loss)

1941 62.0 51.4 0.0 10.6 0.0833% 10.1 0.6 9.5 0.0 0 51.9 

1940 55.9 46.2 0.0 9.7 0.0833% 12.9 3.5 9.4 0.0 0 43.0 

1939 51.2 40.7 0.0 10.5 0.0833% 16.4 7.2 9.2 0.0 0 34.8 

1938 47.7 38.3 0.0 9.4 0.0833% 11.3 2.5 8.8 0.0 0 36.4 

1937 48.2 38.8 0.0 9.4 0.0833% 12.2 3.7 8.5 0.0 0 36.0 

1936 43.8 35.6 0.0 8.2 0.0833% 10.9 2.6 8.3 0.0 0 32.9 

1935 20.8 11.5 0.0 9.3 0.0833% 11.3 2.8 8.5 0.0 0 9.5 

1933-34 7.0 0.0 0.0 7.0 N/A 10.0 0.2 9.8 0.0 0 (3.0)

1

 Figures represent only BIF-insured institutions prior to 1990, BIF- and SAIF-insured institutions from 1990 through 2005, and DIF-insured institutions 

beginning in 2006. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. The effective assessment 

rate is calculated from annual assessment income (net of assessment credits), excluding transfers to the Financing Corporation (FICO), Resolution 

Funding Corporation (REFCORP) and FSLIC Resolution Fund, divided by the four quarter average assessment base. The effective rates from 1950 

through 1984 varied from the statutory rate of 0.0833 percent due to assessment credits provided in those years. The statutory rate increased to 

0.12 percent in 1990 and to a minimum of 0.15 percent in 1991. The effective rates in 1991 and 1992 varied because the FDIC exercised new 

authority to increase assessments above the statutory minimum rate when needed. Beginning in 1993, the effective rate was based on a risk-related 

premium system under which institutions paid assessments in the range of 0.23 percent to 0.31 percent. In May 1995, the BIF reached the mandatory 

recapitalization level of 1.25 percent. As a result, BIF assessment rates were reduced to a range of 0.04 percent to 0.31 percent of assessable 

deposits, effective June 1995, and assessments totaling $1.5 billion were refunded in September 1995. Assessment rates for the BIF were lowered 

again to a range of 0 to 0.27 percent of assessable deposits, effective the start of 1996. In 1996, the SAIF collected a one-time special assessment 

of $4.5 billion. Subsequently, assessment rates for the SAIF were lowered to the same range as the BIF, effective October 1996. This range of rates 

remained unchanged for both funds through 2006. As part of the implementation of the Federal Deposit Insurance Reform Act of 2005, assessment 

rates were increased to a range of 0.05 percent to 0.43 percent of assessable deposits effective at the start of 2007, but many institutions received 

a one-time assessment credit ($4.7 billion in total) to offset the new assessments. For the first quarter of 2009, assessment rates were increased to a 

range of 0.12 to 0.50 percent of assessable deposits. On June 30, 2009, a special assessment was imposed on all insured banks and thrifts, which 

amounted in aggregate to approximately $5.4 billion. For 8,106 institutions, with $9.3 trillion in assets, the special assessment was 5 basis points of 

each institution’s assets minus tier one capital; 89 other institutions, with assets of $4.0 trillion, had their special assessment capped at 10 basis points 

of their second quarter assessment base. From the second quarter of 2009 through the first quarter of 2011, initial assessment rates ranged between 

0.12 and 0.45 percent of assessable deposits. Initial rates are subject to further adjustments. 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. 

Initial assessment rates were lowered to a range of 0.05 to 0.35 percent of the new base. The annualized assessment rates averaged approximately 

17.6 cents per $100 of assessable deposits for the first quarter of 2011 and 11.1 cents per $100 of the new base for the last three quarters of 2011 

(which is the figure shown in the table). The annualized assessment rate for 2016 is based on full year assessment income divided by a four quarter 

average of 2016 quarterly assessment base amounts. The assessment base for fourth quarter 2016 was estimated using the third quarter 2016 

assessment base and an assumed quarterly growth rate of one percent. Beginning July 1, 2016 initial assessment rates were lowered from a range of 

5 basis points to 35 basis points to a range of 3 basis points to 30 basis points, and an additional surcharge was imposed on large banks (generally 

institutions with $10 billion or more in assets) of 4.5 basis points of their assessment base (after making adjustments).

2

 These expenses, which are presented as operating expenses in the Statement of Income and Fund Balance, pertain to the FDIC in its corporate 

capacity only and do not include costs that are charged to the failed bank receiverships that are managed by the FDIC. The receivership expenses are 

presented as part of the “Receivables from Resolutions, net” line on the Balance Sheet. The narrative and graph presented on page 89 of this report 

shows the aggregate (corporate and receivership) expenditures of the FDIC.

3

 Includes $210 million for the cumulative effect of an accounting change for certain postretirement benefits (1992).

4

 Includes a $106 million net loss on government securities (1976).

5

 This amount represents interest and other insurance expenses from 1933 to 1972.

6

 Includes the aggregate amount of $81 million of interest paid on capital stock between 1933 and 1948.
2016

APPENDICES 147

FDIC INSURED INSTITUTIONS CLOSED DURING 2016

Dollars in Thousands

Codes for Bank Class:

NM = State-chartered bank that is not a 

 member of the Federal Reserve System

N = National Bank 

SB = Savings Bank

SI = Stock and Mutual 

Savings Bank

SM= State-chartered bank that is a 

member of the Federal Reserve System

SA = Savings Association

Name and Location

Bank 

Class

Number

of 

Deposit 

Accounts

Total 

Assets1 Total Deposits1

Insured 

Deposit Funding 

and Other 

Disbursements

Estimated Loss 

to 

the DIF2

Date of 

Closing 

or Acquisition

Receiver/Assuming 

Bank and Location

Purchase and Assumption - All Deposits

Trust Company Bank

Memphis, TN

NM 614 $18,998 $20,148 $21,119 $10,931 04/29/16 The Bank of 

Fayette County

Piperton, TN

Whole Bank Purchase and Assumption - All Deposits

North Milwaukee 

State Bank

Milwaukee, WI

NM 2,548 $67,115 $61,493 $59,864 11,846 03/11/16 First-Citizens Bank 

& Trust Company

Raleigh, NC

First CornerStone 

Bank

King of Prussia, PA

NM 2,372 $103,307 $101,040 $97,455 12,482 05/06/16 First-Citizens Bank 

& Trust Company

Raleigh, NC

The Woodbury 

Banking Company

Woodbury, GA

NM 1,358 $21,426 $21,122 $20,475 $5,225 08/19/16 United Bank

Zebulon, GA

Allied Bank

Mulberry, AR

SM 4,081 $66,336 $64,713 $61,271 $6,880 09/23/16 Today’s Bank

Huntsville, AR

1

 Total Assets and Total Deposits data are based upon the last Call Report filed by the institution prior to failure.

2

 Estimated losses are as of December 31, 2016. Estimated losses are routinely adjusted with updated information from new appraisals and asset 

sales, which ultimately affect the asset values and projected recoveries. Represents the estimated loss to the DIF from deposit insurance obligations.
ANNUAL REPORT

148 APPENDICES

RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS 

FOR THE PROTECTION OF DEPOSITORS, 1934 - 2016

Dollars in Thousands

Bank and Thrift Failures1

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3 Funding4 Recoveries5

Estimated 

Additional 

Recoveries

Final and 

Estimated 

Losses6

2,615 $941,561,675 $708,551,440 $582,315,734 $412,100,104 $63,283,794 $106,931,836 

2016 5 $277,182 $268,516 260,184 0 212,820 47,364 

2015 8 6,706,038 4,870,464 4,559,009 730,994 2,921,111 906,904 

2014 18 2,913,503 2,691,485 2,679,230 387,559 1,899,750 391,921 

2013 24 6,044,051 5,132,246 5,019,216 217,015 3,549,064 1,253,137 

2012 51 11,617,348 11,009,630 11,035,242 1,647,257 6,913,768 2,474,217 

2011 92 34,922,997 31,071,862 30,705,964 2,847,739 21,329,461 6,528,764 

20107 157 92,084,988 78,290,185 82,295,469 55,153,961 10,678,036 16,463,472 

20097 140 169,709,160 137,835,121 136,056,847 94,312,538 14,205,363 27,538,946 

20087 25 371,945,480 234,321,715 205,822,476 184,374,984 3,146,441 18,301,051 

2007 3 2,614,928 2,424,187 1,920,576 1,461,932 297,359 161,285

2006 0 0 0 0 0 0 0 

2005 0 0 0 0 0 0 0 

2004 4 170,099 156,733 139,182 134,978 287 3,917 

2003 3 947,317 901,978 883,772 812,933 8,192 62,647 

2002 11 2,872,720 2,512,834 1,567,805 1,711,173 (493,685) 350,317 

2001 4 1,821,760 1,661,214 21,131 1,138,677 (1,410,011) 292,465 

2000 7 410,160 342,584 297,313 265,175 0 32,138 

1999 8 1,592,189 1,320,573 1,308,225 711,758 9,324 587,143 

1998 3 290,238 260,675 292,921 58,248 11,819 222,854 

1997 1 27,923 27,511 25,546 20,520 0 5,026 

1996 6 232,634 230,390 201,533 140,918 0 60,615 

1995 6 802,124 776,387 609,043 524,571 0 84,472 

1994 13 1,463,874 1,397,018 1,224,769 1,045,718 0 179,051 

1993 41 3,828,939 3,509,341 3,841,658 3,209,012 0 632,646 

1992 120 45,357,237 39,921,310 14,541,476 10,866,760 567 3,674,149 

1991 124 64,556,512 52,972,034 21,501,145 15,496,730 4,128 6,000,287

1990 168 16,923,462 15,124,454 10,812,484 8,040,995 0 2,771,489 

1989 206 28,930,572 24,152,468 11,443,281 5,247,995 0 6,195,286 

1988 200 38,402,475 26,524,014 10,432,655 5,055,158 0 5,377,497 

1987 184 6,928,889 6,599,180 4,876,994 3,014,502 0 1,862,492 

1986 138 7,356,544 6,638,903 4,632,121 2,949,583 0 1,682,538 

1985 116 3,090,897 2,889,801 2,154,955 1,506,776 0 648,179 

1984 78 2,962,179 2,665,797 2,165,036 1,641,157 0 523,879 

1983 44 3,580,132 2,832,184 3,042,392 1,973,037 0 1,069,355 

1982 32 1,213,316 1,056,483 545,612 419,825 0 125,787 

1981 7 108,749 100,154 114,944 105,956 0 8,988 

1980 10 239,316 219,890 152,355 121,675 0 30,680 

1934 - 1979 558 8,615,743 5,842,119 5,133,173 4,752,295 0 380,878
2016

APPENDICES 149

RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS 

FOR THE PROTECTION OF DEPOSITORS, 1934 - 2016

Dollars in Thousands

Assistance Transactions1

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3 Funding4 Recoveries5

Estimated 

Additional 

Recoveries

Final and 

Estimated 

Losses6

154 $3,317,099,253 $1,442,173,417 $11,630,356 $6,199,875 0 $5,430,481 

2016 0 0 0 0 0 0 0 

2015 0 0 0 0 0 0 0 

2014 0 0 0 0 0 0 0 

2013 0 0 0 0 0 0 0 

2012 0 0 0 0 0 0 0 

2011 0 0 0 0 0 0 0 

2010 0 0 0 0 0 0 0 

20098 8 1,917,482,183 1,090,318,282 0 0 0 0 

20088 5 1,306,041,994 280,806,966 0 0 0 0 

2007 0 0 0 0 0 0 0 

2006 0 0 0 0 0 0 0 

2005 0 0 0 0 0 0 0 

2004 0 0 0 0 0 0 0 

2003 0 0 0 0 0 0 0 

2002 0 0 0 0 0 0 0 

2001 0 0 0 0 0 0 0 

2000 0 0 0 0 0 0 0 

1999 0 0 0 0 0 0 0 

1998 0 0 0 0 0 0 0 

1997 0 0 0 0 0 0 0 

1996 0 0 0 0 0 0 0 

1995 0 0 0 0 0 0 0 

1994 0 0 0 0 0 0 0 

1993 0 0 0 0 0 0 0 

1992 2 33,831 33,117 1,486 1,236 0 250 

1991 3 78,524 75,720 6,117 3,093 0 3,024 

1990 1 14,206 14,628 4,935 2,597 0 2,338 

1989 1 4,438 6,396 2,548 252 0 2,296 

1988 80 15,493,939 11,793,702 1,730,351 189,709 0 1,540,642 

1987 19 2,478,124 2,275,642 160,877 713 0 160,164 

1986 7 712,558 585,248 158,848 65,669 0 93,179 

1985 4 5,886,381 5,580,359 765,732 406,676 0 359,056 
ANNUAL REPORT

150 APPENDICES

RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS 

FOR THE PROTECTION OF DEPOSITORS, 1934 - 2016 (continued)

Dollars in Thousands

Assistance Transactions1

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3 Funding4 Recoveries5

Estimated 

Additional 

Recoveries

Final and 

Estimated 

Losses6

1984 2 40,470,332 29,088,247 5,531,179 4,414,904 0 1,116,275 

1983 4 3,611,549 3,011,406 764,690 427,007 0 337,683 

1982 10 10,509,286 9,118,382 1,729,538 686,754 0 1,042,784 

1981 3 4,838,612 3,914,268 774,055 1,265 0 772,790 

1980 1 7,953,042 5,001,755 0 0 0 0 

1934 - 1979 4 1,490,254 549,299 0 0 0 0

1

 Institutions for which the FDIC is appointed receiver, including deposit payoff, insured deposit transfer, and deposit assumption cases.

2

 For 1990 through 2005, amounts represent the sum of BIF and SAIF failures (excluding those handled by the RTC); prior to 1990, figures are only 

for the BIF. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. For 2006 to 2016, figures are 

for the DIF.

3

 Assets and deposit data are based on the last Call Report or TFR filed before failure.

4

 Funding represents the amounts provided by the DIF to receiverships for subrogated claims, advances for working capital, and administrative 

expenses paid on their behalf. Beginning in 2008, the DIF resolves failures using whole-bank purchase and assumption transactions, most with an 

accompanying shared-loss agreement (SLA). The DIF satifies any resulting liabilities by offsetting receivables from resolutions when receiverships 

declare a dividend and/or sending cash directly to receiverships to fund an SLA and other expenses.

5

 Recoveries represent cash received and dividends (cash and non-cash) declared by receiverships.

6

 Final losses represent actual losses for unreimbursed subrogated claims of inactivated receiverships. Estimated losses represent the difference 

between the amount paid by the DIF to cover obligations to insured depositors and the estimated recoveries from the liquidation of receivership 

assets. 

7

 Includes amounts related to transaction account coverage under the Transaction Account Guarantee Program (TAG). The estimated losses as of 

December 31, 2016, for TAG accounts in 2010, 2009, and 2008 are $381 million, $1.1 billion, and $13 million, respectively.

8

 Includes institutions where assistance was provided under a systemic risk determination.
2016

APPENDICES 151

NUMBER, ASSETS, DEPOSITS, LOSSES, AND LOSS TO FUNDS OF INSURED THRIFTS 

TAKEN OVER OR CLOSED BECAUSE OF FINANCIAL DIFFICULTIES, 1989 THROUGH 19951

Dollars in Thousands

Year Total Assets Deposits

Estimated 

Receivership 

Loss2

Loss to 

Fund3

Total 748 $393,986,574 $318,328,770 $75,977,846 $81,581,578

1995 2 423,819 414,692 28,192 27,750 

1994 2 136,815 127,508 11,472 14,599 

1993 10 6,147,962 5,708,253 267,595 65,212 

1992 59 44,196,946 34,773,224 3,286,908 3,832,145 

1991 144 78,898,904 65,173,122 9,235,967 9,734,263 

1990 213 129,662,498 98,963,962 16,062,685 19,257,578 

19894 318 134,519,630 113,168,009 47,085,027 48,650,031

1

 Beginning in 1989 through July 1, 1995, all thrift closings were the responsibility of the Resolution Trust Corporation (RTC). Since the RTC was 

terminated on December 31, 1995, and all assets and liabilities transferred to the FSLIC Resolution Fund (FRF), all the results of the thrift closing activity 

from 1989 through 1995 are now reflected on the FRF’s books. Year is the year of failure, not the year of resolution.

2

 The Estimated Receivership Loss represents the projected loss at the fund level from receiverships for unreimbursed subrogated claims of the FRF and 

unpaid advances to receiverships from the FRF.

3

 The Final Loss to Fund represents the total resolution cost of the failed thrifts in the FRF-RTC fund. In addition to the estimated losses for 

receiverships, the final loss includes corporate revenue and expense items, such as interest expense on Federal Financing Bank debt, interest expense 

on escrowed funds, and interest revenue on advances to receiverships.

4

 Total for 1989 excludes nine failures of the former FSLIC.
ANNUAL REPORT

152 APPENDICES

B. MORE ABOUT THE FDIC

FDIC BOARD OF DIRECTORS

Martin J. Gruenberg 

Martin J. Gruenberg is the 20th Chairman of the 

FDIC, receiving Senate confirmation on November 

15, 2012, for a five-year term. Mr. Gruenberg 

served as Vice Chairman and Member of the FDIC 

Board of Directors from August 22, 2005, until his 

confirmation as Chairman. He served as Acting 

Chairman from July 9, 2011, to November 15, 2012, 

and also from November 16, 2005, to June 26, 2006.

Mr. Gruenberg joined the FDIC Board after broad 

congressional experience in the financial services and 

regulatory areas. He served as Senior Counsel to 

Senator Paul S. Sarbanes (D-MD) on the staff of the 

Senate Committee on Banking, Housing, and Urban 

Affairs from 1993 to 2005. Mr. Gruenberg advised 

the Senator on issues of domestic and international 

financial regulation, monetary policy, and trade. 

He also served as Staff Director of the Banking 

Committee’s Subcommittee on International Finance 

and Monetary Policy from 1987 to 1992. Major 

legislation in which Mr. Gruenberg played an active 

role during his service on the Committee includes 

the Financial Institutions Reform, Recovery, and 

Seated (left to right): Thomas M. Hoenig and Martin J. Gruenberg.

Standing (left to right): Thomas J. Curry and Richard Cordray.
2016

APPENDICES 153

Enforcement Act of 1989 (FIRREA); the Federal 

Deposit Insurance Corporation Improvement Act of 

1991 (FDICIA); the Gramm-Leach-Bliley Act; and 

the Sarbanes-Oxley Act of 2002.

Mr. Gruenberg served as Chairman of the Executive 

Council and President of the International Association 

of Deposit Insurers (IADI) from November 2007 to 

November 2012.

Mr. Gruenberg holds a J.D. from Case Western 

Reserve Law School and an A.B. from Princeton 

University, Woodrow Wilson School of Public and 

International Affairs.

Thomas M. Hoenig

Thomas M. Hoenig was confirmed by the Senate as 

Vice Chairman of the FDIC on November 15, 2012. 

He joined the FDIC on April 16, 2012, as a member 

of the Board of Directors of the FDIC for a six-year 

term. He is also a member of the Executive Board of 

the International Association of Deposit Insurers.

Prior to serving on the FDIC Board, Mr. Hoenig was 

the President of the Federal Reserve Bank of Kansas 

City and a member of the Federal Reserve System’s 

Federal Open Market Committee from 1991 to 2011.

Mr. Hoenig was with the Federal Reserve for 38 

years, beginning as an economist, and then as a 

senior officer in banking supervision during the U.S. 

banking crisis of the 1980s. In 1986, he led the 

Kansas City Federal Reserve Bank’s Division of Bank 

Supervision and Structure, directing the oversight of 

more than 1,000 banks and bank holding companies 

with assets ranging from less than $100 million to 

$20 billion. He became President of the Kansas City 

Federal Reserve Bank on October 1, 1991.

Mr. Hoenig is a native of Fort Madison, Iowa, 

and received a doctorate in economics from Iowa 

State University.

Thomas J. Curry

Thomas J. Curry was sworn in as the 30th 

Comptroller of the Currency on April 9, 2012.

The Comptroller of the Currency is the administrator 

of national banks and federal savings associations, 

and chief officer of the Office of the Comptroller 

of the Currency (OCC). The OCC supervises 

approximately 1,700 national banks and federal 

savings associations and about 50 federal branches and 

agencies of foreign banks in the United States. These 

institutions comprise nearly two-thirds of the assets 

of the commercial banking system. The Comptroller 

is a Director of NeighborWorks® America where he 

served as Chairman from March 2014 through June 

2016, and also a member of the Federal Financial 

Institutions Examination Council (FFIEC) where he 

served as Chairman for a two-year term from April 

2013 until April 2015. 

Prior to becoming Comptroller of the Currency, 

Mr. Curry served as a Director of the FDIC Board 

since January 2004, and as the Chairman of the 

NeighborWorks® America Board of Directors. 

Prior to joining the FDIC’s Board of Directors, Mr. 

Curry served five Massachusetts Governors as the 

Commonwealth’s Commissioner of Banks from 1990 

to 1991 and from 1995 to 2003. He served as Acting 

Commissioner from February 1994 to June 1995. He 

previously served as First Deputy Commissioner and 

Assistant General Counsel within the Massachusetts 

Division of Banks. He entered state government in 

1982 as an attorney with the Massachusetts’ Secretary 

of State’s Office.

Mr. Curry served as the Chairman of the Conference 

of State Bank Supervisors from 2000 to 2001, and 

served two terms on the State Liaison Committee 

of the Federal Financial Institutions Examination 

Council, including a term as Committee Chairman.

He is a graduate of Manhattan College (summa cum 

laude), where he was elected to Phi Beta Kappa. He 

received his law degree from the New England School 

of Law. 
ANNUAL REPORT

154 APPENDICES

Richard Cordray 

Richard Cordray serves as the first Director of 

the Consumer Financial Protection Bureau. He 

previously led the Bureau’s Enforcement Division.

Prior to joining the Bureau, Mr. Cordray served 

on the front lines of consumer protection as Ohio’s 

Attorney General. Mr. Cordray recovered more than 

$2 billion for Ohio’s retirees, investors, and business 

owners, and took major steps to help protect its 

consumers from fraudulent foreclosures and financial 

predators. In 2010, his office responded to a record 

number of consumer complaints, but Mr. Cordray 

went further and opened that process for the first 

time to small businesses and nonprofit organizations 

to ensure protections for even more Ohioans. To 

recognize his work on behalf of consumers as Attorney 

General, the Better Business Bureau presented 

Mr. Cordray with an award for promoting an 

ethical marketplace.

Mr. Cordray also served as Ohio Treasurer and 

Franklin County Treasurer, two elected positions in 

which he led state and county banking, investment, 

debt, and financing activities. As Ohio Treasurer, he 

resurrected a defunct economic development program 

that provides low-interest loan assistance to small 

businesses to create jobs, re-launched the original 

concept as GrowNOW, and pumped hundreds of 

millions of dollars into access for credit to small 

businesses. Mr. Cordray simultaneously created a 

Bankers Advisory Council to share ideas about the 

program with community bankers across Ohio.

Earlier in his career, Mr. Cordray was an adjunct 

professor at the Ohio State University College of 

Law, served as a State Representative for the 33rd 

Ohio House District, was the first Solicitor General 

in Ohio’s history, and was a sole practitioner and 

Counsel to Kirkland & Ellis. Mr. Cordray has 

argued seven cases before the United States Supreme 

Court, by special appointment of both the Clinton 

and Bush Justice Departments. He is a graduate of 

Michigan State University, Oxford University, and 

the University of Chicago Law School. Mr. Cordray 

was Editor-in-Chief of the University of Chicago Law 

Review and later clerked for U.S. Supreme Court 

Justices Byron White and Anthony Kennedy.

Mr. Cordray lives in Grove City, Ohio, with his wife 

Peggy—a Professor at Capital University Law School 

in Columbus—and twin children Danny and Holly.
2016

APPENDICES 155

FDIC ORGANIZATION CHART/OFFICIALS

DIVISION OF INFORMATION 

TECHOLOGY

Russell G. Pittman

Director

INFORMATION SECURITY

AND PRIVACY STAFF

Noreen Padilla

 Acting Chief Information 

Security Officer

DEPUTY TO THE CHAIRMAN 

AND CHIEF OPERATING OFFICER,

CHIEF OF STAFF

Barbara A. Ryan

CHIEF RISK OFFICER

Lee Price

Acting Chief Risk Officer 

SPECIAL ADVISOR FOR

SUPERVISORY MATTERS

Jason C. Cave

DEPUTY TO THE CHAIRMAN

Kymberly K. Copa

CHIEF INFORMATION OFFICER 

AND PRIVACY OFFICER

Lawrence Gross, Jr.

DEPUTY TO THE CHAIRMAN 

AND CHIEF FINANCIAL OFFICER

Steven O. App

SENIOR ADVISOR

INTERNATIONAL RESOLUTION POLICY

David S. Hoelscher

OFFICE OF INSPECTOR GENERAL

Fred W. Gibson

DEPUTY TO THE CHAIRMAN

Acting Inspector General

FOR COMMUNICATIONS

Barbara Hagenbaugh

INTERNAL OMBUDSMAN

Robert D. Harris

WRITER-EDITOR

Michele A. Heller

OFFICE OF 

COMMUNICATIONS

DIVISION OF RESOLUTION 

AND RECEIVERSHIPS

Bret D. Edwards

Director

LEGAL DIVISION

Charles Yi

General Counsel

DIVISION OF INSURANCE 

AND RESEARCH

Diane Ellis

Director

DIVISION OF DEPOSITOR 

AND CONSUMER PROTECTION

Mark E. Pearce

Director

OFFICE OF COMPLEX

FINANCIAL INSTITUTIONS

Arthur J. Murton

Director

DIVISION OF RISK 

MANAGEMENT SUPERVISION

Doreen R. Eberley

Director

DIVISION OF 

ADMINISTRATION

Arleas Upton Kea

Director

DIVISION OF FINANCE

Craig R. Jarvill

Director

CORPORATE UNIVERSITY

Suzannah L. Susser

Chief Learning Officer and Director

OFFICE OF 

LEGISLATIVE AFFAIRS

Andy Jiminez

Director

OFFICE OF 

THE OMBUDSMAN

Gordon Talbot

Acting Ombudsman

OFFICE OF MINORITY AND 

WOMEN INCLUSION

Avelino Rodriguez

 Acting Director 

OFFICE OF FINANCIAL 

INSTITUTION ADJUDICATION

C. Richard Miserendino

 Administrative Law Judge

BOARD OF DIRECTORS

Martin J. Gruenberg

FDIC

Chairman

Vacant

FDIC

Board Member

Thomas M. Hoenig

FDIC

Vice Chairman, Board Member

Thomas J. Curry

OCC

Board Member

Richard Cordray

CFPB

Board Member
ANNUAL REPORT

156 APPENDICES

Note: 2007–2016 staffing totals reflect year-end full time equivalent staff. Prior to 2008, staffing totals reflect total employees 

on-board. 

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

9000

6000

3000

0

4,532 4,988 6,557 8,150 7,973 7,476

FDIC Year–End On-Board Staffing

7,254 6,631 6,385 6,096

CORPORATE STAFFING 

STAFFING TRENDS 2007-2016
2016

APPENDICES 157

NUMBER OF EMPLOYEES BY DIVISION/OFFICE 2015 AND 2016 (YEAR-END)1

Total Washington Regional/Field

Division or Office: 2016 2015 2016 2015 2016 2015

Division of Risk Management Supervision 2,627 2,683 204 208 2,423 2,475

Division of Depositor and Consumer Protection 838 841 116 122 722 719

Division of Resolutions and Receiverships 537 719 138 149 399 570

Legal Division 531 564 340 356 191 208

Division of Administration 370 367 256 251 114 116

Division of Information Technology 301 319 237 252 64 67

Corporate University 210 194 202 187 8 7

Division of Insurance and Research 193 205 153 163 40 42

Division of Finance 167 171 164 169 3 2

Information Security and Privacy Staff 34 36 34 36 0 0

Office of Inspector General 122 119 76 74 47 46

Office of Complex Financial Institutions 67 62 50 52 17 10

Executive Offices2 22 22 22 22 0 0

Executive Support Offices 3 79 84 72 76 7 8

TOTAL 6,096 6,385 2,062 2,115 4,034 4,270

1 The FDIC reports staffing totals using a full-time equivalent methodology, which is based on an employee’s scheduled work hours. Division/Office 

staffing has been rounded to the nearest whole FTE. Totals may not foot due to rounding.

2

 Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, and Chief Information Officer. 

3 Includes the Offices of Legislative Affairs, Communications, Ombudsman, Minority and Women Inclusion, and Corporate Risk Management.
ANNUAL REPORT

158 APPENDICES

SOURCES OF INFORMATION

FDIC Website

www.fdic.gov

A wide range of banking, consumer, and financial 

information is available on the FDIC’s website. This 

includes the FDIC’s Electronic Deposit Insurance 

Estimator (EDIE), which estimates an individual’s 

deposit insurance coverage; the Institution Directory, 

which contains financial profiles of FDIC-insured 

institutions; Community Reinvestment Act 

evaluations and ratings for institutions supervised by 

the FDIC; Call Reports, which are bank reports of 

condition and income; and Money Smart, a training 

program to help individuals outside the financial 

mainstream enhance their money management skills 

and create positive banking relationships. Readers 

also can access a variety of consumer pamphlets, 

FDIC press releases, speeches, and other updates on 

the agency’s activities, as well as corporate databases 

and customized reports of FDIC and banking 

industry information. 

FDIC Call Center

Phone: 877-275-3342 (877-ASK-FDIC) 

703-562-2222 

Hearing Impaired: 800-925-4618 

703-562-2289

The FDIC Call Center in Washington, DC, is the 

primary telephone point of contact for general 

questions from the banking community, the public, 

and FDIC employees. The Call Center directly, or 

with other FDIC subject matter experts, responds to 

questions about deposit insurance and other consumer 

issues and concerns, as well as questions about FDIC 

programs and activities. The Call Center also refers 

callers to other federal and state agencies as needed. 

Hours of operation are 8:00 a.m. to 8:00 p.m., 

Eastern Time, Monday – Friday, and 9:00 a.m. to 

5:00 p.m., Saturday – Sunday. Recorded information 

about deposit insurance and other topics is available 

24 hours a day at the same telephone number.

As a customer service, the FDIC Call Center has 

many bilingual Spanish agents on staff and has access 

to a translation service, which is able to assist with 

over 40 different languages.

Public Information Center

3501 Fairfax Drive

Room E-1021

Arlington, VA 22226

Phone: 877-275-3342 (877-ASK-FDIC),

703-562-2200

Fax: 703-562-2296

FDIC Online Catalog: https://catalog.fdic.gov

E-mail: publicinfo@fdic.gov

Publications such as FDIC Quarterly and Consumer 

News and a variety of deposit insurance and 

consumer pamphlets are available at www.fdic.gov

or may be ordered in hard copy through the 

FDIC online catalog. Other information, press 

releases, speeches and congressional testimony, 

directives to financial institutions, policy 

manuals, and FDIC documents are available 

on request through the Public Information 

Center. Hours of operation are 9:00 a.m. to 

4:00 p.m., Eastern Time, Monday – Friday.

Office of the Ombudsman

3501 Fairfax Drive

Room E-2022

Arlington, VA 22226

Phone: 877-275-3342 (877-ASK-FDIC) 

Fax: 703-562-6057

E-mail: ombudsman@fdic.gov

The Office of the Ombudsman (OO) is an 

independent, neutral, and confidential resource and 

liaison for the banking industry and the general 

public. The OO responds to inquiries about the 

FDIC in a fair, impartial, and timely manner. It 

researches questions and fields complaints from 

bankers and bank customers. OO representatives 

are present at all bank closings to provide accurate 

information to bank customers, the media, bank 

employees, and the general public. The OO also 

recommends ways to improve FDIC operations, 

regulations, and customer service.
2016

APPENDICES 159

REGIONAL AND AREA OFFICES

Atlanta Regional Office

Michael J. Dean, Regional Director

10 Tenth Street, NE

Suite 800

Atlanta, Georgia 30309

(678) 916-2200

Alabama

Florida

Georgia

North Carolina

South Carolina

Virginia

West Virginia

Dallas Regional Office

Kristie K. Elmquist, Regional Director

1601 Bryan Street

Dallas, Texas 75201

(214) 754-0098

Colorado

New Mexico

Oklahoma

Texas

Kansas City Regional Office

James D. LaPierre, Regional Director

1100 Walnut Street

Suite 2100

Kansas City, Missouri 64106

(816) 234-8000

Iowa

Kansas

Minnesota

Missouri

Nebraska

North Dakota

South Dakota

Chicago Regional Office

M. Anthony Lowe, Regional Director

300 South Riverside Plaza

Suite 1700

Chicago, Illinois 60606

(312) 382-6000

Illinois

Indiana

Kentucky

Michigan

Ohio

Wisconsin

Memphis Area Office

Kristie K. Elmquist, Director

6060 Primacy Parkway

Suite 300

Memphis, Tennessee 38119

(901) 685-1603

Arkansas

Louisiana

Mississippi

Tennessee

New York Regional Office

John F. Vogel, Regional Director

350 Fifth Avenue

Suite 1200

New York, New York 10118

(917) 320-2500

Delaware

District of Columbia

Maryland

New Jersey

New York

Pennsylvania

Puerto Rico

Virgin Islands
ANNUAL REPORT

160 APPENDICES

Boston Area Office

John F. Vogel, Director

15 Braintree Hill Office Park

Suite 100

Braintree, Massachusetts 02184

(781) 794-5500

Connecticut

Maine

Massachusetts

New Hampshire

Rhode Island

Vermont

San Francisco Regional Office

Kathy L. Moe, Acting Regional Director

25 Jessie Street at Ecker Square

Suite 2300

San Francisco, California 94105

(415) 546-0160

Alaska

American Samoa

Arizona

California

Federated States of Micronesia

Guam

Hawaii

Idaho

Montana

Nevada

Oregon

Utah

Washington

Wyoming
2016

APPENDICES 161

C. OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT OF THE MANAGEMENT 

AND PERFORMANCE CHALLENGES 

FACING THE FDIC

Under the Reports Consolidation Act of 2000, 

the Office of Inspector General (OIG) identifies 

the management and performance challenges 

facing the FDIC and provides its assessment to the 

Corporation for inclusion in the FDIC’s annual 

performance and accountability report. In doing 

so, we keep in mind the FDIC’s overall program 

and operational responsibilities; financial industry, 

economic, and technological conditions and trends; 

areas of congressional interest and concern; relevant 

laws and regulations; the Chairman’s priorities and 

corresponding corporate goals; and ongoing activities 

to address the issues involved. The OIG believes that 

for the foreseeable future, the FDIC faces challenges 

in the critical areas listed below, a number of which 

carry over from past years. A challenge of particular 

emphasis this year is Maintaining Strong Information 

Security and Governance Practices. We would point 

out that all of these challenges may well be impacted 

by changes brought on by a new Administration 

during 2017. 

Maintaining Strong Information Security 

and Governance Practices

Essential to achieving the FDIC’s mission of 

maintaining stability and public confidence in the 

nation’s financial system is safeguarding sensitive 

information, including personally identifiable 

information that the FDIC collects and manages 

in its role as employer, federal deposit insurer, 

regulator of state nonmember financial institutions, 

and receiver of failed institutions. Materials that 

the FDIC possesses related to its Dodd-Frank 

Wall Street Reform and Consumer Protection Act 

(Dodd-Frank Act) responsibilities contain some 

of the most sensitive information that the FDIC 

maintains and safeguarding it from unauthorized 

access or disclosure is critically important. Equally 

important to the FDIC and the Nation is the defense 

of critical infrastructure, which includes financial 

systems and associated computer network operations. 

In that regard, the Federal Information Security 

Modernization Act (FISMA) of 2014 establishes 

standards to assess information security government 

wide. The OIG’s FISMA work is intended not only 

to ensure compliance with those standards but also 

to help defend the critical infrastructure against those 

who would attack it. 

The FDIC has recently come under increased scrutiny 

by the Congress for specific actions it has taken 

related to protecting sensitive information and has 

been criticized for its reporting of breaches of such 

information, as required by FISMA and related Office 

of Management and Budget (OMB) guidance. The 

Corporation’s continuing challenge will be to restore 

confidence both in its ability to protect the sensitive 

information it possesses and its actions to fully report 

major security incidents within prescribed timeframes, 

as required by law. Our office reported and testified 

before the Committee on Science, Space, and 

Technology, U.S. House of Representatives, on our 

work in two areas in this regard, and we continue to 

conduct work on related matters.

One audit dealt with the FDIC’s process for 

identifying and reporting major information security 

incidents and focused on an incident where a former 

FDIC employee copied a large quantity of sensitive 

FDIC information, including personally identifiable 

information, to removable media and took this 

information when departing the FDIC’s employment 

in October 2015. The FDIC detected the incident 

through its Data Loss Prevention tool. Although 

the FDIC had established various incident response 

policies, procedures, guidelines, and processes, these 

controls did not provide reasonable assurance that 

major incidents were identified and reported in a 

timely manner. We recommended actions to provide 

the FDIC with greater assurance that major incidents 

are identified and reported consistent with relevant 

guidance. 
ANNUAL REPORT

162 APPENDICES

In a second audit, we reviewed the Corporation’s 

controls for mitigating the risk of an unauthorized 

release of highly sensitive resolution plans. In 

September 2015, an FDIC employee abruptly 

resigned from the Corporation and took copies of 

sensitive components of resolution plans without 

authorization and in violation of FDIC policy. A 

number of factors contributed to this security 

incident. Most notably, an insider threat program 

was not in place that would have better enabled the 

FDIC to deter, detect, and mitigate the risks posed 

by the employee. Additionally, a key security control 

designed to prevent employees with access to sensitive 

resolution plans from copying electronic information 

to removable media failed to operate as intended. 

To address these concerns, we recommended that 

the FDIC establish a corporate-wide insider threat 

program and take other steps to better protect 

sensitive resolution plans. On September 20, 

2016, the Corporation issued a policy formally 

establishing its Insider Threat and Counterintelligence 

Program and finalized a governance charter and 

implementation plan for the program.

As noted earlier, more broadly speaking, the OIG 

looks to its annual work under FISMA to identify 

the Corporation’s information security successes and 

its ongoing challenges. Our most recent FISMA 

work determined that the FDIC had established a 

number of information security program controls 

and practices that were generally consistent with 

FISMA requirements, OMB policy and guidelines, 

and applicable National Institute of Standards 

and Technology (NIST) standards and guidelines. 

The FDIC had also taken steps to strengthen its 

security program controls following our 2015 

FISMA work. Among other things, the FDIC: 

restricted (with limited exceptions) the ability 

of employees and contractor personnel to copy 

information to removable media in response to the 

major information security incidents involving the 

unauthorized exfiltration of sensitive information by 

departing employees; identified and reported its high 

value assets to the Department of Homeland Security 

(DHS); and updated its security control framework 

to address changes introduced by NIST guidance 

related to security and privacy controls for federal 

information systems and organizations. 

Notwithstanding these actions, our FISMA audit 

found security control weaknesses that impaired 

the effectiveness of the FDIC’s information security 

program and practices and placed the confidentiality, 

integrity, and availability of the FDIC’s information 

systems and data at elevated risk. Some findings were 

identified during the current year and others were 

identified in prior reports issued by the OIG or the 

Government Accountability Office. Areas of notable 

weakness that continue to pose challenges for the 

Corporation include strategic planning, vulnerability 

scanning, the FDIC’s information security manager 

program, configuration management, third-party 

software patching, multifactor authentication, and 

contingency planning.

The FDIC is working to strengthen the effectiveness 

of its information security program controls in a 

number of other areas. For example, the FDIC is 

working to improve its incident response capabilities; 

more effectively protect its sensitive information 

by improving the effectiveness of its Data Loss 

Prevention tool and adopting Digital Rights 

Management software; complete an end-to-end 

assessment of its information security and privacy 

programs; hire a permanent Chief Information 

Security Officer (CISO); and begin addressing action 

items identified during a Cyber Stat Review with 

OMB and DHS officials aimed at improving the 

FDIC’s cybersecurity posture.

Other ongoing challenges for the Corporation that we 

pointed out involve a risk related to the performance 

of the vendor that supports the FDIC’s infrastructure 

services and an observation on the frequent turnover 

in the CISO position and whether the CISO’s 

authorities enable the CISO to effectively address the 

responsibilities defined in FISMA. 

Going forward, a challenging priority for the FDIC 

will be to maintain effective communication with 

the Congress and collaboration among all parties 
2016

APPENDICES 163

involved in protecting sensitive information and the 

Nation’s critical infrastructure. Doing so will require 

strong leadership and an effective IT governance 

structure. In addition, in confronting its information 

security challenges, competing priorities must be 

carefully considered, and sound decision-making will 

be critical to the Corporation’s success. Given the 

substantial financial investment in FDIC systems, 

security features, and related human resources, the 

Corporation needs to consider the cost-effectiveness 

and measurable business value outcomes in its 

decisions to fund major IT projects to ensure proper 

stewardship of millions of dollars in IT investments.

Carrying Out Dodd-Frank Act Responsibilities

The Dodd-Frank Act created a comprehensive new 

regulatory and resolution framework designed to 

avoid the severe consequences of financial instability. 

Under current law, Title I of the Dodd-Frank Act 

provides tools for regulators to impose enhanced 

supervision and prudential standards on systemically 

important financial institutions (SIFI). Title II 

provides the FDIC with a new orderly liquidation 

authority for SIFIs, subject to a systemic risk 

determination by statutorily designated regulators. 

The FDIC has made progress toward implementing 

its systemic resolution authorities under the 

Dodd-Frank Act, but challenges remain. These 

challenges involve the FDIC fulfilling its insurance, 

supervisory, receivership management, and resolution 

responsibilities as it meets the requirements of the 

Dodd-Frank Act. These responsibilities are crosscutting and require collaborative efforts among staff 

throughout the Corporation’s headquarters and 

regional divisions and offices in implementing Titles 

I and II, including the Office of Complex Financial 

Institutions (OCFI), Division of Risk Management 

Supervision (RMS), Division of Resolutions and 

Receiverships (DRR), and Legal Division. 

Of note with respect to the challenge of Dodd-Frank 

Act responsibilities, in April 2016, the FDIC and the 

Federal Reserve Board (FRB) announced a significant 

step forward in the use of the “living will” authority 

to require systemically important financial institutions 

to demonstrate they can fail in an orderly way at no 

cost to taxpayers. Specifically, following eight firms’ 

submission of their living wills or resolution plans 

in July 2015, the FDIC and the Federal Reserve 

announced findings based on their review of the plans 

and conveyed required actions that firms needed 

to take for remediation. For five firms, the agencies 

jointly determined that the plans were not credible 

or would not facilitate an orderly resolution under 

bankruptcy. The FDIC and FRB jointly identified 

a number of deficiencies in those plans, as required 

by statute. Those five firms were required to remedy 

the deficiencies by October 1, 2016. If not, the firms 

could be subject to more stringent capital, leverage, 

or liquidity requirements, or restrictions on growth, 

activities, or operations. On December 13, 2016, the 

FDIC and the FRB announced that four of the five 

firms had adequately remediated deficiencies in their 

2015 plans. 

For two other firms, the FDIC and the FRB did not 

make a joint determination, but did find separately 

that in the two cases, the plans were not credible 

and would not facilitate an orderly resolution under 

bankruptcy. For the eighth and final firm, the 

shortcomings did not rise to the level of the statutory 

standard for a joint determination of non-credibility. 

In addition to the October deadline for the five plans 

referenced above, all shortcomings in the plans must 

be addressed by July 1, 2017. 

Those involved in Dodd-Frank Act activities will 

continue to evaluate the resolution plans submitted 

by the largest bank holding companies and other 

SIFIs under Title I, develop strategies for resolving 

SIFIs under Title II, work to promote cross-border 

coordination and cooperation for the orderly 

resolution of a global SIFI, and coordinate with the 

other regulators in developing policy to implement 

the provisions of the Act.

Also, the FDIC will need to ensure that staff have 

the needed knowledge and experience to continue 
ANNUAL REPORT

164 APPENDICES

to carry out risk assessments to identify supervisory, 

resolution, and insurance pricing-related risks in all 

insured depository institutions with more than $10 

billion in assets, including those for which the FDIC 

is not the primary federal regulator, in addition to 

systemically important bank holding companies and 

nonbank financial companies subject to Title I of the 

Dodd-Frank Act.

Maintaining Effective Supervision and 

Preserving Community Banking

The FDIC’s supervision program promotes the 

safety and soundness of FDIC-supervised insured 

depository institutions. The FDIC is the primary 

federal regulator for 3,790 FDIC-insured, statechartered institutions that are not members of the 

Board of Governors of the Federal Reserve System. 

As such, the FDIC is the lead federal regulator for 

the majority of community banks. In the case of “de 

novo” institutions, the FDIC needs to continue to 

emphasize that these new banks satisfactorily address 

statutory factors, including adequacy of capital, future 

earnings prospects, and the general character and 

fitness of bank management. 

We have pointed out in our past work that a key 

lesson from the crisis is the need for earlier regulatory 

response when risks are building. Even now, for 

example, as they operate in a post-crisis environment, 

banks may be tempted to take additional risks, engage 

in imprudent concentrations, or loosen underwriting 

standards. Some banks are also introducing new 

products or lines of business or seeking new sources 

for non-interest income, all of which can lead to 

interest rate risk, credit risk, operational risk, and 

reputational risk. Such risks need to be managed and 

addressed early-on during the “good times” before a 

period of downturn. RMS has continued to reinforce 

the importance of forward-looking supervision to 

assess the potential impact of an institution’s new and/

or growing risks and ensure early mitigation when 

necessary. 

FDIC examiners need to continue to identify 

problems; bring them to bank management’s 

attention; follow up on problems; bring enforcement 

actions as needed; ban individuals from banking, as 

appropriate; and be alert to such risks as Bank Secrecy 

Act and anti-money-laundering issues. In doing 

so, the Corporation needs to execute its supervisory 

authority in a fair, consistent manner. With respect 

to important international concerns, the FDIC 

also needs to support development of sound global 

regulatory policy through participation on the Basel 

Committee on Bank Supervision and other related 

sub-groups.

In light of technological changes, increased use of 

technology service providers (TSP), new delivery 

channels, and cyber threats, we have pointed out in 

past work that the FDIC’s IT examination program 

needs to be proactive and bankers and Boards of 

Directors need to ensure a strong control environment 

and sound risk management and governance practices 

in their institutions. Importantly, with respect 

to TSPs, one TSP can service hundreds or even 

thousands of financial institutions, so the impact of 

security incidents in one TSP can have devastating 

ripple effects on those institutions. Controls need to 

be designed not only to protect sensitive customer 

information at banks and TSPs, but also to guard 

against intrusions that can compromise the integrity 

and availability of operations, information and 

transaction processing systems, data, and business 

continuity. Given the complexities of the range 

of cyber threats, the FDIC needs to ensure its 

examination workforce has the needed expertise to 

effectively carry out its IT examination function.

An article in the FDIC’s Winter 2015 issue of 

Supervisory Insights highlights a number of steps the 

Corporation has taken to increase industry awareness 

of cyber risks and to provide practical tools to help 

mitigate the risk of cyber attacks. Among those, 

the FDIC has urged institutions to avail themselves 

of existing resources to identify and mitigate cyber 

risks; developed the “Cyber Challenge” exercise 

for community banks to use in assessing their 

preparedness for a cyber-related incident; offered a 

cybersecurity awareness training program for FDICsupervised institutions and FDIC supervision staff 
2016

APPENDICES 165

and management in each of the FDIC’s regional 

offices; continued participation on the Federal 

Financial Institutions Examination Council’s (FFIEC) 

Cybersecurity Critical Infrastructure Working Group 

to determine how well banks manage cyber security 

and assess banks’ preparedness to mitigate cyber risks; 

and assisted in updating the FFIEC’s IT Examination 

Handbook and related guidance. 

In the coming months, the Corporation needs to 

continue efforts, along with the other regulators, to 

address these and other emerging risks and use all 

available supervisory and legal authorities to ensure 

the continued safety and soundness of financial 

institutions and affiliated third-party entities. It also 

needs to ensure effective information-sharing about 

security incidents with regulatory parties and other 

federal groups established to combat cyber threats in 

an increasingly interconnected world.

The FDIC Chairman continues to emphasize that one 

of the FDIC’s most important priorities is the future 

of community banks and the critical role they play in 

the financial system and the U.S. economy as a whole. 

Local communities and small businesses rely heavily 

on community banks for credit and other essential 

financial services. These banks foster economic 

growth and help to ensure that the financial resources 

of the local community are put to work on its behalf. 

Consolidations and other far-reaching changes in 

the U.S. financial sector in recent decades have made 

community banks a smaller part of the U.S. financial 

system. Still, over the last several years, they have 

made up a larger percentage of all FDIC-insured 

banks and thrifts than at any other time over the last 

three decades. Their share of total industry loans has 

also remained relatively constant over the past decade.

The FDIC has sought to identify and implement 

changes to improve the efficiency and effectiveness 

of the community bank risk management and 

compliance examination processes, while still 

maintaining supervisory standards. To ensure the 

continued strength of the community banks, the 

Corporation will also need to sustain initiatives such 

as ongoing research, technical assistance to the banks 

by way of training videos on key risk management 

and consumer compliance matters, continuous 

outreach and dialogue with community banking 

groups, and attention to strengthening minority 

depository institutions. 

Maintaining a strong examination program, 

conducting forward-looking supervisory activities for 

both small and large banks, applying lessons learned, 

being attuned to harmful cyber threats in financial 

institutions and technology service providers, and 

preserving community banking will be critical to 

ensuring stability and continued confidence in the 

financial system going forward. 

Carrying Out Current and Future Resolution 

and Receivership Responsibilities

One of the FDIC’s most important roles is acting 

as the receiver or liquidating agent for failed FDICinsured institutions. The FDIC’s responsibilities 

include planning and efficiently handling the 

resolutions of failing FDIC-insured institutions 

and providing prompt, responsive, and efficient 

administration of failing and failed financial 

institutions in order to maintain confidence and 

stability in our financial system. 

As part of the resolution process, the FDIC values 

a failing federally insured depository institution, 

markets it, solicits and accepts bids for the sale of 

the institution, considers the least costly resolution 

method, determines which bid to accept, and works 

with the acquiring institution through the closing 

process. The receivership process involves performing 

the closing function at the failed bank; liquidating 

any remaining assets; and distributing any proceeds to 

the FDIC, the bank customers, general creditors, and 

those with approved claims. The FDIC seeks to close 

out or pursue professional liability claims within 18 

months of an insured institution’s failure, which can 

prove challenging as well. 

The FDIC places great emphasis on promptly 

marketing and selling the assets of failed institutions 

and terminating the receivership quickly. Although 
ANNUAL REPORT

166 APPENDICES

the number of institution failures has fallen 

dramatically since the crisis, these activities still pose 

challenges to the Corporation. As of December 31, 

2016, DRR was managing 378 active receiverships 

with assets in liquidation totaling about $3.3 billion. 

In addition, through purchase and assumption 

agreements with acquiring institutions, the 

Corporation has entered into shared-loss agreements 

(SLA). Since loss sharing began during the most 

recent crisis in November 2008, the Corporation 

has resolved 304 failures with accompanying 

SLAs. Under these agreements, the FDIC agrees 

to absorb a portion of the loss—generally 80 to 95 

percent—which may be experienced by the acquiring 

institution with regard to those assets, for a period 

of up to 10 years. The FDIC entered into 304 SLAs 

from November 2008 through September 30, 2013, 

with an initial asset base of $216.5 billion. As of 

December 31, 2016, FDIC recoveries totaled $5.2 

billion, representing 15.2 percent of the $34.1 billion 

in FDIC SLA payments. 

As another resolution strategy, the FDIC entered 

into 35 structured sales transactions involving 

43,315 assets with a total unpaid principal balance 

of $26.2 billion. Under these arrangements, the 

FDIC receiverships retain a participation interest 

in future net positive cash flows derived from thirdparty management of these assets. As of December 

31, 2016, the unpaid principal balance in 26 active 

arrangements was $1.5 billion. The Corporation will 

continue to evaluate termination offers from limited 

liability company (LLC) managing members in 

deciding whether to pursue dissolution of the LLCs if 

in the best economic interest of the receiverships. 

As time passes and recovery from the crisis continues, 

these risk sharing agreements will continue to 

wind down and certain active receiverships will be 

terminated. Given the substantial dollar value and 

risks associated with the risk-sharing activities and 

other receivership operations, the FDIC needs to 

ensure continuous monitoring and effective oversight 

to protect the FDIC’s financial interests. As an 

example, a large number of commercial SLAs have 

reached their 5-year mark, resulting in the end of 

FDIC loss-share coverage but not the end of the 

commercial SLAs, which last 8 years. The last 3 years 

of commercial SLA coverage is for recoveries only. 

Acquiring institutions may not pursue recoveries 

as vigorously as they should because they may only 

share in a relatively small percentage of recoveries. 

The FDIC needs to be sure that acquiring institutions 

identify and remit recoveries to the Corporation.

While conditions in the economy and financial system 

have improved since the peak of the financial crisis, 

bank failures continue to occur. The Corporation has 

reshaped its workforce and adjusted its budget and 

resources in line with the trend of far fewer failures. 

Notably, in the case of the FDIC’s resolutions and 

receiverships workforce, authorized staffing decreased 

dramatically from a peak of 2,460 in 2010 to 

authorized staffing of 564 for 2016. As of December 

31, 2016, DRR on-board staffing totaled 537. DRR 

will continue to substantially reduce its nonpermanent 

staff each year, based on declining workload. 

These staff reductions bring with them a loss of 

specialized experience and expertise that could impact 

the success of future, large-scale resolution and 

receivership activities. As discussed in connection 

with Dodd-Frank Act responsibilities, for example, 

the Corporation must continue to review the 

resolution plans of large bank holding companies and 

designated nonbank holding companies to ensure 

their resolvability under the Bankruptcy Code, if 

necessary, and in cases where their failure would 

threaten financial stability, administer their orderly 

liquidation. Carrying out such activities could pose 

significant challenges to those remaining staff in DRR 

who could be called upon to lead critical resolution 

activities.

Ensuring the Continued Strength 

of the Deposit Insurance Fund 

Insuring deposits remains at the heart of the 

FDIC’s commitment to maintain stability and 

public confidence in the nation’s financial system. 
2016

APPENDICES 167

Continuing to replenish the Deposit Insurance Fund 

(DIF) in a post-crisis environment is a critical activity 

for the FDIC. To maintain sufficient DIF balances, 

the FDIC collects risk-based insurance premiums 

from insured institutions and invests deposit 

insurance funds. A broad goal for the FDIC is that 

institutions that pose the greatest risk to the DIF have 

deposit insurance rates that are commensurate with 

that risk. 

The DIF balance had dropped below negative $20 

billion during the worst time of the crisis. As of 

December 31, 2016, the DIF balance had risen to 

$83.2 billion. While the fund is considerably stronger 

than it has been, the FDIC must continue to monitor 

the emerging risks that can threaten fund solvency in 

the interest of continuing to provide and administer 

the insurance coverage that depositors have come 

to rely upon. This is true for insured depositors at 

small banks as well as for claims at large depository 

institutions. 

In response to the Dodd-Frank Act and in the interest 

of protecting and insuring depositors, the Corporation 

has designed a long-term DIF management plan. 

This plan complements the Restoration Plan, which 

is designed to ensure that the DIF reserve ratio will 

reach 1.35 percent by September 30, 2020. As of 

September 30, 2016, the reserve ratio had reached 

1.18 percent, the highest reserve ratio in 8 years. 

In February 2011, the FDIC Board decided to reduce 

overall assessment rates when the reserve ratio reached 

1.15 and the Board reaffirmed that position in April 

2016. Now a large majority of banks will pay lower 

deposit insurance assessments. Assessment rates for 

approximately 93 percent of banks with less than 

$10 billion in assets declined. Regular quarterly 

assessments declined on average by about one-third 

for these smaller institutions.

Additionally, since the ratio has reached 1.15 percent, 

banks with $10 billion or more in assets began paying 

temporary surcharges to bring the reserve ratio up 

to statutory minimums. Even with the surcharges, 

about one-third of large banks still pay lower total 

assessments because of the reduction in regular 

assessment rates. The FDIC is taking a balanced 

approach to restoring the health of the DIF as it 

seeks to reduce the risk that it will need to raise rates 

unexpectedly to address a future crisis and to help 

ensure stable and predictable assessments across the 

board.

Given the volatility of the global markets and financial 

systems, new risks can emerge without warning and 

threaten the safety and soundness of U.S. financial 

institutions and the viability of the DIF. The FDIC 

must be prepared for such a possibility. In the face 

of such threats, the FDIC needs to continue to 

disseminate data and analysis on issues and risks 

affecting the financial services industry to bankers, 

supervisors, and the public.

As part of its efforts, the FDIC also needs to continue 

collaborating with others involved in helping to 

ensure financial stability and protect the DIF. One 

important means of doing so is through participation 

with other financial regulators on the Financial 

Stability Oversight Council, created under the DoddFrank Act. This Council was established to provide 

comprehensive monitoring of stability in the U.S. 

financial system by identifying and responding to 

emerging risks to U.S. financial stability and by 

promoting market discipline. 

The FDIC will also be challenged to contribute to 

global financial stability by continuing its engagement 

with strategically important foreign jurisdictions and 

playing a leadership role in international organizations 

that support robust, effective deposit insurance 

systems, crisis management and resolution programs, 

and bank supervision practices around the globe. 

Promoting Consumer Protections and 

Economic Inclusion

The FDIC carries out its consumer protection role by 

providing consumers with access to information about 

their rights and disclosures that are required by federal 

laws and regulations. Its Consumer Response Center 

serves an important function in this regard. Similarly, 
ANNUAL REPORT

168 APPENDICES

initiatives like the FDIC’s Money Smart and Youth 

Savings programs go a long way towards educating 

the public about important consumer and financial 

matters. Importantly, the FDIC also examines the 

banks for which it is the primary federal regulator 

to determine the institutions’ compliance with laws 

and regulations governing consumer protection, fair 

lending, and community investment. These activities 

require effective examiner training and regular 

collaboration with other regulatory agencies. 

The Dodd-Frank Act consolidated many of the 

consumer financial protection authorities previously 

shared by several federal agencies into the Consumer 

Financial Protection Bureau (CFPB) and granted the 

CFPB authority to conduct rulemaking, supervision, 

and enforcement with respect to federal consumer 

financial laws; handle consumer complaints and 

inquiries; promote financial education; research 

consumer behavior; and monitor financial markets for 

risks to consumers. The FDIC coordinates with the 

CFPB on consumer issues of mutual interest and to 

meet statutory requirements for consultation relating 

to rulemakings in mortgage lending and other types of 

consumer financial services and products. The FDIC 

will need to continue to assess the impact of such 

rulemakings on supervised institutions, communicate 

key changes to stakeholders, and train examination 

staff accordingly. 

The FDIC continues to work with the Congress and 

others to ensure that the banking system remains 

sound and that the broader financial system is 

positioned to meet the credit needs of consumers and 

the economy, especially the needs of creditworthy 

households that may experience distress. One of the 

challenges articulated by the FDIC Chairman is to 

continue to develop and implement targeted strategies 

to expand access to mainstream financial institutions 

by populations that are disproportionately likely to be 

unbanked or underbanked. 

The FDIC conducts national surveys of unbanked 

and underbanked households every 2 years, in 

conjunction with the Census Bureau, to inform 

those strategies. The most recent survey, for example, 

determined that the share of unbanked households in 

the U.S. dropped in 2015 to 7.0 percent, representing 

a significant decline from the 7.7 unbanked rate 

reported in 2013 and the 8.2 unbanked rate in 2011. 

The survey also revealed a growth pattern in consumer 

use of mobile and online banking. For the unbanked 

households, smart phones are often the primary 

means of managing their accounts. The FDIC is 

further exploring the economic inclusion potential of 

mobile financial services. 

In addition, the FDIC’s Advisory Committee 

on Economic Inclusion, composed of bankers, 

community and consumer organizations, and 

academics, will continue to explore ways of bringing 

the unbanked into the financial mainstream. The 

FDIC’s Alliance for Economic Inclusion initiative 

seeks to collaborate with financial institutions; 

community organizations; local, state, and federal 

agencies; and other partners to form broad-based 

coalitions to bring unbanked and underbanked 

consumers and small businesses into the financial 

mainstream. 

The FDIC will need to sustain ongoing efforts to 

carry out required compliance and community 

reinvestment examinations, coordinate with the 

other financial regulators and CFPB on regulatory 

matters involving financial products and services, and 

pursue and measure the success of economic inclusion 

initiatives to the benefit of the American public. 

Implementing Workforce Changes 

and Budget Reductions 

The Corporation continues to reassess its current 

and projected workload along with trends within the 

banking industry and the broader economy.  Based 

on that review, the FDIC expects a continuation 

of steady improvements in the global economy, a 

small number of insured institution failures, gradual 

reductions in post-failure receivership management 

workload, and further reductions in the number of 

3-, 4-, and 5-rated institutions.  While the FDIC 

will continue to need some temporary and term 
2016

APPENDICES 169

employees over the next several years to complete the 

residual workload from the financial crisis, industry 

trends continue to confirm that there will be a steadily 

decreasing need for nonpermanent employees over the 

next several years.

Given those circumstances, the FDIC Board of 

Directors approved a $2.16 billion FDIC Operating 

Budget for 2017, 2.4 percent lower than the 2016 

budget. In conjunction with its approval of the 

2017 budget, the Board also approved an authorized 

2017 staffing level of 6,363 positions for 2017, a 2.6 

percent decrease from 2016 and 32 percent lower than 

the peak in 2011. This was the seventh consecutive 

reduction in the FDIC’s annual operating budget.

As conditions improve throughout the industry and 

the economy, the FDIC will continue its efforts to 

achieve the appropriate level of resources; at the 

same time, however, it needs to remain mindful 

of ever-present risks and other uncertainties in the 

economy that may prompt the need for additional 

resources and new skill sets and expertise that may be 

challenging to obtain. The need for these new skill 

sets comes at a time when the Corporation is focusing 

on succession management, in light of a substantial 

number of FDIC staff, many “baby boomers,” who 

are retiring. In that regard, the FDIC is continuing 

to work toward integrated workforce development 

processes as it seeks to bring on the best people to 

meet its changing needs and priorities, and do so 

in a timely manner. In all of its hiring efforts, the 

Corporation needs to ensure fairness and integrity 

in its processes and hiring practices and decisions. 

Most recently, the Corporation has emphasized its 

Workforce Development Initiative as a means of 

fulfilling the FDIC’s future leadership and workforce 

capability needs. It has also focused on addressing 

resource needs to address the many challenges 

in divisions such as OCFI, RMS, and DRR, as 

previously discussed.

With respect to leadership at the uppermost levels of 

the Corporation, it is important to note that a vacancy 

currently exists on the FDIC Board of Directors—

Jeremiah Norton left the FDIC in June 2015 and his 

seat on the Board remains vacant. The current FDIC 

Chairman’s term is set to expire in November 2017, 

which would leave another position vacant. The 

FDIC Board has experienced such vacancies in the 

past and the FDIC IG at the time strongly advocated 

filling those Board positions. Now, given the myriad 

financial and economic concerns, emerging risks, 

Dodd-Frank Act responsibilities, important priorities 

and challenges facing the FDIC, and the advent of 

a new Administration, strong and sustained senior 

leadership is even more essential. 

The FDIC has long promoted diversity and 

inclusion initiatives in the workplace. Section 342 

of the Dodd-Frank Act reiterates the importance 

of standards for assessing diversity policies and 

practices and developing procedures to ensure the fair 

inclusion and utilization of women and minorities 

in the FDIC’s contractor workforce. The DoddFrank Act also points to the Office of Minority and 

Women Inclusion as being instrumental in diversity 

and inclusion initiatives within the FDIC working 

environment. This office needs to ensure that it has 

the proper staff, expertise, and organizational structure 

to successfully carry out its advisory responsibilities 

to ensure diversity and inclusion throughout the 

Corporation.

The FDIC needs to sustain its emphasis on fostering 

employee engagement and morale on the part of all 

staff in headquarters, regions, and field locations. It 

looks to the annual Federal Employee Viewpoint 

Survey to provide a candid assessment of employee 

views of the FDIC workplace. The Corporation’s 

diversity and inclusion goals and initiatives, 

Workplace Excellence Program, and Workforce 

Development Initiative are positive steps that should 

continue to help create a workplace that promotes 

diversity and equal opportunity.

Finally, an organization’s overall corporate culture 

is essential to its success and, in July/August 2016, 

prompted in part by earlier OIG work, the FDIC 

Board of Directors reaffirmed the Corporation’s 
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170 APPENDICES

Code of Conduct and the six core values that 

underlie it: integrity, competence, teamwork, 

effectiveness, accountability, and fairness. The 

Chairman emphasized that these values apply not 

only to internal conduct but also externally, as FDIC 

leadership and staff interact with bankers, consumers, 

and other members of the public. In further support 

of these values, the Board prohibits retaliation against 

an employee who raises concern about conduct 

that appears to violate laws, rules, or the FDIC’s 

supervisory policy. In that connection, the Chairman 

also underscored the importance of whistleblower 

protection in a message to all FDIC staff on the 

occasion of the U.S. Senate passing Resolution 522 

on July 7, 2016, designating July 30, 2016, National 

Whistleblower Appreciation Day.  This Resolution 

acknowledges and commemorates the contributions 

of whistleblowers to combat waste, fraud, and 

violations of law. As noted by the Chairman, the 

Resolution encouraged executive federal agencies to 

inform employees and contractors about the legal 

rights to “blow the whistle” by honest and good faith 

reporting of misconduct, fraud, misdemeanors, or 

other crimes to the appropriate authorities. 

Ensuring Effective Enterprise Risk 

Management Practices

Enterprise risk management is a critical aspect of 

governance at the FDIC. Notwithstanding a stronger 

economy and financial services industry, the FDIC’s 

enterprise risk management framework and related 

activities need to be attuned to emerging risks, both 

internal and external to the FDIC, that can threaten 

key business processes and corporate success. As 

evidenced in the challenges discussed above, certain 

difficult issues may fall within the purview of a single 

division or office, while many others are cross-cutting 

within the FDIC, and still others involve coordination 

with the other financial regulators and other external 

parties. 

The Corporation needs to maintain effective controls, 

mechanisms, and risk models that can address a wide 

range of concerns—from specific, everyday risks such 

as those posed by use of corporate purchase or travel 

cards and records management activities, for example, 

to the far broader concerns of the ramifications of 

an unwanted and harmful cyber attack or the failure 

of a large bank or systemically important financial 

institution. 

In July 2016, the Office of Management and 

Budget updated Circular A-123, Management’s 

Responsibility for Enterprise Risk Management and 

Internal Control. This circular defines management’s 

responsibility for enterprise risk management (ERM) 

and internal control. It emphasizes the need to 

coordinate risk management and strong and effective 

internal control into existing business activities 

as an integral part of governing and managing an 

agency. Notwithstanding existing corporate risk 

management resources and mechanisms in place, the 

Corporation would be well served to examine and 

adopt those principles and practices embodied in the 

circular that make sense for the FDIC and ensure 

they are institutionalized, as intended by the circular. 

Doing so can help ensure that the Corporation’s 

risk management processes and systems identify 

challenges early on, bring them to the attention of 

corporate leadership, and develop solutions. Given 

the range, complexity, and importance of many of the 

Corporation’s current endeavors—for example, the 

personal identification validation project, email and 

hard copy records management practices, data breach 

prevention measures, personnel security initiatives, 

and the like, such an approach could help ensure 

more effective project management and other controls 

and strengthen oversight of often costly investments 

and mission-critical activities. 

The Corporation’s stakeholders—including the 

Congress, American people, media, and others— 

expect effective governance, sound risk management 

practices, and vigilant regulatory oversight of the 

financial services industry. The Corporation needs to 

maintain the trust and confidence that it has instilled 

over the years. The FDIC Board of Directors, senior 
2016

APPENDICES 171

management, and individuals at every working 

level throughout the FDIC need to acknowledge, 

understand, and take ownership of current and 

emerging risks to the FDIC mission and be prepared 

to take necessary steps to mitigate those risks as 

changes occur and challenging scenarios that can 

undermine the FDIC’s short- and long-term success 

present themselves. A corporate culture marked by 

integrity, efficiency, and transparency is essential to 

that end. 
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172 APPENDICES

D. ACRONYMS 

ACP Access Control Program

AHDP Affordable Housing Disposition Program

AEI Alliance for Economic Inclusion

AFS Available for Sale 

AIG American International Group, Inc.

AML Anti-Money Laundering

ASBA Association of Supervisors of Banks of the 

Americas

ASC Accounting Standards Codification

ASU Accounting Standards Update 

BCBS Basel Committee on Banking Supervision

BOE Bank of England

BSA Bank Secrecy Act

Call Report Consolidated Reports of Condition and 

Income

CAMELS 

rating scale Capital adequacy; Asset quality; Management 

quality; Earnings; Liquidity; Sensitivity to 

market risks

CCIWG Cybersecurity and Critical Infrastructure 

Working Group

CCP Central Counterparties

CDFI Community Development Financial 

Institution

CDOs Collateralized Debt Obligations

CEO Chief Executive Officer

CEP Corporate Employee Program

CFI Complex Financial Institution

CFO Act Chief Financial Officers’ Act

CFPB Consumer Financial Protection Bureau

CFR Center for Financial Research

CFTC Commodity Futures Trading Commission

CIP Customer Identification Program

CISO Chief Information Security Officer

CMG Crisis Management Group

CMP Civil Money Penalty

ComE-IN Advisory Committee on Economic Inclusion

CPI-U Consumer Price Index for All Urban 

Consumers 

CRA Community Reinvestment Act

CSRS Civil Service Retirement System 

DCP Division of Depositor and Consumer 

Protection

DFA Dodd-Frank Act

DHS Department of Homeland Security

DIF Deposit Insurance Fund

DIR Division of Insurance and Research

DIT Division of Information Technology

DOA Division of Administration

DOJ Department of Justice 

DRM Digital Rights Management

DRR Designated Reserve Ratio

DRR (FDIC) Division of Resolution and Receiverships

EDIE Electronic Deposit Insurance Estimator

EGRPRA Economic Growth and Regulatory Paperwork 

Reduction Act of 1996

ERM Enterprise Risk Management

FAQs Frequently Asked Questions

FASB Financial Accounting Standards Board 

FBO Foreign Bank Organization

FDI Act Federal Deposit Insurance Act

FDIC Federal Deposit Insurance Corporation

FEHB Federal Employees Health Benefits

FERS Federal Employees Retirement System

FFB Federal Financing Bank

FFIEC Federal Financial Institutions Examination 

Council

FFMIA Federal Financial Management 

Improvement Act

FHFA Federal Housing Finance Agency

FICO Financing Corporation

FIL Financial Institution Letters

FinCEN Financial Crimes Enforcement Network

FIRREA Financial Institution Reform, Recovery 

and Enforcement Act of 1989

FIS Financial Institution Specialist

FISMA Federal Information Security Modernization 

Act of 2014

FMFIA Federal Managers’ Financial Integrity Act

FMSP Financial Management Scholars Program

FRB Board of Governors of the Federal Reserve 

System
2016

APPENDICES 173

FRF FSLIC Resolution Fund

FRF-FSLIC Assets & Liabilities of FSLIC transferred to 

the FRF Upon the Dissolution of FSLIC

FRF-RTC RTC Assets & Liabilities

FSAP Financial Sector Assessment Program

FSB Financial Stability Board

FS-ISAC Financial Services Information Sharing and 

Analysis Center

FSLIC Federal Savings and Loan Insurance 

Corporation

FSOC Financial Stability Oversight Council

FSVC Financial Services Volunteer Corps

FTE Full-time employee

GAAP Generally Accepted Accounting Principles 

GAO U.S. Government Accountability Office

GECC General Electric Capital Corporation, Inc.

GPRA Government Performance and Results Act

GSA General Services Administration

GSEs Government Sponsored Entities

G-SIFIs Global SIFIs

HSPD Homeland Security Presidential Directive

HVRE High Volatility Commercial Real Estate

IADI International Association of Deposit Insurers

IDI Insured depository institution

IMF International Monetary Fund

InTREx Information Technology Risk Examination

IRS Internal Revenue Service

ISDA International Swaps and Derivatives 

Association

IT Information technology

ITCIP Insider Threat and Counterintelligence 

Program

LCR Liquidity coverage ratio

LIDI Large Insured Depository Institution

LLC Limited Liability Company

LMI Low- or moderate-income

LURAs Land Use Restriction Agreements 

MDIs Minority depository institutions

MFA Multifactor Authentication

MLA Military Lending Act of 2006

MOL Maximum Obligation Limitation

MOU Memorandum of Understanding

MRBA Matters Requiring Board Attention

MWOB Minority- and women-owned business

NAFTA North American Free Trade Agreement

NCUA National Credit Union Administration

NIST National Institute of Standards and 

Technology

NPR Notice of proposed rulemaking

OCC Office of the Comptroller of the Currency

OCFI Office of Complex Financial Institutions

OCRM Office of Corporate Risk Management

O&G Oil and Gas

OIG Office of Inspector General

OLA Orderly Liquidation Authority

OLF Orderly Liquidation Fund 

OMB Office of Management and Budget

OMWI Office of Minority and Women Inclusion

OO Office of the Ombudsman

OPM Office of Personnel Management 

ORE Owned Real Estate

OTC Over-the-counter

OTS Office of Thrift Supervision

P&A Purchase and assumption

PDG Policy Development Group

PFR Primary federal regulator

PIV Personal Identity Verification

QBP Quarterly Banking Profile

REFCORP Resolution Funding Corporation

ReSG FSB’s Resolution Steering Committee

RMS Division of Risk Management Supervision

RTC Resolution Trust Corporation

SBA Small Business Administration

SEC Securities and Exchange Commission

SIFI Systemically important financial institution 

SLA Shared-loss agreement

SMS Systemic Monitoring System

SNC Program Shared National Credit Program

SNM State Nonmember

SRAC Systemic Resolution Advisory Committee

SSGNs Securitizations, and Structured Sale of 

Guaranteed Notes
ANNUAL REPORT

174 APPENDICES

TIPS Treasury Inflation-Protected Securities

TSP Federal Thrift Savings Plan 

TSP (IT-related) Technology service providers

URSIT Uniform Rating System for Information 

Technology

U.S. United States

VIEs Variable Interest Entities 

WE Workplace Excellence

WIOA Workforce Innovation Opportunity Act

YSP Youth Savings Program
NOTES
NOTES
2016

Federal Deposit 

Insurance Corporation

This Annual Report was produced by talented and dedicated staff. 

To these individuals, we would like to offer our sincere thanks and 

appreciation. Special recognition is given to the following for their 

contributions:

♦ Jannie F. Eaddy 

♦ Barbara A. Glasby

♦ Financial Reporting Section Staff

♦ Receivership Support Section Staff

♦ Division and Office Points-of-Contact

FEDERAL DEPOSIT INSURANCE CORPORATION
H H H

H H H

550 17th Street, N.W.

Washington, DC 20429-9990

www.fdic.gov

FDIC-003-2017