FDIC Quarterly 

Quarterly Banking Profile: 

Fourth Quarter 2007 

Feature Articles: 

Building Assets, Building Relationships: 

Bank Strategies for Encouraging 

Lower-Income Households to Save 

Increasing Deposit Insurance Coverage 

for Municipalities and Other Units of 

of General Government: 

Results of the 2006 FDIC Study 

2008, Volume 2, Number 1 
The FDIC Quarterly is published by the Division of Insurance and Research of the Federal Deposit 

Insurance Corporation and contains a comprehensive summary of the most current financial results 

for the banking industry. Feature articles appearing in the FDIC Quarterly range from timely analysis of economic and banking trends at the national and regional level that may affect the risk exposure of FDIC-insured institutions to research on issues affecting the banking system and the 

development of regulatory policy. 

Single copy subscriptions of the FDIC Quarterly can be obtained through the FDIC Public 

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Chairman Sheila C. Bair 

Director, Division of Insurance Arthur J. Murton 

and Research 

Executive Editor Maureen E. Sweeney 

Editorial Board Richard A. Brown 

Diane L. Ellis 

Paul H. Kupiec 

Christopher J. Newbury 

Contributing Editor Munsell St. Clair 

Editor Kathy Zeidler 

Publication Managers Geri Bonebrake 

Elena Johnson 

Lynne Montgomery 

Media Inquiries (202) 898-6993 
FDIC Quarterly 

2008, Volume 2, Number 1 

Quarterly Banking Profile: 

Fourth Quarter 2007 

FDIC-insured commercial banks and savings institutions reported net income of $105.5 billion in 

2007, a decline of $39.8 billion (27.4 percent) from the record $145.2 billion that the industry 

earned in 2006. Fourth-quarter earnings declined to $5.8 billion, a 16-year low. Insured institutions 

set aside a record $31.3 billion in loan-loss provisions in the fourth quarter, as troubled loans 

continued to rise. The noncurrent loan rate rose to 1.39 percent at year end, the highest level in 

more than five years. See page 1. 

Insurance Fund Indicators 

Insured deposits increased 1.2 percent, and the Deposit Insurance Fund reserve ratio remained at 

1.22 percent at year-end. One institution failed during the quarter. See page 15. 

Feature Articles: 

Building Assets, Building Relationships: Bank Strategies for 

Encouraging Lower-Income Households to Save 

Saving enables individual households to meet unforeseen expenses and to plan for their financial 

futures. Not surprisingly, low- and moderate-income (LMI) households have the most difficulty 

saving. There is a common perception that banks do not view LMI households as potential profitable 

customers, but banks already have a relationship with a large number of these customers. This article 

explains the challenges LMI households face in building assets and examines the incentives banks 

have for encouraging these customers to save. The article also describes some strategies banks have 

used to build profitable relationships that also benefit lower-income consumers. See page 23. 

Increasing Deposit Insurance Coverage for Municipalities 

and Other Units of General Government: 

Results of the 2006 FDIC Study 

The Federal Deposit Insurance Reform Conforming Amendments Act of 2005 required the FDIC to 

study the feasibility of increasing the limit on deposit insurance coverage for municipalities and other 

units of general government. The study results were delivered to Congress in February 2007. This 

article examines the arguments for and against additional coverage for municipal deposits, and 

considers whether private sector options provide a viable alternative to traditional public deposit 

collateralization programs. See page 32. 

The views expressed are those of the authors and do not necessarily reflect official positions of the Federal Deposit Insurance 

Corporation. Some of the information used in the preparation of this publication was obtained from publicly available 

sources that are considered reliable. However, the use of this information does not constitute an endorsement of its accuracy by the Federal Deposit Insurance Corporation. Articles may be reprinted or abstracted if the publication and author(s) 

are credited. Please provide the FDIC’s Division of Insurance and Research with a copy of any publications containing 

reprinted material. 
 

Quarterly Banking Profile Fourth Quarter 2007 

INSURED INSTITUTION PERFORMANCE 

Industry Earned $5.8 Billion In Fourth Quarter 

Expenses For Bad Loans, Trading Losses Weigh On Earnings 

Noncurrent Rate On Mortgage Loans Reaches New High 

Pace Of Reserve Building Picks Up 

Net Income Totaled $105.5 Billion In 2007 

Quarterly Net Income Declines to a 16-Year Low 

Record-high loan-loss provisions, record losses in trading 

activities and goodwill impairment expenses combined to 

dramatically reduce earnings at a number of FDIC-insured 

institutions in the fourth quarter of 2007. Fourth-quarter 

net income of $5.8 billion was the lowest amount reported 

by the industry since the fourth quarter of 1991, when 

earnings totaled $3.2 billion. It was $29.4 billion (83.5 percent) less than insured institutions earned in the fourth 

quarter of 2006. The average return on assets (ROA) in 

the quarter was 0.18 percent, down from 1.20 percent a 

year earlier. This is the lowest quarterly ROA since the 

fourth quarter of 1990, when it was a negative 0.19 percent. Insured institutions set aside a record $31.3 billion in 

provisions for loan losses in the fourth quarter, more than 

three times the $9.9 billion they set aside in the fourth 

quarter of 2006. Trading losses totaled $10.6 billion, marking the first time that the industry has posted a quarterly 

net trading loss. In the fourth quarter of 2006, the industry 

had trading revenue of $4.0 billion. Expenses for goodwill 

and other intangibles totaled $7.4 billion, compared to 

$1.6 billion a year earlier. Against these negative factors, 

net interest income remained one of the few positive elements in industry performance. Net interest income for 

the fourth quarter totaled $92.0 billion, an 11.8-percent 

($9.7-billion) year-over-year increase. 

Chart 1 

One in Four Large Institutions Lost Money in the 

Fourth Quarter 

Earnings weakness was fairly widespread in the fourth quarter. More than half of all institutions (51.2 percent) 

reported lower net income than in the fourth quarter of 

2006, and 57.1 percent reported lower quarterly ROAs. 

However, the magnitude of the decline in industry earnings was attributable to a relatively small number of large 

institutions. In contrast to the steep 102 basis-point drop 

in the industry’s ROA, the median ROA fell by only 14 

basis points, from 0.93 percent to 0.79 percent. Seven large 

institutions accounted for more than half of the total yearover-year increase in loss provisions. Ten large institutions 

accounted for the entire decline in trading results. Five 

institutions accounted for three-quarters of the increase in 

goodwill and intangibles expenses, and sixteen institutions 

accounted for three-quarters of the year-over-year decline 

in quarterly net income. One out of every four institutions 

with assets greater than $10 billion reported a net loss for 

the fourth quarter. Institutions associated with subprime 

mortgage lending operations and institutions engaged in 

significant trading activity were among those reporting the 

largest earnings declines. 

Chart 2 

0.0 

8.0 

16.0 

24.0 

32.0 

40.0 

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 

$ Billions 

Securities and Other Gains/Losses, Net 

Net Operating Income 

2003 2004 2005 2006 2007 

29.5 30.2 30.4 31.1 31.8 31.2 32.5 31.1 

34.0 33.2 34.7 

32.6 

36.9 38.0 38.1 

35.2 35.6 36.9 

28.8 

5.8 

Fourth Quarter Earnings Are the Lowest 

Since 1991 

-8.1 

21.4 

-4.1 

19.1 

9.7 

Increase in 

Net Interest 

Income 

Decrease in 

Noninterest 

Income 

Increase in 

Loan Loss 

Provision 

Decrease in 

Gains on 

Securities Sales 

Increase in 

Noninterest 

Expense 

Positive

Factor

Negative

Factors

4th Quarter 2006 to 4th Quarter 2007 ($ Billions) 

Loss Provisions Set a New Quarterly Record 

FDIC QUARTERLY 1 2008, VOLUME 2, NO.1 
 

Margin Erosion Persists 

As interest rates fell during the quarter, average asset yields 

declined more than average funding costs, and net interest 

margins (NIMs) narrowed slightly from third-quarter levels. 

The average NIM in the fourth quarter was 3.30 percent, 

compared to 3.36 percent in the third quarter. Except for the 

fourth quarter of 2006, when the accounting treatment of a 

few large corporate restructurings resulted in a reduction in 

reported net interest income, this is the lowest quarterly NIM 

for the industry since 1989. Almost 60 percent of all institutions had their margins decline from third-quarter levels. 

Margin erosion was especially pronounced at large mortgage 

lenders. 

Full-Year Earnings Fall to Five-Year Low 

For all of 2007, insured institutions earned $105.5 billion, a 

decline of $39.8 billion (27.4 percent) from 2006. This is the 

lowest annual net income for the industry since 2002 and is 

the first time since 1999-2000 that annual net income has 

declined. While much of the decline in industry earnings 

was concentrated among some of the largest institutions, evidence of broader weakness in earnings bespoke an operating 

environment that was less favorable than in previous years. 

Fewer than half of all insured institutions—49.2 percent— 

reported improved earnings in 2007, the first time in at least 

23 years that a majority of insured institutions have not posted full-year earnings increases. The percentage of institutions 

that were unprofitable in 2007—11.6 percent—was the highest since 1991. The average ROA for the year was 0.86 percent, the lowest yearly average since 1991, when it was 0.42 

percent, and the first time in 15 years that the industry’s 

annual ROA has been below 1 percent. More than half of all 

institutions—59.2 percent—reported lower ROAs in 2007 

than in 2006. Sharply higher loss provisions and a very rare 

decline in annual noninterest income were primarily responsible for the lower industry profits. Insured institutions set 

Chart 3 

Margins Remain Near 19-Year Lows 

Net Interest Margin (%) 

5.00 

Assets < $100 Million 

4.50 

4.08 

4.00 

3.50 3.29 

3.00 

Assets > $100 Million 

2.50 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 

2003 2004 2005 2006 2007 

aside $68.2 billion in provisions for loan losses in 2007, more 

than twice the $29.5 billion they set aside in 2006. Loss provisions represented 11.6 percent of net operating revenue 

(net interest income plus total noninterest income), the 

highest proportion for the industry since 1992. Total noninterest income of $233.4 billion was $7.0 billion (2.9 percent) 

less than in 2006, as trading revenue fell from $19.0 billion in 

2006 to only $4.1 billion in 2007, and net gains on loan sales 

fell by $5.1 billion (68.5 percent). This is the first time since 

the mid-1970s that full-year noninterest income has 

declined.1 Noninterest expenses were $30.2 billion (9.1 percent) higher than a year earlier. Net interest income 

increased by $22.7 billion (6.9 percent) in 2007, even though 

the industry’s full-year net interest margin declined to its lowest level since 1988, because interest-earning assets grew by 

9.4 percent during the year. 

Net Charge-Off Rate Rises to Five-Year High 

Net charge-offs registered a sharp increase in the fourth quarter, rising to $16.2 billion, compared to $8.5 billion in the 

fourth quarter of 2006. The annualized net charge-off rate in 

the fourth quarter was 0.83 percent, the highest since the 

fourth quarter of 2002. Net charge-offs were up year-overyear in all major loan categories except loans to the farm sector (agricultural production loans and real estate loans secured 

by farmland). Net charge-offs of loans to commercial and 

industrial (C&I) borrowers were $1.6 billion (104.5 percent) 

higher than in the fourth quarter of 2006. Net charge-offs of 

residential mortgage loans were up by $1.3 billion (144.2 percent), and charge-offs of home equity lines of credit were $1.0 

billion (378.4 percent) higher. Credit card charge-offs were 

up by $1.0 billion (33.0 percent), and charge-offs of other 

loans to individuals increased by $1.1 billion (58.4 percent). 

1 Total noninterest income of FDIC-insured commercial banks declined by 

$1.0 billion (11.7 percent) between 1975 and 1976. Noninterest income data 

for insured savings institutions are not available for those years. 

Chart 4 

-0.2 

0.0 

0.2 

0.4 

0.6 

0.8 

1.0 

1.2 

1.4 

1.6 

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 

Annual ROA % 

-2.0 

0.0 

2.0 

4.0 

6.0 

8.0 

10.0 

12.0 

14.0 

16.0 

Annual ROE % 

ROE 

ROA 

Annual ROA Fell to Its Lowest Level Since 1991 

FDIC QUARTERLY 2 2008, VOLUME 2, NO. 1 
 

 

Quarterly Banking Profile 

Growth in Noncurrent Loans Accelerates 

Despite the heightened level of charge-offs, the rising trend 

in noncurrent loans that began in mid-2006 continued to 

gain momentum in the fourth quarter. Total noncurrent 

loans — loans 90 days or more past due or in nonaccrual status — rose by $26.9 billion (32.5 percent) in the last three 

months of 2007. This is the largest percentage increase in a 

single quarter in the 24 years for which noncurrent loan data 

are available. Eight institutions accounted for half of the 

total increase in noncurrent loans in the fourth quarter, but 

noncurrent loans were up at half of all insured institutions. 

The percentage of loans that were noncurrent at year-end 

was 1.39 percent, the highest level since the third quarter of 

2002. The fourth-quarter increase in noncurrent loans was 

led by noncurrent residential mortgage loans, which grew by 

$11.1 billion (31.7 percent). The percentage of residential 

mortgage loans that were noncurrent rose from 1.57 percent 

to 2.06 percent during the quarter and is now at the highest 

level in the 17 years that noncurrent mortgage data have 

been reported. Noncurrent real estate construction and 

development loans increased by $8.4 billion (73.2 percent), 

noncurrent credit card loans rose by $1.9 billion (26.0 percent), noncurrent home equity loans were up by $1.6 billion 

(43.1 percent), and noncurrent other loans to individuals 

increased by $1.2 billion (26.7 percent). Only the farm loan 

categories registered declines in noncurrent amounts. 

Large Boost to Loss Reserves Fails to Stem Decline in 

Coverage Ratio 

Insured institutions’ loss reserves posted their largest increase 

in 20 years in the fourth quarter, but this growth did not keep 

pace with the growth in noncurrent loans. The industry’s 

$31.3-billion loss provision exceeded the $16.2 billion in net 

charge-offs by a considerable margin, and reserves grew by 

$14.8 billion (17.0 percent). The ratio of reserves to total 

Chart 5 

loans and leases rose from 1.13 percent to 1.29 percent during 

the quarter, its highest level since the first quarter of 2005. 

But the “coverage ratio” of reserves to noncurrent loans fell 

from $1.05 in reserves for every $1.00 of noncurrent loans to 

93 cents at the end of 2007. This is the first time since 1993 

that the industry’s noncurrent loans have exceeded its 

reserves. At year end, one in three institutions had noncurrent loans that exceeded reserves, compared to fewer than 

one in four institutions a year earlier. 

Capital Ratios Exhibit Mixed Results 

Total equity capital increased by $25.1 billion (1.9 percent) 

during the fourth quarter. This increase lagged behind the 

2.6-percent increase in assets during the quarter, and the 

industry’s equity-to-assets ratio declined from 10.44 percent 

to 10.37 percent. Goodwill accounted for almost one-third 

($7.9 billion) of the increase in equity, despite large writedowns of goodwill at several institutions. The industry’s 

leverage capital ratio registered a larger decline during the 

quarter, because leverage capital does not include goodwill. 

The leverage ratio fell from 8.14 percent to 7.98 percent, a 

four-year low. In contrast, the industry’s total risk-based capital ratio, which includes loss reserves, increased from 12.74 

percent to 12.79 percent. At the end of 2007, 99 percent of 

all insured institutions, representing more than 99 percent of 

total industry assets, met or exceeded the highest regulatory 

capital standards. 

Asset Growth Remains Strong in the Fourth Quarter 

Assets continued to grow strongly in the fourth quarter, but 

the focus of growth shifted away from residential mortgage 

loans. Total assets increased by $331.8 billion (2.6 percent) 

during the quarter. Fed funds sold and securities purchased 

under resale agreements increased by $71.5 billion (11.5 percent), assets in trading accounts grew by $64.6 billion (8.0 

Chart 6 

0.00 

0.50 

1.00 

1.50 

2.00 

2.50 

3.00 

3.50 

4.00 

Noncurrent Loan Rate 

Quarterly Net Charge-off Rate 

Percent 

1990 1992 1994 1996 1998 2000 2002 2004 2006 

Asset Quality Continues to Weaken 

1,1791,2271,2601,3361,3741,434 

1,5381,6091,6881,769

1,8711,9592,0342,104

2,1662,188

2,245

2,3042,3482,368 

0 

500 

1,000 

1,500 

2,000 

2,500 

03/03 09/03 03/04 09/04 03/05 09/05 03/06 09/06 03/07 09/07 

Number of insured institutions where construction loans exceed total capital 

A Growing Number of Institutions Have Concentrations 

of Exposure to Construction Lending 

FDIC QUARTERLY 3 2008, VOLUME 2, NO.1 
 

Author: 

Author: 

percent), C&I loans increased by $51.5 billion (3.7 percent), 

and credit card loans grew by $38.0 billion (9.9 percent). The 

industry’s portfolio of mortgage-backed securities rose by 

$36.9 billion (3.1 percent). Real estate loans secured by nonfarm nonresidential properties increased by $29.0 billion (3.1 

percent). Residential mortgage loans rose by only $7.1 billion (0.3 percent), compared to a $30.8-billion increase in 

the third quarter. Real estate construction and development 

loans increased by only $12.5 billion (2.0 percent) during the 

fourth quarter. This is the smallest quarterly increase since 

the fourth quarter of 2003. Despite the slowdown in growth 

of construction lending, the number of institutions with concentrations of exposure to construction lending continued to 

rise. During the fourth quarter, the number of institutions 

whose construction loans exceeded their total capital 

increased from 2,348 to 2,368. 

Domestic Deposits Post Record Growth 

Deposits in domestic offices of insured institutions increased 

by $170.6 billion (2.5 percent), the largest quarterly dollar 

increase ever reported by the industry. Deposits in noninterest-bearing accounts rose by $64.9 billion (5.8 percent), time 

deposits grew by $53.5 billion (2.1 percent), and deposits in 

other interest-bearing accounts increased by $49.1 billion 

(1.6 percent). Brokered deposits increased by $63.3 billion 

(12.4 percent). Nondeposit liabilities rose by $74.0 billion 

(2.3 percent), led by advances from Federal Home Loan 

Banks (up $38.4 billion, or 5.0 percent). Deposits in foreign 

offices grew by $62.2 billion (4.3 percent). The industry’s 

ratio of deposits to total assets, which hit an all-time low of 

64.4 percent at the end of the third quarter, rose slightly to 

64.5 percent at year end. 

Trust Income Rose in 2007 

Both trust assets and income from trust activities registered 

strong growth in 2007. Total assets in trust accounts 

increased by $2.6 trillion (13.4 percent) during the year, with 

assets in managed accounts increasing by $68.6 billion (1.6 

percent) and assets in non-managed accounts rising by $2.5 

trillion (16.9 percent). Assets in custodial and safekeeping 

accounts increased by $9.8 trillion (20.3 percent) in 2007. 

Net income from trust activities totaled $12.8 billion in 

2007, an increase of $2.8 billion (28.6 percent) over 2006. 

Five institutions accounted for 53 percent of the industry’s 

net trust income in 2007. 

Three Failures in 2007 Is Most Since 2004 

The number of FDIC-insured institutions reporting financial 

results declined from 8,559 to 8,533 during the fourth quarter.2 Fifty newly chartered institutions were added during the 

quarter, while 74 institutions were absorbed by mergers. One 

insured commercial bank failed in the fourth quarter. For the 

full year, 181 new insured institutions were chartered, 321 

charters were absorbed in mergers, and three insured institutions failed. In the previous two years, there were no failures 

of FDIC-insured institutions, an interval unprecedented since 

the inception of the FDIC. In 2004, four insured institutions 

failed. Five mutually owned savings institutions, with combined assets of $4.8 billion, converted to stock ownership in 

the fourth quarter. For the entire year, ten insured savings 

institutions with total assets of $10.1 billion converted from 

mutual ownership to stock ownership. At the end of 2007, 

there were 76 FDIC-insured commercial banks and savings 

institutions on the “Problem List,” with combined assets of 

$22.2 billion, up from 65 institutions with $18.5 billion at 

the end of the third quarter. 

2 At the time this issue of the Quarterly Banking Profile went to press, one 

insured commercial bank with assets of $1.2 billion had not yet submitted a 

year-end 2007 Call Report. 

Author: Ross Waldrop, Sr. Banking Analyst 

Division of Insurance and Research, FDIC 

(202) 898-3951 

Chart 7 Chart 8

Commercial Lending Is Leading Overall 

Loan Growth 

Quarterly Change ($ Billions) 

180 

Commercial Loans 160 Consumer Loans 

140 

Chartering and Merger Activity Slowed in 2007 

Number of Institutions 

700 

Mergers 

600 

120 500 

100 400 

80 

60 

40 

20 

300 

New Charters 

200 

100 Failures 

0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 

2004 2005 2006 2007 4 

0 

1992 1994 1996 1998 2000 2002 2004 2006 

FDIC QUARTERLY 4 2008, VOLUME 2, NO. 1 
 

 

Quarterly Banking Profile 

TABLE I-A. Selected Indicators, All FDIC-Insured Institutions* 2007 2006 2005 2004 2003 2002 2001 

Return on assets (%) .................................................. 0.86 1.28 1.28 1.28 1.38 1.30 1.14 

Return on equity (%) ................................................... 8.17 . 12.30 12.43 13.20 15.05 14.08 13.02 

Core capital (leverage) ratio (%) ................................. 7.98 . 8.22 8.25 8.11 7.88 7.86 7.79 

Noncurrent assets plus 

other real estate owned to assets (%) ..................... 0.94 0.54 0.50 0.53 0.75 0.90 0.87 

Net charge-offs to loans (%) ....................................... 0.59 0.39 0.49 0.56 0.78 0.97 0.83 

Asset growth rate (%) ................................................. 9.94 9.03 7.64 11.36 7.58 7.20 5.44 

Net interest margin (%) ............................................... 3.29 . 3.31 3.47 3.52 3.73 3.96 3.78 

Net operating income growth (%) ............................... -23.72 8.50 11.39 4.02 16.39 17.58 -0.48 

Number of institutions reporting .................................. 8,533 . 8,680 8,833 8,976 9,181 9,354 9,614 

Commercial banks ................................................... 7,282 7,401 7,526 7,631 7,770 7,888 8,080 

Savings institutions .................................................. 1,251 1,279 1,307 1,345 1,411 1,466 1,534 

Percentage of unprofitable institutions (%) ................. 11.56 7.93 6.22 5.97 5.99 6.67 8.24 

Number of problem institutions ................................... 76 50 52 80 116 136 114 

Assets of problem institutions (in billions) ................... $22 $8 $7 $28 $30 $39 $40 

Number of failed/assisted institutions ......................... 3 0 0 4 3 11 4 

* Excludes insured branches of foreign banks (IBAs) 

TABLE II-A. Aggregate Condition and Income Data, All FDIC-Insured Institutions 

(dollar figures in millions) 

Number of institutions reporting .......................................................................... 

4th Quarter 3rd Quarter 4th Quarter %Change 

2007 2007 2006 06:4-07:4 

8,533 8,559 8,680 -1.7 

Total employees (full-time equivalent) ................................................................. 

CONDITION DATA 

2,214,621 2,220,559 2,206,656 0.4 

Total assets ......................................................................................................... $13,038,765 $12,706,982 $11,860,042 9.9 

Loans secured by real estate ........................................................................... 4,780,631 4,701,042 4,507,714 6.1 

1-4 Family residential mortgages .................................................................. 2,245,323 2,238,248 2,175,790 3.2 

Nonfarm nonresidential ................................................................................. 968,401 939,426 904,368 7.1 

Construction and development ...................................................................... 628,918 616,447 565,282 11.3 

Home equity lines .......................................................................................... 607,396 591,363 559,307 8.6 

Commercial & industrial loans .......................................................................... 1,440,314 1,388,804 1,214,754 18.6 

Loans to individuals .......................................................................................... 1,059,143 1,013,345 955,263 10.9 

Credit cards ................................................................................................... 422,481 384,506 384,980 9.7 

Farm loans ....................................................................................................... 56,783 56,166 54,257 4.7 

Other loans & leases ........................................................................................ 571,798 546,314 503,608 13.5 

Less: Unearned income ................................................................................... 2,313 2,237 2,401 -3.7 

Total loans & leases ......................................................................................... 7,906,357 7,703,433 7,233,196 9.3 

Less: Reserve for losses .................................................................................. 101,715 86,948 77,533 31.2 

Net loans and leases ........................................................................................ 7,804,643 7,616,485 7,155,663 9.1 

Securities .......................................................................................................... 1,954,086 1,989,074 1,980,497 -1.3 

Other real estate owned ................................................................................... 12,138 9,806 6,057 100.4 

Goodwill and other intangibles ......................................................................... 465,680 461,065 413,434 12.6 

All other assets ................................................................................................. 2,802,218 2,630,552 2,304,391 21.6 

Total liabilities and capital ................................................................................... 13,038,765 12,706,982 11,860,042 9.9 

Deposits ........................................................................................................... 8,414,356 8,181,581 7,825,219 7.5 

Domestic office deposits ............................................................................... 6,911,780 6,741,172 6,631,184 4.2 

Foreign office deposits .................................................................................. 1,502,575 1,440,409 1,194,036 25.8 

Other borrowed funds ....................................................................................... 2,517,336 2,454,143 2,121,086 18.7 

Subordinated debt ............................................................................................ 185,409 177,474 160,547 15.5 

All other liabilities .............................................................................................. 569,405 566,582 505,335 12.7 

Equity capital .................................................................................................... 1,352,259 1,327,202 1,247,855 8.4 

Loans and leases 30-89 days past due ............................................................... 110,937 92,233 71,507 55.1 

Noncurrent loans and leases ............................................................................... 109,914 82,974 57,387 91.5 

Restructured loans and leases ............................................................................ 6,991 4,130 2,608 168.1 

Direct and indirect investments in real estate ...................................................... 1,104 1,098 1,091 1.2 

Mortgage-backed securities ................................................................................ 1,236,031 1,199,169 1,206,913 2.4 

Earning assets ..................................................................................................... 11,306,104 11,031,937 10,336,488 9.4 

FHLB advances ................................................................................................... 808,781 770,363 620,914 30.3 

Unused loan commitments .................................................................................. 8,359,380 8,302,064 7,572,935 10.4 

Trust assets ......................................................................................................... 21,865,518 21,501,132 19,277,633 13.4 

Assets securitized and sold** .............................................................................. 1,773,817 1,741,732 1,310,475 35.4 

Notional amount of derivatives** ......................................................................... 164,780,773 173,284,358 132,182,732 24.7 

INCOME DATA 

Full Year Full Year 4th Quarter 4th Quarter %Change 

2007 2006 %Change 2007 2006 06:4-07:4 

Total interest income ................................................................................... 

Total interest expense ................................................................................. 

Net interest income ................................................................................... 

Provision for loan and lease losses ............................................................. 

Total noninterest income ............................................................................. 

Total noninterest expense ........................................................................... 

Securities gains (losses) .............................................................................. 

Applicable income taxes .............................................................................. 

Extraordinary gains, net ............................................................................... 

Net income ................................................................................................ 

Net charge-offs ............................................................................................ 

Cash dividends ............................................................................................ 

Retained earnings ........................................................................................ 

Net operating income ............................................................................... 

$725,156 $643,459 12.7 $189,149 $171,499 10.3 

372,311 313,353 18.8 97,117 89,180 8.9 

352,845 330,106 6.9 92,032 82,319 11.8 

68,164 29,545 130.7 31,253 9,852 217.2 

233,419 240,430 -2.9 47,831 55,917 -14.5 

362,540 332,307 9.1 100,128 81,044 23.6 

-1,331 1,969 N/M -3,633 513 N/M 

47,019 68,081 -30.9 -731 14,709 N/M 

-1,740 2,669 N/M 237 2,094 -88.7 

105,470 145,242 -27.4 5,816 35,238 -83.5 

43,903 27,016 62.5 16,155 8,509 89.9 

110,160 93,445 17.9 20,550 34,104 -39.7 

-4,690 51,797 N/M -14,734 1,134 N/M

107,852 141,388 -23.7 7,762 32,879 -76.4 

** Call Report filers only. N/M - Not Meaningful 

FDIC QUARTERLY 5 2008, VOLUME 2, NO.1 
TABLE III-A. Full Year 2007, All FDIC-Insured Institutions 

FULL YEAR 

(The way it is...) 

Number of institutions reporting ............................. 

All Insured 

Institutions 

Asset Concentration Groups* 

Credit Card 

Banks 

International 

Banks 

Agricultural 

Banks 

Commercial 

Lenders 

Mortgage 

Lenders 

Consumer 

Lenders 

Other 

Specialized 

<$1 Billion 

All Other 

<$1 Billion 

All Other 

>$1 Billion 

8,533 27 5 1,591 4,773 786 108 374 813 56 

Commercial banks .............................................. 7,282 23 5 1,586 4,279 183 83 332 749 42 

Savings institutions ............................................. 1,251 4 0 5 494 603 25 42 64 14 

Total assets (in billions) ......................................... $13,038.8 $479.3 $2,784.3 $157.5 $4,619.1 $1,333.6 $94.3 $37.9 $110.1 $3,422.5 

Commercial banks .............................................. 11,176.1 437.9 2,784.3 157.1 4,158.8 211.9 41.2 29.5 95.1 3,260.3 

Savings institutions ............................................. 1,862.7 41.4 0.0 0.4 460.3 1,121.7 53.2 8.4 15.0 162.3 

Total deposits (in billions) ...................................... 8,414.4 153.6 1,706.1 128.2 3,268.7 738.3 71.3 26.7 90.1 2,231.4 

Commercial banks .............................................. 7,308.9 143.2 1,706.1 127.8 2,966.0 79.2 27.4 21.1 78.2 2,159.9 

Savings institutions ............................................. 1,105.5 10.4 0.0 0.3 302.8 659.1 43.8 5.6 11.8 71.5 

Net income (in millions) .......................................... 105,470 15,390 14,893 1,808 38,261 3,931 1,179 959 1,111 27,938 

Commercial banks .............................................. 99,511 13,799 14,893 1,804 36,979 1,814 786 627 1,019 27,789 

Savings institutions ............................................. 

Performance Ratios (%) 

5,959 1,591 0 4 1,282 2,117 393 332 92 149 

Yield on earning assets .......................................... 6.76 13.18 6.23 7.15 6.88 6.57 7.61 5.49 6.56 6.23 

Cost of funding earning assets .............................. 3.47 4.63 3.64 3.18 3.29 3.93 3.34 2.45 2.86 3.30 

Net interest margin .............................................. 3.29 8.56 2.59 3.97 3.59 2.63 4.26 3.04 3.70 2.94 

Noninterest income to assets ................................. 1.90 10.50 1.97 0.68 1.26 0.93 2.54 11.07 1.03 1.88 

Noninterest expense to assets ............................... 2.94 8.34 2.83 2.69 2.77 2.23 3.53 9.84 3.05 2.74 

Loan and lease loss provision to assets ................ 0.55 3.72 0.59 0.17 0.38 0.59 1.04 0.09 0.13 0.34 

Net operating income to assets ............................. 0.88 3.34 0.57 1.21 0.91 0.33 1.24 2.58 1.02 0.91 

Pretax return on assets .......................................... 1.24 5.39 0.75 1.45 1.26 0.47 1.99 3.88 1.27 1.27 

Return on assets .................................................... 0.86 3.46 0.58 1.21 0.86 0.30 1.27 2.60 1.04 0.89 

Return on equity ..................................................... 8.17 15.12 7.44 10.88 7.94 3.14 11.69 13.11 9.11 8.34 

Net charge-offs to loans and leases ...................... 0.59 3.95 0.76 0.22 0.35 0.40 0.87 0.29 0.21 0.39 

Loan and lease loss provision to net charge-offs ... 155.26 126.17 176.05 113.69 154.02 209.60 143.98 122.56 113.56 160.85 

Efficiency ratio ........................................................ 59.37 44.54 66.95 61.94 59.45 61.10 52.61 70.95 68.46 60.50 

% of unprofitable institutions .................................. 11.56 7.41 0.00 3.08 14.33 14.25 10.19 24.60 4.06 5.36 

% of institutions with earnings gains ...................... 

Condition Ratios (%) 

49.19 55.56 40.00 61.28 47.18 32.70 49.07 44.92 55.23 46.43 

Earning assets to total assets ................................ 

Loss allowance to: 

86.71 80.98 83.66 91.04 88.45 92.03 91.27 88.15 91.62 85.08 

Loans and leases ................................................ 1.29 4.15 1.46 1.27 1.23 0.86 1.22 1.33 1.18 0.92 

Noncurrent loans and leases .............................. 

Noncurrent assets plus 

92.54 207.47 103.22 121.50 93.62 45.74 61.51 172.87 123.83 80.15 

other real estate owned to assets ....................... 0.94 1.54 0.67 0.83 1.06 1.52 1.65 0.23 0.66 0.68 

Equity capital ratio .................................................. 10.37 21.26 8.01 11.17 11.03 8.61 12.63 20.04 11.46 10.32 

Core capital (leverage) ratio ................................... 7.98 14.57 6.38 10.32 8.48 7.89 9.87 18.59 11.05 7.43 

Tier 1 risk-based capital ratio ................................. 10.12 13.26 8.59 13.70 9.74 12.94 11.33 41.05 18.13 9.86 

Total risk-based capital ratio .................................. 12.79 15.88 12.50 14.75 11.83 14.94 13.12 42.07 19.24 12.78 

Net loans and leases to deposits ........................... 92.75 229.92 71.46 80.85 98.54 126.71 105.89 33.55 68.80 81.82 

Net loans to total assets ......................................... 59.86 73.70 43.79 65.78 69.73 70.15 79.99 23.65 56.27 53.35 

Domestic deposits to total assets .......................... 

Structural Changes 

53.01 29.57 26.68 81.37 68.18 55.29 74.58 68.15 81.79 53.36 

New Charters ...................................................... 181 1 0 5 49 5 0 120 1 0 

Institutions absorbed by mergers ........................ 321 1 0 24 254 12 2 2 7 19 

Failed Institutions ................................................ 

PRIOR FULL YEARS 

(The way it was...) 

3 0 0 0 0 2 0 0 0 1 

Number of institutions .................................. 2006 8,680 26 4 1,634 4,713 817 123 411 895 57

 ............................. 2004 8,976 34 5 1,731 4,423 990 132 466 1,120 75

 ............................. 2002 9,354 40 5 1,823 4,070 1,107 196 488 1,525 100 

Total assets (in billions) ............................... 2006 $11,860.0 $408.4 $2,337.2 $149.2 $4,904.7 $1,445.0 $109.9 $42.2 $119.6 $2,343.9

 ............................. 2004 10,105.9 383.0 1,881.3 138.7 3,301.4 1,503.6 104.1 52.0 143.3 2,598.4

 ............................. 2002 8,435.7 299.3 1,273.1 123.8 2,960.6 1,342.0 166.5 60.2 197.4 2,013.0 

Return on assets (%) ................................... 2006 1.28 4.19 1.01 1.23 1.28 0.94 1.75 1.54 1.04 1.26

 ............................. 2004 1.28 4.03 0.76 1.22 1.29 1.18 1.66 1.68 1.10 1.32

 ............................. 2002 1.30 3.60 0.74 1.24 1.30 1.31 1.35 1.08 1.14 1.32 

Net charge-offs to loans & leases (%) ......... 2006 0.39 3.48 0.48 0.17 0.22 0.15 1.40 0.42 0.20 0.22

 ............................. 2004 0.56 4.66 0.91 0.22 0.30 0.12 1.57 0.59 0.29 0.25

 ............................. 2002 

Noncurrent assets plus 

0.97 6.12 1.77 0.29 0.65 0.20 1.07 1.36 0.35 0.81 

OREO to assets (%) ................................. 2006 0.54 1.37 0.40 0.67 0.55 0.56 0.85 0.20 0.56 0.45

 ............................. 2004 0.53 1.50 0.57 0.68 0.51 0.43 0.53 0.31 0.59 0.45

 ............................. 2002 0.90 1.68 1.19 0.85 0.87 0.71 1.28 0.59 0.70 0.75 

Equity capital ratio (%) ................................. 2006 10.52 22.88 7.75 10.73 11.16 9.91 14.16 21.12 10.98 9.78

 ............................. 2004 10.28 20.54 8.05 10.78 10.10 10.55 11.36 17.47 10.79 10.23

 ............................. 2002 9.20 15.48 7.14 10.76 9.36 9.07 7.35 17.18 10.62 9.10 

* See Table IV-A (page 8) for explanations. 

FDIC QUARTERLY 6 2008, VOLUME 2, NO. 1 
 

Quarterly Banking Profile 

TABLE III-A. Full Year 2007, All FDIC-Insured Institutions 

FULL YEAR 

(The way it is...) 

Number of institutions reporting ............................. 

All 

Insured 

Institutions 

Asset Size Distribution Geographic Regions* 

Less 

than 

$100 Million 

$100 Million 

to 

$1 Billion 

$1 Billion 

to 

$10 Billion 

Greater 

than $10 

Billion New York Atlanta Chicago 

Kansas 

City Dallas 

San 

Francisco 

8,533 3,440 4,425 549 119 1,042 1,220 1,763 1,987 1,743 778 

Commercial banks ............................................... 7,282 3,065 3,706 425 86 548 1,075 1,455 1,880 1,618 706 

Savings institutions .............................................. 1,251 375 719 124 33 494 145 308 107 125 72 

Total assets (in billions) .......................................... $13,038.8 $181.9 $1,310.1 $1,420.3 $10,126.5 $2,439.7 $3,329.1 $2,842.7 $977.9 $738.7 $2,710.7 

Commercial banks ............................................... 11,176.1 162.9 1,062.1 1,112.7 8,838.4 1,759.6 3,060.6 2,685.7 935.2 621.2 2,113.9 

Savings institutions .............................................. 1,862.7 19.0 247.9 307.5 1,288.2 680.1 268.6 157.0 42.7 117.5 596.9 

Total deposits (in billions) ....................................... 8,414.4 148.1 1,039.9 1,008.1 6,218.3 1,512.9 2,184.0 1,828.3 691.1 547.1 1,650.9 

Commercial banks ............................................... 7,308.9 133.8 854.8 792.0 5,528.4 1,066.5 2,023.6 1,717.8 661.1 476.6 1,363.2 

Savings institutions .............................................. 1,105.5 14.3 185.1 216.1 690.0 446.4 160.4 110.5 30.0 70.5 287.7 

Net income (in millions) .......................................... 105,470 1,322 12,440 13,473 78,235 18,068 26,050 23,630 13,304 7,192 17,226 

Commercial banks ............................................... 99,511 1,282 10,804 11,519 75,905 17,126 27,097 23,028 13,116 6,331 12,813 

Savings institutions .............................................. 

Performance Ratios (%) 

5,959 39 1,636 1,954 2,330 942 -1,047 602 187 861 4,413 

Yield on earning assets .......................................... 6.76 6.96 7.14 7.07 6.65 6.81 6.56 6.08 7.61 7.15 7.25 

Cost of funding earning assets ............................... 3.47 2.91 3.29 3.37 3.52 3.45 3.47 3.35 3.26 3.28 3.73 

Net interest margin .............................................. 3.29 4.05 3.86 3.70 3.13 3.36 3.08 2.73 4.34 3.86 3.52 

Noninterest income to assets ................................. 1.90 1.22 1.13 1.43 2.08 2.18 1.53 2.05 3.36 1.37 1.56 

Noninterest expense to assets ............................... 2.94 3.77 3.13 2.83 2.92 3.14 2.57 2.77 4.21 3.19 2.89 

Loan and lease loss provision to assets ................. 0.55 0.21 0.25 0.42 0.62 0.67 0.37 0.39 0.85 0.32 0.80 

Net operating income to assets .............................. 0.88 0.74 0.98 1.05 0.84 0.83 0.88 0.87 1.44 1.01 0.68 

Pretax return on assets .......................................... 1.24 0.97 1.31 1.48 1.20 1.22 1.20 1.27 2.09 1.36 0.93 

Return on assets .................................................... 0.86 0.75 0.99 0.99 0.82 0.79 0.84 0.87 1.46 1.02 0.66 

Return on equity ..................................................... 8.17 5.39 9.44 8.79 7.98 6.45 8.10 9.66 14.29 10.00 6.17 

Net charge-offs to loans and leases ....................... 0.59 0.23 0.24 0.41 0.68 0.90 0.33 0.46 0.78 0.29 0.76 

Loan and lease loss provision to net charge-offs ... 155.26 145.31 149.06 149.28 156.29 130.05 184.23 154.10 154.18 165.05 164.10 

Efficiency ratio ........................................................ 59.37 76.03 66.10 57.57 58.43 56.25 59.87 61.13 57.70 64.13 59.60 

% of unprofitable institutions .................................. 11.56 18.11 7.12 6.19 11.76 16.03 17.54 10.72 6.14 8.20 19.41 

% of institutions with earnings gains ...................... 

Condition Ratios (%) 

49.19 50.00 49.58 45.17 29.41 37.33 39.02 47.14 55.41 58.92 47.94 

Earning assets to total assets ................................ 

Loss Allowance to: 

86.71 91.70 91.80 90.51 85.43 86.67 86.09 86.00 86.55 89.91 87.45 

Loans and leases ................................................ 1.29 1.28 1.17 1.29 1.30 1.52 1.06 1.29 1.39 1.16 1.36 

Noncurrent loans and leases ............................... 

Noncurrent assets plus 

92.54 107.04 95.86 96.09 91.30 121.32 91.96 83.62 81.59 95.20 86.53 

other real estate owned to assets ....................... 0.94 0.95 1.06 1.06 0.90 0.76 0.81 0.95 1.37 0.97 1.09 

Equity capital ratio .................................................. 10.37 13.74 10.52 11.37 10.15 12.07 10.32 9.24 9.75 10.23 10.35 

Core capital (leverage) ratio ................................... 7.98 13.53 9.97 9.44 7.41 8.68 7.07 7.17 8.09 8.88 9.02 

Tier 1 risk-based capital ratio ................................. 10.12 19.67 13.21 11.95 9.32 11.86 8.93 8.79 9.46 11.14 11.59 

Total risk-based capital ratio .................................. 12.79 20.70 14.30 13.26 12.40 13.92 11.64 11.72 12.18 12.80 14.66 

Net loans and leases to deposits ........................... 92.75 76.66 87.98 96.38 93.35 90.83 93.25 84.19 97.15 89.09 102.72 

Net loans to total assets ......................................... 59.86 62.40 69.83 68.41 57.32 56.32 61.18 54.14 68.66 65.99 62.56 

Domestic deposits to total assets ........................... 

Structural Changes 

53.01 81.39 79.26 70.31 46.68 52.94 58.30 50.45 63.54 73.19 39.97 

New Charters ...................................................... 181 174 5 2 0 22 53 16 12 33 45 

Institutions absorbed by mergers ........................ 321 114 167 31 9 74 45 77 48 46 31 

Failed Institutions ................................................ 

PRIOR FULL YEARS 

(The way it was...) 

3 2 0 1 0 1 1 1 0 0 0 

Number of institutions ................................... 2006 8,680 3,632 4,399 530 119 1,092 1,218 1,826 2,018 1,753 773

 ............................. 2004 8,976 4,093 4,286 480 117 1,129 1,219 1,951 2,094 1,834 749

 ............................. 2002 9,354 4,680 4,118 450 106 1,212 1,237 2,055 2,167 1,901 782 

Total assets (in billions) ................................ 2006 $11,860.0 $189.9 $1,290.0 $1,397.5 $8,982.6 $2,214.3 $2,911.4 $2,746.2 $859.8 $652.3 $2,476.1

 ............................. 2004 10,105.9 211.7 1,199.6 1,317.0 7,377.6 2,855.0 2,177.1 2,387.6 768.2 603.1 1,315.1

 ............................. 2002 8,435.7 237.8 1,124.9 1,279.1 5,793.9 2,892.6 1,711.2 1,572.0 440.1 581.5 1,238.3 

Return on assets (%) .................................... 2006 1.28 0.92 1.16 1.22 1.31 1.27 1.31 1.10 1.76 1.23 1.29

 ............................. 2004 1.28 1.00 1.19 1.45 1.27 1.37 1.34 0.88 1.55 1.26 1.60

 ............................. 2002 1.30 0.99 1.16 1.44 1.31 1.11 1.32 1.28 1.58 1.41 1.58 

Net charge-offs to loans & leases (%) .......... 2006 0.39 0.18 0.16 0.20 0.47 0.72 0.19 0.28 0.55 0.21 0.43

 ............................. 2004 0.56 0.28 0.27 0.39 0.65 0.88 0.31 0.41 0.74 0.27 0.60

 ............................. 2002 

Noncurrent assets plus 

0.97 0.32 0.41 0.69 1.18 1.45 0.71 0.77 1.19 0.44 0.81 

OREO to assets (%) .................................. 2006 0.54 0.73 0.59 0.52 0.53 0.51 0.33 0.57 1.05 0.62 0.56

 ............................. 2004 0.53 0.74 0.56 0.51 0.53 0.58 0.35 0.55 0.81 0.61 0.51

 ............................. 2002 0.90 0.85 0.74 0.69 0.98 1.01 0.78 1.00 0.82 0.81 0.74 

Equity capital ratio (%) .................................. 2006 10.52 13.01 10.39 10.97 10.42 12.48 10.05 9.07 10.64 10.42 10.92

 ............................. 2004 10.28 11.82 10.19 10.89 10.15 11.21 8.74 9.36 10.62 10.78 12.10

 ............................. 2002 9.20 11.28 10.06 10.06 8.76 8.85 9.38 8.57 10.34 9.60 9.98 

* See Table IV-A (page 9) for explanations. 

FDIC QUARTERLY 7 2008, VOLUME 2, NO.1 
TABLE IV-A. Fourth Quarter 2007, All FDIC-Insured Institutions 

FOURTH QUARTER 

(The way it is...) 

Number of institutions reporting ............................. 

All Insured 

Institutions 

Asset Concentration Groups* 

Credit Card 

Banks 

International 

Banks 

Agricultural 

Banks 

Commercial 

Lenders 

Mortgage 

Lenders 

Consumer 

Lenders 

Other 

Specialized 

<$1 Billion 

All Other 

<$1 Billion 

All Other 

>$1 Billion 

8,533 27 5 1,591 4,773 786 108 374 813 56 

Commercial banks .............................................. 7,282 23 5 1,586 4,279 183 83 332 749 42 

Savings institutions ............................................. 1,251 4 0 5 494 603 25 42 64 14 

Total assets (in billions) ......................................... $13,038.8 $479.3 $2,784.3 $157.5 $4,619.1 $1,333.6 $94.3 $37.9 $110.1 $3,422.5 

Commercial banks .............................................. 11,176.1 437.9 2,784.3 157.1 4,158.8 211.9 41.2 29.5 95.1 3,260.3 

Savings institutions ............................................. 1,862.7 41.4 0.0 0.4 460.3 1,121.7 53.2 8.4 15.0 162.3 

Total deposits (in billions) ...................................... 8,414.4 153.6 1,706.1 128.2 3,268.7 738.3 71.3 26.7 90.1 2,231.4 

Commercial banks .............................................. 7,308.9 143.2 1,706.1 127.8 2,966.0 79.2 27.4 21.1 78.2 2,159.9 

Savings institutions ............................................. 1,105.5 10.4 0.0 0.3 302.8 659.1 43.8 5.6 11.8 71.5 

Net income (in millions) .......................................... 5,816 3,027 -1,383 424 3,948 -3,230 156 214 258 2,402 

Commercial banks .............................................. 10,540 2,797 -1,383 423 5,097 448 153 117 237 2,651 

Savings institutions ............................................. 

Performance Ratios (annualized, %) 

-4,724 230 0 1 -1,148 -3,678 3 97 21 -249 

Yield on earning assets .......................................... 6.78 13.36 6.20 7.15 6.93 6.38 7.84 5.60 6.61 6.32 

Cost of funding earning assets .............................. 3.48 4.40 3.57 3.17 3.35 3.86 3.41 2.50 2.87 3.36 

Net interest margin .............................................. 3.30 8.97 2.63 3.99 3.58 2.52 4.43 3.10 3.73 2.96 

Noninterest income to assets ................................. 1.49 10.43 1.01 0.71 1.05 0.78 2.57 11.20 1.07 1.43 

Noninterest expense to assets ............................... 3.11 8.32 2.83 2.83 2.97 2.72 3.77 10.26 3.18 2.90 

Loan and lease loss provision to assets ................ 0.97 5.37 0.98 0.20 0.72 1.13 1.71 0.09 0.20 0.68 

Net operating income to assets ............................. 0.24 2.49 -0.19 1.09 0.36 -0.58 0.65 2.28 0.92 0.35 

Pretax return on assets .......................................... 0.16 4.10 -0.63 1.32 0.49 -1.34 1.14 3.61 1.14 0.26 

Return on assets .................................................... 0.18 2.61 -0.20 1.10 0.35 -0.94 0.66 2.30 0.95 0.29 

Return on equity ..................................................... 1.74 11.96 -2.55 9.73 3.14 -10.51 5.29 11.46 8.24 2.78 

Net charge-offs to loans and leases ...................... 0.83 4.23 1.05 0.31 0.60 0.66 1.03 0.26 0.33 0.55 

Loan and lease loss provision to net charge-offs ... 193.46 167.80 209.30 95.69 170.12 240.30 201.17 136.68 104.18 231.63 

Efficiency ratio ........................................................ 66.27 42.33 86.38 64.66 63.50 68.46 54.48 73.26 70.43 71.27 

% of unprofitable institutions .................................. 17.68 11.11 40.00 10.75 20.18 20.87 20.37 28.07 8.86 12.50 

% of institutions with earnings gains ...................... 

Structural Changes 

47.56 48.15 0.00 58.39 43.08 47.20 51.85 46.26 53.38 46.43 

New Charters ...................................................... 50 0 0 1 17 1 0 31 0 0 

Institutions absorbed by mergers ........................ 74 0 0 2 63 4 0 0 4 1 

Failed Institutions ................................................ 

PRIOR FOURTH QUARTERS 

(The way it was...) 

1 0 0 0 0 1 0 0 0 0 

Return on assets (%) ................................... 2006 1.20 3.43 0.96 1.06 1.20 0.91 1.54 2.17 1.00 1.21

 ................................ 2004 1.25 3.72 0.77 1.04 1.25 1.22 1.50 1.74 0.99 1.25

 ................................ 2002 1.20 3.74 0.43 1.02 1.28 1.36 1.41 -0.80 1.02 1.17 

Net charge-offs to loans & leases (%) ......... 2006 0.47 3.88 0.36 0.30 0.35 0.19 1.62 0.32 0.28 0.29

 ................................ 2004 0.60 4.64 1.10 0.31 0.35 0.15 1.44 0.54 0.36 0.24

 ................................ 2002 0.98 5.36 1.73 0.45 0.65 0.29 1.15 2.33 0.49 0.90 

*Asset Concentration Group Definitions (Groups are hierarchical and mutually exclusive): 

Credit-card Lenders - Institutions whose credit-card loans plus securitized receivables exceed 50 percent of total assets plus securitized receivables. 

International Banks - Banks with assets greater than $10 billion and more than 25 percent of total assets in foreign offices. 

Agricultural Banks - Banks whose agricultural production loans, plus real estate loans secured by farmland, exceed 25 percent of the total loans and leases. 

Commercial Lenders - Institutions whose commercial and industrial loans, plus real estate construction and development loans, plus loans 

secured by commercial real estate properties, exceed 25 percent of total assets. 

Mortgage Lenders - Institutions whose residential mortgage loans, plus mortgage-backed securities, exceed 50 percent of total assets. 

Consumer Lenders - Institutions whose residential mortgage loans, plus credit-card loans, plus other loans to individuals, exceed 50 percent of total assets. 

Other Specialized < $1 Billion - Institutions with assets less than $1 billion, whose loans and leases are less than 40 percent of total assets. 

All Other < $1 billion - Institutions with assets less than $1 billion that do not meet any of the definitions above, they have significant lending 

activity with no identified asset concentrations. 

All Other > $1 billion - Institutions with assets greater than $1 billion that do not meet any of the definitions above, they have significant lending 

activity with no identified asset concentrations. 

FDIC QUARTERLY 8 2008, VOLUME 2, NO. 1 
 

Quarterly Banking Profile 

TABLE IV-A. Fourth Quarter 2007, All FDIC-Insured Institutions 

FOURTH QUARTER 

(The way it is...) 

Number of institutions reporting ............................. 

All 

Insured 

Institutions 

Asset Size Distribution Geographic Regions* 

Less 

than $100 

Million 

$100 Million 

to 

$1 Billion 

$1 Billion 

to 

$10 Billion 

Greater 

than $10 

Billion New York Atlanta Chicago 

Kansas 

City Dallas 

San 

Francisco 

8,533 3,440 4,425 549 119 1,042 1,220 1,763 1,987 1,743 778 

Commercial banks ............................................... 7,282 3,065 3,706 425 86 548 1,075 1,455 1,880 1,618 706 

Savings institutions .............................................. 1,251 375 719 124 33 494 145 308 107 125 72 

Total assets (in billions) .......................................... $13,038.8 $181.9 $1,310.1 $1,420.3 $10,126.5 $2,439.7 $3,329.1 $2,842.7 $977.9 $738.7 $2,710.7 

Commercial banks ............................................... 11,176.1 162.9 1,062.1 1,112.7 8,838.4 1,759.6 3,060.6 2,685.7 935.2 621.2 2,113.9 

Savings institutions .............................................. 1,862.7 19.0 247.9 307.5 1,288.2 680.1 268.6 157.0 42.7 117.5 596.9 

Total deposits (in billions) ....................................... 8,414.4 148.1 1,039.9 1,008.1 6,218.3 1,512.9 2,184.0 1,828.3 691.1 547.1 1,650.9 

Commercial banks ............................................... 7,308.9 133.8 854.8 792.0 5,528.4 1,066.5 2,023.6 1,717.8 661.1 476.6 1,363.2 

Savings institutions .............................................. 1,105.5 14.3 185.1 216.1 690.0 446.4 160.4 110.5 30.0 70.5 287.7 

Net income (in millions) .......................................... 5,816 221 2,489 2,484 622 1,709 1,249 4,322 2,385 1,110 -4,960 

Commercial banks ............................................... 10,540 221 2,150 2,163 6,006 2,993 2,959 4,304 2,366 1,054 -3,136 

Savings institutions .............................................. 

Performance Ratios (annualized, %) 

-4,724 0 339 321 -5,385 -1,284 -1,709 18 19 57 -1,824 

Yield on earning assets .......................................... 6.78 7.07 7.12 7.08 6.68 6.86 6.66 6.20 7.65 7.09 7.05 

Cost of funding earning assets ............................... 3.48 2.99 3.30 3.39 3.53 3.44 3.57 3.40 3.22 3.25 3.64 

Net interest margin .............................................. 3.30 4.08 3.82 3.69 3.15 3.42 3.08 2.80 4.43 3.83 3.42 

Noninterest income to assets ................................. 1.49 1.28 1.11 1.00 1.61 2.18 1.00 2.08 3.21 1.30 0.31 

Noninterest expense to assets ............................... 3.11 4.12 3.23 2.63 3.15 3.44 2.65 2.94 4.29 3.39 3.08 

Loan and lease loss provision to assets ................. 0.97 0.29 0.41 0.75 1.09 0.97 0.76 0.70 1.52 0.58 1.41 

Net operating income to assets .............................. 0.24 0.46 0.76 0.69 0.11 0.39 0.28 0.61 0.97 0.60 -0.67 

Pretax return on assets .......................................... 0.16 0.66 0.99 0.98 -0.07 0.58 0.04 0.86 1.26 0.79 -1.35 

Return on assets .................................................... 0.18 0.49 0.77 0.71 0.02 0.28 0.15 0.62 1.00 0.61 -0.73 

Return on equity ..................................................... 1.74 3.55 7.30 6.23 0.24 2.32 1.50 6.77 10.05 5.93 -6.95 

Net charge-offs to loans and leases ....................... 0.83 0.36 0.42 0.60 0.94 1.00 0.56 0.74 1.10 0.46 1.09 

Loan and lease loss provision to net charge-offs ... 193.46 126.15 138.87 179.53 199.30 171.70 222.53 172.84 196.92 189.26 203.52 

Efficiency ratio ........................................................ 66.27 81.69 67.93 57.38 66.98 56.21 70.15 63.36 59.62 67.45 83.58 

% of unprofitable institutions .................................. 17.68 24.65 12.86 11.29 25.21 20.54 25.16 16.39 13.89 13.20 24.81 

% of institutions with earnings gains ...................... 

Structural Changes 

47.56 48.02 48.47 42.08 25.21 45.30 36.48 47.19 53.40 54.79 37.66 

New Charters ...................................................... 50 50 0 0 0 8 13 4 5 9 11 

Institutions absorbed by mergers ........................ 74 30 39 5 0 12 5 33 12 6 6 

Failed Institutions ................................................ 

PRIOR FOURTH QUARTERS 

(The way it was...) 

1 1 0 0 0 0 0 1 0 0 0 

Return on assets (%) .................................... 2006 1.20 0.68 1.08 1.10 1.24 1.26 1.21 1.19 1.82 1.10 0.94

 ................................ 2004 1.25 0.89 1.14 1.36 1.25 1.37 1.19 0.85 1.66 1.18 1.59

 ................................ 2002 1.20 0.84 0.99 1.47 1.20 0.94 1.21 1.14 1.57 1.36 1.66 

Net charge-offs to loans & leases (%) .......... 2006 0.47 0.31 0.26 0.26 0.55 0.94 0.26 0.38 0.70 0.25 0.40

 ................................ 2004 0.60 0.39 0.34 0.45 0.69 0.88 0.33 0.59 0.70 0.34 0.59

 ................................ 2002 0.98 0.47 0.53 0.66 1.17 1.36 0.81 0.79 1.18 0.55 0.86 

* Regions: 

New York - Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Puerto Rico 

Rhode Island, Vermont, U.S. Virgin Islands 

Atlanta - Alabama, Florida, Georgia, North Carolina, South Carolina, Virginia, West Virginia 

Chicago - Illinois, Indiana, Kentucky, Michigan, Ohio, Wisconsin 

Kansas City - Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota 

Dallas - Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Tennessee, Texas 

San Francisco - Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Pacific Islands, Utah, Washington, Wyoming 

FDIC QUARTERLY 9 2008, VOLUME 2, NO.1 
TABLE V-A. Loan Performance, All FDIC-Insured Institutions 

December 31, 2007 All Insured 

Institutions 

Asset Concentration Groups* 

Credit Card 

Banks 

International 

Banks 

Agricultural 

Banks 

Commercial 

Lenders 

Mortgage 

Lenders 

Consumer 

Lenders 

Other 

Specialized 

<$1 Billion 

All Other 

<$1 Billion 

All Other 

>$1 Billion 

Percent of Loans 30-89 Days Past Due 

All loans secured by real estate ....................................... 1.58 2.87 2.71 1.32 1.30 1.85 2.55 1.25 1.73 1.41 

Construction and development ...................................... 1.83 0.00 2.01 2.47 1.84 3.37 1.43 0.96 1.47 1.28 

Nonfarm nonresidential ................................................. 0.78 0.00 0.60 1.04 0.75 0.64 1.59 0.98 1.27 0.85 

Multifamily residential real estate .................................. 0.56 0.00 0.37 0.86 0.77 0.21 1.34 1.63 0.85 0.31 

Home equity loans ......................................................... 1.14 2.98 1.05 0.70 0.84 1.75 0.82 1.33 1.13 1.16 

Other 1-4 family residential ........................................... 2.11 2.02 3.87 1.94 1.74 1.97 3.59 1.39 2.11 1.76 

Commercial and industrial loans ...................................... 0.73 2.80 0.41 1.45 0.81 1.01 1.05 1.25 1.55 0.54 

Loans to individuals .......................................................... 2.07 2.33 2.15 2.27 1.75 1.52 1.92 1.76 2.63 2.07 

Credit card loans ........................................................... 2.32 2.30 2.57 1.39 2.33 2.32 1.21 1.96 1.25 2.26 

Other loans to individuals .............................................. 1.90 2.57 1.95 2.33 1.68 0.98 2.16 1.74 2.68 2.03 

All other loans and leases (including farm) ...................... 0.47 0.15 0.40 0.81 0.77 0.50 0.14 0.75 0.66 0.26 

Total loans and leases ..................................................... 

Percent of Loans Noncurrent** 

1.40 2.28 1.62 1.27 1.20 1.81 2.15 1.31 1.74 1.19 

All real estate loans .......................................................... 1.71 1.81 1.95 1.20 1.62 1.94 3.17 0.82 0.99 1.60 

Construction and development ...................................... 3.15 0.00 1.91 4.12 3.05 6.08 3.35 2.28 2.16 3.00 

Nonfarm nonresidential ................................................. 0.81 0.00 0.56 1.26 0.85 0.64 2.60 0.70 1.23 0.58 

Multifamily residential real estate .................................. 0.76 0.00 0.39 1.08 0.97 0.43 6.79 3.15 0.77 0.47 

Home equity loans ......................................................... 0.86 1.98 0.75 0.49 0.61 1.47 0.13 0.14 0.57 0.87 

Other 1-4 family residential ........................................... 2.06 0.31 2.69 0.99 1.81 2.02 4.64 0.64 0.84 2.05 

Commercial and industrial loans ...................................... 0.66 2.21 0.34 1.35 0.74 0.88 0.73 1.21 1.16 0.54 

Loans to individuals .......................................................... 1.43 2.10 2.09 0.73 0.67 0.96 0.94 0.49 0.78 0.83 

Credit card loans ........................................................... 2.22 2.11 3.04 1.10 1.80 2.05 1.19 0.76 0.70 2.03 

Other loans to individuals .............................................. 0.91 2.03 1.66 0.71 0.54 0.24 0.85 0.47 0.79 0.59 

All other loans and leases (including farm) ...................... 0.56 0.03 1.10 0.57 0.38 0.38 0.11 0.35 0.52 0.21 

Total loans and leases ..................................................... 

Percent of Loans Charged-off (net, YTD) 

1.39 2.00 1.42 1.05 1.31 1.87 1.97 0.77 0.95 1.15 

All real estate loans .......................................................... 0.23 1.80 0.39 0.09 0.22 0.27 0.09 0.03 0.07 0.16 

Construction and development ...................................... 0.36 0.00 0.25 0.38 0.38 0.80 0.06 0.10 0.14 0.14 

Nonfarm nonresidential ................................................. 0.09 0.00 0.04 0.11 0.11 0.04 0.01 -0.03 0.08 0.04 

Multifamily residential real estate .................................. 0.12 0.00 0.04 0.15 0.19 0.02 0.00 0.00 0.10 0.01 

Home equity loans ......................................................... 0.47 1.90 0.49 0.07 0.36 0.82 0.16 0.09 0.05 0.42 

Other 1-4 family residential ........................................... 0.21 1.52 0.44 0.10 0.20 0.20 0.09 0.05 0.06 0.11 

Commercial and industrial loans ...................................... 0.54 4.54 0.35 0.69 0.44 0.74 2.48 0.26 0.49 0.38 

Loans to individuals .......................................................... 2.50 4.17 2.80 0.64 1.16 3.28 1.65 0.90 0.71 1.60 

Credit card loans ........................................................... 4.06 4.16 3.36 2.07 3.37 7.07 2.70 3.49 1.96 4.03 

Other loans to individuals .............................................. 1.52 4.24 2.56 0.55 0.90 0.56 1.29 0.50 0.67 1.14 

All other loans and leases (including farm) ...................... 0.25 0.01 0.06 0.00 0.54 0.42 0.02 0.86 0.00 0.24 

Total loans and leases ..................................................... 

Loans Outstanding (in billions) 

0.59 3.95 0.76 0.22 0.35 0.40 0.87 0.29 0.21 0.39 

All real estate loans .......................................................... $4,780.6 $1.6 $484.6 $58.8 $2,201.6 $882.3 $36.2 $5.4 $43.9 $1,066.3 

Construction and development ...................................... 628.9 0.0 9.8 5.8 502.6 24.6 0.8 0.4 3.0 82.0 

Nonfarm nonresidential ................................................. 968.4 0.0 26.6 16.1 711.9 34.5 3.7 1.5 10.2 164.1 

Multifamily residential real estate .................................. 202.7 0.0 11.8 1.0 115.9 42.0 0.2 0.1 0.7 31.0 

Home equity loans ......................................................... 607.4 1.4 96.3 1.1 191.2 101.6 9.9 0.1 1.7 204.1 

Other 1-4 family residential ........................................... 2,245.3 0.2 288.2 15.3 641.3 678.9 21.5 3.1 25.2 571.7 

Commercial and industrial loans ...................................... 1,440.3 46.6 321.0 14.8 663.2 15.7 4.3 1.1 6.5 367.0 

Loans to individuals .......................................................... 1,059.1 300.8 224.1 6.5 228.1 40.0 34.9 1.7 7.7 215.4 

Credit card loans ........................................................... 422.5 266.0 70.6 0.4 23.8 16.0 9.0 0.2 0.3 36.3 

Other loans to individuals .............................................. 636.7 34.8 153.5 6.1 204.2 24.0 25.9 1.6 7.4 179.1 

All other loans and leases (including farm) ...................... 628.6 19.6 208.2 24.9 169.3 5.7 1.0 0.8 4.7 194.5 

Total loans and leases ..................................................... 

Memo: Other Real Estate Owned (in millions) 

7,908.7 368.5 1,237.8 105.0 3,262.2 943.6 76.5 9.1 62.8 1,843.2 

All other real estate owned ............................................... 12,138.3 N/M 1,060.3 208.0 6,232.5 2,530.1 45.3 18.1 125.3 1,937.0 

Construction and development ...................................... 2,224.0 0.0 0.0 64.2 1,972.6 130.7 4.8 1.5 16.2 34.0 

Nonfarm nonresidential ................................................. 1,526.5 0.0 11.0 66.7 1,171.4 38.5 23.9 11.4 46.8 156.8 

Multifamily residential real estate .................................. 361.9 0.0 0.0 5.9 247.1 22.4 0.3 0.4 8.3 77.5 

1-4 family residential ..................................................... 6,643.1 1.2 544.3 48.1 2,549.9 2,299.5 16.1 3.4 50.0 1,130.7 

Farmland ....................................................................... 68.7 0.0 0.0 22.8 40.2 0.2 0.3 0.4 3.7 1.1 

* See Table IV-A (page 8) for explanations. 

** Noncurrent loan rates represent the percentage of loans in each category that are past due 90 days or more or that are in nonaccrual status. 

FDIC QUARTERLY 10 2008, VOLUME 2, NO. 1 
 

Quarterly Banking Profile 

TABLE V-A. Loan Performance, All FDIC-Insured Institutions 

December 31, 2007 

All 

Insured 

Institutions 

Asset Size Distribution Geographic Regions* 

Less 

than 

$100 Million 

$100 Million 

to 

$1 Billion 

$1 Billion 

to 

$10 Billion 

Greater 

than $10 

Billion New York Atlanta Chicago 

Kansas 

City Dallas 

San 

Francisco 

Percent of Loans 30-89 Days Past Due 

All loans secured by real estate ............................. 1.58 1.71 1.32 1.11 1.74 1.20 1.56 2.00 1.16 1.40 1.77 

Construction and development ........................... 1.83 1.86 1.90 1.63 1.90 1.81 1.59 2.57 1.65 1.43 1.86 

Nonfarm nonresidential ....................................... 0.78 1.32 0.92 0.66 0.74 1.18 0.53 1.01 0.67 0.73 0.47 

Multifamily residential real estate ........................ 0.56 1.29 0.89 0.94 0.37 0.39 0.68 1.43 0.73 0.67 0.27 

Home equity loans .............................................. 1.14 0.94 0.95 0.81 1.18 0.77 1.30 0.92 1.19 0.73 1.42 

Other 1-4 family residential ................................. 2.11 2.23 1.55 1.32 2.28 1.24 2.07 2.92 1.35 2.34 2.52 

Commercial and industrial loans ............................ 0.73 1.46 1.14 0.98 0.64 1.07 0.49 0.87 1.00 0.66 0.52 

Loans to individuals ............................................... 2.07 2.79 2.00 2.20 2.05 2.24 1.86 1.87 2.59 1.72 2.00 

Credit card loans ................................................. 2.32 2.05 2.50 2.42 2.31 2.31 2.78 2.12 2.26 1.21 2.42 

Other loans to individuals .................................... 1.90 2.81 1.96 2.06 1.87 2.12 1.72 1.79 2.89 1.84 1.70 

All other loans and leases (including farm) ............ 0.47 0.73 0.65 0.70 0.43 0.51 0.37 0.72 0.34 0.70 0.24 

Total loans and leases ........................................... 

Percent of Loans Noncurrent** 

1.40 1.66 1.31 1.16 1.45 1.35 1.31 1.60 1.26 1.25 1.47 

All real estate loans ................................................ 1.71 1.27 1.32 1.53 1.84 1.17 1.48 2.23 2.35 1.51 1.83 

Construction and development ........................... 3.15 2.27 2.98 3.05 3.31 2.82 2.89 4.12 3.10 2.27 3.50 

Nonfarm nonresidential ....................................... 0.81 1.27 0.89 0.81 0.74 1.06 0.57 1.21 0.76 0.75 0.44 

Multifamily residential real estate ........................ 0.76 1.02 1.02 1.47 0.48 0.41 0.88 2.35 0.61 1.24 0.29 

Home equity loans .............................................. 0.86 0.64 0.55 0.60 0.90 0.53 1.00 0.76 0.71 0.33 1.14 

Other 1-4 family residential ................................. 2.06 1.17 0.96 1.40 2.31 1.13 1.58 2.81 4.28 2.00 2.37 

Commercial and industrial loans ............................ 0.66 1.37 1.08 0.82 0.58 1.09 0.49 0.60 0.86 0.66 0.56 

Loans to individuals ............................................... 1.43 0.95 0.61 1.06 1.51 1.77 0.84 0.95 1.35 0.58 1.93 

Credit card loans ................................................. 2.22 1.06 1.44 2.02 2.24 2.26 2.33 1.81 1.88 1.10 2.50 

Other loans to individuals .................................... 0.91 0.95 0.54 0.49 0.98 0.90 0.62 0.64 0.90 0.46 1.53 

All other loans and leases (including farm) ............ 0.56 0.60 0.51 0.43 0.58 0.68 0.17 0.59 0.23 0.51 1.18 

Total loans and leases ........................................... 

Percent of Loans Charged-off (net, YTD) 

1.39 1.19 1.22 1.34 1.43 1.25 1.16 1.55 1.70 1.22 1.57 

All real estate loans ................................................ 0.23 0.12 0.14 0.21 0.26 0.10 0.19 0.33 0.28 0.18 0.29 

Construction and development ........................... 0.36 0.29 0.33 0.42 0.35 0.28 0.31 0.51 0.41 0.31 0.36 

Nonfarm nonresidential ....................................... 0.09 0.10 0.08 0.11 0.09 0.07 0.06 0.14 0.07 0.12 0.09 

Multifamily residential real estate ........................ 0.12 0.21 0.13 0.36 0.04 0.01 0.31 0.31 0.07 0.22 0.04 

Home equity loans .............................................. 0.47 0.19 0.14 0.28 0.51 0.22 0.46 0.40 0.68 0.26 0.64 

Other 1-4 family residential ................................. 0.21 0.11 0.11 0.12 0.23 0.08 0.13 0.35 0.20 0.12 0.31 

Commercial and industrial loans ............................ 0.54 0.58 0.50 0.53 0.54 0.98 0.33 0.31 0.94 0.33 0.65 

Loans to individuals ............................................... 2.50 0.67 1.02 2.09 2.64 3.33 1.31 1.52 2.94 1.08 3.20 

Credit card loans ................................................. 4.06 2.44 5.28 3.69 4.08 4.22 4.00 3.44 4.27 2.45 4.11 

Other loans to individuals .................................... 1.52 0.64 0.69 1.27 1.63 1.78 0.92 0.84 1.78 0.77 2.60 

All other loans and leases (including farm) ............ 0.25 0.14 0.28 0.32 0.25 0.21 0.32 0.35 0.13 0.37 0.12 

Total loans and leases ........................................... 

Loans Outstanding (in billions) 

0.59 0.23 0.24 0.41 0.68 0.90 0.33 0.46 0.78 0.29 0.76 

All real estate loans ................................................ $4,780.6 $77.4 $717.5 $716.1 $3,269.6 $805.9 $1,374.4 $870.0 $384.1 $330.2 $1,016.1 

Construction and development ........................... 628.9 10.8 147.0 165.1 306.0 65.1 204.0 122.6 52.1 87.8 97.3 

Nonfarm nonresidential ....................................... 968.4 22.1 243.5 233.8 469.1 182.4 249.7 193.2 88.2 104.8 150.1 

Multifamily residential real estate ........................ 202.7 1.7 27.5 40.9 132.5 47.5 30.4 29.7 8.8 6.9 79.3 

Home equity loans .............................................. 607.4 2.5 33.7 42.0 529.2 58.3 193.0 152.9 75.9 21.6 105.7 

Other 1-4 family residential ................................. 2,245.3 31.4 238.5 220.4 1,755.0 448.2 676.1 355.6 140.9 98.7 525.9 

Commercial and industrial loans ............................ 1,440.3 16.7 123.0 153.6 1,147.0 203.3 345.7 349.3 121.6 102.1 318.4 

Loans to individuals ............................................... 1,059.1 9.0 49.4 79.2 921.6 291.9 179.5 175.8 102.9 40.8 268.3 

Credit card loans ................................................. 422.5 0.1 3.6 29.5 389.2 186.0 23.5 46.1 48.0 7.8 111.2 

Other loans to individuals .................................... 636.7 8.9 45.8 49.7 532.4 105.9 156.0 129.7 54.8 33.0 157.1 

All other loans and leases (including farm) ............ 628.6 11.9 36.2 36.0 544.5 94.4 159.7 164.4 72.5 20.3 117.3 

Total loans and leases ........................................... 

Memo: Other Real Estate Owned (in millions) 

7,908.7 115.0 926.1 984.9 5,882.6 1,395.6 2,059.2 1,559.4 681.0 493.3 1,720.2 

All other real estate owned .................................... 12,138.3 356.1 2,616.9 1,798.3 7,367.0 951.3 3,028.1 2,809.0 1,763.9 1,156.0 2,430.0 

Construction and development ........................... 2,224.0 70.0 1,021.6 712.2 420.2 201.1 782.4 348.2 299.9 391.7 200.8 

Nonfarm nonresidential ....................................... 1,526.5 115.2 667.6 307.2 436.6 148.5 367.0 393.5 250.6 292.1 74.9 

Multifamily residential real estate ........................ 361.9 13.1 100.3 95.2 153.3 30.8 114.4 121.5 29.5 23.7 42.0 

1-4 family residential ........................................... 6,643.1 143.7 792.6 670.5 5,036.4 540.4 1,720.7 1,399.0 637.4 398.7 1,946.9 

Farmland ............................................................. 68.7 13.6 32.4 11.2 11.5 15.0 6.7 8.7 9.1 27.2 1.9 

* See Table IV-A (page 9) for explanations. 

** Noncurrent loan rates represent the percentage of loans in each category that are past due 90 days or more or that are in nonaccrual status. 

FDIC QUARTERLY 11 2008, VOLUME 2, NO.1 
TABLE VI-A. Derivatives, All FDIC-Insured Commercial Banks and State-Chartered Savings Banks 

(dollar figures in millions; 

notional amounts unless otherwise indicated) 

4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter %Change 

2007 2007 2007 2007 2006 06:4-07:4 

Asset Size Distribution 

$100 Million $1 Billion 

Less than to to Greater than 

$100 Million $1 Billion $10 Billion $10 Billion 

ALL DERIVATIVE HOLDERS 

Number of institutions reporting derivatives ................................. 1,042 1,025 1,058 1,056 1,014 2.8 67 632 264 79 

Total assets of institutions reporting derivatives ........................... $9,826,802 $9,460,260 $9,147,067 $8,871,745 $8,834,288 11.2 $4,954 $275,039 $821,793 $8,725,016 

Total deposits of institutions reporting derivatives ........................ 6,324,177 6,031,920 5,900,355 5,750,636 5,751,266 10.0 3,969 216,148 588,151 5,515,908 

Total derivatives .................................................................. 

Derivative Contracts by Underlying Risk Exposure 

164,780,773 173,284,358 153,678,084 144,098,922 132,182,732 24.7 94 17,670 101,276 164,661,733 

Interest rate .......................................................................... 129,587,559 138,789,177 123,340,595 116,751,425 107,434,665 20.6 75 17,256 83,520 129,486,707 

Foreign exchange* ............................................................... 17,174,474 16,696,567 15,117,713 14,167,853 12,564,160 36.7 8 30 5,170 17,169,265 

Equity ................................................................................. 2,533,531 2,783,712 2,491,034 2,173,375 2,270,942 11.6 11 186 12,162 2,521,172 

Commodity & other (excluding credit derivatives) ........................ 1,073,116 1,025,685 951,725 840,505 893,310 20.1 0 0 207 1,072,908 

Credit ................................................................................ 14,412,094 13,989,217 11,777,017 10,165,765 9,019,655 59.8 0 198 216 14,411,679 

Total ................................................................................... 

Derivative Contracts by Transaction Type 

164,780,773 173,284,358 153,678,084 144,098,922 132,182,732 24.7 94 17,670 101,276 164,661,733 

Swaps ................................................................................ 103,100,934 111,410,085 95,320,189 88,006,970 81,339,865 26.8 19 10,639 59,484 103,030,791 

Futures & forwards ................................................................. 18,967,549 17,202,716 16,198,687 15,307,497 14,881,758 27.5 18 1,621 16,017 18,949,894 

Purchased options ................................................................. 13,784,021 14,562,615 14,298,899 14,737,699 12,944,893 6.5 5 3,109 20,357 13,760,550 

Written options .................................................................... 13,956,210 15,033,429 14,773,476 14,601,673 13,332,489 4.7 44 2,088 4,884 13,949,194 

Total ................................................................................... 

Fair Value of Derivative Contracts 

149,808,714 158,208,844 140,591,251 132,653,840 122,499,005 22.3 86 17,457 100,742 149,690,429 

Interest rate contracts ........................................................... 33,902 30,716 20,001 24,423 23,275 45.7 0 45 58 33,799 

Foreign exchange contracts ................................................... 6,569 3,119 5,661 74,088 5,324 23.4 0 0 -7 6,576 

Equity contracts .................................................................... -18,947 -20,872 -24,473 -18,499 -17,845 6.2 0 10 59 -19,016 

Commodity & other (excluding credit derivatives) ........................ 1,422 1,664 1,946 22,530 2,658 -46.5 0 0 0 1,421 

Credit derivatives as guarantor ................................................ -212,447 -104,120 -22,960 9,032 31,583 -772.7 0 0 -16 -212,431 

Credit derivatives as beneficiary ............................................. 

Derivative Contracts by Maturity** 

222,426 110,905 23,824 -9,668 -32,745 -779.3 0 0 7 222,419 

Interest rate contracts ........................................... < 1 year 39,085,024 48,917,897 39,403,807 32,457,730 29,551,704 32.3 11 2,067 23,077 39,059,868

 ............................ 1-5 years 37,222,439 36,310,944 33,846,133 33,802,189 31,385,640 18.6 9 10,311 27,112 37,185,007

 ............................ > 5 years 27,722,186 27,875,202 24,588,177 24,684,533 23,273,618 19.1 12 2,552 27,038 27,692,583 

Foreign exchange contracts ................................... < 1 year 11,592,113 10,094,603 8,948,450 8,372,488 7,690,210 50.7 0 7 3,801 11,588,305

 ............................ 1-5 years 1,604,898 1,831,220 1,667,700 1,571,241 1,415,846 13.4 0 4 17 1,604,878

 ............................ > 5 years 618,960 718,390 676,071 624,415 592,897 4.4 0 5 10 618,945 

Equity contracts ................................................... < 1 year 473,413 464,820 442,652 397,237 341,346 38.7 0 22 148 473,242

 ............................ 1-5 years 297,419 330,227 283,520 236,563 220,856 34.7 5 74 400 296,940

 ............................ > 5 years 70,485 95,900 62,916 74,332 44,858 57.1 0 1 37 70,447 

Commodity & other contracts .................................. < 1 year 288,125 278,442 280,133 271,647 235,107 22.6 0 0 158 287,967

 ............................ 1-5 years 337,075 308,298 261,410 200,458 272,314 23.8 0 0 27 337,048

 ............................ > 5 years 

Risk-Based Capital: Credit Equivalent Amount 

26,387 27,617 27,273 23,931 21,581 22.3 0 0 0 26,387 

Total current exposure to tier 1 capital (%) ................................. 45.6 38.0 30.7 28.3 29.2 0.2 0.4 1.9 52.8 

Total potential future exposure to tier 1 capital (%) ......................... 109.8 115.1 113.4 106.8 97.7 0.1 0.4 0.9 127.5 

Total exposure (credit equivalent amount) to tier 1 capital (%) ......... 155.4 153.1 144.1 135.1 126.9 0.3 0.8 2.7 180.3 

Credit losses on derivatives*** ............................................. 

HELD FOR TRADING 

156.0 125.0 6.0 -3.0 -25.0 -724.0 1.0 0.0 155.0 

Number of institutions reporting derivatives ................................. 166 159 167 156 147 12.9 11 45 57 53 

Total assets of institutions reporting derivatives ........................... 8,307,238 7,977,733 7,640,639 7,388,068 7,223,404 15.0 760 22,358 250,499 8,033,621 

Total deposits of institutions reporting derivatives ........................ 

Derivative Contracts by Underlying Risk Exposure 

5,354,783 5,083,233 4,917,948 4,770,665 4,712,089 13.6 599 17,483 175,641 5,161,060 

Interest rate .......................................................................... 127,126,919 136,068,953 120,820,791 114,003,913 104,692,154 21.4 9 304 30,489 127,096,117 

Foreign exchange ................................................................. 16,483,269 15,489,462 13,683,371 12,769,131 11,788,161 39.8 0 12 4,486 16,478,771 

Equity ................................................................................ 2,515,242 2,767,663 2,474,617 2,168,932 2,266,778 11.0 0 1 347 2,514,894 

Commodity & other ................................................................. 1,072,230 1,024,998 951,236 840,237 893,087 20.1 0 0 148 1,072,082 

Total ................................................................................... 

Trading Revenues: Cash & Derivative Instruments 

147,197,659 155,351,076 137,930,014 129,782,212 119,640,180 23.0 9 317 35,470 147,161,864 

Interest rate .......................................................................... -5,658 1,364 2,939 2,405 1,151 -591.6 0 0 13 -5,671 

Foreign exchange ................................................................. 1,873 2,005 1,265 1,830 1,613 16.1 0 0 9 1,864 

Equity ................................................................................ 211 -92 1,020 1,732 1,214 -82.6 0 0 0 211 

Commodity & other (including credit derivatives) ........................ -6,400 -1,017 907 1,053 -111 5,665.8 0 0 1 -6,401 

Total trading revenues ........................................................... 

Share of Revenue 

-9,974 2,260 6,131 7,020 3,866 -358.0 0 0 23 -9,997 

Trading revenues to gross revenues (%) .................................... -7.2 1.5 4.1 4.9 3.0 0.0 0.0 0.7 -7.4 

Trading revenues to net operating revenues (%) ........................ 

HELD FOR PURPOSES OTHER THAN TRADING 

-233.9 12.6 27.0 33.0 19.6 0.0 -0.4 7.3 -256.0 

Number of institutions reporting derivatives ................................. 959 949 971 969 935 2.6 56 591 237 75 

Total assets of institutions reporting derivatives ........................... 9,651,581 9,300,460 8,967,342 8,637,459 8,604,674 12.2 4,160 254,949 749,334 8,643,139 

Total deposits of institutions reporting derivatives ........................ 

Derivative Contracts by Underlying Risk Exposure 

6,204,217 5,923,372 5,776,699 5,582,898 5,589,964 11.0 3,336 200,320 536,933 5,463,628 

Interest rate .......................................................................... 2,460,640 2,720,224 2,519,804 2,747,512 2,742,511 -10.3 66 16,952 53,031 2,390,591 

Foreign exchange ................................................................. 131,240 120,808 124,526 119,405 111,928 17.3 0 4 366 130,870 

Equity ................................................................................ 18,289 16,048 16,417 4,443 4,164 339.2 11 185 11,815 6,279 

Commodity & other ................................................................. 886 687 489 268 223 297.3 0 0 59 826 

Total notional amount .............................................................. 2,611,055 2,857,768 2,661,237 2,871,628 2,858,826 -8.7 77 17,140 65,272 2,528,566 

All line items are reported on a quarterly basis. 

*Include spot foreign exchange contracts. All other references to foreign exchange contracts in which notional values or fair values are reported exclude spot foreign exchange contracts. 

** Derivative contracts subject to the risk-based capital requirements for derivatives. 

*** The reporting of credit losses on derivatives is applicable to all banks filing the FFIEC 031 report form and to those banks filing the FFIEC 041 report form that have $300 million or more in total assets. 

FDIC QUARTERLY 12 2008, VOLUME 2, NO. 1 
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Quarterly Banking Profile 

TABLE VII-A. Servicing, Securitization, and Asset Sales Activities (All FDIC-Insured Commercial Banks and State-Chartered Savings Banks) 

(dollar figures in millions) 

4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 

2007 2007 2007 2007 

4th Quarter 

2006 

%Change 

06:4-07:4 

Less than 

$100 Million 

Asset Size Distribution 

$100 Million $1 Billion 

to to 

$1 Billion $10 Billion 

Greater than 

$10 Billion 

Assets Sold and Securitized with Servicing Retained or with Recourse or 

Other Seller-Provided Credit Enhancements 

Number of institutions reporting securitization activities ................................................ 

Outstanding Principal Balance by Asset Type 

124 122 126 126 123 0.8 14 49 20 41 

1-4 family residential loans ................................................................................... $1,129,377 $1,111,554 $1,119,076 $1,088,151 $739,041 52.8 $44 $326 $9,074 $1,119,933 

Home equity loans ............................................................................................. 9,353 9,894 10,640 9,339 8,905 5.0 0 0 232 9,120 

Credit card receivables ........................................................................................ 389,502 379,662 372,481 367,796 362,467 7.5 0 2,939 11,713 374,850 

Auto loans ........................................................................................................ 9,019 10,433 12,547 14,132 16,263 -44.5 0 0 291 8,728 

Other consumer loans ......................................................................................... 28,542 29,386 27,396 27,737 28,673 -0.5 0 7 0 28,536 

Commercial and industrial loans ........................................................................... 14,148 15,862 13,193 12,039 10,543 34.2 0 39 5,322 8,787 

All other loans, leases, and other assets* ................................................................ 193,875 184,941 162,434 150,404 144,582 34.1 1 79 681 193,115 

Total securitized and sold ....................................................................................... 

Maximum Credit Exposure by Asset Type 

1,773,817 1,741,732 1,717,767 1,669,598 1,310,475 35.4 45 3,389 27,313 1,743,069 

1-4 family residential loans ................................................................................... 6,891 6,856 6,502 6,047 6,580 4.7 17 4 35 6,836 

Home equity loans ............................................................................................. 2,000 2,336 2,402 2,354 2,332 -14.2 0 0 10 1,990 

Credit card receivables ........................................................................................ 19,196 19,120 18,711 17,685 19,182 0.1 0 167 601 18,428 

Auto loans ........................................................................................................ 380 426 555 628 724 -47.5 0 0 12 368 

Other consumer loans ......................................................................................... 1,379 2,114 1,768 1,861 1,882 -26.7 0 0 0 1,379 

Commercial and industrial loans ............................................................................ 282 399 314 311 348 -19.0 0 0 71 211 

All other loans, leases, and other assets ................................................................. 3,733 4,578 1,053 1,052 964 287.2 1 26 42 3,663 

Total credit exposure ............................................................................................. 33,860 35,829 31,304 29,937 32,013 5.8 18 197 771 32,875 

Total unused liquidity commitments provided to institution's own securitizations ................. 

Securitized Loans, Leases, and Other Assets 30-89 Days Past Due (%) 

4,686 5,095 5,667 6,116 6,503 -27.9 0 0 0 4,686 

1-4 family residential loans ................................................................................... 2.7 2.7 2.6 2.1 3.0 2.7 0.0 10.3 2.6 

Home equity loans .............................................................................................. 0.8 0.7 0.6 0.7 0.7 0.0 0.0 2.4 0.8 

Credit card receivables ........................................................................................ 2.2 2.1 1.9 1.9 2.0 0.0 1.2 1.6 2.2 

Auto loans ......................................................................................................... 2.5 2.0 1.7 1.5 1.7 0.0 0.0 1.1 2.5 

Other consumer loans ......................................................................................... 3.1 2.8 2.8 2.4 3.0 0.0 0.0 0.0 3.1 

Commercial and industrial loans ............................................................................ 1.0 1.0 0.5 0.7 0.7 0.0 0.0 2.3 0.2 

All other loans, leases, and other assets ................................................................. 0.1 0.1 0.1 0.1 0.2 0.0 0.0 0.2 0.1 

Total loans, leases, and other assets ........................................................................ 

Securitized Loans, Leases, and Other Assets 90 Days or More Past Due (%) 

2.3 2.3 2.1 1.9 2.4 2.6 1.1 4.6 2.2 

1-4 family residential loans .................................................................................. 1.5 1.2 1.3 1.1 1.2 0.3 0.0 23.8 1.4 

Home equity loans .............................................................................................. 0.5 0.4 0.3 0.4 0.5 0.0 0.0 1.1 0.5 

Credit card receivables ........................................................................................ 1.9 1.7 1.6 1.8 1.7 0.0 1.1 1.3 1.9 

Auto loans ........................................................................................................ 0.3 0.2 0.2 0.2 0.3 0.0 0.0 0.1 0.4 

Other consumer loans ......................................................................................... 2.4 2.1 2.1 2.0 2.1 0.0 0.0 0.0 2.4 

Commercial and industrial loans ............................................................................ 0.9 0.7 0.6 0.6 0.7 0.0 0.0 2.0 0.3 

All other loans, leases, and other assets ................................................................. 0.1 0.1 0.2 0.1 0.2 0.0 1.9 0.0 0.1 

Total loans, leases, and other assets ........................................................................ 

Securitized Loans, Leases, and Other Assets Charged-Off (net, YTD, annualized, %) 

1.5 1.2 1.2 1.2 1.2 0.3 1.0 8.9 1.4 

1-4 family residential loans ................................................................................... 0.1 0.0 0.0 0.0 0.0 0.0 0.0 3.1 0.0 

Home equity loans ............................................................................................. 0.2 0.1 0.1 0.1 0.3 0.0 0.0 1.6 0.2 

Credit card receivables ........................................................................................ 4.4 3.3 2.2 1.1 3.8 0.0 3.3 3.0 4.5 

Auto loans ........................................................................................................ 1.2 0.8 0.5 0.3 0.7 0.0 0.0 0.5 1.2 

Other consumer loans ........................................................................................ 1.3 1.1 0.7 0.4 1.5 0.0 0.0 0.0 1.3 

Commercial and industrial loans ........................................................................... 2.0 1.3 0.7 0.4 1.3 0.0 0.0 4.2 0.7 

All other loans, leases, and other assets ................................................................. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 

Total loans, leases, and other assets ........................................................................ 

Seller's Interests in Institution's Own Securitizations - Carried as Loans 

1.1 0.8 0.5 0.3 1.1 0.0 2.9 3.1 1.0 

Home equity loans ............................................................................................. 347 494 651 671 869 -60.1 0 0 0 347 

Credit card receivables ........................................................................................ 86,748 77,451 73,405 61,569 75,225 15.3 0 251 4,699 81,798 

Commercial and industrial loans ........................................................................... 

Seller's Interests in Institution's Own Securitizations - Carried as Securities 

7,671 6,018 2,843 2,863 2,596 195.5 0 0 816 6,855 

Home equity loans ............................................................................................. 9 10 10 10 10 -10.0 0 0 0 9 

Credit card receivables ........................................................................................ 436 374 327 281 322 35.4 0 62 374 0 

Commercial and industrial loans ........................................................................... 

Assets Sold with Recourse and Not Securitized 

2 6 9 1 5 -60.0 0 0 0 2 

Number of institutions reporting asset sales ............................................................... 

Outstanding Principal Balance by Asset Type 

757 749 738 731 716 5.7 154 455 103 45 

1-4 family residential loans ................................................................................... 57,554 57,407 55,156 55,719 55,777 3.2 939 6,857 2,719 47,040 

Home equity, credit card receivables, auto, and other consumer loans .......................... 674 775 603 1,906 708 -4.8 1 60 13 600 

Commercial and industrial loans ........................................................................... 4,985 5,302 7,708 8,198 6,668 -25.2 0 172 390 4,423 

All other loans, leases, and other assets ................................................................. 24,082 21,509 8,035 8,103 6,981 245.0 1 89 419 23,573 

Total sold and not securitized ................................................................................. 

Maximum Credit Exposure by Asset Type 

87,296 84,993 71,503 73,926 70,133 24.5 942 7,178 3,540 75,636 

1-4 family residential loans ................................................................................... 14,746 15,866 14,539 13,826 13,213 11.6 98 1,422 1,834 11,392 

Home equity, credit card receivables, auto, and other consumer loans .......................... 605 742 575 1,871 663 -8.7 1 6 4 595 

Commercial and industrial loans ........................................................................... 3,650 3,671 4,453 4,543 4,499 -18.9 0 162 390 3,098 

All other loans, leases, and other assets ................................................................. 6,968 6,447 2,383 2,428 2,530 175.4 1 14 107 6,845 

Total credit exposure ............................................................................................. 

Support for Securitization Facilities Sponsored by Other Institutions 

25,969 26,726 21,951 22,668 20,904 24.2 100 1,604 2,335 21,930 

Number of institutions reporting securitization facilities sponsored by others ..................... 47 49 50 47 47 0.0 24 12 4 7 

Total credit exposure ............................................................................................. 2,841 1,477 1,375 1,348 1,135 150.3 7 113 91 2,630 

Total unused liquidity commitments ........................................................................... 

Other 

10,314 8,242 14,093 5,827 5,857 76.1 0 0 0 10,314 

Assets serviced for others** .................................................................................... 

Asset-backed commercial paper conduits 

3,802,194 3,648,511 3,570,284 3,496,744 3,393,204 12.1 7,715 61,590 121,529 3,611,359 

Credit exposure to conduits sponsored by institutions and others ................................. 22,226 22,592 22,211 21,404 20,714 7.3 2 0 130 22,094 

Unused liquidity commitments to conduits sponsored by institutions and others ............... 374,260 365,850 364,656 327,395 306,435 22.1 0 0 0 374,260 

Net servicing income (for the quarter) ........................................................................ 2,705 3,635 5,330 3,601 2,162 25.1 66 128 138 2,373 

Net securitization income (for the quarter) .................................................................. 5,007 5,812 5,355 4,964 2,407 108.0 0 60 256 4,691 

Total credit exposure to Tier 1 capital (%)*** ............................................................... 6.3 6.5 5.6 5.7 5.8 0.50 1.50 2.50 8.00 

*Line item titled "All other loans and all leases" for quarters prior to March 31, 2006. 

**The amount of financial assets serviced for others, other than closed-end 1-4 family residential mortgages, is reported when these assets are greater than $10 million. 

***Total credit exposure includes the sum of the three line items titled "Total credit exposure" reported above. 

FDIC QUARTERLY 13 2008, VOLUME 2, NO.1 
TABLE VIII-A. Trust Services (All FDIC-Insured Institutions) 

(dollar figures in millions) 

All Insured Institutions Asset Size Distribution 

Dec 31 Dec 31 Dec 31 Dec 31 % Change 

2007 2006 2005 2004 2006-2007 

$100 Million $1 Billion 

Less than to to Greater than 

$100 Million $1 Billion $10 Billion $10 Billion 

Number of institutions reporting ....................................................................... 8,533 8,680 8,833 8,976 -1.7 3,440 4,425 549 119 

Number of institutions with fiduciary powers .................................................... 2,407 2,463 2,515 2,573 -2.3 559 1,431 335 82 

Commercial banks ........................................................................................ 2,213 2,268 2,312 2,369 -2.4 537 1,327 281 68 

Savings institutions ....................................................................................... 194 195 203 204 -0.5 22 104 54 14 

Number of institutions exercising fiduciary powers .......................................... 1,783 1,826 1,866 1,897 -2.4 356 1,072 283 72 

Commercial banks ........................................................................................ 1,631 1,672 1,708 1,740 -2.5 337 995 237 62 

Savings institutions ....................................................................................... 152 154 158 157 -1.3 19 77 46 10 

Number of institutions reporting fiduciary activity ............................................. 1,692 1,739 1,791 1,820 -2.7 333 1,015 275 69 

Commercial banks ........................................................................................ 1,549 1,593 1,642 1,670 -2.8 314 943 232 60 

Savings institutions ....................................................................................... 

Fiduciary and related assets - managed assets 

143 146 149 150 -2.1 19 72 43 9 

Personal trust and agency accounts ................................................................ 801,832 764,549 735,821 740,141 4.9 10,663 71,742 64,841 654,586

 Noninterest-bearing deposits ........................................................................ -55 -4 364 553 N/M 13 115 54 -236 

Interest-bearing deposits ............................................................................... 11,573 9,368 8,012 7,507 23.5 251 2,410 1,613 7,298 

U.S. Treasury and U.S. Government agency obligations ............................. 31,725 32,866 34,664 34,519 -3.5 551 4,589 5,084 21,501 

State, county and municipal obligations ........................................................ 67,161 70,908 73,332 77,554 -5.3 890 5,810 5,394 55,067 

Money market mutual funds .......................................................................... 51,290 38,133 33,640 33,442 34.5 944 4,387 4,480 41,479 

Other short-term obligations .......................................................................... 21,942 9,566 8,601 7,168 129.4 32 420 254 21,236 

Other notes and bonds .................................................................................. 25,429 26,894 27,268 31,964 -5.4 584 2,211 1,979 20,655 

Common and preferred stocks ...................................................................... 523,469 514,944 491,075 496,357 1.7 6,080 41,298 38,422 437,670 

Real estate mortgages .................................................................................. 1,531 1,604 1,476 1,495 -4.6 25 238 195 1,073 

Real estate .................................................................................................... 34,269 31,876 29,721 26,812 7.5 685 4,110 3,718 25,756 

Miscellaneous assets .................................................................................... 

Retirement related trust and agency accounts: 

33,474 27,937 27,520 22,770 19.8 609 6,131 3,649 23,086 

Employee benefit - defined contribution ........................................................ 329,048 307,193 226,768 206,460 7.1 1,255 92,359 11,095 224,338 

Employee benefit - defined benefit ................................................................ 1,060,203 1,153,825 1,067,293 1,067,158 -8.1 1,494 12,672 46,179 999,857 

Other retirement accounts ............................................................................. 414,981 309,451 249,466 211,635 34.1 6,625 8,723 12,588 387,046 

Corporate trust and agency accounts .............................................................. 25,247 31,457 42,634 27,650 -19.7 33 1,001 2,566 21,647 

Investment management agency accounts ...................................................... 1,592,442 1,505,170 1,311,707 1,287,407 5.8 27,091 93,013 65,178 1,407,160 

Other fiduciary accounts .................................................................................. 

Total managed fiduciary accounts: 

236,787 320,331 266,515 203,554 -26.1 3,764 1,938 5,419 225,666 

Assets ........................................................................................................... 4,460,539 4,391,975 3,900,205 3,744,006 1.6 50,926 281,448 207,865 3,920,299 

Number of accounts ...................................................................................... 

Fiduciary and related assets - non-managed assets 

3,337,630 2,998,573 2,915,478 3,994,184 11.3 71,461 217,422 194,463 2,854,284 

Personal trust and agency accounts ................................................................ 

Retirement related trust and agency accounts: 

355,027 309,352 286,571 273,147 14.8 2,614 20,560 15,361 316,492 

Employee benefit - defined contribution ........................................................ 1,824,711 1,779,447 1,525,454 1,325,041 2.5 5,815 490,374 77,232 1,251,291 

Employee benefit - defined benefit ................................................................ 5,333,474 4,542,943 3,567,201 3,415,480 17.4 14,948 17,384 75,156 5,225,987 

Other retirement accounts ............................................................................. 2,097,068 2,121,450 2,107,183 1,538,809 -1.1 2,442 734,417 38,757 1,321,452 

Corporate trust and agency accounts .............................................................. 4,427,690 2,961,810 2,567,357 2,155,927 49.5 5,227 12,567 637,748 3,772,148 

Other fiduciary accounts .................................................................................. 

Total non-managed fiduciary accounts: 

3,367,009 3,170,657 2,580,461 2,447,526 6.2 4,501 6,515 12,261 3,343,732 

Assets ........................................................................................................... 17,404,979 14,885,658 12,634,226 11,155,930 16.9 35,547 1,281,817 856,514 15,231,101 

Number of accounts ...................................................................................... 

Custody and safekeeping accounts: 

16,425,153 16,039,580 15,695,352 22,042,098 2.4 28,764 11,752,525 513,891 4,129,973 

Assets ........................................................................................................... 58,167,932 48,360,083 36,798,168 33,496,968 20.3 267,264 934,499 840,542 56,125,627 

Number of accounts ...................................................................................... 

Fiduciary and related services income 

11,335,508 11,207,692 11,513,512 16,220,035 1.1 562,128 9,031,550 349,862 1,391,968 

Personal trust and agency accounts ................................................................ 

Retirement related trust and agency accounts: 

5,767 5,147 5,244 4,878 12.0 82 374 433 4,877 

Employee benefit - defined contribution ........................................................ 1,183 1,305 1,187 1,173 -9.3 10 288 119 765 

Employee benefit - defined benefit ................................................................ 1,808 1,949 1,789 1,465 -7.2 16 101 87 1,603 

Other retirement accounts ............................................................................. 1,034 871 753 710 18.7 36 69 113 816 

Corporate trust and agency accounts .............................................................. 2,439 2,054 1,877 2,350 18.7 204 30 421 1,784 

Investment management agency accounts ...................................................... 4,159 3,683 3,562 3,178 12.9 100 407 279 3,373 

Other fiduciary accounts .................................................................................. 2,156 1,440 1,350 992 49.7 4 22 24 2,106 

Custody and safekeeping accounts ................................................................. 8,166 8,011 7,167 5,945 1.9 165 467 435 7,099 

Other fiduciary and related services income .................................................... 2,420 1,855 1,577 2,431 30.5 7 116 91 2,207 

Total gross fiduciary and related services income ........................................... 29,292 26,142 24,781 23,130 12.0 633 1,997 2,031 24,631 

Less: Expenses ............................................................................................. 20,502 19,094 17,266 16,639 7.4 236 1,458 1,494 17,313 

Less: Net losses from fiduciary and related services .................................... 360 155 190 202 132.3 1 1 7 351 

Plus: Intracompany income credits for fiduciary and related services .......... 4,543 2,897 1,302 1,135 56.8 1 29 1,479 3,035 

Net fiduciary and related services income ....................................................... 12,809 9,962 8,424 7,417 28.6 384 443 1,981 10,001 

Collective investment funds and common trust funds (market value) 

Domestic equity funds ................................................................................... 448,225 449,079 478,087 482,294 -0.2 6,566 16,668 7,752 417,238 

International/global equity funds ................................................................... 206,551 171,114 129,572 119,084 20.7 1,171 3,390 2,041 199,950 

Stock/bond blend funds ................................................................................. 215,849 217,734 77,526 69,116 -0.9 1,882 745 2,678 210,543 

Taxable bond funds ....................................................................................... 214,145 185,398 248,050 243,403 15.5 943 46,454 2,376 164,372 

Municipal bond funds .................................................................................... 8,328 8,695 60,308 11,127 -4.2 4 607 348 7,369 

Short term investments/money market funds ................................................ 395,025 352,341 365,759 386,342 12.1 2,655 3,197 161 389,013 

Specialty/other funds ..................................................................................... 121,628 96,902 102,112 93,594 25.5 549 33,703 1,126 86,249 

Total collective investment funds ..................................................................... 1,609,751 1,481,262 1,461,414 1,404,959 8.7 13,770 104,764 16,482 1,474,734 

FDIC QUARTERLY 14 2008, VOLUME 2, NO. 1 
Author: 

Author: 

Quarterly Banking Profile 

INSURANCE FUND INDICATORS 

Insured Deposits Grow by 1.2 Percent in the Fourth Quarter 

DIF Reserve Ratio Is Unchanged at 1.22 Percent 

Three Insured Institutions Fail During the Year 

From September 30 to December 31, total assets of the 

nation’s 8,533 FDIC-insured commercial banks and 

savings institutions increased by $331.8 billion (2.6 

percent). Total deposits, which increased by $232.8 

billion, funded about 70 percent of this asset growth. 

During the fourth quarter, total domestic deposits grew 

by 2.5 percent, the highest quarterly percentage 

increase since the fourth quarter of 2004. Brokered 

deposits increased by 12.4 percent, the largest quarterly 

percentage increase since the fourth quarter of 2000 

when brokered deposits increased by 13.0 percent. Five 

institutions accounted for approximately two-thirds of 

this growth. 

Domestic time deposits increased by 2.1 percent, while 

other domestic interest-bearing deposits increased by 

1.7 percent and domestic non-interest bearing deposits 

increased by 5.8 percent. Over the 12 months ending 

December 31, total domestic deposits increased by 4.2 

percent, with domestic interest-bearing deposits rising 

by 5.7 percent but domestic noninterest-bearing 

deposits declining by 2.2 percent. 

Over the past year, the share of assets funded by domestic deposits declined from 56 percent to 53 percent. By 

contrast, foreign deposits as a percent of total assets 

rose during 2007 from 10.1 percent to 11.5 percent, 

and Federal Home Loan Bank (FHLB) advances’ share 

of asset funding increased from 5.2 percent to 6.2 percent. In 2007, foreign office deposits increased by 25.8 

percent ($308.5 billion) and FHLB advances increased 

by 30.3 percent ($187.9 billion). 

Estimated insured deposits (including U.S. branches of 

foreign banks) increased by 1.2 percent during the 

fourth quarter of 2007, compared to nearly flat growth 

(0.2 percent increase) for the previous quarter. For all 

of 2007, insured deposits increased by 3.4 percent, 

down from 6.8 percent in 2006. For institutions reporting as of December 31, 2007 and September 30, 2007, 

insured deposits increased during the fourth quarter at 

5,178 institutions (62 percent), decreased at 3,259 

institutions (38 percent) and remained unchanged at 

46 institutions. 

The Deposit Insurance Fund (DIF) increased by 1.3 

percent ($659 million) during the fourth quarter to 

$52,413 million. Accrued assessment income added 

$239 million to the DIF during the fourth quarter. The 

fund received $138 million from unrealized gains on 

available for sale securities, and took in $321 million 

from interest on securities and other revenue, net of 

operating expenses. The DIF was reduced by $39 million in additional provisions for insurance losses. For 

the year, the fund balance grew by 4.5 percent, up from 

3.2 percent growth in 2006. 

The DIF’s reserve ratio equaled 1.22 percent on 

December 31, 2007, unchanged from the previous quarter. During 2007, the reserve ratio increased by one 

basis point, from 1.21 percent at year-end 2006. 

Only one FDIC-insured institution failed during the 

fourth quarter of 2007, a small commercial bank. At 

the time of failure, this institution had $93 million in 

assets and an estimated failure cost of $3 million. For 

all of 2007, three FDIC-insured institutions failed with 

assets of $2.3 billion and an estimated failure cost of 

$120 million. These are the first failures since 2004, 

during which four institutions failed. 

Author: Kevin Brown, Sr. Financial Analyst 

Division of Insurance and Research, FDIC 

(202) 898-6817 

FDIC QUARTERLY 15 2008, VOLUME 2, NO. 1 
 

 

 

 

TABLE I-B. Insurance Fund Balances and Selected Indicators 

(dollar figures in millions) Deposit Insurance Fund 

4th Quarter 

2007 

3rd Quarter 

2007 

2nd Quarter 

2007 

1st Quarter 

2007 

4th Quarter 

2006 

3rd Quarter 

2006 

2nd Quarter 

2006 

1st Quarter 

2006 

4th Quarter 

2005 

3rd Quarter 

2005 

Beginning Fund Balance*.......................................... 

Changes in Fund Balance: 

$51,754 $51,227 $50,745 $50,165 $49,992 $49,564 $49,193 $48,597 $48,373 $48,023 

Assessments earned................................................... 239 170 140 94 10 10 7 5 13 20 

Interest earned on investment securities........................ 585 640 748 567 476 622 665 478 675 536 

Operating expenses................................................... 262 243 248 239 248 237 242 224 252 227 

Provision for insurance losses....................................... 39 132 -3 -73 49 -50 -6 -45 -19 -65 

All other income, net of expenses**.............................. 

Unrealized gain/(loss) on available-for-sale 

-2 24 1 4 5 1 12 349 4 3 

securities.............................................................. 138 68 -162 81 -21 -18 -77 -57 -235 -47 

Total fund balance change.......................................... 659 527 482 580 173 428 371 596 224 350 

Ending Fund Balance*............................................. 52,413 51,754 51,227 50,745 50,165 49,992 49,564 49,193 48,597 48,373

 Percent change from four quarters earlier..................... 4.48 3.52 3.36 3.15 3.23 3.35 3.21 3.31 2.29 2.94 

Reserve Ratio (%)................................................... 1.22 1.22 1.21 1.20 1.21 1.22 1.23 1.23 1.25 1.26 

Estimated Insured Deposits ....................................... 4,293,201 4,243,894 4,234,835 4,245,148 4,153,764 4,100,013 4,040,353 4,001,906 3,890,941 3,830,950

 Percent change from four quarters earlier..................... 3.36 3.51 4.81 6.08 6.75 7.02 7.52 8.50 7.42 7.63 

Assessment Base 7,052,552 6,879,633 6,821,486 6,801,520 6,594,750 6,439,326 6,386,864 6,272,505 6,177,429 6,038,857

 Percent change from four quarters earlier..................... 6.94 6.84 6.80 8.43 6.76 6.63 8.64 8.15 8.88 9.47 

Number of institutions reporting................................. 8,544 8,571 8,625 8,661 8,692 8,755 8,790 8,803 8,846 8,871 

DIF Reserve Ratio* 

Percent of Insured Deposits 

1.32 1.32 1.31 

1.29 1.28 

1.26 1.25 

1.23 1.23 1.22 1.21 1.20 1.21 1.22 1.22 

6/04 12/04 6/05 12/05 6/06 12/06 6/07 12/07 

TABLE II-B. Problem Institutions and Failed/Assisted Institutions 

(dollar figures in millions) 2007 2006 2005 2004 2003 2002 

Problem Institutions

 Number of institutions........................................................................................................ ... 

Total assets..................................................................................................................... 

Failed/Assisted Institutions

 Number of institutions........................................................................................................ 

Total assets.................................................................................................................... 

76 

$22,189 

3 

$2,345 

50 

$8,265 

0 

$0 

52 

$6,607 

0

$0 

80 

$28,250 

4 

$166 

116 

$29,917 

3 

$1,097 

136

$38,927 

11 

$2,558 

* Prior to 2006, amounts represent sum of separate BIF and SAIF amounts. 

** First Quarter 2006 includes previously escrowed revenue from SAIF-member exit fees. 

Deposit Insurance Fund Balance 

and Insured Deposits* 

($ Millions) 

DIF DIF-Insured 

Balance Deposits 

6/04 46,521 3,531,806 

9/04 46,990 3,559,489 

12/04 47,507 3,622,068 

3/05 47,617 3,688,562 

6/05 48,023 3,757,728 

9/05 48,373 3,830,950 

12/05 48,597 3,890,941 

3/06 49,193 4,001,906 

6/06 49,564 4,040,353 

9/06 49,992 4,100,013 

12/06 50,165 4,153,764 

3/07 50,745 4,245,148 

6/07 51,227 4,234,835 

9/07 51,754 4,243,894 

12/07 52,413 4,293,201 

FDIC QUARTERLY 16 2008, VOLUME 2, NO. 1 
 

 

 

 

 

 

 

 

Quarterly Banking Profile 

TABLE III-B. Estimated FDIC-Insured Deposits by Type of Institution 

(dollar figures in millions) 

December 31, 2007 

Commercial Banks and Savings Institutions 

Number of 

Institutions 

Total 

Assets 

Domestic 

Deposits* 

Est. Insured 

Deposits 

FDIC-Insured Commercial Banks ............................................... 7,282 11,176,096 5,806,795 3,426,148 

FDIC-Supervised ................................................................. 4,772 1,874,698 1,370,557 927,470 

OCC-Supervised ................................................................. 1,632 7,782,387 3,590,744 1,995,866 

Federal Reserve-Supervised .................................................. 878 1,519,012 845,494 502,812 

FDIC-Insured Savings Institutions ............................................... 1,251 1,862,669 1,104,986 860,936

 OTS-Supervised Savings Institutions ........................................ 826 1,556,670 892,592 696,835

 FDIC-Supervised State Savings Banks ..................................... 

Total Commercial Banks and 

425 305,999 212,394 164,101 

Savings Institutions .............................................................. 

Other FDIC-Insured Institutions 

8,533 13,038,765 6,911,780 4,287,084 

U.S. Branches of Foreign Banks ................................................ 11 16,614 8,886 6,116 

Total FDIC-Insured Institutions .................................................. 8,544 13,055,379 6,920,667 4,293,201 

* Excludes $1.50 trillion in foreign office deposits, which are uninsured. 

TABLE IV-B. Distribution of Institutions and Assessment Base Among Risk Categories 

Quarter Ending September 30, 2007 

(dollar figures in billions) Annual Percent of Total 

Rate in Number of Percent of Total Assessment Assessment 

Risk Category Basis Points Institutions Institutions Base Base 

I - Minimum ................................................ 

I - Middle ................................................... 

5 

5.01- 6.00 

2,709 

3,088 

31.6% 

36.0% 

3,872 

2,078 

56.3% 

30.2% 

I - Middle ................................................... 

I - Maximum ................................................ 

6.01- 6.99 

7 

1,422 

859 

16.6% 

10.0% 

456 

296 

6.6% 

4.3% 

II ............................................................... 10 422 4.9% 163 2.4% 

III ............................................................ 28 64 0.7% 14 0.2% 

IV ............................................................ 43 7 0.1% 1 0.0% 

Note: Institutions are categorized based on supervisory ratings, debt ratings and financial data as of September 30, 2007. 

Rates do not reflect the application of assessment credits. See notes to users for further information on risk categories and rates. 

FDIC QUARTERLY 17 2008, VOLUME 2, NO. 1 
Notes To Users 

This publication contains financial data and other information for 

depository institutions insured by the Federal Deposit Insurance 

Corporation (FDIC). These notes are an integral part of this publication and provide information regarding the comparability of source 

data and reporting differences over time. 

Tables I-A through VIII-A. 

The information presented in Tables I-A through V-A of the FDIC 

Quarterly Banking Profile is aggregated for all FDIC-insured 

Institutions, both commercial banks and savings institutions. Tables 

VI-A (Derivatives) and VII-A (Servicing, Securitization, and Asset 

Sales Activities) aggregate information only for insured commercial 

banks and state-chartered savings banks that file quarterly Call 

Reports. Table VIII-A Trust Services aggregates Trust asset and 

income information collected annually from all FDIC-insured institutions. Some tables are arrayed by groups of FDIC-insured institutions 

based on predominant types of asset concentration, while other tables 

aggregate institutions by asset size and geographic region. Quarterly 

and full-year data are provided for selected indicators, including 

aggregate condition and income data, performance ratios, condition 

ratios and structural changes, as well as past due, noncurrent and 

charge-off information for loans outstanding and other assets. 

Tables I-B through IV-B. 

A separate set of tables (Tables I-B through IV-B) provides comparative quarterly data related to the Deposit Insurance Fund (DIF), problem institutions, failed/assisted institutions, estimated FDIC-insured 

deposits, as well as assessment rate information. Depository institutions that are not insured by the FDIC through the DIF are not 

included in the FDIC Quarterly Banking Profile. U.S. branches of 

institutions headquartered in foreign countries and non-deposit trust 

companies are not included unless otherwise indicated. Efforts are 

made to obtain financial reports for all active institutions. However, 

in some cases, final financial reports are not available for institutions 

that have closed or converted their charters. 

DATA SOURCES 

The financial information appearing in this publication is obtained 

primarily from the Federal Financial Institutions Examination 

Council (FFIEC) Call Reports and the OTS Thrift Financial Reports 

submitted by all FDIC-insured depository institutions. This information is stored on and retrieved from the FDIC’s Research Information 

System (RIS) data base. 

COMPUTATION METHODOLOGY 

Certain adjustments are made to the OTS Thrift Financial Reports to 

provide closer conformance with the reporting and accounting 

requirements of the FFIEC Call Reports. Parent institutions are 

required to file consolidated reports, while their subsidiary financial 

institutions are still required to file separate reports. Data from subsidiary institution reports are included in the Quarterly Banking Profile 

tables, which can lead to double-counting. No adjustments are made 

for any double-counting of subsidiary data. 

All asset and liability figures used in calculating performance ratios 

represent average amounts for the period (beginning-of-period 

amount plus end-of-period amount plus any interim periods, divided 

by the total number of periods). For “pooling-of-interest” mergers, the 

assets of the acquired institution(s) are included in average assets 

since the year-to-date income includes the results of all merged institutions. No adjustments are made for “purchase accounting” mergers. 

Growth rates represent the percentage change over a 12-month period in totals for institutions in the base period to totals for institutions 

in the current period. 

All data are collected and presented based on the location of each 

reporting institution's main office. Reported data may include assets 

and liabilities located outside of the reporting institution’s home state. 

In addition, institutions may relocate across state lines or change their 

charters, resulting in an inter-regional or inter-industry migration, 

e.g., institutions can move their home offices between regions, and 

savings institutions can convert to commercial banks or commercial 

banks may convert to savings institutions. 

ACCOUNTING CHANGES 

FASB Statement No. 157 Fair Value Measurements issued in September 2006 

and FASB Statement No. 159 The Fair Value Option for Financial Assets and 

Financial Liabilities issued in February 2007 – both are effective in 2008 

with early adoption permitted in 2007. FAS 157 defines a fair value 

measurement framework, while FAS 159 allows banks to elect a fair 

value option when assets are recognized on the balance sheet and to 

report certain financial assets and liabilities at fair value with subsequent changes in fair value included in earnings. Existing eligible 

items can be fair-valued as early as January 2007 under FAS 159, if 

a bank adopts FAS 157. 

FASB Statement 158 Employers’ Accounting for Defined Benefit Pension and 

Other Postretirement Plans – issued in September 2006 requires a bank 

to recognize in 2007 the funded status of its postretirement plans on 

its balance sheet. An overfunded plan is recognized as an asset and 

an underfunded plan is recognized as a liability. An adjustment is 

made to equity as accumulated other comprehensive income 

(AOCI) upon application of FAS 158 and AOCI is adjusted in subsequent periods as net periodic benefit costs are recognized in earnings. 

FASB Statement No. 156 Accounting for Servicing of Financial Assets – issued 

in March 2006 and effective in 2007, requires all separately recognized servicing assets and liabilities to be initially measured at fair 

value and allows a bank the option to subsequently adjust that 

value by periodic revaluation and recognition of earnings or by periodic amortization to earnings. 

Purchased Impaired Loans and Debt Securities – Statement of Position 03-

3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer. 

The SOP applies to loans and debt securities acquired in fiscal years 

beginning after December 15, 2004. In general, this Statement of 

Position applies to “purchased impaired loans and debt securities,” i.e., 

loans and debt securities that a bank has purchased, including those 

acquired in a purchase business combination, when it is probable, at 

the purchase date, that the bank will be unable to collect all contractually required payments receivable. Banks must follow Statement of 

Position 03-3 for Call Report purposes. The SOP does not apply to 

the loans that a bank has originated, prohibits “carrying over” or creation of valuation allowances in the initial accounting and any subsequent valuation allowances reflect only those losses incurred by the 

investor after acquisition. 

GNMA Buy-back Option – If an issuer of GNMA securities has the 

option to buy back the loans that collateralize the GNMA securities, 

when certain delinquency criteria are met, FASB Statement No. 140 

requires that loans with this buy-back option must be brought back 

on the issuer's books as assets. The rebooking of GNMA loans is 

required regardless of whether the issuer intends to exercise the buyback option. The banking agencies clarified in May 2005 that all 

GNMA loans that are rebooked because of delinquency should be 

reported as past due according to their contractual terms. 

FDIC QUARTERLY 18 2008, VOLUME 2, NO. 1 
Quarterly Banking Profile 

FASB Interpretation No. 45 – In November 2002, the FASB issued 

Interpretation No. 45, Guarantor’s Accounting and Disclosure 

Requirements for Guarantees, Including Indirect Guarantees of 

Indebtedness of Others. This interpretation clarifies that a guarantor is 

required to recognize, at the inception of a guarantee (financial standby letters of credit, performance standby letters of credit), a liability 

for the fair value of the obligation undertaken in issuing the guarantee. Banks apply the initial recognition and measurement provisions 

of Interpretation No. 45 on a prospective basis to guarantees issued or 

modified after December 31, 2002, irrespective of the bank’s fiscal 

year end. A bank’s previous accounting for guarantees issued prior to 

January 1, 2003, is not revised. 

FASB Interpretation No. 46 – The FASB issued Interpretation No. 46, 

Consolidation of Variable Interest Entities, in January 2003 and revised it 

in December 2003. Generally, banks with variable interests in variable interest entities created after December 31, 2003, must consolidate them. The timing of consolidation varies with certain situations 

with application as late as 2005. The assets and liabilities of a consolidated variable interest entity are reported on a line-by-line basis 

according to the asset and liability categories shown on the bank’s balance sheet, as well as related income items. Most small banks are 

unlikely to have any “variable interests” in variable interest entities. 

FASB Statement No. 123 (Revised 2004) and Share-Based Payments 

– requires all entities to recognize compensation expense in an 

amount equal to the fair value of share-based payments, e.g., stock 

options and restricted stock, granted to employees. As of January 2006 

all banks must adopt FAS 123(R). The compensation cost is typically 

recognized over the vesting period with a corresponding credit to 

equity. The recording of the compensation cost also gives rise to a 

deferred tax asset. 

Goodwill and intangible assets – FAS 141 terminates the use of pooling-of-interest accounting for business combinations after 2001 and 

requires purchase accounting. Under FAS 142 amortization of goodwill is eliminated. Only intangible assets other than goodwill are 

amortized each quarter. In addition companies are required to test for 

impairment of both goodwill and other intangibles once each fiscal 

year. The year 2002, the first fiscal year affected by this accounting 

change, has been designated a transitional year and the amount of initial impairments are to be recorded as extraordinary losses on a “net of 

tax” basis (and not as noninterest expense). Subsequent annual 

review of intangibles and goodwill impairment may require additional 

noninterest expense recognition. FASB Statement No. 147 clarifies 

that acquisitions of financial institutions (except transactions between 

two or more mutual enterprises), including branch acquisitions that 

meet the definition of a business combination, should be accounted 

for by the purchase method under FASB Statement No. 141. This 

accounting standard includes transition provisions that apply to 

unidentifiable intangible assets previously accounted for in accordance 

with FASB Statement No. 72. If the transaction (such as a branch 

acquisition) in which an unidentifiable intangible asset arose does not 

meet the definition of a business combination, this intangible asset is 

not be reported as “Goodwill” on the Call Report balance sheet. 

Rather, this unidentifiable intangible asset is reported as “Other intangible assets,” and must continue to be amortized and the amortization 

expense should be reported in the Call Report income statement. 

FASB Statement No. 133 Accounting for Derivative Instruments and Hedging 

Activities – All banks must recognize derivatives as either assets or liabilities on the balance sheet, measured at fair value. A derivative may 

be specifically designated as a “fair value hedge,” a “cash flow hedge,” 

or a hedge of a foreign currency exposure. The accounting for 

changes in the value of a derivative (gains and losses) depends on the 

intended use of the derivative, its resulting designation, and the effectiveness of the hedge. Derivatives held for purposes other than trading are reported as “other assets” (positive fair values) or “other liabilities” (negative fair values). For a fair value hedge, the gain or loss is 

recognized in earnings and “effectively” offsets loss or gain on the 

hedged item attributable to the risk being hedged. Any ineffectiveness of the hedge could result in a net gain or loss on the income 

statement. Accumulated net gains (losses) on cash flow hedges are 

recorded on the balance sheet as “accumulated other comprehensive 

income” and the periodic change in the accumulated net gains (losses) for cash flow hedges is reflected directly in equity as the value of 

the derivative changes. FASB Statement No. 149, Amendment of 

Statement 133 on Derivative Instruments and Hedging Activities 

provides guidance on the circumstances in which a loan commitment 

must be accounted for as derivative. Under Statement No. 149, loan 

commitments that relate to the origination of mortgage loans that will 

be held for sale, commonly referred to as interest rate lock commitments, must be accounted for as derivatives on the balance sheet by 

the issuer of the commitment. 

DEFINITIONS (in alphabetical order) 

All other assets – total cash, balances due from depository institutions, 

premises, fixed assets, direct investments in real estate, investment in 

unconsolidated subsidiaries, customers’ liability on acceptances outstanding, assets held in trading accounts, federal funds sold, securities 

purchased with agreements to resell, fair market value of derivatives, 

and other assets. 

All other liabilities – bank's liability on acceptances, limited-life preferred stock, allowance for estimated off-balance-sheet credit losses, 

fair market value of derivatives, and other liabilities. 

Assessment base –assessable deposits consist of DIF deposits (deposits 

insured by the FDIC Deposit Insurance Fund) in banks’ domestic 

offices with certain adjustments. 

Assets securitized and sold – total outstanding principal balance of 

assets securitized and sold with servicing retained or other sellerprovided credit enhancements. 

Construction and development loans – includes loans for all property 

types under construction, as well as loans for land acquisition and 

development. 

Core capital – common equity capital plus noncumulative perpetual 

preferred stock plus minority interest in consolidated subsidiaries, less 

goodwill and other ineligible intangible assets. The amount of eligible 

intangibles (including servicing rights) included in core capital is limited in accordance with supervisory capital regulations. 

Cost of funding earning assets – total interest expense paid on deposits 

and other borrowed money as a percentage of average earning assets. 

Credit enhancements – techniques whereby a company attempts to 

reduce the credit risk of its obligations. Credit enhancement may be 

provided by a third party (external credit enhancement) or by the 

originator (internal credit enhancement), and more than one type of 

enhancement may be associated with a given issuance. 

Deposit Insurance Fund (DIF) – The Bank (BIF) and Savings 

Association (SAIF) Insurance Funds were merged in 2006 by the 

Federal Deposit Insurance Reform Act to form the DIF. 

Derivatives notional amount – The notional or contractual amounts of 

derivatives represent the level of involvement in the types of derivatives transactions and are not a quantification of market risk or credit 

risk. Notional amounts represent the amounts used to calculate contractual cash flows to be exchanged. 

FDIC QUARTERLY 19 2008, VOLUME 2, NO. 1 
Derivatives credit equivalent amount – the fair value of the derivative 

plus an additional amount for potential future credit exposure based 

on the notional amount, the remaining maturity and type of the 

contract. 

Derivatives transaction types: 

Futures and forward contracts – contracts in which the buyer agrees 

to purchase and the seller agrees to sell, at a specified future date, 

a specific quantity of an underlying variable or index at a specified price or yield. These contracts exist for a variety of variables 

or indices, (traditional agricultural or physical commodities, as 

well as currencies and interest rates). Futures contracts are standardized and are traded on organized exchanges which set limits 

on counterparty credit exposure. Forward contracts do not have 

standardized terms and are traded over the counter. 

Option contracts – contracts in which the buyer acquires the right 

to buy from or sell to another party some specified amount of an 

underlying variable or index at a stated price (strike price) during 

a period or on a specified future date, in return for compensation 

(such as a fee or premium). The seller is obligated to purchase or 

sell the variable or index at the discretion of the buyer of the contract. 

Swaps – obligations between two parties to exchange a series of 

cash flows at periodic intervals (settlement dates), for a specified 

period. The cash flows of a swap are either fixed, or determined 

for each settlement date by multiplying the quantity (notional 

principal) of the underlying variable or index by specified reference rates or prices. Except for currency swaps, the notional principal is used to calculate each payment but is not exchanged. 

Derivatives underlying risk exposure – the potential exposure characterized by the level of banks’ concentration in particular underlying 

instruments, in general. Exposure can result from market risk, credit 

risk and operational risk, as well as, interest rate risk. 

Domestic deposits to total assets – total domestic office deposits as a percent of total assets on a consolidated basis. 

Earning assets – all loans and other investments that earn interest or 

dividend income. 

Efficiency ratio – Noninterest expense less amortization of intangible 

assets as a percent of net interest income plus noninterest income. 

This ratio measures the proportion of net operating revenues that are 

absorbed by overhead expenses, so that a lower value indicates greater 

efficiency. 

Estimated insured deposits – in general, insured deposits are total 

domestic deposits minus estimated uninsured deposits. Prior to June 

30, 2000, the uninsured estimate is calculated as the sum of the excess 

amounts in accounts over $100,000. Beginning June 30, 2000, the 

amount of estimated uninsured deposits is adjusted to consider a 

financial institution's own estimate of uninsured deposits when such 

an estimate is reported. Beginning in 2006, the uninsured deposits 

estimate also considers IRA accounts over $250,000. 

Failed/assisted institutions – an institution fails when regulators take 

control of the institution, placing the assets and liabilities into a 

bridge bank, conservatorship, receivership, or another healthy institution. This action may require the FDIC to provide funds to cover 

losses. An institution is defined as “assisted” when the institution 

remains open and receives some insurance funds in order to continue 

operating. 

FHLB advances – all borrowings by FDIC insured institutions from the 

Federal Home Loan Bank System (FHLB), as reported by Call Report 

filers and by TFR filers. 

Goodwill and other intangibles – intangible assets include servicing 

rights, purchased credit card relationships and other identifiable 

intangible assets. Goodwill is the excess of the purchase price over the 

fair market value of the net assets acquired. 

Loans secured by real estate – includes home equity loans, junior liens 

secured by 1-4 family residential properties and all other loans secured 

by real estate. 

Loans to individuals – includes outstanding credit card balances and 

other secured and unsecured consumer loans. 

Long-term assets (5+ years) – loans and debt securities with remaining 

maturities or repricing intervals of over five years. 

Maximum credit exposure – the maximum contractual credit exposure 

remaining under recourse arrangements and other seller-provided 

credit enhancements provided by the reporting bank to securitizations. 

Mortgage-backed securities – certificates of participation in pools of residential mortgages and collateralized mortgage obligations issued or 

guaranteed by government-sponsored or private enterprises. Also, see 

“Securities”, below. 

Net charge-offs – total loans and leases charged off (removed from balance sheet because of uncollectibility), less amounts recovered on 

loans and leases previously charged off. 

Net interest margin – the difference between interest and dividends 

earned on interest-bearing assets and interest paid to depositors and 

other creditors, expressed as a percentage of average earning assets. 

No adjustments are made for interest income that is tax exempt. 

Net loans to total assets – loans and lease financing receivables, net of 

unearned income, allowance and reserves, as a percent of total assets 

on a consolidated basis. 

Net operating income – income excluding discretionary transactions 

such as gains (or losses) on the sale of investment securities and 

extraordinary items. Income taxes subtracted from operating income 

have been adjusted to exclude the portion applicable to securities 

gains (or losses). 

Noncurrent assets – the sum of loans, leases, debt securities and other 

assets that are 90 days or more past due, or in nonaccrual status. 

Noncurrent loans & leases – the sum of loans and leases 90 days or 

more past due, and loans and leases in nonaccrual status. 

Number of institutions reporting – the number of institutions that actually filed a financial report. 

Other borrowed funds – federal funds purchased, securities sold with 

agreements to repurchase, demand notes issued to the U.S. Treasury, 

FHLB advances, other borrowed money, mortgage indebtedness, obligations under capitalized leases and trading liabilities, less revaluation 

losses on assets held in trading accounts. 

Other real estate owned – primarily foreclosed property. Direct and 

indirect investments in real estate ventures are excluded. The amount 

is reflected net of valuation allowances. For institutions that file a 

Thrift Financial Report (TFR), the valuation allowance subtracted 

also includes allowances for other repossessed assets. Also, for TFR 

filers the components of other real estate owned are reported gross of 

valuation allowances. 

Percent of institutions with earnings gains – the percent of institutions 

that increased their net income (or decreased their losses) compared 

to the same period a year earlier. 

“Problem” institutions – federal regulators assign a composite rating to 

each financial institution, based upon an evaluation of financial and 

operational criteria. The rating is based on a scale of 1 to 5 in ascendFDIC QUARTERLY 20 2008, VOLUME 2, NO. 1 
Quarterly Banking Profile 

ing order of supervisory concern. “Problem” institutions are those 

institutions with financial, operational, or managerial weaknesses that 

threaten their continued financial viability. Depending upon the 

degree of risk and supervisory concern, they are rated either a “4” or 

“5”. For all insured commercial banks and for insured savings banks 

for which the FDIC is the primary federal regulator, FDIC composite 

ratings are used. For all institutions whose primary federal regulator is 

the OTS, the OTS composite rating is used. 

Recourse – an arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it 

has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank’s claim on the asset. If a 

bank has no claim on an asset it has sold, then the retention of any 

credit risk is recourse. 

Reserves for losses – the allowance for loan and lease losses on a consolidated basis. 

Restructured loans and leases – loan and lease financing receivables 

with terms restructured from the original contract. Excludes restructured loans and leases that are not in compliance with the modified 

terms. 

Retained earnings – net income less cash dividends on common and 

preferred stock for the reporting period. 

Return on assets – net income (including gains or losses on securities 

and extraordinary items) as a percentage of average total assets. The 

basic yardstick of bank profitability. 

Return on equity – net income (including gains or losses on securities 

and extraordinary items) as a percentage of average total equity capital. 

Risk-based capital groups – definition: 

Total Tier 1 

Risk-Based Risk-Based Tier 1 Tangible 

(Percent) Capital * Capital * Leverage Equity 

Well-capitalized >10 and >6 and >5 — 

Adequately 

capitalized >8 and >4 and >4 — 

Undercapitalized >6 and >3 and >3 — 

Significantly 

undercapitalized <6 or <3 or <3 and >2 

Critically 

undercapitalized — — — <2 

*As a percentage of risk-weighted assets. 

Risk Categories and Assessment Rate Schedule – The current risk categories and assessment rate schedule became effective January 1, 2007. 

Capital ratios and supervisory ratings distinguish one risk category 

from another. The following table shows the relationship of risk categories (I, II, III, IV) to capital and supervisory groups as well as the 

Supervisory Group 

Capital Group A B C 

1. Well Capitalized 

2. Adequately Capitalized 

3. Undercapitalized 

I 

5-7 bps II 

10 bps 

IV 

43 bps 

III 

28 bps 

III 

28 bps 

assessment rates (in basis points) for each risk category. Supervisory 

Group A generally includes institutions with CAMELS composite ratings of 1 or 2; Supervisory Group B generally includes institutions 

with a CAMELS composite rating of 3; and Supervisory Group C 

generally includes institutions with CAMELS composite ratings of 4 

or 5. For purposes of risk-based assessment capital groups, undercapitalized includes institutions that are significantly or critically undercapitalized. 

Assessment rates are 3 basis points above the base rate schedule. The 

FDIC may adjust rates up or down by 3 basis points from the base rate 

schedule without notice and comment, provided that any single 

adjustment from one quarter to the next cannot move rates more 

than 3 basis points. 

For most institutions in Risk Category I, the assessment rate assigned 

will be based on a combination of financial ratios and CAMELS component ratings. 

For large institutions in Risk Category I (generally those with at least 

$10 billion in assets) that have long-term debt issuer ratings, assessment rates will be determined by weighting CAMELS component ratings 50 percent and long-term debt issuer ratings 50 percent. For all 

large Risk Category I institutions, additional risk factors will be considered to determine whether assessment rates should be adjusted. 

This additional information includes market data, financial performance measures, considerations of the ability of an institution to withstand financial stress, and loss severity indicators. Any adjustment will 

be limited to no more than 1⁄2 basis point. 

Beginning in 2007, each institution is assigned a risk-based rate for a 

quarterly assessment period near the end of the quarter following the 

assessment period. Payment will generally be due on the 30th day of 

the last month of the quarter following the assessment period. 

Supervisory rating changes will be effective for assessment purposes as 

of the examination transmittal date. For institutions with long-term 

debt issuer ratings, changes in ratings will be effective for assessment 

purposes as of the date the change was announced. 

Risk-weighted assets – assets adjusted for risk-based capital definitions 

which include on-balance-sheet as well as off-balance-sheet items 

multiplied by risk-weights that range from zero to 100 percent. A 

conversion factor is used to assign a balance sheet equivalent amount 

for selected off-balance-sheet accounts. 

Securities – excludes securities held in trading accounts. Banks’ securities portfolios consist of securities designated as “held-to-maturity”, 

which are reported at amortized cost (book value), and securities designated as “available-for-sale”, reported at fair (market) value. 

Securities gains (losses) – realized gains (losses) on held-to-maturity and 

available-for-sale securities, before adjustments for income taxes. 

Thrift Financial Report (TFR) filers also include gains (losses) on the 

sales of assets held for sale. 

Seller’s interest in institution’s own securitizations – the reporting bank’s 

ownership interest in loans and other assets that have been securitized, except an interest that is a form of recourse or other seller-provided credit enhancement. Seller’s interests differ from the securities 

issued to investors by the securitization structure. The principal 

amount of a seller’s interest is generally equal to the total principal 

amount of the pool of assets included in the securitization structure 

less the principal amount of those assets attributable to investors, i.e., 

in the form of securities issued to investors. 

Subchapter S Corporation – A Subchapter S corporation is treated as a 

pass-through entity, similar to a partnership, for federal income tax 

purposes. It is generally not subject to any federal income taxes at the 

FDIC QUARTERLY 21 2008, VOLUME 2, NO. 1 
corporate level. This can have the effect of reducing institutions’ 

reported taxes and increasing their after-tax earnings. 

Trust assets – market value, or other reasonably available value of 

fiduciary and related assets, to include marketable securities, and 

other financial and physical assets. Common physical assets held in 

fiduciary accounts include real estate, equipment, collectibles, and 

household goods. Such fiduciary assets are not included in the 

assets of the financial institution. 

Unearned income & contra accounts – unearned income for Call Report 

filers only. 

Unused loan commitments – includes credit card lines, home equity 

lines, commitments to make loans for construction, loans secured by 

commercial real estate, and unused commitments to originate or purchase loans. (Excluded are commitments after June 2003 for originated mortgage loans held for sale, which are accounted for as derivatives 

on the balance sheet.) 

Volatile liabilities – the sum of large-denomination time deposits, foreign-office deposits, federal funds purchased, securities sold under 

agreements to repurchase, and other borrowings. 

Yield on earning assets – total interest, dividend and fee income earned 

on loans and investments as a percentage of average earning assets. 

FDIC QUARTERLY 22 2008, VOLUME 2, NO. 1 
Feature Article: 

Building Assets, Building Relationships: 

Bank Strategies for Encouraging 

Lower-Income Households to Save 

Introduction 

Personal saving enables individual households to withstand unforeseen expenses and income disruptions, such 

as job loss, health emergencies, or major home and 

automobile repairs. Saving also helps households fund 

large expenditures, including buying a home, starting a 

small business, or paying for college. In addition, saving 

helps ensure that households will have sufficient assets 

for retirement. Further, a cushion of savings provides 

households with many intangible benefits. For example, 

studies have shown that people who save feel that they 

have a “stake” in society and have better relationships 

with family and neighbors, increased community 

involvement, and enhanced personal respectability.1 

On a macro level, personal saving is a major component 

of national saving; a country with robust saving generally has more available capital to fund investment and 

support economic growth. 

In very simple terms, individuals can save by putting 

funds in a deposit account at a bank, credit union, or 

brokerage firm. However, another way to save is to build 

financial assets by purchasing a home, insurance policy, 

stocks and bonds, or deferred retirement plans, among 

other things. Access to credit is a critical component of 

asset building, in that large financial assets are often 

accumulated by borrowing, which can magnify returns. 

In addition, households with access to reasonably priced 

credit can borrow money to fund purchases or meet 

emergency needs without tapping savings. Except in 

the case of a windfall, such as an inheritance, it is very 

difficult to build wealth without access to credit. 

Not surprisingly, low- and moderate-income (LMI) 

households have the most difficulty saving. Conventional wisdom suggests that banks do not view LMI 

households as potential profitable customers because 

these households have less income and fewer assets.2 

1 Margaret Lombe and Michael Sherraden, 2007, Effects of Participating in an Asset Building Intervention on Social Inclusion, Working 

Paper Number 07-02, George Warren Brown School of Social Work, 

Washington University in St. Louis. 

2 In this article, the term “bank” refers to banks and savings associations insured by the Federal Deposit Insurance Corporation (FDIC). 

Nevertheless, banks already have an account relationship or other connection with a large number of these 

households, and the majority of LMI customers have 

indicated a desire to expand these relationships. Since 

the bank has realized the fixed costs of acquiring these 

customers, the challenge is to increase the profitability 

of the relationships while also providing LMI households with opportunities to build assets. 

This article explains the obstacles LMI households face 

in asset building, examines the incentives banks have 

for encouraging these households to save, and describes 

some strategies banks have used to build profitable relationships that also benefit LMI consumers. 

Low- and Moderate-Income Households Lag 

in Asset Building 

The U.S. personal saving rate has been declining since 

the early 1980s. As recently as the early 1990s, quarterly 

saving rates were often greater than 7 percent. Since 

2005, however, saving rates have hovered between 

zero and 1 percent, even falling briefly into negative 

territory. The most recent saving rate, 0.0 percent as 

of fourth quarter 2007, is among the lowest since the 

government began collecting the data in 1959 (see 

Chart 1). 

Chart 1 

Source: Bureau of Economic Analysis (Haver Analytics) 

-2 

0 

2 

4 

6 

8 

10 

12 

14 

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 

Personal saving as a percentage of disposable income 

The Personal Saving Rate Has Trended 

Steadily Downward Since the 1980s 

4Q07

0.0% 

FDIC QUARTERLY 23 2008, VOLUME 2, NO. 1 
Chart 2 Chart 3 

*Household net worth is the difference between household assets and household liabilities. 

Source: Federal Reserve Flow of Funds 

Nominal Household Net Worth* 

Total Household Net Worth Has Climbed 

Almost Continuously, Except for a Brief Time 

in the Early 2000s 

60,000 

50,000 

40,000 

30,000 

20,000 

10,000 

0 

$ Billions 

1980 1985 1990 1995 2000 2005 

100 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 

Percentage of households with 

retirement accounts 

Percentage of households with 

primary residence 

It Is Less Common for Lower-Income Households to 

Own Their Homes or Have Retirement Savings 

Percentage of households with asset holdings 

Percentile of Income 

Source: Federal Reserve 2004 Survey of Consumer Finances 

Lowest Second lowest Middle Second highest Highest

 quintile quintile quintile quintile quintile 

However, the saving rate is an imperfect measure of 

household wealth accumulation. Some observers have 

argued that the U.S. saving rate may be understated, 

primarily because several important asset classes are not 

included in the calculation (see Text Box on page 31). In 

addition, a breakdown of the U.S. saving rate by income 

level is not regularly published. This lack of granularity 

in the calculation masks the fact that wealthier households drive the overall U.S. saving rate because they 

earn and spend more and hold higher levels of assets. 

To gain a better understanding of the dynamics of 

personal saving, it is useful to review alternative measures of asset-building progress, namely the trends in and 

distributions of total household wealth and net worth. 

According to the Federal Reserve, overall household net 

worth was $57.7 trillion by fourth quarter 2007, up 3.4 

percent on a year-over-year basis but down about 0.9 

percent from the previous quarter. Net worth has grown 

nearly every quarter since 1953, with the only notable 

downturn occurring after the stock market declines of 

the early 2000s (see Chart 2). The most recent dip in 

household net worth was the first since 2002 and was 

caused by erosion in home equity and stock values. 

Recent increases in overall household net worth 

have been driven in part by growth in the rate of 

homeownership—from 65 percent in 1995 to about 

68 percent in 2007—as well as an increase in home 

values.3 In addition, equity holdings, including the 

increased participation in and value of retirement 

plans, have contributed to higher overall household 

wealth. Higher-income households drive overall house3 Homeownership rates are calculated by the U.S. Census Bureau. 

hold wealth figures because asset holdings are heavily 

concentrated in upper-income bands. For example, 

homeownership rates for the top quintile of households 

exceed 90 percent, and retirement account participation is close to 85 percent. Conversely, about 40 percent of households in the lowest quintile own their 

homes, and only about 10 percent participate in retirement plans (see Chart 3). 

Between 1989 and 2004, the median net worth for 

households increased in all but the second lowest 

income quintile, although higher-income households 

have far greater wealth in absolute terms (see Table 1). 

Moreover, while the median net worth of households 

in the lowest income quintile is about $7,000, almost 

20 percent of these households have negative net 

worth, compared with fewer than 1 percent of households in the highest quintile (see Chart 4). 

Table 1 

Between 1989 and 2004, Median Net Worth 

Grew for Almost All Income Groups, But HighIncome Households Have Far Greater Wealth 

Median Net Worth 

Income Quintile 1989 2004 

Lowest (<$18,900) 

Second lowest ($18,900–$33,899) 

Middle ($33,900–$53,599) 

Second highest ($53,600–$89,299) 

Highest (>$89,299) 

$2,756 

$36,358 

$60,241 

$99,986 

$309,193 

$7,420 

$33,800 

$73,400 

$159,800 

$503,700 

Note: Figures are in 2004 dollars. 

Source: Federal Reserve 2004 Survey of Consumer Finances 

FDIC QUARTERLY 24 2008, VOLUME 2, NO. 1 
Building Assets, Building Relationships 

Chart 4 

One in Five Households in the Lowest Income Quintiles 

Has Liabilities That Exceed Assets, 

Resulting in Negative Net Worth 

Percentage of households reporting negative net worth 

25 

20 

15 

10 

5 

0 

Lowest Second lowest Middle Second highest Highest

 quintile quintile quintile quintile quintile 

Percentile of Income

Source: Federal Reserve 2004 Survey of Consumer Finances 

Barriers to Asset Building for Low- and 

Moderate-Income Households 

There is a seemingly straightforward reason why lowerincome households save less—basic necessities such as 

food, clothing, and shelter consume most, if not all or 

more, of their available income. Indeed, the median 

balance in checking, savings, and money market 

accounts for households in the lowest income quintile 

was only $600.4 Most of these funds would likely be 

used for day-to-day expenses, with little left for building 

emergency funds or long-term planning. In addition, 

other, perhaps less obvious, barriers to saving for lowerincome households remain. 

The Wage Gap 

A growing wage gap has diminished the already limited 

ability of LMI households to save. A recent study on 

income inequality, using data from the U.S. Census 

Bureau’s Current Population Survey, found that the average income of the lowest quintile of households grew by 

only $2,660 (inflation adjusted) during a two-decade 

period from the early 1980s through the early 2000s. In 

contrast, average income of the highest-income households, or the top 20 percent, increased by $45,100 during 

this period.5 By 2005, the wealthiest 1 percent of Americans earned 21.2 percent of all income earned, while the 

bottom 50 percent earned 12.8 percent of all income.6 

4 Federal Reserve Survey of Consumer Finances, 2004. 5 Jared Bernstein, Elizabeth McNichol, and Karen Lyons, January 

2006, Pulling Apart: A State-by-State Analysis of Income Trends, 12, 

Washington, DC: Center on Budget and Policy Priorities and the 

Economic Policy Institution. 

6 “Income-Inequality Gap Widens,” Wall Street Journal, October 12, 

2007. 

Effect of Public Policies on Saving 

Many of the major public policies directed at asset 

building apply mainly to middle- and upper-income 

households through tax subsidies that reward saving. 

Examples of these subsidies include tax-advantaged 

401(k) retirement accounts and Section 529 education 

accounts, as well as deductions for mortgage interest 

and state and local taxes on owner-occupied homes. 

Since the subsidies are proportional to the household’s 

tax bracket, poorer households that pay few or no taxes 

receive little or no benefit. 

For example, a government study estimates that more 

than 55 percent of the dollar value of the mortgage 

interest deduction accrues to households with incomes 

above $100,000, while 46 percent of homeowners who 

pay mortgage interest receive no deduction benefit.7 

Even the Credit for Qualified Retirement Savings 

Contribution, which was designed to encourage saving 

among LMI households, is limited to those with positive tax liabilities.8 

In addition, some public policies can have unintended 

consequences for LMI households. Short-term poverty 

alleviation programs, such as the Temporary Assistance 

for Needy Families and food stamp programs, are sometimes “means-tested,” meaning that households may 

only participate subject to asset-holding limits. Consequently, participants risk having their benefits eliminated or reduced if they build assets. 

Limited Credit Alternatives 

Access to reasonably priced credit is another obstacle 

to wealth building for lower-income households. Often, 

LMI households do not qualify for, or are unaware of, 

mainstream credit products, and they may turn to 

alternative financial services (AFS) providers when 

unforeseen expenses arise. Although AFS providers, 

including payday lenders, pawnshops, and car title 

lenders, provide needed credit, it can be very costly. In 

some cases, use of their products may contribute to a continuous cycle of debt if borrowers rely on them too heavily. For example, payday lenders typically charge annual 

percentage rates (APRs) of about 391 percent or more for 

7 The President’s Advisory Panel on Federal Tax Reform, Simple, Fair, 

and Pro-Growth: Proposals to Fix America’s Tax System, November 

2005. Data are as of 2002. 

8 The Credit for Qualified Retirement Savings Contribution offers a tax 

credit for lower-income taxpayers who make contributions to existing 

retirement plans, such as employer-based 401(k) plans or Individual 

Retirement Accounts. For married, joint filer households, the maximum adjusted gross income to claim this credit is $52,000. 

FDIC QUARTERLY 25 2008, VOLUME 2, NO. 1 
small, very short-term, emergency loans. At these rates, 

the borrower will owe more in fees than the original 

cash advance if the loan is rolled over only a few times.9 

Some banks also provide costly credit products, such 

as credit cards with high rates or fees, for those with 

impaired or limited credit histories. In addition, a 

number of banks provide fee-based overdraft protection—sometimes referred to as “bounce protection”— 

which imposes a fee for each overdrawn item. Per-item 

fees for this protection can be $30 or more.10 Occasional use of fee-based bounce protection can help 

customers avoid overdrawing their accounts and incurring late fees on their bills. However, like payday loans, 

overuse of these programs can result in fees that exceed 

the amount of the overdrafts. 

Why Banks Should Encourage Asset Building among 

Low- and Moderate-Income Consumers 

On the surface, it may seem that banks have little 

financial incentive to build deposit relationships with 

LMI households. Although LMI deposit accounts can 

be used as a funding source, the profitability of these 

accounts is hampered by the costs of acquiring and 

servicing them and the limited ability of LMI 

consumers to build large account balances. 

Because of the competitive nature of banking, banks do 

not publicly release much information regarding the 

profitability of specific products or relationships. 

However, one study reports that upfront fees for developing, marketing, and opening low-cost accounts for 

unbanked federal benefit recipients are in the range of 

$27.60 to $38.60 per account.11 Yet the maximum fee 

banks may charge on these accounts is $3.00 per month. 

Another study provides some insight into transaction 

costs—$1.07 per teller window transaction, $0.27 per 

automated teller machine transaction, and $0.015 per 

9 Payday lenders typically charge $15 to $20 per $100 borrowed for two 

weeks; under a typical payday loan-fee scenario, $500 is borrowed. Fees 

are at least $75 for each two-week borrowing period, which translates 

into a 391 percent APR. At this price, it takes seven rollovers, or 14 

weeks, for a consumer to owe more in fees ($525) than the original loan. 

10 The average overdraft fee climbed 3 percent in 2007 to a record 

high of $28.23. See Greg McBride, “Bounced Check Fees Hit New 

High,” September 26, 2007, www.bankrate.com/brm/news/chk/ 

chkstudy/20070924_bounced_check_fee_a1.asp. 11 Michael Barr, Banking the Poor: Policies to Bring Low-Income 

Americans into the Financial Mainstream, Brookings Institution 

Research Brief, September 2004. These cost estimates assume that 

approximately 10,000 accounts are opened. 

online banking transaction—suggesting that these costs 

could outstrip the benefit to the bank of what would 

likely be low-balance deposit accounts.12 

In light of what would seem to be major financial barriers to pursuing deposit accounts with LMI households, 

it may be surprising to learn that banks are already 

serving, to some degree, large numbers of lower-income 

households. For example, while few banks target the 

very poorest households as customers, in a 2002 survey, 

banks reported that one-third to one-half of their 

customers earned between $10,000 and $49,900.13 

A more recent study of check-cashing customers by 

the Center for Financial Services Innovation (CFSI) 

showed that the majority of these individuals already 

have relationships with banks. Indeed, 60 percent of 

those surveyed have checking accounts, 45 percent have 

savings accounts, and 27 percent have loan balances.14 

Roughly 75 percent indicated that they used both check 

cashers and mainstream financial institutions (banks or 

credit unions) concurrently or at various times, compared 

with about 24 percent who use only check cashers.15 

Perhaps most interesting for banks, the survey also 

indicated that a large percentage of respondents (both 

those who already have bank accounts and those who 

rely exclusively on check cashers) wish to increase the 

number of financial products they have with mainstream financial institutions (see Chart 5). Even among 

consumers who exclusively use check cashers rather 

than banks, almost 60 percent said they were “very 

open” to having a relationship with a bank. This is 

consistent with previous findings that LMI individuals 

in general can and do save, and wish to increase their 

saving and asset-building activities.16 

12 Steven Davidson, "Reaching out with Technology: Connecting the 

Low-Income Population to the Financial Mainstream," Fannie Mae 

Foundation Building Blocks 3, no. 2 (Fall 2002). 13 American Bankers Association, American Bankers Association 

Retail Banking Survey Report, Washington, DC, 2003. 14 Jennifer Tescher, Edna Sawady, and Stephen Kutner, The Power 

of Experience in Understanding the Underbanked Market, Chicago: 

Center For Financial Services Innovation, July 2007. The study 

surveyed the check-cashing and banking habits of 760 people from 

24 urban markets earning between $15,000 and $50,000 a year. The 

average income was $31,000. To participate in the study, respondents 

had to have cashed a check at a traditional check-cashing store or 

other nonbank company in the past six months, and at least one of 

the checks cashed had to be a payroll or government check. 

15 Ibid. 

16 Ellen Seidman, Moez Hababou, and Jennifer Kramer, A Financial 

Services Survey of Low- and Moderate-Income Households, Chicago: 

Center for Financial Services Innovation, July 2005. 

FDIC QUARTERLY 26 2008, VOLUME 2, NO. 1 
Building Assets, Building Relationships 

Chart 5 

Many Underbanked Individuals Would Like to Increase 

the Number of Mainstream Financial Products They Own 

Percentage of respondents who indicate that they currently have

or want to have specified financial products 

100 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 Bank Retirement Bank Certificates Children’s Loans

 savings account checking of deposit college

 account account account 

Want in 2-5 years 

Want in 1 year 

Currently have 

Source: Jennifer Tescher, Edna Sawady, and Stephen Kutner, “The Power of Experience in 

Understanding the Underbanked Market,” Center for Financial Services Innovation, July 2007. 

There is no single explanation for why customers of 

check-cashing services, particularly those who already 

have relationships with banks, so regularly turn to 

alternatives to mainstream financial institutions. 

Some may not qualify for a checking account because 

they cannot meet minimum balances, or perhaps they 

have had difficulty managing an account in the past. 

Check-cashing customers in the CFSI study cited 

the price and convenience of check cashers, negative 

past experiences with banks, respectful treatment, 

and good-quality products and services as reasons for 

patronizing check cashers instead of banks.17 

From a bank perspective, the sheer size of the market 

presents a strong incentive to capture some of the 

transaction volume flowing through check-cashing 

outlets. According to the Financial Services Center of 

America (FiSCA), a national trade group representing 

5,000 financial service centers, check-cashing companies process 180 million checks annually at a face value 

of $55 billion.18 

One recent report indicated that LMI households pay 

more than $8 billion in fees to nonbank check cashers 

and short-term loan providers.19 This finding suggests 

significant possibilities for banks to develop successful 

long-term relationships with LMI consumers. For 

check-cashing customers who already have deposit 

accounts, the bank’s customer acquisition costs are 

17 Tescher et al., The Power of Experience. 18 Data are from 2006/2007, according to FiSCA’s website at 

www.fisca.org (accessed January 7, 2008). 19 Matt Fellowes and Mia Mabanta, Banking on Wealth: America’s New 

Retail Banking Infrastructure and Its Wealth-Building Potential, Brookings Metropolitan Policy Program, Washington, DC, January 2008. 

already “sunk,” so the challenge is to transition these 

customers into profitable relationships and products 

that also enable them to build assets. 

In addition to using deposit accounts as a strategy for 

gaining and strengthening business with LMI households, banks have a strong incentive to serve LMI 

consumers as part of their obligations under the 

Community Reinvestment Act (CRA). Banks that 

provide low-cost saving-related products or services 

that are responsive to the needs of the community, 

including LMI neighborhoods and individuals, may 

receive favorable consideration under the CRA.20 

More generally, banks recognize that helping to 

improve the financial well-being of individuals 

can result in a stronger, more stable local economy, 

thereby creating additional business opportunities for 

the institution over the long term. 

Bank Strategies That Promote Asset Building 

An increasing number of banks are beginning to 

view LMI households as a long-term business opportunity and are recognizing that asset-building 

programs can play an important part in engaging 

these consumers. While strategies vary, most banks 

realize that, like upper-income households, LMI 

families are not monolithic in terms of their needs, 

wants, financial awareness, and capabilities. To be 

successful, banks must determine the needs of their 

local market and tailor their product offerings accordingly.21 While many banks use multiple approaches 

and platforms, the following are some strategies that 

banks have used in developing asset-building 

programs for LMI consumers. 

20 For banks examined subject to large bank procedures, positive 

consideration may be available under the service test (12 CFR 

345.12(i) & 345.24) and potentially also the investment test (12 CFR 

345.12(t) and 345.23). Likewise, intermediate small banks may receive 

positive consideration (12 CFR 345.26 (c)). Small banks seeking an 

outstanding rating may also receive positive consideration for certain 

activities (Appendix A to 12 CFR 345 (d) (3) (ii) (B)). 

21 Several research initiatives are under way that may help banks 

understand, segment, and market products to unbanked and underbanked consumers, many of whom are also LMI households. For 

example, the FDIC is working with the U.S. Census Bureau to explore 

the feasibility of conducting a survey of U.S. households in 2009 to 

estimate the percentage of the population that is unbanked or underbanked. The FDIC is also surveying banks about their interactions 

with these consumers and conducting a case study to highlight 

innovative practices that banks have used to bring underserved 

consumers into the financial mainstream. 

FDIC QUARTERLY 27 2008, VOLUME 2, NO. 1 
Do No Harm. Banks that are successful in attracting 

and expanding relationships with LMI households 

appear to use a fairly straightforward strategy—they 

provide reasonably priced products and services. In 

other words, these banks have found that the best way 

to help customers save is by not overcharging them. 

Of course, most banks strive to ensure that all of their 

products and services are fairly priced. Nevertheless, 

high-cost bank products have been criticized for 

hampering peoples’ ability to build assets. 

One example is fee-based bounce protection (see page 

26), particularly when it is paired with “free” checking 

accounts that have no minimum balance requirement. 

According to one analyst, “They [banks] are able to 

make money on this once-unprofitable segment by 

imposing hefty fees for overdrawing. Customers rarely 

consider these fees when opening an account, and the 

low-balance segment has a much higher frequency of 

non-sufficient fund incidents than others.”22 “Free” 

checking tied to fee-based bounce protection can be a 

profitable approach in the short term. However, as 

another analyst pointed out, the high, and sometimes 

unexpected, fees “provoked customer dissatisfaction,” 

which strains, and often ends, customer relationships.23 

Many banks offer lower-priced alternatives to fee-based 

bounce protection, such as “account linking,” which, for 

a small fee, automatically transfers funds from savings 

accounts or credit cards to checking accounts in the 

case of overdrafts. Another popular alternative is an 

overdraft line of credit tied to a checking account. For 

example, Citibank, N.A. offers the Checking Plus overdraft line of credit to all qualified checking account 

customers for a maximum $5 annual fee and a variable 

APR currently at 19 percent in most states.24 Another 

product specifically targeted to LMI consumers, or those 

who have difficulty balancing accounts, is a low-fee 

debit or stored-value card that helps prevent overdrafts 

by declining purchases that exceed the account balance. 

Direct Deposit. A checking account is often considered 

the basic service for entry into mainstream banking. 

22 Somesh Khanna, David Schoeman, and Jack Stephenson, 

Profitability Under Pressure, BAI Banking Strategies (LXXIX:II) 

March/April 2003. 

23 Rick Spiler, “The New Survival Skills,” ABA Banking Journal, 

American Bankers Association, February 2005. 

24 Derived from Citibank N.A.’s Web site at www.citibank.com 

(accessed January 14, 2008). The APR in New York is 19.5 percent. 

Specific banks mentioned in this article are used only as examples. The 

FDIC and the authors do not endorse any particular bank or product. 

Checking, particularly when paired with direct deposit 

of payroll or other steady income streams, is considered 

“sticky” in that its convenience tends to anchor the 

customer to the bank. The ability to split direct deposits 

among accounts is a simple and effective asset-building 

strategy, particularly for LMI customers who may be able 

to save only a small portion of their paycheck. 

There is considerable potential for banks to increase 

customer relationships simply by promoting and 

expanding direct deposit programs. According to the 

CFSI study, two-thirds of checks cashed at nonbank 

outlets were payroll checks, and another 18 percent 

were state or federal benefits checks. 

Many banks encourage direct deposit when accounts are 

first opened and may offer special pricing as part of their 

marketing efforts. For example, Apple Bank for Savings 

in New York offers Apple Edge, a workplace banking 

program that provides employees of participating 

employers with either advantaged pricing or waivers 

on minimum account balances if they use direct deposit 

for their paychecks. As of September 2007, more than 

450 employers were enrolled in the Apple Edge program, 

which has generated more than 10,000 deposit accounts, 

many from households employed in traditionally lowerincome professions and located in LMI communities.25 

Providing Nonaccount Services. The most common 

nonaccount service that banks provide to LMI households is free or low-fee financial education classes. 

These classes, often conducted on bank premises, allow 

bank staff to connect with potential new customers in 

a number of ways.26 For instance, some institutions 

have offered LMI customers fee-based transactional 

services—such as remittance services, check cashing, 

and bill payment—without requiring the customer to 

have an account at the bank. The fees are generally 

competitive with, or better than, those at checkcashing outlets. The goal is to familiarize customers 

with mainstream banking and, over time, create more 

profitable banking relationships. 

KeyBank in Cleveland, Ohio—with about one-quarter 

of its branch network located in LMI neighborhoods— 

25 Information regarding Apple Edge was obtained from Apple Bank 

for Savings’ publicly disclosed CRA Performance Evaluation from 

November 13, 2007. 

26 For more information regarding the effectiveness of financial education provided by banks, see Susan Burhouse, Angelisa Harris, and 

Luke Reynolds, “Banking on Financial Education,” FDIC Quarterly 1, 

no. 2 (2007): 33–42.” 

FDIC QUARTERLY 28 2008, VOLUME 2, NO. 1 
Building Assets, Building Relationships 

has been experimenting with fee-based check cashing 

and other transactional services under a program called 

KeyBank Plus. The goal of the program is to transition 

at least 30 percent of check-cashing clients to other 

accounts and services. Although KeyBank has 

reported that the program is not yet profitable, bank 

managers recognize that it takes a long-term approach 

to change consumer behaviors and perceptions about 

mainstream banking.27 

Partnering with Other Organizations. Promoting saving 

through partnerships is another popular strategy banks use 

to build relationships with LMI households. A number of 

government agencies, nonprofits, faith-based organizations, schools, and philanthropic groups offer financial 

outreach programs for lower-income families. By partnering with these groups, banks create goodwill within 

their community while also gaining LMI customers. 

For example, America Saves is a national social marketing 

campaign launched in 2001 that encourages people, 

particularly in LMI households, to save. More than 1,000 

organizations are involved in America Saves, including 

more than 500 banks and credit unions that provide noor low-fee savings accounts to LMI households. To date, 

America Saves has enlisted more than 90,000 people.28 

In addition, the FDIC’s Alliance for Economic Inclusion 

(AEI) has established broad-based coalitions of financial 

institutions, community-based organizations, and other 

partners in several markets across the country to bring 

more households into the financial mainstream.29 One of 

the many programs under the AEI is Bank on California, 

a partnership among the California governor’s office, 

financial institutions, mayors, and community groups to 

market starter accounts for underserved consumers. 

Overall, as of year-end 2007, more than 700 banks and 

other organizations have joined the AEI nationwide, and 

almost 29,000 new bank accounts have been opened. 

Individual development accounts (IDAs) are a relatively low-risk way for banks to partner with nonprofits 

27 Ann Carrns, “Banks Court a New Client: The Low-Income Earner,” 

Wall Street Journal, March 16, 2007. 28 Information regarding America Saves was derived from 

www.americasaves.org (accessed February 11, 2008). 29 The AEI markets are the semirural area of Alabama; Greater 

Boston/Worcester, Massachusetts; Chicago; Austin/South Texas; the 

Kansas City metropolitan area; Louisiana and the Mississippi Gulf 

Coast; Baltimore; Wilmington, Delaware; and Los Angeles. For more 

information regarding the FDIC’s Alliance for Economic Inclusion, see 

www.fdic.gov/consumers/community/AEI. 

and other organizations to introduce LMI consumers to 

mainstream banking through a savings account. Introduced in 1996, IDAs provide matched savings for 

lower-income families who are trying to purchase an 

asset, usually a home, small business, or postsecondary 

education. About 240 banks, usually working through 

community groups and nonprofit sponsors, participate 

in the approximately 540 IDA programs operating 

across the United States.30 

Another way banks promote saving through partnerships is with school-based bank branches that establish 

savings accounts for students. These programs, which 

can also expose other family members to the benefits of 

having a bank account, are particularly beneficial to 

immigrant families, who may face language barriers or 

who are unfamiliar with or distrustful of banking institutions in their home countries. For example, Mitchell 

Bank, an $81 million bank in Milwaukee, operates a 

high school bank branch primarily to reach Mexican 

immigrant youth. 

Leveraging Tax Refunds. Tax season is one of the best 

times to reach out to LMI consumers. Annually, the 

Internal Revenue Service (IRS) processes refunds averaging $2,100 each for more than 100 million taxpayers, 

many of whom are LMI consumers who receive the 

Earned Income Tax Credit.31 H&R Block Bank (a 

subsidiary of H&R Block, Inc., the country’s largest 

tax preparer) offered several new wealth accumulation 

accounts during the 2006 tax season, including the 

Emerald Savings Account and the Easy Individual Retirement Account (IRA). Both accounts have no minimum 

balance requirements and feature competitive yields. 

H&R Block Bank in Kansas City also piloted a small 

program offering savings bonds purchased with tax 

refunds; 6 percent (220 of 3,729) of tax preparation 

clients who were offered this opportunity purchased 

the savings bonds.32 

30 For more information regarding IDAs, see Rae-Ann Miller and 

Susan Burhouse, “Individual Development Accounts and Banks: A 

Solid ‘Match,’” FDIC Quarterly 1, no. 1 (2007): 22–31. As described in 

this article, the Saving for Working Families Act, which was reintroduced in March 2007, includes a proposal to provide up to $1.2 billion 

in tax credits to allow banks to offset part of the cost of opening and 

maintaining IDAs. 

31 Anne Stuhldreher (New America Foundation) and Jennifer Tescher 

(Center for Financial Services Innovation), Breaking the Savings Barrier: 

How the Federal Government Can Build an Inclusive Financial System, 

New America Foundation, Asset Building Program, February 2005. 

32 Nick Maynard, “Tax Time Savings: Testing U.S. Savings Bonds at H&R 

Block Tax Sites,” D2D Fund, June 2007, www.d2dfund.org/downloads/ 

block_bond_paper_061907.pdf (accessed March 5, 2008). 

FDIC QUARTERLY 29 2008, VOLUME 2, NO. 1 
A number of banks also participate in the Volunteer 

Income Tax Assistance (VITA) program, which provides 

free tax-preparation services for LMI taxpayers. VITA 

gives banks an opportunity to open new accounts for 

these taxpayers to facilitate direct deposit of tax 

refunds. Opening a bank account may be even more 

attractive when taxpayers file their 2007 tax returns. 

Under new IRS rules, taxpayers can now split their 

refunds among three accounts, allowing at least a 

portion of the refund to be earmarked for savings. 

Linking Credit and Other Products to Saving. Cash 

back, airline miles, and other rewards programs tied to 

credit cards have been available for many years. For 

example, the One card from American Express links 

a 1 percent rebate on all purchases to a high-yield 

savings account at American Express Bank.33 In practice, most of the rewards programs tied to credit cards 

are largely limited to qualifying middle- and upperincome households. 

However, Bank of America’s Keep the Change program 

is one example of a saving-linked product that is morebroadly available to LMI households and others. Keep 

the Change rounds up debit card purchases to the next 

dollar and sweeps the difference into a savings 

account. The bank also partially matches the 

customer’s annual saving through the program. Bank 

statistics as of November 2007 show that 6.5 million 

customers have saved more than $620 million through 

Keep the Change.34 Wachovia Bank is also experimenting with a new saving-linked product, Way2Save, 

whereby a customer links a savings account to a checking account and receives $1 for every debit card 

purchase, automatic debit transaction, or online 

bill payment.35 

A number of banks also provide “credit builder” products, in which all or a portion of an installment loan 

is placed in a certificate of deposit or savings account. 

When the loan is repaid, the consumer receives the 

account balance plus the interest earned. These products enable customers with no credit history, or with a 

challenged credit history, to positively affect their 

credit score over the life of the loan. Most banks that 

33 Information on the One card was obtained from 

www.americanexpress.com (accessed January 24, 2008). 34 Information on Keep the Change was obtained from 

www.bankofamerica.com (accessed January 8, 2008). 35 Jane J. Kim, “Banks Offer Bonuses to Lure Deposits to Saving 

Accounts,” Wall Street Journal, January 16, 2008. 

offer this product strongly encourage customers to 

retain at least some funds in the account. 

While the credit builder product is useful for consumers 

who wish to build or repair credit, it does not address 

LMI consumers who need access to reasonably priced 

credit for an emergency or other necessity. To address 

this need, a growing number of banks have found ways 

to offer reasonably priced small loans to their customers 

in a safe and sound manner that is also profitable for 

the bank. To encourage state nonmember banks to offer 

these types of products, the FDIC Board of Directors 

issued Affordable Small Dollar Loan Guidelines on 

June 19, 2007.36 These guidelines explore several 

aspects of product development, including affordability 

parameters and streamlined underwriting. The guidelines also discuss tools such as financial education and 

linked savings accounts that may address long-term 

financial challenges for borrowers. 

In addition, on June 19, 2007, the FDIC Board 

approved a two-year pilot project to demonstrate the 

value to banks of offering reasonably priced smalldollar lending programs. The pilot, known as the 

Affordable and Responsible Consumer Credit (ARC) 

initiative, involves 31 banks and will operate through 

mid-2010. While the components of small-dollar 

loans vary among participating banks, these loans 

generally feature streamlined underwriting, reasonable 

amortization periods, and APRs below 36 percent. 

Most also have a saving component, whereby banks 

offer borrowers the ability to set aside a portion of 

the amount borrowed, or a portion of each payment, 

in a savings account. The FDIC intends to follow 

the participating banks closely and periodically report 

on the results of the ARC initiative.37 

Conclusion 

Although LMI households earn less and hold fewer 

assets, these consumers conduct a significant volume 

of financial transactions each year. Moreover, many 

banks already have a relationship with LMI households and are well-positioned to expand these relationships through asset-building products and 

strategies. Banks that are most successful take a long36 FDIC’s Affordable Small Dollar Loan Guidelines can be found at 

www.fdic.gov/news/news/press/2007/pr07052a.html. 37 See www.fdic.gov/smalldollarloans/ for information on the ARC 

initiative. 

FDIC QUARTERLY 30 2008, VOLUME 2, NO. 1 
Building Assets, Building Relationships 

Factors That Determine the U.S. Household Saving Rate 

Put simply, the U.S. household saving rate (shown in shifting demographics, trends in retirement planning, 

Chart 1 on page 23) is personal disposable income and widespread access to credit could also explain some 

minus consumption expenditures and nonmortgage of the decline in the traditional saving rate. Near the 

interest and transfer payments. However, some have end of World War II and continuing into the 1960s, the 

argued that the way this ratio is calculated minimizes its United States experienced a baby boom. The babyusefulness as a true measure of saving. boom generation now represents a larger portion of the 

U.S. population than any other generation. The retire- For example, saving data do not uniformly reflect ment of this generation means that an increasing changes in the value of financial assets, such as homes, portion of the population is in retirement and spending stocks and bonds, or private pensions. That is, capital down their previous saving, while a decreasing portion gains on financial assets, whether they are realized or of the population is still working. not, are not included in the household saving data, but 

taxes paid on capital gains realized are included in the Among the working population, defined benefit 

expense portion of the calculation, which reduces the plans—or traditional pensions—have been virtually 

saving rate. Similarly, discretionary extraction of home phased out in favor of defined contribution plans, such 

equity does not count as income, but the portion spent as 401(k) plans. These plans place the responsibility for 

outright counts as consumption expenditures and thus retirement saving on the individual. While many indireduces the saving rate. viduals choose to save in these tax-advantaged plans, 

participants have more discretion to decide how much The omission of financial assets from the calculation has to invest. In contrast, the contribution to defined benea more pronounced effect on the saving rate than in the fit plans was set and mandatory. past because these assets currently comprise a relatively 

larger portion of household balance sheets. For example, According to the Federal Reserve’s 2004 Survey of 

from the mid-1970s through the early 1990s, pension Consumer Finances, 45 percent of individuals cited 

fund reserves, mutual fund shares, and corporate equities retirement as a reason for saving, compared to 23 

together accounted for less than 20 percent of all house- percent in 1989. There has also been a corresponding 

hold assets. In fourth quarter 2007, the combined share drop in emergency spending as a reason for saving (33 

stood at 32.3 percent, which, while below the peak of 45 percent in 1989 compared with 29 percent in 2004). 

percent reached in early 2001, is higher than levels seen Long periods of economic prosperity may have led 

in past decades.a Also, tangible assets, including the some individuals to believe that precautionary saving is 

value of homes, now represent a larger share of total asset less necessary. 

holdings (37.1 percent in fourth quarter 2007) than they 

had during much of the 1990s and early 2000s.b The change in the perceived need for precautionary

saving has been reinforced by increased access to lowAside from concerns surrounding the calculation of the cost credit among middle- and upper-income consumers. 

U.S. saving rate, a change in attitudes about saving, Today, credit cards, home equity lines of credit, and 

other forms of consumer loans are readily available to 

a Federal Reserve Flow of Funds. cover unanticipated expenses without tapping precau- b Ibid. tionary saving. 

term approach and tailor products and services to 

their local market. Some successful strategies include 

“doing no harm” by offering reasonably priced products and services to LMI consumers, expanding direct 

deposit options, partnering with outside organizations 

to obtain motivated customers, leveraging tax refunds 

into saving, and linking saving to credit and other 

bank products. Going forward, there will continue to 

be considerable public debate and numerous policy 

proposals to expand asset-building opportunities for 

all households. 

Authors: Rae-Ann Miller, Special Advisor to the Director, 

Division of Insurance and Research; 

rmiller@fdic.gov. 

Susan Burhouse, Senior Financial Economist, 

Division of Insurance and Research; 

sburhouse@fdic.gov. 

Luke Reynolds, Chief, Community Affairs 

Outreach and Program Development Section, 

Division of Supervision and Consumer 

Protection; lureynolds@fdic.gov. 

FDIC QUARTERLY 31 2008, VOLUME 2, NO. 1 
Feature Article: 

Increasing Deposit Insurance Coverage for 

Municipalities and Other Units of General 

Government: Results of the 2006 FDIC Study 

Foreword 

The Federal Deposit Insurance Reform Conforming 

Amendments Act of 2005 (FDIRCAA) required that the 

Federal Deposit Insurance Corporation (FDIC) study the 

feasibility and consequences of privatizing deposit insurance, establishing a voluntary deposit insurance system for 

deposits in excess of the maximum amount of FDIC insurance, and increasing the limit on deposit insurance coverage 

for municipalities and other units of general government. In 

February 2007, the FDIC sent its report to Congress. The 

results of the FDIC’s findings on privatizing deposit insurance and establishing a voluntary deposit insurance system 

for excess deposits appeared in previous issues of the FDIC 

Quarterly (available at www.fdic.gov/bank/analytical/ 

quarterly/index.html).1 This article summarizes the 

FDIC’s findings on providing additional coverage for 

municipal and other public deposits. 

Introduction 

Industry consolidation, globalization, the expanding 

use of technology, and other changes in the banking 

industry have dramatically altered the financial landscape. Accordingly, in March 2000, the FDIC began a 

comprehensive review of the deposit insurance system 

to ensure that it would continue to meet its responsibilities as deposit insurer in this new banking environment. Additional coverage for municipal deposits was 

one of many issues to emerge during this review, and 

the FDIRCAA required the FDIC to study the issue 

further. This article examines the findings from the 

FDIRCAA study, including the arguments for and 

against additional coverage for municipal deposits. It 

then considers whether options that are currently 

available in the private sector provide a viable alternative to traditional public deposit collateralization programs. 

1 Christine Bradley and Valentine V. Craig, “Privatizing Deposit Insurance: Results of the 2006 FDIC Study,” FDIC Quarterly 1, no. 2 (2007): 

23–32, and Bradley and Craig, “Establishing Voluntary Excess Deposit 

Insurance: Results of the 2006 FDIC Study,” FDIC Quarterly 1, no. 3 

(2007): 30–35. 

Background 

Municipal, or public, deposits are the funds of a state, 

county, municipal, or political subdivision that are 

held as deposits in an FDIC-insured institution.2 

Municipal deposits held in the same state as the public 

entity are insured up to $200,000 ($100,000 in time 

and savings accounts, and $100,000 in demand 

deposits) in any one depository. Out-of-state public 

deposits are insured up to $100,000.3 To limit the risk 

to public entities and, ultimately, local taxpayers, most 

state laws require banks to collateralize public deposits, 

typically with high-quality government securities, to 

the extent that they are not covered by federal deposit 

insurance (see Text Box on page 36.) At the end of 

2006, state and local governments had $2.4 trillion in 

financial assets.4 Of this amount, FDIC-insured commercial banks held $289.7 billion, of which almost 76 

percent ($219.3 billion) was uninsured and secured. 

Throughout the 1990s and into the next decade, 

depository institutions faced new funding challenges as 

asset growth outstripped the growth of core deposits. It 

was against this backdrop that FDIC-insured institutions began to look more closely at municipal deposits 

as a potential source of liquidity.5 Between 2000 and 

2005, several bills were introduced in Congress that 

would have increased coverage of municipal deposits. 

A number of the bills recommended that the FDIC 

insure 80 percent of in-state municipal deposits above 

2 Public deposits also include deposits of Puerto Rico and other U.S. 

possessions and territories, and deposits of Indian tribes. 12 C.F.R. § 

330.15(a)(2)-(5)(2007). 

3 12 C.F.R. §330.15(a)(2) (2007). Insurance coverage for municipal 

deposits, as for general deposits, may be adjusted for inflation beginning January 1, 2011. Federal Deposit Insurance Reform Act of 2005, 

Pub. L. No. 109–171, § 2101–2109, § 2103, 120 Stat. 4, 9–11 (2006) (to be 

codified at 12 U.S.C. § 1821(a)(1)(F)). 

4 Board of Governors of the Federal Reserve System, Flow of Funds 

Accounts of the United States, December 6, 2007, www.federal 

reserve.gov/releases/z1/Current/z1.pdf (accessed January 3, 2008), p. 

66. 

5 Christine M. Bradley and Lynn Shibut, “The Liability Structure of 

FDIC-Insured Institutions: Changes and Implications, FDIC Banking 

Review 18, no. 2 (2006): 1–37. 

FDIC QUARTERLY 32 2008, VOLUME 2, NO. 1 
Increasing Deposit Insurance Coverage for Municipalities 

the basic insurance coverage limit, up to a maximum 

of $2 million. Other legislative measures suggested that 

the maximum coverage for in-state municipal deposits 

be raised to $5 million or that the FDIC provide 100 

percent coverage of all municipal deposits, regardless of 

size. In August 2000, the FDIC evaluated various 

reform options, including additional coverage for 

municipal and other public deposits, but did not take 

an official position.6 In 2003, then FDIC Chairman 

Donald E. Powell commented on one legislative proposal to increase coverage for municipalities: 

Raising the coverage level on public deposits could 

provide banks with more latitude to invest in other 

assets, including loans. Higher coverage levels 

might also help community banks compete for public deposits and reduce administrative costs associated with securing these deposits. On the other 

hand, the collateralization requirement places a 

limit on the ability of riskier institutions to attract 

public funds, while a high deposit insurance limit 

would not. Traditionally, we [the FDIC] have taken 

a dim view of treating one class of deposits—in this 

case, municipals—dramatically differently than the 

others, and we have communicated that concern to 

Capitol Hill.7 

While Chairman Powell expressed reservations about 

raising the limit on municipal deposit insurance, proponents of excess deposit insurance presented a number of reasons for increasing the coverage amount. 

Arguments for Increasing Municipal Deposit 

Coverage 

Early proponents of excess deposit insurance for 

municipalities argued that increased coverage would 

allow municipal deposits to remain in local institutions, where they would be used to meet local needs.8 

In recent years, other arguments have emerged. Propo6 Federal Deposit Insurance Corporation, Options Paper, Washington, 

DC: FDIC, August 2000, www.fdic.gov/deposit/insurance/initiative/ 

OptionPaper.html (accessed January 8, 2008). 7 Federal Deposit Insurance Corporation, Reducing Regulatory Burden—Deposit Insurance Coverage, Washington, DC, FDIC, 2003, 

www.fdic.gov/regulations/resources/reducing/comments/DI.html 

(accessed September 27, 2006). 

8 For example, U.S. Congress, House Report on Federal Deposit Insurance Reform Act to May 16, 2002, 107th Cong., 2nd sess. H. Rep. 467; 

(2002) and U.S. Congress, House Report on Federal Deposit Insurance 

Reform Act to March 27, 2003, 108th Cong., 1st sess. H. Rep. 50 (2003). 

nents contend that increased municipal deposit coverage would make bank operations more efficient and 

less costly, provide a higher degree of safety and additional protection for taxpayers, and permit smaller 

institutions to compete more effectively for these 

deposits. 

Bank Costs. Increasing municipal deposit insurance 

coverage would benefit insured institutions by lowering 

bank costs. State collateralization laws that require 

banks to secure municipal deposits with low-risk, lowyield investments impose opportunity costs by preventing participating institutions from investing in 

higher-yielding assets. It is estimated that collateralization typically costs 15 to 25 basis points in yield on the 

assets used to collateralize the deposits.9 

Safety of Public Deposits. Increasing municipal 

deposit insurance coverage would provide a higher 

degree of safety for public deposits. For collateralization 

to safeguard public deposits, the collateral must be adequate and the security agreement enforceable. In situations involving bank fraud, collateral may be missing 

or otherwise unavailable if an insured institution fails. 

The failure of Oakwood Deposit Bank in February 

2002 illustrates this risk. When the Ohio bank failed, 

some municipal depositors discovered that the collateral securing their deposits was valued at significantly 

less than agreed, while other depositors found that the 

bank had pledged the same collateral multiple times. 

Even if there is no malfeasance, the market value of 

the collateral may have deteriorated at the time of the 

failure. 

Proponents of additional coverage for municipal 

deposits argue that because these deposits primarily 

consist of taxpayer funds, increasing the coverage limits would reduce local government exposure to a bank’s 

credit risk and, ultimately, provide additional protection to taxpayers. 

Competition for Municipal Deposits. Increased insurance coverage for municipal deposits may allow smaller 

institutions to compete more effectively for these 

deposits without having to pay higher interest rates. 

However, recent data suggest that smaller institutions 

are already attracting these deposits. As of December 

31, 2006, FDIC-insured institutions with less than 

9 Steve Cocheo, “You Want $5 Million in Deposits to Be Insured?” 

ABA Banking Journal 95, no.11 (2003): 28–30. 

FDIC QUARTERLY 33 2008, VOLUME 2, NO. 1 
$1 billion in total assets held only 15.2 percent of total 

insured deposits but approximately 24 percent of all 

collateralized public deposits. 

Arguments against Increasing Municipal 

Deposit Coverage 

There are three primary arguments against increasing 

municipal deposit insurance coverage: (1) additional 

coverage is not justified on the basis of the traditional 

goals of deposit insurance; (2) increasing coverage for 

municipal deposits could adversely affect moral hazard 

and market discipline; and (3) excess coverage is likely 

to increase deposit insurance assessments. 

Consistency with Traditional Goals of Deposit Insurance. The traditional goals of deposit insurance are to 

promote financial market stability by maintaining 

depositor confidence in the banking system; to protect 

the country’s local, regional, and national economies 

from the disruptive effects of bank failures; and to protect the deposits of small savers.10 While there are 

credible arguments for increasing the insurance coverage of municipal depositors, the traditional goals for 

the insurance program provide little justification for 

such an increase. In addition, as mentioned earlier, the 

FDIC does not generally advocate favoring one depositor class over another.11 

Effect on Moral Hazard and Market Discipline. 

Greater insurance coverage for public deposits could 

remove an aspect of market discipline that is currently 

in the system.12 State and local governments are gen10 See, for example, Christine M. Bradley, “History of Deposit Insurance,” FDIC Banking Review (13: 2) 2000, pp. 1–25; Gail Otsuka Ayabe, 

“The Brokered Deposit Regulation: A Response to the FDIC’s and 

FHLBB’s Efforts to Limit Deposit Insurance,” UCLA Law Review (33), 

December 1985, pp. 594–641. 

11 Although the FDIC supported increased coverage for retirement 

accounts, it did so for unique reasons. First, increasing the coverage 

level for retirement accounts should help increase the saving rate by 

encouraging depositors to invest more of their retirement savings in 

insured bank deposits. Second, retirement accounts are usually held 

for the long term and depositors are less likely to respond to higheryield offers or other attempts by riskier banks to gather deposits 

quickly. This would not necessarily be the case with insured municipal deposits. 

12 See, for example, Congressional Budget Office, Modifying Federal 

Deposit Insurance, 2005, www.cbo.gov/ftpdocs/63xx/doc6342/ 

05-09-DepositInsurance.pdf (accessed March 5, 2008). 

erally considered more financially sophisticated than 

the average small saver and better able to monitor the 

performance of the depository institutions they use. 

Increasing insurance coverage on public deposits 

removes the incentive for public depositors to monitor 

the risk behavior of their depository institutions, thus 

increasing moral hazard. Also, to the extent that collateral requirements no longer constrain the investment options of depository institutions to investments 

in “safe assets,” such as Treasury securities, depository 

institutions have an incentive to invest in riskier 

assets, increasing their overall risk profile. 

Effect on Deposit Insurance Assessments. FDICinsured deposits would likely increase by at least 

$277.8 billion (the total amount of uninsured, secured 

public deposits held by commercial banks and thrifts as 

of year-end 2007) if all municipal deposits were fully 

insured.13 An increase of this amount at the end of 

December 2007 would have reduced the reserve ratio 

of the Deposit Insurance Fund from 1.22 percent to 

1.15 percent, potentially leading to higher assessment 

rates.14 The financial industry press has reported that 

industry support for additional coverage of municipal 

deposits diminished when it became apparent that 

deposit insurance premiums might increase as a 

result.15 

Structuring Increased Municipal Deposit Insurance 

Congressional authorization would be required for the 

FDIC to provide excess deposit insurance for municipalities and other general units of government. However, the FDIC has considered a number of options for 

structuring this additional coverage, including limiting 

its availability, restricting excess coverage to protect 

taxpayers and the insurance fund, and establishing a 

13 As explained later in this article, excess coverage might be made 

available only on a limited basis, in which case the increase in 

insured deposits might be less. 

14 Under the FDIC Reform Act of 2005, whenever the reserve ratio for 

the Deposit Insurance Fund falls below 1.15 percent (or is projected to 

fall below 1.15 percent within six months), the FDIC must adopt a 

restoration plan that provides that the reserve ratio reach 1.15 percent 

within five years. 12 U.S.C. § 1817(b)(3)(E) (2007). 

15 See, for example, Steve Cocheo, “Community Bankers See Pluses 

and Minuses in FDIC Reform Plan,” ABA Banking Journal 93, no. 6 

(2001): 7–9. 

FDIC QUARTERLY 34 2008, VOLUME 2, NO. 1 
Increasing Deposit Insurance Coverage for Municipalities 

premium pricing structure based on risk.16 Each option 

seeks to limit the FDIC’s loss exposure, constrain moral 

hazard, and restrict the ability of riskier banks to use 

municipal deposits as a source of deposit gathering. 

State legislatures could assist in meeting these goals by 

amending their laws so that excess municipal deposits 

could be placed only in institutions that are eligible to 

receive increased insurance coverage. 

Availability. Excess municipal deposit coverage might 

be made available only on a limited basis. For example, 

term policies could be cancelled if an institution failed 

to maintain the qualifying standards, or only well-capitalized institutions might be eligible to offer increased 

coverage. If a participating institution lost its eligibility 

to offer extra coverage, the insurance coverage of existing municipal deposits could revert to the amount covered under the general deposit insurance rules after 

some period (unless the excess coverage were allowed 

to continue on existing municipal deposits).17 

Although a depository institution could be required to 

be responsible for informing public officials of any loss 

of coverage, this responsibility might be shifted to the 

FDIC to ensure that depositors received prompt and 

adequate notice. 

Caps and Other Limits. A cap could be placed on the 

amount of additional coverage for a municipal depositor. In addition, the municipal depositor might share 

in any loss on the excess deposit. For example, insurance coverage for any municipal depositor could be 

limited to a maximum of $2 million per institution, or 

only 80 percent of the excess deposit might be insured 

up to the designated cap. 

Despite the appeal of a system in which municipal 

depositors share in any losses, such a system has the 

potential to contribute to a bank run in the event of 

financial problems, as recently occurred in the case of 

Northern Rock in the United Kingdom. Under the 

British deposit insurance system, only 90 percent of 

the deposit above a basic level is covered by 

16 Because of the added costs involved, we have assumed in this part 

of the discussion that premiums for excess municipal deposit coverage would be paid only by institutions that offered the additional coverage. However, this need not be the case. Assessments for excess 

deposit insurance could be structured so that all insured institutions 

bore the additional cost. 

17 Pass-through coverage for employee benefit plans and coverage 

for brokered deposits do not terminate when a bank or thrift ceases 

to become eligible to accept them. 12 U.S.C. §§ 1821(d) and 1831f. 

insurance.18 As a result, most depositors stood to lose 

money if Northern Rock failed, which contributed to a 

run on the bank when it experienced financial difficulties.19 Because deposits made by municipalities are typically quite sizable, public withdrawals during a period 

of financial difficulty would likely exacerbate a bank’s 

liquidity problems. The prevention of bank runs has 

been one of the great successes of the U.S. deposit 

insurance system, and any change that might diminish 

the ability of this system to contain bank runs would 

need to be carefully considered. 

Other limits could be imposed on additional insurance 

coverage for municipal deposits. For example, to control aggressive deposit gathering and consistent with 

some state requirements, increased insurance coverage 

could be limited to deposits from a municipality in the 

same state as the insured institution. Limits could also 

be placed on the aggregate value of the public deposits 

held by any one institution. 

Pricing. A decision would need to be made as to 

whether all participating institutions would pay a uniform premium. One option might be to reduce the premiums of participating institutions based on the 

amount of low-risk assets held, but not pledged, as 

security. Another possibility would be to deduct lowrisk assets from the total value of the municipal 

deposits assessed, which might reduce some of the 

administrative costs associated with a strict pledging 

arrangement. 

Private Sector Options 

There are public sector options currently available that 

allow depository institutions to satisfy the safety 

requirements of many municipal authorities without 

requiring collateralization or increased FDIC coverage. 

These options include surety bonds and deposit-placement services. (Reinsurance, which was discussed in a 

previous issue of the FDIC Quarterly, is a private sector 

option that could be used to limit the FDIC’s exposure 

18 Under the British deposit insurance system, approximately the first 

$4,000 is fully insured, and 90 percent of the next $68,000 receives 

insurance coverage. Unlike the U.S. system, deposits held at failed 

British banks are not immediately available. 

19 In the case of Northern Rock, the Bank of England and the British 

Treasury provided depositors with greater assurances than required 

under the law. 

FDIC QUARTERLY 35 2008, VOLUME 2, NO. 1 
Current Practices in Supervising and Administering Collateral 

All states currently require one of three options for the supervision and administration of collateral: uniform 

statewide collateralization; statewide collateral pools; or uncoordinated, autonomous collateral pledging.* 

Uniform Statewide Collateralization. This model prescribes a single system of collateralization for all political subdivisions throughout the state. States that use a uniform statewide system commonly require that public deposits be fully collateralized. Local officials are typically responsible for enforcement and implementation 

of the collateral requirements under this system. Banks bear the full expense of establishing the custodial 

account and forgo the higher income they would normally earn by making loans. 

Although full collateralization of public funds would appear to completely protect municipal deposits, a number of risks remain. For example, the market value of the collateral pledged by the bank may turn out to be 

less than the face value, making the protection inadequate. This can occur when the collateral accepted by 

the government entity is subject to interest rate risk, credit risk, or liquidity risk. One example is municipal 

bonds. These bonds, which are accepted as collateral in several states, are interest-rate sensitive and contain 

liquidity risk because they have a limited secondary market. A shallow secondary market can also delay recovery for the depositor. For example, mortgage-backed securities, which are accepted as collateral in some states, 

have recently lost market value because of their perceived credit risk. Finally, fraud can result in unexpected 

losses to the collateralized depositor. (Fraud is a potential risk in any of the three collateralization options.) 

Statewide Collateral Pools. Some state legislatures have created statewide collateral pools. These pools are 

supervised by a central state agency that administers all collateral set aside by banks as security for the portion 

of the municipal deposits not covered by FDIC deposit insurance. For example, Florida requires that banks 

deposit with the state central agency acceptable securities equal to 50 percent of the deposit not covered by 

FDIC insurance. Statewide collateral pools reduce the costs to individual depository institutions in two ways. 

First, banks save the cost of individually supervising and administering the assets used as collateral. Second, 

because full collateralization is not required, a greater portion of an institution’s assets can be invested in 

higher-yielding assets, such as loans. Local governments and agencies also save with this method, as a central 

agency manages the administration of the collateral. States typically require the collateral pool to exceed the 

total public deposits held by the largest institution in the state. 

Uncoordinated, Autonomous Collateral Pledging. Some states permit public treasurers to obtain collateral 

for public funds at the treasurer’s discretion. This method, called the “home rule” or permissive approach, 

places complete responsibility for collateralization practices with local officials. However, because of the lack 

of uniformity in collateralization agreements, each agreement must be separately negotiated by the depository 

institution and the public official. This lack of standardization results in an increased risk of error or negligence in market-monitoring processes and safekeeping procedures, as well as an increased cost to the depository institution. This increased cost is usually passed on to the municipality through deposits bearing a lower 

yield. 

* Much of the information about the supervision and administration of collateral is derived from Corinne M. Larson, An Introduction to 

Collateralizing Public Deposits, Government Finance Officers Association, 2006. 

FDIC QUARTERLY 36 2008, VOLUME 2, NO. 1 
Authors: 

Increasing Deposit Insurance Coverage for Municipalities 

to excess coverage of municipal deposits.20 Reinsurance is not discussed further in this article.) 

Surety Bonds. Most states allow municipal governments to protect their local deposits by means other 

than collateralization. At least 30 states allow the use 

of a surety bond. Surety bonds, which are issued by 

insurance companies, guarantee the payment of principal and interest on the covered deposits. Most states 

provide guidelines for insurance company eligibility. 

Surety bonds eliminate much of the administrative 

burden for both the municipality and the bank because 

they do not require custodial agreements, security 

agreements, or a continual revaluation of the collateral. In the event of a default, payment on the bond is 

generally made within two days. From the bank’s perspective, these bonds are more economical and efficient because they do not tie up bank security, thus 

saving the bank administrative and opportunity costs 

normally associated with collateralization. 

Despite their advantages, some public officials are wary 

of using surety bonds because the municipality must 

relinquish some control. For example, the municipality 

is not part of the contract negotiation, which is 

between the bank and the insurance company. Nevertheless, if proper precautions are taken, surety bonds 

can be a reasonable and efficient alternative to collateralization. 

Deposit-Placement Services. As discussed in a previous issue of the FDIC Quarterly, the FDIC issued an 

advisory opinion in 2003 confirming that pass-through 

deposit insurance rules apply to funds placed with a 

deposit-placement service. As a result, FDIC-insured 

institutions that use deposit-placement services can, in 

effect, insure deposits in excess of the statutory limit.21 

20 Bradley and Craig, “Establishing Voluntary Excess Deposit Insurance.” 

21 Ibid. A bank belonging to a deposit-placement service can divide 

large deposits into $100,000 increments, which it transfers to other 

participating institutions, resulting in full coverage of the deposit. 

Currently, a depositor can obtain insurance coverage 

for a $50 million deposit by using a deposit-placement 

service. These services can reduce the administrative 

costs of collateralization. They also reduce the opportunity costs incurred when the bank sets aside collateral necessary to secure municipal deposits. 

Because most state laws clearly describe how public 

deposits must be secured, use of a deposit-placement 

service may require state legislative action. However, 

some states (for example, Missouri, Ohio, and Oregon) 

have amended existing laws to permit their use. Other 

states are allowing local governments to use depositplacement services with certain restrictions, such as 

requiring municipal deposits to be kept within the 

state or placing a limit on the amount of the deposit. 

Summary 

Increased federal coverage for public deposits could 

benefit local communities, lower bank costs, and 

increase safety for taxpayers. However, additional 

municipal deposit insurance would represent a departure from the traditional goals of deposit insurance and 

would likely increase both moral hazard and deposit 

insurance assessments. Credible private sector options, 

in the form of surety bonds and deposit-placement 

services, currently offer protection for municipal 

deposits. If federal deposit insurance coverage were to 

be increased on municipal deposits, concerns about 

increased exposure to the Deposit Insurance Fund, 

moral hazard, and appropriate pricing of such coverage 

would need to be addressed. 

Authors: Christine M. Bradley 

Sr. Policy Analyst, cbradley@fdic.gov 

Valentine V. Craig, CFA, 

Sr. Program Analyst, mcraig@fdic.gov 

FDIC QUARTERLY 37 2008, VOLUME 2, NO. 1 
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FDIC QUARTERLY 38 2008, VOLUME 2, NO. 1