V. 

FINANCIAL 

SECTION 
94 FINANCIAL SECTION

ANNUAL 

REPORT

 

Federal Deposit Insurance Corporation 

Deposit Insurance Fund Balance Sheet 

As of December 31 

(Dollars in Thousands) 2020 2019 

ASSETS

 Cash and cash equivalents $ 3,310,527 $ 5,990,765

 Investment in U.S. Treasury securities (Note 3) 110,464,342 100,071,880

 Assessments receivable (Note 10) 1,948,516 1,241,968

 Interest receivable on investments and other assets, net 1,159,130 1,020,947

 Receivables from resolutions, net (Note 4) 1,366,736 2,669,270

 Property and equipment, net (Note 5) 321,080 329,828

 Operating lease right-of-use assets (Note 6) 112,453 

Total Assets $ 118,682,784 $ 111,324,658 

LIABILITIES

 Accounts payable and other liabilities $ 250,617 $ 214,451

 Operating lease liabilities (Note 6) 119,459 0

 Liabilities due to resolutions (Note 7) 814 346,271 

Postretirement benefit liability (Note 13) 335,977 289,462 

0 

 Contingent liabilities:

 Anticipated failure of insured institutions (Note 8) 78,952 93,505

 Guarantee payments and litigation losses (Notes 8 and 9) 200 34,031 

Total Liabilities 786,019 977,720

 Off-balance-sheet exposure (Note 14) 

FUND BALANCE

 Accumulated Net Income 116,924,738 109,820,102 

ACCUMULATED OTHER COMPREHENSIVE INCOME 

Unrealized gain on U.S. Treasury securities, net (Note 3) 1,069,949 587,268 

Unrealized postretirement benefit (loss) (Note 13) (97,922) (60,432) 

Total Accumulated Other Comprehensive Income 972,027 526,836 

Total Fund Balance 117,896,765 110,346,938 

Total Liabilities and Fund Balance $ 118,682,784 $ 111,324,658 

The accompanying notes are an integral part of these financial statements. 
FINANCIAL SECTION 95 

2020

(Dollars in Thousands) 2020 2019 

REVENUE 

 Assessments (Note 10) $ 7,093,175 $ 4,939,063

 Interest on U.S. Treasury securities 1,683,063 2,116,504

 Other revenue 20,240 39,745 

Total Revenue 8,796,478 7,095,312 

EXPENSES AND LOSSES

 Operating expenses (Note 11) 1,846,491 1,795,605

 Provision for insurance losses (Note 12) (157,309) (1,285,531)

 Insurance and other expenses 2,660 3,149 

Total Expenses and Losses 1,691,842 513,223 

Net Income 7,104,636 6,582,089 

OTHER COMPREHENSIVE INCOME

 Unrealized gain on U.S. Treasury securities, net 482,681 1,202,817 

 Unrealized postretirement benefit (loss) (Note 13) (37,490) (46,892) 

Total Other Comprehensive Income 445,191 1,155,925 

Comprehensive Income 7,549,827 7,738,014 

Fund Balance - Beginning 110,346,938 102,608,924 

Fund Balance - Ending $ 117,896,765 $ 110,346,938

Federal Deposit Insurance Corporation 

Deposit Insurance Fund Statement of Income and Fund Balance 

For the Years Ended December 31 

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

ANNUAL 

REPORT

Federal Deposit Insurance Corporation 

Deposit Insurance Fund Statement of Cash Flows 

For the Years Ended December 31 

(Dollars in Thousands) 2020 2019 

OPERATING ACTIVITIES 

$ 5,079,563 

1,988,763

1,665,574

27,895 

(1,746,598)

(247,490)

(2,262) 

Provided by:

Assessments $ 6,375,350 

 Interest on U.S. Treasury securities 3,742,956 

 Recoveries from financial institution resolutions 1,439,452 

 Miscellaneous receipts 17,972 

Used by: 

 Operating expenses (1,745,171) 

 Disbursements for financial institution resolutions (320,501) 

 Miscellaneous disbursements (9,485) 

Net Cash Provided by Operating Activities 9,500,573 6,765,445 

INVESTING ACTIVITIES 

34,250,000 

(40,749,953)

(48,722) 

Provided by:

 Maturity of U.S. Treasury securities 54,575,000 

Used by:

 Purchase of U.S. Treasury securities (66,714,039) 

 Purchase of property and equipment (41,772) 

Net Cash (Used) in Investing Activities (12,180,811) (6,548,675) 

Net (Decrease) Increase in Cash and Cash Equivalents (2,680,238) 216,770 

5,773,995 

$ 5,990,765

Cash and Cash Equivalents - Beginning 

Cash and Cash Equivalents - Ending 

5,990,765 

$ 3,310,527 

The accompanying notes are an integral part of these financial statements. 
2020

FINANCIAL SECTION 97 

DEPOSIT INSURANCE FUND 

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2020 and 2019

1. Operations of the Deposit Insurance Fund

OVERVIEW 

The Federal Deposit Insurance Corporation (FDIC) is the 

independent deposit insurance agency created by Congress 

in 1933 to maintain stability and public confidence in the 

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

operations are generally found in the Federal Deposit 

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

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

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

and savings associations (insured depository institutions). In 

cooperation with other federal and state agencies, the FDIC 

promotes the safety and soundness of insured depository 

institutions (IDIs) by identifying, monitoring, and addressing 

risks to the DIF. Federally chartered IDIs are supervised by the 

Office of the Comptroller of the Currency; state chartered IDIs 

that are members of the Federal Reserve are supervised by 

the Federal Reserve and their state supervisors; and state 

chartered IDIs that are not members of the Federal Reserve 

are supervised by the FDIC and their state supervisors. 

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

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

is a resolution fund responsible for the sale of the remaining 

assets and the satisfaction of the liabilities associated with 

the former Federal Savings and Loan Insurance Corporation 

(FSLIC) and the former Resolution Trust Corporation. The 

FDIC maintains the DIF and the FRF separately to support 

their respective functions. 

Pursuant to the Dodd-Frank Wall Street Reform and 

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

also manages the Orderly Liquidation Fund (OLF). 

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

the OLF is inactive and unfunded until the FDIC is appointed 

as receiver for a covered financial company. A covered 

financial company is a failing financial company (for example, 

a bank holding company or nonbank financial company) for 

which a systemic risk determination has been made as set 

forth in section 203 of the Dodd-Frank Act. 

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

authority to establish a widely available program to 

guarantee obligations of solvent IDIs or solvent depository 

institution holding companies (including affiliates) upon the 

systemic risk determination of a liquidity event during times 

of severe economic distress. The program would not be 

funded by the DIF but rather by fees and assessments paid by 

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

losses or expenses, the FDIC must impose a special 

assessment on participants as necessary to cover the 

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

program would be deposited in the General Fund of the 

Treasury. 

The Dodd-Frank Act also created the Financial Stability 

Oversight Council of which the Chairman of the FDIC is a 

member and expanded the FDIC’s responsibilities to include 

supervisory review of resolution plans (known as living wills) 

and backup examination authority for systemically important 

bank holding companies and nonbank financial companies 

supervised by the Federal Reserve Board. The living wills 

provide for an entity’s rapid and orderly resolution in the 

event of material financial distress or failure. 

OPERATIONS OF THE DIF 

The FDIC, as administrator of the DIF, insures the deposits of 

IDIs and resolves failed IDIs upon appointment of the FDIC as 

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

to the DIF. 

The DIF is primarily funded from deposit insurance 

assessments and interest earned on investments in U.S. 

Treasury securities. Other available funding sources, if 

necessary, are borrowings from the Treasury, the Federal 

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

The FDIC has borrowing authority of $100 billion from the 

Treasury and a Note Purchase Agreement with the FFB, not to 

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

deposit insurance. 

A statutory formula, known as the Maximum Obligation 

Limitation (MOL), limits the amount of obligations the DIF can 

incur to the sum of its cash, 90 percent of the fair market value 

of other assets, and the amount authorized to be borrowed 

from the Treasury. The MOL for the DIF was $217.2 billion and 

$209.5 billion as of December 31, 2020 and 2019, respectively. 

OPERATIONS OF RESOLUTION ENTITIES 

The FDIC, as receiver, is responsible for managing and 

disposing of the assets of failed institutions in an orderly and 

efficient manner. The assets held by receiverships, 

conservatorships, and bridge institutions (collectively, 
DEPOSIT INSURANCE FUND 

ANNUAL 

REPORT

98 FINANCIAL SECTION

resolution entities), and the claims against them, are 

accounted for separately from the DIF assets and liabilities to 

ensure that proceeds from these entities are distributed 

according to applicable laws and regulations. Therefore, 

income and expenses attributable to resolution entities are 

accounted for as transactions of those entities. The FDIC, as 

administrator of the DIF, bills resolution entities for services 

provided on their behalf. 

2. Summary of Significant Accounting Policies

GENERAL 

The financial statements include the financial position, 

results of operations, and cash flows of the DIF and are 

presented in accordance with U.S. generally accepted 

accounting principles (GAAP). These statements do not 

include reporting for assets and liabilities of resolution 

entities because these entities are legally separate and 

distinct, and the DIF does not have any ownership or 

beneficial interests in them. Periodic and final accounting 

reports of resolution entities are furnished to courts, 

supervisory authorities, and others upon request. 

USE OF ESTIMATES 

The preparation of the financial statements in conformity 

with GAAP requires management to make estimates and 

assumptions that affect the reported amounts of assets and 

liabilities, revenue and expenses, and disclosure of 

contingent liabilities. Actual results could differ from these 

estimates. Where it is reasonably possible that changes in 

estimates will cause a material change in the financial 

statements in the near term, the nature and extent of such 

potential changes in estimates have been disclosed. The 

more significant estimates include the assessments 

receivable and associated revenue; the allowance for loss on

receivables from resolutions; the guarantee obligations for 

structured transactions; the postretirement benefit 

obligation; and the estimated losses for anticipated failures.

CASH EQUIVALENTS 

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight Certificates. 

INVESTMENT IN U.S. TREASURY SECURITIES 

The FDI Act requires that the DIF funds be invested in 

obligations of the United States or in obligations guaranteed 

as to principal and interest by the United States. The

Secretary of the Treasury must approve all such investments 

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

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

purchased or sold exclusively through the Treasury’s Bureau 

of the Fiscal Service’s Government Account Series program.

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

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

shown at fair value. Unrealized gains and losses are reported 

as other comprehensive income. Any realized gains and 

losses are included in the Statement of Income and Fund 

Balance as components of net income. Income on securities 

is calculated and recorded daily using the effective interest or 

straight-line method depending on the maturity of the 

security (see Note 3). 

REVENUE RECOGNITION FOR ASSESSMENTS 

Assessment revenue is recognized for the quarterly period of 

insurance coverage based on an estimate. The estimate is 

derived from an institution’s regular risk-based assessment 

rate and assessment base for the prior quarter adjusted for 

certain changes in supervisory examination ratings for larger 

institutions, modest assessment base growth and average 

assessment rate adjustment factors, and assessment credits 

expected to be applied. At the subsequent quarter-end, the 

estimated revenue amounts are adjusted when actual 

assessments for the covered period are determined for each 

institution (see Note 10).

CAPITAL ASSETS AND DEPRECIATION 

The FDIC buildings are depreciated on a straight-line basis 

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

are capitalized and depreciated over the estimated useful life 

of the improvements. Leasehold improvements are 

capitalized and depreciated over the lesser of the remaining 

life of the lease or the estimated useful life of the 

improvements, if determined to be material. Capital assets 

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

useful life include mainframe equipment; furniture, fixtures, 

and general equipment; and internal-use software. 

Computer equipment is depreciated on a straight-line basis 

over a three-year estimated useful life (see Note 5). 

LEASES 

The Balance Sheet presents operating leases in the 

“Operating lease right-of-use assets” and “Operating lease 

liabilities” line items. Operating lease liabilities and right-ofuse (ROU) assets are recognized based on the present value of 

the future minimum lease payments over the lease term at 

the commencement date. The FDIC has elected to use its riskfree rate at the commencement date in determining the 

present value of future payments. 
2020

FINANCIAL SECTION 99 

NOTES TO THE FINANCIAL STATEMENTS

The operating lease ROU asset also includes lease 

prepayments and excludes lease incentives received. The 

lease term includes options to extend or terminate the lease 

when it is reasonably certain that the FDIC will exercise that 

option. For the DIF, the FDIC recognizes lease expense on a 

straight-line basis over the lease term. For lease 

arrangements that contain both lease and nonlease 

components, the FDIC has elected to account for them as a 

single lease component for all classes of underlying assets. 

PROVISION FOR INSURANCE LOSSES 

The provision for insurance losses primarily represents 

changes in the allowance for losses on receivables from 

resolutions and the contingent liability for anticipated failure 

of insured institutions (see Note 12).

REPORTING ON VARIABLE INTEREST ENTITIES 

The receiverships engaged in structured transactions, some 

of which resulted in the issuance of note obligations that the 

FDIC guaranteed, in its corporate capacity. As the guarantor 

of note obligations for several structured transactions, the 

FDIC, in its corporate capacity, holds an interest in many 

variable interest entities (VIEs). The FDIC conducts a 

qualitative assessment of its relationship with each VIE as 

required by the Financial Accounting Standards Board (FASB) 

Accounting Standards Codification (ASC) Topic 810, 

Consolidation. These assessments are conducted to 

determine if the FDIC, in its corporate capacity, has (1) the 

power to direct the activities that most significantly affect the 

economic performance of the VIE and (2) an obligation to 

absorb losses of the VIE or the right to receive benefits from 

the VIE that could potentially be significant to the VIE. When 

a variable interest holder has met both of these 

characteristics, the enterprise is considered the primary 

beneficiary and must consolidate the VIE. 

In accordance with the provisions of FASB ASC Topic 810, an 

assessment of the terms of the legal agreement for each VIE 

was conducted to determine whether any of the terms had 

been activated or modified in a manner that would cause the 

FDIC, in its corporate capacity, to be characterized as a 

primary beneficiary. In making that determination, 

management considered which, if any, activities were 

significant to each VIE. Often, the right to service collateral, 

to liquidate collateral, or to unilaterally dissolve the VIE was 

determined to be the most significant activity. In other cases, 

it was determined that the structured transactions did not 

include such significant activities and that the design of the 

entity was the best indicator of which party was the primary 

beneficiary. 

The conclusion of these analyses was that the FDIC, in its 

corporate capacity, has not engaged in any activity that 

would cause the FDIC to be characterized as a primary 

beneficiary to any VIE with which it was involved as of 

December 31, 2020 and 2019. Therefore, consolidation is not 

required for the December 31, 2020 and 2019, DIF financial 

statements. In the future, the FDIC, in its corporate capacity, 

may become the primary beneficiary upon the activation of 

provisional contract rights that extend to the FDIC if it makes 

payments on guarantee claims. Ongoing analyses will be 

required to monitor consolidation implications under FASB 

ASC Topic 810. 

Note 9 under FDIC Guaranteed Debt of Structured 

Transactions fully describes the FDIC’s involvement with VIEs.

RELATED PARTIES

The nature of related parties and a description of related 

party transactions are discussed in Note 1 and disclosed 

throughout the financial statements and footnotes. 

APPLICATION OF RECENT ACCOUNTING STANDARDS

The FDIC adopted ASU 2016-02, Leases (Topic 842), as of 

January 1, 2020 (see Note 6). Other recent accounting 

standards have been deemed not applicable or material to 

the financial statements as presented. 

PRESENTATION OF STATEMENT OF CASH FLOWS 

In 2020, the FDIC changed the presentation of the DIF’s receipt 

of receivership dividends to enhance the transparency of the 

Statement of Cash Flows. For comparative purposes, the 

FDIC conformed 2019 to the new presentation; as such, the 

FDIC reduced the recoveries from and disbursements for 

financial institution resolutions line items by $9 million with 

no net impact to the DIF’s cash provided by operating 

activities. 

3. Investment in U.S. Treasury Securities 

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

Balance Sheet consisted of the following components by 

maturity (dollars in millions). 
December 31, 2020

Maturity 

Yield at

Purchase

Face

Value

Net

Carrying

Amount

Unrealized

Holding

Gains

Unrealized

Holding

Losses

Fair

Value

Within 1 year 1.23% $ 56,100 $ 57,122 $ 280 $ (4) $ 57,398

After 1 year 

through 5 years 1.05% 51,000 52,272 796 (2) 53,066

Total $ 107,100 $ 109,394 $ 1,076 $ (6) (a) $ 110,464

U.S. Treasury notes and bonds

(a) These unrealized losses occurred over a period of less than a year as a result of

temporary changes in market interest rates. The FDIC does not intend to sell the

securities and is not likely to be required to sell them before their maturity date, thus, 

the FDIC does not consider these securities to be other than temporarily impaired at

December 31, 2020. The aggregate related fair value of securities with unrealized losses

was $12.8 billion as of December 31, 2020.

December 31, 2019

Maturity 

Yield at

Purchase

Face

Value

Net

Carrying

Amount

Unrealized

Holding

Gains

Unrealized

Holding

Losses

Fair

Value

Within 1 year 1.93% $ 45,550 $ 45,928 $ 50 $ (11) $ 45,967

After 1 year 

through 5 years 2.08% 52,900 53,557 555 (7) 54,105

Total $ 98,450 $ 99,485 $ (18) (a) $ 605 $ 100,072

U.S. Treasury notes and bonds

100 FINANCIAL SECTION

DEPOSIT INSURANCE FUND 

ANNUAL 

REPORT

(a) These unrealized losses occurred as a result of temporary changes in market interest 

rates. The FDIC does not intend to sell the securities and is not likely to be required to 

sell them before their maturity date, thus, the FDIC does not consider these securities to

be other than temporarily impaired at December 31, 2019. As of December 31, 2019, 

securities with a continuous unrealized loss position of less than 12 months had an

aggregate related fair value and unrealized loss of $8.6 billion and $8 million, 

respectively. For those with a continuous unrealized loss position of 12 months or 

longer, their aggregate related fair value and unrealized losses were $13.1 billion and 

$10 million, respectively.

4. Receivables from Resolutions, Net

The receivables from resolutions result from DIF payments to 

cover obligations to insured depositors (subrogated claims), 

advances to resolution entities for working capital, and 

administrative expenses paid on behalf of resolution entities. 

Any related allowance for loss represents the difference 

between the funds advanced and/or obligations incurred and 

the expected repayment. Assets held by resolution entities 

(including structured transaction-related assets; see Note 9) 

are the main source of repayment of the DIF’s receivables 

from resolutions. The “Receivables from resolutions, net” line 

item on the Balance Sheet consisted of the following 

components (dollars in thousands). 

December 31

2020

December 31

2019

Receivables from resolutions $ 61,340,917 $ 63,981,989

Allowance for losses (59,974,181) (61,312,719)

Total $ 1,366,736 $ 2,669,270

As of December 31, 2020, the FDIC, as receiver, managed 234

active receiverships; four new receiverships were established 

in 2020. The resolution entities held assets with a book value 

of $2.1 billion as of December 31, 2020, and $3.4 billion as of 

December 31, 2019 (including $1.8 billion and $2.9 billion, 

respectively, of cash, investments, receivables due from the 

DIF, and other receivables).

Estimated cash recoveries from the management and 

disposition of assets that are used to determine the allowance 

for losses are based on asset recovery rates from several 

sources, which may include the following: actual or pending 

institution-specific asset disposition data, failed institutionspecific asset valuation data, aggregate asset valuation data 

on several recently failed or troubled institutions, sampled 

asset valuation data, and empirical asset recovery data based 

on failures since 2007. Methodologies for determining the 

asset recovery rates incorporate estimating future cash 

recoveries, net of applicable liquidation cost estimates, and 

discounting based on market-based risk factors applicable to 

a given asset’s type and quality. The resulting estimated cash 

recoveries are then used to derive the allowance for loss on 

the receivables from these resolutions. 

Note that estimated asset recoveries are regularly evaluated 

during the year, but remain subject to uncertainties because 

of potential changes in economic and market conditions, 

which may cause the DIF’s actual recoveries to vary 

significantly from current estimates. 

For failed institutions resolved using a whole bank purchase 

and assumption transaction with an accompanying sharedloss agreement (SLA), the FDIC agreed to share in future 

losses and recoveries experienced by the acquirer on those 

assets covered under the agreement. The projected sharedloss payments and the end of agreement true-up recoveries 

on the covered residential and commercial loan assets sold to 

the acquiring institution under the agreement are considered 

in determining the allowance for loss on the receivables from 

these resolutions. True-up recoveries are projected to be 

received at expiration in accordance with the terms of the 

SLA, if actual losses at expiration are lower than originally 

estimated. 
NOTES TO THE FINANCIAL STATEMENTS

2020

FINANCIAL SECTION 101 

For December 31, 2020, the shared-loss cost estimates were 

updated for 19 receiverships. Note that all commercial asset 

shared-loss coverage expired as of year-end 2018 and the last 

residential SLA expires in December 2022. The updated cost 

projections on the $3.1 billion of remaining residential 

shared-loss covered assets were based on the FDIC’s 

historical loss experience that also factors in the remaining 

time period of shared-loss coverage as well as assessments of 

final claim certificates for expired agreements. 

The estimated shared-loss liability is accounted for by the 

receiverships and is included in the calculation of the DIF’s 

allowance for loss against the corporate receivable from the 

resolution. As shared-loss claims are asserted and proven, 

receiverships satisfy these shared-loss payments using 

available liquidation funds and/or by drawing on amounts 

due from the DIF for funding the deposits assumed by the 

acquirer (see Note 7).

Receivership shared-loss transactions are summarized as 

follows (dollars in thousands). 

December 31

2020

December 31

2019

Remaining shared-loss covered assets $ 3,099,750 $ 4,205,256

Shared-loss payments made to date, 

net of recoveries 28,649,769 29,116,846

 Estimated remaining shared-loss liability $ 26,609 $ 31,458

 Estimated true-up recoveries $ (18,361) $ (477,130)

Projected shared-loss payments, 

net of true-up recoveries $ 8,248 $ (445,672)

The $1.1 billion reduction in the remaining shared-loss 

covered assets from 2019 to 2020 is primarily due to the 

liquidation of covered assets from active SLAs and natural or 

early termination of SLAs impacting 40 receiverships during 

2020. As of December 31, 2020, the shared-loss coverage 

period has expired for $3 billion or 98 percent of the total 

remaining covered assets, however, related balances are 

included in the above table pending disposition of final claim 

certificates. In contrast with 2019, projected remaining 

shared-loss payments exceed estimated end-of-agreement 

true-up recoveries at year-end 2020 due to the receipt of $468

million in true-up recoveries from the natural or early 

termination of SLAs in 2020. 

CONCENTRATION OF CREDIT RISK 

Financial instruments that potentially subject the DIF to 

concentrations of credit risk are receivables from resolutions. 

The repayment of these receivables is primarily influenced by 

recoveries on assets held by receiverships. As of December 

31, 2020, the majority of the $277 million of assets in 

liquidation is concentrated in residual certificates 

collateralized by underlying residential mortgage-backed 

securities or loans (see Note 9).

5. Property and Equipment, Net 

Depreciation expense was $50 million and $49 million for 

2020 and 2019, respectively. The “Property and equipment, 

net” line item on the Balance Sheet consisted of the following 

components (dollars in thousands). 

December 31 December 31

2020 2019

Land $ 37,352 $ 37,352

Buildings (including building and leasehold improvements) 344,002 342,071

Application software (includes work-in-process) 129,410 108,006

Furniture, fixtures, and equipment 58,363 66,970

Accumulated depreciation (248,047) (224,571)

Total $ 321,080 $ 329,828

6. Leases 

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

842), which increased the transparency and comparability of 

accounting for leases. As such, the ASU, and its related 

amendments, requires lessees to report substantially all 

leases on the balance sheet through the recognition of an 

ROU asset and a corresponding lease liability. The ASU also 

requires expanded quantitative and qualitative disclosures 

and key information regarding leasing arrangements. 

The FDIC adopted ASU 2016-02 prospectively, as of January 1, 

2020, and elected the optional transition method to apply a 

cumulative-effect adjustment at the beginning of the year of 

adoption. As a result, no previously reported amounts have 

been adjusted for adoption of the guidance. Additionally, the 

FDIC elected the practical expedients to (1) not reassess 

whether contracts are or contain leases and (2) retain the 

classification of existing leases as operating. Because of the 

adoption of ASU 2016-02, the DIF recognized operating lease 

ROU assets of $132 million and lease liabilities of $139 million 

as of January 1, 2020. The related operating lease ROU assets 
The FDIC has operating leases for office space, a data center, 

and certain equipment. The lease agreements generally 

contain escalation clauses resulting in adjustments, usually 

on an annual basis. Many leases contain one or more options 

to extend, with renewal terms that can extend the lease term 

from one to five years, and some leases may include options 

to terminate. The following table provides relevant 

information regarding FDIC operating leases for the year 

ended December 31, 2020 (dollars in thousands). 

differ from operating lease liabilities due to differences 

between accrued lease expenses and actual payments made. 

December 31

2020

Operating lease cost $ 48,481

Cash paid for amounts included in the

 measurement of operating leases $ 48,263

ROU assets obtained in exchange for new operating

 lease liabilities $ 22,817

Weighted Average

 Remaining lease term (in years) 3.35

 Discount rate 1.38%

102 FINANCIAL SECTION

ANNUAL 

REPORT

DEPOSIT INSURANCE FUND

The following table provides a maturity analysis of the FDIC’s 

operating lease liabilities as of December 31, 2020 (dollars in 

thousands). 

Decem

2020

ber 31

2021 $ 45,012

2022 31,093

2023 22,856

2024 20,046

2025 3,295

2026/Thereafter 0

Total future minimum lease payments $ 122,302

Less: Imputed interest (2,843)

Total operating lease liabilities $ 119,459

In 2019, the DIF leased space expense totaled $45 million. As 

of December 31, 2019, total lease commitments totaled $134 

million for future years. Future minimum lease commitments 

in 2019 were as follows (dollars in thousands). 

2020 2021 2022 2023 2024 2025/Thereafter

$42,603 $33,603 $20,774 $18,304 $16,824 $1,724

7. Liabilities Due to Resolutions

The DIF records liabilities to resolution entities representing 

the agreed-upon value of assets transferred from the 

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

institutions for use in funding the deposits assumed by the 

acquirers/bridge institutions. The DIF satisfies these 

liabilities either by sending cash directly to a receivership to 

fund shared-loss and other expenses or by offsetting 

receivables from resolutions when a receivership declares a 

dividend. The liabilities decreased from $343 million at yearend 2019 to $14 thousand at year-end 2020 primarily due to 

receivership dividends of $298 million. 

In addition, there were $800 thousand and $3 million in 

unpaid deposit claims related to multiple receiverships as of 

December 31, 2020 and 2019, respectively. The DIF pays these 

liabilities when the claims are approved. 

8. Contingent Liabilities

ANTICIPATED FAILURE OF INSURED INSTITUTIONS 

The DIF records a contingent liability and a loss provision for 

DIF-insured institutions that are likely to fail when the liability 

is probable and reasonably estimable, absent some favorable 

event such as obtaining additional capital or merging. The 

contingent liability is derived by applying expected failure 

rates and loss rates to the institutions based on supervisory 

ratings, balance sheet characteristics, and projected capital 

levels. 

Due to elevated risk and uncertainty arising from the effects 

of the COVID-19 pandemic on the banking industry, the FDIC 

supplemented its methodology for calculating the contingent 

liability to capture vulnerable institutions deemed likely to 

have failure risk not identified by the standard approach. This 

supplemental methodology incorporated a number of 

factors, including lending concentrations and various 

financial metrics, and resulted in an additional $44 million in 

estimated losses for anticipated failures. 

The banking industry’s financial condition and performance

was affected by economic stress related to the COVID-19

pandemic during the first nine months of 2020. According to 

the third quarter 2020 financial data submitted by DIF-insured 

institutions, the banking industry reported net income for the 

first nine months of $88.4 billion, a decline of 51 percent from 

a year ago. The decline in net income was primarily the result 

of higher provision expenses. 
2020

FINANCIAL SECTION 103 

NOTES TO THE FINANCIAL STATEMENTS 

Provisions for credit losses increased $88 billion to $129 

billion in the first nine months of 2020 as compared to the 

same time period a year ago, reflecting the economic 

uncertainties caused by the COVID-19 pandemic as well as 

adoption of the new Current Expected Credit Losses 

accounting guidance. Despite this increase, credit quality 

metrics remain favorable. The total noncurrent loan rate was 

1.17 percent as of September 30, 2020, below the most recent 

high of 5.46 percent in March 31, 2010. 

In addition, the low interest-rate environment created 

challenges for banks. During third quarter 2020, the average 

quarterly net interest margin (NIM) for the banking industry 

declined to 2.68 percent, the lowest NIM ever reported in the 

FDIC’s Quarterly Banking Profile. 

Despite a decline in net income, risk-based capital levels 

improved in 2020, as compared to the same period in 2019, 

due to growth in low-risk assets, such as cash, with total riskbased capital increasing 69 basis points to 15.36 percent. This 

current level is 16 basis points below the highest level 

recorded in first quarter 2011. 

Due to fiscal and monetary policy, as well as economic 

uncertainty, deposits grew by almost $3 trillion, or 20 percent, 

since September 30, 2019. 

While the COVID-19 pandemic created stresses on the 

banking industry in 2020, the contingent liability remained 

relatively stable as of December 31, 2020 compared to 

December 31, 2019. The DIF recorded contingent liabilities 

totaling $79 million and $94 million as of December 31, 2020 

and 2019, respectively. 

In addition to the recorded contingent liabilities, the FDIC has 

identified risks in the financial services industry that could 

result in additional losses to the DIF, should potentially 

vulnerable insured institutions ultimately fail. As a result of 

these risks, the FDIC believes that it is reasonably possible 

that the DIF could incur additional estimated losses of 

approximately $1.1 billion as of December 31, 2020, 

compared to $57 million at year-end 2019. The actual losses, 

if any, will largely depend on future economic and market 

conditions and could differ materially from this estimate. 

Four financial institutions failed in 2020, with total assets of 

$455 million and an estimated loss to the DIF at December 31, 

2020, of $99 million. 

The deterioration in economic activity and the effects of the 

COVID-19 pandemic poses challenges to the banking 

industry. Interest rates declined to near zero in March 2020, 

placing pressure on net interest margins. The unemployment 

rate is elevated, GDP and consumer spending are below 

trend, and the COVID-19 pandemic has adversely affected 

global economies. Continued economic uncertainty may 

require additional provisions for credit losses, which already 

have been substantial. Despite these challenges, the banking 

industry maintained strong capital and liquidity levels during 

the first nine months of 2020. The FDIC continues to evaluate 

ongoing risks to affected institutions in light of existing 

economic and financial conditions, and the extent to which 

such risks may put stress on the resources of the insurance 

fund. 

LITIGATION LOSSES 

The DIF records an estimated loss for unresolved legal cases 

to the extent that those losses are considered probable and 

reasonably estimable. The FDIC recorded probable litigation 

losses of $200 thousand for the DIF as of December 31, 2020 

and 2019. In addition, the FDIC has identified reasonably 

possible losses from unresolved cases of $650 thousand and 

zero as of December 31, 2020 and 2019, respectively. 

9. Other Contingencies 

PURCHASE AND ASSUMPTION INDEMNIFICATION 

In connection with purchase and assumption agreements for 

resolutions, the FDIC, in its receivership capacity, generally 

indemnifies the purchaser of a failed institution’s assets and 

liabilities in the event a third party asserts a claim against the 

purchaser unrelated to the explicit assets purchased or 

liabilities assumed at the time of failure. The FDIC, in its 

corporate capacity, is a secondary guarantor if a receivership

is unable to pay. These indemnifications generally extend for 

a term of six years after the date of institution failure. The 

FDIC is unable to estimate the maximum potential liability for 

these types of guarantees as the agreements do not specify a 

maximum amount and any payments are dependent upon 

the outcome of future contingent events, the nature and 

likelihood of which cannot be determined at this time. During 

2020 and 2019, the FDIC, in its corporate capacity, made no 

indemnification payments under such agreements, and no 

amount has been accrued in the accompanying financial 

statements with respect to these indemnification guarantees. 

FDIC GUARANTEED DEBT OF STRUCTURED TRANSACTIONS 

The FDIC, as receiver, used structured transactions 

(securitizations and structured sales of guaranteed notes 

(SSGNs) or collectively, “trusts”) to dispose of residential 
mortgage loans, commercial loans, and mortgage-backed 

securities held by the receiverships. 

For these transactions, certain loans or securities from failed 

institutions were pooled and transferred into a trust 

structure. The trusts issued senior and/or subordinated debt 

instruments and owner trust or residual certificates 

collateralized by the underlying mortgage-backed securities 

or loans. 

From March 2010 through March 2013, the receiverships 

transferred a portfolio of loans with an unpaid principal 

balance of $2.4 billion and mortgage-backed securities with a 

book value of $6.4 billion to the trusts. Private investors 

purchased the senior notes issued by the trusts for $6.2 billion 

in cash and the receiverships held the subordinated debt 

instruments and owner trust or residual certificates. In

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

guarantees the timely payment of principal and interest due 

on the senior notes, with the last guarantee expected to 

terminate in 2022. If the FDIC is required to perform under its 

guarantees, it acquires an interest in the cash flows of the 

trust equal to the amount of guarantee payments made plus 

accrued interest. The subordinated note holders and owner 

trust or residual certificate holders receive cash flows from 

the trust only after all expenses have been paid, the 

guaranteed notes have been satisfied, and the FDIC has been 

reimbursed for any guarantee payments. 

The following table provides the maximum loss exposure to 

the FDIC, as guarantor, total guarantee fees collected, 

guarantee fees receivable, and other information related to 

the FDIC guaranteed debt for the trusts as of December 31, 

2020 and 2019 (dollars in millions). 

December 31

2020

December 31

2019

Number of trusts

Initial 11 11

Current 3 6

Trust collateral balances

Initial $ 8,780 $ 8,780

Current $ 459 $ 878

Guaranteed note balances

Initial $ 6,196 $ 6,196

Current (maximum loss exposure) $ 46 $ 195

Guarantee payments made by the DIF$ 4 $ 0

Guarantee fees collected to date $ 167 $ 166

Amounts recognized in Interest 

receivable on investments and other 

assets, net

Receivable for guarantee fees $ 0 $ 1

Receivable for guarantee payments,

net $ 0 $ 32

Amounts recognized in Contingent 

liabilities: Guarantee payments and 

litigation losses

Contingent liability for guarantee 

payments $ 0 $ 34

Amounts recognized in Accounts 

payable and other liabilities

a Deferred revenue for guarantee fees $ 0 $ 1

104 FINANCIAL SECTION

ANNUAL 

REPORT

DEPOSIT INSURANCE FUND 

(a) All guarantee fees are recorded as deferred revenue and recognized as revenue 

primarily on a straight-line basis over the term of the notes. 

Except as presented above, the DIF records no other 

structured transaction-related assets or liabilities on its 

balance sheet. 

In December 2020, the DIF made a $4 million guarantee 

payment for one SSGN transaction, which represented the 

shortfall of proceeds required to retire the guaranteed senior 

note. The shortfall resulted because the proceeds from the 

liquidation of the collateral by the Trustee were insufficient to 

pay the note upon maturity. This unreimbursed guarantee 

payment resulted in an actual loss of $4 million compared to 

the estimated loss of $2 million at year-end 2019. Once the 

DIF made the guarantee payment and the note was paid in 

full, the guarantee agreement terminated, and the FDIC’s 
2020

105 FINANCIAL SECTION

NOTES TO THE FINANCIAL STATEMENTS 

relationship as guarantor with and variable interest in the 

Trust concluded. 

Any estimated loss to the DIF from the guarantees is based on 

an analysis of the expected guarantee payments by the FDIC. 

For the three active transactions, the estimated cash flows 

from the trust assets provide sufficient coverage to fully pay 

the debts. 

To date, the FDIC, in its corporate capacity, has not provided, 

and does not intend to provide, any form of financial or other 

type of support for structured transactions that it was not 

previously contractually required to provide. 

10. Assessments

The FDIC deposit insurance assessment system is mandated 

by section 7 of the FDI Act and governed by part 327 of title 12 

of the Code of Federal Regulations (12 CFR Part 327). The riskbased system requires the payment of quarterly assessments 

by all IDIs. 

In response to the Dodd-Frank Act, the FDIC implemented 

several changes to the assessment system and developed a 

comprehensive, long-term fund management plan. 

The long-term fund management plan is designed to restore 

and maintain a positive fund balance for the DIF even during 

a banking crisis and achieve moderate, steady assessment 

rates throughout any economic cycle. The DIF reserve ratio, 

which is the ratio of the DIF balance to estimated insured 

deposits, is a key measure of fund adequacy. Summarized 

below are key longer-term provisions of the plan. 

• The FDIC Board of Directors designates a reserve ratio

for the DIF and publishes the designated reserve ratio 

(DRR) before the beginning of each calendar year, as

required by the FDI Act. Accordingly, in November

2020, the FDIC published a notice maintaining the DRR

at 2 percent for 2021. The DRR is an integral part of the

FDIC’s comprehensive, long-term management plan 

for the DIF and is viewed as a long-range, minimum

goal for the reserve ratio.

• The FDIC suspended dividends indefinitely, and, in lieu

of dividends, prescribes progressively lower

assessment rates when the reserve ratio exceeds 2 

percent and 2.5 percent.

The Dodd-Frank Act increased the minimum reserve ratio for 

the DIF to 1.35 percent, up from the previous statutory 

minimum of 1.15 percent. This minimum was required to be 

achieved by September 30, 2020, and the Dodd-Frank Act 

mandated that the FDIC offset the effect of increasing the 

minimum reserve ratio on institutions with less than $10 

billion in total assets (small banks). To implement this 

requirement, the FDIC imposed a surcharge to the regular 

quarterly assessments of IDIs with $10 billion or more in total 

consolidated assets (large banks) beginning with the quarter 

ending September 30, 2016, and provided for credits to small 

banks for their contribution to the growth in the reserve ratio 

from 1.15 percent to 1.35 percent. As of September 30, 2018, 

the reserve ratio of the DIF exceeded the required minimum 

of 1.35 percent by reaching 1.36 percent. As a result, the 

surcharge assessment on large banks ended and the FDIC 

awarded small bank assessment credits of $765 million. The 

FDIC began applying the small bank credits to reduce 

quarterly assessments beginning with the second quarter 

2019 assessment collection. As of year-end 2020, all credits 

have been used ($206 million in 2020 and $559 million in 

2019). 

As a result of the impact on the economy from the COVID-19 

pandemic and related stimulus programs, the FDIC took 

several actions, including stimulus program offsets. The FDIC 

issued a final rule to mitigate the deposit insurance 

assessment effects of IDIs participating in certain stimulus 

programs, such as the Paycheck Protection Program. Absent 

the changes permitted by the final rule, some IDIs’ 

assessments would have increased. In accordance with the 

final rule, the FDIC applied the changes to IDI assessments 

starting in the second quarter of 2020. 

If the reserve ratio falls below 1.35 percent, or the FDIC 

projects that it will within six months, the FDIC generally must 

implement a Restoration Plan that will return the DIF to 1.35 

percent within eight years. In September 2020, the FDIC 

established a Restoration Plan when the reserve ratio fell 

below 1.35 percent, to 1.30 percent, due to extraordinary 

insured deposit growth in the first and second quarters of 

2020. Under the Restoration Plan, the FDIC will maintain the 

current schedule of assessment rates for all IDIs and closely 

monitor the factors affecting the reserve ratio, updating the 

plan as necessary. To determine whether the reserve ratio 

has reached the statutory minimum, the FDIC will rely on the 

reserve ratio as of September 30, 2028. 

ASSESSMENT REVENUE 

Annual assessment rates averaged approximately 4.0 cents 

and 3.1 cents per $100 of the assessment base in 2020 and 
2019, respectively. The assessment base is generally defined 

as average consolidated total assets minus average tangible 

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

assessment period. 

The “Assessments receivable” line item on the Balance Sheet 

of $1.9 billion and $1.2 billion represents the estimated 

premiums due from IDIs for the fourth quarter of 2020 and 

2019, respectively. The actual deposit insurance assessments 

for the fourth quarter of 2020 will be billed and collected at 

the end of the first quarter of 2021. The DIF recognized $7.1 

billion and $4.9 billion as assessment revenue from 

institutions during 2020 and 2019, respectively. 

PENDING LITIGATION FOR UNDERPAID ASSESSMENTS 

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

District Court for the District of Columbia (and amended this 

complaint on April 7, 2017), alleging that Bank of America, 

N.A. (BoA) underpaid its insurance assessments for multiple 

quarters based on the underreporting of counterparty 

exposures. In total, the FDIC alleges that BoA underpaid 

insurance assessments by $1.12 billion, including interest for 

the quarters ending March 2012 through December 2014. The 

FDIC invoiced BoA for $542 million and $583 million 

representing claims in the initial suit and the amended 

complaint, respectively. BoA has failed to pay these past due 

amounts. Pending resolution of this matter, BoA has fully 

pledged security with a third-party custodian pursuant to a 

security agreement with the FDIC. As of December 31, 2020, 

the total amount of unpaid assessments (including accrued 

interest) was $1.19 billion. For the years ending December 31, 

2020 and 2019, the impact of this litigation is not reflected in 

the financial statements of the DIF. 

RESERVE RATIO 

As of September 30, 2020 and December 31, 2019, the DIF 

reserve ratio was 1.30 percent and 1.41 percent, respectively. 

11. Operating Expenses

The “Operating expenses” line item on the Statement of 

Income and Fund Balance consisted of the following 

components (dollars in thousands). 

DEPOSIT INSURANCE FUND 

FINANCIAL SECTION 106 

ANNUAL 

REPORT

Outside services 271,885 268,093

Travel 24,990 80,684

Buildings and leased space 90,496 89,552

Software/Hardware maintenance 103,341 94,761

Depreciation of property and equipment 49,902 48,547

Other 26,227 27,175

Subtotal 1,866,633 1,834,565

Less: Expenses billed to resolution entities and others (20,142) (38,960)

Total $ 1,846,491 $ 1,795,605

Salaries and benefits $ 1,299,792 $ 1,225,753

December 31

2020

December 31

2019
FINANCIAL SECTION

NOTES TO THE FINANCIAL STATEMENTS 

107 

2020

12. Provision for Insurance Losses 

The “Provision for insurance losses” line item on the 

Statement of Income and Fund Balance is impacted by the 

Balance Sheet line item activity depicted in the table below. 

The table primarily analyzes the changes in estimated losses 

for actual and anticipated failures (dollars in millions). 

December 31, 2020 Contingent Liabilities for:

Anticipated 

 Failures 

Guarantee Payments 

and Litigation Losses

Provision for 

Insurance Losses

Receivables

from Resolutions

Allowance

for Losses

Balance at January 1, 2020 $ 0 $ 63,982 $ (61,313) $ (94) $ (34)

 Estimated losses for current year failures 99 (99)

 Change in contingent liability for anticipated failures, net 1 (15) 15

 Adjustments to estimated losses for prior year failures (237) 237

 Disbursements for failures 167

 Recoveries from resolutions2 (1,564)

 Write-offs for inactivated receiverships 0 (1,145) 1,145

 Other (4) (99) 56 34

Balance at December 31, 2020 $ (157) $ 61,341 $ (59,974) $ (79) $ 0

1

Represents institutions that were added or removed from the contingent liability, as well as the change in the contingent liability for institutions that remained in the liability yearover-year.

2

Includes $298 million of non-cash recoveries from receiverships (see Note 7).

December 31, 2019 Contingent Liabilities for:

Provision for Receivables Allowance Anticipated Guarantee Payments 

Insurance Losses from Resolutions for Losses Failures and Litigation Losses

Balance at January 1, 2019 $ 0 $ 68,268 $ (65,209) $ (114) $ (34)

 Estimated losses for current year failures 31 (31)

 Change in contingent liability for anticipated failures, net 1 (20) 20

 Adjustments to estimated losses for prior year failures (1,287) 1,287

 Disbursements for failures 222

2 Recoveries from resolutions (1,836)

 Write-offs for inactivated receiverships (4) (2,491) 2,495

 Other (6) (181) 145 0

Balance at December 31, 2019 $ (1,286) $ 63,982 $ (61,313) $ (94) $ (34)

1

Represents institutions that were added or removed from the contingent liability, as well as the change in the contingent liability for institutions that remained in the liability yearover-year.

2

Includes $366 million of non-cash recoveries from receiverships (see Note 7).

13. Employee Benefits

PENSION BENEFITS AND SAVINGS PLANS 

Eligible FDIC employees (permanent and term employees with 

appointments exceeding one year) are covered by the federal 

government retirement plans, either the Civil Service 

Retirement System (CSRS) or the Federal Employees 

Retirement System (FERS). Although the DIF contributes a 

portion of pension benefits for eligible employees, it does not 

account for the assets of either retirement system. The DIF also 

does not have actuarial data for accumulated plan benefits or 

the unfunded liability relative to eligible employees. These 

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

of Personnel Management (OPM). 
Under the Federal Thrift Savings Plan (TSP), the FDIC 

provides FERS employees with an automatic contribution of 

1 percent of pay and an additional matching contribution up 

to 4 percent of pay. CSRS employees also can contribute to 

the TSP, but they do not receive agency matching 

contributions. Eligible FDIC employees may also participate 

in an FDIC-sponsored tax-deferred 401(k) savings plan with 

an automatic contribution of 1 percent of pay and an 

additional matching contribution up to 4 percent of pay. The 

expenses for these plans are presented in the table below 

(dollars in thousands). 

December 31 December 31

2020 2019

Civil Service Retirement System $ 1,189 $ 1,806

Federal Employees Retirement System (Basic Benefit) 137,989 116,899

Federal Thrift Savings Plan 37,149 36,149

FDIC Savings Plan 39,578 39,873

Total $ 215,905 $ 194,727

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The DIF has no postretirement health insurance liability since 

all eligible retirees are covered by the Federal Employees 

Health Benefits (FEHB) program. The FEHB is administered 

and accounted for by the OPM. In addition, OPM pays the 

employer share of the retiree’s health insurance premiums.

The FDIC provides certain life and dental insurance coverage 

for its eligible retirees, the retirees’ beneficiaries, and 

covered dependents. Retirees eligible for life and dental 

insurance coverage are those who have qualified due to (1) 

immediate enrollment upon appointment or five years of 

participation in the plan and (2) eligibility for an immediate 

annuity. The life insurance program provides basic coverage 

at no cost to retirees and allows for converting optional 

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

retirees are responsible for a portion of the premium. 

The FDIC has elected not to fund the postretirement life and 

dental benefit liabilities. As a result, the DIF recognized the 

underfunded status (the difference between the 

accumulated postretirement benefit obligation and the plan 

assets at fair value) as a liability. Since there are no plan 

assets, the plan’s benefit liability is equal to the accumulated 

postretirement benefit obligation. 

Postretirement benefit obligation, gain and loss, and 

expense information included in the Balance Sheet and 

Statement of Income and Fund Balance are summarized as 

follows (dollars in thousands). 

December 

2020

31 December 

2019

31

Accumulated postretirement benefit obligation 

recognized in Postretirement benefit liability $ 335,977 $ 289,462

$ (60,432)

$ (47,277)

 385

Cumulative net actuarial (loss) recognized in 

accumulated other comprehensive income: 

Unrealized postretirement benefit (loss) $ (97,922)

Amounts recognized in other comprehensive 

income: Unrealized postretirement benefit (loss)

Actuarial (loss) $ (37,490)

Prior service credit 0

 Total

Net periodic benefit costs recognized in Operating 

expenses

$ (37,490) $ (46,892)

$ 3,775

 10,360

 385

 Service cost $ 5,106

 Interest cost 8,766

 Net amortization out of other comprehensive

income 2,364

 Total $ 16,236 $ 14,520

The year-over-year increase in the accumulated 

postretirement benefit obligation of $47 million is primarily 

attributable to a decrease in the discount rate used to 

present value expected benefit payments. The discount rate 

decreased from 3.46 percent to 2.65 percent at year-end 2020 

to reflect changes in the economic environment and the 

transition to a yield curve with rates of return that better 

match the timing and amount of expected benefit payments. 

The annual postretirement contributions and benefits paid 

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

December 31 December 31

2020 2019

Employer contributions $ 7,211 $ 7,885

$ 871

$ (8,756)

Plan participants' contributions $ 1,091

Benefits paid $ (8,302)

The expected contributions for the year ending December 31, 

2021, are $10 million. Expected future benefit payments for 

each of the next 10 years are presented in the following table 

(dollars in thousands). 

2021 2022 2023 2024 2025 2026-2030

$8,641 $9,187 $9,725 $10,287 $10,806 $61,208

DEPOSIT INSURANCE FUND 

108 FINANCIAL SECTION

ANNUAL 

REPORT
NOTES TO THE FINANCIAL STATEMENTS 

2020

FINANCIAL SECTION 109 

Assumptions used to determine the amount of the 

accumulated postretirement benefit obligation and the net 

periodic benefit costs are summarized as follows. 

December 31 December 31

2020 2019

Discount rate for future benefits (benefit obligation) 2.65% 3.46%

Rate of compensation increase 2.20% 3.49%

Discount rate (benefit cost) 3.46% 4.81%

Dental health care cost-trend rate

 Assumed for next year 3.50% 3.50%

 Ultimate 3.50% 3.50%

 Year rate will reach ultimate 2021 2020

14. Off-Balance-Sheet Exposure 

DEPOSIT INSURANCE 

Estimates of insured deposits are derived primarily from 

quarterly financial data submitted by IDIs to the FDIC and 

represent the accounting loss that would be realized if all IDIs 

were to fail and the acquired assets provided no recoveries. 

As of September 30, 2020 and December 31, 2019, estimated 

insured deposits for the DIF were $8.9 trillion and $7.8 trillion, 

respectively. 

15. Fair Value of Financial Instruments

As of December 31, 2020 and 2019, financial assets 

recognized and measured at fair value on a recurring basis 

include cash equivalents (see Note 2) of $3.3 billion and $6 

billion, respectively, and the investment in U.S. Treasury 

securities (see Note 3) of $110.5 billion and $100.1 billion, 

respectively. The valuation is considered a Level 1 

measurement in the fair value hierarchy, representing 

quoted prices in active markets for identical assets. Other 

financial assets and liabilities, measured at amortized cost, 

are the receivables from resolutions, assessments receivable, 

interest receivable on investments, other short-term 

receivables, and accounts payable and other liabilities. 

16. Information Relating to the Statement of Cash Flows 

The following table presents a reconciliation of net income to 

net cash from operating activities (dollars in thousands). 

December 

2020

31 December 

2019

31

Operating Activities

Net Income: $ 7,104,636 $ 6,582,089

339,247

48,547

(1,124)

(1,285,531)

(46,892)

134,373

(470,766)

1,653,681

0

16,379

0

53,527

420

(258,505)

Adjustments to reconcile net income to net cash 

provided by operating activities:

Amortization of U.S. Treasury securities

Depreciation on property and equipment

Retirement of property and equipment

Provision for insurance losses

Unrealized (loss) on postretirement benefits

Change in Assets and Liabilities:

(Increase) Decrease in assessments receivable

(Increase) in interest receivable and other assets

Decrease in receivables from resolutions

2,229,257

49,902

617

(157,309)

(37,490)

(706,548)

(138,038)

1,445,147

(Increase) in operating lease right-of-use assets

Increase in accounts payable and other liabilities

Increase in operating lease liabilities

Increase in postretirement benefit liability 

(Decrease) Increase in contingent liabilities - 

(112,453)

36,166

119,459

46,515

guarantee payments and litigation losses (33,831)

(Decrease) in liabilities due to resolutions (345,457)

Net Cash Provided by Operating Activities $ 9,500,573 $ 6,765,445

17. Subsequent Events

Subsequent events have been evaluated through February 

11, 2021, the date the financial statements are available to be 

issued. Based on management’s evaluation, there were no 

subsequent events requiring disclosure. 
110 FINANCIAL SECTION

ANNUAL 

REPORT

 

 

 

 

Federal Deposit Insurance Corporation 

FSLIC Resolution Fund Balance Sheet 

As of December 31 

(Dollars in Thousands) 2020 2019 

ASSETS

 Cash and cash equivalents 

 Other assets 

$ 906,835 

612 

$ 922,911

525 

Total Assets $ 907,447 $ 923,436 

LIABILITIES

 Accounts payable and other liabilities $ 17 $ 16 

Total Liabilities 17 16 

RESOLUTION EQUITY (NOTE 5)

 Contributed capital 

 Accumulated deficit 

125,469,317 

(124,561,887) 

125,489,317

(124,565,897) 

Total Resolution Equity 907,430 923,420 

Total Liabilities and Resolution Equity $ 907,447 $ 923,436 

The accompanying notes are an integral part of these financial statements. 
FINANCIAL SECTION 111 

2020

 

 

 

 

Federal Deposit Insurance Corporation 

FSLIC Resolution Fund Statement of Income and Accumulated Deficit 

For the Years Ended Deccember 31 

(Dollars in Thousands) 2020 2019 

REVENUE

 Interest on U.S. Treasury securities $ 3,314 $ 18,673

 Other revenue (Note 6) 721 1,775 

Total Revenue 4,035 20,448 

EXPENSES AND LOSSES

 Operating expenses 320 523

 Recovery of tax benefits (Note 7) 0 (1,200)

 Losses related to thrift resolutions (295) 4 

Total Expenses and Losses 25 (673) 

Net Income 4,010 21,121 

Accumulated Deficit - Beginning (124,565,897) (124,587,018) 

Accumulated Deficit - Ending $ (124,561,887) $ (124,565,897) 

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

ANNUAL 

REPORT

 

(Dollars in Thousands) 2020 2019 

OPERATING ACTIVITIES 

Provided by: 

Interest on U.S. Treasury securities $ 3,314 $ 18,673 

Recovery of tax benefits 0 1,200 

Recoveries from thrift resolutions 941 1,835 

Used by: 

Operating expenses (331) (358) 

Miscellaneous disbursement 0 (1) 

Net Cash Provided by Operating Activities 3,924 21,349 

FINANCING ACTIVITIES 

Used by: 

Payment to Resolution Funding Corporation (Note 5) $ (20,000) $ 0 

Net Cash (Used) in Financing Activities (20,000) 0 

Net (Decrease) Increase in Cash and Cash Equivalents (16,076) 21,349 

Cash and Cash Equivalents - Beginning 922,911 901,562 

Cash and Cash Equivalents - Ending $ 906,835 $ 922,911 

Federal Deposit Insurance Corporation 

FSLIC Resolution Fund Statement of Cash Flows 

For the Years Ended Deccember 31 

The accompanying notes are an integral part of these financial statements. 
FINANCIAL SECTION 113 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FSLIC RESOLUTION FUND 

NOTES TO THE FINANCIAL STATEMENTS 

December 31, 2020 and 2019 

1. Operations/Dissolution of the FSLIC Resolution Fund 

OVERVIEW 

The Federal Deposit Insurance Corporation (FDIC) is the 

independent deposit insurance agency created by Congress 

in 1933 to maintain stability and public confidence in the 

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

operations are generally found in the Federal Deposit 

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

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

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

and savings associations (insured depository institutions). In 

cooperation with other federal and state agencies, the FDIC 

promotes the safety and soundness of insured depository 

institutions by identifying, monitoring, and addressing risks 

to the DIF. 

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

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

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

and satisfaction of liabilities associated with the former 

Federal Savings and Loan Insurance Corporation (FSLIC) and 

the former Resolution Trust Corporation (RTC). The FDIC 

maintains the DIF and the FRF separately to support their 

respective functions. 

The FSLIC was created through the enactment of the 

National Housing Act of 1934. The Financial Institutions 

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

abolished the insolvent FSLIC and created the FRF. At that 

time, the assets and liabilities of the FSLIC were transferred 

to the FRF – except those assets and liabilities transferred to 

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

the FIRREA established the Resolution Funding Corporation 

(REFCORP) to provide part of the initial funds used by the RTC 

for thrift resolutions by authorizing REFCORP to issue debt 

obligations. The REFCORP issued debt obligations in the 

form of long-term bonds ranging in maturity from 2019 to 

2030. 

The RTC Completion Act of 1993 terminated the RTC as of 

December 31, 1995. All remaining assets and liabilities of the 

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

the FRF consists of two distinct pools of assets and liabilities: 

one composed of the assets and liabilities of the FSLIC 

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

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

to satisfy obligations of the other. 

OPERATIONS/DISSOLUTION OF THE FRF 

The FRF will continue operations until all of its assets are sold 

or otherwise liquidated and all of its liabilities are satisfied. 

Any funds remaining in the FRF-FSLIC will be paid to the U.S. 

Treasury. Any remaining funds of the FRF-RTC will be 

distributed to the REFCORP to pay interest on the REFCORP 

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

expended $602 million in appropriations to facilitate, if 

required, efforts to wind up the resolution activity of the FRFFSLIC. 

The FDIC has extensively reviewed and cataloged the FRF's 

remaining assets and liabilities. Some of the unresolved 

issues are: 

• criminal restitution orders (generally have from 1 to 

27 years remaining to enforce); 

• collections of judgments obtained against officers 

and directors and other professionals responsible 

for causing or contributing to thrift losses (generally 

have up to 10 years remaining to enforce, unless the 

judgments are renewed or are covered by the 

Federal Debt Collections Procedures Act, which will 

result in significantly longer periods for collection of 

some judgments); 

• liquidation/disposition of residual assets purchased 

by the FRF from terminated receiverships; 

• a potential tax liability associated with a fully 

adjudicated goodwill litigation case (see Note 3); 

and 

• Affordable Housing Disposition Program monitoring 

(the last agreement expires no later than 2045; see 

Note 4). 

The FRF could realize recoveries from criminal restitution 

orders and professional liability claims. However, any 

potential recoveries are not reflected in the FRF's financial 
114 FINANCIAL SECTION

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FSLIC RESOLUTION FUND 

statements, given the significant uncertainties surrounding 

the ultimate outcome. 

On April 1, 2014, the FDIC concluded its role as receiver, on 

behalf of the FRF, when the last active receivership was 

terminated. In total, 850 receiverships were liquidated by the 

FRF and the RTC. To facilitate receivership terminations, the 

FRF, in its corporate capacity, acquired the remaining 

receivership assets that could not be liquidated during the 

life of the receiverships due to restrictive clauses and other 

impediments. These assets are included in the “Other 

assets” line item on the Balance Sheet. 

During the years of receivership activity, the assets held by 

receivership entities, and the claims against them, were 

accounted for separately from the FRF's assets and liabilities 

to ensure that receivership proceeds were distributed in 

accordance with applicable laws and regulations. Also, the 

income and expenses attributable to receiverships were 

accounted for as transactions of those receiverships. The 

FDIC, as administrator of the FRF, billed receiverships for 

services provided on their behalf. 

2. Summary of Significant Accounting Policies 

GENERAL 

The financial statements include the financial position, 

results of operations, and cash flows of the FRF and are 

presented in accordance with U.S. generally accepted 

accounting principles (GAAP). During the years of 

receivership activity, these statements did not include 

reporting for assets and liabilities of receivership entities 

because these entities were legally separate and distinct, and 

the FRF did not have any ownership or beneficial interest in 

them. 

The FRF is a limited-life entity, however, it does not meet the 

requirements for presenting financial statements using the 

liquidation basis of accounting. According to Accounting 

Standards Codification Topic 205, Presentation of Financial 

Statements, a limited-life entity should apply the liquidation 

basis of accounting only if a change in the entity's governing 

plan has occurred since its inception. By statute, the FRF is a 

limited-life entity whose dissolution will occur upon the 

satisfaction of all liabilities and the disposition of all assets. 

No changes to this statutory plan have occurred since 

inception of the FRF. 

USE OF ESTIMATES 

The preparation of the financial statements in conformity 

with GAAP requires management to make estimates and 

assumptions that affect the reported amounts of assets and 

liabilities, revenue and expenses, and disclosure of 

contingent liabilities. Actual results could differ from these 

estimates. Where it is reasonably possible that changes in 

estimates will cause a material change in the financial 

statements in the near term, the nature and extent of such 

potential changes in estimates have been disclosed. The 

estimates for other assets, goodwill litigation, and 

indemnifications are considered significant. 

CASH EQUIVALENTS 

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight Certificates. 

RELATED PARTIES 

The nature of related parties and a description of related 

party transactions are discussed in Note 1 and disclosed 

throughout the financial statements and footnotes. 

APPLICATION OF RECENT ACCOUNTING STANDARDS 

Recent accounting standards have been deemed not 

applicable or material to the financial statements as 

presented. 

3. Goodwill Litigation 

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

Supreme Court held that when it became impossible 

following the enactment of FIRREA in 1989 for the federal 

government to perform certain agreements to count 

goodwill toward regulatory capital, the plaintiffs were 

entitled to recover damages from the United States. The 

contingent liability associated with the nonperformance of 

these agreements was transferred to the FRF on August 9, 

1989, upon the dissolution of the FSLIC. 

The FRF can draw from an appropriation provided by Section 

110 of the Department of Justice Appropriations Act, 2000 

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

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

of judgments and compromise settlements in the goodwill 

litigation. This appropriation is to remain available until 

expended. 

The last remaining goodwill case was resolved in 2015. 

However, for another case fully adjudicated in 2012, an 

estimated loss for the court-ordered reimbursement of 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

-

potential tax liabilities to the plaintiff was considered remote 

as of December 31, 2020, compared to a $4 million 

reasonably possible loss as of year-end 2019. The remote 

consideration was based on a series of assessed 

circumstances and conditions that render a loss unlikely. 

4. Affordable Housing Disposition Program 

Required by FIRREA under section 501, the Affordable 

Housing Disposition Program (AHDP) was established in 1989 

to ensure the preservation of affordable housing for lowincome households. The FDIC, in its capacity as 

administrator of the FRF-RTC, assumed responsibility for 

monitoring property owner compliance with land use 

restriction agreements (LURAs). To enforce the property 

owners' LURA obligation, the RTC, prior to its dissolution, 

entered into Memoranda of Understanding with 34 

monitoring agencies to oversee these LURAs. As of December 

31, 2020, 23 monitoring agencies oversee these LURAs. The 

FDIC, through the FRF, has agreed to indemnify the 

monitoring agencies for all losses related to LURA legal 

enforcement proceedings. 

From 2006 through 2018, two lawsuits against property 

owners resulted in $23 thousand in legal expenses, which 

were fully reimbursed due to successful litigation. In 2019, 

new litigation against two property owners has thus far 

resulted in legal expenses of $12 thousand. The maximum 

potential exposure to the FRF cannot be estimated as it is 

contingent upon future legal proceedings. However, loss 

mitigation factors include: (1) the indemnification may 

become void if the FDIC is not immediately informed upon 

receiving notice of any legal proceedings and (2) the FDIC is 

entitled to reimbursement of any legal expenses incurred for 

successful litigation against a property owner. AHDP 

guarantees will continue until the termination of the last 

LURA, or 2045 (whichever occurs first). As of December 31, 

2020 and 2019, no contingent liability for this 

indemnification has been recorded. 

5. Resolution Equity 

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

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

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

liabilities of the former RTC. Pursuant to legal restrictions, 

the two pools are maintained separately and the assets of 

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

NOTES TO THE FINANCIAL STATEMENTS 

Contributed capital, accumulated deficit, and resolution 

equity consisted of the following components by each pool 

(dollars in thousands). 

December 31, 2020 

FRF-FSLIC FRF RTC FRF Consolidated 

Contributed capital -

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

Less: Payment to 

REFCORP 0 (20,000) (20,000) 

Contributed capital -

ending 43,864,980 81,604,337 125,469,317 

Accumulated deficit (42,982,914) (81,578,973) (124,561,887) 

Total Resolution Equity $ 882,066 $ 25,364 $ 907,430 

December 31, 2019 

FRF-FSLIC FRF RTC FRF Consolidated 

Contributed capital -

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

Contributed capital -

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

Accumulated deficit (42,986,401) (81,579,496) (124,565,897) 

Total Resolution Equity $ 878,579 $ 44,841 $ 923,420 

CONTRIBUTED CAPITAL 

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

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

losses from thrift resolutions prior to July 1, 1995.

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

certificates to the Financing Corporation (a mixed-ownership 

government corporation established to function solely as a 

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

billion of these instruments to the REFCORP. FIRREA 

prohibited the payment of dividends on any of these capital 

certificates. Through December 31, 2020, the FRF-FSLIC 

received a total of $2.3 billion in goodwill appropriations, the 

effect of which increased contributed capital. 

Through December 31, 2020, the FRF-RTC had returned $4.6 

billion to the U.S. Treasury and made payments of $5.2 billion 

to the REFCORP. The most recent payment to the REFCORP 

was in July of 2020 for $20 million. In addition, the FDIC 

returned $2.6 billion to the U.S. Treasury on behalf of the FRFFSLIC in 2013. These actions reduced contributed capital. 

ACCUMULATED DEFICIT 

The accumulated deficit represents the cumulative excess of 

expenses and losses over revenue for activity related to the 

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

FINANCIAL SECTION 115 

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FSLIC RESOLUTION FUND 

$87.9 billion were brought forward from the former FSLIC 

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

respectively. Since the dissolution dates, the FRF-FSLIC 

accumulated deficit increased by $13.2 billion, whereas the 

FRF-RTC accumulated deficit decreased by $6.3 billion. 

6. Other Revenue 

Other revenue primarily represents recoveries from assets 

acquired from terminated receiverships, such as professional 

liability and criminal restitution claims, and unclaimed 

property escheatments. Other revenue was $721 thousand 

for 2020, compared to $2 million for 2019. 

7. Recovery of Tax Benefits 

Recovery of tax benefits represents receipts based on 

underlying tax provisions from entities that either entered 

into assistance agreements with the former FSLIC, or have 

subsequently purchased financial institutions that had prior 

agreements with the FSLIC. In 2019, FRF received $1 million 

from the settlement of the last remaining FSLIC tax benefits 

sharing agreement. 

8. Fair Value of Financial Instruments 

At December 31, 2020 and 2019, the FRF's financial assets 

measured at fair value on a recurring basis are cash 

equivalents (see Note 2) of $882 million and $878 million, 

respectively. Cash equivalents are Special U.S. Treasury 

Certificates with overnight maturities valued at prevailing 

interest rates established by the U.S. Treasury's Bureau of the 

Fiscal Service. The valuation is considered a Level 1 

measurement in the fair value hierarchy, representing 

quoted prices in active markets for identical assets. 

9. Information Relating to the Statement of Cash Flows 

The following table presents a reconciliation of net income to 

net cash from operating activities (dollars in thousands). 

Operating Activities 

December 31 December 31 

2020 2019 

21,121 

21,349 

Change in Assets and Liabilities: 

Net Income: $ 4,010 $ 

(Increase) Decrease in other assets 

Increase in accounts payable and other 

liabilities 

(87) 221 

1 7 

Net Cash Provided by Operating Activities $ 3,924 $ 

10. Subsequent Events 

Subsequent events have been evaluated through February 

11, 2021, the date the financial statements are available to be 

issued. Based on management's evaluation, there were no 

subsequent events requiring disclosure. 
FINANCIAL SECTION 117 

2020

 

 

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT 

441 G St. N.W. 

Washington, DC 20548 

Independent Auditor’s Report 

To the Board of Directors 

The Federal Deposit Insurance Corporation 

In our audits of the 2020 and 2019 financial statements of the Deposit Insurance Fund (DIF) and 

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

which the Federal Deposit Insurance Corporation (FDIC) administers,1 we found 

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

December 31, 2020, and 2019, are presented fairly, in all material respects, in accordance

with U.S. generally accepted accounting principles;

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

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

December 31, 2020; and

• with respect to the DIF and to the FRF, no reportable noncompliance for 2020 with

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

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

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

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

agreements; and (3) agency comments. 

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

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

Government Corporation Control Act,4 we have audited the financial statements of the DIF and 

of the FRF, both of which FDIC administers. The financial statements of the DIF comprise the 

balance sheets as of December 31, 2020, and 2019; the related statements of income and fund 

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

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

December 31, 2020, and 2019; the related statements of income and accumulated deficit and of 

cash flows for the years then ended; and the related notes to the financial statements. We also 

have audited FDIC’s internal control over financial reporting relevant to the DIF and to the FRF 

as of December 31, 2020, based on criteria established under 31 U.S.C. § 3512(c), (d), 

commonly known as the Federal Managers’ Financial Integrity Act (FMFIA). 

1A third fund managed by FDIC, the Orderly Liquidation Fund, established by Section 210(n) of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376, 1506 (July 21, 2010), is unfunded 

and did not have any transactions from its inception in 2010 through 2020. 

2Other information consists of information included with the financial statements, other than the auditor’s report. 

3Act of September 21, 1950, Pub. L. No. 797, § 2[17], 64 Stat. 873, 890, classified as amended at 12 U.S.C. § 1827. 

431 U.S.C. §§ 9101-9110. 
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GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued) 

We conducted our audits in accordance with U.S. generally accepted government auditing 

standards. We believe that the audit evidence we obtained is sufficient and appropriate to 

provide a basis for our audit opinions. 

Management’s Responsibility 

FDIC management is responsible for (1) the preparation and fair presentation of these financial 

statements in accordance with U.S. generally accepted accounting principles; (2) preparing and 

presenting other information included in documents containing the audited financial statements 

and auditor’s report, and ensuring the consistency of that information with the audited financial 

statements; (3) maintaining effective internal control over financial reporting, including the 

design, implementation, and maintenance of internal control relevant to the preparation and fair 

presentation of financial statements that are free from material misstatement, whether due to 

fraud or error; (4) evaluating the effectiveness of internal control over financial reporting based 

on the criteria established under FMFIA; and (5) its assessment about the effectiveness of 

internal control over financial reporting as of December 31, 2020, included in the accompanying 

Management’s Report on Internal Control over Financial Reporting in appendix I. 

Auditor’s Responsibility 

Our responsibility is to express opinions on these financial statements and opinions on FDIC’s 

internal control over financial reporting relevant to the DIF and to the FRF based on our audits. 

U.S. generally accepted government auditing standards require that we plan and perform the 

audits to obtain reasonable assurance about whether the financial statements are free from 

material misstatement, and whether effective internal control over financial reporting was 

maintained in all material respects. We are also responsible for applying certain limited 

procedures to other information included with the financial statements. 

An audit of financial statements involves performing procedures to obtain audit evidence about 

the amounts and disclosures in the financial statements. The procedures selected depend on 

the auditor’s judgment, including the auditor’s assessment of the risks of material misstatement 

of the financial statements, whether due to fraud or error. In making those risk assessments, the 

auditor considers internal control relevant to the entity’s preparation and fair presentation of the 

financial statements in order to design audit procedures that are appropriate in the 

circumstances. An audit of financial statements also involves evaluating the appropriateness of 

the accounting policies used and the reasonableness of significant accounting estimates made 

by management, as well as evaluating the overall presentation of the financial statements. 

An audit of internal control over financial reporting involves performing procedures to obtain 

evidence about whether a material weakness exists.5 The procedures selected depend on the 

auditor’s judgment, including the assessment of the risk that a material weakness exists. An 

audit of internal control over financial reporting also includes obtaining an understanding of 

internal control over financial reporting and evaluating and testing the design and operating 

effectiveness of internal control over financial reporting based on the assessed risk. Our audit of 

internal control also considered FDIC’s process for evaluating and reporting on internal control 

5A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such 

that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be 

prevented, or detected and corrected, on a timely basis. A deficiency in internal control exists when the design or 

operation of a control does not allow management or employees, in the normal course of performing their assigned 

functions, to prevent, or detect and correct, misstatements on a timely basis. 
FINANCIAL SECTION 119 

2020

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued) 

over financial reporting based on criteria established under FMFIA. Our audits also included 

performing such other procedures as we considered necessary in the circumstances. 

We did not evaluate all internal controls relevant to operating objectives as broadly established 

under FMFIA, such as those controls relevant to preparing performance information and 

ensuring efficient operations. We limited our internal control testing to testing controls over 

financial reporting. Our internal control testing was for the purpose of expressing an opinion on 

whether effective internal control over financial reporting was maintained, in all material 

respects. Consequently, our audit may not identify all deficiencies in internal control over 

financial reporting that are less severe than a material weakness. 

Definition and Inherent Limitations of Internal Control over Financial Reporting 

An entity’s internal control over financial reporting is a process effected by those charged with 

governance, management, and other personnel, the objectives of which are to provide 

reasonable assurance that (1) transactions are properly recorded, processed, and summarized 

to permit the preparation of financial statements in accordance with U.S. generally accepted 

accounting principles, and assets are safeguarded against loss from unauthorized acquisition, 

use, or disposition, and (2) transactions are executed in accordance with provisions of 

applicable laws, regulations, contracts, and grant agreements, noncompliance with which could 

have a material effect on the financial statements. 

Because of its inherent limitations, internal control over financial reporting may not prevent, or 

detect and correct, misstatements due to fraud or error. We also caution that projecting any 

evaluation of effectiveness to future periods is subject to the risk that controls may become 

inadequate because of changes in conditions or that the degree of compliance with the policies 

or procedures may deteriorate. 

Opinions on Financial Statements 

In our opinion, 

• the DIF’s financial statements present fairly, in all material respects, the DIF’s financial

position as of December 31, 2020, and 2019, and the results of its operations and its cash

flows for the years then ended, in accordance with U.S. generally accepted accounting

principles, and

• the FRF’s financial statements present fairly, in all material respects, the FRF’s financial

position as of December 31, 2020, and 2019, and the results of its operations and its cash

flows for the years then ended, in accordance with U.S. generally accepted accounting

principles.

Opinions on Internal Control over Financial Reporting 

In our opinion, although certain internal controls could be improved, 

• FDIC maintained, in all material respects, effective internal control over financial reporting

relevant to the DIF as of December 31, 2020, based on criteria established under FMFIA,

and

• FDIC maintained, in all material respects, effective internal control over financial reporting

relevant to the FRF as of December 31, 2020, based on criteria established under FMFIA.
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GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued) 

As discussed below in more detail, our 2020 audit identified deficiencies in FDIC’s controls over 

contract payment review processes that collectively represent a significant deficiency in FDIC’s 

internal control over financial reporting.6 We considered this significant deficiency in determining 

the nature, timing, and extent of our audit procedures on the DIF’s and the FRF’s financial 

statements. 

Although the significant deficiency in internal control did not affect our opinions on the 2020 

financial statements of the DIF and of the FRF, misstatements may occur in unaudited financial 

information reported internally and externally by FDIC because of this significant deficiency. 

In addition to the significant deficiency in internal control over contract payment review 

processes, we also identified other deficiencies in FDIC’s internal control over financial reporting 

that we do not consider to be material weaknesses or significant deficiencies. Nonetheless, 

these deficiencies warrant FDIC management’s attention. We have communicated these 

matters to FDIC management and, where appropriate, will report on them separately. 

Significant Deficiency in Internal Control over Contract Payment Review Processes 

During our 2020 audit, we identified deficiencies in contract payment review processes that 

collectively represent a significant deficiency in FDIC’s internal control over financial reporting. 

Specifically, FDIC did not consistently implement controls over contract payment review 

processes. FDIC oversight managers are responsible for verifying that contractors deliver 

purchased goods or services and perform their work according to contracts and delivery 

schedules. Oversight managers also monitor the expenditures of funds in relation to contract 

dollar ceilings and approve invoices for payment. We identified deficiencies in FDIC’s 

implementation of these internal controls that increased the risks that improper payments could 

occur and operating expenses and accounts payable could be misstated. For example: 

• A Disbursement Operations Section processor incorrectly entered a manually calculated

payment discount into FDIC's New Financial Environment, which was in addition to the

discount automatically applied by the financial system. The oversight manager and

Disbursement Operations Section approver did not detect the payment error,7 and FDIC

made an improper payment to the contractor.

• An oversight manager approved a contractor invoice, even though supporting

documentation was inconsistent with FDIC’s total payment. While we were able to obtain

evidence that the proper amount was paid, the oversight manager did not investigate,

resolve, and document the inconsistencies before approving and paying the invoice.

• We found two additional instances where the oversight managers approved contract

payments without sufficient documentation to support the invoices; one of these instances

involved a small payment error.

6A significant deficiency is a deficiency, or combination of deficiencies, in internal control over financial reporting that 

is less severe than a material weakness, yet important enough to merit the attention by those charged with 

governance. 

7The Disbursement Operations Section approver is responsible for reviewing and approving the payment entered into 

FDIC’s New Financial Environment for processing, which then automatically routes to the oversight manager for final 

approval. 
FINANCIAL SECTION 121 

2020

 

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued) 

According to GAO’s Standards for Internal Control in the Federal Government,8 agency 

management is responsible for establishing and maintaining effective internal control to serve 

as the first line of defense in safeguarding assets and preventing and detecting errors and fraud. 

Further, GAO’s Framework for Assessing the Acquisition Function for Federal Agencies,9 states 

that when financial data are not useful, relevant, timely, or reliable, the acquisition function is at 

risk of inefficient or wasteful business practices. Without adequate contract payment review 

processes, FDIC cannot reasonably assure that internal controls over contract payments are 

operating effectively, which increases the risks of improper payments and misstatements in the 

financial statements. 

While these deficiencies do not individually or collectively constitute a material weakness, 

FDIC’s deficiencies related to contract payment review processes are important enough to merit 

the attention of those charged with governance of FDIC. Thus, these deficiencies represent a 

significant deficiency in FDIC’s internal control over financial reporting as of December 31, 

2020. Management commitment and attention will be essential to addressing these deficiencies 

and improving FDIC’s controls over contract payment review processes. 

Other Matters 

Other Information 

FDIC’s other information contains a wide range of information, some of which is not directly 

related to the financial statements. This information is presented for purposes of additional 

analysis and is not a required part of the financial statements. We read the other information 

included with the financial statements in order to identify material inconsistencies, if any, with 

the audited financial statements. Our audit was conducted for the purpose of forming opinions 

on the DIF’s and the FRF’s financial statements. We did not audit and do not express an opinion 

or provide any assurance on the other information. 

Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements 

In connection with our audits of the financial statements of the DIF and of the FRF, both of 

which FDIC administers, we tested compliance with selected provisions of applicable laws, 

regulations, contracts, and grant agreements consistent with our auditor’s responsibility 

discussed below. We caution that noncompliance may occur and not be detected by these 

tests. We performed our tests of compliance in accordance with U.S. generally accepted 

government auditing standards. 

Management’s Responsibility 

FDIC management is responsible for complying with applicable laws, regulations, contracts, and 

grant agreements. 

8GAO, Standards for Internal Control in the Federal Government, GAO-14-704G (Washington, D.C.: September 

2014). 

9GAO, Framework for Assessing the Acquisition Function at Federal Agencies, GAO-05-218G (Washington, D.C.: 

September 2005). 
122 FINANCIAL SECTION

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GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued) 

Auditor’s Responsibility 

Our responsibility is to test compliance with selected provisions of applicable laws, regulations, 

contracts, and grant agreements that have a direct effect on the determination of material 

amounts and disclosures in the financial statements of the DIF and of the FRF and to perform 

certain other limited procedures. Accordingly, we did not test FDIC’s compliance with all 

applicable laws, regulations, contracts, and grant agreements. 

Results of Our Tests for Compliance with Laws, Regulations, Contracts, and Grant Agreements 

Our tests for compliance with selected provisions of applicable laws, regulations, contracts, and 

grant agreements disclosed no instances of noncompliance for 2020 that would be reportable, 

with respect to the DIF and to the FRF, under U.S. generally accepted government auditing 

standards. However, the objective of our tests was not to provide an opinion on compliance with 

applicable laws, regulations, contracts, and grant agreements. Accordingly, we do not express 

such an opinion. 

Intended Purpose of Report on Compliance with Laws, Regulations, Contracts, and Grant 

Agreements 

The purpose of this report is solely to describe the scope of our testing of compliance with 

selected provisions of applicable laws, regulations, contracts, and grant agreements, and the 

results of that testing, and not to provide an opinion on compliance. This report is an integral 

part of an audit performed in accordance with U.S. generally accepted government auditing 

standards in considering compliance. Accordingly, this report on compliance with laws, 

regulations, contracts, and grant agreements is not suitable for any other purpose. 

Agency Comments 

In commenting on a draft of this report, FDIC stated that it was pleased to receive unmodified 

opinions on the DIF’s and the FRF’s financial statements. In regard to the significant deficiency 

in internal control over contract payment review processes, FDIC stated that it began taking 

steps to address this issue and will work to enhance control activities and expand monitoring 

capabilities in this area. Further, FDIC stated that it recognizes the essential role a strong 

internal control program plays in an agency achieving its mission. FDIC added that its 

commitment to sound financial management has been and will remain a top priority. The 

complete text of FDIC’s response is reprinted in appendix II. 

James R. Dalkin 

Director 

Financial Management and Assurance 

February 11, 2021 
FINANCIAL SECTION 123 

2020

Appendix I 

MANAGEMENT’S REPORT ON INTERNAL CONTROL 

OVER FINANCIAL REPORTING 

FDlt 

Federal Deposit Insurance Corporation 

550 17th Street NW, Washington, D.C. 20429-9990 Office of the Chairman 

Management's Report on Internal Control over Financial Reporting 

The Federal Deposit Insurance Corporation's (FDIC's) internal control over financial reporting relevant to

the Deposit Insurance Fund (DIF) and the FSLIC Resolution Fund (FRF) is a process effected by those 

charged with governance, management, and other personnel, the objectives of which are to provide

reasonable assurance that (1) transactions are properly recorded, processed, and summarized to permit

the preparation of financial statements in accordance with U.S. generally accepted accounting 

principles, and assets are safeguarded against loss from unauthorized acquisition, use, or disposition; 

and (2) transactions are executed in accordance with provisions of applicable laws, regulations, 

contracts, and grant agreements, noncompliance with which could have a material effect on the financial 

statements. 

FDIC management is responsible for establishing and maintaining effective internal control over financial 

reporting, including the design, implementation, and maintenance of internal control relevant to the 

preparation and fair presentation of financial statements that are free from material misstatement, 

whether due to fraud or error. FDIC management evaluated the effectiveness of the FDIC's internal 

control over financial reporting relevant to the DIF and the FRF as of December 31, 2020, based on the 

criteria established under 31 U.S.C. 3512(c), (d) (commonly known as the Federal Managers' Financial 

Integrity Act (FMFIA)). FDIC management performed this evaluation through its corporate risk 

management program that seeks to comply with the spirit of the following laws, standards, and guidance 

from the Office of Management and Budget (0MB) among others: FMFIA; Chief Financial Officers Act (CFO 

Act); Government Performance and Results Act (GPRA); Federal Information Security Modernization Act 

(FISMA); and 0MB Circular A-123. In addition, other standards that the FDIC considers are the framework

set forth by the Committee of Sponsoring Organizations of the Treadway Commission's Internal ControlIntegrated Framework and the U.S. Government Accountability Office's Standards for Internal Control in

the Federal Government. 

Based on the above evaluation, management concludes that, as of December 31, 2020, FDIC's internal 

control over financial reporting relevant to the DIF and the FRF was effective. 

_ Chairman

BRET EDWARDS Digitally signed by 

BRET EDWARDS 

Bret D. Edwards 

Deputy to the Chairman

and Chief Financial Officer

February 11, 2021 
124 FINANCIAL SECTION

ANNUAL 

REPORT

 

 

 

 

 

 

 

 

 

 

Appendix II 

MANAGEMENT’S RESPONSE TO 

THE AUDITOR’S REPORT 

Federal Deposit Insurance Corporation 

550 17th Street NW, Washington, D.C. 20429-9990 Deputy to the Chairman and CFO 

February 11, 2021 

Mr. James Dalkin 

Director, Financial Management and Assurance 

U.S. Government Accountability Office 

441 G Street, NW 

Washington, D.C. 20548 

Re: FDIC Management Response to the 2020 and 2019 Financial Statements Audit Report 

Dear Mr. Dalkin: 

Thank you for the opportunity to review and comment on the U.S. Government Accountability Office's 

(GAO's) draft report titled, Financial Audit: Federal Deposit Insurance Corporation Funds' 2020 and 2019 

Financial Statements, GAO-21-284R. We are pleased that the Federal Deposit Insurance Corporation 

(FDIC) has received unmodified opinions for the twenty-ninth consecutive year on the financial 

statements of its funds: the Deposit Insurance Fund (DIF) and the FSLIC Resolution Fund (FRF). GAO also 

reported that although internal controls can be improved, the FDIC maintained, in all material respects, 

effective internal control over financial reporting, and that there was no reportable noncompliance with 

provisions of applicable laws, regulations, contracts, and grant agreements that were tested. GAO did 

report a significant deficiency in internal control over contract payment review processes. 

During the audit year, the FDIC began taking steps to address issues concerning the contract payment 

review process. In the coming year, the FDIC will work to enhance the control activities and will expand 

monitoring capabilities in this area to address the identified weakness. The FDIC recognizes the essential 

role a strong internal control program plays in an agency achieving its mission. Our commitment to 

sound financial management has been and will remain a top priority. 

In complying with audit standards that require management to provide a written assessment about the 

effectiveness of its internal control over financial reporting, the FDIC has prepared Management's Report 

on Internal Control over Financial Reporting. The report acknowledges management's responsibility for 

establishing and maintaining internal control over financial reporting and provides the FDIC's conclusion 

regarding the effectiveness of its internal control. 

We want to thank the GAO staff for their professionalism and dedication during the audit and look 

forward to another positive and productive relationship during the 2021 audit. If you have any questions 

or concerns, please do not hesitate to contact me. 

Sincerely, 

BRET EDWARDS Digitally signed by 

BRET EDWARDS 

Bret D. Edwards 

Deputy to the Chairman 

and Chief Financial Officer