FDIC Quarterly 

Quarterly Banking Profile: 

Second Quarter 2007 

Feature Articles: 

Privatizing Deposit Insurance: 

Results of the 2006 FDIC Study 

Banking on Financial Education 

2007, Volume 1, Number 2 
The FDIC Quarterly is published by the Division of Insurance and Research of the Federal Deposit 

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

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

development of regulatory policy. 

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Chairman Sheila C. Bair 

Director, Division of Insurance Arthur J. Murton 

and Research 

Executive Editor Maureen E. Sweeney 

Managing Editors Richard A. Brown 

Diane L. Ellis 

Paul H. Kupiec 

Christopher J. Newbury 

Editors Kim E. Lowry 

Kathy Zeidler 

Publication Managers Geri Bonebrake 

Elena Johnson 

Lynne Montgomery 

Media Inquiries (202) 898-6993 
FDIC Quarterly 

2007, Volume 1, Number 2 

Quarterly Banking Profile: 

Second Quarter 2007 

FDIC-insured commercial banks and savings institutions set aside $11.4 billion in loan loss 

provisions during the second quarter, and noncurrent loans and leases grew for the fifth consecutive 

quarter. However, earnings performance remained solid; quarterly net income of $36.7 billion was 

the fourth-highest ever reported by the industry. See page 1. 

Insurance Fund Indicators 

Insured deposits declined 0.3 percent during second quarter 2007. The Deposit Insurance Fund 

reserve ratio increased one basis point to 1.21 percent. No insured institutions failed during the 

quarter. See page 14. 

Feature Articles: 

Privatizing Deposit Insurance: Results of the 2006 FDIC Study 

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

conduct a study of the feasibility and consequences of privatizing deposit insurance. The results of 

the study were delivered to Congress in February of this year. This article reviews the arguments 

that favor privatization, examines specific privatization proposals, and concludes with a discussion of 

other considerations important to the privatization debate. See page 23. 

Banking on Financial Education 

The rapidly expanding choices of financial products and services have increased the need for 

financial education. This article highlights the results of an FDIC study of its Money Smart financial 

education program. The study demonstrates the positive effects of this curriculum on consumer 

money management attitudes and behaviors. Importantly for bankers, the study shows that financial 

education can strengthen the relationships consumers have with banks and improve their financial 

condition and outlook. In addition, this article describes the many ways banks are offering financial 

education and offers suggestions for banks as they try to enhance their programs. See page 33. 

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

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

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

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

reprinted material. 
 

 

Quarterly Banking Profile Second Quarter 2007 

INSURED INSTITUTION PERFORMANCE 

Quarterly Net Income of $36.7 Billion Is Fourth-Highest Ever 

Net Interest Margins Register Modest Gains Over First Quarter 

Loss Provisions Continue to Rise at Large Institutions 

Increase in Noncurrent Loans Is Largest Since 1990 

Foreign Office Deposits Increase Sharply 

Higher Expenses Hold Down Earnings 

Industry earnings remained strong in the second quarter of 

2007, despite an operating environment that was decidedly 

less favorable than in earlier quarters. A flat yield curve, 

rising levels of troubled loans, and a weak housing market 

all made the task of improving earnings more difficult. 

Insured commercial banks and savings institutions reported 

$36.7 billion in net income for the quarter, a decline of 

$1.3 billion (3.4 percent) from the second quarter of 2006, 

but $772 million (2.1 percent) more than they earned in 

the first quarter of 2007. The decline in earnings compared to a year ago was caused by higher provisions for 

loan losses, particularly at larger institutions, and by 

increased noninterest expenses. The impact of these higher costs was partly offset by increased noninterest income 

and net interest income. For the second consecutive quarter, fewer than half of all insured institutions reported 

higher quarterly earnings than a year earlier. The average 

return on assets (ROA) for the second quarter was 1.21 

percent, down from 1.34 percent in the second quarter of 

2006. More than half of all institutions — 59 percent — 

reported lower ROAs than a year earlier. There were 824 

institutions reporting net losses for the quarter, compared 

to 600 unprofitable institutions a year earlier. This is the 

largest year-over-year increase in unprofitable institutions 

since the third quarter of 1996. The increase in unprofitable institutions was greatest among institutions with less 

than $1 billion in assets, and among institutions with high 

levels of residential real estate and commercial loan exposures. The proportion of unprofitable institutions — 9.6 

percent of all insured institutions — was the highest level 

for a second quarter since 1991. More than half of the 

unprofitable institutions (52.2 percent) were less than five 

years old. 

Loss Provisions Rise Significantly 

Insured institutions added $11.4 billion in provisions for 

loan losses to their reserves during the second quarter, the 

largest quarterly loss provision for the industry since the 

fourth quarter of 2002. This was $4.9 billion (75.3 percent) more than they set aside in the second quarter of 

Chart 1 Chart 2 

29.5 30.2 30.4 31.1 31.8 31.2 32.5 31.1 

34.0 34.3 34.7 

32.7 

36.9 38.0 38.1 

35.4 36.0 36.7 

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

0 

10 

20 

30 

40 

$ Billions 

Securities and Other Gains/Losses, Net 

Net Operating Income 

2003 2004 2005 2006 2007 

Industry Has Second Consecutive Year-over-Year 

Decline in Earnings 

4.9 

5.6 

2.8 

5.6 

0.3 

0.0 

2.0 

4.0 

6.0 

8.0 

2nd Quarter 2006 to 2nd Quarter 2007 ($ Billions) 

Positive 

Factors 

Negative 

Factors 

Increase in 

Net Interest 

Income 

Increase in 

Noninterest 

Income 

Increase in 

Loan Loss 

Provision 

Increase in 

Gains on 

Securities Sales 

Increase in 

Noninterest 

Expense 

Higher Loss Provisions Contribute to 

Earnings Decline 

FDIC QUARTERLY 1 2007, VOLUME 1, NO. 2 
 

 

2006. At institutions with assets greater than $1 billion, loss 

provisions absorbed 7.7 percent of net operating revenue (net 

interest income plus total noninterest income); a year earlier, 

provisions siphoned off only 4.5 percent of revenue. 

Noninterest expenses were $5.6 billion (6.6 percent) higher 

than a year earlier. Spending for salaries and other employee 

benefits was up by $3.5 billion (9.1 percent). The greatest 

positive contribution to earnings came from noninterest 

income, which grew by $5.6 billion (9.0 percent). The 

improvement in noninterest income was led by higher trading revenue (up $1.4 billion, or 28.5 percent), increased servicing income (up $1.1 billion, or 25.1 percent), and increased 

fiduciary income (up $1.0 billion, or 15.8 percent, at institutions filing Call Reports). 

Earning Asset Growth Lifts Net Interest Income 

Net interest income also made a positive contribution to 

earnings; at $88.6 billion, it was $2.8 billion (3.3 percent) 

higher than a year earlier, because interest-earning assets were 

6.6 percent greater. The growth in earning assets overcame a 

12 basis-point decline in the industry’s average net interest 

margin between the second quarter of 2006 and the second 

quarter of 2007 to produce the year-over-year improvement 

in net interest income. More than two out of every three 

institutions (67.1 percent) reported margins below their yearago levels. The average net interest margin in the second 

quarter was 3.34 percent, compared to 3.46 percent a year 

earlier, but it was above the 3.32 percent average in the first 

quarter of 2006. 

Chart 3 

Charge-offs Continue to Rise 

Net charge-offs totaled $9.2 billion in the second quarter, the 

highest quarterly total since the fourth quarter of 2005, and 

$3.1 billion (51.2 percent) more than in the second quarter 

of 2006. This was the second consecutive quarter that net 

charge-offs have had a year-over-year increase. The loan categories with the largest increases in net charge-offs included 

consumer loans other than credit cards (up $757 million, or 

60.9 percent), commercial and industrial (C&I) loans (up 

$577 million, or 71.4 percent), residential mortgage loans (up 

$422 million, or 144.3 percent), and credit card loans (up 

$393 million, or 12.1 percent). All of the major loan categories posted both increased net charge-offs and higher net 

charge-off rates. 

Real Estate Leads the Growth in Noncurrent Loans 

The amount of loans and leases that were noncurrent (loans 

90 days or more past due or in nonaccrual status) grew by 

$6.4 billion (10.6 percent) during the quarter. This is the 

largest quarterly increase in noncurrent loans since the fourth 

quarter of 1990, and marks the fifth consecutive quarter that 

the industry’s inventory of noncurrent loans has grown. 

Almost half of the increase (48.1 percent) consisted of residential mortgage loans. Noncurrent mortgages increased by 

$3.1 billion (12.6 percent) during the quarter. Real estate 

construction and development loans accounted for more than 

a third (34.2 percent) of the increase in noncurrent loans. 

Chart 4 

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

2.5 

3.0 

3.5 

4.0 

4.5 

Net Interest Margin (%) 

Assets > $100 Million 

Assets < $100 Million 

2003 2004 2005 2006 2007

4.12 

3.33 

Large and Small Institutions Saw Margins 

Improve Slightly 

Home Equity Lines of Credit 

First Lien Mortgages 

Closed-End Junior 

Lien Mortgages 

3/31/04 9/30/04 3/31/05 9/30/05 3/31/06 9/30/06 3/31/07 

0.00 

0.20 

0.40 

0.60 

0.80 

1.00 

1.20 

1.40 

Percent Noncurrent 

Note: Noncurrent rates on loans secured by 1-4 family residential properties. 

The Run-Up in Noncurrent Mortgages Has Been 

Led by First Liens 

FDIC QUARTERLY 2 2007, VOLUME 1, NO. 2 
 

 

Quarterly Banking Profile 

Noncurrent construction loans increased by $2.2 billion (39.5 

percent) during the quarter. The amount of home equity 

lines of credit that were noncurrent increased by $407 million (16.6 percent) during the quarter. The industry’s noncurrent loan rate, which was at an all-time low of 0.70 

percent at the end of the second quarter of 2006, rose from 

0.83 percent to 0.90 percent during the second quarter. This 

is the highest noncurrent rate for the industry in three years. 

Pace of Reserve Growth Picks Up 

Banks and thrifts grew their loss reserves by $2.6 billion (3.2 

percent) during the quarter, as loss provisions of $11.4 billion 

surpassed net charge-offs of $9.2 billion. The $2.6-billion rise 

in loss reserves was the largest quarterly increase since the 

first quarter of 2002, but it barely kept pace with growth in 

the industry’s loans and leases. The ratio of reserves to total 

loans increased from 1.08 percent to 1.09 percent during the 

quarter, but remains near the 32-year low of 1.07 percent 

reached at the end of 2006. For the fifth quarter in a row, 

reserves failed to keep pace with the increase in noncurrent 

loans. As a result, the industry’s “coverage ratio” of reserves 

to noncurrent loans fell from $1.30 in reserves for every $1.00 

of noncurrent loans to $1.21 during the quarter. This is the 

lowest level for the coverage ratio since the third quarter of 

2002. Reserves increased at 60 percent of institutions during 

the quarter. 

Chart 5 

Securities Depreciation Limits Growth in Equity 

Equity capital increased by only $11.4 billion (0.9 percent), 

the smallest quarterly increase in seven quarters. Declining 

market values for securities held for sale limited the growth in 

equity during the quarter. Net unrealized losses on securities 

at insured banks that file Call Reports grew from $6.1 billion 

to $20.6 billion during the quarter. Under Generally 

Accepted Accounting Principles (GAAP), these unrealized 

losses are subtracted from equity. The industry’s ratio of equity to total assets fell from 10.58 percent to 10.43 percent during the quarter. 

Commercial Lending Remains Strong 

Total assets grew by $279.9 billion (2.3 percent) in the quarter, led by a $188.4-billion (2.6-percent) increase in loans 

and leases. C&I loans increased by a quarterly record $51.3 

billion (4.1 percent), home equity lines of credit grew by 

$19.9 billion (3.6 percent), credit card loans increased by 

$18.7 billion (5.3 percent), residential mortgage loans rose by 

$18.8 billion (0.9 percent), and real estate construction loans 

increased by $17.9 billion (3.1 percent). In addition to the 

growth in loans, assets in trading accounts grew by $43.9 billion (6.4 percent) in the quarter. Interest-bearing balances 

due from depository institutions increased by $36.6 billion 

(20.1 percent), with most of the growth occurring at a few 

large banks. Mortgage-backed securities increased by $21.6 

billion (1.8 percent). Total mortgage assets increased by 

Chart 6 

Provisions Continue to Exceed Charge-offs 

$ Billions 

15 

Loss Provisions 

12 Net Charge-offs 11 

10 10 

9 9 9 9 9 9 9 8 8 8 8 8 8 8 

7 7 7 7 7 7 7 

6 6 6 6 6 6 

3 

0 

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

Growth in Noncurrent Loans Is Outpacing the 

Rise in Loss Reserves 

$ Billions Coverage Ratio* (%) 

Loan-Loss Reserves ($) 90 175 

75 150 

125 60 Coverage Ratio (%) 

100 45 

75 Noncurrent Loans ($) 30 

50 

15 25 

3/03 9/03 3/04 9/04 3/05 9/05 3/06 9/06 3/07 

*Loan-loss reserves to noncurrent loans. 

FDIC QUARTERLY 3 2007, VOLUME 1, NO. 2 
 

Author: 

Author: 

$60.3 billion (1.5 percent) in the second quarter, accounting 

for just over one-fifth of all asset growth. 

Small Business Lending Grew More Rapidly 

in the Past Year 

Data on lending to small businesses and farms, collected 

annually as of midyear, show that lending to small business 

accelerated during the last 12 months. Loans of less than $1 

million to C&I borrowers grew by $28.5 billion (9.6 percent) 

between June 30, 2006 and June 30, 2007. This is the largest 

increase for these loans in the 12 years for which growth data 

are available. The 9.6-percent growth rate is substantially 

greater than the 3.5-percent growth registered in the 2005 -

2006 period. The growth rates for loans to small businesses 

and farms remained below the growth rates of lending to larger borrowers, as has been the case throughout much of the 

period that small business loan data have been reported. 

Record Growth in Foreign Office Deposits 

Deposits in foreign offices increased by a record $143.3 billion (11.9 percent) during the quarter, as a few large banks 

shifted their funding away from deposits in domestic offices. 

Nondeposit liabilities increased by $128.3 billion (4.6 percent) during the quarter. Deposits in domestic offices 

declined by $3.2 billion (0.05 percent), the first time since 

Chart 7 

Small C & I Loans Had Strong Growth Over the 

Past Year 

12-Month Change ($ Billions) 

75 77 

13 

Large Businesses 

Small Businesses 

22 13 9 

-2 -9 -15 

-28 

-85 

91 

8 

75 

10 

71 

9 

28 

100 

75 

50 

25 

0 

-25 

-50 

-75 

-100 

1999 2000 2001 2002 2003 2004 2005 2006 2007 

the third quarter of 2003 that domestic deposits have fallen. 

Short-term (less than 1 year) nondeposit borrowings grew by 

$66.8 billion (14.9 percent) during the quarter at banks filing 

Call Reports. 

“Problem List” Registers Modest Increase 

The number of insured institutions reporting financial results 

fell from 8,649 in the first quarter to 8,615 in the second 

quarter, a net decline of 34 institutions. There were 48 new 

charters added during the second quarter, and 81 insured 

institutions were absorbed by mergers. No insured institution 

failed in the second quarter. During the quarter, two mutually-owned savings institutions, with $2.9 billion in combined 

assets, converted to stock ownership. The number of institutions on the FDIC’s “Problem List” increased from 53 to 61 

during the quarter, and total assets of “problem” institutions 

grew from $21.5 billion to $23.1 billion. At the end of the 

third quarter of 2006, there were 47 “problem” institutions, 

the fewest in at least 36 years. Since then, the number and 

assets of “problem” institutions have risen in each successive 

quarter, although they remain low by historical standards. 

Author: Ross Waldrop, Sr. Banking Analyst 

Division of Insurance and Research, FDIC 

(202) 898-3951 

Chart 8

Large Banks Funded Growth with Foreign Deposits 

Quarterly Change ($ Billions) 

150 

125 

100 

75 

50 

25 

0 

-25 

157 154 

143 140 

109 110 106 99 

90 

80 

67 64 

36 37 

16 18 14 8 6 

Deposits in Foreign Offices Deposits in Domestic Offices -3 

1 2 3 4 1 2 3 4 1 2 

2005 2006 2007 

FDIC QUARTERLY 4 2007, VOLUME 1, NO. 2 
 

 

Quarterly Banking Profile 

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

Return on assets (%) ................................................................ 1.21 1.34 1.28 1.30 1.28 1.38 1.30 

Return on equity (%) ................................................................. 11.49 12.97 12.31 12.73 13.20 15.05 14.08 

Core capital (leverage) ratio (%) ............................................... 8.18 8.23 8.23 8.25 8.11 7.88 7.86 

Noncurrent assets plus 

other real estate owned to assets (%) ................................... 0.61 0.47 0.53 0.50 0.53 0.75 0.90 

Net charge-offs to loans (%) ..................................................... 0.47 0.34 0.39 0.50 0.56 0.78 0.97 

Asset growth rate (%) ............................................................... 6.38 10.04 9.03 7.64 11.36 7.58 7.20 

Net interest margin (%) ............................................................. 3.33 3.45 3.31 3.50 3.52 3.73 3.96 

Net operating income growth (%) ............................................. -2.36 13.18 8.54 11.43 4.02 16.39 17.58 

Number of institutions reporting ................................................ 8,615 8,777 8,680 8,833 8,976 9,181 9,354 

Commercial banks ................................................................. 7,350 7,478 7,401 7,526 7,631 7,770 7,888 

Savings institutions ................................................................ 1,265 1,299 1,279 1,307 1,345 1,411 1,466 

Percentage of unprofitable institutions (%) ............................... 9.39 6.81 7.88 6.22 5.97 5.99 6.67 

Number of problem institutions ................................................. 61 50 50 52 80 116 136 

Assets of problem institutions (in billions) ................................. $23 $6 $8 $7 $28 $30 $39 

Number of failed/assisted institutions ....................................... 1 0 0 0 4 3 11 

* Excludes insured branches of foreign banks (IBAs). 

** Through June 30, ratios annualized where appropriate. Asset growth rates are for 12 months ending June 30. 

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

(dollar figures in millions) 

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

2nd Quarter 1st Quarter 2nd Quarter %Change 

2007 2007 2006 06:2-07:2 

8,615 8,649 8,777 -1.8 

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

CONDITION DATA 

2,220,904 2,223,357 2,198,688 1.0 

Total assets ......................................................................................................... $12,261,029 $11,981,172 $11,526,174 6.4 

Loans secured by real estate ........................................................................... 4,618,464 4,536,194 4,392,350 5.1 

1-4 Family residential mortgages .................................................................. 2,188,092 2,169,281 2,155,744 1.5 

Nonfarm nonresidential ................................................................................. 942,834 921,435 863,912 9.1 

Construction and development ...................................................................... 600,138 582,260 517,514 16.0 

Home equity lines .......................................................................................... 576,682 556,765 556,196 3.7 

Commercial & industrial loans .......................................................................... 1,300,571 1,249,282 1,157,134 12.4 

Loans to individuals .......................................................................................... 980,817 945,368 933,021 5.1 

Credit cards ................................................................................................... 372,853 354,159 374,348 -0.4 

Farm loans ....................................................................................................... 55,615 52,888 52,706 5.5 

Other loans & leases ........................................................................................ 512,946 495,542 527,255 -2.7 

Less: Unearned income ................................................................................... 3,068 2,288 2,460 24.7 

Total loans & leases ......................................................................................... 7,465,345 7,276,986 7,060,007 5.7 

Less: Reserve for losses .................................................................................. 81,198 78,643 77,918 4.2 

Net loans and leases ........................................................................................ 7,384,147 7,198,343 6,982,089 5.8 

Securities .......................................................................................................... 1,976,771 1,970,236 1,970,901 0.3 

Other real estate owned ................................................................................... 7,990 6,958 5,218 53.1 

Goodwill and other intangibles ......................................................................... 435,932 423,517 390,400 11.7 

All other assets ................................................................................................. 2,456,189 2,382,118 2,177,565 12.8 

Total liabilities and capital ................................................................................... 12,261,029 11,981,172 11,526,174 6.4 

Deposits ........................................................................................................... 8,035,257 7,895,117 7,504,805 7.1 

Domestic office deposits ............................................................................... 6,691,674 6,694,841 6,436,734 4.0 

Foreign office deposits .................................................................................. 1,343,583 1,200,276 1,068,070 25.8 

Other borrowed funds ....................................................................................... 2,248,685 2,174,393 2,217,951 1.4 

Subordinated debt ............................................................................................ 172,377 165,328 142,876 20.6 

All other liabilities .............................................................................................. 525,377 478,446 476,925 10.2 

Equity capital .................................................................................................... 1,279,333 1,267,888 1,183,616 8.1 

Loans and leases 30-89 days past due ............................................................... 74,433 70,396 55,167 34.9 

Noncurrent loans and leases ............................................................................... 66,944 60,549 49,138 36.2 

Restructured loans and leases ............................................................................ 3,277 2,872 3,365 -2.6 

Direct and indirect investments in real estate ...................................................... 1,081 1,033 1,122 -3.7 

Mortgage-backed securities ................................................................................ 1,217,859 1,196,292 1,213,804 0.3 

Earning assets ..................................................................................................... 10,720,947 10,513,956 10,056,268 6.6 

FHLB Advances .................................................................................................. 608,433 607,501 622,592 -2.3 

Unused loan commitments .................................................................................. 8,084,733 7,821,992 7,557,799 7.0 

Trust assets ......................................................................................................... 21,047,497 19,928,708 17,549,892 19.9 

Assets securitized and sold*** ............................................................................. 1,714,556 1,661,359 1,004,034 70.8 

Notional amount of derivatives*** ........................................................................ 153,825,897 146,085,265 120,205,407 28.0 

INCOME DATA 

First Half First Half 2nd Quarter 2nd Quarter %Change 

2007 2006 %Change 2007 2006 06:2-07:2 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

$357,622 $314,081 13.9 $181,788 $162,982 11.5 

182,850 145,487 25.7 93,234 77,272 20.7 

174,772 168,594 3.7 88,554 85,710 3.3 

20,541 12,400 65.7 11,351 6,475 75.3 

130,241 123,410 5.5 68,013 62,417 9.0 

178,099 169,364 5.2 90,635 85,040 6.6 

2,186 948 130.7 597 278 114.2 

35,079 36,830 -4.8 17,970 19,157 -6.2 

-829 468 NM -474 275 NM 

72,652 74,826 -2.9 36,734 38,007 -3.4 

17,294 11,517 50.2 9,164 6,060 51.2 

66,973 40,505 65.3 40,837 21,662 88.5 

5,679 34,320 -83.5 -4,104 16,346 NM 

72,001 73,745 -2.4 36,823 37,551 -1.9 

*** Call Report filers only. NM - Not Meaningful 

FDIC QUARTERLY 5 2007, VOLUME 1, NO. 2 
TABLE III-A. Second Quarter 2007, All FDIC-Insured Institutions 

SECOND QUARTER 

(The way it is...) 

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

All Insured 

Institutions 

Asset Concentration Groups* 

Credit Card 

Banks 

International 

Banks 

Agricultural 

Banks 

Commercial 

Lenders 

Mortgage 

Lenders 

Consumer 

Lenders 

Other 

Specialized 

<$1 Billion 

All Other 

<$1 Billion 

All Other 

>$1 Billion 

8,615 26 4 1,645 4,731 804 119 378 851 57 

Commercial banks .............................................. 7,350 24 4 1,640 4,262 181 87 331 777 44 

Savings institutions ............................................. 1,265 2 0 5 469 623 32 47 74 13 

Total assets (in billions) ......................................... $12,261.0 $395.0 $2,544.3 $155.6 $4,789.4 $1,550.8 $117.7 $42.4 $113.1 $2,552.7 

Commercial banks .............................................. 10,411.0 393.3 2,544.3 155.2 4,323.2 327.1 48.7 34.3 97.3 2,487.6 

Savings institutions ............................................. 1,850.0 1.7 0.0 0.5 466.1 1,223.8 69.0 8.1 15.8 65.1 

Total deposits (in billions) ...................................... 8,035.3 109.7 1,512.2 126.8 3,457.3 970.0 83.0 30.2 93.3 1,652.8 

Commercial banks .............................................. 6,865.3 108.8 1,512.2 126.4 3,152.3 192.7 37.3 24.7 80.7 1,630.2 

Savings institutions ............................................. 1,169.9 0.9 0.0 0.4 305.0 777.3 45.7 5.6 12.6 22.6 

Net income (in millions) .......................................... 36,734 3,293 6,172 488 13,799 3,517 882 251 317 8,015 

Commercial banks .............................................. 31,915 3,264 6,172 487 12,607 861 305 166 292 7,759 

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

Performance Ratios (annualized,%) 

4,819 29 0 1 1,191 2,655 576 85 24 256 

Yield on earning assets .......................................... 6.85 12.83 6.24 7.21 7.11 6.59 8.71 5.54 6.53 6.20 

Cost of funding earning assets .............................. 3.51 4.54 3.69 3.20 3.40 3.89 2.81 2.51 2.83 3.28 

Net interest margin .............................................. 3.34 8.30 2.55 4.01 3.71 2.70 5.90 3.04 3.70 2.92 

Noninterest income to assets ................................. 2.25 10.37 2.49 0.69 1.63 1.23 2.93 10.05 1.26 2.50 

Noninterest expense to assets ............................... 2.99 8.09 2.87 2.70 2.91 2.18 4.24 9.13 3.18 2.81 

Loan and lease loss provision to assets ................ 0.37 3.42 0.32 0.15 0.26 0.24 1.10 0.07 0.11 0.24 

Net operating income to assets ............................. 1.22 3.34 1.02 1.28 1.20 0.83 1.98 2.34 1.10 1.29 

Pretax return on assets .......................................... 1.81 5.31 1.43 1.52 1.70 1.40 4.76 3.58 1.40 1.95 

Return on assets .................................................... 1.21 3.34 0.99 1.27 1.16 0.91 3.04 2.36 1.12 1.28 

Return on equity ..................................................... 11.54 13.97 12.96 11.54 10.82 8.92 22.06 11.26 10.07 12.05 

Net charge-offs to loans and leases ...................... 0.50 3.89 0.60 0.15 0.30 0.25 1.85 0.25 0.18 0.32 

Loan and lease loss provision to net charge-offs ... 123.87 121.05 122.90 151.80 124.87 136.64 75.09 118.13 108.37 141.48 

Efficiency ratio ........................................................ 56.52 44.39 60.63 61.19 57.94 57.84 49.93 71.05 67.83 55.05 

% of unprofitable institutions .................................. 9.56 11.54 0.00 3.77 11.01 12.81 7.56 24.60 3.76 1.75 

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

Structural Changes 

49.07 57.69 75.00 55.87 49.86 32.21 57.14 41.27 49.12 52.63 

New Charters ...................................................... 48 0 0 2 13 2 0 31 0 0 

Institutions absorbed by mergers ........................ 81 0 0 6 68 2 0 0 1 4 

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

PRIOR SECOND QUARTERS 

(The way it was...) 

0 0 0 0 0 0 0 0 0 0 

Return on assets (%) .................................. 2006 1.34 4.64 1.01 1.31 1.33 1.07 1.79 2.74 1.02 1.29 

................................... 2004 1.31 4.08 0.68 1.27 1.36 1.21 1.54 1.28 1.10 1.33 

................................... 2002 1.37 3.68 1.17 1.30 1.28 1.28 1.60 1.69 1.20 1.35 

Net charge-offs to loans & leases (%) ..........2006 0.35 3.43 0.59 0.17 0.17 0.13 0.92 0.56 0.18 0.19 

................................... 2004 0.58 5.08 0.99 0.18 0.32 0.11 1.15 0.41 0.29 0.31 

................................... 2002 0.94 5.78 1.48 0.30 0.73 0.17 1.00 0.67 0.31 0.70 

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

FDIC QUARTERLY 6 2007, VOLUME 1, NO. 2 
 

Quarterly Banking Profile 

TABLE III-A. Second Quarter 2007, All FDIC-Insured Institutions 

SECOND QUARTER 

(The way it is...) 

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

All 

Insured 

Institutions 

Asset Size Distribution Geographic Regions* 

Less 

than 

$100 Million 

$100 Million 

to 

$1 Billion 

$1 Billion 

to 

$10 Billion 

Greater 

than $10 

Billion New York Atlanta Chicago 

Kansas 

City Dallas 

San 

Francisco 

8,615 3,583 4,370 539 123 1,071 1,215 1,807 2,000 1,750 772 

Commercial banks ............................................... 7,350 3,197 3,649 413 91 564 1,070 1,490 1,895 1,628 703 

Savings institutions .............................................. 1,265 386 721 126 32 507 145 317 105 122 69 

Total assets (in billions) .......................................... $12,261.0 $189.8 $1,294.4 $1,411.7 $9,365.1 $2,261.5 $3,004.4 $2,830.9 $910.0 $674.4 $2,579.8 

Commercial banks ............................................... 10,411.0 169.9 1,046.3 1,086.0 8,108.8 1,609.3 2,731.6 2,676.0 872.2 564.9 1,957.0 

Savings institutions .............................................. 1,850.0 19.9 248.2 325.7 1,256.3 652.1 272.8 154.9 37.8 109.5 622.8 

Total deposits (in billions) ....................................... 8,035.3 155.0 1,041.3 1,020.0 5,818.9 1,446.5 2,006.6 1,768.3 642.5 513.1 1,658.3 

Commercial banks ............................................... 6,865.3 139.8 853.0 788.3 5,084.2 1,011.1 1,830.3 1,657.5 616.2 444.3 1,306.0 

Savings institutions .............................................. 1,169.9 15.2 188.3 231.7 734.8 435.4 176.3 110.8 26.3 68.8 352.4 

Net income (in millions) .......................................... 36,734 413 3,701 3,880 28,740 5,811 9,447 7,386 3,416 1,932 8,742 

Commercial banks ............................................... 31,915 394 3,144 3,387 24,990 4,608 9,043 7,122 3,358 1,630 6,154 

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

Performance Ratios (annualized,%) 

4,819 19 557 493 3,751 1,203 404 263 58 302 2,589 

Yield on earning assets .......................................... 6.85 7.08 7.20 7.15 6.75 6.89 6.64 6.31 7.64 7.24 7.28 

Cost of funding earning assets ............................... 3.51 2.97 3.29 3.43 3.57 3.52 3.52 3.48 3.27 3.32 3.67 

Net interest margin .............................................. 3.34 4.12 3.90 3.72 3.18 3.37 3.12 2.82 4.37 3.92 3.60 

Noninterest income to assets ................................. 2.25 1.31 1.26 1.56 2.51 2.41 1.98 2.25 3.51 1.42 2.18 

Noninterest expense to assets ............................... 2.99 3.82 3.14 2.99 2.96 3.18 2.64 2.88 4.28 3.20 2.87 

Loan and lease loss provision to assets ................. 0.37 0.18 0.18 0.30 0.42 0.60 0.21 0.26 0.74 0.23 0.41 

Net operating income to assets .............................. 1.22 0.86 1.14 1.11 1.25 1.04 1.23 1.07 1.55 1.14 1.41 

Pretax return on assets .......................................... 1.81 1.12 1.55 1.66 1.88 1.57 1.91 1.55 2.27 1.53 2.08 

Return on assets .................................................... 1.21 0.88 1.15 1.11 1.24 1.04 1.27 1.05 1.54 1.16 1.37 

Return on equity ..................................................... 11.54 6.47 10.98 9.84 12.03 8.27 12.79 11.59 15.01 10.91 12.49 

Net charge-offs to loans and leases ....................... 0.50 0.14 0.18 0.33 0.59 0.84 0.26 0.37 0.63 0.23 0.64 

Loan and lease loss provision to net charge-offs ... 123.87 204.40 143.59 133.32 121.46 124.39 129.97 131.00 165.65 157.51 97.95 

Efficiency ratio ........................................................ 56.52 74.64 64.20 58.61 54.88 57.03 54.83 59.75 57.19 63.76 52.63 

% of unprofitable institutions .................................. 9.56 15.80 5.38 3.53 3.25 13.17 13.91 8.25 6.00 7.03 15.80 

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

Structural Changes 

49.07 47.25 50.57 49.35 47.15 40.06 42.88 46.21 53.10 55.89 52.07 

New Charters ...................................................... 48 47 1 0 0 5 10 3 2 14 14 

Institutions absorbed by mergers ........................ 81 26 48 7 0 21 12 16 10 12 10 

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

PRIOR SECOND QUARTERS 

(The way it was...) 

0 0 0 0 0 0 0 0 0 0 0 

Return on assets (%) ................................... 2006 1.34 1.02 1.26 1.34 1.36 1.28 1.32 1.09 1.63 1.29 1.78 

................................... 2004 1.31 0.98 1.17 1.46 1.32 1.08 1.40 1.36 1.53 1.31 1.59 

................................... 2002 1.37 1.06 1.20 1.38 1.42 1.25 1.35 1.35 1.60 1.50 1.57 

Net charge-offs to loans & leases (%) ........ 2006 0.35 0.15 0.15 0.20 0.42 0.56 0.15 0.23 0.37 0.22 0.54 

................................... 2004 0.58 0.23 0.23 0.45 0.68 0.85 0.32 0.41 0.76 0.39 0.61 

................................... 2002 0.94 0.31 0.35 0.73 1.16 1.40 0.72 0.73 1.21 0.39 0.83 

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

FDIC QUARTERLY 7 2007, VOLUME 1, NO. 2 
TABLE IV-A. First Half 2007, All FDIC-Insured Institutions 

FIRST HALF 

(The way it is...) 

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

All Insured 

Institutions 

Asset Concentration Groups* 

Credit Card 

Banks 

International 

Banks 

Agricultural 

Banks 

Commercial 

Lenders 

Mortgage 

Lenders 

Consumer 

Lenders 

Other 

Specialized 

<$1 Billion 

All Other 

<$1 Billion 

All Other 

>$1 Billion 

8,615 26 4 1,645 4,731 804 119 378 851 57 

Commercial banks ............................................... 7,350 24 4 1,640 4,262 181 87 331 777 44 

Savings institutions .............................................. 1,265 2 0 5 469 623 32 47 74 13 

Total assets (in billions) .......................................... $12,261.0 $395.0 $2,544.3 $155.6 $4,789.4 $1,550.8 $117.7 $42.4 $113.1 $2,552.7 

Commercial banks ............................................... 10,411.0 393.3 2,544.3 155.2 4,323.2 327.1 48.7 34.3 97.3 2,487.6 

Savings institutions .............................................. 1,850.0 1.7 0.0 0.5 466.1 1,223.8 69.0 8.1 15.8 65.1 

Total deposits (in billions) ....................................... 8,035.3 109.7 1,512.2 126.8 3,457.3 970.0 83.0 30.2 93.3 1,652.8 

Commercial banks ............................................... 6,865.3 108.8 1,512.2 126.4 3,152.3 192.7 37.3 24.7 80.7 1,630.2 

Savings institutions .............................................. 1,169.9 0.9 0.0 0.4 305.0 777.3 45.7 5.6 12.6 22.6 

Net income (in millions) .......................................... 72,652 7,002 11,736 935 27,433 7,010 1,448 477 607 16,003 

Commercial banks ............................................... 63,338 6,955 11,736 933 25,224 1,598 586 317 563 15,425 

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

Performance Ratios (annualized,%) 

9,315 47 0 2 2,210 5,412 862 160 44 578 

Yield on earning assets .......................................... 6.81 12.67 6.15 7.10 7.06 6.59 8.64 5.48 6.47 6.17 

Cost of funding earning assets ............................... 3.48 4.46 3.64 3.15 3.36 3.87 2.99 2.49 2.80 3.25 

Net interest margin .............................................. 3.33 8.21 2.51 3.96 3.70 2.71 5.65 2.99 3.67 2.92 

Noninterest income to assets ................................. 2.17 10.00 2.52 0.67 1.55 1.05 2.80 9.45 1.23 2.42 

Noninterest expense to assets ............................... 2.96 7.90 2.92 2.68 2.86 2.09 4.27 8.70 3.17 2.81 

Loan and lease loss provision to assets ................. 0.34 2.94 0.35 0.15 0.23 0.20 1.37 0.07 0.10 0.19 

Net operating income to assets .............................. 1.20 3.51 0.96 1.23 1.20 0.79 1.53 2.21 1.06 1.28 

Pretax return on assets ........................................... 1.79 5.49 1.40 1.47 1.69 1.40 3.93 3.39 1.35 1.94 

Return on assets ..................................................... 1.21 3.51 0.96 1.23 1.16 0.91 2.54 2.25 1.08 1.29 

Return on equity ..................................................... 11.49 14.84 12.53 11.23 10.83 8.96 18.18 10.73 9.70 12.02 

Net charge-offs to loans and leases ....................... 0.47 3.84 0.58 0.15 0.26 0.24 1.85 0.23 0.16 0.31 

Loan and lease loss provision to net charge-offs ... 118.77 105.61 137.31 156.26 127.37 123.74 93.08 125.49 108.70 114.33 

Efficiency ratio ........................................................ 57.03 44.65 61.73 61.68 57.96 58.30 52.70 71.25 68.62 55.97 

% of unprofitable institutions ................................... 9.39 11.54 0.00 3.53 10.82 13.18 7.56 23.28 3.76 1.75 

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

Condition Ratios(%) 

49.66 46.15 50.00 54.59 52.25 27.86 47.90 43.12 49.47 50.88 

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

Loss Allowance to: 

87.44 77.95 85.23 91.72 88.69 91.24 92.10 88.01 91.95 85.77 

Loans and leases ................................................ 1.09 3.96 1.11 1.33 1.13 0.52 1.59 1.30 1.20 0.75 

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

Noncurrent assets plus 

121.29 220.95 131.52 128.24 133.97 51.94 201.32 153.06 135.61 93.16 

other real estate owned to assets ........................ 0.61 1.31 0.41 0.80 0.68 0.81 0.63 0.23 0.60 0.46 

Equity capital ratio .................................................. 10.43 23.88 7.64 11.15 10.68 10.22 13.72 21.02 11.10 10.40 

Core capital (leverage) ratio ................................... 8.18 15.06 5.89 10.49 8.46 8.22 12.73 19.09 10.97 8.31 

Tier 1 risk-based capital ratio .................................. 10.38 13.77 8.01 13.81 9.75 13.15 15.26 43.86 18.07 10.94 

Total risk-based capital ratio ................................... 12.87 16.87 11.55 14.89 11.98 14.84 16.27 44.90 19.22 13.42 

Net loans and leases to deposits ............................ 91.90 252.58 73.71 82.19 96.44 111.05 110.27 32.08 68.07 79.40 

Net loans to total assets ......................................... 60.22 70.14 43.81 66.96 69.61 69.46 77.73 22.89 56.13 51.41 

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

Structural Changes 

54.58 25.33 26.83 81.47 69.12 62.44 69.28 69.00 82.40 50.91 

New Charters ....................................................... 89 1 0 3 25 2 0 58 0 0 

Institutions absorbed by mergers ........................ 153 1 0 14 121 6 1 1 2 7 

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

PRIOR FIRST HALVES 

(The way it was...) 

1 0 0 0 0 1 0 0 0 0 

Number of institutions .................................. 2006 8,777 29 5 1,681 4,708 861 123 404 910 56 

................................... 2004 9,078 36 6 1,775 4,350 997 144 488 1,195 87 

................................... 2002 9,466 47 6 1,892 4,079 1,168 216 440 1,526 92 

Total assets (in billions) ............................... 2006 $11,526.2 $376.8 $2,097.8 $146.6 $4,552.3 $1,765.2 $97.5 $45.3 $117.1 $2,327.6 

................................... 2004 9,648.5 334.4 1,554.5 135.7 3,031.1 1,402.0 160.7 57.1 155.6 2,817.4 

................................... 2002 8,039.0 299.4 1,294.8 123.3 3,356.5 1,191.8 163.2 48.4 189.7 1,371.8 

Return on assets (%) ................................... 2006 1.34 4.58 1.08 1.29 1.33 1.06 2.00 0.88 1.02 1.27 

................................... 2004 1.33 3.97 0.89 1.26 1.35 1.22 1.58 1.36 1.10 1.29 

................................... 2002 1.34 3.44 0.99 1.28 1.30 1.29 1.52 1.31 1.19 1.33 

Net charge-offs to loans & leases (%) ......... 2006 0.34 3.14 0.55 0.14 0.17 0.12 0.94 0.74 0.15 0.19 

................................... 2004 0.60 5.03 1.13 0.15 0.32 0.12 1.29 0.50 0.27 0.29 

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

Noncurrent assets plus 

0.96 6.42 1.49 0.24 0.67 0.16 1.04 0.51 0.28 0.76 

OREO to assets (%) ................................. 2006 0.47 1.28 0.40 0.67 0.46 0.54 0.60 0.21 0.53 0.36 

................................... 2004 0.60 1.33 0.75 0.80 0.59 0.58 0.79 0.30 0.64 0.43 

................................... 2002 0.91 1.54 1.16 0.94 0.89 0.66 1.22 0.35 0.68 0.82 

Equity capital ratio (%) ................................. 2006 10.27 27.09 8.05 10.73 10.20 10.64 9.92 21.35 10.79 9.13 

................................... 2004 9.50 18.01 7.18 10.52 9.35 8.65 7.99 16.25 10.38 10.23 

................................... 2002 9.25 15.64 7.20 10.82 9.62 9.10 8.56 17.55 10.53 8.46 

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

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

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

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

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

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

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

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

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

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

activity with no identified asset concentrations. 

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

activity with no identified asset concentrations. 

FDIC QUARTERLY 8 2007, VOLUME 1, NO. 2 
 

Quarterly Banking Profile 

TABLE IV-A. First Half 2007, All FDIC-Insured Institutions 

FIRST HALF 

(The way it is...) 

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

All 

Insured 

Institutions 

Asset Size Distribution Geographic Regions* 

Less 

than $100 

Million 

$100 Million 

to 

$1 Billion 

$1 Billion 

to 

$10 Billion 

Greater 

than $10 

Billion New York Atlanta Chicago 

Kansas 

City Dallas 

San 

Francisco 

8,615 3,583 4,370 539 123 1,071 1,215 1,807 2,000 1,750 772 

Commercial banks ............................................... 7,350 3,197 3,649 413 91 564 1,070 1,490 1,895 1,628 703 

Savings institutions .............................................. 1,265 386 721 126 32 507 145 317 105 122 69 

Total assets (in billions) .......................................... $12,261.0 $189.8 $1,294.4 $1,411.7 $9,365.1 $2,261.5 $3,004.4 $2,830.9 $910.0 $674.4 $2,579.8 

Commercial banks ............................................... 10,411.0 169.9 1,046.3 1,086.0 8,108.8 1,609.3 2,731.6 2,676.0 872.2 564.9 1,957.0 

Savings institutions .............................................. 1,850.0 19.9 248.2 325.7 1,256.3 652.1 272.8 154.9 37.8 109.5 622.8 

Total deposits (in billions) ....................................... 8,035.3 155.0 1,041.3 1,020.0 5,818.9 1,446.5 2,006.6 1,768.3 642.5 513.1 1,658.3 

Commercial banks ............................................... 6,865.3 139.8 853.0 788.3 5,084.2 1,011.1 1,830.3 1,657.5 616.2 444.3 1,306.0 

Savings institutions .............................................. 1,169.9 15.2 188.3 231.7 734.8 435.4 176.3 110.8 26.3 68.8 352.4 

Net income (in millions) .......................................... 72,652 809 7,085 7,853 56,905 11,875 18,519 14,791 7,184 3,748 16,535 

Commercial banks ............................................... 63,338 774 6,143 6,752 49,669 9,664 17,531 14,289 7,055 3,199 11,602 

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

Performance Ratios (annualized,%) 

9,315 35 943 1,101 7,237 2,211 989 502 130 550 4,933 

Yield on earning assets .......................................... 6.81 6.98 7.13 7.10 6.71 6.85 6.61 6.27 7.58 7.16 7.21 

Cost of funding earning assets ............................... 3.48 2.91 3.25 3.39 3.54 3.48 3.48 3.45 3.21 3.28 3.66 

Net interest margin .............................................. 3.33 4.07 3.88 3.71 3.17 3.37 3.13 2.82 4.36 3.88 3.56 

Noninterest income to assets ................................. 2.17 1.29 1.20 1.52 2.42 2.32 1.90 2.20 3.46 1.39 2.07 

Noninterest expense to assets ............................... 2.96 3.77 3.12 2.93 2.93 3.13 2.63 2.84 4.24 3.17 2.84 

Loan and lease loss provision to assets ................. 0.34 0.17 0.17 0.28 0.38 0.52 0.16 0.24 0.63 0.20 0.45 

Net operating income to assets .............................. 1.20 0.86 1.10 1.13 1.23 1.06 1.23 1.07 1.64 1.13 1.30 

Pretax return on assets .......................................... 1.79 1.11 1.50 1.69 1.86 1.60 1.88 1.57 2.37 1.50 1.98 

Return on assets .................................................... 1.21 0.86 1.11 1.13 1.24 1.07 1.26 1.06 1.64 1.13 1.31 

Return on equity ..................................................... 11.49 6.37 10.62 10.09 11.98 8.50 12.58 11.67 15.76 10.74 11.95 

Net charge-offs to loans and leases ....................... 0.47 0.14 0.15 0.29 0.56 0.82 0.24 0.34 0.63 0.21 0.60 

Loan and lease loss provision to net charge-offs ... 118.77 188.79 157.13 140.20 114.67 110.62 109.60 127.20 140.03 149.47 115.86 

Efficiency ratio ........................................................ 57.03 74.71 64.99 58.40 55.46 57.32 55.75 59.81 57.22 64.17 53.55 

% of unprofitable institutions .................................. 9.39 15.91 4.97 3.53 2.44 14.10 13.33 8.30 5.70 6.34 15.67 

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

Condition Ratios (%) 

49.66 48.06 51.30 47.87 45.53 37.82 47.82 44.88 51.60 58.74 54.53 

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

Loss Allowance to: 

87.44 92.01 91.90 90.79 86.22 87.08 86.98 87.09 87.03 89.64 88.24 

Loans and leases ................................................ 1.09 1.30 1.15 1.19 1.05 1.43 0.87 1.16 1.21 1.09 0.95 

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

Noncurrent assets plus 

121.29 125.22 130.32 138.77 116.75 146.56 145.77 116.78 87.68 131.86 104.13 

other real estate owned to assets ....................... 0.61 0.80 0.75 0.67 0.58 0.58 0.42 0.63 1.11 0.65 0.66 

Equity capital ratio .................................................. 10.43 13.43 10.48 11.28 10.24 12.47 9.84 9.01 9.99 10.57 11.02 

Core capital (leverage) ratio ................................... 8.18 13.41 10.07 9.57 7.59 9.10 7.39 7.30 8.34 8.80 9.04 

Tier 1 risk-based capital ratio ................................. 10.38 19.58 13.45 12.22 9.53 12.39 9.22 8.84 9.66 11.80 11.88 

Total risk-based capital ratio .................................. 12.87 20.63 14.57 13.51 12.40 14.39 11.63 11.67 12.27 13.16 14.68 

Net loans and leases to deposits ........................... 91.90 76.51 86.18 94.78 92.82 87.65 92.39 87.28 98.46 83.86 99.87 

Net loans to total assets ......................................... 60.22 62.46 69.33 68.49 57.68 56.06 61.70 54.52 69.52 63.80 64.20 

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

Structural Changes 

54.58 81.63 80.33 71.66 47.89 55.41 58.58 51.31 65.26 75.26 43.59 

New Charters ...................................................... 89 84 4 1 0 12 22 7 4 21 23 

Institutions absorbed by mergers ........................ 153 56 83 14 0 32 20 29 23 29 20 

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

PRIOR FIRST HALVES 

(The way it was...) 

1 1 0 0 0 1 0 0 0 0 0 

Number of institutions ................................... 2006 8,777 3,805 4,332 518 122 1,103 1,234 1,864 2,043 1,777 756 

................................... 2004 9,078 4,277 4,217 468 116 1,148 1,228 1,990 2,120 1,846 746 

................................... 2002 9,466 4,918 4,002 446 100 1,235 1,245 2,086 2,192 1,923 785 

Total assets (in billions) ................................ 2006 $11,526.2 $198.6 $1,269.5 $1,422.7 $8,635.4 $2,952.0 $2,861.6 $2,679.3 $825.3 $631.4 $1,576.6 

................................... 2004 9,648.5 221.4 1,172.2 1,293.6 6,961.4 3,326.1 2,041.3 1,701.8 760.3 578.1 1,240.8 

................................... 2002 8,039.0 247.5 1,083.4 1,292.9 5,415.2 2,762.6 1,614.6 1,514.1 420.5 555.5 1,171.6 

Return on assets (%) .................................... 2006 1.34 0.99 1.18 1.34 1.37 1.29 1.32 1.09 1.62 1.30 1.75 

................................... 2004 1.33 0.99 1.17 1.47 1.34 1.15 1.37 1.37 1.52 1.33 1.58 

................................... 2002 1.34 1.02 1.16 1.39 1.38 1.20 1.35 1.34 1.57 1.43 1.53 

Net charge-offs to loans & leases (%) .......... 2006 0.34 0.13 0.13 0.19 0.40 0.51 0.15 0.23 0.36 0.19 0.53 

................................... 2004 0.60 0.20 0.23 0.41 0.72 0.86 0.34 0.42 0.82 0.36 0.63 

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

Noncurrent assets plus 

0.96 0.26 0.31 0.70 1.20 1.47 0.68 0.75 1.21 0.39 0.81 

OREO to assets (%) ................................... 2006 0.47 0.70 0.52 0.45 0.47 0.41 0.29 0.51 0.82 0.64 0.62 

................................... 2004 0.60 0.83 0.62 0.55 0.60 0.61 0.42 0.73 0.63 0.67 0.65 

................................... 2002 0.91 0.87 0.72 0.71 1.00 1.02 0.79 1.02 0.82 0.83 0.74 

Equity capital ratio (%) .................................. 2006 10.27 12.51 10.22 10.90 10.12 11.03 9.49 8.92 10.62 10.14 12.41 

................................... 2004 9.50 11.49 9.90 10.49 9.19 9.65 8.32 8.56 10.28 9.49 11.91 

................................... 2002 9.25 11.28 10.03 9.96 8.82 8.84 9.36 8.82 10.17 9.77 10.01 

* Regions: 

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

Rhode Island, Vermont, U.S. Virgin Islands 

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

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

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

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

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

FDIC QUARTERLY 9 2007, VOLUME 1, NO. 2 
TABLE V-A. Loan Performance, All FDIC-Insured Institutions 

June 30, 2007 

All Insured 

Institutions 

Asset Concentration Groups* 

Credit Card 

Banks 

International 

Banks 

Agricultural 

Banks 

Commercial 

Lenders 

Mortgage 

Lenders 

Consumer 

Lenders 

Other 

Specialized 

<$1 Billion 

All Other 

<$1 Billion 

All Other 

>$1 Billion 

Percent of Loans 30-89 Days Past Due 

All loans secured by real estate ....................................... 1.02 3.36 1.47 1.22 0.88 1.20 0.64 1.05 1.40 0.88 

Construction and development ..................................... 1.04 0.00 1.24 2.21 1.01 1.61 0.67 0.94 1.14 0.78 

Nonfarm nonresidential ................................................. 0.52 0.00 0.28 1.15 0.55 0.52 0.92 0.59 1.13 0.25 

Multifamily residential real estate .................................. 0.44 0.00 0.31 0.80 0.53 0.23 0.52 2.41 0.45 0.42 

Home equity loans ........................................................ 0.72 2.39 0.68 0.49 0.61 0.85 0.47 0.64 0.82 0.79 

Other 1-4 family residential ........................................... 1.37 7.40 2.00 1.66 1.27 1.34 0.71 1.26 1.65 1.15 

Commercial and industrial loans ...................................... 0.58 2.53 0.49 1.55 0.59 0.62 0.96 1.23 1.44 0.34 

Loans to individuals ......................................................... 1.76 2.14 1.99 2.07 1.46 1.11 1.66 2.21 2.02 1.62 

Credit card loans ........................................................... 2.11 2.16 2.29 0.95 1.88 1.64 2.09 3.90 0.93 1.96 

Other loans to individuals .............................................. 1.55 2.00 1.86 2.14 1.39 0.86 1.50 2.03 2.07 1.55 

All other loans and leases (including farm) ...................... 0.45 0.11 0.51 0.83 0.57 0.55 0.10 0.65 0.72 0.20 

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

Percent of Loans Noncurrent** 

1.00 2.05 1.17 1.23 0.85 1.17 1.29 1.22 1.44 0.79 

All real estate loans .......................................................... 1.01 2.40 1.16 1.12 0.95 1.03 0.33 0.87 0.90 1.08 

Construction and development ..................................... 1.29 0.00 0.99 2.19 1.25 1.82 1.32 2.37 1.71 1.29 

Nonfarm nonresidential ................................................. 0.63 0.00 0.53 1.38 0.64 0.69 0.46 0.97 1.10 0.48 

Multifamily residential real estate .................................. 0.66 0.00 0.43 0.68 0.86 0.30 0.07 0.24 1.40 0.41 

Home equity loans ........................................................ 0.50 1.43 0.42 0.36 0.41 0.71 0.03 0.69 0.41 0.52 

Other 1-4 family residential ........................................... 1.26 6.39 1.46 0.91 1.24 1.11 0.45 0.65 0.76 1.52 

Commercial and industrial loans ...................................... 0.62 2.01 0.36 1.46 0.68 0.66 0.83 1.54 1.19 0.49 

Loans to individuals ......................................................... 1.12 1.91 1.43 0.69 0.64 0.56 1.01 0.59 0.63 0.60 

Credit card loans ........................................................... 1.85 1.94 1.96 0.83 1.44 1.33 1.92 1.07 0.63 1.68 

Other loans to individuals .............................................. 0.68 1.68 1.19 0.68 0.52 0.20 0.66 0.54 0.63 0.38 

All other loans and leases (including farm) ...................... 0.24 0.02 0.10 0.70 0.32 2.09 0.03 0.23 0.69 0.16 

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

Percent of Loans Charged-off (net, YTD) 

0.90 1.79 0.84 1.04 0.84 1.00 0.79 0.85 0.88 0.81 

All real estate loans .......................................................... 0.13 1.77 0.25 0.04 0.14 0.11 0.15 0.05 0.04 0.09 

Construction and development ..................................... 0.13 0.00 -0.02 0.12 0.14 0.14 0.38 0.12 0.08 0.05 

Nonfarm nonresidential ................................................. 0.10 0.00 0.03 0.06 0.12 0.03 0.03 0.04 0.07 0.02 

Multifamily residential real estate .................................. 0.11 0.00 0.32 -0.01 0.13 0.01 0.00 0.00 0.05 0.06 

Home equity loans ........................................................ 0.27 1.89 0.30 0.10 0.24 0.36 0.10 0.01 0.03 0.25 

Other 1-4 family residential ........................................... 0.12 1.38 0.25 0.07 0.13 0.09 0.19 0.05 0.04 0.05 

Commercial and industrial loans ...................................... 0.39 4.45 0.08 0.53 0.35 0.38 3.03 0.33 0.37 0.33 

Loans to individuals ......................................................... 2.38 4.12 2.61 0.58 1.15 2.28 2.48 0.81 0.60 1.49 

Credit card loans ........................................................... 3.99 4.12 2.98 2.85 3.68 5.77 4.74 4.37 3.18 3.80 

Other loans to individuals .............................................. 1.36 4.09 2.45 0.44 0.79 0.53 1.51 0.40 0.46 0.99 

All other loans and leases (including farm) ...................... 0.14 0.00 0.00 0.00 0.28 0.52 0.35 0.46 0.22 0.17 

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

Loans Outstanding (in billions) 

0.47 3.84 0.58 0.15 0.26 0.24 1.85 0.23 0.16 0.31 

All real estate loans .......................................................... $4,618.5 $1.7 $467.6 $58.7 $2,272.4 $987.5 $26.2 $6.3 $45.3 $752.7 

Construction and development ..................................... 600.1 0.0 8.2 5.7 501.7 27.0 0.6 0.5 3.0 53.3 

Nonfarm nonresidential ................................................. 942.8 0.0 29.1 16.1 717.8 46.7 2.1 1.7 10.8 118.6 

Multifamily residential real estate .................................. 190.0 0.0 11.3 1.0 114.2 47.3 0.2 0.1 0.8 14.9 

Home equity loans ........................................................ 576.7 1.4 90.8 1.1 200.8 109.5 9.0 0.3 1.6 162.2 

Other 1-4 family residential ........................................... 2,188.1 0.3 279.8 15.4 699.7 756.5 14.1 3.5 26.1 392.6 

Commercial and industrial loans ...................................... 1,300.6 26.9 268.1 14.9 680.9 32.5 9.2 1.2 6.6 260.3 

Loans to individuals ......................................................... 980.8 239.7 203.1 6.6 245.7 56.4 56.7 1.5 8.0 163.1 

Credit card loans ........................................................... 372.9 216.1 62.4 0.4 31.5 18.0 15.8 0.1 0.3 28.2 

Other loans to individuals .............................................. 608.0 23.7 140.7 6.2 214.2 38.4 40.9 1.4 7.7 134.8 

All other loans and leases (including farm) ...................... 568.6 20.1 189.7 25.3 174.4 6.5 1.0 0.8 4.4 146.3 

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

Memo: Other Real Estate Owned (in millions) 

7,468.4 288.5 1,128.4 105.6 3,373.4 1,082.9 93.1 9.8 64.3 1,322.4 

All other real estate owned .............................................. 7,990.0 0.9 821.9 149.9 4,114.3 1,758.3 9.2 14.2 115.1 1,006.4 

Construction and development ..................................... 960.7 0.0 0.0 22.6 798.0 95.1 0.8 0.7 16.0 27.4 

Nonfarm nonresidential ................................................. 1,308.9 0.1 6.0 56.7 1,062.1 62.7 4.7 8.1 45.6 63.0 

Multifamily residential real estate .................................. 234.6 0.0 0.0 4.6 197.5 9.9 0.0 0.0 6.8 15.7 

1-4 family residential ..................................................... 4,238.4 0.8 295.9 38.5 1,799.3 1,567.9 12.3 5.0 43.4 475.3 

Farmland ....................................................................... 72.9 0.0 0.0 27.3 34.8 5.4 0.0 0.6 3.2 1.6 

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

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

FDIC QUARTERLY 10 2007, VOLUME 1, NO. 2 
 

Quarterly Banking Profile 

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

June 30, 2007 

All 

Insured 

Institutions 

Asset Size Distribution Geographic Regions* 

Less 

than 

$100 Million 

$100 Million 

to 

$1 Billion 

$1 Billion 

to 

$10 Billion 

Greater 

than $10 

Billion New York Atlanta Chicago 

Kansas 

City Dallas 

San 

Francisco 

Percent of Loans 30-89 Days Past Due 

All loans secured by real estate ............................. 1.02 1.41 0.99 0.72 1.09 0.75 0.91 1.14 0.94 1.04 1.27 

Construction and development ........................... 1.04 1.29 1.19 0.92 1.01 0.84 0.83 1.46 1.23 0.76 1.16 

Nonfarm nonresidential ....................................... 0.52 1.13 0.77 0.50 0.37 0.57 0.34 0.72 0.66 0.66 0.32 

Multifamily residential real estate ........................ 0.44 0.80 0.70 0.62 0.31 0.25 0.40 1.04 0.79 0.75 0.26 

Home equity loans .............................................. 0.72 0.87 0.74 0.59 0.73 0.63 0.80 0.62 0.83 0.55 0.74 

Other 1-4 family residential ................................. 1.37 1.84 1.18 0.84 1.46 0.87 1.23 1.50 1.11 1.74 1.79 

Commercial and industrial loans ............................ 0.58 1.58 1.04 0.70 0.49 0.78 0.36 0.72 0.84 0.83 0.35 

Loans to individuals ............................................... 1.76 2.33 1.62 1.73 1.77 1.92 1.36 1.50 2.44 1.52 1.85 

Credit card loans ................................................. 2.11 2.02 2.18 1.88 2.13 2.07 2.02 1.82 2.56 1.09 2.22 

Other loans to individuals .................................... 1.55 2.33 1.57 1.65 1.52 1.67 1.27 1.39 2.33 1.61 1.61 

All other loans and leases (including farm) ............ 0.45 0.70 0.61 0.70 0.42 0.61 0.22 0.72 0.42 0.64 0.24 

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

Percent of Loans Noncurrent** 

1.00 1.43 1.02 0.79 1.02 0.98 0.81 1.05 1.09 1.03 1.13 

All real estate loans ................................................ 1.01 1.03 0.90 0.90 1.06 0.83 0.70 1.31 1.78 0.91 1.01 

Construction and development ........................... 1.29 1.32 1.50 1.29 1.18 1.84 1.07 1.65 1.60 0.82 1.13 

Nonfarm nonresidential ....................................... 0.63 1.10 0.75 0.68 0.53 0.80 0.39 0.94 0.69 0.62 0.40 

Multifamily residential real estate ........................ 0.66 0.88 0.75 1.14 0.47 0.31 0.78 1.89 0.56 1.29 0.30 

Home equity loans .............................................. 0.50 0.52 0.41 0.45 0.51 0.41 0.53 0.49 0.52 0.23 0.53 

Other 1-4 family residential ................................. 1.26 1.01 0.77 0.91 1.38 0.80 0.77 1.73 3.41 1.35 1.28 

Commercial and industrial loans ............................ 0.62 1.37 1.05 0.80 0.52 1.10 0.38 0.61 0.80 0.71 0.46 

Loans to individuals ............................................... 1.12 0.84 0.54 0.73 1.20 1.56 0.61 0.74 1.22 0.49 1.36 

Credit card loans ................................................. 1.85 0.75 1.28 1.39 1.89 2.07 1.57 1.50 1.72 0.94 1.80 

Other loans to individuals .................................... 0.68 0.84 0.49 0.41 0.73 0.68 0.49 0.49 0.79 0.39 1.09 

All other loans and leases (including farm) ............ 0.24 0.75 0.57 0.38 0.19 0.14 0.13 0.24 0.34 0.66 0.29 

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

Percent of Loans Charged-off (net, YTD) 

0.90 1.04 0.88 0.86 0.90 0.97 0.60 0.99 1.38 0.82 0.92 

All real estate loans ................................................ 0.13 0.06 0.07 0.10 0.16 0.06 0.10 0.21 0.14 0.07 0.17 

Construction and development ........................... 0.13 0.13 0.12 0.14 0.12 0.12 0.14 0.19 0.12 0.11 0.02 

Nonfarm nonresidential ....................................... 0.10 0.06 0.04 0.04 0.16 0.04 0.05 0.12 0.01 0.04 0.33 

Multifamily residential real estate ........................ 0.11 0.09 0.07 0.32 0.05 0.00 0.32 0.25 0.02 0.08 0.06 

Home equity loans .............................................. 0.27 0.07 0.08 0.19 0.30 0.13 0.23 0.29 0.40 0.20 0.32 

Other 1-4 family residential ................................. 0.12 0.07 0.06 0.06 0.13 0.05 0.06 0.24 0.12 0.06 0.15 

Commercial and industrial loans ............................ 0.39 0.40 0.35 0.44 0.39 0.72 0.28 0.25 0.81 0.24 0.35 

Loans to individuals ............................................... 2.38 0.45 0.87 1.87 2.53 3.31 1.20 1.34 2.65 1.08 3.06 

Credit card loans ................................................. 3.99 3.15 4.98 3.32 4.03 4.29 4.05 3.28 3.87 3.07 3.89 

Other loans to individuals .................................... 1.36 0.40 0.53 1.23 1.47 1.58 0.75 0.69 1.53 0.66 2.55 

All other loans and leases (including farm) ............ 0.14 0.07 0.18 0.31 0.13 0.13 0.23 0.14 0.08 0.34 0.05 

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

Loans Outstanding (in billions) 

0.47 0.14 0.15 0.29 0.56 0.82 0.24 0.34 0.63 0.21 0.60 

All real estate loans ................................................ $4,618.5 $80.1 $703.2 $719.4 $3,115.9 $759.2 $1,263.6 $896.5 $368.1 $300.9 $1,030.2 

Construction and development ........................... 600.1 11.1 143.1 159.9 286.0 62.4 194.7 123.3 48.6 77.6 93.6 

Nonfarm nonresidential ....................................... 942.8 22.3 237.4 227.6 455.6 175.4 247.0 204.6 84.3 87.9 143.6 

Multifamily residential real estate ........................ 190.0 1.8 27.3 40.6 120.2 48.6 23.0 30.3 8.6 6.4 73.1 

Home equity loans .............................................. 576.7 2.6 33.5 43.2 497.4 53.1 176.1 154.2 72.8 19.7 100.7 

Other 1-4 family residential ................................. 2,188.1 32.6 235.7 235.7 1,684.0 415.7 603.0 366.9 136.3 99.6 566.6 

Commercial and industrial loans ............................ 1,300.6 17.4 120.0 149.8 1,013.3 184.0 302.6 340.3 111.9 75.4 286.4 

Loans to individuals ............................................... 980.8 9.5 49.6 76.9 844.7 260.8 171.2 172.6 92.6 41.1 242.5 

Credit card loans ................................................. 372.9 0.2 3.7 25.1 343.9 165.5 20.0 43.0 42.8 7.4 94.3 

Other loans to individuals .................................... 608.0 9.4 45.9 51.9 500.9 95.3 151.3 129.6 49.8 33.8 148.2 

All other loans and leases (including farm) ............ 568.6 13.2 35.6 32.9 486.8 82.5 133.2 152.3 67.8 17.8 114.9 

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

Memo: Other Real Estate Owned (in millions) 

7,468.4 120.2 908.4 979.1 5,460.7 1,286.6 1,870.6 1,561.7 640.4 435.2 1,674.0 

All other real estate owned .................................... 7,990.0 281.4 1,698.6 1,017.8 4,992.2 605.7 1,517.6 2,212.2 1,288.2 773.3 1,593.0 

Construction and development ........................... 960.7 31.7 469.9 287.7 171.3 80.7 313.7 157.6 162.6 183.3 62.7 

Nonfarm nonresidential ....................................... 1,308.9 101.5 566.5 238.8 402.2 131.4 285.9 343.4 191.4 241.7 115.1 

Multifamily residential real estate ........................ 234.6 8.5 59.1 69.6 97.5 6.7 85.4 87.2 17.0 25.0 13.2 

1-4 family residential ........................................... 4,238.4 126.2 556.1 403.6 3,152.5 368.2 786.1 1,085.7 479.6 269.4 1,249.5 

Farmland ............................................................. 72.9 13.6 43.0 13.9 2.4 5.6 12.4 5.0 12.9 34.6 2.2 

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

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

FDIC QUARTERLY 11 2007, VOLUME 1, NO. 2 
TABLE VI-A. Derivatives, All FDIC-Insured Commercial Banks and State-Chartered Savings Banks 

(dollar figures in millions; 

notional amounts unless otherwise indicated) 

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

2007 2007 2006 2006 2006 06:2-07:2 

Asset Size Distribution 

$100 Million $1 Billion 

Less than to to Greater than 

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

ALL DERIVATIVE HOLDERS 

Number of institutions reporting derivatives ........................... 1,055 1,052 1,014 1,014 992 6.4 72 631 266 86 

Total assets of institutions reporting derivatives ...................... $9,144,539 $8,866,417 $8,834,552 $8,411,745 $8,276,560 10.5 $5,003 $274,996 $823,685 $8,040,855 

Total deposits of institutions reporting derivatives ................... 5,898,181 5,746,224 5,751,222 5,431,440 5,403,746 9.1 3,995 218,896 600,061 5,075,230 

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

Derivative Contracts by Underlying Risk Exposure 

153,825,897 146,085,265 132,182,077 127,106,628 120,205,407 28.0 118 18,127 104,342 153,703,309 

Interest rate .................................................................... 123,340,731 118,593,265 107,434,319 103,198,838 98,738,848 24.9 104 17,813 86,201 123,236,613 

Foreign exchange* ........................................................... 15,117,714 14,167,853 12,564,207 12,226,835 12,256,709 23.3 0 53 6,142 15,111,519 

Equity ............................................................................ 2,638,709 2,317,769 2,270,942 2,218,658 1,902,399 38.7 14 223 11,535 2,626,937 

Commodity & other (excluding credit derivatives) ................... 951,725 840,613 893,310 1,558,264 738,026 29.0 0 3 180 951,542 

Credit ............................................................................. 11,777,018 10,165,765 9,019,299 7,904,034 6,569,425 79.3 0 35 284 11,776,699 

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

Derivative Contracts by Transaction Type 

153,825,897 146,085,265 132,182,077 127,106,628 120,205,407 28.0 118 18,127 104,342 153,703,309 

Swaps ............................................................................ 95,320,189 88,007,079 81,339,522 77,555,665 74,448,925 28.0 21 8,404 64,482 95,247,282 

Futures & forwards ........................................................... 16,199,457 15,307,468 14,882,008 14,482,742 13,788,776 17.5 32 2,310 15,940 16,181,174 

Purchased options ............................................................ 14,377,520 15,737,380 12,944,893 13,301,484 12,367,870 16.2 17 4,792 17,473 14,355,239 

Written options ................................................................. 14,842,737 15,588,256 13,332,487 12,945,812 12,081,029 22.9 48 2,563 5,600 14,834,526 

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

Fair Value of Derivative Contracts 

140,739,903 134,640,182 122,498,910 118,285,703 112,686,600 24.9 118 18,069 103,495 140,618,221 

Interest rate contracts ....................................................... 20,077 24,447 23,299 22,720 21,194 -5.3 0 -17 -3 20,097 

Foreign exchange contracts ............................................... 5,661 74,088 5,324 4,144 4,641 22.0 0 0 -26 5,687 

Equity contracts ............................................................... -24,713 -18,845 -17,845 -13,526 -9,364 163.9 1 13 42 -24,769 

Commodity & other (excluding credit derivatives) ..................... 1,946 22,530 2,658 2,562 2,806 -30.6 0 0 0 1,946 

Credit derivatives as guarantor ............................................ -22,960 9,032 31,583 14,671 7,311 NM 0 0 -1 -22,959 

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

Derivative Contracts by Maturity** 

23,820 -9,677 -32,745 -14,819 -8,992 NM 0 0 0 23,820 

Interest rate contracts ....................................... < 1 year 39,403,738 33,255,949 29,551,704 26,615,376 22,679,708 73.7 27 3,220 23,266 39,377,224

 ............................ 1-5 years 33,846,038 33,802,189 31,385,640 30,872,442 31,161,579 8.6 13 8,545 25,804 33,811,677

 ............................ > 5 years 24,588,177 24,684,533 23,273,618 22,518,236 22,835,007 7.7 18 3,070 29,952 24,555,138 

Foreign exchange contracts ............................... < 1 year 8,948,450 8,372,488 7,690,210 6,687,566 7,473,995 19.7 0 23 4,966 8,943,461

 ............................ 1-5 years 1,667,700 1,571,241 1,415,846 1,573,062 1,240,609 34.4 0 4 18 1,667,678

 ............................ > 5 years 676,071 624,415 592,897 767,427 518,618 30.4 0 3 10 676,058 

Equity contracts ............................................... < 1 year 442,652 397,235 341,346 333,262 334,715 32.2 1 20 162 442,469

 ............................ 1-5 years 283,520 236,557 220,856 296,151 219,638 29.1 6 94 407 283,013

 ............................ > 5 years 62,916 74,332 44,858 53,988 44,457 41.5 0 0 32 62,883 

Commodity & other contracts .............................. < 1 year 280,133 271,647 235,107 496,634 230,213 21.7 0 0 134 279,999

 ............................ 1-5 years 261,410 200,542 272,314 274,378 177,869 47.0 0 3 35 261,372

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

Risk-Based Capital: Credit Equivalent Amount 

27,273 23,955 21,581 14,486 10,426 161.6 0 0 0 27,273 

Total current exposure to tier 1 capital (%) ............................ 30.8 28.3 29.2 28.6 33.6 0.4 0.2 1.2 36.0 

Total potential future exposure to tier 1 capital (%) .................. 113.4 106.9 97.7 99.0 90.2 0.2 0.3 1.0 133.2 

Total exposure (credit equivalent amount) to tier 1 capital (%) ... 144.2 135.2 126.9 127.6 123.8 0.5 0.5 2.2 169.2 

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

HELD FOR TRADING 

6.3 -2.9 -25.1 -19.3 -3.3 NM 0.0 1.6 0.3 4.3 

Number of institutions reporting derivatives ........................... 165 152 147 147 149 10.7 6 45 55 59 

Total assets of institutions reporting derivatives ..................... 7,782,327 7,383,462 7,223,466 6,927,469 6,808,697 14.3 373 20,066 244,465 7,517,422 

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

Derivative Contracts by Underlying Risk Exposure 

4,922,584 4,766,993 4,712,044 4,435,577 4,399,031 11.9 282 16,246 170,075 4,735,981 

Interest rate .................................................................... 120,829,579 115,845,739 104,691,811 100,299,894 96,221,190 25.6 10 222 40,985 120,788,363 

Foreign exchange ............................................................ 13,684,212 12,769,131 11,788,411 11,207,259 11,206,773 22.1 0 10 5,153 13,679,049 

Equity ............................................................................ 2,622,872 2,313,326 2,266,778 2,214,881 1,898,493 38.2 0 6 410 2,622,457 

Commodity & other .......................................................... 951,236 840,345 893,087 1,558,095 737,910 28.9 0 0 124 951,112 

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

Trading Revenues: Cash & Derivative Instruments 

138,087,899 131,768,541 119,640,087 115,280,129 110,064,365 25.5 10 238 46,671 138,040,980 

Interest rate .................................................................... 2,980 2,405 1,146 546 1,665 79.0 0 0 19 2,961 

Foreign exchange ............................................................ 1,264 1,831 1,613 1,355 2,672 -52.7 0 0 8 1,256 

Equity ............................................................................ 1,021 1,732 1,214 1,827 100 921.0 0 0 1 1,020 

Commodity & other (including credit derivatives) ..................... 24 175 -111 789 272 -91.2 0 0 0 24 

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

Share of Revenue 

5,289 6,143 3,861 4,517 4,710 12.3 0 0 27 5,262 

Trading revenues to gross revenues (%) .............................. 3.4 4.3 2.9 3.4 3.6 0.0 0.0 0.5 3.5 

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

HELD FOR PURPOSES OTHER THAN TRADING 

22.3 28.9 19.6 20.7 21.6 0.0 0.4 3.8 22.9 

Number of institutions reporting derivatives ............................ 969 969 935 934 920 5.3 64 586 236 83 

Total assets of institutions reporting derivatives ...................... 8,962,437 8,636,687 8,604,934 8,227,057 8,123,922 10.3 4,472 253,102 732,932 7,971,932 

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

Derivative Contracts by Underlying Risk Exposure 

5,772,676 5,582,122 5,589,925 5,305,574 5,299,416 8.9 3,598 201,019 537,402 5,030,657 

Interest rate .................................................................... 2,511,152 2,747,526 2,742,508 2,898,943 2,517,658 -0.3 95 17,591 45,216 2,448,251 

Foreign exchange ............................................................ 124,526 119,405 111,928 102,685 100,555 23.8 0 19 426 124,081 

Equity ............................................................................ 15,837 4,443 4,164 3,777 3,906 305.5 14 218 11,125 4,480 

Commodity & other .......................................................... 489 268 223 169 116 321.6 0 3 56 430 

Total notional amount ....................................................... 2,652,004 2,871,642 2,858,823 3,005,575 2,622,234 1.1 108 17,831 56,824 2,577,241 

All line items are reported on a quarterly basis. 

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

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

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

FDIC QUARTERLY 12 2007, VOLUME 1, NO. 2 
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Quarterly Banking Profile 

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

(dollar figures in millions) 

2nd 4th 3rd 2nd 

Quarter 1st Quarter Quarter Quarter Quarter %Change 

2007 2007 2006 2006 2006 06:2-07:2 

Asset Size Distribution 

$100 Million $1 Billion Greater 

Less than to to than 

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

Assets Securitized and Sold with Servicing Retained or with Recourse 

or Other Seller-Provided Credit Enhancements 

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

Outstanding Principal Balance by Asset Type 

126 125 122 119 120 5.0 16 47 20 43 

1-4 family residential loans .................................................................................... $1,115,865 $1,079,912 $739,024 $453,900 $417,800 167.1 $97 $329 $682 $1,114,758 

Home equity loans ................................................................................................ 10,640 9,339 8,905 9,257 9,632 10.5 0 0 431 10,209 

Credit card receivables ........................................................................................ 372,481 367,796 362,467 422,983 403,434 -7.7 0 6,637 6,675 359,170 

Auto loans ......................................................................................................... 12,547 14,132 16,263 16,781 16,665 -24.7 0 0 361 12,185 

Other consumer loans ........................................................................................ 27,396 27,737 28,673 25,753 24,414 12.2 0 7 0 27,389 

Commercial and industrial loans .............................................................................. 13,193 12,039 10,543 8,404 10,582 24.7 0 30 4,859 8,303 

All other loans, leases, and other assets* .................................................................. 162,434 150,404 144,939 136,330 121,506 33.7 2 86 1,078 161,268 

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

Maximum Credit Exposure by Asset Type 

1,714,556 1,661,359 1,310,814 1,073,407 1,004,034 70.8 99 7,089 14,087 1,693,282 

1-4 family residential loans .................................................................................... 6,511 6,047 6,627 4,619 4,336 50.2 13 3 17 6,478 

Home equity loans ................................................................................................ 2,420 2,368 2,332 2,358 2,358 2.6 0 0 20 2,400 

Credit card receivables ........................................................................................ 18,711 17,685 19,182 25,084 24,495 -23.6 0 488 175 18,048 

Auto loans ...................................................................................................... 555 628 724 813 806 -31.1 0 0 17 538 

Other consumer loans ........................................................................................ 1,768 1,861 1,882 1,653 1,619 9.2 0 0 0 1,767 

Commercial and industrial loans .............................................................................. 314 311 348 407 455 -31.0 0 0 82 232 

All other loans, leases, and other assets .................................................................. 1,053 1,052 997 761 727 44.8 1 25 49 978 

Total credit exposure ................................................................................................ 31,331 29,952 32,093 35,695 34,796 -10.0 14 517 359 30,442 

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

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

5,667 6,116 6,872 7,323 9,359 -39.4 0 0 0 5,667 

1-4 family residential loans .................................................................................... 2.5 2.1 3.0 2.4 2.1 0.0 0.0 2.0 2.5 

Home equity loans ................................................................................................ 0.6 0.7 0.7 0.7 0.6 0.0 0.0 1.8 0.6 

Credit card receivables ........................................................................................ 1.9 1.9 2.0 2.0 1.9 0.0 2.7 0.9 1.9 

Auto loans ............................................................................................................ 1.7 1.5 1.7 1.3 1.1 0.0 0.0 0.9 1.7 

Other consumer loans ........................................................................................ 2.8 2.4 3.0 3.0 2.6 0.0 0.0 0.0 2.8 

Commercial and industrial loans .............................................................................. 0.5 0.7 0.7 1.2 1.2 0.0 0.0 1.4 0.0 

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

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

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

2.1 1.9 2.4 2.0 1.7 0.0 2.5 1.1 2.1 

1-4 family residential loans .................................................................................... 1.2 1.1 1.2 0.9 1.1 0.0 0.0 0.6 1.2 

Home equity loans ................................................................................................ 0.3 0.4 0.5 0.3 0.3 0.0 0.0 1.2 0.3 

Credit card receivables ........................................................................................ 1.6 1.8 1.7 1.6 1.6 0.0 1.6 0.6 1.6 

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

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

Commercial and industrial loans .............................................................................. 0.6 0.6 0.7 0.8 0.9 0.0 0.0 1.4 0.1 

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

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

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

1.2 1.1 1.2 1.1 1.2 0.0 1.5 0.8 1.2 

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

Home equity loans ................................................................................................ 0.1 0.1 0.3 0.2 0.1 0.0 0.0 0.7 0.1 

Credit card receivables ........................................................................................ 2.2 1.1 3.8 2.9 1.9 0.0 2.2 1.0 2.3 

Auto loans ............................................................................................................ 0.5 0.3 0.7 0.5 0.3 0.0 0.0 0.2 0.5 

Other consumer loans ........................................................................................ 0.7 0.4 1.5 1.2 0.7 0.0 0.0 0.0 0.7 

Commercial and industrial loans .............................................................................. 0.7 0.4 1.3 1.2 0.8 0.0 0.0 2.0 0.0 

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

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

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

0.5 0.3 1.1 1.2 0.8 0.0 2.0 1.2 0.5 

Home equity loans ................................................................................................ 651 671 869 728 650 0.2 0 0 3 648 

Credit card receivables ........................................................................................ 73,405 61,569 75,225 68,885 82,533 -11.1 0 341 4,820 68,244 

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

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

2,843 2,863 2,596 2,891 3,284 -13.4 0 0 875 1,968 

Home equity loans ................................................................................................ 10 10 10 11 12 -16.7 0 0 0 10 

Credit card receivables ........................................................................................ 327 281 322 184 137 138.7 0 27 301 0 

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

Assets Sold with Recourse and Not Securitized 

9 1 5 0 0 0.0 0 0 0 9 

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

Outstanding Principal Balance by Asset Type 

733 729 715 708 698 5.0 168 420 100 45 

1-4 family residential loans .................................................................................... 55,761 58,005 55,761 56,002 54,319 2.7 934 6,657 2,684 45,487 

Home equity, credit card receivables, auto, and other consumer loans ........................... 601 1,905 708 115 124 NM 1 30 10 561 

Commercial and industrial loans ........................................................................... 7,716 8,198 6,668 6,781 6,184 24.8 8 90 330 7,288 

All other loans, leases, and other assets ..................................................................... 8,035 8,103 6,981 7,403 12,998 -38.2 2 47 183 7,803 

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

Maximum Credit Exposure by Asset Type 

72,114 76,210 70,118 70,302 73,625 -2.1 945 6,824 3,206 61,139 

1-4 family residential loans .................................................................................... 14,884 16,112 13,197 13,698 12,167 22.3 70 1,463 1,894 11,457 

Home equity, credit card receivables, auto, and other consumer loans ........................ 564 1,869 663 47 64 NM 1 7 1 556 

Commercial and industrial loans ........................................................................... 4,461 4,543 4,499 4,479 4,272 4.4 8 65 330 4,058 

All other loans, leases, and other assets .................................................................. 2,383 2,428 2,530 2,502 2,161 10.3 2 22 90 2,270 

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

Support for Securitization Facilities Sponsored by Other Institutions 

22,292 24,952 20,888 20,726 18,663 19.4 81 1,557 2,314 18,340 

Number of institutions reporting securitization facilities sponsored by others ........................ 50 47 47 48 46 8.7 24 15 3 8 

Total credit exposure ................................................................................................ 1,375 1,348 1,135 958 853 61.2 6 123 95 1,151 

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

Other 

14,093 5,827 6,257 5,066 4,251 231.5 0 0 0 14,093 

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

Asset-backed commercial paper conduits 

3,571,164 3,493,527 3,392,129 3,072,169 2,836,997 25.9 7,553 63,015 89,301 3,411,295 

Credit exposure to conduits sponsored by institutions and others .................................... 22,211 21,404 20,714 19,244 19,293 15.1 2 99 0 22,109 

Unused liquidity commitments to conduits sponsored by institutions and others .................. 364,656 327,395 306,435 294,329 286,363 27.3 0 0 0 364,656 

Net servicing income (for the quarter) ........................................................................... 5,333 3,601 2,159 3,381 4,262 25.1 50 182 155 4,946 

Net securitization income (for the quarter) ..................................................................... 5,437 5,051 2,407 6,832 6,225 -12.7 0 210 141 5,086 

Total credit exposure to Tier 1 capital (%)*** .................................................................. 5.7 5.9 5.8 6.1 5.9 0.4 1.7 2.1 7.3 

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

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

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

FDIC QUARTERLY 13 2007, VOLUME 1, NO. 2 
Author: 

Author: 

Insurance Fund Indicators 

Domestic Deposit Growth Is Flat 

Foreign Deposits Show Record Growth 

DIF Reserve Ratio Rises 1 Basis Point to 1.21 Percent 

New Risk-Based Assessments Add $140 Million to the DIF 

Total assets of the nation’s 8,615 FDIC-insured commercial banks and savings institutions increased by 

$279.9 billion (2.3 percent) during the second quarter 

of 2007. About half of the quarter’s asset growth was 

funded by deposits, as interest-bearing deposits 

increased by $127.6 billion (1.9 percent), and 

noninterest-bearing deposits increased by $12.5 billion 

(1.0 percent). Deposit growth was concentrated in foreign offices, up $143.3 billion (11.9 percent). This was 

the largest quarterly increase of foreign office deposits 

on record. Domestic deposits were almost unchanged 

in the second quarter, declining by only $3.2 billion, 

(0.05 percent) from the previous quarter. 

At the end of June, deposits funded nearly two-thirds of 

insured institution assets, with insured deposits funding 

34 percent, uninsured domestic deposits funding 20 

percent, and foreign office deposits funding 11 percent. 

Estimated insured deposits declined slightly in the second quarter of 2007 (a 0.3 percent decrease), compared 

to a first quarter rise of 2.1 percent and a 1.0 percent 

increase in the second quarter of 2006. For institutions 

existing as of March 31, 2007 and June 30, 2007, 

insured deposits increased during the second quarter at 

4,658 institutions (54 percent), decreased at 3,862 

institutions (45 percent), and remained unchanged at 

46 institutions. 

The Deposit Insurance Fund (DIF) increased by 0.9 

percent ($482 million) during the second quarter to 

$51,227 million (unaudited). Accrued assessment 

income added $140 million to the DIF during the second quarter. The fund received $501 million (net of 

expenses) from interest on securities and other revenue 

and $3 million from a decrease in provisions for insurance losses. Unrealized losses on available-for-sale 

securities reduced the DIF by $162 million. 

The increase in the DIF combined with nearly flat 

insured deposit growth raised the DIF reserve ratio to 

1.21 percent, one basis point higher than the previous 

quarter, but the reserve ratio is two basis points lower 

than a year earlier. 

There were no failures of FDIC-insured institutions 

during the second quarter of 2007. For the first half of 

2007, one insured institution failed with assets of $15.3 

million and an estimated loss to the DIF of $7.2 million. 

Author: Kevin Brown, Sr. Financial Analyst 

Division of Insurance and Research, FDIC 

(202) 898-6817 

FDIC QUARTERLY 14 2007, VOLUME 1, NO. 2 
 

 

 

 

Quarterly Banking Profile 

TABLE I-B. Insurance Fund Balances and Selected Indicators 

(dollar figures in millions) Deposit Insurance Fund 

2nd Quarter 

2007 

1st Quarter 

2007 

4th Quarter 

2006 

3rd Quarter 

2006 

2nd Quarter 

2006 

1st Quarter 

2006 

4th Quarter 

2005 

3rd Quarter 

2005 

2nd Quarter 

2005 

Beginning Fund Balance*.......................................... 

Changes in Fund Balance: 

$50,745 $50,165 $49,992 $49,564 $49,193 $48,597 $48,373 $48,023 $47,617 

Assessments earned................................................... 140 94 10 10 7 5 13 20 14 

Interest earned on investment securities........................ 748 567 476 622 665 478 675 536 657 

Operating expenses................................................... 248 239 248 237 242 224 252 227 254 

Provision for insurance losses....................................... -3 -73 49 -50 -6 -45 -19 -65 -57 

All other income, net of expenses**.............................. 

Unrealized gain/(loss) on available-for-sale 

1 4 5 1 12 349 4 3 4 

securities............................................................... -162 81 -21 -18 -77 -57 -235 -47 -72 

Total fund balance change.......................................... 482 580 173 428 371 596 224 350 406 

Ending Fund Balance*............................................. 51,227 50,745 50,165 49,992 49,564 49,193 48,597 48,373 48,023

 Percent change from four quarters earlier..................... 3.36 3.15 3.23 3.35 3.21 3.31 2.29 2.94 3.23 

Reserve Ratio (%)...................................................... 1.21 1.20 1.21 1.22 1.23 1.23 1.25 1.26 1.28 

Estimated Insured Deposits ....................................... 4,229,874**** 4,241,209 4,152,806 4,099,769 4,040,368 4,001,921 3,890,944 3,830,950 3,757,728

 Percent change from four quarters earlier..................... 4.69**** 5.98 6.73 7.02 7.52 8.50 7.42 7.63 6.40 

Assessment Base 6,815,248 6,801,622 6,595,300 6,439,293 6,386,880 6,272,524 6,177,431 6,038,857 5,878,968

 Percent change from four quarters earlier..................... 6.71 8.44 6.76 6.63 8.64 8.15 8.88 9.47 8.36 

Number of institutions reporting................................. 8,626 8,662 8,693 8,755 8,790 8,803 8,845 8,870 8,881 

DIF Reserve Ratio* 

Percent of Insured Deposits 

1.32 

1.28 

1.24 

1.20 

1.16 

1.12 

3/04 9/04 3/05 9/05 3/06 9/06 3/07 

1.33 1.32 1.32 1.31 

1.29 1.28 

1.26 1.25 

1.23 1.23 1.22 1.21 1.20 1.21 

TABLE II-B. Problem Institutions and Failed/Assisted Institutions 

Deposit Insurance Fund Balance 

and Insured Deposits* 

($Millions) 

DIF DIF-Insured 

Balance Deposits 

12/03 46,022 3,452,503 

3/04 46,558 3,499,469 

6/04 46,521 3,531,806 

9/04 46,990 3,559,489 

12/04 47,507 3,622,068 

3/05 47,617 3,688,562 

6/05 48,023 3,757,728 

9/05 48,373 3,830,950 

12/05 48,597 3,890,944 

3/06 49,193 4,001,921 

6/06 49,564 4,040,368 

9/06 49,992 4,099,769 

12/06 50,165 4,152,806 

3/07 50,745 4,241,209 

6/07 51,227 4,229,874**** 

(dollar figures in millions) 2007*** 2006*** 2006 2005 2004 2003 2002 

Problem Institutions

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

Total assets................................................................................................ 

Failed/Assisted Institutions

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

Total assets................................................................................................ 

61 

$23,077 

1 

$15 

50 

$5,539 

0 

$0 

50 

$8,265 

0 

$0 

52 

$6,607 

0

$0 

80 

$28,250 

4 

$166 

116 

$29,917 

3 

$1,097 

136

$38,927 

11 

$2,558 

* Prior to 2006, amounts represent sum of separate BIF and SAIF amounts. 

** First Quarter 2006 includes previously escrowed revenue from SAIF-member exit fees. 

*** Through June 30. 

**** Insured deposit total for June 30 has been updated from the originally published amount to reflect an amendment to submitted data. 

FDIC QUARTERLY 15 2007, VOLUME 1, NO. 2 
 

 

 

 

 

 

 

 

TABLE III-B. Estimated FDIC-Insured Deposits by Type of Institution 

(dollar figures in millions) 

June 30, 2007 

Commercial Banks and Savings Institutions 

Number of 

Institutions 

Total 

Assets 

Domestic 

Deposits* 

Est. Insured 

Deposits 

FDIC-Insured Commercial Banks .............................................. $10,410,995 7,350 $5,522,309 $3,317,278 

FDIC-Supervised ............................................................... 1,914,303 4,785 1,424,370 955,492 

OCC-Supervised ............................................................... 1,677 7,061,682 3,267,489 1,859,439 

Federal Reserve-Supervised ................................................. 888 1,435,010 830,451 502,347 

FDIC-Insured Savings Institutions ............................................. 1,265 1,850,034 1,169,364 906,917**

 OTS-Supervised Savings Institutions ...................................... 836 1,542,479 949,688 736,182**

 FDIC-Supervised State Savings Banks .................................... 

Total Commercial Banks and 

429 307,555 219,676 170,735 

Savings Institutions ............................................................. 

Other FDIC-Insured Institutions 

8,615 12,261,029 6,691,674 4,224,195** 

U.S. Branches of Foreign Banks ............................................... 16,861 11 6,875 5,680 

Total FDIC-Insured Institutions ................................................ 8,626 12,277,891 6,698,548 4,229,874** 

*Excludes $1,344 billion in foreign office deposits, which are uninsured. 

**Insured deposit total for June 30 has been updated from the originally published amount to reflect an amendment to submitted data. 

TABLE IV-B. Distribution of Institutions and Assessment Base Among Risk Categories 

Quarter Ending March 31, 2007 

(dollar figures in billions) Annual Percent of Total 

Rate in Number of Percent of Total Assessment Assessment 

Risk Category Basis Points Institutions Institutions Base Base 

I - Minimum ............................................ 5 3,079 35.5% 4,019.8 59.1% 

I - Middle ................................................ 5.01- 6.00 3,266 37.7% 2,095.5 30.8% 

I - Middle ................................................ 6.01- 6.99 1,235 14.3% 411.3 6.0% 

I - Maximum ........................................... 7 633 7.3% 168.8 2.5% 

II .......................................................... 10 393 4.5% 87.8 1.3% 

III .......................................................... 28 50 0.6% 7.5 0.1% 

IV ......................................................... 43 6 0.1% 11.0 0.2% 

Note: Institutions are categorized based on supervisory ratings, debt ratings and financial data as of March 31, 2007. 

Rates do not reflect the application of assessment credits. See notes to users for further information on risk categories and rates. 

FDIC QUARTERLY 16 2007, VOLUME 1, NO. 2 
Quarterly Banking Profile 

Notes To Users 

This publication contains financial data and other information for 

depository institutions insured by the Federal Deposit Insurance 

Corporation (FDIC). These notes are an integral part of this publication and provide information regarding the comparability of source 

data and reporting differences over time. 

Tables I-A through VIII-A. 

The information presented in Tables I-A through V-A of the FDIC 

Quarterly Banking Profile is aggregated for all FDIC-insured 

Institutions, both commercial banks and savings institutions. Tables 

VI-A (Derivatives) and VII-A (Servicing, Securitization, and Asset 

Sales Activities) aggregate information only for insured commercial 

banks and state-chartered savings banks that file quarterly Call 

Reports. Table VIII-A Trust Services aggregates Trust asset and 

income information collected annually from all FDIC-insured institutions. Some tables are arrayed by groups of FDIC-insured institutions 

based on predominant types of asset concentration, while other tables 

aggregate institutions by asset size and geographic region. Quarterly 

and full-year data are provided for selected indicators, including 

aggregate condition and income data, performance ratios, condition 

ratios and structural changes, as well as past due, noncurrent and 

charge-off information for loans outstanding and other assets. 

Tables I-B through IV-B. 

A separate set of tables (Tables I-B through IV-B) provides comparative quarterly data related to the Deposit Insurance Fund (DIF), problem institutions, failed/assisted institutions, estimated FDIC-insured 

deposits, as well as assessment rate information. Depository institutions that are not insured by the FDIC through the DIF are not 

included in the FDIC Quarterly Banking Profile. U.S. branches of 

institutions headquartered in foreign countries and non-deposit trust 

companies are not included unless otherwise indicated. Efforts are 

made to obtain financial reports for all active institutions. However, 

in some cases, final financial reports are not available for institutions 

that have closed or converted their charters. 

DATA SOURCES 

The financial information appearing in this publication is obtained 

primarily from the Federal Financial Institutions Examination 

Council (FFIEC) Call Reports and the OTS Thrift Financial Reports 

submitted by all FDIC-insured depository institutions. This information is stored on and retrieved from the FDIC’s Research Information 

System (RIS) data base. 

COMPUTATION METHODOLOGY 

Certain adjustments are made to the OTS Thrift Financial Reports to 

provide closer conformance with the reporting and accounting 

requirements of the FFIEC Call Reports. Parent institutions are 

required to file consolidated reports, while their subsidiary financial 

institutions are still required to file separate reports. Data from subsidiary institution reports are included in the Quarterly Banking Profile 

tables, which can lead to double-counting. No adjustments are made 

for any double-counting of subsidiary data. 

All asset and liability figures used in calculating performance ratios 

represent average amounts for the period (beginning-of-period 

amount plus end-of-period amount plus any interim periods, divided 

by the total number of periods). For “pooling-of-interest” mergers, the 

assets of the acquired institution(s) are included in average assets 

since the year-to-date income includes the results of all merged institutions. No adjustments are made for “purchase accounting” mergers. 

Growth rates represent the percentage change over a 12-month period in totals for institutions in the base period to totals for institutions 

in the current period. 

All data are collected and presented based on the location of each 

reporting institution's main office. Reported data may include assets 

and liabilities located outside of the reporting institution’s home state. 

In addition, institutions may relocate across state lines or change their 

charters, resulting in an inter-regional or inter-industry migration, 

e.g., institutions can move their home offices between regions, and 

savings institutions can convert to commercial banks or commercial 

banks may convert to savings institutions. 

ACCOUNTING CHANGES 

FASB Statement No. 157 Fair Value Measurements issued in September 2006 

and FASB Statement No. 159 The Fair Value Option for Financial Assets and 

Financial Liabilities issued in February 2007 – both are effective in 2008 

with early adoption permitted in 2007. FAS 157 defines a fair value 

measurement framework, while FAS 159 allows banks to elect a fair 

value option when assets are recognized on the balance sheet and to 

report certain financial assets and liabilities at fair value with subsequent changes in fair value included in earnings. Existing eligible 

items can be fair-valued as early as January 2007 under FAS 159, if 

a bank adopts FAS 157. 

FASB Statement 158 Employers’ Accounting for Defined Benefit Pension and 

Other Postretirement Plans – issued in September 2006 requires a bank 

to recognize in 2007 the funded status of its postretirement plans on 

its balance sheet. An overfunded plan is recognized as an asset and 

an underfunded plan is recognized as a liability. An adjustment is 

made to equity as accumulated other comprehensive income 

(AOCI) upon application of FAS 158 and AOCI is adjusted in subsequent periods as net periodic benefit costs are recognized in earnings. 

FASB Statement No. 156 Accounting for Servicing of Financial Assets – issued 

in March 2006 and effective in 2007, requires all separately recognized servicing assets and liabilities to be initially measured at fair 

value and allows a bank the option to subsequently adjust that 

value by periodic revaluation and recognition of earnings or by periodic amortization to earnings. 

Purchased Impaired Loans and Debt Securities – Statement of Position 03-

3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer. 

The SOP applies to loans and debt securities acquired in fiscal years 

beginning after December 15, 2004. In general, this Statement of 

Position applies to “purchased impaired loans and debt securities,” i.e., 

loans and debt securities that a bank has purchased, including those 

acquired in a purchase business combination, when it is probable, at 

the purchase date, that the bank will be unable to collect all contractually required payments receivable. Banks must follow Statement of 

Position 03-3 for Call Report purposes. The SOP does not apply to 

the loans that a bank has originated, prohibits “carrying over” or creation of valuation allowances in the initial accounting and any subsequent valuation allowances reflect only those losses incurred by the 

investor after acquisition. 

GNMA Buy-back Option – If an issuer of GNMA securities has the 

option to buy back the loans that collateralize the GNMA securities, 

when certain delinquency criteria are met, FASB Statement No. 140 

requires that loans with this buy-back option must be brought back 

on the issuer's books as assets. The rebooking of GNMA loans is 

required regardless of whether the issuer intends to exercise the buyback option. The banking agencies clarified in May 2005 that all 

GNMA loans that are rebooked because of delinquency should be 

reported as past due according to their contractual terms. 

FDIC QUARTERLY 17 2007, VOLUME 1, NO. 2 
FASB Interpretation No. 45 – In November 2002, the FASB issued 

Interpretation No. 45, Guarantor’s Accounting and Disclosure 

Requirements for Guarantees, Including Indirect Guarantees of 

Indebtedness of Others. This interpretation clarifies that a guarantor is 

required to recognize, at the inception of a guarantee (financial standby letters of credit, performance standby letters of credit), a liability 

for the fair value of the obligation undertaken in issuing the guarantee. Banks apply the initial recognition and measurement provisions 

of Interpretation No. 45 on a prospective basis to guarantees issued or 

modified after December 31, 2002, irrespective of the bank’s fiscal 

year end. A bank’s previous accounting for guarantees issued prior to 

January 1, 2003, is not revised. 

FASB Interpretation No. 46 – The FASB issued Interpretation No. 46, 

Consolidation of Variable Interest Entities, in January 2003 and revised it 

in December 2003. Generally, banks with variable interests in variable interest entities created after December 31, 2003, must consolidate them. The timing of consolidation varies with certain situations 

with application as late as 2005. The assets and liabilities of a consolidated variable interest entity are reported on a line-by-line basis 

according to the asset and liability categories shown on the bank’s balance sheet, as well as related income items. Most small banks are 

unlikely to have any “variable interests” in variable interest entities. 

FASB Statement No. 123 (Revised 2004) and Share-Based Payments 

– requires all entities to recognize compensation expense in an 

amount equal to the fair value of share-based payments, e.g., stock 

options and restricted stock, granted to employees. As of January 2006 

all banks must adopt FAS 123(R). The compensation cost is typically 

recognized over the vesting period with a corresponding credit to 

equity. The recording of the compensation cost also gives rise to a 

deferred tax asset. 

Goodwill and intangible assets – FAS 141 terminates the use of pooling-of-interest accounting for business combinations after 2001 and 

requires purchase accounting. Under FAS 142 amortization of goodwill is eliminated. Only intangible assets other than goodwill are 

amortized each quarter. In addition companies are required to test for 

impairment of both goodwill and other intangibles once each fiscal 

year. The year 2002, the first fiscal year affected by this accounting 

change, has been designated a transitional year and the amount of initial impairments are to be recorded as extraordinary losses on a “net of 

tax” basis (and not as noninterest expense). Subsequent annual 

review of intangibles and goodwill impairment may require additional 

noninterest expense recognition. FASB Statement No. 147 clarifies 

that acquisitions of financial institutions (except transactions between 

two or more mutual enterprises), including branch acquisitions that 

meet the definition of a business combination, should be accounted 

for by the purchase method under FASB Statement No. 141. This 

accounting standard includes transition provisions that apply to 

unidentifiable intangible assets previously accounted for in accordance 

with FASB Statement No. 72. If the transaction (such as a branch 

acquisition) in which an unidentifiable intangible asset arose does not 

meet the definition of a business combination, this intangible asset is 

not be reported as “Goodwill” on the Call Report balance sheet. 

Rather, this unidentifiable intangible asset is reported as “Other intangible assets,” and must continue to be amortized and the amortization 

expense should be reported in the Call Report income statement. 

FASB Statement No. 133 Accounting for Derivative Instruments and Hedging 

Activities – All banks must recognize derivatives as either assets or liabilities on the balance sheet, measured at fair value. A derivative may 

be specifically designated as a “fair value hedge,” a “cash flow hedge,” 

or a hedge of a foreign currency exposure. The accounting for 

changes in the value of a derivative (gains and losses) depends on the 

intended use of the derivative, its resulting designation, and the effectiveness of the hedge. Derivatives held for purposes other than trading are reported as “other assets” (positive fair values) or “other liabilities” (negative fair values). For a fair value hedge, the gain or loss is 

recognized in earnings and “effectively” offsets loss or gain on the 

hedged item attributable to the risk being hedged. Any ineffectiveness of the hedge could result in a net gain or loss on the income 

statement. Accumulated net gains (losses) on cash flow hedges are 

recorded on the balance sheet as “accumulated other comprehensive 

income” and the periodic change in the accumulated net gains (losses) for cash flow hedges is reflected directly in equity as the value of 

the derivative changes. FASB Statement No. 149, Amendment of 

Statement 133 on Derivative Instruments and Hedging Activities 

provides guidance on the circumstances in which a loan commitment 

must be accounted for as derivative. Under Statement No. 149, loan 

commitments that relate to the origination of mortgage loans that will 

be held for sale, commonly referred to as interest rate lock commitments, must be accounted for as derivatives on the balance sheet by 

the issuer of the commitment. 

DEFINITIONS (in alphabetical order) 

All other assets – total cash, balances due from depository institutions, 

premises, fixed assets, direct investments in real estate, investment in 

unconsolidated subsidiaries, customers’ liability on acceptances outstanding, assets held in trading accounts, federal funds sold, securities 

purchased with agreements to resell, fair market value of derivatives, 

and other assets. 

All other liabilities – bank's liability on acceptances, limited-life preferred stock, allowance for estimated off-balance-sheet credit losses, 

fair market value of derivatives, and other liabilities. 

Assessment base –assessable deposits consist of DIF deposits (deposits 

insured by the FDIC Deposit Insurance Fund) in banks’ domestic 

offices with certain adjustments. 

Assets securitized and sold – total outstanding principal balance of 

assets securitized and sold with servicing retained or other sellerprovided credit enhancements. 

Construction and development loans – includes loans for all property 

types under construction, as well as loans for land acquisition and 

development. 

Core capital – common equity capital plus noncumulative perpetual 

preferred stock plus minority interest in consolidated subsidiaries, less 

goodwill and other ineligible intangible assets. The amount of eligible 

intangibles (including servicing rights) included in core capital is limited in accordance with supervisory capital regulations. 

Cost of funding earning assets – total interest expense paid on deposits 

and other borrowed money as a percentage of average earning assets. 

Credit enhancements – techniques whereby a company attempts to 

reduce the credit risk of its obligations. Credit enhancement may be 

provided by a third party (external credit enhancement) or by the 

originator (internal credit enhancement), and more than one type of 

enhancement may be associated with a given issuance. 

Deposit Insurance Fund (DIF) – The Bank (BIF) and Savings 

Association (SAIF) Insurance Funds were merged in 2006 by the 

Federal Deposit Insurance Reform Act to form the DIF. 

Derivatives notional amount – The notional or contractual amounts of 

derivatives represent the level of involvement in the types of derivatives transactions and are not a quantification of market risk or credit 

risk. Notional amounts represent the amounts used to calculate contractual cash flows to be exchanged. 

FDIC QUARTERLY 18 2007, VOLUME 1, NO. 2 
Quarterly Banking Profile 

Derivatives credit equivalent amount – the fair value of the derivative 

plus an additional amount for potential future credit exposure based 

on the notional amount, the remaining maturity and type of the 

contract. 

Derivatives transaction types: 

Futures and forward contracts – contracts in which the buyer agrees 

to purchase and the seller agrees to sell, at a specified future date, 

a specific quantity of an underlying variable or index at a specified price or yield. These contracts exist for a variety of variables 

or indices, (traditional agricultural or physical commodities, as 

well as currencies and interest rates). Futures contracts are standardized and are traded on organized exchanges which set limits 

on counterparty credit exposure. Forward contracts do not have 

standardized terms and are traded over the counter. 

Option contracts – contracts in which the buyer acquires the right 

to buy from or sell to another party some specified amount of an 

underlying variable or index at a stated price (strike price) during 

a period or on a specified future date, in return for compensation 

(such as a fee or premium). The seller is obligated to purchase or 

sell the variable or index at the discretion of the buyer of the contract. 

Swaps – obligations between two parties to exchange a series of 

cash flows at periodic intervals (settlement dates), for a specified 

period. The cash flows of a swap are either fixed, or determined 

for each settlement date by multiplying the quantity (notional 

principal) of the underlying variable or index by specified reference rates or prices. Except for currency swaps, the notional principal is used to calculate each payment but is not exchanged. 

Derivatives underlying risk exposure – the potential exposure characterized by the level of banks’ concentration in particular underlying 

instruments, in general. Exposure can result from market risk, credit 

risk and operational risk, as well as, interest rate risk. 

Domestic deposits to total assets – total domestic office deposits as a percent of total assets on a consolidated basis. 

Earning assets – all loans and other investments that earn interest or 

dividend income. 

Efficiency ratio – Noninterest expense less amortization of intangible 

assets as a percent of net interest income plus noninterest income. 

This ratio measures the proportion of net operating revenues that are 

absorbed by overhead expenses, so that a lower value indicates greater 

efficiency. 

Estimated insured deposits – in general, insured deposits are total 

domestic deposits minus estimated uninsured deposits. Prior to June 

30, 2000 the uninsured estimate is calculated as the sum of the excess 

amounts in accounts over $100,000. Beginning June 30, 2000 the 

amount of estimated uninsured deposits is adjusted to consider a 

financial institution's own estimate of uninsured deposits when such 

an estimate is reported. Beginning in 2006 the uninsured deposits estimate also considers IRA accounts over $250,000. 

Failed/assisted institutions – an institution fails when regulators take 

control of the institution, placing the assets and liabilities into a 

bridge bank, conservatorship, receivership, or another healthy institution. This action may require the FDIC to provide funds to cover 

losses. An institution is defined as “assisted” when the institution 

remains open and receives some insurance funds in order to continue 

operating. 

FHLB advances – all borrowings by FDIC insured institutions from the 

Federal Home Loan Bank System (FHLB), as reported by Call Report 

filers and by TFR filers. 

Goodwill and other intangibles – intangible assets include servicing 

rights, purchased credit card relationships and other identifiable 

intangible assets. Goodwill is the excess of the purchase price over the 

fair market value of the net assets acquired. 

Loans secured by real estate – includes home equity loans, junior liens 

secured by 1-4 family residential properties and all other loans secured 

by real estate. 

Loans to individuals – includes outstanding credit card balances and 

other secured and unsecured consumer loans. 

Long-term assets (5+ years) – loans and debt securities with remaining 

maturities or repricing intervals of over five years. 

Maximum credit exposure – the maximum contractual credit exposure 

remaining under recourse arrangements and other seller-provided 

credit enhancements provided by the reporting bank to securitizations. 

Mortgage-backed securities – certificates of participation in pools of residential mortgages and collateralized mortgage obligations issued or 

guaranteed by government-sponsored or private enterprises. Also, see 

“Securities”, below. 

Net charge-offs – total loans and leases charged off (removed from balance sheet because of uncollectibility), less amounts recovered on 

loans and leases previously charged off. 

Net interest margin – the difference between interest and dividends 

earned on interest-bearing assets and interest paid to depositors and 

other creditors, expressed as a percentage of average earning assets. 

No adjustments are made for interest income that is tax exempt. 

Net loans to total assets – loans and lease financing receivables, net of 

unearned income, allowance and reserves, as a percent of total assets 

on a consolidated basis. 

Net operating income – income excluding discretionary transactions 

such as gains (or losses) on the sale of investment securities and 

extraordinary items. Income taxes subtracted from operating income 

have been adjusted to exclude the portion applicable to securities 

gains (or losses). 

Noncurrent assets – the sum of loans, leases, debt securities and other 

assets that are 90 days or more past due, or in nonaccrual status. 

Noncurrent loans & leases – the sum of loans and leases 90 days or 

more past due, and loans and leases in nonaccrual status. 

Number of institutions reporting – the number of institutions that actually filed a financial report. 

Other borrowed funds – federal funds purchased, securities sold with 

agreements to repurchase, demand notes issued to the U.S. Treasury, 

FHLB advances, other borrowed money, mortgage indebtedness, obligations under capitalized leases and trading liabilities, less revaluation 

losses on assets held in trading accounts. 

Other real estate owned – primarily foreclosed property. Direct and 

indirect investments in real estate ventures are excluded. The amount 

is reflected net of valuation allowances. For institutions that file a 

Thrift Financial Report (TFR), the valuation allowance subtracted 

also includes allowances for other repossessed assets. Also, for TFR 

filers the components of other real estate owned are reported gross of 

valuation allowances. 

Percent of institutions with earnings gains – the percent of institutions 

that increased their net income (or decreased their losses) compared 

to the same period a year earlier. 

“Problem” institutions – federal regulators assign a composite rating to 

each financial institution, based upon an evaluation of financial and 

operational criteria. The rating is based on a scale of 1 to 5 in ascendFDIC QUARTERLY 19 2007, VOLUME 1, NO. 2 
ing order of supervisory concern. “Problem” institutions are those 

institutions with financial, operational, or managerial weaknesses that 

threaten their continued financial viability. Depending upon the 

degree of risk and supervisory concern, they are rated either a “4” or 

“5”. For all insured commercial banks and for insured savings banks 

for which the FDIC is the primary federal regulator, FDIC composite 

ratings are used. For all institutions whose primary federal regulator is 

the OTS, the OTS composite rating is used. 

Recourse – an arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it 

has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank’s claim on the asset. If a 

bank has no claim on an asset it has sold, then the retention of any 

credit risk is recourse. 

Reserves for losses – the allowance for loan and lease losses on a consolidated basis. 

Restructured loans and leases – loan and lease financing receivables 

with terms restructured from the original contract. Excludes restructured loans and leases that are not in compliance with the modified 

terms. 

Retained earnings – net income less cash dividends on common and 

preferred stock for the reporting period. 

Return on assets – net income (including gains or losses on securities 

and extraordinary items) as a percentage of average total assets. The 

basic yardstick of bank profitability. 

Return on equity – net income (including gains or losses on securities 

and extraordinary items) as a percentage of average total equity capital. 

Risk-based capital groups – definition: 

Total Tier 1 

Risk-Based Risk-Based Tier 1 Tangible 

(Percent) Capital * Capital * Leverage Equity 

Well-capitalized >10 and >6 and >5 — 

Adequately 

capitalized >8 and >4 and >4 — 

Undercapitalized >6 and >3 and >3 — 

Significantly 

undercapitalized <6 or <3 or <3 and >2 

Critically 

undercapitalized — — — <2 

*As a percentage of risk-weighted assets. 

Risk Categories and Assessment Rate Schedule – The current risk categories and assessment rate schedule became effective January 1, 2007. 

Capital ratios and supervisory ratings distinguish one risk category 

from another. The following table shows the relationship of risk categories (I, II, III, IV) to capital and supervisory groups as well as the 

Supervisory Group 

Capital Group A B C 

I 

1. Well Capitalized 5-7 bps III II 

28 bps 10 bps 2. Adequately Capitalized 

3. Undercapitalized III IV

28 bps 43 bps

assessment rates (in basis points) for each risk category. Supervisory 

Group A generally includes institutions with CAMELS composite ratings of 1 or 2; Supervisory Group B generally includes institutions 

with a CAMELS composite rating of 3; and Supervisory Group C 

generally includes institutions with CAMELS composite ratings of 4 

or 5. For purposes of risk-based assessment capital groups, undercapitalized includes institutions that are significantly or critically undercapitalized. 

Assessment rates are 3 basis points above the base rate schedule. The 

FDIC may adjust rates up or down by 3 basis points from the base rate 

schedule without notice and comment, provided that any single 

adjustment from one quarter to the next cannot move rates more 

than 3 basis points. 

For most institutions in Risk Category I, the assessment rate assigned 

will be based on a combination of financial ratios and CAMELS component ratings. 

For large institutions in Risk Category I (generally those with at least 

$10 billion in assets) that have long-term debt issuer ratings, assessment rates will be determined by weighting CAMELS component ratings 50 percent and long-term debt issuer ratings 50 percent. For all 

large Risk Category I institutions, additional risk factors will be considered to determine whether assessment rates should be adjusted. 

This additional information includes market data, financial performance measures, considerations of the ability of an institution to withstand financial stress, and loss severity indicators. Any adjustment will 

be limited to no more than 1⁄2 basis point. 

Beginning in 2007, each institution is assigned a risk-based rate for a 

quarterly assessment period near the end of the quarter following the 

assessment period. Payment will generally be due on the 30th day of 

the last month of the quarter following the assessment period. 

Supervisory rating changes will be effective for assessment purposes as 

of the examination transmittal date. For institutions with long-term 

debt issuer ratings, changes in ratings will be effective for assessment 

purposes as of the date the change was announced. 

Risk-weighted assets – assets adjusted for risk-based capital definitions 

which include on-balance-sheet as well as off-balance-sheet items 

multiplied by risk-weights that range from zero to 100 percent. A 

conversion factor is used to assign a balance sheet equivalent amount 

for selected off-balance-sheet accounts. 

Securities – excludes securities held in trading accounts. Banks’ securities portfolios consist of securities designated as “held-to-maturity”, 

which are reported at amortized cost (book value), and securities designated as “available-for-sale”, reported at fair (market) value. 

Securities gains (losses) – realized gains (losses) on held-to-maturity and 

available-for-sale securities, before adjustments for income taxes. 

Thrift Financial Report (TFR) filers also include gains (losses) on the 

sales of assets held for sale. 

Seller’s interest in institution’s own securitizations – the reporting bank’s 

ownership interest in loans and other assets that have been securitized, except an interest that is a form of recourse or other seller-provided credit enhancement. Seller’s interests differ from the securities 

issued to investors by the securitization structure. The principal 

amount of a seller’s interest is generally equal to the total principal 

amount of the pool of assets included in the securitization structure 

less the principal amount of those assets attributable to investors, i.e., 

in the form of securities issued to investors. 

Subchapter S Corporation – A Subchapter S corporation is treated as a 

pass-through entity, similar to a partnership, for federal income tax 

purposes. It is generally not subject to any federal income taxes at the 

FDIC QUARTERLY 20 2007, VOLUME 1, NO. 2 
Quarterly Banking Profile 

corporate level. This can have the effect of reducing institutions’ 

reported taxes and increasing their after-tax earnings. 

Trust assets – market value, or other reasonably available value of 

fiduciary and related assets, to include marketable securities, and 

other financial and physical assets. Common physical assets held in 

fiduciary accounts include real estate, equipment, collectibles, and 

household goods. Such fiduciary assets are not included in the 

assets of the financial institution. 

Unearned income & contra accounts – unearned income for Call Report 

filers only. 

Unused loan commitments – includes credit card lines, home equity 

lines, commitments to make loans for construction, loans secured by 

commercial real estate, and unused commitments to originate or purchase loans. (Excluded are commitments after June 2003 for originated mortgage loans held for sale, which are accounted for as derivatives 

on the balance sheet.) 

Volatile liabilities – the sum of large-denomination time deposits, foreign-office deposits, federal funds purchased, securities sold under 

agreements to repurchase, and other borrowings. 

Yield on earning assets – total interest, dividend and fee income earned 

on loans and investments as a percentage of average earning assets. 

FDIC QUARTERLY 21 2007, VOLUME 1, NO. 2 
Feature Article: 

Privatizing Deposit Insurance: 

Results of the 2006 FDIC Study 

Foreword 

The Federal Deposit Insurance Corporation (FDIC) was 

required by the Federal Deposit Insurance Reform Conforming Amendments Act of 2005 (FDIRCAA) to study 

the feasibility and consequences of privatizing deposit insurance, establishing a voluntary deposit insurance system for 

deposits in excess of the maximum amount of FDIC insurance, and increasing the limit on deposit insurance coverage 

for municipalities and other units of general local government. In February 2007, the FDIC sent its report to Congress. This article summarizes the FDIC’s findings on the 

first issue: privatizing deposit insurance. Subsequent editions of the FDIC Quarterly will report the FDIC findings on the other two issues. 

Introduction 

Since its inception in 1933, the federal deposit insurance system has promoted financial market stability, 

protecting the economy from the disruptive effects of 

bank failures as well as protecting the deposits of small 

savers. Notwithstanding the successes of the federal 

deposit insurance system, some have argued that a private deposit insurance system would be an improvement. The FDIC explored privatization arguments in 

great depth in 1998 as part of Confidence for the 

Future: An FDIC Symposium. After almost ten years 

and the enactment of the Federal Deposit Insurance 

Reform Act (FDIRA), the FDIC has revisited the privatization debate. This article presents the FDIC’s 

most relevant findings. 

The article begins with a review of the general arguments in favor of privatization. These generally are 

that privatization would diminish moral hazard, reduce 

unwarranted government supervision and regulation of 

depository institutions, and eliminate taxpayer responsibility for losses arising from systemic failure. The article next reviews specific privatization proposals and 

examines the validity of the assumptions underlying 

these proposals. The article concludes with a discussion of other considerations important to the debate 

about private versus public deposit insurance. These 

considerations include the historical record of private 

deposit insurance systems, the sufficiency of private 

capital to underwrite a private deposit insurance system, the cost of deposit insurance in the absence of the 

federal guarantee, and other public policy concerns. 

The FDIC finds that the conclusions reached in 1998 

continue to hold today—namely, that privatization is 

not a remedy for problems arising from deposit insurance. 

Arguments for Privatizing Deposit Insurance 

Privatization proponents generally maintain that the 

costs arising from a government-run deposit insurance 

system are greater than the benefits, that the problems 

associated with a government-run deposit insurance 

system are inherent and insurmountable, and that the 

only solution to the problems is to privatize deposit 

insurance. The various reasons given for this stance, as 

outlined in the next section, are different but overlapping and generally involve concerns about moral hazard, government supervision and regulation, and a 

perception that some institutions are “too big to fail.” 

Concerns about Moral Hazard. In the insurance context, the term “moral hazard” refers to the tendency of 

insured parties to take on more risk than they would if 

they had not been indemnified against losses. The 

argument is that deposit insurance reassures depositors 

that their money is safe and removes the incentive for 

depositors to critically evaluate the condition of their 

bank. With deposit insurance, unsound banks typically 

have little difficulty obtaining funds, and riskier banks 

can obtain funds at costs that are not commensurate 

with their levels of risk. Unless deposit insurance is 

properly priced to reflect risk, banks gain if they take 

on more risk because they need not pay creditors a fair 

FDIC QUARTERLY 23 2007, VOLUME 1, NO. 2 
The Modern Deposit Insurance System 

Although federal deposit insurance was implemented in the United States in 1933, the modern federal 

deposit insurance system has been shaped by legislative changes during the past two decades. In the 

1980s, a crisis in the savings and loan industry culminated in the insolvency of the Federal Savings and 

Loan Insurance Corporation (FSLIC) and taxpayer funding of the FSLIC’s deposit insurance obligations. 

Almost concurrently, a similar crisis in the banking sector—the worst since the 1930s—nearly exhausted 

the resources of the FDIC’s deposit insurance fund. Congress responded to the two crises by reevaluating 

the federal deposit insurance system and enacted a series of reforms. One was the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). Many of FDICIA’s provisions were designed to 

remedy the weaknesses in the deposit insurance system that the recent crises had brought to light. Specifically, FDICIA— 

Required the banking industry to recapitalize the deposit insurance funds, reducing the likelihood the 

public would have to fund deposit insurance obligations in the future. 

Permitted the FDIC to borrow up to $30 billion from the Treasury so that funds would be available to 

close and resolve insolvent institutions quickly. 

Introduced Prompt Corrective Action (PCA), which restricted the activities of banks with low capital 

levels and required timely closure of critically undercapitalized banks. 

Mandated that the FDIC use the least costly solution to resolve bank failures. An exception may be 

made in the case of systemic risk, which requires a recommendation by at least two-thirds of the FDIC 

Board of Directors and the Board of Governors of the Federal Reserve, and an emergency determination by the Secretary of the Treasury in consultation with the President. 

Introduced risk-based deposit insurance premiums so that riskier banks pay higher premiums, thereby 

mitigating moral hazard. 

Recently, Congress again addressed deposit insurance, enacting the Federal Deposit Insurance Reform Act 

of 2005 (FDIRA), which built on the reforms instituted under FDICIA. FDIRA— 

Merged the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF) into a 

single Deposit Insurance Fund (DIF). 

Allowed the FDIC to manage the level of the DIF within a certain range. 

Allowed the FDIC to charge risk-based premiums regardless of the level of the reserve ratio. 

Authorized a one-time credit toward future assessments for institutions that replenished the insurance 

funds in the early 1990s and provided for dividends when the reserve ratio reaches certain thresholds. 

Authorized future increases in insurance coverage levels to adjust for inflation and immediately 

increased the insurance coverage limit of retirement accounts to $250,000. 

risk-adjusted return. A truly risk-based assessment discourages such risky behavior.1 The moral hazard problem is particularly acute for insured depository 

1 As discussed below, historically the moral hazard problem created 

by deposit insurance has also been mitigated by banking regulation 

and the supervision of depository institutions. Among the regulatory 

actions that have been used to reduce the risks associated with 

moral hazard are capital standards, examinations, safety-and-soundness regulations, and enforcement actions. 

institutions that are at or near insolvency but are 

allowed to operate freely because any losses are passed 

on to the insurer, whereas profits accrue to the owners. 

Thus problem institutions have an incentive to take 

excessive risks with insured deposits in the hope of 

returning to profitability. 

Concerns about Government Supervision and Regulation. A major concern of some privatization proponents is the degree of government oversight they 

FDIC QUARTERLY 24 2007, VOLUME 1, NO. 2 
Privatizing Deposit Insurance 

consider to be a by-product of government-sponsored 

deposit insurance. They argue that government-sponsored deposit insurance is responsible for intrusive regulations, product restrictions, and social obligations 

that are placed on insured banks and thrifts. They contend that without government-sponsored insurance 

there would be no need to subject banks to intense 

safety-and-soundness regulation and to limit the products they might offer or their business affiliations.2 

They claim that the regulations made necessary by 

deposit insurance not only limit choices and opportunities, they also hinder rapid response to changes in 

the business environment and are expensive. Inasmuch 

as costly regulations are imposed on only one segment 

of the financial industry (depository institutions), 

insured depository institutions are less competitive 

than financial providers that are not so encumbered. 

As described in the next section, many proponents of 

privatization therefore seek to decouple deposit insurance from the “full faith and credit” of the U.S. government, or otherwise reduce a perceived taxpayer risk, 

to remove the justification for federal supervision and 

regulation of the banking industry.3 

Concerns about “Too-Big-to-Fail” (TBTF). Privatization proponents are especially critical of the systemicrisk exception provided in the Federal Deposit 

Insurance Corporation Insurance Corporation 

Improvement Act (FDICIA) because they argue that it 

has the potential to shift the costs for megabank failures to the taxpayer.4 They argue that when Congress 

provided a statutory exception from the least-cost resolution in the case of systemic risk, it acknowledged 

that certain depository institutions were too big to fail. 

Thus, because of size or perceived importance to the 

financial system, large institutions’ uninsured depositors and unsecured creditors are treated differently 

from those of smaller institutions. As long as the fullfaith-and-credit backing of the U.S. Treasury supports 

deposit insurance, they allege that taxpayers inevitably 

will be responsible for any losses resulting from large 

bank failures. 

2 See Bank Administration Institute and McKinsey & Co. (1996) and 

Kovacevich (1996) for their arguments on deposit insurance and bank 

regulation. 

3 See Bank Administration Institute and McKinsey & Co. (1996). 

4 See Bankers Roundtable (1997). 

Proposals for Privatizing Deposit Insurance: 

Commonalities and Differences 

Consistent with concerns about moral hazard, proponents of privatization generally favor market-oriented 

alternatives to federal deposit insurance. One proposal 

would replace publicly provided deposit insurance with 

a system of cross-guarantees under which small groups 

of banks would form syndicates with joint and several 

liability for the deposits of banks that contracted with 

them.5 Another proposal would convert the FDIC into 

a privately owned and operated insurance company, 

reducing the current system’s reliance on regulation 

and guidance.6 A third proposal would transfer ownership and management of the FDIC to the banks and 

would set an explicit limit on the use of deposit insurance in order to encourage market discipline.7 A 

fourth would retain the FDIC as a public entity but 

would reduce its powers.8 

A common theme among these proposals is a rollback 

of bank supervision and regulation. Most seek to 

reduce the regulatory and supervisory powers of bank 

regulatory agencies to allow banks to become competitive, full-service providers of financial products and 

services. One proposal would exempt banks from federal safety-and-soundness regulations and reporting 

requirements, replacing them with private restrictions 

by member banks.9 This proposal would also abolish 

the FDIC and the regulatory and supervisory functions 

of the Federal Reserve Board (FRB), the Office of the 

Comptroller of the Currency (OCC), and the Office of 

Thrift Supervision (OTS). Another proposal would 

recognize well-capitalized, well-managed institutions 

with less extensive regulation, expanded product 

opportunities, and lower regulatory “taxes.”10 

Many proposals are particularly concerned with the 

issue of TBTF. Most proposals would provide deposit 

insurance coverage for small deposits only. All seek to 

protect the taxpayer from responsibility for a systemic 

collapse by preventing the insurer from funding a systemic-risk exception. Most proposals would eliminate 

5 Petri Proposal, introduced by Rep. Thomas E. Petri (R-WI) (U.S. Congress, House [1996]). This proposal was introduced once and was not 

discussed in the subsequent debate on deposit insurance reform. 

6 Bank Administration Institute and McKinsey & Company (1996). 

7 Kovacevich (1996). 

8 Bankers Roundtable (1997). 

9 Petri Proposal (U.S. Congress, House [1996]). 

10 Bank Administration Institute and McKinsey & Co. (1996). 

FDIC QUARTERLY 25 2007, VOLUME 1, NO. 2 
the full-faith-and-credit backing of the insurer as well 

as the insurer’s line of credit with the Treasury. However, one proposal sees the need for a bank-funded backup fund to explicitly protect insured deposits against a 

systemwide collapse.11 

Evaluation of Privatization Claims 

Can Privatization Alleviate the Moral Hazard 

Problem? 

Proponents of privatization generally assume that the 

moral hazard fostered by deposit insurance can be 

eliminated through privatization. In fact, the problem 

of moral hazard is inherent in insurance itself, regardless of management or ownership. The private provision of deposit insurance does not by itself alleviate 

the moral hazard problem. 

Although moral hazard was clearly problematic in the 

savings and loan crisis, subsequent improvements in 

federal banking regulation and supervision have given 

the FDIC better tools to control moral hazard. The 

moral hazard problem created by deposit insurance has 

been mitigated by capital standards, examinations, 

safety-and-soundness regulations, enforcement actions, 

and timely bank closure policies. In particular, Prompt 

Corrective Action (PCA), introduced under FDICIA, 

has been effective in preventing banks with low capital 

levels from taking on excessive risk in an effort to 

return to profitability while the FDIC bears the risk. A 

properly constructed risk-based premium assessment 

system can also address moral hazard, and the FDIRA 

has enhanced the FDIC’s ability to manage the insurance fund and set premiums according to the riskiness 

of the insured entity. 

Would Privatization Release the Banking 

Industry from Unnecessary Regulatory 

Constraints? 

A privately funded and administered system of deposit 

insurance would not free the banking industry from all 

regulation and constraints. Many nations have privately administered deposit insurance systems and all still 

impose systems for bank supervision and regulation. 

Bank supervision predates the federal deposit insurance 

system. Many bank regulations do not flow from the 

FDIC as deposit insurer but instead are imposed by the 

chartering and supervisory authorities, including not 

only the FDIC, but the OCC, the OTS, the FRB, and 

state banking authorities. Much of the regulatory burden on insured institutions flows from statutes and regulations unrelated to deposit insurance. For instance, 

one month after the events of September 11, 2001, the 

USA PATRIOT Act was passed. The USA PATRIOT 

Act amended the Bank Secrecy Act, with which banks 

must comply. Several provisions and implementing 

rules were added to bankers’ compliance obligations. 

Reporting requirements under such laws are unrelated 

to deposit insurance coverage and are unlikely to be 

eliminated if deposit insurance is privatized. 

Public policymakers are unlikely to abandon concern 

for prudent banking practices if deposit insurance 

reverts to the private sector. In 1998, then U.S. Representative James Leach expressed this idea clearly when 

he noted, “Because a sound economy requires a safe 

and sound banking system, public liabilities exist even 

if public funds are not placed in jeopardy by statute.”12 

Even without federal deposit insurance, policymakers 

would remain concerned about implicit public guarantees. These concerns likely would be manifest in government regulation designed to promote the efficient 

operation of the financial system and ensure the protection of taxpayers and individual savers. 

It is more likely that, in addition to continued public 

regulation, a privately owned and profit-seeking 

deposit insurer would demand oversight. At a minimum, any prudently operated for-profit deposit insurer 

would probably require adherence to best practices and 

would insist on access to management and site visits to 

monitor the condition and riskiness of the institution 

it insured. It is unlikely that the private insurer would 

rely on market-generated information alone. Virtually 

all insurance policies—health, life, and liability—contain restrictions and limitations on coverage as well as 

conditions on approval in order to control risk. 

For instance, American Share Insurance Company, a 

private primary and excess deposit insurer to credit 

unions, requires monthly financial reports from its 

members, examines them regularly, and supervises 

them closely. A review of the history of state-spon12 Leach was speaking at the FDIC conference Confidence for the 

11 Petri Proposal (U.S. Congress, House [1996]). Future (FDIC [1998]). 

FDIC QUARTERLY 26 2007, VOLUME 1, NO. 2 
Privatizing Deposit Insurance 

sored deposit insurance plans also reveals that the 

more successful private insurers were extremely vigilant in regulating and supervising member banks. In 

the pre–Civil War Indiana plan, regarded by some as 

the best of the nonfederal deposit insurance plans, 

insured banks were branches of the State Bank of Indiana. Bank examinations were semiannual, and the 

directors of the State Bank had powers that exceeded 

those granted to bank regulators today. The State Bank 

of Indiana also had the authority to dictate whether 

banks in the state expanded or contracted the availability of credit, and on occasion it exercised this 

authority. In contrast (as described below), weak supervision of member banks was considered a major factor 

in the collapse of the Ohio, Maryland, and Rhode 

Island private deposit insurance plans in 1985 and 

1991. It is unclear, therefore, how the change from a 

public to a private deposit insurance system would 

affect the regulatory constraints under which the banking industry operates. 

Would Privatization Protect the Taxpayer from 

Responsibility for Losses from a Systemic Failure? 

Several of the privatization proposals call for eliminating the government’s ability to exercise a systemic risk 

exception to the least-cost resolution requirement in 

FDICIA. They maintain that when Congress provided 

a statutory exception from this requirement in the case 

of systemic risk, it acknowledged that certain depository institutions were too big to fail. They believe that 

uninsured depositors and creditors of large institutions 

may be treated differently than those of smaller institutions.13 

Economic Policy Issue. The possibility of a systemic 

risk determination—which allows government intervention to prevent broader problems—is not simply a 

deposit insurance issue, but rather an economic issue 

that is best evaluated within the context of a wider 

public policy debate. Eliminating the possibility of a 

systemic risk exception would require a government 

commitment to allow banks—and in the broader context, other very large and important businesses—to fail 

even when their failure would jeopardize the stability 

of the U.S. financial system. If the failure of a private 

firm were to threaten the stability of the U.S. economy—whether that firm were a bank, a financial servic13 See, for instance, Kovacevich (1996). 

es company, or a nonfinancial business—it is unrealistic to assume that the government would not intervene in the national interest. History is replete with 

examples of such intervention. 

In the United States, the federal government has provided financial assistance to avoid large corporate 

bankruptcies (for example, Chrysler and Lockheed), 

assisted the banking and financial sectors when they 

were threatened by the less-developed-country debt 

crisis in the 1980s, and provided financial aid to the 

Mexican government—an important trading partner— 

during that country’s financial crisis in 1995. 

More recently, ten days after the terrorist attacks of 

September 11, 2001, Congress passed a $15 billion 

package of direct cash infusion and loan guarantees to 

aid the domestic airline industry. Subsequently, when 

affordable commercial terrorism insurance became 

unavailable, Congress passed temporary legislation that 

established a federal government backstop for 90 percent of insured losses resulting from certain terrorist 

acts up to an annual $100 billion industry-aggregate 

limit.14 (In December 2005 this legislation was modified to reduce the government’s potential liability.) 

Foreign governments have also intervened when their 

financial systems are in distress. In the early 1990s, 

Norway and Sweden stepped in when their banking 

systems came under severe stress. Japan has launched 

several expensive bailouts of its banks in the recent 

past, and the so-called “East Asian Tiger” countries 

(South Korea, Thailand, Indonesia, and others), 

responding to the global currency crisis in the late 

1990s, undertook massive interventions to strengthen 

their financial sectors. In fact, the vast majority of 

industrialized nations in modern history have intervened to save their largest banks as a means of protecting their financial systems.15 

Reduced Potential for a Systemic Situation. Reforms 

enacted in 1991 as part of FDICIA make a potential 

bank failure substantially less likely to pose a systemic 

risk. Certain provisions in FDICIA were designed 

specifically to reduce systemic risk. They include PCA 

(with the establishment of capital requirements), limits on interbank credit exposures, final net settlement 

14 The federal payment is subject to an insurance company 

deductible. An insurer’s deductible is calculated as a percentage of 

the value of direct earned premiums. 

15 Caprio et al. (2005). 

FDIC QUARTERLY 27 2007, VOLUME 1, NO. 2 
authority, and reinforcement of netting provisions for 

interbank payments. Additionally, authority provided 

by FDIRA has enabled the FDIC to make the premium 

structure more risk-focused and discourages moral hazard. Finally, the use of certain failed-bank resolution 

techniques, including the use of bridge banks and 

advance dividend payments to uninsured claimants, 

has mitigated some of the adverse consequences associated with bank failures. Overall, these powers and policies make it less likely that bank regulators and 

policymakers will need to invoke a systemic risk determination under FDICIA. 

Greater Difficulty Making a Systemic Risk Determination. FDICIA also requires that in order to make a 

systemic risk determination and waive the least-cost 

requirement for resolving insolvent institutions, the 

Secretary of the Treasury, in consultation with the 

President, must determine that there would be “serious 

adverse effects on economic conditions or financial 

stability.” Such a decision can be reached only after 

favorable written recommendations from both the 

FDIC Board of Directors and the Board of Governors 

of the Federal Reserve System, with at least two-thirds 

of the members of each board voting in favor of the 

recommendation. FDICIA further requires that the 

Government Accountability Office review any determination under this extraordinary exception.16 These 

requirements ensure that a systemic risk determination 

can be made only after serious discussions at the highest levels of government. 

Funding the Costs of a Systemic Risk 

Determination. FDICIA also affords taxpayers an additional layer of protection in the event of a systemic 

risk determination. The law requires that banks pay a 

special assessment to the FDIC to recoup the amount 

by which the resolution cost exceeds what it would 

have been under the least-cost resolution 

requirement.17 

Systemic Risk and Too Big to Fail Are Not Synonymous. Finally, it is important to emphasize that the 

16 12 U.S.C. § 1823 (c)(4)(G)(iv) (2001). 

17 12 U.S.C. § 1823(d)(4)(G)(ii) (2001). The assessment is proportional to 

each bank’s total assets less the sum of tangible equity and subordinated debt. Larger banks rely more than smaller institutions on nondeposit liabilities for funding. Therefore, the assessment would fall 

more heavily on large institutions (the likely source of systemic problems) than if the assessment were charged only on domestic 

deposits. 

systemic risk exception does not protect large banks 

from failing: large banks can still fail, with stockholders, uninsured depositors, and creditors incurring losses. 

FDICIA permits the FDIC to waive the least-cost resolution requirement only where there is systemic risk, 

which might result in more protection for uninsured 

depositors and unsecured creditors than under a nonsystemic bank failure. However, as mentioned above, 

FDICIA provisions make this scenario less likely. 

Other Considerations: History, Availability, 

Cost, and Public Policy 

Other considerations raise questions about the advisability of replacing public deposit insurance with a private system. One such consideration is the fate of past 

private deposit insurance systems in the United 

States.18 Another is the ability of private capital to 

underwrite a private deposit insurance system. Cost in 

the absence of the federal guarantee and the public 

policy perspective on deposit insurance also are important considerations. 

History and Lessons of Private Deposit Insurance 

in the United States 

The state of New York implemented the first deposit 

insurance plan in the United States in 1829, and 

between then and the Civil War, five other states created programs. In all these programs, the emphasis was 

on protecting holders of banknotes rather than depositors. Three of the insurance plans failed, and the other 

three vanished soon after the establishment of the 

National Banking System. After the panic of 1907, 

eight mostly midwestern states created mutual deposit 

insurance systems. All these plans failed by 1931. After 

the 1930s, at least 30 additional nonfederal insurance 

plans were established to protect the deposits of all 

depository institutions—banks, thrifts, industrial banks 

and industrial loan companies, and credit unions. Most 

of these plans failed or ceased operation during the 

thrift crisis of the 1980s. Others were phased out when 

18 Historically, private deposit insurance systems have acted as primary insurers (playing the FDIC’s current role as insurer) or as excess 

deposit insurers (providing insurance in addition to the FDIC insurance limit). As discussed below, there are no longer any private primary insurers for banks and savings associations in the United 

States. 

FDIC QUARTERLY 28 2007, VOLUME 1, NO. 2 
Privatizing Deposit Insurance 

their sponsoring states decided, after witnessing the 

problems elsewhere, to require federal deposit insurance for all state institutions. Today, no private 

provider of primary deposit insurance to banks and 

savings associations remains. (American Share Insurance Company continues to provide primary and 

excess deposit insurance to credit unions.) 

With a couple of exceptions, these private deposit 

insurance plans were sponsored by state governments, 

though the states did not back the plans financially. 

Almost all the plans were mutual insurance funds, 

though three of the early plans were based on a system 

of mutual guarantees in which banks guaranteed one 

another’s banknotes. One completely privately held 

company began insuring credit union deposits in 1962, 

and several private companies provided reinsurance for 

deposits until they left the business in the mid-1980s. 

Historically, private insurance plans have had to contend with two serious issues: concentration of risk and 

lack of liquidity in the midst of a crisis. Nearly all private insurance plans collapsed because of the failure of 

one or more large insured institutions. In many of 

these cases, insured depositors either were not protected (or were protected only with substantial assistance 

from state taxpayers) or received access to their funds 

only after a prolonged delay. 

One study of the commonalities of failed private 

deposit insurance systems in the United States found 

that these systems typically shared five characteristics: 

(1) free exit from the system; (2) concentration risk 

(the failure of large institutions often brought down 

the entire system); (3) fraudulent acts by regulators, 

banks, and politicians; (4) limited regulatory powers; 

and (5) inaction on the part of insurers and state regulators.19 

Many of the failed systems actually had relatively high 

reserve ratios when their crises occurred. However, 

they were unable to handle the failure of a very large 

member of their system. The system could not ensure 

immediate access to depositor funds (i.e., the system 

was not able to fulfill the liquidity function of an 

insurer), and this lack of liquidity eroded public confidence, which in turn led to runs on other member 

banks, overwhelming the entire system. Typically, 

deposits were frozen, and state governments had to 

19 English (1993). 

step into the breach. Lacking funds to cover the 

insured deposits immediately, the states generally 

repaid them over a period of time, sometimes years. 

In the more recent failures of private insurance systems 

(Ohio and Maryland in 1985, Rhode Island in 1991), 

many insured depositors had to wait months—and in 

the case of Maryland, years—to receive the full return 

of their principal.20 Ohio was forced to commit $151 

million of nontax revenues to support a bond issue to 

fund depositor claims; most Ohio depositors received 

full availability of their funds within six months. Maryland committed state-sponsored bond revenues sufficient to satisfy insured depositor claims over a five-year 

period. Some depositors did not receive their funds in 

full until 1989, four years after failure. Rhode Island 

requested and received a federal loan guarantee of the 

state bonds it issued to satisfy insured depositor claims. 

In the end, Rhode Island covered the losses on its 

own, and depositors eventually received their funds in 

full, although many had to wait at least a year after the 

failure of the state deposit insurance fund. 

As the history of private deposit insurance systems suggests, private insurers have been unsuccessful in fulfilling all three of the responsibilities traditionally 

assumed by federal deposit insurance.21 A private, 

industry-funded deposit insurer not only needs enough 

resources to protect small depositors but also must be 

capable of providing stability to the entire banking system, especially in times of great financial and economic turmoil. Insufficient public confidence in the 

deposit insurance guarantee could render the system 

unable to prevent or stem banking panics. 

There are legitimate questions as to whether any private deposit insurance system could attain or maintain 

the necessary level of confidence in the deposit guarantee to prevent market instability during times of 

financial or economic turmoil. As history has shown, 

the insurance system must have not only the resources 

to handle isolated failures but the ability to handle 

catastrophes. Bank failures often come in waves—with 

one failure building on, and leading to, another. During a crisis, a private insurance fund typically must 

acquire financing from the banking industry through 

20 Todd (1994). 

21 The responsibilities are to promote financial market stability by 

maintaining depositor confidence in the banking system, to protect 

the economy from the disruptive effects of bank failures, and to protect the deposits of small savers. 

FDIC QUARTERLY 29 2007, VOLUME 1, NO. 2 
its line of credit—or from other private sources—at a 

time when the entire industry and perhaps the economy is in financial trouble. This is expensive in the 

short run, and related interest costs can hamper 

attempts to recapitalize the insurance fund for many 

years after the crisis has passed. 

It is doubtful that depositors would continue to have 

confidence in a depleted or weakened insurance fund 

unless the U.S. Treasury stood behind the deposit guarantee. As Milton Friedman notes in his 1963 monetary 

history of the United States, federal deposit insurance— 

has succeeded in achieving what had been a major 

objective of banking reform for at least a century, 

namely, the prevention of banking panics. . . . 

[B]anking panics have occurred only during severe 

contractions and have greatly intensified such contractions, if indeed they have not been the primary 

factor converting what would otherwise have been 

mild contractions into severe ones. That is why we 

regard federal deposit insurance as so important a 

change in our banking structure and as contributing so greatly to monetary stability—in practice far 

more than the establishment of the Federal Reserve 

System.22 

Availability of Private Capital 

Another consideration is whether enough capital is 

available to underwrite private deposit systems. In the 

1990s, in keeping with a provision of FDICIA, the 

FDIC explored the feasibility of establishing a private 

reinsurance system for deposit insurance.23 The resulting Marsh & McLennan study (2001) found that reinsurers had only limited interest in engaging in 

reinsurance agreements with the FDIC on terms 

acceptable to the FDIC. Doubts about the availability 

of sufficient private capital to fund a private deposit 

insurance system were reinforced by events following 

the terrorist attacks of September 11, 2001. As mentioned, subsequent to September 11, the private insurance/reinsurance industry required a government 

risk-sharing arrangement to continue providing commercial terrorism insurance. The small number of pri22 Friedman and Schwartz (1963), 440–42. 

23 FDIC (1993). The study was conducted in three phases beginning in 

1993. The final report (Marsh & McLennan Companies [2001]) was 

completed in December 2001. 

vate insurance firms currently providing excess deposit 

insurance in the United States (as will be described in 

a forthcoming FDIC Quarterly article) also heightens 

concern about the sufficiency of private capital to support a private deposit insurance system. 

Cost in the Absence of the Federal Guarantee 

There is also the issue of cost. The Marsh & McLennan study found that a reinsurance company’s price for 

excess deposit insurance coverage could be expected to 

be higher than if the FDIC were providing the coverage, because reinsurers’ pricing would represent a freemarket charge without government support. 

Federal Reserve Chairman Alan Greenspan testified in 

2002 about the likely cost of deposit insurance in the 

absence of the federal guarantee.24 He stated that realistically, the government subsidy could not be eliminated because, without it, the average premium would 

need to increase to such a high level to insure against 

the improbable case of very large losses that most 

depository institutions would be discouraged from 

offering broad insurance coverage. He made the case 

that in deposit insurance, unlike life or casualty insurance, each insured loss is not independent of others. 

Deposit-run contagion produces a far larger extremeloss tail on the probability distribution and therefore 

requires substantially higher premiums to offset this 

risk. No private deposit insurer would ever be able to 

match the FDIC premium and cover its risks. 

Public Policy Perspective 

An issue that has been infrequently addressed in this 

debate is the difference between the goals of a public 

deposit insurance system and the goals of a privately 

run system.25 These differences are considerable. To 

maintain economic stability, public regulators historically have promoted the entry of newly chartered institutions into banking markets and have encouraged 

vigorous competition among banking organizations. 

Federal deposit insurance is available to all qualifying 

banks, and it is not easily terminated. In contrast, the 

major objective of a private system would be to maximize the profit of its deposit insurance business, not to 

achieve any public policy goal. Under a mutual guar24 Greenspan (2002). 

25 Hanc (1999). 

FDIC QUARTERLY 30 2007, VOLUME 1, NO. 2 
Authors: 

Authors: 

Authors: 

Authors: 

Authors: 

Privatizing Deposit Insurance 

anty system, one might expect members to be interested in minimizing cost, risk, and competition. To 

accomplish this, it would not be surprising if a mutual 

insurance system denied coverage to newly chartered 

or otherwise risky banks, or agreed to insure them only 

at very high rates or for very short-term contracts.26 

Summary 

Privatization may not eliminate moral hazard, as moral 

hazard is an effect of all types of insurance. Recent regulatory and statutory improvements in federal banking 

law have given the FDIC better tools to control moral 

hazard. Significant regulatory burden on banks is unrelated to deposit insurance, and this burden will not 

necessarily end with privatization. It is unclear how 

privatization would shield the taxpayer from responsibility for losses arising from a systemic crisis more completely than does current law. Government 

intervention in a systemic failure—to prevent broader 

problems—is a macroeconomic policy issue, not a 

deposit insurance issue. The powers and policies enacted in FDICIA and FDIRA have reduced the risk of a 

systemic failure as well as made it considerably more 

difficult to make a systemic risk determination and 

pass the associated costs to taxpayers. In fact, if privatization eliminates the special assessment provisions that 

allow the FDIC to recoup losses for a systemic risk 

determination from the banking industry, privatization 

could actually increase taxpayer exposure in a systemic 

crisis. 

26 Ibid. 

The failure of earlier private insurance systems, the 

availability of private capital to replace the federal 

guarantee, the cost of deposit insurance in the absence 

of the federal guarantee, as well as the public policy 

considerations, are other important factors in the privatization debate. A review of the record of private 

deposit insurance systems in the United States reveals 

that insufficient confidence in the private deposit 

insurance guarantee increased the fragility of these systems and rendered them unable to prevent panics. It is 

questionable whether a private insurer could enjoy a 

high degree of public confidence unless the government stood behind the guarantee. Additionally, the 

availability of private capital to underwrite a private 

deposit insurance system is limited—a finding reinforced by insurers’ unwillingness, subsequent to September 2001, to provide terrorism insurance absent a 

government loss-sharing agreement. Overall, the evidence suggests that the costs of private deposit insurance would likely be prohibitively high, and it is 

questionable whether the goals of a private system 

would coincide with public policy goals. 

Authors: Christine Bradley, Senior Policy Analyst, 

Division of Insurance and Research 

cbradley@fdic.gov 

Valentine V. Craig, CFA, Sr. Program Analyst, 

Division of Insurance and Research 

mcraig@fdic.gov 

The authors are indebted to Kenneth D. Jones 

and Daniel A. Nuxoll of the FDIC and Marshall 

Reinsdorf for their extensive earlier work on privatization which served as a basis for this article. 

FDIC QUARTERLY 31 2007, VOLUME 1, NO. 2 
REFERENCES 

Bank Administration Institute and McKinsey & Company. 1996. Building Better Banks: The 

Case for Performance-Based Regulation. Chicago: Bank Administration Institute. 

Bankers Roundtable. 1997. Deposit Insurance Reform in the Public Interest Partnering for 

Financial Services Modernization. Report of the Subcommittee and Working Group 

on Deposit Insurance Reform, Retail Issues and Deposit Insurance Committee. 

Washington, D.C.: Bankers Roundtable. 

Caprio, Gerard, Jr., James A. Hanson, and Robert E. Litan. 2005. Financial Crises: Lessons 

from the Past, Preparation for the Future. Washington, DC: The Brookings 

Institution. 

English, William B. 1993. The Decline of Private Deposit Insurance in the United States. 

Carnegie-Rochester Conference Series on Public Policy 38:57–128. 

Federal Deposit Insurance Corporation (FDIC). 1993. Private Reinsurance Feasibility Study: 

Report to the Congress. Washington, DC: FDIC. 

———. 1998. Transcript, Confidence for the Future: An FDIC Symposium, Washington, 

DC, January. Federal Deposit Insurance Corporation. http://www.fdic.gov/deposit/ 

insurance/symposium/fdic15.PDF (accessed January 10, 2007). 

Friedman, Milton, and Anna Jacobson Schwartz. 1963. A Monetary History of the United 

States, 1867–1960. Princeton, NJ: Princeton University Press. 

Greenspan, Alan. 2002. Prepared Statement, Oversight Hearing on “The Federal Deposit 

Insurance System and Recommendation for Reform.” U.S. Senate Committee on 

Banking, Housing, and Urban Affairs, April 23, 107th Cong. 2d, sess. 

http://banking.senate.gov/02_04hrg/042302/grnspan.htm (accessed January 10, 

2007). 

Hanc, George. 1999. Deposit Insurance Reform: State of the Debate. FDIC Banking Review 

12, no. 3:1–26. 

Kovacevich, Richard M. 1996. Deposit Insurance: It’s Time to Cage the Monster. Federal 

Reserve Bank of Minneapolis Fedgazette 8, no. 2:14–15. 

Marsh & McLennan Companies. 2001. Reinsurance Feasibility Study. Washington, DC: 

FDIC. 

Todd, Walker F. 1994. Lessons from the Collapse of Three State-Chartered Private Deposit 

Insurance Funds. Federal Reserve Bank of Cleveland Economic Commentary 

(May 1): 1–5. 

U.S. Congress. House. 1996. The Deposit Insurance Reform, Regulatory Modernization, and 

Taxpayer Protection Act of 1996. HR 4318, 104th Cong., 2nd sess. 

———. 2005. Federal Deposit Insurance Reform Act of 2005. HR 1185, 109th Cong., 

1st sess. 

FDIC QUARTERLY 32 2007, VOLUME 1, NO. 2 
Feature Article: 

Banking on Financial Education 

The financial services marketplace has changed 

profoundly in recent decades. Only a generation ago, 

most individuals used their local banks to open checking and savings accounts, and perhaps turned to those 

institutions for home mortgages. Deregulation of interest rates combined with technological and marketplace 

innovations have vastly expanded the types of financial services and improved access to credit for many 

consumers, a process sometimes referred to as the 

“democratization” of credit. Transactions increasingly 

occur outside bank branches; electronic payments are 

taking the place of cash and checks; and financial 

products are being developed to meet the needs of 

many different sectors of the economy. 

As the financial landscape continues to become more 

complex, even the savviest consumers may find it 

difficult to navigate the rapidly expanding choices of 

financial services, providers, and delivery channels. 

Individuals with little or no experience with traditional 

banking services are likely to find it even more challenging. In today’s environment, financial education 

takes on added importance, as it provides consumers 

with the tools to make sound financial decisions. 

Among other things, financial education gives 

consumers knowledge about budgeting, saving and 

investing, choosing credit products, and protecting 

themselves against fraud. Financial education also 

benefits the broader economy by making citizens more 

financially stable. Over the long term, this enhanced 

financial stability can improve the economic outlook 

for an entire community and can create new opportunities for businesses, including banks. 

This article highlights the results of an FDIC study 

of the effectiveness of the Money Smart financial 

education program. The study indicates that financial 

education programs can positively affect consumers’ 

money management attitudes and behaviors. The 

article discusses who may benefit the most from such 

financial education courses and why. Of importance to 

bankers, the study also shows that financial education 

strengthens consumers’ relationships with banks and 

can improve their financial condition and outlook. 

Finally, the article describes some of the many ways 

banks are offering financial education to their 

customers and offers suggestions for banks as they try 

to enhance their education programs. 

Financial Education Improves Consumer Attitudes, 

Behaviors, and Financial Outlook 

One measure of the success of financial education is 

the extent to which it produces positive changes in 

attitudes and behaviors. A new study by the FDIC of 

its Money Smart financial education curriculum shows 

that financial education does change attitudes and 

behaviors and can result in enhanced financial literacy 

and improved creditworthiness.1 In addition, consumers 

who complete financial education programs may then 

establish relationships with the formal banking sector. 

(See “The FDIC’s Money Smart Curriculum” on page 40 

for a description of the Money Smart program.) 

The study, which the FDIC conducted in cooperation 

with NeighborWorks America®, gathered data from 

Money Smart participants nationwide about their 

knowledge, confidence, and behaviors regarding money 

management.2 The study looked at the results of three 

surveys: one, conducted before the course, collected 

baseline data; a post-training survey gathered data to 

determine changes in participants’ financial behavior 

and confidence; and a follow-up survey of 631 graduates six to twelve months after completing the training 

identified actual changes in financial practices and 

confidence.3 Table 1 shows the demographics of 

survey respondents. 

1 Federal Deposit Insurance Corporation, A Longitudinal Evaluation of 

the Intermediate-term Impact of the Money Smart Financial Education Curriculum Upon Consumers’ Behavior and Confidence (Washington, D.C.: FDIC, April 2007). The Gallup Organization was engaged 

to assist with the development of the survey questions and administer 

the survey. 2 The Money Smart curriculum has been offered to high school- and 

college-age students. However, the current version was developed 

for adults, and therefore, the study targeted adults. 

3 The pre- and post-training surveys were conducted with classes 

starting in November 2004 and ending by September 30, 2005. Gallup 

interviews for the follow-up survey began in February 2006 and ended 

in April 2006. 

FDIC QUARTERLY 33 2007, VOLUME 1, NO. 2 
Table 1 Chart 1 

Demographics of Individuals 

Enrolled in Money Smart Courses 

Tend to Correlate with Minority and 

Low- and Moderate-Income Markets 

Number of Percent of 

Characteristic Respondents Respondents* 

Age 

Under 25 years 85 13% 

25–35 years 188 30% 

35–44 years 186 30% 

45–54 years 118 19% 

55 years or older 53 8% 

Unknown 1 0% 

Total 631 100% 

Race/Ethnicity 

White 163 26% 

African American 290 46% 

Asian 22 4% 

Latino 122 19% 

Other 28 4% 

Unknown 6 1% 

Total 631 100% 

Education 

Less than high school 79 13% 

High school 162 26% 

Some college or trade 266 42% 

College 78 12% 

Postgraduate work 45 7% 

Unknown 1 0% 

Total 631 100% 

Annual Income 

Under $10,000 133 21% 

$10,000–$19,000 170 27% 

$20,000–$35,000 175 28% 

$35,000 or over 118 19% 

Unknown 35 5% 

Total 631 100% 

Source: FDIC, A Longitudinal Evaluation of the Intermediate-term Impact of the Money Smart 

Financial Education Curriculum Upon Consumers’ Behavior and Confidence (Washington, D.C., 

April 2007). 

* Percentages may not add to 100 due to rounding. 

The results of this study show that Money Smart graduates gained confidence about their basic money 

management skills (see Chart 1). For example, about 

91 percent of respondents in the follow-up survey 

reported “I am in control of my money,” compared with 

69 percent in the pre-training survey. 

Money Smart Graduates Report 

Feeling More Comfortable and Confident 

about Their Personal Finances 

Pre-Training Post-Training Follow-up 

I am comfortable 

doing business with a 

bank or credit union. 

I understand the 

way I spend my 

money enough to 

make a budget. 

I have financial 

goals that I am 

working toward. 

I am in control 

of my money. 

0% 20% 40% 60% 80% 100% 

Percent of Respondents Who Agree With Each Statement 

Source: FDIC, A Longitudinal Evaluation of the Intermediate-term Impact of the Money 

Smart Financial Education Curriculum Upon Consumers' Behavior and Confidence 

(Washington, D.C., April 2007). 

Although these positive perceptions are important, the 

survey also shows that the knowledge gained through 

the Money Smart program translates into positive 

consumer actions. For example, 22 percent of graduates 

who already had a checking account opened a checking 

account at a different financial institution by the time 

the follow-up survey was conducted, and 13 percent 

opened a different type of account at the same institution, which evidences the ability to shop for financial 

services. Also, immediately after completing the course, 

69 percent of graduates reported an increase in their 

savings (see Chart 2).4 

The results of the survey also show that financial 

education can spur some consumers to establish or 

strengthen relationships with financial institutions. For 

example, after completing the Money Smart program: 

• 43 percent of graduates without a checking account 

opened a checking account. 

• 37 percent of graduates without a savings account 

opened a savings account. 

4 Although these results are positive, they are subjective and should 

be interpreted carefully. Respondents’ savings balances were not 

monitored, and it is possible that the responses indicated heightened 

awareness of the “correct” response because of exposure to the 

Money Smart curriculum. 

FDIC QUARTERLY 34 2007, VOLUME 1, NO. 2 
Banking on Financial Education 

Chart 2 

Most Money Smart Graduates Report 

Increased Personal Savings 

Percent of respondents reporting 

changes in their level of saving 

Decreased 

3 percent 

Increased 

69 percent 

Stayed the same 

28 percent 

Source: FDIC, A Longitudinal Evaluation of the Intermediate-term Impact of the Money 

Smart Financial Education Curriculum Upon Consumers' Behavior and Confidence 

(Washington, D.C., April 2007). 

Chart 3 

Most Money Smart Graduates Report 

Decreased Debt Levels 

Percent of respondents reporting 

changes in their level of debt 

Increased 

12 percent 

Decreased 

S 53 percent tayed the same 

35 percent 

Source: FDIC, A Longitudinal Evaluation of the Intermediate-term Impact of the Money 

Smart Financial Education Curriculum Upon Consumers' Behavior and Confidence 

(Washington, D.C., April 2007). 

• 28 percent of graduates with checking accounts and 

22 percent with savings accounts at the end of the 

course began using direct deposit for the first time. 

Financial education also can improve the financial 

condition of consumers. More than half (53 percent) 

of the graduates reported that their overall debt level 

declined at the conclusion of the course (see Chart 3). 

Bill payment patterns of Money Smart graduates also 

exhibited positive changes. As shown in Chart 4, 

55 percent of respondents indicated they “always” 

paid bills, rent, and other expenses on time, up from 

43 percent before taking the course. In contrast, the 

percentage of respondents stating they “sometimes” or 

“never” pay bills on time fell from 15 percent before 

the course to 8 percent in the follow-up. Credit card 

payment practices also improved, as more graduates 

indicated that they usually pay the full credit card 

balance, and fewer indicated they pay no more than 

the minimum (see Chart 5). In fact, the share of 

respondents indicating that they usually pay no more 

than the minimum declined by one-half, from 

17 percent to 8 percent. 

Who Needs Financial Education? 

Evolution in the financial marketplace and changes in 

personal financial circumstances suggest that virtually 

all consumers could benefit from financial education at 

some point. For example, a first-time homebuyer may 

need homeownership advice and mortgage counseling. 

Older consumers may need information on annuities 

and other investment options as they transition to 

retirement, and small-business owners may benefit from 

educational programs that discuss how to handle credit 

or budget for their new ventures. 

Although virtually all consumers can benefit from some 

type of financial education, those who have little or no 

interaction with mainstream financial institutions can 

perhaps benefit the most. Individuals may fall outside 

the financial mainstream for a number of reasons. 

However, they generally fall into one of three categories: students, immigrants, and low- and moderateincome individuals. 

Students: This group includes school-age children, or 

even young adult college students, who have not had 

the need or opportunity to engage in banking transacFDIC QUARTERLY 35 2007, VOLUME 1, NO. 2 
Chart 4 

Most Money Smart Graduates 

Improved the Timeliness 

of Bill Payments 

Percent of 

Respondents 

Pre-training 60% 

50% 

40% 

30% 

20% 

10% 

0% 

Follow-up 

Always pay Usually pay Sometimes Almost never 

on time on time pay on time pay on time 

Source: FDIC, A Longitudinal Evaluation of the Intermediate-term Impact of the Money 

Smart Financial Education Curriculum Upon Consumers' Behavior and Confidence 

(Washington, D.C., April 2007). 

tions, or have had limited experience with banks. 

According to the U.S. Census Bureau, individuals 

age 25 and under represented more than one-third 

(34 percent) of the overall population as of 2005. 

Offering this group the opportunity to learn the basics 

of budgeting, saving and investing, and using credit 

wisely may be the best way to help them develop good 

financial habits for a lifetime. 

However, it appears that more work needs to be done 

in this area. Only seven states include a personal 

finance course as a high school graduation requirement.5 According to the most recent results of a survey 

by the Jump$tart Coalition for Personal Financial 

Literacy, financial literacy scores among high school 

seniors are quite low. In 2006, 62 percent of students 

failed (defined as a score below 60 percent) the Coalition’s personal finance examination.6 Additionally, 

data from a recent survey of 13,000 college students 

show that young adults’ initial experiences with 

consumer credit are already leading to heavy debt 

burdens.7 More than half these students accumulated 

5 National Council on Education, “Survey of the States: Economic and 

Personal Finance Education in Our Nation’s Schools, A Report Card” 

(New York, NY, June 13, 2007). The states are Georgia, Idaho, Illinois, 

Louisiana, Missouri, South Dakota, and Utah. 

6 Jump$tart Coalition, Financial Literacy: Improving Education. 2006 

Jump$tart Coalition Survey (Washington, D.C., 2006). 7 “Sallie Mae launches new ‘Be Debt Smart’ campaign to educate 

students, parents and graduates on managing debt and understanding credit,” Sallie Mae news release, February 14, 2007, http://www 

.salliemae.com/about/news_info/newsreleases/021407_ 

bedebtsmart.htm. 

Chart 5 

Money Smart Graduates Reported That 

They Were More Likely to Pay Off 

Their Entire Credit Card Balance Each Month 

Percent of 

Respondents 

Pre-training 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

Follow-up 

Pay the full Pay more than Pay the Pay less than 

balance the minimum minimum the minimum 

Source: FDIC, A Longitudinal Evaluation of the Intermediate-term Impact of the Money 

Smart Financial Education Curriculum Upon Consumers' Behavior and Confidence 

(Washington, D.C., April 2007). 

more than $5,000 in credit card debt while in college, 

and one-third accumulated more than $10,000.8 Fewer 

than one in five (19 percent) said they did not take on 

any credit card debt while in college. 9 

Immigrants: Immigrants and their American-born 

offspring accounted for 55 percent of the increase in 

the U.S. population during the past 40 years. Latinos 

and their offspring were by far the largest subset of 

immigrants, and this trend is expected to continue.10 

Projections indicate that by 2011, nearly one of every 

six people living in the United States will be of Latino 

origin, and Latinos will make up 9.5 percent of all 

buying power in this country, up from 5 percent 

in 1990.11 

Obstacles may constrain the ability of immigrants to 

participate in the financial marketplace. Some immigrants may be so new to the country that they have not 

conducted sizable financial transactions. Cultural or 

language barriers may discourage others from developing 

a relationship with a financial institution. For example, 

immigrants from countries with unstable banking 

systems may be wary of dealing with financial institutions in the United States. Other immigrants, like many 

8 Ibid. 

9 Ibid. 

10 Pew Hispanic Center, From 200 Million to 300 Million: The Numbers 

Behind Population Growth (Washington, D.C., October 10, 2006). 11 Selig Center for Economic Growth, “The Multicultural Economy 

2006,” Georgia Business and Economic Conditions, Third Quarter 

2006, Volume 66, Number 3. 

FDIC QUARTERLY 36 2007, VOLUME 1, NO. 2 
Banking on Financial Education 

native-born Americans, are low- and moderate-income 

wage earners whose expenses generally leave little room 

to acquire and build financial assets. 

Low- and Moderate-Income Households: These 

households earn less than 80 percent of the median 

household income for their particular geographic area, 

according to U.S. Census Bureau data. Many low- and 

moderate-income households routinely conduct financial transactions with banks and other financial institutions. However, research shows that low- and 

moderate-income individuals are more likely to have 

limited interactions with mainstream financial institutions such as banks. 

For example, a study by the Center for Financial 

Services Innovation (CFSI) indicates that about 

30 percent of low- and moderate-income households 

are “unbanked,” meaning they do not have any relationships with banks.12 This is more than three times 

the unbanked rate for the general population—about 

9 percent.13 The CFSI study also shows that, of the 

70 percent of low- and moderate-income households 

with bank accounts, almost two-thirds may be considered “underbanked,” meaning they use only limited 

banking services.14 

These customers are considered low- and moderateincome, but they do conduct a large volume of financial transactions. For example, during the period of 

the survey (2003–2004), the CFSI estimates that the 

1 million low- and moderate-income households represented by its survey bought 1.2 million money orders 

and cashed 1.9 million checks per month.15 Also, people 

earning less than $25,000 a year held assets totaling 

$175 billion in aggregate;16 57 percent of households 

in the lowest income quintile found a way to save some 

money; and almost one-fifth save regularly.17 

12 Ellen Seidman, Moez Hababou, and Jennifer Kramer, Getting to 

Know Underbanked Consumers, A Financial Services Analysis 

(Chicago, Illinois: The Center for Financial Services Innovation, 

September 2005). This survey represented almost 1 million households in 63 low- and moderate-income tracts in Washington, D.C., 

Chicago, and Los Angeles. 

13 Federal Reserve, 2004 Survey of Consumer Finances (Washington, 

D.C., 2004). 

14 Seidman et al. 

15 Ibid. 

16 Steven Davidson, “Reaching Out With Technology: Connecting the 

Low-Income Population to the Financial Mainstream,” Building 

Blocks, Fannie Mae Foundation, 2, No. 2 (Fall 2002). 17 Catherine P. Montalto, Households with Low Income: Wealth and 

Financial Behaviors, Report to the Consumer Federation of America, 

(Washington, D.C., February 10, 2004). 

The Business Case for Offering Financial Education 

In addition to strengthening formal banking relationships and improving creditworthiness, bankers have 

found that a key benefit of offering financial education 

is the ability to reach out to new groups of customers. 

Indeed, data gathered by the FDIC indicate that, while 

many banks use the Money Smart financial education 

curriculum because they perceive it to be a quality 

product carrying the FDIC seal, an equal number said 

they use it because financial education is a good business development tool (see Chart 6).18 

The sheer size of the markets represented by students, 

immigrants, and low- and moderate-income households 

and their need for money management skills make a 

clear business case for banks to offer financial 

education programs. 

Banks are actively delivering financial education, and 

some bankers note that providing financial education 

and advice to their customers is a core function of the 

banking business. Indeed, a Consumer Bankers Association survey, which included many of the nation’s largest 

banks, found that nearly 100 percent of responding 

institutions are involved in various forms of financial 

education (see Chart 7).19 

Many new customers gained through financial education efforts initially may need only basic, low-cost 

payment services and savings accounts, which likely 

will not result in immediate profitability for banks. 

However, over the long term, the newly banked likely 

will need more sophisticated and varied products, 

which could reasonably result in profitable 

banking relationships. 

More immediately, banks that provide financial education could receive positive consideration from regulators as their investment, lending, and service 

performance is evaluated under the Community Reinvestment Act (CRA). Although each bank, situation, 

and program is different and would be evaluated on its 

own merits, the following is an example of how banks 

providing financial education could receive positive 

CRA consideration: 

18 FDIC, FDIC Money Smart Survey of User Organizations, 2003 to 2004 

(Washington, D.C., 2004). 19 Consumer Bankers Association, 2003 Survey of Bank-Sponsored 

Financial Literacy Programs (Arlington, VA, 2003). 

FDIC QUARTERLY 37 2007, VOLUME 1, NO. 2 
1

Chart 6 Chart 7 

Financial Institutions Offer Many Targeted 

Financial Education Programs and Services 

0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

Taking 

Advantage of 

a Good Business 

Opportunity 

Wanting to 

Use a Quality 

Product with 

the FDIC "Seal" 

Improving CRA 

Performance 

Responding 

to FDIC 

Invitation 

Responding 

to Community 

Invitation 

Banks See Financial Education as 

a Valuable Business Opportunity 

Percent of banks saying a given reason was "very important" 

in their decision to offer Money Smart classes 

Percent of 

Respondents 

Source: FDIC Money Smart Survey of User Organizations, 2003 to 2004 (Washington, D.C., 

2004). 

• Investment Performance: A bank provides direct 

funding to a nonprofit organization that offers financial education training to consumers. 

• Lending Performance: A bank lends to low- and 

moderate-income financial education program 

participants. 

• Service Performance: A bank directly conducts 

financial education training for low- and moderate 

income individuals or provides low-cost deposit 

accounts to these participants.20 

Bank financial education programs have become 

increasingly creative and often target consumers on the 

basis of their level of knowledge or specific financial 

need, and many incorporate other banking services. 

Although there is no “best method” for delivering 

financial education and related support services, the 

following are a few common practices: 

• Informal, one-on-one counseling. 

• Partnering with nonprofits or local government 

entities to teach formal classes. 

• Donating funds to schools or nonprofits for 

formal classes. 

20 See Interagency Questions and Answers (Q&As) for CRA, 66 Fed. 

Reg. 36619, 36631, §.22(a)-1 (July 12, 2001), http://www.ffiec.gov/ 

cra/pdf/qa01.pdf. 

Mortgage/Homeownership Counseling 

Affordable Mortgage Program 

Credit Counseling 

Employee Tutoring 

Small Business Development 

K-12 Financial Education 

Predatory/Abusive Lending Prevention 

Adopt-a-School Program 

Programs for the Unbanked 

Foreclosure Prevention/Counseling 

College Financial Education 

0% 20% 40% 60% 80% 100% 

Source: Consumer Bankers Association, 2003 Survey of Bank-Sponsored Financial 

Literacy Programs (Arlington, VA, 2003). 

• Establishing mini-branches in schools. 

• Hosting formal classes at bank facilities. 

• Providing mobile branches that move to target 

communities or to employers to provide banking 

services or financial education. 

• Translating important banking documents into the 

language of consumers and hiring bank employees 

who speak those languages. 

• Providing specialized, no-account services, such as 

check cashing or money transmission services. 

“Banks Reach Out with Financial Education” (see 

page 41) highlights how three banks have integrated 

the Money Smart curriculum into their financial education programs. These three banks (and 56 percent of 

all banks using the Money Smart curriculum) determined that offering special products or services to 

Money Smart students is an effective strategy.21 Some 

programs offered by Money Smart bank partners are 

listed below. They range from basic “get to know you” 

strategies to products and services tailored to financial 

education students: 

• 23 percent introduce students to their institutions 

with a tour of their facilities. 

21 FDIC, FDIC Money Smart Survey of User Organizations, 2003 to 2004 

(Washington, D.C., 2004). 

FDIC QUARTERLY 38 2007, VOLUME 1, NO. 2 
Banking on Financial Education 

• 23 percent give unique credit or loan counseling 

available only within the Money Smart process. 

• More than one-fifth offer free checking accounts to 

Money Smart students. 

• 19 percent offer no-minimum-deposit checking or 

savings accounts to Money Smart students.22 

Although many benefits accrue to banks that offer 

financial education, the banks must absorb some operating costs, such as paid advertising or providing some 

sort of incentive for participants to attend. The costs 

will depend on the bank’s approach. Banks can minimize expenses by partnering with community or 

government organizations and using free curricula and 

other resources, including the FDIC’s Money Smart 

program. The FDIC does not specifically endorse other 

programs or groups; however, the following are sources 

of information for bankers who wish to start or expand 

financial education activities: 

• The FDIC’s Money Smart curriculum and access to 

the computer-based instruction version are available 

at the FDIC’s Web site, http://www.fdic.gov/ 

consumers/consumer/moneysmart/index.html. 

• FDIC Consumer News (http://www.fdic.gov/ 

consumers/consumer/news/index.html) provides 

practical guidance for consumers on how to use 

financial services. Each issue offers helpful hints, 

quick tips, and commonsense strategies to protect 

and stretch a consumer’s paycheck. 

• The United States Financial Literacy and Education 

Commission (http://www.treas.gov/offices/domesticfinance/financial-institution/fin-education/ 

commission/) created MyMoney.gov (http://www 

.mymoney.gov/), the U.S. government’s Web site 

dedicated to teaching the basics of financial education. The site contains information from 20 federal 

agencies involved in financial education efforts, 

including the FDIC. 

• America Saves (http://www.americasaves.org/) is a 

nationwide campaign to help individuals and families save and build wealth. More than 1,000 

nonprofit, corporate, and government groups offer 

22 Ibid. 

information, advice, and encouragement for individuals who want to pay down debt and save for 

the future. 

• The Federal Reserve System’s education Web 

site links to instructional materials and tools to 

increase understanding of the Federal Reserve, 

economics, and financial education (http://www. 

federalreserveeducation.org/). In addition, the 

Federal Reserve Bank of Chicago hosts the Financial 

Education Research Center, part of the Consumer 

and Economic Development Research and Information Center (http://chicagofed.org/cedric/financial_ 

education_research_center.cfm). Other online 

resources are available for researchers, educators, and 

program directors interested in supporting these 

types of programs and initiatives. 

• The Office of the Comptroller of the Currency has 

developed a Financial Literacy Resource Directory 

that provides descriptions and contact information 

for a sampling of organizations that have undertaken 

financial literacy initiatives (http://www.occ.treas 

.gov/cdd/finlitresdir.htm). 

• Jump$tart Coalition for Personal Financial Literacy 

(www.jumpstartcoalition.org) is a national coalition 

of organizations dedicated to improving the financial 

literacy of kindergarten through college-age youth. 

The coalition provides advocacy, research, standards, 

and educational resources. 

Financial Education Is Good Business 

Financial education helps consumers become more 

confident about the future by offering them the knowledge to make sound money management decisions. 

Financial education also benefits banks because it helps 

them target new customers who otherwise might not 

have chosen a financial relationship with a bank. 

Although difficult to quantify, bank financial education 

strategies also can positively influence local communities over the long term. These programs generate goodwill and connect banks with local organizations. As 

individuals become better able to manage their money, 

households may benefit from greater financial stability, 

potentially minimizing the numbers of bankruptcies, 

foreclosures, and other credit problems. Benefits also 

could be expected to spill over to local businesses and 

the community at large. 

FDIC QUARTERLY 39 2007, VOLUME 1, NO. 2 
Authors: Susan E. Burhouse, Senior Financial Economist, 

Division of Insurance and Research 

Sburhouse@fdic.gov 

Angelisa M. Harris, Senior Community Affairs 

Specialist, Division of Supervision and 

Consumer Protection 

angharris@fdic.gov 

Luke W. Reynolds, Community Affairs Specialist, 

Division of Supervision and Consumer 

Protection 

lureynolds@fdic.gov 

The authors wish to acknowledge the following individuals 

for their valuable contributions to the writing of this article: 

Eric Scheetz, First Vice President & CRA/Compliance 

Manager, Center Bank 

Missy Tysinger, Vice President, CRA Service Test 

Manager, Wachovia Bank, National Association 

Gladys Everts, Vice President, CRA Service Programs 

Manager, Wachovia Bank, National Association 

Ammar Askari, Assistant Vice President, Strategic Sales 

Community Education Administrator, Marshall & 

Ilsley Bank 

The FDIC’s Money Smart Curriculum 

The FDIC developed Money Smart to help adults outside often partner with community-based organizations and 

the financial mainstream build financial knowledge and other local groups, such as housing authorities, to offer 

develop positive relationships with financial institutions. Money Smart classes. Together, these banks and other 

Money Smart, piloted in early 2001 in the Washington, organizations form the FDIC’s Money Smart Alliance. 

D.C., area, was distributed throughout the United States More than 1,250 organizations in the Alliance facilitate later that year. Today, Money Smart is available in six the delivery of financial education by promoting, deliv- languages in addition to Braille and large print. ering, translating, funding, and evaluating the Money 

Money Smart Smart program. contains these ten modules: 

• Bank On It: Use of Money Smart is not limited to Alliance members. an introduction to bank services. 

The FDIC provides copies of the Money Smart curricu-

• Borrowing Basics: an introduction to credit. lum free of charge to anyone requesting a copy. As of July 

1, 2007, the FDIC has delivered about 440,000 copies. • Check It Out: how to choose and keep a 

checking account. Although all ten Money Smart modules were developed with a detailed instructor script, the FDIC often • Money Matters: how to keep track of your money. provides instructional training and technical support. 

• Pay Yourself First: why you should save, save, save. In addition, a Train-the-Trainer video, produced in 

English and Spanish, is available to help instructors 

• Keep It Safe: your rights as a consumer. 

prepare to teach Money Smart. As of July 1, 2007, the 

• To Your Credit: how your credit history will affect FDIC had offered more than 600 instructor workyour credit future. shops to approximately 13,000 instructors and distributed 35,000 copies of the Train-the-Trainer video. 

• Charge It Right: how to make a credit card work 

for you. The computer-based instruction (CBI) version of 

• Loan To Own: know what you are borrowing before Money Smart was released in English and Spanish in 

you buy. 2004. The CBI version, which can be completed 

online, is available on the FDIC’s Web site at • Your Own Home: what homeownership is all about. www.fdic.gov/consumers/consumer/moneysmart/mscbi 

Money Smart may be offered to students in a classroom, /mscbi.html. The FDIC also will provide a compact 

small group, or one-on-one setting. Financial institutions disc for those without Internet access. 

FDIC QUARTERLY 40 2007, VOLUME 1, NO. 2 
Banking on Financial Education 

Banks Reach Out with Financial Education23 

Words Become Seeds: A Community Bank’s Use of 

Money Smart Helps a Diverse Market 

Center Bank in Los Angeles, California, was established in 1986 to serve the credit needs of the diverse 

community in and around the city’s Koreatown. The 

bank now operates in California, Washington, and 

Illinois. Center Bank’s involvement in the Money 

Smart program began when it helped the FDIC 

launch the Korean-language version of Money Smart. 

In particular, Center Bank cooperated with community-based organizations and competitor banks to 

ensure that the Korean translation was accurate and 

culturally sensitive. Center Bank also was the FDIC’s 

first partner in delivering Money Smart to Koreanspeaking Americans. Classes began in June 2003, and 

soon other Korean-American banks began teaching, 

sponsoring, and using Money Smart. 

Center Bank has continued using Money Smart and 

now offers after-hours classes in branch offices. Each 

class is advertised in local newspapers. At the end of 

the course, students participate in a graduation ceremony and receive a certificate of completion from a 

bank executive. More than 600 people, many of 

whom might not otherwise have come to Center 

Bank, have attended about 40 classes offered at 

Center Bank branches. 

Also, using the Money Smart curriculum, Center Bank 

delivered financial education tips during a program 

on a Korean radio station. While no formal tracking 

occurred, bank management believes that these 

presentations helped attract new customers and highlighted the bank’s services to the local community. 

Educational Outreach in Action—Building Long-term 

Relationships and Measuring Results 

Wachovia Bank, N.A., was the first major bank to 

partner with the FDIC to offer the Money Smart 

curriculum to lower-income consumers. Wachovia 

sees financial outreach as an essential community 

responsibility, and believes that giving consumers a 

23 These are only examples of some banks that use the Money Smart 

curriculum. The FDIC does not endorse these or any other specific 

bank programs. 

stronger financial foundation will help them make 

more informed financial product choices. 

Wachovia uses a variety of delivery channels for 

Money Smart, including community partners, the 

Wachovia branch network, and employee volunteers. 

The Money Smart curriculum is delivered primarily 

through about 60 nonprofit community partners in 

low- and moderate-income neighborhoods. Wachovia 

supports the financial literacy efforts of its community 

partners in various ways, including donation of classroom materials. Classroom materials feature duallanguage (English and Spanish) Money Smart videos 

and DVDs specifically created by Wachovia for 

students and instructors. 

A distinctive element of Wachovia’s financial education program is its ability to track activities and 

results. Wachovia sets goals and establishes benchmarks to track course delivery, participant demographics and skill level, and banking account trends. 

Wachovia uses the data to provide its nonprofit 

community partners an annual report that measures 

the impact of their financial literacy outreach. 

Since the program began in 2003, Wachovia has 

trained more than 70,000 participants, who are 

predominantly African-American, Hispanic/Latino, 

women, low- and moderate-income, and either 

unbanked or underbanked. Based on participants’ selfassessments, the average skill level improved substantially after course completion. 

Wachovia’s plans for financial education programs 

include improving measurement of financial behavior 

among class participants over time. Also, Wachovia is 

developing a more robust measure of the extent to 

which financial education can be used to inform or 

change behaviors about timely personal financial issues, 

such as payday lending, identity theft, stored-value 

cards, mortgage lending disclosures, and bankruptcy. 

FDIC QUARTERLY 41 2007, VOLUME 1, NO. 2 
Tailor Made: A Customized Approach to Financial 

Education Seminar Delivery 

Marshall & Ilsley Bank (M&I) realized that to reach 

new customers, it needed to make some adjustments 

to the content and delivery of its financial education 

program. Beginning in 2005, the bank partnered with 

local community organizations that helped identify 

individuals who would benefit most from financial 

education. M&I customized financial education 

topics and Money Smart modules to meet the needs of 

these audiences and has been particularly active in 

financial education for youth. 

During the past year and a half, M&I has formed partnerships with more than 40 government, community, 

nonprofit, educational, and private organizations to 

deliver customized training. The following are examples 

of M&I’s customized approach to financial education: 

Financial Literacy Alliance for Milwaukee Education 

(FLAME): M&I joined with other Milwaukee-based 

financial institutions to address the lack of financial 

literacy in urban Milwaukee schools. This consortium 

provides training and financial incentives to help 

teachers incorporate a semester-long financial education program into the existing curriculum, thus reaching a wider audience while expending fewer resources. 

City of Milwaukee Summer Youth Internship Program: 

As part of this summer program, youth are hired for city 

jobs and receive life-skills training. M&I was invited to 

participate, and approximately 200 urban youth 

received education about the importance of saving and 

the proper management of a checking account. 

Make a Difference—Wisconsin, Inc.: M&I partnered 

with this nonprofit organization to deliver financial 

education to youth in the Milwaukee Public School 

(MPS) system. A financial literacy program was 

developed for 11th grade students attending an MPS 

high school. This grade level was targeted because 

these students represent the next generation of financial consumers. 

To gauge the effectiveness of these and all of the 

bank’s financial education programs, M&I surveys all 

students before and after the training. The 2006 seminar attendees gave more correct answers on the postsurvey than on the presurvey, and M&I attributes the 

improvement to the seminars. M&I intends to 

conduct more long-term follow-up of program participants’ banking behaviors to document the effectiveness of its financial education efforts. 

M&I also offers a suite of products to participants in 

the financial education seminars as entry points for 

formal banking products: 

• Thrift Savings: Allows customers to open an account 

with $25, earns interest, and allows direct deposit. 

• Foundation Checking: Provides a $50 cash bonus for 

customers who have completed the Get Checking 

program (a six-hour checking education course). The 

account has no minimum balance requirements and 

offers an ATM card after six months of good standing. 

• Credit Builder: Provides a way to borrow $1,000 to 

$5,000, with flexible repayment timeframes, no 

prepayment penalties, and the ability to build savings 

and earn interest. Once approved, the loan dollars are 

held in an M&I Bank certificate of deposit (CD) for 

the term of the loan. When the loan is repaid in full, 

the customer will receive the amount borrowed plus 

the interest earned on the CD. As a result, customers 

with no credit history or with a challenged credit 

history can improve their credit score during the loan 

period, while also building assets (savings). 

FDIC QUARTERLY 42 2007, VOLUME 1, NO. 2