FEDERAL DEPOSIT INSURANCE CORPORATION · 2017-02-04 · 2 FDIC 2009 Annual Report Federal Deposit...

F E D E R A L D E P O S I T I N S U R A N C E C O R P O R A T I O N

2 0 0 9 A N N U A L R E P O R T

MissionThe Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system by:• insuring deposits,• examining and supervising

financial institutions for safety and soundness and consumer protection, and

• managing receiverships.

VisionThe FDIC is a recognized leader in promoting sound public policies; addressing risks in the nation’s financial system; and carrying out its insurance, supervisory, consumer protection, and receivership management responsibilities.

ValuesThe FDIC and its employees have a tradition of distinguished public service. Six core values guide us in accomplishing our mission:

1. IntegrityWe adhere to the highest ethical and professional standards.

2. CompetenceWe are a highly skilled, dedicated, and diverse workforce that is empowered to achieve outstanding results.

3. Teamwork We communicate and collaborate effectively with one another and with other regulatory agencies.

4. EffectivenessWe respond quickly and successfully to risks in insured depository institutions and the financial system.

5. AccountabilityWe are accountable to each other and to our stakeholders to operate in a financially responsible and operationally effective manner.

6. Fairness We respect individual viewpoints and treat one another and our stakeholders with impartiality, dignity, and trust.

2009ANNUALREPORT

2 FDIC 2009 Annual Report

Federal Deposit Insurance Corporation 550 17th Street, NW Washington, DC 20429 Office of the Chairman

June 30, 2010

Dear Sir/Madam,

In accordance with:• theprovisionsofsection17(a)oftheFederalDepositInsuranceAct,• theChiefFinancialOfficersActof1990,PublicLaw101-576,• theGovernmentPerformanceandResultsActof1993,• theprovisionsofSection5(asamended)oftheInspectorGeneralActof1978,and• theReportsConsolidationActof2000,

TheFederalDepositInsuranceCorporation(FDIC)ispleasedtosubmitits2009 Annual Report(alsoreferredtoasthePerformance and Accountability Report),whichincludestheauditedfinancialstate-mentsoftheDepositInsuranceFund(DIF)andtheFederalSavingsandLoanInsuranceCorporationResolutionFund.

InaccordancewiththeReportsConsolidationActof2000,theFDICcompletedanassessmentofthereliabilityoftheperformancedatacontainedinthisreport.Nomaterialinadequacieswerefoundandthedataareconsideredtobecompleteandreliable.

Basedoninternalmanagementevaluations,andinconjunctionwiththeresultsofindependentfinan-cialstatementaudits,theFDICcanprovidereasonableassurancethattheobjectivesofSection2(inter-nalcontrols)andSection4(financialmanagementsystems)oftheFederalManagers’FinancialIntegrityActof1982havebeenachieved,exceptforamaterialweaknessininternalcontrolsrelatedtoestimatinglosses to theDIFfromresolution transactions involving loss-shareagreements,whichwas identifiedby theU.S.GovernmentAccountabilityOffice (GAO).GAO also identified information technologyissuesthataggregatedtoasignificantdeficiency.Duringthefourthquarterof2009andinearly2010,weincreasedresourcesintheseareasandinstitutedimprovementsinourcontrolenvironmentwhich,inconjunctionwithadditionalcontrolenhancementstobecompletedinthesecondquarterof2010,willsignificantlyreducetherisksoutlinedinGAO’sauditreport.Wearecommittedtomaintainingeffectiveinternalcontrolscorporate-widein2010.

Sincerely,

Sheila C. Bair Chairman

ThePresidentoftheUnitedStates ThePresidentoftheUnitedStatesSenate TheSpeakeroftheUnitedStatesHouseofRepresentatives

Table of Contents 3

Message from the Chairman • Sheila C. Bair. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Message from the Chief Financial Officer • Steven O. App. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

In Memoriam • L. William Seidman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

I. Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14TheYearinReview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14SupervisionandConsumerProtection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25ResolutionsandReceiverships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43EffectiveManagementofStrategicResources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

II. Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52DepositInsuranceFundPerformance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52InvestmentSpending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

III. Performance Results Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Summaryof2009PerformanceResultsbyProgram. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 562009BudgetandExpendituresbyProgram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59PerformanceResultsbyProgramandStrategicGoal.................................. 60PriorYears’PerformanceResults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66ProgramEvaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

IV. Financial Statements and Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74DepositInsuranceFund(DIF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74FSLICResolutionFund(FRF). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104GovernmentAccountabilityOffice’sAuditOpinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .117Management’sResponse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .134OverviewoftheIndustry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .137

V. Management Control.........................................................140EnterpriseRiskManagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140MaterialWeaknesses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .141ManagementReportonFinalActions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .141

VI. Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .144A. KeyStatistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .144B. MoreAbouttheFDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .166C. OfficeofInspectorGeneral’sAssessmentoftheManagementand

PerformanceChallengesFacingtheFDIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .176

Table of Contents


Insuring Deposits. Examining Institutions.

Managing Receiverships. Educating Consumers.

Initsuniqueroleasdepositinsurerofbanksandsavingsassociations,andincooperationwiththeotherstateandfederalregulatoryagencies,theFederalDepositInsuranceCorporation(FDIC)promotesthesafetyandsoundnessoftheU.S.financialsystemandtheinsureddepositoryinstitutionsbyidentify-ing,monitoring,andaddressingriskstotheDepositInsuranceFund(DIF).

TheFDICpromotespublicunderstandingandthedevelopmentofsoundpublicpolicybyprovidingtimelyandaccuratefinancialandeconomicinformationandanalyses.Itminimizesdisruptiveeffectsfromthefailureoffinancialinstitutions.Itassuresfairnessinthesaleoffinancialproductsandthepro-visionoffinancialservices.

TheFDIC’slongandcontinuingtraditionofexcellenceinpublicserviceissupportedandsustainedbyahighlyskilledanddiverseworkforcethatcontinuouslymonitorsandrespondsrapidlyandsuccess-fullytochangesinthefinancialenvironment.

AttheFDIC,weareworkingtogethertobethebest.

FDIC by the Numbers:

$250,000 Deposit insurance limit

699,277 Electronic deposit insurance estimator user sessions

140 Failed banks resolved

0 Insured deposit dollars lost

8,012 Insured depository institutions

560 International representatives from 56 emerging and developing markets who received consultation, training, or assistance from the FDIC

4,782 Written deposit insurance inquiries

2,400,000 Money Smart consumers reached since inception

72,614 New bank accounts opened through the Alliance for Economic Inclusion

30 Banks participating in the small-dollar loan pilot program

6,557 FDIC full-time-equivalent employees

Message from the Chairman • Sheila C. Bair 5

Asthefirstdecadeofthenewcenturycametoaturbulentclose,theFDICcontinuedtomeetthechallengeofprotectingdepositsinoverhalfabillion insuredaccounts atover8,000FDIC-insuredinstitutions.Ourguaranteehasprotecteddepositors since 1933with none ever losing somuch as a penny of insured funds.While therecent period of historic financial turmoil hasrequiredustotakesomeextraordinaryactionstocarryoutourmission,itwaspreciselyfortimeslikethesethattheFDICwasestablishedsome76yearsago.

Following the liquiditycrisis that struck thefinancial system in the fall of 2008, the FDICcontinued to focus its efforts in2009on stabi-lizing the liquidityof the industry throughourtemporary support programs, strengtheningbanksupervision,ensuringthefinancialcapac-ity of the Deposit Insurance Fund (DIF), andpromptly resolving failed institutions. During2009,thenumberoffailedbanksroseto140,upfrom25thepreviousyearandthehighestannu-al total since 1992.Meanwhile, the number ofprobleminstitutions—thosewiththetwolowestsupervisoryratings—roseto702,whichwasthehighest year-end total since 1992. Historically,thevastmajorityofprobleminstitutionsdonotfail.However,elevatednumbersofproblemandfailedinstitutionsareexpectedtoremainanear-term challenge, even as the economy recovers,and there issubstantial residualworkloadfromthefailuresthatoccurredinprioryears.

Accordingly, the FDIC has been adding tothe operational resources it needs to dealwithits increased workload. The FDIC workforcegrew to 6,557 full-time equivalent positions atyear-end2009,upfrom4,988atyear-end2008.InDecember2009,theFDICBoardapproveda

Message from the Chairman • Sheila C. BairDanielR

osenbaum

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2010operatingbudgetofalmost$4billion,a56percent increasefrom2009,andauthorized thehiringofsome1,600additionaltemporarywork-ers, which will expand the FDIC’s total work-forcebynearly25percent.

Stabilizing Bank Funding Through the TLGP

InOctober2008,attheheightofthefinancialcrisis,theFDICintroducedaTemporaryLiquid-ityGuaranteeProgram(TLGP)tohelpstabilizetheliquidityoftheindustrythroughourtempo-rarysupportprogramsandpromoteconfidenceacross the financial system. During 2009, theFDIC worked to fully implement the two ele-ments of the TLGP, extended its time frame,andmadeplans foranorderlyexitas financialmarketconditionscontinuedtostabilize.UndertheDebtGuaranteeProgram,atotalofover$618billioninguaranteeddebtwasissued,generatingover$10billioninfeesfromparticipatingbanks.ThisprogramhadbeeninstrumentalinhelpingtoreduceriskpremiumsintheinterbanklendingmarketsuntilitsexpirationonOctober31,2009.The Transaction Account Guarantee Program,whichprovides a full guarantee of all depositsinnoninterest-bearingtransactionaccounts,hasbeenextendedthroughDecember2010.

Balanced Supervision Under Adverse Banking Conditions

As supervisor for nearly 5,000 communitybanks, theFDICsawitsworkloadrise in2009withtheincreaseinthenumberofFDIC-super-visedprobleminstitutions.TheFDICrespondedto thesechallengesbyprioritizingexaminationactivities, increasing staffing levels, and mak-inggreateruseofoff-sitemonitoringandon-site

visitations between examinations. We activelycommunicate with bankers through a varietyof outreach activities, including a CommunityBank Advisory Committee that was launchedthisyear.ThisAdvisoryCommitteewasformedtoprovide theFDICwith advice andguidanceon a broad range of important policy issuesimpacting small community banks through-out the country, aswell as impacting the localcommunities they serve.We have alsoworkedcloselywith other bank regulatory agencies toissue a number of Financial InstitutionLetterson risk management issues, including a state-mentencouragingbankstomeettheborrowingneeds of creditworthy businesses and consum-ers. Striking this balanced approach to banksupervisionduringaperiodofadversityfortheindustrywillbeessentialtoensuringthatcreditismadeavailabletofinancetheanticipatedeco-nomicrecovery.

Keeping the DIF Strong While Banks Recover

AspartofaplantoreplenishtheliquidityoftheDIF,insuredinstitutionspre-paidalmost$46billionofdepositinsurancepremiumsattheendof2009.Thisamount representsapproximatelywhatnon-exemptedinstitutionswereexpectedtopayforthe39-monthperiodbeginningOctober1,2009.Asdesigned,theassessmentprepaymentdidnotimpacttheindustry’searningsandcapi-tal,allowingtheindustrytocontinuerebuildingits capital base and increasing its capacity tolend.TheprepaymentsincreasedtheDIF’stotalcashandinvestmentstoapproximately$66bil-lionasofyear-end.Accordingtocurrentprojec-tions, this level of resources will be sufficienttoresolveinsuredinstitutionsthatareprojected


lossesandmaximize recoveries to receivershipcreditors,includingtheDIF.

Preventing Unnecessary Foreclosures

Throughout the year, the FDIC remained atthe forefront of efforts to stem the sharp risein home foreclosures caused by unaffordablemortgages and rising unemployment. In addi-tiontoadvocatingwideradoptionofstreamlinedandsustainableloanmodifications,werequiredfailed-bankacquirersunder loss-sharingagree-mentstomodifyqualifyingat-riskmortgagesbycuttinginterestratesand,insomecases,deferringprincipal.As 2009 ended, the FDICworked toexpandtheavailabilityofprincipalwrite-downsastheerosionofhomeownerequitymayincreasethelikelihoodofdelinquenciesand,inthecaseofloss-sharingagreements,lossestotheDIF.

Reviving Mortgage Securitization

Mortgage securitization and the “originatetodistribute”modelofmortgagelendingplayedleadingrolesinthebuilduptothefinancialcrisis.Since the crisis, private securitizationvirtuallyshut downas investors lost confidence inmar-ketpracticesthatwereinsufficientlytransparentand ineffective in aligning their interests withthose of originators and underwriters. During2009, the FDIC Board began considering newstandards for its existing “safe harbor” protec-tions for securitizationsbybanks that are laterplacedintoreceivership.Theserules,stillpend-inginputfromthepublicandscheduledtotakeeffect in2010,willbedesigned to fosterbetterrisk management by strengthening underwrit-ing, providing better disclosure, and requiring

tofailoverthenextfewyears;assuch,theDIFwillnothavetoborrowfromtheU.S.Treasurytomeetitsinsuranceobligations.

Protecting Depositors and Resolving Failed Institutions

As the number of failed institutions rose toitshighestlevelsince1992,theFDICinstitutedstrategiestoprotect thedepositorsandcustom-ersoftheseinstitutionsattheleastpossiblecostto theDIF. The FDICmoved to an aggressivemarketingcampaignforfailinginstitutionsthatsuccessfullyledtothesaleofthevastmajorityofthesefailedentitiestohealthieracquirers.Thesestrategies helped to preserve banking relation-shipsinmanycommunitiesandprovidedeposi-torsandcustomerswithuninterruptedaccesstoessential banking services. To this end, analy-sis is performed on every failing institution toidentifybrancheslocatedinlow-andmoderate-incomeareassoastominimizetheimpactthatanyproposedresolutiontransactionmayhaveonitscustomers.Moreover,theFDIC’suseofloss-share arrangements, where failed bank assetsarepassedtotheacquirer,thusremainingintheprivate sectorwith the FDIC sharing in lossesontheassets,isexpectedtosavetheFDIC$30billion over the cost of liquidation. Finally, inselling assets, the FDIC developed an innova-tivestructuredtransactionprogramthatutilizesprivatesectorassetmanagementexpertisewhiletheFDICretainsanequityinterestinallofthefuture cash flows. The overarching rationalebehind both the loss-share agreements and thestructured transaction asset sales initiative isthatthelong-termintrinsicvalueoftheseassetsexceeds their current depressed market value.Both of these strategies shouldminimize asset


Reforming the Regulatory Structure

Inthewakeofthefinancialcrisis,Congressisconsideringmajorlegislationtooverhaulfinancialregulation. The FDIC testified numerous timesduringtheyearonregulatoryreformbeforecom-mittees in both the House and the Senate. OurbroadpolicyviewisthatCongressneedstohelprestoremarketdisciplinebyrepudiatingthedoc-trine that certain large, complex, and intercon-nectedfinancialinstitutionsaresimplytoobigtofail.Regulatorsneedtohaveaclearmandateandthenecessarystatutoryauthoritiestocloseeventhelargestbanksandnon-bankfinancialinstitu-tionswhentheygetintotrouble.Wealsoneedtoimplementregulatoryincentivestolimitthesizeandcomplexityofsystemicallyimportantfirms.

Wesupportcreatinganewconsumerprotec-tionauthorityforfinancialproductsandservicesthat sets consistentnational standards forbanksand non-banks alike. Such an across-the-boardauthoritywouldeliminateregulatorygapswhererisksgrewuncheckedinthebuilduptothecurrentcrisis.Wealsosupportmorestringentregulationofderivativesmarketsandcreationofasystemicriskcouncil to sharedata among regulators andfocusonmacro-prudential risks toourfinancialsystem.Finally,theregulatorycommunityneedstousethepowersitalreadyhastomoreeffective-ly supervise financial institutions and marketsandlimittheriskyactivitiesthatunderminedourfinancialsystem.

Creating a More Effective International Framework

Tomeet the challenges of the future and toprotectinsureddepositors,itisvitallyimportant

issuerstoretainafinancialinterestinthesecuri-tieswhilesupportingprofitableandsustainablesecuritizationsbyinsuredbanksandthrifts.Thegoal is to improve industry standards in theseareas inorder toavoidfuturelosses totheDIFandsupportarevivalofmortgagesecuritizationonasounderfooting.

Protecting Consumers and Expanding Access to Banking Services

TheFDIChas traditionallyplayeda leadingroleinshieldingconsumersfrompredatoryprac-ticesandpromotingaccesstomainstreamfinan-cialservicesforallsegmentsofthepopulation.Webuiltonthattraditionin2009bylaunchingwww.economicinclusion.gov,anewinformationportalwithlinkstotheFDIC’smanysourcesofconsumerinformationandourinitiativestoreachunderservedcommunities.ThewebsiteprovideseasyaccesstoinformationontheFDIC’sAdvi-sory Committee on Economic Inclusion, ourAlliance for Economic Inclusion, our Money Smartfinancialliteracyprogram,andtheFDICNational Survey of Unbanked and Underbanked Households. This groundbreaking survey, con-ductedforusin2009bytheU.S.BureauoftheCensus, revealed that one in four, or 30 mil-lion U.S. households, are either unbanked orunderbanked.WearecertainthatournewEco-nomic Inclusionweb sitewill take us one stepcloser to our goal of bringing these unbankedandunderbankedpopulations into thefinancialmainstream.


fulforthehard-working,dedicated,can-domenandwomenoftheFDICforalltheyhavedonetorespondtothedemandsofthecrisisandhelpputthenation’seconomybackontheroadtorecov-ery. No matter the pressures, they will neverwaverintheircommitmenttoexcellenceintheserviceoftheAmericanpeople.

Sincerely,

SheilaC.Bair

that theFDICcontinue to improve itscapabili-ties to resolve internationally active banks andto strengthen the international framework forresponding to financial crisis in cooperationwith other regulators bothwithin theU.S. andoverseas.During2009,theFDICwasatthefore-frontofefforts to learnfromthe lessonsof thefinancialturmoilbyidentifyingandaddressingweaknessesinresponsestobanksthatareactiveacrossborders.TheFDICco-chaired theBaselCommittee on Banking Supervision’s Cross-borderBankResolutionGroup,whichpreparedareportonneededreformstoallowfortheorderlyliquidationoflarge,complexinternationalbanks.Theserecommendationshaveformedanintegralpart of the international effort by theG20 andtheFinancialStabilityBoardtoreformtheinter-nationalframeworkforregulationandresolutionofthelargestfinancialfirms.TheFDICcontin-uestoworkcloselywiththeFinancialStabilityBoardontheseissues.

The FDIC: An Enduring Symbol of Confidence

During2009,theFDICwascalledupontoonceagaincarryoutitsuniquemissionasthenation’ssymbolofconfidenceinaneconomiccrisis.Wesuccessfullyperformedthismissionbyprotectingtheinsureddepositsof theAmericanpublicandstabilizingthefundingbaseoftheindustryduringaperiodofgreateconomicturmoil.

Theeffectsoftherecessionarelikelytoper-sist for some time, and, as a result, the FDICwill continue to experience a heavy workloadandsomeuniquepolicychallenges.Butwearepreparedtomeet thesechallengesandcommit-ted to seeing that ourmission is carriedout toa successful conclusion. I am especially grate-

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Message from the Chief Financial Officer • Steven O. App 11

arestewardsare fairlypresented. Iapplaud thehardworkanddedicationoftheFDICstaff.

Attheconclusionof2009andmovingforwardinto 2010, the DIF balance remains negative,although there were indications by the end ofthefirstquarterof2010thattheconditionofthebankingindustrymaybestabilizing.TheDIF’s2009 financial statements reflect the impactofa difficult banking environment, inwhich 140banksfailed.Thistotalexceedsallbankfailuresbetween1994and2008,andisthehighestannualnumbersince1992,when179failuresoccurred.

Financial Results for 2009 TheDIF’scomprehensivelosstotaled$38.1

billion for2009compared toacomprehensivelossof$35.1billionforthepreviousyear.Asaresult,theDIFbalancedeclinedfrom$17.3bil-liontonegative$20.9billionasofDecember31,2009. The year-over-year increase of $3.0 bil-lion in comprehensive losswas primarily dueto a$15.9billion increase in theprovision forinsurancelosses,a$4.0billionincrease in theunrealizedlossonU.S.Treasury(UST)invest-ments,anda$1.4billiondecreaseintheinterestearnedonUSTobligations,partiallyoffsetbya$14.8billion increase in assessment revenueand a $3.1 billion increase in other revenue(primarilyfromguaranteeterminationfeesanddebtguaranteesurcharges).

Theprovisionforinsurancelosseswas$57.7bil-lionin2009.Thetotalprovisionconsistsprimarilyof theprovision for future failures ($20.0billion)andthelossesestimatedatfailureforthe140reso-lutionsoccurringduring2009($35.6billion).

Assessmentrevenuewas$17.7billionfor2009.This isa$14.8billion increase from2008,andisdueto thecollectionofa$5.5billionspecial

Message from the Chief Financial Officer • Steven O. App

I am pleased to present the FederalDepositInsurance Corporation’s (FDIC) 2009 Annual Report (also referred to as the Performance and Accountability Report). The report coversfinancial and program performance informa-tion,andsummarizesoursuccessesfortheyear.TheFDICtakespride inprovidingtimely, reli-able, and meaningful information to its manystakeholders.

Fortheeighteenthconsecutiveyear,theU.S.GovernmentAccountabilityOffice(GAO)issuedunqualified audit opinions for the two fundsadministered by the Corporation: the DepositInsuranceFund (DIF) and theFederal SavingsandLoan InsuranceCorporation (FSLIC)Res-olution Fund (FRF). These unqualified auditopinions validate our efforts to ensure that thefinancial statements of the funds forwhichwe


assessmentinSeptember2009andsignificantlyhigherregularassessmentrevenue.Majorfactorscontributing to the increase in regular assess-mentrevenueincludedchangestotherisk-basedassessment regulations, ratings downgrades ofmanyinstitutions(whichpushedthemintohigh-erassessmentratecategories),thedeclineoftheone-timeassessmentcredit,andalargerassess-mentbase.

Although the DIF ended the year with anegative $20.9 billion fundbalance, theDIF’sliquiditywassignificantlyenhancedbyprepaidassessment inflows of $45.7 billion.Cash andmarketable securities stood at $66.0 billion atyear-end, including $6.4 billion in cash andmarketablesecuritiesrelatedtotheTemporaryLiquidityGuaranteeProgram (TLGP).Hence,the DIF is well positioned to fund resolutionactivityin2010andbeyond.Theprepaidassess-ments,whileincreasingDIFcashuponreceipt,didnot initially affect the fundbalance, sincethefundscollectedwereinitiallyrecordedasanoffsetting liability; they are subsequently rec-ognizedquarterlyasrevenuewhenearned.

In accordance with the requirements of theFederal Managers’ Financial Integrity Act of1982, the FDIC’s management conducted itsannual assessment and concluded that the sys-temofinternalcontrols,takenasawhole,com-plieswith internalcontrolstandardsprescribedbyGAOandprovidesreasonableassurancethatthe related objectives are being met, with theexception of a material weakness in internalcontrols related toestimating losses to theDIFfromresolutiontransactionsinvolvingloss-shareagreements,whichwasidentifiedbyGAOdur-ing the courseof the financial statement audit.Separately, GAO determined that a significant

deficiency existed over information systems.The FDIC believes that additional resourcesadded throughout 2009, control improvementsimplementedduringthefourthquarterof2009,and control enhancements to be completedby the end of the second quarter of 2010,willlargelyaddressGAO’sconcerns in theseareas.TheFDICisconfidentaboutthecomprehensive-nessofthesecontrolenhancementsanddoesnotexpectGAOtoidentifyrepeatfindingsfor2010.Wewill continue to enhance our control envi-ronmentthroughouttheyear.

During 2010, we will keep working towardachieving the Corporation’s strategic goalsand objectives. These include identifying andaddressing risks to the insurance funds, con-tinuingwork onU.S. government initiatives tostrengthen the financial system, and providingCongress, other regulatory agencies, insureddepositoryinstitutions,andthepublicwithcriti-caland timely informationandanalyseson thefinancialconditionofboththebankingindustryandtheFDIC-managedfunds.

Sincerely,

StevenO.App

In Memoriam • L. William Seidman 13

In Memoriam • L. William Seidman

WeattheFDICweresaddenedbytheMay13,2009,passingofL.William(Bill)Seidman,formerFDICandResolutionTrustCorporation (RTC)Chairman.Mr.Seidman, the14thChairmanof theFDIC,hadall theattributesofanAmericanhero.Hewasadynamic,bigger-than-life figure,yetaplain-spoken,courageousleaderwithasharpintellect.

Inalifefilledwithachievement,Mr.SeidmandistinguishedhimselfthemostduringhisyearswiththeFDIC.From1985to1991,heledtheCorporationthroughitsmostrigorouschallengessincetheGreatDepression.AsFDICChairman,hefacedatidalwaveofbankfailures—morethan1,100FDIC-insuredinstitutionsintotalduringhistenure.Asthecrisisgrew,Mr.SeidmanstrengthenedtheFDIC’shandbyworkingwithCongressandthepress.Underhisleadership,theFDICmetthisrisingtidewithaseriesofsuccessfulinnovations.

Mr.Seidman’sskillfulmanagementofthebankingcrisisledCongresstodeliveranadditionalchallenge:managingthesavingsandloancrisis.Havingplayedaninstrumentalroleindevelopingthelegislationcre-atingtheRTC,Mr.SeidmanbecametheRTC’sfirstChairmanwhentheagencywaslaunchedonAugust9,1989.Facedwithtwounfoldingcrises,oneinthebankingindustryandtheotherinthesavingsandloanindustry,Mr.Seidmanconfrontedbothwithcourageandcandor.

Mr.SeidmanputhislifelonginterestineducationintoactionattheFDIC.AsChairman,heexpand-ed training and educational programs, and the FDICBoard ofDirectors recognized his efforts bydedicatinganewbuildingandcampusatVirginiaSquareinhishonor.Theskillsandleadershiphedemonstratedduringthesavingsandloancrisisinspireusallaswenavigatetoday’stroubledwaters.TheFDICmournsthelossofafaithfulpublicservant.


I. Management’s Discussion and Analysis

The Year in ReviewThe year 2009 was another extremely busy

one for the FDIC. In addition to the normalcourseofbusiness,theCorporationcontinuedtomanagetheTemporaryLiquidityGuaranteePro-gram(TLGP).Additionalresourceswereneededinresponsetotheincreasedworkloadresultingfromresolving140bankfailures.TheFDICcon-tinueditsworkonhigh-profilepolicyissuesandpublishednumerousNoticesofProposedRule-making (NPRs) throughout the year, seekingcommentfromthepublic.TheCorporationalsocontinuedtofocusonastrongsupervisorypro-gram.TheFDICcontinuedexpansionoffinancialeducationprogramswiththereleaseofaportableaudioversionandaHmonglanguageversionofMoney Smart.TheFDICalsosponsoredandco-sponsoredmajorconferencesandparticipatedinlocalandglobaloutreachinitiatives.

Highlighted in this section are the Corpo-ration’s 2009 accomplishments in each of itsthreemajorbusinesslines—Insurance,Supervi-sionandConsumerProtection,andReceivershipManagement—as well as its program supportareas.

InsuranceTheFDICinsuresbankandsavingsassocia-

tion deposits. As insurer, the FDIC must con-tinually evaluate and effectively manage howchanges in theeconomy, the financialmarkets,and the banking system affect the adequacyandtheviabilityoftheDepositInsuranceFund(DIF).

Temporary Liquidity Guarantee ProgramOnOctober 14, 2008, the FDIC announced

and implemented the TLGP. The TLGP con-

sistsoftwocomponents:(1)theDebtGuaranteeProgram(DGP)—anFDICguaranteeofcertainnewly issued senior unsecured debt; and (2)the Transaction Account Guarantee Program(TAGP)—anFDICguaranteeinfullofnoninter-est-bearingtransactionaccounts.

Under the DGP, the FDIC initially guaran-teedinfull,throughmaturityorJune30,2012,whichevercamefirst,theseniorunsecureddebtissuedbyaparticipatingentitybetweenOctober14,2008,andJune30,2009.Banks,thrifts,bankholding companies, and certain thrift holdingcompanieswere eligible to participate. InMay2009,theFDICBoardfinalizedarulethatextend-edforfourmonthstheperiodduringwhichpar-ticipatingentities could issueFDIC-guaranteeddebt.Allparticipatinginsureddepositoryinsti-tutionsandthoseotherparticipatingentitiesthathad issued FDIC-guaranteed debt on or beforeApril 1, 2009,were permitted to participate intheextensionoftheDGPwithoutfurtherappli-cation to theFDIC.OtherparticipatingentitieswerepermittedtoissuedebtduringtheextendedDGP upon receiving approval from the FDIC.In conjunction with the extension of the DGPissuanceperiod,theexpirationoftheguaranteeperiodwaspushedbacktoDecember31,2012.Asaresult,approvedparticipatingentitiescouldissueFDIC-guaranteeddebtthroughOctober31,2009,andtheFDIC’sguaranteewouldexpireonthestatedmaturitydateofthedebtorDecember31,2012,whichevercamefirst.

Participatingentitiescouldissueuptoamaxi-mumof125percentoftheparvalueoftheentity’sseniorunsecureddebtthatwasoutstandingasofthe close of business September 30, 2008, andthatwasscheduledtomatureonorbeforeJune30,2009.Alldebtwithatermof30daysorless

I. Management’s Discussion and Analysis 15

15basispoints,20basispoints,or25basispointsdependingontheinstitution’sdepositinsuranceassessmentcategory.

Program StatisticsInstitutions were initially required to elect

whethertoparticipateinoneorbothofthepro-grams.Morethanhalfoftheover14,000eligibleentitieselectedtoopt-intotheDGP,whileover7,100banksandthrifts,or86percentofFDIC-insuredinstitutions,optedintotheTAGP.MostoftheinstitutionsthatoptedoutoftheDGPhadlessthan$1billioninassetsandissuednoappre-ciableamountofseniorunsecureddebt.

During its existence, the DGP guaranteedover$618billionindebtissuedby120entities.At its peak, the DGP guaranteed almost $350billionofdebtoutstanding.Theamountofdebtissuancedeclinedasmarketsimprovedthrough-out2009and,asthechartshows(seenextpage),theamountofdebtoutstandingcorrespondinglydecreasedasshorter-termdebtmaturedwithoutbeing rolled over. Near the program’s end onOctober31, 2009,however, thevolumeofdebtoutstandingincreasedslightly.AsofDecember31,2009, the total amountofFDIC-guaranteeddebtoutstandingwas$309billion.

Under the TAGP, the FDIC guaranteed anestimated$834billionofdepositsinnoninterest-bearing transaction accounts as of December31, 2009, that would not have otherwise beeninsured.Morethan5,800FDIC-insuredinstitu-tionsreportedhavingnoninterest-bearingtrans-actionaccountsover$250,000invalue.

TheDGPcollectedapproximately$10billionin fees under the program.As ofDecember 31,2009,oneparticipatingentity(aholdingcompa-ny)thathadissuedguaranteeddebthaddeclared

wasexcludedfromthedefinitionofseniorunse-cureddebt.TheFDICchargedafeebasedontheamountandtermofthedebtissued.Feesrangedfrom50basispointsonanannualizedbasisfordebtwithamaturityof180daysorless,increas-ingto75basispointsonanannualizedbasisfordebtwithamaturityof181to364daysand100basispointsonanannualizedbasisfordebtwithmaturitiesof365daysorgreater.Inconjunctionwith the program extension in 2009, the FDICassessedanadditionalsurchargeondebtwithamaturityofoneyearorgreaterissuedafterApril1,2009.UnliketheotherTLGPfees,whichwerereservedforpossibleTLGPlossesandnotgen-erally available for DIF purposes, the amountof any surcharge collected in connection withtheextendedDGPwastobedepositedintotheDIFandusedbytheFDICwhencalculatingthereserveratiooftheFund.Thesurchargevarieddependingonthetypeofinstitutionissuingthedebtwithinsureddepositoryinstitutionspayingthelowestfees.

The TAGP initially guaranteed in full alldomesticnoninterest-bearingtransactiondepos-itsheldatparticipatingbanksandthriftsthroughDecember 31, 2009. This deadline was laterextendedthroughDecember31,2010.Theguar-anteealsocoverednegotiableorderofwithdrawal(NOW)accounts at participating institutions—provided the institution committed tomaintaininterest rates on the accounts of nomore than0.50percentforthedurationoftheprogram—andInterest on Lawyers Trust Accounts (IOLTAs)and functional equivalents. Participating insti-tutionswere initially assessed a 10 basis pointsurcharge on the portion of covered accountsthatwerenototherwiseinsured.ThefeesfortheTAGPwereincreasedfortheextensiontoeither


December31,2009,totaled$1.765billion.Over-all,TLGPfeesareexpectedtoexceedthelossesfromtheprogram.At theconclusionof thepro-gram,anyremainingTLGPfundswillbeaddedto theDIFbalance.Under the conditions of thesystemic risk determination, if fees are insuffi-cienttocovercostsoftheprogram,thedifferencewouldbemadeupthroughaspecialassessment.

bankruptcyanddefaultedonitsdebt.Subsequent-ly,aclaimforpaymentwasfiledandapproved.Inearly2010,theFDICpaidofftheentireprin-cipal balance, including two quarterly interestpayments. Very few losses are expected on theremaining outstanding debt through the end oftheDGPin2012.AsofDecember31,2009,theFDIChadcollected$639millioninfeesundertheTAGP.1 EstimatedTAGP losseson failuresasof

Average Outstanding TLGP Debt

Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

$400

350

300

250

200

150

100

50

0

Dollars in Billions

1 ThisfigurereflectsfeesassessedthroughSeptember30,2009,andcollectedasofDecember31,2009.


TAGP too quickly could unnerve uninsureddepositors and ultimately reverse the progressmadeinrestoringcreditmarketstomorenormalconditions.TohelptransitioninstitutionsoutoftheTAGP,therefore,theFDICBoard,onAugust26,2009,approvedafinalrulethatextendedtheTAGPforanadditionalsixmonths,throughJune30,2010.

Thefinalruleestablishedhigherassessmentfeesforinstitutionsparticipatingintheextensionperiod.Asmentionedearlier, feeswererevisedfrom a flat-rate 10 basis points to a risk-basedsystemwithanassessmentrateofeither15,20,or25basispointsdependingontheinstitution’sdepositinsuranceassessmentcategory.Thefinalrulealsoprovidedanopportunityforparticipat-ingentitiestooptoutoftheTAGPextensionbyNovember2,2009.Over6,400institutions(or93percentofinstitutionsparticipatingatyear-end)electedtocontinueintheTAGP.

State of the Deposit Insurance Fund and Changes in Assessment Rates

DepositInsuranceFund(DIF)lossesincreasedsignificantlyduring2009,resultinginanegativefundbalanceasofSeptember30,2009.Fortheyear, continued and anticipated bank failuresresultedinadeclineinthereserveratiotonega-tive0.39percentasofDecember31,2009,downfrom0.36percentatthebeginningoftheyear.

Changes in the Assessment RatesThe decline in the reserve ratio occurred

despite an increase in assessment rates overallandseveraladjustmentsmade to therisk-basedassessment systemduring theyear. In the firstquarter, assessment rates increased across-the-boardby7basispoints.Ratesforthefirstquarter

Debt Guarantee Phase-Out and Emergency Guarantee Facility

The DGP enabled financial institutions tomeet their financing needs during a period ofsystem-wide turmoil. The DGP reopened theshort-andmedium-termdebtmarketsforbanksandothereligibleinstitutionsbyallowingthemto issue an arrayof debt instruments at a timewhen bankswere unable to roll over this debtat reasonable rates and terms. Bymid-2009, itappearedthatthefinancialmarketswerestabiliz-ing.InSeptember,theFDICBoardauthorizedanNPRproposingaphaseoutoftheDGP.Specifi-cally, theNPRaskedwhether theFDICshouldclose thebasicDGPas scheduledbut establishalimitedsix-monthemergencyguaranteefacil-itytoaddressthepossibilitythataparticipatingDGPentitymaybeunabletoreplaceitsmatur-ingseniorunsecureddebtwithnon-guaranteeddebt as a result ofmarket disruptions or othercircumstancesbeyond the entity’s control. Fewcomments were received on the proposal andtheFDICBoardvotedonOctober20,2009, toapproveafinalruleendingtheDGPasofOcto-ber31,2009,withonly theemergencyguaran-tee facility continuing on a case-by-case basisthrough April 30, 2010. As its name implies,the FDIC always intended the TLGP to betemporary.

Transaction Account Guarantee Program Phase-Out

TheTAGPwasdesignedtoeliminatepoten-tially disruptive shifts in deposit funding andthus preserve bank lending capacity. The pro-gramproved effective.However, because bankfailures continued to grow during 2009, theFDIC remainedconcerned that terminating the


Setting the Designated Reserve RatioAtameetingonDecember15,2009,pursuant

to provisions in the Federal Deposit InsuranceActthatrequiretheFDICBoardtosettheDesig-natedReserveRatio(DRR)fortheDIFannually,theFDICBoardsetthe2010DRRat1.25percentofestimatedinsureddeposits.The2010DRRof1.25percentisunchangedfromthe2009DRR.

Amendments to the Restoration PlanTheFederalDepositInsuranceReformActof

2005requirestheFDICBoardtoadoptarestora-tionplanwhentheDIFreserveratiofallsbelow1.15percentorisexpectedtowithinsixmonths.Giventhesteadydeclineinthereserveratiodur-ing 2008 and projections for future bank fail-ures,theFDICBoardadoptedaRestorationPlaninOctober2008torestorethereserveratiotoatleast1.15percentwithinfiveyears.Thecontin-ueddeclineintheDIFbalancethroughout2009,however,necessitatedseveralamendmentstotheRestorationPlan.

OnFebruary27,2009, theFDICBoardfirstamendedtheRestorationPlanbyextendingthetimeframeforrecapitalizationoftheDIFfromfive years to seven years due to extraordinary

of2009rangedfrom12to50basispoints.Insti-tutions in the lowest risk category—Risk Cat-egoryI—paidbetween12and14basispoints.

OnFebruary27,2009,theFDICBoardissueda rule incorporating adjustments to the risk-based assessment system to improve how thesystem differentiates for risk. Effective April1,2009, therangeofrateswidenedoverallandwithinRiskCategoryI. InitialbaseassessmentrateswithinRiskCategoryInowrangefrom12to16basispointsonanannualbasis,whiletheinitialbaseratesforriskcategoriesII,III,andIVare22,32,and45basispoints,respectively.Aninstitution’stotalbaseassessmentratemaybelessthanorgreaterthanitsinitialbaserateasaresultof additional adjustments for secured liabilities(increase), brokered deposits (increase), and/orunsecureddebtandTierIcapital(decrease).ForRiskCategoryI,totalbaseassessmentratesmaybeaslowas7basispointsorashighas24basispoints.ARiskCategoryIVinstitutioncouldhaveatotalbaseassessmentrateashighas77.5basispoints.The initialbaseassessment rates, rangeofpossiblerateadjustments,andminimumandmaximumtotalbaserates,asofyear-end,acrossallriskcategoriesareasfollows:

RiskCategory

I

RiskCategory

II

RiskCategory

III

RiskCategory

IV

Initial Base Assessment Rate 12 – 16 22 32 45

Unsecured Debt Adjustment -5 – 0 -5 – 0 -5 – 0 -5 – 0

Secured Liability Adjustment 0 – 8 0 – 11 0 – 16 0 – 22.5

Brokered Deposit Adjustment 0 – 10 0 – 10 0 – 10

Total Base Assessment Rate 7 – 24 17 – 43 27 – 58 40 – 77.5


Actions to Meet Projected Liquidity NeedsWhile the Amended Restoration Plan and

higher assessment rates addressed the need toreturnthereserveratioto1.15percent,theFDICalsohadtoconsideritsneedforcashtopayforprojectednear-termfailures.InJune2008,beforethenumberofbankandthriftfailuresbegantorise significantly and the crisisworsened, totalassetsheldby theDIFwereapproximately$55billion, consisting almost entirely of cash andmarketable securities. As the crisis continuedinto2009,theliquidassetsoftheDIFwereusedtoprotectdepositorsoffailedinstitutions.AsofSeptember30,2009,cashandmarketablesecuri-tieshadfallentoapproximately$23billionandwereprojectedtodeclinefurtherasthepaceofresolutionscontinuedtoputdownwardpressureon cashbalances.TheFDIC faced an immedi-ateneedformoreliquidassetstofundnear-termfailures.

Tomeettheprojectedliquidityneedsfornear-termfailures, theFDICproposedarulemakingrequiring insured institutions to prepay theirestimated quarterly risk-based assessments forthe fourthquarterof2009, and for allof2010,2011,and2012.Theprepaidassessmentfortheseperiods would be collected on December 30,2009,alongwitheachinstitution’sregularquar-terlyrisk-baseddepositinsuranceassessmentforthethirdquarterof2009.

In order to calculate an institution’s assess-mentsforthefourthquarterof2009,andforallof 2010, 2011, and 2012, the institution’s totalbase assessment rate in effect on September30, 2009, would be used. That rate would beincreased by an annualized 3 basis points for2011 and 2012. Again, for purposes of calcu-latingtheamountthataninstitutionprepaidon

circumstances. To meet this time frame andhelp maintain public confidence in the bank-ingsystem,theFDICBoardadoptedaninterimrulewitharequestforcommentthatwouldhaveimposed an emergency special assessment ontheindustryof20basispointsontheassessmentbaseasofJune30,2009.Theinterimrulewouldalsohavepermitted theFDICBoard to imposeanemergencyspecialassessmentafterJune30,2009,ofupto10basispointsontheassessmentbase,ifnecessarytomaintainpublicconfidenceinthefederaldepositinsurancesystem.

In response tocomments,onMay22,2009,theFDICBoardvoted to levyaspecialassess-ment of 5 basis points on each FDIC-insureddepository institution’s assets minus its Tier 1capital,asofJune30,2009.Thespecialassess-mentwascollectedonSeptember30,2009.Theassessmentwascappedat10basispointstimesaninstitution’sassessmentbasesothatnoinsti-tutionpaidanamounthigherthanitwouldhavepaidundertheinterimrule.TheFDICBoardalsovotedtoallowadditionalspecialassessmentsin2009ifconditionsaffectingtheDIFwarranted.

InMay2009,Congressamendedthestatutoryprovisiongoverningtheestablishmentandimple-mentationofaRestorationPlangivingtheFDICeight years in which to bring the reserve ratiobackto1.15percent,absentextraordinarycircum-stances.Asaresult,onSeptember29,2009, theFDICagainadoptedamendmentstotheAmendedRestorationPlanthatallowedtheDIFtoreturntoareserveratioof1.15percentwithineightyears.Concurrently, theFDIC adopted a 3 basis pointincrease in annual risk-based assessment rateseffective January1,2011.TheFDICBoardalsovoted not to impose any further special assess-mentsontheindustryfortheremainderof2009.


thatareimportanttotheFDIC’sroleasdepositinsurer and bank supervisor. During 2009, theCFR co-sponsored two major research confer-ences,aworkshop,andasymposium.

TheCFRorganized and sponsored the 19thAnnual Derivatives Securities and Risk Man-agementConferencejointlywithCornellUniver-sity’sJohnsonGraduateSchoolofManagementand theUniversity ofHouston’sBauerCollegeofBusiness. The conferencewas held inApril2009at theSeidmanCenter andattractedover100researchersfromaroundtheworld.Confer-encepresentationsincludedtermstructuremod-eling,pricedynamics,fixedincome,andoptionspricingandcreditrisk.

The CFR also organized and sponsored the9th Annual Bank Research Conference joint-ly with The Journal for Financial Services Research (JFSR) in September 2009.The con-ference theme, Governance and Compensationin theFinancial Services Industry, included 16paper presentations and was attended by over120 participants. Experts discussed a range ofbanking and financial sector issues—includingcorporate governance, bank lending behavior,incentivestructures,householdfinance,andthesubprimecreditcrisis.

TheCFRheldaone-daysymposiumonmort-gage default risk which was jointly organizedwith theFederalHousingFinanceAgency.Thesymposium attracted more than 200 industryexperts, academics, and policy makers. Dis-cussion topics includedcollateral andappraisalissues, underwriting standards, vendor modeldevelopments, subprime and other alternativemortgage product default modeling issues, aswell as analysis of various aspects of ongoingloanmodificationprograms.

December30,2009,aninstitution’sthirdquarter2009assessmentbasewouldbeincreasedquar-terlyata5percentannualgrowthrate throughthe end of 2012. The proposal for the prepaidassessment had certain attributes that made itmore attractive than imposing another specialassessmenton the industry.Chief among thesewas that theprepaymentwouldnotaffectbankcapitalandearningsata timewhenthesewerealreadyunderpressure.Byimplementingapre-paidassessment,bankswouldbeabletobooktheprepaymentasanassetwithazeropercentriskweight.Thisassetwouldthenbedrawndownasthe bank’s regular quarterly risk-based assess-mentwaslevied.Additionally,thosebanksthatwerelikelytobeseverelyadverselyaffectedbytheprepaymentcouldbeexemptedfromthepre-payment,althoughnotfromtheactualquarterlyrisk-basedassessment.

The comments received by the FDIC weremostly favorable—generally supporting thenotion that the industry should fund its ownneeds to the extent possible. InNovember, theBoard finalized this rulemaking making onesubstantivechange.AnyprepaidassessmentnotexhaustedaftercollectionoftheamountdueonJune 30, 2013—moved up from December 31,2014—willbereturnedtotheinstitutionatthattime.Moreover,ifconditionsimprovebeforethattime,theFDICBoardmayvotetoreturnfundstotheindustrysooner.TheFDICcollected$45.7billion from the prepaid assessments—enoughtofunditsprojectedliquidityneeds.

Center for Financial ResearchTheCenterforFinancialResearch(CFR)was

foundedby theCorporation in2004 toencour-age and support innovative research on topics


laborativeeffortculminatedin the issuanceofthe Core Principles for Effective Deposit Insur-ance SystemsinJune2009.Thisisasignificantmilestoneforimprovingdepositinsurancesys-temsworldwide.TheCore Principles weresub-sequentlywelcomedby theFinancialStabilityBoard (FSB) (formerly the Financial StabilityForum)atitsinauguralmeetinginJune.

TheFinancialStabilityInstitute(FSI)andtheBCBS partnered with IADI during IADI’s 8thAnnualConferenceonSeptember23–24,2009,at theBank for International Settlements (BIS)inBasel,Switzerland,topresenttheCore Prin-ciples. More than 200 individuals representingover100organizationsfrommorethan80juris-dictions attended the conference. Participantsincluded,amongothers,depositinsurers,finan-cialsupervisors,andcentralbankers.Theconfer-encewasorganizedtofurtherpromotetheCore Principlesandcontributetotheirimplementationandfurtherdevelopment.Theeventfeaturedpre-sentationsbyinternationallyrecognizedexpertsJaime Caruana, General Manager of the BIS;NoutWellink,ChairmanoftheBCBSandPresi-dent, De Nederlandsche Bank; Josef Tosovsky,ChairmanoftheFSI;WilliamWhite,ChairmanoftheEconomicandDevelopmentReviewCom-mittee,OrganizationforEconomicCo-operationandDevelopment;andDavidHoelscher,AssistantDirector,MonetaryandCapitalMarketsDepart-ment,InternationalMonetaryFund.

The FDIC’s leadership in developing andimplementing training seminars in partnershipwith IADI, the European Forum of DepositInsurers(EFDI),andtheAssociationofSupervi-sorsofBanksof theAmericas (ASBA)contin-uedin2009.TheFDIChostedanddevelopedthecore curriculum for IADI’s executive training

TheCFRhosteditsannualFallWorkshopinDecember,whichincludedthreedaysofresearchpaper presentations and discussions by FDICstaff. Theworkshopwas attended by about 30externalacademicsand30FDICstaff.

In addition to conferences, workshops andsymposia, 11 CFR working papers were com-pletedandmadepublicon topics including thecostsassociatedwithFDICbankresolutions,theperformanceof theBasel IIAdvanced InternalModel Approach for setting regulatory capitalrequirements,neweconometricmethodstohan-dle unit roots, executive compensation in bankholdingcompanies,bankfailuresandthecostofsystemic risk, thepolitical economyassociatedwiththerecentbailout,andtheroleofspecula-tionincreatingvolatilityintheoilmarkets.

International Outreach The FDIC demonstrated its leadership role

in promoting sound deposit insurance, banksupervision, and bank resolution practices byprovidingtechnicalguidance,training,consult-ing services, and information to internationalgovernmental banking and deposit insuranceorganizationsinmanyareasaroundtheworld.Theglobal crisis thatbegan in the summerof2007 and intensified in 2008 led many inter-national authorities, including deposit insur-ers,totakeaseriesofunprecedentedactionstorestore public confidence and financial stabil-ity.Inresponsetothiscrisis, theInternationalAssociationofDeposit Insurers (IADI),underthe leadership of its President—FDIC’s ViceChairman Martin Gruenberg—and the BaselCommittee on Banking Supervision (BCBS)jointly led an effort to establish an agreed setof deposit insurance core principles. The col-


an interim report was prepared inDecember2008.Subsequent to theinterim report, the Basel Commit-tee asked the CBRG to expand itsanalysistoreviewthedevelopmentsandprocessesofcrisismanagementandresolutionsduringthefinancialcrisiswithspecificreferencetocasestudies of significant actions byrelevant authorities, which includ-ed the failures of Lehman Broth-

ers, Dexia, Fortis, and the Icelandic banks. Inresponse to this direction and building on thisinitialstocktake,theCBRGprovidedtheBaselCommitteewith a final report and recommen-dations to identify concrete andpractical stepstoimprovecross-bordercrisismanagementandresolutions. The report and recommendationshavebeencoordinatedwithandseektocomple-menttheworkoftheFSBbyprovidingpractica-bledetailedapproachestoimplementtheFSB’sPrinciples for Cross- border Cooperation on Crisis Management of April 2, 2009.

Throughout2009,theFDIChasprovidedsup-port to theFSBthroughitsworkontheCross-border Crisis Management Working GroupchairedbyPaulTucker.Thisgrouphassoughttoimplement the high-levelPrinciples for Cross-border Cooperation on Crisis Management of April 2, 2009.These principles include a com-mitment to cooperate by the relevant authori-ties, including supervisory agencies, centralbanks and finance ministries, both in makingadvancedpreparationsfordealingwithfinancialcrisesandinmanagingthem.Theyalsocommitnational authorities from relevant countries tomeet regularly alongside core colleges to con-sider together the specific issues and barriers

seminar on “ClaimsManagement: Reimburse-ment of Insured Depositors.” The FDIC co-sponsoredwithEFDIaconferenceon“DepositInsuranceBeforeandAfteraSystemicCrisis.”TheFDICalsodeliveredtraininginsupervisingoperationalriskunderASBA’strainingprograminLatinAmerica.

The FDIC has also provided leadershipthrough its co-chairing of the BCBS’s Cross-borderBankResolutionGroup (CBRG),whichpublisheditsfinalreportandrecommendationsinMarch 2010. The CBRGwas established inDecember 2007 under a mandate to analyzeexistingresolutionpolicies,allocationofrespon-sibilitiesandlegalframeworksofrelevantcoun-triesasafoundationtoabetterunderstandingofthepotentialimpedimentsandpossibleimprove-mentstocooperationintheresolutionofcross-borderbanks.Duringthefirsthalfof2008,theCBRGcollecteddetaileddescriptionsofnationallawsandpoliciesonthemanagementandreso-lutionofcross-borderbanksusinganextensivequestionnairecompletedbycountriesrepresent-edontheGroup.TheCBRGusedthequestion-naire responses to identify themost significantpotential impediments to theeffectivemanage-ment and resolution of cross-border banks and

IADImembersandFDICstaffattheexecutivetrainingconference.


thatwasheldattheFederalReserveinDecem-ber. The conference addressed approaches andpolicieswith respect tomacroprudential super-vision; cross-border supervisory cooperation;regulatoryreform;andconsumerprotection.TheFDIChasalsostrengtheneditsrelationshipwithChinabysigninganAppendixtotheSuperviso-ryMemorandumofUnderstandingbetweentheFDICandtheChinaBankingRegulatoryCom-missiononMay26,2010.TheAppendixcoversissues relating cross-border contingency plan-ning and the resolution of troubled institutionswithinChinaandtheUnitedStates.

RecognizingIndia’srisingeconomicrole,theFDICparticipatedintheU.S.-IndiaFinanceandEconomicForumhostedbytheIndianMinistryof Finance in December in New Delhi, India.Themeetingbrought togetherallfinancialsec-torregulatorsfromthetwocountriestodiscussavarietyoftopics,includingdepositinsurance,banking sectordevelopments, capital andcom-moditiesmarkets,insurance,andfinancialedu-cation. The FDIC shared its responses duringthecurrenteconomiccrisisanditsviewonthevalueofdepositinsuranceinacrisis,aswellasits efforts in financial education and economicinclusion.

During2009,FDICstaff shared its expertisewith awide range of individuals fromdevelop-ing and emerging economies as well as fromdevelopedeconomies,withthegoalofenhancingcapacity in deposit insurance, supervision, andresolutions.Duringtheyear,theFDIChosted67individualvisitswithatotalofmorethan450for-eignvisitorsfromover30countries.TheFDIC’sresponse to the financial crisis, U.S. regulatoryrestructuring options, and resolution methodswerefrequentlydiscussedduringthesevisits.In

tocoordinateaction thatmayarise inhandlingseverestressatspecificfirms,toshareinforma-tionwherenecessaryandpossible,andtoensurethat firmsdevelopadequatecontingencyplans.TheFSBprinciplescoverpracticalandstrategicex ante preparations and set out expectationsfor how authorities will relate to one anotherin a crisis. They draw upon recent and earlierexperiences of dealingwith cross-border firmsincrisis,includingthe2001G10JointTaskforceReportontheWindingDownofLargeandCom-plexFinancial Institutions, and the2008Euro-peanUnionMemorandumofUnderstandingonFinancialStability.Currently thisgroup ispre-paringdetailedanalysisofobstaclestorecoveryandresolutionplanning,whichwillbepresentedtotheG20inNovember2010.

Junemarkedthetwo-yearanniversaryof thesecondment program agreed upon between theFinancialServicesVolunteerCorps(FSVC)andtheFDICtoplaceoneormoreFDICstaffmem-bersfull-timeinFSVC’sWashington,DC,office.Theprojectsin2009includedanin-depthreviewofbanksupervisorypracticesattheBankofAlba-nia; a seriesof commentaries andconsultationsto assist theCentralBank ofEgypt in creatinganappropriateandeffectiveapproachinthenewarea of retail bank supervision; adapting FDICcoursesforthefirsttimetoaformatstreamlinedandrelevantforexaminersat theReserveBankofMalawi,theBanqued’Algerie,andtheCentralBankofEgypt;anddesigningandparticipatinginFSVC’sfirst-evertrainingandconsultationswiththeCentralBankofLibyaandtheCentralBankofIraqonessentialbanksupervisiontopics.

TheFDICdeepeneditskeyrelationshipwithChinabyparticipatinginthefourthannualU.S.-ChinaBankingSupervisor’sBilateralConference


toimpactlargeinstitutions.Giventheincreasedrisklevels,theFDIChasexpandeditspresenceatthenation’slargestandmostcomplexinstitu-tions through additional and enhanced on-siteandoff-sitemonitoring.

The program increased its on-site presenceattheeightlargecomplexinstitutions,asdesig-natedbytheFDICBoardofDirectors,toassessrisk,monitorliquidity,andparticipateintarget-edreviewswiththeprimaryfederalregulators.Standardized liquidity, and reportingprocessesarealsoinplaceatselectlargeandprobleminsti-tutions.Off-sitemonitoringhasintensifiedwithweekly reportingonhigh-riskbankswith totalassetsof$5billionorgreater.

The Large Insured Depository Institution(LIDI) Program remains the primary instru-ment for off-sitemonitoringof insureddeposi-toryinstitutionswith$10billionormoreintotalassets,orunderthisthresholdatregionaldiscre-tion.TheLIDIProgramcontinues toprovideacomprehensiveprocesstostandardizedatacap-tureandreportingthroughnationwidecompre-hensivequantitativeandqualitativeriskanalysisoflargeandcomplexinstitutions.AsofDecem-ber 31, 2009, the LIDI Program encompassed109institutionswithtotalassetsofover$10tril-lion. In order to enhance large bank oversight,theLIDIProgramwasrefinedtobetterquantifyrisktotheinsurancefundinalllargebanks.Thiswas accomplished, in collaboration with otherdivisions and offices, through the implementa-tionoftheLIDIScorecard.TheLIDIScorecardisdesignedtoweighkeyriskareasandprovideariskrankingandmeasurementsystemthatcom-pares insured institutions on the basis of boththe probability of failure and exposure to lossat failure.ThecomprehensiveLIDIProgram is

addition,twoFDICstaffmembersprovidedtech-nicalassistancethroughtheFSVCon15missionscovering12countries. InNovember,FDICstaffprovided training to 32 Latin American banksupervisorsinthesupervisionofoperationalriskin Panama as part ofASBA’s continental train-ing program. Also, through the FDIC’s Corpo-rate University Examiner training program andtheStateDepartment’sAnti-MoneyLaundering/Counter-Financing of Terrorism training pro-gram,theFDICprovidedtrainingto146studentsfrom 20 countries. Additionally, the FDIC wasabletoprovidedepositinsuranceclaimsmanage-menttrainingthroughtheIADIExecutiveTrain-ingProgramto128representativesfromover50countries. In total, these efforts resulted in theFDIC’sengagementwithover560representativesfrom56emergingordevelopingmarkets.

Complex Financial Institution ProgramThe FDIC’s Complex Financial Institution

(CFI)Programaddressestheuniquechallengesassociatedwith thesupervision, insurance,andpotential resolution of large/complex insuredinstitutions. The FDIC’s ability to analyze andrespond to risks in these institutions is of par-ticularimportance,astheymakeupasignificantshareofthebankingindustry’sassets.Thepro-gramprovidesforaconsistentapproachtolarge-banksupervisionnationwide,allowsforanalysisoffinancialinstitutionrisksonanindividualandcomparativebasis,andenablesaquickresponsetorisksidentifiedatlargeinstitutions.Thepro-gram’sobjectivesareachievedthroughextensivecooperationwiththeFDICregionaloffices,otherFDICdivisionsandoffices,and theotherbankand thrift regulators. Adverse economic andmarket conditions throughout 2009 continued


tions,protectsconsumers’rights,andpromotescommunityinvestmentinitiatives.

Examination Program The FDIC’s strong bank examination pro-

gram is the core of its supervisory program.AsofDecember31,2009, theCorporationwasthe primary federal regulator for 4,943 FDIC-insured,state-charteredinstitutionsthatwerenotmembersoftheFederalReserveSystem(gener-ally referred to as “state non-member” institu-tions).Throughsafetyandsoundness,consumercompliance and Community Reinvestment Act(CRA), and other specialty examinations, theFDIC assesses an institution’s operating con-dition,management practices and policies, and

essential toeffective largebanksupervisionbycapturing information on the risks and utiliz-ingthatinformationtobestdeployresourcestohigh-riskareas,determinetheneedforsupervi-soryaction,andsupport insuranceassessmentsandresolutionplanning.

Supervision and Consumer Protection

Supervision and consumer protection arecornerstonesoftheFDIC’seffortstoensurethestabilityofandpublicconfidenceinthenation’sfinancial system. The FDIC’s supervision pro-gram promotes the safety and soundness ofFDIC-supervised insured depository institu-

FDIC Examinations 2007–2009

2009 2008 2007

Risk Management (Safety and Soundness):

State Non-member Banks 2,398 2,225 2,039

Savings Banks 203 186 213

Savings Associations 1 1 3

National Banks 0 2 0

State Member Banks 2 2 3

Subtotal—Safety and Soundness Examinations 2,604 2,416 2,258

CRA/Compliance Examinations:

Compliance/Community Reinvestment Act 1,435 1,509 1,241

Compliance-only 539 313 528

CRA-only 7 4 4

Subtotal—CRA/Compliance Examinations 1,981 1,826 1,773

Specialty Examinations:

Trust Departments 493 451 418

Data Processing Facilities 2,780 2,577 2,523

Subtotal—Specialty Examinations 3,273 3,028 2,941

Total 7,858 7,270 6,972


ingof“4”or“5”),comparedtothe252probleminstitutions with total assets of $159.4 billiononDecember 31, 2008. This constituted a 179percentincreaseinthenumberofprobleminsti-tutions and a 153 percent increase in probleminstitutionassets.In2009,179institutionswithaggregate assets of $1.3 trillion were removedfrom the list of problem financial institutions,while 629 institutionswith aggregate assets of$1.6trillionwereaddedtothelist.Eighty-threeinstitutionsareinprocessofbeingdowngradedtoproblemstatus,reportingtotalassetsof$32.2billion.ColonialBank,Montgomery,Alabama,wasthelargestfailurein2009,with$25.0billioninassets(andwasaddedtothelistandresolvedin2009).TheFDICistheprimaryfederalregu-latorfor473ofthe702probleminstitutions,withtotalassetsof$242.2billionand$402.8billionrespectively.

During2009,theCorporationissuedthefol-lowing formal and informal corrective actionsto address safety and soundness concerns: 282CeaseandDesistOrders,3TemporaryCeaseandDesist Orders, and 425Memoranda of Under-standing.Of these actions, 9Cease andDesistOrders and 22 Memoranda of Understandingwereissuedbased,inpart,onapparentviolationsoftheBankSecrecyAct.

compliancewithapplicablelawsandregulations.TheFDICalsoeducatesbankersandconsumersonmatters of interest and addresses consumerquestionsandconcerns.

As of December 31, 2009, the Corporationconducted 2,604 statutorily required risk man-agement (safety and soundness) examinations,including a review of Bank Secrecy Act com-pliance, and all required follow-up examina-tions for FDIC-supervised problem institutionswithin prescribed time frames. The FDIC alsoconducted1,981CRA/complianceexaminations(1,435 jointCRA/compliance examinations,539compliance-onlyexaminations,2and7CRA-onlyexaminations)and3,273specialtyexaminations.All CRA/compliance examinations were alsoconductedwithinthetimeframesestablishedbyFDICpolicy,includingrequiredfollow-upexam-inations of problem institutions.3 The accom-panying tableonpage25compares thenumberofexaminations,by type,conductedfrom2007through2009.

Risk ManagementAs of December 31, 2009, there were 702

insured institutionswith total assets of $402.8billion designated as problem institutions forsafetyandsoundnesspurposes(definedasthoseinstitutions having a compositeCAMELS4 rat-

2 Compliance-onlyexaminationsareconductedformostinstitutionsatornearthemid-pointbetweenjointcompliance/CRAexaminationsundertheCommunityReinvestmentActof1977,asamendedbytheGramm-Leach-BlileyActof1999.CRAexaminationsoffinancialinstitutionswithaggregateassetsof$250millionorlessaresubjecttoaCRAexaminationnomorethanonceeveryfiveyearsiftheyreceiveaCRAratingof“Outstanding”andnomorethanonceeveryfouryearsiftheyreceiveaCRAratingof“Satisfactory”ontheirmostrecentexamination.

3 The2009annualperformancegoalforcomplianceexaminationson“3-,4-,and5-rated”institutionswasnotfullymet.Thisannualperformancegoalandtheindicatorhavebeenrevisedfor2010tobeconsistentwiththegoalestablishedinyearspriorto2009.The2009performancetargetwasnotachievedbecauseoftheinadvertentinclusionof“3-rated”institutions.TheFDICdoesnottypicallyissueformalenforcementactionsfor“3-rated”institutions.The2009performancetargetwasfullymetwithrespectto“4-and5-rated”institutions.

4TheCAMELScompositeratingrepresentstheadequacyofCapital,thequalityofAssets,thecapabilityofManagement,thequalityandlevelofEarnings,theadequacyofLiquidity,andtheSensitivitytomarketrisk,andrangesfrom“1”(strongest)to“5”(weakest).


andsupervisorycontrols,inmanycases,arestillunderdevelopmentatyear-end.Amongtheini-tiativesarethefollowing:• ProcessingapplicationsforthoseFDIC-

supervisedinstitutionsapplyingtotheDepartmentoftheTreasury’sTroubledAssetReliefProgram(TARP)CapitalPurchaseProgram(CPP).ThisprogramauthorizestheTreasurytopurchaseupto$250billionofseniorpreferredsharesfromqualifyinginsureddepositoryinstitutions.AsofSep-tember30,2009,theFDIChadreceivedover1,700applicationsrequestingnearly$35bil-lioninTARPfunding.

• AsofDecember31,2009,theFDIC’spro-cessingofCPPrequestswas100percentcompleted.TheDepartmentofTreasurycompletedthefinaldisbursementsundertheCPPprogramonDecember31,2009.

• IssuingamemorandumonFebruary10,2009,toprovideexaminerswithguidanceonreviewingcompliancewithCPPprogramrequirements.Examinershaveincorporatedtheseproceduresintotheiron-sitereviewsofinstitutionsparticipatingintheCPP.Exami-nationproceduresforinstitutionsparticipat-ingintheTLGPwereissuedonSeptember24,2009.

Joint Examination Teams TheFDICusedjointcompliance/riskmanage-

ment examination teams (JETs) to assess risksassociatedwithnew,nontraditional,and/orhigh-riskproductsbeingofferedbyFDIC-supervisedinstitutions. The JET approach recognizes thatto fully understand the potential risks inherentincertainproductsandservices,theexpertiseofbothcomplianceandriskmanagementexaminers

As ofDecember 31, 2009, 327 FDIC-super-visedinstitutionswereassigneda“4”ratingforsafetyandsoundness,and146institutionswereassigned a “5” rating.Of the “4-rated” institu-tions, 297were examinedor had examinationsinprocessasofDecember31,2009,andformalorinformalenforcementactionsareinprocessorhadbeenfinalizedtoaddresstheFDIC’sexami-nation findings. Further, 131 “5-rated” institu-tions were examined or had examinations inprocessasofDecember31,2009.

Compliance AsofDecember31,2009,34FDIC-supervised

institutionswereassignedorinprocessofbeingassigned a “4” rating and one institution wasassigned a “5” rating for compliance. In total,18ofthe“4-rated”andtheone“5-rated”institu-tionswereexaminedin2009;theremaining16wereexaminedpriorto2009andinvolvedeitherappeals or referrals toother agencies.Of these35institutions,1isunderinformalenforcementaction,21areunderCeaseandDesistOrdersand13areinprocessofenforcementactions.

During 2009, theCorporation issued the fol-lowingformalandinformalcorrectiveactionstoaddressComplianceconcerns:18CeaseandDesistOrdersand50MemorandaofUnderstanding.

Restoring and Maintaining Public Confidence and Stability in the Financial System

TheFDICisparticipatingwithotherregula-tors,Congress,banks,andotherstakeholdersinmultiplenewandchanginginitiatives,eachwithits unique challenges and risks, to address thecurrent crises.The initiatives are very large inscale,andtheFDIC’scorrespondinggovernance


ing,andtheFinancialCrimesEnforcementNet-workontheroleoffinancialintelligenceunitsindetectingandinvestigatingillegalactivities.

Additionally, the FDIC hosted 29 represen-tatives from theCentralBankofRussia, spon-soredbytheFinancialServicesVolunteerCorps.SessionsincludeddiscussionofAMLtopics,aswell as supervisory examinationprocesses andinteractionwith the financial intelligence unit.Separately,theFDICmetwithfiveRussianandthreeKazakhstani foreignofficialsasapartoftheU.S.DepartmentofState’sInternationalVis-itorLeadershipProgram to discuss theFDIC’sAMLSupervisoryProgram.

Minority Depository Institution ActivitiesThe preservation of Minority Depository

Institutions (MDIs) remains a high priority fortheFDIC.In2009,theFDICcontinuedtoseekways for improving communication and inter-actionwithMDIs,andrespondingtotheircon-cerns.Technical assistancewas provided to 51MDIs in a variety of different areas including,butnotlimitedto,thefollowing:• Depositinsuranceassessments• Properuseofinterestreserves• Filingbranchandmergerapplications• ComplyingwithPart365—RealEstate

LendingStandards• PreparingCallReports• Performingduediligenceforloan

participations• MonitoringCREconcentrations• Reducingadverselyclassifiedassets• Stresstesting• Identifyingandmonitoringreputationrisk• Maintainingadequateliquidity• Risksrelatedtotheuseofbrokereddeposits

isrequired.TheJETapproachhasthreeprimaryobjectives:• ToenhancetheeffectivenessoftheFDIC’s

supervisoryexaminationsinuniquesituations;

• Toleveragetheskillsofexaminerswhohaveexperiencewithemergingandalternativeloananddepositproducts;and

• Toensurethatsimilarsupervisoryissuesidentifiedindifferentareasofthecountryareaddressedconsistently.

In2009, theFDICusedJETswithin institu-tions involved in significant subprime or non-traditional mortgage activities; institutionsaffiliatedwithorutilizing thirdparties tocon-duct significant consumer lending activities,especiallyinthecreditcardarea;andinstitutionsforwhichtheFDIChasreceivedahighvolumeofconsumercomplaintsorcomplaintswithseri-ousallegationsofimproperconductbybanks.

Bank Secrecy Act/Anti-Money Laundering TheFDICpursuedanumberofBankSecre-

cyAct (BSA), Counter-Financing of Terrorism(CFT)andAnti-MoneyLaundering(AML)ini-tiativesin2009.

TheFDICconducted three training sessionsin2009for57centralbankrepresentativesfromBangladesh, Egypt, Ghana, Indonesia, Jordan,Kuwait,Mali,Nigeria, Pakistan,SaudiArabia,Thailand, United Arab Emirates, and Yemen.ThetrainingfocusedonAML/CFTcontrols,theAML examination process, customer due dili-gence, suspicious activitymonitoring, and for-eign correspondent banking. The sessions alsoincludedpresentationsfromtheFederalBureauof Investigation on combating terrorist financ-


lending,liquidityandfunding,mortgageforeclo-surepreventionprograms,andaccountingissues.

The FDIC held banker roundtables and/orconference callswithMDIs in their geograph-ic regions. Topics of discussion at roundtablesincluded the economy, overall banking condi-tions, agricultural conditions, deposit insur-ance assessments, accounting, and other bankexamination issues. Also, fromDecember 2-3,2009,theFDIC,incooperationwiththePuertoRicoBankersAssociation,hostedacomplianceschoolinGuayabo,PR.Theeventwasattendedbyapproximately150bankersfromninebanks.

In addition, the National MDI Coordinatorheldconferencecallswithrepresentativesfromseveraltradegroups,includingthePuertoRicoBankersAssociation,theNationalBankersAsso-ciation,theKorean-AmericanBankersAssocia-tion, theAsian-AmericanBankersAssociation,the National Association of Chinese-AmericanBankers,andtheHispanicBankersAssociation,todiscusstheMDIprogramandFDICoutreachactivities.

Capital StandardsTheFDICcontinuedtobeactivelyinvolvedin

domesticandinternationaldiscussionsintendedtoaddressthedeficienciesinregulatorycapitalrulesthatwerebroughttolightasaresultoftherecent financial turmoil and to ensure capitalstandardsadequatelysupportthesafeandsoundoperationof banks.This includedparticipationinanumberofsupervisoryworkinggroupmeet-ingswithforeignregulatoryauthorities.

Internationally, the FDIC is participating intheBaselCapitalMonitoringGroupthat trackstheimpactonrisk-basedcapitalwiththeimple-mentation ofBasel II.TheFDICwill continue

• Complianceissues• CommunityReinvestmentAct• Proceduresforfilingregulatoryappeals• CriteriaforassigningCAMELSratings

TheFDICalsocontinuedtoofferthebenefitofhavingexaminersreturntoFDIC-supervisedMDIsfrom90to120daysafterexaminations,toassistmanagementinunderstandingandimple-menting examination recommendations and todiscussotherissuesofinterest.SevenMDIstookadvantage of this initiative in 2009. Also, theFDICheldsixregionaloutreachtrainingeffortsand educational programs to MDIs, three ofwhicharediscussedbelow.

InFebruary2009,theFDICheldaconferencecall to discuss various facets of the proposedchanges to the insurance assessment criteria,including(a)theremovalofstatutoryconstraintson theFDIC’s ability to charge institutions fordeposit insurance under the Federal DepositInsuranceReformActof2005,(b)thetemporaryincreaseinbasicdepositinsurancecoveragefrom$100,000 to $250,000 per depositor under theEmergencyEconomicStabilizationActof2008,and (c) the insurance assessments for financialinstitutions based on their risk category.Therewasalsoadiscussionaboutthecriteriaforpar-ticipatingintheTroubledAssetReliefProgram(TARP). Seventy-eight bankers participated ontheconferencecall.

The FDIC hosted the fourth annual MDINational Conference in Chicago, Illinois, fromJuly 8-10, 2009. The conference themewas “ABridge to Community Stabilization,” and over220bankersfromMDIsattended.Thebreakoutsessions focused on topics of interest to bankmanagement, including commercial real estate


theFundamentalReviewof theTradingBook,AssetIncumbrance,ExternalRatingsandSecu-ritization, and Macroprudential Supervision,willcontinuetheirworkinto2010.

Domestically, the FDIC issued a number ofinteragency rulemakings to align regulatorycapitalmorecloselywithrisk.OnNovember12,2009,theFDICmadefinaltheinterimfinalruleregardingtheriskweightsforResidentialMort-gage Loans Modified Pursuant to the MakingHomeAffordableProgram(MHAP)oftheU.S.DepartmentoftheTreasury.5Thisrulewasjoint-ly issuedwith the other federal banking agen-cies’ support to prevent residential real estateforeclosuresandkeepAmericansintheirhomes.Theruleallowsaninstitutiontocontinuetoriskweightaprudently-underwrittenmortgage loanatthepreferentialriskweighteventhoughithasbeenrestructuredundertheTreasury’sprogram.The final rule clarified that a banking organi-zation may retain the risk weight assigned toamortgage loan before the loanwasmodifiedundertheMHAP.

On August 27, 2009, in response to thefinancial turmoiland theFinancialAccountingStandardsBoard’srevisionstoaccountingrulesfor consolidation of variable interest entities—Statement of Financial Accounting StandardsNo.166,Accounting for Transfers of Financial Assets, an Amendment of FASB Statement No. 140(FAS166—nowcodifiedasASC860),andStatement of Financial Accounting StandardsNo.167,Amendments to FASB Interpretation No. 46(R) (FAS167—nowcodified asASC810)—thefederalbankingregulatorsissuedaproposed

to compile and analyze the information on theinternational impact of Basel II on regulatorycapital as it becomes available through publicandsupervisorysources.

The FDIC continues to participate in inter-nationalefforts to improve thequalityofcapi-tal, minimize the procyclicality of risk-basedcapitalrequirements,andensuretheamountofcapitalbankshold for riskyexposures is com-mensurate with risk (notably securitization,re-securitization, and tradingbookexposures).The FDIC actively participates in thework oftheBaselCommitteeonBankingSupervision’sPolicy Development Group and a number ofworkinggroups:AIGTradingBook,Fundamen-talReviewof theTradingBook,DefinitionofCapital, Non-RiskBased SupplementaryMea-sure (leverage ratio), Liquidity, External Rat-ings and Securitizations, Counterparty CreditRisk, Asset Encumbrance, Procyclicality, andMacroprudential Supervision. The substantiveworkofthesegroupsculminatedinthepublica-tion in June 2009 ofRevisions to the Basel II market risk framework, Guidelines for comput-ing capital for incremental risk in the trading book, and Enhancements to the Basel II frame-work—and twoconsultativepapers inDecem-berof2009—Strengthening the resilience of the banking sector and International framework for liquidity risk measurement, standards and mon-itoring. TheFDICalsoparticipatedindraftingthe request fordata for the impact studies thatthe Basel Committee will undertake in early2010tocalibratetheproposalsintheconsulta-tivepapers.Anumberofthesegroups,including

5OnMarch4,2009,theTreasuryannouncedguidelinesundertheMaking Home Affordable Program(MHAP)topromotesustainableloanmodificationsforhomeownersatriskoflosingtheirhomesduetoforeclosure.


Guidance IssuedDuring2009,theFDICissuedandparticipat-

edintheissuanceofguidanceinseveralareasasdescribedbelow:

Structured Credit ProductsFDIC-supervised institutions continued to

invest in structured credit products, includingprivate label mortgage-backed securities andcollateralized debt obligations. By early 2009,a growing number of these institutions experi-enceddeteriorationinfinancialperformanceasa result of these investments. To reinforce thefederal banking agencies’ existing guidance—Supervisory Policy Statement on Investment Securities and End- User Derivatives Activities and Uniform Agreement on the Classification of Assets and Appraisal of Securities—theagenciesissuednewguidanceonApril30,2009,titled Risk Management of Investments in Structured Credit Products. The guidance reiterates and clarifiesexisting supervisory guidance on the purchaseandholdingofcomplexstructuredcreditprod-ucts.Itfocusesonthevarioussupervisorycon-cerns related to these securities: pre-purchaseanalysis, suitability determination, risk limits,creditratings,valuation,ongoingduediligence,adverseclassification,andcapitaltreatment.

Qualifications for Failed Bank AcquisitionsThe FDIC developed guidance for private

investors interested in acquiring the depositliabilities,orthedepositliabilitiesandassets,offailedinsureddepositoryinstitutions.TheFDICpublished for commenton July9, 2009, aPro-posedStatementofPolicyonQualificationsforFailedBankAcquisitions(ProposedPolicyState-ment).OnAugust26,2009,theFDIC’sBoardof

ruleforcommenttitledImpact of Modifications to Generally Accepted Accounting Principles, Consolidation of Asset-Backed Commercial Paper Programs, and Other Related Issues.ThefinalrulewasapprovedbytheFDICBoardonDecember 15, 2009.The rule discussed theimpactof the accounting changeson the agen-cies’regulatorycapitalrules.Therulemodifiedthegeneral risk-basedandadvanced risk-basedcapital adequacy frameworks to eliminate theexclusion of certain consolidated asset-backedcommercialpaperprogramsfromrisk-weightedassets.Theruleprovidedareservationofauthor-ityinthegeneralrisk-basedandadvancedrisk-basedcapitaladequacyframeworkstopermittheagenciestorequirebankingorganizationstotreatentitiesthatarenotconsolidatedunderaccount-ing standards as if they were consolidated forrisk-based capital purposes. The rule includedanoptionalfour-quartertransitionperiodtoeasetheimpactoftheaccountingchangeonabank’srisk-basedcapitalrequirementsbutdidnotdelaytheimpactoftheaccountingchangeonabank’sleverageratio.

TheFDIC,withtheotherfederalbankregula-tors,commencedanumberofrulemakingsinlate2009, including a revisedStandardizedFrame-work notice of proposed rulemaking (NPR)thatproposestoimplementtheBaselIIAccordstandardized risk-based capital framework, anNPRtorevisetheMarketRiskAmendmentthatproposeshigherregulatorycapitalrequirementsfor significant trading book activities, and anNPRthatproposesimplementationoftheBaselchanges to risk-based capital requirements thatdoublesthecapitalchargeforre-securitizationsandrequiresadditionaldisclosures forsecuriti-zationsandre-securitizations.


enhances the transparency ofworkout transac-tions,andensuresthatsupervisorypoliciesandactionsdonotinadvertentlycurtailtheavailabil-ityofcredittosoundborrowers.

Liquidity Risk ManagementOnJuly31,2009, the federalbankingagen-

ciesandtheNationalCreditUnionAdministra-tionsoughtcommentonaproposedInteragency Guidance on Funding and Liquidity Risk Man-agement.The agencies developed theguidanceto provide sound practices formanaging fund-ingandliquidityriskandstrengtheningliquidityrisk management practices. The new guidanceis intended to supplement existing guidance,includingFIL-84-2008,LiquidityRiskManage-ment,issuedbytheFDICin2008,whichremainsineffect.Whereappropriate,theproposedguid-ance conforms to theBaselCommittee’sPrin-ciples for Sound Liquidity Risk Management and Supervision.The final guidancewaspublishedonApril15,2010.

Brokered DepositsThe FDIC issued a final rule on May 29,

2009, effective January 1, 2010, changing theway it administers statutory restrictionson thedeposit interest rates paid by banks that areless than well-capitalized. Under Part 337.6 ofthe FDIC Rules and Regulations, a less thanwell-capitalized insured depository institutionmaynotpayarateof interest thatsignificantlyexceeds the prevailing rate in the institution’smarketareaortheprevailingratefromwhichthedepositisaccepted.Thefinalruleisintendedtosimplify and strengthen the administration ofthisregulation.

Directorsvotedtoadopt theFinalStatementofPolicyonQualificationsforFailedBankAcqui-sitions(FinalPolicyStatement),whichwaspub-lished in the Federal Register on September2, 2009.The Final Policy Statement takes intoaccountcommentsreceivedfromcompanies,lawfirms, legislators, and other interested parties,andchangedtheminimumcapitalcommitmentfrom 15 percent Tier 1 leverage to 10 percentTier 1 common equity. Other key elements oftheFinalPolicyStatementincludecrosssupportrequirements, a prohibition on affiliated lend-ing,alimitationonthesaleofacquiredsharesinthefirstthreeyears,aprohibitiononbiddingbyexcessivelyopaqueandcomplexbusinessstruc-tures, and minimum disclosure requirements.TheFinalPolicyStatementspecifiesthatitdoesnotapplytoinvestorswhohold5percentorlessof the totalvotingpoweras longas there isnoevidenceofconcertedactionbytheseinvestors.InadoptingtheFinalPolicyStatement,theFDICsoughttostrikeabalancebetweentheinterestsofprivateinvestorsandtheneedtoprovideade-quatesafeguardsfortheinsureddepositoryinsti-tutionsinvolved.

Commercial Real Estate GuidanceIn response to deteriorating trends in com-

mercialrealestate(CRE)andothercommercialloans, theFDIC,alongwith theother financialregulators, issuedthePolicy Statement on Pru-dent Commercial Real Estate Loan Workouts(theCREGuidance)onOctober30,2009.TheCREGuidance updates existing guidance to assistexaminers in evaluating institutions’ efforts toreneworrestructure loans tocreditworthybor-rowers. It promotes supervisory consistency,


centriskweightforrisk-basedcapitalpurposes.The agencies reminded institutions, however,thattheyshouldexercisethesameprudentjudg-mentandsoundriskmanagementpracticeswithrespecttotheregisteredwarrantsastheywouldwithanyotherobligationofastate.

TheFDICalsoinitiatedaninteragencyinter-estrateriskadvisorytohighlightconcernsaboutbanks taking on excessive interest rate risk incurrentlowinterestrateenvironment.Thisadvi-sory,whichwaspublishedinJanuary2010,clari-fiesexistingguidanceandremindsbanksnottolosefocuson theirmanagementof interest raterisk.Banksareexpectedtomanageinterestraterisk exposures using policies and procedurescommensurate with their complexity, businessmodel,riskprofile,andscopeofoperations.

Consumer Protection and Compliance Guidance

In January 2009, the FDIC approved, andissued,alongwiththeotherfederalbankregu-lators,updatedFinalInteragencyQuestionsandAnswersontheCommunityReinvestmentAct(CRA)andrequestedcommentonnewproposedguidance. In June, the FDIC joined the otherregulatorsinrequestingcommentonCRAreg-ulatorychangestoimplementstatutoryrequire-mentsrelatingtostudentloansandactivitiesincooperationwithminority-andwomen-ownedfinancial institutions and low-income creditunions.TheFDICcontributed to the develop-mentandJunereleaseofguidanceandexami-nation procedures on the 2009 Identity TheftRedFlagsregulations.InJuly,theFDICjoinedotherregulatorsinissuingRevisedInteragencyQuestionsandAnswersRegardingFloodInsur-ance, updating guidance first issued in 1987,

De Novo InstitutionsOn August 28, 2009, the FDIC advised the

bankingindustryofsupervisorychangesforstatenon-member institutions insured seven yearsorless(de novoperiod).Underpreviouspolicy,newlyinsuredinstitutionsweresubjecttohighercapital requirements andmore frequent exami-nation activities during the first three years ofoperation.Basedonsupervisoryexperience,theFDICextendedthede novoperiodfromathree-yearperiodtosevenyearsforexaminations,cap-ital,andotherrequirements.Inaddition,materialchangesinbusinessplansfornewlyinsuredinsti-tutionswillrequirepriorFDICapprovalduringthefirstsevenyearsofoperation.

Regulatory ReliefDuring 2009, the FDIC issued six Financial

Institution Letters that provided guidance tohelpfinancialinstitutionsandfacilitaterecoveryin areas damaged by severe storms, tornadoes,flooding,andothernaturaldisasters.AreaswithinAmericanSamoa,Arkansas,Georgia,Kentucky,Minnesota,andNorthDakotawereaffected.

Other Guidance IssuedOn July 8, 2009, in response to the severe

payment situation that the state of Californiawasexperiencing, thefederalbankingagenciesissued supervisory guidance for institutionsregarding the regulatory capital treatment forregisteredwarrants issuedby the stateofCali-fornia as payment for certain obligations. Theagencies’ risk-based capital standards permita banking organization to risk weight generalobligationclaimsonastateat20percent.Thesewarrants, which are general obligations of thestate,would,therefore,beeligibleforthe20per-


tions’ risk profiles and ratings. These ongoinganalyses have been augmentedwith numerousad hoc reviews (such as reviews of commer-cialrealestatelendingtrends,interestrateriskexposure, allowance-for-loan and lease lossestrends, and dividend payments). Furthermore,theFDICreplaceditsformerUnderwritingSur-veyQuestionnairewithaCreditandConsumerProducts/ServicesSurveyinOctober2009.Thenewsurveyextendsbeyondunderwritingprac-tices and addresses new or evolving products/strategiesandconsumercomplianceissuesandisnowcompletedbyexaminersattheconclusionofeachriskmanagementandconsumercompli-ance examination. Supervisory staff monitorsandanalyzesthisreal-timeexaminerinputandusestheinformationtohelpdeterminetheneedfor changes in policy guidance or supervisorystrategiesasappropriate.

TheFDICcontinuestoworkwiththeFFIECto issuesupervisoryguidanceon reversemort-gage products. The FDIC began this effort astheresultofaninternalreviewthathighlightedconsumer risksassociatedwith thisproduct.A2009GAOreporthighlightedsimilarissues.Inaddition,theFDICcontinuestoworkwithotheragenciestoenhancetheTruthinLendingexam-ination procedures to assist examiners whenreviewing compliance with reverse mortgagedisclosurerequirements.

Regulatory Reporting RevisionsThe FDIC, jointly with the Office of the

Comptroller of the Currency and the FederalReserve Board, implemented revisions to theConsolidatedReportsofConditionandIncome(CallReports) on a phased-in basis inMarch,June, and December 2009. The revisions

andrequestedcommentonadditionalproposedguidance.InSeptember,theFDICalertedbankstonewstatutoryrequirementstoprotecttenantsoccupyingforeclosedproperties.

In November, the FDIC joined seven otherfederal agencies in releasing a model privacynoticeformdesignedtomake iteasier forcon-sumerstounderstandhowfinancialinstitutionscollectandsharetheirpersonalinformation.Themodelformresultedfromamulti-yearconsum-ertestingeffort.InDecember,theFDICjoinedthe other Federal Financial InstitutionsExami-nation Council (FFIEC) member agencies inissuing for public comment, supervisory guid-ance on reverse mortgages, building on FDICanalysis performed in 2008. In June, August,andDecember,theFDICissuedguidancetotheinstitutionsitsupervisesalertingthemtosignifi-cantchangesintheTruthinLendingActandtheFederal Reserve Board’s Regulation Z (whichimplements that Act). In December, the FDICremindedinstitutionsofthedramaticallyrevisedReal Estate Settlement Procedures Act regula-tion issued by theDepartment ofHousing andUrbanDevelopment.

Monitoring Potential Risks from New Consumer Products

TheFDIC reliesheavilyonon-site supervi-sory activities to identify existing and emerg-ing risks. In addition to on-site supervisoryactivities, the FDIC uses several establishedoff-site processes, including Statistical CAM-ELSOff-siteRating(SCOR)andGrowthMoni-toring System (GMS), as well as more recentcomprehensive reviews (such as the QuarterlySupervisory Risk Profile) to assess how iden-tified risks are likely to affect insured institu-


andachangefromannualtoquarterlyreportingforsmallbusinessandsmallfarmlendingdata.Theagencieswillcollectnewdatapertainingtoreversemortgages annually beginningDecem-ber31,2010.

Promoting Economic InclusionTheFDICpursuedanumberofinitiativesin

2009tofacilitateunderservedpopulationsusingmainstreambankingservicesratherthanhighercost, non-bank alternatives and to ensure pro-tection of consumers in the provision of theseservices.

Alliance for Economic Inclusion ThegoaloftheFDIC’sAllianceforEconomic

Inclusion (AEI) initiative is tocollaboratewithfinancialinstitutions;communityorganizations;local,state,andfederalagencies;andotherpart-ners in select markets to launch broad-basedcoalitions to bring unbanked and underservedconsumersintothefinancialmainstream.

The FDIC expanded its AEI efforts during2009toincreasemeasurableresultsintheareasof new bank accounts, small-dollar loan prod-ucts,remittanceproducts,anddeliveryoffinan-cialeducation tomoreunderservedconsumers.During 2009, over 60 banks and organizationsjoinedAEInationwide,bringingthetotalnum-ber ofAEImembers to 967.More than 72,614new bank accounts were opened during 2009,bringing the total number of bank accountsopened through the AEI to 162,692. During2009,approximately68,491consumersreceivedfinancialeducationthroughtheAEI,bringingthetotalnumberofconsumerseducatedto142,796.Also,35bankswereintheprocessofofferingordevelopingsmall-dollarloansaspartoftheAEI,

focusedonareasinwhichthebankingindustrywasexperiencingheightenedriskasaresultofmarket turmoil and illiquidity andweakeningeconomicandcreditconditions.Thereportingchanges includednewdataon realestatecon-struction loans with interest reserves, struc-tured financialproducts suchascollateralizeddebtobligations,commercialmortgage-backedsecurities, pledged loans, and fiduciary assetsand income. Selected institutions must reportadditionaldataonrecurringfairvaluemeasure-ments,creditderivatives,andover-the-counterderivativeexposures.

In September 2009, the agencies updatedthe reporting of data on the amount andnum-berofdepositaccountsandestimateduninsureddeposits in theCallReport schedule to reflectthe extension of the temporary increase in thestandard maximum deposit insurance amountfrom$100,000to$250,000perdepositorenact-ed in theHelping Families Save TheirHomesAct.

In December 2009, the agencies approvedrevisions to the Call Report that were imple-mentedinearly2010.Therevisionsincorporatemodifications made in response to commentsreceivedontheagencies’August2009proposalandaresubjecttoapprovalbytheU.S.OfficeofManagementandBudget.Therevisionsrespondto such recent developments as a temporaryincreaseinthedepositinsurancelimit,changesin accounting standards, and credit availabilityconcerns.Thereportingchangesthatwereeffec-tiveMarch31,2010,includenewdataonother-than-temporary impairments of debt securities,loans to non-depository financial institutions,and brokered time deposits; additional data oncertaintimedepositsandunusedcommitments;


demia, consumer or public advocacy organiza-tions,andcommunity-basedgroups.

The Advisory Committee met three timesduring 2009. In February 2009, the meetingtopic was Strategies to Increase Access to the Financial Mainstream.ThemeetingfeaturedanoverviewoftheFDICSurveyofBanks’Effortsto Serve the Unbanked and Underbanked andfocusedoneffectiveandinnovativeproductsandservices, policy approaches, and supervisoryandregulatorystrategiestoimproveappropriateengagementwiththemainstreamfinancialsys-tem,particularlyforlow-andmoderate-income(LMI)andunderservedhouseholds.

The Advisory Committee also met in July2009tocontinueitsdiscussionaboutissuesandchallenges related to improving access to thefinancialmainstreamand todiscuss innovativewaysthatbanksandothersareencouragingsav-ingsthrough“game-based”strategiesthatmakesavings fun or exciting, such as sweepstakes,milestones, or rewards. After this meeting, areport of the Committee’s views regarding theissuesandchallengesofservingLMIandunder-servedconsumerswaspostedontheFDICwebsitetosparkdiscussionofhowbesttoservecon-sumerswhomay be struggling, particularly inthecurrenteconomy.

OnDecember2,2009,theCommitteemettodiscussresultsoftheFDIC National Unbanked and Underbanked Household Survey,overdraftissues,andthestrategicfocusfortheCommittee.Asanextstep,theCommitteewillformulateastrategicplanthatwillprovideaframeworkfortheCommittee’sagendaoverthenexttwoyears.Among other things, the Strategic Plan willincluderecommendationsrelatedto:

and26bankswereofferingremittanceproductsattheendof2009.

TheFDICexpandedtheAEIinitiativetotwoadditionalmarketsduring2009—Detroit/South,MichiganandLittleRock,Arkansas—bringingthe total number of active AEI markets to 14.Additionally, the FDIC worked closely during2009toprovidetechnicalassistanceandsupportto communities in Milwaukee, Wisconsin andnorthwesternIndianainterestedinformingAEIcoalitions.ThestatewideWisconsinSavespro-gramagreedtoleadaninitiativeinMilwaukeepatternedaftertheAEI.

The FDIC also worked closely during 2009with the National League of Cities to providetechnical assistance to facilitate the launch ofBankOn campaigns in Seattle,WA; Savannah,GA;Houston and SanAntonio, TX; and India-napolis,IN.TheFDICwasalsoinvitedtoserveasaworkingcommitteememberandadvisor tofacilitate the launch of aBankOnWashington,DC,campaignlaunchedinApril2010.

FDIC Advisory Committee on Economic Inclusion

The FDIC’s Advisory Committee on Eco-nomic Inclusion was established in 2006 andprovides theFDICwithadviceandrecommen-dations on initiatives focused on expandingaccesstobankingservicesbyunderservedpopu-lations.Thismayincludereviewingbasicretailfinancialservicessuchascheckcashing,moneyorders, remittances, stored value cards, short-termloans,savingsaccounts,andotherservicesthat promote asset accumulation and financialstability.Committeemembersrepresentacross-section of interests from the banking industry,state regulatory authorities, government, aca-


ing ways to offer small-dollar loan customersothermainstreambankingservices.

Therearecurrently30banksofvariedsizesanddiverse locationsandsettingsparticipatinginthepilot.Bankssubmitteddataonaquarterlybasis, which the FDIC analyzed to determinetrends and best practices. The FDIC encour-ages innovation in program design, but mostprogramsgenerallyadheretotheFDIC’sSmall-Dollar Loan Guidelines, issued in June 2007,andallfeaturepaymentperiodsbeyondasinglepaycheck,annualpercentageratesbelow36per-cent,andstreamlinedunderwritingandpromptloanapplicationprocessing.Duringsevenquar-tersof thepilot,bankscumulativelyoriginatedabout 29,000 loanswith a principal balance ofmorethan$34million.Bankersinvolvedinthepilotciteanumberofcommonfactorsthatcon-tributed to the success of their loan programs,includingstrongseniormanagementandboardsupport;anengagedandempowered“champion”inchargeoftheprogram;proximitytolargepop-ulations of consumers with demand for small-dollarloans;and,insomeruralmarkets,limitedcompetition.Thedelinquencyratioforloansinthe pilot tends to be almost three times higherthanforgeneralunsecuredloanstoindividuals.However, charge-off rates for loans originatedundertheprogramarethesameasgeneralunse-curedloanstoindividuals.Thesestatisticsshowthatwhilesmall-dollarloanborrowersaremorelikelytohavetroublepayingontime,theyarenomorelikelytodefault thanthoseinthegeneralpopulation.

Onlyafewbankersparticipatinginthepilothavereportedthatshort-termprofitabilityistheprimary goal for their program. Rather, mostpilotbanksareusingthesmall-dollarloanprod-

• Determiningadesirable“base”levelofhouseholdsavings,andhowmuchhouse-holdsactuallyhave.

• Addressingdesirablefeaturesofsafe,affordablesavingsandtransactionaccountproducts.

• DetermininghowtheFDICcanenhanceeffortstopromoteyouthfinancialeducationprograms.

• ReviewingCRAtoensurethatprogramstargetedtoLMIcommunitiesarereceivingappropriateconsideration.

• Consideringwaystoscalesmall-dollarloans,includingstandardizinganaffordablesmall-dollarloanproduct,providinginformationaboutexistingprograms,seekingphilan-thropicorgovernmentguaranteefunds,andpotentiallyusinggovernmentworkforcesasatestforemployer-basedsmall-dollarloans.

Affordable Small-Dollar Loan Guidelines and Pilot Program

Manyconsumers,eventhosewhohavebankaccounts, turn to high-cost payday or othernon-bank lenders toquicklyobtainsmall loansto cover unforeseen circumstances. To helpinsuredinstitutionsbetterserveanunderservedandpotentiallyprofitablemarketwhileenablingconsumers to transition away from reliance onhigh-cost debt, the FDIC launched a two-yearsmall-dollarloanpilotprojectinFebruary2008.The pilot is designed to review affordable andresponsible small-dollar loan programs offeredby insured financial institutions and assist thebankingindustrybyidentifyinganddisseminat-ing information on replicable business modelsandbestpracticesforsmall-dollarloans,includ-


bygovernmentbodiesorphilanthropicgroups.Theseguaranteesprovideimportantassurancestobanksinterestedinprovid-ingloanfundsandothersupporttotheprograms.Toencouragemoreinstitutionstooffersmall-dollarloanprograms,largerpoolscouldbecreated.

• Consider Conducting a Pilot Using Federal Workforces to Test Innovative Small- Dollar Loan Business Models. The dominantmodelinthesmall-dollarloanpilotisthe“high-touch”relationshipbuildingmodel.Peer-to-peertechnologyandemploy-er-basedlendingarepromisingtechnologiestoreducehandlingcosts,and,withemploy-er-basedmodels,potentiallycreditlosses.Totheextentlegallypermissible,theFDICorotherfederalworkforcescouldexploreservingaspilotsfortestinginnovativesmall-dollarloanbusinessmodels.

FDIC Advisory Committee on Community Banking

OnMay29,2009,theFDICBoardofDirectorsapprovedestablishingtheFDICAdvisoryCom-mittee on Community Banking. This commit-

uctasacornerstoneforprofitablerelationships,whichalsocreatesgoodwillintheircommunity.Afewbanks’businessmodelsfocusexclusivelyonthegoodwillaspectandgeneratinganoppor-tunity for positive Community ReinvestmentAct consideration. Regardless of the businessmodel, all of the bankers involved in the pilothaveindicatedthatsmall-dollarlendingissome-thingtheybelievetheyshouldbedoingtoservetheircommunities.

Through the Advisory Committee on Eco-nomicInclusion,theFDICisconsideringpursu-ingseveralinitiativestobroadentheavailabilityof small-dollar loans at mainstream financialinstitutions, including, but not limited to, thefollowing:• Conduct a Close-Out Symposium,

Article, and “Branding Effort” for the Small- Dollar Loan Pilot.Theclose-outsymposiumwillhighlightfinalpilotfind-ings,summarizetechnologyandotherinno-vationsinsmall-dollarloans,andaddressprogressonincentivestoscalesmall-dollarloansacrossthefinancialmainstream.Thefeaturesidentifiedinthepilotcouldalsobe“branded”astheidealforafford-able,feasiblesmall-dollarloanprograms.

• Consider Creating Pools of Non-Profit Funds or Govern-ment Operating Funds to Serve as “Guarantees” for Acceptable Small-Dollar Loan Programs. Severalexistingsmall-dollarloanprogramsfeature“guarantees”intheformofloanlossreservesorlinked,low-costdepositsprovided

MembersoftheAdvisoryCommitteeonCommunityBankingwithChairmanSheilaC.Bair.


Unbanked and Underbanked Households,breakingnewgroundingainingunderstandingofwhichAmericansremainoutsidethebankingsystem.Thesurvey,conductedonbehalfoftheFDICbytheU.S.BureauoftheCensus,wasasupplementtotheCensusBureau’sCurrentPop-ulationSurveyduringJanuary2009.Thestudy,which is the most comprehensive survey todateoftheunbankedandunderbanked,revealsthatmorethanonequarter(25.6percent)ofallhouseholds in the United States are unbankedor underbanked and that those households aredisproportionately low-income and/or minor-ity.Inadditiontocollectingaccurateestimatesof the number of unbanked and underbankedhouseholdsintheU.S.,thesurveywasdesignedtoprovideinsightsintotheirdemographicchar-acteristicsandreasonswhy thehouseholdsareunbanked or underbanked. The survey rep-resents the first time that this data has beencollected to produce estimates at the national,regional,state,andlargemetropolitanstatisticalarea (MSA) levels. This effort is being under-takeninresponsetotheReformAct,whichcallsfortheFDICtoprovideanestimateofthesizeof the U.S. unbanked market and to identifyissuesthatcauseindividualsandfamiliestobeunbanked.

Information Technology, Cyber Fraud, and Financial Crimes

TheFDICissuedSpecialAlertsinAugustandOctober2009notifyingfinancialinstitutionsofan alarming increase in reports of fraudulentelectronic funds transfer transactions resultingfrom compromised login credentials. During2009,theFDICdetectedanincreaseinboththenumberofsuchincidentsandthelossesresulting

teewasformedtoprovidetheFDICwithadviceand guidance on a broad range of importantpolicyissuesimpactingsmallcommunitybanksthroughoutthecountry,aswellasthelocalcom-munitiestheyserve,withafocusonruralareas.

The14-membercommitteerepresentsacross-sectionofcommunitybankersfromaroundthenation,aswellasamemberfromacademia.Thefirstmeeting,heldonOctober15,2009,coveredtheimpactofthefinancialcrisisoncommunitybanks.Other issues addressedwere regulatoryreform proposals under consideration by Con-gressandtheireffectoncommunitybanks,theimpactofFDICsupervisoryproposalsonthesebanks, and community banks’ perspectives onfundingtheFDIC’sDepositInsuranceFund.

Survey Results of the Unbanked and Underbanked

In February 2009, the FDIC transmitted toCongresstheresultsofthefirstnationalsurveyofbanks’efforts toserveunbankedandunder-bankedindividualsandfamiliesintheirmarketareas.Thesurvey,conductedpursuanttoaman-date inSection7of theFederalDeposit Insur-ance ReformConformingAmendments Act of2005, found that improvementmaybepossiblein the areas of institution focus, outreach, andcommitment to unbanked and underbankedpopulations. The survey found that a majorityof banks—63 percent—offers basic financialeducationmaterials,butfewerparticipateinthetypesofoutreacheffortsthatareviewedbytheindustryasmosteffectivetoattractandmaintainunbankedandunderbankedindividualsaslong-termcustomers.

On December 2, 2009, the FDIC releasedthe findings of its FDIC National Survey of


breachesandnaturaldisasters thatmay impactfinancialinstitutionoperationsorcustomers.

Asanadditionalelementofitsleadershiprolein promoting effective bank supervision prac-tices, the FDIC provides technical assistance,training,andconsultationstointernationalgov-ernmentalbanking regulators in theareaof ITexaminations.In2009,throughoursecondmentprogramwith the Financial ServicesVolunteerCorps, the FDIC provided assistance in devel-oping IT examination programs to the CentralBankofIraq,theCentralBankofLibya,Banqued’Algerie,andBankofAlbania.TheFDICalsohostedavisitbytheChinaBankingRegulatoryCommissionto learnaboutourITexaminationprograms,andtheFDIChostedaninternationalconferenceofbankregulatorstodiscussemerg-ingtechnologyrisksandtocomparesupervisoryapproaches.

Consumer Complaints and Inquiries TheFDICinvestigatesconsumercomplaints

concerning FDIC-supervised institutions andanswersinquiriesfromthepublicaboutconsum-erprotectionlawsandbankingpractices.AsofDecember31,2009,theFDIChadreceived17,245written complaints, of which 8,280 involvedcomplaints against state non-member institu-tions.TheFDICrespondedtoover96percentofthesecomplaintswithin the two-weekstandardestablishedbyCorporatepolicy.TheFDICalsoresponded to 2,797written inquiries, ofwhich503 involved state non-member institutions. Inaddition,theFDICrespondedto6,491telephonecallsfromthepublicandmembersofthebank-ingcommunity,3,878ofwhichconcernedstatenon-memberinstitutions.

from them.Othermajor accomplishments dur-ing2009incombatingidentitytheftincludedthefollowing:• Assistedfinancialinstitutionsinidenti-

fyingandshuttingdownapproximately651“phishing”websites.Theterm“phishing”—asinfishingforconfiden-tialinformation—referstoascamthatencompassesfraudulentlyobtainingandusinganindividual’spersonalorfinancialinformation.

• Issued219SpecialAlertstoFDIC-supervisedinstitutionsonreportedcasesofcounterfeitorfraudulentbankchecks.

• Issued,inconjunctionwiththeotherFFIECagencies,frequentlyaskedques-tions(FAQs)concerning“IdentityTheftRedFlags,AddressDiscrepancies,andChangeofAddressRegulations.”TheseFAQsaredesignedtoassistfinancialinstitu-tionsincomplyingwiththenewregulationsandexaminersinassessinginstitutions’compliance.

The FDIC conducts information technology(IT) examinations at each safety and sound-nessexaminationtoensurethatinstitutionshaveimplemented adequate risk management prac-ticesfortheconfidentiality,integrity,andavail-abilityoftheinstitution’ssensitive,material,andcriticalinformationassetsusingtheFFIECUni-formRatingSystemforInformationTechnology(URSIT). The FDIC also participates in inter-agency examinations of significant technologyserviceproviders.In2009,theFDICconducted2,780 IT examinations at financial institutionsand technology service providers. The FDICalso monitors significant events, such as data


seminars reached an estimated 35,000 bank-ers participating at approximately 10,000 banklocationsthroughoutthecountry.TheFDICalsocontinuedtoworkwithindustrytradegroupstoprovidetrainingforbankemployees.

Deposit Insurance Coverage InquiriesDuring2009,theFDICreceived4,782written

depositinsuranceinquiriesfromconsumersandbankers.Oftheseinquiries,99percentreceivedresponses from the FDIC within two weeks,as requiredbyCorporate policy. In addition towritten deposit insurance inquiries, the FDICreceived and answered 41,259 telephone inqui-riesfromconsumersandbankersduring2009.

The 46,041 total deposit insurance inqui-ries received in 2009 is significantly less thanthe 100,933 total deposit insurance inquiriesreceived in 2008, when there was an unprec-edentedsurgeindepositinsurancequestionsfol-lowing the failureof IndyMacBank.However,the2009depositinsuranceinquiriesrepresenta130percentincreasecomparedto2007,whentheFDICreceivedatotalof20,024inquiriesaboutdepositinsurancecoverage.

Foreclosure PreventionIn 2009, the FDIC launched an initiative to

helpconsumersandthebankingindustryavoidunnecessary foreclosures and stop foreclosure“rescue”scamsthatpromisefalsehopetocon-sumersatriskoflosingtheirhomes.

TheFDICfocused its foreclosuremitigationeffortsinthreeareasduring2009:• Direct outreach to consumers with informa-

tion, education, counseling, and referrals. During2009,theFDIChostedorco-hostedover82consumeroutreacheventsthat

Deposit Insurance EducationAnimportantpartoftheFDIC’sdepositinsur-

ancemission isensuring thatbankersandcon-sumershaveaccesstoaccurateinformationabouttheFDIC’srulesfordepositinsurancecoverage.The FDIC has an extensive deposit insuranceeducation program consisting of seminars forbankers, electronic tools for estimating depositinsurance coverage, andwritten and electronicinformation targeted forbothbankersandcon-sumers.TheFDICalsorespondstothousandsoftelephoneandwritten inquirieseachyear fromconsumersandbankersregardingFDICdepositinsurancecoverage.

Economicconditionsin2008helpedtospurasignificantinterestbybankcustomersinlearn-ingmore about FDIC deposit insurance cover-age. To meet the increased public demand fordepositinsuranceinformation,theFDICimple-mented twomajor initiatives tohelp raisepub-licawarenessof thebenefitsand limitationsofFDICdepositinsurancecoverage.

In2009,theFDICcontinuedwithits2008ini-tiatives aimedat raising thepublic’s awarenessofthebenefitsandlimitationsoffederaldepositinsurance. The FDIC continued its campaignofpublicserviceannouncements for television,radio, and print media; these public serviceannouncements encouraged bank customers tovisitmyFDICinsurance.govtolearnaboutFDICinsurance coverage. In addition to our effortsto raise public awareness, the FDIC expandeditseffortstoeducatebankersabouttherulesandrequirementsforFDICinsurancecoverage.Inthefallof2009,afterall legislativeand regulatorychangeswereimplemented,theFDICconductedaseriesofsixnationwidetelephoneseminarsforbankers on deposit insurance coverage. These


The FDIC also worked collaboratively withotherkeypartners,bothinsideandoutsidefederalgovernment, on post-foreclosure neighborhoodstabilizationefforts.Theseeffortswillcontinuein2010.

Financial Education and Community Development

In 2001, the FDIC—recognizing the needfor enhanced financial education across the country—inaugurateditsaward-winningMoney Smartcurriculum,whichwas,until2009,avail-ableinsixlanguages,largeprintandBraillever-sions for individuals with visual impairments,andacomputer-basedinstructionversion.Sinceits inception, over 2.4million individuals have participated in Money Smart classes and self-pacedcomputer-basedinstruction.Approximate-ly 300,000 of these participants subsequentlyestablishednewbankingrelationships.

TheFDICsignificantlyexpandeditsfinancialeducationeffortsduring2009 throughamulti-part strategy that included making availabletimely, high-quality financial education prod-ucts,expandeddeliverychannels,andtheshar-ingofbestpractices.

Two new Money Smartproductswerereleasedin2009.First,aspartofeffortstoreachunder-servedcommunities,theFDICreleasedaHmong(anAsiandialectfoundinVietnam,Laos,Thai-land,andMyanmar)languageversionofMoney Smart,makingittheseventhlanguageinwhichthe curriculum is offered. Second, the FDICreleased theMoney Smart Podcast Network, a portableaudioversionofMoney Smartsuitablefor use with virtually all MP3 players. It wascreated as a tool for consumers touse to learnon theirownor foreducators seekingan inno-

reachedover17,000consumers.TheFDICalsoreleasedaninformationaltoolkitandlaunchedaphonereferralservicetohelphomeownersavoidscamsandreachtheirservicer.

• Industry outreach and education targeted to lenders, loan servicers, local governmen-tal agencies, housing counselors, and first responders (faith-based organizations, advo-cacy organizations, social service organiza-tions, etc.).TheFDICworkedcollaborativelythroughout2009withlocalforeclosurecoali-tions,AEIpartners,andotherstoco-hostindustry-wideevents.Approximately20sucheventswereconductedduring2009.

• Support for capacity building initiatives to help expand the quantity and quality of fore-closure counseling assistance that is avail-able within the industry.WorkingcloselywithNeighborWorks®Americaandothernationalandlocalcounselortrainingandintermediaries,theFDICworkedtosupportindustryeffortstobuildthecapacityofhous-ingcounselingagencies.

AspartoftheFDIC’sforeclosurepreventionefforts, theFDICreleasedtwoneweducationalbrochures during 2009 (in both English andSpanish) to help consumers avoid scams andturn to legitimate sourcesof assistance.The Is Foreclosure Knocking at Your Door? brochureencouragesconsumerstoseekaloanmodifica-tion.The Beware of Foreclosure Rescue Scams brochurealertshomeowners tocommonscamsanddirects themto legitimatesourcesofassis-tance. The demand for both brochures wasstrong—over150,000copieswererequestedanddistributed.


new savings deposits in financial institutions.Also,recognizingtheimportanceofsmallbusi-ness growth and job creation as an essentialcomponentinAmerica’seconomicrecovery,theFDICexpandeditsemphasisonfacilitatingsmallbusiness development, expansion and recoveryduring2009.Thisincludedhostingwell-receivedevents to help small businesses identify sup-portive programs, including mainstream lend-ingoptions.TheFDICalsohelpedfacilitatetheestablishment of two new small business loanpoolsduring2009tooriginateloanstoeligibleentrepreneurs and small businesses unable toobtain traditional loans because of an elevatedriskprofile(e.g.,start-upbusinesseswithinsuf-ficientcashfloworcollateral).Thesenewloanpools were launched in Alexandria, Virginia,andBatonRouge,Louisiana.

Resolutions and Receiverships TheFDIChastheuniquemissionofprotect-

ing depositors of insured banks and savingsassociations.NodepositorhaseverexperiencedalossontheinsuredamountofhisorherdepositinanFDIC-insured institutiondue toa failure.Once an institution is closed by its charteringauthority—the state for state-chartered institu-tions,theOfficeoftheComptrolleroftheCur-rency(OCC)fornationalbanks,andtheOfficeofThriftSupervision(OTS)forfederalsavingsassociations—andtheFDICisappointedreceiv-er, the FDIC is responsible for resolving thefailedbankorsavingsassociation.

TheFDICemploysavarietyofbusinessprac-tices to resolvea failed institution.Thesebusi-nesspractices are typically associatedwith theresolution process or the receivership process.Dependingonthecharacteristicsof the institu-

vativeway to supplement traditionalclassroominstruction.ThenewMP3versionreceivedmorethan328,716hitsfrom11,015individualvisitorsbetweenits releaseonMay27,2009,andyear-end2009.Showingitsappeal,visitorstothewebsitespentanaverageof38minuteson thesite.Additionally, toenhancethequalityofexistingproducts, information on foreclosure preven-tionscamsandlegitimatesourcesofforeclosureassistancewasaddedtotheadult instructor-ledandself-pacedversionsofMoney Smart.

TheFDICalsoexpandeditsdeliverychannelsfor financial education. For example, 237 neworganizations joined the FDIC’sMoney Smart Alliance. Finally, best practices were sharedthroughfoureditionspublishedofMoney Smart News,whichreachedover40,000subscribers.

During 2009, the FDIC undertook over 200community development, technical assistance,financialeducation,andoutreachactivitiesandevents.Theseactivitiesweredesignedtopromoteawarenessofinvestmentopportunitiestofinan-cial institutions, access to capital within com-munities, knowledge-sharing among the publicand private sector, and wealth-building oppor-tunities for families. Representatives through-outthefinancialindustryandtheirstakeholderscollaboratedwiththeFDIConabroadrangeofinitiativesstructuredtomeetlocalandregionalneedsforfinancialproductsandservices,credit,asset-building, affordable housing, small busi-ness and micro-enterprise development andfinancialeducation.

For example, the FDIC participated in 15localsavingscampaignsduringthe2009Amer-ica Savesweektoencourageconsumerstobuildwealth.TheFDIC’sleadershipofonesuchlocalcampaignhelpedfacilitatenearly$10millionin


assets”foraspecificperiodoftime(forexample,five to ten years). The economic rationale forthesetransactionsisthatretentionofsharedlossassetsinthebankingsectorcanproduceabetternet recovery thanwould theFDIC’s immediateliquidationoftheseassets.

Deposit payoffs are only executed if a bidfor aP&A transactiondoes notmeet the least-costtestorifnobidsarereceived,inwhichcasethe FDIC, in its corporate capacity as depositinsurer, makes sure that the customers of thefailedinstitutionreceivethefullamountoftheirinsureddeposits.

TheBankingActof1933authorizedtheFDICtoestablishaDINBtoassumetheinsureddepos-itsofa failedbank.ADINB isanewnationalbank with limited life and powers that allowsfailedbankcustomersabriefperiodof time tomove their deposit account(s) to other insuredinstitutions.ADINBallowsforafailedbanktobeliquidatedinanorderlyfashion,minimizingdisruption to local communities and financialmarkets.Another resolution option, open bankassistance transactions, generally can only beusedintheeventthebank’sfailurewouldresultinsystemicrisk.

The receivership process involves perform-ing the closing functions at the failed institu-tion,liquidatinganyremainingfailedinstitutionassets,anddistributinganyproceedsoftheliq-uidationtotheFDICandothercreditorsofthereceivership. In its role as receiver, the FDIChasusedawidevarietyofstrategiesandtoolstomanageandsellretainedassets.Theseinclude,butarenotlimitedtoassetsaleand/ormanage-ment agreements, partnership agreements, andsecuritizations.

tion,theFDICmayrecommendseveralofthesepracticestoensurepromptandsmoothpaymentof deposit insurance to insured depositors, tominimizeimpactontheDepositInsuranceFund,and tospeeddividendpayments tocreditorsofthefailedinstitution.

The resolution process involves valuing afailing institution, marketing it, soliciting andaccepting bids for the sale of the institution,determining which bid is least costly to theinsurancefund,andworkingwiththeacquiringinstitutionthroughtheclosingprocess.

Inorder tominimizedisruption to the localcommunity,theresolutionprocessmustbeper-formed quickly and as smoothly as possible.There are three basic resolution methods: pur-chaseandassumptiontransactions,depositpay-offs,andutilizingaDepositInsuranceNationalBank(DINB).

Thepurchaseandassumption(P&A)transac-tionisthemostcommonresolutionmethodusedfor failing institutions. InaP&Atransaction,ahealthy institutionpurchasescertainassetsandassumes certain liabilities of the failed institu-tion.ThereareavarietyofP&Atransactionsthatcanbeused.Sinceeachfailingbanksituationisdifferent, P&A transactions provide flexibilitytostructuredealsthatresultinthehighestvalueforthefailedinstitution.ForeachpossibleP&Atransaction, theacquirermayeither acquirealloronlytheinsuredportionofthedeposits.Losssharingmaybeofferedby the receiver in con-nectionwithaP&Atransaction.Inalosssharingtransaction,theFDICasreceiveragreestosharelosses on certain loans with the acquirer. TheFDICusuallyagreestoabsorbasignificantpor-tion(forexample,80percent)offuturelossesonassetsthathavebeendesignatedas“sharedloss


marketedtobesoldwithin90daysofaninstitu-tion’sfailure.

Structured asset sales in 2009 included$1.3 billion of residential loans from FranklinNationalBank.ThistransactioninvolvedFDIC-guaranteed purchase money debt, and equityin a Limited Liability Company (LLC) sharedbetweenthereceiverandthesuccessfulbidder.

TheCorusConstructionVentureLLCstruc-turedassetsaleconsistedof$4.5billionofcon-dominium and office construction loans fromCorusBank.Inthistransaction,theFDICstruc-turedthepurchasemoneydebtataninitialtermleverageofone-to-onetothebiddersandstruc-turedthenotestobeintheformofmultiplebul-letmaturitynotesguaranteedbytheFDIC.

In2009,thebookvalueofassetsunderman-agementincreasedby$26.2billionto$41.4bil-lion.The followingchart showsbeginningandendingbalancesofassetsbyassettype.

Assets in Inventory by Asset TypeDollars in Millions

Asset Type

Assets in Inventory 01/01/09

Assets in Inventory 12/31/09

Securities $467 $12,425

Consumer Loans 204 475

Commercial Loans 2,985 4,423

Real Estate Mortgages 9,808 15,613

Other Assets/Judgments 703 4,096

Owned Assets 832 3,257

Net Investments in Subsidiaries 108 1,066

Total $15,107 $41,355

Financial Institution Failures TheFDICexperiencedasignificantincrease

inthenumberandsizeofinstitutionfailuresascompared to previous years.During 2009, 140financial institutionsfailed.For the institutionsthat failed, theFDICsuccessfullycontactedallknownqualifiedandinterestedbidderstomarketthese institutions. Additionally, the FDICmar-ketedover80percentofthemarketableassetsoftheseinstitutionsatthetimeoffailureandmadeinsuredfundsavailable toalldepositorswithinonebusiness dayof the failure.Therewerenolossesoninsureddeposits,andnoappropriatedfundswererequiredtopayinsureddeposits.

Thefollowingchartprovidesacomparisonoffailureactivityoverthelastthreeyears.

Failure Activity 2007–2009Dollars in Billions

2009 2008 2007

Total Institutions 140 25 3

Total Assets of Failed Institutions* $169.7 $371.9 $2.6

Total Deposits of Failed Institutions* $137.1 $234.3 $2.4

Estimated Loss to the DIF $35.6 $19.8 $0.2

*Total Assets and Total Deposits data are based on the last Call Report filed by the institution prior to failure.

Asset Management and SalesAs part of its resolution process, the FDIC

makes every effort to sell as many assets aspossible to an assuming institution and gener-ally issuccessful indoing this.Assets thatarepassed to the receivership are evaluated, andthose thataredeterminedtobemarketableare


tion.TheFDICconductsoutreachtoencourageandinformMWOBsabouttheprocurementpro-cessandopportunitiesforprimeandsubcontractawards.For2010,theFDICseekstoincreasethenumberofawardsanddollarvalueoftheawardsmadetoMWOBsinallracial,gender,andethniccategoriesinthefinancialservicesindustry.

Protecting Insured Depositors Withtheincreaseinfailureactivityin2009,

theFDIC’sfocusonprotectingdepositsininsti-tutionsthatfailwasofcriticalimportance.Con-fidenceinthebankingsystemhingesondepositinsurance,andnoinsureddepositswentunpaidin2009.

TheFDIC’s ability to attract healthy institu-tions to assume deposits and purchase assetsof failed banks and savings associations at thetimeoffailureminimizesthedisruptiontocus-tomers and allows assets to be returned to theprivate sector immediately. Assets remainingafterresolutionareliquidatedbytheFDICinanorderlymanner,andtheproceedsareusedtopaycreditors, including depositors whose accountsexceeded the insurance limit.EffectiveOctober3,2008,throughDecember31,2009,thestandardmaximum deposit insurance amount increasedfrom $100,000 to $250,000, and this increasewaslaterextendedtoDecember31,2013.During2009,theFDICpaiddividendsof$21.0milliontodepositorswhoseaccountsexceededtheinsuredlimit(s).

Professional Liability and Financial Crimes Recoveries

The FDIC staff works to identify potentialclaims against directors, officers, accountants,appraisers, attorneys, and other professionals

Receivership Management ActivitiesTheFDIC,asreceiver,managesfailedbanks

and their subsidiaries with the goal of expedi-tiously winding up their affairs. The oversightandpromptterminationofreceivershipshelptopreservevaluefortheuninsureddepositorsandother creditorsby reducingoverheadandotherholdingcosts.Once theassetsofa failed insti-tutionhavebeensoldand the finaldistributionof any proceeds ismade, the FDIC terminatesthe receivership estate. In 2009, the number ofreceiverships under management increased by74percentduetotheincreaseinfailureactivity.The following chart showsoverall receivershipactivityfortheFDICin2009.

Receivership Activity

Active Receiverships as of 01/01/09* 49

New Receiverships 140

Receiverships Inactivated 2

Active Receiverships as of 12/31/09* 187

*Includes eight FSLIC Resolution Fund receiverships.

Minority and Women Owned BusinessesThe significant increase in the number of

financial institution failures over the last twoyearshasresulted in theFDIC’s increasedreli-anceoncontractorstoassistinresolvingreceiv-ershipscreatedfromfailedfinancialinstitutionsand liquidating their assets. In 2009, theFDICmade1,212contractawardstotaling$2.66billon;376(31%)ofthoseawards,valuedat$862million(32%),weretominorityandwomen-ownedbusi-nesses(MWOBs).TheFDICpromotestheinclu-sion of MWOBs in its procurement program,which relies on competitive bidding by invita-


operationaleffectivenessandminimizepotentialfinancialriskstotheDIF.

Human Capital ManagementTheFDIC’shumancapitalmanagementpro-

gramsaredesignedtorecruit,develop,reward,and retain a highly skilled, cross-trained,diverse,andresults-orientedworkforce.In2009,the FDIC stepped up workforce planning anddevelopment initiatives that emphasized hiringthe additional skill sets needed to address thegreatlyincreasednumberoffinancialinstitutionfailuresandinstitutionsinat-riskcategories.TheCorporationalsodeployedanumberofstrategiestomorefullyengageallemployeesinadvancingtheFDIC’smission.

Succession ManagementIn2009,theCorporationsignificantlyexpand-

ed its education and training curriculum foremployees in the business lines, support func-tions, and leadershipdevelopment.Additionally,learninganddevelopmentwassupplementedandsupportedwith the expansion of e-learning, jobaids,andtoolkitsthatweremadeavailabletonewandtenuredemployeestofacilitateworkprocess-esandoverallefficiencies.

A leadership development curriculum waslaunchedtoexpandopportunitiestoallemploy-ees,includingnewly-hiredemployees.Thisnewcurriculum takes a comprehensive approach,aligning leadership development with criticalcorporate goals and objectives, and promotesdesiredculture.Bydevelopingemployeesacrossthespanoftheircareers,theCorporationbuildsa culture of leadership and further promotes aleadershipsuccessionstrategy.

whomay have contributed to the failure of aninsured financial institution. Once a claim isdeemed meritorious and cost-effective to pur-sue, theFDIC initiates legal action against theappropriate parties.During the year, theFDICrecovered approximately $53.5 million fromthese professional liability claims/settlements.Inaddition,aspartofthesentencingprocessforthoseconvictedofcriminalwrongdoingagainstinstitutionsthatlaterfailed,acourtmayorderadefendanttopayrestitutionortoforfeitfundsorproperty to the receivership. The FDIC,work-inginconjunctionwiththeU.S.DepartmentofJustice, collected $5.5million in criminal res-titutionsandforfeituresduringtheyear.Attheendof2009,theFDIC’scaseloadwascomposedof25professionalliabilitylawsuits(upfrom17atyear-end2008)and1,878openinvestigations(upfrom284).Therealsowere3,379activeres-titution and forfeiture orders (up from 638 atyear-end2008).Thisincludes190FSLICReso-lutionFund orders—i.e., orders inherited fromtheFederalSavingsandLoanInsuranceCorpo-rationonAugust10,1989,andordersinheritedfromtheResolutionTrustCorporationonJanu-ary1,1996.

Effective Management of Strategic Resources

TheFDICrecognizesthatitmusteffectivelymanageitshuman,financial,andtechnologicalresources in order to successfully carry out itsmissionandmeettheperformancegoalsandtar-getssetforthinitsannualperformanceplan.TheCorporationmustalignthesestrategicresourceswithitsmissionandgoalsanddeploythemwherethey are most needed in order to enhance its


human resources resultingfrom the increased numberof failed financial institu-tionsandthevolumeofaddi-tional examinations. Amongthese strategies, the FDICreemployed over 200 retiredFDIC examiners, attorneys,resolutions and receivershipsspecialists, and support per-sonnel; hired employees offailed institutions in tem-porary and term positions;recruitedmid-careerexamin-ers who had developed theirskills in other organizations;recruited term loan review

specialists and compliance analysts from theprivate sector; and redeployed current FDICemployees with the requisite skills from otherpartsoftheCorporation.

Asthenumberoffailedfinancialinstitutionsproliferatedin2009,theFDICBoardauthorizedthe opening of two temporary satellite offic-esonboth thewest coast and theeast coast tobringresourcesinareashitespeciallyhard.TheWest Coast Temporary SatelliteOffice openedin Irvine,California, in early spring and as ofyear-endhadover400employeeswitha targetofover500.TheEastCoastTemporarySatelliteOffice opened in Jacksonville, Florida, in thefall.AlthoughtheCorporationisstillrecruitingfor this office, eventually it toowill have over500employees.TheCorporationalsoincreasedresolutionsandreceivershipsstaffintheDallasregionaloffice.Almostallofthenewemployeesin thesenewofficeshavebeenhiredonanon-permanentbasistohandlethetemporaryincrease

Also in 2009, the Corporation completed apilot Corporate Executive Development Pro-gram.Thiscomprehensive18-monthsuccessionprogramprovidedaformalizedprocesstoiden-tifyanddevelophigh-performing,high-potentialsupervisorsandseniortechnicalspecialists.Pilotresultsarebeingevaluatedandwillbeleveragedinfuturesuccessionmanagementstrategiesanddecisions.

Additionally, theCorporation formalized itsMasterofBusinessAdministration(MBA)pro-gram for Corporate Managers and ExecutiveManagers,inconjunctionwithamajoruniversity.TheevaluationresultsofthepilotMBAprogramwereoverwhelminglypositive,andparticipantsprovidedexplicitexamplesofdirectapplicationtotheirjobsandimprovedstrategicthinking.

Strategic Workforce Planning and ReadinessTheFDICutilizedanumberof employment

strategiesin2009tomeettheneedforadditional

SeniorleadersmeetwithCEDPparticipantstodiscusstheirfirstyear(ltor):RichBrown,RexTaylor,MaureenSweeney,LauraLapin,KathyNorcross,MickeyCollins,SteveMosier,RusPittman,Erica

Bovenzi,AndrewStirling,BobMooney,andIraKitmacher.Executiveadvisorsandhostsupervisorsnotshown:GlenBjorklund,JimLaPierre,andLisaRoy.


theFederalHumanCapitalSurveymandatedbyCongress.AcorporateCultureChangeInitiativewasinstitutedin2008toaddressissuesresultingfromthesurvey.

TheCulture Change Initiative has continuedto gain momentum, and progress is occurringtowardcompletionofgoalsidentifiedintheCul-tureChangeStrategicPlan.The2008employeesurvey results showed marked improvement inthe areas of opportunity, while maintaining orimprovingonareasofstrength.TheCorporationworked with the National Treasury Employees’Uniontodevelopanewpay-for-performancesys-temthatisperceivedtobemoretransparentandfair to employees. The new system was imple-mented in 2009. Also in 2009, the Corporationdelivered training to itsCorporateManagersontrust. It offered leadership enrichment activitiesthatprovidedcontinuallearning.CultureChangedialogue sessions were held across the country,with approximately 5,500 employees participat-ing.Analysisindicatesapositiveresponsetotheseeventsandawillingnesstoengageinthechangeprocess. The question-and-answer mailbox andquarterly all-employee teleconferences with theChairmancontinuedsothatemployeescouldpro-videinput,makesuggestions,andaskquestions.

The next phase of the Initiativewas startedinSeptember2009with the selectionof anewProgram Manager. The Internal OmbudsmanProgram,initiatedaspartoftheCultureChangeInitiative, continued, providing another avenuefor following up on employee issues.TheCul-tureChangeCouncilisbeingreconstituted,withat least six formerCouncilandTeammembersreturningtoensurecontinuityanduptosixnewmembersbeingselected.Bestpracticesinpublicand private sector organizations on sustaining

inbankclosingandassetmanagementactivitiesexpectedoverthenexttwotofouryears.Tostafftheseofficesandmeetotherneedsbroughtonbythefinancialcrisis,theCorporationhirednearly1,800additionalemployeesin2009.TheuseoftermappointmentswillallowtheFDICstafftoreturntoanadjustednormalsizeoncethecrisisisoverwithoutthedisruptionsthatreductionsinpermanentstaffwouldcause.

TheFDICcontinueditseffortstobuildwork-forceflexibilityandreadinessby increasing itsentry-level hiring into theCorporateEmployeeProgram(CEP).TheCEPisamulti-yeardevel-opment program designed to cross-train newemployees in the FDIC’smajor business lines.In2009,206newbusinesslineemployees(736since program inception) entered the multi-disciplined program. At its largest participantcapacity since inception, theCEP continues toprovide a foundation across the full spectrumoftheCorporation’sbusinesslines,allowingforgreater flexibility to respond to changes in thefinancial services industry and in meeting theCorporation’sstaffneeds.As inyearspast, theprogram continues to provide the FDIC thoseflexibilitiesasprogramparticipantswerecalledupon toassistwithbothbankexaminationandbankclosing activitiesbasedon the skills theyobtained through their program requirementsandexperiences.

Employee EngagementThe FDIC continually evaluates its human

capital programs and strategies to ensure thattheCorporationremainsanemployerofchoiceand that all of its employees are fully engagedandalignedwithitsmission.TheFDIC’sannualemployee survey incorporates and expands on


Toprovideadditionalflexibilityinemployeelearningandgrowth,theFDICassistedinmeet-ingthechallengeofincreasedactivitybylocat-ing training facilitieswithin satellite offices inJacksonville and Irvine. This helped to ensurethatnecessarytrainingcouldbeprovidedlocal-ly,reducingtheneedforemployeetravel.

In2009,theCorporationprovideditsemploy-eeswithover100instructor-ledcoursesand600web-basedcoursesinsupportofvariedmissionrequirements. Therewere over 7,000 instancesof completed instructor-led courses and18,000instancesofcompletedweb-basedcourses.

Information Technology ManagementInformationtechnology(IT)resourcesareone

ofthemostvaluableassetsavailabletotheFDICinfulfillingitscorporatemission.Intoday’srap-idlychangingbusinessenvironment,technologyisfrequentlythefoundationforachievingmanyFDICbusiness goals, especially those address-ing efficiency and effectiveness in an industrywhere timely and accurate communication anddataareparamountforsupervisinginstitutions,resolving institution failures, and monitoringassociatedrisksinthemarketplace.

During2009,theFDICwasfacedwithmanychallengesstemming fromtheeconomicdown-turn and its historic impact on the financialindustry.Tohelpmeetthosechallenges,theFDICcontinuedtoleverageinnovative,timely,reliable,andsecureITproductsandservicestomeetpri-oritybusinessdrivers andadapt to amyriadofnewfinancialprograms.

Enterprise ArchitectureThe overall vision of the FDIC’s enterprise

architectureistoprovideanefficient,agile,flex-

cultureandorganizationalchangewerestudiedin 2009 andwill be summarized,with recom-mendationsmadeonsustainingtheFDIC’sCul-tureChangeInitiative.

Employee Learning and Growth The FDIC offers a range of learning and

growth opportunities tomeet the varied needsof its employees. It uses innovative solutionsto prepare new and existing employees for thechallenges ahead. By streamlining existingcourses, promoting blended learning, and cre-ating online just-in-time toolkits and job aids,the FDIC has allowed new employees tomorequickly and thoroughly assume their job func-tions.Inordertomeetthe2009learningneedsofnewemployees, theFDICrespondedwithflex-iblecourseschedulingandadditionalinstructor-led and computer-based courses, including thenewContinuingProfessionalEducationCentre,which allows employees to more easily main-tain theirCertified PublicAccountant accredi-tationandothercertifications,despiteincreasedworkloads.

TheCorporationdealtwithnewchallengesin2009andsupportedemployeesbyprovidingjust-in-timetrainingtoaddressspecificissues,suchasmanagingandsellinganeverincreasingnum-berofloansacquiredfromfailedinstitutions.Tobetter prepare employees to perform this task,the FDIC undertook amulti-pronged approachthat consisted of online presentations, onlinejob aids, online simulations, and instructor-ledcourses.TheCorporationfocuseditseffortsonprovidingmultiple points of access to learningdeliveredquicklyandwiththeleastdisruptiontoongoingworkactivities.


chosenasrecipientsofthe“ExcellenceAwardforOpen Source Business Use in Government” inthecategoryof“SafeComputingEnvironment”at the 2009 Government Open Source Confer-ence.Theawardrecognizedgovernmentemploy-eesorteamsforsignificantaccomplishmentsinOpenSource Technologythatmeetgovernmentbusinessormissionrequirements.

Securing the FDIC Through Strong Privacy Initiatives

TheFDICcontinuedtostrengthenprivacybyprovidingarisk-based,enterprise-widePrivacyProgramthatmaintainsandbuildspublictrust,andisbasedonsoundprivacypracticesincom-pliancewithapplicablelaws.In2009,theFDICexperiencedasignificantincreaseinbankclos-ingactivities.Asaresult,theFDICperformedanumberofCorporate-wideinitiativestoincreasetheidentification,protection,andcontrolofper-sonallyidentifiableinformation.

ibleandcost-effectiveenvironmentthatsupportsthe corporate strategic goals andobjectives fortheFDICanditscustomers.During2009,mod-ernizationoftheinfrastructurecontinued.Alsoaroadmapofthesecurityarchitecturewasdevel-opedwith functionalitybasedonglobal indus-try standards,whichwill facilitate the sharingof information and resources, while protectingaccesstosensitiveandprivacyinformation.

Improving Application Systems In2009,theFDICenhancedseveralapplica-

tion systems that support the FDIC’s business,includingthe:• AssessmentInformationManagement

System—usedtocalculate,collect,andaccountforthequarterlyassessmentpremi-umspaidbyinsuredfinancialinstitutions;

• CentralDataRepository—usedinthecollec-tionandmanagementofcallreportdatafromtheU.S.financialinstitutions;

• NewFinancialEnvironment—state-of-the-artfinancialsystem;and

• RiskRelatedPremiumSystem—providescorebusinessfunctionalityrelatedtodepositinsuranceriskpremiumcalculationsforindi-vidualfinancialinstitutions.

Security Outreach, Education, and Awareness

TheFDICworked collectivelywith theU.S.DepartmentofAgriculture and theDepartmentofEducation’sOfficeofFederalStudentAidontheOpenFISMA (Federal Information SecurityManagement Act) Interagency Initiative. Thisinitiativedevelopedasystemtotrackvulnerabili-tiesthataffectthesecurityofsystemsandappli-cations. TheFDIC and these departmentswere


II. Financial Highlights

Deposit Insurance Fund Performance

The FDIC administers the Deposit Insur-anceFund(DIF)andtheFSLICResolutionFund(FRF),whichfulfills theobligationsof thefor-merFederalSavingsandLoanInsuranceCorpo-ration(FSLIC)andtheformerResolutionTrustCorporation (RTC).The following summarizestheconditionoftheDIF.(SeetheaccompanyinggraphsonFDIC-InsuredDepositsandInsuranceFundReserveRatios.)

TheDIF’s comprehensive loss totaled $38.1billion for 2009 compared to a comprehensivelossof$35.1billionfor thepreviousyear.Asaresult,theDIFbalancedeclinedfrom$17.3bil-liontonegative$20.9billionasofDecember31,2009.Theyear-over-yearincreaseof$3.0billionin comprehensive loss was primarily due to a$15.9billionincreaseintheprovisionforinsur-ancelosses,a$4.0billionincreaseintheunreal-ized loss onU.S.Treasury (UST) investments,anda$1.4billiondecreaseintheinterestearnedonUST obligations, partially offset by a $14.8billionincreaseinassessmentrevenueanda$3.1billionincreaseinotherrevenue(primarilyfromguarantee termination fees and debt guaranteesurcharges).

Theprovisionforinsurancelosseswas$57.7billionin2009.Thetotalprovisionconsistspri-marilyoftheprovisionforfuturefailures($20.0billion)andthelossesestimatedatfailureforthe140 resolutions occurring during 2009 ($35.6billion).

Assessment revenue was $17.7 billion for2009. This is a $14.8 billion increase from2008,andisduetothecollectionofa$5.5bil-lionspecialassessment inSeptember2009andsignificantlyhigherregularassessmentrevenue.

Source: Commercial Bank Call and Thrift Financial Reports

Estimated DIF Insured Deposits Dollars in Billions$6,000

5,000

4,000

3,000

2,000

1,000

0Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09

Deposit Insurance Fund Reserve RatiosFund Balances as a Percent of Insured Deposits

–0.50–0.40–0.30–0.20–0.10

0.000.100.200.300.400.500.600.700.800.901.001.101.201.30

Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09Sep-07

II. Financial Highlights 53

marketable securities related to the TemporaryLiquidity Guarantee Program (TLGP). Hence,the DIF is well positioned to fund resolutionactivityin2010andbeyond.Theprepaidassess-ments,while increasingDIFcashuponreceipt,did not initially affect the fund balance, sincethefundscollectedwereinitiallyrecordedasanoffsettingliability;theyaresubsequentlyrecog-nizedquarterlyasrevenuewhenearned.

Corporate Operating BudgetThe FDIC segregates its corporate operat-

ingbudgetandexpensesintotwodiscretecom-

Major factors contributing to the increase inregularassessmentrevenueincludedchangestothe risk-based assessment regulations, ratingsdowngradesofmanyinstitutions(whichpushedthemintohigherassessmentratecategories),thedeclineoftheone-timeassessmentcredit,andalargerassessmentbase.

Although the DIF ended the year with anegative $20.9 billion fund balance, the DIF’sliquidity was significantly enhanced by pre-paid assessment inflows of $45.7 billion. Cashandmarketablesecuritiesstoodat$66.0billionat year-end, including $6.4 billion in cash and

Deposit Insurance Fund Selected StatisticsDollars in Millions

For the years ended December 31

2009 2008 2007

Financial Results

Revenue $24,706 $7,306 $3,196

Operating Expenses 1,271 1,033 993

Insurance and Other Expenses (includes provision for loss) 59,438 43,306 98

Net (Loss) Income (36,003) (37,033) 2,105

Comprehensive (Loss) Income (38,138) (35,137) 2,248

Insurance Fund Balance ($20,862) $17,276 $52,413

Fund as a Percentage of Insured Deposits (reserve ratio) (0.39)% 0.36% 1.22%

Selected Statistics

Total DIF-Member Institutions* 8,012 8,305 8,534

Problem Institutions 702 252 76

Total Assets of Problem Institutions $402,782 $159,405 $22,189

Institution Failures 140 25 3

Total Assets of Failed Institutions in Year** $169,709 $371,945 $2,615

Number of Active Failed Institution Receiverships 179 41 22

*Commercial banks and savings institutions. Does not include U.S. insured branches of foreign banks.**Total Assets data are based upon the last Call Report filed by the institution prior to failure.


threemajorbusinesslinesanditsmajorprogramsupport functions. The most significant fac-torcontributingtotheproposedincreaseintheongoing operations component is the projectedincreaseintheCorporation’ssupervisorywork-loadin2010andtheplannedstaffingincreasesin the Division of Supervision and ConsumerProtection(DSC)toaddressthatworkload.The2010 ongoing operations budget also includesincreasedfundsforadditional resolutionsstaff,travel, office space, and equipment for theseadditionalstaff.Underthisbudget,theCorpora-tionwillfocuslargelyonitscoremissionrespon-sibilitiesin2010andwillnotdevotesignificantresources to new discretionary activities. Inaddition, the 2010 receivership funding budgetallows for substantially increased resources forcontractor support as well as non-permanentincreasesinauthorizedstaffingfortheDivisionofResolutionsandReceiverships,theLegalDivi-sion, and other organizations should workloadrequirementsintheseareasrequireanimmedi-ateresponse.

Investment SpendingThe FDIC instituted a separate Investment

Budgetin2003.Ithasadisciplinedprocessforreviewingproposednewinvestmentprojectsandmanaging the construction and implementationof approved projects.All of the projects in thecurrentinvestmentportfolioaremajorITsysteminitiatives. Proposed IT projects are carefullyreviewedtoensurethattheyareconsistentwiththe Corporation’s enterprise architecture. Theproject approvalandmonitoringprocessesalsoenabletheFDICtobeawareofriskstothemajorcapitalinvestmentprojectsandfacilitateappro-priate,timelyinterventiontoaddresstheserisks

ponents: ongoing operations and receivershipfunding. The receivership funding componentrepresents expenses resulting from financialinstitutionfailuresandis,therefore,largelydriv-enbyexternalforces,whiletheongoingopera-tionscomponentaccountsforallotheroperatingexpensesandtendstobemorecontrollableandestimable.CorporateOperatingexpensestotaled$2.33billionin2009,including$1.24billioninongoingoperationsand$1.10billionforreceiver-shipfunding(numbersdonotsumduetoround-ing).Thisrepresentedapproximately98percentof the approved budget for ongoing operationsand84percentoftheapprovedbudgetforreceiv-ershipfundingfortheyear.(Thenumbersabovewill not agreewith theDIFandFRF financialstatementsdue todifferences inhow itemsareclassified.)

Giventherecentchallengesfacingtheindus-try,asevidencedintheoverallCAMELSdete-rioration and anup-tick in financial institutionfailureactivity,theFDICisdeterminedtoensurethatitisadequatelypreparedtoeffectivelyfulfillitsmissionin2010.Consequently,inDecember2009, the Board of Directors approved a 2010Corporate Operating Budget of approximately$3.99 billion, consisting of $1.49 billion forongoingoperationsand$2.50billionforreceiv-ership funding. The level of approved ongoingoperationsbudgetisapproximately$254million(20.5percent)higher thanactual2009ongoingoperationsexpenses,whiletheapprovedreceiv-ershipfundingbudgetis$1.40billion(127.8per-cent)higherthanthe$1.10billionofactual2009receivershipfundingexpenses.

As in prior years, the 2010 budgetwas for-mulatedprimarilyonthebasisofananalysisofprojectedworkloadforeachoftheCorporation’s

II. Financial Highlights 55

throughoutthedevelopmentprocess.Aninvest-ment portfolio performance review is providedtotheFDIC’sBoardofDirectorsquarterly.

TheCorporationundertooksignificantcapi-tal investments during the 2003–2009 period,the largest of which was the expansion of itsVirginia Square office facility. Other projectsinvolvedthedevelopmentandimplementationofmajor IT systems. Investment spending totaled$266millionduringthisperiod,peakingat$108million in2004.Spending for investment proj-ectsin2009totaledapproximately$6.1million.In 2010, investment spending is estimated tototal$1.1million.

Investment Spending 2003−2009Dollars in Millions$120

100

80

60

40

20

02003 2004 2005 2006 2007 2008 2009

$27

$108

$62

$25

$12

$26

$6


III. Performance Results Summary

Summary of 2009 Performance Results by Program

TheFDICsuccessfullyachieved45ofthe46annual performance targets established in its2009 Annual Performance Plan. The one goalthatwas not achieved involved the inadvertentinclusionof“3-rated”institutionsintherequire-mentforfollow-upwithin12months.Therewere

no instances inwhich2009performancehadamaterial adverse effect on successful achieve-mentoftheFDIC’smissionoritsstrategicgoalsand objectives regarding its major programresponsibilities.

Key accomplishments byprogramare high-lightedinthetablebelow.

Program Area Performance Results

Insurance • UniformlyraiseddepositinsuranceassessmentrateseffectiveJanuary1,2009,by7basispoints.• InFebruary2009,extendedtheRestorationPlanto7yearsduetotheextraordinarycircumstancesfacingthebank-

ing industry. In May, Congress revised the law to require the reserve ratio to be restored to 1.15 percent within 8 years absent extraordinary circumstances. In September, the Board amended the amended Plan to extend the restoration period to 8 years.

• Finalizedimprovementstotherisk-basedpricingsystem,includingaddingvariousfinancialratiostothelargebankmethod used to determine premium rates for large institutions and adjusting all institutions’ premium rates for unse-cureddebtandforsignificantrelianceonbrokereddepositsorsecuredliabilities.Alsowidenedtherangeofratespaid by institutions in each risk category.

• Imposedaspecialassessmentof5basispointsoneachinstitution’sassetslessTierIcapitaleffectiveJune30,2009.• ExtendedperiodtoissueguaranteeddebtthroughtheTLGPtoOctober31,2009,extendedtermofguaranteefrom

June 30, 2012, to December 31, 2012, and imposed surcharges on any debt issued April 1, 2009, or later. • IssuedafinalruleextendingtheTransactionAccountGuaranteeProgramcomponentoftheTLGPfromDecember31,

2009, to December 31, 2010, and gave participating institutions a one-time opportunity to opt out. Raised fees and made them risk-based depending upon an institution’s deposit insurance risk category.

• ConductedsemiannualreviewsoftheContingentLossReserve(CLR)methodologythroughananalysisofthevari-ance between projected and actual losses. As a result, substantive changes were made during late 2008 and into 2009 to improve the accuracy of the CLR calculation.

• EstablishedaDesignatedReserveRatioof1.25percentfor2010,inaccordancewiththeprovisionsofthedepositinsurance reform legislation.

• Researchedandanalyzedemergingrisksandtrendsinthebankingsector,financialmarkets,andtheoverallecono-mytoidentifyissuesaffectingthebankingindustryandtheDepositInsuranceFund.

• Providedpolicyresearchandanalysisinsupportoflegislativeeffortstoreformfinancialindustryregulation,aswellassupport for testimony and speeches.

• Publishedeconomicandbankinginformationandanalyses,throughtheFDIC Quarterly, FDIC Quarterly Banking Profile (QBP), FDIC State Profiles, and the Center for Financial Research Working Papers.

• Conductednumerousoutreachactivitiestobankers,tradegroups,communitygroups,otherregulators,andforeignvisitors addressing economic and banking risk analysis.

• CompletedriskassessmentsandLIDIScorecardsforalllargeinsureddepositoryinstitutionsandfolloweduponallidentifiedconcernsthroughoff-sitereviewandanalysis.

• Increasedon-sitepresenceatlargecomplexinstitutionstoassessrisk,monitorliquidity,andparticipateintargetedreviews with the primary federal regulators.

• ContinuedtodeveloptheLegacyLoansProgramtobepreparedtoofferthisprogramtosupportthecreditneedsofthe economy.

• Answered99percentofinquiriesfromconsumersandbankersaboutFDICdepositinsurancecoveragewithin14days.

III. Performance Results Summary 57


Insurance (continued)

• ContinuedandexpandedtheFDIC’spubliceducationcampaigntoincreaseawarenessofFDICdepositinsurancecoverage.

• Conducted25depositinsuranceseminarsforbankers,including6nationalteleconferences,onFDICdepositinsur-ance coverage. These seminars reached more than 35,000 bankers.

• WorkedwithseveralnationalconsumerorganizationstosecurecommitmentstofeatureFDICdepositinsuranceinformation on their websites and in newsletters, and to disseminate such information at their conferences and events.

• ElectronicDepositInsuranceEstimatorusersessionsfor2009totaled699,277.• Expandedavenuesforpublicizingdepositinsurancerulesandresourcesby:

o Enhancing the FDIC’s Electronic Deposit Insurance Estimator (EDIE) to incorporate new functionality that allows usersto(1)confirmwhethertheirbankisFDIC-insuredwhilewithintheEDIEapplication,and(2)calculateinsur-ancecoveragefordepositsheldbyrevocabletrustswithmorethanfivebeneficiaries/over$1.25millionatoneinstitution.

o Producingupdatedversionsoftwovideosondepositinsurancecoverage:(1)a30-minutevideoforconsumersand new bank employees and (2) a 95-minute seminar for bankers who answer coverage questions for depositors.

o Producing two consumer brochures on deposit insurance coverage.

These resources are available in multiple languages. The videos are available on the FDIC’s web site and YouTube chan-nel, and are downloadable for multi-media applications.

Supervision and Consumer Protection

• Conducted2,604riskmanagement(safetyandsoundness)examinations,includingrequiredfollow-upexaminationsof problem institutions, within prescribed time frames.

• Conducted1,981complianceandCommunityReinvestmentActexaminations,includingrequiredfollow-upexami-nations of problem institutions, within prescribed time frames.

• Conducted2,698BankSecrecyActexaminations,includingrequiredfollow-upexaminationsandvisitations.• Conducted2,780ITexaminationsoffinancialinstitutionsandtechnologyserviceproviders.• WorkedwithotherfederalbankingregulatorsandtheBaselCommitteeonBankingSupervisiontodevelopproposals

to strengthen capital and liquidity requirements.• Publishedafinalruleamendingtheannualaudit,auditcommittee,andrelatedreportingrequirementsapplicableto

insured depository institutions with $500 million or more in total assets.• PublishedNoticeofProposedRulemakingfortheSecureandFairEnforcementforMortgageLicensingActof2008

andpostedthedraftfinalguidancetotheFDICwebsitetoimplementprovisionsapplicabletomortgageloanorigi-natorsemployedbyinsureddepositories.Staffcontinuedrulewritingandotherpreparatoryactivitiesrelatedtoimplementing these new regulations.

• PublishedtheSupervisory Insights journal to contribute to and promote sound principles and best practices for bank supervision.

• Amongotherreleases,issuedFinancialInstitutionLetters(FILs)providingguidanceon:(1)managingcommercialrealestateconcentrations;(2)liquidityriskmanagement;(3)theuseofvolatilefundingsourcesbyfinancialinstitutionsinweakened condition; (4) enhanced supervisory procedures for newly insured FDIC-supervised depository institutions; and (5) reminding institutions that if, for risk management purposes, they decide to reduce or suspend home equity lines of credit, they must comply with certain legal requirements. In addition, six disaster-related FILs were issued.

• IssuedindustrynotificationoftwointeragencyreleasesregardingconductingCross-BorderFundsTransfersandExaminationProceduresforcompliancewiththeUnlawfulInternetGamblingEnforcementAct.

• IssuedupdatedinteragencyguidanceontheCommunityReinvestmentAct(CRA),andrequestedcommentonnewproposed guidance. Issued an interagency proposal to amend the CRA regulation to implement statutory require-mentsrelatingtostudentloansandactivitiesincooperationwithminority-andwomen-ownedfinancialinstitutionsand low-income credit unions.



Supervision and Consumer Protection(continued)

• Releasedinteragencyguidanceonthe2009IdentityTheftRedFlagsregulations;issuedupdatedguidanceonfloodinsurance mandatory purchase requirements and requested comment on additional proposed guidance; joined seven other federal agencies in releasing a model privacy notice form based on extensive consumer testing; request-ed comment on supervisory guidance on reverse mortgages.

• Consumerresearchfunctionsupportedsupervisionactivitiesonfairlending,enforcementactions,theunbankedandunderbankedsurvey,andsupportedeffortsoftheAdvisoryCommitteeonEconomicInclusion(ComE-In)policyinitiatives of the Corporation.

• Alertedbankstonewstatutoryrequirementstoprotecttenantsoccupyingforeclosedproperties;issuedthreeFILsnotifyinginstitutionsofsignificantchangestotheTruthinLendingActandtheFederalReserveBoard’sRegulationZ(which implements that Act); and reminded institutions of the dramatically revised Real Estate Settlement Procedures Act regulation issued by the Department of Housing and Urban Development.

• ExpandedtheAEIinitiativetotwoadditionalmarkets,bringingthetotalnumberofactiveAEImarketsto14.Addi-tionally, FDIC worked closely during 2009 to provide technical assistance and support to several communities in forming coalitions patterned after the AEI.

• Hostedorco-hostedover104eventstohelpconsumersandthebankingindustryavoidunnecessaryforeclosuresand stop foreclosure “rescue” scams that promise false hope to consumers at risk of losing their homes.

• Conductedover200outreachandtechnicalassistanceeventsforbankersandcommunitygroupstopromoteaware-ness of community investment opportunities, access to capital, knowledge-sharing between the public and private sectors, and wealth-building opportunities for families.

• Continuedtodisseminatetheaward-winningMoney Smartfinancialeducationcurriculuminsevenlanguages,including releasing a Hmong language version and the Money Smart Podcast Network, a portable audio version of Money Smart suitableforusewithvirtuallyallMP3players.Over200financialeducation-relatedoutreachactivitieswere conducted in 2009 and 50 new Money Smart Alliance added. Financial education best practices were shared through four published editions of Money Smart News, which reached over 40,000 subscribers.

• In2007,theFDICreleasedfindingsfromalongitudinalevaluationoftheMoney Smart curriculum on adults. The FDICinitiatedinthefourthquarterof2009,amulti-yearprojectthatisdesignedtomeasuretheeffectivenessoftheMoney Smart for Young Adults curriculum. This survey project is intended to provide research data that will be useful foreducatorsandothersinvolvedinyouthfinancialeducation,aswellasinformtheFDIC’scurriculumdevelopmentefforts.Progressduring2009includedbackgroundresearchandoutreachtoexternalstakeholderswhowehopewillparticipate.

• Respondedto96percentofconsumercomplaintsaboutFDIC-supervisedbankswithintimeframesrequiredbypolicy, and acknowledged 100 percent of all consumer complaints and inquiries within 14 days.

• Implementedaninitiativetomaketheaward-winningFDIC Consumer News available to the public in an audio format on FDIC.gov and YouTube. Also converted the FDIC’s consumer video on identity theft, Don’t Be An On-line Victim, to a YouTube-compatibleformatandplacedthevideoontheFDIC’sYouTubechannel.Allvideoandaudiofilesareavail-able for download to multimedia applications in various formats including MP3, WAV, and MP4.

Receivership Management

• Successfullyclosed140failedinstitutionsandensuredcustomershadaccesstoinsureddepositswithinonebusinessday.

• Adoptedafinalrulerequiringthelargestinsureddepositoryinstitutionstoadoptmechanismsthatwould,intheeventoftheinstitution’sfailure:(1)providetheFDICwithstandarddepositaccountandothercustomerinformation;and (2) allow the placement and release of holds on liability accounts, including deposits.

• AchievedaprimarygoaloftheInvestigationsUnittomakeadecisiontoeithercloseortopursueprofessionalliabilityclaims on 80 percent of all investigative claim areas within 18 months of an institution’s failure date.

• Identifiedandimplementedprogramimprovementstoensureefficientandeffectivemanagementofthecontractresources used to perform receivership management functions.

• Marketedatleast90percentofthebookvalueofafailedinstitution’smarketableassetswithin90daysoftheinstitu-tion’s failure.

• Terminatedatleast75percentofnewreceivershipswithinthreeyearsofthedateoffailure.


Protectionprogram;and$1.42billion,or56per-cent,totheReceivershipManagementprogram.

Actualexpendituresfortheyeartotaled$2.33billion.Excluding$140million,or6percent,forCorporateGeneralandAdministrativeexpendi-tures,actualexpenditureswereallocatedtopro-gramsasfollows:$233million,or10percent,totheInsuranceprogram;$723million,or31per-cent, to theSupervisionandConsumerProtec-tionprogram;and$1.24billion,or53percent,totheReceivershipManagementprogram.

2009 Budget and Expenditures by Program (Excluding Investments)

TheFDICbudgetfor2009totaled$2.56bil-lion. Excluding $185million, or 7 percent, forCorporate General and Administrative expen-ditures, budget amountswere allocated to cor-porate programs as follows: $178million, or 7percent,totheInsuranceprogram;$776million,or30percent,totheSupervisionandConsumer

2009 Budget and Expenditures (Support Allocated)Dollars in Millions$1,600

1,400

1,200

1,000

800

600

400

200

0 InsuranceProgram

Supervision andConsumer Protection

Program

ReceivershipManagement

Program

General andAdministrative

Budget

Expenditures


Performance Results by Program and Strategic Goal

2009 Insurance Program ResultsStrategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

# Annual Performance Goal Indicator Target Results

1 Respond promptly to all financialinstitutionclosingsand related emerging issues.

Number of business days after institution failure that depositors have access to insured funds either through transfer of deposits to the successor insured depository institution or depositor payout.

Insured depositor losses resulting from a financialinstitutionfailure.

Depositors have access to insured funds within one business day if the failure occurs on a Friday.

Depositors have access to insured funds within two business days if the failure occurs on any other day of the week.

There are no depositor losses on insured deposits.

No appropriated funds are required to pay insured depositors.

Achieved.See pgs. 45, 58.

Achieved.See pg. 45.



2 Identify and address risks to the DIF.

Insurance risks posed by insured depository institutions.

Concerns referred for examination or other action.

Emerging risks to the DIF.

Assess the insurance risks in large insured depository institutions and adopt appropriate strategies.

Identify and follow up on all material issues raisedthroughoff-sitereviewandanalysis.

Identifyandanalyzeexistingandemergingareas of risk.




3 Disseminate data and analy-sesonissuesandrisksaffect-ingthefinancialservicesindustry to bankers, super-visors, the public, and other stakeholders.

Scope and timeliness of information dissemi-nationonidentifiedorpotentialissuesandrisks.

Results of research and analyses are disseminat-ed in a timely manner through regular publica-tions, ad hoc reports, and other means.

Industry outreach activities are undertaken to inform bankers and other stakeholders about current trends, concerns, and other available FDIC resources.





4 Effectivelyadministertem-poraryfinancialstabilityprograms.

Administration of the Temporary Liquidity GuaranteeProgram(TLGP).

Administration of the Capital Purchase Program (CPP).

Implementation of the Legacy Loans Program (LLP).

Oversightoftheuseoffinancialstabilityresources by FDIC-supervised institutions.

Provide liquidity to the banking system by guaranteeing noninterest-bearing transaction deposit accounts and new senior unsecured debt issued by eligible institutions under the TLGP.

Implement an orderly phase-out of new guar-antees under the program when the period for issuance of new debt expires.

Substantially complete by September 30, 2009, the review of and recommendations to the Department of the Treasury on CPP applications from FDIC-supervised institutions.

Expeditiously implement procedures for the LLP, including the guarantee to be provided for debt issued by Public Private Investment Funds, andprovideinformationtofinancialinstitutionsand private investors potentially interested in participating.

Expeditiously implement procedures to review theuseofCPPfunds,TLGPguarantees,andotherresourcesmadeavailableunderfinancialstability programs during examinations of par-ticipating FDIC-supervised institutions.

Achieved.See pgs. 14-17.





5 Maintain and improve the deposit insurance system.

Enhance the risk-based pricing system.

Loss reserves.

Fund adequacy.

Adopt and implement revisions to the pricing regulationsthatprovideforgreaterriskdiffer-entiation among insured depository institutions reflectingboththeprobabilityofdefaultandloss in the event of default.

Revise the guidelines and enhance the addi-tional risk measures used to adjust assessment rates for large institutions.

Enhancetheeffectivenessofthereservingmethodology by applying sophisticated analyti-cal techniques to review variances between projected losses and actual losses, and by adjusting the methodology accordingly.

Set assessment rates to restore the insurance fund reserve ratio to at least 1.15 percent of estimated insured deposits by year-end 2015.

Monitor progress in achieving the restoration plan.








6 Provide educational informa-tion to insured depository institutions and their custom-ers to help them understand the rules for determining the amount of insurance cover-age on deposit accounts.

Timeliness of responses to insurance coverage inquiries.

Public education campaign to increase awareness of deposit insurance changes and expected 2010 changes.

Respond to 90 percent of written inquiries from consumers and bankers about FDIC deposit insurance coverage within two weeks.

Conduct at least three sets of Deposit Insur-ance Seminars/teleconferences per quarter for bankers.

Enter into deposit insurance educational part-nershipswithconsumerorganizationstoedu-cate consumers.

Expandavenuesforpublicizingdepositinsur-ance rules and resources to consumers through a variety of media.





7 Expand and strengthen the FDIC’s leadership role in pro-viding technical guidance, training, consulting services and information to interna-tional governmental bank-ing and deposit insurance organizations.

Scope of information sharing and assistance available to international governmental bank regulatory and deposit insurance entities.

Undertake outreach activities to inform and train foreign bank regulators and deposit insurers.

Foster strong relationships with international banking regulators and associations that pro-mote sound banking supervision and regula-tion, failure resolution, and deposit insurance practices.



2009 Supervision and Consumer Protection Program ResultsStrategic Goal: FDIC-supervised institutions are safe and sound.


1 Conduct on-site risk management examinations to assess theoverallfinancialcondition,managementpracticesandpolicies, and compliance with applicable laws and regula-tions of FDIC-supervised depository institutions.

Percentage of required examinations conducted in accordance with statutory requirements and FDIC policy.

One hundred percent of required risk management examinations are conducted on schedule.


2 TakepromptandeffectivesupervisoryactiontoaddressissuesidentifiedduringtheFDICexaminationofFDIC-supervised institutions that receive a composite Uniform Financial Institutions Rating of “3”, “4”, or “5” (problem institution). Monitor FDIC-supervised insured depository institutions’ compliance with formal and informal enforce-ment actions.

Percentage of follow-up exami-nations of 3-, 4-, and 5-rated institutions conducted within required time frames.

One hundred percent of follow-up examinations are conducted within 12 months of comple-tion of the prior examination to confirmthatidentifiedproblemshave been corrected.


3 Assist in protecting the infrastructure of the U.S. banking systemagainstterroristfinancing,moneylaundering,andotherfinancialcrimes.

Percentage of required examinations conducted in accordance with statutory requirements and FDIC policy.

One hundred percent of required Bank Secrecy Act examinations are conducted on schedule.




4 More closely align regulatory capital with risk and ensure that capital is maintained at prudential levels.

Preliminary results of new capi-tal requirements.

Improvements to capital requirements.

Conduct analyses of early results of the performance of new capital rulesinlightofrecentfinancialturmoil as information becomes available.

Working domestically and inter-nationally, develop improve-ments to regulatory capital requirements based on the experienceoftherecentfinancialmarket turmoil.



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

5 Conduct on-site CRA and compliance examinations to assess compliance with applicable laws and regulations by FDIC-supervised depository institutions.

Percentage of examinations conducted in accordance with statutory requirements and FDIC policy.

One hundred percent of required examinations are conducted on schedule.


6 Takepromptandeffectivesupervisoryactiontomonitorandaddressproblemsidentifiedduringcomplianceexam-inations of FDIC-supervised institutions that receive an overall “3”, “4”, or “5” rating for compliance with consumer protection and fair lending laws.

Percentage of follow-up exami-nations or visitations of 3-, 4-, and 5-rated institutions con-ducted within required time frames.

One hundred percent of follow-up examinations or visitations are conducted within 12 months from the date of an enforcement actiontoconfirmcompliancewith the prescribed enforcement action.

Not Achieved.See pg. 26.

7 Scrutinizeevolvingconsumerproducts,analyzetheircurrent or potential impact on consumers and identify potentially harmful or illegal practices. Promptly institute a supervisory response program across FDIC-supervised institutionswhensuchpracticesareidentified.

Establishment of supervisory response programs to address potential risks posed by new consumer products.

Proactively identify and respond to harmful or illegal practices associated with evolving con-sumer products.


8 Educate consumers about their rights and responsibilities under consumer protection laws and regulations.

Communications tools used to educate consumers.

Expand use of media, such as the Internet, videos, and MP3 down-loads, to disseminate information to the public on their rights and responsibilities as consumers.


9 Effectivelyinvestigateandrespondtoconsumercom-plaintsaboutFDIC-supervisedfinancialinstitutions.

Timely responses to written complaints and inquiries.

Responses are provided to 95 percent of written complaints and inquiries within time frames established by policy, with all complaints and inquiries receiv-ing at least an initial acknowledg-ment within two weeks.




10 ProvideeffectiveoutreachrelatedtoCRA,fairlending,andcommunity development.

Number of outreach activities conducted, including technical assistance activities.

Expanded access to high qual-ityfinancialeducationthroughthe Money Smart curriculum.

Support for expanded foreclo-surepreventioneffortsforcon-sumers at risk of foreclosure (in partnership with Neigh-borWorks® America and other organizations).

Conduct 50 technical assistance (examinationsupport)effortsor banker/community out-reach activities related to CRA, fair lending, and community development.

Evaluate the Money Smart initia-tives and curricula for necessary updates and enhancements, such as games for young people, infor-mationonelderfinancialabuse,and additional language versions, if needed.

Initiate a longitudinal survey projecttomeasuretheeffective-ness of the Money Smart for Young Adults curriculum.

Provide technical assistance, support, and consumer outreach activities in all six FDIC regions to at least eight local Neighbor-Works®Americaaffiliatesorlocalcoalitions that are providing fore-closure mitigation counseling in high need areas.





11 Continue to expand the FDIC’s national leadership role in developing and implementing programs and strategies to encourage and promote broader economic inclusion within the nation’s banking system.

Degree of success achieved in bringing the unbanked/under-servedintothefinancialmain-stream through the Alliance for Economic Inclusion (AEI).

Results of pilot small-dollar lending program conducted byparticipatingfinancialinstitutions.

Expand the number of AEI coali-tions by two.

Analyzequarterlydatasubmittedby participating institutions to identify trends and best practices.




2009 Receivership Management Program ResultsStrategic Goal: Recovery to creditors of receiverships is achieved.


1 Marketfailinginstitutionstoallknownqualifiedandinter-ested potential bidders.

Scopeofqualifiedandinter-ested bidders solicited.

Contactallknownqualifiedandinterested bidders.


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

Percentage of failed institu-tion’s assets marketed.

Ninety percent of the book value of a failed institution’s marketable assets is marketed within 90 days of failure.


Enhancements to contract management program.

Identify and implement program improvementstoensureefficientandeffectivemanagementofthecontract resources used to per-form receivership management functions.


3 Manage the receivership estate and its subsidiaries toward an orderly termination.

Timely termination of new receiverships.

Terminate at least 75 percent of new receiverships within three years of the date of failure.


4 Conduct investigations into all potential professional liability claim areas for all failed insured depository insti-tutions, and decide as promptly as possible to close or pursueeachclaim,consideringthesizeandcomplexityofthe institution.

Percentage of investigated claim areas for which a deci-sion has been made to close or pursue the claim.

For 80 percent of all claim areas, a decision is made to close or pur-sue claims within 18 months of the failure date.



Prior Years’ Performance ResultsRefer to the respective full Annual Report of prior years for more information on performance results for those years. Minor word-

ing changes may have been made to reflect current goals and targets. (Shaded areas indicate no such target existed for that respective year.)

Insurance Program ResultsStrategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

Annual Performance Goals and Targets 2008 2007 2006

1. Respondpromptlytoallfinancialinstitutionclosingsandemergingissues.

• DepositorshaveaccesstoinsuredfundswithinonebusinessdayifthefailureoccursonaFriday.

Achieved. Achieved. Not Applicable.No Failures.

• Depositorshaveaccesstoinsuredfundswithintwobusinessdaysifthefailureoccursonany other day of the week.

Achieved. Achieved. Not Applicable. No Failures.

• Completerulemaking/reviewcommentsreceivedinresponsetotheAdvanceNoticeofProposedRulemakingonLarge-BankDepositInsuranceDeterminationModernization.

Achieved. Achieved. Achieved.

• Therearenodepositorlossesoninsureddeposits. Achieved.

• Noappropriatedfundsarerequiredtopayinsureddepositors. Achieved.

2. Identify and address risks to the Deposit Insurance Fund (DIF).

• Assesstheinsurancerisksinallinsureddepositoryinstitutionsandadoptappropriatestrategies.


• Identifyandfollowuponallmaterialissuesraisedthroughoff-sitereviewandanalysis. Achieved. Achieved. Achieved.

• Identifyandanalyzeexistingandemergingareasofrisk,includingnon-traditionalandsub-prime mortgage lending, declines in housing market values, mortgage-related derivatives/collateralizeddebtobligations(CDOs),hedgefundownershipofinsuredinstitutions,com-mercialrealestatelending,internationalrisk,andotherfinancialinnovations.

Achieved. Achieved.

• Addresspotentialrisksfromcross-borderbankinginstabilitythroughcoordinatedreviewofcritical issues and, where appropriate, negotiate agreements with key authorities.

Achieved. Achieved.

3. Disseminatedataandanalysesonissuesandrisksaffectingthefinancialservicesindustrytobankers, supervisors, the public and other stakeholders.

• Disseminateresultsofresearchandanalysesinatimelymannerthroughregularpublica-tions, ad hoc reports and other means.


• Undertakeindustryoutreachactivitiestoinformbankersandotherstakeholdersaboutcur-rent trends, concerns and other available FDIC resources.




4. Maintain and improve the deposit insurance system.

• Implementthenewdepositinsurancepricingsystem. Achieved.

• Reviewtheeffectivenessofthenewpricingregulationsthatwereadoptedtoimplementthe reform legislation.

Achieved.

• Completeandissueguidanceonthepricingofdepositinsuranceforlargebanks. Achieved.• Enhancetheadditionalriskmeasuresusedtoadjustassessmentratesforlargeinstitutions. Achieved.• PublishanANPRseekingcommentonapermanentdividendsystem. Achieved.• Developandimplementanassessmentcreditanddividendssystemandanewdeposit

insurance pricing system.Achieved.

• Developafinalruleonapermanentdividendsystem. Achieved.• Implementdepositinsurancereformlegislationinaccordancewithstatutorilyprescribed

time frames.Achieved.

• Ensure/enhancetheeffectivenessofthereservingmethodologybyapplyingsophisticatedanalytical techniques to review variances between projected losses and actual losses, and by adjusting the methodology accordingly.


• Setassessmentratestomaintaintheinsurancefundreserveratiobetween1.15and1.50percent of estimated insured deposits.

Not Achieved. Achieved. Achieved.

5. Provide educational information to insured depository institutions and their customers to help them understand the rules for determining the amount of insurance coverage on deposit accounts.

• Publishacomprehensiveandauthoritativeresourceguideforbankers,attorneys,financialadvisors and similar professionals on the FDIC’s rules and requirements for deposit insur-ance coverage of revocable and irrevocable trust accounts.

Achieved.

• ConductatleastthreesetsofDepositInsuranceSeminarSeriesforbankers. Achieved.• Conductaseriesofnationalteleconferencesforinsuredfinancialinstitutionstoaddress

current questions and issues relating to FDIC insurance coverage of deposit accounts.Achieved.

• Conductoutreacheventsandactivitiestosupportadepositinsuranceeducationprogramthat features FDIC 75th anniversary theme.

Achieved.

• UpdateInsuring Your Deposits (basic deposit insurance brochure for consumers), Your Insured Deposit (comprehensive deposit insurance brochure), and EDIE (Electronic Deposit InsuranceEstimator)ontheFDIC’swebsitetoreflectchangesresultingfromenactmentofdeposit insurance legislation.

Achieved.

• Assessthefeasibilityof(andiffeasible,definetherequirementsfor)aconsolidatedElec-tronic Deposit Insurance Estimator (EDIE) application for bankers and consumers (to be developed in 2009).

Achieved.

• DevelopandmakeavailabletothepublicanupdatedSpanishlanguageversionofEDIEreflectingdepositinsurancereform.

Achieved.

• DevelopandmakeavailabletothepublicaSpanishlanguageversionoftheFDIC’s 30-minute video on deposit insurance coverage.

Achieved.

• Respondto90percentofinquiriesfromconsumersandbankersaboutFDICdeposit insurance coverage within time frames established by policy.


• Respondto90percentofwritteninquirieswithintimeframesestablishedbypolicy. Achieved.


Supervision and Consumer Protection Program ResultsStrategic Goal: FDIC-supervised institutions are safe and sound.


1. Conducton-siteriskmanagementexaminationstoassesstheoverallfinancialcondition,man-agement practices and policies, and compliance with applicable laws and regulations of FDIC-supervised depository institutions.

• Onehundredpercentofrequiredriskmanagementexaminationsareconductedonschedule.


2. TakepromptandeffectivesupervisoryactiontoaddressproblemsidentifiedduringtheFDICexamination of FDIC-supervised institutions that receive a composite Uniform Financial Institu-tions Rating of “4” or “5” (problem institution). Monitor FDIC-supervised insured depository insti-tutions’ compliance with formal and informal enforcement actions.

• Onehundredpercentoffollow-upexaminationsareconductedwithin12monthsof completion of the prior examination.


3. AssistinprotectingtheinfrastructureoftheU.S.bankingsystemagainstterroristfinancing,moneylaunderingandotherfinancialcrimes.

• OnehundredpercentofrequiredBankSecrecyAct(BSA)examinationsareconductedonschedule.

Achieved.

4. Increase regulatory knowledge to keep abreast of current issues related to money laundering andterroristfinancing.

• Anadditional10percent(atleast10percentforyear2006)ofBSA/AMLsubject-matterexpertsnationwidearecertifiedundertheAssociationofCertifiedAnti-MoneyLaunderingSpecialistscertificationprogram.

Achieved. Achieved.


6. Expand and strengthen the FDIC’s participation and leadership role in providing technical guid-ance, training, consulting services and information to international governmental banking and depositinsuranceorganizations.

• Undertakeoutreachactivitiestoinformandtrainforeignbankregulatorsanddepositinsurers.

Achieved. Achieved.

• Fosterstrongrelationshipswithinternationalbankingregulatorsandassociationsthatpro-mote sound banking supervision and regulations, failure resolution and deposit insurance practices.

Achieved. Achieved.



5. More closely align regulatory capital with risk in large or multinational banks while maintaining capital at prudential levels.

• DevelopoptionsforrefiningBaselIIthatareresponsivetolessonslearnedfromthe2007-2008 market turmoil.

Achieved.

• FurtherdeveloptheBaselIIframeworktoensurethatitdoesnotresultinasubstantialreductioninrisk-basedcapitalrequirementsorsignificantcompetitiveinequitiesamongdifferentclassesofbanks.ConsideralternativeapproachesforimplementingtheBaselCapital Accord.

Achieved.

• Conductanalysisofearlyresultsofthenewcapitalregimeasinformationbecomesavailable.

Achieved.

• Promoteinternationalcooperationontheadoptionofsupplementalcapitalmeasuresincountries that will be operating under Basel II.

Achieved.

• PublishaNoticeofProposedRulemaking. Achieved.

• Participateinthecontinuinganalysisoftheprojectedresultsofthenewcapitalregime. Achieved. Achieved.

6. More closely align regulatory capital with risk in banks not subject to Basel II capital rules while maintaining capital at prudential levels.

• FinalizearegulatorycapitalframeworkbasedontheBaselII“StandardizedApproach”asanoption for U.S. banks not required to use the new advanced approaches.

Achieved.

• CompleterulemakingonBaselIA. Not Applicable.

• DevelopaNoticeofProposedRulemakingforpublicissuance. Achieved.

7. Ensure that FDIC-supervised institutions that plan to operate under the new Basel II Capital Accord are well-positioned to respond to the new capital requirements.

• Performon-siteexaminationsoroff-siteanalysesofallFDIC-supervisedbanksthathaveindicatedapossibleintentiontooperateunderBaselIItoensurethattheyareeffectivelyworkingtowardmeetingrequiredqualificationstandards.

Not Applicable.

Achieved. Achieved.

8. Reduce regulatory burden on the banking industry while maintaining appropriate consumer protection and safety and soundness safeguards.

• Completeandevaluateoptionsforrefiningthecurrentrisk-focusedapproachusedintheconduct of BSA/AML examinations to reduce the burden they impose on FDIC-supervised institutions.

Achieved.

• ApplicableprovisionsoftheFinancialServicesRegulatoryReliefActof2006(FSRRA)areimplemented in accordance with statutory requirements.

Partially Achieved.

• SupportisprovidedtotheGovernmentAccountabilityOffice(GAO),asrequested,forstud-ies required under FSRRA.

Achieved.

• StateAMLassessmentsofMoneyServiceBusinesses(MSB)areincorporatedintoFDICriskmanagement examinations in states where MSB AML regulatory programs are consistent with FDIC risk management standards.

Partially Achieved.



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

1. Conduct CRA and compliance examinations in accordance with the FDIC’s examination frequency policy.

• Onehundredpercentofrequiredexaminationsareconductedwithintimeframesestab-lished by FDIC policy.


2. Takepromptandeffectivesupervisoryactiontomonitorandaddressproblemsidentifiedduringcompliance examinations of FDIC-supervised institutions that received a “4” or “5” rating for com-pliance with consumer protection and fair lending laws.

• Onehundredpercentoffollow-upexaminationsorrelatedactivitiesareconductedwithin12monthsfromthedateofaformalenforcementactiontoconfirmthattheinstitutionisincompliance with the enforcement action.


3. DeterminetheneedforchangesincurrentFDICpracticesforfollowinguponsignificantviola-tionsofconsumercompliancelawsandregulationsidentifiedduringexaminationsofbanksforcompliance with consumer protection and fair lending laws.

• Completeareviewoftheeffectivenessofthe2007instructionsissuedonthehandlingofrepeatinstancesofsignificantviolationsidentifiedduringcomplianceexaminations.

Achieved.

• Ananalysisiscompletedforallinstitutionsontheprevalenceandscopeofrepeatinstancesofsignificantviolationsfromthepreviouscomplianceexamination.

Achieved.

• AdeterminationismaderegardingtheneedforchangestocurrentFDICandFFIECguid-anceonfollow-upsupervisoryactiononsignificantviolationsidentifiedduringcomplianceexaminations based on the substance and level of risk posed to consumers by these repeat violations.

Achieved.

4. Scrutinizeevolvingconsumerproducts,analyzetheircurrentorpotentialimpactonconsumersand identify potentially harmful or illegal practices. Promptly institute a supervisory response programacrossFDIC-supervisedinstitutionswhensuchpracticesareidentified.

• RevisetheFDIC’ssystemforidentifying,reviewing,andaddressingpotentiallyharmfulorillegal practices associated with evolving consumer products.

Achieved.

• DevelopandimplementnewsupervisoryresponseprogramsacrossallFDIC-supervisedinstitutions to address potential risks posed by new consumer products.

Achieved.



5. ProvideeffectiveoutreachrelatedtotheCRA,fairlending,andcommunitydevelopment.

• Conduct125technicalassistance(examinationsupport)effortsorbanker/communityout-reach activities related to the CRA, fair lending, and community development.


• Releasea“YoungAdult”versionoftheMoney Smart curriculum. Achieved.

• Distributeatleast10,000copiesofthe“YoungAdult”versionof Money Smart. Achieved.

• Analysisofsurveyresultsisdisseminatedwithinsixmonthsofcompletionofthesurveythrough regular publications, ad hoc reports and other means.

Achieved.

• Providetechnicalassistance,supportandconsumeroutreachactivitiesinallsixFDICregionstoatleasteightlocalNeighborWorks®Americaaffiliatesorlocalcoalitionsthatareproviding foreclosure mitigation counseling in high need areas.

Achieved.

• 200,000additionalindividualsaretaughtusingtheMoney Smart curriculum. Achieved. Achieved.

• 120schoolsystemsandgovernmententitiesarecontactedtomakethemawareoftheavailability of Money Smartasatooltoteachfinancialeducationtohighschoolstudents.

Achieved.

• Areviewofexistingriskmanagementandcompliance/CRAexaminationguidelinesandpracticesiscompletedtoensurethattheyencourageandsupporttheeffortsofinsuredfinancialinstitutionstofostereconomicinclusion,consistentwithsafeandsoundbankingpractices.

Achieved.

• Apilotprojectisconductedwithbanksnearmilitaryinstallationstoprovidesmall-dollarloan alternatives to high-cost payday lending.

Not Achieved.

• StrategiesaredevelopedandimplementedtoencourageFDIC-supervisedinstitutionstooffersmall-denominationloanprograms.

Achieved.

• Researchisconductedandfindingsdisseminatedonprogramsandstrategiestoencourageand promote broader economic inclusion within the nation’s banking system.

Achieved.

6. Continue to expand the FDIC’s national leadership role in development and implementation of programs and strategies to encourage and promote broader economic inclusion within the nation’s banking system.

• Analyzequarterlydatasubmittedbyparticipatinginstitutionstoidentifyearlytrendsandpotential best practices.

Achieved.

• Open27,000newbankaccounts. Achieved.

• Initiatenewsmall-dollarloanproductsin32financialinstitutions. Achieved.

• Initiateremittanceproductsin32financialinstitutions. Achieved.

• Reach18,000consumersthroughfinancialeducationinitiatives. Achieved.

7. EffectivelyinvestigateandrespondtoconsumercomplaintsaboutFDIC-supervisedfinancialinstitutions.

• Responsesareprovidedto90percentofwrittencomplaintsandinquirieswithintimeframes established by policy.



Receivership Management Program ResultsStrategic Goal: Recovery to creditors of receivership is achieved.


1. Marketfailinginstitutionstoallknownqualifiedandinterestedpotentialbidders.

• Contactallknownqualifiedandinterestedbidders. Achieved. Achieved. Not Applicable. No Failures.

2. Value, manage, and market assets of failed institutions and their subsidiaries in a timely manner tomaximizenetreturn.

• Ninetypercentofthebookvalueofafailedinstitution’smarketableassetsismarketedwithin 90 days of failure.

Achieved. Achieved. Not Applicable. No Failures.

3. Manage the receivership estate and its subsidiaries toward an orderly termination.

• Terminateallreceivershipswithin90daysoftheresolutionofallimpediments. Achieved. Achieved. Achieved.

4. Conduct investigations into all potential professional liability claim areas for all failed insured depository institutions and decide as promptly as possible to close or pursue each claim, consideringthesizeandcomplexityoftheinstitution.

• For80percentofallclaimareas,adecisionismadetocloseorpursueclaimswithin18 months of the failure date.

Achieved. Not Appli-cable. No claims within the 18-month period.

Not Applicable. No Failures.


as necessary, and briefed the Chairman on atleastamonthlybasis. Inmanycases,enhance-ments to operating procedures and automatedsystemsofsupportweremadeasadirectresultofthisheightenedmanagementattention.Signif-icantly, all identifiedprogramneedshavebeencoordinatedwith those persons responsible forplanning, budgeting, staffing and ensuring theadequacyofinfrastructuresupport.

Theseandotheractionswere taken inaddi-tion to evaluations that are part of the Cor-poration’s ongoing efforts to seek continuousimprovements in its programs and operations.Someofthese2009initiativesincluded:reviewsoffinancialmanagementandcontrolsgoverningreceiverships;scrutinyofourincreasedvolumeof procurement card and convenience checkactivity; coordinationwith the FDIC’sOIG onMaterial Loss Reviews to identify any neededimprovementsintheCorporation’sbankexami-nation programs; improved monitoring of theperformanceandavailabilityoftheFDIC’scriti-calautomatedsystems;andtheidentificationofoperationswhere backlogs could present prob-lemsifnotproperlymonitored.

Itisanticipatedthatprogramevaluationener-gies in 2010 will again focus on progress intheabove six initiatives, aswell asoncontrolsassociated with financial reporting throughoutthe Corporation, systems development efforts,and key operations supporting the Corporateresponsetothefinancialcrisis.

Program EvaluationProgramevaluationsaredesignedtoimprove

the operational effectiveness of the FDIC’sprograms and ensure that objectives are met.These evaluations are often led by the OfficeofEnterpriseRiskManagement andaregener-allyinterdivisional,collaborativeeffortsinvolv-ing management and staff from the affectedprogram(s).

TheCorporation’s2009AnnualPerformancePlancontainedseveralobjectivesaimedatensur-ingthattheFDICwouldcontinuetoaddresskeycorporate issues, includingcontinuingworkonthe Temporary Liquidity Guarantee Program,issues relating to contract oversight manage-ment,anticipatedincreasesinbankfailuresandcontinuous improvements to the FDIC’s corebusinessfunctions.

During2009,indirectresponsetochallengesassociated with the financial crisis, the FDICcreated six internal organizations and work-ing groups to address areas of increased riskto ensure that both theFDIC’s core businessesandnewresponsibilitieswerebeingmanagedaseffectively as possible.The six initiativesweretiedto:1)LegacyLoans;2)SystemicResolutionAuthority; 3) Temporary Liquidity GuaranteeProgram;4)LossSharingAgreements;5)Con-tract Management Oversight; and 6) ResourceManagement. Each team identified key issuesandrisksassociatedwiththeirareaofchallenge,developedactionplansandperformancemetrics


IV. Financial Statements and Notes

Deposit Insurance Fund Balance Sheet at December 31Dollars in Thousands

2009 2008

Assets

Cash and cash equivalents $ 54,092,423 $ 1,011,430

Cash and cash equivalents—restricted—systemic risk (Note 16) 6,430,589 2,377,387

Investment in U.S. Treasury obligations, net (Note 3) 5,486,799 27,859,080

Assessments receivable, net (Note 9) 280,510 1,018,486

Receivables and other assets—systemic risk (Note 16) 3,298,819 1,138,132

Trust preferred securities (Note 5) 1,961,824 0

Interest receivable on investments and other assets, net 220,588 405,453

Receivables from resolutions, net (Note 4) 38,408,622 15,765,465

Property and equipment, net (Note 6) 388,817 368,761

Total Assets $ 110,568,991 $ 49,944,194

Liabilities

Accounts payable and other liabilities $ 273,338 $ 132,597

Unearned revenue—prepaid assessments (Note 9) 42,727,101 0

Liabilities due to resolutions (Note 7) 34,711,726 4,724,462

Deferred revenue—systemic risk (Note 16) 7,847,447 2,077,880

Postretirementbenefitliability(Note13) 144,952 114,124

Contingent liabilities for:

Anticipated failure of insured institutions (Note 8) 44,014,258 23,981,204

Systemic risk (Note 16) 1,411,966 1,437,638

Litigation losses (Note 8) 300,000 200,000

Total Liabilities 131,430,788 32,667,905

Commitments and off-balance-sheet exposure (Note 14)

Fund Balance

Accumulated Net (Loss) Income (21,001,312) 15,001,272

UnrealizedGainonU.S.Treasuryinvestments,net(Note3) 142,127 2,250,052

Unrealizedpostretirementbenefit(Loss)Gain(Note13) (2,612) 24,965

Total Fund Balance (20,861,797) 17,276,289

Total Liabilities and Fund Balance $ 110,568,991 $ 49,944,194The accompanying notes are an integral part of these financial statements.

Deposit Insurance Fund (DIF)

IV. Financial Statements and Notes 75

Deposit Insurance Fund Statement of Income and Fund Balance for the Years Ended December 31Dollars in Thousands

2009 2008

Revenue

Interest on U.S. Treasury obligations $ 704,464 $ 2,072,317

Assessments (Note 9) 17,717,374 2,964,518

Systemic risk revenue (Note 16) 1,721,626 1,463,537

Realizedgainonsaleofsecurities(Note3) 1,389,285 774,935

Other revenue (Note 10) 3,173,611 31,017

Total Revenue 24,706,360 7,306,324

Expenses and Losses

Operating expenses (Note 11) 1,271,099 1,033,490

Systemic risk expenses (Note 16) 1,721,626 1,463,537

Provision for insurance losses (Note 12) 57,711,772 41,838,835

Insurance and other expenses 4,447 3,693

Total Expenses and Losses 60,708,944 44,339,555

Net Loss (36,002,584) (37,033,231)

Unrealized(Loss)GainonU.S.Treasuryinvestments,net(Note3) (2,107,925) 1,891,144

Unrealizedpostretirementbenefit(Loss)Gain(Note13) (27,577) 5,340

Comprehensive Loss (38,138,086) (35,136,747)

Fund Balance—Beginning 17,276,289 52,413,036

Fund Balance—Ending $ (20,861,797) $ 17,276,289

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


Deposit Insurance Fund Statement of Cash Flows for the Years Ended December 31Dollars in Thousands

2009 2008

Operating Activities

Net Loss $ (36,002,584) $ (37,033,231)

Adjustments to reconcile net loss to net cash provided by (used by)operatingactivities:

AmortizationofU.S.Treasuryobligations 210,905 457,289

Treasuryinflation-protectedsecuritiesinflationadjustment 10,837 (271,623)

GainonsaleofU.S.Treasuryobligations (1,389,285) (774,935)

Depreciation on property and equipment 70,488 55,434

Loss on retirement of property and equipment 924 447

Provision for insurance losses 57,711,772 41,838,835

Unrealized(Loss)Gainonpostretirementbenefits (27,577) 5,340

GuaranteeterminationfeefromCitigroup (1,961,824) 0

Systemic risk expenses 0 (2,352)

Change in Operating Assets and Liabilities:

Decrease (Increase) in assessments receivable, net 737,976 (773,905)

Decrease in interest receivable and other assets 192,750 402,225

(Increase) in receivables from resolutions (60,229,760) (32,955,471)

(Increase) in receivable—systemic risk (2,160,688) (21,285)

Increase (Decrease) in accounts payable and other liabilities 140,740 (18,838)

Increase(Decrease)inpostretirementbenefitliability 30,828 (2,034)

(Decrease) in contingent liabilities—systemic risk (25,672) 0

Increase in liabilities due to resolutions 29,987,265 4,724,462

Increase in unearned revenue—prepaid assessments 42,727,101 0

Increase in deferred revenue—systemic risk 5,769,567 2,377,387

Net Cash Provided by (Used by) Operating Activities 35,793,763 (21,992,255)


Deposit Insurance Fund Statement of Cash Flows (continued)Dollars in Thousands

2009 2008

Investing Activities

Provided by:

Maturity of U.S. Treasury obligations, held-to-maturity 0 3,304,350

Maturity of U.S. Treasury obligations, available-for-sale 6,382,027 3,930,226

Sale of U.S. Treasury obligations 15,049,873 13,974,732

Used by:

Purchase of property and equipment (91,468) (72,783)

Net Cash Provided by Investing Activities 21,340,432 21,136,525

Net Increase (Decrease) in Cash and Cash Equivalents 57,134,195 (855,730)

Cash and Cash Equivalents—Beginning 3,388,817 4,244,547

Unrestricted Cash and Cash Equivalents—Ending 54,092,423 1,011,430

Restricted Cash and Cash Equivalents—Ending 6,430,589 2,377,387

Cash and Cash Equivalents—Ending $ 60,523,012 $ 3,388,817



Notes to the FiNaNcial statemeNtsDeposit iNsuraNce FuNDDecember 31, 2009 aND 2008

1. Legislation and Operations of the Deposit Insurance Fund

OverviewThe Federal Deposit Insurance Corporation

(FDIC) is the independent deposit insuranceagencycreatedbyCongressin1933tomaintainstability and public confidence in the nation’sbanking system. Provisions that govern theoperationsoftheFDICaregenerallyfoundintheFederalDepositInsurance(FDI)Act,asamend-ed(12U.S.C.1811,et seq.). Incarryingout thepurposesoftheFDIAct,asamended,theFDICinsuresthedepositsofbanksandsavingsassoci-ations (insured depository institutions), and incooperationwithotherfederalandstateagenciespromotes the safety and soundness of insureddepository institutions by identifying,monitor-ing and addressing risks to the Deposit Insur-anceFund(DIF).Anactiveinstitution’sprimaryfederal supervisor is generally determined bythe institution’s charter type. Commercial andsavingsbanksare supervisedby theFDIC, theOfficeoftheComptrolleroftheCurrency,ortheFederal Reserve Board, while savings associa-tions(knownas“thrifts”)aresupervisedbytheOfficeofThriftSupervision.

TheFDICistheadministratoroftheDIF.TheDIF is responsible for protecting insured bankand thrift depositors from loss due to institu-tionfailures.TheFDICisrequiredby12U.S.C.1823(c)toresolvetroubledinstitutionsinaman-ner thatwill result in the least possible cost tothedepositinsurancefundunlessasystemicrisk

determinationismadethatcompliancewiththeleast-costtestwouldhaveseriousadverseeffectsoneconomicconditionsorfinancialstabilityandanyactionorassistancetakenunderthesystemicriskdeterminationwouldavoidormitigatesuchadverse effects. A systemic risk determinationcanonlybeinvokedbytheSecretaryoftheU.S.Treasury, in consultation with the President,and upon thewritten recommendation of two-thirdsofboththeFDICBoardofDirectorsandtheBoardofGovernorsof theFederalReserveSystem.ThesystemicriskprovisionrequirestheFDIC to recover any related losses to the DIFthrough one ormore special assessments fromallinsureddepositoryinstitutionsand,withtheconcurrence of the U.S. Treasury (Treasury),depository institution holding companies (seeNote16).

The FDIC is also the administrator of theFSLIC Resolution Fund (FRF). The FRF isa resolution fund responsible for the sale ofremaining assets and satisfaction of liabilitiesassociatedwiththeformerFederalSavingsandLoan Insurance Corporation (FSLIC) and theResolutionTrustCorporation.TheDIFandtheFRFaremaintainedseparatelytocarryouttheirrespectivemandates.

Recent LegislationHelping Families Save Their Homes Act of

2009 (PublicLaw111-22)wasenactedonMay20,2009.Thislegislationprovidesfor:1)extend-ingtheFDIC’sdepositinsurancecoveragefrom$100,000 to $250,000 until 2013, 2) extendingFDIC’s authority to borrow from the Treasuryinamountsnecessarytocarryouttheincreasedinsurancecoverage,notwithstandingtheamountlimitationscontainedinSections14(a)and15(c)


of the FDI Act, 3) repealing the prohibitionagainsttheFDICtakingtheincreasedinsurancecoverage into account for purposes of settingassessments,4)extendingthegenerallyapplica-bletimelimitfrom5yearsto8yearsforanFDICRestorationPlan to rebuild the reserve ratio oftheDIF, 5) permanently increasing the FDIC’sauthoritytoborrowfromtheTreasuryfrom$30billion to $100 billion and, if necessary, up to$500billionthrough2010,and6)allowingFDICto charge systemic risk special assessments byrulemakingonboth insureddepository institu-tions and, with Treasury concurrence, deposi-toryinstitutionholdingcompanies.

The Emergency Economic Stabilization Act of 2008 (EESA), legislation to help stabilizethe financialmarkets,was enacted onOctober3, 2008. The legislation requires that TreasuryconsultwiththeFDICandotherfederalagenciesin theestablishmentof the troubledasset reliefprogram(knownasTARP).

Operations of the DIFTheprimarypurposeoftheDIFisto:1)insure

the deposits andprotect the depositors ofDIF-insured institutions and 2) resolveDIF-insuredfailedinstitutionsuponappointmentofFDICasreceiverinamannerthatwillresultintheleastpossiblecosttotheDIF(unlessasystemicriskdeterminationismade).

The DIF is primarily funded from depositinsurance assessments and interest earned oninvestmentsinU.S.Treasuryobligations.Addi-tionalfundingsources,ifnecessary,areborrow-ingsfromtheTreasury,FederalFinancingBank(FFB),FederalHomeLoanBanks,andinsureddepository institutions. The FDIC has borrow-ingauthorityof$100billionfromtheTreasury,

andifnecessary,upto$500billionthrough2010.Additionally,FDIChasaNotePurchaseAgree-mentwiththeFFBnottoexceed$100billiontoenhanceDIF’sabilitytofunddepositinsuranceobligations.

Astatutoryformula,knownastheMaximumObligationLimitation(MOL),limitstheamountofobligationstheDIFcanincurtothesumofitscash,90percentofthefairmarketvalueofotherassets,andtheamountauthorizedtobeborrowedfrom the Treasury. TheMOL for theDIFwas$118.2billionand$69.0billionasofDecember31, 2009 and 2008, respectively. In connectionwiththetemporaryincreaseinthebasicdepos-it insurance coverage limit from $100,000 to$250,000,theFDICmayborrowfromtheTrea-sury tocarryout the increase in themaximumdeposit insuranceamountwithoutregardtotheMOLorthe$100billionlimit.

Operations of Resolution EntitiesThe FDIC is responsible for managing and

disposingoftheassetsoffailedinstitutionsinanorderlyandefficientmanner.Theassetsheldbyreceiverships,pass-throughconservatorshipsandbridge institutions (collectively, resolution enti-ties),andtheclaimsagainstthem,areaccountedfor separately fromDIF assets and liabilities toensure thatproceedsfromtheseentitiesaredis-tributed in accordancewith applicable laws andregulations. Accordingly, income and expensesattributabletoresolutionentitiesareaccountedforastransactionsofthoseentities.AllarebilledbytheFDICforservicesprovidedontheirbehalf.


2. Summary of Significant Accounting Policies

GeneralThese financial statements pertain to the

financialposition,resultsofoperations,andcashflows of the DIF and are presented in accor-dancewithU.S. generally accepted accountingprinciples(GAAP).AspermittedbytheFederalAccounting StandardsAdvisoryBoard’s State-ment of Federal Financial Accounting Stan-dards34,The Hierarchy of Generally Accepted Accounting Principles, Including the Application of Standards Issued by the Financial Accounting Standards Board, the FDIC prepares financialstatements in conformity with standards pro-mulgatedbytheFinancialAccountingStandardsBoard(FASB).Thesestatementsdonotincludereporting for assets and liabilities of resolutionentities because these entities are legally sepa-rateanddistinct,andtheDIFdoesnothaveanyownership interests in them.Periodicand finalaccountability reports of resolution entities arefurnishedtocourts,supervisoryauthorities,andothersuponrequest.

Use of EstimatesManagement makes estimates and assump-

tions that affect the amounts reported in thefinancial statements and accompanying notes.Actualresultscoulddifferfromtheseestimates.Where it is reasonablypossible thatchanges inestimates will cause a material change in thefinancialstatementsinthenearterm,thenatureand extent of such changes in estimates havebeen disclosed.Themore significant estimatesinclude the assessments receivable and associ-ated revenue; the allowance for loss on receiv-

ables from resolutions (including loss-shareagreements);theestimatedlossesfor:anticipatedfailures,litigation,andrepresentationsandwar-ranties;guaranteeobligationsfor:theTemporaryLiquidityGuarantee Program and debt of lim-ited liability companies; valuationof trust pre-ferredsecurities;andthepostretirementbenefitobligation.

Cash EquivalentsCashequivalentsareshort-term,highlyliquid

investments consisting primarily of U.S. Trea-sury Overnight Certificates. The majority ofcash equivalents held by theDIF atDecember31, 2009, resulted from the collection of $45.7billioninprepaidassessmentsonDecember30,2009forallquarterlyassessmentperiodsthroughDecember31,2012(seeNote9).

Investment in U.S. Treasury ObligationsDIF funds are required to be invested in

obligations of the United States or in obliga-tionsguaranteedas toprincipalandinterestbytheUnitedStates;theSecretaryoftheTreasurymustapproveall such investments inexcessof$100,000. The Secretary has granted approvaltoinvestDIFfundsonlyinU.S.Treasuryobli-gations that are purchased or sold exclusivelythroughtheBureauofthePublicDebt’sGovern-mentAccountSeries(GAS)program.

DIF’s investments in U.S. Treasury obliga-tionsareclassifiedasavailable-for-sale.Securi-ties designated as available-for-sale are shownat fair value. Unrealized gains and losses arereportedasothercomprehensive income.Real-izedgainsandlossesare includedin theState-mentofIncomeandFundBalanceascomponentsofNetIncome.Incomeonsecuritiesiscalculated


andrecordedonadailybasisusingtheeffectiveinterestmethod.

Revenue Recognition for AssessmentsAssessment revenue is recognized for the

quarterly period of insurance coverage basedon an estimate. The estimate is derived froman institution’s risk-based assessment rate andassessmentbaseforthepriorquarteradjustedforthecurrentquarter’savailableassessmentcred-its,anychangesinsupervisoryexaminationanddebt issuer ratings for larger institutions,andamodestdeposit insurancegrowth factor.At thesubsequent quarter-end, the estimated revenueamounts are adjustedwhen actual assessmentsfor the coveredperiodaredetermined for eachinstitution. (SeeNote9 for additional informa-tiononassessments.)

Capital Assets and DepreciationThe FDIC buildings are depreciated on a

straight-linebasisovera35to50yearestimatedlife. Leasehold improvements are capitalizedanddepreciatedoverthelesseroftheremaininglife of the lease or the estimated useful life oftheimprovements,ifdeterminedtobematerial.Capitalassetsdepreciatedonastraight-linebasisover a five-year estimated useful life includemainframe equipment; furniture, fixtures, andgeneral equipment; and internal-use software.Personalcomputerequipment isdepreciatedonastraight-linebasisoverathree-yearestimatedusefullife.

Related PartiesThe nature of related parties and a descrip-

tion of related party transactions are discussedinNote1anddisclosedthroughoutthefinancialstatementsandfootnotes.

ReclassificationsCertain reclassifications have beenmade in

the2008financialstatementstoconformtothepresentationusedin2009.

Disclosure about Recent Accounting Pronouncements

FASBAccountingStandardsCodification•(ASC)105,Generally Accepted Account-ing Principles(formerlySFASNo.168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162,issuedinJune2009),becameeffectiveforfinancialstate-mentscoveringperiodsendingafterSeptem-ber15,2009.OnJuly1,2009,theFASBASCwaslaunchedandbecamethesolesourceofauthoritativeaccountingprinciplesappli-cabletotheFDIC. Allexistingstandardsthatwereusedto

createtheCodificationhavebecomesuper-seded.Asaresult,referencestogenerallyacceptedaccountingprinciplesintheseNoteswillconsistofthenumbersusedintheCodificationand,ifappropriate,theformerpronouncementnumber.TheCodification’spurposewasnottocreatenewaccountingorreportingguidance,buttoorganizeandsim-plifyauthoritativeGAAPliterature.Conse-quently,therewillbenochangetotheDIF’sfinancialstatementsduetotheimplementa-tionofthisCodification.

StatementofFinancialAccountingStandards•(SFAS)No.167,Amendments to FASB Inter-pretation No. 46(R),wasissuedbytheFASBinJune2009,andsubsequentlycodified


uponissuanceofAccountingStandardsUpdateNo.2009-17,Consolidations (ASC 810) - Improvements to Financial Reporting by Enterprises Involved with Variable Inter-est Entities.SFAS167,effectiveforreportingperiodsbeginningafterNovember15,2009,modifiestheformerquantitativeapproachfordeterminingtheprimarybeneficiaryofavariableinterestentity(VIE)toaqualitativeassessment.Anenterprisemustdeterminequalitativelywhetherithas(1)thepowertodirecttheactivitiesoftheVIEthatmostsignificantlyimpacttheentity’seconomicperformanceand(2)theobligationtoabsorblossesoftheVIEortherighttoreceiveben-efitsfromtheVIEthatcouldpotentiallybesignificanttotheVIE.Ifanenterprisehasbothofthesecharacteristics,theenterpriseisconsideredtheprimarybeneficiaryandmustconsolidatetheVIE.Managementiscurrentlyreviewingthepossibleimpact,ifany,ofSFAS167(nowcodifiedinASC810)onDIF’saccountingandfinancialreportingrequirementsfor2010.

SFASNo.166,• Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140,wasissuedbytheFASBinJune2009.Subsequently,theFASBissuedAccountingStandardsUpdateNo.2009-16,Transfers and Servicing (ASC 860) - Account-ing for Transfers of Financial Assets, to formallyincorporatetheprovisionsofSFASNo.166intotheCodification.SFAS166removestheconceptofaqualifyingspecial-purpose entityfromGAAP,changestherequirementsforderecognizingfinancialassets,andrequiresadditionaldisclosures

aboutatransferor’scontinuinginvolvementintransferredfinancialassets.TheFASB’sobjectiveistoimprovetheinformationthatareportingentityprovidesinitsfinancialstate-mentsaboutatransferoffinancialassets;theeffectsofatransferonitsfinancialposition,financialperformance,andcashflows;andatransferor’scontinuinginvolvement,ifany,intransferredfinancialassets. TheprovisionsofSFAS166(nowcodified

inASC860)becomeeffectivefortheDIFforalltransfersoffinancialassetsoccurringonorafterJanuary1,2010.

SFASNo.165,• Subsequent Events,wasissuedinMay2009andsubsequentlycodi-fiedinFASBASC855,Subsequent Events.ASC855representstheinclusionofguidanceonsubsequenteventsintheaccountinglit-erature.Historically,managementhadreliedonauditingliteratureforguidanceonassess-inganddisclosingsubsequentevents.ASC855nowrequiresthedisclosureofthedatethroughwhichanentityhasevaluatedsubse-quenteventsandthebasisforthatdate—thatis,whetherthatdaterepresentsthedatethefinancialstatementswereissuedorwereavailabletobeissued.Thesenewprovisions,effectivefortheDIFasofDecember31,2009,donothaveasignificantimpactonthefinancialstatements.

FASBStaffPosition(FSP)FAS115-2and•FAS124-2,Recognition and Presentation of Other-Than-Temporary Impairments,wasissuedinApril2009andsubsequentlycodi-fiedinFASBASC320,Investments-Debt and Equity Securities.Itmodifiestheother-


than-temporaryimpairment(OTTI)guidancefordebtsecurities.AnOTTIisconsideredtohaveoccurredif1)anentityhastheintenttosellanimpairedsecurity,2)itismorelikelythannotthatitwillberequiredtosellthesecuritybeforeitsanticipatedrecovery,or3)anentitydoesnotexpecttorecovertheentireamortizedcostbasiswhenthereisnointentorlikelyrequirementtosellthesecurity. Inaddition,theFSPrequiresthatanOTTI

lossshouldberecognizedinearningsorothercomprehensiveincome.Iftheentityhastheintenttosellthesecurityoritismorelikelythannotthatitwillberequiredtosellthesecurity,theentireimpairment(amor-tizedcostbasisoverfairvalue)willberec-ognizedinearnings.However,ifanentity’smanagementassertsthatitdoesnothavetheintenttoselladebtsecurityanditismorelikelythannotthatitwillnothavetosellthesecuritybeforerecoveryofitscostbasis,thenanentitymustseparatetheimpairmentlossintotwocomponents:1)theamountrelatedtocreditloss,whichisrecordedinearnings,and2)theremainderoftheimpairmentloss,whichisrecordedinothercomprehensiveincome.TheprovisionsoftheFSP,nowcodifiedinASC320,becameeffectivefortheDIFasofJune30,2009.

Otherrecentaccountingpronouncements•havebeendeemedtobenotapplicableormaterialtothefinancialstatementsaspresented.

3. Investment in U.S. Treasury Obligations, Net

AsofDecember 31, 2009 and 2008, invest-ments in U.S. Treasury obligations, net, were$5.5billionand$27.9billion,respectively.AsofDecember31,2009and2008,theDIFheld$2.1billion and $2.7 billion, respectively, of Treas-uryinflation-protectedsecurities(TIPS).ThesesecuritiesareindexedtoincreasesordecreasesintheConsumerPriceIndexforAllUrbanCon-sumers(CPI-U).

FortheyearendedDecember31,2009,avail-able-for-sale securities were sold for total pro-ceedsof$15.2billion.Thegrossrealizedgainsonthesesalestotaled$1.4billion.Todeterminegrossrealizedgains,thecostofsecuritiessoldisbasedonspecific identification.Netunrealizedholdinglossesonavailable-for-salesecuritiesof$2.1billionareincludedinothercomprehensiveloss.


Total Investment in U.S. Treasury Obligations, Net at December 31, 2009Dollars in Thousands

Maturity Yield at

Purchase (a)Face

Value

NetCarryingAmount

UnrealizedHolding

Gains

UnrealizedHoldingLosses

FairValue

U.S. Treasury notes and bonds

Within 1 year 5.04% $ 3,058,000 $ 3,062,038 $ 48,602 $ 0 $ 3,110,640

After 1 year through 5 years 4.15% 300,000 302,755 11,648 0 314,403

U.S. Treasury inflation-protected securities

After 1 year through 5 years 3.14% 1,968,744 1,979,879 81,877 0 2,061,756

Total $ 5,326,744 $ 5,344,672 $ 142,127 $ 0 $ 5,486,799

(a)ForTIPS,theyieldsintheabovetablearestatedattheirrealyieldsatpurchase,nottheireffectiveyields.EffectiveyieldsonTIPSincludealong-termannualinflationassumptionasmeasuredbytheCPI-U.Thelong-termCPI-Uconsensusforecastis1.1percent,basedonfiguresissuedbytheCongressionalBudgetOfficeandBlue Chip Economic Indicators in early 2009.

Total Investment in U.S. Treasury Obligations, Net at December 31, 2008Dollars in Thousands

Maturity (a) Yield at

Purchase (b)Face

Value

NetCarryingAmount

UnrealizedHolding

Gains

UnrealizedHolding

Losses (c)Fair

Value

U.S. Treasury notes and bonds

Within 1 year 4.25% $ 6,192,000 $ 6,350,921 $ 130,365 $ 0 $ 6,481,286

After 1 year through 5 years 4.72% 9,503,000 9,451,649 1,030,931 0 10,482,580

After 5 years through 10 years 4.79% 6,130,000 7,090,289 1,142,753 0 8,233,042

U.S. Treasury inflation-protected securities

Within 1 year 3.82% 726,550 726,561 0 (5,627) 720,934

After 1 year through 5 years 3.14% 1,973,057 1,989,608 0 (48,370) 1,941,238

Total $ 24,524,607 $ 25,609,028 $ 2,304,049 $ (53,997) $ 27,859,080

(a)Forpurposesofthistable,allcallablesecuritiesareassumedtomatureontheirfirstcalldates.Theiryieldsatpurchasearereportedastheiryieldtofirstcalldate.CallableU.S.Treasurybondsmaybecalledfiveyearspriortotherespectivebonds’statedmaturityontheirsemi-annualcouponpaymentdatesupon120daysnotice.(b)ForTIPS,theyieldsintheabovetablearestatedattheirrealyieldsatpurchase,nottheireffectiveyields.EffectiveyieldsonTIPSincludealong-termannualinflationassumptionasmeasuredbytheCPI-U.Thelong-termCPI-Uconsensusforecastis2.2percent,basedonfiguresissuedbytheCongressionalBudgetOfficeandBlue Chip Economic Indicators in early 2008.(c)TheunrealizedlossesontheU.S.Treasuryinflation-protectedsecurities(TIPS)isattributabletothetwo-monthdelayinadjustingTIPS’principalforchangesintheNovemberandDecemberConsumerPriceIndexforallUrbanConsumers.AsthelossesoccurredoveraperiodlessthanayearandtheDecember31,2008,unrealizedlossesconvertedtounrealizedgainsbyFebruary28,2009,theFDICdoesnotconsiderthesesecuritiestobeotherthantemporarilyimpairedatDecember31,2008.


4. Receivables From Resolutions, Net

Receivables From Resolutions, Net at December 31Dollars in Thousands

2009 2008

Receivables from closed banks $ 98,647,508 $ 27,389,467

Receivables from operating banks 0 9,406,278

Allowance for losses (60,238,886) (21,030,280)

Total $ 38,408,622 $ 15,765,465

Thereceivablesfromresolutionsincludepay-mentsmade by theDIF to cover obligations toinsureddepositors(subrogatedclaims),advancesto resolution entities for working capital, andadministrativeexpensespaidonbehalfofresolu-tionentities.Anyrelatedallowanceforlossrepre-sentsthedifferencebetweenthefundsadvancedand/or obligations incurred and the expectedrepayment.Estimatedfuturepaymentsonlossesincurred on assets sold to an acquiring institu-tionunderaloss-sharingagreementarefactoredintothecomputationoftheexpectedrepayment.Assets held by DIF resolution entities are themain source of repayment of the DIF’s receiv-ablesfromresolutions.

AsofDecember31,2009,therewere179activereceivershipswhich includes 140 established in2009.AsofDecember31,2009and2008,DIFresolutionentitiesheldassetswithabookvalueof $49.3 billion and $45.8 billion, respectively(includingcash,investments,andmiscellaneousreceivablesof$7.7billionand$5.1billion,respec-tively).Ninety-ninepercentof the current asset

bookvalueof$49.3billionisheldbyresolutionentitiesestablishedin2008and2009.

Estimated cash recoveries from themanage-ment and disposition of assets that are used todeterminetheallowanceforlosseswerebasedonassetrecoveryratesfromseveralsourcesinclud-ing: actual or pending institution-specific assetdisposition data; failed institution-specific assetvaluationdata;aggregateassetvaluationdataonseveralrecentlyfailedortroubledinstitutions;andempiricalassetrecoverydatabasedonfailuresasfarbackas1990.Methodologiesfordeterminingthe asset recovery rates incorporate estimatingfuturecashrecoveries,netofapplicable liquida-tioncostestimates,anddiscountingbasedonmar-ket-basedriskfactorsapplicabletoagivenasset’stype and quality. The resulting estimated cashrecoveriesarethenusedtoderivetheallowanceforlossonthereceivablesfromtheseresolutions.

Forfailedinstitutionsresolvedusingawholebankpurchaseandassumptiontransactionwithanaccompanyingloss-shareagreement,thepro-jectedfutureloss-sharepaymentsandmonitoringcostsonthecoveredassetssoldtotheacquiringinstitutionundertheagreementareconsideredindeterminingtheallowanceforlossonthereceiv-ablesfromtheseresolutions.Theloss-sharecostprojectionsarebasedontheintrinsicvalueofthecoveredassets.Theintrinsicvalueisdeterminedusing economicmodels that consider the qual-ityandtypeofcoveredassets,currentandfuturemarket conditions, risk factors and estimatedassetholdingperiods.

Estimated asset recoveries are regularlyevaluated during the year, but remain subjectto uncertainties because of potential changesineconomicandmarketconditions.Continuingeconomic uncertainties could cause the DIF’s


actualrecoveriestovarysignificantlyfromcur-rentestimates.

Whole Bank Purchase and Assumption Transactions with Loss-sharing Agreements

TheFDICresolved90of the140failures in2009usingaWholeBankPurchaseandAssump-tionresolutiontransactionwithanaccompanyingLoss-ShareAgreement on assets purchased bytheacquirer.Theacquiring institutionassumesallof thedepositsandpurchasesessentiallyalloftheassetsofafailedinstitution.Themajorityofthecommercialandresidentialassetsarepur-chasedunderaloss-shareagreement,wheretheFDICagreestoshareinfuturelossesexperiencedbytheacquireronthoseassetscoveredundertheagreement. Loss-share agreements are used bytheFDICtokeepassetsintheprivatesectorandminimizedisruptionstoloancustomers.

Losses on the covered assets will be sharedbetween theacquirerand theFDICin itscapac-ityasreceiverofthefailedinstitutionwhenlossesoccurthroughthesale,foreclosure,loanmodifica-tion,orthewrite-downofloansinaccordancewiththetermsoftheloss-shareagreement.Theagree-menttypicallycoversa5to10yearperiodwiththereceivercovering80percentofthelossesincurredby the acquirer up to a stated threshold amount(which varies by agreement) and the acquiringbank covering20percent.Any losses above thestatedthresholdamountwillbereimbursedbythereceiverat95percentofthelossesbookedbytheacquirer.Theestimatedliabilityforloss-sharingisaccountedforbythereceiverandisconsideredinthedeterminationoftheDIF’sallowanceforlossagainst thecorporate receivable fromtheresolu-tion.Asloss-shareclaimsareassertedandproven,DIF receiverships will satisfy these loss-share

paymentsusingavailableliquidationfundsand/oramountsduefromtheDIFforfundingthedepositsassumedbytheacquirer(seeNote7).

ThroughDecember31,2009,93DIFreceiv-ershipsareestimatedtopayapproximately$22.2billionoverthelengthoftheseloss-shareagree-ments on approximately $126.4 billion in totalcovered assets at the inception date of theseagreements.Todate,37receivershipshavemadeloss-sharepaymentstotaling$892.2million.

Financial instruments that potentially sub-ject theDIF to concentrations of credit risk arereceivables from resolutions. The repayment ofDIF’s receivables from resolutions is primarilyinfluenced by recoveries on assets held byDIFreceivershipsandpaymentsonthecoveredassetsunder loss-sharing agreements. Themajority ofthe$165.5billioninremainingassetsinliquida-tion($41.4billion)andcurrentloss-sharecoveredassets($124.1billion)areconcentratedincommer-cial loans($71.7billion), residential loans($70.3billion),andsecurities($14.7billion).Mostoftheassetsintheseassettypesoriginatedfromfailedinstitutions located in California ($55.6 billion),Florida ($15.7 billion), Alabama ($15.6 billion),Texas($11.3billion),andIllinois($7.3billion).

5. Trust Preferred Securities

On January 15, 2009, subject to a systemicrisk determination, the Treasury, the FDIC andtheFederalReserveBankofNewYorkexecutedtermsofaguaranteeagreementwithCitigrouptoprovideprotectionagainstthepossibilityofunusu-allylargelossesonanassetpoolofapproximately$301.0billionof loans and securities backedbyresidentialandcommercial realestateandothersuchassetsthatwouldremainonthebalancesheet


ofCitigroup.Thetermoftheloss-shareguaranteewas10yearsforresidentialassetsand5yearsfornon-residentialassets.TheFDICexposure fromthisguaranteewascappedat$10billion.

In consideration for its portion of the loss-shareguaranteeatinception,theFDICreceived3,025 shares ofCitigroup’s designated cumula-tiveperpetualpreferredstock(SeriesG)withaliquidationpreferenceatthetimeof$1,000,000pershareforatotalof$3.025billionpayingdiv-idends at a rate of 8percent annually.On July30, 2009, all shares of preferred stock initiallyreceivedwere exchanged for3,025,000ofCiti-groupCapitalXXXIIItrustpreferredsecurities(TruPs)withaliquidationamountof$1,000persecurity. The principal amount is due in 2039.Theequivalentexchangeof$3.025billionpaysa quarterly distribution at a rate of 8 percentannually.TheTreasuryinitiallyreceived$4.034billion inpreferredstockfor its loss-sharepro-tection and received an equivalent, aggregateamountof$4.034billionintrustpreferredsecu-ritiesatthetimeoftheexchangeforTruPs.

OnDecember23,2009,Citigroupterminatedtheloss-sharingagreementcitingimprovementsin its financial condition and in financialmar-ket stability. The FDIC incurred no loss fromtheguaranteepriortoterminationoftheagree-ment. In connectionwith the early terminationoftheguaranteeprogram,theTreasuryandtheFDIC agreed that Citigroup would reduce thecombined$7.1billionliquidationamountoftheTruPsby$1.8billion.PursuanttoanagreementbetweentheTreasuryandtheFDIC,TruPsheldbytheTreasurywerereducedby$1.8billionandtheFDICinitiallyretainedallTruPsholdingsof$3.025billion.TheFDICwilltransferanaggre-gateliquidationamountof$800millioninTruPs

totheTreasury,plusanyrelatedinterest,lessanypaymentsmade or required to bemade by theFDICforguaranteeddebtinstrumentsissuedbyCitigrouporanyofitsaffiliatesundertheTem-poraryLiquidityGuaranteeProgram(TLGP;seeNote16).Thistransferwilloccurwithin5daysofthedateonwhichnoCitigroupdebtremainsoutstandingunder theTLGP.The fair value ofthe TruPs and related interest are recorded assystemicriskassetsdescribedinNote16.

The remaining $2.225 billion (par value) ofTruPsheldby theFDICareclassifiedasavail-able-for-saledebt securities in accordancewithFASBASC Topic 320, Investments—Debt and Equity Securities.Uponterminationoftheguar-anteeagreement,theDIFrecognizedrevenueof$1.962billionforthefairvalueoftheTruPs.(SeeNote10,Other Revenue andNote15,Disclosures About the Fair Value of Financial Instruments).

6. Property and Equipment, Net

Property and Equipment, Net at December 31Dollars in Thousands

2009 2008

Land $ 37,352 $ 37,352

Buildings (including lease-hold improvements) 295,265 281,401

Application software (including work-in-process) 179,479 173,872

Furniture,fixtures,andequipment 117,430 84,574

Accumulated depreciation (240,709) (208,438)

Total $ 388,817 $ 368,761

The depreciation expense was $70 millionand$55millionfor2009and2008,respectively.


7. Liabilities Due to Resolutions

AsofDecember31,2009, theDIF recordedliabilities totaling $34.7 billion to resolutionentities representing the agreed-upon value ofassetstransferredfromthereceiverships,atthetime of failure, to the acquirers/bridge institu-tions for use in funding the deposits assumedby the acquirers/bridge institutions. Ninety-sevenpercentoftheseliabilitiesareduetofail-uresresolvedunderawholebankpurchaseandassumptiontransaction,mostwithanaccompa-nying loss-share agreement. The DIF satisfiesthese liabilities either by directly sending cashtothereceivershipstofundloss-shareandotherexpensesorbyoffsettingreceivablesfromreso-lutionswhenareceivershipdeclaresadividend.Inherent in these liabilities are$470million inunreimburseddepositclaimssubrogatedby theDIFonbehalfoftheTemporaryLiquidityGuar-anteeProgram(seeNote16).

Inaddition,therewere$150millioninunpaidbrokered deposit claims related to multiplereceiverships. The DIF pays these liabilitieswhentheclaimsareapproved.

8. Contingent Liabilities for:

Anticipated Failure of Insured Institutions

TheDIF records a contingent liability and alossprovisionforDIF-insuredinstitutionsthatarelikelytofail,absentsomefavorableeventsuchasobtainingadditionalcapitalormerging,whentheliabilityisprobableandreasonablyestimable.Thecontingentliabilityisderivedbyapplyingexpect-edfailureratesandlossratestoinstitutionsbasedonsupervisoryratings,balancesheetcharacteris-tics,andprojectedcapitallevels.

During the year, the conditions of the bank-ingindustrycontinuedtodeteriorate.Thediffi-culteconomicandcreditenvironmentcontinuedtochallengethesoundnessofmanyDIF-insuredinstitutions.Theongoingweaknessinhousingandcommercialrealestatemarketsledtoassetqual-ityproblemsandvolatility infinancialmarkets,whichhurtthebankingindustryperformanceandweakenedmanyinstitutionswithsignificantport-folios of residential and commercialmortgages.Theimpactoftheeconomicdeteriorationinthebankingindustrycausedasignificantincreaseinthecontingentlossreserve.AsofDecember31,2009and2008,thecontingentliabilitiesforantic-ipated failureof insured institutionswere$44.0billionand$24.0billion,respectively.

Inadditiontotheserecordedcontingentliabil-ities,theFDIChasidentifiedriskinthefinancialservicesindustrythatcouldresultinanaddition-al losstotheDIFshouldpotentiallyvulnerableinsuredinstitutionsultimatelyfail.Asaresultofthese risks, theFDICbelieves that it is reason-ablypossiblethattheDIFcouldincuradditionalestimatedlossesuptoapproximately$24billion.The actual losses, if any, will largely dependon future economic andmarket conditions andcoulddiffermateriallyfromthisestimate.

During2009,140bankswithcombinedassetsof$171.2billionfailed.Itisuncertainhowlongand how deep the current downturn will be.Supervisory and market data suggest that thebanking industry will continue to experienceelevated levels of stress over the coming year.The FDIC continues to evaluate the ongoingriskstoaffectedinstitutionsinlightoftheexist-ingeconomicand financialconditions,and theextent towhich such riskswill continue toputstressontheresourcesoftheinsurancefund.


Litigation LossesTheDIFrecordsanestimated lossforunre-

solvedlegalcasestotheextentthatthoselossesareconsideredprobableandreasonablyestima-ble.TheFDICrecordedprobablelitigationlossesof$300millionand$200millionfortheDIFasof December 31, 2009 and 2008, respectively,andhasdeterminedthattherearenoreasonablypossiblelossesfromunresolvedcases.

Other Contingencies

Representations and WarrantiesInanefforttomaximizethereturnfromthe

sale of assets frombank and thrift resolutions,FDIC as receiver offered representations andwarranties, andguaranteesoncertain loanandservicingrightssales.Althoughtheserepresenta-tionsandwarrantieswereofferedbythereceiv-er,DIF guaranteed the obligations under theseagreements.Ingeneral,theguarantees,represen-tations,andwarrantiesrelatetothecompletenessandaccuracyofloandocumentation,thequalityoftheunderwritingstandardsused,theaccuracyof the delinquency status, and the conformityof the loanswith characteristics of the pool inwhichtheyweresoldatthetimeofsale.

AsaresultofloansandservicingrightssoldinconnectionwiththeassetdispositionofIndy-MacFederalBank,theunpaidprincipalbalanceforloanssubjecttorepresentationsandwarran-tiesincreasedby$184billionto$195billionasof December 31, 2009. Since the receivershipsaretheprimaryguarantorsandtheyhavesuffi-cient funds topayassertedclaims, theDIFdidnotrecordcontingentliabilitiesfromanyoftheoutstandingclaimsasserted inconnectionwith

representationsandwarrantiesatDecember31,2009and2008.

In addition, until the contracts offering therepresentations and warranties and guaranteeshave expired, future losses could be incurred,some as late as 2032. Consequently, the FDICbelievesitispossiblethatlossesmaybeincurredby the DIF from the universe of outstandingcontracts with unasserted representation andwarrantyclaims.However,becauseoftheuncer-taintiessurrounding the timingofwhenclaimsmaybeasserted, theFDICisunabletoreason-ably estimate a range of loss to the DIF fromoutstandingcontractswithunassertedrepresen-tationandwarrantyclaims.

Purchase and Assumption IndemnificationIn connection with Purchase and Assump-

tion agreements for resolutions, the FDIC inits receivership capacity generally indemni-fiesthepurchaserofafailedinstitution’sassetsand liabilities in theeventa thirdpartyassertsa claim against the purchaser unrelated to theexplicit assets purchased or liabilities assumedatthetimeoffailure.TheFDICinitsCorporatecapacityisasecondaryguarantorifandwhenareceiverisunabletopay.Theseindemnificationsgenerallyextendforatermofsixyearsafterthedate of institution failure. The FDIC is unabletoestimate themaximumpotential liability forthesetypesofguaranteesastheagreementsdonot specify a maximum amount and any pay-mentsaredependentupontheoutcomeoffuturecontingent events, the nature and likelihood ofwhich cannot be determined at this time.Dur-ing 2009 and 2008, the FDIC in its Corporatecapacityhasnotmadeanyindemnificationpay-ments under such agreements and no amount


assets,net”and“Accountspayableandotherlia-bilities”lineitems,respectively.Guaranteefeesarerecognizedasrevenueonastraight-linebasisoverthetermofthenotes.

The source of payment for the LLC-issueddebt is the collections from the LLC assets. Ifcash flow collections from the LLC assets areinsufficient tocover thepaymentson thenotesinaccordancewithpriorityofpayments,thentheFDICasguarantor is required tomakeaguar-anteepayment for any shortfall.The estimatedlossoftheguaranteestotheDIFisbasedonthediscounted present value of the expected guar-anteepaymentsbytheFDIC,reimbursementstotheFDIC forguaranteepayments, andguaran-teefeecollections.Underbothabasecaseandamorestressfulmodelingscenario,thecashflowsfromtheLLCassetsprovidesufficientcoverageto fully pay the debts by their maturity dates.Therefore, the estimated loss to the DIF fromtheseguaranteesiszero.

AsofDecember31,2009,themaximumesti-matedguaranteeexposureequals the totalout-standingdebtof$2.1billion.

9. Assessments

The FDI Act, as amended, requires a risk-based assessment system. The Act allows theFDICdiscretion in defining risk and, by regu-lation,theFDIChasestablishedseveralassess-mentriskcategoriesbaseduponsupervisoryandcapitalevaluations.OnMarch4,2009,theBoardissueda final ruleonAssessments to:1)makeit fairer andmore sensitive to risk, 2) improvethe way the risk-based assessment system dif-ferentiates risk among insured institutions,and 3) increase deposit insurance assessment

hasbeenaccruedintheaccompanyingfinancialstatementswithrespecttotheseindemnificationguarantees.

FDIC Guaranteed Debt of Limited Liability Companies

During2009,theFDICinitscorporatecapac-ityofferedguaranteesonloansissuedbynewly-formed limited liability companies (LLCs) thatwere created to dispose of certain residentialmortgage loans, construction loans, and otherassets of two receiverships. The receivershipstransferredaportfolioofassetswithanunpaidprincipalbalanceof$5.8billiontotheLLCs.Pri-vate investorspurchaseda40–50percentown-ership interest in theLLCs for $615million incashandtheLLCsissuednotesof$2.1billiontothereceiverships topartiallyfundthepurchaseoftheassets.Thereceivershipsholdtheremain-ing50–60percent equity interest in theLLCs.Inexchangefortheguarantees,theDIFexpectstoreceiveestimatedfeestotaling$71.4million,which equals one percent per annum over theestimatedlifeofthenotes.

Thetermoftheguaranteesextendsuntiltheearliestof1)paymentinfullofthenotesor2)twoyearsfollowingthematuritydateofthenotes(12years). In theeventofnotepaymentdefaultbyanLLC,theFDICinitscorporatecapacitycantakeoneormoreof the following remedies:1)accelerate the payment of the unpaid principalamountofthenotes;2)selltheassetsheldascol-lateral;and3)forecloseontheequityinterestsofthedebtor.

The DIF has recorded a receivable for theestimatedguaranteefeesof$71.4millionandanoffsettingdeferredrevenueliability,includedinthe“Interestreceivableoninvestmentsandother


OnMay22,2009,theFDICadoptedafinal•ruleimposinga5basispointspecialassess-mentoneachinsureddepositoryinstitution’stotalassetsminusTier1capitalasreportedinitsreportofconditionasofJune30,2009.Thespecialassessmentof$5.5billionwascollectedonSeptember30,2009,atthesametimetheregularquarterlyrisk-basedassessmentforthesecondquarter2009wascollected.OnNovember17,2009,theFDICissueda•FinalRule,Prepaid Assessments,toaddresstheDIF’sliquidityneedstopayforprojectednear-termfailuresandtoensurethatthedepositinsurancesystemremainsindustry-funded.PursuanttotheRule,onDecember30,2009,amajorityofinsureddepositoryinstitutionsprepaidestimatedquarterlyrisk-basedassessmentsof$45.7billionfortheperiodOctober2009throughDecember2012.Theprepaidamountwasbasedonmaintainingassessmentratesattheircurrentlevelsthroughtheendof2010andadoptingauniform3basispointincreaseinassessmentrateseffectiveJanuary1,2011.Aninstitu-tion’squarterlyrisk-baseddepositinsur-anceassessmentsthereafterwillbeoffsetbytheamountprepaiduntilthatamountisexhaustedoruntilJune30,2013,whenanyamountremainingwouldbereturnedtotheinstitution. Prepaidassessmentsweremandatory

forallinstitutions,buttheFDICexerciseditsdiscretionassupervisorandinsurertoexemptaninstitutionfromtheprepaymentrequirementiftheFDICdeterminedthattheprepaymentwouldadverselyaffectthesafetyandsoundnessoftheinstitution.In

rates to raise assessment revenue to helpmeetthe requirements of the Restoration Plan. Theassessment rate averaged approximately 23.32centsand4.18centsper$100oftheassessmentbase,asdefinedinpart327.5(b)ofFDICRulesandRegulations,for2009and2008,respective-ly.(Theassessmentratewouldhavebeen16.19centsifthespecialassessmentimposedonJune30,2009wasexcludedfromthe2009assessmentincome.)

IncompliancewithprovisionsoftheFDIAct,asamended,and implementingregulations, theFDICisrequiredto:

annuallyestablishandpublishadesignated•reserveratio(DRR)withinthestatutoryrangefrom1.15to1.50percentofestimatedinsureddeposits.AsofDecember31,2009,theDIFreserveratiowas(0.39)percentofestimatedinsureddepositsandtheFDIChassettheDRRat1.25percentfor2010;adoptaDIFrestorationplantoreturnthe•reserveratioto1.15percentgenerallywithineightyears,ifthereserveratiofallsbelow1.15percentorisexpectedtofallbelow1.15percentwithinsixmonths(seeparagraphtitled,Amended Restoration Plan);annuallydetermineifadividendshouldbe•paid,basedonthestatutoryrequirementgen-erallytodeclaredividendsforone-halfoftheamountbetween1.35and1.50percentandallamountsexceeding1.50percent.

Assessment RevenueDuring2009,theFDICimplementedactions

to supplementDIF’s revenue through a specialassessmentandliquiditythroughprepaidassess-mentsfrominsureddepositoryinstitutions:


addition,institutionswereallowedtorequestexemptionfrompaymentundercertaincircumstances.

Forthoseinstitutionsthatprepaidassessments,theDIFrecognizedrevenueof$3.0billionforthefourthquarterinsuranceperiod.Theremainingprepaidamountof$42.7billionisincludedinthe“Unearnedrevenue—prepaidassessments” lineitemontheBalanceSheet.Forthoseinstitutionsthat did not prepay assessments, the “Assess-ments Receivable, net” line item of $281 mil-lion represents the estimated gross premiumsduefrominsureddepositoryinstitutionsforthefourth quarter of the year. The actual depositinsuranceassessmentforthefourthquarterwasbilledandcollectedattheendofthefirstquar-terof2010.During2009and2008,$17.7billionand$3.0billion,respectively,wererecognizedasassessmentrevenuefrominstitutions.

TheFDIAct,asamended,grantedaone-timeassessment credit of approximately$4.7billionto certain eligible insured depository institu-tions (or their successors) based on the assess-mentbaseoftheinstitutionasofDecember31,1996, as compared to the combined aggregateassessment base of all eligible institutions. Ofthecreditsgranted,$2.7millionremainedasofDecember31,2009.

Amended Restoration PlanAFederalRegisternotice forAmendment of

FDIC Restoration Planwas issued onOctober2,2009,amendingDIF’sRestorationPlanwhichwasoriginallyadoptedonOctober7,2008andsubsequently amended on February 27, 2009.The Amended Restoration Plan addresses theneedtoreturntheDIFtoitsmandatedminimum

reserveratioof1.15percentofestimatedinsureddeposits.TheRestorationPlanprovidedfor thefollowing:1)theperiodofthePlanwasextendedtoeightyears;2)currentassessmentrateswillbemaintained throughDecember31,2010,withauniformincreaseinrisk-basedassessmentratesof3basispointseffectiveJanuary1,2011;and3)at least semi-annually hereafter, theFDICwillupdate its loss and income projections for theFundand,ifnecessary,willincreaseassessmentratespriortotheendoftheeight-yearperiod,toreturnthereserveratioto1.15percent.

Assessments Related to FICOAssessmentscontinuetobeleviedoninstitu-

tionsforpaymentsoftheinterestonobligationsissued by the Financing Corporation (FICO).The FICO was established as a mixed-owner-shipgovernment corporation to function solelyasafinancingvehiclefortheformerFSLIC.TheannualFICOinterestobligationofapproximate-ly$790millionispaidonaproratabasisusingthe same rate for banks and thrifts. The FICOassessmenthasno financial impacton theDIFand is separate from deposit insurance assess-ments.TheFDIC, as administrator of theDIF,acts solely as a collection agent for the FICO.During2009and2008,approximately$784mil-lionand$791million,respectively,wascollectedandremittedtotheFICO.


10. Other Revenue

Other Revenue for the Years Ended December 31Dollars in Thousands

2009 2008

Guaranteeterminationfees $ 2,053,825 $ 0

Debt guarantee surcharges 871,746 0

Dividends and interest on Citigroup trust preferred securities 231,227 0

Other 16,813 31,017

Total $ 3,173,611 $ 31,017

Guarantee Termination Fees

Bank of AmericaInJanuary2009,theFDIC,Treasury,andthe

FederalReserveBankofNewYork(federalpar-ties) signedaSummaryofTerms(TermSheet)with Bank of America to guarantee or lendagainstapoolofupto$118.0billionoffinancialinstruments consisting of securities backed byresidentialandcommercialrealestateloansandcorporate debt and related derivatives. InMay2009,priortocompletingdefinitivedocumenta-tion,BankofAmericanotified the federalpar-tiesof itsdesire to terminatenegotiationswithrespecttotheguaranteecontemplatedintheTermSheet.AllpartiesagreedthatBankofAmericareceivedvalueforenteringintotheTermSheetandthatthefederalpartiesshouldbecompensat-edforout-of-pocketexpensesandafeeequaltotheamountBankofAmericawouldhavepaidfortheguaranteefromthedateofthesigningoftheTermSheetthroughtheterminationdate.Under

the terms of the settlement, the federal partiesreceivedatotalof$425million.Ofthisamount,the FDIC received and recognized revenue of$92millionfortheDIF.NolosseswerebornebytheFDICpriortothesettlement.

CitigroupInconnectionwiththeterminationoftheloss-

share agreementwithCitigroup, theDIF recog-nizedrevenueof$1.962billionforthefairvalueofthetrustpreferredsecuritiesreceivedasconsider-ationfortheguaranteeasagreedtointhetermi-nationandrecorded$231millionindividendsandinterestfromCitigroup(seeNote5).

Surcharges on FDIC-Guaranteed DebtOnJune3,2009,theFDICpublishedafinal

ruleintheFederalRegisteramendingtheTem-poraryLiquidityGuaranteeProgram(TLGP)toprovidealimitedextensionoftheDebtGuaran-teeProgram(DGP)forinsureddepositoryinsti-tutionsandotherparticipatingentities(seeNote16). The amendment also imposed surchargesonFDIC-guaranteeddebtissuedafterMarch31,2009,withamaturityofoneyearormore.TheDGP extensions, coupled with the surcharges,were designed to facilitate an orderly transi-tion period for all participants to return to thenon-guaranteed debt market and to reduce thepotentialformarketdisruptionsattheendoftheprogram. Unlike other TLGP fees, which arereservedforprojectedTLGPlosses,theamountof surchargescollectedweredeposited into theDIF.During2009,theDIFcollectedsurchargesintheamountof$872million.


11. Operating Expenses

Operatingexpenseswere$1.3billionfor2009,comparedto$1billionfor2008.Thechartbelowliststhemajorcomponentsofoperatingexpenses.

Operating Expenses for the Years Ended December 31Dollars in Thousands

2009 2008

Salariesandbenefits $ 901,836 $ 702,040

Outside services 244,479 159,170

Travel 97,744 67,592

Buildings and leased space 65,286 53,630

Software/Hardware maintenance 40,678 29,312

Depreciation of prop-erty and equipment 70,488 55,434

Other 37,563 32,198

Services reimbursed byTLGP (3,613) (2,352)

Services billed to reso-lution entities (183,362) (63,534)

Total $ 1,271,099 $ 1,033,490

12. Provision for Insurance Losses

Provisionfor insurancelosseswas$57.7bil-lionfor2009and$41.8billionfor2008.Thefol-lowing chart lists themajor components of theprovisionforinsurancelosses.

Provision for Insurance Losses for the Years Ended December 31Dollars in Thousands

2009 2008

Valuation Adjustments

Closed banks and thrifts $ 37,586,603 $ 17,974,530

Other assets (7,885) 7,377

Total Valuation Adjustments 37,578,718 17,981,907

Contingent Liabilities Adjustments:

Anticipated failure of insured institutions 20,033,054 23,856,928

Litigation 100,000 0

Total Contingent Liabilities Adjustments 20,133,054 23,856,928

Total $ 57,711,772 $ 41,838,835

13. Employee Benefits

Pension Benefits and Savings PlansEligible FDIC employees (permanent and

term employees with appointments exceedingoneyear)arecoveredbythefederalgovernmentretirementplans,eithertheCivilServiceRetire-mentSystem(CSRS)or theFederalEmployeesRetirement System (FERS). Although the DIFcontributes a portion of pension benefits foreligible employees, it does not account for theassetsofeitherretirementsystem.TheDIFalsodoes not have actuarial data for accumulatedplanbenefitsortheunfundedliabilityrelativetoeligibleemployees.TheseamountsarereportedonandaccountedforbytheU.S.OfficeofPer-sonnelManagement(OPM).


EligibleFDICemployeesalsomayparticipatein a FDIC-sponsored tax-deferred 401(k) sav-ingsplanwithmatchingcontributionsuptofivepercent.Under theFederalThriftSavingsPlan(TSP),theFDICprovidesFERSemployeeswithanautomaticcontributionof1percentofpayandanadditionalmatchingcontributionupto4per-centofpay.CSRSemployeesalsocancontributeto the TSP. However, CSRS employees do notreceiveagencymatchingcontributions.

Pension Benefits and Savings Plans Expenses for the Years Ended December 31Dollars in Thousands

2009 2008

Civil Service Retire-ment System $ 6,401 $ 6,204

Federal Employees Retirement System (BasicBenefit) 56,451 44,073

FDIC Savings Plan 25,449 21,786

Federal Thrift Savings Plan 20,503 16,659

Total $ 108,804 $ 88,722

Postretirement Benefits Other Than Pensions

TheDIFhasnopostretirementhealth insur-anceliability,sincealleligibleretireesarecov-ered by the Federal Employees Health Benefit(FEHB) program. FEHB is administered andaccounted for by the OPM. In addition, OPMpays the employer share of the retiree’s healthinsurancepremiums.

The FDIC provides certain life and dentalinsurance coverage for its eligible retirees, theretirees’beneficiaries,andcovereddependents.

Retirees eligible for life and dental insurancecoveragearethosewhohavequalifieddueto:1)immediateenrollmentuponappointmentorfiveyearsofparticipationintheplanand2)eligibil-ityforanimmediateannuity.Thelifeinsuranceprogram provides basic coverage at no cost toretirees and allows converting optional cover-agestodirect-payplans.Forthedentalcoverage,retireesareresponsibleforaportionofthedentalpremium.

TheFDIChaselectednottofundthepostre-tirement lifeanddentalbenefit liabilities.Asaresult,theDIFrecognizedtheunderfundedsta-tus(differencebetweentheaccumulatedpostre-tirementbenefitobligationandtheplanassetsatfairvalue)asaliability.Sincetherearenoplanassets,theplan’sbenefitliabilityisequaltotheaccumulated postretirement benefit obligation.AtDecember31,2009and2008,theliabilitywas$145.0million and $114.1million, respectively,whichisrecognizedinthe“Postretirementben-efitliability”lineitemontheBalanceSheet.Thecumulative actuarial gains/losses (changes inassumptionsandplanexperience)andpriorser-vicecosts/credits(changestoplanprovisionsthatincrease or decrease benefits)were ($2.6)mil-lionand$25.0millionatDecember31,2009and2008, respectively.Theseamountsarereportedas accumulated other comprehensive incomein the“Unrealizedpostretirementbenefit (loss)gain”lineitemontheBalanceSheet.

TheDIF’s expenses for postretirement ben-efits for2009and2008were$7.7millioneachyear,whichareincludedinthecurrentandprioryear’s operating expenses on the Statement ofIncome andFundBalance.The changes in theactuarial gains/losses and prior service costs/creditsfor2009and2008of($27.6)millionand


$5.3million,respectively,arereportedasothercomprehensiveincomeinthe“Unrealizedpost-retirement benefit (loss) gain” line item. Keyactuarialassumptionsusedintheaccountingfortheplanincludethediscountrateof5.25percent,therateofcompensationincreaseof4.10percent,andthedentalcoveragetrendrateof7.0percent.Thediscountrateof5.25percentisbaseduponrates of return on high-quality fixed incomeinvestmentswhosecashflowsmatchthetimingandamountofexpectedbenefitpayments.

14. Commitments and Off-Balance-Sheet Exposure

Commitments:

Leased SpaceThe FDIC’s lease commitments total $158

million for future years. The lease agreementscontain escalation clauses resulting in adjust-ments,usuallyonanannualbasis.TheDIFrec-ognizedleasedspaceexpenseof$29millionand$21 million for the years ended December 31,2009and2008,respectively.

Leased Space CommitmentsDollars in Thousands

2010 2011 2012 2013 20142015/

Thereafter

$ 37,630 $ 37,553 $ 30,982 $ 21,182 $ 17,995 $ 13,041

Off-Balance-Sheet Exposure:

Deposit InsuranceAs of December 31, 2009, the estimated

insureddepositsforDIFwere$5.4trillion.Thisestimate is derived primarily from quarterlyfinancial data submitted by insured depositoryinstitutions to the FDIC. This estimate repre-sentstheaccountinglossthatwouldberealizedifallinsureddepositoryinstitutionsweretofailandtheacquiredassetsprovidednorecoveries.


15. Disclosures About the Fair Value of Financial Instruments

Financialassetsrecognizedandmeasuredatfairvalueonarecurringbasisateachreportingdateincludecashequivalents(Note2),theinvestmentinU.S.Treasuryobligations(Note3)andtrustpre-ferredsecurities(Note5).ThefollowingtablespresenttheDIF’sfinancialassetsmeasuredatfairvalueasofDecember31,2009and2008.

Assets Measured at Fair Value at December 31, 2009Dollars in Thousands

Fair Value Measurement UsingQuoted Prices in

Active Markets for Identical Assets

(Level 1)

Significant Other Observable

Inputs (Level 2)

Significant Unobservable

Inputs (Level 3)

Total Assets at Fair Value

Assets

Cash and cash equivalents (Special U.S. Treasuries)1 $ 54,092,423 $ 54,092,423

Investment in U.S. Treasury Obligations (Available-for-Sale)2 5,486,799 5,486,799

Trust preferred securities (Available-for-Sale) $ 1,961,824 1,961,824

Trust preferred securities held for UST (Note 16) 705,375 705,375

Total Assets $ 59,579,222 $ 0 $ 2,667,199 $ 62,246,4211 Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the U.S. Bureau of Public Debt.2 The investment in U.S. Treasury obligations is measured based on prevailing market yields for federal government entities.


Fair Value Measurement Using

Quoted Prices in Active Markets for

Identical Assets (Level 1)

Significant Other Observable

Inputs (Level 2)


Inputs (Level 3)


Assets

Cash and cash equivalents (Special U.S. Treasuries)1 $ 1,011,430 $ 0 $ 0 $ 1,011,430

Investment in U.S. Treasury Obligations (Available-for-Sale)2 27,859,080 0 0 27,859,080

Total Assets $ 28,870,510 $ 0 $ 0 $ 28,870,5101 Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the U.S. Bureau of Public Debt.2 The investment in U.S. Treasury obligations is measured based on prevailing market yields for federal government entities.


In exchange for prior loss-share guaranteecoverage provided to Citigroup as described inNote5,theFDICandtheTreasuryreceivedtrustpreferred securities. The fair value of the trustpreferred securitieswas derived from a propri-etaryvaluationmodeldevelopedbytheTreasuryto estimate the value of financial instrumentsobtained as consideration for actions taken tostabilizethefinancialsystemundertheTroubledAssetReliefProgrampursuanttotheEmergencyEconomicStabilizationActof2008.Themodelestablishes the fairvalueof theTruPsbasedonthe discounted present value of expected cashflows. Key inputs include assumptions aboutdefaultprobabilities,dividenddeferralprobabili-ties and call options. The FDIC independentlyperformedbenchmarkprocedures to ensure thereasonablenessofthemodeloutputs.

SomeoftheDIF’sfinancialassetsandliabili-tiesarenotrecognizedatfairvaluebutarerecord-edatamountsthatapproximatefairvalueduetotheir shortmaturitiesand/orcomparabilitywithcurrentinterestrates.Suchitemsincludeinterestreceivable on investments, assessment receiv-ables,othershort-termreceivables,accountspay-ableandotherliabilities.

ThenetreceivablesfromresolutionsprimarilyincludetheDIF’ssubrogatedclaimarisingfromobligationstoinsureddepositors.Theresolutionentityassets thatwillultimatelybeused topaythecorporatesubrogatedclaimarevaluedusingdiscountratesthatincludeconsiderationofmar-ket risk. These discounts ultimately affect theDIF’s allowance for loss against the net receiv-ables fromresolutions.Therefore, thecorporatesubrogatedclaimindirectlyincludestheeffectofdiscounting and should not be viewed as beingstatedintermsofnominalcashflows.

Althoughthevalueofthecorporatesubrogat-edclaimisinfluencedbyvaluationofresolutionentity assets (seeNote 4), suchvaluation is notequivalenttothevaluationofthecorporateclaim.Sincethecorporateclaimisunique,notintendedfor sale to theprivate sector, andhasno estab-lishedmarket, it isnotpracticable toestimateafairvalue.

TheFDICbelieves thatasale to theprivatesector of the corporate claim would requireindeterminate, but substantial, discounts foran interested party to profit from these assetsbecause of credit and other risks. In addition,the timingofresolutionentitypayments to theDIFonthesubrogatedclaimdoesnotnecessar-ilycorrespondwiththetimingofcollectionsonresolutionentityassets.Therefore,theeffectofdiscounting used by resolution entities shouldnotnecessarilybeviewedasproducinganesti-mateof fairvalue for thenet receivables fromresolutions.

Thereisnoreadilyavailablemarketforguaran-teesassociatedwithsystemicrisk(seeNote16).

16. Systemic Risk Transactions

Pursuant to systemic risk determinations,the FDIC established the Temporary LiquidityGuaranteeProgram(TLGP)forinsureddeposi-toryinstitutions,designatedaffiliatesandcertainholding companies during 2008, and providedloss-share guarantee assistance to Citigrouponapoolofcoveredassetsin2009,whichwassubsequentlyterminatedasdescribedinNote5.TheFDICreceivedconsiderationinexchangeforguaranteesissuedundertheTLGPandguaran-teeassistanceprovidedtoCitigroup.


Atinceptionoftheguarantees,theDIFrecog-nizedaliabilityforthenon-contingentfairvalueof the obligation the FDIC has undertaken tostandreadytoperformoverthetermoftheguar-antees.AsrequiredbyFASBASC460,Guaran-tees,thisnon-contingentliabilitywasmeasuredat the amount of consideration received inexchangeforissuingtheguarantee.Assystemicriskexpensesareincurred(includingcontingentliabilitiesandvaluationallowances),theDIFwillreducedeferredrevenueandrecognizeanoffset-tingamountas systemic risk revenue.Revenuerecognitionwillalsooccurduringthetermoftheguaranteeifasupportableanddocumentedanal-ysis has determined that the consideration andany related interest/dividend income receivedexceedstheprojectedsystemicrisklosses.Anydeferredrevenuenotabsorbedbylossesduringtheguaranteeperiodwillberecognizedasrev-enuetotheDIF.

Temporary Liquidity Guarantee ProgramTheFDICestablishedtheTLGPonOctober

14,2008inanefforttocounterthesystem-widecrisisinthenation’sfinancialsector.TheTLGPconsistsoftwocomponents:(1)theDebtGuar-antee Program (DGP), and (2) the TransactionAccountGuaranteeProgram(TAG).OnNovem-ber 26, 2008, a final rule for the programwaspublishedintheFederalRegisterandcodifiedinpart370oftitle12oftheCodeofFederalRegu-lations(12CFRPart370).

Debt Guarantee ProgramThe Debt Guarantee Program initially per-

mittedparticipatingentitiestoissueFDIC-guar-anteed senior unsecured debt betweenOctober14, 2008 and June 30, 2009, with the FDIC’s

guaranteeforsuchdebt toexpireontheearlierof the maturity of the debt (or the conversiondate, formandatory convertible debt issued onorafterFebruary27,2009)orJune30,2012.ToreducemarketdisruptionattheconclusionoftheDGPandtofacilitatetheorderlyphase-outoftheprogram,theFDICissuedafinalruleonJune3,2009,thatextendedtheperiodduringwhichpar-ticipatingentities could issueFDIC-guaranteeddebt, through October 31, 2009. Concurrently,theFDICextendedtheexpirationoftheguaran-teeperiodfromJune30,2012toDecember31,2012.UpontheexpirationoftheextendedDGP,thefinalrulegrantsexistingparticipatingenti-ties access to a limited six-month emergencyFDIC guarantee facility expiring on April 30,2010.TheFDIC’sguaranteeforalldebtexpireson the earliest of the mandatory convertibledebt, the stated date ofmaturity, orDecember31,2012.

FeesforparticipationintheDGParereservedfor possible TLGP losses. Since inception, theFDIChasrecorded$8.3billionofguaranteefeesandfeesof$1.2billionfromparticipatingenti-ties that elected to issue seniorunsecurednon-guaranteeddebt.During2009,thetotalamountcollectedundertheDGPwas$7.1billion,com-prised of $6.1 billion for guaranteed debt and$1.0 billion for non-guaranteed debt. The feesareincludedinthe“Cashandcashequivalents—restricted—systemic risk” line itemand recog-nized as “Deferred revenue-systemic risk” ontheBalanceSheet.

Additionally,asdescribedinNote5,theFDICholds$800million(parvalue)ofCitigrouptrustpreferredsecurities(andanyrelatedinterest)assecurityintheeventpaymentsarerequiredtobemade by the FDIC for guaranteed debt instru-


mentsissuedbyCitigrouporanyofitsaffiliatesundertheTLGP.AtDecember31,2009,thefairvalueof thesesecurities totaled$705.4million,andwasdeterminedusingthevaluationmethod-ologydescribed inNote15 forother trust pre-ferredsecuritiesheldbytheDIF.BecausetheseTruPs are held on behalf of the Treasury, thedeclineinvaluehasnoimpactonthefundbal-anceoftheDIF.

The FDIC’s payment obligation under theDGPwillbetriggeredbyapaymentdefault.Inthe event of default, theFDICwill continue tomakescheduledprincipalandinterestpaymentsunderthetermsofthedebtinstrumentthroughits maturity, or in the case of mandatory con-vertible debt, through the mandatory conver-siondate.ThedebtholderorrepresentativemustassigntotheFDICtherighttoreceiveanyandalldistributionsontheguaranteeddebtfromanyinsolvency proceeding, including the proceedsofanyreceivershiporbankruptcyestate,totheextentofpaymentsmadeundertheguarantee.

Since inceptionof theprogram,$618billionin total guaranteed debt has been issued. Todate, one debt issuer has defaulted on guaran-teeddebtof$2.0million.Eighty-four financialentities (54 insured depository institutions and30 affiliates and holding companies) had $309billion in guaranteed debt outstanding at year-end2009.AtDecember31,2009,thecontingentliabilityforthisguaranteewas$87.9millionandis includedin the“Contingent liabilityforSys-temicRisk”lineitem.TheFDICbelievesthatitis reasonablypossible thatadditionalestimatedlossesofapproximately$2.5billioncouldoccurundertheDGP.

Transaction Account Guarantee ProgramThe Transaction Account Guarantee Program

providesunlimited coverage for non-interest bear-ingtransactionaccountsheldbyinsureddepositoryinstitutions on all deposit amounts exceeding thefullyinsuredlimit(generally$250,000).InAugust2009,theFDICextendedtheexpirationdateoftheTAGprogramfromDecember31,2009toJune30,2010.During2009,theFDICcollectedTAGfeesof$639.2millionwhichareearmarkedforTLGPpos-siblelossesandpayments.

Uponthefailureofaparticipatinginsureddepos-itory institution, payment of guaranteed claims ofdepositors with non-interest bearing transactionaccountsarefundedwithTLGPrestrictedcash.TheFDICwillbesubrogatedtotheseclaimsofdeposi-torsagainstthefailedentity,anddividendpaymentsby the receivershiparedepositedback intoTLGPrestrictedaccounts.

At December 31, 2009, the “Receivables andother assets—systemic risk” line item includes$187.5 million of estimated TAG fees due frominsureddepositoryinstitutions.Thisreceivablewascollectedattheendofthefirstquarterof2010.

The contingent liability resulting from theanticipatedfailureofinsuredinstitutionspartici-patingintheTAGwas$1.3billionatDecember31,2009.For the2009failures,estimatedlossesof$1.7billionwererecordedforthenon-interestbearing transaction accounts. The provision foranticipatedfailuresandthelossrecordedatreso-lutionarebothrecordedas“Systemicriskexpens-es” with a corresponding amount of guaranteefeesrecognizedas“Systemicriskrevenue.”TheFDICbelieves that it is reasonablypossible thatadditionalestimatedlossesofapproximately$721millioncouldoccurundertheTAG.


As of December 31, 2009, the maximum esti-mated exposure under the TAG is $834 billion. However, 525 institutions elected to exit the TAG program after December 31, 2009. The reported TAG deposits associated with these institutions

at December 31, 2009, totaled $568 billion. Con-sequently, the maximum exposure under the TAG as of January 1, 2010, is estimated to be $266 billion.

Systemic Risk Activity at December 31, 2009Dollars in Thousands

Cash and cash equivalents—

restricted—systemic risk

Receivables and other assets—

systemic risk

Deferred revenue—

systemic risk

Contingent liability—

systemic risk

Revenue/Expenses—

systemic risk

Balance at 01-01-09 $ 2,377,387 $ 1,138,132 $ (2,077,880) $ (1,437,638)

Guaranteed and non-guaranteed debt fees collected 7,066,423 (1,026,870) (6,039,553)

TAG fees collected 639,176 (89,977) (549,199)

Receivable for TAG fees 187,541 (187,541)

Receivable for TAG accounts at failed institutions 4,124,849

TruPs and accrued interest held for UST 801,422 (801,422)

Market value adjustment on TruPs held for UST (94,624) 94,624

Estimated losses for TAG accounts at failed institutions (1,741,653) 1,741,653 $ 1,741,653

Provision for TLGP losses in future failures (25,672) 25,672 (25,672)

Default of guaranteed debt issued by a failed bank (16) 16 2,033

Overnight investment interest collected 6,085 (6,085)

TLGP operating expenses 3,612 3,612

Reimbursement to DIF for TLGP operating expenses incurred

(3,658,466)

Totals $ 6,430,589 $ 3,298,820(a) $ (7,847,447) $ (1,411,966) $ 1,721,626

(a) Total may not equal the line item due to rounding


17. Subsequent Events

Subsequent events have been evaluatedthrough June 14, 2010, the date the financialstatementsareavailabletobeissued.

FDIC Guaranteed Debt of Limited Liability Companies

During2010,theFDICinitscorporatecapac-ity offered guarantees on $997.4 million inpurchasemoney notes issued by newly-formedlimited liability companies (LLCs). The termsof theguaranteesexpireno later than the finalnotematuringin2020.TheLLCswerecreatedto dispose of $4.6 billion of performing andnon-performingcommercialandresidentialrealestate loansaswellas relatedassetspurchasedfrom multiple receiverships (multibank struc-tured transactions).Private investorspurchased40-50percentownership interests in theLLCs,with the receiverships holding the remaining50-60percentequityinterest.Inexchangefortheguarantees,theDIFexpectstoreceiveestimatedfees totaling$29.0million.Baseduponmodel-ingscenarios,thecashflowsfromtheassetsofeachLLCprovidesufficientcoveragetodefeasethedebtsbytheirmaturitydates.Therefore,theestimatedlosstotheDIFfromtheseguaranteesiszero.

During2010,FDIC-guaranteednotesissuedbythreeLLCstoreceivershipsduring2009and2010were sold to private investors. The timely pay-mentofprincipaldueonthenoteswillcontinuetobefullyguaranteedbytheFDIC(seeNote8).

FDIC Guaranteed Debt of NotesOnMarch12,2010,theFDICissued$1.8bil-

lionofnotesbackedbyapproximately$3.6bil-

lion of residential mortgage-backed securities(RMBS) from seven failed bank receiverships.Theunderlyingsecuritiesweresoldtoastatuto-rytrust,whichsubsequentlyissuedtwoseriesofseniornotes.Thenotesmaturein2038and2048andarebackedbytheRMBS.Investorsinclud-ed banks, investment funds, insurance funds,andpensionfunds.The$1.8billioninproceedswill go to the seven failed bank receivershipsandeventuallybeusedtopaycreditors,includ-ing theDIF.Thiswillmaximize recoveries forthe receiverships and recover substantial fundsfor theDIF.TheFDIC, in its corporate capac-ity,willfullyandunconditionallyguaranteethetimelypaymentofprincipalandinterestdueandpayableontheseniornotes.Inexchangefortheguarantees,theDIFexpectstoreceivemonthlypaymentsbasedontheoutstandingprincipalbal-anceoftheseniornotes.

Amendment of the TLGP to Extend the Transaction Account Guarantee Program (TAG)

An Interim Rule with request for comments, issuedonApril 19, 2010, amends theTLGP toextendtheexpirationdatefortheTAGfromJune30, 2010 toDecember 31, 2010, andgrants theFDICdiscretiontoextendtheprogramtoDecem-ber 31, 2011,without additional rulemaking, ifeconomicconditionswarrantsuchanextension.Assessment rates for institutions participatingin theTAG remain unchangedunder the inter-im rule. Additionally, the interim rule would:1) require TAG assessment reporting based onaverage daily account balances; 2) reduce themaximuminterestrateforqualifyingnegotiableorder of withdrawal (NOW) accounts guaran-teedpursuant to theTAG to0.25percent from


0.50percent;3)provideanirrevocable,one-timeopportunityforinstitutionscurrentlyparticipat-ingintheTAGtoopt-outoftheprogram,effec-tiveonJuly1,2010;and4)establishconformingdisclosurerequirementsforinstitutionsthatopt-out of and those that continue to participate intheextendedprogram.

Proposed Revision of the Deposit Insurance Assessment System

OnApril13,2010,theFDICBoardofDirec-torsapprovedforissuanceaNoticeofProposedRulemakingonAssessments(NPR)torevisetheassessmentsystemapplicabletolargebanks.TheNPRwouldeliminateriskcategoriesandtheuseoflong-termdebtissuerratings,andreplacethefinancialratioscurrentlyusedwithascorecardconsisting of well-defined financial measuresthataremoreforwardlookingandbettersuitedforlargeinstitutions.Additionally,theproposalwouldaltertheassessmentratesapplicabletoallinsureddepositoryinstitutionstoensurethattherevenuecollectedundertheproposedassessmentsystemwouldapproximatelyequalthatundertheexistingassessmentsystem.

2010 Failures Through June 14, 2010Through June 14, 2010, 82 insured institu-

tionsfailedwithtotallossestotheDIFestimatedtobe$16.8billion.


FSLIC Resolution Fund (FRF)

FSLIC Resolution Fund Balance Sheet at December 31Dollars in Thousands

2009 2008

Assets

Cash and cash equivalents (Note 2) $ 3,470,125 $ 3,467,227

Receivables from thrift resolutions and other assets, net (Note 3) 32,338 34,952

Receivables from U.S. Treasury for goodwill judgments (Note 4) 405,412 142,305

Total Assets $ 3,907,875 $ 3,644,484

Liabilities

Accounts payable and other liabilities $ 2,972 $ 8,066

Contingent liabilities for litigation losses and other (Note 4) 405,412 142,305

Total Liabilities 408,384 150,371

Resolution Equity (Note 5)

Contributed capital 127,847,696 127,442,179

Accumulateddeficit (124,348,205) (123,948,066)

Total Resolution Equity 3,499,491 3,494,113

Total Liabilities and Resolution Equity $ 3,907,875 $ 3,644,484



FSLIC Resolution Fund Statement of Income and Accumulated Deficit for the Years Ended December 31Dollars in Thousands

2009 2008

Revenue

Interest on U.S. Treasury obligations $ 3,167 $ 56,128

Other revenue 5,276 7,040

Total Revenue 8,443 63,168

Expenses and Losses

Operating expenses 4,905 3,188

Provision for losses 2,051 (891)

Goodwill/Guarinilitigationexpenses(Note4) 408,997 254,247

Recoveryoftaxbenefits (10,279) (26,846)

Other expenses 2,908 11,623

Total Expenses and Losses 408,582 241,321

Net Loss (400,139) (178,153)

Accumulated Deficit—Beginning (123,948,066) (123,769,913)

Accumulated Deficit—Ending $ (124,348,205) $ (123,948,066)



FSLIC Resolution Fund Statement of Cash Flows for the Years Ended December 31 Dollars in Thousands

2009 2008

Operating Activities

Net Loss $ (400,139) $ (178,153)

Adjustments to reconcile net loss to net cash used by operating activities:

Provision for losses 2,051 (891)

Change In Operating Assets and Liabilities:

Decrease in receivables from thrift resolutions and other assets 563 751

(Decrease)/Increase in accounts payable and other liabilities (5,094) 3,791

Increase in contingent liabilities for litigation losses and other 263,107 106,954

Net Cash Used by Operating Activities (139,512) (67,548)

Financing Activities

Provided by:

U.S. Treasury payments for goodwill litigation (Note 4) 142,410 142,642

Used by:

Payments to Resolution Funding Corporation (Note 5) 0 (225,000)

Net Cash Provided/(Used) by Financing Activities 142,410 (82,358)

Net Increase/(Decrease) in Cash and Cash Equivalents 2,898 (149,906)

Cash and Cash Equivalents—Beginning 3,467,227 3,617,133

Cash and Cash Equivalents—Ending $ 3,470,125 $ 3,467,227



Notes to the FiNaNcial statemeNtsFslic resolutioN FuNDDecember 31, 2009 aND 2008

1. Legislative History and Operations/Dissolution of the FSLIC Resolution Fund

Legislative HistoryThe Federal Deposit Insurance Corpora-

tion (FDIC) is the independent deposit insur-ance agency created by Congress in 1933 tomaintain stability andpublic confidence in thenation’sbankingsystem.Provisionsthatgoverntheoperationsof theFDICaregenerally foundin theFederalDeposit Insurance (FDI)Act, asamended, (12U.S.C. 1811, et seq). In carryingoutthepurposesoftheFDIAct,asamended,theFDICinsuresthedepositsofbanksandsavingsassociations,andincooperationwithotherfed-eralandstateagenciespromotes thesafetyandsoundnessof insureddepository institutionsbyidentifying,monitoringandaddressing risks tothedepositinsurancefundestablishedintheFDIAct, as amended. In addition,FDIC is chargedwith responsibility for the sale of remainingassets and satisfaction of liabilities associatedwiththeformerFederalSavingsandLoanInsur-ance Corporation (FSLIC) and the ResolutionTrustCorporation(RTC).

The U.S. Congress created the FSLICthroughtheenactmentof theNationalHousingActof1934.TheFinancialInstitutionsReform,Recovery, and Enforcement Act of 1989 (FIR-REA)abolishedtheinsolventFSLIC,createdtheFSLICResolutionFund (FRF), and transferredtheassetsandliabilitiesoftheFSLICtotheFRF-exceptthoseassetsandliabilitiestransferredto

the RTC-effective on August 9, 1989. Further,the FIRREA established the Resolution Fund-ing Corporation (REFCORP) to provide partof the initial funds used by theRTC for thriftresolutions.

TheRTCCompletionActof1993(RTCCom-pletionAct)terminatedtheRTCasofDecember31,1995.All remainingassetsandliabilitiesoftheRTCweretransferredtotheFRFonJanuary1,1996.Today,theFRFconsistsoftwodistinctpoolsofassetsandliabilities:onecomposedoftheassetsandliabilitiesoftheFSLICtransferredto the FRF upon the dissolution of the FSLIC(FRF-FSLIC), and the other composed of theRTCassetsandliabilities(FRF-RTC).Theassetsof one pool are not available to satisfy obliga-tionsoftheother.

TheFDICistheadministratoroftheFRFandthe Deposit Insurance Fund. These funds aremaintainedseparatelytocarryouttheirrespec-tivemandates.

Operations/Dissolution of the FRFTheFRFwillcontinueoperationsuntilallof

itsassetsaresoldorotherwiseliquidatedandallofitsliabilitiesaresatisfied.Anyfundsremain-ing in theFRF-FSLICwill be paid to theU.S.Treasury.AnyremainingfundsoftheFRF-RTCwillbedistributedtotheREFCORPtopaytheinterest on the REFCORP bonds. In addition,the FRF-FSLIC has available until expended$602.2millioninappropriationstofacilitate, ifrequired,effortstowinduptheresolutionactiv-ityoftheFRF-FSLIC.

TheFDIChasconductedanextensivereviewand cataloging of FRF’s remaining assets andliabilities. Some of the issues and items thatremainopeninFRFare:1)criminalrestitution


orders(generallyhavefrom3to8yearsremain-ingtoenforce);2)collectionsofsettlementsandjudgments obtained against officers and direc-tors and other professionals responsible forcausing or contributing to thrift losses (gener-allyhaveup to10years remaining toenforce);3)numerousassistanceagreementsenteredintoby the former FSLIC (FRF could continue toreceivetaxbenefitssharingthroughyear2013);4)goodwilllitigation(nofinaldateforresolutionhasbeenestablished;seeNote4);and5)afford-ablehousingprogrammonitoring(requirementscanexceed25years).TheFRFcouldpotentiallyrealizesubstantial recoveries fromthe taxben-efits sharing of up to approximately $231mil-lion;however,anyassociatedrecoveriesarenotreflectedinFRF’sfinancialstatementsgiventhesignificant uncertainties surrounding the ulti-mateoutcome.

Receivership OperationsThe FDIC is responsible for managing and

disposing of the assets of failed institutions inanorderlyandefficientmanner.Theassetsheldby receivership entities, and the claims againstthem, are accounted for separately from FRFassetsandliabilities toensure thatreceivershipproceeds are distributed in accordance withapplicablelawsandregulations.Also,theincomeand expenses attributable to receiverships areaccountedforas transactionsof thosereceiver-ships.Receivershipsarebilledby theFDICforservicesprovidedontheirbehalf.

2. Summary of Significant Accounting Policies

GeneralThese financial statements pertain to the

financialposition,resultsofoperations,andcashflows of the FRF and are presented in accor-dancewithU.S. generally accepted accountingprinciples(GAAP).AspermittedbytheFederalAccounting StandardsAdvisoryBoard’s State-ment of Federal Financial Accounting Stan-dards34,The Hierarchy of Generally Accepted Accounting Principles, Including the Application of Standards Issued by the Financial Accounting Standards Board, the FDIC prepares financialstatements in conformity with standards pro-mulgatedbytheFinancialAccountingStandardsBoard(FASB).Thesestatementsdonotincludereporting for assets and liabilities of resolutionentities because these entities are legally sepa-rateanddistinct,andtheFRFdoesnothaveanyownership interests in them.Periodicand finalaccountability reports of resolution entities arefurnishedtocourts,supervisoryauthorities,andothersuponrequest.

Use of EstimatesManagement makes estimates and assump-

tionsthataffecttheamountsreportedinthefinan-cialstatementsandaccompanyingnotes.Actualresultscoulddifferfromtheseestimates.Whereitisreasonablypossiblethatchangesinestimateswill cause a material change in the financialstatementsinthenearterm,thenatureandextentofsuchchangesinestimateshavebeendisclosed.Themoresignificantestimatesincludeallowancefor losseson receivables from thrift resolutionsandtheestimatedlossesforlitigation.


Cash EquivalentsCashequivalentsareshort-term,highlyliquid

investments consisting primarily of U.S. Trea-suryOvernightCertificates.

Provision for LossesTheprovisionforlossesrepresentsthechange

in the valuation of the receivables from thriftresolutionsandotherassets.

Disclosure about Recent Accounting Pronouncements

FinancialAccountingStandardsBoard•(FASB)AccountingStandardsCodification(ASC)105,Generally Accepted Account-ing Principles(formerlySFASNo.168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162,issuedinJune2009)becameeffectiveforfinancialstate-mentscoveringperiodsendingafterSeptem-ber15,2009.TheFDICfollowsaccountingstandardssetbytheFASB.OnJuly1,2009,theFASBASCwaslaunchedandbecamethesolesourceofauthoritativeaccountingprin-ciplesapplicabletotheFDIC. Allexistingstandardsthatwereusedto

createtheCodificationhavebecomesuper-seded.Asaresult,referencestogenerallyacceptedaccountingprinciplesintheseNoteswillconsistofthenumbersusedintheCodificationand,ifapplicable,theformerpronouncementnumber.TheCodification’spurposewasnottocreatenewaccountingorreportingguidance,buttoorganizeandsimplifyauthoritativeGAAPliterature.Con-sequently,therewillbenochangetoFRF’s

financialstatementsduetotheimplementa-tionofthisStatement.

SFASNo.167,• Amendments to FASB Inter-pretation No. 46(R),wasissuedbytheFASBinJune2009,andsubsequentlycodifieduponissuanceofAccountingStandardsUpdateNo.2009-17,Consolidations(ASC810)—Improvements to Financial Reporting by Enterprises Involved with Variable Inter-est Entities.SFAS167,effectiveforreportingperiodsbeginningafterNovember15,2009,modifiestheformerquantitativeapproachfordeterminingtheprimarybeneficiaryofavariableinterestentity(VIE)toaqualitativeassessment.Anenterprisemustdeterminequalitativelywhetherithas(1)thepowertodirecttheactivitiesoftheVIEthatmostsignificantlyimpacttheentity’seconomicperformanceand(2)theobligationtoabsorblossesoftheVIEortherighttoreceiveben-efitsfromtheVIEthatcouldpotentiallybesignificanttotheVIE.Ifanenterprisehasbothofthesecharacteristics,theenterpriseisconsideredtheprimarybeneficiaryandmustconsolidatetheVIE.Managementiscurrentlyreviewingthepossibleimpact,ifany,ofSFAS167(nowcodifiedinASC810)onFRF’saccountingandfinancialreportingrequirementsfor2010.

SFASNo.166,• Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140,wasissuedbytheFASBinJune2009.Subsequently,theFASBissuedAccountingStandardsUpdateNo.2009-16,Transfers and Servicing (ASC 860)—Account-ing for Transfers of Financial Assets, to


formallyincorporatetheprovisionsofSFASNo.166intotheCodification.SFAS166removestheconceptofaqualifyingspecial-purposeentityfromGAAP,changestherequirementsforderecognizingfinancialassets,andrequiresadditionaldisclosuresaboutatransferor’scontinuinginvolvementintransferredfinancialassets.TheFASB’sobjectiveistoimprovetheinformationthatareportingentityprovidesinitsfinancialstate-mentsaboutatransferoffinancialassets;theeffectsofatransferonitsfinancialposition,financialperformance,andcashflows;andatransferor’scontinuinginvolvement,ifany,intransferredfinancialassets. TheprovisionsofSFAS166(nowcodified

inASC860)becomeeffectivefortheFRFforalltransfersoffinancialassetsoccurringonorafterJanuary1,2010.

SFASNo.165,• Subsequent Events,wasissuedinMay2009andsubsequentlycodi-fiedinFASBASC855,Subsequent Events.ASC855representstheinclusionofguidanceonsubsequenteventsintheaccountinglit-erature.Historically,managementhadreliedonauditingliteratureforguidanceonassess-inganddisclosingsubsequentevents.ASC855nowrequiresthedisclosureofthedatethroughwhichanentityhasevaluatedsubse-quenteventsandthebasisforthatdate—thatis,whetherthatdaterepresentsthedatethefinancialstatementswereissued or were available to be issued.Thesenewprovisions,effectivefortheFRFasofDecember31,2009,donothaveasignificantimpactonthefinancialstatements.

Other recent accounting pronouncementshave been deemed to be not applicable to thefinancialstatementsaspresented.

Related PartiesThe nature of related parties and a descrip-

tion of related party transactions are discussedinNote1anddisclosedthroughoutthefinancialstatementsandfootnotes.

3. Receivables From Thrift Resolutions and Other Assets, Net

Receivables From Thrift ResolutionsThereceivablesfromthriftresolutionsinclude

paymentsmadebytheFRFtocoverobligationstoinsureddepositors,advancestoreceivershipsforworkingcapital,andadministrativeexpensespaidonbehalfofreceiverships.Anyrelatedallow-ance for loss represents thedifferencebetweenthe fundsadvancedand/orobligations incurredandtheexpectedrepayment.AssetsheldbytheFDICinitsreceivershipcapacityfortheformerRTCareasignificantsourceofrepaymentoftheFRF’sreceivablesfromthriftresolutions.AsofDecember31,2009,8ofthe850FRFreceiver-shipsremainactiveprimarilyduetounresolvedlitigation,includinggoodwillmatters.

The FRF receiverships held assets with abook value of $20million as ofDecember 31,2009and2008,(whichprimarilyconsistofcash,investments, and miscellaneous receivables).Theestimatedcashrecoveriesfromthemanage-mentanddispositionoftheseassetsareusedtoderivetheallowanceforlosses.TheFRFreceiv-ershipassetsarevaluedbydiscountingprojectedcashflows,netofliquidationcostsusingcurrent


market-based risk factors applicable to a givenasset’s type and quality. These estimated assetrecoveries are regularly evaluated, but remainsubject to uncertainties because of potentialchanges in economic and market conditions.SuchuncertaintiescouldcausetheFRF’sactualrecoveriestovaryfromcurrentestimates.

Other AssetsOtherassetsprimarilyincludecreditenhance-

ment reservesvalued at $21.3millionand$21.2million as of December 31, 2009 and 2008,respectively. The credit enhancement reservesresulted from swap transactions where the for-merRTCreceivedmortgage-backedsecuritiesinexchange for single-familymortgage loans.TheRTC supplied credit enhancement reserves forthemortgageloansintheformofcashcollateralto cover future credit losses over the remaininglifeoftheloans.Thesereservesmaycoverfuturecreditlossesthrough2020.

Receivables From Thrift Resolutions and Other Assets, Net at December 31Dollars in Thousands

2009 2008

Receivables from closed thrifts $ 5,744,509 $ 5,725,450

Allowance for losses (5,736,737) (5,717,740)

Receivables from Thrift Resolutions, Net 7,772 7,710

Other assets 24,566 27,242

Total $ 32,338 $ 34,952

4. Contingent Liabilities for:

Litigation LossesTheFRFrecordsanestimatedlossforunre-

solvedlegalcasestotheextentthoselossesareconsidered probable and reasonably estimable.AsofDecember31,2009and2008,respectively,$405.4millionand$142.3millionwererecordedasprobablelosses.Additionally,atDecember31,2009,theFDIChasdeterminedthattherearenolossesfromunresolvedlegalcasesconsideredtobereasonablypossible.

In December 2008, FDIC concluded a 13½yearoldlegalcase(FDIC v. Hurwitz)arisingfromtheDecember30,1988failureofUnitedSavingsAssociationofTexas. InAugust2005, theDis-trictCourtorderedsanctionsagainsttheFDICintheamountof$72million.However,inAugust2008,theFifthCircuitCourtofAppealsreversed$57millionof the sanctions, but remanded theremaining $15million to the District Court todeterminewhatportion shouldbepaid.Subse-quently, inNovember 2008, an agreementwasreachedbetweentheparties,wherebytheFDICwould pay $10 million to settle the case. OnDecember 17, 2008, the settlement agreementwasfullyexecutedandthesettlementfundswerepaid.The$10millionpaymentisrecognizedinthe“Otherexpenses”lineitem.

Additional Contingency

Goodwill LitigationIn United States v. Winstar Corp., 518U.S.

839 (1996), the SupremeCourt held thatwhenitbecameimpossiblefollowingtheenactmentofFIRREAin1989for thefederalgovernment toperform certain agreements to count goodwill


pending at the appellate or trial court level, aswellastheuniquecircumstancesofeachcase.

The FDIC believes that it is probable thatadditional amounts, possibly substantial, maybepaidfromtheFRF-FSLICasaresultofjudg-ments and settlements in the goodwill litiga-tion. Based on representations from the DOJ,the FDIC is unable to estimate a range of losstotheFRF-FSLICfromthegoodwill litigation.However,theFRFcandrawfromanappropria-tionprovidedbySection110oftheDepartmentofJusticeAppropriationsAct,2000(PublicLaw106-113,AppendixA,Title I, 113Stat. 1501A-3,1501A-20)suchsumsasmaybenecessaryforthepaymentofjudgmentsandcompromiseset-tlements in thegoodwill litigation.Thisappro-priation is to remain available until expended.Because an appropriation is available to paysuchjudgmentsandsettlements,anyliabilityforgoodwilllitigationshouldhaveacorrespondingreceivablefromtheU.S.TreasuryandthereforehavenonetimpactonthefinancialconditionoftheFRF-FSLIC.

The FRF paid $142.4 million as a result ofjudgmentsandsettlementsinfourgoodwillcasesfortheyearendedDecember31,2009,comparedto$142.6millionforfourgoodwillcasesfortheyear ended December 31, 2008. As describedabove,theFRFreceivedappropriationsfromtheU.S.Treasurytofundthesepayments.Basedonrecentcourtdecisions,theFRFaccrueda$405.4millioncontingentliabilityandoffsettingreceiv-ablefromtheU.S.Treasuryforjudgmentsinsixcases.During 2009, four of the six caseswerefullyadjudicatedbutnotpaidasofyearend.

Inaddition,theFRF-FSLICpaysthegoodwilllitigationexpensesincurredbyDOJbasedonaMemorandum of Understanding (MOU) dated

toward regulatory capital, the plaintiffs wereentitled to recover damages from the UnitedStates. Approximately eight remaining casesarependingagainst theUnitedStatesbasedonallegedbreachesoftheseagreements.

On July 22, 1998, the Department of Jus-tice’s (DOJ’s) Office of Legal Counsel (OLC)concluded that the FRF is legally available tosatisfy all judgments and settlements in thegoodwilllitigationinvolvingsupervisoryactionorassistanceagreements.OLCdeterminedthatnonperformance of these agreements was acontingent liability that was transferred to theFRFonAugust9,1989,uponthedissolutionoftheFSLIC.OnJuly23,1998,theU.S.Treasurydetermined, based on OLC’s opinion, that theFRFistheappropriatesourceoffundsforpay-ments of any such judgments and settlements.The FDICGeneralCounsel concluded that, asliabilities transferred onAugust 9, 1989, thesecontingentliabilitiesforfuturenonperformanceofprioragreementswithrespecttosupervisorygoodwill were transferred to the FRF-FSLIC,whichisthatportionoftheFRFencompassingtheobligationsoftheformerFSLIC.TheFRF-RTC,whichencompassestheobligationsoftheformerRTCandwascreateduponthetermina-tion of theRTC onDecember 31, 1995, is notavailable to pay any settlements or judgmentsarisingoutofthegoodwilllitigation.

ThegoodwilllawsuitsareagainsttheUnitedStatesandassucharedefendedbytheDOJ.OnJanuary 26, 2010, theDOJ again informed theFDICthatitis“unableatthistimetoprovideareasonableestimateofthelikelyaggregatecon-tingentliabilityresultingfromtheWinstar-relat-edcases.”Thisuncertaintyarises,inpart,fromthe existence of significant unresolved issues


Representations and WarrantiesAspartoftheRTC’seffortstomaximizethe

returnfromthesaleofassetsfromthriftresolu-tions,representationsandwarranties,andguar-anteeswere offered on certain loan sales. Themajority of loans subject to these agreementshavebeenpaidoff,refinanced,ortheperiodforfilingclaimshasexpired.TheFDIC’sestimateofmaximum potential exposure to the FRF is$13.2million.Noclaimsinconnectionwithrep-resentations andwarranties have been assertedsince 1998 on the remaining open agreements.Becauseoftheageoftheremainingportfolioandlackofclaimactivity,theFDICdoesnotexpectnewclaimstobeassertedinthefuture.Conse-quently, the financial statements at December31,2009and2008,donotincludealiabilityfortheseagreements.

5. Resolution Equity

As stated in the Legislative History sectionofNote1,theFRFiscomprisedoftwodistinctpools: the FRF-FSLIC and the FRF-RTC. TheFRF-FSLICconsistsoftheassetsandliabilitiesof the former FSLIC. The FRF-RTC consistsof the assets and liabilities of the formerRTC.Pursuanttolegalrestrictions,thetwopoolsaremaintainedseparatelyandtheassetsofonepoolare not available to satisfy obligations of theother.

The following table shows the contributedcapital,accumulateddeficit,andresultingreso-lutionequityforeachpool.

October 2, 1998, between the FDIC and DOJ.Under the terms of theMOU, the FRF-FSLICpaid $3.5million and $4.3million to DOJ forfiscal years (FY) 2010 and 2009, respectively.Asinprioryears,DOJcarriedoverandappliedall unused funds toward current FY charges.AtDecember 31, 2009,DOJ had an additional$3.3millioninunusedFY2009fundsthatwereappliedagainstFY2010chargesof$6.8million.

Guarini LitigationParalleling the goodwill cases are similar

cases alleging that the government breachedagreements regarding tax benefits associatedwithcertainFSLIC-assistedacquisitions.Theseagreements allegedly contained the promise oftaxdeductionsforlossesincurredonthesaleofcertainthriftassetspurchasedbyplaintiffsfromtheFSLIC,eventhoughtheFSLICprovidedtheplaintiffs with tax-exempt reimbursement. AprovisionintheOmnibusBudgetReconciliationActof1993(popularlyreferredtoasthe“Guari-nilegislation”)eliminatedthetaxdeductionsfortheselosses.

All eight of the original Guarini cases havebeen settled. However, a case settled in 2006furtherobligates theFRF-FSLICas aguarantorfor all tax liabilities in the event the settlementamountisdeterminedbytaxauthoritiestobetax-able.Themaximumpotentialexposureunderthisguaranteeisapproximately$81million.However,theFDICbelievesthatitisveryunlikelythesettle-mentwillbesubjecttotaxation.Moredefinitiveinformationmaybeavailableduring2010, aftertheIRScompletesitsLargeCaseProgramauditontheinstitution’s2006returns.TheFRFisnotexpectedtofundanypaymentunderthisguaran-teeandnoliabilityhasbeenrecorded.


Accumulated DeficitThe accumulated deficit rep-

resents the cumulative excess ofexpenses over revenue for activ-ity related to the FRF-FSLIC andthe FRF-RTC. Approximately$29.8 billion and $87.9 billionwere brought forward from theformerFSLICandtheformerRTConAugust9,1989,andJanuary1,1996,respectively.TheFRF-FSLICaccumulated deficit has increasedby$13.0billion,whereastheFRF-

RTCaccumulateddeficithasdecreasedby$6.3billion,sincetheirdissolutiondates.

6. Employee Benefits

Pension BenefitsEligible FDIC employees (permanent and

term employees with appointments exceedingoneyear)arecoveredbythefederalgovernmentretirementplans,eithertheCivilServiceRetire-mentSystem(CSRS)or theFederalEmployeesRetirement System (FERS).Although theFRFcontributes a portion of pension benefits foreligible employees, it does not account for theassetsofeitherretirementsystem.TheFRFalsodoes not have actuarial data for accumulatedplanbenefitsortheunfundedliabilityrelativetoeligibleemployees.TheseamountsarereportedonandaccountedforbytheU.S.OfficeofPer-sonnelManagement.TheFRF’spension-relatedexpenseswere$42thousandand$169thousandfor2009and2008,respectively.

Resolution Equity at December 31, 2009Dollars in Thousands

FRF-FSLIC FRF-RTCFRF

Consolidated

Contributed capital—beginning $ 45,692,842 $ 81,749,337 $ 127,442,179

Add:U.S.Treasurypayments/receivable for goodwill litigation 405,517 0 405,517

Less:REFCORPpayments 0 0 0

Contributed capital—ending 46,098,359 81,749,337 127,847,696

Accumulateddeficit (42,764,230) (81,583,975) (124,348,205)

Total $ 3,334,129 $ 165,362 $ 3,499,491

Contributed CapitalTheFRF-FSLICandtheformerRTCreceived

$43.5 billion and $60.1 billion from the U.S.Treasury,respectively,tofundlossesfromthriftresolutionspriortoJuly1,1995.Additionally,theFRF-FSLIC issued $670million in capital cer-tificatestotheFinancingCorporation(amixed-ownership government corporation establishedtofunctionsolelyasafinancingvehiclefortheFSLIC)andtheRTCissued$31.3billionoftheseinstrumentstotheREFCORP.FIRREAprohib-ited the payment of dividends on any of thesecapitalcertificates.

ThroughDecember 31, 2009, the FRF-RTChasreturned$4.556billiontotheU.S.Treasuryandmadepaymentsof$5.022billiontotheREF-CORP.Theseactionsservetoreducecontributedcapital.

FRF-FSLIC received $142.4million in U.S.Treasury payments for goodwill litigation in2009. Furthermore, $405.4 million and $142.3millionwereaccruedforasreceivablesatyear-end 2009 and2008, respectively.The effect ofthisactivitywasanincreaseincontributedcapi-talof$405.5millionin2009.


7. Disclosures About the Fair Value of Financial InstrumentsThe financial asset recognized and measured at fair value on a recurring basis at each reporting date

is cash equivalents. The following tables present the FRF’s financial asset measured at fair value as of December 31, 2009 and 2008.

Postretirement Benefits Other Than PensionsThe FRF no longer records a liability for the

postretirement benefits of life and dental insur-ance (a long-term liability), due to the expected dissolution of the FRF. The liability is recorded by the DIF. However, the FRF does continue to pay its proportionate share of the yearly claim expenses associated with these benefits.


Fair Value Measurement UsingQuoted Prices in Active Markets

for Identical Assets

(Level 1)

Significant Other

Observable Inputs

(Level 2)


Inputs (Level 3)


Assets

Cash equivalents (Special U.S. Treasuries)1 $ 3,470,125 $ 0 $ 0 $ 3,470,1251 Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the U.S. Bureau of Public Debt.


Fair Value Measurement UsingQuoted Prices in Active Markets

for Identical Assets

(Level 1)

Significant Other

Observable Inputs

(Level 2)


Inputs (Level 3)


Assets

Cash equivalents (Special U.S. Treasuries)1 $ 3,467,227 $ 0 $ 0 $ 3,467,2271 Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the U.S. Bureau of Public Debt.


Some of the FRF’s financial assets and lia-bilities are not recognized at fair value but are recorded at amounts that approximate fair value due to their short maturities and/or comparabil-ity with current interest rates. Such items include other short-term receivables and accounts pay-able and other liabilities.

The net receivable from thrift resolutions is influenced by the underlying valuation of receiv-ership assets. This corporate receivable is unique and the estimate presented is not necessarily indicative of the amount that could be realized in a sale to the private sector. Such a sale would require indeterminate, but substantial, discounts for an interested party to profit from these assets because of credit and other risks. Consequently, it is not practicable to estimate its fair value.

Other assets primarily consist of credit enhancement reserves, which are valued by performing projected cash flow analyses using market-based assumptions (see Note 3).

117

Government Accountability Office’s Audit Opinion


Management’s Response

AppendixI


Management’s Report on Internal Control over Financial Reporting

TheFederalDepositInsuranceCorporation’s(FDIC’s)internalcontroloverfinancialreportingisaprocesseffectedbythosechargedwithgovernance,management,andotherpersonnel,designedtoprovidereasonableassuranceregardingthepreparationofreliablefinancialstatementsinaccordancewithU.S.generallyacceptedaccountingprinciples(GAAP),andcompliancewithapplicablelawsandregulations.TheobjectiveoftheFDIC’sinternalcontroloverfinancialreportingistoreasonablyassurethat(1)transactionsareproperlyrecorded,processedandsummarizedtopermittheprepara-tionoffinancialstatementsinaccordancewithGAAP,andassetsaresafeguardedagainstlossfromunauthorizedacquisition,use,ordisposition;and(2)transactionsareexecutedinaccordancewiththelawsandregulationsthatcouldhaveadirectandmaterialeffectonthefinancialstatements.

Managementisresponsibleforestablishingandmaintainingeffectiveinternalcontroloverfinan-cialreporting.ManagementassessedtheeffectivenessoftheFDIC’sinternalcontroloverfinancialreportingasofDecember31,2009,throughitsenterpriseriskmanagementprogramthatseekstocomplywiththespiritofthefollowingstandards,amongothers:FederalManagers’FinancialInteg-rityAct(FMFIA);ChiefFinancialOfficersAct(CFOAct);GovernmentPerformanceandResultsAct(GPRA);FederalInformationSecurityManagementAct(FISMA);andOMBCircularA-123.Inaddition,otherstandardsthattheFDICconsidersaretheframeworksetforthbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission’sInternal Control-Integrated Framework andtheU.S.GovernmentAccountabilityOffice’s(GAO’s)Standards for Internal Control in the Fed-eral Government.

Basedonourevaluation,FDICmanagementconcludedthatasofDecember31,2009,theCorporationgenerallymaintainedeffectiveinternalcontrols,withtheexceptionofamaterialweaknessrelatedtoitsprocessforestimatinglossesonloss-sharingarrangements.Therefore,theCorporationdidnotmaintain,inallmaterialrespects,effectiveinternalcontroloverfinancialreporting.

FederalDepositInsuranceCorporation June14,2010

137

Overview of the IndustryTotalnetincomeforthe8,012FDIC-insured

commercialbanksand savings institutions thatreported financial results as of December 31,2009,was$12.5billionfortheyear,upfrom$4.5billionin2008,butwellbelowthe$100billionthat insured institutions earned in 2007. Theaveragereturnonassets(ROA),abasicyardstickofearningsperformance,was0.09percent,com-paredto0.03percentin2008.ThesearethetwolowestannualROAsfortheindustryinthepast22 years. Most of the year-over-year improve-ment in industry profitability occurred at thelargest institutions. Almost two out of everythreeinsuredinstitutions(63.2percent)reportedalowerROAin2009thanin2008,and29.5per-centofallinstitutionsreportedanetlossfortheyear.Thisisthehighestpercentageofunprofit-able institutions in the26years forwhichdataareavailable.

Historicallyhigh expenses for credit-qualityproblems were the principal cause of earningsweakness. Insured institutions set aside $247.7billioninloan-lossprovisionsduring2009,com-pared to $177 billion a year earlier. Total lossprovisions in 2009 represented 38 percent ofthe industry’s net operating revenue (net inter-estincomeplustotalnoninterestincome)fortheyear,thelargestproportioninanyyearsincethecreationoftheFDIC.

Despite the burden of increased loan lossexpensesandtheweaknessoftheU.S.economy,the industrywas considerably resilient in gen-erating revenue during the year. Net operatingrevenue totaled $656.3 billion, an increase of$90.9billion(16.1percent)over2008.Netinter-estincomewas$38.1billion(10.7percent)high-

erthanayearearlier,whilenoninterestincomeincreasedby$52.8billion(25.4percent).

The improvement in net interest incomewasattributabletohighernetinterestmargins(NIMs),as the industry’s total interest-earning assetsdeclinedby$477.2billion (4.1percent) in2009.TheaverageNIMroseto3.47percentin2009,upfrom3.16percentayearearlier.Thisisthehigh-estannualNIMfor the industrysince2005andthefirsttimeinsevenyearsthatithasincreased.Muchoftheyear-over-yearimprovementinNIMsoccurred at larger institutions,which benefittedfrom a sharp decline in average funding costs.More than half of all institutions (53.8 percent)reportedlowerNIMscomparedto2008.

Growth in noninterest income was led byincreased trading revenue,which totaled $24.8billion,comparedtotradinglossesof$1.8billionayearearlier.Servicingfeesalsopostedstronggrowth, rising to $30.8 billion in 2009 from$13.6 billion in 2008. Income from securitiza-tionactivitieswasanotableareaofnoninterestincomeweaknessin2009.Securitizationincometotaledonly$4.8billion,downfrom$15.3billionthepreviousyear.

Higherassetvaluescontributed toa$14bil-lion reduction in realized losses on securitiesandotherassetsin2009.In2008,insuredinsti-tutionsreported$15.4billioninrealizedlosses;in2009,realizedlossestotaledonly$1.4billion.Improvementinassetvalueswasalsoevidentina$12.6billion(38.6percent)declineinchargesforgoodwill impairmentandother intangibleassetexpenses. These charges, which reached $32.7billionin2008,fellto$20.1billionin2009.

Despite lower goodwill impairment costs,total noninterest expenses increased by $16.2billion(4.4percent) in2009.Deposit insurance


premiums paid by insured institutions totaled$17.8 billion, an increase of $14.8 billion over2008.Expenses for salariesandemployeeben-efitswere$11.4billion(7.5percent)higherthanin2008.

Aswasthecasein2008,failuressignificant-ly affected earnings reported for the full yearbecause losses incurred by failed institutionswere not included in the year-to-date incomereportedbysurvivinginstitutionsasofDecem-ber31.During2009,119failedinstitutionsfiledfinancialreportsforoneormorequarterspriortotheirfailure.Together,theseinstitutionsreportedmorethan$8.2billioninnetlossesthatarenotincluded in full-year earnings for the industry.Similarly,forinstitutionsthatchangeownershipor aremerged into other institutions, purchaseaccounting rules stipulate that the income andexpenses that have been booked by acquiredinstitutionsaretoberesettozeroasofthedateof acquisition. Previously accrued income andexpenses become adjustments to assets, equitycapital,andreserves,andarenotincludedinthesubsequentreportingofyear-to-dateincomeandexpense. If the 2009 losses reported by failedinstitutionshadbeenincluded,theindustry’snetincome for theyearwouldhavebeen less than$5billion.

The industry’s troubled loans continued toincrease in 2009.At the end ofDecember, theamount of loans and leases that were noncur-rent(90daysormorepastdueorinnonaccrualstatus) was $391.3 billion, compared to $233.6billionattheendof2008.Noncurrentloansandleasesrepresented5.37percentofall loansandleases,thehighestpercentageinthe26yearsthatinsured institutions have reported noncurrentloan data.Residentialmortgage loans account-

edformorethanhalf(51.2percent)ofthetotalincrease innoncurrent loans in2009, risingby$80.7 billion. Noncurrent real estate construc-tionanddevelopment(C&D)loansroseby$20.3billion, noncurrent loans to commercial andindustrial (C&I) borrowers increased by $16.7billion,andnoncurrentrealestateloanssecuredbynonfarmnonresidentialproperties increasedby$24.3billion.

Net charge-offs of loans and leases totaled$186.8billionin2009,comparedto$100.4billionin2008.Thefull-yearnetcharge-offrateof2.49percentwas the highest annual rate since 1934.Netcharge-offsofcreditcardloanstotaled$37.5billion for the year, net charge-offs of residen-tialmortgageloanswere$33.9billion,C&Iloancharge-offstotaled$31.8billion,andnetcharge-offsofrealestateC&Dloanswere$27.3billion.

Totalassetsofinsuredinstitutionsregisteredahistoricdeclinein2009,asweakloandemand,tighter loan underwriting standards, increasedloan charge-offs, and deleveraging by institu-tions seeking to boost their regulatory capi-tal ratiosallcontributed toacontraction in theindustry’s balance sheet. Assets fell by $731.7billion(5.3percent)duringtheyear, thelargestannualpercentagedeclinesincetheinceptionoftheFDIC.Thereductioninassetswasledbya$640.9billion(8.3percent)declineinnetloansandleases.C&Iloanbalancesdeclinedby$273.2billion(18.3percent),residentialmortgageloansfellby$128.5billion(6.3percent),andrealestateC&Dloansdeclinedby$139.4billion(23.6per-cent).Realestateloanssecuredbynonfarmnon-residential properties (up $25.2 billion, or 2.4percent)was the onlymajor loan category thathadmeaningfulgrowthin2009.

139

Incontrasttothereductioninindustryassets,depositbalances increasedby$191.1billion (2.1percent)duringtheyear.Nondepositliabilitiesfellby$1trillion(31.3percent).Atyear-end,depositsfunded70.4percentof total industry assets, thehighestproportionsinceMarch31,1996.

The number of insured institutions on theFDIC’s “Problem List” rose from 252 institu-tionswith assetsof$159billion to702 institu-tionswithassetsof$402.8billionin2009.Thisisthelargestnumberandassettotalof“problem”institutions since the middle of 1993. At year-end,morethan95percentofallinsuredinstitu-tions,representingmorethan98percentoftotalindustryassets,metorexceededtheregulatorythreshold defining “well-capitalized” for pur-posesofpromptcorrectiveaction.


V. Management Control

Enterprise Risk ManagementTheOfficeofEnterpriseRiskManagement,

undertheauspicesoftheChiefFinancialOfficerorganization, is responsible for corporate over-sightofinternalcontrolandenterpriseriskman-agement(ERM).ThisincludesensuringthattheFDIC’soperationsandprogramsareeffectiveandefficientandthatinternalcontrolsaresufficienttominimizeexposuretowasteandmismanage-ment. The FDIC recognizes the importance ofa strong riskmanagement and internal controlprogramandhasadoptedamoreproactiveandenterprise-wide approach to managing risk.Thisapproachfocusesontheidentificationandmitigation of risk consistently and effectivelythroughout the Corporation, with emphasis onthose areas/issues most directly related to theFDIC’soverallmission.Asanindependentgov-ernment corporation, the FDIC has differentrequirements thanappropriated federalgovern-ment agencies; nevertheless, its ERM programseekstocomplywiththespiritofthefollowingstandards,amongothers:• FederalManagers’FinancialIntegrityAct

(FMFIA);• ChiefFinancialOfficersAct(CFOAct);• GovernmentPerformanceandResultsAct

(GPRA);• FederalInformationSecurityManagement

Act(FISMA);and• OMBCircularA-123.

TheCFOActextendstotheFDICtheFMFIArequirements for establishing, evaluating andreporting on internal controls. The FMFIArequires agencies to annually provide a state-

ment of assurance regarding the effectivenessofmanagement, administrative and accountingcontrols,andfinancialmanagementsystems.

The FDIC has developed and implementedmanagement,administrative,andfinancialsys-temscontrolsthatreasonablyensurethat:• Programsareefficientlyandeffectivelycar-

riedoutinaccordancewithapplicablelawsandmanagementpolicies;

• Programsandresourcesaresafeguardedagainstwaste,fraud,andmismanagement;

• Obligationsandcostscomplywithapplicablelaws;and

• Reliable,complete,andtimelydataaremain-tainedfordecision-makingandreportingpurposes.

The FDIC’s control standards incorporatethe Government Accountability Office’s (GAO) Standards for Internal Control in the Federal Government. Good internal control systemsareessentialforensuringtheproperconductofFDICbusinessandtheaccomplishmentofman-agementobjectivesbyservingaschecksandbal-ancesagainstundesirableactionsoroutcomes.

AspartoftheCorporation’scontinuedcom-mitmenttoestablishandmaintaineffectiveandefficient internal controls, FDIC managementroutinely conducts reviews of internal controlsystems. The results of these reviews, as wellas considerationof the results of audits, evalu-ations,andreviewsconductedbytheGAO,theOfficeofInspectorGeneral(OIG)andotherout-sideentities,areusedasabasisfor theFDIC’sreportingon theconditionof theCorporation’sinternalcontrolactivities.

V. Management Control 141

andgoingundetectedissuchthatthereisarea-sonable possibility that they could have led tomaterialmisstatementstoDIF’sfinancialstate-mentsthatwouldnothavebeentimelydetectedandcorrected.

Corrective Actions and Target Completion Dates

Severalcorrectiveactionswereinprocessorhavebeencompletedpriortoreleaseofthispub-lication.Remainingactionsinclude:• Implementrevisedguidanceandprocedures

overtheleastcosttestanalysis,including,improvingthereviewchecklistsforpeerreview—June2010

• Requireamonthlyreviewofasampleofcompletedanalyses—July2010.

• Implementaprocesstoimprovethedocu-mentationandapprovalofthechangestotheleastcosttestmodelandloss-shareworksheet—June2010

• ImplementanindependentreviewoftheLLRtemplates—June2010

Additionally,FDICmanagementwillcontin-uetofocusonhighpriorityareas,includingthesixProgramManagementOfficeorganizations,ITsystemssecurity,resolutionofbankfailures,andprivacy,amongothers.

Management Report on Final Actions

AsrequiredunderamendedSection5oftheInspectorGeneralAct of 1978, theFDICmustreportinformationonfinalactiontakenbyman-agement on certain audit reports. For the fed-eralfiscalyearperiodOctober1,2008,through

Material WeaknessesMaterial weaknesses are control shortcom-

ingsinoperationsorsystemsthat,amongotherthings, severely impair or threaten the organi-zation’s ability to accomplish itsmission or topreparetimely,accuratefinancialstatementsorreports.Theshortcomingsareofsufficientmag-nitude that theCorporation isobliged to reportthemtoexternalstakeholders.

Todeterminetheexistenceofmaterialweak-nesses, the FDIC has assessed the results ofmanagement evaluations andexternal auditsofthe Corporation’s risk management and inter-nal control systemsconducted in2009, aswellasmanagement actions taken to address issuesidentifiedintheseauditsandevaluations.Attheendofthe2009audit,GAOidentifiedamaterialweaknessinloss-shareestimationprocessesandasignificantdeficiencyintheinformationtech-nology(IT)securityarea.TheFDICisaddress-ingthecontrolissuesraisedbyGAO,relatedtoits2009financialstatementaudits.

Description of Material WeaknessGAOidentifieddeficiencies incontrolsover

FDIC’sprocess forderivingandreportingesti-matesoflossestotheDIFfromresolutiontrans-actions involving loss-sharing arrangements.Thesedeficienciesresultedinerrorsinthedraft2009DIF financial statements thatwent unde-tectedbyFDICandthatnecessitatedadjustmentsinfinalizingthefinancialstatements.Althoughtheneteffectof theseerrors, less than0.4per-centofnetreceivables,wasultimatelynotmate-rialinrelationtothefinancialstatementstakenasawhole,thenatureofthecontroldeficienciesidentifiedthatresultedintheseerrorsoccurring


Table 3: Audit Reports Without Final Actions But With Management Decisions Over One Year Old for FY 2009

Report No. and Issue Date OIG Audit Finding Management Action

Disallowed Costs

1. AUD-08-006 03-12-2008

TheOIGrecommendedthattheFDICshouldupdate Circular 1380.3, Safeguarding FDIC Infor-mationTechnology(IT)Hardware,toreflecttheFDIC’s current business environment for manag-ingitslaptopcomputerinventoryandtodefinepolicy for the disposal of hard drives.

The FDIC is completing the update and approval process for Circular 1380.3, Safeguarding FDIC Information Technology (IT) Hardware.

Completed:November2009

$0

2. EM-08-002 03-05-2008

TheOIGrecommendedthattheFDICshould revise Circular 1610.2, Security Policy and Proce-dures for FDIC Contractors and Subcontractors, to enhance the current process for conducting con-tractor employee background investigations.

The revisions to Circular 1610.2, Security Policy and Procedures for FDIC Contractors and Subcontrac-tors, have been completed, and DOA has been asked to delay further review due to work being done by the Legal Division to develop security guidelines for contractors.

Completed:February2010

$0

3. EVAL-08-002 12-06-2007

TheOIGrecommendedthattheFDICshouldrevise the FDIC Business Continuity Plans (BCP) and pandemic preparedness plans to more spe-cificallydescribetheroleteleworkplaysinthoseplans.TheOIGalsorecommendedthattheFDICmodify FDIC Form 2121.5, Employee/Supervi-sor Telework Program Agreement, for regular or recurring telework situations to include identify-ing any sensitive data that may be used during telework to assist management in making the decision to approve or disapprove a telework request.

TheFDICisintheprocessoffinalizingmultiplechanges to the Business Continuity Plan and coordinatingacrossmultipleDivisionsandOfficestoeffectthesechanges.Additionally,theFDICiscompleting the changes to Circular 2121.1, Fed-eral Program Circular and Telework Form 2121.5, Employee/Supervisor Telework Program Agree-ment. These documents have been circulated for review and comment. Completed:March2010

$0

4. EVAL-08-005 09-24-2008

TheOIGrecommendedthattheFDICshouldimprove the facilities’ infrastructure for moni-toring energy management and sustainability effortsby:a)Installingorupgradingbuildingenergy management systems, and b) Installing sub-meteringcapabilitiestomonitorspecificusesof energy.

Several of the electrical sub-meters installed in March 2009 were found to be defective, resulting in erroneous energy consumption data. The defective electrical sub-meters are in the process of being repaired/replaced.

Completed:December2009

$0

September30,2009,therewerenoauditreportsinthefollowingcategories:

Table1:ManagementReportonFinalActiononAuditswithDisallowedCosts

Table2:ManagementReportonFinalActionon Audits with Recommendations to PutFundstoBetterUse

Thefollowing tableprovides informationonauditreportsoveroneyearold:

This page intentionally left blank.


A. Key Statistics

TheFDIC’sStrategicPlanandAnnualPerformancePlanprovidethebasisforannualplanningandbudgetingforneededresources.The2009aggregatebudget(forcorporate,receivership,andinvest-mentspending)was$2.57billion,whileactualexpendituresfortheyearwere$2.34billion,about$1.11billionmorethan2008expenditures.

Overthepastdecade,theFDIC’sexpenditureshavevariedinresponsetoworkload.Duringthelasttwoyears,expenditureshaverisen,largelyduetoincreasingresolutionandreceivershipactivity.Toa lesserextent, increasedexpenseshaveresultedfromsupervision-relatedcostsassociatedwith theoversightofmoretroubledinstitutions.

VI. Appendices

FDIC Expenditures 2000–2009Dollars in Millions

$2,500

2,000

1,500

1,000

500

02000 2001 2002 2003 2004 2005 2006 2007 2008 2009

VI. Appendices 145

Estimated Insured Deposits and the Deposit Insurance Fund, December 31, 1934, through December 31, 20091

Dollars in Millions (except Insurance Coverage)

Deposits in Insured Institutions

Insurance Fund as a Percentage of

Year Insurance Coverage2

Total Domestic Deposits

Est. Insured Deposits3

Percentage of Insured Deposits

Deposit Insurance

Fund


Est. Insured Deposits

2009 $250,000 7,705,342 5,391,876 70.0 (20,861.8) (0.27) (0.39)2008 100,000 7,505,360 4,756,809 63.4 17,276.3 0.23 0.36 2007 100,000 6,921,686 4,292,163 62.0 52,413.0 0.76 1.22 2006 100,000 6,640,105 4,153,786 62.6 50,165.3 0.76 1.21 2005 100,000 6,229,764 3,890,941 62.5 48,596.6 0.78 1.25 2004 100,000 5,724,621 3,622,059 63.3 47,506.8 0.83 1.31 2003 100,000 5,223,922 3,452,497 66.1 46,022.3 0.88 1.33 2002 100,000 4,916,078 3,383,598 68.8 43,797.0 0.89 1.29 2001 100,000 4,564,064 3,215,581 70.5 41,373.8 0.91 1.29 2000 100,000 4,211,895 3,055,108 72.5 41,733.8 0.99 1.37 1999 100,000 3,885,826 2,869,208 73.8 39,694.9 1.02 1.38 1998 100,000 3,817,150 2,850,452 74.7 39,452.1 1.03 1.38 1997 100,000 3,602,189 2,746,477 76.2 37,660.8 1.05 1.37 1996 100,000 3,454,556 2,690,439 77.9 35,742.8 1.03 1.33 1995 100,000 3,318,595 2,663,873 80.3 28,811.5 0.87 1.08 1994 100,000 3,184,410 2,588,619 81.3 23,784.5 0.75 0.92 1993 100,000 3,220,302 2,602,781 80.8 14,277.3 0.44 0.55 1992 100,000 3,275,530 2,677,709 81.7 178.4 0.01 0.01 1991 100,000 3,331,312 2,733,387 82.1 (6,934.0) (0.21) (0.25) 1990 100,000 3,415,464 2,784,838 81.5 4,062.7 0.12 0.15 1989 100,000 3,412,503 2,755,471 80.7 13,209.5 0.39 0.48 1988 100,000 2,337,080 1,756,771 75.2 14,061.1 0.60 0.80 1987 100,000 2,198,648 1,657,291 75.4 18,301.8 0.83 1.10 1986 100,000 2,162,687 1,636,915 75.7 18,253.3 0.84 1.12 1985 100,000 1,975,030 1,510,496 76.5 17,956.9 0.91 1.19 1984 100,000 1,805,334 1,393,421 77.2 16,529.4 0.92 1.19 1983 100,000 1,690,576 1,268,332 75.0 15,429.1 0.91 1.22 1982 100,000 1,544,697 1,134,221 73.4 13,770.9 0.89 1.21 1981 100,000 1,409,322 988,898 70.2 12,246.1 0.87 1.24 1980 100,000 1,324,463 948,717 71.6 11,019.5 0.83 1.16


Estimated Insured Deposits and the Deposit Insurance Fund, December 31, 1934, through December 31, 20091 (continued)Dollars in Millions (except Insurance Coverage)







Deposit Insurance

Fund



1979 40,000 1,226,943 808,555 65.9 9,792.7 0.80 1.211978 40,000 1,145,835 760,706 66.4 8,796.0 0.77 1.161977 40,000 1,050,435 692,533 65.9 7,992.8 0.76 1.151976 40,000 941,923 628,263 66.7 7,268.8 0.77 1.161975 40,000 875,985 569,101 65.0 6,716.0 0.77 1.181974 40,000 833,277 520,309 62.4 6,124.2 0.73 1.181973 20,000 766,509 465,600 60.7 5,615.3 0.73 1.211972 20,000 697,480 419,756 60.2 5,158.7 0.74 1.231971 20,000 610,685 374,568 61.3 4,739.9 0.78 1.271970 20,000 545,198 349,581 64.1 4,379.6 0.80 1.251969 20,000 495,858 313,085 63.1 4,051.1 0.82 1.291968 15,000 491,513 296,701 60.4 3,749.2 0.76 1.261967 15,000 448,709 261,149 58.2 3,485.5 0.78 1.331966 15,000 401,096 234,150 58.4 3,252.0 0.81 1.391965 10,000 377,400 209,690 55.6 3,036.3 0.80 1.451964 10,000 348,981 191,787 55.0 2,844.7 0.82 1.481963 10,000 313,304 177,381 56.6 2,667.9 0.85 1.501962 10,000 297,548 170,210 57.2 2,502.0 0.84 1.471961 10,000 281,304 160,309 57.0 2,353.8 0.84 1.471960 10,000 260,495 149,684 57.5 2,222.2 0.85 1.481959 10,000 247,589 142,131 57.4 2,089.8 0.84 1.471958 10,000 242,445 137,698 56.8 1,965.4 0.81 1.431957 10,000 225,507 127,055 56.3 1,850.5 0.82 1.461956 10,000 219,393 121,008 55.2 1,742.1 0.79 1.441955 10,000 212,226 116,380 54.8 1,639.6 0.77 1.411954 10,000 203,195 110,973 54.6 1,542.7 0.76 1.391953 10,000 193,466 105,610 54.6 1,450.7 0.75 1.371952 10,000 188,142 101,841 54.1 1,363.5 0.72 1.341951 10,000 178,540 96,713 54.2 1,282.2 0.72 1.331950 10,000 167,818 91,359 54.4 1,243.9 0.74 1.36

VI. Appendices 147

Estimated Insured Deposits and the Deposit Insurance Fund, December 31, 1934, through December 31, 20091 (continued)Dollars in Millions (except Insurance Coverage)







Deposit Insurance

Fund



1949 5,000 156,786 76,589 48.8 1,203.9 0.77 1.571948 5,000 153,454 75,320 49.1 1,065.9 0.69 1.421947 5,000 154,096 76,254 49.5 1,006.1 0.65 1.321946 5,000 148,458 73,759 49.7 1,058.5 0.71 1.44 1945 5,000 157,174 67,021 42.6 929.2 0.59 1.39 1944 5,000 134,662 56,398 41.9 804.3 0.60 1.43 1943 5,000 111,650 48,440 43.4 703.1 0.63 1.45 1942 5,000 89,869 32,837 36.5 616.9 0.69 1.88 1941 5,000 71,209 28,249 39.7 553.5 0.78 1.96 1940 5,000 65,288 26,638 40.8 496.0 0.76 1.86 1939 5,000 57,485 24,650 42.9 452.7 0.79 1.84 1938 5,000 50,791 23,121 45.5 420.5 0.83 1.82 1937 5,000 48,228 22,557 46.8 383.1 0.79 1.70 1936 5,000 50,281 22,330 44.4 343.4 0.68 1.54 1935 5,000 45,125 20,158 44.7 306.0 0.68 1.52 1934 5,000 40,060 18,075 45.1 291.7 0.73 1.61

1 Prior to 1989, figures are for BIF only and exclude insured branches of foreign banks. For 1989 to 2005, figures represent sum of BIF and SAIF amounts; for 2006 to 2008, figures are for DIF. Amounts from 1989 to 2008 include insured branches of foreign banks. 2 Coverage for certain retirement accounts increased to $250,000 in 2006. Coverage limits do not reflect temporary increases authorized by the Emergency Economic Stabilization Act of 2008. Initial coverage limit was $2,500 from January 1 to June 30, 1934. 3 Prior to year-end 1991, insured deposits were estimated using percentages determined from June Call and Thrift Financial reports.


Income and Expenses, Deposit Insurance Fund, from Beginning of Operations, September 11, 1933, through December 31, 2009 Dollars in Millions

Income Expenses and Losses

Year TotalAssessment

Income Assessment

Credits

Investment and Other

Sources

Effective Assessment

Rate1 Total Provision for Losses

Admin. and Oper. Expenses2

Interest & Other Ins. Expenses

Funding Transfer from the

FSLIC Resolution

FundNet Income

(Loss)

Total $142,396.6 $88,268.6 $11,391.0 $66,107.8 $164,264.5 $135,742.4 $18,138.9 $10,389.2 $139.5 ($21,728.4)

2009 24,706.4 $17,865.4 $148.0 6,989.0 0.2332% 60,709.0 $57,711.8 $1,271.1 $1,726.1 0 (36,002.6)2008 7,306.3 4,410.4 1,445.9 4,341.8 0.0418% 44,339.5 41,838.8 1,033.5 1,467.2 0 (37,033.2) 2007 3,196.2 3,730.9 3,088.0 2,553.3 0.0093% 1,090.9 95.0 992.6 3.3 0 2,105.3 2006 2,643.5 31.9 0.0 2,611.6 0.0005% 904.3 (52.1) 950.6 5.8 0 1,739.2 2005 2,420.5 60.9 0.0 2,359.6 0.0010% 809.3 (160.2) 965.7 3.8 0 1,611.2 2004 2,240.3 104.2 0.0 2,136.1 0.0019% 607.6 (353.4) 941.3 19.7 0 1,632.7 2003 2,173.6 94.8 0.0 2,078.8 0.0019% (67.7) (1,010.5) 935.5 7.3 0 2,241.3 2002 1,795.9 107.8 0.0 2,276.9 0.0023% 719.6 (243.0) 945.1 17.5 0 1,076.3 2001 2,730.1 83.2 0.0 2,646.9 0.0019% 3,123.4 2,199.3 887.9 36.2 0 (393.3) 2000 2,570.1 64.3 0.0 2,505.8 0.0016% 945.2 28.0 883.9 33.3 0 1,624.9 1999 2,416.7 48.4 0.0 2,368.3 0.0013% 2,047.0 1,199.7 823.4 23.9 0 369.7 1998 2,584.6 37.0 0.0 2,547.6 0.0010% 817.5 (5.7) 782.6 40.6 0 1,767.1 1997 2,165.5 38.6 0.0 2,126.9 0.0011% 247.3 (505.7) 677.2 75.8 0 1,918.2 1996 7,156.8 5,294.2 0.0 1,862.6 0.1622% 353.6 (417.2) 568.3 202.5 0 6,803.2 1995 5,229.2 3,877.0 0.0 1,352.2 0.1238% 202.2 (354.2) 510.6 45.8 0 5,027.0 1994 7,682.1 6,722.7 0.0 959.4 0.2192% (1,825.1) (2,459.4) 443.2 191.1 0 9,507.2 1993 7,354.5 6,682.0 0.0 672.5 0.2157% (6,744.4) (7,660.4) 418.5 497.5 0 14,098.9 1992 6,479.3 5,758.6 0.0 720.7 0.1815% (596.8) (2,274.7) 614.83 1,063.1 35.4 7,111.5 1991 5,886.5 5,254.0 0.0 632.5 0.1613% 16,925.3 15,496.2 326.1 1,103.0 42.4 (10,996.4) 1990 3,855.3 2,872.3 0.0 983.0 0.0868% 13,059.3 12,133.1 275.6 650.6 56.1 (9,147.9) 1989 3,496.6 1,885.0 0.0 1,611.6 0.0816% 4,352.2 3,811.3 219.9 321.0 5.6 (850.0) 1988 3,347.7 1,773.0 0.0 1,574.7 0.0825% 7,588.4 6,298.3 223.9 1,066.2 0 (4,240.7) 1987 3,319.4 1,696.0 0.0 1,623.4 0.0833% 3,270.9 2,996.9 204.9 69.1 0 48.5 1986 3,260.1 1,516.9 0.0 1,743.2 0.0787% 2,963.7 2,827.7 180.3 (44.3) 0 296.4 1985 3,385.5 1,433.5 0.0 1,952.0 0.0815% 1,957.9 1,569.0 179.2 209.7 0 1,427.6 1984 3,099.5 1,321.5 0.0 1,778.0 0.0800% 1,999.2 1,633.4 151.2 214.6 0 1,100.3 1983 2,628.1 1,214.9 164.0 1,577.2 0.0714% 969.9 675.1 135.7 159.1 0 1,658.2 1982 2,524.6 1,108.9 96.2 1,511.9 0.0769% 999.8 126.4 129.9 743.5 0 1,524.8 1981 2,074.7 1,039.0 117.1 1,152.8 0.0714% 848.1 320.4 127.2 400.5 0 1,226.6 1980 1,310.4 951.9 521.1 879.6 0.0370% 83.6 (38.1) 118.2 3.5 0 1,226.8

VI. Appendices 149

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations, September 11, 1933, through December 31, 2009 (continued) Dollars in Millions



Income Assessment

Credits


Sources






FSLIC Resolution

FundNet Income

(Loss)

1979 1,090.4 881.0 524.6 734.0 0.0333% 93.7 (17.2) 106.8 4.1 0 996.7 1978 952.1 810.1 443.1 585.1 0.0385% 148.9 36.5 103.3 9.1 0 803.2 1977 837.8 731.3 411.9 518.4 0.0370% 113.6 20.8 89.3 3.5 0 724.2 1976 764.9 676.1 379.6 468.4 0.0370% 212.3 28.0 180.4 4 3.9 0 552.6 1975 689.3 641.3 362.4 410.4 0.0357% 97.5 27.6 67.7 2.2 0 591.8 1974 668.1 587.4 285.4 366.1 0.0435% 159.2 97.9 59.2 2.1 0 508.9 1973 561.0 529.4 283.4 315.0 0.0385% 108.2 52.5 54.4 1.3 0 452.8 1972 467.0 468.8 280.3 278.5 0.0333% 59.7 10.1 49.6 6.0 5 0 407.3 1971 415.3 417.2 241.4 239.5 0.0345% 60.3 13.4 46.9 0.0 0 355.0 1970 382.7 369.3 210.0 223.4 0.0357% 46.0 3.8 42.2 0.0 0 336.7 1969 335.8 364.2 220.2 191.8 0.0333% 34.5 1.0 33.5 0.0 0 301.3 1968 295.0 334.5 202.1 162.6 0.0333% 29.1 0.1 29.0 0.0 0 265.9 1967 263.0 303.1 182.4 142.3 0.0333% 27.3 2.9 24.4 0.0 0 235.7 1966 241.0 284.3 172.6 129.3 0.0323% 19.9 0.1 19.8 0.0 0 221.1 1965 214.6 260.5 158.3 112.4 0.0323% 22.9 5.2 17.7 0.0 0 191.7 1964 197.1 238.2 145.2 104.1 0.0323% 18.4 2.9 15.5 0.0 0 178.7 1963 181.9 220.6 136.4 97.7 0.0313% 15.1 0.7 14.4 0.0 0 166.8 1962 161.1 203.4 126.9 84.6 0.0313% 13.8 0.1 13.7 0.0 0 147.3 1961 147.3 188.9 115.5 73.9 0.0323% 14.8 1.6 13.2 0.0 0 132.5 1960 144.6 180.4 100.8 65.0 0.0370% 12.5 0.1 12.4 0.0 0 132.1 1959 136.5 178.2 99.6 57.9 0.0370% 12.1 0.2 11.9 0.0 0 124.4 1958 126.8 166.8 93.0 53.0 0.0370% 11.6 0.0 11.6 0.0 0 115.2 1957 117.3 159.3 90.2 48.2 0.0357% 9.7 0.1 9.6 0.0 0 107.6 1956 111.9 155.5 87.3 43.7 0.0370% 9.4 0.3 9.1 0.0 0 102.5 1955 105.8 151.5 85.4 39.7 0.0370% 9.0 0.3 8.7 0.0 0 96.8 1954 99.7 144.2 81.8 37.3 0.0357% 7.8 0.1 7.7 0.0 0 91.9 1953 94.2 138.7 78.5 34.0 0.0357% 7.3 0.1 7.2 0.0 0 86.9 1952 88.6 131.0 73.7 31.3 0.0370% 7.8 0.8 7.0 0.0 0 80.8 1951 83.5 124.3 70.0 29.2 0.0370% 6.6 0.0 6.6 0.0 0 76.9 1950 84.8 122.9 68.7 30.6 0.0370% 7.8 1.4 6.4 0.0 0 77.0


Income and Expenses, Deposit Insurance Fund, from Beginning of Operations, September 11, 1933, through December 31, 2009 (continued) Dollars in Millions



Income Assessment

Credits


Sources






FSLIC Resolution

FundNet Income

(Loss)

1949 151.1 122.7 0.0 28.4 0.0833% 6.4 0.3 6.1 0.0 0 144.7 1948 145.6 119.3 0.0 26.3 0.0833% 7.0 0.7 6.3 6 0.0 0 138.6 1947 157.5 114.4 0.0 43.1 0.0833% 9.9 0.1 9.8 0.0 0 147.6 1946 130.7 107.0 0.0 23.7 0.0833% 10.0 0.1 9.9 0.0 0 120.7 1945 121.0 93.7 0.0 27.3 0.0833% 9.4 0.1 9.3 0.0 0 111.6 1944 99.3 80.9 0.0 18.4 0.0833% 9.3 0.1 9.2 0.0 0 90.0 1943 86.6 70.0 0.0 16.6 0.0833% 9.8 0.2 9.6 0.0 0 76.8 1942 69.1 56.5 0.0 12.6 0.0833% 10.1 0.5 9.6 0.0 0 59.0 1941 62.0 51.4 0.0 10.6 0.0833% 10.1 0.6 9.5 0.0 0 51.9 1940 55.9 46.2 0.0 9.7 0.0833% 12.9 3.5 9.4 0.0 0 43.0 1939 51.2 40.7 0.0 10.5 0.0833% 16.4 7.2 9.2 0.0 0 34.8 1938 47.7 38.3 0.0 9.4 0.0833% 11.3 2.5 8.8 0.0 0 36.4 1937 48.2 38.8 0.0 9.4 0.0833% 12.2 3.7 8.5 0.0 0 36.0 1936 43.8 35.6 0.0 8.2 0.0833% 10.9 2.6 8.3 0.0 0 32.9 1935 20.8 11.5 0.0 9.3 0.0833% 11.3 2.8 8.5 0.0 0 9.5

1933-34 7.0 0.0 0.0 7.0 N/A 10.0 0.2 9.8 0.0 0 (3.0)1 Figures represent only BIF insured institutions prior to 1990, BIF and SAIF insured institutions from 1990 through 2005, and DIF insured institutions beginning in 2006. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. The effective assessment rate is calculated from annual assessment income (net of assessment credits) excluding transfers to the Financing Corporation (FICO), Resolution Funding Corporation (REFCORP) and the FSLIC Resolution Fund, divided by the four quarter average assessment base. The effective rates from 1950 through 1984 varied from the statutory rate of 0.0833 percent due to assessment credits provided in those years. The statutory rate increased to 0.12 percent in 1990 and to a minimum of 0.15 percent in 1991. The effective rates in 1991 and 1992 varied because the FDIC exercised new authority to increase assessments above the statutory minimum rate when needed. Beginning in 1993, the effective rate was based on a risk-related premium system under which institutions paid assessments in the range of 0.23 percent to 0.31 percent. In May 1995, the BIF reached the mandatory recapitalization level of 1.25 percent. As a result, BIF assessment rates were reduced to a range of 0.04 percent to 0.31 percent of assessable deposits, effective June 1995, and assessments totaling $1.5 billion were refunded in September 1995. Assessment rates for BIF were lowered again to a range of 0 to 0.27 percent of assessable deposits, effective the start of 1996. In 1996, the SAIF collected a one-time special assessment of $4.5 billion. Subsequently, assessment rates for SAIF were lowered to the same range as BIF, effective October 1996. This range of rates remained unchanged for both funds through 2006. As part of the implementation of the Federal Deposit Insurance Reform Act of 2005, assessment rates were increased to a range of 0.05 percent to 0.43 percent of assessable deposits effective at the start of 2007, but many institutions received a one-time assessment credit ($4.7 billion in total) to offset the new assessments.2 These expenses, which are presented as operating expenses in the Statements of Income and Fund Balance, pertain to the FDIC in its Corporate capacity only and do not include costs that are charged to the failed bank receiverships that are managed by the FDIC. The receivership expenses are presented as part of the “Receivables from Bank Resolutions, net” line on the Balance Sheets. The narrative and graph presented in the “Corporate Planning and Budget” section of this report (next page) show the aggregate (corporate and receivership) expenditures of the FDIC.3 Includes $210 million for the cumulative effect of an accounting change for certain postretirement benefits.4 Includes $105.6 million net loss on government securities.5 This amount represents interest and other insurance expenses from 1933 to 1972.6 Includes the aggregate amount of $80.6 million of interest paid on capital stock between 1933 and 1948

VI. Appendices 151

Number, Assets, Deposits, Losses, and Loss To Funds of Insured Thrifts Taken Over or Closed Because of Financial Difficulties, 1989 Through 19951 Dollars in Thousands

Year Total Assets Deposits Estimated

Receivership Loss2 Loss to Funds3

Total 748 $393,986,574 $317,501,978 $75,315,686 $81,583,975

1995 2 423,819 414,692 28,192 27,750

1994 2 136,815 127,508 11,472 14,599

1993 10 6,147,962 4,881,461 267,595 65,212

1992 59 44,196,946 34,773,224 3,234,851 3,780,088

1991 144 78,898,904 65,173,122 8,624,734 9,123,030

1990 213 129,662,498 98,963,962 16,063,792 19,258,686

19894 318 134,519,630 113,168,009 47,085,050 49,314,610 1 Beginning in 1989 through July 1, 1995, all thrift closings were the responsibility of the Resolution Trust Corporation (RTC). Since the RTC was terminated on December 31, 1995, and all assets and liabilities transferred to the FSLIC Resolution Fund (FRF), all the results of the thrift closing activity from 1989 through 1995 are now reflected on FRF’s books. Year is the year of failure, not the year of resolution. 2 The estimated losses represent the projected loss at the fund level from receiverships for unreimbursed subrogated claims of the FRF and unpaid advances to receiverships from the FRF. 3 The Loss to Funds represents the total resolution cost of the failed thrifts in the FRF-RTC fund, which includes corporate revenue and expense items such as interest expense on Federal Financing Bank debt, interest expense on escrowed funds, and interest revenue on advances to receiverships, in addition to the estimated losses for receiverships. 4 Total for 1989 excludes nine failures of the former FSLIC.


FDIC-Insured Institutions Closed During 2009Dollars in Thousands

Name and LocationBank Class

Number of

Deposit Accounts

Total Assets2

Total Deposits2

FDIC Disburse-

ments3Estimated

Loss¹

Date of Closing or

AcquisitionReceiver/Assuming Bank and Location

Purchase and Assumption—Insured Deposits

Bank of Clark CountyVancouver, WA

NM 5,059 $441,085 $377,506 $389,930 $143,563 01/16/09 Umpqua BankRoseburg, OR

1st Centennial BankRedlands, CA

NM 8,453 $797,959 $678,570 $629,958 $156,663 01/23/09 First California BankWestlake Village, CA

Silverton Bank, NAAtlanta,GA

N 1,368 $4,157,246 $3,314,928 $2,579,148 $484,909 05/01/09 Federal Deposit Insurance Corporation

Independent Bankers BankSpringfield,IL

SM 604 $585,508 $511,473 $143,739 $35,088 12/18/09 Federal Deposit Insurance Corporation

Insured Deposits Transfer

Omni National BankAtlanta,GA

N 8,723 $979,585 $813,205 $839,583 $341,281 03/27/09 SunTrust BankAtlanta,GA

Whole Bank Purchase and Assumption—All Deposits

BankUnited, FSBCoralGables,FL

SB 246,732 $13,111,463 $8,775,985 $2,698,688 $5,568,945 05/21/09 BankUnitedCoralGables,FL

National Bank of CommerceBerkeley, IL

N 8,191 $419,741 $395,868 $141,800 $87,638 01/16/09 Republic Bank of ChicagoOak Brook, IL

Suburban Federal Savings BankCrofton, MD

SB 14,900 $347,408 $301,847 $49,000 $109,329 01/30/09 Bank of EssexTappahannock, VA

County BankMerced, CA

SM 84,185 $1,711,552 $1,324,635 $20,000 $131,778 02/06/09 Westamerica BankSan Rafael, CA

Alliance BankCulver City, CA

NM 9,213 $1,113,361 $951,106 $71,989 $207,769 02/06/09 California Bank & TrustSan Diego, CA

Pinnacle BankBeaverton, OR

NM 1,444 $71,921 $64,168 $10,000 $14,336 02/13/09 Washington Trust BankSpokane, WA

Heritage Community BankGlenwood,IL

NM 11,764 $235,154 $225,735 $23,520 $39,235 02/27/09 MB Financial Bank, N.A.Glenwood,IL

FreedomBankofGeorgiaCommerce,GA

NM 5,081 $172,454 $159,048 $13,385 $40,057 03/06/09 NortheastGeorgiaBankLavonia,GA

Colorado National BankColorado Springs, CO

N 4,799 $123,508 $85,150 $6,700 $16,097 03/20/09 Herring BankAmarillo, TX

Teambank, N.A.Paola, KS

N 36,698 $669,830 $532,520 $75,713 $105,699 03/20/09 GreatSouthernBankSpringfield,MO

Cape Fear BankWilmington, NC

NM 10,867 $492,418 $402,820 $118,791 $125,365 04/10/09 First FS&LA of CharlestonCharleston, SC

VI. Appendices 153

FDIC-Insured Institutions Closed During 2009 (continued)Dollars in Thousands


Number of

Deposit Accounts

Total Assets2

Total Deposits2

FDIC Disburse-

ments3Estimated

Loss¹

Date of Closing or


GreatBasinBankofNevadaElko, NV

NM 13,178 $238,940 $220,834 $20,810 $19,592 04/17/09 Nevada State BankLas Vegas, NV

American Sterling BankSugar Creek, MO

SB 10,222 $166,456 $170,946 $21,800 $46,043 04/17/09 Metcalf BankLee’s Summit, MO

Strategic Capital BankChampaign, IL

NM 1,713 $546,576 $479,384 $61,000 $145,291 05/22/09 Midland States BankEffingham,IL

CitizensNationalBankMacomb, IL

N 13,607 $438,560 $393,635 $201,244 $25,999 05/22/09 Morton Community BankMorton, IL

Bank of LincolnwoodLincolnwood, IL

NM 8,003 $212,718 $209,285 $87,587 $66,854 06/05/09 Republic Bank of ChicagoOak Brook, IL

Cooperative BankWilmington, NC

NM 29,001 $966,778 $768,479 $51,699 $270,651 06/19/09 First BankTroy, NC

The First National Bank of AnthonyAnthony, KS

N 9,326 $156,954 $142,551 $12,622 $32,532 06/19/09 Bank of KansasSouth Hutchinson, KS

Southern Community BankFayetteville,GA

NM 13,372 $371,695 $297,962 $99,190 $103,941 06/19/09 United Community BankBlairsville,GA

Neighborhood Community BankNewnan,GA

SM 7,067 $212,616 $190,070 $46,720 $70,663 06/26/09 CharterBankWestPoint,GA

HorizonBankPine City, MN

NM 4,823 $84,763 $69,254 $10,532 $22,825 06/26/09 Stearns Bank, N.A.St. Cloud, MN

MetroPacificBankIrvine, CA

NM 709 $75,316 $70,078 $38,367 $31,887 06/26/09 Sunwest BankTustin, CA

Mirae BankLos Angeles, CA

NM 6,385 $480,619 $409,951 $10,500 $59,962 06/26/09 Wilshire State BankLos Angeles, CA

TheElizabethStateBankElizabeth,IL

NM 4,761 $55,027 $48,131 $5,495 $12,274 07/02/09 GalenaStateBankandTrustGalena,IL

Founders BankWorth, IL

NM 48,969 $889,172 $832,160 $77,038 $129,972 07/02/09 The PrivateBank and Trust CompanyChicago, IL

Rock River BankOregon, IL

NM 4,633 $74,808 $74,893 $12,043 $24,880 07/02/09 The Harvard State BankHarvard, IL

The John Warner BankClinton, IL

NM 6,487 $69,609 $65,179 $7,515 $13,180 07/02/09 State Bank of LincolnLincoln, IL

First State Bank of WinchesterWinchester, IL

NM 3,362 $30,073 $30,806 $2,410 $7,492 07/02/09 The First National Bank of BeardstownBeardstown, IL

First National Bank of DanvilleDanville, IL

N 12,698 $148,218 $140,185 $19,400 $22,233 07/02/09 First Financial Bank, N.A.Terre Haute, IN




Number of

Deposit Accounts

Total Assets2

Total Deposits2

FDIC Disburse-

ments3Estimated

Loss¹

Date of Closing or


Millennium State Bank of Texas Dallas, TX

NM 1,646 $118,601 $115,478 $54,860 $51,863 07/02/09 State Bank of TexasIrving, TX

Temecula Valley BankTemecula, CA

NM 22,684 $1,396,622 $1,276,287 $263,324 $382,418 07/17/09 First-CitizensBankandTrust CompanyRaleigh, NC

Vineyard Bank, N.A.Corona, CA

N 37,539 $1,638,378 $1,526,186 $165,552 $572,830 07/17/09 California Bank & TrustSan Diego, CA

First Piedmont BankWinder,GA

NM 3,705 $114,113 $108,499 $6,750 $31,994 07/17/09 First American Bank and Trust CompanyAthens,GA

Security Bank of Bibb CountyMacon,GA

NM 35,441 $943,744 $831,437 $347,100 $370,351 07/24/09 State Bank and Trust CompanyPinehurst,GA

SecurityBankofGwinnettCountySuwanee,GA


Security Bank of Houston CountyPerry,GA


Security Bank of Jones CountyGray,GA


Security Bank of North FultonAlpharetta,GA


Security Bank of North MetroWoodstock,GA


Waterford Village BankClarence, NY

NM 1,873 $55,707 $56,145 $6,600 $12.154 07/24/09 Evans Bank, NAAngola, NY

Community First BankPrineville, OR

SM 11,345 $199,508 $180,691 $46,969 $60,410 08/07/09 Home Federal Bank Nampa, ID

First State Bank of AltusAltus, OK

NM 7,901 $90,867 $98,161 $36,825 $18,030 07/31/09 Herring BankAmarillo, TX

Mutual BankHarvey, IL

NM 34,851 $1,595,657 $1,546,525 $348,400 $656,151 07/31/09 United Central BankGarland,TX

Peoples Community BankWest Chester, OH

SB 37,951 $606,153 $538,787 $37,300 $135,480 07/31/09 First Financial Bank, N.A.Hamilton, OH

First BankamericanoElizabeth,NJ

NM 7,085 $163,372 $155,463 $16,340 $16,139 07/31/09 Crown BankBrick, NJ

VI. Appendices 155



Number of

Deposit Accounts

Total Assets2

Total Deposits2

FDIC Disburse-

ments3Estimated

Loss¹

Date of Closing or


Community National Bank of Sarasota CountyVenice, FL

N 5,807 $92,528 $92,352 $15,375 $26,456 08/07/09 Stearns Bank, N.A.St. Cloud, MN

First State Bank of SarasotaSarasota, FL

NM 12,193 $447,667 $394,701 $54,896 $124,608 08/07/09 Stearns Bank, N.A.St. Cloud, MN

CommunityBankofArizonaPhoenix,AZ

NM 2,022 $158,517 $143,834 $24,566 $27,892 08/14/09 MidFirst BankOklahoma City, OK

Colonial BankMontgomery, AL

NM 756,514 $25,455,112 $20,020,047 $3,983,800 $3,810,331 08/14/09 Branch Banking and Trust (BB&T)Winston-Salem, NC

GuarantyBankAustin, TX

SB 577,832 $13,464,352 $11,984,112 $2,454,739 $2,737,425 08/21/09 BBVA CompassBirmingham, AL

Capital South BankBirmingham, AL

SM 18,031 $586,586 $539,422 $80,191 $162,355 08/21/09 Iberiabank Lafeyette, LA

ebankAtlanta,GA

SB 3,914 $144,688 $131,510 $21,298 $68,164 08/21/09 Stearns Bank, N.A.St. Cloud, MN

First Coweta BankNewnan,GA

NM 6,015 $163,755 $154,903 $152,856 $50,082 08/21/09 United BankZebulon,GA

Bradford BankBaltimore, MD

SB 18,354 $451,888 $382,159 $37,338 $92,252 08/28/09 Manufacturers and Traders Trust CompanyBuffalo,NY

AffinityBankVentura, CA

NM 19,710 $1,211,431 $905,593 $124,371 $266,609 08/28/09 PacificWesternBankSan Diego, CA

Mainstreet BankForest Lake, MN

NM 21,832 $458,533 $432,818 $46,414 $97,859 08/28/09 Central BankStillwater, MN

First Bank of Kansas CityKansas City, MO

NM 701 $15,723 $14,479 $16,489 $7,244 09/04/09 GreatAmericanBankDe Soto, KS

InBankOak Forest, IL

NM 9,941 $209,848 $209,211 $58,588 $53,690 09/04/09 MB Financial Bank, N.A.Chicago, IL

FirstStateBank—FlagstaffFlagstaff,AZ

SM 4,516 $107,235 $95,734 $99,504 $47,358 09/04/09 Sunwest BankTustin, CA

Vantus BankSioux City, IA

SB 43,421 $503,643 $394,369 $133,300 $99,458 09/04/09 GreatSouthernBankSpringfield,MO

Brickwell Community BankWoodbury, MN

NM 1,657 $72,576 $64,981 $4,783 $27,074 09/11/09 CorTrust Bank, NAMitchell, SD

Venture BankLacey, WA

NM 37,005 $968,385 $917,729 $188,485 $239,762 09/11/09 First-CitizensBank&TrustRaleigh, NC

Irwin Union Bank & Trust Co.Columbus, IN

SM 62,735 $2,839,747 $2,254,025 $850,000 $608,072 09/18/09 First Financial Bank, NAHamilton, OH




Number of

Deposit Accounts

Total Assets2

Total Deposits2

FDIC Disburse-

ments3Estimated

Loss¹

Date of Closing or


Irwin Union, FSBLouisville, KY

SB 9,356 $518,151 $462,611 $113,200 $125,763 09/18/09 First Financial Bank, NAHamilton, OH

GeorgianBankAtlanta,GA

NM 12,548 $2,230,230 $1,960,123 $543,754 $804,828 09/25/09 FirstCitizensBank&Trust,Inc.Columbia, SC

Southern Colorado National BankPueblo, CO

N 1,206 $37,142 $29,568 $4,619 $9,889 10/02/09 Legacy BankWiley, CO

Jennings State BankSpringGrove,MN


San Joaquin BankBakersfield,CA

SM 10,068 $766,359 $626,359 $49,252 $94,572 10/16/09 CitizensBusinessBankOntario, CA

American United BankLawrenceville,GA

NM 1,950 $110,094 $102,386 $17,100 $45,210 10/23/09 Ameris BankMoultrie,GA

First DuPage BankWestomont, IL

SM 5,851 $262,093 $253,992 $22,423 $63,667 10/23/09 First Midwest BankItasca, IL

Flagship National BankBradenton, FL

N 6,069 $177,563 $170,118 $34,200 $63,623 10/23/09 First Federal Bank of FloridaLake City, FL

Partners BankNaples, FL

SB 1,503 $65,498 $64,798 $34,034 $32,770 10/23/09 Stonegate BankFort Lauderdale, FL

Bank of ElmwoodRacine, WI

SM 15,958 $327,444 $272,782 $112,248 $88,364 10/23/09 Tri City National BankOak Creek, WI

Riverview Community BankOstego, MN


California National BankLos Angeles, CA

N 216,381 $7,781,100 $6,145,207 $105,700 $956,535 10/30/09 U.S. Bank, NAMinneapolis, MN

San Diego National BankSan Diego, CA


Bank USA, N.A.Phoenix,AZ

N 1,810 $213,205 $170,685 $3,700 $19,947 10/30/09 U.S. Bank, NAMinneapolis, MN

Community Bank of LemontLemont, IL

NM 2,871 $81,843 $80,688 $6,096 $24,095 10/30/09 U.S. Bank, NAMinneapolis, MN

North Houston BankHouston, TX


PacificNationalBankSan Francisco, CA


Park National BankChicago, IL

N 174,506 $4,680,881 $3,716,626 $0 $628,737 10/30/09 U.S. Bank, NAMinneapolis, MN

VI. Appendices 157



Number of

Deposit Accounts

Total Assets2

Total Deposits2

FDIC Disburse-

ments3Estimated

Loss¹

Date of Closing or


CitizensNationalBankTeague, TX

N 3,781 $118,236 $97,590 $6,300 $24,717 10/30/09 U.S. Bank, NAMinneapolis, MN

Madisonville State BankMadisonville, TX


Prosperan BankOakdale, MN

NM 8,204 $197,442 $182,794 $35,106 $53,196 11/06/09 Alerus Financial, N.A.GrandForks,ND

Home Federal Savings BankDetroit, MI

SB 2,477 $12,994 $12,730 $6,270 $7,902 11/06/09 Liberty Bank and Trust CompanyNew Orleans, LA

United Security BankSparta,GA

NM 4,807 $153,639 $149,616 $31,757 $64,949 11/06/09 Ameris BankMoultrie,GA

GatewayBankofSt.LouisSaint Louis, MO

NM 1,818 $26,882 $27,534 $10,054 $11,729 11/06/09 Central Bank of Kansas CityKansas City, MO

United Commercial BankSan Francisco, CA

NM 290,762 $10,895,336 $6,937,677 $849,926 $1,451,767 11/06/09 East West BankPasadena, CA

Century Bank, FSBSarasota, FL

SB 27,349 $755,923 $659,742 $106,444 $282,096 11/13/09 IberiabankLafayette, LA

Orion BankNaples, FL

SM 30,766 $2,612,515 $2,169,446 $496,404 $630,873 11/13/09 IberiabankLafayette, LA

PacificCoast,N.B.San Clemente, CA

N 2,338 $131,418 $128,867 $29,096 $30,637 11/13/09 Sunwest BankTustin, CA

Commerce Bank of Southwest FloridaFort Myers, FL


The Buckhead Community BankAtlanta,GA

NM 17,403 $856,236 $813,668 $63,705 $241,187 12/04/09 State Bank and Trust CompanyMacon,GA

The Tattnall BankReidsville,GA

NM 3,434 $49,612 $47,100 $14,703 $17,184 12/04/09 HeritageBank of the SouthAlbany,GA

Benchmark BankAurora, IL

NM 5,234 $173,062 $182,760 $42,969 $69,948 12/04/09 MB Financial Bank, N.A.Chicago, IL

Amtrust BankCleveland, OH

SB 460,174 $11,438,990 $8,558,609 $3,035,000 $2,340,668 12/04/09 New York Community BankWestbury, NY

GreaterAtlanticBankReston, VA

SB 8,008 $203,262 $179,248 $29,800 $37,602 12/04/09 SonabankMcLean, VA

First Security National BankNorcross,GA

N 3,994 $127,455 $121,645 $17,638 $30,125 12/04/09 State Bank and Trust CompanyMacon,GA




Number of

Deposit Accounts

Total Assets2

Total Deposits2

FDIC Disburse-

ments3Estimated

Loss¹

Date of Closing or


Republic Federal Bank, N.A.Miami, FL

N 7,318 $433,011 $352,695 $167,564 $109,371 12/11/09 1st United BankBoca Raton, FL

Valley Capital Bank, N.A.Mesa,AZ

N 758 $40,270 $41,312 $0 $9,844 12/11/09 Enterprise Bank & TrustClayton, MO

SolutionsBankOverland Park, KS

SM 10,137 $511,103 $421,271 $21,156 $112,521 12/11/09 Arvest BankFayetteville, AR

Imperial Capital BankLa Jolla, CA

NM 35,400 $4,046,888 $2,822,300 $726,843 $487,912 12/18/09 City National BankLos Angeles, CA

New South Federal Savings BankIrondale, AL

SB 20,968 $1,464,127 $1,163,916 $86,350 $223,592 12/18/09 Beal BankPlano, TX

Peoples First Community BankPanama City, FL

SB 81,612 $1,795,420 $1,684,443 $294,000 $484,327 12/18/09 Hancock BankGulfport,MS

First Federal Bank of California, FSBSanta Monica, CA

SB 135,555 $6,143,903 $4,538,607 $0 $158,115 12/18/09 OneWest Bank, FSBPasadena, CA

Purchase and Assumption—All Deposits

Ocala National BankOcala, FL

N 10,663 $219,424 $204,663 $215,695 $93,239 01/30/09 CenterState Bank of FloridaWinter Haven, FL

FirstBank Financial ServicesMcDonough,GA

NM 6,245 $317,237 $279,308 $299,078 $126,255 02/06/09 Regions BankBirmingham, AL

Corn Belt Bank and Trust CompanyPittsfield,IL

NM 4,520 $260,201 $233,788 $234,458 $79,498 02/13/09 The Carlinville National BankCarlinville, IL

RiversideBankoftheGulfCoastCape Coral, FL

SM 24,518 $523,673 $422,708 $462,057 $203,865 02/13/09 TIB BankNaples, FL

Sherman County BankLoup City, NE

NM 5,009 $135,431 $90,647 $114,150 $43,442 02/13/09 Heritage BankWood River, NE

Silver Falls BankSilverton, OR

NM 4,476 $134,206 $115,976 $118,660 $52,539 02/20/09 CitizensBankCorvallis, OR

Security Savings BankHenderson, NV

NM 3,927 $238,307 $174,872 $180,418 $69,679 02/27/09 Bank of NevadaLas Vegas, NV

American Southern BankKennesaw,GA

NM 1,024 $105,950 $105,940 $108,784 $36,285 04/24/09 BankofNorthGeorgiaAlpharetta,GA

First Bank of Idaho, FSBKetchum, ID

SB 15,195 $490,656 $370,580 $438,920 $171,135 04/24/09 U.S. Bank, NAMinneapolis, MN

Michigan Heritage BankFarmington Hills, MI

SM 3,159 $167,710 $149,065 $144,922 $55,953 04/24/09 Level One BankFarmington Hills, MI

VI. Appendices 159



Number of

Deposit Accounts

Total Assets2

Total Deposits2

FDIC Disburse-

ments3Estimated

Loss¹

Date of Closing or


America West BankLayton, UT

NM 1,909 $281,564 $286,040 $300,259 $125,477 05/01/09 Cache Valley BankLogan, UT

CitizensCommunityBankRidgewood, NJ

NM 1,099 $40,657 $40,664 $40,082 $17,931 05/01/09 North Jersey Community BankEnglewoodCliffs,NJ

Westsound BankBremerton, WA

NM 11,814 $334,608 $304,464 $283,655 $107,122 05/08/09 Kitsap BankPort Orchard, WA

Bank of WyomingThermopolis, WY

NM 2,866 $70,188 $66,598 $64,882 $30,480 07/10/09 Central Bank & TrustLander, WY

BankFirstSioux Falls, SD

SM 4,185 $210,844 $232,203 $218,222 $77,943 07/17/09 Alerus Financial, N.A.GrandForks,ND

Integrity BankJupiter, FL

NM 2,293 $105,298 $98,511 $93,134 $38,351 07/31/09 Stonegate BankFort Lauderdale, FL

Union Bank, N.A.Gilbert,AZ

N 2,526 $119,529 $110,362 $110,785 $52,996 08/14/09 MidFirst BankOklahoma City, OK

Dwelling House Savings & LoanPittsburgh, PA

SB 4,285 $12,947 $12,984 $12,690 $9,722 08/14/09 PNC Bank, N.A.Pittsburgh, PA

Corus Bank, NAChicago, IL

N 154,011 $7,003,321 $7,060,693 $4,047,049 $946,457 09/11/09 MB Financial Bank, NAChicago, IL

Warren BankWarren, MI

SM 12,104 $504,816 $467,767 $464,729 $240,075 10/02/09 The Huntington National BankColumbus, OH

Hillcrest Bank FloridaNaples, FL

NM 1,535 $82,774 $83,254 $85,334 $31,448 10/23/09 Stonegate BankFort Lauderdale, FL

Insured Deposit Payoffs

New Frontier BankGreeley,CO

NM 30,791 $1,774,588 $1,496,347 $1,667,720 $860,709 04/10/09 Federal Deposit Insurance Corporation

CitizensStateBankNew Baltimore, MI

NM 16,262 $168,551 $157,149 $111,826 $30,660 12/18/09 Federal Deposit Insurance Corporation

Community Bank of NevadaLas Vegas, NV

SM $25,906 $1,397,798 $1,372,744 $1,306,797 $742,411 08/14/09 Deposit Insurance Bank of Las Vegas

MagnetbankSalt Lake City, UT

NM 25 $300,674 $282,578 $277,788 $155,393 01/30/09 Federal Deposit Insurance Corporation

FirstCity BankStockbridge,GA


First Bank of Beverly HillsCalabasas, CA

NM 1,203 $1,260,354 $866,492 $1,076,009 $352,190 04/24/09 Federal Deposit Insurance Corporation




Number of

Deposit Accounts

Total Assets2

Total Deposits2

FDIC Disburse-

ments3Estimated

Loss¹

Date of Closing or


Community Bank of West GeorgiaVillaRica,GA

SM 4,140 $201,222 $189,398 $196,961 $86,224 06/26/09 Federal Deposit Insurance Corporation

Platinum Community BankRolling Meadows, IL

SB 2,946 $147,961 $110,186 $272,361 $95,683 09/04/09 Federal Deposit Insurance Corporation

Rockbridge Commerical BankAtlanta,GA


Codes for Bank Class: NM = State-chartered bank that is not a member of the Federal Reserve System N = National Bank SB = Savings Bank SM = State-chartered bank that is a member of the Federal Reserve System SA = Savings Association1 Estimated losses are as of 12/31/09. Estimated losses are routinely adjusted with updated information from new appraisals and asset sales, which ultimately affect the asset values and projected recoveries.2 Total Assets and Total Deposits data is based upon the last Call Report filed by the institution prior to failure.3 Represents corporate cash disbursements.

VI. Appendices 161

Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the Protection of Depositors, 1934–2009

Bank and Thrift Failures3

Dollars in Thousands

Year1

Number of Banks/

Thrifts Total Assets Total Deposits

Insured Deposit Funding

and Other Disbursements Recoveries

Estimated Additional Recoveries

Estimated Losses

2,260 $786,995,568 $574,449,063 $434,150,618 $309,778,647 $34,030,548 $90,341,423

20094 140 169,709,160 137,067,132 134,805,303 64,484,333 32,946,066 37,374,904

20084 25 371,945,480 234,321,715 194,075,587 173,798,116 445,081 19,832,390

2007 3 2,614,928 2,424,187 1,909,546 1,338,239 360,572 210,735

2006 0 0 0 0 0 0 0

2005 0 0 0 0 0 0 0

2004 4 170,099 156,733 138,895 134,978 0 3,917

2003 3 947,317 901,978 883,772 812,933 8,192 62,647

2002 11 2,872,720 2,512,834 2,068,519 1,630,631 66,228 371,660

2001 4 1,821,760 1,661,214 1,605,147 1,113,270 181,417 310,460

2000 7 410,160 342,584 297,313 265,175 0 32,138

1999 8 1,592,189 1,320,573 1,307,045 685,154 7,409 614,482

1998 3 290,238 260,675 286,678 52,248 11,799 222,631

1997 1 27,923 27,511 25,546 20,520 0 5,026

1996 6 232,634 230,390 201,533 140,918 0 60,615

1995 6 802,124 776,387 609,043 524,571 0 84,472

1994 13 1,463,874 1,397,018 1,224,769 1,045,718 0 179,051

1993 41 3,828,939 3,509,341 3,841,658 3,209,012 0 632,646

1992 120 45,357,237 39,921,310 14,173,886 10,499,860 3 3,674,023

1991 124 64,556,512 52,972,034 21,190,376 15,194,017 3,781 5,992,578

1990 168 16,923,462 15,124,454 10,812,484 8,040,995 0 2,771,489

1989 206 28,930,572 24,152,468 11,443,281 5,247,995 0 6,195,286

1988 200 38,402,475 26,524,014 10,432,655 5,055,158 0 5,377,497

1987 184 6,928,889 6,599,180 4,876,994 3,014,502 0 1,862,492

1986 138 7,356,544 6,638,903 4,632,121 2,949,583 0 1,682,538

1985 116 3,090,897 2,889,801 2,154,955 1,506,776 0 648,179


Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the Protection of Depositors, 1934–2009 (continued)

Bank and Thrift Failures3 (continued)Dollars in Thousands

Year1

Number of Banks/

Thrifts Total Assets Total Deposits

Insured Deposit Funding

and Other Disbursements Recoveries


Estimated Losses

1984 78 2,962,179 2,665,797 2,165,036 1,641,157 0 523,879

1983 44 3,580,132 2,832,184 3,042,392 1,973,037 0 1,069,355

1982 32 1,213,316 1,056,483 545,612 419,825 0 125,787

1981 7 108,749 100,154 114,944 105,956 0 8,988

1980 10 239,316 219,890 152,355 121,675 0 30,680

1934 –1979 558 8,615,743 5,842,119 5,133,173 4,752,295 0 380,878

Assistance TransactionsDollars in Thousands

154 $3,317,099,253 $1,442,173,417 $11,630,356 $6,199,875 $0 $5,430,481

20092 8 1,917,482,183 1,090,318,282 0 0 0 0

20082 5 1,306,041,994 280,806,966 0 0 0 0

2007 0 0 0 0 0 0 0

2006 0 0 0 0 0 0 0

2005 0 0 0 0 0 0 0

2004 0 0 0 0 0 0 0

2003 0 0 0 0 0 0 0

2002 0 0 0 0 0 0 0

2001 0 0 0 0 0 0 0 2000 0 0 0 0 0 0 0 1999 0 0 0 0 0 0 0

1998 0 0 0 0 0 0 0

1997 0 0 0 0 0 0 0

1996 0 0 0 0 0 0 0 1995 0 0 0 0 0 0 0 1994 0 0 0 0 0 0 0

VI. Appendices 163

Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the Protection of Depositors, 1934–2009 (continued)

Assistance Transactions (continued)Dollars in Thousands

Year1

Number of Banks/

Thrifts Total Assets Total Deposits Disbursements Recoveries


Estimated Losses

1993 0 0 0 0 0 0 0

1992 2 33,831 33,117 1,486 1,236 0 250

1991 3 78,524 75,720 6,117 3,093 0 3,024 1990 1 14,206 14,628 4,935 2,597 0 2,338 1989 1 4,438 6,396 2,548 252 0 2,296

1988 80 15,493,939 11,793,702 1,730,351 189,709 0 1,540,642

1987 19 2,478,124 2,275,642 160,877 713 0 160,164

1986 7 712,558 585,248 158,848 65,669 0 93,179 1985 4 5,886,381 5,580,359 765,732 406,676 0 359,056 1984 2 40,470,332 29,088,247 5,531,179 4,414,904 0 1,116,275

1983 4 3,611,549 3,011,406 764,690 427,007 0 337,683

1982 10 10,509,286 9,118,382 1,729,538 686,754 0 1,042,784

1981 3 4,838,612 3,914,268 774,055 1,265 0 772,790 1980 1 7,953,042 5,001,755 0 0 0 0 1934 –1979 4 1,490,254 549,299 0 0 0 0 1 For 1990 through 2005, amounts represent the sum of BIF and SAIF failures (excluding those handled by the RTC); prior to 1990, figures are only for BIF. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. For 2006 to 2009, figures are for DIF. Assets and deposit data are based on the last Call or TFR Report filed before failure.2 Includes institutions where assistance was provided under a systemic risk determination. Any costs that exceed the amounts estimated under the least cost resolution requirement would be recovered through a special assessment on all FDIC-insured institutions.3 Institutions closed by the FDIC, including deposit payoff, insured deposit transfer, and deposit assumption cases.4 Includes transaction account coverage under the Transaction Account Guarantee Program.


FDIC Actions on Financial Institutions Applications 2007–2009

2009 2008 2007

Deposit Insurance 19 123 215Approved* 19 123 215Denied 0 0 0

New Branches 521 1,012 1,480Approved 521 1,012 1,480Denied 0 0 0

Mergers 190 275 306Approved 190 275 306Denied 0 0 0

Requests for Consent to Serve1 503 283 177Approved 503 283 177

Section 19 20 8 24Section 32 483 275 153

Denied 0 0 0Section 19 0 0 0Section 32 0 0 0

Notices of Change in Control 18 28 17Letters of Intent Not to Disapprove 18 28 15Disapproved 0 0 2

Broker Deposit Waivers 35 38 22Approved 34 38 22Denied 1 0 0

Savings Association Activities2 39 45 54Approved 39 45 54Denied 0 0 0

State Bank Activities/Investments3 2 11 21Approved 2 11 21Denied 0 0 0

Conversion of Mutual Institutions 6 10 10Non-Objection 6 10 10Objection 0 0 0

* Of the 19 reported in 2009, 11 are de novo applications. There were 101 and 191 de novo applications approved in 2008 and 2007, respectively.1 Under Section 19 of the Federal Deposit Insurance (FDI) Act, an insured institution must receive FDIC approval before employing a person convicted of dishonesty or breach of trust. Under Section 32, the FDIC must approve any change of directors or senior executive officers at a state non-member bank that is not in compliance with capital requirements or is otherwise in troubled condition. 2 Amendments to Part 303 of the FDIC Rules and Regulations changed FDIC oversight responsibility in October 1998. In 1998, Part 303 changed the Delegations of Authority to act upon applications. 3 Section 24 of the FDI Act, in general, precludes a federally-insured state bank from engaging in an activity not permissible for a national bank and requires notices to be filed with the FDIC.

VI. Appendices 165

Compliance, Enforcement, and Other Related Legal Actions 2007–2009

2009 2008 2007

Total Number of Actions Initiated by the FDIC 551 273 205

Termination of Insurance

Involuntary Termination

Sec. 8a For Violations, Unsafe/Unsound Practices or Conditions 0 0 0

Voluntary Termination

Sec. 8a By Order Upon Request 0 1 0

Sec. 8p No Deposits 4 2 2

Sec. 8q Deposits Assumed 2 1 4

Sec. 8b Cease-and-Desist Actions

Notices of Charges Issued1,3 3 1 3

Consent Orders 302 97 48

Sec. 8e Removal/Prohibition of Director or Officer

Notices of Intention to Remove/Prohibit 2 4 1

Consent Orders 64 62 40

Sec. 8g Suspension/Removal When Charged With Crime 0 0 0

Civil Money Penalties Issued

Sec. 7a Call Report Penalties 1 0 0

Sec. 8i Civil Money Penalties 154 98 96

Sec. 10c Orders of Investigation 10 2 7

Sec. 19 Denials of Service After Criminal Conviction 0 0 0

Sec. 32 Notices Disapproving Office/Director’s Request for Review 0 0 0

Truth-in-Lending Act Reimbursement Actions

Denials of Requests for Relief 0 1 0

GrantsofRelief 0 0 0

Banks Making Reimbursement1 94 94 91

Suspicious Activity Reports (Open and closed institutions)1 128,973 133,153 137,548

Other Actions Not Listed2 12 5 71 These actions do not constitute the initiation of a formal enforcement action and, therefore, are not included in the total number of actions initiated.2 Other Actions Not Listed includes two Section 19 Waiver grants and three Other Formal Actions.3 Correction for 2008


B. More About the FDIC

FDIC Board of Directors

Sheila C. BairSheilaC.Bairwassworninasthe19thChairmanoftheFederalDepositInsur-

anceCorporation(FDIC)onJune26,2006.ShewasappointedChairmanforafive-yearterm,andasamemberoftheFDICBoardofDirectorsthroughJuly2013.

ChairmanBairhasanextensivebackgroundinbankingandfinanceinacareerthathastakenherfromCapitolHill,toacademia,tothehighestlevelsofgovern-ment.BeforejoiningtheFDICin2006,shewastheDean’sProfessorofFinancialRegulatoryPolicy for the IsenbergSchool ofManagement at theUniversity ofMassachusetts-Amherstsince2002.Whilethere,shealsoservedontheFDIC’sAdvisoryCommitteeonBankingPolicy.

OthercareerexperienceincludesservingasAssistantSecretaryforFinancialInstitutionsattheU.S.DepartmentoftheTreasury(2001to2002),SeniorVice

PresidentforGovernmentRelationsoftheNewYorkStockExchange(1995to2000),aCommissionerandAct-ingChairmanoftheCommodityFuturesTradingCommission(1991to1995),andResearchDirector,DeputyCounselandCounseltoSenateMajorityLeaderRobertDole(1981to1988).

AsFDICChairman,Ms.Bairhaspresidedoveratumultuousperiodinthenation’sfinancialsector.Herinno-vationshavetransformedtheagencywithprogramsthatprovidetemporaryliquidityguarantees,increasesindepositinsurancelimits,andsystematicloanmodificationstotroubledborrowers.Ms.Bair’sworkattheFDIChasalsofocusedonconsumerprotectionandeconomicinclusion.ShehaschampionedthecreationofanAdvi-soryCommitteeonEconomicInclusion,seminalresearchonsmall-dollarloanprograms,andtheformationofbroad-basedalliancesinnineregionalmarketstobringunderservedpopulationsintothefinancialmainstream.

SincebecomingFDICChairman,Ms.Bairhasreceivedanumberofprestigioushonors.Amongthem,in2009shewasnamedoneofTime Magazine’s“Time100”mostinfluentialpeople;awardedtheJohnF.KennedyProfileinCourageAward;andreceivedtheHubertH.HumphreyCivilRightsAward.In2008,ChairmanBairtoppedThe Wall Street Journal’sannual50“WomentoWatchList.”Thatsameyear,Forbes Magazine named Ms.BairasthesecondmostpowerfulwomanintheworldafterGermany’sChancellorAngelaMerkel.

ChairmanBairhasalsoreceivedseveralhonorsforherpublishedworkonfinancialissues,includinghereducationalwritingsonmoneyandfinanceforchildren,andforprofessionalachievement.Amongthehonorsshehasreceivedare:DistinguishedAchievementAward,AssociationofEducationPublishers(2005);PersonalServiceFeatureoftheYear,andAuthoroftheMonthAwards,Highlights Magazine for Children(2002,2003and2004);andTheTreasuryMedal(2002).Herfirstchildren’sbook,Rock, Brock and the Savings Shock,waspublishedin2006andhersecond,Isabel’s Car Wash,in2008.

ChairmanBair receivedabachelor’sdegree fromKansasUniversityandaJ.D. fromKansasUniversitySchoolofLaw.SheismarriedtoScottP.Cooperandhastwochildren.

VI. Appendices 167

Martin J. GruenbergMartin J.Gruenbergwas sworn inasViceChairmanof theFDICBoardof

DirectorsonAugust22,2005.UpontheresignationofChairmanDonaldPowell,he servedasActingChairman fromNovember15,2005, to June26,2006.OnNovember2,2007,Mr.GruenbergwasnamedChairmanoftheExecutiveCouncilandPresidentoftheInternationalAssociationofDepositInsurers(IADI).

Mr.GruenbergjoinedtheFDICBoardafterbroadcongressionalexperienceinthefinancialservicesandregulatoryareas.HeservedasSeniorCounseltoSenatorPaulS.Sarbanes(D-MD)onthestaffoftheSenateCommitteeonBanking,Hous-ing,andUrbanAffairs from1993 to2005.Mr.Gruenbergadvised theSenatoronissuesofdomesticandinternationalfinancialregulation,monetarypolicyandtrade.HealsoservedasStaffDirectoroftheBankingCommittee’sSubcommittee

onInternationalFinanceandMonetaryPolicyfrom1987to1992.MajorlegislationinwhichMr.GruenbergplayedanactiveroleduringhisserviceontheCommitteeincludestheFinancialInstitutionsReform,Recov-ery,andEnforcementActof1989(FIRREA),theFederalDepositInsuranceCorporationImprovementActof1991(FDICIA),theGramm-Leach-BlileyAct,andtheSarbanes-OxleyActof2002.

Mr.GruenbergholdsaJ.D.fromCaseWesternReserveLawSchoolandanA.B.fromPrincetonUniversity,WoodrowWilsonSchoolofPublicandInternationalAffairs.

Thomas J. CurryThomasJ.CurrytookofficeonJanuary12,2004,asamemberoftheBoardof

DirectorsoftheFederalDepositInsuranceCorporationforasix-yearterm.Mr.Curry serves as Chairman of the FDIC’sAssessmentAppeals Committee andCaseReviewCommittee.

Mr.CurryalsoservesastheChairmanoftheNeighborWorks®AmericaBoardofDirectors.NeighborWorks®Americaisanationalnon-profitorganizationchar-teredbyCongresstoprovidefinancialsupport,technicalassistance,andtrainingforcommunity-basedneighborhoodrevitalizationefforts.

PriortojoiningtheFDIC’sBoardofDirectors,Mr.CurryservedfiveMassa-chusettsGovernorsastheCommonwealth’sCommissionerofBanksfrom1990to1991andfrom1995to2003.HeservedasActingCommissionerfromFebruary

1994toJune1995.HepreviouslyservedasFirstDeputyCommissionerandAssistantGeneralCounselwithintheMassachusettsDivisionofBanks.Heenteredstategovernmentin1982asanattorneywiththeMassachu-setts’SecretaryofState’sOffice.

DirectorCurryservedastheChairmanoftheConferenceofStateBankSupervisorsfrom2000to2001.HeservedtwotermsontheStateLiaisonCommitteeoftheFederalFinancialInstitutionsExaminationCouncil,includingatermasCommitteechairman.

HeisagraduateofManhattanCollege(summacumlaude),wherehewaselectedtoPhiBetaKappa.HereceivedhislawdegreefromtheNewEnglandSchoolofLaw.


John C. DuganJohnC.Duganwassworninasthe29thComptrolleroftheCurrencyonAugust

4,2005.InadditiontoservingasadirectoroftheFDIC,ComptrollerDuganalsoservesaschairmanof theJointForum,agroupofseniorfinancialsectorregula-torsfromtheUnitedStates,Canada,Europe,Japan,andAustralia,andasadirec-toroftheFederalFinancialInstitutionsExaminationCouncilandNeighborWorks® America.

PriortohisappointmentasComptroller,Mr.DuganwasapartneratthelawfirmofCovington&Burling,wherehechairedthefirm’sFinancialInstitutionsGroup.He specialized in banking and financial institution regulation.He alsoservedasoutsidecounseltotheABASecuritiesAssociation.

HeservedattheDepartmentofTreasuryfrom1989to1993andwasappointedassistantsecretaryfordomesticfinancein1992.In1991,heoversawacomprehensivestudyofthebankingindustrythatformedthebasisforthefinancialmodernizationlegislationproposedbytheadministrationofthefirstPresidentBush.From1985to1989,Mr.DuganwasminoritycounselandminoritygeneralcounselfortheU.S.SenateCommitteeonBanking,Housing,andUrbanAffairs.

AmonghisprofessionalandvolunteeractivitiesbeforebecomingComptroller,heservedasadirectorofMinbanc,acharitableorganizationwhosemissionistoenhanceprofessionalandeducationalopportunitiesforminoritiesinthebankingindustry.HewasalsoamemberoftheAmericanBarAssociation’scommitteeonbankinglaw,theFederalBarAssociation’ssectionoffinancialinstitutionsandtheeconomy,andtheDistrictofColumbiaBarAssociation’ssectionofcorporations,finance,andsecuritieslaws.

AgraduateoftheUniversityofMichiganin1977withanA.B.inEnglishliterature,Mr.DuganalsoearnedhisJ.D.fromHarvardLawSchoolin1981.

John E. BowmanJohnE.BowmanbecameActingDirectoroftheOfficeofThriftSupervision

(OTS)inMarch2009.Mr.BowmanjoinedtheOTSinJuneof1999asDeputyChiefCounselforBusinessTransactions.InMay2004,hewasappointedChiefCounselandinApril2007,hewasappointedDeputyDirectorandChiefCounsel.BeforejoiningtheOTS,Mr.BowmanwasapartnerwiththelawfirmofBrown&WoodLLPinitsWashington,DC,office,wherehespecializedingovernmentandcorporatefinance,securitiesandfinancialservicesregulation.

Beforeenteringprivatepractice,Mr.BowmanservedformanyyearsasAssis-tantGeneralCounselforBankingandFinanceattheU.S.DepartmentoftheTrea-sury.While at Treasury, he provided counsel to theTreasuryUnder SecretaryforDomesticFinance,theAssistantSecretariesforFinancialInstitutionsPolicy,

FinancialMarketsandEconomicPolicy,andtheFiscalAssistantSecretaryonabroadrangeofissuesfromfinancialserviceslegislationtothefinancingofthefederaldebt.

Duringhisgovernmentcareer,Mr.Bowmanhasbeentherecipientofnumerousawardsandhonors,includ-ingthePresidentialRankAwardandtheSecretaryoftheTreasury’sDistinguishedServiceAward.

VI. Appendices 169

Office of theChairman

Sheila C. BairChairman

Vice Chairman

Martin J. Gruenberg

Deputy to the Chairmanfor Resolution and Legal Policy

Michael H. Krimminger

Deputy to the Chairman

Jason C. Cave

Deputy to the Chairmanand

Chief Financial Officer

Steven O. App

Board of Directors

Sheila C. BairMartin J. Gruenberg

Thomas J. CurryJohn C. Dugan

John E. Bowman

Chief Information Officer/Chief Privacy Officer

Michael E. Bartell

Office of Inspector General

Jon T. RymerInspector General

Chief of Staff

Jesse O. Villareal, Jr.

Office of Public Affairs

Andrew S. GrayDirector

Division ofSupervision and

Consumer Protection

Sandra L. ThompsonDirector

Division of Insuranceand Research

Arthur J. MurtonDirector

Division of Resolutionsand Receiverships

Mitchell L. GlassmanDirector

Office ofInternational Affairs

Fred S. CarnsDirector

General Counsel

Michael Brad�eld

Deputy to the Chairmanfor External Affairs

Paul M. Nash

Office ofLegislative Affairs

VacantDirector

Office of theOmbudsman

Cottrell L. WebsterOmbudsman

Office of Diversity andEconomic Opportunity

D. Michael CollinsDirector

Legal Division

Michael Brad�eldGeneral Counsel

CorporateUniversity

Thom H. TerwilligerChief Learning O�cer

Office of EnterpriseRisk Management

James H. Angel, Jr.Director

Division ofAdministration

Arleas Upton KeaDirector

Division of InformationTechnology

Michael E. BartellDirector

Division of Finance

Bret D. EdwardsDirector

FDIC Organization Chart/Officialsas of December 31, 2009


Note: In 2008, the Corporation adopted the Full-Time Equivalent methodology reflective of an employee’s scheduled work hours. Prior to 2008, staffing totals reflect total employees on board.

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Staffing Trends 2000–2009

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

6,452 6,167 5,430 5,311 5,078 4,514 4,476 4,532 4,988 6,557

FDIC Year-End Staffing

Corporate Staffing

VI. Appendices 171

Number of Employees by Division/Office 2008–2009 (Year-End)1

Total Washington Regional/Field

2009 2008 2009 2008 2009 2008

Division of Supervision and Consumer Protection 3,168 2,733 222 207 2,946 2,526

Division of Resolutions and Receiverships 1,158 391 78 60 1,080 331

Legal Division 625 472 302 275 323 197

Division of Administration 373 316 217 209 156 107

Corporate University 350 240 52 47 298 193

Division of Information Technology 298 283 227 221 71 62

Division of Insurance and Research 193 182 150 145 43 36

Division of Finance 155 159 145 148 10 11

OfficeofInspectorGeneral 120 111 84 81 36 30

ExecutiveOffices2 53 48 53 48 0 0

OfficeofDiversityandEconomicOpportunity 29 31 29 31 0 0

OfficeoftheOmbudsman 22 11 11 8 11 3

OfficeofEnterpriseRiskManagement 13 12 13 12 0 0

Total 6,557 4,988 1,584 1,493 4,973 3,4961 The FDIC reports staffing totals using a Full-Time Equivalent methodology, which is based on an employee’s scheduled work hours. Totals may not foot due to rounding. 2 Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, Chief Information Officer, Legislative Affairs, Public Affairs, International Affairs, and External Affairs.


Sources of Information

FDIC Web Site

www.fdic.gov

Awiderangeofbanking,consumerandfinancialinformationisavailableontheFDIC’swebsite.This includes theFDIC’sElectronicDeposit InsuranceEstimator (EDIE),whichestimatesan indi-vidual’s deposit insurance coverage; the Institution Directory—financial profiles of FDIC-insuredinstitutions;CommunityReinvestmentActevaluationsandratingsforinstitutionssupervisedbytheFDIC;CallReports—banks’reportsofconditionandincome;and Money Smart,atrainingprogramtohelpindividualsoutsidethefinancialmainstreamenhancetheirmoneymanagementskillsandcreatepositivebankingrelationships.Readersalsocanaccessavarietyofconsumerpamphlets,FDICpressreleases, speeches,andotherupdateson theagency’sactivities,aswellascorporatedatabasesandcustomizedreportsofFDICandbankingindustryinformation.

FDIC Call Center

Phone: 877-275-3342 (877-ASK-FDIC) 703-562-2222

Hearing Impaired: 800-925-4618 (Toll Free), 703-562-2289 (Local)

TheFDICCallCenterinWashington,DC,istheprimarytelephonepointofcontactforgeneralques-tionsfromthebankingcommunity,thepublic,andFDICemployees.TheCallCenterdirectly,orinconcertwithotherFDICsubject-matterexperts, responds toquestionsaboutdeposit insuranceandotherconsumer issuesandconcerns,aswellasquestionsaboutFDICprogramsandactivities.TheCallCenteralsomakesreferralstootherfederalandstateagenciesasneeded.Hoursofoperationare8:00a.m.to8:00p.m.EasternTime,Monday–Friday,and9:00a.m.to5:00p.m.Saturday–Sunday.Recordedinformationaboutdepositinsuranceandothertopicsisavailable24hoursadayatthesametelephonenumber.

Asacustomerservice,theFDICCallCenterhasmanybilingualSpanishagentsonstaffandhasaccesstoatranslationserviceabletoassistwithover40differentlanguages.

VI. Appendices 173

Public Information Center

3501 Fairfax Drive Room E-1021 Arlington, VA 22226

Phone: 877-275-3342 (877-ASK-FDIC), or 703-562-2200

Fax: 703-562-2296E-mail: [email protected]

FDICpublications,pressreleases,speechesandcongressionaltestimony,directivestofinancialinsti-tutions,policymanuals,andotherdocumentsareavailableonrequestorbysubscriptionthroughthePublicInformationCenter.Thesedocumentsincludethe Quarterly Banking Profile, FDIC Consumer News, andavarietyofdepositinsuranceandconsumerpamphlets.

Office of the Ombudsman

3501 Fairfax Drive Room E-2022 Arlington, VA 22226

Phone: 877-275-3342 (877-ASK-FDIC)Fax: 703-562-6057E-mail: [email protected]

TheOfficeoftheOmbudsman(OO)isanindependent,neutral,andconfidentialresourceandliaisonforthebankingindustryandthegeneralpublic.TheOOrespondstoinquiriesabouttheFDICinafair,impartial,andtimelymanner.Itresearchesquestionsandcomplaintsprimarilyfrombankers.TheOOalsorecommendswaystoimproveFDICoperations,regulations,andcustomerservice.


Regional and Area Offices

Atlanta Regional Office

10 Tenth Street, NESuite 800Atlanta,Georgia30309(678) 916-2200

Alabama

Florida

Georgia

North Carolina

South Carolina

Virginia

West Virginia

Dallas Regional Office

1601 Bryan StreetDallas, Texas 75201(214) 754-0098

Colorado

New Mexico

Oklahoma

Texas

Memphis Area Office

5100 Poplar AvenueSuite 1900Memphis, Tennessee 38137(901) 685-1603

Arkansas

Louisiana

Mississippi

Tennessee

Kansas City Regional Office

2345GrandBoulevardSuite 1200Kansas City, Missouri 64108(816) 234-8000

Iowa

Kansas

Minnesota

Missouri

Nebraska

North Dakota

South Dakota

Chicago Regional Office

300SouthRiverdalePlazaChicago, Illinois 60606(312) 382-6000

Illinois

Indiana

Kentucky

Michigan

Ohio

Wisconsin

VI. Appendices 175

San Francisco Regional Office

25 Ecker StreetSuite 2300San Francisco, California 94105(415) 546-0160

Alaska

Arizona

California

Guam

Hawaii

Idaho

Montana

Nevada

Oregon

Utah

Washington

Wyoming

New York Regional Office

350 Fifth AvenueSuite 1200New York, New York 10118(917) 320-2500

Delaware

District of Columbia

Maryland

New Jersey

New York

Pennsylvania

Puerto Rico

Virgin Islands

Boston Area Office

15BraintreeHillOfficeParkSuite 100Braintree, Massachusetts 02184(781) 794-5500

Connecticut

Maine

Massachusetts

New Hampshire

Rhode Island

Vermont


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

2009 Management and Performance Challenges

Under the Reports Consolidation Act, theOIGisrequiredtoidentifythemostsignificantmanagementandperformancechallengesfacingthe Corporation and provide its assessment totheCorporation for inclusion in its annualper-formance and accountability report. The OIGconducts this assessment yearly and identifiesa number of specific areas of challenge facingthe Corporation at the time. In identifying thechallenges,weconsider theCorporation’sover-all program and operational responsibilities;financial industry,economic,andtechnologicalconditions and trends; areas of congressionalinterest andconcern; relevant lawsand regula-tions;theChairman’sprioritiesandcorrespond-ingcorporategoals;andtheongoingactivitiestoaddresstheissuesinvolved.Takingtimeannual-lytoreexaminethecorporatemissionandpriori-tiesastheOIGidentifiesthechallengeshelpsinplanningourworkanddirectingOIGresourcestokeyareasofrisk.

Unprecedentedeventsandturmoilintheecon-omyandfinancialservicesindustryoverthepastyearandahalfhaveimpactedeveryfacetoftheFDIC’smission andoperations and continue toposechallenges.Inlookingattherecentpastandthecurrentenvironmentandanticipating to theextentpossiblewhatthefutureholds,theOfficeof Inspector General (OIG) believes the FDICfaceschallengesintheareaslistedbelow.WhiletheCorporation’smostpressingpriorityhasbeen

its continuing efforts to restore and maintainpublicconfidenceandstability,challengeshavepersisted inotherareasaswell.Wewouldnotein particular that the Corporation is devotingsignificantattention tocarryingout itsmassiveresolutionandreceivershipworkload,broughtonby140financialinstitutionfailuresoverthepastyear, incontrast to25failuresduring2008and3 in2007.Further, theChairmanhas indicatedthattheFDICanticipatesfailuresduring2010toexceed the level in 2009.At the same time, aswe pointed out last year, the FDIC faces chal-lengesinmaintainingtheviabilityoftheDepositInsuranceFund(DIF),enhancingitssupervisionof financial institutions, protecting consumers,andmanagingitsgrowinginternalandcontrac-torworkforceandothercorporateresources.TheCorporationwillcontinuetofacedauntingchal-lengesasitcarriesoutitslongstandingmission,respondstoemergingissues,andplaysakeypartinshapingthefutureofbankregulation.

Restoring and Maintaining Public Confidence and Stability in the Financial System

Importantly,andintegraltomaintainingcon-fidenceandstabilityinthefinancialsystem,not-withstandingthe140failuresof2009,theFDICstoodbehinditsdepositinsurancecommitment,andnodepositor lostasinglepennyof insureddeposits. Additionally, over the past year, theFDICplayedakeyrole,alongwithotherregula-tors,theCongress,theDepartmentoftheTreas-ury,financialinstitutions,andotherstakeholdersinanumberoftemporaryfinancialstabilitypro-gramsthatwereformedtoaddresscrisiscondi-tions. These included the Temporary LiquidityGuaranteeProgram,TroubledAssetReliefPro-gram,andloanmodificationprograms,tonamea

VI. Appendices 177

toaddressthefundamentalcausesoftherecentcrisis.Theseentitiesmakeupasignificantshareof the banking industry’s assets. Although theFDIC is not the primary federal regulator forthese institutions, it holds significant responsi-bility as deposit insurer for all. The FDIC hasexpanded its own presence at such institutionsthrough additional and enhanced on-site andoff-sitemonitoringandoversight.Asoftheendof December 2009, its Large Insured Deposi-toryInstitutionprogramcovered109institutionswithtotalassetsofmorethan$10trillion.Earlyidentificationandremediationofissuesthatposeriskstotheoverallfinancialsystemwillcontin-uetobeachallengingtask.

Inarelatedvein,theFDIChasalsoendorseda resolution mechanism that can effectivelyaddressfailedfinancialfirmsregardlessoftheirsizeandcomplexityandassurethatshareholdersand creditors absorb losseswithout cost to thetaxpayers. Such a mechanism would maintainfinancialmarketstabilityandminimizesystemicconsequencesfor thenationaland internationaleconomy.TheCorporationmayfacechallengesas it advocates for changes to the supervisionandresolutionofsystemically important finan-cialfirms.

Asthedebatecontinuesovertheseandotheraspects of regulatory reform in the monthsahead, theFDIC’scontinuouscoordinationandcooperationwiththeotherfederalregulatorsandpartiesthroughoutthebankingandfinancialser-vicesindustrieswillbecritical.TheFDIC,alongwithotherregulators,willcontinuetobesubjecttoincreasedscrutinyandpossiblecorrespondingregulatoryreformproposalsthatmayhaveasub-stantialimpactontheregulatoryentitiesandtheprogramsandactivitiestheycurrentlyoperate.

few.Someofthesehavewounddown,othersareongoing.ThefulfillmentoftheFDIC’sinsurancecommitmentandthesuccessfulimplementationofprogramsdesignedtoensuretheflowofcredit,strengthenthefinancialsystem,andprovideaidtohomeownersandsmallbusinesseshavegonealongwayinhelpingtorestoreconfidenceandstabilityinthefinancialsystem.Goingforward,theCorporationwillneedtocontinuetoremainpoisedtoaddressnewchallenges.Forexample,emergingproblemsinthecommercialrealestate(CRE)sectorwilllikelyrequireattention.Whileresidentialrealestatemarketssufferedfirstdur-ingtherecentcrisis,problemsonthecommercialsidecameabout later.Salesofcommercialrealestatesloweddramaticallyin2008and2009,asvacancy rates and rental rates declined signifi-cantly.CREpricedeclineshavealsobeenlargeron average than declines in home values,withCREpriceindicesdownbyover40percentfromtheir fall2007highpoint.Thesharpdecline isattributable in part to higher required rates ofreturnonthepartofinvestorsanddeteriorationin theavailabilityofcredit forcommercial realestatefinancing.Bankswill likely increasinglyfeeltherepercussionsofstressintheCREsectorinthemonthsahead,andtheFDICwillneedtocloselymonitortheimpactofsuchproblemsontheinstitutionsitregulatesandinsures.

Overthepastyear,theFDIChasalsobeenaproponentofcertainchangestothefinancialreg-ulatorysystemtofurtherstabilizeandshoreupconfidenceinthefinancialservicesindustry.Inthatconnection,theFDICChairmanbelievesweneedtomoveawayfromtheconceptof“toobigtofail”andcreateasystemofmacro-prudentialsupervision for systemically important finan-cial firms and other large/complex institutions


ing187activereceiverships,withassetstotalingabout$41billion.

Ofspecialnote,theFDICisretaininglargevol-umesofassetsaspartofpurchaseandassumptionagreements with institutions that are assumingtheinsureddepositsoffailedinstitutions.Anum-ber of the purchase and assumption agreementsincludeshared-lossarrangementswithotherpar-tiesthatinvolvepoolsofassetsworthbillionsofdollarsandthatcanextendupto10years.Fromadollarstandpoint,theFDIC’sexposureisstag-gering:asofDecember31,2009,theCorporationwaspartyto93sharedlossagreementsrelatedtoclosed institutions,with initialcoveredassetsof$126.4billion.BecausetheassuminginstitutionsareservicingtheassetsandtheFDICisreimburs-ingasubstantialportionoftherelatedlossesandexpenses,thereissignificantrisktotheCorpora-tion.Additionally,theFDICisincreasinglyusingstructuredsalestransactionstosellassetstothirdpartiesthatarenotrequiredtoberegulatedfinan-cial institutions. Such arrangements need to becloselymonitored toensurecompliancewithalltermsandconditionsoftheagreementsatatimewhentheFDIC’scontrolenvironmentiscontinu-ingtoevolve.

Ittakesasubstantiallevelofhumanresourcesto handle themounting resolution and receiver-shipworkload,andeffectivelyadministeringsucha complexworkforcewill be challenging.DRRstaffinggrewfromapproximately400employeesatthestartof2009totheyear-endstaffinglevelof1,158full-timeequivalents.TheFDICBoardofDirectorsapprovedafurtherincreaseintheDivi-sion’sstaffingto2,310for2010.Mostofthesenewemployees have been hired on non-permanentappointmentswithtermsofupto5years.Addi-tionally, over $1.8 billion will be available for

Resolving Failed Institutions and Managing Receiverships

A fundamental part of the FDIC missionand perhaps theCorporation’smost significantcurrent challenge is efficiently handling theresolutions of failingFDIC-insured institutionsand providing prompt, responsive, and effec-tive administration of failing and failed finan-cialinstitutionsinitsreceivershipcapacity.Theresolutionprocessinvolvesthecomplexprocessofvaluingafailingfederallyinsureddepositoryinstitution,marketingit,solicitingandacceptingbids for the sale of the institution, consideringthe least costly resolution method, determin-ingwhich bid to accept, andworkingwith theacquiring institution through the closing pro-cess.Thereceivershipprocess,alsodemanding,involvesperforming theclosing functionat thefailed bank; liquidating any remaining assets;anddistributinganyproceeds to theFDIC, thebank customers, general creditors, and thosewithapprovedclaims.

The Corporation is now facing a resolutionand receivership workload of huge proportion.One hundred forty institutions failed during2009, with total assets at failure of $171.2 bil-lion and total estimated losses to the DepositInsuranceFundof approximately$35.6billion.During2009, thenumberof institutionson theFDIC’s “Problem List” also rose to its high-estlevelin16years.AsofDecember31,2009,therewere702insuredinstitutionsonthe“Prob-lemList,” indicatingaprobabilityofmorefail-urestocomeandanincreasedassetdispositionworkload. Total assets of problem institutionsincreasedto$402.8billionasofyear-end2009.As of the end ofDecember 2009, theDivisionof Resolutions and Receiverships was manag-

VI. Appendices 179

lymannerthosereceivershipsnotsubjecttoloss-shareagreements,structuredsales,orotherlegalimpediments.

Ensuring the Viability of the Deposit Insurance Fund (DIF)

AcriticalpriorityfortheFDICistoensurethattheDIFremainsviabletoprotectinsureddeposi-tors in the event of an institution’s failure. Thebasicmaximuminsuranceamountundercurrentlawis$250,000throughyear-end2013.Estimatedinsureddepositsbasedonthecurrentlimitroseto$5.4trillionasofDecember31,2009.

TheDIFhassufferedfromthefailuresofthepast.Estimatedlossesfromfailuresin2008totaled$19.8 billion and from failures in 2009 totaled$35.6billion.TomaintainsufficientDIFbalanc-es,theFDICcollectsrisk-basedinsurancepremi-umsfrominsuredinstitutionsandinvestsdepositinsurancefunds.InSeptember2009,theFDIC’sDIFbalance—orthenetworthofthefund—fellbelowzeroforthefirsttimesincethethirdquarterof1992.Thefundbalanceofnegative$20.9bil-lionasofDecember31,2009,reflectsa$44bil-lioncontingentlossreservethathasbeensetasidetocoverestimatedlossesoverthenextyear.Justasbanksreserveforloanlosses,theFDIChastosetasidereservesforanticipatedclosingsoverthenextyear.CombiningthefundbalancewiththiscontingentlossreserveshowedtotalDIFreserveswithapositivebalanceof$23.1billion.

TheFDICBoard ofDirectors closelymoni-tors theviabilityof theDIF. InFebruary2009,theFDICBoardtookactiontoensurethecontin-uedstrengthofthefundbyimposingaone-timeemergencyspecialassessmentoninstitutionsasof June30,2009.On twooccasions, theBoardalsosetassessmentratesthatgenerallyincrease

contractingforreceivership-relatedservicesdur-ing2010,andby theendof2009,DRRalreadyemployed over 1,500 contractor personnel. Thesignificantsurge in failed-bankassetsandasso-ciatedcontractingactivitieswillrequireeffectiveand efficient contractor oversight managementandtechnicalmonitoringfunctions.Bringingonsomanycontractorsandnewemployeesinashortperiodoftimecanstrainpersonnelandadminis-trativeresourcesinsuchareasasemployeeback-groundchecks,which,ifnottimelyandproperlyexecutedcancompromise the integrityofFDICprogramsandoperations.

As theCorporation’sworkforce responds toinstitutionfailuresandcarriesoutitsresolutionand receivership responsibilities, it will faceanumberofchallenges. Itneeds toensure thatrelated processes, negotiations, and decisionsregardingthefuturestatusof thefailedorfail-ing institutions are marked by fairness, trans-parency, and integrity. Itwill be challenged intimelymarketingfailinginstitutionstoqualifiedand interested potential bidders, selling assets,andmaximizingpotentialvaluesoffailedbankfranchises.Over time, these tasksmaybeevenmore difficult, given concentrations of assetsin thesamegeographicarea,adecreasingpoolof interested buyers, and an inventory of lessattractiveorhard-to-sellassets.Itisalsopossiblethat individuals or entities thatmay have beeninvolvedinpreviousinstitutionfailurescouldtryto reenter the FDIC’s asset purchase andman-agementarena.Appropriatesafeguardsmustbein place to ensure the Corporation knows thebackgroundsofitsbiddersandacquirerstopre-ventthosepartiesfromprofitingattheexpenseoftheCorporation.Finally,inordertominimizecosts,itwillbeimportanttoterminateinatime-


the amount that institutions pay each quarterfor insurance and also made adjustments thatexpandtherangeofassessmentrates.TheCor-porationhadadoptedarestorationplaninOcto-ber2008toincreasethereserveratiotothe1.15percent designated thresholdwithin five years.InFebruary2009,theBoardvotedtoextendtherestoration plan horizon to seven years and inSeptember2009extendedthetimeframetoeightyears.AsofDecember31,2009,thereserveratiowasnegative0.39percent.

To further bolster the DIF’s cash position,theFDICBoardapprovedameasureonNovem-ber 12, 2009, to require insured institutions toprepay13quarters’worthofdeposit insurancepremiums—about $45.7 billion—at the end of2009.TheintentofthismeasurewastoprovidetheFDICwiththefundsneededtocarryonwiththetaskofresolvingfailedinstitutionsin2010,but without accelerating the impact of assess-mentsontheindustry’searningsandcapital.TheCorporationwillfacechallengesgoingforwardin its ongoing efforts to replenish theDIF andimplementadepositinsurancepremiumsystemthatdifferentiatesbasedonrisktothefund.

The Corporation will also be continuing toplayaleadershiproleinitsworkwithglobalpart-nersonsuchmattersasBaselIItoensurestrongregulatorycapitalstandardstoprotecttheinterna-tionalfinancialsystemfromproblemsthatmightarisewhenamajorbankorseriesofbanksfail.

Ensuring Institution Safety and Soundness Through an Effective Examination and Supervision Program

TheCorporation’sbanksupervisionprogrampromotesthesafetyandsoundnessofFDIC-su-pervised insured depository institutions. As of

December31,2009, theFDICwas theprimaryfederalregulatorforabout5,000FDIC-insured,state-chartered institutions thatwere notmem-bers of the Federal Reserve System (generallyreferred toas“statenon-member” institutions).TheexaminationofthebanksthatitregulatesisacoreFDICsupervisoryfunction.TheCorpora-tion also has back-up examination authority toprotecttheinterestsofthedepositinsurancefundfor about 3,000 national banks, state-charteredbanksthataremembersof theFederalReserveSystem,andsavingsassociations.

Inthecurrentenvironment,effortstocontin-uetoensuresafetyandsoundnessandcarryouttheexaminationfunctionwillbechallenginginanumberofways.Ofparticularimportancefor2010 is that theCorporation needs to continuetoassesstheimplicationsoftherecentfinancialandeconomiccrisisandintegratelessonslearnedandanyneededchangestotheexaminationpro-gramintothesupervisoryprocess.Atthesametime,itneedstocontinuetocarryoutscheduledexaminationstoensurethesafetyandsoundnessofthethousandsofinstitutionsthatitregulates.TheCorporationhasdevelopedacomprehensive“forward-lookingsupervision”trainingprogramfor its examiners designed to build on lessonslearnedoverthepastyearorsoandwillneedtoputthattrainingintopracticegoingforward.

Asinthepast,theCorporationneedstoensureithassufficientresourcestokeeppacewithitsrigorous examination schedule and the neededexpertise to address complex transactions andnew financial instruments that may affect aninstitution’ssafetyandsoundness.Inlightofthemanychangesinfinancialinstitutionoperationsoverthepastyearorso,theFDIC’sexaminationworkforce may need to review and comment

VI. Appendices 181

beeffective to ensure institutions arepromptlycomplying with any supervisory enforcementactions—informalorformal—resultingfromtheFDIC’s risk-management examination process.In some cases, tomaintain the integrity of thebankingsystem,theCorporationwillalsoneedto aggressively pursue prompt actions againstbank boards or senior officers who may havecontributedtoaninstitution’sfailure.

The rapid changes in the banking indus-try, increase inelectronicandon-linebanking,growingsophisticationoffraudschemes,andthemere complexity of financial transactions andfinancial instruments all create potential risksat FDIC-insured institutions and their serviceproviders. These risks could negatively impactthe FDIC and the integrity of the U.S. finan-cial system and contribute to institution fail-uresifexistingchecksandbalancesfalterorareintentionallybypassed.TheFDICmustseek tominimizetheextent towhichthe institutions itsupervisesareinvolvedinorvictimsoffinancialcrimesandotherabuse. Itneeds tocontinue tofocusonBankSecrecyActexaminationstopre-ventbanksandotherfinancialserviceprovidersfrombeingusedasintermediariesfor,ortohidethe transfer or deposit ofmoney derived from,criminal activity. FDIC examiners need to bealerttothepossibilityofotherfraudulentactiv-ityinfinancialinstitutions,andmakefulluseofreports, information,andother resourcesavail-abletothemtohelpdetectsuchfraud.

Protecting and Educating Consumers and Ensuring an Effective Compliance Program

TheFDIC’seffortstoensurethatbanksservetheir communities and treat consumers fairlycontinuetobeapriority.TheFDICcarriesoutits

on a number of new issues when they assignexamination ratings.With respect to riskman-agementexaminations,seniorDSCmanagementandexaminerswillneedtocontinuetoadoptthe“forward-looking” supervisory approach, care-fully assess the institution’s overall risks, andbase ratings not on current financial conditionalone, but rather on consideration of possiblefuturerisks.Theserisksshouldbeidentifiedbyrigorousandeffectiveon-siteandoff-sitereviewmechanisms and accuratemetrics that identifyrisksembeddedinthebalancesheetsandopera-tions of the insured depository institutions sothatstepscanbetakentomitigatetheir impactontheinstitutions.

The Corporation’s supervision workload isfurther compounded by the increased numberofprobleminstitutions thatexist,as referencedearlier—thatis,institutionsassignedacompos-iteratingof4or5undertheUniformFinancialInstitutionsRatingSystembyitsprimaryfederalregulatororbytheFDICifitdisagreeswiththeprimaryfederalregulator’srating.Probleminsti-tutionsaresubjecttoclosesupervisionwithmorefrequent examinations, visitations, and off-sitereviews. They are also subject to enforcementactions requiring corrective actions designedtoresolvethebank’sdeterioratingcondition.Inlightofrecentfailures,suchscrutinyisofpara-mountimportance.

In all cases, examiners need to continue tobringanyidentifiedproblemstothebank’sBoardandmanagement’sattention,assignappropriateratings, andmake actionable recommendationsto address areas of concern. In doing so theywillcontinue toneed thefullsupportofseniorFDIC management. Subsequently, the FDIC’scorrective action and follow-upprocessesmust


personalsavings,responsiblefinancialmanage-ment,andthebenefitsandlimitationsofdepositinsurance.Itwillcontinueeducationalandout-reach endeavors to disseminate updated infor-mationtoallconsumers,includingtheunbankedandunderbanked,goingforwardsothattaxpay-ers have the needed knowledge for responsiblefinancial management and informed decision-making.

With respect to consumerprotections in thecontextofpossibleregulatoryreform,theFDICsupports the establishment of a single primaryfederal consumer-products regulator. In theFDIC’sview,suchanentityshouldregulatepro-vidersofconsumercredit,savings,payment,andother financialproductsandservices. It shouldhave sole rulemaking authority for consumerfinancial protection statutes and should havesupervisory andenforcement authorityover allnon-bankprovidersofconsumercreditandback-upsupervisoryauthorityoverinsureddeposito-ryinstitutions.Aswithotherregulatoryreforminitiatives, the FDICmay face challenges as itseekstomakethisconceptarealityinthecom-ingmonths.

Effectively Managing the FDIC Workforce and Other Corporate Resources

TheFDIC’shuman,financial,IT,andphysi-cal resourceshavebeenstretchedover thepastyear and theCorporationwill continue to facechallengesduring2010inpromotingsoundgov-ernanceandeffectivestewardshipofitscorebusi-nessprocessesandresources.Ofparticularnote,FDICstaffinglevelsareincreasingdramatically.TheBoardapproveda2010FDICstaffinglevelof8,653,reflectinganincreasefrom7,010posi-tions in 2009. These staff—mostly temporary,

consumerprotectionrolebyeducatingconsum-ers,providing themwithaccess to informationabouttheirrightsanddisclosuresthatarerequiredby federal laws and regulations, and examin-ing the banks where the FDIC is the primaryfederal regulator to determine the institutions’compliance with laws and regulations govern-ing consumer protection, unfair or deceptiveactsandpractices,fairlending,andcommunityinvestment. The FDIC’s compliance program,includingexaminations,visitations,andfollow-upsupervisoryattentiononviolationsandotherprogramdeficiencies,iscriticaltoensuringthatconsumers and businesses obtain the benefitsandprotectionsaffordedthembylaw.Proactive-lyidentifyingandassessingpotentialrisksasso-ciatedwithnewandexistingconsumerproductswillcontinuetochallengetheFDIC.

TheFDICwillcontinuetoconductCommu-nity Reinvestment Act (CRA) examinations inaccordancewiththeCRA,a1977lawintendedto encourage insured banks and thrifts to helpmeet the credit needs of the communities inwhichtheyarecharteredtodobusiness,includ-ing low- and moderate-income neighborhoods,consistentwith safe and soundoperations.TheCorporationneeds tomaximize thebenefits oftheinteractionsbetweenitscomplianceandriskmanagement functions in the interest ofmain-taining healthy, viable institutions that servetheircommunitieswell.

TheFDICwillcontinuetoaddressitsmount-ingworkload of responding to public inquiriesfrom consumers regarding deposit insurancecoverageandotherconcernsstemmingfromthefinancial distress they have experienced.Also,the Corporation will continue to emphasizefinancial literacy topromote the importanceof

VI. Appendices 183

poration’sfinancialmanagementeffortsmustcon-tinuouslyseektobeefficientandcost-conscious.

Amidsttheturmoilintheindustryandecon-omy,theFDICisengaginginmassiveamountsof information sharing—both internally andwithexternalpartners. Its information technol-ogyresourcesneedtoensuretheintegrity,avail-ability, and appropriate confidentiality of bankdata, personally identifiable information, andother sensitive information in an environmentof increasingly sophisticated security threatsand global connectivity. Continued attentionto ensuring the physical security of all FDICresourcesisalsocritical.

The FDIC’s numerous enterprise risk man-agementactivitiesneedtoconsistentlyidentify,analyze, and mitigate operational risks on anintegrated,corporate-widebasis.SuchrisksneedtobecommunicatedthroughouttheCorporationandtherelationshipbetweeninternalandexter-nal risks and related risk mitigation activitiesshouldbeunderstoodbyallinvolved.Tofurtherenhanceriskmonitoringefforts,theCorporationhas established six new ProgramManagementOffices to address risks associated with suchactivitiesassharedlossagreements,contractingoversightfornewprogramsandresolutionactiv-ities,thesystemicresolutionauthorityprogram,and human resource management concerns.Thesenewofficesand thecontractorsengagedto assist themwill require additional oversightmechanismstohelpensuretheirsuccess.

**********

TheFDICOIGiscommittedtoitsmissionofassistingandaugmentingtheFDIC’scontributiontostabilityandpublicconfidenceinthenation’sfinancialsystem.Nowmorethanever,wehavea

and including a number of rehired annuitants—will perform bank examinations and othersupervisory activities to address bank failures,and, as mentioned previously, an increasingnumberwillbedevotedtomanagingandsellingassetsretainedbytheFDICwhenafailedbankissold.TheFDIChasopenedtwonewtemporarySatellite Offices (East Coast and West Coast)andwillopenathirdintheMidwestforresolv-ingfailedfinancialinstitutionsandmanagingtheresultingreceiverships.Asreferencedearlier,theCorporation’s contracting level has also grownsignificantly, especiallywith respect to resolu-tionandreceivershipwork.

Opening new offices, rapidly hiring andtraining many new staff, expanding contract-ing activity, and training those with contractoversight responsibilities are all placing heavydemands on the Corporation’s personnel andadministrativestaffandoperations.Whencon-ditionsimprovethroughouttheindustryandtheeconomy, a number of employeeswill need tobe released and staffing levelswill return to apre-crisislevel,whichmaycauseadditionaldis-ruption to ongoing operations and theworkingenvironment.Amongotherchallenges,pre-andpost-employmentchecksfornewemployeesandcontractorswillneedtoensurethehigheststan-dardsofethicalconduct,andforallemployees,theCorporationwillseektosustainitsemphasisonfosteringemployeeengagementandmorale.

Tosupport these increases inFDICandcon-tractor resources, the Board approved a nearly$4.0 billion 2010 Corporate Operating Budget,approximately$1.4billionhigher than for2009.TheFDIC’soperating expenses are largelypaidfrom the insurance fund, and consistent withsoundcorporategovernanceprinciples, theCor-


crucialroletoplaytohelpensureeconomy,effi-ciency,effectiveness,integrity,andtransparencyof programs and associated activities, and toprotectagainstfraud,waste,andabusethatcanunderminetheFDIC’ssuccess.OurmanagementandperformancechallengesevaluationisbasedprimarilyontheFDIC’soperatingenvironmentandavailableinformationasoftheendof2009,unless otherwise noted. We will continue tocommunicate and coordinate closely with theCorporation, theCongress, and other financialregulatoryOIGsasweaddresstheseissuesandchallenges.ResultsofOIGworkwillbepostedat www.fdicig.gov.

http://www.fdicig.gov

2009Federal Deposit Insurance Corporation

This Annual Report was produced by talented and dedicated staff. To these individuals, we would like to offer our sincere thanks and appreciation. Special recognition is given to the following individuals for their contributions.

Jannie F. Eaddy•

Barbara Glasby•

David Kornreich•

Mia Jordan•

Robert Nolan•

Patricia Hughes•

F E D E R A L D E P O S I T

I N S U R A N C E C O R P O R A T I O N

5 5 0 1 7 t h S t r e e t , N WW a s h i n g t o n , D C 2 0 4 2 9 - 9 9 9 0

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