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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

April 2012: 

Financial Audit: 

Federal Deposit Insurance Corporation Funds' 2011 and 2010 Financial 
Statements: 

GAO-12-416: 

GAO Highlights: 

Highlights of GAO-12-416 a report to congressional committees. 

Why GAO Did This Study: 

Created in 1933 to insure bank deposits and promote sound banking 
practices, the Federal Deposit Insurance Corporation (FDIC) plays an 
important role in maintaining public confidence in the nation’s 
financial system. FDIC administers the Deposit Insurance Fund (DIF), 
which protects bank and savings deposits, and the Federal Savings and 
Loan Insurance Corporation (FSLIC) Resolution Fund (FRF), which was 
created to close out the business of the former FSLIC. 

Section 17 of the Federal Deposit Insurance Act, as amended, and the 
Government Corporation Control Act require GAO to annually audit the 
financial statements of the DIF and the FRF. GAO is responsible for 
obtaining reasonable assurance about whether FDIC’s financial 
statements for the DIF and the FRF are presented fairly in all 
material respects, in conformity with U.S. generally accepted 
accounting principles, and whether FDIC maintained effective internal 
control over financial reporting, and for testing FDIC’s compliance 
with selected laws and regulations. 

What GAO Found: 

In GAO’s opinion, FDIC fairly presented, in all material respects, the 
2011 and 2010 financial statements for the two funds it administers—
DIF and FRF. Also, in GAO’s opinion, although certain internal 
controls related to the DIF should be improved, FDIC maintained, in 
all material respects, effective internal control over financial 
reporting. Further, GAO did not find any reportable instances of 
noncompliance with provisions of the laws and regulations it tested.
The banking industry continued to recover in 2011 from the effects of 
the financial crisis and the recession of 2007-09. During 2011, 92 
insured banks with combined assets of $36.6 billion failed. However, 
the losses to the DIF from failures that occurred in 2011 fell short 
of the amount reserved at the end of 2010. The aggregate number and 
size of institution failures in 2011--and their estimated cost to the 
DIF--were less than anticipated. As discussed in note 17 to DIF’s 
financial statements, through April 11, 2012, 16 institutions have 
failed during 2012. 

As of December 31, 2011, the DIF had a fund balance of $11.8 billion 
and its ratio of reserves to estimated insured deposits was 0.17 
percent. In contrast, at December 31, 2010, the DIF had a negative 
fund balance of $7.4 billion, and its ratio of reserves to estimated 
insured deposits was a negative 0.12 percent. The improvement was 
primarily attributable to assessment revenue earned in 2011, lower 
losses from bank failures in 2011 than projected at December 31, 2010, 
and a reduction in estimated losses from anticipated failures at 
December 31, 2011. 

During 2011, FDIC continued its implementation of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act. The Act set a statutory 
minimum designated reserve ratio for DIF of not less than 1.35 percent 
of estimated insured deposits, and requires that FDIC take such steps 
as necessary to achieve this reserve ratio by September 30, 2020. FDIC 
adopted a new restoration plan for the DIF in October 2010 in response 
to the Act’s requirements, and in December 2011 adopted a final rule 
to maintain the designated reserve ratio at 2 percent. 

During the 2011 audit, GAO identified deficiencies in controls over 
FDIC’s process for deriving and reporting estimates of losses to the 
DIF from resolution transactions involving shared loss agreements. 
These deficiencies resulted in errors in the draft 2011 DIF financial 
statements provided to GAO that went undetected by FDIC and that 
necessitated adjustments in finalizing the financial statements. While 
these deficiencies, individually and collectively, do not constitute a 
material weakness in internal control over financial reporting, they 
nevertheless increase the risk of additional undetected errors or 
irregularities in the DIF’s financial statements. Consequently, GAO 
believes they collectively represent a significant deficiency in 
FDIC’s internal control over DIF financial reporting. Additionally, 
GAO identified other less significant matters involving FDIC’s 
financial reporting internal control which merit management’s 
attention. 

What GAO Recommends: 

GAO is not making recommendations in this report, but will be 
reporting separately on matters identified during its audit, along 
with recommendations for strengthening the corporation’s internal 
controls. In commenting on a draft of this report, FDIC stated that it 
recognizes the important role a strong internal control program plays 
in achieving the agency’s mission, and its dedication to sound 
financial management has been and will remain a top priority. 

View [hyperlink, http://www.gao.gov/products/GAO-12-416] or key 
components. For more information, contact Steven J. Sebastian at (202) 
512-3406 or sebastians@gao.gov. 

[End of section] 

Contents: 

Transmittal Letter: 

Auditor's Report: 

Opinion on the DIF's Financial Statements: 

Opinion on the FRF's Financial Statements: 

Opinion on Internal Control: 

Compliance with Laws and Regulations: 

Objectives, Scope, and Methodology: 

FDIC Comments: 

Deposit Insurance Fund's Financial Statements: 
Balance Sheet: 
Statement of Income and Fund Balance: 
Statement of Cash Flows: 
Notes to the Financial Statements: 

FSLIC Resolution Fund's Financial Statements: 
Balance Sheet: 
Statement of Income and Accumulated Deficit: 
Statement of Cash Flows: 
Notes to the Financial Statements: 

Appendix: 

Appendix I: Comments from the Federal Deposit Insurance Corporation: 

Abbreviations: 

CFO: Chief Financial Officer: 

DIF: Deposit Insurance Fund: 

FDIC: Federal Deposit Insurance Corporation: 

FMFIA: Federal Managers' Financial Integrity Act of 1982: 

FRF: FSLIC Resolution Fund: 

FSLIC: Federal Savings and Loan Insurance Corporation: 

TLGP: Temporary Liquidity Guarantee Program: 

[End of section] 

United States Government Accountability Office: 
Washington, D.C. 20548: 

April 19, 2012: 

The Honorable Tim Johnson: 
Chairman: 
The Honorable Richard C. Shelby: 
Ranking Member: 
Committee on Banking, Housing, and Urban Affairs: 
United States Senate: 

The Honorable Spencer Bachus: 
Chairman: 
The Honorable Barney Frank: 
Ranking Member: 
Committee on Financial Services: 
House of Representatives: 

This report presents the results of our audits of the financial 
statements of the Deposit Insurance Fund (DIF) and the FSLIC 
Resolution Fund (FRF) as of, and for the years ending December 31, 
2011, and 2010. These financial statements are the responsibility of 
the Federal Deposit Insurance Corporation (FDIC), the administrator of 
the two funds. 

This report contains our (1) unqualified opinions on the DIF's and the 
FRF's financial statements; (2) opinion that FDIC maintained, in all 
material respects, effective internal control over financial reporting 
as of December 31, 2011; and (3) conclusion that we found no 
reportable compliance issues during 2011 with provisions of laws and 
regulations we tested. The report also discusses that while FDIC 
maintained effective internal control in all material respects, we 
identified deficiencies in controls over FDIC's process for deriving 
and reporting estimates of losses to the DIF from resolution 
transactions involving shared loss agreements. The report discusses 
our conclusion that these deficiencies collectively represent a 
significant deficiency in internal control over financial reporting 
with respect to the DIF. 

We are sending copies of this report to the Chairman of the Board of 
Directors of FDIC, the Chairman of the FDIC Audit Committee, the 
Chairman of the Board of Governors of the Federal Reserve System, the 
Comptroller of the Currency, the Secretary of the Treasury, the 
Director of the Office of Management and Budget; and other interested 
parties. In addition, this report will be available at no charge on 
the GAO website at [hyperlink, http://www.gao.gov]. 

If you have any questions concerning this report, please contact me at 
(202) 512-3406 or sebastians@gao.gov]. Contact points for our Offices 
of Congressional Relations and Public Affairs may be found on the last 
page of this report. 

Signed by: 

Steven J. Sebastian: 
Managing Director: 
Financial Management and Assurance: 

[End of section] 

Auditor's Report To the Board of Directors The Federal Deposit 
Insurance Corporation: 

In accordance with section 17 of the Federal Deposit Insurance Act, as 
amended, and the Government Corporation Control Act, we are 
responsible for conducting audits of the financial statements of the 
funds administered by the Federal Deposit Insurance Corporation 
(FDIC). In our audits of the Deposit Insurance Fund's (DIF) and the 
FSLIC Resolution Fund's (FRF) financial statements[Footnote 1] for 
2011 and 2010, we found: 

* the financial statements as of and for the years ended December 31, 
2011, and 2010, are presented fairly, in all material respects, in 
conformity with U.S. generally accepted accounting principles; 

* although certain internal controls should be improved, FDIC 
maintained, in all material respects, effective internal control over 
financial reporting as of December 31, 2011; and: 

* no reportable noncompliance with provisions of laws and regulations 
we tested. 

The following sections discuss in more detail (1) these conclusions; 
(2) our audit objectives, scope, and methodology; and (3) agency 
comments. 

Opinion on the DIF's Financial Statements: 

The financial statements, including the accompanying notes, present 
fairly, in all material respects, in conformity with U.S. generally 
accepted accounting principles, the DIF's assets, liabilities, and 
fund balance as of December 31, 2011, and 2010, and its income and 
fund balance and its cash flows for the years then ended. 

As discussed in note 8 to the DIF's financial statements, the banking 
industry continued to recover in 2011 from the effects of the 
financial crisis and the recession of 2007-09. During 2011, 92 insured 
banks with combined assets of $36.6 billion failed. However, the 
losses to the DIF from failures that occurred in 2011 fell short of 
the amount reserved at the end of 2010, as the aggregate number and 
size of institution failures in 2011--and their estimated cost to the 
DIF--were less than anticipated. The DIF's contingent liability for 
anticipated failures declined from $17.7 billion at December 31, 2010, 
to $6.5 billion at December 31, 2011. As discussed in note 17 to the 
DIF's financial statements, through April 11, 2012, 16 institutions 
have failed during 2012. 

As of December 31, 2011, the DIF had a fund balance of $11.8 billion, 
and its ratio of reserves to estimated insured deposits was 0.17 
percent. In contrast, at December 31, 2010, the DIF had a negative 
fund balance of $7.4 billion, and its ratio of reserves to estimated 
insured deposits was a negative 0.12 percent. The improvement was 
primarily attributable to assessment revenue earned in 2011, lower 
losses from bank failures in 2011 than projected at December 31, 2010, 
and a reduction in estimated losses from anticipated failures at 
December 31, 2011. 

During 2011, FDIC continued its implementation of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act,[Footnote 2] which included 
significant provisions related to the capitalization of the DIF. The 
act set a statutory minimum designated reserve ratio for the DIF of 
not less than 1.35 percent of estimated insured deposits and requires 
that FDIC take such steps as may be necessary to achieve this reserve 
ratio by September 30, 2020. FDIC adopted a new DIF restoration plan 
in October 2010 in response to the act's requirements. As discussed in 
note 9 to the DIF's financial statements, in December 2011, the FDIC 
adopted a final rule to maintain the DIF's designated reserve ratio at 
2 percent, based on its view that this level would enable it to 
withstand substantial losses consistent with FDIC's comprehensive long-
term management plan. In addition, the act provides for a permanent 
increase in the standard deposit insurance coverage amount from 
$100,000 to $250,000 (retroactive to January 1, 2008), and unlimited 
deposit insurance coverage for non-interest-bearing transaction 
accounts through the end of 2012. The act also authorizes FDIC to 
undertake enforcement actions against depository institution holding 
companies if their conduct, or threatened conduct, poses a risk of 
loss to the DIF. 

The DIF also continues to face some exposure as a result of actions 
taken pursuant to the systemic risk determination made in 2008. As 
discussed in note 16 to DIF's financial statements, pursuant to this 
systemic risk determination, FDIC established the Temporary Liquidity 
Guarantee Program (TLGP) in 2008. The only component of the TLGP 
remaining is the Debt Guarantee Program, under which FDIC guaranteed 
newly issued senior unsecured debt up to prescribed limits issued by 
insured institutions and certain holding companies. FDIC charged fees 
to participants that are to be used to cover any losses under the Debt 
Guarantee Program. The guarantees covered each participating debt to 
the earliest of the related date of maturity, or December 31, 2012. As 
of December 31, 2011, the amount of debt guaranteed by FDIC under the 
Debt Guarantee Program was $167.4 billion. 

Opinion on the FRF's Financial Statements: 

The financial statements, including the accompanying notes, present 
fairly, in all material respects, in conformity with U.S. generally 
accepted accounting principles, the FRF's assets, liabilities, and 
resolution equity as of December 31, 2011, and 2010, and its income 
and accumulated deficit and its cash flows for the years then ended. 

Opinion on Internal Control: 

Although certain internal controls associated with the DIF's financial 
reporting should be improved, FDIC maintained, in all material 
respects, effective internal control over financial reporting as of 
December 31, 2011. FDIC's internal control provided reasonable 
assurance that misstatements, losses, or noncompliance material in 
relation to the DIF financial statements and the FRF financial 
statements would be prevented or detected and corrected on a timely 
basis. Our opinion is based on criteria established under 31 U.S.C. 
§3512 (c), (d), commonly known as the Federal Managers' Financial 
Integrity Act of 1982 (FMFIA). 

Significant Deficiency: 

During our 2011 audit, we identified deficiencies in controls over 
FDIC's process for deriving and reporting estimates of losses to the 
DIF from resolution transactions involving shared loss agreements. 
These deficiencies resulted in errors in the draft 2011 DIF financial 
statements that FDIC did not detect and that necessitated FDIC 
adjustments in finalizing the financial statements. While these 
deficiencies, individually and collectively, do not constitute a 
material weakness in internal control over financial reporting, 
[Footnote 3] they nevertheless increase the risk of additional 
undetected errors or irregularities in the DIF's financial statements. 
Consequently, we believe they collectively represent a significant 
deficiency in FDIC's internal control over financial reporting for the 
DIF.[Footnote 4] 

Since 2009, FDIC has used purchase and assumption agreements with 
accompanying shared loss agreements as the primary means of resolving 
failed financial institutions. Under such agreements, FDIC sells a 
failed institution to an acquirer with an agreement that FDIC, through 
the DIF, will share in any losses the acquirer experiences in 
servicing and disposing of assets purchased and covered under the 
shared loss agreement. Typically, these shared loss agreements are 
structured such that FDIC assumes 80 percent of any such losses. 

For financial reporting purposes, FDIC developed a process to 
calculate an estimate of losses under these shared loss agreements. 
The estimate was $42.8 billion (46 percent) of the total DIF allowance 
for losses related to the Receivables from resolutions, net line item 
on the DIF's balance sheet at December 31, 2011. As an integral part 
of this shared loss estimation process, FDIC developed a series of 
computerized programs that are commonly referred to as the shared loss 
model. 

As part of our audit, we reviewed the process by which FDIC derived 
its estimates of losses to the DIF from shared loss agreements. We 
identified deficiencies in internal control over this process that 
allowed significant errors in the shared loss estimate to occur and 
not be detected or corrected. During prior financial audits, we 
identified and reported on control deficiencies in FDIC's process for 
estimating losses from shared loss agreements.[Footnote 5] Although 
FDIC has taken steps intended to address the deficiencies that we 
previously identified, the controls put in place were not sufficient 
to prevent, detect, and correct errors in the shared loss model. 
During our 2011 audit, the following three control deficiencies were 
identified that adversely affected FDIC's shared loss estimation 
process: 

1. FDIC lacked effective controls over testing and verifying the 
shared loss model. FDIC's tests were not designed to consistently 
verify that the model's logic and test results were consistent with 
the objectives of the model. Further, the tests did not evaluate all 
portions of the model's loss calculation. As a result, FDIC's tests 
did not detect three separate programming errors in the model, such as 
double counting of some losses that led to errors in the shared loss 
estimate in the draft DIF financial statements. The lack of effective 
controls resulted in undetected gross errors in the draft DIF 
financial statements' overall allowance for losses of $578 million and 
a $184 million net reduction in the loss estimate. FDIC subsequently 
corrected this error in finalizing the DIF's 2011 financial statements. 

2. FDIC lacked effective controls over the integrity of source data 
used by the shared loss model in deriving the shared loss estimates. 
FDIC's controls did not fully provide reasonable assurance that the 
source data used by the model were accurate. FDIC recognized that the 
model depended on accurate source data. However, in testing the model, 
FDIC did not develop steps to verify either the model's input or 
results with original source documents. As a result, we identified 
errors, not only in the source data but also in the model itself that 
FDIC's testing had not previously identified. This control deficiency 
resulted in undetected gross errors in the draft DIF financial 
statements' overall allowance for losses of $191 million and a $90 
million net reduction in the loss estimate. FDIC subsequently 
corrected this error in finalizing the DIF's 2011 financial statements. 

3. FDIC lacked effective documentation for key aspects of its shared 
loss estimation process that hindered an adequate review of both the 
process and the shared loss model and, ultimately, the loss estimates 
derived from the model. As a result, FDIC's multiple reviews and 
approvals did not identify programming errors that existed within the 
model. We reported in 2009 and again in 2010 that FDIC did not have 
clear and comprehensive documentation over this process to allow for 
such a review.[Footnote 6] FDIC attempted to address this continuing 
issue by strengthening its internal controls over the entire shared 
loss estimation process in 2011 through documenting flow charts, data 
dictionaries, and high-level descriptions of the process. However, 
FDIC did not adequately document how the model should perform 
calculations or how the calculations link to its estimation 
methodology. As a result, FDIC's review of the model was not fully 
effective at identifying errors. 

As a direct result of these deficiencies in internal control over the 
shared loss model, FDIC did not detect errors in the calculation of 
the shared loss estimate in preparing the draft 2011 DIF financial 
statements. Given the significance of this process and its impact on 
the DIF's financial statements, it is critical that FDIC design and 
implement effective controls and ensure that all steps in the shared 
loss model are fully documented to allow for appropriate review of key 
steps in the process. We will be making recommendations to FDIC to 
address the issues that make up this significant deficiency in a 
separate report. 

We identified other less significant matters concerning FDIC's 
internal control that we will report separately, along with 
recommended corrective actions for these matters. 

Compliance with Laws and Regulations: 

Our tests for compliance with selected provisions of laws and 
regulations disclosed no instances of noncompliance that would be 
reportable under U.S. generally accepted government auditing 
standards. However, the objective of our audits was not to provide an 
opinion on overall compliance with laws and regulations. Accordingly, 
we do not express such an opinion. 

Objectives, Scope, and Methodology: 

FDIC management is responsible for (1) preparing the annual financial 
statements in conformity with U.S. generally accepted accounting 
principles, (2) establishing and maintaining effective internal 
control over financial reporting and evaluating its effectiveness, and 
(3) complying with applicable laws and regulations. Management 
evaluated the effectiveness of FDIC's internal control over financial 
reporting as of December 31, 2011, based on criteria established under 
FMFIA. FDIC management provided an assertion concerning the 
effectiveness of its internal control over financial reporting (see 
appendix I). 

We are responsible for planning and performing the audit to obtain 
reasonable assurance and provide our opinion about whether (1) the 
financial statements are presented fairly, in all material respects, 
in conformity with U.S. generally accepted accounting principles, and 
(2) FDIC management maintained, in all material respects, effective 
internal control over financial reporting as of December 31, 2011. We 
are also responsible for testing compliance with selected provisions 
of laws and regulations that have a direct and material effect on the 
financial statements. 

In order to fulfill these responsibilities, we: 

* examined, on a test basis, evidence supporting the amounts and 
disclosures in the financial statements; 

* assessed the accounting principles used and significant estimates 
made by FDIC management; 

* evaluated the overall presentation of the financial statements; 

* obtained an understanding of FDIC and its operations, including its 
internal control over financial reporting; 

* considered FDIC's process for evaluating and reporting on internal 
control over financial reporting based on criteria established under 
FMFIA; 

* assessed the risk that a material misstatement exists in the 
financial statements and the risk that a material weakness exists in 
internal control over financial reporting; 

* tested relevant internal control over financial reporting; 

* evaluated the design and operating effectiveness of internal control 
over financial reporting based on the assessed risk; 

* tested compliance with certain laws and regulations, including 
selected provisions of the Federal Deposit Insurance Act, as amended; 
and: 

* performed such other procedures as we considered necessary in the 
circumstances. 

An entity's internal control over financial reporting is a process 
effected by those charged with governance, management, and other 
personnel, the objectives of which are to provide reasonable assurance 
that (1) transactions are properly recorded, processed, and summarized 
to permit the preparation of financial statements in conformity with 
U.S. generally accepted accounting principles, and assets are 
safeguarded against loss from unauthorized acquisition, use, or 
disposition and (2) transactions are executed in accordance with laws 
and regulations that could have a direct and material effect on the 
financial statements. 

We did not evaluate all internal controls relevant to operating 
objectives as broadly defined by FMFIA, such as controls relevant to 
preparing statistical reports and ensuring efficient operations. We 
limited our internal control testing to controls over financial 
reporting. Because of inherent limitations in internal control, 
internal control may not prevent or detect and correct misstatements 
caused by error or fraud, losses, or noncompliance. We also caution 
that projecting any evaluation of effectiveness to future periods is 
subject to the risk that controls may become inadequate because of 
changes in conditions, or that the degree of compliance with policies 
and procedures may deteriorate. 

We did not test compliance with all laws and regulations applicable to 
FDIC. We limited our tests of compliance to those laws and regulations 
that have a direct and material effect on the financial statements for 
the year ended December 31, 2011. We caution that noncompliance may 
occur and not be detected by these tests and that such testing may not 
be sufficient for other purposes. 

We performed our audits in accordance with U.S. generally accepted 
government auditing standards. We believe our audits provide a 
reasonable basis for our opinions and other conclusions. 

FDIC Comments: 

In commenting on a draft of this report, the FDIC's Chief Financial 
Officer (CFO) noted that the agency was pleased to receive unqualified 
opinions on the DIF and FRF financial statements and that we reported 
that it had effective internal control over financial reporting and 
compliance with laws and regulations for each fund. 

FDIC's CFO also stated that during the audit year, FDIC management and 
staff continued to take steps to strengthen and improve controls over 
the shared loss estimation process and will continue to focus on this 
area in the coming audit year. The CFO added that FDIC recognizes the 
important role a strong internal control program plays in an agency 
achieving its mission, and that FDIC's dedication to sound financial 
management has been and will remain a top priority. 

Signed by: 

Steven J. Sebastian: 
Managing Director: 
Financial Management and Assurance: 

April 11, 2012: 

[End of section] 

Deposit Insurance Fund's Financial Statements: 

Balance Sheet: 

Deposit Insurance Fund: 

Federal Deposit Insurance Corporation: 

Deposit Insurance Fund Balance Sheet at December 31: 

Dollars in Thousands: 

Assets: 

Cash and cash equivalents - unrestricted: 
2011: $3,277,839; 
2010: $27,076,606. 

Cash and cash equivalents - restricted - systemic risk (Note 16): 
(Includes cash/cash equivalents of $5,030,369 at December 31, 2010 and 
$6,430,589 at December 31, 2009): 
2011: $4,827,319; 
2010: $6,646,968. 

Investment in U.S. Treasury obligations, net: (Note 3): 
2011: $33,863,245; 
2010: $12,371,268. 

Assessments receivable, net (Note 9): 
2011: $282,247; 
2010: $217,893. 

Receivables and other assets - systemic risk (Note 16): 
2011: $1,948,151; 
2010: $2,269,422. 

Trust preferred securities (Note 5): 
2011: $2,213,231; 
2010: $2,297,818. 

Interest receivable on investments and other assets, net: 
2011: $488,179; 
2010: $259,683. 

Receivables from resolutions, net (Note 4): 
2011: $218,548,396; 
2010: $29,532,545. 

Property and equipment, net (Note 5): 
2011: $401,915; 
2010: $416,065. 

Total Assets: 
2011: $75,850,522; 
2010: $81,088,268. 

Liabilities: 

Accounts payable and other liabilities: 
2011: $374,164; 
2010: $514,287. 

Unearned revenue - prepaid assessments (Note 9): 
2011: $17,399,828; 
2010: $30,057,033. 

Liabilities due to resolutions (Note 7): 
2011: $32,790,512; 
2010: $30,511,877. 

Deferred revenue - systemic risk (Note 16): 
2011: $6,639,954; 
2010: $9,054,541. 

Postretirement benefit liability (Note 13): 
2011: $187,968; 
2010: $165,874. 

Contingent liabilities for: Anticipated failure of insured 
institutions: (Note 8): 
2011: $6,511,321; 
2010: $17,687,569. 

Contingent liabilities for: Systemic risk (Note 16): 
2011: $2,216;
2010: $119,993. 

Contingent liabilities for: Litigation losses: (Note 8): 
2011: $1,000; 
2010: $300,000. 

Total Liabilities: 
2011: $64,023,990; 
2010: $88,440,508. 

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

Fund Balance: 

Accumulated net income: 
2011: $11,560,990; 
2010: ($7,696,428). 

Unrealized gain on available-for-sale securities, net (Note 3): 
2011: $47,697; 
2010: $26,698. 

Unrealized postretirement benefit (Loss) Gain (Note 13): 
2011: ($33,562)
2010: ($18,503). 

Unrealized Gain on trust preferred securities (Note 5): 
2011: $251,407; 
2010: $335,993. 

Total Accumulated Other Comprehensive Income 
2011: $265,542; 
2010: $344,188. 

Total Fund Balance: 
2011: $11,826,532;
2010: ($7,352,240). 

Total Liabilities and Fund Balance: 
2011: $75,850,522; 
2010: $81,088,268. 

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

[End of statement] 

Statement of Income and Fund Balance: 

Deposit Insurance Fund: 

Federal Deposit Insurance Corporation: 

Deposit Insurance Fund Statement of Income and Fund Balance for the 
Years Ended December 31: 

Dollars in Thousands: 

Revenue: 

Assessments (Note 9): 
2011: $13,498,587; 
2010: $13,610,436. 

Interest on U.S. Treasury obligations: 
2011: $127,621; 
2010: $204,871. 

Systemic risk revenue (Note 16): 
2011: ($131,141); 
2010: ($672,818). 

Other revenue (Note 10): 
2011: $2,846,929; 
2010: $237,425. 

Total Revenue: 
2011: $16,341,996; 
2010: $13,379,914. 

Expenses and Losses: 

Operating expenses (Note 11): 
2011: $1,625,351; 
2010: $1,592,641. 

Systemic risk expenses (Note 16): 
2011: ($131,141); 
2010: ($672,818). 

Provision for insurance losses (Note 12): 
2011: ($4,413,629); 
2010: ($847,843). 

Insurance and other expenses: 
2011: $3,996; 
2010: $3,050. 

Total Expenses and Losses: 
2011: ($2,915,423); 
2010: $75,030. 

Net Income: 
2011: $19,257,419; 
2010: $13,304,884. 

Other Comprehensive Income:  

Unrealized (Loss) Gain on available-for-sale securities, net (Note 3): 
2011: $20,999; 
2010: ($115,429). 

Unrealized postretirement benefit (Loss) Gain (Note 13): 
2011: ($15,059); 
2010: ($15,891). 

Unrealized Gain on trust preferred securities (Note 5): 
2011: ($84,587); 
2010: $335,993. 

Comprehensive Income (Loss): 
2011: $19,178,772; 
2010: $13,509,557. 

Fund Balance - Beginning: 
2011: ($7,352,240); 
2010: ($20,861,797). 

Fund Balance - Ending: 
2011: $11,826,532; 
2010: ($7,352,240). 

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

Statement of Cash Flows: 

Deposit Insurance Fund: 

Federal Deposit Insurance Corporation: 

Deposit Insurance Fund Statement of Cash Flows for the Years Ended 
December 31: 

Dollars in Thousands: 

Operating Activities: 

Net Income (Loss): 
2011: $19,257,419; 
2010: $13,304,884. 

Adjustments to reconcile net income to net cash provided (used by) 
operating activities: 

Amortization of U.S. Treasury obligations: 
2011: $388,895; 
2010: ($5,149). 

Treasury inflation-protected securities (TIPS) inflation adjustment: 
2011: ($25,307);
2009: ($23,051). 

Depreciation on property and equipment: 
2011: $77,720; 
2010: $68,790. 

Loss on retirement of property and equipment: 
2011: $1,326; 
2010: $620. 

Provision for insurance losses: 
2011: ($4,413,629); 
2010: ($847,843). 

Unrealized Loss on postretirement benefits: 
2011: ($15,059); 
2010: ($15,891). 

Change In Operating Assets and Liabilities: 

Decrease in assessments receivable, net: 
2011: ($64,354); 
2010: $62,617. 

(Increase) Decrease in interest receivable and other assets: 
2011: ($227,962); 
2010: ($34,194). 

(Increase) in receivables from resolutions: 
2011: ($5,802,003); 
2010: ($16,607,671). 

Decrease (Increase) in receivable - systemic risk: 
2011: $321,271; 
2010: $1,029,397. 

Increase in accounts payable and other liabilities: 
2011: ($140,123); 
2010: $240,949. 

Increase in postretirement benefit liability: 
2011: $22,094; 
2010: $20,922. 

Decrease in contingency liabilities - systemic risk: 
2011: ($117,777); 
2010: ($1,262,639). 

(Decrease) in contingent liabilities - litigation losses: 
2011: ($276,000);  
2010: $0. 

(Decrease) Increase in liabilities due to resolutions: 
2011: $2,278,635; 
2010: ($4,199,849). 

Increase in Debt Guarantee Program liabilities - systemic risk: 
2011: $87,693; 
2010: $27,318. 

[Decrease) Increase in unearned revenue - prepaid assessments: 
2011: ($12,657,206); 
2010: ($12,670,068). 

(Decrease) Increase in deferred revenue - systemic risk: 
2011: ($2,399,644); 
2010: $1,203,936. 

Net Cash (Used by) Provided by Operating Activities: 
2011: ($3,704,011); 
2010: ($19,734,240). 

Investing Activities: 

Provided by: Maturity of U.S. Treasury obligations: 
2011: $12,976,273; 
2010: $21,558,000. 

Provided by: Sale of U.S. Treasury obligations: 
2011: $
2010: $0. 

Used by: Purchase of property and equipment: 
2011: ($64,896); 
2010: ($96,659). 

Used by: Purchase U.S. Treasury obligations: 
2011: ($36,409,429); 
2010: ($30,143,138). 

Net Cash (used by) Provided by Investing Activities: 
2011: ($23,498,052); 
2010: ($8,681,797). 

Net (Decrease) in Cash and Cash Equivalents: 
2011: ($27,202,063); 
2010: ($28,416,037). 

Cash and Cash Equivalents - Beginning: 
2011: $32,106,975; 
2010: $60,523,012. 

Unrestricted Cash and Cash Equivalents - Ending: 
2011: $3,277,839; 
2010: $27,076,606. 

Restricted Cash and Cash Equivalents - Ending: 
2011: $1,627,073; 
2010: $5,030,369. 

Cash and Cash Equivalents - Ending: 
2011: $4,904,912. 
2010: $32,106,975. 

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

[End of statement] 

Notes to the Financial Statements: 
Deposit Insurance Fund: 
December 31, 2011 and 2010: 

1. Legislation and Operations of the Deposit Insurance Fund: 

Overview: 

The Federal Deposit Insurance Corporation (FDIC) is the independent 
deposit insurance agency created by Congress in 1933 to maintain 
stability and public confidence in the nation's banking system. 
Provisions that govern the operations of the FDIC are generally found 
in the Federal Deposit Insurance (FDI) Act, as amended (12 U.S.C. 
1811, et seq). In carrying out the purposes of the FDI Act, the FDIC, 
as administrator of the Deposit Insurance Fund (DIF), insures the 
deposits of banks and savings associations (insured depository 
institutions). In cooperation with other federal and state agencies, 
the FDIC promotes the safety and soundness of insured depository 
institutions by identifying, monitoring and addressing risks to the 
DIF. Commercial banks, savings banks and savings associations (known 
as "thrifts") are supervised by either the FDIC, the Office of the 
Comptroller of the Currency, or the Federal Reserve Board. 

The FDIC, through administration of the DIF, is responsible for 
protecting insured bank and thrift depositors from loss due to 
institution failures. The FDIC is required by section 13 of the
FDI Act to resolve troubled institutions in a manner that will result 
in the least possible cost to the DIF. This section permits an 
exception if a systemic risk determination demonstrates that 
compliance with the least-cost test would have serious adverse effects 
on economic conditions or financial stability and that any action or 
assistance pursued under the systemic risk determination would avoid 
or mitigate such adverse effects. A systemic risk determination under 
this statutory provision can only be triggered by the Secretary of the 
Treasury, in consultation with the President, and upon the written 
recommendation of two-thirds of both the FDIC Board of Directors and 
the Board of Governors of the Federal Reserve System. Until passage of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act) on July 21, 2010 (see "Recent Legislation" below), a 
systemic risk determination would have permitted open bank assistance 
to an individual insured depository institution (IDI). As explained 
below, such open bank assistance is no longer available. The systemic 
risk provision requires the FDIC to recover any related losses to the 
DIF through one or more special assessments from all IDIs and, with 
the concurrence of the Secretary of the Treasury, depository 
institution holding companies (see Note 16). 

The FDIC is also the administrator of the FSLIC Resolution Fund (FRF). 
The FRF is a resolution fund responsible for the sale of remaining 
assets and satisfaction of liabilities associated with the former 
Federal Savings and Loan Insurance Corporation (FSLIC) and the former 
Resolution Trust Corporation. The DIF and the FRF are maintained 
separately by the FDIC to support their respective functions. 

Pursuant to the enactment of the Dodd-Frank Act, the FDIC is the 
manager of the Orderly Liquidation Fund (OLF). Established as a 
separate fund in the U.S. Treasury (Treasury), the OLF is inactive and 
unfunded until the FDIC is appointed as receiver for a covered 
financial company (a failing financial company, such as a bank holding 
company or nonbank financial company for which a systemic risk 
determination has been made as set forth in section 203 of the
Dodd-Frank Act). At the commencement of an orderly liquidation of a 
covered financial company, the FDIC may borrow funds required by the 
receivership from the Treasury, up to the Maximum Obligation 
Limitation for each covered financial company and in accordance with an
Orderly Liquidation and Repayment Plan. Borrowings will be repaid to 
the Treasury with the proceeds of asset sales. If such proceeds are 
insufficient, any remaining shortfall must be recovered from 
assessments imposed on financial companies as specified in the Dodd-
Frank Act. 

Recent Legislation: 

The Dodd-Frank Act (Public Law 111-203) provides comprehensive reform 
of the supervision and regulation of the financial services industry. 
Under this legislation, the FDIC's responsibilities include 1) 
liquidating failing systemically important financial firms in an 
orderly manner as manager of the newly created OLF; 2) issuing 
regulations, jointly with the Federal Reserve Board (FRB), requiring 
that nonbank financial companies supervised by the FRB and bank 
holding companies with assets equal to or exceeding $50 billion 
provide the FRB, the FDIC, and the Financial Stability Oversight 
Council (FSOC) a plan for their rapid and orderly resolution in the 
event of material financial distress or failure; 3) serving as a 
voting member of the FSOC; 4) undertaking backup examination authority 
for nonbank financial companies supervised by the FRB and bank holding 
companies with at least $50 billion in assets; 5) bringing backup 
enforcement actions against depository institution holding companies 
if their conduct or threatened conduct poses a risk of loss to the 
DIF; and 6) providing federal oversight of state-chartered thrifts, 
beginning upon the transfer of such authority from the Office of Thrift
Supervision (which occurred on July 21, 2011). 

The Dodd-Frank Act limits the systemic risk determination authority 
under section 13 of the FDI Act to IDIs for which the FDIC has been 
appointed receiver. As amended by the Dodd-Frank Act, the FDI Act now 
requires that any action taken or assistance provided pursuant to a 
systemic risk determination must be for the purpose of winding up the 
IDI in receivership. Under Title XI of the Dodd-Frank Act, the FDIC is 
granted new authority to establish a widely available program to 
guarantee obligations of solvent IDIs or solvent depository 
institution holding companies (including affiliates) upon the systemic 
determination of a liquidity event during times of severe economic 
distress. This program would not be funded by the DIF but rather by 
fees and assessments paid by all participants in the program. If fees 
are insufficient to cover losses or expenses, the FDIC must impose a 
special assessment on participants as necessary to cover the 
shortfall. Any excess funds at the end of the liquidity event program 
would be deposited in the General Fund of the Treasury. 

The Dodd-Frank Act also made changes related to the FDIC's deposit 
insurance mandate. These changes include a permanent increase in the 
standard deposit insurance amount to $250,000 (retroactive to January 
1, 2008) and unlimited deposit insurance coverage for noninterest-
bearing transaction accounts for two years, from December 31, 2010, to 
the end of 2012. Additionally, the legislation changed the assessment 
base from a deposits-based formula to one based on assets and 
established new reserve ratio requirements (see Note 9). 

Operations of the DIF: 

The primary purposes of the DIF are to 1) insure the deposits and 
protect the depositors of IDIs and 2) resolve failed IDIs upon 
appointment of the FDIC as receiver, in a manner that will result in 
the least possible cost to the DIF (unless a systemic risk 
determination is made). 

The DIF is primarily funded from deposit insurance assessments. Other 
available funding sources, if necessary, are borrowings from the 
Treasury, the Federal Financing Bank (FFB), Federal Home Loan Banks, 
and IDIs. The FDIC has borrowing authority of $100 billion from
the Treasury and a Note Purchase Agreement with the FFB, not to exceed 
$100 billion, to enhance the DIF's ability to fund both deposit 
insurance and Temporary Liquidity Guarantee Program (TLGP) obligations. 

A statutory formula, known as the Maximum Obligation Limitation (MOL), 
limits the amount of obligations the DIF can incur to the sum of its 
cash, 90 percent of the fair market value of other assets, and the 
amount authorized to be borrowed from the Treasury. The MOL for the 
DIF was $114.4 billion and $106.3 billion as of December 31, 2011 and 
2010, respectively. 

Operations of Resolution Entities: 

The FDIC is responsible for managing and disposing of the assets of 
failed institutions in an orderly and efficient manner. The assets 
held by receiverships, pass-through conservatorships, and bridge 
institutions (collectively, resolution entities), and the claims 
against them, are accounted for separately from DIF assets and 
liabilities to ensure that proceeds from these entities are 
distributed in accordance with applicable laws and regulations. 
Accordingly, income and expenses attributable to resolution entities 
are accounted for as transactions of those entities. Resolution 
entities are billed by the FDIC for services provided on their behalf. 

2. Summary of Significant Accounting Policies: 

General: 

These financial statements pertain to the financial position, results 
of operations, and cash flows of the DIF and are presented in 
conformity with U.S. generally accepted accounting principles (GAAP). 
As permitted by the Federal Accounting Standards Advisory Board's 
Statement of Federal Financial Accounting Standards 34, The Hierarchy 
of Generally Accepted Accounting Principles, Including the Application 
of Standards Issued by the Financial Accounting Standards Board, the 
FDIC prepares financial statements in conformity with standards 
promulgated by the Financial Accounting Standards Board (FASB). These 
statements do not include reporting for assets and liabilities of 
resolution entities because these entities are legally separate and 
distinct, and the DIF does not have any ownership interests in them. 
Periodic and final accountability reports of resolution entities are 
furnished to courts, supervisory authorities, and others upon request. 

Use of Estimates: 

Management makes estimates and assumptions that affect the amounts 
reported in the financial statements and accompanying notes. Actual 
results could differ from these estimates. Where it is reasonably 
possible that changes in estimates will cause a material change in the 
financial statements in the near term, the nature and extent of such 
potential changes in estimates have been disclosed. The more 
significant estimates include the assessments receivable and 
associated revenue; the allowance for loss on receivables from 
resolutions (including shared-loss agreements); liabilities due to 
resolutions; the estimated losses for anticipated failures, 
litigation, and representations and warranties; guarantee obligations 
for the TLGP and structured transactions; the valuation of trust 
preferred securities; and the postretirement benefit obligation. 

Cash Equivalents: 

Cash equivalents are short-term, highly liquid investments consisting 
primarily of U.S. Treasury Overnight Certificates. 

Investment in U.S. Treasury Obligations: 

DIF funds are required to be invested in obligations of the United 
States or in obligations guaranteed as to principal and interest by 
the United States. The Secretary of the Treasury must approve all such 
investments in excess of $100,000 and has granted the FDIC approval to 
invest DIF funds only in U.S. Treasury obligations that are purchased 
or sold exclusively through the Bureau of the Public Debt's Government 
Account Series program. 

The DIF's investments in U.S. Treasury obligations are classified as 
available-for-sale. Securities designated as available-for-sale are 
shown at fair value. Unrealized gains and losses are reported as other 
comprehensive income. Realized gains and losses are included in the
Statement of Income and Fund Balance as components of net income. 
Income on securities is calculated and recorded on a daily basis using 
the effective interest or straight-line method depending on the 
maturity of the security. 

Revenue Recognition for Assessments: 

Assessment revenue is recognized for the quarterly period of insurance 
coverage based on an estimate. The estimate is derived from an 
institution's risk-based assessment rate and assessment base for the 
prior quarter adjusted for the current quarter's available assessment 
credits, certain changes in supervisory examination ratings for larger 
institutions, and a modest assessment base growth factor. At the 
subsequent quarter-end, the estimated revenue amounts are adjusted 
when actual assessments for the covered period are determined for each 
institution (see Note 9). 

Capital Assets and Depreciation: 

The FDIC buildings are depreciated on a straight-line basis over a 35- 
to 50-year estimated life. Leasehold improvements are capitalized and 
depreciated over the lesser of the remaining life of the lease or the 
estimated useful life of the improvements, if determined to be 
material. Capital assets depreciated on a straight-line basis over a 
five-year estimated useful life include mainframe equipment; 
furniture, fixtures, and general equipment; and internal-use software.
Personal computer equipment is depreciated on a straight-line basis 
over a three-year estimated useful life. 

Reporting on Variable Interest Entities: 

FDIC receiverships engaged in structured transactions, some of which 
resulted in the issuance of note obligations that were guaranteed by 
the FDIC in its corporate capacity (see Note 8, Contingent Liabilities 
for: FDIC Guaranteed Debt of Structured Transactions). As the 
guarantor of note obligations for several structured transactions, the 
FDIC in its corporate capacity is the holder of a variable interest in 
a number of variable interest entities (VIEs). The FDIC conducts a 
qualitative assessment of its relationship with each VIE as required 
by Accounting Standards Codification (ASC) Topic 810, Consolidation, 
modified by Accounting Standards Update (ASU) No. 2009-17, 
Improvements to Financial Reporting by Enterprises Involved with 
Variable Interest Entities. These assessments are conducted to 
determine if the FDIC in its corporate capacity has 1) power to direct 
the activities that most significantly impact the economic performance 
of the VIE and 2) an obligation to absorb losses of the VIE or the 
right to receive benefits from the VIE that could potentially be 
significant to the VIE. When a variable interest holder has met both 
of these characteristics, the enterprise is considered the primary 
beneficiary and must consolidate the VIE. In accordance with the 
provisions of ASC 810, an assessment of the terms of the legal 
agreement for each VIE was conducted to determine whether any of the 
terms had been activated or modified in a manner which would cause the 
FDIC in its corporate capacity to be characterized as a primary 
beneficiary. In making that determination, consideration was given to 
which, if any, activities were significant to each VIE. Often, the 
right to service collateral, to liquidate collateral, or to 
unilaterally dissolve the limited liability company (LLC) or trust was 
determined to be the most significant activity. In other cases, it was 
determined that the structured transactions did not include such 
significant activities and that the design of the entity was the best 
indicator of which party was the primary beneficiary. The results of 
each analysis identified a party other than the FDIC in its corporate 
capacity as the primary beneficiary. 

The conclusion of these analyses was that the FDIC in its corporate 
capacity has not engaged in any activity that would cause the FDIC in 
its corporate capacity to be characterized as a primary beneficiary to 
any VIE with which it was involved at December 31, 2011 and 2010. 
Therefore, consolidation is not required for the 2011 and 2010 DIF 
financial statements. In the future, the FDIC in its corporate 
capacity may become the primary beneficiary upon the activation of 
provisional contract rights that extend to the Corporation if payments 
are made on guarantee claims. Ongoing analyses will be required in 
order to monitor consolidation implications under ASC 810. 

The FDIC's involvement with VIEs, in its corporate capacity, is fully 
described in Note 8. 

Related Parties: 

The nature of related parties and a description of related-party 
transactions are discussed in Note 1 and disclosed throughout the 
financial statements and footnotes. 

Disclosure about Recent Relevant Accounting Pronouncements: 

Recent accounting pronouncements have been deemed to be not applicable 
or material to the financial statements as presented. 

Reclassification: 

Reclassifications have been made in 2010 financial statements to 
conform to the presentation used in 2011. 

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

As of December 31, 2011 and 2010, investments in U.S. Treasury 
obligations, net, were $33.9 billion and $12.4 billion, respectively. 
As of December 31, 2011 and 2010, the DIF held $5.0 billion and $2.0 
billion, respectively, of Treasury Inflation-Protected Securities 
(TIPS), which are indexed to increases or decreases in the Consumer 
Price Index for All Urban Consumers (CPI-U). 

Total Investment in U.S. Treasury Obligations, Net at December 31, 
2011: 

Dollars in Thousands: 

U.S. Treasury notes and bonds: 

Maturity: Within 1 year; 
Yield at Purchase[A]: 0.27%; 
Face Value: $24,500,000[B]; 
Net Carrying Amount: $24,889,547; 
Unrealized Holding Gains: $17,842; 
Unrealized Holding Losses: ($93); 
Fair Value: $24,907,296. 

Maturity: After 1 year through 5 years; 
Yield at Purchase[A]: 0.93%; 
Face Value: $3,900,000; 
Net Carrying Amount: $3,923,428; 
Unrealized Holding Gains: $38,778; 
Unrealized Holding Losses: $0; 
Fair Value: $3,962,206. 

U.S. Treasury Inflation-Protected Securities: 

Maturity: Within 1 year; 
Yield at Purchase[A]: 0.51%; 
Face Value: $1,200,000; 
Net Carrying Amount: $1,537,664; 
Unrealized Holding Gains: $659; 
Unrealized Holding Losses: ($8); 
Fair Value: $1,538,315. 

Maturity: After 1 year through 5 years; 
Yield at Purchase[A]: -0.92%; 
Face Value: $3,050,000; 
Net Carrying Amount: $3,464,909; 
Unrealized Holding Gains: $0; 
Unrealized Holding Losses: ($9,481); 
Fair Value: $3,455,428. 

Total: 
Face Value: $32,650,000; 
Net Carrying Amount: $33,815,548; 
Unrealized Holding Gains: $57,279; 
Unrealized Holding Losses: ($9,582)[C]; 
Fair Value: $33,863,245. 

[A] For TIPS, the yields in the above table are stated at their real 
yields at purchase, not their effective yields. Effective yields on 
TIPS include a long-term annual inflation assumption as measured by 
the CPI-U. The long-term CPI-U consensus forecast is 1.8 percent, 
based on figures issued by the Congressional Budget Office and Blue 
Chip Economic Indicators in early 2011. 

[B] Includes one Treasury note totaling $1.8 billion which matured on 
Saturday, December 31, 2011. Settlement occurred on the next business 
day, January 3, 2012. 

[C] All unrealized losses occurred as a result of temporary changes in 
market interest rates. These unrealized losses occurred over a period 
of less than a year. Unrealized losses related to the TIPS have 
converted to unrealized gains by January 31, 2012, and unrealized 
losses related to the U.S. Treasury notes and bonds existed on just 
one security that matured with no unrealized loss on January 31, 2012, 
and thus the FDIC does not consider these securities to be other than 
temporarily impaired at December 31, 2011. 

[End of table] 
Total Investment in U.S. Treasury Obligations, Net at December 31, 2010 

Dollars in Thousands: 

U.S. Treasury notes and bonds: 

Maturity: Within 1 year; 
Yield at Purchase[A]: 0.73%; 
Face Value: $3,000,000; 
Net carrying amount: $3,052,503; 
Unrealized Holding Gains: $2,048; 
Unrealized Holding Losses: ($31); 
Fair Value: $3,054,520. 

U.S. Treasury Inflation-Protected Securities: 

Maturity: Within 1 year; 
Yield at Purchase[A]: 3.47%; 
Face Value: $1,375,955; 
Net carrying amount: $1,375,967; 
Unrealized Holding Gains: $1,391; 
Unrealized Holding Losses: $0; 
Fair Value: $1,377,358. 

Maturity: After 1 year through 5 years; 
Yield at Purchase[A]: 2,41%; 
Face Value: $615,840; 
Net Carrying Amount: $621,412; 
Unrealized Holding Gains: $22,381; 
Unrealized Holding Losses: ($0; 
Fair Value: $643,793. 

U.S. Treasury bills: 

Maturity: Within 1 year 
through 5 years; 
Yield at Purchase[A]: 0.19%; 
Face Value: $7,300,000; 
Net carrying amount: $7,294,688; 
Unrealized Holding Gains: $909; 
Unrealized Holding Losses: $0; 
Fair Value: $7,295,597. 

Total: 
Face Value: $12,291,795; 
Net carrying amount: $12,344,570; 
Unrealized Holding Gains: $26,729; 
Unrealized Holding Losses: ($31)[B]; 
Fair Value: $12,371,268. 

[A] For TIPS, the yields in the above table are stated at their real 
yields at purchase, not their effective yields. Effective yields on 
TIPS include a long-term annual inflation assumption as measured by 
the CPI-U. The long-term CPI-U consensus forecast is 1.8 percent, 
based on figures issued by the Congressional Budget Office and Blue 
Chip Economic Indicators in early 2010. 

[B] All unrealized losses occurred as a result of temporary changes in 
market interest rates. The unrealized loss on one security occurred 
over a period of less than a year and converted to an unrealized gain 
by January 31, 2011, and thus the FDIC does not consider the security 
to be other than temporarily impaired at December 31, 2010. 

[End of table] 

4. Receivables from Resolutions, Net: 

Receivables from Resolutions, Net at December 31: 

Dollars in Thousands: 

Receivables from closed banks 
2011: $121,369,428; 
2010: $115,896,763. 

Allowance for losses 
2011: ($92,821,032); 
2010: ($86,364,218). 

Total 
2011: $28,548,396; 
2010: $29,532,545. 

[End of table] 

The receivables from resolutions include payments made by the DIF to 
cover obligations to insured depositors (subrogated claims), advances 
to resolution entities for working capital, and administrative 
expenses paid on behalf of resolution entities. Any related allowance 
for loss represents the difference between the funds advanced and/or 
obligations incurred and the expected repayment. Estimated future 
payments on losses incurred on assets sold to an acquiring institution 
under a shared-loss agreement (SLA) are factored into the computation 
of the expected repayment. Assets held by DIF resolution entities 
(including structured transaction-related assets; see Note 8) are the 
main source of repayment of the DIF's receivables from resolutions. 

As of December 31, 2011, there were 426 active receiverships, 
including 92 established in 2011. As of December 31, 2011 and 2010, 
DIF resolution entities held assets with a book value of $71.4 billion 
and $80.4 billion, respectively (including $50.5 billion and $53.4 
billion, respectively of cash, investments, receivables due from the 
DIF, and other receivables). Ninety-nine percent of the current asset 
book value of $71.4 billion is held by resolution entities established 
since 2008. 

Estimated cash recoveries from the management and disposition of 
assets that are used to determine the allowance for losses are based 
on asset recovery rates from several sources including actual or 
pending institution-specific asset disposition data, failed 
institution-specific asset valuation data, aggregate asset valuation 
data on several recently failed or troubled institutions, sampled 
asset valuation data, and empirical asset recovery data based on 
failures as far back as 1990. Methodologies for determining the asset 
recovery rates incorporate estimating future cash recoveries, net of 
applicable liquidation cost estimates, and discounting based on market-
based risk factors applicable to a given asset's type and quality. The 
resulting estimated cash recoveries are then used to derive the 
allowance for loss on the receivables from these resolutions. 

For failed institutions resolved using a whole bank purchase and 
assumption transaction with an accompanying SLA, the projected future 
shared-loss payments, recoveries, and monitoring costs on the covered 
assets sold to the acquiring institution under the agreement are 
considered in determining the allowance for loss on the receivables 
from these resolutions. The shared-loss cost projections are based on 
the covered assets' intrinsic value which is determined using 
financial models that consider the quality, condition and type of 
covered assets, current and future market conditions, risk factors and 
estimated asset holding periods. For year-end 2011 financial 
reporting, the shared-loss cost estimates were updated for the 
majority (85% or 235) of the 278 active shared-loss agreements; the 
remaining 43 were already based on recent loss estimates. The updated 
shared-loss cost projections for the larger agreements were primarily 
based on new third-party valuations estimating the cumulative loss of 
covered assets. The remaining agreements were stratified by 
receivership age. A random sample of banks within each age stratum was 
selected for new third-party loss estimations, and valuation results 
from the sample banks were aggregated and extrapolated to banks within 
the like age stratum based on asset type and performance status. 

Note that estimated asset recoveries are regularly evaluated during 
the year, but remain subject to uncertainties because of potential 
changes in economic and market conditions. Continuing economic 
uncertainties could cause the DIF's actual recoveries to vary 
significantly from current estimates. 

Whole Bank Purchase and Assumption Transactions with Shared-Loss 
Agreements: 

Since the beginning of 2008, the FDIC resolved 281 failures using 
whole bank purchase and assumption resolution transactions with 
accompanying SLAs on assets purchased by the financial institution 
acquirer. The acquirer typically assumes all of the deposits and 
purchases essentially all of the assets of a failed institution. The 
majority of the commercial and residential loan assets are purchased 
under an SLA, where the FDIC agrees to share in future losses and 
recoveries experienced by the acquirer on those assets covered under 
the agreement. SLAs are used by the FDIC to keep assets in the private 
sector and to minimize disruptions to loan customers. 

Losses on the covered assets are shared between the acquirer and the 
FDIC in its receivership capacity of the failed institution when 
losses occur through the sale, foreclosure, loan modification, or 
write-down of loans in accordance with the terms of the SLA. The 
majority of the agreements cover a five- to 10-year period with the 
receiver covering 80 percent of the losses incurred by the acquirer 
and the acquiring bank covering 20 percent. Prior to March 26, 2010, 
most SLAs included a threshold amount, above which the receiver 
covered 95 percent of the losses incurred by the acquirer. As 
mentioned above, the estimated shared-loss liability is accounted for 
by the receiver and is included in the calculation of the DIF's 
allowance for loss against the corporate receivable from the 
resolution. As shared-loss claims are asserted and proven, DIF 
receiverships satisfy these shared-loss payments using available 
liquidation funds and/or by drawing on amounts due from the DIF for 
funding the deposits assumed by the acquirer (see Note 7). 

As of December 31, 2011, 249 receiverships have made shared-loss 
payments totaling $16.2 billion. In addition, DIF receiverships are 
estimated to pay an additional amount of $26.6 billion over the 
duration of these SLAs on $135.0 billion in total remaining covered 
assets. 

Concentration of Credit Risk: 

Financial instruments that potentially subject the DIF to 
concentrations of credit risk are receivables from resolutions. The 
repayment of the DIF's receivables from resolutions is primarily 
influenced by recoveries on assets held by DIF receiverships and 
payments on the covered assets under SLAs. The majority of the $155.9 
billion in remaining assets in liquidation ($20.9 billion) and current 
shared-loss covered assets ($135.0 billion) are concentrated in 
commercial loans ($83.1 billion), residential loans ($52.5 billion), 
securities ($3.4 billion), and structured transaction-related assets 
as described in Note 8 ($14.2 billion). Most of the assets in these 
asset types originated from failed institutions located in California 
($43.7 billion), Florida ($18.1 billion), Illinois ($13.2 billion), 
Puerto Rico ($13.1 billion), Georgia ($12.8 billion) and Alabama 
($12.7 billion). 

5. Trust Preferred Securities: 

Pursuant to a systemic risk determination, the Treasury, the FDIC, and 
the Federal Reserve Bank of New York executed terms of a guarantee 
agreement on January 15, 2009 with Citigroup to provide loss 
protection on a pool of approximately $301.0 billion of assets that 
remained on the balance sheet of Citigroup. In consideration for its 
portion of the shared-loss guarantee at inception, the FDIC received 
$3.025 billion of Citigroup's preferred stock. All shares of the 
preferred stock were subsequently converted to Citigroup Capital 
XXXIII trust preferred securities (TruPs) with a liquidation amount of 
$1,000 per security and a distribution rate of 8 percent per annum 
payable quarterly. The principal amount is due in 2039. 

On December 23, 2009, Citigroup terminated the guarantee agreement, 
citing improvements in its financial condition. The FDIC incurred no 
loss from the guarantee prior to the termination of the agreement. In 
connection with the early termination of the agreement, the FDIC 
agreed to reduce its portion of the $3.025 billion in TruPs by $800 
million. However, pursuant to an agreement between the Treasury and 
the FDIC, the Treasury agreed to return $800 million in TruPs on 
behalf of the FDIC from its portion of Citigroup TruPs holdings 
received as a result of the shared-loss agreement. The FDIC has 
retained the $800 million of Citigroup TruPs as security in the event 
payments are required to be made by the DIF for guaranteed debt 
instruments issued by Citigroup and its affiliates under the TLGP (see 
Note 16). The FDIC will transfer an aggregate liquidation amount of 
$800 million in TruPs to the Treasury, plus any related interest, less 
any payments made or required to be made under the TLGP within five 
days of the date on which no Citigroup debt remains outstanding under 
the TLGP. The fair value of these TruPs and related interest are 
recorded as systemic risk assets (see Note 16). 

The remaining $2.225 billion (liquidation amount) of TruPs held by the 
FDIC is classified as available-for-sale debt securities in accordance 
with FASB ASC Topic 320, Investments — Debt and Equity Securities. At 
December 31, 2011, the fair value of the TruPs was $2.213 billion (see 
Note 15). An unrealized holding gain of $251 million is included in 
accumulated other comprehensive income. 

6. Property and Equipment, Net: 

Property and Equipment, Net at December 31: 

Dollars in Thousands: 

Land: 
2011: $37,352; 
2010: $37,352. 

Buildings (including leasehold improvements): 
2011: $316,129; 
2010: $312,173. 

Application software (includes work-in-process): 
2011: $130,718; 
2010: $122,736. 

Furniture, Fixtures, and equipment: 
2011: $159,120; 
2010: $144,661. 

Accumulated depreciation: 
2011: ($241,404); 
2010: ($200,857). 

Total: 
2011: $401,915; 
2010: $416,065. 

The depreciation expense was $78 million and $69 million for 2011 and 
2010, respectively. 

[Ends of table] 

7. Liabilities Due to Resolutions: 

As of December 31, 2011 and 2010, the DIF recorded liabilities 
totaling $32.7 billion and $30.4 billion to resolution entities 
representing the agreed-upon value of assets transferred from the 
receiverships, at the time of failure, to the acquirers/bridge 
institutions for use in funding the deposits assumed by the 
acquirers/bridge institutions. Ninety-one percent of these liabilities 
are due to failures resolved under whole-bank purchase and assumption 
transactions, most with an accompanying SLA. The DIF satisfies these 
liabilities either by directly sending cash to the receivership to 
fund shared-loss and other expenses or by offsetting receivables from 
resolutions when the receivership declares a dividend. 

In addition, there was $80 million in unpaid deposit claims related to 
multiple receiverships as of December 31, 2011 and 2010. The DIF pays 
these liabilities when the claims are approved. 

8. Contingent Liabilities for: 

Anticipated Failure of Insured Institutions: 

The DIF records a contingent liability and a loss provision for DIF-
insured institutions that are likely to fail, absent some favorable 
event such as obtaining additional capital or merging, when
the liability is probable and reasonably estimable. The contingent 
liability is derived by applying expected failure rates and loss rates 
to institutions based on supervisory ratings, balance sheet 
characteristics, and projected capital levels. 

The banking industry continued recovering in 2011. The industry 
recorded total net income of $119.5 billion for all of 2011, an 
increase of nearly 40 percent from 2010 net income. The improvement in 
industry earnings continued to be driven by declining loan loss 
provisions, with full-year provisions at their lowest level in four 
years. At the same time, the pace of U.S. economic growth slowed, 
unemployment remained at historically high levels, and real estate 
markets exhibited ongoing weaknesses in many parts of the country. 
These factors have slowed the improvement in asset quality and 
contributed to keeping the number of problem institutions and failures 
well above historic norms. Notwithstanding these challenges, the 
losses to the DIF from failures that occurred in 2011 fell short of 
the amount reserved at the end of 2010, as the aggregate number and 
size of institution failures in 2011 were less than anticipated. The 
removal from the reserve of banks that did fail in 2011, as well as 
projected favorable trends in bank supervisory downgrade and failure 
rates and the smaller size of institutions that remain troubled, all 
contributed to a decline by $11.2 billion to $6.5 billion in the 
contingent liability for anticipated failures of insured institutions 
at the end of 2011. 

In addition to these recorded contingent liabilities, the FDIC has 
identified risk in the financial services industry that could result 
in additional losses to the DIF should potentially vulnerable insured 
institutions ultimately fail. As a result of these risks, the FDIC 
believes that it is reasonably possible that the DIF could incur 
additional estimated losses of up to $10.2 billion for year-end 2011 
as compared to $24.5 billion for year-end 2010. The actual losses, if 
any, will largely depend on future economic and market conditions and 
could differ materially from this estimate. 

During 2011, 92 banks failed with combined assets at the date of 
failure of $36.6 billion. Supervisory and market data suggest that 
while the financial performance of the banking industry should 
continue to improve over the coming year, ongoing asset quality 
problems and limited opportunities for earnings growth will continue 
to result in an elevated level of stress for the industry. The FDIC 
continues to evaluate the ongoing risks to affected institutions in 
light of the existing economic and financial conditions, and the 
extent to which such risks will continue to put stress on the 
resources of the insurance fund. 

Litigation Losses: 

The DIF records an estimated loss for unresolved legal cases to the 
extent that those losses are considered probable and reasonably 
estimable. During 2011, the contingent liability declined by
$299 million to $1 million due primarily to a payment of $276 million 
for a judgment of one legal case for which an allowance was previously 
recorded. As of December 31, 2011 and 2010, the FDIC has determined 
that there are no reasonably possible losses from unresolved cases. 

Other Contingencies: 

IndyMac Federal Bank Representation and Indemnification Contingent 
Liability: 

On March 19, 2009, the FDIC as receiver of IndyMac Federal Bank (IMFB) 
and certain subsidiaries (collectively, sellers) sold substantially 
all of the assets of IMFB and the respective subsidiaries, including 
mortgage loans and mortgage loan servicing rights, to OneWest Bank and 
its affiliates. To maximize sale returns, the sellers made certain 
representations customarily made by commercial parties regarding the 
assets and agreed to indemnify the acquirers for losses
incurred as a result of breaches of such representations, losses 
incurred as a result of the failure to obtain contractual counterparty 
consents to the sale, and third party claims arising from pre-sale 
acts and omissions of the sellers or the failed bank. Although the 
representations and indemnifications were made by or are obligations 
of the sellers, the FDIC, in its corporate capacity, guaranteed the 
receivership's indemnification obligations under the sale agreements.
The representations relate generally to ownership of and right to sell 
the assets; compliance with applicable law in the origination of the 
loans; accuracy of the servicing records; validity of loan documents; 
and servicing of the loans serviced for others. Until the periods for 
asserting claims under these arrangements have expired and all 
indemnification claims quantified and paid, losses could continue to 
be incurred by the receivership and, in turn, the DIF, either 
directly, as a result of the FDIC corporate guaranty of the 
receivership's indemnification obligations, or indirectly, as a result 
of a reduction in the receivership's assets available to pay the DIF's 
claims as subrogee for insured accountholders. The acquirers' rights 
to assert claims to recover losses incurred as a result of breaches of 
loan seller representations extend out to March 19, 2019 for the 
Fannie Mae and Ginnie Mae reverse mortgage servicing portfolios 
(unpaid principal balance of $16.7 billion at December 31, 2011 
compared to $21.7 billion at December 31, 2010), and March 19, 2014 
for the Fannie Mae, Freddie Mac and Ginnie Mae mortgage servicing 
portfolios (unpaid principal balance of $38.5 billion at December 31, 
2011 compared to $45.3 billion at December 31, 2010). The acquirers' 
rights to assert claims to recover losses incurred as a result of 
other third party claims (including due to pre-March 19, 2009 acts or 
omissions) and breaches of servicer representations, including 
liability with respect to the Fannie Mae, Ginnie Mae and Freddie Mac 
portfolios as well as the private mortgage servicing portfolio and 
whole loans (unpaid principal balance of $62.0 billion at December 31, 
2011 compared to $74.2 billion at December 31, 2010) expired on March 
19, 2011. As of the expiration date of this claim period, notices 
relating to potential defects were received, but they require review 
to determine whether a valid defect exists and, if so, the 
identification and costing of possible cure actions. It is highly 
unlikely that all of these potential defects will result in losses. 

As of December 31, 2011, the IndyMac receivership has paid $5 million 
in approved claims and has accrued an additional $2 million liability 
for claims asserted but unpaid. Alleged breaches of origination and 
servicing representations exist, and review and evaluation is in 
process for approximately $275 to $345 million in reasonably possible 
liabilities. In addition, potential losses relating to origination and 
servicing representations, which currently cannot be determined, may 
be incurred under other agreements with investors. 

The FDIC believes it is likely that additional losses will be 
incurred, however quantifying the contingent liability associated with 
the representations and the indemnification obligations is subject to 
a number of uncertainties, including (1) borrower prepayment speeds; 
(2) the occurrence of borrower defaults and resulting foreclosures and 
losses; (3) the assertion by third party investors of claims with 
respect to loans serviced for them; (4) the existence and timing of
discovery of breaches and the assertion of claims for indemnification 
for losses by the acquirer; (5) the compliance by the acquirer with 
certain loss mitigation and other conditions to indemnification; (6) 
third party sources of loss recovery (such as title companies and 
insurers); (7) the ability of the acquirer to refute claims from 
investors without incurring reimbursable losses; and (8) the cost to 
cure breaches and respond to third party claims. Because of these and 
other uncertainties that surround the liability associated with 
indemnifications and the quantification of possible losses, the FDIC 
has determined that, while additional losses are probable, the amount 
is not estimable. 

Purchase and Assumption Indemnification: 

In connection with purchase and assumption agreements for resolutions, 
the FDIC in its receivership capacity generally indemnifies the 
purchaser of a failed institution's assets and liabilities in the 
event a third party asserts a claim against the purchaser unrelated to 
the explicit assets purchased or liabilities assumed at the time of 
failure. The FDIC in its corporate capacity is a secondary guarantor 
if a receivership is unable to pay. These indemnifications generally 
extend for a term of six years after the date of institution failure. 
The FDIC is unable to estimate the maximum potential liability for 
these types of guarantees as the agreements do not specify a maximum 
amount and any payments are dependent upon the outcome of future 
contingent events, the nature and likelihood of which cannot be 
determined at this time. During 2011 and 2010, the FDIC in its 
corporate capacity made no indemnification payments under such 
agreements, and no amount has been accrued in the accompanying 
financial statements with respect to these indemnification guarantees. 

FDIC Guaranteed Debt of Structured Transactions: 

The FDIC as receiver uses three types of structured transactions to 
dispose of certain performing and non-performing residential mortgage 
loans, commercial loans, construction loans, and mortgage-backed 
securities held by the receiverships. The three types of structured 
transactions are 1) limited liability companies (LLC5), 2) 
securitizations, and 3) structured sale of guaranteed notes (SSGN5). 

LLCs: 

Under the LLC structure, the FDIC in its receivership capacity 
contributes a pool of assets to a newly-formed LLC and offers for 
sale, through a competitive bid process, some of the equity in the 
LLC. The day-to-day management of the LLC is transferred to the 
highest bidder along with the purchased equity interest. In many 
instances, the FDIC in its corporate capacity guarantees notes issued 
by the LLCs. In exchange for a guarantee, the DIF receives a guarantee 
fee in either 1) a lump-sum, up-front payment based on the estimated 
duration of the note or 2) a monthly payment based on a fixed 
percentage multiplied by the outstanding note balance. The terms of 
these guarantee agreements generally stipulate that all cash flows 
received from the entity's collateral be used to pay, in the following 
order, 1) operational expenses of the entity, 2) the FDIC's 
contractual guarantee fee, 3) the guaranteed notes (or, if applicable, 
fund the related defeasance account for payoff of the notes at 
maturity), and 4) the equity investors. If the FDIC is required to 
perform under these guarantees, it acquires an interest in the cash 
flows of the LLC equal to the amount of guarantee payments made plus 
accrued interest thereon. Once all expenses have been paid, the 
guaranteed notes have been satisfied, and the FDIC has been reimbursed 
for any guarantee payments, the equity holders receive any remaining 
cash flows. 

Since 2009, private investors purchased a 40- to 50-percent ownership 
interest in the LLC structures for $1.6 billion in cash and the LLCs 
issued notes of $4.4 billion to the receiverships to partially fund 
the purchase of the assets. The receiverships hold the remaining 50-to 
60-percent equity interest in the LLCs and, in most cases, the 
guaranteed notes. The FDIC in its corporate capacity guarantees the 
timely payment of principal and interest due on the notes. The terms 
of the note guarantees extend until the earlier of 1) payment in full 
of the notes or 2) two years following the maturity date of the notes. 
The note with the longest term matures in 2020. In the event of note 
payment default, the FDIC as guarantor is entitled to exercise or 
cause the exercise of certain rights and remedies including: 1) 
accelerating the payment of the unpaid principal amount of the notes; 
2) selling the assets held as collateral; or 3) foreclosing on the 
equity interests of the debtor. 

Securitizations and SSGNs: 

Securitizations and SSGNs (collectively, "trusts") are transactions in 
which certain assets or securities from failed institutions are pooled 
and transferred into a trust structure. The trusts issue 1) senior 
and/or subordinated debt instruments and 2) owner trust or residual 
certificates collateralized by the underlying mortgage-backed 
securities or loans. 

Since 2010, private investors purchased the senior notes issued by the 
trusts for $5.3 billion in cash. The receiverships hold 100 percent of 
the subordinated debt instruments and owner trust or residual 
certificates. The FDIC in its corporate capacity guarantees the timely 
payment of principal and interest due on the senior notes, the latest 
maturity of which is 2050. In exchange for the guarantee, the DIF 
receives a monthly payment based on a fixed percentage multiplied by 
the outstanding note balance. These guarantee agreements generally 
stipulate that all cash flows received from the entity's collateral be 
used to pay, in the following order, 1) operational expenses of the 
entity, 2) the FDIC's contractual guarantee fee, 3) interest on the 
guaranteed notes, 4) principal of the guaranteed notes, and 5) the 
holders of the subordinated notes and owner trust or residual 
certificates. If the FDIC is required to perform under its guarantees, 
it acquires an interest in the cash flows of the trust equal to the 
amount of guarantee payments made plus accrued interest thereon. Once 
all expenses have been paid, the guaranteed notes have been satisfied, 
and the FDIC has been reimbursed for any guarantee payments, the 
subordinated note holders and owner trust or residual certificates 
holders receive the remaining cash flows. 

All Structured Transactions with FDIC Guaranteed Debt: 

Through December 31, 2011, the receiverships have transferred a 
portfolio of loans with an unpaid principal balance of $16.4 billion 
and mortgage-backed securities with a book value of $7.7 billion to 14 
LLCs and 8 trusts. The LLCs and trusts subsequently issued notes 
guaranteed by the FDIC in an original principal amount of $9.7 
billion. To date, the DIF has collected guarantee fees totaling $203 
million and recorded a receivable for additional guarantee fees of
$106 million, included in the "Interest receivable on investments and 
other assets, net" line item on the Balance Sheet. All guarantee fees 
are recorded as deferred revenue, included in the "Accounts payable 
and other liabilities" line item, and recognized as revenue primarily 
on a straight-line basis over the term of the notes. At December 31, 
2011, the amount of deferred revenue recorded was $134 million. The 
DIF records no other structured-transaction-related assets or 
liabilities on its balance sheet. 

The estimated loss to the DIF from the guarantees is derived from an 
analysis of the discounted present value of the expected guarantee 
payments by the FDIC, reimbursements to the FDIC for guarantee 
payments, and guarantee fee collections. Under both a base case and a 
more stressful modeling scenario, the cash flows from the LLC or trust 
assets provide sufficient coverage to fully pay the debts. Therefore, 
the estimated loss to the DIF from these guarantees is zero. To date, 
the FDIC in its corporate capacity has not provided, and does not 
intend to provide, any form of financial or other type of support to a 
trust or LLC that it was not previously contractually required to 
provide. 

As of December 31, 2011, the maximum loss exposure is $3.7 billion for 
LLCs and $3.9 billion for trusts, representing the sum of all 
outstanding debt guaranteed by the FDIC in its corporate capacity. 
Some transactions have established defeasance accounts to pay off the 
notes at maturity. A total of $2.2 billion has been deposited into 
these accounts. 

9. Assessments: 

The Dodd-Frank Act, enacted on July 21, 2010, provides for significant 
assessment and capitalization reforms for the DIF. In response, the 
FDIC implemented several changes to the assessment system and 
developed a comprehensive, long-term fund management plan. The plan is 
designed to restore and maintain a positive fund balance for the DIF 
even during a banking crisis and achieve moderate, steady assessment 
rates throughout any economic cycle. Summarized below are actions 
taken to implement assessment system changes and provisions of the 
comprehensive plan. 

New Restoration Plan: 

In October 2010, the FDIC adopted a new Restoration Plan to ensure 
that the ratio of the DIF fund balance to estimated insured deposits 
(reserve ratio) reaches 1.35 percent by September 30, 2020. The new 
Plan provides for the following: 1) the period of the Restoration Plan 
is extended from the end of 2016 to September 30, 2020; 2) 
institutions may continue to use assessment credits without additional 
restriction during the term of the Restoration Plan; 3) the FDIC will 
pursue rulemaking regarding the method that will be used to offset the 
effect on small institutions (less than $10 billion in assets) of 
requiring that the reserve ratio reach 1.35 percent by September 30, 
2020, rather than 1.15 percent by the end of 2016; and 4) at least 
semiannually, the FDIC will update its loss and income projections for 
the fund and, if needed, increase or decrease assessment rates, 
following notice-and-comment rulemaking, if required. 

Designated Reserve Ratio: 

In December 2011, the FDIC adopted a final rule maintaining the 
designated reserve ratio (DRR) at 2 percent, effective January 1, 
2012. The FDIC views the 2 percent DRR as maintaining the
DIF at a level that can withstand substantial losses, consistent with 
the FDIC's comprehensive, long-term fund management plan. 

Calculation of Assessment: 

In February 2011, the FDIC adopted a final rule, effective on April 1, 
2011, amending part 327 of title 12 of the Code of Federal Regulations 
to 1) redefine the assessment base used for calculating deposit 
insurance assessments from adjusted domestic deposits to average 
consolidated total assets minus average tangible equity (measured as 
Tier 1 capital); 2) change the assessment rate adjustments; 3) lower 
the initial base rate schedule and the total base rate schedule for 
all IDIs to collect approximately the same revenue for the DIF as 
would have been collected under the old assessment base; 4) suspend 
dividends indefinitely, and, in lieu of dividends, adopt lower 
assessment rate schedules when the reserve ratio reaches 1.15 percent, 
2 percent, and 2.5 percent; and 5) change the risk-based assessment 
system for large IDIs (generally, those institutions with at least $10 
billion in total assets). Specifically, the final rule eliminates risk 
categories and the use of long-term debt issuer ratings for large 
institutions and combines CAMELS ratings and certain forward-looking 
financial measures into two scorecards: one for most large 
institutions and another for large institutions that are structurally 
and operationally complex or that pose unique challenges and risks in 
case of failure (highly complex institutions). 

Assessment Revenue: 

Annual assessment rates averaged approximately 17.6 cents per $100 and 
17.7 cents per $100 of the assessment base for the first quarter of 
2011 and all of 2010, respectively. Beginning in the second quarter of 
2011, the assessment base changed to average total consolidated assets 
less average tangible equity (with certain adjustments for banker's 
banks and custodial banks), as required by the Dodd-Frank Act. The 
FDIC implemented a new assessment rate schedule at the same time to 
conform to the larger assessment base. The annual assessment rate 
averaged approximately 11.1 cents per $100 of the assessment base for 
the last three quarters of 2011. 

In December 2009, a majority of IDIs prepaid $45.7 billion of 
estimated quarterly risk-based assessments to address the DIF's 
liquidity need to pay for projected near-term failures and to ensure 
that the deposit insurance system remained industry-funded. The 
prepaid assessments cover the insurance period from October 2009 
through December 2012. An institution's quarterly risk-based deposit 
insurance assessment thereafter is offset by the amount prepaid until 
the amount is exhausted or until June 30, 2013, when any amount 
remaining is to be returned to the institution. At December 31, 2011, 
the remaining prepaid amount of $17.4 billion is included in the 
"Unearned revenue - prepaid assessments" line item on the Balance 
Sheet. 

Prepaid assessments were mandatory for all institutions, but the FDIC 
exercised its discretion as supervisor and insurer to exempt an 
institution from the prepayment requirement if the FDIC determined 
that the prepayment would adversely affect the safety and soundness of 
the institution. 

Reserve Ratio: 

As of December 31, 2011, the DIF reserve ratio was 0.17 percent of 
estimated insured deposits. 

Assessments Related to FICO: 

Assessments continue to be levied on institutions for payments of the 
interest on obligations issued by the Financing Corporation (FICO). 
The FICO was established as a mixed-ownership government corporation 
to function solely as a financing vehicle for the former FSLIC. The 
annual FICO interest obligation of approximately $790 million is paid 
on a pro rata basis using the same rate for banks and thrifts. The 
FICO assessment has no financial impact on the DIF and is separate 
from deposit insurance assessments. The FDIC, as administrator of the 
DIF, acts solely as a collection agent for the FICO. During 2011 and 
2010, approximately $795 million and $796 million, respectively, was 
collected and remitted to the FICO. 

10. Other Revenue: 

Other Revenue for the Years Ended December 31: 

Dollars in Thousands: 

Temporary Liquidity Guarantee Program revenue (Note 16): 
2011: $2,569,579; 
2009: $0. 

Dividends and interest on Citigroup trust preferred securities: 
2011: $178,000; 
2009: $177,675. 

Guarantee fees for structured transactions: 
2011: $92,229; 
2010: $44,557. 

Other: 
2011: $7,121; 
2010: $15,193. 

Total: 
2011: $2,846,929; 
2010: $237,425. 

[End of table] 

Temporary Liquidity Guarantee Program Revenue: 

Pursuant to a systemic risk determination in October 2008, the FDIC 
established the TLGP (see Note 16). In exchange for guarantees issued 
under the TLGP, the FDIC received fees that were set aside, as 
deferred revenue, for potential TLGP losses. As losses occur, the FDIC 
recognizes the loss as a systemic risk expense and offsets the loss by 
recognizing an equivalent portion of the deferred revenue as systemic 
risk revenue. This accounting practice isolates systemic risk 
activities from the normal operating activities of the DIF. 

From inception of the TLGP, it has been FDIC's policy to recognize 
revenue to the DIF for any deferred revenue not absorbed by losses 
upon expiration of the TLGP guarantee period (December 31, 2012) or 
earlier for any portion of guarantee fees determined in excess of 
amounts needed to cover potential losses. During 2011, the DIF 
recognized revenue of $2.6 billion for fees held as deferred revenue 
(see Note 16). In the unforeseen event a debt default occurs greater 
than the remaining amount held as deferred revenue, to the extent 
needed, any amount previously recognized as revenue to the DIF will be 
returned to the TLGP. 

11. Operating Expenses: 

Operating expenses were $1.6 billion for both 2011 and 2010. The chart 
below lists the major components of operating expenses. 

Table: Operating Expenses for the Years Ended December 31: 

Dollars in Thousands: 

Salaries and benefits: 
2011: $1,320,991; 
2010: $1,184,523. 

Outside services: 
2011: $342,502; 
2010: $360,880. 

Travel: 
2011: $115,135; 
2010: $111,110. 

Buildings and leased space: 
2011: $93,630; 
2010: $85,137. 

Software/Hardware maintenance: 
2011: $58,981; 
2010: $50,575. 

Depreciation of property and equipment: 
2011: $77,720; 
2010: $68,790. 

Other: 
2011: $46,652; 
2010: $35,384. 

Subtotal: 
2011: $2,055,611
2010: $1,896,157. 

Services billed to resolution entities: 
2011: ($430,260); 
2010: ($303,516). 

Total: 
2011: $1,625,351; 
2010: $1,592,641. 

[End of table] 

12. Provision for Insurance Losses: 

Provision for insurance losses was negative $4.4 billion for 2011, 
compared to negative $848 million for 2010. The negative provision for 
2011 primarily resulted from a reduction in the contingent loss 
reserve due to the improvement in the financial condition of 
institutions that were previously identified to fail and a reduction 
in the estimated losses for institutions that have failed in prior 
years. The following chart lists the major components of the provision 
for insurance losses. 

Provision for Insurance Losses for the Years Ended December 31: 

Dollars in Thousands: 

Valuation Adjustments: 

Closed banks and thrifts: 
2011: $6,786,643; 
2010: $25,483,252. 

Other assets: 
2011: ($1,024); 
2010: ($4,406). 

Total Valuation Adjustments: 
2011: $6,785,619; 
2010: $25,478,846. 

Contingent Liabilities Adjustments: 
  
Anticipated failure of insured institutions: 
2011: ($11,176,248); 
2009: ($26,326,689). 

Litigation: 
2011: ($23,000); 
2009: $0. 

Total Contingent Liabilities Adjustments: 
2011: ($11,199,248); 
2009: ($26,326,689). 

Total: 
2011: ($4,413,629); 
2009: ($847,843). 

[End of table] 

13. Employee Benefits: 

Pension Benefits and Savings Plans: 

Eligible FDIC employees (permanent and term employees with 
appointments exceeding one year) are covered by the federal government 
retirement plans, either the Civil Service Retirement System (CSRS) or 
the Federal Employees Retirement System (FERS). Although the DIF 
contributes a portion of pension benefits for eligible employees, it 
does not account for the assets of either retirement system. The DIF 
also does not have actuarial data for accumulated plan benefits or the 
unfunded liability relative to eligible employees. These amounts are 
reported on and accounted for by the U.S. Office of Personnel 
Management (OPM). 

Eligible FDIC employees also may participate in a FDIC-sponsored tax-
deferred 401(k) savings plan with matching contributions up to 5 
percent. Under the Federal Thrift Savings Plan (TSP), the FDIC 
provides FERS employees with an automatic contribution of 1 percent of 
pay and an additional matching contribution up to 4 percent of pay. 
CSRS employees also can contribute to the TSP, but they do not receive 
agency matching contributions. 

Pension Benefits and Savings Plans Expenses for the Years Ended 
December 31: 

Dollars in Thousands: 

Civil Service Retirement System: 
2011: $6,140; 
2010: $6,387. 

Federal Employees Retirement System (Basic Benefit): 
2011: $95,846; 
2010: $78,666. 

FDIC Savings Plan: 
2011: $36,645; 
2010: $30,825. 

Federal Thrift Savings Plan: 
2011: $33,910; 
2010: $28,679. 

Total: 
2011: $172,541; 
2010: $144,557. 

[End of table] 

Postretirement Benefits Other Than Pensions: 

The DIF has no postretirement health insurance liability since all 
eligible retirees are covered by the Federal Employees Health Benefits 
(FEHB) program. The FEHB is administered and accounted for by the OPM. 
In addition, OPM pays the employer share of the retiree's health 
insurance premiums. 

The FDIC provides certain life and dental insurance coverage for its 
eligible retirees, the retirees' beneficiaries, and covered 
dependents. Retirees eligible for life and dental insurance coverage 
are those who have qualified due to 1) immediate enrollment upon 
appointment or five years of participation in the plan and 2) 
eligibility for an immediate annuity. The life insurance program 
provides basic coverage at no cost to retirees and allows converting 
optional coverage to direct-pay plans. For the dental coverage, 
retirees are responsible for a portion of the dental premium. 

The FDIC has elected not to fund the postretirement life and dental 
benefit liabilities. As a result, the DIF recognized the underfunded 
status (the difference between the accumulated postretirement benefit 
obligation and the plan assets at fair value) as a liability. Since 
there are no plan assets, the plan's benefit liability is equal to the 
accumulated postretirement benefit obligation. At December 31, 2011 
and 2010, the liability was $188 million and $166 million, 
respectively, which is recognized in the "Postretirement benefit 
liability" line item on the Balance Sheet. The cumulative actuarial 
losses (changes in assumptions and plan experience) and prior service 
costs (changes to plan provisions that increase benefits) were $34 
million and $19 million at December 31, 2011 and 2010, respectively. 
These amounts are reported as accumulated other comprehensive income 
in the "Unrealized postretirement benefit loss" line item on the 
Balance Sheet. 

The DIF's expenses for postretirement benefits for 2011 and 2010 were 
$12 million and $9 million, respectively, which are included in the 
current and prior year's operating expenses on the Statement of Income 
and Fund Balance. The changes in the actuarial losses and prior 
service costs for 2011 and 2010 of $15 million and $16 million, 
respectively, are reported as other comprehensive income in the 
"Unrealized postretirement benefit loss" line item. Key actuarial 
assumptions used in the accounting for the plan include the discount 
rate of 4.5 percent, the rate of compensation increase of 4.1 percent, 
and the dental coverage trend rate of 6.0 percent. The discount rate 
of 4.5 percent is based upon rates of return on high-quality fixed 
income investments whose cash flows match the timing and amount of 
expected benefit payments. 

14. Commitments and Off-Balance-Sheet Exposure Commitments: 

Leased Space: 

The FDIC's lease commitments total $199 million for future years. The 
lease agreements contain escalation clauses resulting in adjustments, 
usually on an annual basis. The DIF recognized leased space expense of 
$56 million and $45 million for the years ended December 31, 2011 and 
2010, respectively. 

Leased Space Commitments: 

Dollars in Thousands: 

2012: $52,773; 
2013: $44,950; 
2014: $32,294; 
2015: $25,807; 
2016: 22,679; 
2017/Thereafter: $20,918. 

[End of table] 

Off-Balance-Sheet Exposure: 

Deposit Insurance: 

As of December 31, 2011, estimated insured deposits for the DIF were 
$7.0 trillion. This estimate is derived primarily from quarterly 
financial data submitted by IDIs to the FDIC. This estimate represents 
the accounting loss that would be realized if all IDIs were to fail 
and the acquired assets provided no recoveries. Included in this 
estimate was approximately $1.4 trillion of noninterest-bearing 
transaction deposits that exceeded the basic coverage limit of 
$250,000 per account, which received coverage under the Dodd-Frank Act 
beginning on December 31, 2010 to the end of 2012. 

15. Disclosures About the Fair Value of Financial Instruments: 

Financial assets recognized and measured at fair value on a recurring 
basis at each reporting date include cash equivalents (Note 2), the 
investment in U.S. Treasury obligations (Note 3) and trust preferred 
securities (Note 5). The following tables present the DIF's financial 
assets measured at fair value as of December 31, 2011 and 2010. 

Assets Measured at Fair Value at December 31, 2011: 

Dollars in Thousands: 

Fair Value Measurements Using: 

Assets: Cash and cash equivalents (Special U.S. Treasuries)[1]: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$3,266,631; 
Significant Other Observable Inputs (Level 2): $0; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $3,266,631. 

Available for Sale Debt Securities: 

Investment in U.S. Treasury Obligations[2]: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$33,863,245; 
Significant Other Observable Inputs (Level 2): $0; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $33,863,245. 

Trust preferred securities: 
Quoted Prices in Active Markets for Identical Assets (Level 1): $0; 
Significant Other Observable Inputs (Level 2): $2,213,231; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $2,213,231. 

Trust preferred securities held for UST (Note 16): 
Quoted Prices in Active Markets for Identical Assets (Level 1): $0; 
Significant Other Observable Inputs (Level 2): $795,769; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $795,769. 

Total Assets: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$37,129,876; 
Significant Other Observable Inputs (Level 2): $3,009,000; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $40,138,876. 

[1] 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. 

[End of table] 

In exchange for prior shared-loss guarantee coverage provided to 
Citigroup, the FDIC and the Treasury received TruPs (see Note 5). At 
December 31, 2011, the fair value of the securities in the amount of 
$3.009 billion was classified as a Level 2 measurement based on an 
FDIC-developed model using observable market data for traded Citigroup 
securities to determine the expected present value of future cash 
flows. Key inputs include market yields on U.S. dollar interest rate 
swaps and discount rates for default, call, and liquidity risks that 
are derived from traded Citigroup securities and modeled pricing 
relationships. 

Assets Measured at Fair Value at December 31, 2010: 

Dollars in Thousands: 

Fair Value Measurements Using: 

Assets: Cash and cash equivalents (Special U.S. Treasuries)[1]: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$27,076,606; 
Significant Other Observable Inputs (Level 2): $0; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $27,076,606. 

Available for Sale Debt Securities: 

Investment in U.S. Treasury Obligations[2]: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$12,371,268; 
Significant Other Observable Inputs (Level 2): $0; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $12,371,268. 

Trust preferred securities: 
Quoted Prices in Active Markets for Identical Assets (Level 1): $0; 
Significant Other Observable Inputs (Level 2): $2,297,818; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $2,297,818. 

Trust preferred securities held for UST (Note 16): 
Quoted Prices in Active Markets for Identical Assets (Level 1): $0; 
Significant Other Observable Inputs (Level 2): $826,182; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $826,182. 

Total Assets: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$39,447,874; 
Significant Other Observable Inputs (Level 2): $3,124,000; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $42,571,874. 

[1] 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. 

[End of table] 

Some of the DIF's financial assets and liabilities are not recognized 
at fair value but are recorded at amounts that approximate fair value 
due to their short maturities and/or comparability with current 
interest rates. Such items include interest receivable on investments, 
assessments receivable, other short-term receivables, accounts 
payable, and other liabilities. 

The net receivables from resolutions primarily include the DIF's 
subrogated claim arising from obligations to insured depositors. The 
resolution entity assets that will ultimately be used to pay the 
corporate subrogated claim are valued using discount rates that 
include consideration of market risk. These discounts ultimately 
affect the DIF's allowance for loss against the receivables from 
resolutions. Therefore, the corporate subrogated claim indirectly 
includes the effect of discounting and should not be viewed as being 
stated in terms of nominal cash flows. 

Although the value of the corporate subrogated claim is influenced by 
valuation of resolution entity assets (see Note 4), such valuation is 
not equivalent to the valuation of the corporate claim. Since the 
corporate claim is unique, not intended for sale to the private 
sector, and has no established market, it is not practicable to 
estimate a fair value. 

The FDIC believes that a sale to the private sector of the corporate 
claim would require indeterminate, but substantial, discounts for an 
interested party to profit from these assets because of credit and 
other risks. In addition, the timing of resolution entity payments to 
the DIF on the subrogated claim does not necessarily correspond with 
the timing of collections on resolution entity assets. Therefore, the 
effect of discounting used by resolution entities should not 
necessarily be viewed as producing an estimate of fair value for the 
net receivables from resolutions. 

There is no readily available market for guarantees associated with 
systemic risk (see Note 16). 

16. Systemic Risk Transactions: 

Pursuant to a systemic risk determination, the FDIC established the 
TLGP for IDIs, designated affiliates and certain holding companies on 
October 14, 2008, in an effort to counter the systemwide crisis in the 
nation's financial sector. The program is codified in part 370 of 
title 12 of the Code of Federal Regulations. 

The FDIC received fees in exchange for guarantees issued under the 
TLGP and set aside, as deferred revenue, all fees for potential TLGP 
losses. At inception of the guarantees, the DIF recognized a liability 
for the non-contingent fair value of the obligation the FDIC assumed 
over the term of the guarantees. In accordance with FASB ASC 460, 
Guarantees, this non-contingent liability was measured at the amount 
of consideration received in exchange for issuing the guarantee. As 
systemic risk expenses are incurred, the DIF will reduce deferred 
revenue and recognize an offsetting amount as systemic risk revenue. 
Not later than the end of the guarantee period (December 31, 2012), 
any deferred revenue not absorbed by losses during the guarantee 
period will be recognized as revenue to the DIF. 

At its inception, the TLGP consisted of two components: 1) the 
Transaction Account Guarantee Program (TAG) and 2) the Debt Guarantee 
Program (DGP). The TAG provided unlimited coverage for noninterest-
bearing transaction accounts held by IDIs on all deposit amounts 
exceeding the fully insured limit of $250,000 through December 31, 
2010. During its existence, the FDIC collected TAG fees of $1.2 
billion. Total subrogated claims arising from obligations to 
depositors with noninterest-bearing transaction accounts were $8.8 
billion, with estimated losses of $2.2 billion. 

The DGP permitted participating entities to issue FDIC-guaranteed 
senior unsecured debt through October 31, 2009. The FDIC's guarantee 
for all such debt expires on the earliest of the conversion date for 
mandatory convertible debt, the stated date of maturity, or December 31,
2012. Through the end of the debt issuance period, the DIF collected 
$8.3 billion of guarantee fees and fees of $1.2 billion from 
participating entities that elected to issue senior unsecured non-
guaranteed debt. The fees are included in the "Cash and investments - 
restricted - systemic risk" line item and recognized as "Deferred 
revenue - systemic risk" on the Balance Sheet. 

Additionally, the FDIC holds $800 million (liquidation amount) of 
Citigroup TruPs on behalf of the Treasury (and any related interest) 
as security in the event payments are required to be made by the DIF 
for guaranteed debt instruments issued by Citigroup or any of its 
affiliates under the TLGP (see Note 5). At December 31, 2011, the fair 
value of these securities totaled $796 million, and was determined 
using the valuation methodology described in Note 15 for other
Citigroup TruPs held by the DIF. There is an offsetting liability in 
the "Deferred revenue -systemic risk" line item, representing amounts 
to be transferred to the Treasury or, if necessary, paid for 
guaranteed debt instruments issued by Citigroup or its affiliates 
under the TLGP. Consequently, there is no impact on the fund balance 
of the DIF. 

The FDIC's payment obligation under the DGP is triggered by a payment 
default. In the event of default, the FDIC will continue to make 
scheduled principal and interest payments under the terms of the debt 
instrument through its maturity, or in the case of mandatory 
convertible debt, through the mandatory conversion date. The 
debtholder or representative must assign to the FDIC the right to 
receive any and all distributions on the guaranteed debt from any 
insolvency proceeding, including the proceeds of any receivership or 
bankruptcy estate, to the extent of payments made under the guarantee. 

Since inception of the program, $618.0 billion in total guaranteed 
debt has been issued. Through December 31, 2011, the FDIC has paid $35 
million in claims for principal and/or interest arising from the 
default of guaranteed debt obligations of six debt issuers. Fifty-nine 
financial entities (33 IDIs and 26 affiliates and holding companies) 
had $167.4 billion in guaranteed debt outstanding at December 31, 
2011. This compares to $267.1 billion in guaranteed debt outstanding 
at December 31, 2010. Reported outstanding debt is derived from data 
submitted by debt issuers. 

At December 31, 2011, the DIF recognized a liability of $117 million 
for debt guarantee obligations that were paid in early 2012 as 
scheduled under the terms of the debt instruments. This liability is 
presented in the "Debt Guarantee Program liabilities — systemic risk" 
line item. The DIF has also recorded a contingent liability of $2 
million in the "Contingent liability for systemic risk" line item for 
probable additional guaranteed debt obligations. The FDIC believes 
that it is also reasonably possible that additional estimated losses 
of approximately $93 million could be incurred under the DGP. 

The DIF may recognize revenue before the end of the guarantee period 
for the portion of guarantee fees that was determined to exceed 
amounts needed to cover potential losses. During 2011, the DIF 
recognized revenue of $2.6 billion for a portion of DGP guarantee fees 
previously held as systemic risk deferred revenue (see Note 10). The 
$2.6 billion relates to fees on debt guarantees that have expired. In 
addition, the DIF transferred an equal amount of "Cash and 
investments - restricted - systemic risk" to the DIF's cash and 
investments. In the unforeseen event a debt default occurs greater 
than the remaining amount held as deferred revenue, to the extent 
needed, any amount previously recognized as revenue to the DIF will be 
returned to the TLGP. 

Because of uncertainties surrounding the outlook for the economy and 
financial markets, there remains a possibility that the TLGP could 
incur a loss that would absorb some or all of the remaining guarantee 
fees. Therefore, it is appropriate to continue the practice of 
deferring revenue recognition for the remaining $5.7 billion of 
"Deferred revenue - systemic risk" (which excludes the liability of 
$925 million to Treasury for the fair value and related interest of the
Citigroup TruPs). 

Systemic Risk Activity at December 31, 2011: 

Dollars in thousands: 

Balance at 01-01-10: 

Cash and cash equivalents - restricted - systemic risk: $6,646,968; 
Receivables and other assets - systemic risk: $2,269,422; 
Deferred revenue - systemic risk: ($9,054,541); 
Debt Guarantee Program liabilities - systemic risk: ($29,334); 
Contingent liability - systemic risk: ($119,993); 
Revenue/Expenses - systemic risk: $0. 

TAG fees collected: 
Cash and cash equivalents - restricted - systemic risk: $41,419; 
Receivables and other assets - systemic risk: ($50,235); 
Deferred revenue - systemic risk: $8,816; 
Debt Guarantee Program liabilities - systemic risk: $; 
Contingent liability - systemic risk: $0; 
Revenue/Expenses - systemic risk: $0. 

Receivable for TAG fees: 
Cash and cash equivalents - restricted - systemic risk: $3; 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: ($3); 
Debt Guarantee Program liabilities - systemic risk: $0; 
Contingent liability - systemic risk: $0;  
Revenue/Expenses - systemic risk: $0. 

Receivable for TAG accounts at failed institutions: 
Cash and cash equivalents - restricted - systemic risk: $0; 
Receivables and other assets - systemic risk: ($424,628);   
Deferred revenue - systemic risk: $0; 
Debt Guarantee Program liabilities - systemic risk: $0; 
Contingent liability - systemic risk: $0;  
Revenue/Expenses - systemic risk: $0. 

Dividends and overnight interest on TruPs held for UST: 
Cash and cash equivalents - restricted - systemic risk: $0; 
Receivables and other assets - systemic risk: $64,029;  
Deferred revenue - systemic risk: ($64,029);   
Debt Guarantee Program liabilities - systemic risk: $0; 
Contingent liability - systemic risk: $0;  
Revenue/Expenses - systemic risk: $0. 

Fair value adjustment on TruPs held for UST: 
Cash and cash equivalents - restricted - systemic risk: $0; 
Receivables and other assets - systemic risk: ($30,413); 
Deferred revenue - systemic risk: $30,413); 
Debt Guarantee Program liabilities - systemic risk: $0; 
Contingent liability - systemic risk: $0;  
Revenue/Expenses - systemic risk: $0. 

Estimated losses for TAG accounts at failed institutions: 
Cash and cash equivalents - restricted - systemic risk: $0; 
Receivables and other assets - systemic risk: $119,976; 
Deferred revenue - systemic risk: ($119,976); 
Debt Guarantee Program liabilities - systemic risk: $0; 
Contingent liability - systemic risk: $0;  
Revenue/Expenses - systemic risk: ($119,976). 

Realized losses not yet paid:   
Cash and cash equivalents - restricted - systemic risk: $0; 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: $117,027; 
Debt Guarantee Program liabilities - systemic risk: ($87,693);  
Contingent liability - systemic risk: $0;  
Revenue/Expenses - systemic risk: $87,693. 

Provision for DGP losses: 
Cash and cash equivalents - restricted - systemic risk: $0; 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: ($147,111); 
Debt Guarantee Program liabilities - systemic risk: $0;  
Contingent liability - systemic risk: $117,777; 
Revenue/Expenses - systemic risk: ($117,777). 

Guaranteed debt obligations paid: 
Cash and cash equivalents - restricted - systemic risk: ($27,433); 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: $27,433; 
Debt Guarantee Program liabilities - systemic risk: $0;  
Contingent liability - systemic risk: $0; 
Revenue/Expenses - systemic risk: $27,433. 
 
Transfer of excess TLGP funds to the DIF: 
Cash and cash equivalents - restricted - systemic risk: ($2,569,579); 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: $2,569,579; 
Debt Guarantee Program liabilities - systemic risk: $0;  
Contingent liability - systemic risk: $0; 
Revenue/Expenses - systemic risk: $0. 

U.S. investment interest collected: 
Cash and cash equivalents - restricted - systemic risk: $66,640; 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: ($66,640); 
Debt Guarantee Program liabilities - systemic risk: $0;  
Contingent liability - systemic risk: $0; 
Revenue/Expenses - systemic risk: $0. 

Interest receivable on U.S. Treasury obligations: 
Cash and cash equivalents - restricted - systemic risk: $55,880; 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: ($55,880); 
Debt Guarantee Program liabilities - systemic risk: $0;  
Contingent liability - systemic risk: $0; 
Revenue/Expenses - systemic risk: $0. 

Amortization of U.S. Treasury obligations: 
Cash and cash equivalents - restricted - systemic risk: ($71,262); 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: $71,262; 
Debt Guarantee Program liabilities - systemic risk: $0;  
Contingent liability - systemic risk: $0; 
Revenue/Expenses - systemic risk: $0. 
 
Accrued interest purchased: 
Cash and cash equivalents - restricted - systemic risk: ($43,983); 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: $43,983; 
Debt Guarantee Program liabilities - systemic risk: $0;  
Contingent liability - systemic risk: $0; 
Revenue/Expenses - systemic risk: $0. 

Unrealized gain on U.S. Treasury obligations: 
Cash and cash equivalents - restricted - systemic risk: $439; 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: ($439); 
Debt Guarantee Program liabilities - systemic risk: $0;  
Contingent liability - systemic risk: $0; 
Revenue/Expenses - systemic risk: $0. 

TLGP operating expenses: 
Cash and cash equivalents - restricted - systemic risk: $0; 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: $152; 
Debt Guarantee Program liabilities - systemic risk: $0;  
Contingent liability - systemic risk: 0; 
Revenue/Expenses - systemic risk: ($8,514). 

Receipts of receivership's dividends: 
Cash and cash equivalents - restricted - systemic risk: $728,227; 
Receivables and other assets - systemic risk: $0; 
Deferred revenue - systemic risk: $0; 
Debt Guarantee Program liabilities - systemic risk: $0;  
Contingent liability - systemic risk: $0; 
Revenue/Expenses - systemic risk: $0. 

Totals: 
Cash and cash equivalents - restricted - systemic risk: $4,827,319; 
Receivables and other assets - systemic risk: $1,948,151; 
Deferred revenue - systemic risk: ($6,639,954); 
Debt Guarantee Program liabilities - systemic risk: ($117,027);  
Contingent liability - systemic risk: ($2,216); 
Revenue/Expenses - systemic risk: ($131,141). 

(1) As of December 31, 2011, the fair value of investments in U.S. 
Treasury obligations held by TLGP was $3.1 billion. An unrealized gain 
of $439 thousand is reported in the "Deferred revenue - systemic risk" 
line item. 

[End of table] 

17. Subsequent Events: 

Subsequent events have been evaluated through April 11, 2012, the date 
the financial statements are available to be issued. 

2012 Failures through April 11, 2012: 

Through April 11, 2012, 16 insured institutions failed in 2012 with 
total losses to the DIF estimated to be $1.3 billion. 

[End of section] 

FSLIC Resolution Fund’s Financial Statements: 

Balance Sheet: 
  
Federal Deposit Insurance Corporation: 
FSLIC Resolution Fund Balance Sheet at December 31: 

Dollars in Thousands: 

Assets: 

Cash and cash equivalents: 
2011: $3,533,410; 
2010: $3,547,907. 

Receivables from thrift resolutions and other assets, net (Note 3): 
2011: $65,163; 
2010: $23,408. 

Receivables from U.S. Treasury for goodwill litigation (Note 4): 
2011: $356,455; 
2010: $323,495. 

Total Assets: 
2011: $3,955,028; 
2010: $3,894,810. 

Liabilities: 

Accounts payable and other liabilities: 
2011: $3,544; 
2010: $2,990. 

Contingent liabilities for goodwill litigation (Note 4): 
2011: $356,455; 
2010: $323,495. 

Total Liabilities: 
2011: $359,999; 
2010: $326,485. 

Resolution Equity (Note 5): 

Contributed capital: 
2011: $127,875,656; 
2010: $127,792,696. 

Accumulated deficit: 
2011: ($124,280,627); 
2010: ($124,224,371). 

Total Resolution Equity: 
2011: $3,595,029; 
2010: $3,568,325. 

Total Liabilities and Resolution Equity: 
2011: $3,955,028; 
2010: $3,894,810. 

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

[End of table] 

FSLIC Resolution Fund: 
Federal Deposit Insurance Corporation: 
FSLIC Resolution Fund Statement of Income and Accumulated Deficit for 
the Years Ended December 31: 

Dollars in Thousands: 

Revenue: 

Interest on U.S. Treasury obligations: 
2011: $1,361; 
2010: $3,876. 

Other revenue: 
2011: $3,257; 
2010: $9,393. 

Total Revenue: 
2011: $4,618; 
2010: $13,269. 

Expenses and Losses: 

Operating expenses: 
2011: $4,660; 
2010: $3,832. 

Provision for losses:
2011: ($8,578); 
2010: ($945). 

Goodwill litigation expenses (Note 4):
2011: $82,960; 
2010: ($53,266). 

Recovery of tax benefits: 
2011: ($18,373); 
2010: ($63,256). 

Other expenses: 
2011: $205; 
2010: $3,070. 

Total Expenses and Losses: 
2011: $60,874; 
2010: ($110,565). 

Net (Loss)/Income: 
2011: ($56,256); 
2010: $123,834). 

Accumulated Deficit - Beginning: 
2011: ($124,224,371); 
2010: ($124,348,205). 

Accumulated Deficit - Ending: 
2011: ($124,280,627); 
2010: ($124,224,371). 

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

[End of Statement of Income and Accumulated Deficit] 

FSLIC Resolution Fund: 
Federal Deposit Insurance Corporation: 
FSLIC Resolution Fund Statement of Cash Flows for the Years Ended 
December 31: 

Dollars in Thousands: 

Operating Activities: 

Net Income (Loss): 
2011: ($56,256); 
2010: $123,834. 

Adjustments to reconcile net (loss)/income to net cash used by
operating activities: Provision for losses: 
2011: ($8,578); 
2010: ($945). 

Change in Operating Assets and Liabilities: 

Decrease in receivables from thrift resolutions and other assets: 
2011: ($33,177); 
2010: $9,875. 

Increase (Decrease) in accounts payable and other liabilities: 
2011: $554; 
2010: $18. 

(Decrease) Increase in contingent liabilities for goodwill litigation: 
2011: $32,960; 
2010: ($81,917). 

Net Cash Used by Operating Activities: 
2011: ($64,497); 
2010: $50,865. 

Financing Activities: 

Provided by: U.S. Treasury payments for goodwill litigation (Note 4): 
2011: $50,000; 
2010: $26,917. 

Net Cash Provided by Financing Activities: 
2011: $50,000; 
2010: $26,917. 

Net Increase in Cash and Cash Equivalents: 
2011: (14,497); 
2010: $77,782. 

Cash and Cash Equivalents - Beginning: 
2011: $3,547,907; 
2010: $3,470,125. 

Cash and Cash Equivalents - Ending: 
2011: $3,533,410; 
2010: $3,547,907. 

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

[End of Statement of Cash Flows] 

Notes to the Financial Statements: 
FSLIC Resolution Fund: 
December 31, 2011 and 2010: 

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

Legislative History: 

The Federal Deposit Insurance Corporation (FDIC) is the independent 
deposit insurance agency created by Congress in 1933 to maintain 
stability and public confidence in the nation's banking system. 
Provisions that govern the operations of the FDIC are generally found 
in the Federal Deposit Insurance (FDI) Act, as amended (12 U.S.C. 
1811, et seq). In carrying out the purposes of the FDI Act, the FDIC, 
as administrator of the Deposit Insurance Fund (DIF), insures the 
deposits of banks and savings associations (insured depository 
institutions). In cooperation with other federal and state agencies, 
the FDIC promotes the safety and soundness of insured depository 
institutions by identifying, monitoring and addressing risks to the DIF.
Commercial banks, savings banks and savings associations (known as 
"thrifts") are supervised by either the FDIC, the Office of the 
Comptroller of the Currency, or the Federal Reserve Board. In 
addition, the FDIC, through administration of the FSLIC Resolution 
Fund (FRF), is responsible for the sale of remaining assets and 
satisfaction of liabilities associated with the former Federal Savings 
and Loan Insurance Corporation (FSLIC) and the former Resolution
Trust Corporation (RTC). The DIF and the FRF are maintained separately 
by the FDIC to support their respective mandates. 

The U.S. Congress created the FSLIC through the enactment of the 
National Housing Act of 1934. The Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989 (FIRREA) abolished the insolvent 
FSLIC, created the FRF, and transferred the assets and liabilities of 
the FSLIC to the FRF-except those assets and liabilities transferred 
to the RTC-effective on August 9, 1989. Further, the FIRREA 
established the Resolution Funding Corporation (REFCORP) to provide 
part of the initial funds used by the RTC for thrift resolutions. 

The RTC Completion Act of 1993 (RTC Completion Act) terminated the RTC 
as of December 31, 1995. All remaining assets and liabilities of the 
RTC were transferred to the FRF on January 1, 1996. Today, the FRF 
consists of two distinct pools of assets and liabilities: one composed 
of the assets and liabilities of the FSLIC transferred to the FRF upon 
the dissolution of the FSLIC (FRF-FSLIC), and the other composed of 
the RTC assets and liabilities (FRF-RTC). The assets of one pool are 
not available to satisfy obligations of the other. 

Operations/Dissolution of the FRF: 

The FRF will continue operations until all of its assets are sold or 
otherwise liquidated and all of its liabilities are satisfied. Any 
funds remaining in the FRF-FSLIC will be paid to the U.S. Treasury. 
Any remaining funds of the FRF-RTC will be distributed to the REFCORP 
to pay the interest on the REFCORP bonds. In addition, the FRF-FSLIC 
has available until expended $602 million in appropriations to 
facilitate, if required, efforts to wind up the resolution activity of 
the FRF-FSLIC. 

The FDIC has conducted an extensive review and cataloging of FRF's 
remaining assets and liabilities. Some of the issues and items that 
remain open in FRF are 1) criminal restitution orders (generally have 
from 1 to 12 years remaining to enforce); 2) collections of 
settlements and judgments obtained against officers and directors and 
other professionals responsible for causing or contributing to thrift 
losses (generally have from 2 months to 7 years remaining to enforce, 
unless the judgments are renewed, which will result in significantly 
longer periods for collection for some judgments); 3) a few assistance 
agreements entered into by the former FSLIC (FRF could continue to 
receive or refund overpayments of tax benefits sharing through
2014); 4) goodwill litigation (no final date for resolution has been 
established; see Note 4); and 5) affordable housing program monitoring 
(requirements can exceed 25 years). The FRF could potentially realize 
recoveries from tax benefits sharing of up to approximately $36 
million; however, any associated recoveries are not reflected in FRF's 
financial statements given the significant uncertainties surrounding 
the ultimate outcome. 

Receivership Operations: 

The FDIC is responsible for managing and disposing of the assets of 
failed institutions in an orderly and efficient manner. The assets 
held by receivership entities, and the claims against them, are 
accounted for separately from FRF assets and liabilities to ensure 
that receivership proceeds are distributed in accordance with 
applicable laws and regulations. Also, the income and expenses 
attributable to receiverships are accounted for as transactions of 
those receiverships. Receiverships are billed by the FDIC for services 
provided on their behalf. 

2. Summary of Significant Accounting Policies: 

General: 

These financial statements pertain to the financial position, results 
of operations, and cash flows of the FRF and are presented in 
accordance with U.S. generally accepted accounting principles (GAAP). 
As permitted by the Federal Accounting Standards Advisory Board's
Statement of Federal Financial Accounting Standards 34, The Hierarchy 
of Generally Accepted Accounting Principles, Including the Application 
of Standards Issued by the Financial Accounting Standards Board, the 
FDIC prepares financial statements in conformity with standards 
promulgated by the Financial Accounting Standards Board (FASB). These 
statements do not include reporting for assets and liabilities of 
receivership entities because these entities are legally separate and 
distinct, and the FRF does not have any ownership interests in them. 
Periodic and final accountability reports of receivership entities are 
furnished to courts, supervisory authorities, and others upon request. 

Use of Estimates: 

Management makes estimates and assumptions that affect the amounts 
reported in the financial statements and accompanying notes. Actual 
results could differ from these estimates. Where it is reasonably 
possible that changes in estimates will cause a material change in the 
financial statements in the near term, the nature and extent of such 
changes in estimates have been disclosed. The more significant 
estimates include the allowance for losses on receivables from thrift 
resolutions and the estimated losses for litigation. 

Cash Equivalents: 

Cash equivalents are short-term, highly liquid investments consisting 
primarily of U.S. Treasury Overnight Certificates. 

Provision for Losses: 

The provision for losses represents the change in the estimation of 
the allowance for losses related to the receivables from thrift 
resolutions and other assets. 

Related Parties: 
The nature of related parties and a description of related party 
transactions are discussed in Note 1 and disclosed throughout the 
financial statements and footnotes. 

Disclosure about Recent Relevant Accounting Pronouncements: 

Recent accounting pronouncements have been deemed to be not applicable 
or material to the financial statements as presented. 

3. Receivables From Thrift Resolutions and Other Assets, Net: 

Receivables From Thrift Resolutions: 

The receivables from thrift resolutions include payments made by the 
FRF to cover obligations to insured depositors, advances to 
receiverships for working capital, and administrative expenses paid on 
behalf of receiverships. Any related allowance for loss represents the 
difference between the funds advanced and/or obligations incurred and 
the expected repayment. Assets held by the FDIC in its receivership 
capacity for the former RTC are a significant source of repayment of 
the FRF's receivables from thrift resolutions. As of December 31, 
2011, five of the 850 FRF receiverships remain active until their 
goodwill litigation or liability-related impediments are resolved. 
During 2011, the receivables from closed thrifts and related allowance 
for losses decreased by $4.0 billion due to three receiverships that 
were terminated during the year. 

The FRF receiverships held assets with a book value of $15 million and 
$18 million as of December 31, 2011 and 2010, respectively (which 
primarily consist of cash, investments, and miscellaneous 
receivables). At December 31, 2011, $12 million of the $15 million in 
assets in the FRF receiverships was cash held for non-FRF, third party 
creditors. 

Other Assets: 

Other assets include credit enhancement reserves valued at $14 million 
and $17 million as of December 31, 2011 and 2010, respectively. The 
credit enhancement reserves resulted from swap transactions where the 
former RTC received mortgage-backed securities in exchange for single-
family mortgage loans. The RTC supplied credit enhancement reserves 
for the mortgage loans in the form of cash collateral to cover future 
credit losses over the remaining life of the loans. These cash 
reserves, which may cover future credit losses through 2020, are 
valued by estimating credit losses on the underlying loan portfolio 
and then discounting cash flow projections using market-based rates. 

Most of the remaining amount in other assets is a receivable of $44 
million for recoveries from tax benefit sharing as of December 31, 
2011. Recoveries from tax benefit sharing represents receipts based on 
the realization of tax savings from entities that either entered into 
assistance agreements with the former FSLIC, or have subsequently 
purchased financial institutions that had prior agreements with the 
FSLIC. In 2011, the FRF refunded $26 million in tax benefit sharing 
recoveries that were received in a prior year. 

Receivables From Thrift Resolutions and Other Assets, Net at December 
31: 

Dollars in Thousands: 

Receivables from closed thrifts: 
2011: $1,800,417; 
2010: $5,763,949. 

Allowance for losses: 
2011: ($1,797,154); 
2010: ($5,762,186). 

Receivables from Thrift Resolutions, Net: 
2011: $3,263; 
2010: $1,763. 

Other assets: 
2011: $61,900; 
2010: $21,645. 

Total: 
2011: $65,163; 
2010: $23,408. 

[End of table] 

4. Contingent Liabilities for: 

Goodwill Litigation: 

In United States v. Winstar Corp., 518 U.S. 839 (1996), the Supreme 
Court held that when it became impossible following the enactment of 
FIRREA in 1989 for the federal government to perform certain 
agreements to count goodwill toward regulatory capital, the plaintiffs 
were entitled to recover damages from the United States. 

On July 22, 1998, the Department of Justice's (DOJ's) Office of Legal 
Counsel (OLC) concluded that the FRF is legally available to satisfy 
all judgments and settlements in the goodwill litigation involving 
supervisory action or assistance agreements. OLC determined that 
nonperformance of these agreements was a contingent liability that was 
transferred to the FRF on August 9, 1989, upon the dissolution of the 
FSLIC. On July 23, 1998, the U.S. Treasury determined, based on OLC's 
opinion, that the FRF is the appropriate source of funds for payments 
of any such judgments and settlements. The FDIC General Counsel 
concluded that, as liabilities transferred on August 9, 1989, these 
contingent liabilities for future nonperformance of prior agreements 
with respect to supervisory goodwill were transferred to the FRF-
FSLIC, which is that portion of the FRF encompassing the obligations 
of the former FSLIC. The FRF-RTC, which encompasses the obligations of 
the former RTC and was created upon the termination of the RTC on 
December 31, 1995, is not available to pay any settlements or 
judgments arising out of the goodwill litigation. 

The FRF can draw from an appropriation provided by Section 110 of the 
Department of Justice Appropriations Act, 2000 (Public Law 106-113, 
Appendix A, Title I, 113 Stat. 1501A-3, 1501A-20) such sums as may be 
necessary for the payment of judgments and compromise settlements in 
the goodwill litigation. This appropriation is to remain available 
until expended. Because an appropriation is available to pay such 
judgments and settlements, any estimated liability for goodwill 
litigation should have a corresponding receivable from the U.S. 
Treasury and therefore have no net impact on the financial condition 
of the FRF-FSLIC. 

For the year ended December 31, 2011, the FRF paid $50 million as a 
result of a settlement in one goodwill case compared to $27 million 
for four goodwill cases in 2010. The FRF received appropriations from 
the U.S. Treasury to fund these payments. 

As of December 31, 2011, five remaining cases are pending against the 
United States based on alleged breaches of the agreements stated 
above. Of the five remaining cases, a contingent liability and an 
offsetting receivable of $356 million and $323 million was recorded 
for one case as of December 31, 2011 and 2010, respectively. This case 
is currently before the lower court pending remand following appeal 
and is still considered active. 

The FDIC believes that it is reasonably possible that the FRF could 
incur additional estimated losses for two of the five remaining cases 
of up to $268 million. The plaintiff in one case was awarded $205 
million by the Court of Federal Claims, and this case is currently on 
appeal. The remaining $63 million is additional damages contended by 
the plaintiff to the $356 million contingent liability for the one 
case mentioned in the previous paragraph. For the three remaining 
active cases, the FDIC is unable to estimate a range of loss to the 
FRF-FSLIC. No awards were given to the plaintiffs in these three cases 
by the appellate courts. Two cases are currently on appeal, and the 
other case is fully adjudicated but the Court of Federal Claims is 
considering awarding litigation costs to the United States. 

In addition, the FRF-FSLIC pays the goodwill litigation expenses 
incurred by the DOJ, the entity that defends these lawsuits against 
the United States, based on a Memorandum of Understanding (MOU) dated 
October 2, 1998, between the FDIC and the DOJ. FRF-FSLIC pays in 
advance the estimated goodwill litigation expenses. Any unused funds 
are carried over and applied toward the next fiscal year (FY) charges. 
In 2011, FRF-FSLIC did not provide any additional funding to the DOJ 
because the unused funds from FY 2011 were sufficient to cover 
estimated FY 2012 expenses of $2.6 million. 

Guarini Litigation: 

Paralleling the goodwill cases were similar cases alleging that the 
government breached agreements regarding tax benefits associated with 
certain FSLIC-assisted acquisitions. These agreements allegedly 
contained the promise of tax deductions for losses incurred on the 
sale of certain thrift assets purchased by plaintiffs from the FSLIC, 
even though the FSLIC provided the plaintiffs with tax-exempt 
reimbursement. A provision in the Omnibus Budget Reconciliation Act of 
1993 (popularly referred to as the "Guarini legislation") eliminated 
the tax deductions for these losses. 

All eight of the original Guarini cases have been settled. However, a 
case settled in 2006 further obligates the FRF-FSLIC as a guarantor 
for all tax liabilities in the event the settlement amount is 
determined by tax authorities to be taxable. The maximum potential 
exposure under this guarantee is approximately $81 million. However, 
the FDIC believes that it is very unlikely the settlement will be 
subject to taxation. More definitive information may be available 
during 2012, after the Internal Revenue Service (IRS) completes its 
Large Case Program audit on the affected entity's 2006 returns; this 
audit remains ongoing. As of December 31, 2011, no liability has been 
recorded. The FRF does not expect to fund any payment under this 
guarantee. 

Representations and Warranties: 

As part of the RTC's efforts to maximize the return from the sale of 
assets from thrift resolutions, representations and warranties, and 
guarantees were offered on certain loan sales. The majority of loans 
subject to these agreements have been paid off, refinanced, or the 
period for filing claims has expired. The FDIC's estimate of maximum 
potential exposure to the FRF is zero. No claims in connection with 
representations and warranties have been asserted since 1998 on the 
remaining open agreements. Because of the age of the remaining 
portfolio and lack of claim activity, the FDIC does not expect new 
claims to be asserted in the future. Consequently, the financial 
statements at December 31, 2011 and 2010, do not include a liability 
for these agreements. 

5. Resolution Equity: 

As stated in the Legislative History section of Note 1, the FRF is 
comprised of two distinct pools: the FRF-FSLIC and the FRF-RTC. The 
FRF-FSLIC consists of the assets and liabilities of the former FSLIC. 
The FRF-RTC consists of the assets and liabilities of the former RTC. 
Pursuant to legal restrictions, the two pools are maintained 
separately and the assets of one pool are not available to satisfy 
obligations of the other. The following table shows the contributed 
capital, accumulated deficit, and resulting resolution equity for each 
pool. 

Resolution Equity at December 31, 2011: 

Dollars in Thousands: 

Contributed capital - beginning: 
FRF-FSLIC: $46,098,359; 
FRF-RTC: $81,749,337; 
FRF Consolidated: $127,792,696. 

Add: U.S. Treasury payments/receivable for goodwill litigation 
FRF-FSLIC: $82,960; 
FRF-RTC: $0;  
FRF Consolidated: $82,960. 

Contributed capital - ending: 
FRF-FSLIC: $46,126,319; 
FRF-RTC: $81,749,337; 
FRF Consolidated: $127,875,656. 

Accumulated deficit: 
FRF-FSLIC: ($42,702,916); 
FRF-RTC: ($81,577,711); 
FRF Consolidated: ($124,280,627). 

Total: 
FRF-FSLIC: $3,423,403; 
FRF-RTC: $171,626; 
FRF Consolidated: $3,595,029. 

[End of table] 

Contributed Capital: 

The FRF-FSLIC and the former RTC received $43.5 billion and $60.1 
billion from the U.S. Treasury, respectively, to fund losses from 
thrift resolutions prior to July 1, 1995. Additionally, the FRF-FSLIC 
issued $670 million in capital certificates to the Financing 
Corporation (a mixed-ownership government corporation established to 
function solely as a financing vehicle for the FSLIC) and the RTC 
issued $31.3 billion of these instruments to the REFCORP. FIRREA 
prohibited the payment of dividends on any of these capital 
certificates. 

Through December 31, 2011, the FRF-RTC has returned $4.6 billion to 
the U.S. Treasury and made payments of $5.0 billion to the REFCORP. 
These actions serve to reduce contributed capital. The most recent 
payment to the REFCORP was in January of 2008 for $225 million. 

FRF-FSLIC received $50 million in U.S. Treasury payments for goodwill 
litigation in 2011. Furthermore, $356 million and $323 million were 
accrued for as receivables at year-end 2011 and 2010, respectively. 
The effect of this activity was an increase in contributed capital of 
$83 million in 2011. 

Accumulated Deficit: 

The accumulated deficit represents the cumulative excess of expenses 
and losses over revenue for activity related to the FRF-FSLIC and the 
FRF-RTC. Approximately $29.8 billion and $87.9 billion were brought 
forward from the former FSLIC and the former RTC on August 9, 1989, 
and January 1, 1996, respectively. The FRF-FSLIC accumulated deficit 
has increased by $12.9 billion, whereas the FRF-RTC accumulated 
deficit has decreased by $6.3 billion, since their dissolution dates. 

6. Disclosures About the Fair Value of Financial Instruments: 

The financial assets recognized and measured at fair value on a 
recurring basis at each reporting date are cash equivalents and credit 
enhancement reserves. The following table presents the FRF's financial 
assets measured at fair value as of December 31, 2011 and 2010. 

Assets Measured at Fair Value at December 31, 2011: 

Dollars in Thousands: 

Fair Value Measurements Using: 

Cash and cash equivalents (Special U.S. Treasuries)[1]: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$3,377,203; 
Significant Other Observable Inputs (Level 2): $0; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $3,377,203. 

Credit enhancement reserves[2]: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$0; 
Significant Other Observable Inputs (Level 2): $14,431; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $14,431. 

Total Assets: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$3,377,203; 
Significant Other Observable Inputs (Level 2): $14,431; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $3,391,634. 

[1] 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] Credit enhancement reserves are valued by performing projected 
cash flow analyses using market-based assumptions (see Note 3). 

Assets Measured at Fair Value at December 31, 2010: 

Dollars in Thousands: 

Fair Value Measurements Using: 

Cash and cash equivalents (Special U.S. Treasuries)[1]: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$3,397,440; 
Significant Other Observable Inputs (Level 2): $0; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $3,397,440. 

Credit enhancement reserves[2]: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$0; 
Significant Other Observable Inputs (Level 2): $17,378; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $17,378. 

Total Assets: 
Quoted Prices in Active Markets for Identical Assets (Level 1): 
$3,397,440; 
Significant Other Observable Inputs (Level 2): $17,378; 
Significant Unobservable Inputs (Level 3): $0; 
Total Assets at Fair Value: $3,414,818. 

[1] 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] Credit enhancement reserves are valued by performing projected 
cash flow analyses using market-based assumptions (see Note 3). 

[End of table] 

Some of the FRF's financial assets and liabilities are not recognized 
at fair value but are recorded at amounts that approximate fair value 
due to their short maturities and/or comparability with current 
interest rates. Such items include other short-term receivables and 
accounts payable and other liabilities. 

The net receivable from thrift resolutions is influenced by the 
underlying valuation of receivership 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. 

[End of section] 

Appendix I: Comments from the Federal Deposit Insurance Corporation: 

FDIC: 
Federal Deposit Insurance Corporation: 
Deputy to the Chairman and CFO: 
550 17th Street NW: 
Washington, D.C. 20429-9990: 

April 11, 2012: 

Mr. Steven J. Sebastian: 
Director, Financial Management and Assurance: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Re: FDIC Management Response on the GAO 2011 Financial Statements 
Audit Report: 

Dear Mr. Sebastian: 

Thank you for the opportunity to review and comment on the U.S. 
Government Accountability Office's (GAO's) draft report titled, 
Financial Audit: Federal Deposit Insurance Corporation Funds' 2011 and 
2010 Financial Statements, GAO-12-416. We are pleased that the Federal 
Deposit Insurance Corporation (FDIC) received an unqualified opinion 
for the twentieth consecutive year on the financial statements of its 
funds: the Deposit Insurance Fund (DIF) and the FSLIC Resolution Fund 
(FRF). Also, GAO reported that the FDIC had effective internal control 
over financial reporting and compliance with laws and regulations for 
each fund, and there was no reportable noncompliance with the laws and 
regulations that were tested. GAO did report a significant control 
deficiency in FDIC's process for deriving and reporting estimates of 
losses to the DIF from resolution transactions involving shared loss 
agreements. 

During the audit year, the FDIC management and staff continued to take 
steps to strengthen and improve controls over the shared loss 
estimation process and will continue to focus on this area in the 
coming audit year. FDIC recognizes the important role a strong 
internal control program plays in an agency achieving its mission. Our 
dedication to sound financial management has been and will remain a 
top priority. 

In complying with audit standards that require management to provide a 
written assertion about the effectiveness of its internal control over 
financial reporting, the FDIC has prepared Management's Report on 
Internal Control over Financial Reporting (see attachment). The report 
acknowledges management's responsibility for establishing and 
maintaining internal control over financial reporting and provides the 
FDIC's conclusion regarding the effectiveness of its internal control. 

We want to thank the GAO staff for their professionalism and 
dedication during the audit and look forward to a productive and 
successful relationship during the 2012 audit. If you have any 
questions or concerns, please do not hesitate to contact me. 

Sincerely, 

Signed by: 

Steven O. App: 
Deputy to the Chairman and Chief Financial Officer: 

Management's Report on Internal Control over Financial Reporting: 

The Federal Deposit Insurance Corporation's (FDIC's) internal control 
over financial reporting is a process effected by those charged with 
governance, management, and other personnel, designed to provide 
reasonable assurance regarding the preparation of reliable financial 
statements in conformity with U.S. generally accepted accounting 
principles (GAAP), and compliance with applicable laws and 
regulations. The objective of the FDIC's internal control over 
financial reporting is to reasonably assure that (1) transactions are 
properly recorded, processed and summarized to permit the preparation 
of financial statements in accordance with GAAP, and assets are 
safeguarded against loss from unauthorized acquisition, use, or 
disposition; and (2) transactions are executed in accordance with the 
laws and regulations that could have a direct and material effect on 
the financial statements. 

Management is responsible for establishing and maintaining effective 
internal control over financial reporting. Management assessed the 
effectiveness of the FDIC's internal control over financial reporting 
as of December 31, 2011 through its corporate risk management program 
that seeks to comply with the spirit of the following standards, among 
others: Federal Managers' Financial Integrity Act of 1982 (FMFIA); 
Chief Financial Officers Act (CFO Act); Government Performance and 
Results Act (GPRA); Federal Information Security Management Act 
(FISMA); and OMB Circular A-123. In addition, other standards that the 
FDIC considers are the framework set forth by the Committee of
Sponsoring Organizations of the Treadway Commission's Internal 
Control — Integrated Framework and the U.S. Government Accountability 
Office's (GAO's) Standards for Internal Control in the Federal 
Government. 

Based on the above assessment, management concluded that, as of 
December 31, 2011, FDIC's internal control over financial reporting is 
effective based upon the criteria established in FMFIA. 

Federal Deposit Insurance Corporation: 
April 11, 2012: 

[End of section] 

Footnotes: 

[1] A third fund managed by FDIC, the Orderly Liquidation Fund, 
established by section 210 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376, 1506 
(July 21, 2010), is unfunded and did not have any transactions during 
2010 and 2011. 

[2] Pub. L. No. 111-203, 124 Stat. 1376 (July 21, 2010). 

[3] A material weakness is a deficiency, or combination of 
deficiencies, in internal control over financial reporting such that 
there is a reasonable possibility that a material misstatement of the 
entity's financial statements will not be prevented or detected and 
corrected on a timely basis. A deficiency in internal control exists 
when the design or operation of a control does not allow management or 
employees, in the normal course of performing their assigned 
functions, to prevent or detect and correct misstatements on a timely 
basis. 

[4] A significant deficiency is a deficiency, or a combination of 
deficiencies, in internal control that is less severe than a material 
weakness, yet important enough to merit the attention of those charged 
with governance. 

[5] GAO, Financial Audit: Federal Deposit Insurance Corporation Funds' 
2009 and 2008 Financial Statements, [hyperlink, 
http://www.gao.gov/products/GAO-10-705] (Washington, D.C.: June 25, 
2010); Management Report: Opportunities for Improvements in FDIC's 
Internal Controls and Accounting Procedures, [hyperlink, 
http://www.gao.gov/products/GAO-11-23R] (Washington, D.C.: Nov. 30, 
2010); and Management Report: Opportunities for Improvements in FDIC's 
Internal Controls and Accounting Procedures, [hyperlink, 
http://www.gao.gov/products/GAO-11-687R] (Washington, D.C.: Aug. 5, 
2011). 

[6] [hyperlink, http://www.gao.gov/products/GAO-10-705], [hyperlink, 
http://www.gao.gov/products/GAO-11-23R], and [hyperlink, 
http://www.gao.gov/products/GAO-11-687R]. 

[End of section] 

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