Federal Deposit
Insurance Corporation

2009 Annual Report

I. Management's Discussion and Analysis

Effective Management of Strategic Resources
The FDIC recognizes that it must effectively manage its human, financial, and technological resources in order to successfully carry out its mission and meet the performance goals and targets set forth in its annual performance plan. The Corporation must align these strategic resources with its mission and goals and deploy them where they are most needed in order to enhance its operational effectiveness and minimize potential financial risks to the DIF.

Human Capital Management
The FDIC's human capital management programs are designed to recruit, develop, reward, and retain a highly skilled, cross-trained, diverse, and results-oriented workforce. In 2009, the FDIC stepped up workforce planning and development initiatives that emphasized hiring the additional skill sets needed to address the greatly increased number of financial institution failures and institutions in at-risk categories. The Corporation also deployed a number of strategies to more fully engage all employees in advancing the FDIC's mission.

Succession Management
In 2009, the Corporation significantly expanded its education and training curriculum for employees in the business lines, support functions, and leadership development. Additionally, learning and development was supplemented and supported with the expansion of e-learning, job aids, and tool kits that were made available to new and tenured employees to facilitate work processes and overall efficiencies.

A leadership development curriculum was launched to expand opportunities to all employees, including newly-hired employees. This new curriculum takes a comprehensive approach, aligning leadership development with critical corporate goals and objectives, and promotes desired culture. By developing employees across the span of their careers, the Corporation builds a culture of leadership and further promotes a leadership succession strategy.

d

Senior leaders meet with CEDP participants to discuss their first year (l to r): Rich Brown, Rex Taylor, Maureen Sweeney, Laura Lapin, Kathy Norcross, Mickey Collins, Steve Mosier, Rus Pittman, Erica Bovenzi, Andrew Stirling, Bob Mooney, and Ira Kitmacher. Executive advisors and host supervisors not shown: Glen Bjorklund, Jim LaPierre, and Lisa Roy.

Also in 2009, the Corporation completed a pilot Corporate Executive Development Program. This comprehensive 18-month succession program provided a formalized process to identify and develop high-performing, high-potential supervisors and senior technical specialists. Pilot results are being evaluated and will be leveraged in future succession management strategies and decisions.

Additionally, the Corporation formalized its Master of Business Administration (MBA) program for Corporate Managers and Executive Managers, in conjunction with a major university. The evaluation results of the pilot MBA program were overwhelmingly positive, and participants provided explicit examples of direct application to their jobs and improved strategic thinking.

Strategic Workforce Planning and Readiness
The FDIC utilized a number of employment strategies in 2009 to meet the need for additional human resources resulting from the increased number of failed financial institutions and the volume of additional examinations. Among these strategies, the FDIC reemployed over 200 retired FDIC examiners, attorneys, resolutions and receiverships specialists, and support personnel; hired employees of failed institutions in temporary and term positions; recruited mid-career examiners who had developed their skills in other organizations; recruited term loan review specialists and compliance analysts from the private sector; and redeployed current FDIC employees with the requisite skills from other parts of the Corporation.

As the number of failed financial institutions proliferated in 2009, the FDIC Board authorized the opening of two temporary satellite offices on both the west coast and the east coast to bring resources in areas hit especially hard. The West Coast Temporary Satellite Office opened in Irvine, California, in early spring and as of year-end had over 400 employees with a target of over 500. The East Coast Temporary Satellite Office opened in Jacksonville, Florida, in the fall. Although the Corporation is still recruiting for this office, eventually it too will have over 500 employees. The Corporation also increased resolutions and receiverships staff in the Dallas regional office. Almost all of the new employees in these new offices have been hired on a nonpermanent basis to handle the temporary increase in bank closing and asset management activities expected over the next two to four years. To staff these offices and meet other needs brought on by the financial crisis, the Corporation hired nearly 1,800 additional employees in 2009. The use of term appointments will allow the FDIC staff to return to an adjusted normal size once the crisis is over without the disruptions that reductions in permanent staff would cause.

The FDIC continued its efforts to build workforce flexibility and readiness by increasing its entry-level hiring into the Corporate Employee Program (CEP). The CEP is a multi-year development program designed to cross-train new employees in the FDIC's major business lines. In 2009, 206 new business line employees (736 since program inception) entered the multidisciplined program. At its largest participant capacity since inception, the CEP continues to provide a foundation across the full spectrum of the Corporation's business lines, allowing for greater flexibility to respond to changes in the financial services industry and in meeting the Corporation's staff needs. As in years past, the program continues to provide the FDIC those flexibilities as program participants were called upon to assist with both bank examination and bank closing activities based on the skills they obtained through their program requirements and experiences.

Employee Engagement
The FDIC continually evaluates its human capital programs and strategies to ensure that the Corporation remains an employer of choice and that all of its employees are fully engaged and aligned with its mission. The FDIC's annual employee survey incorporates and expands on the Federal Human Capital Survey mandated by Congress. A corporate Culture Change Initiative was instituted in 2008 to address issues resulting from the survey.

The Culture Change Initiative has continued to gain momentum, and progress is occurring toward completion of goals identified in the Culture Change Strategic Plan. The 2008 employee survey results showed marked improvement in the areas of opportunity, while maintaining or improving on areas of strength. The Corporation worked with the National Treasury Employees' Union to develop a new pay-for-performance system that is perceived to be more transparent and fair to employees. The new system was implemented in 2009. Also in 2009, the Corporation delivered training to its Corporate Managers on trust. It offered leadership enrichment activities that provided continual learning. Culture Change dialogue sessions were held across the country, with approximately 5,500 employees participating. Analysis indicates a positive response to these events and a willingness to engage in the change process. The question-and-answer mailbox and quarterly all-employee teleconferences with the Chairman continued so that employees could provide input, make suggestions, and ask questions.

The next phase of the Initiative was started in September 2009 with the selection of a new Program Manager. The Internal Ombudsman Program, initiated as part of the Culture Change Initiative, continued, providing another avenue for following up on employee issues. The Culture Change Council is being reconstituted, with at least six former Council and Team members returning to ensure continuity and up to six new members being selected. Best practices in public and private sector organizations on sustaining culture and organizational change were studied in 2009 and will be summarized, with recommendations made on sustaining the FDIC's Culture Change Initiative.

Employee Learning and Growth
The FDIC offers a range of learning and growth opportunities to meet the varied needs of its employees. It uses innovative solutions to prepare new and existing employees for the challenges ahead. By streamlining existing courses, promoting blended learning, and creating online just-in-time toolkits and job aids, the FDIC has allowed new employees to more quickly and thoroughly assume their job functions. In order to meet the 2009 learning needs of new employees, the FDIC responded with flexible course scheduling and additional instructorled and computer-based courses, including the new Continuing Professional Education Centre, which allows employees to more easily maintain their Certified Public Accountant accreditation and other certifications, despite increased workloads.

The Corporation dealt with new challenges in 2009 and supported employees by providing just-in-time training to address specific issues, such as managing and selling an ever increasing number of loans acquired from failed institutions. To better prepare employees to perform this task, the FDIC undertook a multi-pronged approach that consisted of online presentations, online job aids, online simulations, and instructor-led courses. The Corporation focused its efforts on providing multiple points of access to learning delivered quickly and with the least disruption to ongoing work activities.

To provide additional flexibility in employee learning and growth, the FDIC assisted in meeting the challenge of increased activity by locating training facilities within satellite offices in Jacksonville and Irvine. This helped to ensure that necessary training could be provided locally, reducing the need for employee travel.

In 2009, the Corporation provided its employees with over 100 instructor-led courses and 600 web-based courses in support of varied mission requirements. There were over 7,000 instances of completed instructor-led courses and 18,000 instances of completed web-based courses.

Information Technology Management
Information technology (IT) resources are one of the most valuable assets available to the FDIC in fulfilling its corporate mission. In today's rapidly changing business environment, technology is frequently the foundation for achieving many FDIC business goals, especially those addressing efficiency and effectiveness in an industry where timely and accurate communication and data are paramount for supervising institutions, resolving institution failures, and monitoring associated risks in the marketplace.

During 2009, the FDIC was faced with many challenges stemming from the economic downturn and its historic impact on the financial industry. To help meet those challenges, the FDIC continued to leverage innovative, timely, reliable, and secure IT products and services to meet priority business drivers and adapt to a myriad of new financial programs.

Enterprise Architecture
The overall vision of the FDIC's enterprise architecture is to provide an efficient, agile, flexible and cost-effective environment that supports the corporate strategic goals and objectives for the FDIC and its customers. During 2009, modernization of the infrastructure continued. Also a roadmap of the security architecture was developed with functionality based on global industry standards, which will facilitate the sharing of information and resources, while protecting access to sensitive and privacy information.

Improving Application Systems
In 2009, the FDIC enhanced several application systems that support the FDIC's business, including the:

• Assessment Information Management System—used to calculate, collect, and account for the quarterly assessment premiums paid by insured financial institutions;
• Central Data Repository—used in the collection and management of call report data from the U.S. financial institutions;
• New Financial Environment—state-of-the-art financial system; and
• Risk Related Premium System—provides core business functionality related to deposit insurance risk premium calculations for individual financial institutions.

Security Outreach, Education, and Awareness
The FDIC worked collectively with the U.S. Department of Agriculture and the Department of Education's Office of Federal Student Aid on the OpenFISMA (Federal Information Security Management Act) Interagency Initiative. This initiative developed a system to track vulnerabilities that affect the security of systems and applications. The FDIC and these departments were chosen as recipients of the "Excellence Award for Open Source Business Use in Government" in the category of "Safe Computing Environment" at the 2009 Government Open Source Conference. The award recognized government employees or teams for significant accomplishments in Open Source Technology that meet government business or mission requirements.

Securing the FDIC Through Strong Privacy Initiatives
The FDIC continued to strengthen privacy by providing a risk-based, enterprise-wide Privacy Program that maintains and builds public trust, and is based on sound privacy practices in compliance with applicable laws. In 2009, the FDIC experienced a significant increase in bank closing activities. As a result, the FDIC performed a number of Corporate-wide initiatives to increase the identification, protection, and control of personally identifiable information.