Federal Deposit Insurance Corporation
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
February 28, 2019
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App
Deputy to the Chairman
and Chief Financial Officer
SUBJECT: Fourth Quarter 2018 CFO Report to the Board
The attached report highlights the FDIC’s financial activities and results for the quarter ended
December 31, 2018.
Executive Summary
• During the fourth quarter of 2018, the Deposit Insurance Fund (DIF) balance increased by $2.4
billion, from $100.2 billion at September 30, 2018, to $102.6 billion at December 31, 2018. The
quarterly increase was primarily due to $1.4 billion in assessment revenue and a $756 million
reduction in unrealized losses on U.S. Treasury securities.
• The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.36
percent as of December 31, 2018. The reserve ratio was unchanged from September 30, 2018,
and increased by 6 basis points during 2018.
• There were no financial institution failures during the fourth quarter of 2018; the last failure
occurred on December 15, 2017.
• Through December 31, 2018, overall FDIC Operating Budget expenditures were below budget by 9
percent ($195 million). About $80 million was attributable to underspending in the Receivership
Funding budget component due to lower-than-projected resolutions and receivership management
workload because there were no bank closings during the year. Most of the remainder of the
underspending was in the Ongoing Operations budget component ($112 million). About half of this
variance was in the Salaries and Compensation major expenses category and was the result of
higher-than-expected vacancies in budgeted positions throughout the year. In addition, lower-than-
anticipated expenses for facilities and the deferral of construction projects to 2019 and lower-than-
budgeted expenses for outside counsel, security services (including background checks), and
other outside services were the primary factors contributing to the Ongoing Operations variance.
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
February 28, 2019
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App
Deputy to the Chairman
and Chief Financial Officer
SUBJECT: Fourth Quarter 2018 CFO Report to the Board
The attached report highlights the FDIC’s financial activities and results for the quarter ended
December 31, 2018.
Executive Summary
• During the fourth quarter of 2018, the Deposit Insurance Fund (DIF) balance increased by $2.4
billion, from $100.2 billion at September 30, 2018, to $102.6 billion at December 31, 2018. The
quarterly increase was primarily due to $1.4 billion in assessment revenue and a $756 million
reduction in unrealized losses on U.S. Treasury securities.
• The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.36
percent as of December 31, 2018. The reserve ratio was unchanged from September 30, 2018,
and increased by 6 basis points during 2018.
• There were no financial institution failures during the fourth quarter of 2018; the last failure
occurred on December 15, 2017.
• Through December 31, 2018, overall FDIC Operating Budget expenditures were below budget by 9
percent ($195 million). About $80 million was attributable to underspending in the Receivership
Funding budget component due to lower-than-projected resolutions and receivership management
workload because there were no bank closings during the year. Most of the remainder of the
underspending was in the Ongoing Operations budget component ($112 million). About half of this
variance was in the Salaries and Compensation major expenses category and was the result of
higher-than-expected vacancies in budgeted positions throughout the year. In addition, lower-than-
anticipated expenses for facilities and the deferral of construction projects to 2019 and lower-than-
budgeted expenses for outside counsel, security services (including background checks), and
other outside services were the primary factors contributing to the Ongoing Operations variance.
2
I. Financial Results (See pages 7 – 8 for detailed data and charts.)
Deposit Insurance Fund
• The DIF’s comprehensive income totaled $9.9 billion for 2018, compared to comprehensive income of
$9.6 billion during 2017, a $277 million year-over-year increase. The slight increase was largely the
result of a $576 million increase in interest on U.S Treasury securities, a $380 million increase in
negative provision for insurance losses, and a $364 million decrease in unrealized losses on U.S.
Treasury securities. The increases were almost fully offset by a $1.1 billion decrease in assessment
revenue.
• The provision for insurance losses was a negative $563 million for 2018, compared to negative $183
million for 2017. The negative provision for 2018 primarily resulted from a $570 million decrease to the
estimated losses for prior year failures, attributable to: (1) a decrease in receivership shared-loss
liability cost estimates of $186 million primarily due to lower-than-anticipated losses on covered assets,
reductions in shared-loss cost estimates from the early termination of shared-loss agreements (SLAs)
during the year, and unanticipated recoveries from SLAs where the commercial loss coverage has
expired but the recovery period remains active; (2) $172 million of estimated recoveries from residual
certificates retained by receiverships for structured transactions; and (3) $130 million of unanticipated
recoveries received by receiverships from tax refunds, litigation settlements, and professional liability
claims.
• Assessment revenue was $9.5 billion for 2018, compared to $10.6 billion for 2017. The $1.1 billion
year-over-year decrease was primarily due to the cessation of the surcharge assessment on large
institutions effective October 1, 2018, as a result of the reserve ratio exceeding the required minimum
of 1.35 percent as of September 30, 2018.
• Small banks will receive credits to offset the portion of their assessments that helped to raise the DIF
reserve ratio from 1.15 percent to 1.35 percent. These credits amount to $765 million in aggregate,
and will be automatically applied to offset regular deposit insurance assessments for assessment
periods where the DIF reserve ratio is at or above 1.38 percent. Because the DIF reserve ratio was
below 1.38 percent as of December 31, 2018, assessment credits will not offset fourth quarter
insurance assessments collected in March 2019.
Assessments
• During December, the DIF recognized assessment revenue of $1.4 billion, representing the estimate
for the fourth quarter 2018 insurance coverage. Additionally, the DIF recognized a $27 million
adjustment for lower-than-estimated collections for the third quarter 2018 insurance coverage (regular
assessments: $23 million and surcharges: $4 million), which decreased assessment revenue.
• On December 28, 2018, the FDIC collected $1.4 billion in DIF assessments and $1.3 billion in
surcharge assessments for third quarter 2018 insurance coverage.
II. Investment Results (See pages 9 – 10 for detailed data and charts.)
DIF Investment Portfolio
• On December 31, 2018, the total liquidity (also total market value) of the DIF investment portfolio stood
at $99.0 billion, up $13.4 billion from its December 31, 2017, balance of $85.6 billion. During the year,
interest revenue, receivership dividends, and deposit insurance assessment collections far exceeded
resolution-related outlays and operating expenses.
I. Financial Results (See pages 7 – 8 for detailed data and charts.)
Deposit Insurance Fund
• The DIF’s comprehensive income totaled $9.9 billion for 2018, compared to comprehensive income of
$9.6 billion during 2017, a $277 million year-over-year increase. The slight increase was largely the
result of a $576 million increase in interest on U.S Treasury securities, a $380 million increase in
negative provision for insurance losses, and a $364 million decrease in unrealized losses on U.S.
Treasury securities. The increases were almost fully offset by a $1.1 billion decrease in assessment
revenue.
• The provision for insurance losses was a negative $563 million for 2018, compared to negative $183
million for 2017. The negative provision for 2018 primarily resulted from a $570 million decrease to the
estimated losses for prior year failures, attributable to: (1) a decrease in receivership shared-loss
liability cost estimates of $186 million primarily due to lower-than-anticipated losses on covered assets,
reductions in shared-loss cost estimates from the early termination of shared-loss agreements (SLAs)
during the year, and unanticipated recoveries from SLAs where the commercial loss coverage has
expired but the recovery period remains active; (2) $172 million of estimated recoveries from residual
certificates retained by receiverships for structured transactions; and (3) $130 million of unanticipated
recoveries received by receiverships from tax refunds, litigation settlements, and professional liability
claims.
• Assessment revenue was $9.5 billion for 2018, compared to $10.6 billion for 2017. The $1.1 billion
year-over-year decrease was primarily due to the cessation of the surcharge assessment on large
institutions effective October 1, 2018, as a result of the reserve ratio exceeding the required minimum
of 1.35 percent as of September 30, 2018.
• Small banks will receive credits to offset the portion of their assessments that helped to raise the DIF
reserve ratio from 1.15 percent to 1.35 percent. These credits amount to $765 million in aggregate,
and will be automatically applied to offset regular deposit insurance assessments for assessment
periods where the DIF reserve ratio is at or above 1.38 percent. Because the DIF reserve ratio was
below 1.38 percent as of December 31, 2018, assessment credits will not offset fourth quarter
insurance assessments collected in March 2019.
Assessments
• During December, the DIF recognized assessment revenue of $1.4 billion, representing the estimate
for the fourth quarter 2018 insurance coverage. Additionally, the DIF recognized a $27 million
adjustment for lower-than-estimated collections for the third quarter 2018 insurance coverage (regular
assessments: $23 million and surcharges: $4 million), which decreased assessment revenue.
• On December 28, 2018, the FDIC collected $1.4 billion in DIF assessments and $1.3 billion in
surcharge assessments for third quarter 2018 insurance coverage.
II. Investment Results (See pages 9 – 10 for detailed data and charts.)
DIF Investment Portfolio
• On December 31, 2018, the total liquidity (also total market value) of the DIF investment portfolio stood
at $99.0 billion, up $13.4 billion from its December 31, 2017, balance of $85.6 billion. During the year,
interest revenue, receivership dividends, and deposit insurance assessment collections far exceeded
resolution-related outlays and operating expenses.