Federal Deposit Insurance Corporation
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
August 30, 2018
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App
Deputy to the Chairman
and Chief Financial Officer
Craig R. Jarvill
Director, Division of Finance
SUBJECT: Second Quarter 2018 CFO Report to the Board
The attached report highlights the FDIC’s financial activities and results for the quarter ended
June 30, 2018.
Executive Summary
During the second quarter of 2018, the Deposit Insurance Fund (DIF) balance increased by $2.5
billion, from $95.1 billion at March 31, 2018 to $97.6 billion at June 30, 2018. The quarterly
increase was primarily due to $2.6 billion of assessment revenue.
The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.33
percent for second quarter 2018, compared to the first quarter 2018 reserve ratio of 1.30 percent.
There were no financial institution failures during the second quarter of 2018; the last failure
occurred on December 15, 2017.
Through June 30, 2018, overall FDIC Operating Budget expenditures were below budget by 7
percent ($73 million). This variance was primarily the result of vacancies in budgeted positions,
delays in purchasing equipment for the backup data center, and lower-than-budgeted spending for
contractual services and outside legal counsel.
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
August 30, 2018
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App
Deputy to the Chairman
and Chief Financial Officer
Craig R. Jarvill
Director, Division of Finance
SUBJECT: Second Quarter 2018 CFO Report to the Board
The attached report highlights the FDIC’s financial activities and results for the quarter ended
June 30, 2018.
Executive Summary
During the second quarter of 2018, the Deposit Insurance Fund (DIF) balance increased by $2.5
billion, from $95.1 billion at March 31, 2018 to $97.6 billion at June 30, 2018. The quarterly
increase was primarily due to $2.6 billion of assessment revenue.
The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.33
percent for second quarter 2018, compared to the first quarter 2018 reserve ratio of 1.30 percent.
There were no financial institution failures during the second quarter of 2018; the last failure
occurred on December 15, 2017.
Through June 30, 2018, overall FDIC Operating Budget expenditures were below budget by 7
percent ($73 million). This variance was primarily the result of vacancies in budgeted positions,
delays in purchasing equipment for the backup data center, and lower-than-budgeted spending for
contractual services and outside legal counsel.
2
I. Financial Results (See pages 6 – 7 for detailed data and charts.)
Deposit Insurance Fund
For the six months ending June 30, 2018, the DIF’s comprehensive income totaled $4.8 billion
compared to comprehensive income of $4.4 billion for the same period last year. This $415 million
increase was primarily the result of a $738 million decrease in provision for insurance losses and a
$241 million increase in interest on U.S. Treasury securities, partially offset by a $653 million
reduction to comprehensive income from unrealized losses on U.S. Treasury securities (year-to-
date 2018 unrealized loss of $658 million versus year-to-date 2017 unrealized loss of $5 million).
The provision for insurance losses was a negative $206 million for the first half of 2018, compared
to a positive $532 million for the same period last year. The negative provision for 2018 primarily
resulted from reductions to the estimated losses for prior year failures, whereas the positive
provision for 2017 was largely attributable to higher-than-anticipated estimated losses for current
year failures, as compared to the related contingent liability at year-end 2016.
During the first half of 2018, DIF incurred a $658 million unrealized loss on its portfolio of U.S.
Treasury securities as a result of yields rising considerably across all investable maturity sectors of
the Treasury yield curve. This rise resulted in declines in the securities’ market values relative to
their book values.
Assessments
During June, the DIF recognized assessment revenue of $2.6 billion. Of this amount, $1.4 billion
represented the estimate for the second quarter 2018 insurance coverage and $1.3 billion
represented estimated surcharges on banks with $10 billion or more in assets. Additionally, the DIF
recognized an $81 million adjustment for lower-than-estimated collections for the first quarter 2018
insurance coverage (regular assessments: $75 million and surcharges: $6 million), which
decreased assessment revenue. This adjustment was primarily due to lower-than-estimated
assessment rates.
On June 29, 2018, the FDIC collected $1.4 billion in DIF regular assessments and $1.3 billion in
surcharge assessments for first quarter 2018 insurance coverage.
II. Investment Results (See pages 8 – 9 for detailed data and charts.)
DIF Investment Portfolio
On June 30, 2018, the total liquidity (also total market value) of the DIF investment portfolio stood
at $92.3 billion, up $6.7 billion from its December 31, 2017, balance of $85.6 billion. During the
first half of the year, interest revenue, receivership dividends, and deposit insurance assessment
collections far exceeded resolution-related outlays and operating expenses.
On June 30, 2018, the DIF investment portfolio’s yield was 1.78 percent, up 26 basis points from its
1.52 percent yield on December 31, 2017. The new Treasury securities purchased during the first
half of the year had higher yields than the maturing securities’ yields.
In accordance with the approved second quarter 2018 DIF portfolio investment strategy, staff
purchased a total of 29 short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale. The 29 securities had a total par value of $11.9 billion, a
weighted average yield of 2.49 percent, and a weighted average maturity of 2.23 years.
I. Financial Results (See pages 6 – 7 for detailed data and charts.)
Deposit Insurance Fund
For the six months ending June 30, 2018, the DIF’s comprehensive income totaled $4.8 billion
compared to comprehensive income of $4.4 billion for the same period last year. This $415 million
increase was primarily the result of a $738 million decrease in provision for insurance losses and a
$241 million increase in interest on U.S. Treasury securities, partially offset by a $653 million
reduction to comprehensive income from unrealized losses on U.S. Treasury securities (year-to-
date 2018 unrealized loss of $658 million versus year-to-date 2017 unrealized loss of $5 million).
The provision for insurance losses was a negative $206 million for the first half of 2018, compared
to a positive $532 million for the same period last year. The negative provision for 2018 primarily
resulted from reductions to the estimated losses for prior year failures, whereas the positive
provision for 2017 was largely attributable to higher-than-anticipated estimated losses for current
year failures, as compared to the related contingent liability at year-end 2016.
During the first half of 2018, DIF incurred a $658 million unrealized loss on its portfolio of U.S.
Treasury securities as a result of yields rising considerably across all investable maturity sectors of
the Treasury yield curve. This rise resulted in declines in the securities’ market values relative to
their book values.
Assessments
During June, the DIF recognized assessment revenue of $2.6 billion. Of this amount, $1.4 billion
represented the estimate for the second quarter 2018 insurance coverage and $1.3 billion
represented estimated surcharges on banks with $10 billion or more in assets. Additionally, the DIF
recognized an $81 million adjustment for lower-than-estimated collections for the first quarter 2018
insurance coverage (regular assessments: $75 million and surcharges: $6 million), which
decreased assessment revenue. This adjustment was primarily due to lower-than-estimated
assessment rates.
On June 29, 2018, the FDIC collected $1.4 billion in DIF regular assessments and $1.3 billion in
surcharge assessments for first quarter 2018 insurance coverage.
II. Investment Results (See pages 8 – 9 for detailed data and charts.)
DIF Investment Portfolio
On June 30, 2018, the total liquidity (also total market value) of the DIF investment portfolio stood
at $92.3 billion, up $6.7 billion from its December 31, 2017, balance of $85.6 billion. During the
first half of the year, interest revenue, receivership dividends, and deposit insurance assessment
collections far exceeded resolution-related outlays and operating expenses.
On June 30, 2018, the DIF investment portfolio’s yield was 1.78 percent, up 26 basis points from its
1.52 percent yield on December 31, 2017. The new Treasury securities purchased during the first
half of the year had higher yields than the maturing securities’ yields.
In accordance with the approved second quarter 2018 DIF portfolio investment strategy, staff
purchased a total of 29 short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale. The 29 securities had a total par value of $11.9 billion, a
weighted average yield of 2.49 percent, and a weighted average maturity of 2.23 years.