Federal Deposit Insurance Corporation
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
August 30, 2019
MEMORANDUM TO: The Board of Directors
FROM: Bret Edwards
Deputy to the Chairman
and Chief Financial Officer
SUBJECT: Second Quarter 2019 CFO Report to the Board
The attached report highlights the FDIC’s financial activities and results for the quarter ended
June 30, 2019.
Executive Summary
• During the second quarter of 2019, the Deposit Insurance Fund (DIF) balance rose to $107.4
billion, up $2.6 billion from March 31, 2019. The quarterly increase was primarily due to $1.2 billion
in assessment revenue, $1.2 billion in interest and unrealized gains on U.S. Treasury securities,
and a $610 million increase in negative provision for insurance losses, partially offset by $459
million in operating expenses.
• The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.40
percent as of June 30, 2019. The reserve ratio was four basis points higher than March 31, 2019;
growth to the DIF was strong while insured deposit growth stayed flat.
• During the second quarter of 2019, the FDIC was named receiver for one failed financial institution.
The assets at inception for this failed institution was $37 million with an estimated loss of $28
million. The corporate cash outlay during the second quarter for this failure was approximately $30
million.
• Through June 30, 2019, overall FDIC Operating Budget expenditures were below the year-to-date
budget by nine percent ($90 million). This variance was primarily the result of underspending in
the Salaries and Compensation, Outside Services – Personnel, and Equipment expense
categories in the Ongoing Operations budget component and the Outside Services – Personnel
expense category in the Receivership Funding budget component.
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
August 30, 2019
MEMORANDUM TO: The Board of Directors
FROM: Bret Edwards
Deputy to the Chairman
and Chief Financial Officer
SUBJECT: Second Quarter 2019 CFO Report to the Board
The attached report highlights the FDIC’s financial activities and results for the quarter ended
June 30, 2019.
Executive Summary
• During the second quarter of 2019, the Deposit Insurance Fund (DIF) balance rose to $107.4
billion, up $2.6 billion from March 31, 2019. The quarterly increase was primarily due to $1.2 billion
in assessment revenue, $1.2 billion in interest and unrealized gains on U.S. Treasury securities,
and a $610 million increase in negative provision for insurance losses, partially offset by $459
million in operating expenses.
• The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.40
percent as of June 30, 2019. The reserve ratio was four basis points higher than March 31, 2019;
growth to the DIF was strong while insured deposit growth stayed flat.
• During the second quarter of 2019, the FDIC was named receiver for one failed financial institution.
The assets at inception for this failed institution was $37 million with an estimated loss of $28
million. The corporate cash outlay during the second quarter for this failure was approximately $30
million.
• Through June 30, 2019, overall FDIC Operating Budget expenditures were below the year-to-date
budget by nine percent ($90 million). This variance was primarily the result of underspending in
the Salaries and Compensation, Outside Services – Personnel, and Equipment expense
categories in the Ongoing Operations budget component and the Outside Services – Personnel
expense category in the Receivership Funding budget component.
I. Financial Results(See pages6 — 7for detailed data and charts.)
Deposit Insurance Fund
• For the six months ending June 30, 2019, the DIF's comprehensive income totaled $4.8 billion,
matching comprehensive income from the same period last year. Although assessment revenue
declined by $2.9 billion year-over-year, this was fully offset by an $800 million increase in negative
provision for insurance losses and a $2.1 billion increase in interest and fair value adjustments on U.S.
Treasury securities.
• Assessment revenue was $2.6 billion for the first half of 2019, compared to $5.4 billion for the same
period last year. The $2.9 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.
The provision for insurance losses was a negative $1.0 billion for the first half of 2019, compared to a
negative $206 million for the same period last year. The negative provision for 2019 primarily resulted
from a $413 million reduction of receiverships' shared-loss liability estimates due to expirations and
pending early terminations, $416 million in unanticipated recoveries from litigation settlements and
professional liability claims by receiverships, and a $113 million reduction in future receivership
expense estimates.
Assessments
• During June, the DIF recognized assessment revenue of $1.1 billion, representing the estimate for the
second quarter 2019 insurance coverage. Gross assessment revenue of $1.4 billion was reduced by
$313 million for expected small bank assessment credit usage. Additionally, the DIF recognized a $119
million adjustment for prior period amendments and a $9 million adjustment for higher-than-estimated
first quarter 2019 collections, both of which increased assessment revenue.
On June 28, 2019, the FDIC collected $1.5 billion in DIF assessments for first quarter 2019 insurance
coverage.
II. Investment Results(See pages 8 — 9 for detailed data and charts.)
DIF Investment Portfolio
• On June 30, 2019, the total liquidity (also total market value)of the DIF investment portfolio stood at
$104.0 billion, up $5.0 billion from its December 31, 2018, balance of $99.0 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, 2019, the DIF investment portfolio's yield was 2.12 percent, up 7 basis points from its 2.05
percent yield on December 31, 2018. 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 2019 DIF portfolio investment strategy, staff
purchased a total of 7short-maturity conventional Treasury securities, all designated as available-for-
sale. The 7 securities had a total par value of $6.1 billion, a weighted average yield of 2.19 percent,
and a weighted average maturity of 0.92 years.
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Deposit Insurance Fund
• For the six months ending June 30, 2019, the DIF's comprehensive income totaled $4.8 billion,
matching comprehensive income from the same period last year. Although assessment revenue
declined by $2.9 billion year-over-year, this was fully offset by an $800 million increase in negative
provision for insurance losses and a $2.1 billion increase in interest and fair value adjustments on U.S.
Treasury securities.
• Assessment revenue was $2.6 billion for the first half of 2019, compared to $5.4 billion for the same
period last year. The $2.9 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.
The provision for insurance losses was a negative $1.0 billion for the first half of 2019, compared to a
negative $206 million for the same period last year. The negative provision for 2019 primarily resulted
from a $413 million reduction of receiverships' shared-loss liability estimates due to expirations and
pending early terminations, $416 million in unanticipated recoveries from litigation settlements and
professional liability claims by receiverships, and a $113 million reduction in future receivership
expense estimates.
Assessments
• During June, the DIF recognized assessment revenue of $1.1 billion, representing the estimate for the
second quarter 2019 insurance coverage. Gross assessment revenue of $1.4 billion was reduced by
$313 million for expected small bank assessment credit usage. Additionally, the DIF recognized a $119
million adjustment for prior period amendments and a $9 million adjustment for higher-than-estimated
first quarter 2019 collections, both of which increased assessment revenue.
On June 28, 2019, the FDIC collected $1.5 billion in DIF assessments for first quarter 2019 insurance
coverage.
II. Investment Results(See pages 8 — 9 for detailed data and charts.)
DIF Investment Portfolio
• On June 30, 2019, the total liquidity (also total market value)of the DIF investment portfolio stood at
$104.0 billion, up $5.0 billion from its December 31, 2018, balance of $99.0 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, 2019, the DIF investment portfolio's yield was 2.12 percent, up 7 basis points from its 2.05
percent yield on December 31, 2018. 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 2019 DIF portfolio investment strategy, staff
purchased a total of 7short-maturity conventional Treasury securities, all designated as available-for-
sale. The 7 securities had a total par value of $6.1 billion, a weighted average yield of 2.19 percent,
and a weighted average maturity of 0.92 years.
2