Federal Deposit Insurance Corporation
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
August 17, 2010
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App
Deputy to the Chairman and
Chief Financial Officer
Bret D. Edwards
Director, Division of Finance
SUBJECT: Second Quarter 2010 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the period ending
June 30, 2010.
Executive Summary
During the second quarter of 2010, the Deposit Insurance Fund (DIF) balance increased by $5.5
billion to negative $15.2 billion. This increase was primarily due to a $3.2 billion increase in
assessments earned and a $2.6 billion decrease in the provision for insurance losses, offset by a
$381.8 million increase in operating expenses.
During the second quarter of 2010, the FDIC was named receiver for 45 failed institutions. The
combined assets at inception for these institutions totaled approximately $48.0 billion with a
total estimated loss of $10.5 billion. The corporate cash outlay during the second quarter for
these failures was approximately $18.4 billion.
Year-to-date through June 30, 2010, expenditures from the Corporate Operating Budget ran
below budget by 2 percent ($29.4 million). The variance was primarily the result of lower
spending for contractual services as well as vacancies in budgeted positions in both the
Ongoing Operations and Receivership Funding components of the budget.
Expenditures from the Investment Budget ran 70 percent ($0.8 million) below year-to-date
project spending estimates through June 30, 2010. For the information technology projects that
make up the Investment Budget, detailed quarterly reports are provided separately to the Board
by the Capital Investment Review Committee.
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
August 17, 2010
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App
Deputy to the Chairman and
Chief Financial Officer
Bret D. Edwards
Director, Division of Finance
SUBJECT: Second Quarter 2010 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the period ending
June 30, 2010.
Executive Summary
During the second quarter of 2010, the Deposit Insurance Fund (DIF) balance increased by $5.5
billion to negative $15.2 billion. This increase was primarily due to a $3.2 billion increase in
assessments earned and a $2.6 billion decrease in the provision for insurance losses, offset by a
$381.8 million increase in operating expenses.
During the second quarter of 2010, the FDIC was named receiver for 45 failed institutions. The
combined assets at inception for these institutions totaled approximately $48.0 billion with a
total estimated loss of $10.5 billion. The corporate cash outlay during the second quarter for
these failures was approximately $18.4 billion.
Year-to-date through June 30, 2010, expenditures from the Corporate Operating Budget ran
below budget by 2 percent ($29.4 million). The variance was primarily the result of lower
spending for contractual services as well as vacancies in budgeted positions in both the
Ongoing Operations and Receivership Funding components of the budget.
Expenditures from the Investment Budget ran 70 percent ($0.8 million) below year-to-date
project spending estimates through June 30, 2010. For the information technology projects that
make up the Investment Budget, detailed quarterly reports are provided separately to the Board
by the Capital Investment Review Committee.
2
The following is an assessment of each of the three major finance areas: financial statements,
investments, and budget.
Trends and Outlook
Financial Results Comments
I. Financial
Statements
As illustrated in the first graph on page 10, the fund balance has
decreased since 2008 due to estimated losses from actual bank failures,
as well as contingent liabilities for future failures. Over the past two
quarters, however, the fund balance has improved modestly—though it
remains negative. The DIF’s contingent liabilities for future failures
have similarly moderated recently. The DIF’s available cash increased
dramatically in the fourth quarter of 2009 due to the collection of
approximately three years of prepaid assessments, which was effected
to ensure that the DIF would have adequate liquidity to resolve future
failures. Current cash flow projections indicate that the DIF continues
to have sufficient cash to resolve expected failures.
Observations from recent bank resolutions suggest some moderation in
expected losses on failed bank assets compared with earlier periods of
the current crisis. These indications include lower discounts in recent
loss-share deals, increased numbers of bids in recent LLC deals with
lower loss rate assumptions, and stable asset valuations for recent
liquidations.
The second graph on page 10 shows the cash outlays made by the DIF
to cover brokered deposits not assumed by acquiring institutions. These
outlays were particularly high in the second quarter of 2010 due to the
three Puerto Rico institutions that failed at the end of April, where
brokered deposits made up an above-average share of their total
deposits.
The following is an assessment of each of the three major finance areas: financial statements,
investments, and budget.
Trends and Outlook
Financial Results Comments
I. Financial
Statements
As illustrated in the first graph on page 10, the fund balance has
decreased since 2008 due to estimated losses from actual bank failures,
as well as contingent liabilities for future failures. Over the past two
quarters, however, the fund balance has improved modestly—though it
remains negative. The DIF’s contingent liabilities for future failures
have similarly moderated recently. The DIF’s available cash increased
dramatically in the fourth quarter of 2009 due to the collection of
approximately three years of prepaid assessments, which was effected
to ensure that the DIF would have adequate liquidity to resolve future
failures. Current cash flow projections indicate that the DIF continues
to have sufficient cash to resolve expected failures.
Observations from recent bank resolutions suggest some moderation in
expected losses on failed bank assets compared with earlier periods of
the current crisis. These indications include lower discounts in recent
loss-share deals, increased numbers of bids in recent LLC deals with
lower loss rate assumptions, and stable asset valuations for recent
liquidations.
The second graph on page 10 shows the cash outlays made by the DIF
to cover brokered deposits not assumed by acquiring institutions. These
outlays were particularly high in the second quarter of 2010 due to the
three Puerto Rico institutions that failed at the end of April, where
brokered deposits made up an above-average share of their total
deposits.