Federal Deposit Insurance Corporation
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
August 9, 2011
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App
Deputy to the Chairman and
Chief Financial Officer
Craig Jarvill
Acting Director, Division of Finance
SUBJECT: Second Quarter 2011 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the quarter ended
June 30, 2011.
Executive Summary
For the second quarter of 2011, the Deposit Insurance Fund (DIF) balance increased by $4.9
billion, from negative $1.0 billion to a positive $3.9 billion. This quarterly increase was
primarily due to $3.2 billion in assessment revenues and a $2.1 billion decrease in the provision
for insurance losses, offset by $463 million in operating expenses. The second quarter of 2011
was the first quarter since June 30, 2009 that the DIF ended with a positive fund balance.
During the second quarter of 2011, the FDIC was named receiver for 22 failed institutions. The
combined assets at inception for these institutions totaled approximately $9.6 billion with a
total estimated loss of $2.0 billion. The corporate cash outlay during the second quarter for
these failures was approximately $1.3 billion.
Through June 30, 2011, overall Corporate Operating Budget expenditures were below budget
by 22 percent ($405.7 million). This variance was primarily the result of lower-than-budgeted
resolutions activity during the first half of the year.
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
August 9, 2011
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App
Deputy to the Chairman and
Chief Financial Officer
Craig Jarvill
Acting Director, Division of Finance
SUBJECT: Second Quarter 2011 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the quarter ended
June 30, 2011.
Executive Summary
For the second quarter of 2011, the Deposit Insurance Fund (DIF) balance increased by $4.9
billion, from negative $1.0 billion to a positive $3.9 billion. This quarterly increase was
primarily due to $3.2 billion in assessment revenues and a $2.1 billion decrease in the provision
for insurance losses, offset by $463 million in operating expenses. The second quarter of 2011
was the first quarter since June 30, 2009 that the DIF ended with a positive fund balance.
During the second quarter of 2011, the FDIC was named receiver for 22 failed institutions. The
combined assets at inception for these institutions totaled approximately $9.6 billion with a
total estimated loss of $2.0 billion. The corporate cash outlay during the second quarter for
these failures was approximately $1.3 billion.
Through June 30, 2011, overall Corporate Operating Budget expenditures were below budget
by 22 percent ($405.7 million). This variance was primarily the result of lower-than-budgeted
resolutions activity during the first half of the year.
2
I. Corporate Fund Financial Results (See pages 8 - 9 for detailed data and charts.)
Deposit Insurance Fund (DIF)
For the six months ended June 30, 2011, the DIF’s comprehensive income totaled $11.3 billion
compared to comprehensive income of $5.6 billion for the same period last year. This $5.7
billion year-over-year increase was mostly due to the decrease in the provision for insurance
losses.
The provision for insurance losses was negative $5.2 billion for the first half of 2011. The
negative provision primarily resulted from a $2.7 billion reduction in the contingent loss
reserve due to the improvement in the financial condition of institutions that were previously
identified to fail; a $1.7 billion reduction in the estimated losses for banks that have failed
where recent liquidation activity yielded recoveries higher than previously estimated; and a
$0.7 billion adjustment for lower-than-anticipated loss estimates at time of failure for banks
that failed in 2010.
During the second quarter of 2011, the DIF recognized $3.2 billion in estimated assessment
revenue for second quarter 2011 insurance coverage. Of this amount, $3.0 billion was
recognized for those institutions that prepaid assessments and $205 million was recorded as a
receivable from those institutions that did not prepay assessments.
On June 30, 2011, the FDIC collected $191 million in DIF assessments for first quarter 2011
insurance coverage from those institutions that had not prepaid their assessments.
The assessment base computed by the FDIC used deposit data reported by each insured
institution through the March 31, 2011 report date. Beginning April 1, 2011, the Dodd-Frank
Wall Street Reform and Consumer Protection Act (DFA) requires that the base on which
deposit insurance assessments are charged be revised from domestic deposits to assets. The
assessment collection date of September 30, 2011, will utilize an assessment base of average
consolidated total assets minus average tangible equity (defined as Tier 1 Capital).
II. Investment Results (See pages 10 - 11 for detailed data and charts.)
DIF Investment Portfolio
The total liquidity (total market value including accrued interest) of all DIF-related investment
portfolios stood at $45.0 billion on June 30, 2011, down from $46.2 billion on December 31,
2010, led by the decline in the DIF investment portfolio as discussed below.
The DIF investment portfolio’s total market value decreased by $1.9 billion during the first half
of 2011, and totaled $37.7 billion on June 30, 2011. The decrease was primarily the result of
having to fund 48 bank failures during the first half of 2011. However, it should be noted that
35 of these failures were resolved as cash-conserving shared-loss transactions, requiring
substantially lower initial resolution payments, thus helping to mitigate the decline in the DIF
portfolio’s balance. Moreover, during the first half of 2011, the DIF received $5.6 billion in
dividends and other payments from its receiverships, thus mitigating the DIF portfolio’s
decline.
I. Corporate Fund Financial Results (See pages 8 - 9 for detailed data and charts.)
Deposit Insurance Fund (DIF)
For the six months ended June 30, 2011, the DIF’s comprehensive income totaled $11.3 billion
compared to comprehensive income of $5.6 billion for the same period last year. This $5.7
billion year-over-year increase was mostly due to the decrease in the provision for insurance
losses.
The provision for insurance losses was negative $5.2 billion for the first half of 2011. The
negative provision primarily resulted from a $2.7 billion reduction in the contingent loss
reserve due to the improvement in the financial condition of institutions that were previously
identified to fail; a $1.7 billion reduction in the estimated losses for banks that have failed
where recent liquidation activity yielded recoveries higher than previously estimated; and a
$0.7 billion adjustment for lower-than-anticipated loss estimates at time of failure for banks
that failed in 2010.
During the second quarter of 2011, the DIF recognized $3.2 billion in estimated assessment
revenue for second quarter 2011 insurance coverage. Of this amount, $3.0 billion was
recognized for those institutions that prepaid assessments and $205 million was recorded as a
receivable from those institutions that did not prepay assessments.
On June 30, 2011, the FDIC collected $191 million in DIF assessments for first quarter 2011
insurance coverage from those institutions that had not prepaid their assessments.
The assessment base computed by the FDIC used deposit data reported by each insured
institution through the March 31, 2011 report date. Beginning April 1, 2011, the Dodd-Frank
Wall Street Reform and Consumer Protection Act (DFA) requires that the base on which
deposit insurance assessments are charged be revised from domestic deposits to assets. The
assessment collection date of September 30, 2011, will utilize an assessment base of average
consolidated total assets minus average tangible equity (defined as Tier 1 Capital).
II. Investment Results (See pages 10 - 11 for detailed data and charts.)
DIF Investment Portfolio
The total liquidity (total market value including accrued interest) of all DIF-related investment
portfolios stood at $45.0 billion on June 30, 2011, down from $46.2 billion on December 31,
2010, led by the decline in the DIF investment portfolio as discussed below.
The DIF investment portfolio’s total market value decreased by $1.9 billion during the first half
of 2011, and totaled $37.7 billion on June 30, 2011. The decrease was primarily the result of
having to fund 48 bank failures during the first half of 2011. However, it should be noted that
35 of these failures were resolved as cash-conserving shared-loss transactions, requiring
substantially lower initial resolution payments, thus helping to mitigate the decline in the DIF
portfolio’s balance. Moreover, during the first half of 2011, the DIF received $5.6 billion in
dividends and other payments from its receiverships, thus mitigating the DIF portfolio’s
decline.