Federal Deposit Insurance Corporation
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
November 8, 2013
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: Third Quarter 2013 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the quarter ended
September 30, 2013.
Executive Summary
During the third quarter of 2013, the Deposit Insurance Fund (DIF) balance increased by $2.9
billion, from $37.9 billion to $40.8 billion. This quarterly increase was primarily due to $2.3
billion of assessment revenue, a $539 million decrease in the provision for insurance losses,
and a $156 million net realized gain on sale of trust preferred securities (TruPs), partially offset
by $298 million of operating expenses.
During the third quarter of 2013, the FDIC was named receiver for 6 failed institutions. The
combined assets at inception for these institutions totaled approximately $3.8 billion with a
total estimated loss of $775 million. The corporate cash outlay during the third quarter for
these failures was approximately $1.1 billion.
Through September 30, 2013, overall Corporate Operating Budget expenditures were below
budget by 15 percent ($296 million), largely due to substantial under-spending in the
Receivership Funding budget component. Spending in that component was $176 million, or
27 percent, less-than-budgeted, while spending in the Ongoing Operations component was
$121 million, or 9 percent, under budget. The variance in the Receivership Funding
component was primarily due to less costly resolutions and lower-than-anticipated asset
management and marketing and contract support costs for failed bank resolutions.
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
November 8, 2013
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: Third Quarter 2013 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the quarter ended
September 30, 2013.
Executive Summary
During the third quarter of 2013, the Deposit Insurance Fund (DIF) balance increased by $2.9
billion, from $37.9 billion to $40.8 billion. This quarterly increase was primarily due to $2.3
billion of assessment revenue, a $539 million decrease in the provision for insurance losses,
and a $156 million net realized gain on sale of trust preferred securities (TruPs), partially offset
by $298 million of operating expenses.
During the third quarter of 2013, the FDIC was named receiver for 6 failed institutions. The
combined assets at inception for these institutions totaled approximately $3.8 billion with a
total estimated loss of $775 million. The corporate cash outlay during the third quarter for
these failures was approximately $1.1 billion.
Through September 30, 2013, overall Corporate Operating Budget expenditures were below
budget by 15 percent ($296 million), largely due to substantial under-spending in the
Receivership Funding budget component. Spending in that component was $176 million, or
27 percent, less-than-budgeted, while spending in the Ongoing Operations component was
$121 million, or 9 percent, under budget. The variance in the Receivership Funding
component was primarily due to less costly resolutions and lower-than-anticipated asset
management and marketing and contract support costs for failed bank resolutions.
2
I. Corporate Fund Financial Results (See pages 9 - 10 for detailed data and charts.)
Deposit Insurance Fund
For the nine months ending September 30, 2013, the DIF’s comprehensive income totaled
$7.8 billion compared to comprehensive income of $13.4 billion for the same period last year.
This $5.6 billion decrease was mostly due to a decrease in other revenue of $4.1 billion, and a
$2.0 billion decrease in assessment revenue, partially offset by a decrease in provision for
insurance losses of $192 million and a $136 million decrease in operating expenses.
The year-over-year decrease of $4.1 billion in other revenue was primarily due to the
recognition of $4.0 billion in revenue in June 2012 for the Debt Guarantee Program fees that
were previously held as systemic risk deferred revenue.
The provision for insurance losses was negative $539 million for the third quarter of 2013. The
negative provision primarily resulted from a $440 million decrease in the contingent loss
reserve due to lower estimated losses from anticipated future failures.
On September 9, 2013, the FDIC exchanged the Citigroup TruPs with a par value of $2.225
billion held by the Corporation for subordinated notes with a par value of $2.420 billion from
Citigroup. The carrying book value of the TruPs was $1.962 billion resulting in a gain on the
exchange of $458 million, which was offset by a reclassification of accumulated unrealized
gain of $302 million. Thus, the effect to the DIF fund balance was a net realized gain of $156
million. Subsequently, on September 10, 2013, the subordinated notes were sold at par to the
institutional fixed income market for $2.420 billion.
FSLIC Resolution Fund (FRF)
After evaluating FRF’s remaining assets and liabilities, the FDIC returned $2.6 billion to the
U.S. Treasury on behalf of the FRF- FSLIC and paid $125 million to REFCORP on behalf of
FRF-RTC in the third quarter 2013.
During September, FRF paid $501 thousand to a plaintiff in a goodwill case, representing
reimbursement for a tax liability incurred on a $181 million settlement that occurred in 2012.
Assessments
During the third quarter of 2013, the DIF recognized a total of $2.3 billion in assessment
revenue. The estimate for third quarter 2013 insurance coverage totaled $2.4 billion.
Additionally, the DIF recognized a net adjustment of $56 million that reduced assessment
revenue. This adjustment consisted of $7 million in prior period amendments and a $49 million
decrease to the estimate for second quarter 2013 insurance coverage recorded at June 30,
2013. The latter adjustment was due to lower average assessment rates for large banks.
On September 30, 2013, the FDIC collected $2.5 billion in DIF assessments for second
quarter 2013 insurance coverage. For the first time since the collection date of March 30,
2010, there were no prepaid assessments reducing the quarterly collection amount.
I. Corporate Fund Financial Results (See pages 9 - 10 for detailed data and charts.)
Deposit Insurance Fund
For the nine months ending September 30, 2013, the DIF’s comprehensive income totaled
$7.8 billion compared to comprehensive income of $13.4 billion for the same period last year.
This $5.6 billion decrease was mostly due to a decrease in other revenue of $4.1 billion, and a
$2.0 billion decrease in assessment revenue, partially offset by a decrease in provision for
insurance losses of $192 million and a $136 million decrease in operating expenses.
The year-over-year decrease of $4.1 billion in other revenue was primarily due to the
recognition of $4.0 billion in revenue in June 2012 for the Debt Guarantee Program fees that
were previously held as systemic risk deferred revenue.
The provision for insurance losses was negative $539 million for the third quarter of 2013. The
negative provision primarily resulted from a $440 million decrease in the contingent loss
reserve due to lower estimated losses from anticipated future failures.
On September 9, 2013, the FDIC exchanged the Citigroup TruPs with a par value of $2.225
billion held by the Corporation for subordinated notes with a par value of $2.420 billion from
Citigroup. The carrying book value of the TruPs was $1.962 billion resulting in a gain on the
exchange of $458 million, which was offset by a reclassification of accumulated unrealized
gain of $302 million. Thus, the effect to the DIF fund balance was a net realized gain of $156
million. Subsequently, on September 10, 2013, the subordinated notes were sold at par to the
institutional fixed income market for $2.420 billion.
FSLIC Resolution Fund (FRF)
After evaluating FRF’s remaining assets and liabilities, the FDIC returned $2.6 billion to the
U.S. Treasury on behalf of the FRF- FSLIC and paid $125 million to REFCORP on behalf of
FRF-RTC in the third quarter 2013.
During September, FRF paid $501 thousand to a plaintiff in a goodwill case, representing
reimbursement for a tax liability incurred on a $181 million settlement that occurred in 2012.
Assessments
During the third quarter of 2013, the DIF recognized a total of $2.3 billion in assessment
revenue. The estimate for third quarter 2013 insurance coverage totaled $2.4 billion.
Additionally, the DIF recognized a net adjustment of $56 million that reduced assessment
revenue. This adjustment consisted of $7 million in prior period amendments and a $49 million
decrease to the estimate for second quarter 2013 insurance coverage recorded at June 30,
2013. The latter adjustment was due to lower average assessment rates for large banks.
On September 30, 2013, the FDIC collected $2.5 billion in DIF assessments for second
quarter 2013 insurance coverage. For the first time since the collection date of March 30,
2010, there were no prepaid assessments reducing the quarterly collection amount.