Federal Deposit Insurance Corporation
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
August 26, 2014
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 2014 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the quarter ended
June 30, 2014.
Executive Summary
During the second quarter of 2014, the DIF balance increased by $2.2 billion, from $48.9
billion to $51.1 billion. This quarterly increase was primarily due to $2.2 billion of assessment
revenue and a $204 million decrease in the provision for insurance losses, partially offset by
$428 million of operating expenses.
During the second quarter of 2014, the FDIC was named receiver for 7 failed institutions. The
combined assets at inception for these institutions totaled $842 million with a total estimated
loss of $112 million. The corporate cash outlay during the second quarter for these failures
was approximately $235 million.
Through June 30, 2014, overall Corporate Operating Budget expenditures were below budget
by 8 percent ($93 million). Spending in the Ongoing Operations component was $59 million,
or 7 percent, under budget, largely due to underspending for salaries and compensation,
equipment, and contractual services. The variance in the Receivership Funding component
was $34 million, or 11 percent, under budget, primarily due to lower-than-budgeted spending
for contractual services at the site of failed financial institutions.
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
August 26, 2014
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 2014 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the quarter ended
June 30, 2014.
Executive Summary
During the second quarter of 2014, the DIF balance increased by $2.2 billion, from $48.9
billion to $51.1 billion. This quarterly increase was primarily due to $2.2 billion of assessment
revenue and a $204 million decrease in the provision for insurance losses, partially offset by
$428 million of operating expenses.
During the second quarter of 2014, the FDIC was named receiver for 7 failed institutions. The
combined assets at inception for these institutions totaled $842 million with a total estimated
loss of $112 million. The corporate cash outlay during the second quarter for these failures
was approximately $235 million.
Through June 30, 2014, overall Corporate Operating Budget expenditures were below budget
by 8 percent ($93 million). Spending in the Ongoing Operations component was $59 million,
or 7 percent, under budget, largely due to underspending for salaries and compensation,
equipment, and contractual services. The variance in the Receivership Funding component
was $34 million, or 11 percent, under budget, primarily due to lower-than-budgeted spending
for contractual services at the site of failed financial institutions.
2
I. Corporate Fund Financial Results (See pages 6 - 7 for detailed data and charts.)
Deposit Insurance Fund
For the six months ending June 30, 2014, the DIF’s comprehensive income totaled $3.9 billion
compared to comprehensive income of $4.9 billion for the same period last year. This $1.0
billion decrease was mostly due to a $554 million decrease in assessment revenue and a
$676 million increase in provision for insurance losses.
The provision for insurance losses was $144 million for the first half of 2014. The positive
provision primarily resulted from a $449 million increase in the estimated losses for anticipated
failures, partially offset by a $295 million decrease in the estimated losses for institutions that
failed in current and prior years. The reduction in the estimated losses from failures was
primarily attributable to a decrease in the receiverships’ shared-loss liability and unanticipated
recoveries of tax refunds and professional liability claims by receiverships.
Assessments
During June, the DIF recognized a total of $2.2 billion in assessment revenue, representing
the estimate for second quarter 2014 insurance coverage. Additionally, the DIF recognized a
net adjustment of $20 million that increased assessment revenue. This adjustment consisted
of a $6 million decrease from prior period amendments and a $26 million increase to the
estimate for first quarter 2014 insurance coverage recorded at March 31, 2014. The latter
adjustment was due to higher than estimated assessment rates.
On June 30, 2014, the FDIC collected $2.3 billion in DIF assessments for first quarter 2014
insurance coverage.
II. Investment Results (See pages 8 - 9 for detailed data and charts.)
DIF Investment Portfolio
On June 30, 2014, the total liquidity (also total market value) of the DIF investment portfolio
stood at $48.3 billion, higher than its December 31, 2013, balance of $42.5 billion. During the
first half of 2014, interest revenue, receivership dividends, and deposit insurance assessment
collections exceeded resolution-related outlays and operating expenses.
On June 30, 2014, the DIF investment portfolio’s yield was 0.61 percent, up 16 basis points
from its December 31, 2013, yield of 0.45 percent. Two factors primarily contributed to the
increase. During the six-month period, newly purchased Treasury securities generally had
higher yields than maturing securities. And low yielding overnight investments comprised a
smaller percentage of the portfolio at period end.
In accordance with the approved second quarter 2014 DIF portfolio investment strategy, staff
purchased a total of 16 short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale (AFS). The 16 securities had a total par value of $7.4 billion,
a weighted average yield of 0.66 percent, and a weighted average maturity (WAM) of 2.29
years.
I. Corporate Fund Financial Results (See pages 6 - 7 for detailed data and charts.)
Deposit Insurance Fund
For the six months ending June 30, 2014, the DIF’s comprehensive income totaled $3.9 billion
compared to comprehensive income of $4.9 billion for the same period last year. This $1.0
billion decrease was mostly due to a $554 million decrease in assessment revenue and a
$676 million increase in provision for insurance losses.
The provision for insurance losses was $144 million for the first half of 2014. The positive
provision primarily resulted from a $449 million increase in the estimated losses for anticipated
failures, partially offset by a $295 million decrease in the estimated losses for institutions that
failed in current and prior years. The reduction in the estimated losses from failures was
primarily attributable to a decrease in the receiverships’ shared-loss liability and unanticipated
recoveries of tax refunds and professional liability claims by receiverships.
Assessments
During June, the DIF recognized a total of $2.2 billion in assessment revenue, representing
the estimate for second quarter 2014 insurance coverage. Additionally, the DIF recognized a
net adjustment of $20 million that increased assessment revenue. This adjustment consisted
of a $6 million decrease from prior period amendments and a $26 million increase to the
estimate for first quarter 2014 insurance coverage recorded at March 31, 2014. The latter
adjustment was due to higher than estimated assessment rates.
On June 30, 2014, the FDIC collected $2.3 billion in DIF assessments for first quarter 2014
insurance coverage.
II. Investment Results (See pages 8 - 9 for detailed data and charts.)
DIF Investment Portfolio
On June 30, 2014, the total liquidity (also total market value) of the DIF investment portfolio
stood at $48.3 billion, higher than its December 31, 2013, balance of $42.5 billion. During the
first half of 2014, interest revenue, receivership dividends, and deposit insurance assessment
collections exceeded resolution-related outlays and operating expenses.
On June 30, 2014, the DIF investment portfolio’s yield was 0.61 percent, up 16 basis points
from its December 31, 2013, yield of 0.45 percent. Two factors primarily contributed to the
increase. During the six-month period, newly purchased Treasury securities generally had
higher yields than maturing securities. And low yielding overnight investments comprised a
smaller percentage of the portfolio at period end.
In accordance with the approved second quarter 2014 DIF portfolio investment strategy, staff
purchased a total of 16 short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale (AFS). The 16 securities had a total par value of $7.4 billion,
a weighted average yield of 0.66 percent, and a weighted average maturity (WAM) of 2.29
years.