Federal Deposit Insurance Corporation
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
November 18, 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: Third Quarter 2014 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the quarter ended
September 30, 2014.
Executive Summary
• During the third quarter of 2014, the DIF balance increased by $3.2 billion, from $51.1 billion at
June 30, 2014 to an all-time high of $54.3 billion. The previous high point of the DIF was at
the end of the first quarter 2008 with a balance of $52.8 billion. The quarterly increase was
primarily due to $2.0 billion of assessment revenue and a $1.7 billion decrease in the provision
for insurance losses, partially offset by $406 million of operating expenses.
• During the third quarter of 2014, the FDIC was named receiver for 2 failed institutions. The
combined assets at inception for these institutions totaled $238 million with a total estimated
loss of $48 million. The corporate cash outlay during the third quarter for these failures was
approximately $86 million.
• Through September 30, 2014, overall Corporate Operating Budget expenditures were below
budget by 10 percent ($170 million). Spending in the Ongoing Operations component was
$119 million, or 9 percent, under budget, largely due to underspending in the salaries and
compensation, contractual services, and equipment categories. The variance in the
Receivership Funding component was $51 million, or 11 percent, under budget, primarily due
to lower-than-budgeted contract expenses attributable to less costly resolutions, and lower-
than-anticipated asset management and marketing costs.
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
November 18, 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: Third Quarter 2014 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the quarter ended
September 30, 2014.
Executive Summary
• During the third quarter of 2014, the DIF balance increased by $3.2 billion, from $51.1 billion at
June 30, 2014 to an all-time high of $54.3 billion. The previous high point of the DIF was at
the end of the first quarter 2008 with a balance of $52.8 billion. The quarterly increase was
primarily due to $2.0 billion of assessment revenue and a $1.7 billion decrease in the provision
for insurance losses, partially offset by $406 million of operating expenses.
• During the third quarter of 2014, the FDIC was named receiver for 2 failed institutions. The
combined assets at inception for these institutions totaled $238 million with a total estimated
loss of $48 million. The corporate cash outlay during the third quarter for these failures was
approximately $86 million.
• Through September 30, 2014, overall Corporate Operating Budget expenditures were below
budget by 10 percent ($170 million). Spending in the Ongoing Operations component was
$119 million, or 9 percent, under budget, largely due to underspending in the salaries and
compensation, contractual services, and equipment categories. The variance in the
Receivership Funding component was $51 million, or 11 percent, under budget, primarily due
to lower-than-budgeted contract expenses attributable to less costly resolutions, and lower-
than-anticipated asset management and marketing costs.
2
I. Corporate Fund Financial Results (See pages 7 - 8 for detailed data and charts.)
Deposit Insurance Fund
• For the nine months ending September 30, 2014, the DIF’s comprehensive income totaled
$7.129 billion compared to comprehensive income of $7.800 billion for the same period last
year. This $671 million decrease was mostly due to an $884 million decrease in assessment
revenue and an $83 million increase in operating expenses that was partially offset by a $448
million decrease in the provision for insurance losses.
• The provision for insurance losses was a negative $1.5 billion for 2014. The negative
provision for 2014 primarily resulted from a decrease of $2.5 billion in the estimated losses for
institutions that failed in prior years, partially offset by an increase of $918 million in the
contingent liability for anticipated failures.
The $2.5 billion reduction in the estimated losses from failures was primarily attributable to two
components. The first component was unanticipated recoveries of $1.6 billion in litigation
settlements, professional liability claims, and tax refunds by the receiverships, which are not
recognized until the cash is received since significant uncertainties surround their recovery.
The second component was asset recoveries that exceeded projections and higher valuations
on remaining receivership assets totaling $1.1 billion.
Assessments
• During September, the DIF recognized a total of $2.0 billion in assessment revenue. Of this
amount, the estimate for third quarter 2014 insurance coverage totaled $2.1 billion.
Additionally, the DIF recognized a net adjustment of $63 million that decreased assessment
revenue. This adjustment consisted of an $18 million decrease from prior period amendments
and a $45 million decrease to the estimate for second quarter 2014 insurance coverage
recorded at June 30, 2014. The latter adjustment was primarily due to lower than estimated
rates for large institutions.
• On September 30, 2014, the FDIC collected $2.1 billion in DIF assessments for second
quarter 2014 insurance coverage.
II. Investment Results (See pages 9 - 10 for detailed data and charts.)
DIF Investment Portfolio
• On September 30, 2014, the total liquidity (also total market value) of the DIF investment
portfolio stood at $50.2 billion, higher than its December 31, 2013, balance of $42.5 billion.
During the first three quarters of 2014, interest revenue, receivership dividends, and deposit
insurance assessment collections exceeded resolution-related outlays and operating
expenses.
• On September 30, 2014, the DIF investment portfolio’s yield was 0.68 percent, up 23 basis
points from its December 31, 2013, yield of 0.45 percent. Two factors primarily contributed to
the increase. During the nine-month period, newly purchased Treasury securities generally
had higher yields than maturing securities. Low yielding overnight investments comprised a
smaller percentage of the portfolio at period end.
I. Corporate Fund Financial Results (See pages 7 - 8 for detailed data and charts.)
Deposit Insurance Fund
• For the nine months ending September 30, 2014, the DIF’s comprehensive income totaled
$7.129 billion compared to comprehensive income of $7.800 billion for the same period last
year. This $671 million decrease was mostly due to an $884 million decrease in assessment
revenue and an $83 million increase in operating expenses that was partially offset by a $448
million decrease in the provision for insurance losses.
• The provision for insurance losses was a negative $1.5 billion for 2014. The negative
provision for 2014 primarily resulted from a decrease of $2.5 billion in the estimated losses for
institutions that failed in prior years, partially offset by an increase of $918 million in the
contingent liability for anticipated failures.
The $2.5 billion reduction in the estimated losses from failures was primarily attributable to two
components. The first component was unanticipated recoveries of $1.6 billion in litigation
settlements, professional liability claims, and tax refunds by the receiverships, which are not
recognized until the cash is received since significant uncertainties surround their recovery.
The second component was asset recoveries that exceeded projections and higher valuations
on remaining receivership assets totaling $1.1 billion.
Assessments
• During September, the DIF recognized a total of $2.0 billion in assessment revenue. Of this
amount, the estimate for third quarter 2014 insurance coverage totaled $2.1 billion.
Additionally, the DIF recognized a net adjustment of $63 million that decreased assessment
revenue. This adjustment consisted of an $18 million decrease from prior period amendments
and a $45 million decrease to the estimate for second quarter 2014 insurance coverage
recorded at June 30, 2014. The latter adjustment was primarily due to lower than estimated
rates for large institutions.
• On September 30, 2014, the FDIC collected $2.1 billion in DIF assessments for second
quarter 2014 insurance coverage.
II. Investment Results (See pages 9 - 10 for detailed data and charts.)
DIF Investment Portfolio
• On September 30, 2014, the total liquidity (also total market value) of the DIF investment
portfolio stood at $50.2 billion, higher than its December 31, 2013, balance of $42.5 billion.
During the first three quarters of 2014, interest revenue, receivership dividends, and deposit
insurance assessment collections exceeded resolution-related outlays and operating
expenses.
• On September 30, 2014, the DIF investment portfolio’s yield was 0.68 percent, up 23 basis
points from its December 31, 2013, yield of 0.45 percent. Two factors primarily contributed to
the increase. During the nine-month period, newly purchased Treasury securities generally
had higher yields than maturing securities. Low yielding overnight investments comprised a
smaller percentage of the portfolio at period end.