Federal Deposit Insurance Corporation
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
February 17, 2015
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: Fourth Quarter 2014 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the quarter ended
December 31, 2014.
Executive Summary
During the fourth quarter of 2014, the DIF balance increased by $8.5 billion, from $54.3 billion
at September 30, 2014 to an all-time high of $62.8 billion. The quarterly increase was
primarily due to a $6.8 billion decrease in the provision for insurance losses and $2.0 billion of
assessment revenue, partially offset by $408 million of operating expenses.
Based on the 4th Quarter 2014 estimated insured deposits and year-end fund balance, the DIF
reserve ratio rose to 1.01 percent, from 0.88 percent as of September 30, 2014. A year ago,
the DIF reserve ratio was 0.79 percent.
During the fourth quarter of 2014, the FDIC was named receiver for 4 failed institutions. The
combined assets at inception for these institutions totaled $1.2 billion with a total estimated
loss of $147 million. The corporate cash outlay during the fourth quarter for these failures was
approximately $354 million.
Overall Corporate Operating Budget expenditures through December 31, 2014, were below
budget by 10 percent ($244 million). Spending in the Ongoing Operations component was
$160 million, or 9 percent, under budget, largely due to underspending in the salaries and
compensation, contractual services, and travel categories. The variance in the Receivership
Funding component was $83 million, or 14 percent, under budget, primarily due to lower-than-
budgeted contract expenses for failed bank 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
February 17, 2015
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: Fourth Quarter 2014 CFO Report to the Board
The attached report highlights the Corporation’s financial activities and results for the quarter ended
December 31, 2014.
Executive Summary
During the fourth quarter of 2014, the DIF balance increased by $8.5 billion, from $54.3 billion
at September 30, 2014 to an all-time high of $62.8 billion. The quarterly increase was
primarily due to a $6.8 billion decrease in the provision for insurance losses and $2.0 billion of
assessment revenue, partially offset by $408 million of operating expenses.
Based on the 4th Quarter 2014 estimated insured deposits and year-end fund balance, the DIF
reserve ratio rose to 1.01 percent, from 0.88 percent as of September 30, 2014. A year ago,
the DIF reserve ratio was 0.79 percent.
During the fourth quarter of 2014, the FDIC was named receiver for 4 failed institutions. The
combined assets at inception for these institutions totaled $1.2 billion with a total estimated
loss of $147 million. The corporate cash outlay during the fourth quarter for these failures was
approximately $354 million.
Overall Corporate Operating Budget expenditures through December 31, 2014, were below
budget by 10 percent ($244 million). Spending in the Ongoing Operations component was
$160 million, or 9 percent, under budget, largely due to underspending in the salaries and
compensation, contractual services, and travel categories. The variance in the Receivership
Funding component was $83 million, or 14 percent, under budget, primarily due to lower-than-
budgeted contract expenses for failed bank resolutions, and lower-than-anticipated asset
management and marketing costs.
2
I. Corporate Fund Financial Results (See pages 8 - 9 for detailed data and charts.)
Deposit Insurance Fund
For 2014, the DIF’s comprehensive income totaled $15.6 billion compared to comprehensive
income of $14.2 billion for 2013. This $1.4 billion year-over-year increase was primarily due to
a $2.6 billion decrease in the provision for insurance losses, which was partially offset by a
$1.1 billion decrease in assessment revenue and a $136 million decrease in other revenue.
The provision for insurance losses was negative $8.3 billion for 2014, compared to negative
$5.7 billion for 2013. The negative provision for 2014 primarily resulted from a decrease of
$9.1 billion in the estimated losses for institutions that failed in current and prior years, partially
offset by an increase of $850 million in the contingent liability for anticipated failures due to the
deterioration in the financial condition of certain troubled institutions. The $9.1 billion reduction
in the estimated losses from failures was primarily attributable to: (1) unanticipated recoveries
of $1.8 billion in litigation settlements, professional liability claims, and tax refunds by the
receiverships and (2) a $6.7 billion decrease in the receiverships’ shared-loss liability that
resulted from decreases in covered asset balances, lower future loss rate estimates, and
unanticipated recoveries on shared-loss agreement losses.
Assessments
During December, the DIF recognized a total of $2.0 billion in assessment revenue. The
estimate for fourth quarter 2014 insurance coverage also totaled $2.0 billion. Additionally, the
DIF recognized a net adjustment of $29 million that increased assessment revenue. This
adjustment consisted of a $6 million increase from prior period amendments and a $23 million
increase to the estimate for third quarter 2014 insurance coverage recorded at September 30,
2014. The latter adjustment was primarily due to higher than estimated rates and assessment
base.
On December 30, 2014, the FDIC collected $2.1 billion in DIF assessments for third quarter
2014 insurance coverage.
II. Investment Results (See pages 10 - 11 for detailed data and charts.)
DIF Investment Portfolio
On December 31, 2014, the total liquidity (also total market value) of the DIF investment
portfolio stood at $52.3 billion, higher than its December 31, 2013, balance of $42.5 billion.
During the year, interest revenue, receivership dividends, and deposit insurance assessment
collections exceeded resolution-related outlays and operating expenses.
On December 31, 2014, the DIF investment portfolio’s yield was 0.70 percent, up 25 basis
points from its December 31, 2013, yield of 0.45 percent. Two factors primarily contributed to
the increase. During the year, newly purchased Treasury securities generally had
considerably 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 fourth quarter 2014 DIF portfolio investment strategy, staff
purchased a total of 14 short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale. The 14 securities had a total par value of $4.9 billion, a
weighted average yield of 0.72 percent, and a weighted average maturity of 2.12 years.
I. Corporate Fund Financial Results (See pages 8 - 9 for detailed data and charts.)
Deposit Insurance Fund
For 2014, the DIF’s comprehensive income totaled $15.6 billion compared to comprehensive
income of $14.2 billion for 2013. This $1.4 billion year-over-year increase was primarily due to
a $2.6 billion decrease in the provision for insurance losses, which was partially offset by a
$1.1 billion decrease in assessment revenue and a $136 million decrease in other revenue.
The provision for insurance losses was negative $8.3 billion for 2014, compared to negative
$5.7 billion for 2013. The negative provision for 2014 primarily resulted from a decrease of
$9.1 billion in the estimated losses for institutions that failed in current and prior years, partially
offset by an increase of $850 million in the contingent liability for anticipated failures due to the
deterioration in the financial condition of certain troubled institutions. The $9.1 billion reduction
in the estimated losses from failures was primarily attributable to: (1) unanticipated recoveries
of $1.8 billion in litigation settlements, professional liability claims, and tax refunds by the
receiverships and (2) a $6.7 billion decrease in the receiverships’ shared-loss liability that
resulted from decreases in covered asset balances, lower future loss rate estimates, and
unanticipated recoveries on shared-loss agreement losses.
Assessments
During December, the DIF recognized a total of $2.0 billion in assessment revenue. The
estimate for fourth quarter 2014 insurance coverage also totaled $2.0 billion. Additionally, the
DIF recognized a net adjustment of $29 million that increased assessment revenue. This
adjustment consisted of a $6 million increase from prior period amendments and a $23 million
increase to the estimate for third quarter 2014 insurance coverage recorded at September 30,
2014. The latter adjustment was primarily due to higher than estimated rates and assessment
base.
On December 30, 2014, the FDIC collected $2.1 billion in DIF assessments for third quarter
2014 insurance coverage.
II. Investment Results (See pages 10 - 11 for detailed data and charts.)
DIF Investment Portfolio
On December 31, 2014, the total liquidity (also total market value) of the DIF investment
portfolio stood at $52.3 billion, higher than its December 31, 2013, balance of $42.5 billion.
During the year, interest revenue, receivership dividends, and deposit insurance assessment
collections exceeded resolution-related outlays and operating expenses.
On December 31, 2014, the DIF investment portfolio’s yield was 0.70 percent, up 25 basis
points from its December 31, 2013, yield of 0.45 percent. Two factors primarily contributed to
the increase. During the year, newly purchased Treasury securities generally had
considerably 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 fourth quarter 2014 DIF portfolio investment strategy, staff
purchased a total of 14 short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale. The 14 securities had a total par value of $4.9 billion, a
weighted average yield of 0.72 percent, and a weighted average maturity of 2.12 years.