Federal Deposit Insurance Corporation
55017th Street, N.W., Washington D.C. 20429-9990 Deputy to the Chairman and CFO
May 12, 2016
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App
Deputy to the h irman and
Chief Financial Officer
Craig R. Jarvill
Director, Division of Finance
SUBJECT: First Quarter 2016 CFO Report to the Board
The attached report highlights the Corporation's financial activities and results for the quarter ended
March 31, 2016.
Executive Summary
• During the first quarter of 2016, the Deposit Insurance Fund (DIF) balance increased by $2.5
billion, from $72.6 billion to $75.1 billion. This quarterly increase was primarily due to $2.3
billion of assessment revenue, a $412 million unrealized gain on U.S. Treasury investments,
and $147 million of interest on U.S. Treasury obligations, partially offset by $415 million in
operating expenses.
• During the first quarter of 2016, the FDIC was named receiver for 1 failed institution. North
Milwaukee State Bank, which failed on March 11, 2016, had assets at time of failure of $64
million with an estimated loss to the DIF of $10 million. The corporate cash outlay during the
first quarter for this failure was approximately $10 million.
• Through March 31, 2016, overall FDIC Operating Budget expenditures were below budget by
11 percent($57 million). This variance was primarily the result of vacancies in budgeted
positions and lower-than-budgeted spending for equipment and contractual services in the
Ongoing Operations component of the budget and contractual services in the Receivership
Funding component of the budget.
55017th Street, N.W., Washington D.C. 20429-9990 Deputy to the Chairman and CFO
May 12, 2016
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App
Deputy to the h irman and
Chief Financial Officer
Craig R. Jarvill
Director, Division of Finance
SUBJECT: First Quarter 2016 CFO Report to the Board
The attached report highlights the Corporation's financial activities and results for the quarter ended
March 31, 2016.
Executive Summary
• During the first quarter of 2016, the Deposit Insurance Fund (DIF) balance increased by $2.5
billion, from $72.6 billion to $75.1 billion. This quarterly increase was primarily due to $2.3
billion of assessment revenue, a $412 million unrealized gain on U.S. Treasury investments,
and $147 million of interest on U.S. Treasury obligations, partially offset by $415 million in
operating expenses.
• During the first quarter of 2016, the FDIC was named receiver for 1 failed institution. North
Milwaukee State Bank, which failed on March 11, 2016, had assets at time of failure of $64
million with an estimated loss to the DIF of $10 million. The corporate cash outlay during the
first quarter for this failure was approximately $10 million.
• Through March 31, 2016, overall FDIC Operating Budget expenditures were below budget by
11 percent($57 million). This variance was primarily the result of vacancies in budgeted
positions and lower-than-budgeted spending for equipment and contractual services in the
Ongoing Operations component of the budget and contractual services in the Receivership
Funding component of the budget.
2
I. Corporate Fund Financial Results (See pages 6– 7 for detailed data and charts.)
Deposit Insurance Fund
For the first quarter of 2016, the DIF’s comprehensive income totaled $2.5 billion, equivalent to
the amount reported in the same period last year. Although assessment revenue and
earnings (interest and net unrealized gains) on U.S. Treasury obligations were higher in 2016
than 2015 ($139 million and $268 million, respectively), there were smaller negative provision
for losses in 2016 compared to last year (negative $43 million in 2016 vs. negative $426
million in 2015).
The provision for insurance losses was a negative $43 million for the first quarter of 2016. The
negative provision primarily resulted from a $97 million decrease in the estimated losses for
institutions that failed in current and prior years, partially offset by a $48 million increase in the
estimated losses for future failures.
Assessments
During March, the DIF recognized assessment revenue of $2.3 billion. Of this amount, $2.2
billion represented the estimate for first quarter 2016 insurance coverage. Additionally, the DIF
recognized an adjustment of $90 million that increased assessment revenue. This adjustment
consisted of $36 million primarily due to prior period amendments from compliance review
activity and a $54 million increase to the estimate for fourth quarter 2015 insurance coverage
recorded at December 31, 2015. The latter adjustment was primarily due to higher than
estimated assessment base and rates for large banks.
On March 30, 2016, the FDIC collected $2.3 billion in DIF assessments for fourth quarter 2015
insurance coverage.
II. Investment Results (See pages 8 -9 for detailed data and charts.)
DIF Investment Portfolio
On March 31, 2016, the total liquidity (also total market value) of the DIF investment portfolio
stood at $67.8 billion, up $4.0 billion from its December 31, 2015, balance of $63.7 billion.
During the quarter, interest revenue, receivership dividends, and deposit insurance
assessment collections exceeded resolution-related outlays and operating expenses.
On March 31, 2016, the DIF investment portfolio’s yield was 0.94 percent, little changed from
its December 31, 2015, yield. Although the new Treasury securities purchased during the
quarter generally had higher yields than the maturing securities’ yields, the portfolio had a
larger balance of low yielding overnight investments at the end of the first quarter, thus
temporarily bringing down the overall portfolio yield.
In accordance with the approved first quarter 2016 DIF portfolio investment strategy, staff
purchased a total of nine short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale. The nine securities had a total par value of $6.8 billion, a
weighted average yield of 0.71% percent, and a weighted average maturity of 1.00 years.
I. Corporate Fund Financial Results (See pages 6– 7 for detailed data and charts.)
Deposit Insurance Fund
For the first quarter of 2016, the DIF’s comprehensive income totaled $2.5 billion, equivalent to
the amount reported in the same period last year. Although assessment revenue and
earnings (interest and net unrealized gains) on U.S. Treasury obligations were higher in 2016
than 2015 ($139 million and $268 million, respectively), there were smaller negative provision
for losses in 2016 compared to last year (negative $43 million in 2016 vs. negative $426
million in 2015).
The provision for insurance losses was a negative $43 million for the first quarter of 2016. The
negative provision primarily resulted from a $97 million decrease in the estimated losses for
institutions that failed in current and prior years, partially offset by a $48 million increase in the
estimated losses for future failures.
Assessments
During March, the DIF recognized assessment revenue of $2.3 billion. Of this amount, $2.2
billion represented the estimate for first quarter 2016 insurance coverage. Additionally, the DIF
recognized an adjustment of $90 million that increased assessment revenue. This adjustment
consisted of $36 million primarily due to prior period amendments from compliance review
activity and a $54 million increase to the estimate for fourth quarter 2015 insurance coverage
recorded at December 31, 2015. The latter adjustment was primarily due to higher than
estimated assessment base and rates for large banks.
On March 30, 2016, the FDIC collected $2.3 billion in DIF assessments for fourth quarter 2015
insurance coverage.
II. Investment Results (See pages 8 -9 for detailed data and charts.)
DIF Investment Portfolio
On March 31, 2016, the total liquidity (also total market value) of the DIF investment portfolio
stood at $67.8 billion, up $4.0 billion from its December 31, 2015, balance of $63.7 billion.
During the quarter, interest revenue, receivership dividends, and deposit insurance
assessment collections exceeded resolution-related outlays and operating expenses.
On March 31, 2016, the DIF investment portfolio’s yield was 0.94 percent, little changed from
its December 31, 2015, yield. Although the new Treasury securities purchased during the
quarter generally had higher yields than the maturing securities’ yields, the portfolio had a
larger balance of low yielding overnight investments at the end of the first quarter, thus
temporarily bringing down the overall portfolio yield.
In accordance with the approved first quarter 2016 DIF portfolio investment strategy, staff
purchased a total of nine short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale. The nine securities had a total par value of $6.8 billion, a
weighted average yield of 0.71% percent, and a weighted average maturity of 1.00 years.