FDIC
Federal Deposit Insurance Corporation
55017th Street N.W., Washington D.C. 20429-9990 Deputy to the Chairman antl CFO
November 30, 2016
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App ~,
Deputy to the C airman and
Chief Financial Officer
Craig R. Jarvill (j~"G
Director, Division of Finance
SUBJECT: Third Quarter 2016 CFO Report to the Board
The attached report highlights the Corporation's financial activities and results for the quarter ended
September 30, 2016.
Executive Summary
• During the third quarter of 2016, the Deposit Insurance Fund (DIF) balance increased by $2.8
billion, from $77.9 billion to $80.7 billion. This quarterly increase was primarily due to $2.6
billion of assessment revenue, $171 million of interest on U.S. Treasury securities, and a $566
million decrease in provision for insurance losses, partially offset by $422 million in operating
expenses and a $167 million unrealized loss on U.S. Treasury securities.
• The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.18
percent for the third quarter 2016, compared to the second quarter 2016 reserve ratio of 1.17
percent.
• During the third quarter of 2016, the FDIC was named receiver for 2failed institutions. The
assets at inception for these failed institutions were $85 million with estimated losses of $12
million. The corporate cash outlay during the third quarter for these failures was approximately
$10 million.
• Through September 30, 2016, overall FDIC Operating Budget expenditures were below
budget by 10 percent($154 million). Spending in the Ongoing Operations component was $73
million, or 5 percent, under budget, largely due to underspending for salaries and
compensation and contractual services. Spending in the Receivership Funding component
was $81 million, or 29 percent, under budget, primarily due to lower-than-budgeted spending
for contractual services related to failed financial institutions.
Federal Deposit Insurance Corporation
55017th Street N.W., Washington D.C. 20429-9990 Deputy to the Chairman antl CFO
November 30, 2016
MEMORANDUM TO: The Board of Directors
FROM: Steven O. App ~,
Deputy to the C airman and
Chief Financial Officer
Craig R. Jarvill (j~"G
Director, Division of Finance
SUBJECT: Third Quarter 2016 CFO Report to the Board
The attached report highlights the Corporation's financial activities and results for the quarter ended
September 30, 2016.
Executive Summary
• During the third quarter of 2016, the Deposit Insurance Fund (DIF) balance increased by $2.8
billion, from $77.9 billion to $80.7 billion. This quarterly increase was primarily due to $2.6
billion of assessment revenue, $171 million of interest on U.S. Treasury securities, and a $566
million decrease in provision for insurance losses, partially offset by $422 million in operating
expenses and a $167 million unrealized loss on U.S. Treasury securities.
• The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.18
percent for the third quarter 2016, compared to the second quarter 2016 reserve ratio of 1.17
percent.
• During the third quarter of 2016, the FDIC was named receiver for 2failed institutions. The
assets at inception for these failed institutions were $85 million with estimated losses of $12
million. The corporate cash outlay during the third quarter for these failures was approximately
$10 million.
• Through September 30, 2016, overall FDIC Operating Budget expenditures were below
budget by 10 percent($154 million). Spending in the Ongoing Operations component was $73
million, or 5 percent, under budget, largely due to underspending for salaries and
compensation and contractual services. Spending in the Receivership Funding component
was $81 million, or 29 percent, under budget, primarily due to lower-than-budgeted spending
for contractual services related to failed financial institutions.
I. Corporate Fund Financial Results(See pages 8 - 9for detailed data and charts.)
Deposit Insurance Fund
• For the nine months ending September 30, 2016,the DIF's comprehensive income totaled
$8.1 billion compared to comprehensive income of $7.3 billion for the same period last
year. This $769 million increase was primarily due to a $612 million increase in assessment
revenue, a $187 million increase in interest on U.S. Treasury securities, and a $94 million
increase in the unrealized gain on U.S. Treasury securities.
Provision for insurance losses was a negative $1.2 billion as of the third quarter of 2016,
primarily resulting from a decrease in the estimated losses for institutions that failed in current
and prior years. The main components of this reduction were: 1)$477 million in unanticipated
recoveries from litigation settlements, professional liability claims, and tax refunds by the
receiverships; 2)a $318 million decrease in the receiverships' shared-loss liability due to both
the early termination of numerous shared-loss agreements(SLAs)during the year, which
resulted in lower-than-anticipated losses on covered assets, and the unanticipated recoveries
from SLAs where the commercial loss coverage has expired but the recovery period remains
active; 3)a $291 million reduction in projected future receivership expenses and legal and
representation and warranty liabilities; and 4)a $133 million decrease resulting from greater-
than-anticipated collections from receiverships' asset sales and updated estimated recovery
rates applied to the remaining assets in liquidation.
Assessments
During September, the DIF recognized a total of $2.6 billion in assessment revenue. Of this
amount, $1.4 billion represented the estimate for third quarter 2016 insurance coverage. Also,
the DIF recognized $1.2 billion in estimated large bank surcharges for the third quarter 2016.
Additionally, the DIF recognized an adjustment of $47 million that decreased assessment
revenue. This adjustment consisted of a $2 million decrease from prior period amendments
and a $45 million decrease to the estimate for second quarter 2016 insurance coverage
recorded at June 30, 2016. The latter adjustment was primarily due to lower than estimated
assessment rates for several large banks.
• On September 30, 2016, the FDIC collected $2.2 billion in DIF assessments for second
quarter 2016 insurance coverage.
II. Investment Results(See pages 10 - 11 for detailed data and charts.)
DIF Investment Portfolio
• On September 30, 2016, the total liquidity (also total market value)of the DIF investment
portfolio stood at $72.9 billion, up $9.2 billion from its December 31, 2015, balance of $63.7
billion. During the first three quarters of 2016, interest revenue, receivership dividends, and
deposit insurance assessment collections exceeded resolution-related outlays and operating
expenses.
• On September 30, 2016, the DIF investment portfolio's yield was 0.95 percent, up just one
basis point from its December 31, 2015, yield of 0.94 percent. Although the new Treasury
securities purchased during the year-to-date period generally had notably higher yields than
the maturing securities' yields, the portfolio had a larger balance of low yielding overnight
2
Deposit Insurance Fund
• For the nine months ending September 30, 2016,the DIF's comprehensive income totaled
$8.1 billion compared to comprehensive income of $7.3 billion for the same period last
year. This $769 million increase was primarily due to a $612 million increase in assessment
revenue, a $187 million increase in interest on U.S. Treasury securities, and a $94 million
increase in the unrealized gain on U.S. Treasury securities.
Provision for insurance losses was a negative $1.2 billion as of the third quarter of 2016,
primarily resulting from a decrease in the estimated losses for institutions that failed in current
and prior years. The main components of this reduction were: 1)$477 million in unanticipated
recoveries from litigation settlements, professional liability claims, and tax refunds by the
receiverships; 2)a $318 million decrease in the receiverships' shared-loss liability due to both
the early termination of numerous shared-loss agreements(SLAs)during the year, which
resulted in lower-than-anticipated losses on covered assets, and the unanticipated recoveries
from SLAs where the commercial loss coverage has expired but the recovery period remains
active; 3)a $291 million reduction in projected future receivership expenses and legal and
representation and warranty liabilities; and 4)a $133 million decrease resulting from greater-
than-anticipated collections from receiverships' asset sales and updated estimated recovery
rates applied to the remaining assets in liquidation.
Assessments
During September, the DIF recognized a total of $2.6 billion in assessment revenue. Of this
amount, $1.4 billion represented the estimate for third quarter 2016 insurance coverage. Also,
the DIF recognized $1.2 billion in estimated large bank surcharges for the third quarter 2016.
Additionally, the DIF recognized an adjustment of $47 million that decreased assessment
revenue. This adjustment consisted of a $2 million decrease from prior period amendments
and a $45 million decrease to the estimate for second quarter 2016 insurance coverage
recorded at June 30, 2016. The latter adjustment was primarily due to lower than estimated
assessment rates for several large banks.
• On September 30, 2016, the FDIC collected $2.2 billion in DIF assessments for second
quarter 2016 insurance coverage.
II. Investment Results(See pages 10 - 11 for detailed data and charts.)
DIF Investment Portfolio
• On September 30, 2016, the total liquidity (also total market value)of the DIF investment
portfolio stood at $72.9 billion, up $9.2 billion from its December 31, 2015, balance of $63.7
billion. During the first three quarters of 2016, interest revenue, receivership dividends, and
deposit insurance assessment collections exceeded resolution-related outlays and operating
expenses.
• On September 30, 2016, the DIF investment portfolio's yield was 0.95 percent, up just one
basis point from its December 31, 2015, yield of 0.94 percent. Although the new Treasury
securities purchased during the year-to-date period generally had notably higher yields than
the maturing securities' yields, the portfolio had a larger balance of low yielding overnight
2