Federal Deposit Insurance Corporation
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
March 1, 2017
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 2016 CFO Report to the Board
The attached report highlights the FDIC’s financial activities and results for the quarter ended
December 31, 2016.
Executive Summary
During the fourth quarter of 2016, the Deposit Insurance Fund (DIF) balance increased by $2.5
billion, from $80.7 billion to $83.2 billion. The quarterly increase was primarily due to $2.7
billion of assessment revenue and a $332 million decrease in the provision for insurance
losses, partially offset by $437 million of operating expenses and an unrealized loss on U.S.
Treasury securities of $325 million.
The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.20
percent for the fourth quarter 2016, compared to the third quarter 2016 reserve ratio of 1.18
percent.
There were no financial institution failures during the fourth quarter of 2016.
Overall FDIC Operating Budget expenditures through December 31, 2016, were below budget
by 12 percent ($261 million). Spending in the Ongoing Operations component was $121
million, or 7 percent, under budget, largely due to underspending for salaries and
compensation and contractual services. Spending in the Receivership Funding component
was $140 million, or 35 percent, under budget, primarily due to lower-than-budgeted spending
for contractual services related to financial institution failures.
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
March 1, 2017
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 2016 CFO Report to the Board
The attached report highlights the FDIC’s financial activities and results for the quarter ended
December 31, 2016.
Executive Summary
During the fourth quarter of 2016, the Deposit Insurance Fund (DIF) balance increased by $2.5
billion, from $80.7 billion to $83.2 billion. The quarterly increase was primarily due to $2.7
billion of assessment revenue and a $332 million decrease in the provision for insurance
losses, partially offset by $437 million of operating expenses and an unrealized loss on U.S.
Treasury securities of $325 million.
The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.20
percent for the fourth quarter 2016, compared to the third quarter 2016 reserve ratio of 1.18
percent.
There were no financial institution failures during the fourth quarter of 2016.
Overall FDIC Operating Budget expenditures through December 31, 2016, were below budget
by 12 percent ($261 million). Spending in the Ongoing Operations component was $121
million, or 7 percent, under budget, largely due to underspending for salaries and
compensation and contractual services. Spending in the Receivership Funding component
was $140 million, or 35 percent, under budget, primarily due to lower-than-budgeted spending
for contractual services related to financial institution failures.
2
I. Financial Results (See pages 8 - 9 for detailed data and charts.)
Deposit Insurance Fund
The DIF balance was $83.2 billion at year-end 2016, an increase of $10.6 billion from $72.6
billion at year-end 2015. The DIF’s comprehensive income totaled $10.6 billion for 2016
compared to comprehensive income of $9.8 billion during 2015. This $742 million year-over-
year increase was primarily due to a $1.1 billion increase in assessment revenue and a $249
million increase in interest revenue, partially offset by $683 million lower negative provision for
insurance losses.
The provision for insurance losses was negative $1.6 billion for 2016, compared to negative
$2.3 billion for 2015. The negative provision for 2016 primarily resulted from a decrease of
$1.7 billion in the estimated losses for institutions that failed in current and prior years, partially
offset by a $97 million increase in the contingent liability for anticipated failures. The $1.7
billion decrease in the estimated losses from failures was primarily attributable to (1)
unanticipated recoveries of $545 million in litigation settlements, professional liability claims,
and tax refunds by the receiverships; (2) a $584 million decrease in the receiverships’ shared-
loss liability; (3) a $406 million decrease in projected future receivership expenses and
receivership legal and representation and warranty liabilities; and (4) a $231 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 December, the DIF recognized a total of $2.7 billion in assessment revenue. Of this
amount, $1.5 billion represented the estimate for fourth quarter 2016 insurance coverage.
Also, the DIF recognized $1.2 billion in estimated large bank surcharges for the fourth quarter
2016. Additionally, the DIF recognized an adjustment of $20 million that increased assessment
revenue. This adjustment consisted of a $45 million increase from prior period amendments
and a $25 million decrease to the estimate for third quarter 2016 insurance coverage recorded
at September 30, 2016. The latter adjustment was primarily due to lower than estimated
assessment rates for several large banks.
On December 30, 2016, the FDIC collected $1.5 billion in DIF regular assessments and $1.2
billion in surcharge assessments for third quarter 2016 insurance coverage.
II. Investment Results (See pages 10 - 11 for detailed data and charts.)
DIF Investment Portfolio
On December 31, 2016, the total liquidity (also total market value) of the DIF investment
portfolio stood at $75.3 billion, up $11.6 billion from its December 31, 2015, balance of $63.7
billion. During the year, interest revenue, receivership dividends, and deposit insurance
assessment collections exceeded resolution-related outlays and operating expenses.
On December 31, 2016, the DIF investment portfolio’s yield was 1.12 percent, up 18 basis
points from its December 31, 2015, yield of 0.94 percent. The new Treasury securities
purchased during the year generally had higher yields than the maturing securities’ yields,
some considerably higher.
In accordance with the approved fourth quarter 2016 DIF portfolio investment strategy, staff
purchased a total of 21 short- to intermediate-maturity conventional Treasury securities, all
I. Financial Results (See pages 8 - 9 for detailed data and charts.)
Deposit Insurance Fund
The DIF balance was $83.2 billion at year-end 2016, an increase of $10.6 billion from $72.6
billion at year-end 2015. The DIF’s comprehensive income totaled $10.6 billion for 2016
compared to comprehensive income of $9.8 billion during 2015. This $742 million year-over-
year increase was primarily due to a $1.1 billion increase in assessment revenue and a $249
million increase in interest revenue, partially offset by $683 million lower negative provision for
insurance losses.
The provision for insurance losses was negative $1.6 billion for 2016, compared to negative
$2.3 billion for 2015. The negative provision for 2016 primarily resulted from a decrease of
$1.7 billion in the estimated losses for institutions that failed in current and prior years, partially
offset by a $97 million increase in the contingent liability for anticipated failures. The $1.7
billion decrease in the estimated losses from failures was primarily attributable to (1)
unanticipated recoveries of $545 million in litigation settlements, professional liability claims,
and tax refunds by the receiverships; (2) a $584 million decrease in the receiverships’ shared-
loss liability; (3) a $406 million decrease in projected future receivership expenses and
receivership legal and representation and warranty liabilities; and (4) a $231 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 December, the DIF recognized a total of $2.7 billion in assessment revenue. Of this
amount, $1.5 billion represented the estimate for fourth quarter 2016 insurance coverage.
Also, the DIF recognized $1.2 billion in estimated large bank surcharges for the fourth quarter
2016. Additionally, the DIF recognized an adjustment of $20 million that increased assessment
revenue. This adjustment consisted of a $45 million increase from prior period amendments
and a $25 million decrease to the estimate for third quarter 2016 insurance coverage recorded
at September 30, 2016. The latter adjustment was primarily due to lower than estimated
assessment rates for several large banks.
On December 30, 2016, the FDIC collected $1.5 billion in DIF regular assessments and $1.2
billion in surcharge assessments for third quarter 2016 insurance coverage.
II. Investment Results (See pages 10 - 11 for detailed data and charts.)
DIF Investment Portfolio
On December 31, 2016, the total liquidity (also total market value) of the DIF investment
portfolio stood at $75.3 billion, up $11.6 billion from its December 31, 2015, balance of $63.7
billion. During the year, interest revenue, receivership dividends, and deposit insurance
assessment collections exceeded resolution-related outlays and operating expenses.
On December 31, 2016, the DIF investment portfolio’s yield was 1.12 percent, up 18 basis
points from its December 31, 2015, yield of 0.94 percent. The new Treasury securities
purchased during the year generally had higher yields than the maturing securities’ yields,
some considerably higher.
In accordance with the approved fourth quarter 2016 DIF portfolio investment strategy, staff
purchased a total of 21 short- to intermediate-maturity conventional Treasury securities, all