Federal Deposit Insurance Corporation
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
November 17, 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: Third Quarter 2017 CFO Report to the Board
The attached report highlights the FDIC’s financial activities and results for the quarter ended
September 30, 2017.
Executive Summary
During the third quarter of 2017, the Deposit Insurance Fund (DIF) balance increased by $2.9
billion, from $87.6 billion at June 30, 2017 to $90.5 billion at September 30, 2017. The quarterly
increase was primarily due to $2.6 billion of assessment revenue, $274 million of interest on U.S.
Treasury securities, and a $512 million decrease in provision for insurance losses, partially offset
by $404 million of operating expenses.
The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.28
percent for the third quarter 2017, compared to the second quarter 2017 reserve ratio of 1.24
percent.
There were no financial institution failures during the third quarter of 2017.
Through September 30, 2017, overall FDIC Operating Budget expenditures were below budget by
8 percent ($119 million). This variance was primarily the result of higher than expected vacancies
in budgeted positions during the year. In addition, lower-than-anticipated expenses for facilities,
outside legal counsel, and other outside services contributed to the variance.
550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO
November 17, 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: Third Quarter 2017 CFO Report to the Board
The attached report highlights the FDIC’s financial activities and results for the quarter ended
September 30, 2017.
Executive Summary
During the third quarter of 2017, the Deposit Insurance Fund (DIF) balance increased by $2.9
billion, from $87.6 billion at June 30, 2017 to $90.5 billion at September 30, 2017. The quarterly
increase was primarily due to $2.6 billion of assessment revenue, $274 million of interest on U.S.
Treasury securities, and a $512 million decrease in provision for insurance losses, partially offset
by $404 million of operating expenses.
The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.28
percent for the third quarter 2017, compared to the second quarter 2017 reserve ratio of 1.24
percent.
There were no financial institution failures during the third quarter of 2017.
Through September 30, 2017, overall FDIC Operating Budget expenditures were below budget by
8 percent ($119 million). This variance was primarily the result of higher than expected vacancies
in budgeted positions during the year. In addition, lower-than-anticipated expenses for facilities,
outside legal counsel, and other outside services contributed to the variance.
2
I. Financial Results (See pages 5 – 6 for detailed data and charts.)
Deposit Insurance Fund
For the nine months ending September 30, 2017, the DIF’s comprehensive income totaled $7.3
billion compared to comprehensive income of $8.1 billion for the same period last year. This $760
million decline was primarily the result of a $1.3 billion increase in provision for insurance losses
(year-to-date 2017 positive $20 million versus year-to-date 2016 negative $1.2 billion) and a $393
million lower contribution to year-to-date comprehensive income from unrealized (loss)/gain on
U.S. Treasury securities (year-to-date 2017 unrealized loss of $38 million versus year-to-date 2016
unrealized gain of $355 million), partially offset by a $640 million increase in assessment revenue
and a $270 million increase in interest revenue.
The provision for insurance losses was $20 million for year-to-date 2017, compared to negative
$1.2 billion for year-to-date 2016. The provision for 2017 primarily resulted from a decrease of
$702 million to the estimated losses for prior year failures offset by a $683 million adjustment for
higher-than-anticipated losses at the time of failure for current year failures, as compared to the
estimated liability at year-end 2016. Reductions for estimated losses for prior year failures
occurred in both periods; however, the decreases in 2016 were approximately 40 percent more
than those in 2017 ($702 million for year-to-date 2017 and $1.2 billion for year-to-date 2016).
Assessments
During September, the DIF recognized assessment revenue of $2.6 billion. Of this amount, $1.4
billion represented the estimate for the third quarter 2017 insurance coverage and $1.2 billion
represented estimated assessment surcharges on banks with $10 billion or more in assets.
Additionally, the DIF recognized a $67 million adjustment for lower-than-estimated collections for
the second quarter 2017 insurance coverage (regular assessments and surcharges), which
decreased assessment revenue.
On September 29, 2017, the FDIC collected $1.4 billion in DIF regular assessments and $1.2
billion in surcharge assessments for second quarter 2017 insurance coverage.
II. Investment Results (See pages 7 - 8 for detailed data and charts.)
DIF Investment Portfolio
On September 30, 2017, the total liquidity (also total market value) of the DIF investment portfolio
stood at $81.2 billion, up $5.9 billion from its December 31, 2016, balance of $75.3 billion. During
the first three quarters of the year, interest revenue, receivership dividends, and deposit insurance
assessment collections exceeded resolution-related outlays and operating expenses.
On September 30, 2017, the DIF investment portfolio’s yield was 1.42 percent, up 30 basis points
from its 1.12 percent yield on December 31, 2016. The new Treasury securities purchased during
the first three quarters of the year generally had higher yields than the maturing securities’ yields,
some considerably higher.
In accordance with the approved third quarter 2017 DIF portfolio investment strategy, staff
purchased a total of 19 short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale. The 19 securities had a total par value of $10.2 billion, a
weighted average yield of 1.56 percent, and a weighted average maturity of 2.73 years.
I. Financial Results (See pages 5 – 6 for detailed data and charts.)
Deposit Insurance Fund
For the nine months ending September 30, 2017, the DIF’s comprehensive income totaled $7.3
billion compared to comprehensive income of $8.1 billion for the same period last year. This $760
million decline was primarily the result of a $1.3 billion increase in provision for insurance losses
(year-to-date 2017 positive $20 million versus year-to-date 2016 negative $1.2 billion) and a $393
million lower contribution to year-to-date comprehensive income from unrealized (loss)/gain on
U.S. Treasury securities (year-to-date 2017 unrealized loss of $38 million versus year-to-date 2016
unrealized gain of $355 million), partially offset by a $640 million increase in assessment revenue
and a $270 million increase in interest revenue.
The provision for insurance losses was $20 million for year-to-date 2017, compared to negative
$1.2 billion for year-to-date 2016. The provision for 2017 primarily resulted from a decrease of
$702 million to the estimated losses for prior year failures offset by a $683 million adjustment for
higher-than-anticipated losses at the time of failure for current year failures, as compared to the
estimated liability at year-end 2016. Reductions for estimated losses for prior year failures
occurred in both periods; however, the decreases in 2016 were approximately 40 percent more
than those in 2017 ($702 million for year-to-date 2017 and $1.2 billion for year-to-date 2016).
Assessments
During September, the DIF recognized assessment revenue of $2.6 billion. Of this amount, $1.4
billion represented the estimate for the third quarter 2017 insurance coverage and $1.2 billion
represented estimated assessment surcharges on banks with $10 billion or more in assets.
Additionally, the DIF recognized a $67 million adjustment for lower-than-estimated collections for
the second quarter 2017 insurance coverage (regular assessments and surcharges), which
decreased assessment revenue.
On September 29, 2017, the FDIC collected $1.4 billion in DIF regular assessments and $1.2
billion in surcharge assessments for second quarter 2017 insurance coverage.
II. Investment Results (See pages 7 - 8 for detailed data and charts.)
DIF Investment Portfolio
On September 30, 2017, the total liquidity (also total market value) of the DIF investment portfolio
stood at $81.2 billion, up $5.9 billion from its December 31, 2016, balance of $75.3 billion. During
the first three quarters of the year, interest revenue, receivership dividends, and deposit insurance
assessment collections exceeded resolution-related outlays and operating expenses.
On September 30, 2017, the DIF investment portfolio’s yield was 1.42 percent, up 30 basis points
from its 1.12 percent yield on December 31, 2016. The new Treasury securities purchased during
the first three quarters of the year generally had higher yields than the maturing securities’ yields,
some considerably higher.
In accordance with the approved third quarter 2017 DIF portfolio investment strategy, staff
purchased a total of 19 short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale. The 19 securities had a total par value of $10.2 billion, a
weighted average yield of 1.56 percent, and a weighted average maturity of 2.73 years.