Federal Deposit Insurance Corporation
55017th Street N W Washington D.C. 20429-9990 Deputy to the Chairman and CFO
August 22, 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: Second Quarter 2017 CFO Report to the Board
The attached report highlights the FDIC's financial activities and results for the quarter ended
June 30,2017.
Executive Summary
• During the second quarter of 2017,the Deposit Insurance Fund (DIF) balance increased by
$2.7 billion, from $84.9 billion at March 31, 2017 to $87.6 billion at June 30, 2017. The
quarterly increase was primarily due to $2.6 billion of assessment revenue, $251 million of
interest on U.S. Treasury securities, and a $233 million decrease in provision for insurance
losses, partially offset by $450 million of operating expenses.
• The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.24
percent for the second quarter 2017, compared to the first quarter 2017 reserve ratio of 1.20
percent.
• During the second quarter of 2017,the FDIC was named receiver for three failed institutions.
The combined assets at inception for these failed institutions were $4.6 billion with estimated
losses of $1.0 billion. The corporate cash outlay during the second quarter for these failures
was approximately $2.6 billion.
• Through June 30,2017, overall FDIC Operating Budget expenditures were below budget by 5
percent($53 million). This variance was primarily the result of vacancies in budgeted
positions in the Ongoing Operations budget. In the Receivership Funding budget component,
the variance was aftributable to lower-than-anticipated expenses for outside legal services and
facility-related expenses.
55017th Street N W Washington D.C. 20429-9990 Deputy to the Chairman and CFO
August 22, 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: Second Quarter 2017 CFO Report to the Board
The attached report highlights the FDIC's financial activities and results for the quarter ended
June 30,2017.
Executive Summary
• During the second quarter of 2017,the Deposit Insurance Fund (DIF) balance increased by
$2.7 billion, from $84.9 billion at March 31, 2017 to $87.6 billion at June 30, 2017. The
quarterly increase was primarily due to $2.6 billion of assessment revenue, $251 million of
interest on U.S. Treasury securities, and a $233 million decrease in provision for insurance
losses, partially offset by $450 million of operating expenses.
• The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.24
percent for the second quarter 2017, compared to the first quarter 2017 reserve ratio of 1.20
percent.
• During the second quarter of 2017,the FDIC was named receiver for three failed institutions.
The combined assets at inception for these failed institutions were $4.6 billion with estimated
losses of $1.0 billion. The corporate cash outlay during the second quarter for these failures
was approximately $2.6 billion.
• Through June 30,2017, overall FDIC Operating Budget expenditures were below budget by 5
percent($53 million). This variance was primarily the result of vacancies in budgeted
positions in the Ongoing Operations budget. In the Receivership Funding budget component,
the variance was aftributable to lower-than-anticipated expenses for outside legal services and
facility-related expenses.
1. Financial Results(See pages 6 - 7for detailed data and charts.)
Deposit Insurance Fund
For the six months ending June 30,2017,the DIF's comprehensive income totaled $4.4 billion
compared to comprehensive income of $5.3 billion for the same period last year. This $884
million decline was primarily the result of a $1.2 billion increase in provision for insurance
losses(year-to-date 2017 positive $532 million versus year-to-date 2016 negative $670
million) and a $527 million lower contribution to year-to-date comprehensive income from
unrealized (loss)/gain on U.S. Treasury securities (year-to-date 2097 unrealized loss of $5
million versus year-to-date 2016 unrealized gain of $522 million), partially offset by a $715
million increase in assessment revenue and a $167 million increase.in interest revenue.
• The provision for insurance losses was $532 million for the first half of 2017, largely
attributable to a $683 million adjustment for higher-than-anticipated losses for the current year
failures, partially offset by a $103 million reduction to the receivership's representation and
warranty liabilities and $63 million in unanticipated recoveries by receiverships,
Assessments
During June, the DIF recognized assessment revenue of $2.6 billion. Of this amount, $1.4
billion represented the estimate for second quarter 2017 insurance coverage and $1.2 billion
represented estimated surcharges on banks with $10 billion or more in assets, Additionally,
the DIF recognized a $43 million adjustment for lower-than-estimated collections for first
quarter 2017 insurance coverage(regular assessments:$37 million and surcharges:$6
million), which decreased assessment revenue.
• On June 30, 2017, the FDIC collected $1.4 billion in DIF assessments and $1.2 billion in
surcharge assessments for first quarker 2017 insurance coverage.
II. Investment Results(See pages 8 - 9 for detailed data and charts.)
DIF Investment Portfolio
• On June 30,2017, the total liquidity (also total market value) of the DIF investment portfolio
stood at $78.8 billion, up $3,5 billion from its December 31, 2016, balance of $75.3 billion.
During the first half of the year, interest revenue, receivership dividends, and deposit
insurance assessment collections exceeded resolution-related outlays and operating
expenses,
• On June 30, 2017, the DIF investment portfolio's yield was 1.35 percent, up 23 basis points
from its 1.12 percent yield on December 31, 2016. The new Treasury securities purchased
during the first half of the year generally had higher yields than the maturing securities' yields,
some considerably higher.
• In accordance with the approved second quarter 2017 DIF portfolio investment strategy, staff
purchased a total of 13 short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale. The 13 securities had a total par value of $8.4 billion, a
weighted average yield of 1.49 percent, and a weighted average maturity of 2.73 years.
Deposit Insurance Fund
For the six months ending June 30,2017,the DIF's comprehensive income totaled $4.4 billion
compared to comprehensive income of $5.3 billion for the same period last year. This $884
million decline was primarily the result of a $1.2 billion increase in provision for insurance
losses(year-to-date 2017 positive $532 million versus year-to-date 2016 negative $670
million) and a $527 million lower contribution to year-to-date comprehensive income from
unrealized (loss)/gain on U.S. Treasury securities (year-to-date 2097 unrealized loss of $5
million versus year-to-date 2016 unrealized gain of $522 million), partially offset by a $715
million increase in assessment revenue and a $167 million increase.in interest revenue.
• The provision for insurance losses was $532 million for the first half of 2017, largely
attributable to a $683 million adjustment for higher-than-anticipated losses for the current year
failures, partially offset by a $103 million reduction to the receivership's representation and
warranty liabilities and $63 million in unanticipated recoveries by receiverships,
Assessments
During June, the DIF recognized assessment revenue of $2.6 billion. Of this amount, $1.4
billion represented the estimate for second quarter 2017 insurance coverage and $1.2 billion
represented estimated surcharges on banks with $10 billion or more in assets, Additionally,
the DIF recognized a $43 million adjustment for lower-than-estimated collections for first
quarter 2017 insurance coverage(regular assessments:$37 million and surcharges:$6
million), which decreased assessment revenue.
• On June 30, 2017, the FDIC collected $1.4 billion in DIF assessments and $1.2 billion in
surcharge assessments for first quarker 2017 insurance coverage.
II. Investment Results(See pages 8 - 9 for detailed data and charts.)
DIF Investment Portfolio
• On June 30,2017, the total liquidity (also total market value) of the DIF investment portfolio
stood at $78.8 billion, up $3,5 billion from its December 31, 2016, balance of $75.3 billion.
During the first half of the year, interest revenue, receivership dividends, and deposit
insurance assessment collections exceeded resolution-related outlays and operating
expenses,
• On June 30, 2017, the DIF investment portfolio's yield was 1.35 percent, up 23 basis points
from its 1.12 percent yield on December 31, 2016. The new Treasury securities purchased
during the first half of the year generally had higher yields than the maturing securities' yields,
some considerably higher.
• In accordance with the approved second quarter 2017 DIF portfolio investment strategy, staff
purchased a total of 13 short- to intermediate-maturity conventional Treasury securities, all
designated as available-for-sale. The 13 securities had a total par value of $8.4 billion, a
weighted average yield of 1.49 percent, and a weighted average maturity of 2.73 years.