Federal Deposit Insurance Corporation 

550 17th Street, N.W., Washington, D.C. 20429-9990 Deputy to the Chairman and CFO

 

 March 3, 2010 

MEMORANDUM TO: The Board of Directors 

FROM: Steven O. App 

Deputy to the Chairman and 

 Chief Financial Officer 

Bret D. Edwards 

Director, Division of Finance 

SUBJECT: Fourth Quarter 2009 CFO Report to the Board 

The attached report highlights the Corporation’s financial activities and results for the period ending 

December 31, 2009. 

Executive Summary

 The year-end financial results presented in this report are unaudited. We expect our external 

auditor, the U. S. Government Accountability Office, to conclude their audits of the FDIC 

financial statements in April. 

 For the fourth quarter of 2009, the Deposit Insurance Fund (DIF) balance decreased by $12.6 

billion (153 percent) to negative $20.9 billion. This decrease was primarily due to a $17.8 

billion increase in the provision for insurance losses, which was partially offset by a $3.1 

billion increase in assessment revenue. Although the fund balance decreased in the fourth 

quarter, the unrestricted cash and cash equivalents increased by $45.5 billion, primarily due to 

the collection of prepaid assessments. 

 During the fourth quarter of 2009, the FDIC was named receiver for 45 failed institutions. The 

combined assets at inception for these institutions totaled approximately $64.9 billion with a 

total estimated loss of $10.0 billion. The corporate cash outlay during the fourth quarter for 

these failures was $7.8 billion. The FDIC entered into loss-share agreements with the acquiring 

institution for 34 of these receiverships, with expected loss-share payments due to the acquirers 

of approximately $6.4 billion over the length of the agreements. 

 For the year ending December 31, 2009, expenditures from the Corporate Operating Budget 

and the Investment Budget ran below budget by 9 percent ($226.8 million) and 2 percent ($0.1 

million), respectively. The variance with respect to the Corporate Operating Budget was 

primarily the result of lower spending for contractual services in the Receivership Funding 

component of the budget. For the information technology projects that make up the Investment 

Budget, detailed quarterly reports are provided separately to the Board by the Capital 

Investment Review Committee. 
2

The following is an assessment of each of the three major finance areas: financial statements, 

investments, and budget. 

Trends and Outlook

Financial Results Comments 

I. Financial 

Statements 

 Although the DIF’s fund balance declined by $38.1 billion during 2009, 

the DIF’s liquidity was significantly enhanced by prepaid assessments 

inflows–cash and marketable securities stood at $66.0 billion at yearend. Hence, the DIF is well positioned to fund resolution activity in 

2010 and beyond. 

 As of December 31, 2009, the DIF’s exposure, as a result of resolving 

many failed institutions utilizing whole bank with loss-share 

transactions, has increased substantially. DIF receiverships’ remaining 

loss-share payment exposure is approximately $21.3 billion over the 

term of the loss-share agreements. The estimated liability for loss 

sharing is accounted for by the individual receiverships and is 

considered in the determination of the DIF’s allowance for loss against 

the corporate receivable from the resolution. 

 During 2009, the FDIC in its corporate capacity offered guarantees on 

loans issued by newly-formed limited liability companies (LLCs) that 

were created to dispose of certain residential mortgage loans, 

construction loans, and other assets of two receiverships. As of 

December 31, 2009, the DIF is not expected to take any losses on these 

guarantees. 
3

Trends and Outlook

Financial Results Comments 

II. Investments  The DIF investment portfolio’s amortized cost (book value) increased 

by $32.7 billion during 2009, and totaled $59.3 billion on December 31, 

2009. To a large extent, the increase was the result of the portfolio 

receiving almost $45.7 billion in prepaid deposit insurance assessments 

and $3.2 billion in regular deposit insurance assessments at the end of 

December 2009. Prior to the receipt of those funds, the DIF investment 

portfolio had declined significantly over the course of the year due to 

funding 140 failed institution resolutions during 2009. However, it 

should be noted that 90 of these bank and thrift failures were resolved 

as loss-share transactions (in which the acquirers purchased 

substantially all of the failed institutions’ assets and the FDIC and the 

acquirers entered into loss-share agreements) requiring little or no initial 

resolution funding, thus helping to mitigate the DIF portfolio’s decline. 

At year-end, the DIF investment portfolio’s yield was 0.49 percent, 

down 410 basis points from its December 31, 2008, yield of 4.59 

percent. The yield decline stemmed from several factors; in addition to 

the sale and maturity of generally higher-yielding securities during 

much of the year, the DIF investment portfolio received a total of $48.9 

billion in insurance assessments at year-end, and all of those new funds 

were placed in overnight investments. Consequently, the DIF portfolio 

ended the year with a very high $53.9 billion overnight investment 

balance earning an ultra-low 0.02 percent yield. 

 Most conventional Treasury market yields increased during the fourth 

quarter of 2009—particularly longer-maturity conventional Treasury 

yields—after having declined during the third quarter of 2009. The 

yield increases probably reflected investors’ growing confidence of an 

economic turnaround; moreover, longer-maturity Treasury yields 

appear to be subject to upward pressure as increasing amounts of new 

Treasuries are issued to help finance Federal budget deficits. 

Nevertheless, Treasury yields remain relatively low from a historical 

perspective, largely reflecting the still comparatively weak U.S. 

economy, the ultra-low federal funds target rate, and investors’ modest 

inflationary expectations. During the first quarter of 2010, Treasury 

yields are expected to continue to trade within a range around current 

levels, and to gradually rise over the next several quarters, allowing that 

the economic recovery continues to take hold and solidify. 
4

Trends and Outlook

Financial Results Comments 

III. Budget  Approximately $1.2 billion was spent in the Ongoing Operations 

component of the 2009 Corporate Operating Budget, which was $24.3 

million (2 percent) below the budget for the year. Spending exceeded 

budgeted levels by a combined $7.7 million in the Travel and 

Equipment expense categories, but this was offset by a combined $32.0 

million in under spending in all of the remaining expense categories. 

 Approximately $1.1 billion was spent in the Receivership Funding 

component of the 2009 Corporate Operating Budget, which was $202.5 

million (16 percent) below the budget for the year. Most of the under 

spending ($101.5 million) occurred in the Outside Services – Personnel 

expense category. 

 Authorized staffing increased by 12 percent, from 6,269 at the 

beginning of the year to 7,010 at the end of 2009. Similar to last year, 

this increase was attributable primarily to increased resolution and 

receivership management activity and the elevated examination 

workload that resulted from a rise in the number of troubled institutions. 

In December, the Board approved a further increase in authorized 

staffing for 2010 to 8,653. Approximately 93 percent of the additional 

positions for 2009 and 2010 are non-permanent. On board staff 

increased from 4,988 at the beginning of the year to 6,557 at the end of 

2009, primarily due to the hiring in the Division of Resolutions and 

Receiverships, Division of Supervision and Consumer Protection, and 

the Legal Division. 

I. Corporate Fund Financial Results (See pages 11 - 12 for detailed data and charts.) 

Deposit Insurance Fund (DIF) 

 For 2009, the DIF’s comprehensive loss was $38.1 billion compared to a comprehensive loss of 

$35.1 billion during 2008. This year-over-year change of $3.0 billion was primarily due to a 

$15.9 billion increase in the provision for insurance losses, a $4.0 billion increase in the 

unrealized loss on U.S. Treasury investments, and a $1.4 billion decrease in interest earned on 

U.S. Treasury obligations, partially offset by a $14.8 billion increase in assessment revenue and 

a $3.4 billion increase in other revenue. 

 Other revenue was $3.4 billion for 2009 primarily due to guarantee termination fees of $2.3 

billion and the collection of debt issuance surcharges under the Temporary Liquidity Guarantee 

Program (TLGP) of $872 million. In connection with the termination of the loss-share 

agreement with Bank of America and Citigroup, the FDIC received a termination fee of $92 

million from Bank of America and recognized revenue of $2.2 billion for the carrying amount 

of the Citigroup trust preferred securities received as consideration for the guarantee. 

 The provision for insurance losses was $57.7 billion in 2009. The total provision consists 

mainly of the increase in the provision for future failures ($20.0 billion) and the losses 

estimated at failure for the 140 resolutions occurring during 2009 ($35.6 billion). 
5

 On December 30, 2009, the FDIC collected prepaid assessments of $45.7 billion for the 

coverage period of October 2009 through December 2012. The DIF recognized the amount 

collected as both an asset (cash) and an offsetting liability (unearned revenue). Hereafter, the 

DIF will recognize revenue for the regular risk-based assessments quarterly as it is earned. 

II. Investments

Investment Results (See pages 13 - 14 for detailed data and charts.)

DIF Investment Portfolio 

 The amortized cost (book value) of the DIF investment portfolio increased by $32.7 billion 

during 2009, or by 123 percent, from $26.6 billion on December 31, 2008, to $59.3 billion on 

December 31, 2009. Similarly, the DIF portfolio’s market value increased by $30.6 billion, or 

by 106 percent, from $28.8 billion on December 31, 2008, to $59.4 billion on December 31, 

2009. During the year, deposit insurance assessment collections—including the $45.7 billion 

in prepaid assessment collected at the end of December 2009—and other cash inflows 

exceeded operating expenses and resolution-related cash outlays. 

 The DIF investment portfolio’s total return for 2009 was 0.306 percent, approximately 172 

basis points higher than that of its benchmark, the Merrill Lynch 1 – 10 Year U.S. Treasury 

Index (Index), which had a total return of -1.411 percent during the same period. The DIF 

portfolio’s higher-yielding Treasury Inflation-Protected Securities (TIPS) considerably 

outperformed the Index’s conventional Treasury securities. In addition, because the DIF’s 

conventional Treasury securities have a lower average duration than the securities held in the 

Index—and given the substantial increase in yields over the course of the year on longerduration securities—the DIF’s conventional Treasury securities outperformed those in the 

Index. Finally, the DIF portfolio’s high cash balances helped contribute to the positive relative 

return. 

 During the fourth quarter of 2009, staff did not need to sell any Treasury securities to help fund 

resolution-related cash outlays, as the DIF had received about $8.7 billion at the end of the third 

quarter of 2009 from regular quarterly deposit insurance assessments and special assessments. 

Although there were 45 bank failures during the fourth quarter, resolution outlays were 

relatively low, as several of the larger failures were resolved as whole bank transactions with 

loss-share agreements. 

Other Corporate Investment Portfolios 

 During 2009, the book value of the Debt Guarantee Program investment portfolio increased 

substantially, from $2.4 billion on December 31, 2008 to $6.4 billion on December 31, 2009. 

The funds in this portfolio are from the guarantee fees related to the Debt Guarantee Program 

under the TLGP. More recently, during the fourth quarter, the book value of the Debt 

Guarantee Program investment portfolio decreased from $7.0 billion on September 30, 2009, to 

the aforementioned $6.4 billion. The recent decline in funds was due to the fact that new Debt 

Guarantee Program fees received were less than the transfer of funds that were used to 

reimburse the DIF for claims under the TLGP’s Transaction Account Guarantee Program. 
6

Consistent with the approved quarterly investment strategy, all Debt Guarantee Program 

investment portfolio funds were invested in overnight investments during the quarter. 

 During 2009, the Other Systemic Risk Reserves investment portfolio increased from $0 on 

December 31, 2008, to $191.6 million on December 31, 2009, reflecting the receipt over the 

course of the year of three dividend payments totaling $191.6 million on the $3.0 billion of 

Citigroup trust preferred securities held by the DIF. As a result of an agreement executed on 

December 23, 2009 that terminated the FDIC’s guarantee against losses on a portfolio of 

Citigroup assets, the entire balance of funds held in the Other Systemic Risk Reserves 

investment portfolio were transferred to the DIF, effective December 31, 2009. 

 On December 31, 2009, the FDIC collected $188.7 million in fees related to the Transaction 

Account Guarantee Program under the TLGP. However, these funds were then immediately 

transferred to the Debt Guarantee Program investment portfolio for reimbursement of claims 

and expenses, so the Transaction Account Guarantee Program investment portfolio had no 

balance at year end. 

The Treasury Market 

 During the fourth quarter of 2009, most conventional Treasury yields increased, with the 

largest increases seen in longer-maturity securities. The three-month Treasury bill (T-Bill) 

yield actually declined by 6 basis points, while the six-month T-Bill increased by 2 basis 

points. The yield on the two-year Treasury note, which also is very sensitive to actual and 

anticipated changes in the federal funds rate, increased by 19 basis points, still reflecting 

consensus forecasts for no significant changes in the federal funds target rate over the near 

term. Intermediate- to longer-maturity Treasury security yields increased more substantially; 

the yield on the five-year Treasury note increased by 37 basis points, and the yield on the tenyear Treasury note increased by 53 basis points. Finally, the 30-year Treasury bond yield 

increased by 59 basis points. The conventional Treasury yield curve steepened further during 

the fourth quarter. On December 31, 2009, the two- to ten-year yield curve had a 270-basis 

point positive spread (higher than the 236-basis point spread at the beginning of the quarter). 

Over the past five years, this spread has averaged 93 basis points. 

Prospective Strategies 

 In light of the large cash infusion received during the fourth quarter of 2009, the first quarter 

2010 DIF investment strategy calls for purchasing up to $25.0 billion of shorter-term Treasury 

securities with maturities between April 1, 2010, and December 31, 2010. This strategy 

attempts to balance the need to maintain sufficient portfolio liquidity for the funding of 

potential near-term resolutions against the yield pick-up that can be obtained by investing in 

short-maturity securities. 

 Similar to the first quarter 2010 DIF investment strategy outlined above, for the Debt 

Guarantee Program investment portfolio, staff will consider purchasing up to $3.0 billion of 

Treasury securities with maturities between April 1, 2010, and December 31, 2010. This 

strategy attempts to balance the need to maintain sufficient portfolio liquidity against the yield 

pick-up that can be obtained by investing in short-maturity securities. 
7

III. Budget Results (See pages 15 - 16 for detailed data.) 

Approved Budget Modifications 

The 2009 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other 

officials the authority to make certain modifications to the 2009 Corporate Operating Budget. The 

following budget reallocations were made during the fourth quarter in accordance with the 

authority delegated by the Board of Directors. None of these modifications changed the total 2009 

Corporate Operating Budget approved by the Board in December 2008. 

 In November 2009, existing budget authority within the Ongoing Operations Budget 

component was reallocated among certain Executive Offices and between expense categories. 

All reallocations were less than $25,000 between expense categories and less than $12,000 

between offices. 

 In December 2009, the CFO approved the reallocation of existing budget authority within the 

Salaries and Compensation expense category of the Ongoing Operations component of the 

2009 Corporate Operating Budget to reflect updated salary and benefit expense estimates for 

several divisions and offices. This reallocation was based upon an analysis of actual spending 

for salaries, bonuses, and fringe benefits through November 30, 2009, and on-board staffing 

estimates through year-end. 

 In December 2009, the CFO approved the reallocation of $103,000 in existing budget authority 

in the Executive Offices within the Travel expense category of the Ongoing Operations 

component of the 2009 Corporate Operating Budget. 

Approved Staffing Modifications 

The 2009 Budget Resolution delegated to the CFO the authority to modify approved 2009 staffing 

authorizations for divisions and offices, as long as those modifications did not increase the total 

approved 2009 Corporate Operating Budget. The following change was approved by the CFO in 

accordance with the authority delegated to him by the Board of Directors: 

 In November 2009, one position was transferred from the COO to the CFO within the 

Executive Offices. This authorized position will assist with duties that have been recently 

transferred to the CFO. 

Spending Variances 

Significant spending variances by major expense category and division/office are discussed below. 

Significant spending variances for the year ending December 31, 2009, are defined as those that 

either (a) exceed the annual budget for a major expense category or total division/office budget, or 

(b) are under the annual budget for a major expense category or division/office by an amount that 

exceeds $1 million and represents more than 3 percent of the major expense category or total 

division/office budget. 
8

Significant Spending Variances by Major Expense Category 

Ongoing Operations

There were significant spending variances in six major expense categories for the year in the 

Ongoing Operations component of the 2009 Corporate Operating Budget: 

 Outside Services – Personnel expenditures were approximately $9.9 million, or 5 percent, less 

than budgeted. Approximately $4.6 million (46 percent) of this variance was attributable to 

under spending for contract support for DIT internal operations and systems development and 

maintenance activities overseen by the CIO Council. Under spending for DIT operations was 

largely attributable to delays in project startups as attention was redirected to failed financial 

institution closing support. In addition, the Legal Division spent $3.2 million less than 

budgeted largely due to an earlier-than-planned reduction in contracting support for the Tier 2 

Deposit Insurance Call Center. The Office of Inspector General (OIG) also spent $1.3 million 

less than budgeted due to lower levels of contract work than was expected during the year. 

 Travel expenditures were $2.9 million, or 4 percent, greater than budgeted, largely due to the 

increase in the number of examinations conducted and the rapid increase in the number of 

examination staff. 

 Buildings expenditures were $8.0 million, or 11 percent, less than budgeted, largely due to 

tenant improvement allowance savings in the New York Regional Office, Boston Area and 

field offices, and the Chicago Regional Office. 

 Equipment expenditures were approximately $4.8 million, or 7 percent, more than budgeted, 

primarily due to increased security software licensing costs attributable to the larger number of 

FDIC employees and contractors on board and software purchased by the CIO Council in 

support of the E-Discovery project; the purchase of FF&E for an expanded number of staff in 

the newly-leased New York Regional Office and many field offices; and increased costs for 

online library services. 

 Outside Services – Other expenditures were approximately $1.7 million, or 8 percent, less than 

budgeted. The variance was largely due to significant under spending for the deposit insurance 

awareness campaign. All remaining campaign elements are expected to be completed before 

the existing support contract expires on March 31, 2010. 

 Other Expenses were approximately $3.1 million, or 23 percent, less than budgeted. The 

variance was fully attributable to under spending of budgeted allowances for Professional 

Learning Accounts. 

Receivership Funding

The Receivership Funding component of the 2009 Corporate Operating Budget includes funding 

for expenses that are incurred in conjunction with institution failures and the management and 

disposition of the assets and liabilities of the ensuing receiverships. It does not, however, include 

salary and benefits expenses for permanent employees who form the base staffing platform for 

potential resolution and receivership management activity. Those expenses are included in the 

Ongoing Operations component of the operating budget. 
9

Significant spending variances occurred in all seven major expense categories for the year in the 

Receivership Funding component of the 2009 Corporate Operating Budget: 

 Salaries and Compensation ($16.6 million, or 15 percent, less than budgeted). 

 Outside Services – Personnel ($101.5 million, or 12 percent, less than budgeted). 

 Travel ($32.6 million, or 54 percent, less than budgeted). 

 Buildings ($18.5 million, or 13 percent, less than budgeted). 

 Equipment ($12.5 million, or 28 percent, less than budgeted). 

 Outside Services – Other ($5.7 million, or 27 percent, less than budgeted). 

 Other Expenses ($15.1 million, or 31 percent, less than budgeted). 

These variances were all attributable to lower-than-planned resolutions and receivership activity 

during the fourth quarter. The Receivership Funding component of the budget was increased by 

$300 million in December 2009 to ensure that ample budget authority existed to fund the 

continuing costs of active receiverships, the management of assets already in inventory, and the 

resolution of all bank failures that were potentially expected to occur through year-end. Although 

actual failures and their resultant expenses were substantial and exceeded the original 2009 

Receivership Funding budget authority, these expenses fell short of the additional budgeted 

authority provided by the Board. Such variances occur frequently in the Receivership Funding 

component of the budget due to the need to maintain adequate funding for sudden and unexpected 

failure resolution expenses. 

Significant Spending Variances by Division/Office1

Seven organizations had significant spending variances for the year: 

 The Division of Resolutions and Receiverships spent approximately $179.2 million, or 15 

percent, less than budgeted. The variance was attributable to lower-than-budgeted spending in 

the Receivership Funding budget component, as explained above. 

 The Division of Administration spent approximately $19.6 million, or 8 percent, less than 

budgeted. This variance was largely due to spending nearly $14.4 million less than budgeted in 

the combined Buildings expense categories of the Ongoing Operations and Receivership 

Funding Budget components. This was attributable to lower expenses resulting from landlord 

concessions as well as unused Receivership Funding Budget authority for unexpected 

administrative support requirements related to the resolution of failed institutions. 

 The Division of Information Technology spent approximately $10.1 million, or 4 percent, less 

than budgeted for the year. Nearly $8.5 million of this variance was in the Receivership 

Funding budget component and was primarily the result of lower-than-planned resolutions and 

receivership activity in the fourth quarter. 

 The OIG spent approximately $3.8 million, or 13 percent, less than budgeted. The variance 

was principally due to the fact that the OIG operated for virtually all of the fourth quarter under 

a continuing resolution, which effectively froze OIG spending at its FY 2009 appropriation 

level, which was 38 percent below the level authorized under the FY 2010 appropriation. 

 

1

 Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets. 
10

These funding limitations precluded the OIG from filling vacant authorized positions and 

executing certain procurement actions, thus resulting in less-than-anticipated expenditures in 

the fourth quarter. 

 Corporate University spent approximately $3.6 million, or 7 percent, less than budgeted. This 

variance was primarily due to fewer travel and overtime expenses for Financial Institution 

Specialists to participate in closings and other receivership related matters as well as 

adjustments to client project timeframes. 

 The Executive Support spent approximately $3.1 million, or 11 percent, less than budgeted. 

This variance was largely due to lower-than-budgeted spending on the deposit insurance 

awareness campaign by the Office of Public Affairs and unspent Receivership Funding budget 

authority of $1.1 million for Salaries and Compensation in the Office of the Ombudsman due to 

delays in hiring staff at the temporary satellite offices. 

 The Executive Offices spent $1.2 million, or 13 percent, less than budgeted, due to vacancies in 

budgeted positions in certain offices during the year and unspent Travel budget authority in 

Office of the Chief Operating Officer. 
Balance Sheet

Unaudited Unaudited Quarterly Audited Year-Over-Year

Dec-09 Sep-09 Change Dec-08 Change

Cash & cash equivalents - unrestricted $ 8,546 54,092 $ 45,546 $ 1,011 $ 53,081 $ 

Cash & cash equivalents - restricted - systemic risk 7,141 6,431 2,377 (710) 4,054 

Investment in U.S. Treasury obligations, net 7,590 5,487 27,859 (2,103) (22,372)

Trust preferred securities - 1,962 1,962 - 1,962 

Assessments receivable, net 3,353 365 1,018 (2,988) (653)

Receivables and other assets, net - systemic risk 5,110 3,301 1,138 (1,809) 2,163 

Interest receivable on investments and other assets, net 159 207 48 405 (198)

Receivables from resolutions, net 30,321 38,399 8,078 15,765 22,634 

Property, buildings and other capitalized assets, net 375 388 13 370 18 

Total Assets $ 62,595 110,632 $ 48,037 $ 49,943 $ 60,689 $ 

Accounts payable and other liabilities 274 198 76 184 90

Unearned revenue - prepaid assessments 42,776 - 42,776 - 42,776

Liabilities due to resolutions ($470M-TLGP's liability) 34,712 20,106 14,606 4,672 30,040

Deferred revenue - systemic risk 8,526 10,316 (1,790) 6,448 2,078

Postretirement benefit liability 145 114 31 114 31

Contingent Liabilities: future failures 44,014 38,933 5,081 23,981 20,033

Contingent Liabillties: systemic risk 735 871 (136) 1,438 (703)

Contingent Liabilities: litigation losses & other 300 300 0 200 100

Total Liabilities $ 70,838 131,482 $ 60,644 $ 32,667 $ 98,815 $ 

FYI: Unrealized gain/(loss) on U.S. Treasury investments, net 192 142 2,250 (50) (2,108)

FYI: Unrealized gain/(loss) on trust preferred securities - (263) - (263) (263)

FYI: Unrealized postretirement benefit gain/(loss) 25 (3) 25 (28) (28)

FUND BALANCE $ (8,243) (20,850) $ (12,607) $ 17,276 $ (38,126) $ 

Income Statement (year-to-date) 

Unaudited Unaudited Quarterly Audited Year-Over-Year

Dec-09 Sep-09 Change Dec-08 Change

Assessments earned $ 14,675 17,753 $ 3,078 $ 2,965 $ 14,788 $ 

Systemic risk revenue 972 1,043 71 1,464 (421)

Interest earned on U.S. Treasury obligations 628 704 76 2,072 (1,368)

Realized gain on sale of securities 1,389 1,389 - 775 614 

Other revenue 699 3,437 2,738 31 3,406 

Total Revenue $ 18,363 24,326 $ 5,963 $ 7,307 $ 17,019 $ 

Operating expenses (includes depreciation expense) 892 1,271 379 1,033 238 

Systemic risk expenses 972 1,043 71 1,464 (421)

Provision for insurance losses 39,946 57,722 17,776 41,839 15,883 

Other expenses 14 17 3 4 13 

Total Expenses & Losses $ 41,824 60,053 $ 18,229 $ 44,340 $ 15,713 $ 

Net Income/(Loss) (35,727) (23,461) (12,266) 1,306 (37,033) 

Unrealized gain/(loss) on U.S. Treasury investments, net (2,108) (2,058) 1,891 (50) (3,999)

Unrealized gain/(loss) on trust preferred securities - (263) 0 (263) (263)

Unrealized postretirement benefit gain/(loss) - (28) 5 (28) (33)

YTD Comprehensive Income/(Loss) $ (25,519) (38,126) $ (12,607) $ (35,137) $ (2,989) $ 

 

Deposit Insurance Fund

Deposit Insurance Fund

Assessment Collections and Cash Outlays for Bank Failures

$48,840

$619 $867 $1,087 $2,593

$10,316 $8,667 $7,772

$4,464

$20,606

$7,947

$16,729

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

3 Qtr. 2008 4 Qtr. 2008 1 Qtr. 2009 2 Qtr. 2009 3 Qtr. 2009 4 Qtr. 2009

$ in Millions

Assessment Collections Cash Outlays

Covered Assets, Liability, and Payments for Loss Sharing Agreements for Bank Failures by Quarter 

$39,085

$44,533

$12,587 $14,077 $16,155

$2,211 $2,778 $3,942 $6,881 $6,423

$144 $187 $431 $130 $0 $0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

4 Qtr. 2008 1 Qtr. 2009 2 Qtr. 2009 3 Qtr. 2009 4 Qtr. 2009

$ in Millions

Covered Assets Liability Payments-to-Date

*

FDIC CFO REPORT TO THE BOARD – Fourth Quarter 2009

Fund Financial Results ($ in Millions) 

11

* Includes IndyMac Conservatorship
12

Fund Financial Results - continued ($ in Millions ) 

$20.8

Statements of Cash Flows (year-to-date) 

Unaudited Unaudited Quarterly Audited Year-Over-Year

Dec-09 Sep-09 Change Dec-08 Change

Net (Loss)/Income $ (35,728) $ (23,461) $ (12,267) $ (37,033) $ 1,305 

Amortization of U.S. Treasury obligations (unrestricted) 211 191 20 457 (246)

TIPS Inflation Adjustment 11 18 (7) (271) 282 

Depreciation on property and equipment 71 50 21 55 16 

Loss on retirement of property and equipment 1 1 - - 1 

Provision for insurance losses 57,723 39,946 17,777 41,839 15,884 

Unrealized (loss)/gain on postretirement benefits (28) - (28) 5 (33)

(Gain) on sale of UST obligations (1,389) (1,389) - (775) (614)

Guarantee termination fee from Citigroup (2,225) - (2,225) - (2,225)

Systemic risk expenses - - - (2) 2 

Net change in operating assets and liabilities 17,059 (22,444) 39,503 (26,336) 43,395 

Net Cash Provided by/(Used by) Operating Activities $ 35,706 $ (7,088) $ 42,794 $ (22,061) $ 57,767 

Investments matured and sold 21,432 19,391 2,041 21,209 223 

Investments purchased (includes purchase of property and 

equipment) (4) (3) (1) (4) - 

Net Cash Provided by/(Used by) Investing Activities $ 21,428 $ 19,388 $ 2,040 $ 21,205 $ 223 

Net Increase/(Decrease) in Cash and Cash Equivalents 57,134 12,300 44,834 (856) 57,990 

Cash and Cash Equivalents at beginning of year 3,388 3,388 - 4,245 (857)

 Unrestricted Cash and Cash Equivalents - Ending 54,092 8,546 45,546 1,011 53,081 

 Restricted Cash and Cash Equivalents - Ending 6,431 7,141 (710) 2,377 4,054 

Cash and Cash Equivalents - Ending $ 60,522 $ 15,688 $ 44,834 $ 3,389 $ 57,133 

Selected Financial Data

Unaudited Unaudited Quarterly Audited Year-Over-Year

Dec-09 Sep-09 Change Dec-08 Change

Cash and cash equivalents $ 3,454 3,470 $ 16 $ 3,467 $ 3 $ 

Accumulated deficit, net (123,959) - (123,959) (123,948) (11)

Resolution equity 3,483 3,499 16 3,494 5 

Total revenue 8 8 - 63 (55)

Operating expenses 4 5 1 3 2 

Goodwill/Guarini litigation expenses 4 19 15 254 (235)

Net (Loss)/Income $ (11) (11) $ - $ (178) $ 167 $ 

Deposit Insurance Fund

FSLIC Resolution Fund

 Receivership Selected Statistics December 2009 vs. December 2008

Year-to-Date ($ in millions) Dec-09 Dec-08 Change Dec-09 Dec-08 Change Dec-09 Dec-08 Change

Total Receiverships 179 41 138 8 8 - 187 49 138 

Assets in Liquidation 41,325 $ 15,073 $ 26,252 $ 31 $ 34 $ (3) $ 41,356 $ 15,107 $ 26,249 $ 

Collections 10,301 $ 1,858 $ 8,443 $ 9 $ 7 $ 2 $ 10,310 $ 1,865 $ 8,445 $ 

Dividends Paid - Cash 4,698 $ 1,553 $ 3,145 $ - $ 4 $ (4) $ 4,698 $ 1,557 $ 3,141 $ 

DIF FRF ALL FUNDS

 (Total Resolutions = 140)

PA: Purchase & Assumption - All 

Deposits (22)

PI: Purchase & Assumption - Insured 

Deposits (5)

TA: Whole Bank Purchase & 

Assumption - All Deposits (104)

PO: Direct Payoff (5)

DT: Deposit Transfer (4)

2009 Bank Failures by Resolution Type 

$146.8

$11.8

$5.8 $2.5 $4.4

$29.2

$2.7 $0.9 $0.8 $2.0

$0

$20

$40

$60

$80

$100

$120

$140

$160

PA PI TA PO DT

$ in Billions

Total Assets DIF Estimated Loss
13

12/31/09 12/31/08 Change

Par Value $59,268 $25,496 $33,772

Amortized Cost $59,286 $26,580 $32,706

Market Value $59,428 $28,830 $30,598

Primary Reserve 1 $59,525 $29,227 $30,298

Primary Reserve % of Total Portfolio 100.0% 100.0% 0.0%

Year-to-Date Total Return (Portfolio) 0.306% 8.550% not applicable

Year-to-Date Total Return (Benchmark) 2 (1.411%) 11.334% not applicable

Total Return Variance (in basis points) 171.7 (278.4) not applicable

Yield-to-Maturity 3 0.49% 4.59% (4.10%)

Weighted Average Maturity (in years) 0.08 3.34 (3.26)

Effective Duration (in years) 4

 Total Portfolio 0.06 2.85 (2.79)

 Available-for-Sale Securities 0.66 2.94 (2.28)

 Held-to-Maturity Securities 5 not applicable not applicable

12/31/09 12/31/08 Change

Debt Guarantee Program

 Book Value 6 $6,431 $2,425 $4,006

 Yield-to-Maturity 0.02% 0.11% (0.09%)

 Weighted Average Maturity overnight overnight no change

Transaction Account Guarantee Program

 Book Value 6 $0 $0 $0

 Yield-to-Maturity not applicable not applicable not applicable

 Weighted Average Maturity not applicable not applicable not applicable

Other Systemic Risk Reserves

 Book Value 6 $192 $0 $192

 Yield-to-Maturity 0.02% not applicable not applicable

 Weighted Average Maturity overnight not applicable not applicable

FRF-FSLIC

 Book Value 6 $3,330 $3,325 $5

 Yield-to-Maturity 0.02% 0.11% (0.09%)

 Weighted Average Maturity overnight overnight no change

12/31/09 12/31/08 Change

Book Value 7 $7,223 $3,447 $3,776

Effective Annual Yield 0.11% 1.21% (1.10%)

Weighted Average Maturity (in days) 5 23 (18)

National Liquidation Fund (NLF) Investment Portfolio Summary

(Dollar Values in Millions)

5

 In early August 2008, management reclassified all of the DIF portfolio's HTM securities as AFS securities effective as of June

30, 2008, because the FDIC could no longer assert it had the positive intent and ability to hold its HTM securities until their

maturity dates.

7

 Due to the short-term nature of the NLF, the portfolio's Book and Market Values are identical for reporting purposes.

Summary of Other Corporate Investment Portfolios

(Dollar Values in Millions)

6

 Due to the current short-term nature of these portfolios, each of their respective Par, Book, and Market Values are identical for 

reporting purposes.

3

 The Yield-to-Maturity includes the potential yield of Treasury Inflation-Protected Securities (TIPS), which assumes an average

1.1% annual increase in the CPI over the remaining life of each TIPS.

4

 For each TIPS, an estimated 80 percent "yield beta" factor is applied to its real yield duration to arrive at an estimated 

effective duration.

Deposit Insurance Fund Portfolio Summary

(Dollar Values in Millions)

1

 Primary Reserve is the total market value (including accrued interest) of overnight investments, available-for-sale securities, 

and held-to-maturity securities maturing within three months.

2

 The benchmark is the total return of the Merrill Lynch 1-10 Year U.S. Treasury Index.
14

Invest all proceeds from deposit insurance assessments, Temporary Liquidity Guarantee Program 

surcharges, maturing securities, coupon and other interest payments, and receivership dividends in 

overnight investments and/or in short-term Treasury bills in anticipation of using such funds for 

resolution activities.

Purchase up to $25 billion (par value) of available-for-sale (AFS) securities with maturity dates 

between April 1, 2010, and December 31, 2010, subject to the following additional restrictions: no 

more than $20 billion (par value) of such securities shall have maturity dates beyond June 30, 2010; 

and no more than $10 billion (par value) of such securities shall have maturity dates beyond 

September 30, 2010.

For the Debt Guarantee Program portfolio, in anticipation of potentially using these funds on an as 

needed basis to fund DIF resolutions, all funds will be invested in overnight investments and/or shortterm Treasury bills. For the Other Systemic Risk Reserves portfolio, strategically invest all available 

funds in overnight investments and/or in conventional or callable Treasury securities with effective 

maturity dates not to exceed December 31, 2012. 

For the Debt Guarantee Program portfolio, purchase up to $3 billion (par value) of AFS securities with 

maturity dates between April 1, 2010, and December 31, 2010. For the Other Systemic Risk 

Reserves portfolio, there is no first quarter 2010 strategy because all of the portfolio's funds were 

transferred to the DIF portfolio on January 7, 2010 (effective as of December 31, 2009).

NATIONAL LIQUIDATION FUND

Maintain an overnight deposit balance within a target range of $15 million to $25 million.

Strategically invest the remaining funds in the zero- to 12-month maturity sector.

Maintain an overnight deposit target floor balance within a range of $15 million to $25 million.

Strategy Changes for 1st Quarter 2010

Investment Strategies

Strategy as of 4th Quarter 2009

Strategy as of 4th Quarter 2009

DEPOSIT INSURANCE FUND

Strategy Changes for 1st Quarter 2010

DEBT GUARANTEE PROGRAM 

OTHER SYSTEMIC RISK RESERVES

Strategy as of 4th Quarter 2009

Strategy Changes for 1st Quarter 2010
15

1) Budgets for investment projects are approved on a multi-year basis; the year-to-date budget amount reflects the 2009 spending estimates 

for approved projects. 

YTD YTD % of 

Major Expense Category Budget Expenditures Budget Used Variance

Corporate Operating Budget 

Ongoing Operations

Salaries & Compensation $816,151 $806,790 99% ($9,361)

Outside Services - Personnel 186,345 176,427 95% (9,918)

Travel 80,318 83,195 104% 2,877

Buildings 73,179 65,208 89% (7,971)

Equipment 69,055 73,896 107% 4,841

Outside Services - Other 21,162 19,448 92% (1,714)

Other Expenses 13,570 10,479 77% (3,091)

Total Ongoing Operations $1,259,780 $1,235,443 98% ($24,337)

Receivership Funding

Salaries & Compensation $111,818 $95,196 85% ($16,622)

Outside Services - Personnel 868,998 767,456 88% (101,542)

Travel 60,254 27,693 46% (32,561)

Buildings 143,610 125,063 87% (18,547)

Equipment 45,106 32,656 72% (12,450)

Outside Services - Other 21,044 15,391 73% (5,653)

Other Expenses 49,170 34,055 69% (15,115)

Total Receivership Funding $1,300,000 $1,097,510 84% ($202,490)

Total Corporate Operating Budget $2,559,780 $2,332,953 91% ($226,827)

Investment Budget 1 $6,249 $6,150 98% ($99)

Grand Total $2,566,029 $2,339,103 91% ($226,926)

(Dollars in Thousands)

Executive Summary of 2009 Budget and Expenditures

by Major Expense Category

Through December 31, 2009
16

1) Executive Support includes the Offices of Diversity and Economic Opportunity, Public Affairs, Ombudsman, Legislative Affairs,

Enterprise Risk Management, and International Affairs.

2) Executive Offices include the offices of the Chairman, Vice Chairman, Independent Director, Deputy to the Chairman and Chief

Operating Officer, Deputy to the Chairman and Chief Financial Officer, and Deputy to the Chairman for External Affairs.

3) Budgets for investment projects are approved on a multi-year basis; the year-to-date budget amount reflects the 2009 spending estimates 

for approved projects. 

YTD YTD % of 

Division/Office Budget Expenditures Budget Used Variance

 Corporate Operating Budget 

 Supervision & Consumer Protection $500,826 $499,168 100% ($1,658)

 Information Technology 268,138 258,076 96% (10,062)

 Administration 243,760 224,120 92% (19,640)

 Resolutions & Receiverships 1,203,292 1,024,134 85% (179,158)

 Legal 157,432 154,795 98% (2,637)

 Insurance & Research 36,442 35,171 97% (1,271)

 Finance 31,068 30,336 98% (732)

 Inspector General 29,354 25,593 87% (3,761)

 Corporate University 48,911 45,311 93% (3,600)

 Executive Support 1 27,412 24,341 89% (3,071)

 Executive Offices 2 9,665 8,428 87% (1,237)

 Government Litigation 3,480 3,480 100% 0

 Total, Corporate Operating Budget $2,559,780 $2,332,953 91% ($226,827)

 Investment Budget 3

 Information Technology $5,306 $5,272 99% ($34)

 Resolutions & Receiverships 231 144 62% (87)

 Insurance & Research 712 734 103% 22

 Total, Investment Budget 3 $6,249 $6,150 98% ($99)

 Combined Division/Office Budgets

 Supervision & Consumer Protection $500,826 $499,168 100% ($1,658)

 Information Technology 273,444 263,348 96% (10,096)

 Administration 243,760 224,120 92% (19,640)

 Resolutions & Receiverships 1,203,523 1,024,278 85% (179,245)

 Legal 157,432 154,795 98% (2,637)

 Insurance & Research 37,154 35,905 97% (1,249)

 Finance 31,068 30,336 98% (732)

 Inspector General 29,354 25,593 87% (3,761)

 Corporate University 48,911 45,311 93% (3,600)

 Executive Support 1 27,412 24,341 89% (3,071)

 Executive Offices 2 9,665 8,428 87% (1,237)

 Government Litigation 3,480 3,480 100% 0

 Grand Total $2,566,029 $2,339,103 91% ($226,926)

Executive Summary of 2009 Budget and Expenditures

by Budget Component and Division/Office

Through December 31, 2009

(Dollars in Thousands)