Federal Deposit Insurance Corporation

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

August 27, 2020

MEMORANDUM TO: The Board of Directors

FROM: Bret Edwards

Deputy to the Chairman

 and Chief Financial Officer

SUBJECT: Second Quarter 2020 CFO Report to the Board

The attached report highlights the FDIC’s financial activities and results for the quarter ended June 30, 2020.

Executive Summary

• During the second quarter of 2020, the Deposit Insurance Fund (DIF) balance rose to $114.7 billion, up $1.445

billion from the March 31, 2020, balance of $113.2 billion. The quarterly increase was primarily due to $1.8 billion in 

assessment revenue partially offset by $465 million in operating expenses.

• The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.30 percent as of June 

30, 2020. The reserve ratio decreased by nine basis points from March 31, 2020, as extraordinary growth in 

estimated insured deposits far outpaced the increase in the fund balance and was responsible for the decline in 

the reserve ratio. Since the DIF reserve ratio has dropped below its minimum of 1.35 percent, the FDIC must 

establish and implement a Restoration Plan to return the fund to its minimum reserve ratio within 8 years. The 

FDIC will present a fund Restoration Plan to the Board in the near future.

• With a fund balance of $114.7 billion as of June 30, 2020, the DIF is currently well-positioned to cover possible short 

and mid-term risks. However, there remains uncertainty about the effects of the COVID-19 health crisis on the 

economy and the banking industry over the long-term. Effects from a weakened economic outlook, elevated 

unemployment levels, and diminished repayment capacity of borrowers may stress the balance sheets of several 

institutions across the United States. The FDIC continues to evaluate a range of possible outcomes for economic 

stress, the risks those outcomes pose to insured financial institutions, and the extent to which such risks may draw 

on the resources of the DIF.

• During the second quarter of 2020, the FDIC was named receiver for one failed institution. The assets at inception

for this failed institution were $156 million with an estimated loss to the DIF as of June 30, 2020, of $47 million. The 

corporate cash outlay during the second quarter for this failure was approximately $145 million. 

• Through June 30, 2020, overall FDIC Operating Budget expenditures were below the year-to-date budget by about 

$69.4 million, or seven percent. This variance was primarily the result of underspending of $58 million in the 

Ongoing Operations budget component. The largest variances were in the Salaries and Compensation expense 

category ($18 million, or 2.8 percent) due to unfilled vacancies in authorized positions and the Travel expense 

category ($21.5 million, or 55 percent) due to travel restrictions during the COVID-19 pandemic.
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I. Financial Results (See pages 6 – 7 for detailed data and charts.) 

Deposit Insurance Fund 

 For the six months ending June 30, 2020, the DIF’s comprehensive income totaled $4.3 billion, compared to 

comprehensive income of $4.8 billion for the same period last year, a decrease of $533 million. While assessment 

revenue increased year-over-year by $606 million, this was more than offset by the year-over-year change in 

negative provision for insurance losses of $971 million. The provision balance for 2020 is a negative $35 million, 

reflecting minor adjustments to loss estimates for prior year failures. In contrast, the provision balance for 2019, a 

negative $1 billion, reflected large decreases in loss estimates for prior year bank failures, primarily arising from 

shared-loss liability reductions and unanticipated recoveries from litigation settlements and professional liability 

claims by receiverships. 

 The $1.1 billion unrealized gain on U.S. Treasury securities for the first half of 2020 was a result of yields declining 

considerably across most maturity sectors of the Treasury yield curve, resulting in increases in the securities’ 

market values relative to their book values. 

Assessments 

 During June, the DIF recognized assessment revenue of $1.6 billion for the estimate of second quarter 2020 

insurance coverage. The last application of small bank assessment credits occurred in the first quarter 2020 and 

this quarter there was no reduction made for credits. Additionally, the DIF recognized a $158 million adjustment for 

higher-than-estimated collections for the first quarter 2020 insurance coverage, which increased assessment 

revenue. 

 On June 30, 2020, the FDIC collected $1.5 billion in DIF assessments for first quarter 2020 insurance coverage. 

II. Investment Results (See pages 8 – 9 for detailed data and charts.)

DIF Investment Portfolio 

 On June 30, 2020, the total liquidity (also total market value) of the DIF investment portfolio stood at $111.5 billion, 

up $4.5 billion from its December 31, 2019, balance of $107.0 billion. During the quarter, interest revenue, 

receivership dividends, and deposit insurance assessment collections far exceeded resolution-related outlays and 

operating expenses. 

 On June 30, 2020, the DIF investment portfolio’s yield was 1.61 percent, down 37 basis points from its 1.98 percent 

yield on December 31, 2019. The new Treasury securities purchased during the second quarter of the year had 

significantly lower yields than the maturing securities’ yields. 

 In accordance with the approved second quarter 2020 DIF portfolio investment strategy, staff purchased a total of 

nine conventional Treasury securities. The nine securities had a total par value of $13 billion, a weighted average 

yield of 0.236 percent, and a weighted average maturity of 1.72 years. 
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III. Budget Results (See pages 10 – 11 for detailed data.) 

Approved Budget Modifications 

The 2020 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to 

make certain modifications to the 2020 FDIC Operating Budget. The following budget reallocations were approved 

during the second quarter in accordance with the authority delegated by the Board of Directors: 

 In June, the CFO approved the following mid-year adjustments to 2020 Ongoing Operations budgets: 

 

o Adjustments to the Salaries and Compensation budgets of several organizations to address projected 

variances in that expense category, including an increase of $2.1 million in Corporate University (CU) to 

provide funding for the salaries and benefits of long-term detailees from other organizations, a net 

increase of $1.5 million in the budgets of various Executive Offices to cover the costs of detailees, and a 

decrease of $3.8 million in the Legal Division budget to reflect the large number of unfilled vacancies. 

These adjustments did not change the total corporate budget for Salaries and Compensation. 

o A net increase of $4.6 million for one-time initiatives in the combined budgets of the organizations 

reporting to the Chief Information Officer (CIOO), bringing the total 2020 budget for one-time initiatives 

up to $34.6 million. This increase includes additional funding of $2.2 million for two projects, one to 

improve resolution information tracking and another to automate purchase and assumption settlement 

processes; $2.6 million for infrastructure support; and various increases and decreases to reflect updated 

project estimates for previously-approved initiatives. 

o A net increase of $5.8 million for continuing operations expenses in the combined budgets of the CIOO, 

representing an increase of about 2.5% in the CIOO’s non-salaries budget. This included increases in the 

Outside Services-Personnel category of $5 million for the Division of Information Technology (DIT) and $1 

million for the Office of Chief Information Security Officer (OCISO) to address projected higher-thanbudgeted full-year operational expenses across multiple functions. These increases were partially offset 

by decreases in the Equipment and Travel budgets totaling $1.8 million. 

o A net increase of $3.1 million in the DRR budget, including an increase of $3.5 million in the Outside 

Services-Personnel expense category and a decrease of $427,000 in the Travel expense category. The 

increase in the Outside Services-Personnel expense category will support enhancements to DRR’s 

policies, procedures and ability to quickly respond to failure activity. 

o A net increase of $160,000 in the Division of Finance budget, including an increase of $260,000 in Outside 

Services-Personnel and a decrease of $100,000 in Travel. The increased budget will be used to respond to 

OIG audit recommendations related to crisis readiness and provide additional support for the Model Risk 

Management Program. 

o A decrease of $795,605 in the Travel budget of Division of Insurance and Research to reflect funds not 

expected to be used in 2020. 

o Realignments among major expense categories in the budgets of the Division of Administration and the 

Office of Minority and Women Inclusion, with no net change to the total budgets of each organization. 

 The CFO also approved in June a $6.9 million net decrease in the Receivership Funding budget component for 

the Legal Division. This included decreases of $7.25 million in the Outside Services-Personnel expense 

category and $65,000 in the Travel expense category to reflect lower projected litigation-related expenses due 

to pre-trial settlements, bringing professional liability investigations work in-house, and pandemic-related 

delays. These decreases were partially offset by an increase of $0.4 million in the Salaries and Compensation 
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budget to cover the unbudgeted salaries of a small number of term employees whose appointments expired 

during the first half of the year. 

Following these second quarter budget modifications, the balances in the Corporate Unassigned contingency reserves 

were $17,203,552 in the Ongoing Operations budget component and $18,917,515 in the Receivership Funding budget 

component.

Approved Staffing Modifications 

The 2020 Budget Resolution delegated to the CFO the authority to modify approved 2020 staffing authorizations for 

divisions and offices, as long as those modifications did not increase the total approved 2020 FDIC Operating Budget. 

 In April, the CFO approved the realignment of two positions from OCISO to DIT in conjunction with the transfer 

of operational management responsibility for certain information security functions. 

 In April, the CFO approved a decrease of two authorized permanent positions in the Division of Depositor and 

Consumer Protection (DCP) in conjunction with a field territory restructuring and DCP’s annual realignment of 

field supervisory positions to ensure appropriate field supervisory spans-of-control. In the same month, the 

CFO approved an increase of two additional examiner positions for large bank supervision, resulting in a net 

zero impact on total authorized staffing. 

 In April, the CFO approved an increase of eight authorized permanent positions in the Division of Risk 

Management Supervision (RMS), including six additional examiner positions for large bank supervision and 

two Supervisory Examiner positions in conjunction with RMS’s annual realignment of field supervisory 

positions to ensure appropriate field supervisory spans-of-control. 

 In May, the CFO approved an increase of two permanent authorized positions in OCISO to help accelerate its 

workforce transformation in conjunction with the IT Modernization program. 

 In June, the CFO approved an increase of seven permanent authorized positions in DRR, including two 

positions transferred from the Division of Complex Institution Supervision and Resolution (CISR) and five new 

positions, in conjunction with the transfer of responsibility for ensuring compliance with Part 360.9 

requirements. 

Following these changes, authorized staffing totaled 5,770 for the Corporation (comprised of 5,765 permanent and 5 

non-permanent positions). 

Spending Variances 

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

spending variances for the quarter ending June 30, 2020, are defined as those that either (1) exceeded the YTD budget 

for a major expense category or division/office by more than $2 million and represented more than three percent of the 

major expense category or total division/office budget; or (2) were under the YTD budget for a major expense category 

or division/office by more than $10 million and represented more than 10 percent of the major expense category or 

total division/office budget. 

Significant Spending Variances by Major Expense Category 

Ongoing Operations 

There was a significant spending variance through the second quarter in the Travel expense category of the Ongoing 

Operations budget component. Spending in the Travel expense category was under the YTD budget by $21.5 million, or 

55 percent. The variance in the Travel expense category was primarily attributable to FDIC’s travel restrictions and 
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mandatory telework in response to the COVID-19 pandemic in the second quarter of 2020, which restricted most 

business travel including those related to onsite examination, regulatory meetings, and in-person training. The 

variance primarily reflects underspending by RMS ($13.8 million, or 54 percent of its 2020 YTD budget), DCP ($3.9 

million, or 59 percent of its 2020 YTD budget), CU ($1.5 million, or 57 percent of its 2020 YTD budget), and CISR ($1.2 

million, or 75 percent of its 2020 YTD budget). 

Significant Spending Variances by Division/Office1

Only one organization had significant spending variances through the second quarter. The Legal Division underspent 

its YTD budget by $10.9 million or 13.4 percent. The variance was primarily attributable to $1.8 million in 

underspending in the Salaries and Compensation category in the Ongoing Operations component due to vacancies in 

budgeted positions and $9.0 million in underspending in the Outside Services – Personnel category in the Receivership 

Funding component due to settlements, a decision to perform new professional liability investigations with FDIC staff, 

and delays in pending litigation due to the COVID-19 pandemic. 

 

1Information on division/office variances reflects variances in the FDIC Operating Budget and does not include 

variances related to approved multi-year investment projects. 
Fund Financial Results ($ in Millions) 

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Balance Sheet

Quarterly Year-Over-Year

Jun-20 Mar-20 Change Jun-19 Change

Cash and cash equivalents $ 5,144 $ 9,490 $ (4,346) $ 8,795 $ (3,651)

Investment in U.S. Treasury securities 105,024 99,733 5,291 94,524 10,500

Assessments receivable 1,632 1,357 275 1,060 572

Interest receivable on investments and other assets, net 1,369 709 660 694 675

Receivables from resolutions, net 1,860 2,456 (596) 3,204 (1,344)

Property and equipment, net 320 326 (6) 320 0

Operating lease right-of-use assets 118 120 (2) 0 118

Total Assets $ 115,467 $ 114,191 $ 1,276 $ 108,597 $ 6,870

Accounts payable and other liabilities 221 215 6 241 (20)

Operating lease liabilities 127 127 0 0 127

Liabilities due to resolutions 73 213 (140) 530 (457)

Postretirement benefit liability 289 289 0 236 53

Contingent liability for anticipated failures 74 107 (33) 111 (37)

Contingent liability for guarantee payments and litigation losses 32 34 (2) 33 (1)

Total Liabilities $ 816 $ 985 $ (169) $ 1,151 $ (335)

FYI: Unrealized gain (loss) on U.S. Treasury securities, net 1,654 2,037 (383) 500 1,154

FYI: Unrealized postretirement benefit (loss) gain (61) (61) 0 (14) (47)

Fund Balance $ 114,651 $ 113,206 $ 1,445 $ 107,446 $ 7,205

Deposit Insurance Fund
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Fund Financial Results - continued ($ in Millions) 

Receivership Selected Statistics June 2020 vs. June 2019

Income Statement (year-to-date)

Quarterly Year-Over-Year

Jun-20 Mar-20 Change Jun-19 Change

Assessments 3,162 $ 1,372 $ 1,790 $ 2,556 $ 606 $ 

Interest on U.S. Treasury securities 961 507 454 1,042 (81)

Other revenue 6 3 3 12 (6) 

Total Revenue $ 1,882 4,129 $ 2,247 $ 3,610 $ 519 $ 

Operating expenses 925 460 465 893 32 

Provision for insurance losses (35) 12 (47) (1,006) 971 

Insurance and other expenses 2 1 1 1 1

Total Expenses and Losses $ 473 892 $ 419 $ (112) $ 1,004 $ 

Net Income $ 1,409 3,237 $ 1,828 $ 3,722 $ (485) $ 

Unrealized gain (loss) on U.S. Treasury securities, net 1,067 1,450 (383) 1,115 (48) 

Unrealized postretirement benefit gain (loss) 0 0 0 0 0

Comprehensive Income $ 2,859 4,304 $ 1,445 $ 4,837 $ (533) $ 

Deposit Insurance Fund

The coverage ratio peaked in 2019 at 

118%, after years of seeing a steady 

rise. Since 2014, the DIF balance has 

grown by over 80% and therefore has 

generated an increasing amount of 

interest income. Secondarily, 

Treasury yields remained below their 

historical averages, but did gradually 

rise from 2015 to 2018. However in 

2019, yields dropped slowly, then in 

March 2020, the entire yield curve 

suffered extraordinary downward 

pressure as the FOMC slashed the 

overnight Fed Funds rate to nearly 

zero to support the economy.

While the investment portfolio 

balance should continue to grow at a 

slower pace, the maturing securities 

purchased at past higher yields can 

only be reinvested in significantly 

lower yields. Interest revenue in the 

coming quarters is expected to 

decrease as the Federal Funds 

Target Rate sits between 0bps and 

25bps, and the 5-year tenor is 

yielding approximately 30.6bps.

 ($ in millions) Jun-20 Jun-19 Change Jun-20 Jun-19 Change Jun-20 Jun-19 Change

Total Receiverships 244 263 (19) 0 0 0 244 263 (19)

Assets in Liquidation 380 $ 1,039 $ (659) $ 1 $ 2 $ (1) $ 381 $ 1,041 $ (660) $ 

YTD Collections 285 $ 555 $ (270) $ 1 $ $ 0 1 $ 286 $ 555 $ (269) $ 

YTD Dividend/Other Pmts - 797 $ 859 $ (62) $ $ 0 $ 0 $ 0 797 $ 859 $ (62) $ 

DIF FRF ALL FUNDS

Selected Financial Data

Quarterly Year-Over-Year

Jun-20 Mar-20 Change Jun-19 Change

Cash and cash equivalents 926 $ 926 $ $ 0 912 $ 14 $ 

Accumulated deficit (124,563) (124,563) 0 (124,576) 13 

Total resolution equity 907 926 (19) 913 (6) 

Total revenue 3 3 0 11 (8)

Operating expenses 0 0 0 0 0

Recovery of tax benefits 0 0 0 0 0

Losses related to thrift resolutions 0 0 0 0 0

Net Income (Loss) 3 $ 3 $ $ 0 11 $ (8) $ 

FSLIC Resolution Fund
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6/30/20 12/31/19 Change

Par Value $107,107 $104,429 $2,678

Amortized Cost $108,501 $105,464 $3,038

Total Market Value (including accrued interest) $111,474 $107,024 $4,450

Primary Reserve 1 $111,474 $107,024 $4,450

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

Yield-to-Maturity 1.61% 1.98% -0.37%

Weighted Average Maturity (in years) 1.03 1.18 -0.15

Effective Duration (in years)

 Total Portfolio 1.00 1.15 -0.15

 Available-for-Sale Securities 2 1.05 1.22 -0.17

6/30/20 12/31/19 Change

FRF-FSLIC

 Book Value 3 $881 $878 $3

 Yield-to-Maturity 0.11% 1.51% -1.40%

 Weighted Average Maturity overnight overnight no change

6/30/20 12/31/19 Change

Book Value 4 $1,974 $2,128 ($154)

Effective Annual Yield 0.40% 1.76% -1.35%

Weighted Average Maturity (in days) 15 32 (17)

4

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

Summary of Other Corporate Investment Portfolios

(Dollar Values in Millions)

3

 Due to the current short-term nature of this portfolio, its respective Par, Book, and Market Values are identical for reporting 

purposes.

Deposit Insurance Fund Portfolio Summary

(Dollar Values in Millions)

1

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

(AFS), and held-to-maturity securities maturing within three months.

National Liquidation Fund (NLF) Investment Portfolio Summary

(Dollar Values in Millions)

2

 Excludes any overnight investments.
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DEPOSIT INSURANCE FUND

Invest up to $18 billion (par value) in AFS securities with maturities between September 

30, 2020 and December 31, 2024. 

Invest up to $32 billion (par value) in AFS securities with maturities between December 

31, 2020 and July 1, 2025. 

NATIONAL LIQUIDATION FUND

Maintain an overnight deposit target floor balance within a range of $100 million to $300 

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 $50 million to $200 

million.

Investment Strategies

Strategy Changes for the 3rd Quarter 2020

Strategy for the 2nd Quarter 2020

Strategy for the 2nd Quarter 2020

Strategy Changes for the 3rd Quarter 2020
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Annual YTD YTD % of YTD YTD

Major Expense Category Budget Budget Expenditures Budget Used Variance

FDIC Operating Budget 

Ongoing Operations

Salaries & Compensation $1,272,831 $643,699 $625,712 97% ($17,987)

Outside Services - Personnel 311,371 145,662 139,527 96% (6,135)

Travel 78,194 39,287 17,806 45% (21,481)

Buildings 99,034 48,826 49,799 102% 973

Equipment 106,650 58,140 48,303 83% (9,837)

Outside Services - Other 15,917 8,309 8,160 98% (149)

Other Expenses 15,443 8,185 4,822 59% (3,363)

Total Ongoing Operations $1,899,440 $952,108 $894,129 94% ($57,979)

Receivership Funding

Salaries & Compensation $765 $236 $850 360% $614

Outside Services - Personnel 69,300 27,622 17,852 65% (9,770)

Travel 1,030 535 389 73% (146)

Buildings 2,227 1,112 1,063 96% (49)

Equipment 8 3 (29) -967% (32)

Outside Services - Other 571 284 40 14% (244)

Other Expenses 1,099 548 628 115% 80

Total Receivership Funding $75,000 $30,340 $20,793 69% ($9,547)

Office of the Inspector General

Salaries & Compensation $37,033 $18,516 $17,280 93% ($1,236)

Outside Services - Personnel 2,400 1,200 1,041 87% (159)

Travel 1,035 518 423 82% (95)

Buildings 0 0 0 0

Equipment 1,888 944 658 70% (286)

Outside Services - Other 0 0 4 4

Other Expenses 626 313 219 70% (94)

Total Office of the Inspector General $42,982 $21,491 $19,625 91% ($1,866)

Total FDIC Operating Budget $2,017,422 $1,003,939 $934,547 93% ($69,392)

Executive Summary of 2020 Budget and Expenditures

by Budget Component and Major Expense Category

Through June 30, 2020

(Dollars in Thousands)
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1) Executive Support includes the Offices of Minority and Women Inclusion, Communications, Ombudsman, Legislative Affairs, 

Financial Institution Adjudication, and FDiTech Lab. 

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, Deputy to the Chairman for Policy, and Chief Information 

Officer.

Annual YTD YTD % of YTD YTD

Division/Office Budget Budget Expenditures Budget Used Variance

 FDIC Operating Budget 

 Risk Management Supervision $546,948 $278,190 $260,416 94% ($17,774)

 Information Technology 320,824 164,606 157,889 96% (6,717)

 Administration 273,690 134,407 130,440 97% (3,967)

 Depositor & Consumer Protection 185,003 94,154 85,425 91% (8,729)

 Legal 158,929 81,162 70,292 87% (10,870)

 Resolutions & Receiverships 147,249 73,621 70,237 95% (3,384)

 Complex Institution Supervision & Resolution 85,608 42,853 39,795 93% (3,058)

 Insurance & Research 59,499 29,994 28,757 96% (1,237)

 Inspector General 42,982 21,491 19,625 91% (1,866)

 Finance 42,939 21,326 19,774 93% (1,552)

 Chief Information Security Officer 40,120 22,855 19,556 86% (3,299)

 Executive Support 1 29,433 14,481 10,635 73% (3,846)

 Corporate University - Corporate 23,604 10,616 10,172 96% (444)

 Executive Offices 2 13,079 6,143 5,952 97% (191)

 Corporate University - CEP 11,394 8,040 5,582 69% (2,458)

 Corporate Unassigned 36,121 0 0 0

 Total FDIC Operating Budget $2,017,422 $1,003,939 $934,547 93% ($69,392)

Executive Summary of 2020 Budget and Expenditures

by Division/Office

Through June 30, 2020

(Dollars in Thousands)