52 FDIC 2009 Annual Report

II. Financial Highlights

Deposit Insurance Fund 

Performance 

The FDIC administers the Deposit Insurance Fund (DIF) and the FSLIC Resolution Fund

(FRF), which fulfills the obligations of the former Federal Savings and Loan Insurance Corporation (FSLIC) and the former Resolution Trust

Corporation (RTC). The following summarizes

the condition of the DIF. (See the accompanying

graphs on FDIC-Insured Deposits and Insurance

Fund Reserve Ratios.)

The DIF’s comprehensive loss totaled $38.1

billion for 2009 compared to a comprehensive

loss of $35.1 billion for the previous year. As a

result, the DIF balance declined from $17.3 billion to negative $20.9 billion as of December 31,

2009. The year-over-year increase of $3.0 billion

in comprehensive loss 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 (UST) investments,

and a $1.4 billion decrease in the interest earned

on UST obligations, partially offset by a $14.8

billion increase in assessment revenue and a $3.1

billion increase in other revenue (primarily from

guarantee termination fees and debt guarantee

surcharges).

The provision for insurance losses was $57.7

billion in 2009. The total provision consists primarily of the provision for future failures ($20.0

billion) and the losses estimated at failure for the

140 resolutions occurring during 2009 ($35.6

billion).

Assessment revenue was $17.7 billion for

2009. This is a $14.8 billion increase from

2008, and is due to the collection of a $5.5 billion special assessment in September 2009 and

significantly higher regular assessment revenue.

Source: Commercial Bank Call and Thrift Financial Reports

Estimated DIF Insured Deposits 

Dollars in Billions

$6,000

5,000

4,000

3,000

2,000

1,000

0

Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09

Deposit Insurance Fund Reserve Ratios

Fund Balances as a Percent of Insured Deposits

–0.50

–0.40

–0.30

–0.20

–0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09
II. Financial Highlights 53

marketable securities related to the Temporary

Liquidity Guarantee Program (TLGP). Hence,

the DIF is well positioned to fund resolution

activity in 2010 and beyond. The prepaid assessments, while increasing DIF cash upon receipt,

did not initially affect the fund balance, since

the funds collected were initially recorded as an

offsetting liability; they are subsequently recognized quarterly as revenue when earned.

Corporate Operating Budget

The FDIC segregates its corporate operating budget and expenses into two discrete comMajor factors contributing to the increase in

regular assessment revenue included changes to

the risk-based assessment regulations, ratings

downgrades of many institutions (which pushed

them into higher assessment rate categories), the

decline of the one-time assessment credit, and a

larger assessment base.

Although the DIF ended the year with a

negative $20.9 billion fund balance, the DIF’s

liquidity was significantly enhanced by prepaid assessment inflows of $45.7 billion. Cash

and marketable securities stood at $66.0 billion

at year-end, including $6.4 billion in cash and

Deposit Insurance Fund Selected Statistics

Dollars in Millions

For the years ended December 31

2009 2008 2007

Financial Results

Revenue $24,706 $7,306 $3,196

Operating Expenses 1,271 1,033 993

Insurance and Other Expenses (includes provision for loss) 59,438 43,306 98

Net (Loss) Income (36,003) (37,033) 2,105

Comprehensive (Loss) Income (38,138) (35,137) 2,248

Insurance Fund Balance ($20,862) $17,276 $52,413

Fund as a Percentage of Insured Deposits (reserve ratio) (0.39)% 0.36% 1.22%

Selected Statistics

Total DIF-Member Institutions* 8,012 8,305 8,534

Problem Institutions 702 252 76

Total Assets of Problem Institutions $402,782 $159,405 $22,189

Institution Failures 140 25 3

Total Assets of Failed Institutions in Year** $169,709 $371,945 $2,615

Number of Active Failed Institution Receiverships 179 41 22

*Commercial banks and savings institutions. Does not include U.S. insured branches of foreign banks.

**Total Assets data are based upon the last Call Report filed by the institution prior to failure.
54 FDIC 2009 Annual Report

three major business lines and its major program

support functions. The most significant factor contributing to the proposed increase in the

ongoing operations component is the projected

increase in the Corporation’s supervisory workload in 2010 and the planned staffing increases

in the Division of Supervision and Consumer

Protection (DSC) to address that workload. The

2010 ongoing operations budget also includes

increased funds for additional resolutions staff,

travel, office space, and equipment for these

additional staff. Under this budget, the Corporation will focus largely on its core mission responsibilities in 2010 and will not devote significant

resources to new discretionary activities. In

addition, the 2010 receivership funding budget

allows for substantially increased resources for

contractor support as well as non-permanent

increases in authorized staffing for the Division

of Resolutions and Receiverships, the Legal Division, and other organizations should workload

requirements in these areas require an immediate response.

Investment Spending

The FDIC instituted a separate Investment

Budget in 2003. It has a disciplined process for

reviewing proposed new investment projects and

managing the construction and implementation

of approved projects. All of the projects in the

current investment portfolio are major IT system

initiatives. Proposed IT projects are carefully

reviewed to ensure that they are consistent with

the Corporation’s enterprise architecture. The

project approval and monitoring processes also

enable the FDIC to be aware of risks to the major

capital investment projects and facilitate appropriate, timely intervention to address these risks

ponents: ongoing operations and receivership

funding. The receivership funding component

represents expenses resulting from financial

institution failures and is, therefore, largely driven by external forces, while the ongoing operations component accounts for all other operating

expenses and tends to be more controllable and

estimable. Corporate Operating expenses totaled

$2.33 billion in 2009, including $1.24 billion in

ongoing operations and $1.10 billion for receivership funding (numbers do not sum due to rounding). This represented approximately 98 percent

of the approved budget for ongoing operations

and 84 percent of the approved budget for receivership funding for the year. (The numbers above

will not agree with the DIF and FRF financial

statements due to differences in how items are

classified.)

Given the recent challenges facing the industry, as evidenced in the overall CAMELS deterioration and an up-tick in financial institution

failure activity, the FDIC is determined to ensure

that it is adequately prepared to effectively fulfill

its mission in 2010. Consequently, in December

2009, the Board of Directors approved a 2010

Corporate Operating Budget of approximately

$3.99 billion, consisting of $1.49 billion for

ongoing operations and $2.50 billion for receivership funding. The level of approved ongoing

operations budget is approximately $254 million

(20.5 percent) higher than actual 2009 ongoing

operations expenses, while the approved receivership funding budget is $1.40 billion (127.8 percent) higher than the $1.10 billion of actual 2009

receivership funding expenses.

As in prior years, the 2010 budget was formulated primarily on the basis of an analysis of

projected workload for each of the Corporation’s
II. Financial Highlights 55

throughout the development process. An investment portfolio performance review is provided

to the FDIC’s Board of Directors quarterly.

The Corporation undertook significant capital investments during the 2003–2009 period,

the largest of which was the expansion of its

Virginia Square office facility. Other projects

involved the development and implementation of

major IT systems. Investment spending totaled

$266 million during this period, peaking at $108

million in 2004. Spending for investment projects in 2009 totaled approximately $6.1 million.

In 2010, investment spending is estimated to

total $1.1 million.

Investment Spending 2003−2009

Dollars in Millions

$120

100

80

60

40

20

0

2003 2004 2005 2006 2007 2008 2009

$27

$108

$62

$25

$12

$26

$6