Federal Deposit Insurance Corporation 

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

 

 February 11, 2011 

MEMORANDUM TO: The Board of Directors 

FROM: Steven O. App 

Deputy to the Chairman and 

 Chief Financial Officer 

Craig Jarvill 

Acting Director, Division of Finance 

SUBJECT: Fourth Quarter 2010 CFO Report to the Board 

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

December 31, 2010. 

Executive Summary

 During the fourth quarter of 2010, the Deposit Insurance Fund (DIF) balance increased by $657 

million to negative $7.4 billion. This increase was primarily due to a $3.5 billion increase in 

assessments earned, offset by a $2.4 billion increase in provision for insurance losses and a 

$452 million increase in operating expenses. 

 During the fourth quarter of 2010, the FDIC was named receiver for 30 failed institutions. The 

combined assets at inception for these institutions totaled approximately $8.9 billion with a 

total estimated loss of $2.1 billion. The corporate cash outlay during the fourth quarter for these 

failures was approximately $2.2 billion. 

 Year-to-date through December 31, 2010, Corporate Operating Budget expenditures were 

below budget by 14 percent ($567.9 million). This variance was primarily the result of lower 

spending for contractual services and vacancies in budgeted positions in both the Receivership 

Funding and the Ongoing Operations components. 
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 

 While the number of resolutions per year has increased since 2008, the 

start of the current crisis, through 2010, the average assets at inception 

and the average estimated loss per resolution has declined. Only 25 

institutions failed in 2008, however, the average total assets per 

institution were $2.6 billion (excluding Washington Mutual Bank, 

which was resolved at no cost to the DIF), compared with $594 million 

per institution in 2010 for the 157 failures. In addition to the decline in 

the size of the failed institutions, as measured by average total assets, 

the loss estimates on those assets also declined during that period. 
3

Trends and Outlook

Financial Results Comments 

II. Investments  The total liquidity (total market value plus accrued interest) of all DIFrelated investment portfolios stood at $46.2 billion on December 31, 

2010, down from $66.1 billion on December 31, 2009, led primarily by 

the decline in the DIF investment portfolio as discussed below. 

 The DIF investment portfolio’s amortized cost (book value) decreased 

by $19.8 billion during 2010, and totaled $39.5 billion on December 31, 

2010. The decrease was primarily the result of having to fund 157 bank 

failures during 2010, although it should be noted that 130 of these 

failures were resolved as cash-conserving 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 lower initial resolution funding, thus helping to 

mitigate the decline in the DIF portfolio’s balance. Moreover, during 

2010, the DIF received $13.6 billion in dividends and other payments 

from its receiverships. These payments also helped to mitigate the DIF 

portfolio’s decline. Nevertheless, the DIF portfolio’s balance is 

expected to continue to decline over the next few quarters. 

 On December 31, 2010, the DIF investment portfolio’s yield was 0.40 

percent, down 9 basis points from its December 31, 2009, yield of 0.49 

percent. A primary negative factor was that $3.1 billion in relatively 

high yielding Treasury notes and bonds matured during the period. 

However, a somewhat offsetting positive factor was that overnight 

investment yields increased modestly, rising from 0.02 percent on 

December 31, 2009, to 0.05 percent on December 31, 2010—and the 

ultra-low yielding overnight investments comprised a considerably 

larger percentage of the DIF portfolio at the beginning of the year. 

 During the fourth quarter of 2010, short-maturity Treasury bill (T-Bill) 

yields were little changed while longer-maturity Treasury yields posted 

dramatic increases. Treasury yields remain at historically low levels, 

reflecting such factors as subdued inflation trends and stable inflation 

expectations, as well as the ultra-low federal funds target rate and 

continuing investor expectations that the rate will remain low for some 

time. However, the recent increases in longer-maturity Treasury yields 

appeared to reflect factors such as investor expectations for a 

strengthening economy and concerns over growing debt levels. 

According to consensus expectations, Treasury yields are expected to 

increase, albeit modestly, during 2011. 
4

Trends and Outlook

Financial Results Comments 

III. Budget  Approximately $1.4 billion was spent in the Ongoing Operations 

component of the 2010 Corporate Operating Budget, which was $65.3 

million (4 percent) below the annual budget for the year ending 

December 31, 2010. Actual expenses were below annual budgets in the 

Outside Services – Personnel expense category (by $32.5 million), and 

the Salaries & Compensation expense category (by $29.9 million). 

 Approximately $2.0 billion was spent in the Receivership Funding 

component of the 2010 Corporate Operating Budget, which was $502.7 

million (20 percent) below the annual budget for the year. Actual 

expenses were significantly less than budget in the Outside Services – 

Personnel (by $427.9 million), Salaries & Compensation (by $68.8 

million), and Buildings (by $47.3 million) expense categories, but were 

partially offset by overspending in the Outside Services – Other (by 

$40.2 million) and Other Expenses (by $30.0 million) expense 

categories. 

I. Corporate Fund Financial Results (See pages 12 - 13 for detailed data and charts.) 

Deposit Insurance Fund (DIF) 

 For 2010, the DIF’s comprehensive income was $13.5 billion compared to a comprehensive 

loss of $38.1 billion during 2009. This year-over-year change of $51.6 billion was primarily 

due to a $58.6 billion decline in the provision for insurance losses partially offset by a $4.1 

billion decrease in assessments earned (which is largely attributable to the 2009 special 

assessment). 

 The provision for insurance losses was negative $848 million for 2010, compared to a positive 

$57.7 billion for 2009. The 2009 provision reflected the significant losses estimated to be 

incurred by the DIF from the 2009 and future failures. In contrast, the 2010 negative provision 

is primarily impacted by a reduction in the contingent loss reserve due to the improvement in 

the financial condition of institutions that were previously identified to fail and adjustments to 

the estimated losses for banks that have failed.

FSLIC Resolution Fund (FRF) 

 In December 2010, the FDIC, as manager of the FRF, received $5.6 million in tax benefit 

recoveries under the terms of an assistance agreement with the former FSLIC. 
5

II. Investments

Investment Results (See pages 14 - 15 for detailed data and charts.)

DIF Investment Portfolio 

 The amortized cost (book value) of the DIF investment portfolio decreased by $19.8 billion 

during 2010, or by 33.4 percent, from $59.3 billion on December 31, 2009, to $39.5 billion on 

December 31, 2010. Similarly, the DIF portfolio’s primary reserve (total market value 

including accrued interest) decreased by $19.9 billion, or by 33.4 percent, from $59.5 billion on 

December 31, 2009, to $39.6 billion on December 31, 2010. During the year, resolution 

outlays and operating expenses greatly exceeded receivership payments, assessment 

collections, and other inflows. 

 The DIF investment portfolio’s total return for 2010 was 0.20 percent, 502 basis points lower 

than the 5.22 percent total return of its benchmark, the Merrill Lynch 1-10 Year Treasury Index 

(Index). Given that most longer-maturity Treasury yields declined (that is, Treasury security 

prices rose) over the full one-year period, the DIF portfolio’s large balances of comparatively 

low yielding overnight investments and short-maturity Treasury securities were a drag on 

performance relative to the Index’s longer-duration conventional Treasury securities. 

 In accordance with the approved fourth quarter 2010 investment strategy, which strove to 

balance the need for liquidity against the desire to pick up some yield by investing in shortmaturity Treasuries, staff purchased a total of seven short-maturity Treasury securities on two 

occasions during the fourth quarter of 2010. The seven securities had a total par value of $6.0 

billion, a weighted average yield-at-cost of 0.28 percent, and a weighted average maturity 

(WAM) of 0.81 years (a little under 10 months). 

Other Corporate Investment Portfolios 

 On December 31, 2010, the Debt Guarantee Program (DGP) investment portfolio stood at $6.6 

billion (total market value), an increase from $6.4 billion on December 31, 2009. During 2010, 

although the DGP reimbursed a net amount of $273 million to the DIF for claims against the 

Transaction Account Guarantee (TAG) Program, the DGP received a total of $481 million in 

reimbursements from TAG Program assessments during the period, hence the net increase in 

the DGP portfolio. In accordance with the approved fourth quarter 2010 investment strategy 

for the DGP portfolio, staff purchased four short-maturity Treasury securities during the fourth 

quarter of 2010. The securities had a total par value of $1.0 billion, a weighted average yieldat-cost of 0.30 percent, and a WAM of 0.85 years (a little over 10 months). 

 During 2010, as mentioned above, the FDIC collected about $481 million in fees related to the 

TAG Program under the Temporary Liquidity Guarantee Program. Again, these funds were 

immediately transferred to the DGP investment portfolio for reimbursement of claims and 

expenses, so the TAG Program investment portfolio had no balance on December 31, 2010. 
6

The Treasury Market 

 During the fourth quarter of 2010, short-maturity T-Bill yields were little changed while 

longer-maturity Treasury yields posted dramatic increases. The three-month T-Bill yield 

decreased by 3 basis points, while the yield on the six-month T-Bill decreased by 1 basis point. 

The one-year T-Bill yield increased by 1 basis point. The two-year Treasury note yield, which 

is sensitive not only to actual as well as anticipated changes in the federal funds rate, but also to 

changes in investor sentiment, increased by 17 basis points. Intermediate- to longer-maturity 

Treasury security yields increased considerably during the fourth quarter. The yield on the 

five-year Treasury note increased by 75 basis points, while the yield on the ten-year Treasury 

note increased by 78 basis points. The conventional Treasury yield curve remained relatively 

steep during the fourth quarter of 2010. On December 31, 2010, the two-year to ten-year yield 

curve had a 270-basis point positive spread (higher than the 209-basis point spread at the 

beginning of the quarter). Over the past five years, this spread has averaged 135 basis points. 

Prospective Strategies 

 Similar to the fourth quarter 2010 investment strategy, the first quarter 2011 DIF investment 

strategy calls for purchasing up to $20.0 billion of short-term Treasury securities with 

maturities between April 1, 2011, and December 31, 2013. 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 

Treasury securities. The maturity dates eligible for investment were extended from December 

31, 2011, to December 31, 2013, so as to take advantage of the recent increases in Treasury 

yields. 

 For the Debt Guarantee Program, the first quarter 2011 investment strategy calls for purchasing 

up to $3 billion (par value) of available-for-sale securities with maturity dates between April 1, 

2011, and December 31, 2013. Again, this strategy attempts to balance the need to maintain 

sufficient portfolio liquidity against the yield pick-up that can be obtained by investing in shortmaturity securities. The maturity dates eligible for investment were extended from December 

31, 2011, to December 31, 2013, so as to take advantage of the recent increases in Treasury 

yields. 

III. Budget Results (See pages 16 - 17 for detailed data.) 

Approved Budget Modifications 

The 2010 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other 

officials the authority to make certain modifications to the 2010 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 2010 

Corporate Operating Budget approved by the Board in December 2009.) 

 In October 2010, the CFO approved a $1,000,000 reallocation in the Outside Services – 

Personnel expense category of the Ongoing Operations budget to the Office of Enterprise Risk 

Management (OERM) from the Corporate Unassigned budget. The purpose of this budget 

authority reallocation was to assist the Risk Steering Committee in preparing a Board case that 
7

included the organization structure options and operating model choices for the risk 

management organization, and initial view of the organizational design, staffing level and their 

costs for the proposed Office of the Corporate Risk Management. 

 In October 2010, the CFO approved the reallocation of existing budget authority within the 

Salaries & Compensation expense category of the Ongoing Operations and Receivership 

Funding components of the 2010 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 September 30, 

2010. In conjunction with these reallocations, the Corporate Unassigned budgets were 

increased by $8,357,797 and $13,816,111 in the Ongoing Operations and Receivership Funding 

budget components, respectively.

 In October 2010, the CFO approved the reallocation of budget authority within the Salaries & 

Compensation expense category of the Ongoing Operations and Receivership Funding 

components of the Corporate Unassigned budget to fund the change in the awards policy for 

Corporate Managers (CMs). The realignment increased budget authority in several divisions 

and offices and decreased the Corporate Unassigned budget for Ongoing Operations and 

Receivership Funding by $627,063 and $137,866, respectively.

 In December 2010, the CFO approved the reallocation of $655,000 in budget authority in the 

Ongoing Operations component from the Corporate Unassigned budget to the Outside Services 

– Personnel budget of the Office of Diversity and Economic Opportunity (ODEO) in support of 

efforts to fund the expanded Corporate Outreach and asset purchaser efforts as well as to fund 

the use of sign language interpreters. 

 In December 2010, the CFO approved the reallocation of existing budget authority within the 

Salaries & Compensation expense category of the Ongoing Operations component of the 2010 

Corporate Operating Budget from the Corporate Unassigned budget (-$6,350,751) to the 

budgets of the Division of Supervision and Consumer Protection (+$5,976,672), Division of 

Resolutions and Receiverships (+$237,286), Executive Offices (+$90,000), Office of the 

Ombudsman (+$24,206), and Office of International Affairs (+$22,587). This reallocation was 

based upon an analysis of actual spending for salaries, bonuses, and fringe benefits through 

November 30, 2010, and on-board staffing estimates through year-end. 

 In December 2010, the CFO approved the reallocation of $1,050 in existing budget authority in 

the Executive Offices from the Travel expense category to the Outside Services – Other 

expense category of the Ongoing Operations component of the 2010 Corporate Operating 

Budget. 

Following these budget reallocations, the amounts remaining available within the Corporate 

Unassigned budgets for the Ongoing Operations and Receivership Funding budget components 

were $9,524,119 and $197,191,989, respectively.

Spending Variances 

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

Significant spending variances for the year ending December 31, 2010, are defined as those that 

either (a) exceed the annual budget for a major expense category or total division/office budget, or 
8

(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. 

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 2010 Corporate Operating Budget: 

 Outside Services – Personnel expenditures were $32.5 million, or 14 percent, less than budgeted. 

The largest components of this variance include the following. The Division of Administration 

(DOA) spent $6.3 million less than budgeted, largely due to lower-than-anticipated costs for 

background investigations; delays in the hiring of Human Resources support contractors; lowerthan-expected spending on records retention and destruction; and, significant savings from 

developing the Human Capital plan internally. The CIO Council’s spending for systems 

development and discretionary small enhancements was $5.7 million less than budgeted. 

Department of Justice expenses for the goodwill litigation were $4.9 million lower than 

budgeted through the fourth quarter. The Division of Resolutions & Receiverships (DRR) 

spent $3.6 million less than budgeted due to the diversion of resources to train and assimilate 

new staff, thus delaying the issuance of a Blanket Ordering Agreement solicitation. The Office 

of Inspector General (OIG) spent $3.0 million less than budgeted due to the delay in awarding 

new contracts due to operating under a Continuing Resolution. The Division of Information 

Technology’s (DIT) spending for internal operations was nearly $2.2 million less than budgeted 

and the Office of Complex Financial Institutions (OCFI) spent $1.0 million less than budgeted, 

as no OCFI staff was on-board to initiate outside contractor work in 2010. 

 Travel expenditures were $0.1 million, or less than 1 percent, greater than budgeted, due to an 

increase in the number of examinations conducted and an increase in the number of examination 

staff. Those examination costs were largely, but not fully offset by the lower-than-projected 

travel for Corporate Employee Program (CEP) and Corporate University personnel, and lower 

than anticipated investigative and audit workload in the OIG. 

 

 Buildings expenditures were $0.2 million, or less than 1 percent, greater than budgeted, largely 

due to slightly greater-than-estimated expenses associated with implementation of the 2010 

Headquarters Space Realignment Plan. 

 Equipment expenditures were approximately $5.2 million, or 6 percent, greater than budgeted. 

DIT spent $1.8 million more than budgeted as funds were re-prioritized to purchase security 

software to facilitate compliance with GAO audit findings, and the CIO Council spent $1.8 

million more than budgeted largely on hardware and software purchases at year end. In 

addition, DOA spent $1.5 million more than budgeted due to unanticipated expenses related to 

furnishing an additional floor at the Courthouse building, unanticipated carpet replacement 

expenses at Virginia Square, and un-accrued expenses from 2009 that were paid in 2010. 

 Outside Services – Other expenditures were $4.8 million, or 22 percent, less than budgeted. 

DOA spent $2.4 million less than budgeted, largely due to lower unit shipping costs resulting 

from the decision to incorporate General Services Administration’s (GSA) Strategic Source 

Initiative; significant savings from establishing ground service as the default for express mail 
9

services; and, lower-than-budgeted spending for insurance. In addition, the Office of Public 

Affairs (OPA) spent $1.9 million less than budgeted for its advertising and media campaigns 

due to the office’s need to redirect its attention to more urgent matters relating to the 

implementation of Dodd-Frank legislation. 

 Other Expenses expenditures were $3.6 million, or 24 percent, less than budgeted. The Division 

of Supervision and Consumer Protection (DSC) spent $2.4 million less than budgeted due to 

lower PLA participation as a result of workload demands, unused funds related to the 

cancellation of the Economic Inclusion Conference, and lower-than-projected expenses for the 

Interagency Accounting, Assistant Regional Director (ARD) and National Field Supervisor (FS) 

conferences. 

Receivership Funding

The Receivership Funding component of the 2010 Corporate Operating Budget includes funding 

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

and disposition of the assets and liabilities of the ensuing receiverships, except for salary and 

benefits expenses for permanent employees assigned to the receivership management function. 

There were significant spending variances in all of the seven major expense categories through the 

fourth quarter in the Receivership Funding component of the 2010 Corporate Operating Budget: 

 Salaries & Compensation ($68.8 million, or 22 percent, less than budgeted). 

 

 Outside Services – Personnel ($427.9 million, or 26 percent, less than budgeted). 

 Travel ($18.0 million, or 30 percent, less than budgeted). 

 Buildings ($47.3 million, or 19 percent, less than budgeted). 

 Equipment ($10.9 million, or 24 percent, less than budgeted). 

 Outside Services – Other ($40.2 million, or 149 percent, more than budgeted). 

 Other Expenses ($30.0 million, or 16 percent, more than budgeted). 

The variances in the Outside Services – Personnel expense category were attributable to fewer-thananticipated resolutions through the fourth quarter of 2010. The variance in the Salaries & 

Compensation category was attributable to slower than projected hiring of non-permanent staff. 

Lower-than-budgeted spending occurred in the Buildings and Other Expense categories as a result 

of shorter than expected operations at receivership locations and the fewer-than-anticipated number 

of field sites in operation. The variance in the Travel category was also due to the lower-thananticipated number of resolutions through the fourth quarter of 2010. The variance in the 

Equipment category was primarily attributable to lower laptop prices and lower-than-anticipated 

costs for the Midwest Temporary Satellite Office (MWTSO). The variance in the Outside Services 

– Other expense category reflected approximately $43.3 million in unbudgeted guarantee fee costs 

that were incurred in conjunction with a Limited Liability Company (LLC) transaction. The 

variance in the Other Expense category was attributable to the extensive time required to facilitate 

the transfer of banking operations and the disposition of the failed bank assets. 
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Significant Spending Variances by Division/Office1

Twelve organizational units had significant spending variances through the end of the fourth quarter: 

 DRR spent $279.5 million, or 13 percent, less than budgeted, mostly due to less-than-budgeted 

spending for resolution and receivership workload activities for the reasons identified above. 

This was slightly offset by the payment of a large, unbudgeted guarantee fee and greater-thanbudgeted expenses in the Other Expense category in connection with disposition of failed bank 

assets. 

 DIT spent $20.9 million, or 8 percent, less than budgeted. The majority of this variance was in 

the Receivership Funding budget component and was largely attributable to less-than-projected 

bank closing activities and associated contractor support; and lower-than-anticipated expenses 

for the MWTSO facility and laptops. Vacancies in budgeted positions significantly contributed 

to the $2.8 million variance in the Ongoing Operations budget component, where excluding the 

Salaries & Compensation expense category, the net variance for internal operations was only 

$0.5 million. 

 The Legal Division spent $12.3 million, or 4 percent, less than budgeted. This variance 

included approximately $8.5 million in under spending for Salaries & Compensation due to 

slower-than-projected hiring to fill budgeted positions. 

 OIG spent $6.5 million, or 17 percent, less than budgeted. The OIG was operating under a 

continuing resolution for the first quarter of fiscal year 2010, which delayed spending during the 

following quarter. The OIG again operated under a continuing resolution in the first quarter of 

the fiscal year 2011, which effectively froze OIG spending at its fiscal year 2010 appropriated 

level. 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. 

 Government Litigation was $4.9 million, or 74 percent, less than budgeted. This variance was 

attributable to lower than expected expense payments to the Department of Justice for litigation 

expenses on the goodwill cases. 

 Executive Support Offices spent $4.2 million, or 11 percent, less than budgeted. This variance 

was mostly attributable to lower-than-budgeted expenses for advertising and media campaign 

costs in the Office of Public Affairs due to the office’s need to redirect its attention to more 

urgent matters relating to the implementation of Dodd-Frank legislation. 

 The CIO Council spent $3.9 million, or 6 percent, less than budgeted. This variance was 

primarily attributable to under-spending of discretionary funds by divisions and offices for small 

enhancements. 

 The Division of Finance (DOF) spent $3.9 million, or 10 percent, less than budgeted. This 

variance was attributable to lower-than-expected requirements for contractor services for 

temporary DOF accounting and auditing work, and slower-than-expected hiring.

 

1

 Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets. 
11

 CU – Corporate spent $3.9 million, or 16 percent, less than budgeted. This variance is primarily 

due to unanticipated schedule adjustments for several major initiatives within the College of 

Corporate Business. 

 The OCFI spent $2.4 million, or 100 percent, less than budgeted. This variance was due to 

delays in officially staffing this new office in 2010. 

 CU – CEP spent $2.2 million, or 9 percent, less than budgeted. This variance included spending 

approximately $1.6 million less than budgeted for travel expenses and approximately $0.5 

million less than budgeted for Salaries & Compensation expenses for Financial Institution 

Specialists due to a slightly adjusted average class size. 

 The Corporate Unassigned budget of $206.7 million lapsed unused on December 31, 2010. This 

source of funds was established to provide an unallocated contingency reserve to meet 

unanticipated or unbudgeted resource requirements. 
Unaudited Unaudited Quarterly Audited Year-Over-Year

Dec-10 Sep-10 Change Dec-09 Change

Cash & cash equivalents - unrestricted $ 22,701 27,077 $ 4,376 $ 54,092 $ $ (27,015)

Cash & investments - restricted - systemic risk 6,158 6,647 489 6,431 216 

Investment in U.S. Treasury obligations, net 14,727 12,371 5,487 (2,356) 6,884 

Trust preferred securities 2,315 2,298 1,962 (17) 336 

Assessments receivable, net 248 218 281 (30) (63)

Receivables and other assets, net - systemic risk 3,007 2,269 3,299 (738) (1,030)

Interest receivable on investments and other assets, net 163 260 97 220 40 

Receivables from resolutions, net 49,684 29,533 38,409 (20,151) (8,876)

Property, buildings and other capitalized assets, net 387 416 29 388 28 

Total Assets $ 99,390 81,089 $ $ 110,569 (18,301) $ $ (29,480)

Accounts payable and other liabilities 514 370 144 274 240

Unearned revenue - prepaid assessments 30,057 33,370 (3,313) 42,727 (12,670)

Liabilities due to resolutions 30,512 42,796 (12,284) 34,712 (4,200)

Deferred revenue - systemic risk 9,055 8,729 326 7,847 1,208

Postretirement benefit liability 166 145 21 145 21

Contingent Liabilities: future failures 17,688 21,267 (3,579) 44,014 (26,326)

Contingent Liabillties: systemic risk 149 422 (273) 1,412 (1,263)

Contingent Liabilities: litigation losses & other 300 300 - 300 - 

Total Liabilities $ 107,399 88,441 $ $ 131,431 (18,958) $ $ (42,990)

FYI: Unrealized gain/(loss) on U.S. Treasury investments, net 40 27 142 (13) (115)

FYI: Unrealized gain/(loss) on trust preferred securities 353 336 - (17) 336 

FYI: Unrealized postretirement benefit gain/(loss) (19) (3) (16) (3) (16)

FUND BALANCE $ (8,009) (7,352) $ 657 $ (20,862) $ 13,510 $ 

Income Statement (year-to-date) 

Unaudited Unaudited Quarterly Audited Year-Over-Year

Dec-10 Sep-10 Change Dec-09 Change

Assessments earned $ 10,112 13,610 $ 3,498 $ 17,717 $ $ (4,107)

Systemic risk revenue (673) (418) 1,722 (255) (2,395)

Interest earned on U.S. Treasury obligations 166 205 39 704 (499)

Realized gain on sale of securities - - - 1,389 (1,389)

Other revenue 173 238 65 3,174 (2,936)

Total Revenue $ 10,033 13,380 $ 3,347 $ 24,706 $ $ (11,326)

Operating expenses (includes depreciation expense) 1,141 1,593 452 1,271 322 

Systemic risk expenses (673) (418) 1,722 (255) (2,395)

Provision for insurance losses (848) 2,446 (3,294) 57,712 (58,560)

Other expenses 2 3 1 4 (1)

Total Expenses & Losses $ 75 $ 2,644 (2,569) $ 60,709 $ $ (60,634)

Net Income/(Loss) 12,602 13,305 703 49,308 (36,003) 

Unrealized gain/(loss) on U.S. Treasury investments, net (115) (102) (13) 1,993 (2,108) 

Unrealized gain/(loss) on trust preferred securities 353 336 - (17) 336 

Unrealized postretirement benefit gain/(loss) - (16) (16) 11 (27) 

YTD Comprehensive Income/(Loss) $ 12,853 13,510 $ 657 $ (38,138) $ 51,648 $ 

 

Deposit Insurance Fund

• Cash collections in 2010 are 

from institutions that did not 

prepay assessments at year-end 

2009.

• Third quarter 2009 assessment 

collections include a $5.5 billion 

special assessment. 

• DIF collected $45.7 billion in 

prepaid assessments on 

12/30/09, which was recorded as 

a liability and is recognized as 

revenue quarterly as it is earned. 

 

Quarterly DIF Cash Flows in 2010

$3,767

$1,051

$4,665 $5,221

($6,934)

($20,369)

($5,069)

($2,727)

-$25,000

-$20,000

-$15,000

-$10,000

-$5,000

$0

$5,000

$10,000

1Q10 2Q10 3Q10 4Q10

$ in Millions

Cash Inflows Cash Outflows Net Cash Flow

Resolution of three Puerto Rico institutions in 

4/2010 resulted in cash outflows of $13 B.

Quarterly Assessments Premiums

(based on insurance coverage period) 

3,196

1,177

2,593

8,622

0 0 0 0 280 265 244 216 218

2,982 3,037 3,217 3,181 3,210

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

$ in Millions

Cash Collections Prepaid Assessments

FDIC CFO REPORT TO THE BOARD – Fourth Quarter 2010

Fund Financial Results ($ in Millions) 

12

Estimated

• During 2010, the DIF’s liquidity decreased 

by $20.4 B (cash inflows of $14.7 B and 

cash outflows of $35.1 B).

• Cash inflows consist of gross dividends, 

interest revenue, and assessments. Cash 

outflows consist of resolution-related 

outlays and operating expenses.

• Resolutions-related outlays comprised 

95% of all DIF cash outflows. These 

outlays include initial wires to acquirers, 

initial wire payments to receiverships, 

payoffs of brokered deposits, loss-share 

payments to receiverships, and deposit 

payouts.
Statements of Cash Flows (year-to-date) 

Unaudited Unaudited Quarterly Audited Year-Over-Year

Dec-10 Sep-10 Change Dec-09 Change

Net Income/(Loss) $ 13,305 $ 12,602 $ 703 $ (36,003) $ 49,308 

Amortization of U.S. Treasury obligations (unrestricted) (5) (4) (1) 211 (216)

TIPS Inflation Adjustment (23) (17) (6) 11 (34)

Depreciation on property and equipment 69 50 19 70 (1)

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

Provision for insurance losses (848) (3,294) 2,446 57,712 (58,560)

Unrealized (loss)/gain on postretirement benefits (16) - (16) (27) 11 

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

Guarantee termination fee from Citigroup - - - (1,962) 1,962 

Systemic risk expenses - - - - - 

Net change in operating assets and liabilities (32,217) (31,634) (583) 17,170 (49,387)

Net Cash Provided by/(Used by) Operating Activities $ (19,734) $ (22,297) $ 2,563 $ 35,794 $ (55,528)

Investments matured and sold 21,558 11,858 9,700 21,432 126 

Investments purchased (includes purchase of property and 

equipment) (30,240) (23,125) (7,115) (92) (30,148)

Net Cash Provided by/(Used by) Investing Activities $ (8,682) $ (11,267) $ 2,585 $ 21,340 $ (30,022)

Net (Decrease)/Increase in Cash and Cash Equivalents (28,416) (33,564) 5,148 57,134 (85,550)

Cash and Cash Equivalents at beginning of year 60,523 60,523 - 3,389 57,134 

 Unrestricted Cash and Cash Equivalents - Ending 27,077 22,701 4,376 54,092 (27,015)

 Restricted Cash and Cash Equivalents - Ending 5,030 4,258 772 6,431 (1,401)

Cash and Cash Equivalents - Ending $ 32,107 $ 26,959 $ 5,148 $ 60,523 $ (28,416)

Selected Financial Data

Unaudited Unaudited Quarterly Audited Year-Over-Year

Dec-10 Sep-10 Change Dec-09 Change

Cash and cash equivalents $ 3,541 3,548 $ 7 $ 3,470 $ 78 $ 

Accumulated deficit, net (124,224) 9 (124,233) 124 (124,348) 

Resolution equity 3,560 3,568 8 3,499 69 

Total revenue 11 13 2 8 5 

Operating expenses 3 4 1 5 (1)

Goodwill litigation expenses 2 (53) 409 (55) (462)

Recovery of tax benefits (63) (58) (5) (10) (53)

Net Income/(Loss) $ 60 124 $ 64 $ (400) $ 524 $ 

Deposit Insurance Fund

FSLIC Resolution Fund

 Receivership Selected Statistics December 2010 vs. December 2009

 ($ in millions) Dec-10 Dec-09 Change Dec-10 Dec-09 Change Dec-10 Dec-09 Change

Total Receiverships 336 179 157 8 8 - 344 187 157 

Assets in Liquidation 26,974 $ 41,325 $ (14,351) $ 25 $ 31 $ (6) $ 26,999 $ 41,356 $ (14,357) $ 

YTD Collections 25,456 $ 10,301 $ 15,155 $ 17 $ 9 $ 8 $ 25,473 $ 10,310 $ 15,163 $ 

YTD Dividends Paid - Cash 7,363 $ 4,698 $ 2,665 $ - $ - $ - $ 7,363 $ 4,698 $ 2,665 $ 

DIF FRF ALL FUNDS

$2,606

$1,223

$594

$265 $154

$817

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2008 * 2009 2010

$ in Millions

Avg. Total Assets Avg. Total Estimated Losses

Bank Failures Average Total Assets and Estimated Losses by Year of Failure

13

Fund Financial Results - continued ($ in Millions) 

Year of Bank Total Total

Failures Failures Assets Estimated

$ in millions Losses 

$ in millions

2008* 24 $62,545 $19,604

2009 140 $171,220 $37,122

2010 157 $93,218 $24,180

* Excludes WAMU with total assets of 

$299 billion and zero losses.
14

12/31/10 12/31/09 Change

Par Value $39,430 $59,268 ($19,838)

Amortized Cost $39,483 $59,286 ($19,803)

Market Value $39,510 $59,428 ($19,918)

Primary Reserve 1 $39,550 $59,525 ($19,975)

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

Year-to-Date Total Return (Portfolio) 0.196% 0.306% not applicable

Year-to-Date Total Return (Benchmark) 2 5.219% (1.411%) not applicable

Total Return Variance (in basis points) (502.3) 171.7 not applicable

Yield-to-Maturity 3 0.40% 0.49% (0.09%)

Weighted Average Maturity (in years) 0.16 0.08 0.08

Effective Duration (in years) 4

 Total Portfolio 0.15 0.06 0.09

 Available-for-Sale Securities 0.46 0.66 (0.20)

 Held-to-Maturity Securities 5 not applicable not applicable not applicable

12/31/10 12/31/09 Change

Debt Guarantee Program

 Par Value $6,630 $6,431 $199

 Book Value $6,646 $6,431 $215

 Market Value $6,646 $6,431 $215

 Yield-to-Maturity 0.10% 0.02% 0.08%

 Weighted Average Maturity 0.14 overnight 0.14

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 7

 Book Value 6 $0 $192 ($192)

 Yield-to-Maturity not applicable 0.02% not applicable

 Weighted Average Maturity not applicable overnight not applicable

FRF-FSLIC

 Book Value 6 $3,397 $3,330 $67

 Yield-to-Maturity 0.05% 0.02% 0.03%

 Weighted Average Maturity overnight overnight no change

12/31/10 12/31/09 Change

Book Value 8 $17,506 $7,223 $10,283

Effective Annual Yield 0.13% 0.11% 0.02%

Weighted Average Maturity (in days) 6 5 1

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.

8

 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)

7

 All funds in this portfolio ($192 million) were transferred to the DIF investment portfolio on January 7, 2010, as a result of the 

December 23, 2009, termination agreement of the Citigroup asset guarantee program.

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 presently assumes 

an average 1.8 percent 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.
15

DEPOSIT INSURANCE FUND

Purchase up to $20 billion (par value) of available-for-sale (AFS) securities with maturity dates 

between January 1, 2011, and December 31, 2011, subject to the following additional restrictions: no 

more than $15 billion (par value) of such securities shall have maturity dates beyond March 31, 2011; 

and no more than $10 billion (par value) of such securities shall have maturity dates beyond June 30, 

2011.

Purchase up to $20 billion (par value) of available-for-sale (AFS) securities with maturity dates 

between April 1, 2011, and December 31, 2013, subject to the following additional restrictions: no 

more than $15 billion (par value) of such securities shall have maturity dates beyond September 30, 

2011; and no more than $10 billion (par value) of such securities shall have maturity dates beyond 

March 31, 2012.

DEBT GUARANTEE PROGRAM

Purchase up to $2 billion (par value) of AFS securities with maturity dates between January 1, 2011, 

and December 31, 2011. 

Purchase up to $3 billion (par value) of AFS securities with maturity dates between April 1, 2011, and 

December 31, 2013. 

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 $100 million to $300 million.

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

Strategy Changes for 1st Quarter 2011

Investment Strategies

Strategy as of 4th Quarter 2010

Strategy as of 4th Quarter 2010

Strategy Changes for 1st Quarter 2011

Strategy as of 4th Quarter 2010

Strategy Changes for 1st Quarter 2011
16

1) Budgets for investment projects are approved on a multi-year basis; the year-to-date budget amount reflects the 2010 spending estimates 

for approved projects. The YTD expenditures amount includes a credit for reimbursed costs from a prior period.

YTD YTD % of 

Major Expense Category Budget Expenditures Budget Used Variance

Corporate Operating Budget 

Ongoing Operations

Salaries & Compensation $962,073 $932,189 97% ($29,884)

Outside Services - Personnel 240,699 208,154 86% (32,545)

Travel 88,454 88,558 100% 104

Buildings 76,894 77,087 100% 193

Equipment 84,527 89,717 106% 5,190

Outside Services - Other 21,650 16,880 78% (4,770)

Other Expenses 14,983 11,417 76% (3,566)

Total Ongoing Operations $1,489,280 $1,424,002 96% ($65,278)

Receivership Funding

Salaries & Compensation $315,072 $246,313 78% ($68,759)

Outside Services - Personnel 1,615,331 1,187,417 74% (427,914)

Travel 59,566 41,534 70% (18,032)

Buildings 254,172 206,880 81% (47,292)

Equipment 44,759 33,905 76% (10,854)

Outside Services - Other 26,985 67,207 249% 40,222

Other Expenses 184,116 214,094 116% 29,978

Total Receivership Funding $2,500,000 $1,997,350 80% ($502,650)

Total Corporate Operating Budget $3,989,280 $3,421,352 86% ($567,928)

Investment Budget 1

$1,089 $413 38% ($676)

Grand Total $3,990,369 $3,421,765 86% ($568,604)

(Dollars in Thousands)

Executive Summary of 2010 Budget and Expenditures

by Major Expense Category

Through December 31, 2010
17

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 2010 spending estimates 

for approved projects. 

YTD YTD % of 

Division/Office Budget Expenditures Budget Used Variance

 Corporate Operating Budget 

 Supervision & Consumer Protection $594,626 $588,987 99% ($5,639)

 Information Technology 259,375 239,363 92% (20,012)

 Administration 285,485 275,688 97% (9,797)

 Resolutions & Receiverships 2,077,539 1,797,820 87% (279,719)

 Legal 277,582 265,281 96% (12,301)

 Insurance & Research 42,541 41,385 97% (1,156)

 Finance 37,321 33,426 90% (3,895)

 Inspector General 39,271 32,726 83% (6,545)

 Corporate University - CEP 25,988 23,740 91% (2,248)

 Corporate University - Corporate 25,027 21,115 84% (3,912)

 Executive Support 1 37,286 33,134 89% (4,152)

 Executive Offices 2 10,522 9,871 94% (651)

 Complex Financial Institutions 2,357 2 0% (2,355)

 Government Litigation 6,700 1,767 26% (4,933)

 CIO Council 60,944 57,047 94% (3,897)

 Corporate Unassigned 206,716 0 0% (206,716)

 Total, Corporate Operating Budget $3,989,280 $3,421,352 86% ($567,928)

 Investment Budget 3

 Information Technology $1,001 $118 12% ($883)

 Resolutions & Receiverships 63 270 428% 207

 Insurance & Research 25 25 100% 0

 Total, Investment Budget 3 $1,089 $413 38% ($676)

 Combined Division/Office Budgets

 Supervision & Consumer Protection $594,626 $588,987 99% ($5,639)

 Information Technology 260,376 239,481 92% (20,895)

 Administration 285,485 275,688 97% (9,797)

 Resolutions & Receiverships 1,798,090 87% (279,512) 2,077,602

 Legal 277,582 265,281 96% (12,301)

 Insurance & Research 42,566 41,410 97% (1,156)

 Finance 37,321 33,426 90% (3,895)

 Inspector General 39,271 32,726 83% (6,545)

 Corporate University - CEP 25,988 23,740 91% (2,248)

 Corporate University - Corporate 25,027 21,115 84% (3,912)

 Executive Support 1 33,134 89% (4,152) 37,286

 Executive Offices 2 9,871 94% (651) 10,522

 Complex Financial Institutions 2 0% (2,355) 2,357

 Government Litigation 1,767 26% (4,933) 6,700

 CIO Council 60,944 57,047 94% (3,897)

 Corporate Unassigned 206,716 0 0% (206,716)

 Grand Total $3,990,369 $3,421,765 86% ($568,604)

Executive Summary of 2010 Budget and Expenditures

by Budget Component and Division/Office

Through December 31, 2010

(Dollars in Thousands)