Federal Deposit Insurance Corporation 

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

 

 November 12, 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: Third Quarter 2010 CFO Report to the Board 

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

September 30, 2010. 

Executive Summary

 During third quarter of 2010, the Deposit Insurance Fund (DIF) balance increased by $7.2 

billion to negative $8.0 billion. This increase was primarily due to a $3.6 billion increase in 

assessments earned and a $3.8 billion decrease in provision for insurance losses, offset by a 

$414 million increase in operating expenses. 

 During the third quarter of 2010, the FDIC was named receiver for 41 failed institutions. The 

combined assets at inception for these institutions totaled approximately $14.0 billion with a 

total estimated loss of $2.3 billion. The corporate cash outlay during the third quarter for these 

failures was approximately $3.3 billion. 

 For the nine months ending September 30, 2010, Corporate Operating Budget expenditures 

were below budget by 6 percent ($163.9 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. 

 Expenditures from the Investment Budget were 62 percent ($0.7 million) below project 

spending estimates through September 30, 2010. 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 (CIRC). 
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 

 As of September 30, 2010, unearned assessment revenue was $33.4 

billion, which is the amount remaining from the $45.7 billion in prepaid 

assessments collected on December 30, 2009. Estimated assessments 

were prepaid by the majority of institutions for the period October 2009 

through December 2012, and are recorded as a liability. As a result, the 

DIF recognized prepaid assessments of $3.4 billion during the third 

quarter of 2010. Additional assessment revenue of $248 million was 

recognized for third quarter insurance coverage from institutions that 

were exempt from the mandatory prepayments. Therefore, the total 

assessment revenue recognized during the third quarter of 2010 was 

$3.6 billion. 

 An institution’s quarterly risk-based deposit insurance assessment 

thereafter is offset by the amount prepaid until that amount is exhausted 

or until June 30, 2013, when any amount remaining would be returned 

to the institution. 
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 $43.7 billion on September 30, 

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 $21.8 billion during the first three quarters of 2010, totaling $37.4 

billion on September 30, 2010. The decrease was the result of having to 

fund 127 bank failures during the first three quarters of 2010. It should 

be noted that 106 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 little or no initial 

resolution funding, thus helping to mitigate the decline in the DIF 

portfolio’s balance. Moreover, during the first three quarters, the DIF 

received $8.6 billion in dividends and other payments from 

receiverships, which 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. 

 At the end of the third quarter, the DIF investment portfolio’s yield was 

0.47 percent, down 2 basis points from its December 31, 2009, yield of 

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

high yielding Treasury notes and bonds that matured during the period. 

However, a generally offsetting positive factor was that overnight 

investment yields increased considerably, rising from 0.02 percent on 

December 31, 2009, to 0.12 percent on September 30, 2010—and the 

ultra-low yielding overnight investments comprised a considerably 

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

 Short-term Treasury bill yields declined modestly during the third 

quarter of 2010, while longer-maturity Treasury yields posted more 

dramatic declines. 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. Moreover, the recent declines in longer-maturity Treasury yields 

reflect growing concerns over signs of a potential slowdown in both 

domestic and global economic growth. Nevertheless, according to 

consensus expectations, Treasury yields are expected to increase, albeit 

modestly, during 2011. 
4

Trends and Outlook

Financial Results Comments 

III. Budget  Approximately $1.0 billion was spent in the Ongoing Operations 

component of the 2010 Corporate Operating Budget, which was $76.4 

million (7 percent) below the budget for the nine months ending 

September 30, 2010. Most of this variance reflected lower-thanbudgeted spending in the Outside Services-Personnel expense category 

by $25.6 million, the Salaries and Compensation expense category by 

$21.5 million, and the Equipment expense category by $16.0 million. 

 Approximately $1.5 billion was spent in the Receivership Funding 

component of the 2010 Corporate Operating Budget, which was $87.5 

million (5 percent) below the budget for the nine months ending 

September 30, 2010. Actual expenses were significantly less than 

budget in Outside Services-Personnel expense category by $157.7 

million, Salaries and Compensation expense category by $28.2 million, 

and Travel expense category by $13.4 million. This was partially offset 

by overspending in Other Expenses by $75.2 million and Outside 

Services-Other by $40.0 million. 

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

Deposit Insurance Fund (DIF) 

 For the nine months ending September 30, 2010, the DIF’s comprehensive income totaled 

$12.9 billion compared with a comprehensive loss of $25.5 billion for the same period last 

year. This $38.4 billion year-over-year increase was primarily due to a $43.2 billion decline in 

the provision for insurance losses partially offset by a $4.6 billion decrease in assessments 

earned, a $462 million decline in interest income from U.S. Treasury obligations, and a $249 

million increase in operating expenses. 

 The provision for insurance losses was a negative $3.3 billion as of September 30, 2010, 

compared to a positive $39.9 billion for the same period in 2009. The 2009 provision reflected 

the significant increase in losses estimated to be incurred by the DIF from 2009 and future 

failures. In contrast, the 2010 negative provision is primarily influenced by two factors—

lower-than-anticipated loss estimates at time of failure for banks that have failed and leveling 

off of estimated losses to the DIF from banks expected to fail. 

 During the third quarter of 2010, the Debt Guarantee Program (DGP) incurred $5.3 million in 

losses related to the default of DGP-guaranteed debt. To date, three debt issuers have defaulted 

on guaranteed debt totaling $7.3 million.

FSLIC Resolution Fund (FRF) 

 In August, the Adam Corporation/Group (TACG) paid the FRF $43.2 million, as ordered by an 

arbitration panel in June, to resolve a dispute over the tax benefit sharing payments due to the 
5

FDIC, in its capacity as manager of FRF, under the tax provisions of a 1988 FSLIC Assistance 

Agreement. Of the amount paid, $42.6 million is included in the line item Recovery of Tax 

Benefits. The remaining $560 thousand consists of a supplemental award for reimbursement of 

fees and expenses and interest on the late payment of the award. The FRF had accrued $42.6 

million in June based on the arbitration panel’s decision. 

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 decreased by $21.8 billion 

during the first three quarters of 2010, or 36.8 percent, from $59.3 billion on December 31, 

2009, to $37.4 billion on September 30, 2010. Similarly, the DIF portfolio’s primary reserve 

(total market value plus accrued interest) decreased by $22.0 billion or 37.0 percent, from $59.5 

billion on December 31, 2009, to $37.5 billion on September 30, 2010. During the period, 

resolution outlays and operating expenses greatly exceeded receivership payments, assessment 

collections, and other inflows. 

 The DIF investment portfolio’s total return for the first three quarters of 2010 was 0.13 percent, 

698 basis points lower than its benchmark, the Merrill Lynch 1 – 10 Year U.S. Treasury Index 

(Index), which had a total return of 7.11 percent during the same period. Given that most 

longer-maturity Treasury yields declined during the period (that is, Treasury security prices 

rose), the DIF portfolio’s large balances of comparatively low yielding overnight investments 

and short-maturity Treasury bills (T-Bills) were a drag on performance relative to the Index’s 

longer-duration conventional Treasury securities. 

 In accordance with the approved third 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 four short-maturity T-Bills during the third 

quarter of 2010. The four securities had a total par value of $4.0 billion, a weighted average 

yield-at-cost of 0.19 percent, and a weighted average maturity (WAM) of 0.45 years. 

Other Corporate Investment Portfolios 

 During the first three quarters of 2010, the book value of the Debt Guarantee Program (DGP) 

investment portfolio decreased from $6.4 billion on December 31, 2009, to $6.2 billion on 

September 30, 2010. Although the DGP portfolio received a total of $433 million in 

reimbursements from Transaction Account Guarantee (TAG) Program assessments during the 

period, the DGP reimbursed $712 million to the DIF for claims against the TAG Program, 

hence the net decline in the DGP investment portfolio. In accordance with the approved third 

quarter 2010 investment strategy for the DGP portfolio, staff purchased two short-maturity TBills during the most recent quarter. The securities had a total par value of $600 million, a 

weighted average yield-at-cost of 0.19 percent, and a WAM of 0.46 years. 

 During the first three quarters of 2010, as mentioned above, the FDIC collected about $433 

million in fees related to the TAG Program under the Temporary Liquidity Guarantee Program. 
6

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 September 30, 2010. 

The Treasury Market 

 Short-maturity Treasury bill yields declined modestly during the third quarter of 2010, while 

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

decreased by 2 basis points, while the yield on the six-month T-Bill decreased by 3 basis 

points. The one-year T-Bill yield declined by 6 basis points. The two-year Treasury note 

yield, which is sensitive not only to actual and anticipated changes in the federal funds rate, but 

also to changes in investor sentiment, declined by 18 basis points. Intermediate- to longermaturity Treasury security yields declined during the third quarter. The yield on the five-year 

Treasury note declined by 51 basis points, while the yield on the ten-year Treasury note 

declined by 42 basis points. Consequently, the conventional Treasury yield curve flattened 

during the quarter. On September 30, 2010, the two-year to ten-year yield curve had a 209-

basis point positive spread (lower than the 233-basis point spread at the beginning of the 

quarter). Over the past five years, this spread has averaged 123 basis points. 

Prospective Strategies 

 Similar to the third quarter investment strategy, the fourth quarter 2010 DIF investment strategy 

calls for purchasing up to $20.0 billion of shorter-term Treasury securities with maturities 

between January 1, 2011, and December 31, 2011. 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. 

 For the Debt Guarantee Program, similar to its third quarter investment strategy, the fourth 

quarter 2010 investment strategy calls for purchasing up to $2.0 billion of Treasury securities 

with maturities between January 1, 2011, and December 31, 2011. 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 short-maturity securities. 

III. Budget Results (See pages 15 - 16 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 third 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 early August 2010, the CFO approved the reallocation of existing budget authority within 

the Ongoing Operations and Receivership Funding components of the 2010 Corporate 

Operating Budget following the mid-year reassessment of actual and projected spending and 

the second quarter analysis of spending for salaries, bonuses, and fringe benefits. Funding was 

also provided for 219 newly authorized positions. The budgets for all divisions and offices and 
7

all major expense categories were adjusted in this reallocation. In conjunction with these 

reallocations, the Corporate Unassigned budgets were reduced by $16,793,089 and $8,528,963, 

respectively, in the Ongoing Operations and Receivership Funding budget components. This 

reallocation was made effective in July 2010. 

 In August 2010, in conjunction with the establishment of the Office of Complex Financial 

Institutions (CFI) by the Board of Directors, the CFO approved the reallocation of $2,356,537 

in budget authority from the Division of Supervision and Consumer Protection (DSC) Ongoing 

Operations budget to the Ongoing Operations budget of the new CFI. This adjustment 

realigned budget authority within the Salaries and Compensation, Outside Services-Personnel, 

Travel, and Other Expenses categories. 

 In August 2010, the CFO approved a $1,953,530 million increase in the Ongoing Operations 

budget for the Division of Information Technology (DIT) with an offsetting decrease of 

$1,953,530 in DIT’s Receivership Funding budget. This adjustment provided additional budget 

authority for contractual services in the Ongoing Operations budget component for 

infrastructure support and removed excess budget authority for these services in the 

Receivership Funding budget component. The Corporate Unassigned budget authority for the 

Ongoing Operations and Receivership Funding budget components were adjusted by like 

amounts to fund this adjustment within the Outside Services-Personnel expense category. 

 In October, the CFO approved a reallocation of $775,000 in budget authority within the 

Ongoing Operations component of the 2010 Corporate Operating Budget from the Corporate 

Unassigned budget to the Chief Financial Officer’s Ongoing Operations budget to cover 

higher-than budgeted expenses for the 2009 audit conducted by the Government Accountability 

Office (GAO). This reallocation was made effective in September 2010. 

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

Unassigned budgets for the Ongoing Operations and Receivership Funding budget components 

are $9,781,136 and $183,513,744, respectively. 

Approved Staffing Modifications 

The 2010 Budget Resolution delegated to the CFO the authority to modify approved 2010 staffing 

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

approved 2010 Corporate Operating Budget. The following changes were approved by the CFO in 

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

 In August 2010, the CFO approved an increase of 219 authorized positions (49 permanent, 170 

non-permanent) within four divisions. Authorized staffing was increased by 150 positions (all 

non-permanent) in the Division of Resolutions and Receiverships (DRR) to provide increased 

contractor oversight capabilities; by 45 positions (43 permanent, 2 non-permanent) in DSC, 

largely for additional field compliance examiner positions; by 12 positions (5 permanent, 7 

non-permanent) in DIT for increased information security activities; and by 12 positions (1 

permanent, 11 non-permanent) in the Division of Administration (DOA) for a permanent 

Information Security Manager and non-permanent Contract Specialists to address the 

substantial increase in DRR contracting. 
8

 In August 2010, the CFO approved an initial authorization of 148 positions (all permanent) for 

CFI, through the transfer of 35 previously-authorized positions from DSC and the 

establishment of 113 newly authorized positions. 

Spending Variances 

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

Significant spending variances for the nine months ending September 30, 2010, are defined as 

those that either (1) exceed the YTD budget by $1 million and represent more than 2 percent for a 

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

expense category or division/office by an amount that exceeds $2 million and represents more than 

4 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 five major expense categories through the third 

quarter in the Ongoing Operations component of the 2010 Corporate Operating Budget: 

 Outside Services-Personnel expenditures were $25.6 million, or 14 percent, less than budgeted. 

Approximately $5.5 million of this variance was attributable to under spending by DIT for 

internal operations due to delays in starting several internal initiatives, and $4.2 million was 

attributable to the budget timing on the CIO Council discretionary funds and development 

projects. Department of Justice expenses for the goodwill litigation were $5.0 million lower 

than expected through the third quarter. DRR spent $3.2 million less than budgeted due to 

postponement of training of new employees in the use of the Claims Administration System 

(CAS) and the Asset Liability Management System (ALMS) as well as delays in the initiation 

of various business process improvements. In addition, CU spent $2.7 million less than 

budgeted, largely due to delays in obtaining subject matter experts (SMEs) for College of 

Corporate Business projects. 

 Buildings expenditures were $4.2 million, or 7 percent, less than budgeted, largely due to 

generous landlord concessions in the New York Regional Office and the Courthouse building, 

and surpluses in the maintenance, repairs and improvements budgets. 

 Equipment expenditures were approximately $16.0 million, or 26 percent, less than budgeted, 

primarily due to timing issues on hardware/software purchases. Major procurements have been 

initiated for key components including laptops, printers and servers. Once these components 

are received, this variance will be significantly reduced. 

 Outside Services-Other expenditures were $3.3 million, or 20 percent, less than budgeted. DOA 

spent $1.7 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 

services; and lower-than-budgeted spending for insurance. In addition, OPA spent $1.3 million 

less than budgeted for its advertising and publicity campaigns due to the office’s need to 

redirect its attention to more urgent matters relating to the implementation of Dodd-Frank 

legislation. 
9

 Other Expenses expenditures were $3.6 million, or 32 percent, less than budgeted. The 

variance was mostly due to significant underutilization of Professional Learning Account 

budgets and off-site conferences by employees in order to meet ongoing workload priorities. 

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 six of the seven major expense categories through the 

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

 Salaries & Compensation ($28.2 million, or 15 percent, less than budgeted). 

 

 Outside Services-Personnel ($157.7, million or 15 percent, less than budgeted). 

 Travel ($13.4 million, or 30 percent, less than budgeted). 

 Equipment ($6.5 million, or 23 percent, less than budgeted). 

 Outside Services-Other ($40.0 million, or 202 percent, more than budgeted). 

 Other Expenses ($75.2 million, or 70 percent, more than budgeted). 

The variance in the Salaries and Compensation category was attributable to slower than projected 

hiring of non-permanent staff. The variances in the Outside Services-Personnel expense category 

were attributable to fewer-than-anticipated resolutions through the third quarter of 2010; lower than 

expected costs for records management and storage services, guard services, and administrative 

contract expenses associated with bank closing activities. In addition, more FDIC staff and fewer 

contractors were used to reconfigure and test bank closing telecommunications equipment and to 

setup telecommunications support at bank closings. The variance in the Travel category was due to 

a lower-than-anticipated number of resolutions through the third 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. 

Significant Spending Variances by Division/Office1

Twelve organizations had significant spending variances through the end of the third quarter: 

 DRR spent $63.8 million, or 4 percent, less than budgeted, mostly due to less-than-budgeted 

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

 

1

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

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 $37.7 million, or 20 percent, less than budgeted. This variance was largely 

attributable to the timing of equipment purchases; lower-than-anticipated expenses for the 

MWTSO facility and laptops; delays in starting some internal DIT initiatives and vacancies in 

budgeted positions. 

 DOA spent $15.1 million, or 7 percent, less than budgeted. This variance was largely 

attributable to generous landlord concessions in the Courthouse building and the New York 

Regional Office; surpluses in maintenance, repairs and improvements; lower-than-budgeted 

spending for Insurance; lower unit shipping costs from incorporating GSA’s Strategic Sourcing 

Initiative; significant savings realized by establishing ground services as the default for express 

mail services; and delays in filling budgeted vacancies. 

 The Legal Division spent $10.6 million, or 5 percent, less than budgeted. This variance 

included approximately $8.4 million in under spending for Receivership Funding salaries due 

to slower than projected hiring to fill budgeted positions. 

 Government Litigation was $5.0 million, or 74 percent, less than budgeted. This variance was 

attributable to lower than expected expense reimbursements to the Department of Justice for 

litigation expenses on the Goodwill cases. 

 The CIO Council spent $4.1 million, or 9 percent, less than budgeted. This variance was 

primarily attributable to delays in the development projects to which funds were allocated by 

the CIO Council and under spending for discretionary funds by divisions and offices for small 

enhancements. 

 The Division of Finance spent $4.2 million, or 15 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.

 The Office of the Inspector General spent $3.8 million, or 13 percent, less than budgeted. This 

variance included approximately $1.7 million in under spending for Outside Services-Personnel 

due to a delay in awarding audit contracts. The OIG was under a continuing resolution for the 

first quarter of the fiscal year, which delayed spending in this area during the following quarter. 
FDIC CFO REPORT TO THE BOARD – Third Quarter 2010

Fund Financial Results ($ in Millions) 

11

Balance Sheet

Quarterly Year-Over-Year

Sep-10 Jun-10 Change Sep-09 Change

Cash & cash equivalents - unrestricted $ 18,824 22,701 $ 3,877 $ 8,546 $ 14,155 $ 

Cash & investments - restricted - systemic risk 5,786 6,158 372 7,141 (983)

Investment in U.S. Treasury obligations, net 19,264 14,727 7,590 (4,537) 7,137 

Trust preferred securities 2,130 2,315 185 - 2,315 

Assessments receivable, net 313 248 3,353 (65) (3,105)

Receivables and other assets, net - systemic risk 3,486 3,007 5,110 (479) (2,103)

Interest receivable on investments and other assets, net 165 163 159 (2) 4 

Receivables from resolutions, net 50,451 49,684 30,321 (767) 19,363 

Property, buildings and other capitalized assets, net 391 387 376 (4) 11 

Total Assets $ 100,810 99,390 $ $ 62,596 (1,420) $ 36,794 $ 

Accounts payable and other liabilities 370 328 42 199 171

Unearned revenue - prepaid assessments 33,370 36,785 (3,415) 33,370 -

Liabilities due to resolutions 42,796 41,862 934 20,106 22,690

Deferred revenue - systemic risk 8,729 8,321 408 10,316 (1,587)

Postretirement benefit liability 145 145 - 114 31

Contingent Liabilities: future failures 21,267 27,534 (6,267) 38,933 (17,666)

Contingent Liabillties: systemic risk 422 782 (360) 871 (449)

Contingent Liabilities: litigation losses & other 300 300 - 300 0

Total Liabilities $ 116,057 107,399 $ $ 70,839 (8,658) $ 36,560 $ 

FYI: Unrealized gain/(loss) on U.S. Treasury investments, net 62 40 192 (22) (152)

FYI: Unrealized gain/(loss) on trust preferred securities 168 353 185 - 353 

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

FUND BALANCE $ (15,247) (8,009) $ 7,238 $ (8,243) $ 234 $ 

Income Statement (year-to-date) 

 Quarterly Year-Over-Year

Sep-10 Jun-10 Change Sep-09 Change

Assessments earned $ 6,520 10,112 $ 3,592 $ 14,675 $ $ (4,563)

Systemic risk revenue (418) (138) 972 (280) (1,390)

Interest earned on U.S. Treasury obligations 126 166 40 628 (462)

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

Other revenue 79 173 94 699 (526)

Total Revenue $ 6,587 10,033 $ 3,446 $ 18,363 $ $ (8,330)

Operating expenses (includes depreciation expense) 727 1,141 414 892 249 

Systemic risk expenses (418) (138) 972 (280) (1,390)

Provision for insurance losses 469 (3,294) 39,946 (3,763) (43,240)

Other expenses 2 2 - 14 (12)

Total Expenses & Losses $ 1,060 (2,569) $ $ 41,824 (3,629) $ $ (44,393)

Net Income/(Loss) 5,527 12,602 7,075 36,063 (23,461) 

Unrealized gain/(loss) on U.S. Treasury investments, net (102) (80) (22) 1,956 (2,058) 

Unrealized gain/(loss) on trust preferred securities 168 353 185 - 353 

Unrealized postretirement benefit gain/(loss) - - - - - 

Comprehensive Income/(Loss) $ 5,615 12,853 $ 7,238 $ (25,519) $ 38,372 $ 

 

Deposit Insurance Fund

Deposit Insurance Fund

Total Outlays for Resolutions and Cash Dividends/Payments Received from Receiverships

1,733 1,997

3,443

51 71

3,586

1,264 2,400 1,025 2,191 2,799

14,352

2,725

445 325 601 0 794

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10

$ in Millions

Total Outlays for Resolutions Cash Dividends/Payments Received from Receiverships

Covered Assets, Estimated Liabilities, and Payments Made for Loss Share Agreements 

 (based on date of bank failure)

39.7

44.2

15.2

34.4

8.3

14.1 16.9 14.3

1.6

9.5

2.5 2.6 4.4 5.1 3.1

1.9 0.4 0.2 0.0 0.3 1.3 2.5 1.5 0.2 $0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

4Q 08 1Q 09* 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10

$ in Billions

* Includes IndyMac conservatorship Covered Assets Estimated Liabilities Payments Made

• Total number of Loss 

Share Agreements = 199

• Total Covered Assets 

(at inception) = $187.1 

billion

• Total Remaining 

Estimated Loss Share 

Liabilities = $30.7 billion

• Total Payments-to-date 

= $6.4 billion
12

Fund Financial Results - continued ($ in Millions) 

$20.8

Statement of Cash Flows (year-to-date) 

 Quarterly Year-Over-Year

Sep-10 Jun-10 Change Sep-09 Change

Net Income/(Loss) $ 12,602 $ 5,527 7,075 $ $ (23,461) $ 36,063 

Amortization of U.S. Treasury obligations (unrestricted) (4) (17) 191 13 (195)

TIPS inflation adjustment (17) (13) 18 (4) (35)

Depreciation on property and equipment 50 34 16 50 - 

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

Provision for insurance losses (3,294) 469 39,946 (3,763) (43,240)

Unrealized (loss)/gain on postretirement benefits - - - - - 

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

Guarantee termination fee from Citigroup - - - - - 

Systemic risk expenses - - - - - 

Net change in operating assets and liabilities (31,634) (28,073) (3,561) (22,444) (9,190)

Net Cash (Used by)/Provided by Operating Activities $ (22,297) $ (22,073) $ $ (224) (7,089) $ (15,208)

Investments matured and sold 11,858 2,643 9,215 19,391 (7,533)

Investments purchased (includes purchase of property and 

equipment) (23,125) (18,481) (4,644) (3) (23,122)

Net Cash (Used by)/Provided by Investing Activities $ (11,267) $ (15,838) $ $ 19,388 $ 4,571 (30,655)

Net (Decrease)/Increase in Cash and Cash Equivalents (33,564) (37,911) 12,299 4,347 (45,863)

Cash and Cash Equivalents at beginning of year 60,523 60,523 - 3,388 57,135 

 Unrestricted Cash and Cash Equivalents - Ending 22,701 18,824 3,877 8,546 14,155 

 Restricted Cash and Cash Equivalents - Ending 4,258 3,788 470 7,141 (2,883)

Cash and Cash Equivalents - Ending $ 26,959 $ 22,612 $ 4,347 $ 15,687 $ 11,272 

Selected Financial Data

 Quarterly Year-Over-Year

Sep-10 Jun-10 Change Sep-09 Change

Cash and cash equivalents $ 3,497 3,541 $ 44 $ 3,454 $ 87 $ 

Accumulated deficit, net (124,288) (124,284) (4) (123,959) (329)

Resolution equity 3,570 3,560 3,483 (10) 77 

Total revenue 9 11 2 8 3 

Operating expenses 2 3 1 4 (1)

Goodwill litigation expenses - 2 2 4 (2)

Recovery of tax benefits (58) - (58) 10 (68)

Net Income/(Loss) $ 65 60 $ (5) $ (11) $ 71 $ 

Deposit Insurance Fund

FSLIC Resolution Fund

 Receivership Statistics September 2010 vs. September 2009

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

Total Receiverships 306 134 172 8 8 - 314 142 172 

Assets in Liquidation 34,822 $ 38,222 $ (3,400) $ 28 $ 34 $ (6) $ 34,850 $ 38,256 $ (3,406) $ 

Collections (YTD) 15,821 $ 6,750 $ 9,071 $ 13 $ 5 $ 8 $ 15,834 $ 6,755 $ 9,079 $ 

Dividends Paid - Cash (YTD) 7,326 $ 4,162 $ 3,164 $ - $ - $ - $ 7,326 $ 4,162 $ 3,164 $ 

DIF FRF ALL FUNDS

Assets-at-Failure and Estimated Losses for Bank Resolutions

6

41 41

12 21 24

50 45 45 $64.9

$24.7 $9.5 $26.8

$70.0

$22.3

$48.0

$14.0

$302.7

$1.5 $4.1 $2.3 $10.0 $6.1 $11.0 $2.3 $14.3 $8.9

$0

$50

$100

$150

$200

$250

$300

$350

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

$ in Billions

# of Institutions Assets-at-failure Estimated losses
13

9/30/10 12/31/09 Change

Par Value $37,441 $59,268 ($21,827)

Amortized Cost $37,443 $59,286 ($21,843)

Market Value $37,483 $59,428 ($21,945)

Primary Reserve 1 $37,500 $59,525 ($22,025)

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

Year-to-Date Total Return (Portfolio) 0.129% 0.306% not applicable

Year-to-Date Total Return (Benchmark) 2 7.106% (1.411%) not applicable

Total Return Variance (in basis points) (697.7) 171.7 not applicable

Yield-to-Maturity 3 0.47% 0.49% (0.02%)

Weighted Average Maturity (in years) 0.12 0.08 0.04

Effective Duration (in years) 4

 Total Portfolio 0.11 0.06 0.05

 Available-for-Sale Securities 0.28 0.66 (0.38)

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

9/30/10 12/31/09 Change

Debt Guarantee Program

 Par Value $6,158 $6,431 ($273)

 Book Value $6,157 $6,431 ($274)

 Market Value $6,158 $6,431 ($273)

 Yield-to-Maturity 0.15% 0.02% 0.13%

 Weighted Average Maturity 0.08 overnight 0.08

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 $3,388 $3,330 $58

 Yield-to-Maturity 0.12% 0.02% 0.10%

 Weighted Average Maturity overnight overnight no change

9/30/10 12/31/09 Change

Book Value 8 $15,564 $7,223 $8,341

Effective Annual Yield 0.19% 0.11% 0.08%

Weighted Average Maturity (in days) 7 5 2

3

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

an average 1.8% 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.

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.
14

DEPOSIT INSURANCE FUND

Purchase up to $15 billion (par value) of available-for-sale (AFS) securities with maturity dates 

between October 1, 2010, and June 30, 2011, subject to the following additional restrictions: no more 

than $10 billion (par value) of such securities shall have maturity dates beyond December 31, 2010; 

and no more than $3 billion (par value) of such securities shall have maturity dates beyond March 31, 

2011.

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.

DEBT GUARANTEE PROGRAM

Purchase up to $2 billion (par value) of AFS securities with maturity dates between October 1, 2010, 

and June 30, 2011. 

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

and December 31, 2011. 

NATIONAL LIQUIDATION FUND

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

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

Strategy Changes for 4th Quarter 2010

Investment Strategies

Strategy as of 3rd Quarter 2010

Strategy as of 3rd Quarter 2010

Strategy Changes for 4th Quarter 2010

Strategy as of 3rd Quarter 2010

Strategy Changes for 4th Quarter 2010
15

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 cost from a prior period.

YTD YTD % of 

Major Expense Category Budget Expenditures Budget Used Variance

Corporate Operating Budget 

Ongoing Operations

Salaries & Compensation $694,717 $673,231 97% ($21,486)

Outside Services - Personnel 178,739 153,101 86% (25,638)

Travel 65,641 63,506 97% (2,135)

Buildings 58,713 54,488 93% (4,225)

Equipment 61,350 45,367 74% (15,983)

Outside Services - Other 16,524 13,191 80% (3,333)

Other Expenses 11,236 7,622 68% (3,614)

Total Ongoing Operations $1,086,920 $1,010,506 93% ($76,414)

Receivership Funding

Salaries & Compensation $190,733 $162,534 85% ($28,199)

Outside Services - Personnel 1,076,761 919,038 85% (157,723)

Travel 44,419 30,993 70% (13,426)

Buildings 164,779 167,823 102% 3,044

Equipment 28,541 22,041 77% (6,500)

Outside Services - Other 19,847 59,888 302% 40,041

Other Expenses 107,654 182,885 170% 75,231

Total Receivership Funding $1,632,734 $1,545,202 95% ($87,532)

Total Corporate Operating Budget $2,719,654 $2,555,708 94% ($163,946)

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

Grand Total $2,720,743 $2,556,121 94% ($164,622)

(Dollars in Thousands)

Executive Summary of 2010 Budget and Expenditures

by Major Expense Category

Through September 30, 2010
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 2010 spending estimates 

for approved projects. 

YTD YTD % of 

Division/Office Budget Expenditures Budget Used Variance

 Corporate Operating Budget 

 Supervision & Consumer Protection $431,785 $421,457 98% (10,328)

 Information Technology 184,874 148,066 80% (36,808)

 Administration 216,289 201,239 93% (15,050)

 Resolutions & Receiverships 1,476,925 1,412,902 96% (64,023)

 Legal 196,208 185,641 95% (10,567)

 Insurance & Research 32,384 29,993 93% (2,391)

 Finance 27,983 23,804 85% (4,179)

 Inspector General 28,184 24,398 87% (3,786)

 Corporate University - CEP 20,736 18,726 90% (2,010)

 Corporate University - Corporate 17,646 14,431 82% (3,215)

 Executive Support 1 27,010 24,786 92% (2,224)

 Executive Offices 2 7,769 8,044 104% 275

 Complex Financial Institutions 589 0 0% (589)

 Government Litigation 6,700 1,749 26% (4,951)

 CIO Council 44,572 40,472 91% (4,100)

 Total, Corporate Operating Budget $2,719,654 $2,555,708 94% (163,946)

 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 $431,785 $421,457 98% (10,328)

 Information Technology 185,875 148,184 80% (37,691)

 Administration 216,289 201,239 93% (15,050)

 Resolutions & Receiverships 1,476,988 1,413,172 96% (63,816)

 Legal 196,208 185,641 95% (10,567)

 Insurance & Research 32,409 30,018 93% (2,391)

 Finance 27,983 23,804 85% (4,179)

 Inspector General 28,184 24,398 87% (3,786)

 Corporate University - CEP 20,736 18,726 90% (2,010)

 Corporate University - Corporate 17,646 14,431 82% (3,215)

 Executive Support 1 27,010 24,786 92% (2,224)

 Executive Offices 2 7,769 8,044 104% 275

 Complex Financial Institutions 589 0 0% (589)

 Government Litigation 6,700 1,749 26% (4,951)

 CIO Council 44,572 40,472 91% (4,100)

 Grand Total $2,720,743 $2,556,121 94% (164,622)

(Dollars in Thousands)

Executive Summary of 2010 Budget and Expenditures

by Budget Component and Division/Office

Through September 30, 2010