3

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 tables on FDIC-Insured 

Deposits and Insurance Fund 

Reserve Ratios on the following 

page.) 

For the twelve months ending 

December, 31, 2007, DIF’s comprehensive income totaled $2.2 billion 

compared to $1.6 billion for the 

previous year, an increase of 38 percent. Excluding the recognition of 

exit fees earned of $345 million 

(a one-time adjustment) from the 

2006 results, comprehensive income 

rose by $1.02 billion, or 84 percent, 

from a year ago. This year-over-year 

increase was primarily due to a 

$611 million increase in assessment 

revenue, a $299 million increase 

in interest revenue, a $298 million 

decrease in the unrealized loss on 

AFS securities, offset by a $42 million 

increase in operating expenses and a 

$147 million increase in the provision 

for insurance losses.

The $611 million increase in 

assessment revenue resulted 

from significant changes to the riskbased assessment system beginning in 2007 (see footnote 7 to DIF’s 

financial statements for a detailed 

explanation). For 2007, DIF recognized $643 million in assessment 

revenue representing $3.7 billion in 

gross premiums due from insured 

depository institutions net of 

$3.1 billion in assessment credits 

used. Assessment revenue increased 

from $94 million in the first quarter 

to $245 million in the fourth quarter. 

 4,000

 3,500

 3,000

 2,500

 2,000

 1,500

 1,000

 500

 0

1960 1970 1980 1990 2000

FDIC-DIF Insured Deposits (estimated 1960 -2007)●

D o l l a r s i n b i l l i o n s

2007

• All amounts are year-end except 2007 is at 9/30/07.

 From 1989 through 2005, amounts represent the sum of separate Bank Insurance Fund and Savings Association Insurance Fund 

 amounts.

 Source: Commercial Bank Call Reports and Thrift Financial Reports.

$

The increased revenue each quarter 

primarily resulted from a reduction 

in the assessment credits used by 

financial institutions to offset gross 

assessments. This trend toward higher

assessment income is expected to 

continue as institutions deplete their 

available credits. Of the $4.7 billion in 

one-time assessment credits granted,

$1.6 billion (34 percent) remained as 

of December 31, 2007.
3

1.45

1.40

1.35

1.30

1.25

1.20

1.15

1.00

0

 3/04 6/   04   2/04 3/5  /05  9/05 12/0506  66 9/0  12   

Deposit Insurance Fund Reserve Ratios (Fund Balances as a Percent of Estimated Insured Deposits)

Prior to 2007, amounts represent the sum of separate Bank Insurance Fund and Savings Association Insurance Fund amounts.
3

Corporate Operating Budget 

Spending

The FDIC has had an exceptional 

record of controlling operating 

costs over the past five years, and 

2007 was no exception. Corporate 

Operating Budget spending totaled 

$1,002 million in 2007, including 

$981.8 million for ongoing operations 

and $19.7 million for receivership 

funding. During the five-year period 

from 2003 through 2007, the FDIC’s 

annual Corporate Operating Budget 

spending declined from $1,008 million

to $1,002 million, a reduction of 

$6 million, or 0.6 percent, despite 

the effects of inflation on the FDIC’s 

costs. That reduction was primarily 

attributable to significant reductions 

in staffing as well as a steady 

reduction in resolutions and receivership activities resulting from the 

historically low number of bank 

failures.

Cost Reductions Realized 

through Staff Reductions

Salary and benefits costs represent 

more than 60 percent of the FDIC’s 

annual Corporate Operating Budget. 

Because compensation costs are so 

significant, the FDIC has engaged in 

 For the years ended December 31

2007 2006 2

Financial Results 

Revenue $ 3,196   2,644   2,4

Operating Expenses 99  95  9

Insurance and Other Expenses

(includes provision for loss)   (46  (15

Net Income 2,105 1,739 1,61

Comprehensive Income 2,248 1,569 1,0

Insurance Fund Balance $ 52,413   50,165   48,5

Fund as a Percentage of Insured Deposits 

(Reserve Ratio) 1.22% 1.21% 1.25%

Selected Statistics

Total DIF-Member Institutions ●8,560 8,680 8,

Problem Institutions 5 50 

Total Assets of Problem Institutions $ 18,515   8,265   6,

Institution Failures 3 0 0

Total Assets of Current Year Failed Institutions $ 2,345   0  

Number of Active Failed Institution Receiverships 22 25 27

Selected Statistics Deposit Insurance Fund

D o l l a r s i n m i l l i o n s

▼

▼

▼

▼

▼ As of September 30, 2007.

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

 For 2005, amounts represent sum of separate BIF and SAIF amounts.

a continuing effort to realign staffing 

to reflect reduced workload requirements as it has moved past the 

banking and thrift crisis. Total FDIC 

staffing fell from 5,430 at the 

beginning of 2003 to 4,532 at yearend 2007, a 17 percent reduction 

over five years. As a result, aggregate 

spending for salaries and benefits 

decreased by 4 percent, from 

$666 million in 2003 to $639 million 

in 2007, despite an increase of 

16.9 percent in the salaries of 

individual employees during this 

period. 
37

$ Millions 

 1,500

 1,000

 500

 0

 2003 2004 200  20   20

 $1,008 1,004 990 973 1,002 

 5,311 5,078 4,514 4,476 4,532 

 FDIC Staffing and Operating Budget Spending 2003-2007

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Staff

• • • • • •

Operating Expenses

Staff

A Continuing Record 

of Prudent Stewardship

Two comparisons illustrate the FDIC’s 

prudent stewardship of the funds 

under management (DIF and FRF) 

over the past five years. 

The FDIC relies primarily upon 

interest earned on the investment 

of the Deposit Insurance Fund 

for its operations. It is notable that 

the Corporation has reduced its 

operational spending even as the 

interest earned on the DIF (and its 

predecessor funds) has increased 

significantly. As a result, the FDIC’s 

annual spending has dramatically 

declined as a percentage of interest 

revenue on the DIF. The combined 

interest earned by the DIF and FRF 

grew to $2,696 million in 2007 

($2,540 million for DIF and $156 million 

for FRF), while combined operating 

and investment budget spending fell 

to 37.6 percent of interest revenue, 

down from 49.4 percent in 2003.

The Corporation’s prudent stewardship of the DIF can also be seen 

when operating budget spending 

is compared to the growth of the 

industry over the past five years. 

The banking industry’s deposit 

insurance assessment base rose by 

approximately 33 percent during this 

period, from $5.1 trillion in 2003 to 

approximately $6.8 trillion in 2007. 

During that same period, the FDIC’s 

operating budget spending decreased 

by 0.6 percent. As a result, the 

FDIC’s operating budget spending 

represented only 0.0147 percent 

(approximately 1.5 basis points) 

of the average deposit insurance 

assessment base in 2007, compared 

to 0.0198 percent (approximately 

2 basis points) of the average deposit 

insurance assessment base in 2003. 

$ Millions 

 3,000

 2,000

 1,000

 0

 2003 2004 200  20   20

 $2,095 2,148 2,440 2,392 2,696 

 $1,035 1,112 1,052 998 1,013 

 Total Interest Revenue vs. Operating and Investment Budget Spending

Total Interest Revenue (DIF + FRF)

Total Budget Spending
3

$ Trillions 

 7.0

 6.0

 5.0

 4.0 

 3.0

 2.0

 1.0

 0

 2003 2004 200  20   20

 $5.1 5.4 5.9 6.4 6.8 

 

 As the Assessment Base Increased . . .

$ Biillions 

 1.400

 1.200

 1.000

 0.800

 

 0.600

 0.400

 0.200

 0.000

 2003 2004 200  20   20

 $1.008 1.004 0.990 0.973 1.002 

 

 Operating Budget Spending Declined, and as a Result . . .

 

Percentage

 0.03

 0.02

 

 0.01

 0.00

 2003 2004 200  20   20

 0.0198% 0.0186 0.0168 0.0152 0.0147 

 

Spending has Declined Significantly as a Percentage 

 of the Assessment Base.

Assessment 

Base (Average)

Operating Budget 

Spending

Spending per

Assessment Base
3

These comparisons demonstrate the 

good value provided to the banking 

industry through the FDIC’s continuing 

commitment to prudent stewardship 

of the DIF.

2008 Corporate Operating Budget

Although its staffing realignment was 

essentially completed in 2006, the 

FDIC will continue to emphasize 

control of spending in 2008 and 

future years. In December 2007, 

the Board of Directors approved a 

2008 Corporate Operating Budget 

of approximately $1.142 billion, 

including $1.067 billion for ongoing 

operations. The approved 2008 

budget is 3.1 percent higher than 

the 2007 Corporate Operating Budget. 

This limited budget increase was 

required for negotiated employee 

pay increases and included funding 

for a number of major new initiatives,

including additional staff for risk 

management and compliance 

examinations, as well as increased 

funding for resolution preparedness. 

The Corporation realigned its spending

priorities and reduced costs in other 

areas to address these priority 

initiatives while limiting the size 

of the overall 2008 budget increase. 

In 2008 and future years, the FDIC 

will continue to rigorously review 

its workload and staffing and seek 

operational efficiencies through 

continuous improvement of its 

business processes.

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 throughout the 

$ Millions 

 120

 80

 40

 0

 2003 2004 200  20   20

 $ 27 108 62 25 12 

 

 Investment Spending 2003-2007

Investment Spending

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-

2007 period, including construction 

of a major expansion of its Virginia 

Square facility and the implementation of 11 major new IT systems. 

Investment spending totaled 

$234 million during this period, 

peaking at $108 million in 2004. 

Spending for investment projects 

in 2007 totaled approximately 

$12 million. In 2008, investment 

spending is estimated to total 

$17 million.