Federal Deposit Insurance Corporation

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

 May 16, 2018

MEMORANDUM TO: The Board of Directors

FROM: Steven O. App

Deputy to the Chairman

and Chief Financial Officer

Craig R. Jarvill

Director, Division of Finance

SUBJECT: First Quarter 2018 CFO Report to the Board 

The attached report highlights the FDIC’s financial activities and results for the quarter ended 

March 31, 2018.

Executive Summary

• During the first quarter of 2018, the Deposit Insurance Fund (DIF) balance was $95.1 billion, up

$2.3 billion from year-end 2017. The quarterly increase was primarily due to $2.9 billion of 

assessment revenue, partially offset by a $496 million unrealized loss on U.S. Treasury securities.

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

percent for first quarter 2018, unchanged from fourth quarter 2017, due primarily to strong growth 

in estimated insured deposits.

• There were no financial institution failures during the first quarter of 2018.

• Through March 31, 2018, overall FDIC Operating Budget expenditures were below budget by 7 

percent ($35 million). This variance was primarily the result of vacancies in budgeted positions and 

less than expected contractual services in both the Ongoing Operations and Receivership Funding 

components of the budget.
2

I. Financial Results (See pages 5 – 6 for detailed data and charts.)

Deposit Insurance Fund 

• For the first quarter of 2018, the DIF’s comprehensive income totaled $2.3 billion, compared to 

comprehensive income of $1.8 billion for the same period last year. This $559 million increase was 

primarily the result of an $830 million decrease in provision for insurance losses and a $113 million 

increase in assessment revenue, partially offset by a $503 million reduction to comprehensive 

income from unrealized losses on U.S. Treasury securities (year-to-date 2018 unrealized loss of 

$496 million versus year-to-date 2017 unrealized gain of $7 million).

• The provision for insurance losses was a negative $65 million for the first quarter of 2018, 

compared to a positive $765 million for the same period last year. The 2017 provision was primarily 

attributable to an increase in estimated losses for anticipated failures. 

• During the first quarter 2018, DIF incurred a $496 million unrealized loss on its portfolio of U.S. 

Treasury securities as a result of yields rising dramatically across all maturity sectors of the 

Treasury yield curve. This rise resulted in declines in the securities’ market values relative to their 

book values.

Assessments

• During March, the DIF recognized assessment revenue of $2.9 billion. Of this amount, $1.5 billion 

represented the estimate for the first quarter 2018 insurance coverage and $1.3 billion represented 

estimated assessment surcharges on banks with $10 billion or more in assets. Additionally, the DIF 

recognized a $100 million adjustment for higher-than-estimated collections for the fourth quarter 

2017 insurance coverage (regular assessments: $91 million and surcharges: $9 million), which 

increased assessment revenue. This adjustment was primarily due to higher-than-estimated 

assessment rates for many large banks.

• On March 30, 2018, the FDIC collected $1.5 billion in DIF regular assessments and $1.3 billion in 

surcharge assessments for fourth quarter 2017 insurance coverage.

II. Investment Results (See pages 7 – 8 for detailed data and charts.)

DIF Investment Portfolio

• On March 31, 2018, the total liquidity (also total market value) of the DIF investment portfolio stood 

at $88.5 billion, up $2.9 billion from its December 31, 2017, balance of $85.6 billion. During the 

quarter, interest revenue, receivership dividends, and deposit insurance assessment collections far 

exceeded resolution-related outlays and operating expenses.

• On March 31, 2018, the DIF investment portfolio’s yield was 1.63 percent, up 11 basis points from 

its 1.52 percent yield on December 31, 2017. The new Treasury securities purchased during the 

quarter generally had higher yields than the maturing securities’ yields, some considerably higher.

• In accordance with the approved first quarter 2018 DIF portfolio investment strategy, staff 

purchased a total of 23 short- to intermediate-maturity conventional Treasury securities, all 

designated as available-for-sale. The 23 securities had a total par value of $7.7 billion, a weighted 

average yield of 2.23 percent, and a weighted average maturity of 2.78 years.
3

II. Budget Results (See pages 9 – 10 for detailed data.)

Approved Budget Modifications

The 2018 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials 

the authority to make certain modifications to the 2018 FDIC Operating Budget. The following budget 

reallocations were approved during the first quarter in accordance with the authority delegated by the 

Board of Directors.

• In January 2018, several divisions and offices reallocated funds among expense categories within 

their approved budgets to better align their budgets with updated projections of spending by 

expense category for the year. Most of these administrative realignments involved very small 

amounts.

 Corporate University made the largest realignment in the Ongoing Operations budget 

component, transferring almost $600,000 from the Outside Services – Personnel expense 

category to the Equipment expense category. This reallocation was made to properly account 

for projected spending for on-line information services and IT licenses that had previously been 

treated as contracts.

 The largest realignment in the Receivership Funding budget component was made by the 

Division of Resolutions and Receiverships, which reallocated approximately $1 million from the 

Travel expense category to the Other Expenses category to provide budget resources for 

anticipated costs associated with tax return preparation.

• In February 2018, the CFO approved the reallocation of $510,000 within the Ongoing Operations 

budget component from the Corporate Unassigned contingency reserve to the Division of 

Information Technology’s (DIT) Outside Services – Personnel budget. These additional funds will 

be used by DIT for one-time costs associated with the migration of Office of Inspector General

(OIG) e-mail to a separate Office 365 online environment.

• In March 2018, the CFO approved the reallocation of $525,164 within the Ongoing Operations 

budget component from the Corporate Unassigned contingency reserve to various budgets within 

the Executive Offices. These funds will ensure adequate resources are available to support 

updated expense projections for the year. Funds were adjusted in the Salaries and Compensation 

and Travel expense categories of several individual offices.

Following these first quarter budget modifications, the balances in the Corporate Unassigned 

contingency reserves were $23,964,836 in the Ongoing Operations budget component and 

$23,850,871 in the Receivership Funding budget component.

 Approved Staffing Modifications

The 2018 Budget Resolution delegated to the CFO the authority to modify approved 2018 staffing 

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

approved 2018 FDIC Operating Budget. 

• In February, the CFO approved the following staffing modifications:

 After a review of authorized and on-board staffing levels in the Office of Minority and Women 

Inclusion (OMWI) and an assessment of OMWI’s anticipated workload, the CFO approved the 

Acting OMWI Director’s request to reduce OMWI’s 2018 permanent staffing allocation by one 

position.
4

 One authorized permanent position was realigned from the CFO’s office to the Division of 

Administration (DOA) to support DOA’s internal review and risk management program.

• In March, the CFO approved an increase of one position in RMS’s 2018 staffing authorization to 

address a requirement for one additional Supervisory Examiner positon, based on an updated 

analysis of field office supervisory spans of control.

Spending Variances

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

Significant spending variances for the three months ending March 31, 2018, are defined as those that 

either (1) exceed the YTD budget by more than $3 million and represent more than five percent of 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 $15 million and represents more than 

fifteen percent of the major expense category or total division/office budget. 

Significant Spending Variances by Major Expense Category

Ongoing Operations

There were no significant spending variances during the first quarter in any major expense category of 

the Ongoing Operations budget component of the 2018 FDIC Operating Budget.

Receivership Funding

The Receivership Funding component of the 2018 FDIC Operating Budget includes funding for 

expenses that are incurred in conjunction with 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 no significant spending variances during the first quarter in any major expense category of 

the Receivership Funding budget component of the 2018 FDIC Operating Budget.

Office of Inspector General

There were no significant spending variances during the first quarter in any major expense category of 

OIG budget component of the 2018 FDIC Operating Budget.

Significant Spending Variances by Division/Office1

No organizations had significant spending variances through the end of the first quarter.

Other Matters

An updated analysis of 2018 funding requirements for employee pay and benefits was completed in 

March, in accordance with the 2018 Budget Resolution. The analysis determined that the projected 

costs related to fringe benefits had been overestimated during the preparation of the 2018 FDIC 

Operating Budget by approximately $3.2 million in the Salaries and Compensation expense category. 

This variance was primarily due to the inclusion of an expected small general fringe benefit cost 

increase that has not been fully experienced to date. The CFO elected not to exercise his delegated 

authority to adjust the 2018 FDIC Operating Budget to address this variance, since the net projected 

budget difference is not material to the total amount of the 2018 Salaries and Compensation budget or 

to the overall 2018 FDIC Operating Budget.

 1 Information on division/office variances reflects variances in the FDIC Operating Budget.
Fund Financial Results ($ in Millions) 

5

The larger unrealized 

losses on the DIF 

portfolio’s U.S. 

Treasury securities 

lately has been the 

result of yields 

continuing to rise 

dramatically across all 

maturity sectors of the 

Treasury yield curve, 

resulting in further 

declines in the 

securities’ market 

values relative to their 

book values.

Balance Sheet

Quarterly Year-Over-Year

Mar-18 Dec-17 Change Mar-17 Change

Cash and cash equivalents $ 3,119 $ 1,829 $ 1,290 $ 3,374 $ (255)

Investment in U.S. Treasury securities 84,831 83,303 1,528 75,076 9,755

Assessments receivable, net 2,783 2,634 149 2,709 74

Interest receivable on investments and other assets, net 581 506 75 458 123

Receivables from resolutions, net 5,194 5,973 (779) 6,760 (1,566)

Property and equipment, net 325 334 (9) 340 (15)

Total Assets $ 96,833 $ 94,579 $ 2,254 $ 88,717 $ 8,116

Accounts payable and other liabilities 200 237 (37) 208 (8)

Liabilities due to resolutions 1,154 1,203 (49) 2,011 (857)

Postretirement benefit liability 259 259 - 232 27

Contingent liability for anticipated failures 113 98 15 1,335 (1,222)

Contingent liability for litigation losses and other 35 35 0 3 32

Total Liabilities $ 1,761 $ 1,832 $ (71) $ 3,789 $ (2,028)

FYI: Unrealized gain (loss) on U.S. Treasury securities, net (975) (479) (496) 28 (1,003)

FYI: Unrealized postretirement benefit (loss) gain (46) (46) - (26) (20)

Fund Balance $ 95,072 $ 92,747 $ 2,325 $ 84,928 $ 10,144

Deposit Insurance Fund
6

Fund Financial Results - continued ($ in Millions) 

Selected Financial Data

Quarterly Year-Over-Year

Mar-18 Dec-17 Change Mar-17 Change

Cash and cash equivalents $ 889 $ 885 $ 4 $ 879 $ 10

Accumulated deficit (124,601) (124,604) 3 (124,609) 8

Total resolution equity 889 886 3 880 9

Total revenue 3 8 1 2

Operating expenses 0 1 0 0

Losses related to thrift resolutions 0 0 0 0

Net Income (Loss) $ 3 $ 7 $ 1 2

FSLIC Resolution Fund

The FDIC, as receiver, manages failed banks with the goal of expeditiously winding up their affairs. The oversight and prompt termination of

receiverships help to preserve value for the uninsured depositors and other creditors by reducing overhead and other holding costs. Once the

assets of a failed institution have been sold, the final distribution of any proceeds is made and the FDIC terminates the receivership. As of

March 31, 2018, the FDIC has inactivated 218 receiverships (or 41 percent) of the 531 receiverships created from 2007 through 2017.

Income Statement (year-to-date)

Year-Over-Year

Mar-18 Dec-17 Mar-17 Change

Assessments $ 2,850 $ 10,595 $ 2,737 $ 113

Interest on U.S. Treasury securities 338 1,057 227 111

Other revenue 1 12 2 (1)

Total Revenue $ 3,189 $ 11,664 $ 2,966 $ 223

Operating expenses 433 1,740 442 (9)

Provision for insurance losses (65) (183) 765 (830)

Insurance and other expenses 0 2 0 0

Total Expenses and Losses $ 368 $ 1,559 $ 1,207 $ (839)

Net Income 2,821 10,105 1,759 1,062

Unrealized gain (loss) on U.S. Treasury securities, net (496) (500) 7 (503)

Unrealized postretirement benefit gain (loss) - (20) - -

Comprehensive Income $ 2,325 $ 9,585 $ 1,766 $ 559

Deposit Insurance Fund

$ in millions

Mar-18 Mar-17 Change Mar-18 Mar-17 Change Mar-18 Mar-17 Change

Total Receiverships 317 375 (58) - - - 317 375 (58)

Assets in Liquidation $ 2,097 $ 3,006 $ (909) $ 2 $ 2 - $ 2,099 $ 3,008 $ (909)

YTD Collections $ 492 $ 379 $ 113 - - $ - $ 492 $ 379 $ 113

YTD Dividend/Other Pymts - Cash $ 847 $ 1,203 $ (356) - - - $ 847 $ 1,203 $ (356)

DIF FRF ALL FUNDS
7

3/31/18 12/31/17 Change

Par Value $88,749 $85,376 $3,373

Amortized Cost $89,002 $85,707 $3,295

Total Market Value (including accrued interest) $88,477 $85,590 $2,887

Primary Reserve 1 $88,477 $85,590 $2,887

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

Yield-to-Maturity 2 1.63% 1.52% 0.11%

Weighted Average Maturity (in years) 1.97 2.05 -0.08

Effective Duration (in years)

 Total Portfolio 1.90 1.97 -0.07

 Available-for-Sale Securities 1.99 2.07 -0.08

 Held-to-Maturity Securities 3 not applicable not applicable not applicable

3/31/18 12/31/17 Change

FRF-FSLIC

 Book Value 4 $845 $842 $3

 Yield-to-Maturity 1.64% 1.20% 0.44%

 Weighted Average Maturity overnight overnight no change

3/31/18 12/31/17 Change

Book Value 5 $4,363 $4,733 ($370)

Effective Annual Yield 1.58% 1.24% 0.34%

Weighted Average Maturity (in days) 51 51 0

Deposit Insurance Fund Portfolio Summary

(Dollar Values in Millions)

1

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

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

National Liquidation Fund (NLF) Investment Portfolio Summary

(Dollar Values in Millions)

3

 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.

5

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

Summary of Other Corporate Investment Portfolios

(Dollar Values in Millions)

4

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

purposes.

2

 The Yield-to-Maturity includes the potential yields of any Treasury Inflation-Protected Securities (TIPS), which assumes an 

average 2.0% annual increase in the CPI over the remaining life of each TIPS.
8

DEPOSIT INSURANCE FUND

Purchase up to $11 billion (par value) of Treasury securities with maturity dates 

between June 30, 2018, and June 30, 2023, subject to the following additional 

provisions: all newly purchased securities will be designated as AFS; no more than 

$2 billion (adjusted par value) of such securities shall consist of TIPS; and target at 

least $3 billion (par value) of newly purchased securities maturing between July 1, 

2021, and June 30, 2023.

Purchase up to $15 billion (par value) of Treasury securities with maturity dates 

between September 30, 2018, and June 30, 2023, subject to the following additional 

provisions: all newly purchased securities will be designated as AFS; no more than 

$2 billion (adjusted par value) of such securities shall consist of TIPS; and target at 

least $2 billion (par value) of newly purchased securities maturing between July 1, 

2021, and June 30, 2023.

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.

No strategy changes for the second quarter of 2018.

Strategy Changes for the 2nd Quarter 2018

Investment Strategies

Strategy for the 1st Quarter 2018

Strategy for the 1st Quarter 2018

Strategy Changes for the 2nd Quarter 2018
9

Annual YTD YTD % of YTD YTD

Major Expense Category Budget Budget Expenditures Budget Used Variance

FDIC Operating Budget 

Ongoing Operations

Salaries & Compensation $1,234,811 $317,407 $299,024 94% ($18,383)

Outside Services - Personnel 271,788 57,641 52,131 90% (5,510)

Travel 92,677 22,855 20,990 92% (1,865)

Buildings 104,832 24,147 21,798 90% (2,349)

Equipment 93,364 16,148 16,496 102% 348

Outside Services - Other 16,197 3,397 3,121 92% (276)

Other Expenses 13,366 3,188 3,375 106% 187

Total Ongoing Operations $1,827,035 $444,783 $416,935 94% ($27,848)

Receivership Funding

Salaries & Compensation $21,690 $6,232 $4,521 73% ($1,711)

Outside Services - Personnel 183,300 39,674 37,452 94% (2,222)

Travel 3,574 887 593 67% (294)

Buildings 6,968 1,739 1,342 77% (397)

Equipment 969 271 148 55% (123)

Outside Services - Other 1,327 328 402 123% 74

Other Expenses 7,172 1,791 336 19% (1,455)

Total Receivership Funding $225,000 $50,922 $44,794 88% ($6,128)

Office of Inspector General

Salaries & Compensation $34,853 $8,713 $8,169 94% ($544)

Outside Services - Personnel 1,660 415 346 83% (69)

Travel 1,583 396 219 55% (177)

Buildings 0 0 0 0

Equipment 1,555 389 83 21% (306)

Outside Services - Other 0 0 0 0

Other Expenses 447 112 23 21% (89)

Total Office of Inspector General $40,098 $10,025 $8,840 88% ($1,185)

Total FDIC Operating Budget $2,092,133 $505,730 $470,569 93% ($35,161)

Executive Summary of 2018 Budget and Expenditures

by Budget Component and Major Expense Category

Through March 31, 2018

(Dollars in Thousands)
10

1) Executive Support includes the Offices of Minority and Women Inclusion, Communications, Ombudsman, 

Legislative Affairs, and Financial Institution Adjudication. 

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 Chief Information 

Officer.

Annual YTD YTD % of YTD YTD

Division/Office Budget Budget Expenditures Budget Used Variance

 FDIC Operating Budget 

 Risk Management Supervision $593,176 $151,957 $141,893 93% ($10,064)

 Administration 278,660 68,929 63,581 92% (5,348)

 Resolutions & Receiverships 238,195 61,292 54,157 88% (7,135)

 Information Technology 222,167 44,965 45,493 101% 528

 Legal 201,429 51,554 48,627 94% (2,927)

 Depositor & Consumer Protection 186,468 48,149 42,925 89% (5,224)

 Insurance & Research 51,855 12,960 12,536 97% (424)

 CIO Council 51,086 10,879 10,019 92% (860)

 Information Security & Privacy Staff 44,203 10,525 10,055 96% (470)

 Finance 40,851 10,404 10,009 96% (395)

 Inspector General 40,098 10,025 8,840 88% (1,185)

 Executive Support 1 22,875 5,512 5,067 92% (445)

 Corporate University - Corporate 21,773 5,952 6,673 112% 721

 Complex Financial Institutions 21,063 4,876 4,468 92% (408)

 Corporate University - CEP 19,345 4,647 3,972 85% (675)

 Executive Offices 2 11,073 3,104 2,254 73% (850)

 Corporate Unassigned 47,816 0 0 0

 Total FDIC Operating Budget $2,092,133 $505,730 $470,569 93% ($35,161)

Executive Summary of 2018 Budget and Expenditures

by Division/Office

Through March 31, 2018

(Dollars in Thousands)