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Message 

from the 

Chief 

Financial

Officer

Steven O. App 

I am pleased to present the FDIC’s 2003

Annual Report, which provides our stakeholders with meaningful financial and 

program performance information and 

summarizes our success in meeting our

2003 goals and objectives. The FDIC is 

dedicated to providing timely, reliable and

useful information to our stakeholders. To

that end, I am especially proud that this

report and the annual financial statements

audits were produced for the first time 

within the new financial reporting benchmark for all Cabinet-level agencies, 45 days

after the end of the fiscal year. 

Financial highlights during 2003 include:

● The Bank Insurance Fund (BIF) increased by $1.7 billion to $33.8 billion, and 

the Savings Association Insurance Fund (SAIF) increased by $493 million to 

$12.2 billion, compared to $1.6 billion and $812 million, respectively, in 2002.

● Assessment income declined for both funds in 2003, and interest earned 

on the funds suffered from the continuing low interest rate environment. 

The interest earned on the BIF declined by $162 million, or ten percent, 

and the interest earned on the SAIF declined by $32 million, or six percent. 

● Both the BIF and the SAIF reported unrealized losses on available-for-sale 

securities in 2003 of $10 million and $7 million, respectively, following a large 

accumulation of unrealized gains in 2002 of $566 million and $192 million, 

respectively. These unrealized losses were largely due to the fact that interest

rates increased and reached a plateau in late 2003 after dropping sharply 

in 2002 and early 2003. Despite the modest unrealized losses in 2003, 

cumulative unrealized gains in the funds remained high at $802 million in 

the BIF and $274 million in the SAIF.

● Although assessments, interest revenue, and unrealized gains declined in 

2003 for both funds, this was more than offset in the BIF and partially offset 

in the SAIF by a reduction in the estimated losses for future failures of 

$830 million and $87 million, respectively. The overall reduction was primarily 

the result of an improvement in the loss reserve calculation methodology 

and the improved financial condition of a few large troubled institutions.

Efforts to reduce operating costs continued in 2003. The Board of Directors

approved a 2004 Corporate Operating Budget that was $5 million lower than 

the 2003 Corporate Operating Budget, despite absorbing higher cost for salaries

and benefits on a per capita basis, and inflation in non-personnel cost. However,

total estimated spending is projected to rise by $90 million to $1.2 billion, in

2004, because of higher spending on several major capital investment projects

that are now underway. That investment spending will in most cases reduce

future operating costs.

A strong capital investment management program is critical to attaining the

Corporation’s business goals. In late 2002, the Capital Investment Review

Committee (CIRC) was established to review major proposed investment 

projects before their submission to the Board of Directors and to oversee 

those projects for which the Board approves funding. 
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Highlights of some of the FDIC’s major capital investment projects during 

2003 follow:

● Construction began in September to expand FDIC’s Seidman Center 

office complex and training center in Northern Virginia with completion 

scheduled for early 2006. Compared to the projected costs of continued 

leasing in downtown Washington, DC, the project will save the FDIC an 

estimated $78 million over 20 years on a net present value basis.

● Under the auspices of the Federal Financial Institutions Examination Council, 

an inter-agency project was initiated to consolidate and streamline the 

collection, editing, and publication of quarterly bank financial reports through 

a Central Data Repository (CDR). 

● A new enterprise solution was approved to better manage failed bank and 

thrift asset-servicing functions. The Asset Servicing Technology Enhancement

Project (ASTEP) will permit the Corporation to replace obsolete systems 

and maximize the use of outsourcing while maintaining centralized asset 

management information through the use of “middleware.”

To keep pace in an ever-changing technological environment, the Corporation

conducted a comprehensive review of its information technology program. 

The review focused on information technology process improvements, sourcing

strategies and organizational structure. The FDIC also worked to strengthen its

information security program by developing additional policies and procedures

and initiating a more extensive self-assessment program. 

The U.S. General Accounting Office (GAO) issued unqualified opinions on the

FDIC’s 2003 financial statements audits of the BIF, SAIF, and the Federal Savings

and Loan Insurance Corporation Resolution Fund (FRF). This is the twelfth consecutive year the Corporation received unqualified opinions for all three funds.

The FDIC evaluated its risk management and internal control systems in accordance with the reporting requirements of the Federal Managers’ Financial Integrity

Act of 1982 (FMFIA) and GAO internal control standards. I can provide you with

reasonable assurance, based on these assessments, that the Corporation’s risk

management and internal control systems, taken as a whole, are in conformance

with the standards prescribed by GAO and that the objectives of FMFIA have

been achieved. No material weaknesses were found in the FDIC’s system of

internal controls that would affect the accuracy of the financial statements. 

The FDIC will continue in 2004 to meet its statutory, regulatory and fiduciary

responsibilities through sound financial management and a strong risk management and internal control program. 

Sincerely,

Steven O. App