Federal Deposit Insurance Corporation

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

November 17, 2020

MEMORANDUM TO: The Board of Directors

FROM: Bret Edwards

Deputy to the Chairman

 and Chief Financial Officer

SUBJECT: Third Quarter 2020 CFO Report to the Board

The attached report highlights the FDIC’s financial activities and results for the quarter ended September 30, 2020.

Executive Summary

• During the third quarter of 2020, the Deposit Insurance Fund (DIF) balance rose to $116.4 billion, up $1.8 billion 

from the June 30, 2020 balance. The quarterly increase was primarily due to $2.0 billion in assessment revenue 

partially offset by a $284 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 at 

September 30, 2020, unchanged from the previous quarter.

• With a fund balance of $116.4 billion as of September 30, 2020, the DIF is currently well-positioned to cover 

possible short and mid-term risks that may occur. However, there remains uncertainty about the effects of the 

COVID-19 health crisis on the economy and the banking industry over the long-term. Effects from a weakened 

economic outlook, elevated unemployment levels, and diminished repayment capacity of borrowers may stress 

the balance sheets of several institutions across the United States. The FDIC continues to evaluate a range of 

possible outcomes for economic stress, the risks those outcomes pose to insured financial institutions, and the 

extent to which such risks may draw on the resources of the DIF.

• There were no financial institution failures during the third quarter of 2020; the last failure occurred on April 3, 

2020.

• Through September 30, 2020, overall FDIC Operating Budget expenditures were below the year-to-date budget by 

about $109.8 million, or seven percent. This variance was primarily the result of underspending of $93 million in 

the Ongoing Operations budget component. The largest variances were in the Travel expense category ($37.4 

million, or 64 percent) due to travel restrictions during the COVID-19 pandemic and the Salaries and Compensation 

expense category ($24.8 million, or 3 percent) due to unfilled vacancies in authorized positions.
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I. Financial Results (See pages 5 – 6 for detailed data and charts.) 

Deposit Insurance Fund 

x For the nine months ending September 30, 2020, the DIF’s comprehensive income totaled $6.1 billion, compared to 

comprehensive income of $6.3 billion for the same period last year, a decrease of $244 million. Although 

assessment revenue increased year-over-year by $1.5 billion, this was more than offset by a $233 million year-overyear decrease in interest on U.S. Treasury securities, a $418 million year-over-year decrease in the unrealized gain 

on U.S. Treasury securities, and a year-over-year change in negative provision for insurance losses of $1.1 

billion. The provision balance for 2020 is a negative $109 million, reflecting adjustments to loss estimates for prior 

year failures largely as a result of unanticipated recoveries from professional liability claims by receiverships and 

reductions to receivership future expense estimates. In contrast, the provision balance for 2019, a negative $1 

billion, reflected large decreases in loss estimates for prior year bank failures, primarily arising from shared-loss 

liability reductions and unanticipated recoveries from litigation settlements and professional liability claims by 

receiverships. 

Assessments 

x During September, the DIF recognized assessment revenue of $1.9 billion for the estimate of third quarter 2020 

insurance coverage. Additionally, the DIF recognized a $144 million adjustment for higher-than-estimated 

collections for the second quarter 2020 insurance coverage, which increased assessment revenue. 

x On September 30, 2020, the FDIC collected $1.8 billion in DIF assessments for second quarter 2020 insurance 

coverage. 

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

DIF Investment Portfolio 

x On September 30, 2020, the total liquidity (also total market value) of the DIF investment portfolio stood at $113.4 

billion, up $6.4 billion from its December 31, 2019, balance of $107.0 billion. During the quarter, interest revenue, 

receivership dividends, and deposit insurance assessment collections far exceeded resolution-related outlays and 

operating expenses. 

x On September 30, 2020, the DIF investment portfolio’s yield was 1.22 percent, down 76 basis points from its 1.98 

percent yield on December 31, 2019. The new Treasury securities purchased during the third quarter of the year 

had significantly lower yields than the maturing securities’ yields. 

x In accordance with the approved third quarter 2020 DIF portfolio investment strategy, staff purchased a total of 15 

conventional Treasury securities. The 15 securities had a total par value of $24.4 billion, a weighted average yield of 

0.184 percent, and a weighted average maturity of 2.20 years. 

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

Approved Budget Modifications 

The 2020 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to 

make certain modifications to the 2020 FDIC Operating Budget. The following budget reallocations were approved 

during the third quarter in accordance with the authority delegated by the Board of Directors: 

In August, the CFO approved the following adjustments to 2020 Ongoing Operations budgets: 

 
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x A decrease of $910,000 in the budget of the Division of Information Technology (DIT) and an increase of the 

same amount in the budget of the Office of Communications to correct an error made during the mid-year 

budget review. These adjustments did not change the total corporate budget. 

x An increase of $500,000 in the budget of the Office of the Chief Information Security Officer (OCISO) to support 

the transition to a new support contract. As a result, the Corporate Unassigned contingency reserve in the 

Ongoing Operations budget component was decreased by $500,000. 

Following these third quarter budget modifications, the balances in the Corporate Unassigned contingency reserves 

were $16,703,552 in the Ongoing Operations budget component and $18,917,515 in the Receivership Funding budget 

component. 

Approved Staffing Modifications 

The 2020 Budget Resolution delegated to the CFO the authority to modify approved 2020 staffing authorizations for 

divisions and offices, as long as those modifications did not increase the total approved 2020 FDIC Operating Budget. 

x In July, the CFO approved a net decrease of 48 positions, to 2,358 positions, in the permanent staffing 

authorization for the Division of Risk Management Supervision (RMS) to support RMS’s workforce reshaping 

plans. Those plans included the establishment of 26 new authorized positions and the elimination of 74 

authorized positions. The eliminated positions that are currently occupied were designated as “incumbencyonly,” to be eliminated when they become vacant. The new positions add needed skills in the areas of 

application and supervisory oversight, capital markets data analytics and risk monitoring, examiner training, 

and emerging risk monitoring, primarily in RMS’s Washington office. 

x In July, the CFO approved the realignment of two authorized permanent positions among the Office of the 

Deputy to the Chairman and Chief Operating Officer, the Office of Minority and Women Inclusion, and the 

Division of Administration. There was no immediate impact on total budget or authorized staffing levels for 

the FDIC. 

Following these changes, total authorized staffing for the Corporation totaled 5,722 (comprised of 5,717 permanent 

and 5 non-permanent positions). 

Spending Variances 

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

variances for the quarter ending September 30, 2020, are defined as those that either (1) exceeded the YTD budget for a 

major expense category or division/office by more than $1 million and represented more than two percent of the major 

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

division/office by more than $7 million and represented more than seven 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 through the third quarter in two major expense categories of the Ongoing 

Operations budget component. 

x Spending in the Travel expense category was under the YTD budget by $37.4 million, or 64 percent. This 

variance was primarily attributable to the mandatory telework and travel restrictions that were implemented 

in March 2020 in response to the COVID-19 pandemic. The variance largely reflects underspending for travel 

related to examinations and other supervisory activities by RMS ($24.6 million, or 64 percent of its 2020 YTD 

budget), the Division of Depositor and Consumer Protection (DCP) ($6.5 million, or 65 percent of its 2020 YTD 
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budget), Corporate University – Corporate Employee Program ($1.9 million, or 72 percent of its 2020 YTD 

budget), and the Division of Complex Institution Supervision and Resolution ($1.9 million, or 83 percent of its 

2020 YTD budget). 

x Spending in the Equipment expense category was under the YTD budget by $11.2 million, or 14 percent. The 

variance was attributable primarily to underspending by DIT and OCISO of $8.3 million and $2.1 million, 

respectively, due to later-than-anticipated ordering and delivery of IT equipment. 

Receivership Funding 

There was a significant spending variance through the third quarter in one major expense category of the Receivership 

Funding budget component. 

x Spending in the Outside Services-Personnel expense category was under the YTD budget by $13.6 million, or 

35 percent. The variance was primarily attributable to underspending by the Legal Division of $11.1 million, or 

53 percent of its YTD budget, and by the Division of Resolutions and Receiverships (DRR) of $2.7 million, or 16 

percent of its 2020 YTD budget. The Legal Division’s underspending was the result of reduced use of outside 

legal services due to settlements, a decision to perform new professional liability investigations with FDIC 

staff, and delays in pending litigation due to the COVID-19 pandemic. DRR’s underspending was largely due to 

fewer-than-budgeted bank closings and the small size of closed institutions. 

Significant Spending Variances by Division/Office1

Three organizations had significant spending variances through the end of third quarter. 

x The Legal Division underspent its YTD budget by $17.1 million, or 14 percent, primarily in the Outside ServicesPersonnel major expense category in the Receivership Funding budget component, for the reasons noted 

above. It also underspent its YTD Salaries and Compensation budget in the Ongoing Operations budget 

component due to a high number of vacancies in budgeted positions. 

x DCP underspent its YTD budget by $11.1 million, or eight percent, primarily in the Travel and Outside ServicesPersonnel major expense categories in the Ongoing Operations budget component due to the impact of 

mandatory telework and delays in planned contractual services for MoneySmart. In addition, it underspent its 

YTD Salaries and Compensation budget due to vacancies in budgeted positions and low utilization of its 

awards budget. 

x DRR underspent its YTD budget by $8.4 million or eight percent, primarily in the Outside Services-Personnel 

major expense category in the Receivership Funding budget component, for the reasons noted above. In 

addition, in the Ongoing Operations budget component, it underspent its Outside Services-Personnel budget 

due to an accounting error and a delay in the onboarding of contractor resources for IT Resolutions and 

Receivership Support, and its Salaries and Compensation budget due to delays in filling vacancies in budgeted 

positions and lower-than-anticipated overtime expenses. 

1

Information on division/office variances reflects variances in the FDIC Operating Budget and does not include 

variances related to approved multi-year investment projects. 
Fund Financial Results ($ in Millions) 

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The DIF has experienced a 9% growth in the market value of its investment portfolio from second quarter of 2019 through 

the third quarter of 2020. However that growth has failed to translate into higher interest earned, as yields plummeted to 

record lows in the second quarter of 2020 and will remain there for what is anticipated to be the next 2 to 3 years. Overnight

interest, beginning in April of this year and through the third quarter and likely beyond, is a fraction of what was earned 

prior to March.

Balance Sheet

Quarterly Year-Over-Year

Sep-20 Jun-20 Change Sep-19 Change

Cash and cash equivalents 6,801 $ 5,144 $ 1,657 $ 4,268 $ 2,533 $ 

Investment in U.S. Treasury securities 105,830 105,02 806 4 100,873 4,957 

Assessments receivable 1,902 1,632 270 1,115 787 

Interest receivable on investments and other assets, net 864 1,369 (505) 582 282 

Receivables from resolutions, net 1,352 1,860 (508) 2,801 (1,449) 

Property and equipment, net 314 320 (6) 317 (3) 

Operating lease right-of-use assets 115 118 (3) 0 115 

Total Assets $ 115,467 117,178 $ 1,711 $ 109,956 $ 7,222 $ 

Accounts payable and other liabilities 234 221 13 212 22 

Operating lease liabilities 122 127 (5) 0 122 

Liabilities due to resolutions 5 73 (68) 427 (422) 

Postretirement benefit liability 289 289 0 236 53 

Contingent liability for anticipated failures 62 74 (12) 108 (46) 

Contingent liability for guarantee payments and litigation losses 32 32 0 33 (1)

Total Liabilities $ 816 744 $ (72) $ 1,016 $ (272) $ 

FYI: Unrealized gain (loss) on U.S. Treasury securities, net 1,370 1,654 (284) 586 784 

FYI: Unrealized postretirement benefit (loss) gain (61) (61) 0 (14) (47) 

Fund Balance $ 114,651 116,434 $ 1,783 $ 108,940 $ 7,494 $ 

Deposit Insurance Fund
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Fund Financial Results - continued ($ in Millions) 

Receivership Selected Statistics September 2020 vs. September 2019

Income Statement (year-to-date)

Quarterly Year-Over-Year

Sep-20 Jun-20 Change Sep-19 Change

Assessments 5,209 $ 3,162 $ 2,047 $ 3,667 $ 1,542 $ 

Interest on U.S. Treasury securities 1,353 961 392 1,586 (233)

Other revenue 12 6 6 17 (5) 

Total Revenue $ 4,129 6,574 $ 2,445 $ 5,270 $ 1,304 $ 

Operating expenses 1,376 925 451 1,336 40 

Provision for insurance losses (109) (35) (74) (1,198) 1,089 

Insurance and other expenses 3 2 0 2 1

Total Expenses and Losses $ 892 1,270 $ 378 $ 140 $ 1,130 $ 

Net Income $ 3,237 5,304 $ 2,067 $ 5,130 $ 174 $ 

Unrealized gain (loss) on U.S. Treasury securities, net 783 1,067 (284) 1,201 (418) 

Unrealized postretirement benefit gain (loss) 0 0 0 0 0

Comprehensive Income $ 4,304 6,087 $ 1,783 $ 6,331 $ (244) $ 

Deposit Insurance Fund

Selected Financial Data

Quarterly Year-Over-Year

Sep-20 Jun-20 Change Sep-19 Change

Cash and cash equivalents 907 $ 926 $ (19) $ 918 $ (11) $ 

Accumulated deficit (124,562) (124,563) 1 (124,570) 8 

Total resolution equity 907 907 0 919 (12) 

Total revenue 4 3 1 17 (13)

Operating expenses 0 0 0 0 0

Recovery of tax benefits 0 0 0 0 0

Losses related to thrift resolutions 0 0 0 0 0

Net Income (Loss) 4 $ 3 $ 1 $ 17 $ (13) $ 

FSLIC Resolution Fund

 ($ in millions) Sep-20 Sep-19 Change Sep-20 Sep-19 Change Sep-20 Sep-19 Change

Total Receiverships 238 252 (14) 0 0 0 238 252 (14)

Assets in Liquidation 370 $ 575 $ (205) $ $ 0 2 $ (2) $ 370 $ 577 $ (207) $ 

YTD Collections 338 $ 1,113 $ (775) $ 1 $ 2 $ (1) $ 339 $ 1,115 $ (776) $ 

YTD Dividend/Other Pmts - Cash 1,301 $ 1,374 $ (73) $ $ 0 $ 0 $ 0 1,301 $ 1,374 $ (73) $ 

DIF FRF ALL FUNDS

The total unrealized gains have decreased since the end of the first quarter of 2020, as the second and third quarters 

saw an aggregate of approximately $31.9BN in par value mature. Proceeds were subsequently reinvested at much 

lower yields. With $20.0BN of par value expected to mature in the first quarter of 2021, those unrealized gains have 

seen significant reduction as they approach maturity.
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9/30/20 12/31/19 Change

Par Value $108,949 $104,429 $4,520

Amortized Cost $111,259 $105,464 $5,795

Total Market Value (including accrued interest) $113,442 $107,024 $6,418

Primary Reserve 1 $113,442 $107,024 $6,418

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

Yield-to-Maturity 1.22% 1.98% -0.76%

Weighted Average Maturity (in years) 1.27 1.18 0.09

Effective Duration (in years)

 Total Portfolio 1.24 1.15 0.09

 Available-for-Sale Securities 2 1.32 1.22 0.10

9/30/20 12/31/19 Change

FRF-FSLIC

 Book Value 3 $881 $878 $3

 Yield-to-Maturity 0.07% 1.51% -1.44%

 Weighted Average Maturity overnight overnight no change

9/30/20 12/31/19 Change

Book Value 4 $1,657 $2,128 ($471)

Effective Annual Yield 0.27% 1.76% -1.49%

Weighted Average Maturity (in days) 6 32 (26)

4

 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)

3

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

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 securities (AFS), 

and held-to-maturity securities maturing within three months.

National Liquidation Fund (NLF) Investment Portfolio Summary

(Dollar Values in Millions)

2

 Excludes any overnight investments.
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DEPOSIT INSURANCE FUND

Invest up to $32 billion (par value) in AFS securities with maturities between 

December 31, 2020 and July 1, 2025. 

Invest up to $17 billion (par value) in AFS securities with maturities between March 

31, 2021 and October 1, 2025. 

NATIONAL LIQUIDATION FUND

Maintain an overnight deposit target floor balance within a range of $50 million to 

$200 million.

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

No strategy changes for the fourth quarter of 2020.

Investment Strategies

Strategy Changes for the 4th Quarter 2020

Strategy for the 3rd Quarter 2020

Strategy for the 3rd Quarter 2020

Strategy Changes for the 4th Quarter 2020
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Annual YTD YTD % of YTD YTD

Major Expense Category Budget Budget Expenditures Budget Used Variance

FDIC Operating Budget 

Ongoing Operations

Salaries & Compensation $1,272,831 $962,607 $937,857 97% ($24,750)

Outside Services - Personnel 311,371 221,857 208,605 94% (13,252)

Travel 78,301 58,524 21,149 36% (37,375)

Buildings 99,034 74,562 71,302 96% (3,260)

Equipment 106,543 82,143 70,980 86% (11,163)

Outside Services - Other 15,917 12,040 12,531 104% 491

Other Expenses 15,443 11,635 7,766 67% (3,869)

Total Ongoing Operations $1,899,440 $1,423,368 $1,330,190 93% ($93,178)

Receivership Funding

Salaries & Compensation $765 $500 $963 193% $463

Outside Services - Personnel 69,300 39,014 25,390 65% (13,624)

Travel 1,030 783 404 52% (379)

Buildings 2,227 1,669 1,694 101% 25

Equipment 8 6 4 67% (2)

Outside Services - Other 571 427 278 65% (149)

Other Expenses 1,099 823 905 110% 82

Total Receivership Funding $75,000 $43,222 $29,638 69% ($13,584)

Office of Inspector General

Salaries & Compensation $37,033 $27,775 $25,888 93% ($1,887)

Outside Services - Personnel 2,400 1,800 1,418 79% (382)

Travel 1,035 777 599 77% (178)

Buildings 0 0 0 0

Equipment 1,888 1,416 929 66% (487)

Outside Services - Other 0 0 4 4

Other Expenses 626 469 408 87% (61)

Total Office of Inspector General $42,982 $32,237 $29,246 91% ($2,991)

Total FDIC Operating Budget $2,017,422 $1,498,827 $1,389,074 93% ($109,753)

Executive Summary of 2020 Budget and Expenditures

by Budget Component and Major Expense Category

Through September 30, 2020

(Dollars in Thousands)
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1) Executive Support includes the Offices of Minority and Women Inclusion, Communications, Ombudsman, Legislative Affairs, Financial 

Institution Adjudication, FDiTech Lab, and the former Office of CIO Management Services. 

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, Deputy to the Chairman for Policy, Deputy to the Chairman for External Affairs, 

Deputy to the Chairman for Financial Stability, Deputy to the Chairman for Consumer Protection and Innovation, and Chief Information 

Officer/Chief Privacy Officer.

Annual YTD YTD % of YTD YTD

Division/Office Budget Budget Expenditures Budget Used Variance

 FDIC Operating Budget 

 Risk Management Supervision $546,948 $414,024 $390,770 94% ($23,254)

 Information Technology 319,914 244,838 238,795 98% (6,043)

 Administration 273,690 203,026 190,079 94% (12,947)

 Depositor & Consumer Protection 185,003 140,061 128,929 92% (11,132)

 Legal 158,929 120,582 103,451 86% (17,131)

 Resolutions & Receiverships 147,249 110,752 102,369 92% (8,383)

 Complex Institution Supervision & Resolution 85,608 64,105 58,578 91% (5,527)

 Insurance & Research 59,499 44,719 42,400 95% (2,319)

 Inspector General 42,982 32,237 29,246 91% (2,991)

 Finance 42,939 32,280 29,427 91% (2,853)

 Chief Information Security Officer 40,620 32,016 28,470 89% (3,546)

 Executive Support 1 30,343 23,031 17,511 76% (5,520)

 Corporate University - Corporate 23,604 17,174 14,700 86% (2,474)

 Executive Offices 2 13,079 9,651 8,617 89% (1,034)

 Corporate University - CEP 11,394 10,331 5,732 55% (4,599)

 Corporate Unassigned 3 35,621 0 0 0

 Total FDIC Operating Budget $2,017,422 $1,498,827 $1,389,074 93% ($109,753)

Executive Summary of 2020 Budget and Expenditures

by Division/Office

Through September 30, 2020

(Dollars in Thousands)