Federal Deposit Insurance Corporation 

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

 

 August 17, 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: Second Quarter 2010 CFO Report to the Board 

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

June 30, 2010. 

Executive Summary

 During the second quarter of 2010, the Deposit Insurance Fund (DIF) balance increased by $5.5 

billion to negative $15.2 billion. This increase was primarily due to a $3.2 billion increase in 

assessments earned and a $2.6 billion decrease in the provision for insurance losses, offset by a 

$381.8 million increase in operating expenses. 

 During the second quarter of 2010, the FDIC was named receiver for 45 failed institutions. The 

combined assets at inception for these institutions totaled approximately $48.0 billion with a 

total estimated loss of $10.5 billion. The corporate cash outlay during the second quarter for 

these failures was approximately $18.4 billion. 

 Year-to-date through June 30, 2010, expenditures from the Corporate Operating Budget ran 

below budget by 2 percent ($29.4 million). The variance was primarily the result of lower 

spending for contractual services as well as vacancies in budgeted positions in both the 

Ongoing Operations and Receivership Funding components of the budget. 

 Expenditures from the Investment Budget ran 70 percent ($0.8 million) below year-to-date 

project spending estimates through June 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. 
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 illustrated in the first graph on page 10, the fund balance has 

decreased since 2008 due to estimated losses from actual bank failures, 

as well as contingent liabilities for future failures. Over the past two 

quarters, however, the fund balance has improved modestly—though it 

remains negative. The DIF’s contingent liabilities for future failures 

have similarly moderated recently. The DIF’s available cash increased 

dramatically in the fourth quarter of 2009 due to the collection of 

approximately three years of prepaid assessments, which was effected 

to ensure that the DIF would have adequate liquidity to resolve future 

failures. Current cash flow projections indicate that the DIF continues 

to have sufficient cash to resolve expected failures. 

 Observations from recent bank resolutions suggest some moderation in 

expected losses on failed bank assets compared with earlier periods of 

the current crisis. These indications include lower discounts in recent 

loss-share deals, increased numbers of bids in recent LLC deals with 

lower loss rate assumptions, and stable asset valuations for recent 

liquidations. 

 The second graph on page 10 shows the cash outlays made by the DIF 

to cover brokered deposits not assumed by acquiring institutions. These 

outlays were particularly high in the second quarter of 2010 due to the 

three Puerto Rico institutions that failed at the end of April, where 

brokered deposits made up an above-average share of their total 

deposits. 
3

Trends and Outlook

Financial Results Comments 

II. Investments  The total liquidity (market value plus accrued interest) of all DIFrelated investment portfolios (the DIF investment portfolio and the 

systemic-risk-related investment portfolios) stood at $44.0 billion on 

June 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 $21.2 billion during the first half of 2010, and totaled $38.1 billion 

on June 30, 2010. The decrease was the result of having to fund 86 

bank failures during the first half of the year, although it should be 

noted that 73 of these failures were resolved as loss-share transactions 

that required little or no initial resolution funding, and thus helped to 

mitigate the decline in the DIF portfolio’s balance. Moreover, during 

the first half of 2010, the DIF received $4.1 billion in dividends, 

repayments of borrowings, and expense reimbursements from its 

receiverships. These receipts 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 second quarter, the DIF investment portfolio’s yield 

was 0.62 percent, up 13 basis points from its December 31, 2009, yield 

of 0.49 percent. Although $2.7 billion in generally higher-yielding 

securities matured during the first half of the year, this reduction in 

yield was more than offset by two factors. First, the yield on overnight 

investments increased considerably, rising from 0.02 percent on 

December 31, 2009 to 0.09 percent on June 30, 2010. Second, 

overnight investments comprised a much smaller percentage of the DIF 

portfolio by the end of the second quarter. 

 Short-maturity Treasury yields remained stable during the second 

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

declines. Overall, 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 continuing concerns over the European debt crisis and the 

weakening Euro, as well as new concerns over signs of a potential 

slowdown in global economic growth. Nevertheless, according to 

consensus expectations, Treasury yields are expected to increase 

modestly during the remainder of 2010 and during 2011. 
4

Trends and Outlook

Financial Results Comments 

III. Budget  Approximately $664.8 million was spent in the Ongoing Operations 

component of the 2010 Corporate Operating Budget, which was $39.9 

million (6 percent) below the budget for the six months ending June 30, 

2010. Actual expenses in the Salaries and Compensation and Outside 

Services – Personnel categories were both about $13 million below their 

year-to-date budgets and accounted for most of this variance. 

 Approximately $1.0 billion was spent in the Receivership Funding 

component of the 2010 Corporate Operating Budget, which was $10.5 

million (1 percent) above the budget for the six months ending June 30, 

2010. Actual expenses exceeded the year-to-date budgets by $103.1 

million in the Other Expenses category, $41.3 million in the Outside 

Services – Other category, and $27.9 million in the Buildings category. 

This over-spending was largely offset by under-spending in the Outside 

Services – Personnel and Salaries and Compensation categories of

$126.8 million and $21.7 million, respectively. 

I. Corporate Fund Financial Results (See pages 10 - 11 for detailed data and charts.) 

Deposit Insurance Fund (DIF) 

 For the six months ending June 30, 2010, the DIF’s comprehensive income totaled $5.6 billion 

compared with a comprehensive loss of $6.9 billion for the same period last year. This $12.5 

billion year-over-year increase was primarily due to a $17.8 billion decline in the provision for 

insurance losses partially offset by a $5.2 billion decrease in assessments earned. The reason 

for this decrease in assessments earned was the recognition of a $5.6 billion receivable for a 

one-time special assessment at June 30, 2009, which was collected on September 30, 2009. 

 Assessment revenue increased by $3.2 billion during the second quarter to $6.5 billion at June 

30, 2010. The DIF recognized revenue of $2.9 billion for the second quarter insurance period 

for those institutions that prepaid assessments on December 30, 2009. For those institutions 

that did not prepay assessments, the “Assessments receivable, net” line item of $313 million 

represents the estimated gross premiums due from insured depository institutions for the second 

quarter. 

 The provision for insurance losses was $469.2 million as of June 30, 2010, compared with 

$18.3 billion for the same period in 2009. The total provision consists mainly of the decrease 

in the provision for future failures ($16.5 billion) and the losses estimated at resolution for the 

86 failures occurring in 2010 ($16.8 billion). 
5

FSLIC Resolution Fund (FRF) 

 On June 25, 2010, the Arbitration Panel of the American Arbitration Association resolved a 

dispute between the FDIC, in its capacity as manager of the FRF, and The Adam 

Corporation/Group (TACG), over the amount TACG was required to pay the FDIC in tax 

benefit sharing payments under the tax provisions of a 1988 FSLIC Assistance Agreement. 

Finding that the FDIC was the “prevailing party,” the panel awarded $42.6 million to the FDIC. 

The $42.6 million was accrued in the FRF’s June financial statements and is reflected in the 

“Receivables from thrift resolutions and other assets, net” line item of the balance sheet and in 

the “Recovery of tax benefits” line item on the income statement. If the TACG does not pay 

the award within 30 days, interest will accrue. 

II. Investments

Investment Results (See pages 12 - 13 for detailed data and charts.)

DIF Investment Portfolio 

 The amortized cost (book value) of the DIF investment portfolio decreased by $21.2 billion, or 

35.8 percent, during the first half of 2010, from $59.3 billion on December 31, 2009, to $38.1 

billion on June 30, 2010. Similarly, the DIF portfolio’s primary reserve (total market value 

plus accrued interest) decreased by $21.3 billion, or 35.8 percent, from $59.5 billion on 

December 31, 2009, to $38.2 billion on June 30, 2010. During the period, resolution outlays 

and operating expenses greatly exceeded receivership payments and assessment collections. 

 The DIF investment portfolio’s total return for the first half of 2010 was 0.08 percent, 

approximately 462 basis points lower than its benchmark, the Merrill Lynch 1 – 10 Year U.S. 

Treasury Index (Index), which had a total return of 4.70 percent during the same period. Given 

that most longer-maturity Treasury yields declined during the period (that is, prices rose), the 

DIF portfolio’s large overnight investment and short-maturity Treasury bill (T-Bill) balances 

invested in relatively low yielding investments were a drag on performance relative to the 

Index’s longer-duration conventional Treasury securities. 

 In accordance with the approved second 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 second 

quarter of 2010. The four securities had a total par value of $4.8 billion, a weighted average 

yield-at-cost of 0.18 percent, and a weighted average maturity (WAM) of 0.46 years. 

Other Corporate Investment Portfolios 

 During the first half of 2010, the book value of the Debt Guarantee Program (DGP) investment 

portfolio decreased from $6.4 billion on December 31, 2009 to $5.8 billion on June 30, 2010. 

Although the DGP portfolio received a total of $322 million in reimbursements from 

Transaction Account Guarantee (TAG) Program assessments at the end of the first and second 

quarters, the DGP reimbursed $970 million to the DIF portfolio for claims against the TAG 

Program during the quarter, hence the net decline. In accordance with the approved second 

quarter 2010 investment strategy for the DGP portfolio, staff purchased two short-maturity T-
6

Bills 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 0.49 years. 

 During the first half of 2010, as mentioned above, the FDIC collected about $322 million in 

fees related to the TAG Program under the Temporary Liquidity Guarantee Program. 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 June 30, 

2010. 

The Treasury Market 

 Short-term Treasury yields remained stable during the second quarter of 2010, while longerterm Treasury yields posted dramatic declines. The three-month T-Bill yield actually increased 

by 2 basis points, while the yield on the six-month T-Bill decreased by 1 basis point. The oneyear T-Bill yield declined by 7 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 42 basis points. Intermediate- to longer-maturity 

Treasury security yields declined during the second quarter. The yield on the five-year 

Treasury note declined by 77 basis points while the yield on the ten-year Treasury note 

declined by 90 basis points. Consequently, the conventional Treasury yield curve flattened 

during the second quarter of 2010. On June 30, 2010, the two- to ten-year yield curve had a 

233-basis point positive spread (lower than the 281-basis point spread at the beginning of the 

quarter). Over the past five years, this spread has averaged 113 basis points. 

Prospective Strategies 

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

strategy calls for purchasing up to $15.0 billion of shorter-term Treasury securities with 

maturities between October 1, 2010, and June 30, 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 DGP portfolio, similar to its second quarter investment strategy, the third quarter 2010 

investment strategy calls for purchasing up to $2.0 billion of Treasury securities with maturities 

between October 1, 2010, and June 30, 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 14 - 15 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. 

One budget reallocation was made during the second quarter by the CFO in accordance with 

this authority. In May 2010, the CFO approved the reallocation of budget authority within the 

Salaries and Compensation expense category of the Ongoing Operations and Receivership 

Funding components of the 2010 Corporate Operating Budget to reflect updated salary and 
7

benefit expense estimates for all divisions and offices, except for the Office of Inspector 

General. This reallocation did not change the total 2010 Corporate Operating Budget approved 

by the Board. 

This reallocation followed a comprehensive analysis of the approved authority for salaries, 

bonuses, and fringe benefits through March 31, 2010. The large number of vacancies in 

budgeted positions and lower-than-estimated locality pay adjustments negotiated for 2010 were 

major factors causing excess budget authority. Some of this excess was reallocated to provide 

necessary funding for authorized staffing increases in the Division of Supervision and 

Consumer Protection, the Office of Legislative Affairs, and the Office of the Ombudsman that 

were reported in the First Quarter CFO Report to the Board. Remaining excess funds totaling 

$13 million in the Ongoing Operations and $18 million in the Receivership Funding budget 

components were realigned, thereby increasing the Ongoing Operations Corporate Unassigned 

budget from $13 million to $25 million, and the Receivership Funding Corporate Unassigned 

budget from $176 million to $194 million. These Corporate Unassigned budgets will be 

available to meet new budget requirements that may emerge during the remainder of the year. 

Approved Staffing Modifications 

The 2010 Budget Resolution delegated to the CFO the authority to modify 2010 Authorized 

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

approved 2010 Corporate Operating Budget. In June 2010, in accordance with the authority 

delegated to him by the Board of Directors, the CFO approved an increase of two authorized 

permanent positions in the Office of Enterprise Risk Management to support its rapidly 

growing risk assessment workload associated with the increase in the Corporation’s business 

activities and workload. The CFO determined that sufficient funding would be available for 

these positions for the balance of 2010 in the Ongoing Operations budget component through 

the reallocation of surplus budget authority during the mid-year budget review process. 

Spending Variances 

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

below. Significant spending variances for the six months ending June 30, 2010, are defined as 

those that either (1) exceed the YTD budget by $2 million and represent more than 3 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 $3 million and 

represents more than 5 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 two major expense categories through the second 

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

 Outside Services – Personnel expenditures were $13.2 million, or 12 percent, less than 

budgeted. The variance was largely due to under-spending in the CIO Council and 

Division of Information Technology (DIT) budgets. Approximately $6 million of this 

variance was attributable to under-spending for systems development and discretionary 
8

small enhancements overseen by the CIO Council, and almost $5 million was attributable to 

under-spending by DIT for internal operations due to delays in starting some internal 

initiatives. In addition, DRR spent $3 million less than budgeted due to postponement of 

training for new employees in Asset Management and in the use of the new Claims 

Administration System (CAS) as well as lower than anticipated spending for business 

support services, IT security services, and financial advisory services. 

 Equipment expenditures were $6.9 million, or 19 percent, less than budgeted. The variance 

was largely attributable to delays in the purchase of “technical refresh” equipment and 

software and delayed billing for software maintenance, including license renewal fees for 

30 disparate software packages. The invoicing was delayed because the contractor who 

makes the purchases for the FDIC had to wait to bill the FDIC until after the invoice was

received from the software reseller. In the future, DIT will accrue for these license renewal 

fees. 

Receivership Funding

The Receivership Funding component of the 2010 Corporate 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. 

Significant spending variances occurred during the second quarter in all seven major expense 

categories of the Receivership Funding component of the 2010 Corporate Operating Budget: 

 Salaries & Compensation ($21.7 million, or 19 percent, less than budgeted). 

 Outside Services – Personnel ($126.8 million, or 17 percent, less than budgeted). 

 Travel ($9.4 million, or 32 percent, less than budgeted). 

 Buildings ($27.9 million, or 37 percent, more than budgeted). 

 Equipment ($3.9 million, or 21 percent, less than budgeted). 

 Outside Services – Other ($41.3 million, or 337 percent, more than budgeted). 

 Other Expenses ($103.1 million, or 331 percent, more than budgeted). 

The variances in the Outside Services – Personnel and Travel expense categories were 

attributable to fewer-than-anticipated resolutions through the second quarter of 2010. The 

variance in the Salaries and Compensation category was attributable to delays in the hiring of 

non-permanent staff. Greater-than-budgeted spending occurred in the Buildings and Other 

Expenses categories as a result of longer than expected receivership operations at the sites of 

failed institutions and the greater number of field sites in operation. In addition, approximately 

$43.6 million in unbudgeted guarantee fee costs incurred in conjunction with a Limited 

Liability Company (LLC) transaction were recorded to the Outside Services – Other expense 

category. A variance in the Equipment category was primarily attributable to lower-than-
9

anticipated costs for the Midwest Temporary Satellite Office (MWTSO) and the purchase of 

fewer laptops than were budgeted for during the first half of 2010. 

Significant Spending Variances by Division/Office1

Three organizations had significant spending variances through the end of the second quarter: 

 The Division of Information Technology spent $26.3 million, or 21 percent, less than 

budgeted. This variance was largely attributable to lower-than-budgeted hardware/software 

maintenance costs and deferrals in equipment purchases, lower-than-anticipated facility 

costs at the MWTSO, and delays in starting some internal DIT initiatives. 

 The Legal Division spent $7.4 million, or 7 percent, more than budgeted. This variance 

was due to the need for more outside counsel assistance for litigation and other legal work

than was anticipated through the second quarter. A budget modification was requested in 

the mid-year budget process. 

 The CIO Council spent $5.6 million, or 17 percent, less than budgeted. This variance was 

primarily attributable to the timing of spending for development projects to which funds 

were allocated by the CIO Council and for discretionary funds allocated to divisions/offices 

for small enhancements. 

 

1

 Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets. 
FDIC CFO REPORT TO THE BOARD – Second Quarter 2010

Fund Financial Results ($ in Millions) 

10

Balance Sheet

Quarterly Year-Over-Year

Jun-10 Mar-10 Change Jun-09 Change

Cash & cash equivalents - unrestricted $ 41,094 18,824 $ $ 3,633 (22,270) $ 15,191 $ 

Cash & investments - restricted - systemic risk 6,077 5,786 7,360 (291) (1,574)

Investment in U.S. Treasury obligations, net 15,792 19,264 3,472 18,019 1,245 

Trust preferred securities 2,140 2,130 - (10) 2,130 

Assessments receivable, net 268 313 45 9,048 (8,735)

Receivables and other assets, net - systemic risk 3,165 3,486 321 4,328 (842)

Interest receivable on investments and other assets, net 134 165 31 302 (137)

Receivables from resolutions, net 39,091 50,451 11,360 21,729 28,722 

Property, buildings and other capitalized assets, net 386 391 5 368 23 

Total Assets $ 108,147 100,810 $ $ 64,787 (7,337) $ 36,023 $ 

Accounts payable and other liabilities 328 351 (23) 207 121

Unearned revenue - prepaid assessments 36,785 39,718 (2,933) 36,785 -

Liabilities due to resolutions 41,862 38,362 3,500 11,091 30,771

Deferred revenue - systemic risk 8,321 7,999 322 10,032 (1,711)

Postretirement benefit liability 145 145 - 114 31

Contingent Liabilities: future failures 27,534 40,720 (13,186) 31,968 (4,434)

Contingent Liabillties: systemic risk 782 1,269 (487) 893 (111)

Contingent Liabilities: litigation losses & other 300 300 - 200 100

Total Liabilities $ 128,864 116,057 $ $ 54,419 (12,807) $ 61,638 $ 

FYI: Unrealized gain/(loss) on U.S. Treasury investments, net 113 62 962 (51) (900)

FYI: Unrealized gain/(loss) on trust preferred securities 178 168 - (10) 168 

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

FUND BALANCE $ (20,717) (15,247) $ 5,470 $ 10,368 $ (25,615) $ 

Income Statement (year-to-date) 

 Quarterly Year-Over-Year

Jun-10 Mar-10 Change Jun-09 Change

Assessments earned $ 3,278 6,520 $ 3,242 $ 11,710 $ $ (5,190)

Systemic risk revenue 49 (138) 327 (187) (465)

Interest earned on U.S. Treasury obligations 62 126 64 452 (326)

Realized gain on sale of securities - - - 657 (657)

Other revenue 23 79 56 377 (298)

Total Revenue $ 3,412 6,587 $ 3,175 $ 13,523 $ $ (6,936)

Operating expenses (includes depreciation expense) 345 727 382 564 163 

Systemic risk expenses 49 (138) 327 (187) (465)

Provision for insurance losses 3,021 469 18,252 (2,552) (17,783)

Other expenses 1 2 1 - 2 

Total Expenses & Losses $ 3,416 1,060 $ $ 19,143 (2,356) $ $ (18,083)

Net Income/(Loss) 5,527 5,531 (4) 11,147 (5,620) 

Unrealized gain/(loss) on U.S. Treasury investments, net (80) (29) (51) 1,208 (1,288) 

Unrealized gain/(loss) on trust preferred securities 178 168 - (10) 168 

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

YTD Comprehensive Income/(Loss) $ 145 5,615 $ 5,470 $ (6,908) $ 12,523 $ 

 

Deposit Insurance Fund

Deposit Insurance Fund

Major Components of the DIF Balance Sheet

($30)

($20)

($10)

$0

$10

$20

$30

$40

$50

$60

$70

$80

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

Dollars in Billions

Fund Balance Cash & Investments Contingent Liabilities for Future Failures

Prepaid 

Assessment 

Collections

Outlays for Failed Institution Brokered Deposits by Quarter

(Data are based on the quarter in which the institution failed.) 

$1,568

$7

$3,832

$2,302 $2,352 $1,442 $1,937

$11,515

$6,745

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

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

$ in Millions

Fund Balance = Total DIF Assets - Total 

DIF Liabilities

DIF Assets generally include cash and 

investments, receivables (from 

receiverships, assessments, and interest), 

and other assets.

DIF Liabilities generally include unearned 

revenue (prepaid assessments), liabilities to 

receiverships, deferred revenue and 

contingent liabilities (future failures).

DIF Cash & Investments include cash & 

cash equivalents (unrestricted), cash & 

investments (restricted-systemic risk), UST 

obligations, and accrued interest.
11

Fund Financial Results - continued ($ in Millions) 

$20.8

Statements of Cash Flows (year-to-date) 

 Quarterly Year-Over-Year

Jun-10 Mar-10 Change Jun-09 Change

Net (Loss)/Income $ 5,527 $ (4) $ $ 5,531 (5,620) $ 11,147 

Amortization of U.S. Treasury obligations (unrestricted) (17) 3 145 (20) (162)

TIPS Inflation Adjustment (13) (4) 38 (9) (51)

Depreciation on property and equipment 34 18 16 33 1 

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

Provision for insurance losses 469 3,021 18,252 (2,552) (17,783)

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

(Gain) on sale of UST obligations - - - (658) 658 

Guarantee termination fee from Citigroup - - - - - 

Systemic risk expenses - - - - - 

Net change in operating assets and liabilities (26,054) (4,656) (21,398) (13,610) (12,444)

Net Cash Provided by/(Used by) Operating Activities $ (20,054) $ (1,622) $ $ (18,432) (1,420) $ (18,634)

Investments matured and sold 2,643 1,355 1,288 9,027 (6,384)

Investments purchased (includes purchase of property and 

equipment) (18,482) (13,085) (5,397) (2) (18,480)

Net Cash Provided by/(Used by) Investing Activities $ (15,839) $ (11,730) $ $ 9,025 $ (4,109) (24,864)

Net Increase/(Decrease) in Cash and Cash Equivalents (35,912) (13,352) 7,605 (22,560) (43,517)

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

 Unrestricted Cash and Cash Equivalents - Ending 18,824 41,094 3,633 15,191 (22,270)

 Restricted Cash and Cash Equivalents - Ending 5,786 6,077 7,360 (291) (1,574)

Cash and Cash Equivalents - Ending $ 24,611 $ 47,171 $ (22,560) $ 10,993 $ 13,618 

Selected Financial Data

 Quarterly Year-Over-Year

Jun-10 Mar-10 Change Jun-09 Change

Cash and cash equivalents $ 3,476 3,497 $ 21 $ 3,459 $ 38 $ 

Accumulated deficit, net (124,284) 44 (124,328) (123,955) (329)

Resolution equity 3,520 3,570 50 3,487 83 

Total revenue 6 9 3 7 2 

Operating expenses 1 2 1 3 (1)

Goodwill/Guarini litigation expenses - - - - - 

Net (Loss)/Income $ 20 65 $ 45 $ (7) $ 72 $ 

Deposit Insurance Fund

FSLIC Resolution Fund

 Receivership Selected Statistics June 2010 vs. June 2009

Year-to-Date ($ in millions) Jun-10 Jun-09 Change Jun-10 Jun-09 Change Jun-10 Jun-09 Change

Total Receiverships 265 85 180 8 8 - 273 93 180 

Assets in Liquidation 39,469 $ 26,467 $ 13,002 $ 29 $ 33 $ (4) $ 39,498 $ 26,500 $ 12,998 $ 

Collections 10,809 $ 4,297 $ 6,512 $ 12 $ 5 $ 7 $ 10,821 $ 4,302 $ 6,519 $ 

Dividends Paid - Cash 3,528 $ 3,078 $ 450 $ - $ - $ - $ 3,528 $ 3,078 $ 450 $ 

DIF FRF ALL FUNDS

Total DIF Liquidity at Quarter End

(Total Market Value plus Accrued Interest, including TLGP Funds)

$31.7 $29.7

$66.1

$33.9

$23.4

$44.0

$63.3

$33.0

$53.2

$0

$10

$20

$30

$40

$50

$60

$70

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

$ in Billions
12

6/30/10 12/31/09 Change

Par Value $38,060 $59,268 ($21,208)

Amortized Cost $38,062 $59,286 ($21,224)

Market Value $38,124 $59,428 ($21,304)

Primary Reserve 1 $38,188 $59,525 ($21,337)

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

Year-to-Date Total Return (Portfolio) 0.080% 0.306% not applicable

Year-to-Date Total Return (Benchmark) 2 4.700% (1.411%) not applicable

Total Return Variance (in basis points) (462.0) 171.7 not applicable

Yield-to-Maturity 3 0.62% 0.49% 0.13%

Weighted Average Maturity (in years) 0.17 0.08 0.09

Effective Duration (in years) 4

 Total Portfolio 0.16 0.06 0.10

 Available-for-Sale Securities 0.32 0.66 (0.34)

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

6/30/10 12/31/09 Change

Debt Guarantee Program

 Par Value $5,788 $6,431 ($643)

 Book Value $5,786 $6,431 ($645)

 Market Value $5,786 $6,431 ($645)

 Yield-to-Maturity 0.14% 0.02% 0.12%

 Weighted Average Maturity overnight overnight no change

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 Reserves7

 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 $3,344 $3,330 $14

 Yield-to-Maturity 0.09% 0.02% 0.07%

 Weighted Average Maturity overnight overnight no change

6/30/10 12/31/09 Change

Book Value 8 $13,658 $7,223 $6,435

Effective Annual Yield 0.15% 0.11% 0.04%

Weighted Average Maturity (in days) 24 5 19

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.
13

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

between July 1, 2010, and March 31, 2011, subject to the following additional restrictions: no more 

than $10 billion (par value) of such securities shall have maturity dates beyond September 30, 2010; 

and no more than $5 billion (par value) of such securities shall have maturity dates beyond December 

31, 2010.

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 $2 billion (par value) of AFS securities with maturity dates between July 1, 2010, and 

March 31, 2011. 

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

and June 30, 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.

No changes to strategy.

Strategy Changes for 3rd Quarter 2010

Investment Strategies

Strategy as of 2nd Quarter 2010

Strategy as of 2nd Quarter 2010

DEPOSIT INSURANCE FUND

Strategy Changes for 3rd Quarter 2010

DEBT GUARANTEE PROGRAM

Strategy as of 2nd Quarter 2010

Strategy Changes for 3rd Quarter 2010
14

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 $455,726 $443,225 97% ($12,501)

Outside Services - Personnel 112,932 99,747 88% (13,185)

Travel 42,167 41,119 98% (1,048)

Buildings 38,477 36,663 95% (1,814)

Equipment 36,531 29,607 81% (6,924)

Outside Services - Other 11,635 9,040 78% (2,595)

Other Expenses 7,234 5,419 75% (1,815)

Total Ongoing Operations $704,702 $664,820 94% ($39,882)

Receivership Funding

Salaries & Compensation $116,006 $94,303 81% ($21,703)

Outside Services - Personnel 738,927 612,160 83% (126,767)

Travel 29,516 20,105 68% (9,411)

Buildings 74,886 102,819 137% 27,933

Equipment 18,829 14,927 79% (3,902)

Outside Services - Other 12,235 53,505 437% 41,270

Other Expenses 31,133 134,242 431% 103,109

Total Receivership Funding $1,021,532 $1,032,061 101% $10,529

Total Corporate Operating Budget $1,726,234 $1,696,881 98% ($29,353)

Investment Budget 1 $1,089 $332 30% ($757)

Grand Total $1,727,323 $1,697,213 98% ($30,110)

(Dollars in Thousands)

Executive Summary of 2010 Budget and Expenditures

by Major Expense Category

Through June 30, 2010
15

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 $283,292 $275,538 97% ($7,754)

 Information Technology 121,227 95,847 79% (25,380)

 Administration 136,891 136,411 100% (480)

 Resolutions & Receiverships 937,274 947,406 101% 10,132

 Legal 113,597 120,989 107% 7,392

 Insurance & Research 19,087 19,886 104% 799

 Finance 18,579 15,879 85% (2,700)

 Inspector General 18,349 15,493 84% (2,856)

 Corporate University - CEP 14,825 13,613 92% (1,212)

 Corporate University - Corp 9,947 9,072 91% (875)

 Executive Support 1 16,610 17,020 102% 410

 Executive Offices 2 4,550 3,281 72% (1,269)

 CIO Council 32,006 26,446 83% (5,560)

 Total, Corporate Operating Budget $1,726,234 $1,696,881 98% ($29,353)

 Investment Budget 3

 Information Technology $1,001 $118 12% ($883)

 Resolutions & Receiverships 63 189 300% 126

 Insurance & Research 25 25 100% 0

 Total, Investment Budget 3 $1,089 $332 30% ($757)

 Combined Division/Office Budgets

 Supervision & Consumer Protection $283,292 $275,538 97% ($7,754)

 Information Technology 122,228 95,965 79% (26,263)

 Administration 136,891 136,411 100% (480)

 Resolutions & Receiverships 937,337 947,595 101% 10,258

 Legal 113,597 120,989 107% 7,392

 Insurance & Research 19,112 19,911 104% 799

 Finance 18,579 15,879 85% (2,700)

 Inspector General 18,349 15,493 84% (2,856)

 Corporate University - CEP 14,825 13,613 92% (1,212)

 Corporate University - Corp 9,947 9,072 91% (875)

 Executive Support 1 16,610 17,020 102% 410

 Executive Offices 2 4,550 3,281 72% (1,269)

 CIO Council 32,006 26,446 83% (5,560)

 Grand Total $1,727,323 $1,697,213 98% ($30,110)

(Dollars in Thousands)

Executive Summary of 2010 Budget and Expenditures

by Budget Component and Division/Office

Through June 30, 2010