Federal Deposit Insurance Corporation 

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

 

 November 17, 2009 

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: Third Quarter 2009 CFO Report to the Board 

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

September 30, 2009. 

Executive Summary

• The Deposit Insurance Fund (DIF) balance decreased by $18.6 billion (180 percent) to negative 

$8.2 billion during the third quarter of 2009. The third quarter 2009 decrease was primarily 

due to a $21.7 billion increase in the provision for insurance losses, which was partially offset 

by a $3.0 billion increase in assessment revenue. 

• During the third quarter of 2009, the FDIC was named receiver for 50 failed institutions. The 

combined assets at inception for these institutions totaled approximately $70.2 billion with an 

estimated loss totaling $14.3 billion. The corporate cash outlay during the third quarter for 

these failures was $16.5 billion. Thirty-six receiverships entered into loss-share agreements 

with the acquiring institutions and are expected to pay approximately $7.6 billion to acquirers 

over the length of the agreements. 

• For the nine months ending September 30, 2009, Corporate Operating and Investment Budget 

related expenditures ran 6 percent ($92.1 million) below budget and 3 percent ($0.1 million) 

over budget,1

 respectively. The variance with respect to the Corporate Operating Budget was 

primarily in the Receivership Funding budget component, where spending in all except one 

expense category was below budget through the third quarter. This Ongoing Operations 

Budget surplus is expected to be consumed as expenses increase during the fourth quarter due 

to accelerating resolution activity. Detailed quarterly reports are provided separately to the 

Board by the Capital Investment Review Committee for those information technology projects 

that are included in the Investment Budget. 

 

1

 Budgets for investment projects are approved on a multi-year basis; the year-to-date budget amount reflects the 2009 

spending estimates for approved projects. Both IT projects with investment budget funding remain within their approved 

investment budget amounts. 
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 

• During the third quarter of 2009, the DIF balance declined by $18.6 

billion to negative $8.2 billion largely due to loss provisions for future 

failures. The FDIC projects the DIF will remain negative over the next 

several years because approximately $75.0 billion in failure costs are 

expected to be incurred from the end of the third quarter through the 

end of 2013. 

• To ensure the reserve ratio returns to 1.15 percent within eight years 

and to meet the DIF’s liquidity needs, the FDIC has approved a 

proposal to require all institutions to prepay, on December 31, 2009, 

their estimated risk-based assessments for the fourth quarter of 2009 

and for all of 2010, 2011, and 2012. The FDIC estimates that the 

prepaid assessments will total approximately $45 billion. Although the 

DIF’s liquidity will be significantly enhanced from prepaid assessments 

inflows, they would not initially affect the fund balance. Upon receipt 

of these funds on December 30, 2009, the DIF would account for the 

amount collected as both an asset (cash) and an offsetting liability 

(deferred revenue). Thereafter, the DIF would recognize revenue for 

the regular risk-based assessments quarterly as it is earned. 
3

Trends and Outlook

Financial Results Comments 

II. Investments • The market value (including accrued interest) of the DIF’s cash and 

U.S. Treasury securities totaled $23.4 billion as of September 30, 2009 

($16.3 billion of primary reserve assets and $7.1 billion in systemic 

risk-related portfolios). DIF’s cash and U.S. Treasury securities are 

available to fund resolutions as needed. The DIF investment portfolio’s 

primary reserve (market value including accrued interest) decreased by 

$12.9 billion during the first nine months of 2009, and totaled $16.3 

billion on September 30, 2009. The total market value of the other DIFrelated investment portfolios – the Debt Guarantee Program, the 

Transaction Account Guarantee Program, and the Other Systemic Risk 

Reserves portfolio – increased by $4.7 billion during the first nine 

months of 2009, and totaled $7.1 billion on September 30, 2009. 

• The decline in the DIF’s primary reserve portfolio was largely the result 

of funding 95 failed institution resolutions during the first nine months 

of 2009. However, it should be noted that 56 of these bank and thrift 

failures were resolved as loss-share transactions (in which the acquirers 

purchased substantially all of the failed institutions’ assets and the FDIC 

and the acquirers entered into loss-share agreements) requiring little or 

no initial resolution funding, thus helping to mitigate the decline in the 

DIF’s portfolio value over this period. At quarter-end, the DIF 

investment portfolio yield was 2.3 percent, down 232 basis points from 

its December 31, 2008, yield of 4.59 percent. The yield decline 

stemmed from several factors; in addition to the sale and maturity of 

generally higher yielding securities during the first three quarters, on 

September 29, 2009, the DIF portfolio received $8.7 billion in regular 

and special assessment funds, and consequently the DIF portfolio ended 

the quarter with a very high overnight investment balance of $8.6 

billion earning a low 0.07 percent yield. 

• Conventional Treasury market yields decreased during the third quarter 

of 2009, after increasing substantially during the second quarter of 

2009. Treasury yields remain relatively low from a historical 

perspective, largely reflecting the still comparatively weak U.S. 

economy, the low federal funds target rate, and investors’ modest 

inflationary expectations. During the fourth quarter of 2009, Treasury 

yields are expected to continue to trade within a range around current 

levels, and to gradually rise over the next several quarters, allowing that 

the economic recovery continues to take hold and solidify. 
4

Trends and Outlook

Financial Results Comments 

III. Budget • Approximately $891.6 million was spent in the Ongoing Operations 

component of the 2009 Corporate Operating Budget, which was $10.6 

million (1 percent) below the budget for the nine months ending 

September 30, 2009. Spending in the Outside Services – Personnel 

expense category was $9.1 million greater than the year-to-date budget, 

but this amount was more than offset by the net under spending in other 

expense categories. The Salaries and Compensation expense category 

was $8.9 million below the year-to-date budget. Nevertheless, a minor 

shortfall is projected for the full year in this budget component. To 

address this shortfall, the CFO recommended and the Board approved 

on October 20, 2009, a $16.0 million increase in budget authority for 

Ongoing Operations. 

• Approximately $646.0 million was spent in the Receivership Funding 

component of the 2009 Corporate Operating Budget, which was $81.5 

million (11 percent) below the budget for the nine months ending 

September 30, 2009. The Salaries and Compensation and Travel 

expense categories were each $26.5 million below their year-to-date 

budgets. Together these two variances represented 65 percent of the 

total Receivership Funding variance. Approximately $337.8 million 

was spent during the third quarter, which represented a 72 percent 

increase over spending during the second quarter. If the trend of 

monthly spending increases continues during the fourth quarter, 

spending will substantially exceed the current $1 billion budget for this 

component before year-end. 

I. Corporate Fund Financial Results (See pages 12 - 13 for detailed data and charts.) 

Deposit Insurance Fund (DIF) 

• For the nine months ending September 30, 2009, DIF’s comprehensive loss totaled $25.5 

billion compared with a comprehensive loss of $17.8 billion for the same period last year. This 

$7.7 billion increase in the year-over-year loss was primarily due to a $17.3 billion increase in 

the provision for insurance losses and a $3.4 billion decrease in the unrealized gain on 

available-for-sale securities (AFS) partially offset by a $12.7 billion increase in assessment 

revenue and a $681.3 million increase in other revenue (largely attributable to the collection of 

debt issuance surcharges under the TLGP). 

• Assessment revenue was $14.7 billion as of September 30, 2009, compared with only $2.0 

billion for the comparable nine-month period in 2008. This $12.7 billion increase was due to 

the collection of a $5.5 billion special assessment on September 30, 2009 and significantly 

higher regular assessment revenue. With respect to regular assessment activity, DIF earned 

approximately $5.8 billion for first and second quarter 2009 insurance coverage and recognized 

a $3.4 billion receivable for third quarter insurance coverage (which will be collected on 

December 31, 2009). Major factors contributing to this increase in regular assessment revenue 

year-over-year include changes to the risk-based assessment regulations, ratings downgrades of 
5

many institutions (which pushed them into higher assessment rate categories), the decline of the 

one-time assessment credit made available with the enactment of deposit insurance reform, and 

a larger assessment base. 

• The provision for insurance losses was $39.9 billion for the nine months ending September 30, 

2009, compared with $22.7 billion for the same period in 2008. The total provision consists 

mainly of the loss provisions for future failures (approximately $28.7 billion) and estimated 

losses on the 95 failures that occurred in first nine months of 2009 (approximately $11.2 

billion). The loss provision of $11.2 billion represents the difference between the estimated 

losses recorded at resolution for the 95 failures and their contingent loss reserve at December 

31, 2008. 

II. Investments

Investment Results (See pages 14 - 15 for detailed data and charts.)

DIF Investment Portfolio 

• The amortized cost (book value) of the DIF investment portfolio decreased by $10.6 billion 

during the first nine months of 2009, or by 39.9 percent, from $26.6 billion on December 31, 

2008, to $16.0 billion on September 30, 2009. Similarly, the DIF portfolio’s market value 

dropped by approximately $12.6 billion, or by 43.8 percent, from $28.8 billion on December 31, 

2008, to $16.2 billion on September 30, 2009. Again, the declines were primarily the result of 

funding failed institution resolutions during the first nine months of 2009. 

• The DIF investment portfolio's total return for the first nine months of 2009 was 0.123 percent, 

approximately 94 basis points higher than its benchmark, the Merrill Lynch 1 - 10 Year U.S. 

Treasury Index (Index), which had a total return of negative return of 0.814 percent during the 

same period. The DIF portfolio’s Treasury Inflation-Protected Securities (TIPS) considerably 

outperformed the Index’s conventional Treasury securities. In addition, because the DIF 

conventional Treasury securities have a lower average duration than the securities held in the 

Index, and given the substantial increase in yields over the course of the year on longer 

duration securities, the DIF’s conventional Treasury securities outperformed those in the Index. 

Finally, the DIF portfolio’s high cash balances helped contribute to the positive relative return. 

• During the third quarter of 2008, to help fund resolution-related cash outlays, staff sold a total 

of 50 AFS conventional Treasury securities on four occasions; the securities had a total book 

value of $8.3 billion, a total market value of $9.0 billion, a weighted average maturity (WAM) 

of 3.38 years, a weighted average modified duration of 3.07 years, and a weighted average 

yield at cost of 4.59 percent. These security sales resulted in a realized gain of $731.7 million. 

On September 30, 2009, the DIF portfolio’s overnight investment balance was $8.6 billion 

(about 53.1 percent of the portfolio by market value), reflecting the receipt of approximately 

$8.7 billion in assessments on September 30, 2009. 

Other Corporate Investment Portfolios 

• During the first nine months of 2009, the book value of the Debt Guarantee Program 

investment portfolio increased substantially, from $2.4 billion on December 31, 2008, to $7.0 
6

billion on September 30, 2009. The funds in this portfolio are from the guarantee fees related 

to the Debt Guarantee Program under the Temporary Liquidity Guarantee Program (TLGP). 

More recently, during the third quarter, the book value of the Debt Guarantee Program 

investment portfolio decreased from $7.5 billion on June 30, 2009, to $7.0 billion on September 

30, 2009. The quarter’s decline in funds was due to the fact that the TLGP fees collected 

during the quarter were less than amount of claims against the TLGP’s Transaction Account 

Guarantee program. Consistent with the approved quarterly investment strategy, all Debt 

Guarantee Program portfolio funds were invested in overnight investments during the quarter. 

• The Other Systemic Risk Reserves investment portfolio was established in 2009 and holds 

$131.1 million as of September 30, 2009. Included in this amount was the receipt of a $50.4 

million payment on July 30, 2009, coincident with the conversion of the former Fixed Rate 

Cumulative Perpetual Preferred Stock, Series G issued by Citigroup Inc. (Citigroup Stock) to 

the new trust preferred security issued by Citigroup Capital XXXIII (Citigroup TruPS). As the 

Citigroup Stock last paid its $60.5 million quarterly dividend on May 15, 2009, the $50.4 

million represents 2.5 months of the regular dividend rate. Subsequently, the DIF will receive 

the full $60.5 million dividend per quarter from the Citigroup TruPS, but with different 

payment dates: October 30, January 30, April 30, and July 30. 

• On September 30, 2009, the FDIC collected about $181.8 million in fees related to the 

Transaction Account Guarantee Program under the TLGP. However, these funds were then 

immediately transferred to the Debt Guarantee Program portfolios for reimbursement of claims 

and expenses, so the recently established Transaction Account Guarantee Program investment 

portfolio had no balance at month-end. 

The Treasury Market 

• During the third quarter of 2009, conventional Treasury yields decreased modestly across all 

sectors of the Treasury yield curve. The three-month Treasury bill (T-Bill) and the six-month 

T-Bill yields declined by 7 basis points and 17 basis points, respectively. The yield on twoyear Treasury note, which also is very sensitive to actual and anticipated changes in the federal 

funds rate, decreased by 16 basis points during the third quarter, generally reflecting consensus 

forecasts for no changes in the federal funds target rate over the near term. Intermediate- to 

longer-maturity Treasury security yields decreased modestly as well; the yield on the five-year 

Treasury note decreased by 25 basis points, while the yield on the ten-year Treasury note 

decreased by 22 basis points. Finally, the thirty-year Treasury bond yield decreased by 28 basis 

points. The conventional Treasury yield curve remained relatively steep during the third 

quarter. On September 30, 2009, the two-year to ten-year yield curve had a 236-basis point 

positive spread (a little lower than the 242-basis point spread at the beginning of the quarter). 

Over the past five years, this spread has averaged 87 basis points. 

Prospective Strategies 

• The fourth quarter 2009 DIF investment strategy calls for placing all net proceeds from deposit 

insurance assessments, maturing securities, Temporary Liquidity Guarantee Program 

surcharges, coupon and other interest payments, and receivership dividends into overnight 

investments and/or short-term T-Bills in anticipation of using such funds for resolution 

activities. 
7

• For the TLGP, all funds will be invested into overnight investments in anticipation of possibly 

using such funds for resolution activities or claims against the TLGP. 

• For the Other Systemic Risk Reserves investment portfolio—which by contrast to the DIF 

portfolio is in investment mode—the fourth quarter 2009 investment strategy calls for 

strategically investing all available funds in overnight investments, and/or in conventional or 

callable Treasury securities with effective maturity dates not to exceed December 31, 2012. 

III. Budget Results (See pages 16 - 17 for detailed data.) 

Approved Budget Modifications 

The 2009 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other 

officials the authority to make certain modifications to the 2009 Corporate Operating Budget. The 

following budget reallocations were made during the third quarter in accordance with the authority 

delegated by the Board of Directors (none of these modifications changed the total 2009 Corporate 

Operating Budget approved by the Board in December 2008): 

• In early September 2009, the CFO approved the reallocation of existing budget authority within 

the Salaries and Compensation expense category of the Ongoing Operations component of the 

2009 Corporate Operating Budget to reflect updated salary and benefit expense estimates for 

nearly all divisions and offices. This reallocation was based upon an analysis of actual 

spending for salaries, bonuses, and fringe benefits through June 30, 2009, and on-board staffing 

as of that date. This reallocation was made effective in August 2009. 

• In early October 2009, the CFO approved the reallocation of $40,625 in budget authority within 

the Ongoing Operations component of the 2009 Corporate Operating Budget from the Outside 

Services – Personnel expense category of the Government Litigation budget to the Division of 

Supervision and Consumer Protection to provide additional budget authority in the Travel 

(+$37,500) and Other Expenses (+$3,125 for Professional Learning Accounts (PLA)) 

categories to support estimated expenses for up to 86 newly-authorized positions. This 

reallocation was made effective in September 2009. 

• In early October 2009, the CFO approved the reallocation of existing budget authority within 

the Salaries and Compensation expense category of the Ongoing Operations component of the 

2009 Corporate Operating Budget to reflect updated salary and benefit expense estimates for 

several divisions and offices. This reallocation was based upon an analysis of current staffing 

levels, spending for salaries, bonuses, and fringe benefits through August 31, 2009, and 

projected staffing levels for the final four months of the year. This reallocation was made 

effective in September 2009. 

• In early October 2009, the CFO approved the reallocation of existing budget authority within 

the Receivership Funding component of the 2009 Corporate Operating Budget from the Legal 

Division (-$43,500,000) and the Corporate Unassigned (-$10,146,457) budgets to the budgets 

of the Division of Resolutions and Receiverships (+$35,021,126), Division of Information 

Technology (+$11,342,366), Division of Administration (+$6,753,580), Office of the 

Ombudsman (+$290,000), Corporate University (+$185,885), Office of Diversity and 

Economic Opportunity (+$37,000), and Office of Enterprise Risk Management (+$16,500). 
8

Budget authority was realigned among all expense categories as follows: Salaries and 

Compensation (-$37,064,173); Outside Services–Personnel (+$20,404,220); Travel 

(-$2,656,328); Buildings (+$23,884,738); Equipment (+$13,932,261); Outside Services – Other 

(-$7,030,378); and Other Expenses (-$11,470,340). This reallocation was the result of the midyear reassessment of actual and projected spending by all divisions and offices for the 

Receivership Funding budget component. This reallocation was made effective in September 

2009. 

 

Approved Staffing Modifications 

The 2009 Budget Resolution delegated to the CFO the authority to modify approved 2009 staffing 

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

approved 2009 Corporate Operating Budget. In accordance with that authority, the CFO approved 

the following staffing modifications during the third quarter after determining that there were 

sufficient unspent funds available for reallocation elsewhere within the approved budget to cover 

the increased 2009 salary and benefits costs associated with any newly-authorized positions: 

• In July 2009, the CFO approved an increase of six authorized non-permanent positions in 

Corporate University (CU) to address increased course administration workload, the need for a 

team leader for the Instructional Systems Designers working on the Division of Resolutions 

and Receiverships (DRR) Commission and Corporate Employee Program (CEP) Certificate 

Programs in Dallas, and additional performance management and oversight workload 

attributable to the decision to hire more first-year Financial Institution Specialists (FISs) in the 

CEP. 

• In August 2009, the CFO approved a reduction of one authorized position in the Office of 

Enterprise Risk Management (OERM) based on a determination that the position was no longer 

essential to OERM operations. 

• In August 2009, the CFO approved an increase of one authorized position in DRR to support 

the Franchise and Asset Marketing area by maintaining resolution files and a database of 

resolutions, asset valuations, loss sharing, and other asset information for reference and 

reporting; participating in closings; coordinating the schedule of investor meetings; and 

compiling and providing investor information. 

• In September 2009, the CFO approved an increase of 32 non-permanent positions in the Legal 

Division. The approved increase included 17 new positions in the Supervision Branch to 

address increased enforcement and related open bank supervision workload, 3 new positions in 

the Corporate Operations Branch to address increased employee and contractor ethics and 

Board support workload, and 12 new positions in the Litigation and Resolutions Branch to 

address the increasing workload associated with the resolution of failed institutions. 

• In September 2009, the CFO approved an increase of up to 86 authorized positions (47 

permanent, 39 non-permanent) in the Division of Supervision and Consumer Protection (DSC). 

This included 41 new supervisory examiner (SE) positions to reduce current supervisory spans 

of control for SEs; 35 new positions in Washington and Regional Offices to address increased 

enforcement and failing bank workload; and up to 10 new capital markets experts and 

large/complex bank specialist positions (the latter were approved contingent upon acceptance 
9

of employment offers by specific individuals on pending rosters; if those offers are not 

accepted, the DSC staffing authorization will be adjusted downward accordingly). 

• In September 2009, the CFO approved an increase of six authorized non-permanent positions in 

the Division of Information Technology. These positions were authorized to address increased 

client support workload for the Dallas and Chicago Regional Offices and the growth in security 

workload associated with the rising number of new employees and contractors. 

Spending Variances 

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

Significant spending variances for the nine months ending September 30, 2009, are defined as 

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

4 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 four major expense categories through the third 

quarter in the Ongoing Operations component of the 2009 Corporate Operating Budget: 

• Outside Services – Personnel expenditures were $9.1 million, or 7 percent, more than budgeted. 

Approximately $3.8 million of this variance was attributable to expenses related to document 

management services provided to DRR in connection with resolution and receivership 

activities. These costs are properly classified as Receivership Funding expenses.2

 In addition, 

about $2.4 million was spent on unbudgeted financial advisory services related to the Legacy 

Loans Program that was being developed to address disruptions in the banking system; 

expenses for systems maintenance and help desk operations costs exceeded budgeted funds by 

$3.7 million; and expenses for security services (guard services, background investigations on 

employees and contractors, and security systems) were greater than anticipated. Partially 

offsetting these items were expenses for the Deposit Insurance Call Center, open bank 

litigation, and other smaller miscellaneous contracts that were lower than year-to-date budgeted 

amounts. 

• Buildings expenditures were $4.3 million, or 9 percent, less than budgeted. The variance was 

due to delays in the relocation and build-outs of the New York Regional Office, the Chicago 

Regional Office, and the Boston Area Office. 

• Outside Services – Other expenditures were $2.9 million, or 17 percent, less than budgeted. 

The variance was largely due to the unpredictable nature and timing of spending for public 

services media. 

 

2

 Appropriate accounting adjustments will be made to both the Ongoing Operations and Receivership Funding budget 

components to address these coding errors. 
10

• Other Expenses expenditures were $2.6 million, or 25 percent, less than budgeted. The 

variance was mostly due to significant underutilization of PLA budgets by employees due to an 

increasing workload. 

Receivership Funding

The Receivership Funding component of the 2009 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. 

There were significant spending variances in six major expense categories through the third quarter 

in the Receivership Funding component of the 2009 Corporate Operating Budget: 

• Salaries & Compensation ($26.5 million, or 32 percent, less than budgeted). 

• Travel ($26.5 million, or 61 percent, less than budgeted). 

• Buildings ($7.5 million, or 12 percent, more than budgeted). 

• Equipment ($6.1 million, or 19 percent, less than budgeted). 

• Outside Services – Other ($8.8 million, or 46 percent, less than budgeted). 

• Other Expenses ($6.5 million, or 19 percent, less than budgeted). 

These variances occurred primarily because bank closings have been less costly to administer than 

anticipated due to the prevalence of structured and whole bank transactions for the first nine 

months of 2009 and because budgeted positions have not been filled as quickly as originally 

projected. These factors led to lower-than-budgeted expenses for salaries and compensation, asset 

management and liquidation contracts, outside legal counsel, travel, and other expenses. In light of 

the expected acceleration in the rate of bank failures for the remainder of the year, Receivership 

Funding expenditures are expected to increase as the number of active receiverships and the 

cumulative inventory of assets under management grows. 

Significant Spending Variances by Division/Office3

Five organizations had significant spending variances through the end of the third quarter: 

• DRR spent $42.5 million, or 6 percent, less than budgeted, mostly due to less-than-budgeted 

spending for resolution and receivership workload activities for the reasons identified above. 

This was slightly offset by unbudgeted contract spending for financial advisory services and 

greater-than-budgeted expenses for travel in connection with employee relocations. 

• The Legal Division spent $15.9 million, or 13 percent, less than budgeted. Approximately 

$11.7 million of this variance was due to under spending of its Receivership Funding budget 

because resolution activities have to-date required substantially less outside legal services than 

anticipated. In addition, the termination of temporary contract support for the Deposit 

 

3

 Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets. 
11

Insurance Call Center and lower-than-anticipated expenses for open bank litigation contributed 

to the Division’s variance in the Ongoing Operations budget component. 

• The Division of Administration spent $15.8 million, or 10 percent, less than budgeted. This 

variance was largely attributable to delays in building out and relocating employees to new 

offices; temporary delays in purchasing Furniture, Fixtures and Equipment for those build-outs; 

and lower-than-expected costs for leasehold improvements at the Dallas Regional Office and 

the temporary West Coast Satellite Office. 

• CU spent $2.2 million, or 7 percent, less than budgeted. This variance included approximately 

$1.4 million less than budgeted for travel due to lower-than-anticipated travel expenses for 

Financial Institution Specialists (FISs) in the Corporate Employee Program. 

• The Office of Inspector General (OIG) spent $2.2 million, or 11 percent, less than budgeted. 

This variance was mostly attributable to vacancies in budgeted positions. 
FDIC CFO REPORT TO THE BOARD – Third Quarter 2009

Fund Financial Results ($ in Millions) 

12

Balance Sheet

Quarterly Year-Over-Year

Sep-09 Jun-09 Change Sep-08 Change

Cash & cash equivalents - unrestricted $ 3,633 8,546 $ 4,913 $ 854 $ 7,692 $ 

Cash & cash equivalents - restricted - systemic risk 7,360 7,141 (219) - 7,141 

Investment in U.S. Treasury obligations, net 18,019 7,590 (10,429) 32,559 (24,969)

Preferred stock - systemic risk 3,025 3,025 - - 3,025 

Assessments receivable, net 3,353 9,048 (5,695) 890 2,463

Receivable, net - systemic risk 1,303 2,085 782 - 2,085 

Interest receivable on investments and other assets, net 302 159 (143) 472 (313)

Receivables from resolutions, net 21,729 30,321 8,592 14,414 15,907 

Property, buildings and other capitalized assets, net 368 376 8 364 12

Total Assets $ 62,596 $ 64,787 $ (2,191) 49,553$ $ 13,043

Accounts payable and other liabilities 199 121 78 2,923 (2,724)

Liabilities due to resolutions ($1,064M-TLGP's liability) 20,106 11,091 9,015 20,106 -

Guarantee obligations - systemic risk 10,316 10,032 284 - 10,316

Postretirement benefit liability 114 114 116 - (2)

Contingent Liabilities: future failures 38,933 31,968 6,965 11,726 27,207

Contingent Liabillties: systemic risk 871 893 (22) 871 -

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

Total Liabilities $ 70,839 $ 54,419 $ 16,420 14,965$ $ 55,874

FYI: Unrealized gain on available-for-sale securities, net 962 192 (770) 1,699 (1,507)

FYI: Unrealized postretirement benefit gain 25 25 20 - 5

FUND BALANCE $ (8,243) 10,368$ (18,611)$ 34,588$ $ (42,831)

Income Statement 

Quarterly Year-Over-Year

Sep-09 Jun-09 Change Sep-08 Change

Assessments earned $ 11,710 14,675 $ 2,965 $ 1,969 $ 12,706 $ 

Systemic risk revenue 327 972 645 - 972

Interest earned on investment securities 628 452 1,795 176 (1,167)

Realized gain on sale of securities 657 1,389 732 473 916

Other revenue 699 377 322 18 681

Total Revenue $ 18,363 $ 13,523 $ 4,840 $ 4,255 $ 14,108

Operating expenses (includes depreciation expense) 564 892 328 743 149

Systemic risk expenses 327 972 645 - 972

Provision for insurance losses 39,946 18,252 21,694 22,676 17,270

Other expenses - 14 14 1 13

Total Expenses & Losses $ 19,143 41,824 $ 22,681 $ 23,420$ $ 18,404

Net (Loss)/Income (23,461) (5,620) (17,841) (19,165) (4,296)

Unrealized gain/(loss) on available-for-sale securities, net (2,058) (1,288) (770) 1,340 (3,398)

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

YTD Comprehensive (Loss)/Income $ (25,519) $ (6,908) $ (18,611) (17,825)$ $ (7,694)

 

Deposit Insurance Fund

Deposit Insurance Fund

Assessment Collections and Cash Outlays for Bank Failures

$8,667

$2,594 $867 $1,088

$619

$16,548

$6,817

$12,251

$4,447

$10,239

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

3rd Qtr. 2008 4th Qtr. 2008 1st Qtr. 2009 2nd Qtr. 2009 3rd Qtr. 2009

$ in Millions

Assessment Collections Cash Outlays

Top 10 DIF Net Receivables from 2008 and 2009 Bank Failures as of September 30, 2009

(The Top 10 equals $19.9 billion, or 66%, of the total $30.3 billion in Net Receivables)

1.1 1.1 0.852 0.797 0.786 0.7

1.6

3.7

4.6

4.7

$0

$1

$2

$3

$4

$5

$6

Corus Bank IndyMac

Bank

Colonial Bank Franklin Bank Silverton

Bank

Irwin Union

B&T

New Frontier

Bank

1st National

Bank of

Nevada

Bank United 1st Bank of

Beverly Hills

$ in Billion
13

Fund Financial Results - continued ($ in Millions ) 

$20.8

Statements of Cash Flows 

Quarterly Year-Over-Year

Sep-09 Jun-09 Change Sep-08 Change

Net (Loss)/Income $ (23,461) $ (5,620) $ (17,841) $ (19,165) $ (4,296)

Amortization of U.S. Treasury obligations (unrestricted) 191 145 46 370 (179)

TIPS Inflation Adjustment 18 38 (20) (313) 331 

Depreciation on property and equipment 50 33 17 41 9 

Provision for insurance losses 39,946 18,252 21,694 22,676 17,270 

Unrealized gain on postretirement benefits - - - - - 

(Gain) on sale of UST obligations (1,389) (658) (731) (473) (916)

Systemic risk expenses - - - - - 

Net change in operating assets and liabilities (22,444) (13,610) (8,834) (22,308) (136)

Net Cash Provided by (Used by) Operating Activities $ (7,089) $ (1,420) $ (5,669) $ (19,172) $ 12,083 

Investments matured and sold 19,391 9,027 10,364 15,784 3,607 

Investments purchased (includes purchase of property and 

equipment) (3) (2) (1) (3) - 

Net Cash Provided by (Used by) Investing Activities $ 19,388 $ 9,025 $ 10,363 $ 15,781 $ 3,607 

Net Increase (Decrease) in Cash and Cash Equivalents 12,299 7,605 4,694 (3,391) 15,690 

Cash and Cash Equivalents at beginning of year 3,388 3,388 - 4,245 (857)

 Unrestricted Cash and Cash Equivalents - Ending 8,546 3,633 4,913 - 8,546 

 Restricted Cash and Cash Equivalents - Ending 7,141 7,360 (219) - 7,141 

Cash and Cash Equivalents - Ending $ 15,687 $ 10,993 $ 4,694 $ 854 $ 14,833 

Selected Financial Data

Quarterly Year-Over-Year

Sep-09 Jun-09 Change Sep-08 Change

Cash and cash equivalents $ 3,459 3,454 $ $ 3,459 (5) $ $ (5)

Accumulated deficit, net (123,959) (123,955) (4) (123,885) (74)

Resolution equity 3,487 3,483 3,470 (4) 13

Total revenue 8 7 60 1 (52)

Operating expenses 3 4 1 4 -

Goodwill/Guarini litigation expenses - 4 4 167 (163)

Net Income/(Loss) $ (11) (7)$ $ (115) (4) $ $ 104

Deposit Insurance Fund

FSLIC Resolution Fund

 Receivership Selected Statistics September 2009 vs. September 2008

Year-to-Date ($ in millions) Sep-09 Sep-08 Change Sep-09 Sep-08 Change Sep-09 Sep-08 Change

Total Receiverships 134 30 104 8 9 (1) 142 39 103 

Assets in Liquidation 38,222$ 9,481$ 28,741$ $ 34 $ 34 $ 38,256 - $ 9,515$ 28,741$ 

Collections $ 6,750 432$ 6,318$ $ 7 5 $ (2) $ 6,755 $ 439$ 6,316$ 

Dividends Paid - Cash $ 4,162 844$ 3,318$ $ 4$ (4) - $ 4,162$ 848$ 3,314$ 

DIF FRF ALL FUNDS

$3.0

$1.4

$0.4 $0.6

$1.3

$2.6

$1.0

$0.4 $0.4 $0.3

$0

$1

$2

$3

$4

Colonial Bank Bank United Downey S&L Guaranty

Bank

IndyMac Fed

Bank

PFF B&T Vineyard

Bank

Irwin Union

B&T

Georgian

Bank

Mutual Bank

$ in Billions

As of September 30, 2009, 10 out of the 59 receiverships from 2008 and 2009, with Loss Sharing agreements comprise 

80% ($11.5 billion) of the $14.3 billion total loss estimate. 
14

9/30/09 12/31/08 Change

Par Value $15,945 $25,496 ($9,551)

Amortized Cost $15,983 $26,580 ($10,597)

Market Value $16,175 $28,830 ($12,655)

Primary Reserve 1 $16,297 $29,227 ($12,930)

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

Year-to-Date Total Return (Portfolio) 0.123% 8.550% not applicable

Year-to-Date Total Return (Benchmark) 2 (0.814%) 11.334% not applicable

Total Return Variance (in basis points) 93.7 (278.4) not applicable

Yield-to-Maturity 3 2.27% 4.59% (2.32%)

Weighted Average Maturity (in years) 0.37 3.34 (2.97)

Effective Duration (in years) 4

 Total Portfolio 0.32 2.85 (2.53)

 Available-for-Sale Securities 0.68 2.94 (2.26)

 Held-to-Maturity Securities 5 not applicable not applicable

9/30/09 12/31/08 Change

Debt Guarantee Program

 Book Value 6 $7,010 $2,425 $4,585

 Yield-to-Maturity 0.07% 0.11% (0.04%)

 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 Reserves

 Book Value 6 $131 $0 $131

 Yield-to-Maturity 0.07% not applicable not applicable

 Weighted Average Maturity overnight not applicable not applicable

FRF-FSLIC

 Book Value 6 $3,313 $3,325 ($12)

 Yield-to-Maturity 0.07% 0.11% (0.04%)

 Weighted Average Maturity overnight overnight no change

9/30/09 12/31/08 Change

Book Value 7 $6,035 $3,447 $2,588

Yield-to-Maturity 0.21% 1.21% (1.00%)

Weighted Average Maturity (in days) 18 23 (5)

3

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

1.1% 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.

7

 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)

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.
15

Invest all proceeds from deposit insurance assessments, Temporary Liquidity Guarantee Program 

surcharges, maturing securities, coupon and other interest payments, and receivership dividends in 

overnight investments and/or in short-term Treasury bills in anticipation of using such funds for 

resolution activities.

No changes in strategy.

Strategically invest all available funds in overnight investments and/or in conventional or callable 

Treasury securities with effective maturity dates not to exceed December 31, 2012. 

Strategy Changes for 4th Quarter 2009

For the Debt Guarantee Program, in anticipation of potentially using these funds on an as-needed 

basis to fund DIF resolutions, all funds will be invested in overnight investments and/or short-term 

Treasury bills. For the Other Systemic Risk Reserves, there are no changes in strategy.

Maintain a target overnight investment balance between $15 million and $25 million.

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

No changes in strategy.

Strategy as of 3rd Quarter 2009

NATIONAL LIQUIDATION FUND

Strategy Changes for 4th Quarter 2009

Investment Strategies

Strategy as of 3rd Quarter 2009

Strategy as of 3rd Quarter 2009

DEPOSIT INSURANCE FUND

Strategy Changes for 4th Quarter 2009

DEBT GUARANTEE PROGRAM 

OTHER SYSTEMIC RISK RESERVES
16

1) Budgets for investment projects are approved on a multi-year basis; the year-to-date budget amount reflects the 2009 spending estimates 

for approved projects. 

YTD YTD % of 

Major Expense Category Budget Expenditures Budget Used Variance

Corporate Operating Budget 

Ongoing Operations

Salaries & Compensation $594,098 $585,162 98% ($8,936)

Outside Services - Personnel 127,733 136,831 107% 9,098

Travel 57,717 58,300 101% 583

Buildings 47,570 43,239 91% (4,331)

Equipment 48,327 46,781 97% (1,546)

Outside Services - Other 16,664 13,758 83% (2,906)

Other Expenses 10,060 7,504 75% (2,556)

Total Ongoing Operations $902,169 $891,575 99% ($10,594)

Receivership Funding

Salaries & Compensation $82,516 $56,038 68% ($26,478)

Outside Services - Personnel 449,656 435,005 97% (14,651)

Travel 43,297 16,840 39% (26,457)

Buildings 65,010 72,534 112% 7,524

Equipment 32,755 26,638 81% (6,117)

Outside Services - Other 19,130 10,323 54% (8,807)

Other Expenses 35,139 28,609 81% (6,530)

Total Receivership Funding $727,503 $645,987 89% ($81,516)

Total Corporate Operating Budget $1,629,672 $1,537,562 94% ($92,110)

Investment Budget 1 $3,983 $4,122 103% $139

Grand Total $1,633,655 $1,541,684 94% ($91,971)

(Dollars in Thousands)

Executive Summary of 2009 Budget and Expenditures

by Major Expense Category

Through September 30, 2009
17

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 2009 spending estimates 

for approved projects. 

YTD YTD % of 

Division/Office B udget Expenditures Budget Used Variance

 Corporate Operating Budget 

 Supervision & Consumer Protection $370,122 $359,976 97% ($10,146)

 Information Technology 188,522 188,574 100% 52

 Administration 162,783 147,032 90% (15,751)

 Resolutions & Receiverships 656,908 614,494 94% (42,414)

 Legal 117,948 102,069 87% (15,879)

 Insurance & Research 26,780 25,952 97% (828)

 Finance 23,371 21,833 93% (1,538)

 Inspector General 20,367 18,201 89% (2,166)

 Corporate University 33,012 30,840 93% (2,172)

 Executive Support 1 19,626 18,210 93% (1,416)

 Executive Offices 2 6,753 6,901 102% 148

 Government Litigation 3,480 3,480 100% 0

 Total Corporate Operating Budget $1,629,672 $1,537,562 94% ($92,110)

 Investment Budget 3

 Information Technology $3,419 $3,651 107% $232

 Resolutions & Receiverships 199 113 57% (86)

 Insurance & Research 365 358 98% (7)

 Total Investment Budget 3 $3,983 $4,122 103% $139

 Combined Division/Office Budgets

 Supervision & Consumer Protection $370,122 $359,976 97% ($10,146)

 Information Technology 191,941 192,225 100% 284

 Administration 162,783 147,032 90% (15,751)

 Resolutions & Receiverships 657,107 614,607 94% (42,500)

 Legal 117,948 102,069 87% (15,879)

 Insurance & Research 27,145 26,310 97% (835)

 Finance 23,371 21,833 93% (1,538)

 Inspector General 20,367 18,201 89% (2,166)

 Corporate University 33,012 30,840 93% (2,172)

 Executive Support 1 19,626 18,210 93% (1,416)

 Executive Offices 2 6,753 6,901 102% 148

 Government Litigation 3,480 3,480 100% 0

 Grand Total $1,633,655 $1,541,684 94% ($91,971)

(Dollars in Thousands)

Executive Summary of 2009 Budget and Expenditures

by Budget Component and Division/Office

Through September 30, 2009