FDIC 

Federal Deposit Insurance Corporation 

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

May 8, 2013 

MEMORANDUM TO: The Board of Directors 

FROM: Steven 0. App 4?ZC 0. 

Deputy to the Chairman and 

Chief Financial Officer 

Craig R. Jarvill 

Director, Division of Finance 

SUBJECT: First Quarter 2013 CFO Report to the Board 

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

March 31, 2013. 

Executive Summary 

During the first quarter of 2013, the Deposit Insurance Fund (DIE) balance increased by $2.7 

billion, from $33.0 billion to $35.7 billion. This quarterly increase was primarily due to $2.6 

billion of assessment revenue and a negative $499 million provision for insurance losses, 

partially offset by $436 million of operating expenses. The DIE balance has increased by 

$31.8 billion since the fund became positive on June 30, 2011 after seven consecutive 

quarters of negative balances. 

 During the first quarter of 2013, the FDIC was named receiver for four failed institutions. The 

combined assets at inception for these institutions totaled approximately $463 million with a 

total estimated loss of $116 million. The corporate cash outlay during the first quarter for 

these failures was approximately $155 million. This is the lowest quarterly failure count since 

the second quarter of 2008, when two institutions failed. 

 Through March 31, 2013, overall Corporate Operating Budget expenditures were below 

budget by 14 percent ($91 million). This variance was primarily the result of lower-thanbudgeted spending for contractual services and operations at the site of failed financial 

institutions in the Receivership Funding component. 
I. Corporate Fund Financial Results (See pages 5 - 6 for detailed data and charts.) 

Deposit Insurance Fund 

 For the three months ending March 31, 2013, the DIF’s comprehensive income totaled $2.8 

billion compared to comprehensive income of $3.5 billion for the same period last year. This 

$700 million decrease was mostly due to a $1.0 billion decrease in assessment revenue and a 

$124 million lower contribution to year-to-date comprehensive income from unrealized 

gains/losses on trust preferred securities, partially offset by a $511 million decrease in 

provision for insurance losses. 

 The provision for insurance losses was negative $499 million for the first quarter of 2013, 

compared to $12 million for the same period in 2012. The negative provision for 2013 resulted 

from a $434 million decrease in the contingent loss reserve due to lower estimated losses from 

anticipated future failures and a $66 million reduction in the estimated losses for institutions 

that have failed in the current and prior years. 

Assessments 

 During the first quarter of 2013, the DIF recognized a total of $2.6 billion in assessment 

revenue. The estimate for first quarter 2013 insurance coverage totaled $2.8 billion$1.5 

billion was recognized for those institutions that prepaid assessments and $1.3 billion was 

recorded as a receivable from those institutions that did not have prepaid assessments 

available for offset. Additionally, the DIF recognized a net adjustment of $126 million that 

reduced assessment revenue. This adjustment consisted of $11 million in prior period 

amendments and a $115 million decrease to the estimate for fourth quarter 2012 insurance 

coverage recorded at December 31, 2012. The latter adjustment was due to lower average 

assessment rates. 

 On March 29, 2013, the FDIC collected $951 million in DIF assessments for fourth quarter 

2012 insurance coverage. At March 31, 2013, the "Unearned revenue - prepaid 

assessments" line item on the Balance Sheet was zero; the "Refunds of prepaid assessments" 

line item reflects the estimated $5.8 billion that will be returned to the institutions in June 2013. 

Quarterly DIF Assessment Revenue 

(Distributed by Approximate Assessment Base Size) 

$4.0 

$3.7 

$3.5 ---- 

20% 

3.0 $2.9 $2..8 $19 

$2.5 20% 21% 20% 

20% 

- $2.0 if- 22% 21% 22% 

22% 

$1.0 60% 

I 57% 58% 58% 58% 

’ 

::: 

Mar ’12 Jun ’12 Sep ’12 Dec ’12 Mar ’13 

 Institutions over $1008 Institutions between $10-S10013  Institutions under $108 

2 
II. Investment Results (See pages 7 - 8 for detailed data and charts.) 

Total DIF Portfolio Liquidity 

 On March 31, 2013, the total liquidity (also total market value) of the DIF investment portfolio 

stood at $38.8 billion, higher than its December 31, 2012, balance of $38.2 billion. Over the 

course of the quarter, receivership dividends, assessments, and other inflows were greater 

than outflows for funding initial resolution payments, operating expenses, and other payments 

related to receivership activities. 

 On March 31, 2013, the DIF investment portfolio’s yield was 0.38 percent, up two basis points 

from its December 31, 2012, yield of 0.36 percent. During the quarter, newly purchased 

Treasury securities generally had somewhat higher yields than maturing securities, and the 

overnight investment rate was higher on March 31, 2013, than at December 31, 2012, hence 

the modest increase in portfolio yield. 

 In accordance with the approved first quarter 2013 DIF portfolio investment strategy, staff 

purchased a total of ten short-maturity conventional Treasury securities on three occasions. 

The ten securities had a total par value of $3.8 billion, a weighted average yield of 0.24 

percent, and a weighted average maturity (WAM) of 1.36 years. 

DIF Investment Portfolio Total Yield 

5.00% 

4.50% - 

4.00% 

3.50% - 

3.00% 

2.50% 

2.00% 

1.50% 

1.00% 

0.50% 

0.00% ---.- 

Year-end 2008 2009 2010 2011 2012 Mar-13 

Ill Budget Results (See pages 9 - 10 for detailed data.) 

Approved Budget Modifications 

The 2013 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other 

officials the authority to make certain modifications to the 2013 Corporate Operating Budget. 

The following budget reallocations were approved during the first quarter in accordance with 

the authority delegated by the Board of Directors. 

In January 2013, various divisions and offices realigned their approved Ongoing Operations or 

Receivership Funding budget authority among expense categories. The most significant 

realignments of the Ongoing Operations budget component occurred within the CIO Council 

and the Division of Administration (DOA). The CIO Council reallocated slightly over $1 million 

from Outside Services - Personnel to the Equipment expense category, largely due to thirdparty hosting of application software and related hardware for several IT projects. DOA 

reallocated about $1 million from Buildings to the Equipment expense category to cover 

3 
additional equipment needs identified after the annual budget was formulated. The Division of 

Information Technology (DIT) reallocated $223 thousand of its Receivership Funding budget 

authority from Equipment to the Outside Services - Other expense category to correctly 

account for telephone usage fees. 

Spending Variances 

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

Significant spending variances for the three months ending March 31, 2013, are defined as those that 

either (1) exceed the YTD budget by $3 million and represent more than five 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 $5 million and represents more than ten percent 

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

Significant Spending Variances by Major Expense Category 

Ongoing Operations 

There was a significant spending variance in only one major expense category during the first quarter 

in the Ongoing Operations component of the 2013 Corporate Operating Budget: 

 Travel expenditures were $5 million, or 21 percent, less than budgeted. The Division of Risk 

Management Supervision (RMS) spent $3 million less than budgeted primarily due to a larger 

than expected number of field examiner vacancies and lower-than-projected travel costs per 

on-board examiner. 

Receivership Funding 

The Receivership Funding component of the 2013 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 two of the seven major expense categories during the 

first quarter in the Receivership Funding component of the 2013 Corporate Operating Budget: 

 Outside Services-Personnel ($46 million, or 32 percent, less than budgeted). 

 Other Expenses ($7 million, or 64 percent, less than budgeted). 

The variance in the Outside Services - Personnel expense category was attributable to lower-thanbudgeted contractual costs during the first quarter of 2013 due to fewer than projected bank closings, 

less costly resolutions and lower than anticipated asset management and marketing costs. The 

variance in the Other Expenses category was attributable to fewer bank failures and reduced time 

required to transfer failed institutions’ banking operations and dispose of failed bank assets. 

Significant Spending Variances by Division/Office’ 

Only one organization had a significant spending variance through the end of the first quarter: 

 DRR spent $58 million, or 30 percent, less than budgeted, mostly due to less-than-budgeted 

spending for resolution and receivership management activities for the reasons noted above. 

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

4 
FDIC CFO REPORT TO THE BOARD - First Quarter 2013 

’Cash and cash equivalents $ 1,052 $ 3,100 $ (2,048) $ 741 $ 311 

Cash and investments - restricted - systemic risk - - - 4,723 (4,723) 

Investment in U.S. Treasury obligations, net 37,474 34,869 2,605 33,937 3,537 

Trust preferred securities 2,256 2,264 (8) 2,329 (73) 

Assessments receivable, net 1,295 1,007 288 318 977 

Receivables and other assets - systemic risk - - - 1,974 (1,974) 

Interest receivable on investments and other assets, net 470 433 37 505 (35) 

Receivables from resolutions, net 22,549 23,120 (571) 28,963 (6,414) 

Property and equipment, net 381 393 (12) 389 (8) 

Total Assets $ 65,477 $ 65,186 $ 291 $ 73,879 $ (8,402) 

Accounts payable and other liabilities 319 350 (31) 364 (45) 

Unearned revenue - prepaid assessments - 1,576 (1,576) 14,002 (14,002) 

Refunds of prepaid assessments 5,829 5,675 154 - 5,829 

Liabilities due to resolutions 20,696 21,174 (478) 32,000 (11,304) 

Deferred revenue - systemic risk - - - 6,698 (6,698) 

Postretirement benefit liability 224 224 - 188 36 

Contingent liability for anticipated failures 2,659 3,221 (562) 5,330 (2,671) 

Contingent liability for litigation losses 8 8 - 5 3 

Total Liabilities $ 29,735 $ 32,228 $ (2,493) $ 58,587 $ (28,852) 

FYI: Unrealized gain (loss) on U.S. Treasury investments, net 72 34 1 38 92 (20) 

FYI: Unrealized gain (loss) on trust preferred securities 294 302 (8) 367 (73) 

FYI: Unrealized postretirement benefit (loss) gain (61) (61) - (34) (27) 

Fund Balance $ 35,742 $ 32,958 $ 2 1 784 $ 15,292 $ 20,450 

Income Statement Trend Schedule 

Th ru 

$ in Billions 2008 2009 2010 2011 2012 3/31/13 Cumulative 

Assessments 3.0 17.7 13.6 13.5 12.4 2.6 62.8 

Earnings on UST Invmts 4.7 0 0.1 0.1 0.1 0.03 5.1 

Guarantee-Related 

Revenue: 

Citi-term fee/earnings 0 2.2 0.5 0.1 0.2 0.04 3.0 

TLGP (net of losses) 0 0 0 2.6 - 5.9 0 8.5 

Other 0 1.0 0.04 0.1 0.1 0.01 1.2 

Operating Expenses 1.0 1.3 1.6 1.6 1.8 0.4 7.7 

Provision for Ins Losses 41.8 57.7 (0.8) (4.4) (4.2) (0.5) 89.6 

Comprehensive Income (35.1) (38.1) 13.4 19.2 21.1 2.8 (16.7) 

Fund Balance 17.3 (20.9) (7.4) 11.8 33.0 35.7 

Since year-end 2007, the DIE’s balance has declined from $52.4 billion to $35.7 billion, a total drop of $16.7 

billion. Over this time period, DIE has absorbed $89.5 billion in estimated losses for both actual and anticipated 

bank failures ($86.8 billion and $2.7 billion, respectively). 

5 
’Assessments $ 2,645 $ 12,397 $ 3,694 $ (i3O49) 

Systemic risk revenue - (161) 10 (10) 

Interest on U.S. Treasury obligations (9) 159 20 (29) 

Other revenue 56 6,127 64 (8) 

Total Revenue $ 2,692 $ 18,522 $ 3,788 $ (1,096) 

Operating expenses 436 1,778 460 (24) 

Systemic risk expenses - (161) 10 (10) 

Provision for insurance losses (499) (4,223) 12 (511) 

Insurance and other expenses 1 7 1 - 

Total Expenses and Losses $ (62) $ (2,599) $ 483 $ (545) 

Net Income (Loss) 2,754 21,121 3,305 (551) 

Unrealized gain (loss) on U.S. Treasury investments, net 38 (14) 44 (6) 

Unrealized gain (loss) on trust preferred securities (8) 51 116 (124) 

Unrealized postretirement benefit gain (loss) - (27) - - 

Comprehensive Income (Loss) 

In $ 2,784 $ 21,131 $ 3,465 $ (681) 

Cash and ancash equivalents $ 3,594 I $ 3,594 3,579$ 151 

Accumulated deficit (124,459) (124,460) (124,281) (178)1 

Total resolution equity 3,598 3,595 3 I 

Total revenue 

Operating expenses 

1 - 1 - 

A(179) 

1 

Goodwill litigation expenses 

Recoveryoftaxbenefits 

- - 

NetlncomeLoss $ 1 

’ $inmillions 

Mar-13 Mar-12 Change Mar-13 Mar-12 Change Mar-13 Mar-12 Change 

Total Receiverships 467 442 25 3 1 5 (2) - 470 447 23 1 

AssetsinLiquidation $15,498 $21,015 $(5,517) $6 $20 $(14)1 $15,504 $21,035 $(5,531) 

YTD Collections _ I $ 2,367 _ $ 2,597 _ Is 

_ 

(230)1 $ 2 _ $ 4 _ $ (2) 1 $ 2,369 _ $ 2,601 _ $ (232) 

YTD Dividend/Other Pyrnts- Cash, l$768!$1,337 1$ (569)1 $- _L$_- ___$ -$ 768 _$1,337 _$(569)1 

Bank Failures - Average Total Assets and Average Estimated DIF Losses Since 2008, estimated 

(as of March 31, 2013) losses averaged 23% 

$3500 .. of total assets. 

32°o 

___________________________________________________________________ 2008 excludes 

Washington Mutual

Bank with total assets 

of $299 billion and 

$3,000 

24% 23% 25% 

30% 

’p 

::.:: 

25% 

C _____________________________________________________________ zero estimated losses 

to the DIF. 20% 

$i,soo 

____________ 

1,223 lndyMac Bank 15% 

$1,000 JR98 accounted for twothirds ($13.2B) of total 10% 

$500 398 I 2008 failure estimated 

247 

1131 

231 

___ 

116 losses of $19.9B. 

$0 _ I_ 95 

54 29 I ExcludingIndyMac 

_ I_ Bank, average total I 0% 

2008 2009 2010 2011 2012 2013 ’rrD assets and estimated 

losses in 2008 were 

Avg. Total Assets I $1,504 million and 

Avg. Estimated Losses L I $290 million (19%), 

_ 

-k--Avg_ Est. Losses asa%ofAvg_ Assets I respectively. 
Deposit Insurance Fund Portfolio 

(Dollar Values in Millions) 

3/31/13 

iii ii!1 I’ 

12/31/12 Change 

Par Value $37,604 $37,086 $518 

Amortized Cost $38,486 $37,927 $559 

Total Market Value (including accrued interest) $38,839 $38,249 $590 

Primary Reserve 1 $38,839 $38,249 $590 

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

Yield-to-Maturity 2 0.38% 0.36% 0.02% 

Weighted Average Maturity (in years) 0.58 0.68 (0.10) 

Effective Duration (in years) 

Total Portfolio 0.54 0.64 (0.10) 

Available-for-Sale Securities 0.59 0.70 (0.11) 

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

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

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

For each TIPS, an estimated 80 percent "yield beta" factor is applied to its real yield duration to arrive at an estimated effective 

duration. 

In early August 2008, management reclassified all of the DIE 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. 

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

purposes. 

3/31/13 12/31/12 Change 

Book Value 6 $14,940 $14,702 $238 

Effective Annual Yield 0.12% 0.12% 0% 

Weighted Average Maturity (in days) 36 20 16 

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

7 
InvestmentiStrategies 

Deposit Insurance Fund Strategy for the 1st Quarter 2013 

Purchase up to $4 billion (par value) of available-for-sale (AFS) securities with maturity dates between 

June 30, 2013, and June 30, 2016, subject to the following additional restrictions: no more than $3 billion 

(par value) of such securities shall have maturity dates beyond June 30,2014; no more than $2 billion 

(par value) of such securities shall have maturity dates beyond June 30, 2015; and no more than $2 

billion (adjusted par value) of such securities shall consist of Treasury Inflation-Protected Securities 

(TIPS). 

Strategy Changes for 2nd Quarter 2013 

Purchase up to $6 billion (par value) of available-for-sale (AFS) securities with matuhty dates between 

September 30, 2013, and December 31, 2016, subject to the following additional restrictions: no more 

than $4 billion (par value) of such securities shall have maturity dates beyond December 31, 2014; no 

more than $3 billion (par value) of such securities shall have maturity dates beyond December 31, 2015; 

and no more than $3 billion (adjusted par value) of such securities shall consist of Treasury InflationProtected Securities (TIPS). 

National Liquidation Fund Strategy for 1st Quarter 2013 

Maintain an overnight deposit target floor balance within a range of $100 million to $300 million. 

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

Strategy Changes for 2nd Quarter 2013 

No strategy changes for the second quarter of 2013. 
Executive Summary of 2013 Budget and Expenditures 

by Major Expense Category 

Through March 31, 2013 

(Dollars in Thousands) 

Annual YTD YTD ’ % of YTD ’ YTD 

Major Expense Category Budget Budget Expenditures Budget Used Variance 

Corporate Operating Budget 

Ongoing Operations 

Salaries & Compensation $1,184,356 $288,081 $276,567 96% ($11,514) 

Outside Services - Personnel 285,416 58,711 52,860 90% (5,851) 

Travel 109,247 26,381 20,934 79% (5,447) 

Buildings 90,834 21,753 18,969 87% (2,784) 

Equipment 78,112 11,433 8,046 70% (3,387) 

Outside Services -Other 18,029 4,272 2,980 70% (1,292) 

Other Expenses 16,645 3,605 3,281 91% (324) 

Total Ongoing Operations $1,782,639 $414,236 $383,637 93% ($30,599) 

Receivership Funding 

Salaries & Compensation $188,858 $47,393 $43,037 91% ($4,356) 

Outside Services - Personnel 592,500 143,641 97,459 68% (46,181) 

Travel 22,067 5,516 2,666 48% (2,850) 

Buildings 37,430 9,934 9,791 99% (143) 

Equipment 10,687 955 679 71% (276) 

Outside Services - Other 6,386 1,595 1,245 78% (350) 

Other Expenses 42,072 10,518 3,820 36% (6,698) 

Total Receivership Funding $900,000 $219,552 $158,697 72% ($60,855) 

Total Corporate Operating Budget $2,682,639 $633,788 $542,334 86% ($91,454) 

Investment Budget $26,440 $4,002 $5,565 139% $1,563 

Grand Total $2,709,079 $637,790 $547,899 86% ($89,891) 

1) Budgets for investment projects are approved on a multi-year basis: the year-to-date budget amount reflects the 2013 spending estimates 

for approved projects. 
Executive Summary of 2013 Budget and Expenditures 

by Budget Component and Division/Office 

Through March 31, 2013 

(Dollars in Thousands) 

Annual YTD YTD % of YTD YTD 

Division/Office Budget Budget Expenditures Budget Used Variance 

Corporate Operating Budget 

Resolutions & Receiverships $780,465 $194,887 $136,835 70% ($58,053) 

Risk Management Supervision 533,995 132,080 124,786 94% (7,294) 

Legal 299,582 73,063 68,378 94% (4,685) 

Administration 267,104 62,783 57,152 91% (5,631) 

Information Technology 262,459 49,088 47,873 98% (1,215) 

Depositor & Consumer Protection 168,548 42,248 38,864 92% (3,384) 

CIO Council 71,582 16,610 13,957 84% (2,652) 

Complex Financial Institutions 57,121 13,999 11,109 79% (2,890) 

Insurance & Research 45,538 10,458 9,633 92% (825) 

Finance 41,731 9,897 9,256 94% (641) 

Inspector General 33,722 8,345 7,035 84% (1,310) 

Executive Support 1 31,075 7,244 6,019 83% (1,225) 

Corporate University - Corporate 188,858 5,065 4,877 96% (188) 

Corporate University - CEP 19,255 4,240 3,654 86% (586) 

Executive Offices 2 10,657 3,781 2,906 77% (875) 

Government Litigation 1,000 0 0 NIA 0 

Corporate Unassigned 37,632 0 0 FilA 0 

Total, Corporate Operating Budget $2,682,639 $633,788 $542,334 86% ($91,454) 

Investment Budget 

Information Technology $16,876 $3,633 $3,875 107% $242 

Administration 8,723 175 1,582 904% 1,407 

Corporate University - Corporate 200 50 74 148% 24 

Risk Management Supervision 373 132 33 25% (99) 

Depositor & Consumer Protection 236 0 1 N/A 1 

CIO Council 32 12 0 0% (12) 

Total, Investment Budget $26,440 $4,002 $5,565 139% $1,563 

Combined Division/Office Budgets 

Resolutions & Receiverships $780,497 $194,899 $136,835 70% ($58,064) 

Risk Management Supervision 534,368 132,212 124,819 94% (7,393) 

Legal 299,582 73,063 68,378 94% (4,685) 

Administration 275,827 62,958 58,734 93% (4,224) 

Information Technology 279,335 52,721 51,748 98% (973) 

Depositor & Consumer Protection 168,784 42,248 38,864 92% (3,384) 

CIO Council 71,582 16,610 13,957 84% (2,652) 

Complex Financial Institutions 57,121 13,999 11,109 79% (2,890) 

Insurance & Research 45,538 10,458 9,633 92% (825) 

Finance 41,731 9,897 9,257 94% (641) 

Inspector General 33,722 8,345 7,035 84% (1,310) 

Executive Support 1 31,075 7,244 6,019 83% (1,225) 

Corporate University - Corporate 21,373 5,115 4,951 97% (164) 

Corporate University - CEP 19,255 4,240 3,654 86% (586) 

Executive Offices 2 10,657 3,781 2,906 77% (875) 

Government Litigation 1,000 0 0 N/A 0 

Corporate Unassigned 37,632 0 0 N/A 0 

Grand Total $2,709,079 $637,790 $547,899 86% ($89,891) 

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

Corporate 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 2013 spending estimates 

for approved projects. 

10