Federal Deposit Insurance Corporation

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

 May 29, 2019 

MEMORANDUM TO: The Board of Directors

FROM: Steven O. App

Deputy to the Chairman

 and Chief Financial Officer

SUBJECT: First Quarter 2019 CFO Report to the Board 

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

March 31, 2019. 

Executive Summary

• During the first quarter of 2019, the Deposit Insurance Fund (DIF) balance rose to $104.9 billion as

of March 31, 2019, up $2.3 billion from year-end 2018. The quarterly increase was primarily due to

$1.4 billion in assessment revenue and $928 million in interest and unrealized gains on U.S.

Treasury securities.

• The reserve ratio, which is the ratio of the DIF balance to estimated insured deposits, was 1.36

percent as of March 31, 2019. The reserve ratio was unchanged from December 31, 2018, as

strong seasonal growth in insured deposits offset the growth in the DIF.

• There were no financial institution failures during the first quarter of 2019; the last failure occurred

on December 15, 2017.

• Through March 31, 2019, overall FDIC Operating Budget expenditures were below budget by 11

percent ($54.9 million). This variance was primarily the result of vacancies in budgeted positions in

the Ongoing Operations budget component and less than expected spending for contractual

services in both the Ongoing Operations and Receivership Funding components of the budget.
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I. Financial Results (See pages 5 – 6 for detailed data and charts.)

Deposit Insurance Fund 

• For the first quarter of 2019, the DIF’s comprehensive income totaled $2.261 billion, slightly less than

comprehensive income of $2.325 billion for the same period last year. The slight decrease of $64

million was primarily the result of a $1.5 billion decrease in assessment revenue (surcharge

assessments ended effective October 1, 2018), almost fully offset by a $917 million year-over-year

change in unrealized gains/losses on U.S. Treasury securities and a $331 million increase in negative

provision for insurance losses.

• The provision for insurance losses was a negative $396 million for the first quarter of 2019, which

primarily resulted from a $335 million receipt by one receivership from a litigation settlement related to

professional negligence claims. In addition, lower-than-anticipated losses from the early termination of

shared-loss agreements contributed $26 million to the negative provision.

Assessments

• During March, the DIF recognized assessment revenue of $1.4 billion, representing the estimate for

the first quarter 2019 insurance coverage. Additionally, the DIF recognized a $2 million adjustment for

prior period amendments and a $917 thousand adjustment for lower-than-estimated 4th quarter 2018

collections, both of which decreased assessment revenue.

• On March 29, 2019, the FDIC collected $1.4 billion in DIF assessments for fourth quarter 2018

insurance coverage.

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

DIF Investment Portfolio

• On March 31, 2019, the total liquidity (also total market value) of the DIF investment portfolio stood at

$101.1 billion, up $2.1 billion from its December 31, 2018, balance of $99.0 billion. During the quarter,

interest revenue, receivership dividends, and deposit insurance assessment collections far exceeded

resolution-related outlays and operating expenses.

• On March 31, 2019, the DIF investment portfolio’s yield was 2.11 percent, up 6 basis points from its

2.05 percent yield on December 31, 2018. The new Treasury securities purchased during the quarter

generally had higher yields than the maturing securities’ yields, some considerably higher.

• In accordance with the approved first quarter 2019 DIF portfolio investment strategy, staff purchased a

total of 5 short-maturity conventional Treasury securities, all designated as available-for-sale. The 5

securities had a total par value of $4.5 billion, a weighted average yield of 2.56 percent, and a

weighted average maturity of 0.79 years.

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

Approved Budget Modifications

The 2019 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the 

authority to make certain modifications to the 2019 FDIC Operating Budget. The following budget 

reallocations were approved during the first quarter in accordance with the authority delegated by the 

Board of Directors.
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• In January, the Chief Information Officer (CIO) Council, Corporate University, the Legal Division, the 

Division of Information Technology (DIT), and the Office of Chief Information Security Officer (OCISO)

reallocated budget authority among major expense categories within their Ongoing Operations 

budgets. 

• In March, following establishment of the FDiTech Lab, the CFO approved the reallocation of $792,752 

from the Corporate Unassigned contingency reserve to create an initial 2019 Ongoing Operations 

budget for the new organization. The initial budget consists of $760,052 for Salaries and 

Compensation, $30,000 for Travel, and $2,700 for Other Expenses. This change was not reflected in 

budget totals until April.

Following these first quarter budget modifications (including the FDiTech Lab budget implemented in April), 

the balances in the Corporate Unassigned contingency reserves were $11,707,248 in the Ongoing 

Operations budget component and $8,994,445 in the Receivership Funding budget component.

Approved Staffing Modifications

The 2019 Budget Resolution delegated to the CFO the authority to modify approved 2019 staffing 

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

2019 FDIC Operating Budget. 

• In March, the CFO approved a decrease of four authorized permanent Supervisory Examiner (SE) 

positions (revised in April to a decrease of five authorized permanent SE positions) and an increase of 

one authorized non-permanent SE position in RMS’s 2019 staffing authorization, based on an updated 

analysis of field office supervisory spans of control.

Also in March, the CFO approved an initial 2019 staffing authorization of two new authorized permanent 

positions for the FDiTech Lab. The new organization will be staffed this year primarily through the 

temporary detail of FDIC employees to the FDiTech Lab to work on specific projects.

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, 2019, are defined as those that 

either (1) exceed the YTD budget by more than $3 million and represent more than five percent of 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 $15 million and represents more than fifteen 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 during the first quarter in one major expense category of the 

Ongoing Operations budget component.

Spending in the Equipment major expense category exceeded the YTD budget by $3.1 million, or 13 

percent. The organizations reporting to the CIO (DIT, CIO Council, and OCISO) accounted for most of the 

variance, with a combined overspending of $2.7 million, or 21 percent of their total YTD budgets for 

Equipment. This variance was attributable principally to the delayed acquisition of security equipment for 

the Backup Data Center ($876,525 for purchases that were originally expected to occur in 2018), 

erroneous coding to the Equipment category ($800,823) and an unbudgeted subscription charge 

($993,000). The accounting errors were caused by two year-end accruals that were incorrectly coded to 

the Equipment expense category (these errors have now been corrected).
4

Receivership Funding

The Receivership Funding component of the 2019 FDIC 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 and other expenses required to ensure 

readiness without regard to whether failures occur. 

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

Receivership Funding budget component.

Outside Services – Personnel expenses during the first quarter were $17.4 million, or 47 percent, less than 

budgeted. This variance was mostly attributable to under-spending by the Division of Resolutions and 

Receiverships (DRR) of $11.1 million, or 51 percent, of its YTD budget for contractual support for preclosing, closing, and post-closing receivership operations; accounting services; asset marketing and 

management; and resolutions-related activities. This was largely attributable to the fact that there were no 

bank closings in the first quarter. In addition, the Legal Division spent $6.1 million, or 43 percent, less than 

budgeted because it did not accrue for unpaid invoices for outside counsel expenses.

Office of Inspector General

There were no significant spending variances during the first quarter in any major expense category of the 

Office of the Inspector General budget component.

Significant Spending Variances by Division/Office1

One organization had a significant spending variance through the end of the first quarter.

DRR spent $15.3 million, or 29 percent, less than budgeted due to the lack of closing activity in the first 

quarter and a one-time credit of $317,000 for an insurance payment for hurricane damage to owned real 

estate. 

 1 Information on division/office variances reflects variances in the FDIC Operating Budget.
Fund Financial Results ($ in Millions) 

5

Balance Sheet

Quarterly Year-Over-Year

Mar-19 Dec-18 Change Mar-18 Change

Cash and cash equivalents $ 7,062 $ 5,774 $ 1,288 $ 3,119 $ 3,943

Investment in U.S. Treasury securities 93,507 92,708 799 84,831 8,676

Assessments receivable 1,372 1,376 (4) 2,783 (1,411)

Interest receivable on investments and other assets, net 567 550 17 581 (14)

Receivables from resolutions, net 3,187 3,058 129 5,194 (2,007)

Property and equipment, net 324 329 (5) 325 (1)

Total Assets $ 106,019 $ 103,795 $ 2,224 $ 96,833 $ 9,186

Accounts payable and other liabilities 211 198 13 200 11

Liabilities due to resolutions 554 605 (51) 1,154 (600)

Postretirement benefit liability 236 236 (0) 259 (23)

Contingent liability for anticipated failures 115 114 1 113 2

Contingent liability for guarantee payments and litigation losses 33 33 (0) 35 (2)

Total Liabilities $ 1,149 $ 1,186 $ (37) $ 1,761 $ (612)

FYI: Unrealized gain (loss) on U.S. Treasury securities, net (194) (615) 421 (975) 781

FYI: Unrealized postretirement benefit (loss) gain (14) (14) 0 (46) 32

Fund Balance $ 104,870 $ 102,609 $ 2,261 $ 95,072 $ 9,798

Deposit Insurance Fund

Inversion Point

The Treasury yield curve is now 

inverted reflecting concerns 

about economic growth both in 

the U.S. and internationally. The 

short end of the curve is 

anchored due to the current Fed 

Funds Target which is set to 

2.25-2.50%. The inversion 

which starts in the 6-month 

sector became stronger in 

February and reflects growing 

concerns for a mild recession in 

2020 and market speculation 

that there will be no Fed rate 

hikes and even the possibility of 

a cut in the next year. At the 

same time, inflation remains 

muted which is keeping yields 

for the longer maturity sectors 

down and fairly flat.
6

Fund Financial Results - continued ($ in Millions) 

Receivership Selected Statistics March 2019 vs. March 2018

Income Statement (year-to-date)

Year-Over-Year

Mar-19 Dec-18 Mar-18 Change

Assessments $ 1,369 $ 9,527 $ 2,850 $ (1,481)

Interest on U.S. Treasury securities 507 1,633 338 169

Other revenue 2 11 1 1

Total Revenue $ 1,878 $ 11,171 $ 3,189 $ (1,311)

Operating expenses 434 1,765 433 1

Provision for insurance losses (396) (563) (65) (331)

Insurance and other expenses 0 3 0 0

Total Expenses and Losses $ 38 $ 1,205 $ 368 $ (330)

Net Income 1,840 9,966 2,821 (981)

Unrealized gain (loss) on U.S. Treasury securities, net 421 (136) (496) 917

Unrealized postretirement benefit gain (loss) 0 32 0 0

Comprehensive Income $ 2,261 $ 9,862 $ 2,325 $ (64)

Deposit Insurance Fund

Selected Financial Data

Quarterly Year-Over-Year

Mar-19 Dec-18 Change Mar-18 Change

Cash and cash equivalents $ 907 $ 902 $ 5 $ 889 $ 18

Accumulated deficit (124,582) (124,587) 5 (124,601) 19

Total resolution equity 908 902 6 889 19

Total revenue 5 17 3 2

Operating expenses 0 0 0 0

Losses related to thrift resolutions 0 0 0 0

Net Income (Loss) $ 5 $ 17 $ 3 $ 2

FSLIC Resolution Fund

 ($ in millions) Mar-19 Mar-18 Change Mar-19 Mar-18 Change Mar-19 Mar-18 Change

Total Receiverships 271 317 (46) 0 0 0 271 317 (46)

Assets in Liquidation $ 1,035 $ 2,097 $ (1,062) $ 2 $ 2 $ 0 $ 1,037 $ 2,099 $ (1,062)

YTD Collections $ 400 $ 492 $ (92) $ 0 $ 0 $ 0 $ 400 $ 492 $ (92)

YTD Dividend/Other Pmts - $ 255 $ 847 $ (592) $ 0 $ 0 $ 0 $ 255 $ 847 $ (592)

DIF FRF ALL FUNDS

Since 2013, the coverage 

ratio has steadily risen as a 

result of significant 

increases in interest 

revenue on U.S. Treasury 

securities, nominally offset 

by increases in operating 

expenses.

Increases in interest 

revenue on U.S. Treasury 

securities are due to: 1) 

increases in the federal 

funds target rate, 2) higher 

yields on new long-term 

investments purchased as 

older long-term 

investments matured, and 

3) steady growth in the 

investment portfolio 

balance. 
7

3/31/19 12/31/18 Change

Par Value $101,105 $99,339 $1,766

Amortized Cost $100,856 $99,063 $1,793

Total Market Value (including accrued interest) $101,079 $98,954 $2,125

Primary Reserve 1 $101,079 $98,954 $2,125

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

Yield-to-Maturity 2 2.11% 2.05% 0.06%

Weighted Average Maturity (in years) 1.53 1.75 -0.22

Effective Duration (in years)

 Total Portfolio 1.48 1.69 -0.21

 Available-for-Sale Securities 1.61 1.79 -0.18

 Held-to-Maturity Securities 3 not applicable not applicable not applicable

3/31/19 12/31/18 Change

FRF-FSLIC

 Book Value 4 $862 $857 $5

 Yield-to-Maturity 2.47% 2.42% 0.05%

 Weighted Average Maturity overnight overnight no change

3/31/19 12/31/18 Change

Book Value 5 $3,079 $2,988 $91

Effective Annual Yield 2.50% 2.46% 0.04%

Weighted Average Maturity (in days) 37 51 (14)

Deposit Insurance Fund Portfolio Summary

(Dollar Values in Millions)

1

 Primary Reserve is the total market value (including accrued interest) of overnight investments, all available-for-sale 

securities (AFS), and held-to-maturity (HTM) securities maturing within three months.

National Liquidation Fund (NLF) Investment Portfolio Summary

(Dollar Values in Millions)

3

 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.

5

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

Summary of Other Corporate Investment Portfolios

(Dollar Values in Millions)

4

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

purposes.

2

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

average 2.0% annual increase in the CPI over the remaining life of each TIPS.
8

DEPOSIT INSURANCE FUND

Purchase up to $12 billion (par value) of Treasury securities with maturity dates 

between June 30, 2019, and December 31, 2023, subject to the following additional 

provisions: all newly purchased securities will be designated as AFS; no more than 

$2 billion (adjusted par value) of such securities shall consist of TIPS; and no "soft 

target" minimum investment for newly purchased Treasury securities in the 3- to 5- 

year maturity sectors.

Purchase up to $15 billion (par value) of Treasury securities with maturity dates 

between September 30, 2019, and December 31, 2023, subject to the following 

additional provisions: all newly purchased securities will be designated as AFS; no 

more than $2 billion (adjusted par value) of such securities shall consist of TIPS; 

and no "soft target" minimum investment for newly purchased Treasury securities in 

the 3- to 5- year maturity sectors.

NATIONAL LIQUIDATION FUND

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.

No strategy changes for the second quarter of 2019.

Strategy Changes for the 2nd Quarter 2019

Investment Strategies

Strategy for the 1st Quarter 2019

Strategy for the 1st Quarter 2019

Strategy Changes for the 2nd Quarter 2019
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Annual YTD YTD % of YTD YTD

Major Expense Category Budget Budget Expenditures Budget Used Variance

FDIC Operating Budget 

Ongoing Operations

Salaries & Compensation $1,238,631 $315,479 $292,643 93% ($22,836)

Outside Services - Personnel 257,631 59,255 51,663 87% (7,591)

Travel 85,014 20,924 17,593 84% (3,331)

Buildings 107,516 24,968 23,501 94% (1,467)

Equipment 107,853 24,628 27,715 113% 3,087

Outside Services - Other 15,991 3,607 3,109 86% (498)

Other Expenses 12,828 3,828 3,233 84% (595)

Total Ongoing Operations $1,825,464 $452,689 $419,457 93% (33,232)

Receivership Funding

Salaries & Compensation $3,804 $1,237 $788 64% ($449)

Outside Services - Personnel 156,634 36,791 19,440 53% (17,351)

Travel 3,272 816 272 33% (544)

Buildings 5,488 1,371 298 22% (1,073)

Equipment 1,160 290 110 38% (180)

Outside Services - Other 1,023 255 345 135% 90

Other Expenses 3,619 903 68 8% (835)

Total Receivership Funding $175,000 $41,663 $21,321 51% ($20,342)

Office of Inspector General

Salaries & Compensation $37,013 $9,253 $8,030 87% ($1,223)

Outside Services - Personnel 1,595 399 744 186% 345

Travel 1,218 304 307 101% 3

Buildings 0 0 0 0

Equipment 2,686 672 347 52% (325)

Outside Services - Other 0 0 0 0

Other Expenses 470 118 39 33% (79)

Total Office of Inspector General $42,982 $10,746 $9,467 88% ($1,279)

Total FDIC Operating Budget $2,043,446 $505,098 $450,245 89% ($54,853)

Executive Summary of 2019 Budget and Expenditures

by Budget Component and Major Expense Category

Through March 31, 2019

(Dollars in Thousands)
10

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

Legislative Affairs, and Financial Institution Adjudication. 

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 Chief Information 

Officer.

3) Does not include reallocation of $792,752 for FDiTech Lab, approved in March, but due to coding requirements 

not reflected until April.

Annual YTD YTD % of YTD YTD

Division/Office Budget Budget Expenditures Budget Used Variance

 FDIC Operating Budget 

 Risk Management Supervision $581,235 $148,608 $136,497 92% ($12,111)

 Resolutions & Receiverships 208,689 52,967 37,706 71% (15,261)

 Administration 269,286 71,518 65,693 92% (5,825)

 Legal 192,595 48,801 39,172 80% (9,629)

 Information Technology 245,953 53,300 50,351 94% (2,949)

 Depositor & Consumer Protection 180,935 46,410 42,938 93% (3,472)

 Insurance & Research 56,302 14,039 13,051 93% (988)

 CIO Council 50,970 12,239 13,531 111% 1,292

 Finance 43,127 10,815 9,620 89% (1,195)

 Inspector General 42,982 10,746 9,467 88% (1,279)

 Chief Information Security Officer 51,036 11,615 9,979 86% (1,636)

 Executive Support 1 22,828 5,439 4,642 85% (797)

 Complex Financial Institutions 20,985 5,062 4,499 89% (563)

 Corporate University - Corporate 22,590 5,827 6,371 109% 544

 Corporate University - CEP 19,364 4,548 3,934 86% (614)

 Executive Offices 2 13,075 3,164 2,794 88% (370)

 Corporate Unassigned 3 21,494 0 0 0

 Total FDIC Operating Budget $2,043,446 $505,098 $450,245 89% ($54,853)

Executive Summary of 2019 Budget and Expenditures

by Division/Office

Through March 31, 2019

(Dollars in Thousands)