Federal Deposit Insurance Corporation 

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

 

 May 5, 2014 

MEMORANDUM TO: The Board of Directors 

FROM: Steven O. App 

Deputy to the Chairman and 

Chief Financial Officer 

Craig R. Jarvill 

Director, Division of Finance 

SUBJECT: First Quarter 2014 CFO Report to the Board 

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

March 31, 2014. 

Executive Summary 

 During the first quarter of 2014, the DIF balance increased by $1.7 billion, from $47.2 billion to 

$48.9 billion. This quarterly increase was primarily due to $2.4 billion of assessment revenue, 

partially offset by $422 million of operating expenses and a $348 million increase in the 

provision for insurance losses. 

 

 During the first quarter of 2014, the FDIC was named receiver for 5 failed institutions. The 

combined assets at inception for these institutions totaled $643 million with a total estimated 

loss of $92 million. The corporate cash outlay during the first quarter for these failures was 

approximately $151 million. 

 Through March 31, 2014, overall Corporate Operating Budget expenditures were below 

budget by 10 percent ($58 million). This variance was primarily the result of lower-thanbudgeted spending for contractual services, largely in the Receivership Funding component of 

the budget; and, vacancies in budgeted positions, largely in the Ongoing Operations 

component of the budget. 
2

I. Corporate Fund Financial Results (See pages 5 - 6 for detailed data and charts.) 

Deposit Insurance Fund 

 For the three months ending March 31, 2014, the DIF’s comprehensive income totaled $1.7 

billion compared to comprehensive income of $2.8 billion for the same period last year. This 

$1.1 billion decrease was mostly due to a $252 million decrease in assessment revenue and 

an $847 million increase in provision for insurance losses. 

 The provision for insurance losses was $348 million for the first quarter of 2014. The positive 

provision primarily resulted from a $520 million increase in the estimated losses for future 

failures and a $167 million decrease in the estimated losses for institutions that failed in 

current and prior years. 

Assessments

 During the first quarter of 2014, the DIF recognized a total of $2.4 billion in assessment 

revenue. Of this amount, the estimate for first quarter 2014 insurance coverage totaled $2.3 

billion. Additionally, the DIF recognized a net adjustment of $127 million that increased 

assessment revenue. This adjustment consisted of $29 million in prior period amendments 

and a $156 million increase to the estimate for fourth quarter 2013 insurance coverage 

recorded at December 31, 2013. The latter adjustment was due to higher than estimated 

assessment base and rates.

 On March 28, 2014, the FDIC collected $2.4 billion in DIF assessments for fourth quarter 2013 

insurance coverage.

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

DIF Investment Portfolio 

 

 On March 31, 2014, the total liquidity (also total market value) of the DIF investment portfolio 

stood at $45.0 billion, higher than its December 31, 2013, balance of $42.5 billion. During the 

quarter, interest revenue, receivership dividends, and deposit insurance assessment 

collections exceeded resolution-related outlays and operating expenses. 

 

 On March 31, 2014, the DIF investment portfolio’s yield was 0.56 percent, up 11 basis points 

from its December 31, 2013, yield of 0.45 percent. Two factors primarily contributed to the 

increase. During the quarter, newly purchased Treasury securities generally had higher yields 

than maturing securities. And low yielding overnight investments comprised a much smaller 

percentage of the portfolio at quarter end. 

 In accordance with the approved first quarter 2014 DIF portfolio investment strategy, staff 

purchased a total of 19 short- to intermediate-maturity conventional Treasury securities, all 

designated as available-for-sale (AFS). The 19 securities had a total par value of $9.5 billion, 

a weighted average yield of 0.74 percent, and a weighted average maturity (WAM) of 2.57 

years. 
3

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

Approved Budget Modifications 

The 2014 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other 

officials the authority to make certain modifications to the 2014 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 2014, the Division of Information Technology (DIT) and the Office of Minority and 

Women Inclusion (OMWI) realigned small portions of their approved Corporate Operating 

Budgets among various expense categories. In the Ongoing Operations budget component, 

DIT increased its Outside Services – Other expense category by $467,898, offset by 

reductions in the Outside Services – Personnel, Equipment, and other expense categories. 

DIT also reallocated $351,388 between three expense categories in the Receivership Funding 

component of its budget. OMWI realigned $54,164 between several expense categories 

within its Ongoing Operations budget component. All adjustments were administrative in 

nature to better align funding resources with planned expenditures. None of the budget 

realignments increased or decreased the total original Board-approved budget for either DIT or 

OMWI, or the Ongoing Operations or Receivership Funding components of their budgets. 

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, 2014, 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 during the first quarter in only one major expense 

category of the Ongoing Operations component of the 2014 Corporate Operating Budget: 

 Equipment expenditures were $5 million, or 42 percent, less than budgeted. The Division 

of Administration (DOA) spent $3 million less than budgeted due to lower spending for 

online information services and under-spending for furniture, fixture and equipment 

(FF&E). DOA anticipates these variances will decrease as the year progresses. In 

addition, DIT spent $2 million less than budgeted for hardware and software maintenance 

due delays in the timing of budgeted purchases. 

Receivership Funding 

The Receivership Funding component of the 2014 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. 
4

There was a significant spending variance in two of the seven major expense categories 

during the first quarter in the Receivership Funding component of the 2014 Corporate 

Operating Budget: 

 Outside Services-Personnel expenditures were $19 million, or 19 percent, less than 

budgeted. This variance was attributable to lower-than-budgeted contract expenses 

during the first quarter due to fewer bank closings than budgeted, less costly 

resolutions, and lower-than-anticipated asset management and marketing costs 

booked through March. This resulted in lower expenses for contracts supporting 

Owned Real Estate, Valuations, Securitizations, Due Diligence, Shared-Loss, 

Receivership Assistance Contracts, and Structured Sales. 

 Other Expenses expenditures were $3 million, or 58 percent, more than budgeted. 

This variance was attributable to costs incurred for the transfer of banking operations 

and the disposition of failed bank assets. 

Significant Spending Variances by Division/Office1

Only three organizations had significant spending variances through the end of the first 

quarter: 

 The Division of Resolutions and Receiverships spent $17 million, or 13 percent, less than 

budgeted, mostly due to less-than-budgeted spending for resolution and receivership 

workload for the reasons described above. 

 The Legal Division spent $10 million, or 13 percent, less than budgeted. Approximately $7 

million of this variance was in the Receivership Funding budget component and was 

largely attributable to lower-than-budgeted spending for legal services contracting and 

slower-than-projected hiring to fill budgeted positions. Additionally, a $2 million variance in 

the Ongoing Operations budget component was due to slower-than-projected hiring. 

 DOA spent $6 million, or 9 percent, less than budgeted when its Investment Budget 

spending is taken into account. However, it spent $8 million, or 13 percent, less than 

budgeted under the Corporate Operating Budget. That variance was largely attributable to 

lower-than-projected spending for online information services and FF&E purchases; delays 

in awarding a Human Resource contract; under-spending for the digitizing of all 

background investigation case holdings and instituting an electronic records management 

system now expected to begin during the second quarter; delays in bringing replacement 

contract personnel on board to perform background investigations; and delays in filling 

budgeted positions. This variance was partially offset by earlier-than-anticipated spending 

of over $2 million from its budget for the 550 HVAC Retrofit investment project. 

 

1

 Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets. 
FDIC CFO REPORT TO THE BOARD – First Quarter 2014 

Fund Financial Results ($ in Millions) 

5

Balance Sheet

Unaudited Audited Quarterly Unaudited Year-Over-Year

Mar-14 Dec-13 Change Mar-13 Change

Cash and cash equivalents 511 $ 3,543 $ (3,032) $ 1,052 $ (541) $ 

Investment in U.S. Treasury obligations, net 44,215 38,511 5,704 37,474 6,741 

Trust preferred securities - - - 2,256 (2,256) 

Assessments receivable, net 2,266 2,228 38 1,295 971 

Interest receivable on investments and other assets, net 424 511 (87) 470 (46) 

Receivables from resolutions, net 15,580 16,345 (765) 22,549 (6,969) 

Property and equipment, net 368 377 (9) 381 (13) 

Total Assets $ 61,515 63,364 $ 1,849 $ 65,477 $ (2,113) $ 

Accounts payable and other liabilities 257 300 (43) 319 (62) 

Refunds of prepaid assessments - - - 5,829 (5,829) 

Liabilities due to resolutions 12,438 12,626 (188) 20,696 (8,258) 

Postretirement benefit liability 194 194 - 224 (30) 

Contingent liability for anticipated failures 1,577 1,199 378 2,659 (1,082) 

Contingent liability for litigation losses 5 5 - 8 (3) 

Total Liabilities $ 14,324 14,471 $ 147 $ 29,735 $ (15,264) $ 

FYI: Unrealized gain (loss) on U.S. Treasury investments, net 45 20 25 72 (27) 

FYI: Unrealized gain (loss) on trust preferred securities - - - 294 (294) 

FYI: Unrealized postretirement benefit (loss) gain (16) (16) - (61) 45 

Fund Balance $ 47,191 48,893 $ 1,702 $ 35,742 $ 13,151 $ 

Deposit Insurance Fund

*

* On June 28, 2013, DIF refunded $5.9 billion in prepaid assessments to insured depository institutions that had

remaining prepaid assessment balances.
6

Fund Financial Results - continued ($ in Millions) 

Income Statement (year-to-date)

Unaudited Audited Unaudited Year-Over-Year

Mar-14 Dec-13 Mar-13 Change

Assessments 2,393 $ 9,734 $ 2,645 $ (252) $ 

Interest on U.S. Treasury obligations 45 104 (9) 54 

Realized gain on sale of trust perferred securities - 458 - - 

Other revenue 9 163 56 (47) 

Total Revenue $ 10,459 2,447 $ 2,692 $ (245) $ 

Operating expenses 422 1,609 436 (14) 

Provision for insurance losses 348 (5,659) (499) 847 

Insurance and other expenses - 4 1 (1) 

Total Expenses and Losses $ (4,046) 770 $ (62) $ 832 $ 

Net Income (Loss) 14,505 1,677 2,754 (1,077) 

Unrealized gain (loss) on U.S. Treasury investments, net 25 (14) 38 (13) 

Unrealized gain (loss) on trust preferred securities - (302) (8) 8 

Unrealized postretirement benefit gain (loss) - 44 - - 

Comprehensive Income (Loss) $ 14,233 1,702 $ 2,784 $ (1,082) $ 

Deposit Insurance Fund

Beginning in 2013, the 

increase in the DIF 

portfolio’s yield has been 

largely attributable to 

investing in longermaturity securities 

coupled with a steeper 

yield curve 

environment. The 

portfolio’s yield 

increased substantially 

by 20 basis points over 

the 15-month period 

between December 31, 

2012 and March 31, 

2014.

Selected Financial Data

Unaudited Audited Quarterly Unaudited Year-Over-Year

Mar-14 Dec-13 Change Mar-13 Change

Cash and cash equivalents 872 $ 872 $ - $ 3,594 $ (2,722) $ 

Accumulated deficit (124,460) (124,460) - (124,459) (1) 

Total resolution equity 873 872 1 3,598 (2,725) 

Total revenue - 3 1 (1) 

Operating expenses - 2 1 (1) 

Goodwill litigation expenses - 1 - - 

Provision for losses (1) (1) (2) 1 

Net Income (Loss) 1 $ (1) $ 1 $ - $ 

FSLIC Resolution Fund

Receivership Selected Statistics March 2014 vs. March 2013

$ in millions

Mar-14 Mar-13 Change Mar-14 Mar-13 Change Mar-14 Mar-13 Change

Total Receiverships 467 484 17 1 3 (2) 485 470 15 

Assets in Liquidation $ 15,498 10,246 $ (5,252) $ 5 $ 6 $ (1) $ 10,251 $ 15,504 $ (5,253) $ 

YTD Collections $ 2,367 1,157 $ (1,210) $ 1 $ 2 $ (1) $ 1,158 $ 2,369 $ (1,211) $ 

YTD Dividend/Other Pymts - Cash $ 768 1,078 $ 310 $ - $ - $ - $ 1,078 $ 768 $ 310 $ 

DIF FRF ALL FUNDS
7

3/31/14 12/31/13 Change

Par Value $43,424 $40,682 $2,742

Amortized Cost $44,672 $42,025 $2,647

Total Market Value (including accrued interest) $45,046 $42,461 $2,585

Primary Reserve 1 $45,046 $42,461 $2,585

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

Yield-to-Maturity 2 0.56% 0.45% 0.11%

Weighted Average Maturity (in years) 1.66 1.41 0.25

Effective Duration (in years)

 Total Portfolio 1.62 1.36 0.26

 Available-for-Sale Securities 1.63 1.49 0.14

 Held-to-Maturity Securities 0 0 0

3/31/14 12/31/13 Change

FRF-FSLIC

 Book Value 3 $826 $826 $0

 Yield-to-Maturity 0.03% 0.01% 0.02%

 Weighted Average Maturity overnight overnight no change

3/31/14 12/31/13 Change

Book Value 4 $13,313 $13,657 ($344)

Effective Annual Yield 0.10% 0.10% 0.00%

Weighted Average Maturity (in days) 58 62 (4)

4

 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)

3 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 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.

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, and heldto-maturity securities maturing within three months.

National Liquidation Fund (NLF) Investment Portfolio Summary

(Dollar Values in Millions)
8

DEPOSIT INSURANCE FUND

Purchase up to $10 billion (par value) of Treasury securities with maturity dates between June 

30, 2014, and March 31, 2019, subject to the following additional provisions: all newly 

purchased securities will be designated as available-for-sale (AFS); and no more than $3 

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

Securities (TIPS).

Purchase up to $9 billion (par value) of Treasury securities with maturity dates between 

September 30, 2014, and December 31, 2019, subject to the following additional provisions: 

all newly purchased securities will be designated as available-for-sale (AFS); and no more 

than $3 billion (adjusted par value) of such securities shall consist of Treasury InflationProtected Securities (TIPS).

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 2014.

Strategy Changes for 2nd Quarter 2014

Investment Strategies

Strategy for 1st Quarter 2014

Strategy for the 1st Quarter 2014

Strategy Changes for 2nd Quarter 2014
9

1) Budgets for investment projects are approved on a multi-year basis; the year-to-date budget amount reflects the 2014 spending estimates 

for approved projects. 

Annual YTD YTD % of YTD YTD

Major Expense Category Budget Budget Expenditures Budget Used Variance

Corporate Operating Budget 

Ongoing Operations

Salaries & Compensation $1,206,502 $297,052 $278,369 94% ($18,683)

Outside Services - Personnel 269,244 54,515 48,807 90% (5,708)

Travel 105,765 25,134 21,395 85% (3,739)

Buildings 89,155 20,686 20,057 97% (629)

Equipment 85,537 12,683 7,349 58% (5,334)

Outside Services - Other 18,152 4,094 3,333 81% (761)

Other Expenses 17,097 3,727 3,009 81% (718)

Total Ongoing Operations $1,791,452 $417,893 $382,319 91% ($35,574)

Receivership Funding

Salaries & Compensation $124,532 $41,944 $37,875 90% ($4,069)

Outside Services - Personnel 400,107 100,323 81,068 81% (19,255)

Travel 10,414 3,912 2,062 53% (1,850)

Buildings 28,580 7,595 7,107 94% (488)

Equipment 7,745 733 424 58% (309)

Outside Services - Other 4,999 1,343 1,458 109% 115

Other Expenses 23,623 5,987 9,434 158% 3,447

Total Receivership Funding $600,000 $161,838 $139,428 86% ($22,410)

Total Corporate Operating Budget $2,391,452 $579,731 $521,747 90% ($57,984)

Investment Budget 1 $23,215 $2,802 $4,710 168% $1,908

Grand Total $2,414,667 $582,533 $526,457 90% ($56,076)

Executive Summary of 2014 Budget and Expenditures

by Major Expense Category

Through March 31, 2014

(Dollars in Thousands)
10

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

Corporate Risk Management, and Information Security and Privacy Staff.

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, Chief Information 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 2014 spending estimates 

for approved projects. 

Annual YTD YTD % of YTD YTD

Division/Office Budget Budget Expenditures Budget Used Variance

 Corporate Operating Budget 

 Risk Management Supervision $569,322 $140,933 $132,052 94% ($8,881)

 Resolutions & Receiverships 507,130 137,114 119,952 87% (17,162)

 Legal 302,043 76,216 66,567 87% (9,649)

 Administration 269,844 63,683 55,664 87% (8,019)

 Information Technology 234,719 45,609 44,048 97% (1,561)

 Depositor & Consumer Protection 169,934 42,121 38,894 92% (3,227)

 CIO Council 59,237 13,628 12,747 94% (882)

 Executive Support 1 55,309 12,774 11,413 89% (1,361)

 Insurance & Research 50,700 11,486 9,803 85% (1,683)

 Finance 40,018 9,776 9,080 93% (696)

 Inspector General 33,698 8,424 6,767 80% (1,657)

 Corporate University - Corporate 22,006 4,704 5,162 110% 458

 Complex Financial Institutions 23,715 5,899 3,943 67% (1,956)

 Corporate University - CEP 16,876 3,891 3,652 94% (239)

 Executive Offices 2 11,654 3,473 2,002 58% (1,471)

 Corporate Unassigned 25,247 0 0 N/A 0

 Total, Corporate Operating Budget $2,391,452 $579,731 $521,747 90% ($57,984)

 Investment Budget 3

 Administration $9,500 $2,375 $4,607 194% $2,232

 Risk Management Supervision 967 230 25 11% (205)

 Information Technology 10,409 141 79 56% (62)

 Depositor & Consumer Protection 970 29 0 -1% (29)

 Corporate University - Corporate 1,368 26 0 0% (26)

 Resolutions & Receiverships 1 1 0 0% (1)

 Total, Investment Budget 3 $23,215 $2,802 $4,710 168% $1,908

 Combined Division/Office Budgets

 Risk Management Supervision $570,289 $141,163 $132,077 94% ($9,086)

 Resolutions & Receiverships 507,131 137,115 119,952 87% (17,163)

 Legal 302,043 76,216 66,567 87% (9,649)

 Administration 279,344 66,058 60,271 91% (5,787)

 Information Technology 245,128 45,750 44,127 96% (1,623)

 Depositor & Consumer Protection 170,904 42,150 38,894 92% (3,256)

 CIO Council 59,237 13,628 12,747 94% (882)

 Executive Support 1 55,309 12,774 11,413 89% (1,361)

 Insurance & Research 50,700 11,486 9,803 85% (1,683)

 Finance 40,018 9,776 9,080 93% (695)

 Inspector General 33,698 8,424 6,767 80% (1,657)

 Corporate University - Corporate 23,374 4,730 5,162 109% 432

 Complex Financial Institutions 23,715 5,899 3,943 67% (1,956)

 Corporate University - CEP 16,876 3,891 3,652 94% (239)

 Executive Offices 2 11,654 3,473 2,002 58% (1,471)

 Corporate Unassigned 25,247 0 0 N/A 0

 Grand Total $2,414,667 $582,533 $526,457 90% ($56,076)

Executive Summary of 2014 Budget and Expenditures

by Budget Component and Division/Office

Through March 31, 2014

(Dollars in Thousands)