FDIC¡

Federal Deposit Insurance Corporation

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

May 22, 2009

FROM:

The Board of Directors

Steven O. APP.A~..~? arr

Deputy to the Chairman and

Chief Financial Officer

BretD. Edwards~ Ë~

Director, Division of Finance

MEMORANDUM TO:

SUBJECT: First Quarter 2009 CFO Report to the Board

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

March 31, 2009.

Executive Summary

. The Deposit Insurance Fund (DIF) balance decreased by 25 percent ($4.3 billion) to $13.0

billion during the first quarter of 2009. The first quarter 2009 decrease was primarily due to

$6.6 billion in the provision for insurance losses and a $331.3 million decrease in the

unrealized gain on available-for-sale securities, offset by $2.6 billion in assessment revenue,

$136.3 million in the realized gain on sale of securities, and $212.1 million in interest earned

on investment securities.

. During the first quarter of2009, the FDIC was named receiver for 21 failed institutions. The

combined assets at inception for these institutions totaled approximately $9.5 billion with an

estimated loss totaling $2.2 billion. The corporate cash outlay during the first quarter for these

failures was $3.6 billion. Eight receiverships entered into loss share agreements with the

acquiring institutions and are expected to pay approximately $687.5 million over the length of

the agreements.

. For the three months ending March 31, 2009, Corporate Operating and Investment Budget

related expenditures ran below budget by 27 percent ($139.5 million) and 29 percent ($548.0

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

primarily in the Receivership Funding budget component, where spending in all expense

categories was well below budget for the first quarter. This budget surplus is expected to be

reduced as expenses increase in future quarters in connection with additional resolution

activity.
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 past two quarters, the FDIC resolved ten institutions using a 

Whole Bank Purchase and Assumption resolution transaction with an 

accompanying Loss Share Agreement on the assets purchased by the 

acquirer. Under the terms of the agreement, losses on the covered 

assets will be shared between the acquirer and the FDIC in its 

Receivership capacity. As of March 31, 2009, DIF receiverships are 

estimated to pay approximately $2.8 billion over the length of these 

loss-share agreements (typically over 5 to 10 years) on approximately 

$17.9 billion in total covered assets. The estimated liability for loss 

sharing is accounted for by the receiver and is considered in the 

determination of the DIF’s allowance for loss against the corporate 

receivable from the resolution. As loss-share claims are asserted and 

proven, DIF receiverships will satisfy these loss-share payments using 

available liquidation funds and/or amounts due from the DIF for 

funding the deposits assumed by the acquirer. Through the end of the 

first quarter, the DIF receiverships have not made any loss-share 

payments.

II. Investments 

• The Deposit Insurance Fund (DIF) investment portfolio’s amortized 

cost (book value) decreased by $2.1 billion during the first quarter of 

2009, and totaled $24.5 billion on March 31, 2009. The decline was 

largely the result of funding 21 failed institution resolutions during the 

first quarter. However, it should be noted that eight of this quarter’s 

bank and thrift failures were resolved as “whole bank” purchase and 

assumption transactions (in which the acquirers purchased all or 

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

acquirers entered into loss-share transactions) requiring little or no 

initial resolution funding, thus helping to mitigate this quarter’s decline 

in the portfolio’s value. At quarter end, the DIF investment portfolio 

yield was 4.43 percent, down 16 basis points from its December 31, 

2008, yield of 4.59 percent. The yield decline stemmed from several 

factors, notably the sale and maturity of generally higher yielding 

securities, as well as the DIF portfolio ending the quarter with a 

comparatively high overnight investment balance of $1.5 billion earning 

an ultra-low 0.04 percent yield. The high quarter-end overnight 

investment balance was largely attributable to the receipt of almost $1.1 

billion in assessments on March 30, 2009. 
3

Trends and Outlook

Financial Results Comments 

II. Investments 

• The recently established Debt Guarantee Program investment portfolio 

[from the guarantee fees under the Temporary Liquidity Guarantee 

Program (TLGP)] increased from $2.4 billion on December 31, 2008, to 

$6.2 billion on March 31, 2009, with all funds invested in overnight 

deposits. 

• Conventional Treasury market yields increased modestly during the first 

quarter of 2009, with longer-maturity Treasury securities posting the 

largest yield increases. Although Treasury yields remain relatively low 

amid continued flight-to-quality trades and in light of the weak U.S. 

economy, the modestly higher yields appeared to generally reflect 

concerns over the increasing supply of Treasury securities. During the 

second quarter of 2009, Treasury yields are expected to continue to 

trade within a range around current levels. 

III. Budget 

• Approximately $274.7 million was spent in the Ongoing Operations 

component of the 2009 Corporate Operating Budget, which was $9.5 

million (3 percent) below the budget for the three months ending March 

31, 2009. The Salaries and Compensation expense category was $14.9 

million below the year-to-date budget, but this was partially offset by 

$5.5 million and $3.8 million in overspending in the Outside Services – 

Personnel and Equipment expense categories, respectively. 

• Approximately $111.8 million was spent in the Receivership Funding 

component of the 2009 Corporate Operating Budget, which was $130.0 

million (54 percent) below the budget for the three months ending 

March 31, 2009, despite the fact that spending during the first quarter 

was 59% greater than during the previous quarter. This anomaly was 

attributable to the fact that a large portion of the annual budget was 

spread evenly throughout the year rather than being allocated on the 

basis of a projected trend of increasing expenses in successive months 

as the cumulative number of failures grows during the year. A review 

of the distribution of the Receivership Funding budget by month is 

being conducted, and a more realistic distribution of the budget by 

month was completed in April. 

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

Deposit Insurance Fund (DIF) 

• For the three months ending March 31, 2009, the DIF’s comprehensive loss totaled $4.3 billion 

compared to comprehensive income of $430.1 million for the same period last year. The yearover-year decrease of $4.7 billion was mostly due to a $6.1 billion increase in the provision for 
4

insurance losses, a $458.3 million decrease in the unrealized gain on available-for-sale 

securities, and a $406.1 million decrease in interest earned on U.S. Treasury obligations; 

partially offset by a $2.2 billion increase in assessment revenue and a $136.3 million increase 

in realized gains from the sale of U.S. Treasury obligations. 

 

• In February, the FDIC received $3.0 billion in preferred stock from Citigroup in return for 

providing a loss guarantee (up to $10 billion–after initial losses of $44.5 billion are taken by 

Citigroup and U.S. Treasury) on an asset pool of $300.8 billion of loans and securities backed 

by residential and commercial real estate. The preferred stock is reported in the “Preferred 

stock – systemic risk” line item on DIF’s balance sheet. The FDIC also received the first 

quarterly dividend of $20.2 million from the preferred stock in February. 

• For the first three months of 2009, the FDIC collected $3.8 billion in fees under the Debt 

Guarantee Program (DGP) and $90.0 million in fees under the Transaction Account Guarantee 

Program (TAGP). For the 21 failures that occurred during the first quarter of 2009, the FDIC 

paid $323.3 million in claims under the TAGP and recorded estimated losses of $66.5 million 

against this receivable. 

FSLIC Resolution Fund (FRF)

• FRF paid Goodwill judgments for three cases in the aggregate amount of $142.3 million that 

were accrued in 2008. 

II. Investments

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

• The amortized cost (book value) of the DIF investment portfolio decreased by $2.1 billion (7.7 

percent) during the first quarter of 2009, from $26.6 billion on December 31, 2008, to $24.5 

billion on March 31, 2009. Similarly, the DIF portfolio’s market value dropped by $2.4 billion 

(8.3 percent), from $28.8 billion on December 31, 2008 to $26.4 billion on March 31, 2009. 

Again, the declines were primarily the result of funding failed institution resolutions during the 

quarter. 

• The DIF investment portfolio's total return for the first quarter of 2009 was 0.140 percent, 

approximately 46 basis points higher than its benchmark, the Merrill Lynch 1 – 10 Year U.S. 

Treasury Index (Index), which had a total return of -0.320 percent during the same period. The 

DIF portfolio’s Treasury Inflation-Protected Securities (TIPS) considerably outperformed the 

Index’s conventional Treasury securities; short-maturity TIPS market real yields declined 

during the quarter while conventional Treasury yields increased. Moreover, the DIF portfolio’s 

cash balances held during the quarter helped contribute to the positive relative return. Finally, 

because the DIF portfolio’s conventional Treasury securities have a lower average duration 

than the securities held in the Index, their price declines were less than those of the Index. 

 

• During the first quarter of 2009, to help fund resolution-related cash outlays, staff sold a total of 

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

value of $1.2 billion, a total market value of $1.3 billion, a weighted average maturity (WAM) 

of 7.90 years, a weighted average modified duration of 6.09 years, and a weighted average 
5

yield-at-cost of 4.90%. These security sales resulted in a realized gain of $136.3 million. On 

March 31, 2009, the DIF portfolio’s overnight investment balance was $1.5 billion (about 5.8 

percent of the portfolio by market value), largely reflecting the receipt of almost $1.1 billion in 

assessments on March 30, 2009. 

 

Other Corporate Investment Portfolios 

• The book value of the recently established Debt Guarantee Program investment portfolio 

increased from $2.4 billion on December 31, 2008, to $6.2 billion on March 31, 2009. The 

funds in this portfolio are from the guarantee fees related to the Debt Guarantee Program under 

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

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

• On February 16, 2009, the FDIC collected $20.2 million in dividends on the Fixed Rate 

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

Subsequently, the DIF should receive dividends of $60.5 million per quarter from the Citigroup 

Stock. These funds are segregated and invested separately from DIF’s other cash and 

investments in the newly established Other Systemic Risk Reserves investment portfolio. 

• On March 30, 2009, the FDIC collected about $90.0 million in fees related to the transaction 

account guarantee program under the TLGP. However, on March 31, 2009, all funds were 

transferred to the DIF portfolio for reimbursement of claims and expenses, so the newly 

established Transaction Account Guarantee Program investment portfolio had no balance at 

month end. 

The Treasury Market 

• During the first quarter of 2009, Treasury yields increased modestly, with longer-maturity 

Treasuries posting the largest yield increases. Although Treasury yields remain relatively low 

amid continued flight-to-quality trades and in light of the weak U.S. economy, the modestly 

higher yields appeared to generally reflect concerns over the increasing supply of Treasury 

securities. The three-month Treasury bill (T-Bill) and the six-month T-Bill yields increased by 

12 basis points and 16 basis points, respectively. The yield on two-year Treasury note, which 

also is very sensitive to actual and anticipated changes in the federal funds rate, as well as to 

flight-to-quality concerns, increased by only four basis points during the first quarter. 

Intermediate- to longer-maturity Treasury security yields also increased, with longer-maturity 

Treasuries posting the largest increases. The yield on the five-year Treasury note increased by 

12 basis points, while the yield on the ten-year Treasury note increased by 45 basis points. 

Accordingly, the conventional Treasury yield curve steepened during the first quarter of 2009; 

on March 31, 2009, the two- to ten-year yield curve had a 186-basis point positive spread 

(compared to a positive 154-basis point spread at the beginning of the quarter). Over the past 

five years, this spread has averaged 82 basis points. 

Prospective Strategies 

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

insurance assessments, maturing securities, TLGP 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.
6

III. Budget Results (See pages 14 – 15 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 first quarter in accordance with the 

authority delegated by the Board of Directors. These reallocations did not change the total 

2009 Corporate Operating Budget approved by the Board: 

• In January 2009, the Division of Supervision and Consumer Protection (DSC) and the 

Division of Information Technology (DIT) reallocated budget authority among major 

expense categories within their approved budgets. DSC reallocated funds within the 

Ongoing Operations budget component among four major expense categories to better 

reflect projected expenses by reducing Travel by $1,296,183, increasing Outside Services – 

Personnel by $1,081,431, increasing Outside Services – Other by $143,406, and increasing 

Other Expenses $71,346. DIT reallocated $196,198 in budget authority from the 

Equipment expense category to the Outside Services – Other expense category within the 

Receivership Funding budget component to correct the misclassification of budget authority 

for cell phones. 

• In February 2009, the CFO approved the reallocation of budget authority within the Salaries 

and Compensation expense category to ensure that the awards budget in all divisions and 

offices, except for the Office of Inspector General, was consistent with established 

corporate practices. Excess funds totaling $1,749,368 were reallocated to the Corporate 

Unassigned budget and will be available to meet new budget requirements that emerge 

during the year. 

• In February 2009, the CFO approved the reallocation of budget authority to provide funding 

for an increase in authorized staffing for DSC. Funds totaling $1,919,037 were transferred 

from the Corporate Unassigned budget in the Ongoing Operations component to DSC’s 

Salaries and Compensation budget to provide funding for the additional staff. 

• In February 2009, the CFO approved the reallocation of $91,456 in budget authority within 

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

Division of Finance to the Office of the Ombudsman to realign funding for approved 

staffing modifications. 

 

• In March 2009, the CFO approved the reallocation of $10,131,882 in budget authority 

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

the Corporate Unassigned budget to the DIT budget to support the establishment of the 

temporary West Coast Satellite Office. Funding was provided for additional contractor 

support as well as laptops and other equipment required in connection with the projected 

increase in failure workload. DIT’s Receivership Funding budget was increased by 

$9,321,939 in Equipment, $512,867 in Outside Services – Personnel, and $297,076 in 

Outside Services – Other. 
7

Approved Staffing Modifications 

The 2009 Budget Resolution delegated to the CFO the authority to modify Authorized 2009 

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

approved 2009 Corporate Operating Budget. The following changes were approved by the 

CFO in accordance with the authority delegated to him by the Board of Directors: 

• In February 2009, the CFO approved an increase of 26 positions (16 permanent, 10 nonpermanent) in DSC’s authorized 2009 staffing. Ten non-permanent positions were 

approved to address the increasing workload associated with the Troubled Asset Relief 

Program (TARP), the TLGP, and the increasing number of problem institutions. Fifteen 

permanent positions were approved to provide increased oversight of “systemically 

important” institutions and holding companies. The final permanent position was approved 

for an Examination Specialist to perform liaison responsibilities with the Departments of 

Justice and Homeland Security on critical infrastructure protection matters. A budget 

adjustment was made in conjunction with this approval. 

• In February 2009, the CFO approved a reduction of one authorized position in the Division 

of Finance (DOF) based on a determination that the position was no longer essential to 

DOF operations. A budget adjustment was made in conjunction with this approval. 

 

• In February 2009, the CFO approved the increase of one authorized position in the Office 

of the Ombudsman (OO). The additional position will allow OO to perform critical duties 

that it was unable to accomplish with its current authorized staff. A budget adjustment was 

made in conjunction with this approval. 

 

• In March 2009, the CFO approved an increase of one authorized staff position in the Office 

of the Chairman for a Senior Advisor. A budget adjustment will be made in April in 

conjunction with this approval. 

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, 2009, are defined 

as those that either (1) exceed the YTD budget by $3.0 million and represent more than 5 

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 represent more than 10 percent of the major expense category or total division/office 

budget. 

Significant Spending Variances by Major Expense Category 

Ongoing Operations

There were significant spending variances in two major expense categories during the first 

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

• Outside Services – Personnel expenditures were $5.5 million, or 15 percent, more than 

budgeted. The variance was largely due to higher-than-projected system maintenance 
8

expenses in DIT during the first quarter. This included unbudgeted expenses associated 

with systems supporting the TLGP. The CIO Council will reprioritize funding for overall 

IT projects during the remainder of the year to stay within the IT systems development and 

maintenance allocation in the DIT budget. In addition, higher-than-projected expenses 

were incurred for IT security monitoring during the first quarter; these expenses are 

expected to be lower than budgeted for the rest of the year. Unbudgeted expenses were also 

incurred for data center costs related to the Document Management System contract. 

Outside counsel litigation expenses incurred by the Legal Division were slightly above 

budget in the first quarter. 

• Equipment expenditures were $3.8 million, or 34 percent, more than budgeted. The 

variance was largely due to accelerated Technical Refresh purchases (budgeted to occur 

later in the year) and the procurement of software for laptops for new FDIC staff and 

contractors. Additional budget authority may be requested to cover these unbudgeted 

laptop software expenses. 

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 all seven major expense categories during the first 

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

• Salaries & Compensation ($13.7 million, or 57 percent, less than budgeted). 

• Outside Services – Personnel ($77.6 million, or 50 percent, less than budgeted). 

• Travel ($10.8 million, or 73 percent, less than budgeted). 

• Buildings ($5.5 million, or 37 percent, less than budgeted). 

• Equipment ($6.2 million, or 49 percent, less than budgeted). 

• Outside Services – Other ($5.9 million, or 84 percent, less than budgeted). 

• Other Expenses ($10.2 million, or 80 percent, less than budgeted). 

In all cases, these variances occurred because the Receivership Funding budget authority was 

generally spread evenly throughout the year, although actual expenses are expected to increase 

each quarter as the cumulative number of failures and the inventory of assets under 

management grows. Budget authority in the Receivership Funding component will be 

reallocated in April to more accurately reflect quarterly expense projections. 
9

Significant Spending Variances by Division/Office1

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

• The Division of Resolution and Receiverships spent $94.7 million, or 46 percent, less than 

budgeted. This variance was attributable to under spending in the Receivership Funding 

component of its operating budget for the reasons identified above. 

• The Legal Division spent $20.7 million, or 43 percent, less than budgeted. Approximately 

$19.7 million of this variance was due to under spending in the Receivership Funding 

component of the division’s operating budget for the reasons identified above. 

• The Division of Administration spent $11.0 million, or 20 percent, less than budgeted. This 

variance was largely attributable to delays in building out the Boston Area Office and in 

relocating the New York Regional Office, delays in improvements and more favorable 

landlord concessions at the temporary West Coast Satellite Office, lower-than-projected 

expenses for bank closing security services, temporary delays in planned capital 

improvement projects at the Student Residence Center, and temporary delays in purchasing 

Furniture, Fixtures and Equipment. 

Other Matters 

In accordance with the requirements of the 2009 Budget Resolution, an analysis of 2009 

funding requirements for employee salaries and compensation was completed after the close of 

the first quarter. The analysis determined that those costs had been over-estimated by 

approximately $3.1 million during the preparation of the 2009 Corporate Operating Budget. 

This represents only about three-tenths of 1 percent of the 2009 Salaries and Compensation 

budget. Because projected supervisory and resolutions workload has risen substantially since 

the 2009 Corporate Operating Budget was formulated, the CFO decided not to exercise the 

authority delegated to him in the 2009 Board Resolution to modify the 2009 Corporate 

Operating Budget. The projected surplus funding will be reserved for reallocation to meet new 

budget requirements that emerge during 2009. Increased funding in the Salaries and 

Compensation expense category is expected to be needed later in the year as staff is added to 

address increases in supervisory and resolutions workload. 

 

1

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

as seen at the bottom of page 15. 
FDIC CFO REPORT TO THE BOARD – First Quarter 2009

Fund Financial Results ($ in Millions) 

10

Balance Sheet

Unaudited Audited

Mar-09 Dec-08

Cash & cash equivalents - unrestricted $ 1,636 $ 1,011 $ 625 $ 8,080 $ (6,444)

Cash & cash equivalents - restricted - systemic risk 6,086 2,377 3,709 0 6,086 

Investment in U.S. Treasury obligations, net 24,909 27,859 (2,950) 43,626 (18,717)

Preferred stock - systemic risk 3,025 0 3,025 0 3,025 

Assessments receivable, net 2,550 1,018 1,532 442 2,108 

Receivable, net - systemic risk 683 1,138 (455) 0 683 

Interest receivable on investments and other assets, net 342 406 (64) 623 (281)

Receivables from resolutions, net 18,145 15,766 2,379 751 17,394 

Property, buildings and other capitalized assets, net 372 369 3 347 25 

Total Assets $ 57,748 $ 49,944 $ 7,804 $ 53,869 $ 3,879 

Accounts payable and other liabilities 754 185 569 127 627 

Liabilities due to resolutions 5,420 4,672 748 0 5,420 

Guarantee obligations - systemic risk 8,396 2,078 6,318 0 8,396 

Postretirement benefit liability 114 114 0 116 (2)

Contingent Liabilities: future failures 28,459 23,981 4,478 583 27,876 

Contingent Liabillties: systemic risk 1,398 1,438 (40) 0 1,398 

Contingent Liabilities: litigation losses & other 200 200 0 200 0 

Total Liabilities $ 44,741 $ 32,668 $ 12,073 $ 1,026 $ 43,715 

FYI: Unrealized gain on available-for-sale securities, net 1,919 2,250 (331) 486 1,433 

FYI: Unrealized postretirement benefit gain 25 25 0 19 6 

FUND BALANCE $ 13,007 $ 17,276 $ (4,269) $ 52,843 $ (39,836)

Income Statement 

Unaudited Audited

Mar-09 Dec-08

Assessments earned $ 2,615 $ 2,965 $ 448 $ 2,167 

Systemic risk revenue 73 1,464 0 73 

Interest earned on investment securities 212 2,072 618 (406)

Realized gain on sale of securities 136 775 0 136 

Other revenue 2 31 1 1 

Total Revenue $ 3,038 $ 7,307 $ 1,067 $ 1,971 

Operating expenses (includes depreciation expense) 266 1,033 238 28 

Systemic risk expenses 73 1,464 0 73 

Provision for insurance losses 6,637 41,839 525 6,112 

Other expenses 0 4 1 (1)

Total Expenses & Losses $ 6,976 $ 44,340 $ 764 $ 6,212 

Net (Loss)/Income $ (3,938) $ (37,033) $ 303 $ (4,241)

Unrealized gain/(loss) on available-for-sale securities, net (331) 1,891 127 (458)

Unrealized postretirement benefit gain/(loss) 0 5 0 0 

YTD Comprehensive (Loss)/Income $ (4,269) $ (35,137) $ 430 $ (4,699)

 

Change

Mar-08 Change

Mar-08

Unaudited Year-Over-Year

Deposit Insurance Fund

Deposit Insurance Fund

Year-Over-Year

Change

Quarterly Unaudited

Failed Banks with Loss Sharing Agreements since November 21, 2008 by Loss Estimate

$1,370.9

$12.5 $28.5 $10.4

$179.3

$42.3

$132.5 $209.9

$728.5

$72.1

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Downey S&L PFF B&T Suburban

FSB

County Bank Alliance Bank Pinnacle

Bank

Heritage

Community

Freedom

Bank

Colorado NB TeamBank

NA

 $ in Millions

Net Assessment Revenue and Cash Outlays for Bank Failures

$2,615

$640 $881 $996 $448

$3,877

$1,710

$24

$20,606

$7,947

$0

$5,000

$10,000

$15,000

$20,000

$25,000

1 Qtr. 2008 2 Qtr. 2008 3 Qtr. 2008 4 Qtr. 2008 1 Qtr. 2009

$ in Millions

Assessment Revenue Cash Outlays
11

Fund Financial Results - continued ($ in Millions ) 

$20.8

Statements of Cash Flows 

Unaudited Audited

Mar-09 Dec-08

Net (Loss)/Income $ (3,938) $ (37,033) $ 303 $ (4,241)

Amortization of U.S. Treasury obligations (unrestricted) 80 457 129 (49)

TIPS Inflation Adjustment 57 (272) (80) 137 

Depreciation on property and equipment 15 55 13 2 

Provision for insurance losses 6,637 41,839 525 6,112 

Unrealized gain on postretirement benefits 0 5 0 0 

(Gain) on sale of UST obligations (136) (775) 0 (136)

Systemic risk expenses 32 (2) 0 32 

Net change in operating assets and liabilities (1,031) (26,336) (94) (937)

Net Cash Provided by (Used by) Operating Activities $ 1,716 $ (22,062) $ 796 $ 920 

Investments matured and sold 2,619 21,209 3,039 (420)

Investments purchased (includes purchase of property and 

equipment) (2) (4) 0 (2)

Net Cash Provided by (Used by) Investing Activities $ 2,617 $ 21,205 $ 3,039 $ (422)

Net Increase (Decrease) in Cash and Cash Equivalents 4,334 (857) 3,835 499 

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

 Unrestricted Cash and Cash Equivalents - Ending 1,636 1,011 8,080 (6,444)

 Restricted Cash and Cash Equivalents - Ending 6,086 2,377 0 6,086 

Cash and Cash Equivalents - Ending $ 7,722 $ 3,388 $ 8,080 $ (358)

Selected Financial Data

Unaudited Audited

Mar-09 Dec-08

Cash and cash equivalents $ 3,467 $ 3,467 $ 0 $ 3,415 $ 52 

Accumulated deficit, net (123,944) (123,948) 4 (123,825) (119)

Resolution equity 3,498 3,494 4 3,444 54 

Total revenue $ 5 $ 63 $ 23 $ (18)

Operating expenses 1 3 1 0 

Goodwill/Guarini litigation expenses 0 254 77 (77)

Net Income/(Loss) $ 4 $ (178) $ (55) $ 59 

Change

FSLIC Resolution Fund

Quarterly

Change Mar-08

Unaudited

Deposit Insurance Fund

Mar-08

 Year-Over-Year Unaudited

Change

Year-Over-Year

Other 

Assets/Judgments, 

$822, 5.1%

Owned Assets, 

$1,101, 6.9%

Real Estate 

Mortgages, $8,845, 

55.2%

Securities, $3,011, 

18.8%

Commercial Loans, 

$1,862, 11.6% Consumer Loans, 

$332, 2.1%

Net Invsmts in Subs, 

$42, 0.3%

DIF Receivership Assets-in-Liquidation by Asset Type

as of March 31, 2009

Total = $16.0 billion

$ in Millions

 Receivership Selected Statistics March 2009 vs. March 2008

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

Total Receiverships 61 23 38 8 11 (3) 69 34 35

Assets in Liquidation 16,061 $ 821 $ 15,240 34 $ 32 $ 2 16,095 $ 853 $ 15,242

Collections 1,614 $ 48 $ 1,566 4 $ 1 $ 3 1,618 $ 49 $ 1,569

Dividends Paid 3,838 $ 58 $ 3,780 - $ 1 $ (1) 3,838 $ 59 $ 3,779

DIF FRF ALL FUNDS
12

3/31/09 12/31/08 Change

Par Value $23,719 $25,496 ($1,777)

Amortized Cost $24,522 $26,580 ($2,058)

Market Value $26,440 $28,830 ($2,390)

Primary Reserve 1 $26,772 $29,227 ($2,455)

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

Year-to-Date Total Return (Portfolio) 0.140% 8.550% not applicable

Year-to-Date Total Return (Benchmark) 2 (0.320%) 11.334% not applicable

Total Return Variance (in basis points) 46.0 (278.4) not applicable

Yield-to-Maturity 3 4.43% 4.59% (0.16%)

Weighted Average Maturity (in years) 2.95 3.34 (0.39)

Effective Duration (in years) 4

 Total Portfolio 2.55 2.85 (0.30)

 Available-for-Sale Securities 2.70 2.94 (0.24)

 Held-to-Maturity Securities 5 not applicable not applicable

3/31/09 12/31/08 Change

Book Value 6 $5,674 $3,447 $2,227

Yield-to-Maturity 0.67% 1.21% (0.54%)

Weighted Average Maturity (in days) 34 23 11

3

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

2.2% annual increase in the CPI over the remaining life of each TIPS.

6

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

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.

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 posititive intent and ability to hold its HTM securities until their 

maturity dates.

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.

U.S. Treasury Security Yield Curve

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3

Month

6

Month

1Year

2

Year

3

Year

4

Year

5

Year

7

Year

10

Year

03/31/09 Conventional 12/31/08 Conventional
13

DEPOSIT INSURANCE FUND

Strategy as of 1st Quarter 2009

Invest all proceeds from deposit insurance assessments, 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.

Strategy Changes for 2nd Quarter 2009

No changes in strategy.

DEBT GUARANTEE PROGRAM 

OTHER GUARANTEE SYSTEMIC RISK RESERVES

Strategy as of 1st Quarter 2009

For the Debt Guarantee Program portfolio, strategically invest all available funds in overnight 

investments and/or in conventional or callable Treasury securities with effective maturity dates not to 

exceed June 30, 2012. (Other Systemic Risk Reserves were invested solely in overnight 

investments.)

Strategy Changes for 2nd Quarter 2009

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. 

NATIONAL LIQUIDATION FUND

Strategy as of 1st Quarter 2009

Maintain a target overnight investment balance between $20 million and $25 million.

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

Strategy Changes for 2nd Quarter 2009

Maintain an overnight deposit balance within a target range of $15 million to $25 million.

Investment Strategies
14

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 $194,808 $179,903 92% ($14,905)

Outside Services - Personnel 37,056 42,521 115% 5,465

Travel 16,836 16,593 99% (243)

Buildings 15,544 13,634 88% (1,910)

Equipment 11,091 14,912 134% 3,821

Outside Services - Other 5,420 4,860 90% (560)

Other Expenses 3,406 2,240 66% (1,166)

Total Ongoing Operations $284,161 $274,663 97% ($9,498)

Receivership Funding

Salaries & Compensation $24,020 $10,292 43% ($13,728)

Outside Services - Personnel 155,823 78,195 50% (77,628)

Travel 14,750 3,911 27% (10,839)

Buildings 14,791 9,272 63% (5,519)

Equipment 12,766 6,536 51% (6,230)

Outside Services - Other 6,984 1,112 16% (5,872)

Other Expenses 12,661 2,499 20% (10,162)

Total Receivership Funding $241,795 $111,817 46% ($129,978)

Total Corporate Operating Budget $525,956 $386,480 73% ($139,476)

Investment Budget 1 $1,874 $1,326 71% ($548)

Grand Total $527,830 $387,806 73% ($140,024)

(Dollars in Thousands)

Executive Summary of 2009 Budget and Expenditures

by Major Expense Category

Through March 31, 2009
15

1) Executive Support includes the Offices of Diversity and Economic Opportunity, Public Affairs, Ombudsman, Legislative Affairs,

Enterprise Risk Management, and International Affairs.

2) Executive Offices include the offices of the Chairman, Vice Chairman, Independent Director, Deputy to the Chairman and Chief

Operating Officer, and Deputy to the Chairman and Chief Financial Officer.

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 Budget Expenditures Budget Used Variance

 Corporate Operating Budget 

 Supervision & Consumer Protection $119,104 $107,714 90% ($11,390)

 Information Technology 55,919 57,426 103% 1,507

 Administration 55,676 44,635 80% (11,041)

 Resolutions & Receiverships 206,133 111,463 54% (94,670)

 Legal 48,527 27,788 57% (20,739)

 Insurance & Research 8,931 8,286 93% (645)

 Finance 8,054 6,670 83% (1,384)

 Inspector General 6,859 5,911 86% (948)

 Corporate University 8,321 9,654 116% 1,333

 Executive Support 1 6,443 5,176 80% (1,267)

 Executive Offices 2 1,989 1,757 88% (232)

 Total, Corporate Operating Budget $525,956 $386,480 73% ($139,476)

 Investment Budget 3

 Information Technology $1,714 $1,195 70% ($519)

 Resolutions & Receiverships 102 76 75% (26)

 Insurance & Research 58 55 95% (3)

 Total, Investment Budget 3 $1,874 $1,326 71% ($548)

 Combined Division/Office Budgets

 Supervision & Consumer Protection $119,104 $107,714 90% ($11,390)

 Information Technology 57,633 58,621 102% 988

 Administration 55,676 44,635 80% (11,041)

 Resolutions & Receiverships 206,235 111,539 54% (94,696)

 Legal 48,527 27,788 57% (20,739)

 Insurance & Research 8,989 8,341 93% (648)

 Finance 8,054 6,670 83% (1,384)

 Inspector General 6,859 5,911 86% (948)

 Corporate University 8,321 9,654 116% 1,333

 Executive Support 1 6,443 5,176 80% (1,267)

 Executive Offices 2 1,989 1,757 88% (232)

 Grand Total $527,830 $387,806 73% ($140,024)

Executive Summary of 2009 Budget and Expenditures

by Budget Component and Division/Office

Through March 31, 2009

(Dollars in Thousands)