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Summary
Trends and Results - First Quarter 2009
| 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.
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| 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.
- 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.
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| 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.
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