Chief Financial Officer's (CFO) Report to the Board
I. Financial Results - Fourth Quarter 2018
Deposit Insurance Fund (DIF)
- The DIF’s comprehensive income totaled $9.9 billion for 2018, compared to comprehensive income of $9.6 billion during 2017, a $277 million year-over-year increase. The slight increase was largely the result of a $576 million increase in interest on U.S Treasury securities, a $380 million increase in negative provision for insurance losses, and a $364 million decrease in unrealized losses on U.S. Treasury securities. The increases were almost fully offset by a $1.1 billion decrease in assessment revenue.
- The provision for insurance losses was a negative $563 million for 2018, compared to negative $183 million for 2017. The negative provision for 2018 primarily resulted from a $570 million decrease to the estimated losses for prior year failures, attributable to: (1) a decrease in receivership shared-loss liability cost estimates of $186 million primarily due to lower-than-anticipated losses on covered assets, reductions in shared-loss cost estimates from the early termination of shared-loss agreements (SLAs) during the year, and unanticipated recoveries from SLAs where the commercial loss coverage has expired but the recovery period remains active; (2) $172 million of estimated recoveries from residual certificates retained by receiverships for structured transactions; and (3) $130 million of unanticipated recoveries received by receiverships from tax refunds, litigation settlements, and professional liability claims.
- Assessment revenue was $9.5 billion for 2018, compared to $10.6 billion for 2017. The $1.1 billion year-over-year decrease was primarily due to the cessation of the surcharge assessment on large institutions effective October 1, 2018, as a result of the reserve ratio exceeding the required minimum of 1.35 percent as of September 30, 2018.
- Small banks will receive credits to offset the portion of their assessments that helped to raise the DIF reserve ratio from 1.15 percent to 1.35 percent. These credits amount to $765 million in aggregate, and will be automatically applied to offset regular deposit insurance assessments for assessment periods where the DIF reserve ratio is at or above 1.38 percent. Because the DIF reserve ratio was below 1.38 percent as of December 31, 2018, assessment credits will not offset fourth quarter insurance assessments collected in March 2019.
Assessments
- During December, the DIF recognized assessment revenue of $1.4 billion, representing the estimate for the fourth quarter 2018 insurance coverage. Additionally, the DIF recognized a $27 million adjustment for lower-than-estimated collections for the third quarter 2018 insurance coverage (regular assessments: $23 million and surcharges: $4 million), which decreased assessment revenue.
- On December 28, 2018, the FDIC collected $1.4 billion in DIF assessments and $1.3 billion in surcharge assessments for third quarter 2018 insurance coverage.