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Chief Financial Officer's (CFO) Report to the Board

301 Moved Permanently

301 Moved Permanently


Summary Trends and Results - Second Quarter 2009

Financial Results Comments
I. Financial Statements
  • Since the beginning of the Temporary Liquidity Guarantee Program (TLGP) in October 2008 to June 30, 2009, the TLGP has $792.0 million in estimated losses upon the failure of 54 participating institutions in the Transaction Account Guarantee Program (TAGP) and has incurred no losses from payment default under the DGP. A graph on page 13 shows the DIF receivership claims under the TAGP and the estimated losses by month. Of the $2.1 billion in total receivership TAGP claims and $792.2 million in total estimated TAGP losses, one institution comprises the majority of that amount with $1.5 billion in TAGP claims and $649.8 million in estimated losses.
  • As of June 30, 2009, TLGP has $7.4 billion in cash and cash equivalents. Note that the TLGP does not currently expect any new guarantees under the DGP after October 31, 2009 and the TAGP is currently scheduled to expire on December 31, 2009 (Note: There is a notice of proposed rulemaking that presents an alternative to extend the TAGP until June 30, 2010).
II. Investments
  • The DIF investment portfolio’s amortized cost (book value) decreased by $5.8 billion during the first half of 2009, and totaled $20.8 billion on June 30, 2009. The decline was largely the result of funding 45 failed institution resolutions during the first half of 2009. However, it should be noted that 20 of these bank and thrift failures were resolved as loss-share transactions (in which the acquirers purchased substantially all of the failed institutions’ assets and the FDIC and the acquirers entered into loss-share agreements) requiring little or no initial resolution funding, thus helping to mitigate this quarter’s decline in the portfolio value. At quarter end, the DIF investment portfolio yield was 3.89 percent, down 70 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 $3.7 billion earning an ultra-low 0.10 percent yield. The high quarter-end overnight investment balance was attributable to the receipt of $2.6 billion in assessments and about $209.3 million in receivership dividends on June 30, 2009 (as well as other net cash inflows during June).
  • Most conventional Treasury market yields increased substantially during the second quarter of 2009, with longer-maturity Treasury securities posting the largest yield increases. Although Treasury yields remain relatively low in light of the weak U.S. economy, the higher yields appeared to reflect a number of factors, including growing sentiment that the U.S. recession might soon be ending, a reversal of flight-to-quality trades, and concerns over the increasing supply of Treasury securities. During the third quarter of 2009, Treasury yields are expected to continue to trade within a range around current levels, and to gradually rise over the course of the rest of the year.
III. Budget
  • Approximately $565.0 million was spent in the Ongoing Operations component of the 2009 Corporate Operating Budget, which was $12.4 million (2 percent) below the budget for the six months ending June 30, 2009. The Salaries and Compensation expense category was $10.8 million below the year-to-date budget. Spending in the Outside Services - Personnel expense category was $6.3 million greater than the year-to-date budget, but this amount was more than offset by the net under spending in all the remaining expense categories
  • Approximately $308.2 million was spent in the Receivership Funding component of the 2009 Corporate Operating Budget, which was $116.0 million (27 percent) below the budget for the six months ending June 30, 2009. The Outside Services - Personnel expense category was nearly $47.6 million below the year-to-date budget, and represented 41 percent of the total Receivership Funding variance. In addition, the Salaries and Compensation and Travel expense categories ran $26.4 million and $20.0 million under their year-to-date budgets, respectively. Collectively, these three expense categories represented 81 percent of the total year-to-date budget variance in the Receivership Funding component.

Last Updated 09/02/2009

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