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Executive
Summary -
Third Quarter 2008
The attached report highlights the Corporation's financial activities
and results for the period ending June 30, 2008.
- The Deposit Insurance Fund (DIF) balance decreased by 23.5
percent ($10.629 billion) to $34.588 billion during the third quarter
of 2008. The third quarter 2008 decrease was primarily due to the
$11.930 billion increase in the provision for insurance losses mainly
related
to anticipated failures, partially offset by an $881 million increase
in assessment revenue.
- During the third quarter of 2008, the FDIC was named receiver
for nine failed institutions-IndyMac Bank of Pasadena, California;
First National Bank of Reno, Nevada; First Heritage Bank of Newport
Beach, California; First Priority Bank of Bradenton, Florida; The
Columbian Bank and Trust Company of Topeka, Kansas; Integrity Bank
of Alpharetta, Georgia; Silver State Bank of Henderson, Nevada;
Ameribank, Inc. of Northfork, West Virginia; and Washington Mutual
Bank (WaMu) of Henderson, Nevada. The combined total assets at inception
for these institutions were $337 billion with an estimated loss
totaling $11 billion. The corporate cash outlay during the third
quarter for these failures was $22 billion.
WaMu,
with total assets of $299 billion and total deposits of $188 billion,
is the largest
failed institution in the history of the FDIC. JPMorgan Chase
acquired the assets and assumed all the deposits. All depositors
were fully
protected and there will be no loss to the DIF. IndyMac Bank
had assets totaling $28 billion and total deposits of $19 billion
and is the fourth
largest institution to fail in FDIC history. All insured, non-brokered
deposits and substantially all the assets were transferred to
IndyMac Federal Bank, FSB, a newly chartered federal financial institution,
for which the FDIC has been named conservator. The FDIC will
continue
to operate the conservatorship until future sale. The current
loss estimate for the IndyMac Bank receivership is $8.9 billion.
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- As of
June 30, 2008, the DIF reserve ratio stood at 1.01 percent,
which is the lowest reserve ratio for a combined bank and thrift
fund since
March 1995. Because the fund reserve ratio has fallen below
1.15 percent, the FDIC is required, pursuant to the Federal
Deposit Insurance
Reform Act of 2005, to establish a restoration plan to restore
the reserve ratio to at least 1.15 percent no later than five
years after
the establishment of the plan. As part of the plan, the Board
proposes to increase assessment rates by 7 basis points uniformly,
from a
range of 5 to 43 basis points to a range of 12 to 50 basis
points, for the first quarter 2009 insurance coverage only.
Beginning with
the second quarter 2009 coverage, the initial assessment rates
would range from 10 to 45 basis points. In addition, the FDIC
is proposing
several adjustments, related to unsecured debt, secured liabilities,
and brokered deposits that are designed to ensure that riskier
institutions will bear a greater share of the proposed increase
in assessment
rates, thereby reducing the subsidization of riskier institutions
by safer ones.
- For the
nine months ending September 30, 2008, Corporate Operating and
Investment Budget related expenditures ran below budget by 4
percent ($32 million)
and 14 percent ($3 million), respectively. The variance with
respect to the Corporate Operating Budget expenditures was primarily
the result
of lower spending for contractual services in the Ongoing Operations
component of the budget through the third quarter.
On
the pages following is an assessment of each of the three major finance
areas:
financial statements, investments, and budget.
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