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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

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2008 Annual Report

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IV. Financial Statements and Notes

Deposit Insurance Fund (DIF) – Cont.

9. Operating Expenses
Operating expenses were $1 billion for 2008, compared to $993 million for 2007. The chart below lists the major components of operating expenses.

Operating Expenses for the Years Ended December 31
Dollars in Thousands
  2008 2007
Salaries and benefits $702,040 $640,294
Outside services 159,170 137,812
Travel 67,592 55,281
Buildings and leased space 53,630 61,377
Software/Hardware maintenance 29,312 28,542
Depreciation of property and equipment 55,434 63,115
Other 32,198 23,640
Services billed to receiverships (59,608) (17,491)
Services billed to conservatorships (6,278) 0
Total $1,033,490 $992,570

10. Provision for Insurance Losses
Provision for insurance losses was $41.8 billion for 2008 and $95 million for 2007. The following chart lists the major components of the provision for insurance losses.

Provision for Insurance Losses
for the Years Ended December 31
Dollars in Thousands
  2008 2007
Valuation Adjustments
Closed banks and thrifts $17,974,530 $81,229
Other assets 7,377 286
Total Valuation Adjustments $17,981,907 $81,515
Contingent Liabilities Adjustments
Anticipated failure of
insured institutions
23,856,928 13,501
Total Contingent
Liabilities Adjustments
23,856,928 13,501
Total $41,838,835 $95,016

11. Employee Benefits
Pension Benefits and Savings Plans
Eligible FDIC employees (permanent and term employees with appointments exceeding one year) are covered by the federal government retirement plans, either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). Although the DIF contributes a portion of pension benefits for eligible employees, it does not account for the assets of either retirement system. The DIF also does not have actuarial data for accumulated plan benefits or the unfunded liability relative to eligible employees. These amounts are reported on and accounted for by the U.S. Office of Personnel Management (OPM).

Eligible FDIC employees also may participate in a FDIC-sponsored tax-deferred 401(k) savings plan with matching contributions up to five percent. Under the Federal Thrift Savings Plan (TSP), FDIC provides FERS employees with an automatic contribution of 1 percent of pay and an additional matching contribution up to 4 percent of pay. CSRS employees also can contribute to the TSP. However, CSRS employees do not receive agency matching contributions.

Pension Benefits and Savings Plans Expenses
for the Years Ended December 31
Dollars in Thousands
  2008 2007
Civil Service Retirement System $6,204 $6,698
Federal Employees Retirement System (Basic Benefit) 44,073 40,850
FDIC Savings Plan 21,786 21,008
Federal Thrift Savings Plan 16,659 15,938
Severance Pay 0 59
Total $88,722 $84,553

Postretirement Benefits Other Than Pensions
The DIF has no postretirement health insurance liability, since all eligible retirees are covered by the Federal Employees Health Benefit (FEHB) program. FEHB is administered and accounted for by the OPM. In addition, OPM pays the employer share of the retiree’s health insurance premiums.

The FDIC provides certain life and dental insurance coverage for its eligible retirees, the retirees’ beneficiaries, and covered dependents. Retirees eligible for life and dental insurance coverage are those who have qualified due to: 1) immediate enrollment upon appointment or five years of participation in the plan and 2) eligibility for an immediate annuity. The life insurance program provides basic coverage at no cost to retirees and allows converting optional coverages to direct-pay plans. For the dental coverage, retirees are responsible for a portion of the dental premium.

The FDIC has elected not to fund the postretirement life and dental benefit liabilities. As a result, the DIF recognized the underfunded status (difference between the accumulated postretirement benefit obligation and the plan assets at fair value) as a liability. Since there are no plan assets, the plan’s benefit liability is equal to the accumulated postretirement benefit obligation. At December 31, 2008 and 2007, the liability was $114.1 million and $116.2 million, respectively, which is recognized in the “Postretirement benefit liability” line item on the Balance Sheet. The cumulative actuarial gains/losses (changes in assumptions and plan experience) and prior service costs/credits (changes to plan provisions that increase or decrease benefits) were $25.0 million and $19.6 million at December 31, 2008 and 2007, respectively. These amounts are reported as accumulated other comprehensive income in the “Unrealized postretirement benefit gain” line item on the Balance Sheet.

The DIF’s expenses for postretirement benefits for 2008 and 2007 were $7.7 million and $7.2 million, respectively, which are included in the current and prior year’s operating expenses on the Statement of Income and Fund Balance. The changes in the actuarial gains/losses and prior service costs/credits for 2008 and 2007 of $5.3 million and $17.4 million, respectively, are reported as other comprehensive income in the “Unrealized postretirement benefit gain” line item. Key actuarial assumptions used in the accounting for the plan include the discount rate of 6.5 percent, the rate of compensation increase of 4.10 percent, and the dental coverage trend rate of 7.0 percent. The discount rate of 6.5 percent is based upon rates of return on high-quality fixed income investments whose cash flows match the timing and amount of expected benefit payments.

12. Commitments and Off-Balance-Sheet Exposure
Leased Space
The FDIC’s lease commitments total $130 million for future years. The lease agreements contain escalation clauses resulting in adjustments, usually on an annual basis. The DIF recognized leased space expense of $21 million and $22 million for the years ended December 31, 2008 and 2007, respectively.

Leased Space Commitments
Dollars in Thousands
2009 2010 2011 2012 2013 2014/
$24,608 $52,251 $21,750 $14,975 $9,195 $7,037

Off-Balance-Sheet Exposure:
Deposit Insurance
As of December 31, 2008, the estimated insured deposits for DIF were $4.8 trillion. This estimate is derived primarily from quarterly financial data submitted by insured depository institutions to the FDIC. This estimate represents the accounting loss that would be realized if all insured depository institutions were to fail and the acquired assets provided no recoveries.


Last Updated 08/8/2009

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