FDIC Quarterly Banking Profile
DEPOSIT INSURANCE FUND TRENDS
FOURTH QUARTER 2017
Deposit Insurance Fund Increases by $2.2 Billion Insured Deposits Grow by 0.8 Percent DIF Reserve Ratio Rises 2 Basis Points to 1.30 Percent
The Deposit Insurance Fund (DIF) balance increased by $2.2 billion, to $92.7 billion, during the fourth quarter. Assessment income of $2.7 billion, which includes temporary assessment surcharges on large banks, was the largest source of the increase. Interest income and other revenue of $308 million, and a negative provision for insurance losses of $203 million, also increased the fund balance. Operating expenses of $443 million, unrealized losses on available-for-sale securities of $461 million, and other unrealized losses of $20 million partially offset the increase in the fund balance.1 Two insured institutions with combined assets of $199 million failed in the fourth quarter. Eight insured institutions with combined assets of $5.1 billion failed in all of 2017.
The deposit insurance assessment base—average consolidated total assets minus average tangible equity—increased by 1.1 percent in the fourth quarter and by 3.0 percent over 12 months.2 3 Total estimated insured deposits increased by 0.8 percent in the fourth quarter of 2017 and by 3.5 percent year-over-year. The DIF's reserve ratio (the fund balance as a percent of estimated insured deposits) rose to 1.30 percent on December 31, 2017, from 1.28 percent at September 30, 2017, and 1.20 percent four quarters ago. The December 31, 2017, reserve ratio is the highest for the DIF since December 31, 2004, when the reserve ratio was 1.31 percent.4
By law, the reserve ratio must reach a minimum of 1.35 percent by September 30, 2020. The law also requires that, in setting assessments, the FDIC offset the effect of the increase in the reserve ratio from 1.15 to 1.35 percent on banks with less than $10 billion in assets. To satisfy these requirements, large banks are subject to a temporary surcharge of 4.5 basis points of their assessment base, after making certain adjustments.5 6 Surcharges began in the third quarter of 2016 and will continue through the quarter in which the reserve ratio reaches or exceeds 1.35 percent. If, however, the reserve ratio has not reached 1.35 percent by the end of 2018, large banks will pay a shortfall assessment in early 2019 to close the gap.
Small banks will receive credits to offset the portion of their assessments that help to raise the reserve ratio from 1.15 percent to 1.35 percent. When the reserve ratio is at or above 1.38 percent, the FDIC will automatically apply a small bank's credits to reduce its regular assessment up to the entire amount of the assessment.
TABLE II-C. Problem Institutions and Failed Institutions