FDIC Quarterly Banking Profile
DEPOSIT INSURANCE FUND TRENDS
SECOND QUARTER 2017
Deposit Insurance Fund Increases by $2.7 Billion DIF Reserve Ratio Rises 4 Basis Points to 1.24 Percent Three Insured Institutions Fail
The Deposit Insurance Fund (DIF) balance increased by $2.7 billion, to $87.6 billion, during the second quarter. Assessment income of $2.6 billion, which includes temporary assessment surcharges on large banks, drove the fund balance increase. Interest on investments of $251 million, a negative provision for insurance losses of $233 million, and other miscellaneous income of $4 million also added to the fund balance. Operating expenses of $450 million and unrealized losses on available-for-sale securities of $12 million reduced the fund balance. Three insured institutions failed in the second quarter, with combined assets of $4.4 billion.
The deposit insurance assessment base—average consolidated total assets minus average tangible equity—increased by 0.5 percent in the second quarter and by 3.5 percent over 12 months.12 Total estimated insured deposits decreased by 0.4 percent in the second quarter of 2017 but rose by 5.5 percent year-over-year. The DIF’s reserve ratio (the fund balance as a percent of estimated insured deposits) was 1.24 percent on June 30, up from 1.20 percent at March 31, 2017, and 1.17 percent on June 30 of last year. The June 30, 2017, reserve ratio of 1.24 percent is the highest since December 31, 2005, when the reserve ratio was 1.25 percent.3
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.45 Surcharges began in the third quarter of 2016 and will continue through the quarter in which the reserve ratio first meets 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 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