Wednesday, August 24, 2011

FDIC Deposit Insurance Fund Balance Turns Positive (Chart) *Previously negative for 7 quarters*

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FDIC Quarterly Banking Profile

DIF Balance Turns Positive (FDIC, August 23, 2011) The condition of the Deposit Insurance Fund (DIF) continues to improve. The DIF increased by $4.9 billion during the second quarter of 2011 to $3.9 billion (unaudited), the sixth consecutive quarterly increase. This is the first positive quarter-end balance since June 30, 2009. Assessment income of $3.2 billion and a $2.1 billion negative provision for insurance losses were the primary contributors to the improvement in the DIF balance. Interest earnings, combined with unrealized gains on available-for-sale securities and other net revenue, increased the fund by another $144 million. Operating expenses reduced the fund balance by $463 million.

FDIC Deposit Insurance Fund The FDIC Deposit Insurance Fund balance was +$3.92 billion at the quarter ending 6-30-11. This is the first positive balance since the QE 6-30-09 (+$10.37 billion) and after 7 consecutive negative quarters. The peak balance was +$52.84 billion at QE 3-31-08. This was before the 2008 USA financial system crisis and Great Recession. The low balance was -$20.86 billion at the QE 12-31-09. The Provision for Insurance Losses (PIL), the cost of seizing and liquidating failed banks, was -$2.1 billion, a negative expense, at the QE 6-30-11 and has been negative 4 of the past 5 quarters. The PIL peaked at +$21.69 billion for the QE 9-30-09. Prior to the QE 3-31-08, the PIL was an immaterial amount, positive or negative, of less than $100 million.

Conclusion The FDIC Deposit Insurance Fund (DIF) balance and related Provision for Insurance Losses (PIL) indicate continued improvement through the three months ended June 30, 2011. The DIF balance has turned positive after 7 consecutive quarters with a negative balance. The PIL has been negative, a negative expense, 4 of the past 5 quarters. The PIL is increased, and therefore the DIF decreased, as a result of bank failures and the resulting costs of seizure and liquidation. However, the FDIC problem bank list remains extremely high which indicates ongoing bank failures and DIF costs. Bank failures and the related charts of total failures and cost to the FDIC Deposit Insurance Fund are posted weekly on this blog.

About the FDIC

Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 7,575 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.

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