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1st Quarter - 2008

This edition of our Letter to Stakeholders highlights the FDIC’s activities and accomplishments during the first quarter of 2008. Despite the difficulties stemming from the decline in housing prices, mortgage sector problems, and a slowdown in the economy, the Deposit Insurance Fund (DIF) remains financially strong with 99 percent of FDIC-insured institutions well-capitalized at year-end 2007. We are focusing our attention on maintaining the safety and soundness of the institutions we insure and are prepared to move promptly to handle any bank failures that may occur. For more information about the FDIC, please visit our Web site at www.fdic.gov.

Our Priorities

Depositor Protection

• The FDIC received its sixteenth consecutive set of unqualified audit opinions on the financial statements for the DIF and the FSLIC Resolution Fund. The Government Accountability Office also reported no material weaknesses or significant deficiencies with respect to the Corporation’s financial reporting or controls over financial systems.
  
  
• The DIF earned assessment income of $643 million in 2007. The FDIC estimates assessment income earned of $448 million in the first quarter of 2008. The FDIC Board of Directors voted to keep the assessment rates charged to insured financial institutions unchanged for 2008.
  
  
• During the first quarter of 2008, DIF’s contingent liability for anticipated failures increased by $459 million to $583 million at quarter end. This increase, due to the continued deterioration in the banking industry’s financial conditions, is reflected in the DIF’s Provision for Insurance Losses.

• The FDIC issued a Financial Institution Letter – Managing Commercial Real Estate Concentrations in a Challenging Environment. The Letter re-emphasizes the importance of strong capital and loan loss allowance levels, and robust credit risk management practices for state nonmember institutions with significant concentrations of commercial real estate and construction development loans.

Mission Support

• The FDIC is strongly encouraging state nonmember institution mortgage servicers to report their loan modification and foreclosure prevention efforts through the HOPE NOW Alliance, and to support the efforts of the State Foreclosure Prevention Working Group.

• In response to changing economic conditions, the FDIC increased the frequency of its special examination activities, including targeted reviews of selected issues conducted between regularly scheduled examinations, and activities conducted in cooperation with other federal banking agencies. The FDIC has also continued to increase the number of field examiners (including the hiring of both retired annuitants and mid-career professionals) to accommodate increasing workload. 

• The FDIC selected 31 banks to participate in a two-year pilot project to help the agency identify best practices in affordable small-dollar loan programs that can be replicated by other financial institutions. Participating financial institutions that offer these products in a safe and sound manner may receive favorable consideration under the Community Reinvestment Act.