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2004 Annual Report Highlights

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II. Financial Statements

Deposit Insurance Fund Performance
The FDIC administers two deposit insurance funds Ė the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF) Ė and manages the FSLIC Resolution Fund (FRF), which fulfills the obligations of the former Federal Savings and Loan Insurance Corporation (FSLIC) and the former Resolution Trust Corporation (RTC). The following summarizes the condition of the FDICís insurance funds.

The BIF reported comprehensive income (net income plus current period unrealized gains /losses on available-for-sale securities) of $1 billion for the twelve months ending December 31, 2004, compared to $1.7 billion for the same period in the prior year. This reduction was primarily due to an increase in unrealized losses on available-for-sale securities of $102 million and a reduction in net income of $625 million. The decline in net income primarily resulted from a smaller negative adjustment of $269 million to the provision for losses at December 31, 2004, compared to a negative $931 million adjustment for the same period last year. BIFís provision for losses negative adjustments were mostly attributable to the reduction of estimated losses for future and actual failures. As of December 31, 2004, the fund balance was $34.8 billion, up from $33.8 billion at year-end 2003.

The SAIF reported comprehensive income of $480 million for the twelve months ending December 31, 2004, compared to $493 million for the same period in the prior year. This reduction of $13 million was primarily due to slightly lower earnings on U.S.Treasury obligations whereby a $30 million increase in unrealized losses was partially offset by a $23 million increase in interest revenue.

As of December 31, 2004, the fund balance was $12.7 billion, up from $12.2 billion at year-end 2003.

Operating Expenses
Corporate Operating Budget expenses totaled $1.004 billion in 2004, including $986 million in ongoing operations and $18 million for receivership funding. This represented approximately 97 percent of the approved budget on ongoing operations and 24 percent of the approved budget for receivership funding. Receivership funding expenses were down significantly from 2003 because the four financial institution failures in 2004 were relatively small banks.

In December 2004, the Board of Directors approved a 2005 Corporate Operating Budget of approximately $1.1 billion, including just over $1.0 billion for ongoing operations. The level of approved spending in the 2005 budget remains virtually the same as that in 2004 due to continuing efforts to identify operational efficiencies and control costs. The Corporate Operating Budget includes funding for a number of major new initiatives, including funding for a Hispanic financial literacy program, and hiring additional financial analysts and risk modeling specialists to prepare for implementation of the Basel Capital Accord.

FDIC-Insured Deposits (estimated 1960-2004) chartd

Investment Spending
The FDIC has a disciplined process for reviewing proposed new capital investment projects and managing the implementation of approved projects. Most of the projects in the current investment portfolio are major IT system initiatives.

Proposed projects are carefully reviewed to ensure that they are consistent with the Corporationís enterprise architecture and include an appropriate return on investment for the insurance funds. The process also enables the FDIC to be aware of risks to the major capital investment projects and facilitates appropriate, timely intervention to address these risks throughout the development process. An investment portfolio performance review of the major capital investments is provided to the FDICís Board of Directors quarterly. During 2004, the Board of Directors approved only one new investment project, a new Web-based time and attendance reporting system. Additional spending was also approved for three existing investment projects: (1) Legal Integrated Management System increased by $1.4 million to $5.06 million, (2) New Financial Environment increased $17 million to $51.8 million, and (3) ViSION increased $6.2 million to $12.7 million.

Bank Insurance Fund Balance Sheets at December 31, condensed
Dollars in Thousands
  2004 2003
Cash and cash equivalents $1,822,005 $2,544,281
Investment in U.S. Treasury obligations, net:
  Held-to-maturity securities 22,637,330 16,293,073
  Available-for-sale securities 9,470,605 14,209,773
Interest receivable on investments and other assets, net 601,498 550,999
Receivables from bank resolutions, net 375,303 511,089
Property and equipment, net 357,106 287,380
Total Assets $35,263,847 $34,396,595
Liabilities
Accounts payable and other liabilities $268,680 $231,441
Contingent liabilities for:
  Anticipated failure of insured institutions 8,261 178,266
  Litigation losses and other 200,301 204,693
Total Liabilities 477,242 614,400
Commitments and off-balance-sheet exposure
Fund Balance
Accumulated net income 34,096,676 32,979,898
Unrealized gain on available-for-sale securities, net 689,929 802,297
Total Fund Balance 34,786,605 33,782,195
Total Liabilities and Fund Balance $35,263,847 $34,396,595


Bank Insurance Fund Statements of Income and Fund Balance for the Years Ended
December 31, condensed
Dollars in Thousands
  2004 2003
Interest on U.S. Treasury obligations $1,552,576 $1,530,014
Assessments 95,268 80,159
Other revenue 27,553 15,831
Total Revenue 1,675,397 1,626,004
Expenses and Losses
Operating expenses 822,381 805,496
Provision for insurance losses (269,368) (931,164)
Insurance and other expenses 5,606 9,945
Total Expenses and Losses 558,619 (115,723)
Net Income 1,116,778 1,741,727
Unrealized loss on available-for-sale securities, net (112,368) (9,872)
Comprehensive Income 1,004,410 1,731,855
Fund Balance - Beginning 33,782,195 32,050,340
Fund Balance - Ending $34,786,605 $33,782,195


Bank Insurance Fund Statement of Cash Flows for the Years Ended December 31, condensed
Dollars in Thousands
  2004 2003
  Net Income: $1,116,778 $1,741,727
    Adjustments to reconcile net income to net cash provided by operating activities:
    Amortization of U.S. Treasury obligations 737,439 455,628
    Treasury inflation-indexed securities (TIIS) inflation adjustment (181,650) (115,150)
    Depreciation on property and equipment 54,424 54,947
    Provision for losses (269,368) (931,164)
    Terminations/adjustments of work-in-process accounts 817 92
  Change In Operating Assets and Liabilities:
    (Increase) in interest receivable and other assets (36,433) (69,826)
    Decrease in receivables from bank resolutions 218,693 102,663
    Increase in accounts payable and other liabilities 15,819 85,577
    (Decrease) in contingent liabilities for litigation losses and other (1,047) (25,367)
Net Cash Provided by Operating Activities 1,655,472 1,299,127
Investing Activities
  Provided by:
    Maturity of U.S. Treasury obligations, held-to-maturity 3,365,000 3,890,000
    Maturity of U.S. Treasury obligations, available-for-sale 5,810,000 1,690,000
  Used by:
    Purchase of property and equipment (104,502) (41,804)
    Purchase of U.S. Treasury obligations, held-to-maturity (10,026,597) (3,659,868)
    Purchase of U.S. Treasury obligations, available-for-sale (1,421,649) (5,240,070)
Net Cash Used by Investing Activities (2,377,748) (3,361,742)
Net Decrease in Cash and Cash Equivalents (722,276) (2,062,615)
Cash and Cash Equivalents - Beginning 2,544,281 4,606,896
Cash and Cash Equivalents - Ending $1,822,005 $2,544,281


Savings Association Insurance Fund Balance Sheet at December 31, condensed
Dollars in Thousands
  2004 2003
Cash and cash equivalents $644,346 $827,141
Cash and other assets: Restricted for SAIF-member exit fees(Includes cash and cash equivalents of $56.5 million and $231.9 million at December 31, 2004 and 2003, respectively) 328,394 319,286
Investment in U.S. Treasury obligations, net:
  Held-to-maturity securities 8,835,964 6,823,709
  Available-for-sale securities 2,720,315 4,152,048
Interest receivable on investments and other assets, net 200,204 188,189
Receivables from thrift resolutions, net 346,923 273,242
Total Assets $13,076,146 $12,583,615
Liabilities
Accounts payable and other liabilities $25,568 $20,540
Contingent liabilities for:
  Anticipated failure of insured institutions 1,957 3,192
  Litigation losses 39 532
SAIF-member exit fees and investment proceeds held in escrow 328,394 319,286
Total Liabilities 355,958 343,550
Commitments and off-balance-sheet exposure
Fund Balance
Accumulated net income 12,482,227 11,965,776
Unrealized gain on available-for-sale securities, net 237,961 274,289
Total Fund Balance 12,720,188 12,240,065
Total Liabilities and Fund Balance $13,076,146 $12,583,615


Savings Association Insurance Fund Statement of Income and Fund Balance for the Years Ended December 31, condensed
Dollars in Thousands
  2004 2003
Interest on U.S. Treasury obligations $555,592 $532,474
Assessments 8,891 14,594
Other revenue 292 192
Total Revenue 564,775 547,260
Expenses and Losses
Operating expenses 120,282 129,584
Provision for insurance losses (72,162) (82,489)
Insurance and other expenses 204 105
Total Expenses and Losses 48,324 47,200
Net Income 516,451 500,060
Unrealized loss on available-for-sale securities, net (36,328) (6,733)
Comprehensive Income 480,123 493,327
Fund Balance - Beginning 12,240,065 11,746,738
Fund Balance - Ending $12,720,188 $12,240,065


Savings Association Insurance Fund Statement of Cash Flows for the Years Ended December 31, condensed
Dollars in Thousands
  2004 2003
  Net Income: $516,451 $500,060
    Adjustments to reconcile net income to net cash provided by operating activities:
    Amortization of U.S. Treasury obligations 262,317 155,992
    Treasury inflation-indexed securities (TIIS) inflation adjustment (61,431) (38,943)
    Provision for losses (72,162) (82,489)
  Change in Operating Assets and Liabilities:
    Decrease in unamortized premium and discount of U.S. Treasury
    Obligations (restricted)
2,443 931
    (Increase) in entrance and exit fees receivable, including interest
    receivable on investments and other assets
(16,288) (32,810)
    (Increase)/Decrease in receivables from thrift resolutions (2,635) 8,699
    Increase in accounts payable and other liabilities 5,028 13,440
    (Decrease) in contingent liabilities for litigation losses 0 (209)
    Increase in exit fees and investment proceeds held in escrow 9,107 7,422
Net Cash Provided by Operating Activities 642,830 532,093
Investing Activities
  Provided by:
    Maturity of U.S. Treasury obligations, held-to-maturity 1,690,000 1,170,000
    Maturity of U.S. Treasury obligations, available-for-sale 1,360,000 575,000
  Used by:
    Purchase of U.S. Treasury obligations, held-to-maturity (4,051,084) (2,305,056)
    Purchase of U.S. Treasury obligations, available-for-sale 0 (1,008,066)
Net Cash Used by Investing Activities (1,001,084) (1,568,122)
Net Decrease in Cash and Cash Equivalents (358,254) (1,036,029)
Cash and Cash Equivalents - Beginning 1,059,052 2,095,081
  Unrestricted Cash and Cash Equivalents - Ending $644,346 $827,141
  Restricted Cash and Cash Equivalents - Ending $56,452 $231,911
Cash and Cash Equivalents - Ending $700,798 $1,059,052


FSLIC Resolution Fund Balance Sheets at December 31, condensed
Dollars in Thousands
  2004 2003
Cash and cash equivalents $3,501,387 $3,278,532
Receivables from thrift resolutions and other assets, net 82,275 198,432
Total Assets $3,583,662 $3,476,964
Liabilities
Accounts payable and other liabilities $5,606 $19,381
Contingent liabilities for litigation losses and other 410 1,169
Total Liabilities 6,016 20,550
Resolution Equity
Contributed capital 126,382,877 126,377,851
Accumulated deficit (122,805,158) (122,962,936)
Unrealized (loss)/gain on available-for-sale securities, net (73) 41,499
Accumulated deficit, net (122,805,231) (122,921,437)
Total Resolution Equity 3,577,646 3,456,414
Total Liabilities and Resolution Equity $3,583,662 $3,476,964


FSLIC Resolution Fund Statements of Income and Accumulated Deficit for the Years Ended December 31, condensed
Dollars in Thousands
  2004 2003
Interest on U.S. Treasury obligations $40,076 $32,902
Realized gain on investment in securitization-related assets acquired from receiverships 66,708 756
Other revenue 21,114 16,849
Total Revenue 127,898 50,507
Expenses and Losses
Operating expenses 22,932 27,828
Provision for losses (6,911) (33,306)
Expenses for goodwill settlements and litigation 31,632 15,324
Recovery of tax benefits (82,937) (19,609)
Other expenses 5,404 7,933
Total Expenses and Losses (29,880) (1,830)
Net Income 157,778 52,337
Unrealized loss on available-for-sale securities, net (41,572) (1,258)
Comprehensive Income 116,206 51,079
Accumulated Deficit - Beginning (122,921,437) (122,972,516)
Accumulated Deficit - Ending $(122,805,231) $(122,921,437)


FSLIC Resolution Fund Statements of Cash Flows for the Years Ended December 31, condensed
Dollars in Thousands
  2004 2003
Net Income: $157,778 $52,337
Adjustments to reconcile net income to net cash provided by operating activities:
Provision of losses (6,911) (33,306)
Change in Assets and Liabilities:
(Increase)/Decrease in receivables from thrift resolutions and other assets (35,238) (80,339)
(Decrease)/Increase in accounts payable and other liabilities (13,775) 4,973
Net Cash Provided by Operating Activities 101,854 104,343
Investing Activities
Investment in securitization-related assets acquired from receiverships 115,975 5,829
Net Cash Provided by Investing Activities 115,975 5,829
Financing Activities
Provided by:
U.S.Treasury payments for goodwill settlements 5,026 30
Used by:
Payments to Resolution Funding Corporation 0 (450,000)
Net Cash Provided/(Used) by Financing Activities 5,026 (449,970)
 
Net Increase/(Decrease) in Cash and Cash Equivalents 222,855 (339,798)
Cash and Cash Equivalents - Beginning 3,278,532 3,618,330
Cash and Cash Equivalents - Ending $3,501,387 $3,278,532



Last Updated 06/10/2005 communications@fdic.gov