Deposit Insurance Fund Performance
The FDIC administers two deposit insurance funds – the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF) – 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 FDIC’s 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. BIF’s 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.
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.
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 Corporation’s 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 FDIC’s 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
Cash and cash equivalents
Investment in U.S. Treasury obligations, net:
Interest receivable on investments and other assets, net
Receivables from bank resolutions, net
Property and equipment, net
Accounts payable and other liabilities
Contingent liabilities for:
Anticipated failure of insured institutions
Litigation losses and other
Commitments and off-balance-sheet exposure
Accumulated net income
Unrealized gain on available-for-sale securities, net
Total Fund Balance
Total Liabilities and Fund Balance
Bank Insurance Fund Statements of Income and Fund Balance for the Years Ended
December 31, condensed
Dollars in Thousands
Interest on U.S. Treasury obligations
Expenses and Losses
Provision for insurance losses
Insurance and other expenses
Total Expenses and Losses
Unrealized loss on available-for-sale securities, net
Fund Balance - Beginning
Fund Balance - Ending
Bank Insurance Fund Statement of Cash Flows for the Years Ended December 31, condensed
Dollars in Thousands
Adjustments to reconcile net income to net cash provided by operating activities: