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Summary
Trends and Results -
Third Quarter 2005
| Financial Results |
Comments |
| I. Financial
Statements |
- Deposit insurance fund reserve ratios remain above the 1.25
percent designated reserve ratio (DRR); however, if estimated insured
deposits continue to increase in line with recent growth rates, it is
likely that the funds’ reserve ratios will trend lower absent
higher deposit insurance assessments. If deposit insurance reform had
already been enacted, the combined reserve ratio for BIF and SAIF would
have been 1.29 percent as of June 30, 2005 (this assumes that the current
SAIF escrow funds are included in the combined fund, as the proposed
legislation would allow).
- BIF’s fund balance increased by a modest $240 million
during the third quarter of 2005 (by approximately 0.7 percent) to
$35.3 billion while SAIF’s fund balance increased by $110 million
(0.9 percent) to $13.0 billion. As noted above, these rates of fund
growth may not be sufficient to offset the growth in BIF’s and
SAIF’s estimated insured deposits, thus
resulting in lower reserve ratios in the future.
- BIF’s and SAIF’s OPEX coverage ratios (Interest
Revenue/Operating Expenses), which had generally been on
the decline since 2001, have modestly increased during the first nine
months
of 2005 and may increase further going forward with the potential
for
generally steady-to-higher investment portfolio interest
revenue
and steady-to-lower operating expenses.
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| II. Investments |
- As highlighted in the Executive Summary, during the first nine
months of 2005, the BIF portfolio’s yield increased by 10 basis points,
rising to 4.76 percent, while the SAIF portfolio’s yield increased
by 16 basis points, rising to 4.85 percent. Expectations are for Treasury
market yields to rise modestly, which should lead to increased interest
revenue over the long run. However, over the next 12 months, $6.2 billion
par value of BIF securities yielding 4.61 percent and $1.9 billon par value
of SAIF securities yielding 4.37 percent will mature. Absent significant
increases in Treasury market yields, the BIF portfolio’s yield will
likely decline over the next 12 months and the SAIF portfolio’s yield
will likely level off.
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| III. Budget |
- Approximately $716 million was spent in the Ongoing Operations
component of the Corporate Operating Budget, which was $29 million (4
percent) below the budget for the nine months ending September 30, 2005.
This was
$26 million higher than the $690 million spent for the nine months ending
September 30, 2004. Much of this increase is due to the $22 million paid
for separation incentives in 2005.
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| Overall |
- During the first three quarters of 2005, the deposit insurance
fund balance sheets and income statements continue to show solid results.
- Both insurance funds continue to experience strong cash flows.
- Both the bank and thrift industries are projected to remain
relatively healthy for the remainder of 2005.
- In the absence of a deceleration in the recent growth rate
of estimated insured deposits, the BIF reserve ratio may
fall below the designated reserve ratio, perhaps before the end of 2005.
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