301 Moved Permanently
301 Moved Permanently
openresty
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Summary
Trends and Results - Third Quarter 2009
Financial
Results |
Comments |
I.
Financial Statements |
- During
the third quarter of 2009, the DIF balance declined by
$18.6 billion to negative $8.2 billion largely due to loss
provisions for future failures. The FDIC projects the DIF
will remain negative over the next several years because
approximately $75.0 billion in failure costs are expected
to be incurred from the end of the third quarter through
the end of 2013.
- To
ensure the reserve ratio returns to 1.15 percent within
eight years and to meet the DIF’s liquidity needs,
the FDIC has approved a proposal to require all institutions
to prepay, on December 31, 2009, their estimated risk-based
assessments for the fourth quarter of 2009 and for all
of 2010, 2011, and 2012. The FDIC estimates that the prepaid
assessments will total approximately $45 billion. Although
the DIF’s liquidity will be significantly enhanced
from prepaid assessments inflows, they would not initially
affect the fund balance. Upon receipt of these funds on
December 30, 2009, the DIF would account for the amount
collected as both an asset (cash) and an offsetting liability
(deferred revenue). Thereafter, the DIF would recognize
revenue for the regular risk-based assessments quarterly
as it is earned.
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II.
Investments |
- The
market value (including accrued interest) of the DIF’s
cash and U.S. Treasury securities totaled $23.4 billion
as of September 30, 2009 ($16.3 billion of primary reserve
assets and $7.1 billion in systemic risk-related portfolios).
DIF’s cash and U.S. Treasury securities are available
to fund resolutions as needed. The DIF investment portfolio’s
primary reserve (market value including accrued interest)
decreased by $12.9 billion during the first nine months
of 2009, and totaled $16.3 billion on September 30, 2009.
The total market value of the other DIF-related investment
portfolios – the Debt Guarantee Program, the Transaction
Account Guarantee Program, and the Other Systemic Risk
Reserves portfolio – increased by $4.7 billion during
the first nine months of 2009, and totaled $7.1 billion
on September 30, 2009.
- The
decline in the DIF’s primary reserve portfolio was
largely the result of funding 95 failed institution resolutions
during the first nine months of 2009. However, it should
be noted that 56 of these bank and thrift failures were
resolved as loss-share transactions (in which the acquirers
purchased substantially all of the failed institutions’ assets
and the FDIC and the acquirers entered into loss-share
agreements) requiring little or no initial resolution funding,
thus helping to mitigate the decline in the DIF’s
portfolio value over this period. At quarter-end, the DIF
investment portfolio yield was 2.3 percent, down 232 basis
points from its December 31, 2008, yield of 4.59 percent.
The yield decline stemmed from several factors; in addition
to the sale and maturity of generally higher yielding securities
during the first three quarters, on September 29, 2009,
the DIF portfolio received $8.7 billion in regular and
special assessment funds, and consequently the DIF portfolio
ended the quarter with a very high overnight investment
balance of $8.6 billion earning a low 0.07 percent yield.
- Conventional
Treasury market yields decreased during the third quarter
of 2009, after increasing substantially
during the second quarter of 2009. Treasury yields remain
relatively
low from a historical perspective, largely reflecting the
still comparatively weak U.S. economy, the low federal
funds target
rate, and investors’ modest inflationary expectations.
During the fourth quarter of 2009, Treasury yields are
expected to continue to trade within a range around current
levels,
and to gradually rise over the next several quarters, allowing
that the economic recovery continues to take hold and solidify.
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III.
Budget |
- Approximately
$891.6 million was spent in the Ongoing Operations component
of the 2009 Corporate Operating Budget,
which was $10.6 million (1 percent) below the budget for
the nine months ending September 30, 2009. Spending in the
Outside Services – Personnel expense category was $9.1
million greater than the year-to-date budget, but this amount
was more than offset by the net under spending in other expense
categories. The Salaries and Compensation expense category
was $8.9 million below the year-to-date budget. Nevertheless,
a minor shortfall is projected for the full year in this
budget component. To address this shortfall, the CFO recommended
and the Board approved on October 20, 2009, a $16.0 million
increase in budget authority for Ongoing Operations.
- Approximately
$646.0 million was spent in the Receivership Funding
component of the 2009 Corporate Operating
Budget, which was $81.5 million (11 percent) below the
budget for the nine months ending September 30, 2009. The
Salaries and Compensation and Travel expense categories
were each $26.5 million below their year-to-date budgets.
Together these two variances represented 65 percent of
the total Receivership Funding variance. Approximately
$337.8 million was spent during the third quarter, which
represented a 72 percent increase over spending during
the second quarter. If the trend of monthly spending increases
continues during the fourth quarter, spending will substantially
exceed the current $1 billion budget for this component
before year-end.
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