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Executive Summary -
Fourth Quarter 2004
This report summarizes the
Corporation's financial activities and results for the twelve months
of 2004.
- Overall, the deposit insurance funds remained financially sound
and exhibited healthy earnings during 2004. Additionally, the estimated level
of probable and reasonably estimable failure activity at year-end is at historically
low levels for both insurance funds. However, as a result of changes in loss
provisions during the prior year and reductions in unrealized gains on available-for-sale
securities in the current year, there is a significant decline in year-over-year
comprehensive income for BIF and a moderate decline for SAIF.
- The decision to expedite the liquidation of the remaining non-cash
assets of the FSLIC Resolution Fund (FRF) continues to yield tangible results.
During 2004, the book value of FRF assets in liquidation declined by 49
percent and now stands at only $64 million.
- Operating- and investment-related expenses ran below budget by 8
percent and 10 percent, respectively. The variance with respect to the
operating budget expenses was primarily the result of limited resolutions
and receivership
activities, including newly initiated bank closings during the year. A
detailed report on the status of the investment-related expenses, except Virginia
Square – Phase
II, is provided separately to the Board by the Capital Investment Review
Committee.
- Staff believes that the Treasury yield environment will reflect
greater-than-normal economic uncertainties over the near term. Assuming
that the nascent economic recovery continues, an attendant rise in yields
will
result in lower unrealized gains for BIF’s and SAIF’s current
holdings of available-for-sale (AFS) securities. However, new investments
could be made at these anticipated higher yields that would increase portfolio
yields.
On the pages following is an assessment of each the three major finance areas: financial statements,
investments, and budget.
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