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Summary
Trends and Results -
Fourth Quarter 2004
| Financial Results |
Comments |
| I. Financial Statements |
- Reserve Ratios
are still well above the 1.25 designated reserve ratio (DRR) with
losses in both BIF and SAIF now hovering at historically low levels.
If insured deposit growth increases to historical averages, it may
result in lower reserve ratios going forward.
- OPEX coverage ratio (Interest Revenue/Operating Expenses), which had been on the decline, appears to be leveling off and may head higher with the potential for investment yield increases and steady to lower operating expenses.
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| II. Investments |
- Consensus forecasts predict a marked increase in shorter-term
Treasury yields. However, uncertainties about the strength of the economic
recovery or market sentiments that increases in the Fed funds rate will
keep inflation in check could result in longer-term yields remaining
at current historically low levels for at least the near term.
- If yields do incease, this could lead to increased interest revenue over the long run. Over the short run, increasing yields would likely accelerate the erosion of existing unrealized gains on AFS securities. However, regardless of changes in yields, these unrealized gains will
be reduced due to the passage of time.
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| III. Budget |
- The 2004 Corporate Operating Budget provided $1.090 billion in
spending authority for 2004. Overall spending for the Corporation during
the year was $1.004 billion, which was 8 percent below the budgeted amount.
The majority of this variance occurred in the Receivership Funding component
of the budget.
- Approximately $986 million was spent in the Ongoing Operations
component of the budget, which was about $29 million (3 percent) below the
budgeted level. However, spending in the 4th quarter of 2004 exceeded the
quarterly budget by $19 million in the Ongoing Operations component of the
Corporate Operating Budget. Payments for contracted services exceeded the
quarter’s budget by nearly $13 million and the recording of $7 million
for employee buyout acceptances were the major contributors to the result.
- Approximately $18 million was spent in the Receivership Funding
component of the budget, which was about $57 million (76 percent) below
the budgeted level.
- The attached tables (on pages 12 - 13) for the twelve months
ending December 31, 2004, compare actual expenditures to the approved
Corporate Operating Budget by major expense category and budget component.
In addition, there is a comparison of actual expenditures in the combined
operating and investment budgets to the budget/estimates by division/office.
- On December 7, 2004, the Board revised the 2004 year-end authorized
staff from 5,425 to 5,329. No change was made to the 2004 Corporate Operating
Budget.
- Approximately $12 million in Investment Budget funds that was
estimated to be used in 2004, was not spent and will be available for
expenditures in future periods, in accordance with the board resolutions.
- Significant future savings are anticipated from workforce reshaping
efforts now underway, however, the bulk of those savings will not be
realized until 2006 and beyond.
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| Overall |
- Insurance fund balance sheets and income statements continue to
show solid results.
- Both insurance funds experiencing strong cash flows.
- Both the bank and thrift industries are projected to remain relatively
healthy in 2005.
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