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Executive
Summary -
Fourth Quarter 2006
This report highlights the
Corporation's financial activities and results for the twelve-month
period ending December 31, 2006.
- The Deposit
Insurance Fund (DIF) fund balance grew by approximately 3 percent
to $50.2 billion during 2006, versus a 2 percent increase during
2005. The DIF’s 2006 comprehensive income of $1.6 billion compares
favorably to $1.1 billion for 2005. Seventy-two percent ($345
million) of this year-over-year increase is attributable to recognizing
the
former SAIF’s restricted exit fee revenue (and cumulative interest
earned on that revenue) as income upon the merger of the BIF
and SAIF on March 31, 2006, as called for in the recently enacted
deposit insurance
reform legislation.
- In October
2006, Preliminary Statements of One-Time Assessment Credit were made
available
to all insured depository institutions in
accordance with the final rule implementing the one-time assessment
credit as called for under deposit insurance reform legislation.
Institutions had until December 18, 2006, to submit a request for review
if
they disagreed
with any of the information presented on the Preliminary Statement,
such as the December 31, 1996, assessment base or the credit
eligibility criteria.
Claims as to the Preliminary Statement relying on the de facto
provisions also were subject to the December 18, 2006, deadline.
The FDIC received
89 requests for review of the one-time assessment credit that were
postmarked on or before December 18, 2006. Of these 89 requests
for review, staff
has identified 23 that did not actually dispute the credit amounts.
Of the remaining 66 requests for review, the FDIC is performing
reviews and is issuing written determinations on their findings. Institutions
have 30 days from the date of the written notification to submit
an appeal
to the FDIC Assessment
Appeals Committee.
- The
DIF’s 2006 interest earned on investment securities was
$2.241 billion, a decline of $101 million from 2005 interest
totaling $2.342 billion. The decline is attributable to lower
inflation compensation related to the DIF’s holdings of
Treasury Inflation-Protected Securities (TIPS). In fact, a measure
of the DIF’s core interest earnings—that is, interest
earned excluding TIPS inflation compensation—increased
by $135 million in 2006 to $2.131 billion, reflecting somewhat
higher average investment security yields and a larger investment
security balance. The TIPS inflation compensation declined by
$236 million in 2006, from $345 million in 2005 to $109 million
in 2006. TIPS inflation compensation is the additional revenue
earned reflecting (lagged) increases in the overall Consumer
Price Index for All Urban Consumers (CPI-U). For the 12-month
period corresponding to 2005 TIPS inflation compensation, the
CPI-U increased 4.3 percent, largely stemming from higher consumer
energy prices over that period. In contrast, for the 12-month
period corresponding to 2006 TIPS inflation compensation, the
CPI-U increased only 1.3 percent, largely stemming from declining
consumer energy prices over this more recent period.
- For the
twelve months ending December 31, 2006, expenditures under the
Corporate Operating Budget ran 8 percent below budget, and expenditures
under
the Investment Budget ran 9 percent below budget. The variance
with respect to the Corporate Operating Budget was primarily the result
of limited spending on resolutions and receivership activities
in the
Receivership Funding component of the budget throughout the year.
Detailed quarterly reports are provided separately to the Board for
the IT projects
included in the Investment Budget by the Capital Investment Review
Committee.
- Approximately
$6.7 million (74 percent) of the $9.05 million supplemental budget
approved
by the Board of Directors in March for the
implementation of deposit insurance reform was spent through December
31, 2006.
On
the pages following is an assessment of each of the three major finance
areas:
financial statements, investments, and budget.
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