1. Legislative History and Operations of the Savings Association Insurance
Fund
Legislative History
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)
was enacted to reform, recapitalize, and consolidate the federal deposit insurance system.
The FIRREA created the Savings Association Insurance Fund (SAIF), the Bank Insurance Fund
(BIF), and the FSLIC Resolution Fund (FRF). It also designated the Federal Deposit
Insurance Corporation (FDIC) as the administrator of these funds. All three funds are
maintained separately to carry out their respective mandates.
The SAIF and the BIF are insurance funds responsible for protecting insured
thrift and bank depositors from loss due to institution failures. The FRF is a resolution
fund responsible for winding up the affairs of the former Federal Savings and Loan
Insurance Corporation (FSLIC) and liquidating the assets and liabilities transferred from
the former Resolution Trust Corporation (RTC).
Pursuant to the Resolution Trust Corporation Completion Act of 1993 (RTC
Completion Act), resolution responsibility transferred from the RTC to the SAIF on July 1,
1995. Prior to that date, thrift resolutions were the responsibility of the RTC (January
1, 1989 through June 30, 1995) or the FSLIC (prior to 1989).
Pursuant to FIRREA, an active institution’s insurance fund membership and
primary federal supervisor are generally determined by the institution’s charter
type. Deposits of SAIF-member institutions are generally insured by the SAIF; SAIF members
are predominantly thrifts supervised by the Office of Thrift Supervision (OTS). Deposits
of BIF-member institutions are generally insured by the BIF; BIF members are predominantly
commercial and savings banks supervised by the FDIC, the Office of the Comptroller of the
Currency, or the Federal Reserve Board.
In addition to traditional thrifts and banks, several other categories of
institutions exist. The Federal Deposit Insurance Act (FDI Act), Section 5(d)(3), provides
that a member of one insurance fund may, with the approval of its primary federal
supervisor, merge, consolidate with, or acquire the deposit liabilities of an institution
that is a member of the other insurance fund without changing insurance fund status for
the acquired deposits. These institutions with deposits insured by both insurance funds
are referred to as Oakar financial institutions. The FDI Act, Section 5(d)(2)(G), allows
SAIF-member thrifts to convert to a bank charter and retain their SAIF membership. These
institutions are referred to as Sasser financial institutions. The Home Owners’ Loan
Act (HOLA), Section 5(o), allows BIF-member banks to convert to a thrift charter and
retain their BIF membership. These institutions are referred to as HOLA thrifts.
Other Significant Legislation
The Competitive Equality Banking Act of 1987 established the Financing Corporation (FICO)
as a mixed-ownership government corporation whose sole purpose was to function as a
financing vehicle for the FSLIC.
The Omnibus Budget Reconciliation Act of 1990
(1990 OBR Act) and the Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) made changes to the FDIC's assessment authority (see Note 7)
and borrowing authority. The FDICIA also requires the FDIC to: 1) resolve failing
institutions in a manner that will result in the least possible cost to the deposit
insurance funds and 2) maintain the insurance funds at 1.25 percent of insured deposits or
a higher percentage as circumstances warrant.
The Deposit Insurance Funds Act of 1996 (DIFA) was enacted to provide for: 1) the
capitalization of the SAIF to its designated reserve ratio (DRR) of 1.25 percent by means
of a one-time special assessment on SAIF-insured deposits; 2) the expansion of the
assessment base for payments of the interest on obligations issued by the FICO to include
all FDIC-insured thrifts and banks; 3) beginning January 1, 1997, the imposition of a FICO
assessment rate on SAIF-assessable deposits that is five times the rate for BIF-assessable
deposits through the earlier of December 31, 1999, or the date on which the last savings
association ceases to exist; 4) the payment of the annual FICO interest obligation of
approximately $790 million on a pro rata basis between thrifts and banks on the earlier of
January 1, 2000, or the date on which the last savings association ceases to exist; 5)
authorization of SAIF assessments only if needed to maintain the fund at the DRR; 6) the
refund of amounts in the SAIF in excess of the DRR with such refund not to exceed the
previous semiannual assessment; 7) assessment rates for SAIF members not lower than the
assessment rates for BIF members with comparable risk; and 8) the merger of the SAIF and
the BIF on January 1, 1999, if no insured depository institution is a savings association
on that date. Congress did not enact legislation to either merge the SAIF and the BIF or
to eliminate the thrift charter.
The DIFA required the establishment of a Special Reserve of the SAIF if, on January 1,
1999, the reserve ratio exceeded the DRR of 1.25 percent. The reserve ratio exceeded the
DRR by approximately 0.14 percent on January 1, 1999. As a result, $978 million was placed
in a Special Reserve of the SAIF and was administered by the FDIC. On November 12, 1999,
the Gramm-Leach-Bliley Act (GLBA) was enacted which eliminated the SAIF Special Reserve.
The GLBA was enacted in order to modernize the financial services industry (banks,
brokerages, insurers, and other financial service providers). The GLBA lifts restrictions
on affiliations among banks, securities firms, and insurance companies. It also expands
the financial activities permissible for financial holding companies and insured
depository institutions, their affiliates and subsidiaries.
Recent
Legislative Initiatives
Congress continues to focus on legislative
proposals that would affect the deposit insurance funds. The FDIC has proposed an
initiative to reform the deposit insurance system. Some of the proposals, such as deposit
insurance pricing and determining deposit insurance levels, may have a significant impact
on the SAIF and the BIF, if enacted into law. However, these proposals continue to vary
and FDIC management cannot predict which provisions, if any, will ultimately be enacted.
Operations of the
SAIF
The primary
purpose of the SAIF is to: 1) insure the deposits and protect the depositors of
SAIF-insured institutions and 2) resolve failed institutions, including managing and
liquidating their assets. In this capacity, the SAIF has financial responsibility for all
SAIF-insured deposits held by SAIF-member institutions and by BIF-member banks designated
as Oakar financial institutions.
The SAIF is primarily funded from interest
earned on investments in U.S. Treasury obligations and SAIF assessment premiums.
Additional funding sources are borrowings from the U.S. Treasury, the Federal Financing
Bank (FFB), and the Federal Home Loan Banks, if necessary. The 1990 OBR Act established
the FDIC's authority to borrow working capital from the FFB on behalf of the SAIF and the
BIF. The FDICIA increased the FDIC's authority to borrow for insurance losses from the
U.S. Treasury, on behalf of the SAIF and the BIF, from $5 billion to $30 billion. The
FDICIA also established a limitation on obligations that can be incurred by the SAIF,
known as the maximum obligation limitation (MOL). As of December 31, 2000 and December
31,1999, the MOL for the SAIF was $18.4 billion and $16.7 billion, respectively.
Receivership
Operations
The FDIC is responsible for managing and disposing
of the assets of failed institutions in an orderly and efficient manner. The assets held
by receivership entities, and the claims against them, are accounted for separately from
SAIF assets and liabilities to ensure that liquidation proceeds are distributed in
accordance with applicable laws and regulations. Also, the income and expenses
attributable to receiverships are accounted for as transactions of those receiverships.
Liquidation expenses paid by the SAIF on behalf of the receiverships are recovered from
those receiverships.
2. Summary of
Significant Accounting Policies
General
These financial statements pertain to the financial
position, results of operations, and cash flows of the SAIF and are presented in
accordance with generally accepted accounting principles (GAAP). These statements do not
include reporting for assets and liabilities of closed thrift institutions for which the
FDIC acts as receiver or liquidating agent. Periodic and final accountability reports of
the FDIC's activities as receiver or liquidating agent are furnished to courts,
supervisory authorities, and others as required.
Use of Estimates
FDIC management makes estimates and assumptions
that affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates. Where it is reasonably possible that
changes in estimates will cause a material change in the financial statements in the near
term, the nature and extent of such changes in estimates have been disclosed.
Cash Equivalents
Cash equivalents are short-term, highly liquid
investments with original maturities of three months or less. Cash equivalents consist
primarily of Special U.S. Treasury Certificates.
Investments in
U.S. Treasury Obligations
Investments in U.S. Treasury obligations are recorded pursuant to the Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." SFAS No. 115 requires that securities be classified in
one of three categories: held-to-maturity, available-for-sale, or trading. The SAIF does
not designate any securities as trading. Securities designated as held-to-maturity are
shown at amortized cost. Amortized cost is the face value of securities plus the
unamortized premium or less the unamortized discount. Amortizations are computed on a
daily basis from the date of acquisition to the date of maturity. Securities designated as
available-for-sale are shown at market value, which approximates fair value. Unrealized
gains and losses are included in Comprehensive Income. Realized gains and losses are
included in the Statements of Income and Fund Balance as components of Net Income.
Interest on both types of securities is calculated on a daily basis and recorded monthly
using the effective interest method.
Allowance for Losses on Receivables From Thrift
Resolutions
The SAIF records a receivable for the amounts advanced and/or obligations incurred for
resolving failing and failed thrifts. Any related allowance for loss represents the
difference between the funds advanced and/or obligations incurred and the expected
repayment. The latter is based on estimates of discounted cash recoveries from the assets
of assisted or failed thrifts, net of all applicable estimated liquidation costs.
Cost Allocations Among Funds
Operating expenses not directly charged to the funds are allocated to all funds
administered by the FDIC using workload-based-allocation percentages. These percentages
are developed during the annual corporate planning process and through supplemental
functional analyses.
Postretirement Benefits Other Than Pensions
The FDIC established an entity to provide the accounting and administration of
postretirement benefits on behalf of the SAIF, the BIF, and the FRF. Each fund has fully
paid its liability for these benefits directly to the entity. The SAIF’s prepaid or
accrued postretirement benefit cost is presented in the SAIF’s Statements of
Financial Position.
Disclosure About Recent Accounting Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of SFAS No. 133,"
was issued in June 2000. For entities that adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" prior to June 15, 2000, Statement 138
is effective for all fiscal quarters beginning after June 15, 2000. SFAS No. 138 amends
Statement 133 principally for certain issues relating to hedging transactions. The
adoption of these statements has no material quantitative or qualitative impact on the
SAIF’s Statements of Financial Position, Income and Fund Balance, and Cash Flows.
Other recent accounting pronouncements were evaluated and deemed to be not applicable
to the financial statements.
Related Parties
The nature of related parties and a description of related party transactions are
discussed in Note 1 and disclosed throughout the financial statements
and footnotes.
3. Cash
and Other Assets: Restricted for SAIF-Member Exit Fees
The SAIF collects entrance and exit fees for
conversion transactions when an insured depository institution converts from the BIF to
the SAIF (resulting in an entrance fee) or from the SAIF to the BIF (resulting in an exit
fee). Regulations approved by the FDIC's Board of Directors (Board) and published in
the Federal Register on March 21, 1990, directed that exit fees paid to the SAIF
be held in escrow.
The FDIC and the Secretary of the Treasury will
determine when it is no longer necessary to escrow such funds for the payment of interest
on obligations previously issued by the FICO. These escrowed exit fees are invested
in U.S. Treasury securities pending determination of ownership. The interest earned
is also held in escrow. There were no conversion transactions during 2000 and 1999
that resulted in an exit fee to the SAIF.
| Cash
and Other Assets: Restricted for SAIF-Member Exit Fees at December 31 |
| Dollars in Thousands |
| |
2000 |
1999 |
| Cash and cash equivalents |
$ 40,154 |
$23,302 |
| Investment in U.S. Treasury obligations, net |
239,088 |
239,975 |
| Interest receivable on U.S. Treasury obligations |
4,535 |
4,529 |
| Exit fees receivable |
3 |
684 |
| Total |
$283,780 |
$268,490 |
| U.S. Treasury Obligations at December 31, 2000 (Restricted for SAIF-Member Exit Fees) |
| Dollars in Thousands |
| Held-to-Maturity |
| Maturity |
Yield at Purchase |
Face Value |
Amortized Cost |
Unrealized Holding Gains |
Unrealized Holding Losses |
Market Value |
| Less than 1 year |
5.52% |
$15,000 |
$15,093 |
$0 |
$(20) |
$15,073 |
| 1-3 years |
6.12% |
$135,000 |
$134,831 |
$2,012 |
$0 |
$136,843 |
| 3-5 years |
5.79% |
20,000 |
21,189 |
455 |
0 |
21,644 |
| 5-10 years |
5.20% |
64,000 |
67,975 |
454 |
(373) |
68,056 |
| Total |
empty cell |
$234,000 |
$239,088 |
$2,921 |
$(393) |
$241,616 |
| U.S. Treasury Obligations
at December 31, 1999 (Restricted for SAIF-Member Exit Fees) |
| Dollars in Thousands |
| Held-to-Maturity |
| Maturity |
Yield at Purchase |
Face Value |
Amortized Cost |
Unrealized Holding Gains |
Unrealized Holding Losses |
Market Value |
| 1-3 years |
5.90% |
$115,000 |
$115,336 |
$0 |
$(876) |
$114,460 |
| 3-5 years |
6.30% |
55,000 |
56,131 |
217 |
(582) |
55,766 |
| 5-10 years |
5.20% |
64,000 |
68,508 |
0 |
(5,265) |
63,243 |
| Total |
empty cell |
$234,000 |
$239,975 |
$217 |
$(6,723) |
$233,469 |
The unamortized premium, net of the unamortized discount, was $5.1 million and $6.0 milion
at December 31, 2000, and 1999, respectively.
|
| 4. Investment in U.S. Treasury Obligations, Net Cash received by the SAIF is invested in non-marketable Government Account Series
(GAS) market-based U.S. Treasury securities with maturities exceeding three months. As of
December 31, 2000 and December 31, 1999, the book value of investments in U.S. Treasury
Obligations, net, was $10.7 billion and $10 billion, respectively. The book value is
computed by adding the amortized cost of the held-to-maturity securities to the market
value of the available-for-sale securities. In 2000, the FDIC purchased $291 million of
Treasury inflation-indexed securities (TIIS) for the SAIF. These securities are indexed to
increases or decreases in the Consumer Price Index (CPI). |
| U.S. Treasury Obligations, Net at December 31, 2000 (Unrestricted)
|
| Dollars in Thousands |
| Maturity |
Yield at Purchase a |
Face Value |
Amortized Cost |
Unrealized Holding Gains |
Unrealized Holding Losses |
Market Value |
| Held-to-Maturity |
| Less than one year |
5.98% |
$1,899,500 b |
$1,902,048 |
$2,346 |
$(52) |
$1,904,342 |
| 1-3 years |
6.04% |
1,640,000 |
1,675,585 |
21,246 |
0 |
1,696,831 |
| 3-5 years |
6.62% |
930,000 |
932,512 |
49,654 |
0 |
982,166 |
| 5-10 years |
5.64% |
3,380,394 |
3,440,704 |
117,935 |
(5,768) |
3,552,871 |
| Total |
empty cell |
$7,849,894 |
$7,950,849 |
$191,181 |
$(5,820) |
$8,136,210 |
| Available-for-Sale |
Less than
one year |
5.17% |
$80,000 |
$80,269 |
$0 |
$(181) |
$80,088 |
| 1-3 years |
6.56% |
450,000 |
439,061 |
14,005 |
0 |
453,066 |
| 3-5 years |
6.14% |
805,000 |
836,059 |
30,855 |
0 |
866,914 |
| 5-10 years |
4.43% |
1,288,270 |
1,271,405 |
37,492 |
0 |
1,308,897 |
| Total |
empty cell |
$2,623,270 |
$2,626,794 |
$82,352 |
$(181) |
$2,708,965 |
| Total Investment in U.S. Treasury Obligations, Net |
| Total |
empty cell |
$10,473,164 |
$10,577,643 |
$273,533 |
$(6,001) |
$10,845,175 |
a. For Treasury inflation-indexed securities (TIIS), the yields in the above table include their real yields at purchase, not their effective yields. Effective yields on TIIS include a weighted average of Bloomberg's calculation of yield with an inflation assumption. The inflation assumption of 3.4% was the latest year-over-year increase in the Consumer Price Index (CPI) on November 30, 2000. These effective yields are 7.18% and 7.47% for TIIS classified as held-to-maturity and available-for-sale, respectively.
b. Includes two Treasury notes totaling $150 million which matured on Sunday, December 31, 2000. Settlement occurred on the next business day, January 2, 2001. |
|
| U.S. Treasury Obligations, Net at December 31, 1999 (Unrestricted) |
| Dollars in Thousands |
| Maturity |
Yield at Purchase a |
Face Value |
Amortized Cost |
Unrealized Holding Gains |
Unrealized Holding Losses |
Market Value |
| Held-to-Maturity |
| Less than one year |
5.93% |
$1,630,000 |
$1,631,605 |
$1,020 |
$(1,154) |
$1,631,471 |
| 1-3 years |
5.97% |
2,915,000 |
2,937,618 |
280 |
(14,021) |
2,923,877 |
| 3-5 years |
6.34% |
705,000 |
739,940 |
2,131 |
(4,218) |
737,853 |
| 5-10 years |
5.61% |
2,713,214 |
2,771,691 |
5,896 |
(126,467) |
2,651,120 |
| Total |
empty cell |
$7,963,214 |
$8,080,854 |
$9,327 |
$(145,860) |
$7,944,321 |
| Available-for-Sale |
Less than
one year |
5.62% |
$150,000 |
$150,379 |
$22 |
$(14) |
$150,387 |
| 1-3 years |
5.17% |
80,000 |
81,096 |
0 |
(1,046) |
80,050 |
| 3-5 years |
6.28% |
240,000 |
255,838 |
0 |
(2,151) |
253,687 |
| 5-10 years |
5.03% |
1,447,582 |
1,443,149 |
0 |
(28,555) |
1,414,594 |
| Total |
empty cell |
$1,917,582 |
$1,930,462 |
$22 |
$(31,766) |
$1,898,718 |
| Total Investment in U.S. Treasury Obligations, Net |
| Total |
empty cell |
$9,880,796 |
$10,011,316 |
$9,349 |
$(177,626) |
$9,843,039 |
| a. For Treasury inflation-indexed securities (TIIS), the yields in the above table include their real yields at purchase, not their effective yields. Effective yields on TIIS include a weighted average of Bloomberg's calculation of yield with an inflation assumption. The inflation assumption of 2.6% was the latest year-over-year increase in the Consumer Price Index (CPI) on December 14, 1999. These effective yields are 6.47% and 6.71% for TIIS classified as held-to-maturity and available-for-sale, respectively. |
|
| As of December 31, 2000 and 1999,
the unamortized premium, net of the unamortized discount, was $104.5 million and $130.5
million, respectively. |
5.
Receivables from Thrift Resolutions, Net
The thrift resolution process takes different forms depending on the unique facts and
circumstances surrounding each failing or failed institution. Payments for institutions
that fail are made to cover obligations to insured depositors and represent claims by the
SAIF against the receiverships’ assets. There was one thrift failure in 2000 and one
in 1999, with assets at failure of $30 million and $63 million, respectively, and SAIF
outlays of $29 million and $63 million, respectively.
Assets held by the FDIC in its receivership capacity for closed SAIF-insured
institutions are the main source of repayment of the SAIF’s receivables from closed
thrifts. As of December 31, 2000 and 1999, SAIF receiverships held assets with a book
value of $56.1 million and $114 million, respectively (including cash and miscellaneous
receivables of $48.2 million and $104.0 million at December 31, 2000, and 1999,
respectively). The estimated cash recoveries from the management and disposition of these
assets that are used to derive the allowance for losses are based, in part, on a
statistical sampling of receivership assets. These estimated recoveries are regularly
evaluated, but remain subject to uncertainties because of potential changes in economic
conditions. These factors could cause the SAIF’s and other claimants’ actual
recoveries to vary from the level currently estimated.
6.
Contingent Liabilities for:
Anticipated
Failure of Insured Institutions
The SAIF records a contingent liability and a loss provision for thrifts (including Oakar
and Sasser financial institutions) that are likely to fail, absent some favorable event
such as obtaining additional capital or merging, when the liability becomes probable and
reasonably estimable.
The contingent liabilities for anticipated failure of insured institutions as of
December 31, 2000 and 1999, were $135 million and $56 million, respectively. The
contingent liability is derived in part from estimates of recoveries from the management
and disposition of the assets of these probable thrift failures. Therefore, these
estimates are subject to the same uncertainties as those affecting the SAIF's receivables
from thrift resolutions (see Note 5). Consequently, this could affect
the ultimate cost to the SAIF from probable failures.
There are other thrifts where the risk of failure is less certain, but still considered
reasonably possible. Should these thrifts fail, the SAIF could incur additional estimated
losses ranging from $1 million to $255 million.
The accuracy of these estimates will largely depend on future economic conditions. The
Board has the statutory authority to consider the contingent liability from anticipated
failures of insured institutions when setting assessment rates.
Litigation Losses
The SAIF records an estimated loss for unresolved legal cases to the extent those losses
are considered probable and reasonably estimable. In addition to the amount recorded as
probable, the FDIC has determined that losses from unresolved legal cases totaling $617
thousand are reasonably possible.
7.
Assessments
The 1990 OBR Act removed caps on assessment rate
increases and authorized the FDIC to set assessment rates for SAIF members semiannually,
to be applied against a member's average assessment base. The FDICIA: 1) required the FDIC
to implement a risk-based assessment system; 2) authorized the FDIC to increase assessment
rates for SAIF-member institutions as needed to ensure that funds are available to satisfy
the SAIF's obligations; 3) required the FDIC to build and maintain the reserves in the
insurance funds to 1.25 percent of insured deposits; and 4) authorized the FDIC to
increase assessment rates more frequently than semiannually and impose emergency special
assessments as necessary to ensure that funds are available to repay U.S. Treasury
borrowings.
The FDIC uses a risk-based assessment system that charges higher rates to those
institutions that pose greater risks to the SAIF. To arrive at a risk-based assessment for
a particular institution, the FDIC places each institution in one of nine risk categories,
using a two-step process based first on capital ratios and then on other relevant
information. The assessment rate averaged approximately 0.24 cents and 0.20 cents per $100
of assessable deposits for 2000 and 1999, respectively. On November 7, 2000, the Board
voted to retain the SAIF assessment schedule at the annual rate of 0 to 27 cents per $100
of assessable deposits for the first semiannual period of 2001. The Board reviews premium
rates semiannually.
The DIFA (see Note 1) provided, among other things, for the
capitalization of the SAIF to its DRR of 1.25 percent by means of a one-time special
assessment on SAIF-insured deposits. The SAIF achieved its required capitalization by
means of a $4.5 billion special assessment effective October 1, 1996. Since October 1996,
the SAIF has maintained a capitalization level at or higher than the DRR of 1.25 percent
of insured deposits. As of December 31, 2000, the capitalization level for the SAIF is
1.43 percent of estimated insured deposits.
The DIFA provided for the elimination of the mandatory minimum assessment formerly
provided for in the FDI Act. It also provided for the expansion of the assessment base for
payments of the interest on obligations issued by the FICO to include all FDIC-insured
institutions (including thrifts, banks, and Oakar and Sasser financial institutions). It
also made the FICO assessment separate from regular assessments, effective on January 1,
1997.
The FICO assessment has no financial impact on the SAIF. The FICO assessment is
separate from the regular assessments and is imposed on thrifts and banks, not on the
insurance funds. The FDIC, as administrator of the SAIF and the BIF, is acting solely as a
collection agent for the FICO. During 2000 and 1999, $158 million and $426 million,
respectively, was collected from SAIF- member institutions and remitted to the FICO.
8.
Provision for Insurance Losses
Provision for insurance losses was $180.8
million and $30.6 million for December 31, 2000 and December 31, 1999, respectively. The
large provision in 2000 was primarily attributed to recognizing losses of $186.1 million
for the anticipated failure of insured institutions. The following chart lists the major
components of the provision for insurance losses.
| Provision for Insurance Losses for the Years Ended December 31 |
| Dollars in Thousands |
| |
2000 |
1999 |
| Valuation Adjustments: |
| Closed banks |
(7221) |
(11,352) |
| Total Valuation Adjustments |
$(7,221) |
$(11,352) |
| Contingent Liabilities Adjustments |
| Anticipated failure of insured institutions |
186,083 |
42,000 |
| Litigation losses |
1,943 |
0 |
| Total Contingent Liabilities Adjustments |
188,026 |
42,000 |
| Total |
$180,805 |
$30,648 |
9. Pension Benefits, Savings Plans, and Accrued
Annual Leave
Eligible FDIC employees (permanent and term
employees with appointments exceeding one year) are covered by either the Civil Service
Retirement System (CSRS) or the Federal Employees Retirement System (FERS). The CSRS is a
defined benefit plan, which is offset with the Social Security System in certain cases.
Plan benefits are determined on the basis of years of creditable service and compensation
levels. The CSRS-covered employees also can contribute to the tax-deferred Federal Thrift
Savings Plan (TSP).
The FERS is a three-part plan consisting of a
basic defined benefit plan that provides benefits based on years of creditable service and
compensation levels, Social Security benefits, and the TSP. Automatic and matching
employer contributions to the TSP are provided up to specified amounts under the FERS.
Although the SAIF contributes a portion of
pension benefits for eligible employees, it does not account for the assets of either
retirement system. The SAIF also does not have actuarial data for accumulated plan
benefits or the unfunded liability relative to eligible employees. These amounts are
reported on and accounted for by the U.S. Office of Personnel Management.
Eligible FDIC employees also may participate in
a FDIC-sponsored tax-deferred 401(k) savings plan with matching contributions. The SAIF
pays its share of the employer's portion of all related costs.
The SAIF’s pro rata share of the
Corporation’s liability to employees for accrued annual leave is approximately $5.0
million and $4.4 million at December 31, 2000 and 1999, respectively.
| Pension
Benefits and Savings Plans Expenses for the Years Ended December 31 |
| Dollars in Thousands |
| |
2000 |
1999 |
| Civil Service Retirement System |
$1.603 |
$1,276 |
| Federal Employees Retirement System
(Basic Benefit) |
4,092 |
3,268 |
| FDIC Savings Plan |
2,594 |
2,029 |
| Federal Thrift Savings Plan |
1,631 |
1,267 |
| Total |
$9,920 |
$7,840 |
10. Postretirement
Benefits Other Than Pensions
The FDIC provides certain dental and life
insurance coverage for its eligible retirees, the retirees’ beneficiaries, and
covered dependents. Retirees eligible for life insurance coverage are those who have
qualified due to: 1) immediate enrollment upon appointment or five years of participation
in the plan and 2) eligibility for an immediate annuity. Dental coverage is provided to
all retirees eligible for an immediate annuity.
The life insurance program, underwritten by Metropolitan Life Insurance Company,
provides basic coverage at no cost to retirees and allows converting optional coverages to
direct-pay plans. Dental care is underwritten by Connecticut General Life Insurance
Company and provides coverage at no cost to retirees.
| Postretirement Benefits Other
Than Pensions |
| Dollars in Thousands |
| |
2000 |
1999 |
| Funded Status at December 31 |
| Fair value of plan assets (a) |
$5,479 |
$5,160 |
| Less: Benefit obligation |
4,811 |
5,833 |
| Over (Under) Funded Status of the Plans |
$668 |
$(673) |
| Prepaid (accrued) postretirement benefit cost recognized in
the Statements of Financial Position |
$101 |
$(673) |
| Expenses and Cash Flows for the Period Ended
December 31 |
| Net periodic benefit cost |
$601 |
$483 |
| Employer contributions |
223 |
129 |
| Benefits paid |
223 |
129 |
| Weighted-Average Assumptions at December 31 |
| Discount rate |
5.25% |
4.50% |
| Expected return on plan assets |
5.25% |
4.50% |
| Rate of compensation increase |
6.30% |
3.00% |
| (a) Invested in U.S.
Treasury obligations. |
Total dental coverage trend rates were assumed to be 7% per year, inclusive of general inflation. Dental costs were assumed to be subject to an annual cap of $2,000.
|
| 11. Commitments and Off-Balance-Sheet Exposure Commitments
Leases
The SAIF's allocated share of the FDIC’s lease commitments totals $19.2 million for
future years. The lease agreements contain escalation clauses resulting in adjustments,
usually on an annual basis. The allocation to the SAIF of the FDIC’s future lease
commitments is based upon current relationships of the workloads among the SAIF, the BIF,
and the FRF. Changes in the relative workloads could cause the amounts allocated to the
SAIF in the future to vary from the amounts shown below. The SAIF recognized leased space
expense of $5.7 million at both December 31, 2000 and 1999, respectively.
| Lease Commitments |
| Dollars in Thousands |
| 2001 |
2002 |
2003 |
2004 |
2005 |
2006/Thereafter |
| $5,074 |
$4,832 |
$3,559 |
$2,248 |
$1,495 |
$2,003 |
Off-Balance-Sheet Exposure
Deposit Insurance
As of December 31, 2000, deposits insured by the SAIF totaled approximately $753 billion.
This would be the accounting loss if all depository institutions were to fail and the
acquired assets provided no recoveries.
12. Disclosures About
the Fair Value of Financial Instruments
Cash equivalents are short-term, highly liquid
investments and are shown at current value. The fair market value of the investment in
U.S. Treasury obligations is disclosed in Notes 3 and 4
and is based on current market prices. The carrying amount of interest receivable on
investments, short-term receivables, and accounts payable and other liabilities
approximates their fair market value. This is due to their short maturities or comparisons
with current interest rates. As explained in Note 3, entrance and exit fees receivables
are net of discounts calculated using an interest rate comparable to U.S. Treasury Bill or
Government bond/note rates at the time the receivables are accrued.
The net receivables from thrift resolutions primarily include the SAIF’s
subrogated claim arising from payments to insured depositors. The receivership assets that
will ultimately be used to pay the corporate subrogated claim are valued using discount
rates that include consideration of market risk. These discounts ultimately affect the
SAIF’s allowance for loss against the net receivables from thrift resolutions.
Therefore, the corporate subrogated claim indirectly includes the effect of discounting
and should not be viewed as being stated in terms of nominal cash flows.
Although the value of the corporate subrogated claim is influenced by valuation of
receivership assets (see Note 5), such receivership valuation is not
equivalent to the valuation of the corporate claim. Since the corporate claim is unique,
not intended for sale to the private sector, and has no established market, it is not
practicable to estimate its fair market value.
The FDIC believes that a sale to the
private sector of the corporate claim would require indeterminate, but substantial,
discounts for an interested party to profit from these assets because of credit and other
risks. In addition, the timing of receivership payments to the SAIF on the subrogated
claim does not necessarily correspond with the timing of collections on receivership
assets. Therefore, the effect of discounting used by receiverships should not
necessarily be viewed as producing an estimate of market value for the net receivables
from thrift resolutions.
|
13. Supplementary Information Relating to the Statements of Cash Flows
| Reconciliation of Net Income to Net Cash Provided by Operating Activities for the Years Ended December 31 |
| Dollars in Thousands |
| |
2000 |
1999 |
| Net Income |
$364,062 |
$476,839 |
Adjustments to
Reconcile Net Income to Net Cash
Provided by Operating Activities |
| Income
Statement Items: |
| Provision
for insurance losses |
180,805 |
30,648 |
| Amortization
of U.S. Treasury obligations (unrestricted) |
32,317 |
51,708 |
| TIIS
inflation adjustment |
(36,930) |
(11,818) |
| Change
in Assets and Liabilities: |
| Decrease
in amortization of U.S. Treasury obligations (restricted) |
887 |
808 |
| (Increase)
in entrance and exit fees receivable, including interest receivable on
investments and other assets |
(33,381) |
(13,500) |
| Decrease
(Increase) in receivables from thrift resolutions |
64,716 |
(41,450) |
| Increase
in receivables from acquired fins |
(240) |
0 |
| Increase
(Decrease) in accounts payable and other liabilities |
2,842 |
(2,325) |
| (Decrease)
in contingent liability for anticipated failure of insured institutions |
(8,000) |
(17,000) |
| Increase
in exit fees and investment proceeds held in escrow |
15,290 |
14,701 |
| Net Cash Provided by
Operating Activities |
$582,368 |
$488,611 |
|
