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 three funds. All three funds
are maintained separately to carry out their respective mandates.
The SAIF and the BIF
are insurance funds responsible for protecting depositors in operating banks and thrift
institutions from loss due to failure of the institution. 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 (1993 RTC 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 institutions insurance fund membership and primary federal supervisor are
generally determined by the institutions charter type. Deposits of SAIF-member
institutions are mostly insured by the SAIF; SAIF members are predominantly thrifts
supervised by the Office of Thrift Supervision (OTS). Deposits of BIF-member institutions
are mostly 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.
The Financing
Corporation (FICO), established under the Competitive Equality Banking Act of 1987, is a
mixed-ownership government corporation whose sole purpose was to function as a financing
vehicle for the FSLIC. Effective December 12, 1991, as provided by the Resolution Trust
Corporation Refinancing, Restructuring and Improvement Act of 1991 (1991 RTC Act), the
FICOs ability to serve as a financing vehicle for new debt was terminated.
Assessments paid on SAIF-insured deposits (excluding Sasser and BIF-member
Oakar banks) are subject to draws by FICO for payment of interest on their
outstanding debt through maturity of this debt in 2019. Sasser banks are SAIF
members that converted to a state bank charter in accordance with Section 5(d)(2)(G) of
the Federal Deposit Insurance Act (FDI Act). Oakar banks are described in a
following section, Operations of the SAIF.
Other significant
legislation includes the Omnibus Budget Reconciliation Act of 1990 (1990 OBR Act) and the
Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). These acts made
changes to the FDICs assessment authority (see Note 7) and
borrowing authority (see Operations of the SAIF
below). The FDICIA also requires the FDIC to: 1) resolve troubled 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.
Recent
Legislation
The Deposit Insurance Funds Act of 1996 (DIFA 1996) was enacted to provide for: 1) the
capitalization of the SAIF to its designated reserve ratio 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 institutions, i.e., banks and thrifts; 3) beginning January 1, 1997, the
imposition of a FICO assessment rate for SAIF-assessable deposits that is five times the
rate for BIF-assessable deposits; 4) the payment of the approximately $790 million annual
FICO interest obligation on a pro rata basis between banks and thrifts on the earlier of
December 31, 1999 or the date on which the last savings association ceases to exist; 5)
authorization of assessments only if needed to maintain the SAIF at the designated reserve
ratio; and 6) the merger of the BIF and the SAIF on January 1, 1999, if no insured
depository institution is a savings association on that date.
Additionally, DIFA
provides: 1) exemptions from the special assessment for certain institutions; 2) a 20
percent adjustment of the special assessment for certain Oakar banks and certain other
institutions; and 3) assessment rates for SAIF members not lower than the assessment rates
for BIF members with comparable risk.
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 SAIF-insured institutions. In this
capacity, the SAIF has financial responsibility for all SAIF-insured deposits held by
SAIF-member institutions and BIF-member banks designated as Oakar banks.
The Oakar bank
provisions are found in Section 5(d)(3) of the FDI Act. The provisions allow, with
approval of the appropriate federal regulatory authority, any insured depository
institution to merge, consolidate or transfer the assets and liabilities of an acquired
institution without changing insurance coverage for the acquired deposits. Such acquired
deposits continue to be either SAIF-insured deposits and assessed at the SAIF assessment
rate or BIF-insured deposits and assessed at the BIF assessment rate. In addition, any
losses resulting from the failure of these institutions are to be allocated between the
BIF and the SAIF based on the respective dollar amounts of the institutions
BIF-insured and SAIF-insured deposits.
The SAIF is primarily
funded from the following sources: 1) SAIF assessments from BIF-member Oakar banks; 2)
other SAIF assessments that are not required for the FICO, including assessments from
Sasser banks; 3) interest earned on unrestricted investments in U.S. Treasury obligations;
4) U.S. Treasury payments not to exceed $8 billion for losses for fiscal years 1994
through 1998 contingent upon appropriations from the U.S. Treasury; 5) U.S. Treasury
payments from unused appropriations to the RTC for losses for two years after the date of
the RTC termination, December 31, 1995; and 6) borrowings from Federal Home Loan Banks,
the U.S. Treasury and the Federal Financing Bank (FFB).
The 1993 RTC Act places
significant restrictions on funding from sources 4) and 5) above. Among other
restrictions, before appropriated funds from either source are used, the FDIC must certify
to Congress that: 1) SAIF-insured institutions are unable to pay premiums sufficient to
cover insurance losses or to repay amounts borrowed from the U.S. Treasury without
adversely affecting their ability to raise and maintain capital or to maintain the
assessment base and 2) an increase in premiums could reasonably be expected to result in
greater losses to the government.
The 1990 OBR Act
established the FDICs authority to borrow working capital from the FFB on behalf of
the SAIF and the BIF. FDICIA increased the FDICs 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). At December 31, 1996, the MOL for the SAIF was $16.9
billion. |
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 SAIF acts as receiver
or liquidating agent. Periodic and final accountability reports of the SAIFs
activities as receiver or liquidating agent are furnished to courts, supervisory
authorities and others as required.
Use
of Estimates
The preparation of the SAIFs financial statements in conformity with GAAP require
FDIC management to make 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
and Cash Equivalents
The SAIF considers cash and cash equivalents to be short-term, highly liquid investments
with original maturities of three months or less.
U.S.
Treasury Obligations
Securities are intended to be held to maturity and are shown at book value. Book value 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. Interest 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 as a receivable the amounts advanced and/or obligations incurred for
resolving troubled 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 the estimates of discounted cash recoveries from assets
of assisted or failed thrifts, net of all estimated liquidation costs.
Litigation
Losses
The SAIF accrues, as a charge to current period operations, an estimate of probable losses
from litigation. The FDICs Legal Division recommends these estimates on a
case-by-case basis. Any litigation loss estimates related to the SAIF in its corporate
capacity would be included in Estimated liabilities for: Litigation losses.
Any litigation loss estimates related to receiverships would be included in the allowance
for losses for Receivables from thrift resolutions, net.
Receivership
Operations
The FDIC is responsible for controlling and disposing of the assets of failed institutions
in an orderly and efficient manner. The assets, and the claims against them, are accounted
for separately 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 incurred by the SAIF on behalf of the receiverships are recovered from those
receiverships.
Cost
Allocations Among Funds
Certain operating expenses (including personnel, administrative and other indirect
expenses) not directly charged to each fund under the FDICs management are allocated
on the basis of the relative degree to which the operating expenses were incurred by the
funds.
The FDIC includes the
cost of buildings used in operations in the BIFs financial statements. The BIF
charges SAIF a rental fee representing an allocated share of its annual depreciation. The
cost of furniture, fixtures and equipment purchased by the FDIC on behalf of the three
funds under its administration is allocated among these funds on a pro rata basis. The
SAIF expenses its share of these allocated costs at the time of acquisition because of
their immaterial amounts.
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. The SAIF funds its
liabilities for these benefits directly to the entity.
Disclosure
about Recent Financial Accounting Standards Board Pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 125, Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities in June 1996, effective for transactions occurring
after December 31, 1996. The SAIF will generally be unaffected by its provisions since
most transactions subject to SFAS 125 occur at the receivership level and not at the fund
level. To the extent that the SAIF may be affected, the FDICs current accounting
practices are consistent with the rules contained in SFAS 125. Other recent pronouncements
issued by the FASB have been adopted or are either not applicable or not material to the
financial statements.
Related
Parties
The nature of related parties and descriptions of related party transactions are disclosed
throughout the financial statements and footnotes.
Reclassifications
Reclassifications have been made in the 1995 financial statements to conform to the
presentation used in 1996. |
All cash received by the SAIF is
invested in U.S. Treasury obligations with maturities exceeding three months unless the
cash is used: 1) to defray operating expenses; 2) for outlays related to liquidation
activities; or 3) for investments in U.S. Treasury one-day special certificates which are
cash equivalents. In both 1996 and 1995, $190 million were restricted and invested in U.S.
Treasury notes (see Note 4). The related interest earned on these
invested funds was also held as restricted funds. |
|
|
|
|
|
|
|
Maturity |
Yield
at
Purchase |
Book
Value |
Unrealized
Holding
Gains |
Unrealized
Holding
Losses |
Market
Value |
Face
Value |
|
Less than one year |
5.7% |
$
1,740,792 |
$
3,276 |
$ 0 |
$
1,744,069 |
$
1,740,000 |
1-3 years |
5.9% |
3,305,270 |
6,930 |
8,326 |
3,303,873 |
3,290,000 |
3-5 years |
6.0% |
3,718,030 |
0 |
21,546 |
3,696,484 |
3,670,000 |
Total |
|
$
8,764,092 |
$
10,206 |
$
29,872 |
$
8,744,426 |
$
8,700,000 |
|
|
|
|
|
|
|
|
Maturity |
Yield
at
Purchase |
Book
Value |
Unrealized
Holding
Gains |
Unrealized
Holding
Losses |
Market
Value |
Face
Value |
|
Less than one year |
5.8% |
$1,785,035 |
$
6,708 |
$ 535 |
$
1,791,208 |
$
1,785,000 |
1-3 years |
5.7% |
588,968 |
5,744 |
0 |
594,712 |
590,000 |
3-5 years |
5.4% |
458,916 |
1,584 |
0 |
460,500 |
450,000 |
Total |
|
$2,832,919 |
$
14,036 |
$
535 |
$
2,846,420 |
$
2,825,000 |
|
In 1996, the unamortized premium,
net of unamortized discount, was $64.1 million. In 1995, the unamortized premium, net of
unamortized discount, was $7.9 million. |
The SAIF receives
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 FDICs Board of Directors
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.
Interest on these investments was $11.1 million and $9.1 million for 1996 and 1995,
respectively. Restricted assets included: $31 million in cash and cash equivalents, $190
million of investments in U.S. Treasury obligations, net, and $7 million in exit fees and
interest receivable. For 1995, restricted assets included: $12.5 million in cash and cash
equivalents, $190 million of investments in U.S. Treasury obligations, net, and $13
million in exit fees and interest receivable.
Within specified
parameters, the regulations allow an institution to pay its entrance/exit fees interest
free, in equal annual installments over a maximum period of not more than five years. When
an institution elects such a payment plan, the SAIF records the entrance or exit fee
receivable at its present value. The discount rate used to determine the present value of
the funds for 1996 and 1995 was 5 percent and 3 percent, respectively. |
|
|
|
|
|
|
|
Beginning
Balance
01/01/96 |
New
Receivables |
Collections |
Net
Change
Unamortized
Discount |
Ending
Balance
12/31/96 |
|
Entrance fees |
$ 11 |
$ 0 |
$ (8) |
$ 0 |
$ 3 |
Exit fees |
8,810 |
442 |
(5,992) |
254 |
3,514 |
Total |
$ 8,821 |
$ 442 |
$ (6,000) |
$ 254 |
$ 3,517 |
|
|
|
|
|
|
|
|
Beginning
Balance
01/01/95 |
New
Receivables |
Collections |
Net
Change
Unamortized
Discount |
Ending
Balance
12/31/95 |
|
Entrance fees |
$
6 |
$
11 |
$
(6) |
$
0 |
$
11 |
Exit fees |
35,686 |
1,117 |
(29,751) |
1,758 |
8,810 |
Total |
$
35,692 |
$
1,128 |
$
(29,757) |
$
1,758 |
$
8,821 |
|
The FDIC resolution
process results in different types of transactions depending on the unique facts and
circumstances surrounding each failing or failed institution. Payments to prevent a
failure are made to operating institutions when cost and other criteria are met. Such
payments may facilitate a merger or allow a troubled institution to continue operations.
Payments for institutions that fail are made to cover insured depositors claims and
represent a claim against the receiverships assets. For 1996, one thrift failed, and
was resolved in a transaction whereby an acquirer purchased certain assets and assumed the
insured deposits of the failed thrift.
The FDIC, as receiver
for failed thrifts, engages in a variety of strategies at the time of failure to maximize
the return from the management and disposition of assets and to minimize realized losses.
A failed thrift acquirer can purchase selected assets at the time of resolution and assume
full ownership, benefit and risk related to such assets. The receiver may also engage in
other types of transactions as circumstances warrant. As described in Note 2, the
allowance for losses is established against the receivable from thrift resolutions.
As of December 31, 1996
and 1995, the SAIF, in its receivership capacity, held assets with a book value of $78.2
and $37.2 million, respectively. These assets represent a significant source of repayment
of receivables from thrift resolutions. The estimated cash recoveries from the management
and disposition of these assets (excluding cash and miscellaneous receivables of $42.3
million at December 31,1996 and $30.9 million at December 31,1995) used to derive the
allowance for losses are based in part on a statistical sampling of receivership assets.
The potential sampling error is not material to the SAIFs financial statements.
These estimated recoveries are regularly evaluated, but remain subject to uncertainties
because of changing economic conditions. These factors could affect the SAIFs and
other claimants actual recoveries from the level currently estimated. |
Anticipated
Failure of Insured Institutions
The SAIF records an estimated liability and loss provision for thrifts as well as Oakar
and Sasser banks that are likely to fail in the foreseeable future (absent some favorable
event such as obtaining additional capital or merging). The estimated liability and
corresponding reduction in the fund balance are recorded in the period when the liability
is deemed probable and reasonably estimable.
The estimated
liabilities for anticipated failure of insured institutions as of December 31, 1996 and
1995, were $4 million and $111 million, respectively. The estimated liability is derived
in part from estimates of recoveries from the sale of the assets of these probable
failures. Therefore, they are subject to the same uncertainties as those affecting the
SAIFs receivables from thrift resolutions (see Note 5). This
could affect the ultimate costs to the SAIF from probable failures.
There are other
institutions where the risk of failure is less certain, but still considered reasonably
possible. Should these institutions fail the SAIF would incur additional losses of about
$20 million.
The accuracy of these
estimates will largely depend on future economic conditions. In addition, FDIC considers
probable losses in setting assessment rates and, as circumstances warrant, may increase
assessment rates to recover some or all losses due to anticipated thrift failures.
Litigation
Losses
As stated in Note 2, the SAIF records an estimated loss for
unresolved legal cases to the extent those losses are considered to be probable in
occurrence and reasonably estimable in amount. For 1996 and 1995, FDIC identified no legal
cases that met the criteria for recognition in the financial statements. The FDICs
Legal Division has determined that losses from unresolved legal cases totaling $7 million
and $11 million are reasonably possible at December 31, 1996 and 1995, respectively. |
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 members 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 SAIFs obligations; 3) required the
FDIC to build 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 DIFA 1996 (see Note 1) provided, among other things, for the capitalization of the SAIF
to its designated reserve ratio of 1.25 percent by means of a one-time special assessment
on SAIF-insured deposits. Effective October 1, 1996, SAIF achieved its required
capitalization by means of a $4.5 billion special assessment.
Prior to January 1,
1997, the FICO had priority over the SAIF for receiving and utilizing SAIF assessments to
ensure availability of funds for interest on FICOs debt obligations. Accordingly,
the SAIF recognized as assessment revenue only that portion of SAIF assessments not
required by the FICO. Assessments on the SAIF-insured deposits held by BIF-member Oakar or
SAIF-member Sasser institutions prior to January 1, 1997 were not subject to draws by FICO
and, thus, were retained in SAIF in their entirety. FICO assessments collected during 1996
and 1995 were $808 million and $718 million, respectively.
The DIFA 1996 expanded
the assessment base for payments of the interest on obligations issued by the FICO to
include all FDIC-insured institutions, (including banks, thrifts, Oakars and Sassers), and
made the FICO assessment separate from regular assessments, effective January 1, 1997.
Beginning in 1997, the
FICO assessment will have no financial effect on the SAIF since the FICO claim will be
assessed separately from the regular assessment, and the FICO assessment is imposed on
thrifts and not on the SAIF. The FDIC as administrator of the SAIF is acting solely as an
agent for the FICO to collect and remit the FICO assessment to the FICO.
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
FDIC Board of Directors (Board) reviews premium rates semiannually.
From 1993 through 1995,
each thrift paid an assessment rate of between 23 and 31 cents per $100 of domestic
deposits, depending on risk classification.
In December, 1996, the
Board lowered SAIF assessment rates to a range of 0 to 27 cents per $100 of insured
deposits (annual rates). The new rates, which are identical to those previously approved
for BIF members, were effective October 1, 1996 for Sasser and Oakar institutions, and
effective on January 1, 1997 for all other SAIF-insured institutions. For calendar year
1996, the assessment rate averaged approximately 20.4 cents per $100 of domestic deposits.
As of December 31, 1996, the SAIFs reserve ratio is 1.30 percent of insured
deposits.
The SAIF refunded $219
million (includes $2.9 million in interest) to Sasser/Oakar banks during the fourth
quarter of 1996. Refunds were necessary because fourth quarter assessment rates were set
prior to SAIFs capitalization. Total assessment revenue for 1996 and 1995 was $5.2
billion and $970 million, respectively. 1996 assessment revenue includes the one-time
special assessment of $4.5 billion required to capitalize SAIF. |
|
|
|
|
For
the Year Ended
December 31, 1996 |
For the Year
Ended
December 31, 1995 |
|
Interest on subrogated claims |
$
24,476 |
$
... 0 |
Other miscellaneous income |
1,780 |
788 |
Total |
$
26,256 |
$ 788 |
|
The interest on subrogated claims
represents post-insolvency interest. There is an Oakar bank receivership that has residual
funds remaining after paying all claimants. Once claimants have been paid, the SAIF and
other claimants are eligible to receive interest on their claims against the receivers on
a pro rata basis. Due to the uncertainty of collection, post-insolvency interest is
recognized when received. |
Eligible FDIC
employees (i.e., all permanent and temporary employees with appointments exceeding one
year) are covered by either the Civil Service Retirement System (CSRS) or the Federal
Employee 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.
Eligible FDIC employees
also may participate in an FDIC-sponsored tax-deferred savings plan with matching
contributions. The SAIF pays its share of the employers portion of all related
costs.
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 and accounted for by the U.S. Office of Personnel Management.
Due to a substantial
decline in the FDICs workload, the Corporation developed a staffing reduction
program, a component of which is a voluntary separation incentive plan, or buyout. To
date, two corporate-wide buyout plans have been offered to eligible employees. The first
buyout plan did not have a material financial effect on the SAIF, and management believes
the second buyout plan will also not have a material financial effect on the fund.
The liability to
employees for accrued annual leave is approximately $4,031 million and $757 thousand at
December 31, 1996 and 1995, respectively. |
|
|
|
|
For the Year Ended
December 31, 1996 |
For the Year
Ended
December 31, 1995 |
|
Civil Service
Retirement System |
$ .. 613 |
$
... 549 |
Federal Employee
Retirement System (Basic Benefit) |
1,821 |
1,394 |
FDIC Savings Plan |
1,111 |
895 |
Federal Thrift
Savings Plan |
641 |
486 |
Total |
$ 4,186 |
$ 3,324 |
|
The FDIC provides
certain health, dental and life insurance coverage for its eligible retirees, the
retirees beneficiaries and covered dependents. Retirees eligible for health and/or
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 FDIC is
self-insured for hospital/medical, prescription drug, mental health and chemical
dependency coverage. Additional risk protection was purchased from Aetna Life Insurance
Company through stop-loss and fiduciary liability insurance. All claims are administered
on an administrative services only basis with the hospital/medical claims administered by
Aetna Life Insurance Company, the mental health and chemical dependency claims
administered by OHS Foundation Health Psychcare Inc., and the prescription drug claims
administered by Caremark.
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.
The SAIF expensed $168
thousand and $226 thousand for net periodic postretirement benefit costs for the years
ended December 31, 1996 and 1995, respectively. For measurement purposes, the FDIC assumed
the following: 1) a discount rate of 5.75 percent; 2) an average long-term rate of return
on plan assets of 5.75 percent; 3) an increase in health costs in 1997 of 9.75 percent,
decreasing to an ultimate rate in the year 2000 of 7.75 percent; and 4) an increase in
dental costs in 1996 and thereafter of 4 percent (in addition to general inflation). Both
the assumed discount rate and health care cost rate have a significant effect on the
amount of the obligation and periodic cost reported.
If the health care cost
rate was increased one percent, the accumulated postretirement benefit obligation as of
December 31, 1996, would have increased by 20.4 percent. The effect of this change on the
aggregate of service and interest cost for 1996 would be an increase of 26.2 percent.
|
|
|
|
|
For the Year Ended
December 31, 1996 |
For
the Year Ended December 31, 1995 |
|
Service cost (benefits attributed to
employee service during the year) |
$ 432 |
$ 431 |
Interest cost on accumulated
postretirement benefit obligation |
457 |
281 |
Net total of other components |
(204) |
(68) |
Return on plan assets |
(517) |
(418) |
Total |
$ 168 |
$
226 |
|
As stated in Note
2, the FDIC established an entity to provide accounting and administration on behalf
of the SAIF, the BIF and the FRF. The SAIF funds its liability and these funds are being
managed as plan assets. |
|
|
|
|
For the Year Ended December 31, 1996 |
For
the Year Ended December 31, 1995 |
|
Retirees |
$ 3,686 |
$
2,230 |
Fully eligible
active plan participants |
343 |
629 |
Other active
participants |
4,125 |
5,124 |
Total
Obligation |
8,154 |
7,983
|
Less: Plan assets at
fair value (a) |
9,421 |
8,904 |
(Over)
Funded Status |
(1,267) |
(921) |
Unrecognized prior
service cost |
1,280 |
1,305 |
Unrecognized net
gain |
745 |
273 |
Postretirement
Benefit Liability Recognized in the Statements of Financial Position |
$ 758 |
$
657 |
|
(a) Invested in U.S.
Treasury instruments |
|
|
|
The SAIFs allocated share of
FDICs lease commitments totals $10.1 million for future years. The lease agreements
contain escalation clauses resulting in adjustments, usually on an annual basis. The
allocation to the SAIF of FDICs future lease commitments is based upon current
relationships of the workloads among SAIF, BIF and FRF. Changes in the relative workloads
among the three funds in future years could change the amount of the FDICs lease
payments which will be allocated to SAIF. The SAIF recognized leased space expense of $2.2
million and $1.6 million for the years ended December 31, 1996 and 1995, respectively. |
|
|
|
|
|
1997 |
1998 |
1999 |
2000 |
2001 |
2002/Thereafter |
|
$2,862 |
$1,982 |
$1,468 |
$1,225 |
$1,119 |
$1,492 |
|
Insured
Deposits
As of December 31, 1996, the total deposits insured by the SAIF is
approximately $682 billion. This would be the accounting loss if all the depository
institutions fail and the assets acquired as a result of the resolution process provided
no recoveries. |
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 Note
3 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 comparison
with current interest rates. As explained in Note 4, entrance and
exit fees receivable 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 receivable from
thrift resolutions primarily involves the SAIFs subrogated claim arising from
payments to insured depositors. The receivership assets which will ultimately be used to
pay the corporate subrogated claim are valued using discount rates which include
consideration of market risk. These discounts ultimately affect the SAIFs allowance
for loss against the net receivable 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, 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 do 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. |
|
|
|
|
For the Year Ended December 31, 1996 |
For
the Year Ended December 31, 1995 |
|
Net Income |
$ 5,530,574 |
$
1,421,132 |
|
|
|
Adjustments to
Reconcile Net Income to Net Cash Provided by Operating Activities |
|
|
|
|
|
Income
Statement Items: |
|
|
Provision for insurance
losses |
(91,636) |
(321,000) |
Amortization of U.S.
Treasury securities (unrestricted) |
4,788 |
(8,114) |
|
|
|
Change in
Assets and Liabilities: |
|
|
(Increase) in
amortization of U.S. Treasury securities (restricted) |
(157) |
(450) |
Decrease in entrance
and exit fees receivable |
5,305 |
26,871
|
(Increase) in interest
receivable on investments and other assets |
(75,900) |
(9,771) |
(Increase) Decrease in
receivables from thrift resolutions |
(33,260) |
6,841 |
Increase in accounts
payable and other liabilities |
60,419 |
105,198a |
Increase in exit fees
and investment proceeds held in escrow |
11,814 |
13,027
|
Net Cash
Provided by Operating Activities |
$ 5,411,947 |
$
1,233,734 |
|
(a) SAIF
Transferred $169 million to the FRF |
|
In the first quarter of 1997,
management negotiated with the National Treasury Employees Union (NTEU) a change in
employee health benefits. This change involves a conversion from the FDIC health plan to
the Federal Employees Health Benefits (FEHB) plan. This conversion will involve all
employees with five or more years until retirement eligibility. Assuming enabling
legislation is also passed, the conversion will also affect all retirees and employees
within five years of retirement. Management does not expect the conversion, which will
become effective on January 1, 1998, to result in an accounting loss to the SAIF. |
|