Home > About FDIC > Financial Reports > 2000 Annual Report




2000 Annual Report

Savings Association Insurance Fund

Federal Deposit Insurance Corporation
Savings Association Insurance Fund Statements of Financial Position at December 31
Dollars in Thousands
  2000 1999
Cash and cash equivalents $149,988 $146,186
Cash and other assets: Restricted for SAIF-member exit fees (Note 3) (Includes cash and cash equivalents of $40.2 million and $23.3 million at December 31, 2000 and December 31, 1999, respectively) 283,780 268,490
Investment in U.S. Treasury obligations, net (Note 4)
Held-to-maturity securities 7,950,849 8,080,854
Available-for-sale securities 2,708,965 1,898,718
Interest receivable on investments and other assets, net 188,473 153,558
Receivables from thrift resolutions, net (Note 5) 4,147 62,244
Total Assets $11,286,202 $10,610,050
Liabilities
Accounts payable and other liabilities $7,748 $4,888
Contingent liabilities for: (Note 6)
Anticipated failure of insured institutions 234,083 56,000
Litigation losses 1,943 0
SAIF-member exit fees and investment proceeds held in
escrow (Note 3)
283,780 268,490
Total Liabilities 527,554 329,378
Commitments and off-balance-sheet exposure (Note 11)
Fund Balance
Accumulated net income 10,676,477 10,312,416
Unrealized gain/(loss) on available-for-sale securities, net (Note 4) 82,171 (31,744)
Total Fund Balance 10,758,648 10,280,672
Total Liabilities and Fund Balance $11,286,202 $10,610,050
The accompanying notes are an integral part of these financial statements.


Savings Association Insurance Fund Statements of Income and Fund Balance for the Years Ended December 31
Dollars in Thousands
  2000 1999
Interest on U.S. Treasury obligations $644,222 $585,830
Assessments (Note 7) 19,237 15,116
Other revenue 621 49
Total Revenue 664,080 600,995
Expenses and Losses
Operating expenses 110,920 92,882
Provision for insurance losses (note 8) 180,805 30,648
Other insurance expenses 8,293 626
Total Expenses and Losses 300,018 124,156
Net Income 364,062 476,839
Unrealized gain/(loss) on available-for-sale securities, net (Note 4) 113,914 (35,998)
Comprehensive Income 477,976 440,841
Fund Balance - Beginning 10,280,672 9,839,831
Fund Balance - Ending $10,758,648 $10,280,672
The accompanying notes are an integral part of these financial statements.


Savings Association Insurance Fund Statements of Cash Flows for the Years Ended
December 31
Dollars in Thousands
  2000 1999
Cash provided by:
Interest on U.S. Treasury obligations $606,521 $606,244
Assessments 19,829 15,384
Entrance and exit fees, including interest on exit fees (Note 3) 14,414 15,487
Recoveries from thrift resolutions 88,451 5,775
Miscellaneous receipts 60 2,310
Cash used by:
Operating expenses (107,137) (91,789)
Disbursements for thrift resolutions (39,753) (64,494)
Miscellaneous disbursements (17) (306)
Net Cash Provided by Operating Activities (Note 13) 582,368 488,611
Cash Flows From Investing Activities
Cash provided by:
Maturity of U.S. Treasury obligations, held-to-maturity 1,630,000 1,635,000
Maturity of U.S. Treasury obligations, available-for-sale 150,000 425,000
Cash used by:
Purchase of U.S. Treasury obligations, held-to-maturity (1,522,399) (1,326,004)
Purchase of U.S. Treasury obligations, available-for-sale (819,316) (1,775,103)
Net Cash Used by Investing Activities (561,715) (1,041,107)
Net Increase/(Decrease) in Cash and Cash Equivalents 20,653 (552,496)
Cash and Cash Equivalents - Beginning 169,488 721,984
Unrestricted Cash and Cash Equivalents - Ending 149,988 146,186
Restricted Cash and Cash Equivalents - Ending 40,153 23,302
Cash and Cash Equivalents - Ending $190,141 $169,488
The accompanying notes are an integral part of these financial statements.


NOTES TO THE FINANCIAL STATEMENTS
December 31, 2000 and 1999


1. Legislative History and Operations of the Savings Association Insurance Fundline

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 Policiesline

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 Feesline

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, Netline

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, Netline

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:line

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. Assessmentsline

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 Lossesline

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
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
line

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 Pensionsline

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
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 Exposureline

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 Instrumentsline

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 line

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
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


PREVIOUS | NEXT | CONTENTS | FDIC HOME
Last Updated 04/05/2002 communications@fdic.gov