1

II. Financial

Highlights

Deposit Insurance Fund

Performance

The FDIC administers two deposit

insurance funds – the Bank Insurance

Fund (BIF) and the Savings Association

Insurance Fund (SAIF) – and manages

the FSLIC Resolution Fund (FRF),

which fulfills the obligations of the

former Federal Savings and Loan

Insurance Corporation (FSLIC) 

and the former Resolution Trust

Corporation (RTC). The following

summarizes the condition of the

FDIC’s insurance funds. (See the

accompanying tables on FDICInsured Deposits, Insurance Fund

Reserve Ratios and Risk-Related

Premiums on the following pages.)

The BIF reported comprehensive

income (net income plus current

period unrealized gains/losses on

available-for-sale securities) of 

$1 billion for the twelve months 

ending December 31, 2004, compared

to $1.7 billion for the same period 

in the prior year. This reduction 

was primarily due to an increase 

in unrealized losses on available-forsale securities of $102 million and 

a reduction in net income of $625 

million. The decline in net income

primarily resulted from a smaller

negative adjustment of $269 million

to the provision for losses at

December 31, 2004, compared to 

a negative $931 million adjustment

for the same period last year. BIF’s

provision for losses negative adjustments were mostly attributable to

the reduction of estimated losses 

for future and actual failures. As of

December 31, 2004, the fund balance

was $34.8 billion, up from $33.8 

billion at year-end 2003. 

The SAIF reported comprehensive

income of $480 million for the twelve

months ending December 31, 2004,

compared to $493 million for the

same period in the prior year. This

reduction of $13 million was primarily

due to slightly lower earnings on

U.S.Treasury obligations whereby 

a $30 million increase in unrealized

losses was partially offset by a $23

million increase in interest revenue.

As of December 31, 2004, the fund

balance was $12.7 billion, up from

$12.2 billion at year-end 2003.

Operating Expenses

Corporate Operating Budget expenses

totaled $1.004 billion in 2004, including

$986 million in ongoing operations and

$18 million for receivership funding.

This represented approximately 

97 percent of the approved budget

on ongoing operations and 24 percent

of the approved budget for receivership funding. Receivership funding

expenses were down significantly

from 2003 because the four financial

institution failures in 2004 were 

relatively small banks.

In December 2004, the Board of

Directors approved a 2005 Corporate

Operating Budget of approximately

$1.1 billion, including just over 

$1.0 billion for ongoing operations.

The level of approved spending in

the 2005 budget remains virtually

the same as that in 2004 due to 

continuing efforts to identify operational efficiencies and control costs.

The Corporate Operating Budget

includes funding for a number 

of major new initiatives, including 

funding for a Hispanic financial 

literacy program, and hiring additional

financial analysts and risk modeling

specialists to prepare for implementation of the Basel Capital Accord. 
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The 2005 budget includes estimated

funding requirements ($35 million)

for litigation expenses projected to

be incurred on behalf of the FDIC

by the U.S. Department of Justice. 

Investment Spending

The FDIC has a disciplined process

for reviewing proposed new capital

investment projects and managing

the implementation of approved 

projects. Most of the projects in 

the current investment portfolio 

are major IT system initiatives.

Proposed projects are carefully

reviewed to ensure that they are

consistent with the Corporation’s

enterprise architecture and include

an appropriate return on investment

for the insurance funds. The process

also enables the FDIC to be aware of

risks to the major capital investment

projects and facilitates appropriate,

timely intervention to address these

risks throughout the development

process. An investment portfolio 

performance review of the major

capital investments is provided to the

FDIC’s Board of Directors quarterly.

During 2004, the Board of Directors

approved only one new investment

project, a new Web-based time 

and attendance reporting system.

Additional spending was also approved

for three existing investment projects:

(1) Legal Integrated Management

System increased by $1.4 million 

to $5.06 million, (2) New Financial

Environment increased $17 million 

to $51.8 million, and (3) ViSION

increased $6.2 million to $12.7 million.

Funding for FDIC staff assigned to

investment projects was transferred

to the Corporate Operating Budget,

at year-end 2004, in order to more

accurately account for and provide

year-to-year comparisons of salary

and compensation expenses included

in those operating budgets. However,

all other project spending continues

to be provided through separate

investment budget authorizations.

SAIF-Insured

BIF-Insured

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Source: Commercial Bank Call Reports and Thrift Financial Reports

1960 70 80 90 2000

FDIC-Insured Deposits (estimated 1960-2004)

Dollars in billions

04
26

1.45

1.40

1.35

1.30

1.25 (target ratio)

0

6/02 9/02 12/02 3/03 6/03 9/03 12/03 3/04 6/04 9/04 

Insurance Fund Reserve Ratios Percent of Insured Deposits

BIF

SAIF
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Risk-Related Premiums

The following tables show the number and percentage of institutions insured by the Bank Insurance 

Fund (BIF) and the Savings Association Insurance Fund (SAIF), according to risk classifications effective

for the first semiannual assessment period of 2004. Each institution is categorized based on its 

capital group (1, 2, or 3) and supervisory subgroup (A, B, or C), which is generally determined by on-site 

examinations. Assessment rates are basis points, cents per $100 of assessable deposits, per year.

BIF Supervisory Subgroups●

Capital Group A B C

1. Well Capitalized:

Assessment Rate 0 3 17

Number of Institutions 7,314 (92.7%) 421 (5.3%) 79 (1.0%)

2. Adequately Capitalized:

Assessment Rate 3 10 24

Number of Institutions 58 (0.7%) 4 (0.1%) 8 (0.1%)

3. Undercapitalized:

Assessment Rate 10 24 27

Number of Institutions 2 (0.0%) 0 (0.0%) 2 (0.0%)

SAIF Supervisory Subgroups■

1. Well Capitalized:

Assessment Rate 0 3 17

Number of Institutions 1,073 (93.3%) 62 (5.4%) 9 (0.8%)

2. Adequately Capitalized:

Assessment Rate 3 10 24

Number of Institutions 4 (0.3%) 2 (0.2%) 0 (0.0%)

3. Undercapitalized:

Assessment Rate 10 24 27

Number of Institutions 0 (0.0%) 0 (0.0%) 0 (0.0%)

BIF data exclude SAIF-member “Oakar” institutions that hold BIF-insured deposits. The assessment rate reflects the rate 

for BIF-assessable deposits, which remained the same throughout 2004.

SAIF data exclude BIF-member “Oakar” institutions that hold SAIF-insured deposits. The assessment rate reflects the rate

for SAIF-assessable deposits, which remained the same throughout 2004.

●

■