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Executive
Summary -
2nd Quarter 2006
This report highlights the
Corporation's financial activities and results for the six-month
period ending June 30, 2006.
- The DIF
fund balance as of June 30, 2006, increased by approximately
2 percent to $49.6 billion from year-end 2005. The DIF reported
comprehensive income of $967 million for the first half of 2006 compared
to
$518
million for the same period in 2005. This increase of $449 million
is primarily due to the recognition of exit fees earned of $346
million and a decrease in the unrealized loss on AFS securities
of $105 million.
- In a July 2006 notice of proposed rulemaking, the FDIC proposed
a base schedule of risk-based assessment rates ranging from 2 to
40 basis points. The FDIC has proposed to continue allowing the Board
to adjust
rates uniformly up to a maximum of five basis points higher or
lower than the base rates without the need for further notice-and-comment
rulemaking,
provided that any single adjustment from one quarter to the next
cannot move rates by more than five basis points. If the Board sets actual
rates
equal to the base rates, net assessment revenue for 2007 is estimated
to range from $250 million to $300 million (compared to $61 million
earned in 2005) after applying the one-time assessment credit.
- The DIF’s investment
portfolio primary reserve declined by approximately $2.7 billion (18.6
percent) during the first six months
of 2006. This is the result of staff implementing an investment
strategy that takes account of the relatively healthy banking and thrift
industries
and the likelihood for this environment to persist prospectively.
- For the
six months ending June 30, 2006, expenditures under the Corporate
Operating Budget ran 8 percent below budget and expenditures
under the Investment
Budget ran 27 percent below budget. The variance with respect
to the Corporate Operating Budget was primarily the result of
limited spending
on resolutions and receivership activities in the Receivership
Funding component of the budget through the second quarter. Detailed
quarterly
reports are provided separately to the Board for those projects
included in the Investment Budget, either by the Capital Investment
Review Committee
for all information technology projects or by the Division of
Administration for the Virginia Square – Phase II project.
- Approximately $3.2 million (35 percent) of the $9.05 million
supplemental budget approved by the Board of Directors in March for the
implementation of deposit insurance reform was spent through June 30,
2006.
On
the pages following is an assessment of each of the three major finance
areas:
financial statements, investments, and budget.
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