Note 5. Loans Receivable and Related Foreclosed Property, Net

Note 5 is broken down into the following sections:

• Direct Loan and Loan Guarantee Programs
• Net Assets for the Department's Loan Programs
• Direct Loans Obligated Prior to FY 1992
• Direct Loans Obligated After FY 1991
• New Disbursements of Direct Loans (Post-FY 1991)
• Subsidy Expense for Direct Loans by Program and Component
• Subsidy Rates for Direct Loans by Program and Component
• Schedule for Reconciling Allowance for Subsidy Cost (Post-FY 1991 Direct Loans)
• Defaulted Guaranteed Loans from Pre-FY 1992 Guarantees
• Defaulted Guaranteed Loans from Post-FY 1991 Guarantees
• Loan Guarantees
• Subsidy Expense for Loan Guarantees by Program and Component
• Total Loan Guarantee Subsidy Expense
• Subsidy Rates for Loan Guarantees by Program and Component
• Schedule for Reconciling Loan Guarantee Liabilities (Post-FY 1991 Loan Guarantees)
• Administrative Expenses

The Department operates the following direct loan and loan guarantee programs:

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The net assets for the Department’s loan programs consist of:

Net Assets for Department Loan Programs
(In Thousands)

	FY 2005	FY 2004
Direct Loans Obligated Prior to FY 1992	$ 44,619	$ 52,913
Direct Loans Obligated After FY 1991	345,218	227,758
Defaulted Guaranteed Loans from Pre-FY 1992 Guarantees	23	3,295
Defaulted Guaranteed Loans from Post-FY 1991 Guarantees	27,649	33,172
Total	$417,509	$317,138

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Direct Loans Obligated Prior to FY 1992 consist of:

Direct Loans Obligated Prior to FY 1992
FY 2005
(In Thousands)

Direct Loan Program	Loans Receivable, Gross	Interest Receivable	Allowance for Loan Losses	Value of Assets Related to Direct Loans, Net
CEIP	$22,145	$7,686	$(24,093)	$ 5,738
Drought Loan Portfolio	26,504	453	(270)	26,687
Economic Development Revolving Fund	12,204	113	(123)	12,194
Fisheries Loan Fund	912	91	(1,003)	-
Total	$61,765	$8,343	$(25,489)	$44,619

Direct Loans Obligated Prior to FY 1992
FY 2004
(In Thousands)

Direct Loan Program	Loans Receivable, Gross	Interest Receivable	Allowance for Loan Losses	Value of Assets Related to Direct Loans, Net
CEIP	$22,392	$7,748	$(20,268)	$ 9,872
Drought Loan Portfolio	28,655	463	(291)	28,827
Economic Development Revolving Fund	14,305	153	(244)	14,214
Fisheries Loan Fund	1,881	138	(2,019)	-
Total	$67,233	$8,502	$(22,822)	$52,913

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Direct Loans Obligated After FY 1991 consist of:

Direct Loans Obligated After FY 1991
FY 2005
(In Thousands)

Direct Loan Program	Loans Receivable, Gross	Interest Receivable	Allowance for Subsidy Cost (Present Value)	Value of Assets Related to Direct Loans, Net
Bering Sea Pollock Fishery Buyback	$ 61,980	$   48	$ 6,336	$ 68,364
Crab Buyback Loans	97,399	3,578	18,064	119,041
Fisheries Finance IFQ Loans	15,891	172	2,577	18,640
Fisheries Finance Traditional Loans	76,928	737	9,056	86,721
Fisheries Finance Tuna Fleet Loans	13,889	118	1,617	15,624
Pacific Groundfish Buyback Loans	35,663	1,226	(61)	36,828
Total	$301,750	$5,879	$37,589	$345,218

Direct Loans Obligated After FY 1991
FY 2004
(In Thousands)

Direct Loan Program	Loans Receivable, Gross	Interest Receivable	Allowance for Subsidy Cost (Present Value)	Value of Assets Related to Direct Loans, Net
Bering Sea Pollock Fishery Buyback	$ 66,137	$   56	$ 7,915	$ 74,108
Fisheries Finance IFQ Loans	15,679	155	2,420	18,254
Fisheries Finance Traditional Loans	64,535	589	8,288	73,412
Fisheries Finance Tuna Fleet Loans	23,833	191	3,507	27,531
Pacific Groundfish Buyback Loans	35,663	1,252	(2,462)	34,453
Total	$205,847	$2,243	$19,668	$227,758

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New Disbursements of Direct Loans (Post-FY 1991):

New Disbursements of Direct Loans (Post-FY 1991)
(In Thousands)

Direct Loan Program	FY 2005	FY 2004
Crab Buyback Loans	$ 97,399	$     -
Fisheries Finance IFQ Loans	3,058	3,290
Fisheries Finance Traditional Loans	31,176	21,150
Fisheries Finance Tuna Fleet Loans	-	38,301
Pacific Groundfish Buyback Loans	-	35,663
Total	$131,633	$98,404

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Subsidy Expense for Direct Loans by Program and Component:

Subsidy Expense for New Disbursements of Direct Loans:

Subsidy Expense for New Disbursements of Direct Loans
FY 2005
(In Thousands)

Direct Loan Program	Interest Rate Differential	Defaults	Fees and Other Collections	Other	Total
Crab Buyback Loans	$(22,665)	$18,185	$   -	$    -	$(4,480)
Fisheries Finance IFQ Loans	(696)	54	(21)	157	(506)
Fisheries Finance Traditional Loans	(4,605)	384	(216)	1,974	(2,463)
Total	$(27,966)	$18,623	$(237)	$2,131	$(7,449)

Subsidy Expense for New Disbursements of Direct Loans
FY 2004
(In Thousands)

Direct Loan Program	Interest Rate Differential	Defaults	Fees and Other Collections	Other	Total
Fisheries Finance IFQ Loans	$   (588)	$    92	$ (31)	$  110	$  (417)
Fisheries Finance Traditional Loans	(3,115)	309	(71)	581	(2,296)
Fisheries Finance Tuna Fleet Loans	(5,266)	202	(27)	537	(4,554)
Pacific Groundfish Buyback Loans	(11,373)	11,758	-	-	385
Total	$(20,342)	$12,361	$(129)	$1,228	$(6,882)

Modifications and Reestimates:

Modifications and Reestimates
FY 2005
(In Thousands)

Direct Loan Program	Total Modifications	Interest Rate Reestimates	Technical Reestimates	Total Reestimates
Bering Sea Pollock Fishery Buyback	$    -	$     -	$ 1,396	$  1,396
Fisheries Finance IFQ Loans	-	(144)	333	189
Fisheries Finance Traditional Loans	-	(24)	252	228
Fisheries Finance Tuna Fleet Loans	-	-	1,677	1,677
Pacific Groundfish Buyback Loans	-	-	(616)	(616)
Crab Buyback Loans	-	(7,110)	(7,275)	(14,385)
Total	$    -	$(7,278)	$(4,233)	$(11,511)

Modifications and Reestimates
FY 2004
(In Thousands)

Direct Loan Program	Total Modifications	Interest Rate Reestimates	Technical Reestimates	Total Reestimates
Bering Sea Pollock Fishery Buyback	$    -	$     -	$  954	$  954
Fisheries Finance IFQ Loans	-	(93)	267	174
Fisheries Finance Traditional Loans	-	(984)	(682)	(1,666)
Fisheries Finance Tuna Fleet Loans	-	(2,386)	2,172	(214)
Pacific Groundfish Buyback Loans	-	(2,578)	4,395	1,817
Total	$    -	$(6,041)	$7,106	$1,065

Total Direct Loan Subsidy Expense:

Total Direct Loan Subsidy Expense
(In Thousands)

Direct Loan Program	FY 2005	FY 2004
Bering Sea Pollock Fishery Buyback	$  1,396	$   954
Crab Buyback Loans	(18,865)	-
Fisheries Finance IFQ Loans	(317)	(243)
Fisheries Finance Traditional Loans	(2,235)	(3,962)
Fisheries Finance Tuna Fleet Loans	1,677	(4,768)
Pacific Groundfish Buyback Loans	(616)	2,202
Total	$(18,960)	$(5,817)

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Subsidy Rates for Direct Loans by Program and Component:

Budget Subsidy Rates for Direct Loans for the Current Fiscal-year's Cohorts:

The budget subsidy rates disclosed pertain only to the reporting period’s cohorts. These rates cannot be applied to the new disbursements of direct loans during the reporting period to yield the subsidy expense. The subsidy expense for new disbursements of direct loans for the reporting period could result from disbursements of loans from both the reporting period’s cohorts and prior fiscal-year(s) cohorts. The subsidy expense for the reporting period may also include modifications and reestimates.

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Schedule for Reconciling Allowance for Subsidy Cost (Post-FY 1991 Direct Loans):

Schedule for Reconciling Allowance for Subsidy Cost (Post-FY 1991 Direct Loans)
(In Thousands)

	FY 2005	FY 2004
Beginning Balance of the Allowance for Subsidy Cost	$ 19,668	$ 20,110
Add Subsidy Expense for Direct Loans Disbursed During the Reporting Years by Component:
Interest Rate Differential Costs	27,966	20,342
Default Costs (Net of Recoveries)	(18,623)	(12,361)
Fees and Other Collections	237	129
Other Subsidy Costs	(2,131)	(1,228)
Total of the above Subsidy Expense Components	7,449	6,882
Adjustments:
Fees Received	(256)	(330)
Subsidy Allowance Amortization	(783)	(3,750)
Other	-	(2,179)
Ending Balance of the Allowance for Subsidy Cost Before Reestimates	26,078	20,733
Add or Subtract Subsidy Reestimates by Component:
Interest Rate Reestimates	7,278	6,041
Technical/Default Reestimates	4,233	(7,106)
Total of the above Reestimate Components	11,511	(1,065)
Ending Balance of the Allowance for Subsidy Cost	$ 37,589	$ 19,668

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Defaulted Guaranteed Loans from Pre-FY 1992 Guarantees:

Defaulted Guaranteed Loans from Pre-FY 1992 Guarantees
FY 2005
(In Thousands)

Loan Guarantee Program	Defaulted Guaranteed Loans Receivable, Gross	Interest Receivable	Foreclosed Property	Allowance for Loan Losses	Value of Assets Related to Defaulted Guaranteed Loans Receivable, Net
FVOG Program	$17,211	$ 14	$ 14	$(17,216)	$   23

Defaulted Guaranteed Loans from Pre-FY 1992 Guarantees
FY 2004
(In Thousands)

Loan Guarantee Program	Defaulted Guaranteed Loans Receivable, Gross	Interest Receivable	Foreclosed Property	Allowance for Loan Losses	Value of Assets Related to Defaulted Guaranteed Loans Receivable, Net
FVOG Program	$19,650	$  -	$376	$(16,731)	$3,295

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Defaulted Guaranteed Loans from Post-FY 1991 Guarantees:

Defaulted Guaranteed Loans from Post-FY 1991 Guarantees
FY 2005
(In Thousands)

Loan Guarantee Program	Defaulted Guaranteed Loans Receivable, Gross	Interest Receivable	Foreclosed Property	Allowance for Subsidy Cost (Present Value)	Value of Assets Related to Defaulted Guaranteed Loans Receivable, Net
Emergency Steel Loan Guarantee Program	$18,896	$  547	$    -	$ 1,339	$20,782
FVOG Program	11,599	1,254	2,970	(8,956)	6,867
Total	$30,495	$1,801	$2,970	$(7,617)	$27,649

Defaulted Guaranteed Loans from Post-FY 1991 Guarantees
FY 2004
(In Thousands)

Loan Guarantee Program	Defaulted Guaranteed Loans Receivable, Gross	Interest Receivable	Foreclosed Property	Allowance for Subsidy Cost (Present Value)	Value of Assets Related to Defaulted Guaranteed Loans Receivable, Net
Emergency Steel Loan Guarantee Program	$ 92,097	$    -	$    -	$(67,017)	$25,080
FVOG Program	12,608	1,262	2,949	(8,727)	8,092
Total	$104,705	$1,262	$2,949	$(75,744)	$33,172

The Emergency Steel Loan Guarantee Program amounts reported above for both FY 2005 and FY 2004 represent one defaulted guaranteed loan receivable. In June 2005, the borrower repaid $73.2 million of principal against this loan receivable, and the borrower also paid $17.9 million of accrued interest. These collections were made possible by a liquidation, under bankruptcy, of the borrower’s assets. These actual collections exceeded the cash flow expectations reflected in the Allowance for Subsidy Cost of $(67.0) million as of September 30, 2004. The Department furthermore anticipates that the government will fully collect in FY 2006 the remaining principal balance of $18.9 million, plus accrued interest. This should be made possible by the expected further liquidation of assets by the borrower. The better-than-expected actual and anticipated cash flows discussed above contributed to the downward subsidy reestimate of $(85.3) million, as of September 30, 2005, for this defaulted guaranteed loan receivable.

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Loan Guarantees:

Guaranteed Loans Outstanding:

Outstanding non-acquired guaranteed disbursed loans as of September 30, 2005 and 2004, which are not reflected in the financial statements, are as follows:

Outstanding Non-acquired Guaranteed Disbursed Loans Not Reflected in the Financial Statements
As of September 30, 2005 and 2004
(In Thousands)

Loan Guarantee Program	FY 2005		FY 2004
	Outstanding Principal of Guaranteed Loans Disbursed, Face Value	Amount of Outstanding Principal Guaranteed	Outstanding Principal of Guaranteed Loans Disbursed, Face Value	Amount of Outstanding Principal Guaranteed
Emergency Oil and Gas Loan Guarantee Program	$     -	$     -	$  1,248	$  1,061
Emergency Steel Loan Guarantee Program	242,435	212,817	246,074	215,927
FVOG Program	32,366	32,366	45,202	45,202
Total	$274,801	$245,183	$292,524	$262,190

New Disbursements of Loan Guarantees, by year:

New Disbursements of Loan Guarantees
(In Thousands)

Loan Guarantee Program	FY 2005		FY 2004
	Outstanding Principal of Guaranteed Loans Disbursed, Face Value	Amount of Outstanding Principal Guaranteed	Outstanding Principal of Guaranteed Loans Disbursed, Face Value	Amount of Outstanding Principal Guaranteed
Emergency Steel Loan Guarantee Program	$24,536	$21,591	$80,964	$71,248

Loan Guarantee Liabilities:

Loan Guarantee Liabilities
(In Thousands)

Loan Guarantee Program	FY 2005	FY 2004
	Loan Guarantee Liabilities for Post- FY 1991 Guarantees Disbursed, Present Value	Loan Guarantee Liabilities for Post- FY 1991 Guarantees Disbursed, Present Value
Emergency Oil and Gas Loan Guarantee Program	$   294	$   605
Emergency Steel Loan Guarantee Program	78,347	70,069
FVOG Program	3,171	2,971
Total	$81,812	$73,645

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Subsidy Expense for Loan Guarantees by Program and Component:

Subsidy Expense for New Disbursements of Loan Guarantees:

Subsidy Expense for New Disbursements of Loan Guarantees
FY 2005
(In Thousands)

Loan Guarantee Program	Interest Supplements	Defaults	Fees and Other Collections	Total
Emergency Steel Loan Guarantee Program	$    -	$ 7,368	$(123)	$ 7,245

Subsidy Expense for New Disbursements of Loan Guarantees
FY 2004
(In Thousands)

Loan Guarantee Program	Interest Supplements	Defaults	Fees and Other Collections	Total
Emergency Steel Loan Guarantee Program	$    -	$22,824	$(405)	$22,419

Modifications and Reestimates:

Modifications and Reestimates
FY 2005
(In Thousands)

Loan Guarantee Program	Total Modifications	Interest Rate Reestimates	Technical Reestimates	Total Reestimates
Emergency Oil and Gas Loan Guarantee Program	$    -	$    -	$   (814)	$   (814)
Emergency Steel Loan Guarantee Program	1,348	-	(87,264)	(87,264)
FVOG Program	-	-	523	523
Total	$1,348	$    -	$(87,555) 1	$(87,555)
1 Of this amount, $(84.8) million represents downward subsidy reestimates for defaulted guaranteed loan receivables, and $(2.8) million is the total downward subsidy reestimates for loan guarantee liabilities. (back)

Modifications and Reestimates
FY 2004
(In Thousands)

Loan Guarantee Program	Total Modifications	Interest Rate Reestimates	Technical Reestimates	Total Reestimates
Emergency Oil and Gas Loan Guarantee Program	$    -	$    -	$ (724)	$ (724)
Emergency Steel Loan Guarantee Program	-	676	1,069	1,745
Total	$    -	$  676	$  345	$1,021

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Total Loan Guarantee Subsidy Expense:

Total Loan Guarantee Subsidy Expense
(In Thousands)

Loan Guarantee Program	FY 2005	FY 2004
Emergency Oil and Gas Loan Guarantee Program	$   (814)	$  (724)
Emergency Steel Loan Guarantee Program	(78,671)	24,164
FVOG Program	523	-
Total	$(78,962)	$23,440

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Subsidy Rates for Loan Guarantees by Program and Component:

Budget Subsidy Rates for Loan Guarantees for the Current Fiscal-year’s Cohorts:

There were no new cohorts of guaranteed loans during FY 2005 and FY 2004.

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Schedule for Reconciling Loan Guarantee Liabilities (Post-FY 1991 Loan Guarantees):

Schedule for Reconciling Loan Guarantee Liabilities (Post-FY 1991 Loan Guarantees)
(In Thousands)

	FY 2005	FY 2004
Beginning Balance of Loan Guarantee Liabilities	$73,645	$51,068
Add Subsidy Expense for Guaranteed Loans Disbursed During the Reporting Years by Component:
Default Costs (Net of Recoveries)	7,368	22,824
Fees and Other Collections	(123)	(405)
Total of the above Subsidy Expense Components	7,245	22,419
Adjustments:
Loan Guarantee Modifications	1,348	-
Fees Received	198	220
Interest Accumulation on the Liabilities Balance	1,004	(28)
Other	1,127	(1,055)
Ending Balance of Loan Guarantee Liabilities Before Reestimates	84,567	72,624
Add or Subtract Subsidy Reestimates by Component:
Interest Rate Reestimates	-	676
Technical/Default Reestimates	(2,755)	345
Total of the above Reestimate Components	(2,755)	1,021
Ending Balance of Loan Guarantee Liabilities	$81,812	$73,645

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Administrative Expenses:

Administrative expenses in support of the Department’s direct loan and loan guarantee programs consist of:

Direct Loan Program Administrative Expenses
(In Thousands)

Direct Loan Program	FY 2005	FY 2004
Drought Loan Portfolio and Economic Development Revolving Fund	$  892	$1,708
NOAA Direct Loan Programs	2,863	3,251
Total	$3,755	$4,959

Loan Guarantee Program Administrative Expenses
(In Thousands)

Loan Guarantee Program	FY 2005	FY 2004
Emergency Oil and Gas Loan Guarantee Program	$ 23	$   15
Emergency Steel Loan Guarantee Program	253	598
FVOG Program	318	462
Total	$594	$1,075

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