Seldom are budget cuts ever considered to be good omens, but if you need a reason to end the year on a high note, you might want to take a look at the FDIC’s proposed corporate operating budget.

Next year, the Federal Deposit Insurance Corp. will reduce its total budget by 3 percent, or $72.8 million. Most of that reduction is taking place in the agency’s receivership funding budget – that is, the money that’s set aside to cover expenses associated with bank failures – which was reduced 12.5 percent, or $75 million, from the corresponding figure in 2014.

The FDIC’s actual operations budget will increase by $2.2 million, or 0.1 percent. Included in that figure are a 4 percent increase in the average salaries of most FDIC employees and 61 additional permanent positions. The agency offset those increases, however, by eliminating 386 non-permanent positions and reducing its budget for outside services by $14.3 million, or 5.3 percent, largely due to switching contract service providers in the agency’s IT function.

Observers say the substantial reduction in the FDIC’s receivership budget portends an improvement in the overall health of American banks. In a memorandum accompanying the proposed budget, the agency noted that bank failures receded to pre-crisis levels this year, with only 17 institutions failing through the early part of November, compared with 24 failures in 2013.

“It’s a positive reflection on the industry that they’re able to roll back a little bit from the heights of the economic crisis. The problem bank list numbers have fallen consistently over the last couple of years. Clearly healthier institutions require a little bit less work on behalf of the FDIC,” said Jon Skarin, senior vice president at the Massachusetts Bankers Association.

Lightening The Load 

Scroll through a list of bank failures in the years since the recession, and you’ll note many of those failures occurred in states like Georgia, California and Arizona. In fact, the Bay State experienced just one bank failure resulting from the recent recession. Massachusetts was not hit so hard, the thinking goes, in large part because it had its own commercial real estate crisis in the recession of the early 1990s and many bankers today still keep that in the back of their minds.

But aside from improving health in the American banking industry, the FDIC is also expecting to lighten its workload in the years to come. In explaining its anticipated workload projections for the New Year, the agency notes that between bank failures and M&A activity, the number of FDIC-supervised institutions declined by 24.5 percent between year-end 2007 and November of this year, falling from 5,527 at the beginning of the recent financial crisis to around 4,171 over that time period.

While bank failures dropped off significantly after 2010, the agency anticipates further consolidation will continue in 2015 and beyond, thereby reducing the number of examinations it needs to make. In 2015, the FDIC expects to make 2,117 risk management examinations, a decline of 8.8 percent from the 2,322 it made this year.

“I think there’s a tendency always to overestimate the degree of consolidation,” said William Mayer, partner at the Boston-based Goodwin Procter and co-chair of the firm’s financial institutions group. “During a financial crisis or in the aftermath of a crisis, naturally you’re going to have a lot of consolidation of troubled institutions looking for more stable merger partners, as well as resolutions that involve consolidation … In a healthier economic environment where banks are not failing, there is a tendency to overstate the potential for consolidation.”

Even though the regulatory process for completing a merger has become a little bit more certain than it may have been in years past and conditions for consolidation are improving, Mayer thinks the pace of consolidation will slow as the economy continues to improve.

Skarin took a different point of view, however.

“We’ve always had consolidation; this is not a new phenomenon,” he said. “I think one difference, moving forward, is [that we] really haven’t seen any de novo applications over the past several years … There’s always been that give and take where new banks are formed as other banks consolidate. I think consolidation will continue, but it’s our hope the de novo process picks up, too.”