CALL REPORT PREPARATION

Transcription

1 CALL REPORT PREPARATION LENDING SCHEDULES Presented by Ann Thomas This webinar is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal or accounting services. If legal or accounting advice is required, it is recommended that each financial institution consult its own attorney or accountant. This material may not be reproduced without written permission of Thomas Consulting. CALL REPORT PREPARATON LENDING SCHEDULES TABLE OF CONTENTS Slide RC-C, Part I 3 Classification Priority 5 Memoranda 28 RC-C, Part II 60 RC-K, Quarter to Date Averages 67 RC-L, Off Balance Sheet Items 69 RC-N, Past Due & Nonaccrual Loans 84 RC-R, Risk Based Capital for Loans 96 RI, Loan Interest & Fee Income 112 RI-B, Charge-Off s & Recoveries

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3 Loans, Classification Priority RCC 10, Lease Financing Receivable report net of unearned income property acquired by the bank for leasing purposes RCC 8, Loans to States & Political Subdivisions, includes real estate secured and overdrafts Indian tribes are considered state & political subdivisions 5 Loans, Classification Priority RCC 1, Loans Secured by Real Estate Collateral Definition of Real Estate Secured loans consider primary collateral; do not consider real estate taken in abundance of caution unless bank gives more preferential terms because of additional real estate value of real estate collateral (excluding any senior debt) must be greater than 50% of the principal amount of the loan at origination in order to be considered secured by real estate 6 3

4 Loans, Classification Priority RC-C 1, Loans Secured by Real Estate Definition of Real Estate secured Example 1, loan amount $200,000, collateral value $225,000 Real estate secured because collateral value is more than $100,000 Example 2, 2 nd lien loan $100,000, collateral value $150,000, first lien amount $90,000 Real estate secured because net collateral ($60,000) value is more than $50,000 Example 3, $700,000 loan secured by real estate and equipment; real estate value $340,000, equipment value $360,000 Would NOT be coded as real estate secured because collateral value is less than $350,000 (1/2 of loan amount) 7 Loans, Classification Priority RC-C 1, Loans Secured by Real Estate Definition of Real Estate secured Example 4, two loans on same day, $25,000 line of credit and a $125,000 term loan ; loans will be cross-collateralized by equipment with an estimated value of $40,000 and a third lien on the borrower s residence, which has an estimated value of $140,000 and first and second liens with unpaid balances payable to other lenders totaling $126,000; the two loans should be considered together to determine whether they are secured by real estate. Would NOT be reported as secured by real estate. Remaining real estate collateral value is $14,000, which is less than 50% of loan origination amounts 8 4

5 Loans, Classification Priority RC-C 1, Loans Secured by Real Estate Definition of Real Estate secured Example 5, $10,000 home equity line of credit secured by a junior lien on a 1-4 property; bank also has a loan to the same borrower that is secured by a first lien on the same 1-4 property; unpaid principal balance is $71,000. The estimated value of the property at origination of the home equity line of credit is $75,000. Consider 2 loans together. Would be reported as secured by real estate. Real estate collateral value greater than 50% of loan origination amounts (consider existing plus new) Would NOT be reported as secured by real estate if another bank held the 1 st lien. Remaining real estate collateral value of $4000 is less than 50% of new loan amount. 9 Loans, Classification Priority RCC 1, Loans Secured by Real Estate RCC 1a, Construction, Land Development, & Vacant Land Construction is new construction as well as alternations or additions to existing property Loans written as combination constructionpermanent loans secured by real estate should be reported in RCC 1a until construction is completed or principal amortization payments begin, whichever comes first. When the first of these events occurs, the loans should begin to be reported in the real estate loan category appropriate to the real estate 10 collateral 5

6 Loans, Classification Priority RCC 1, Loans Secured by Real Estate RCC 1a, Construction, Land Development, Vacant Land a combination construction-permanent loan arises when the lender enters into a contractual agreement with the original borrower at the time the construction loan is originated to also provide the original borrower with permanent financing that amortizes principal after construction is completed and a certificate of occupancy is obtained (if applicable) 11 Loans, Classification Priority RCC 1, Loans Secured by Real Estate RCC 1a, Construction, Land Development, Vacant Land is intended to apply to situations where, at the time the construction loan is originated, the original borrower: is expected to be the owner-occupant of the property upon completion of construction & receipt of a certificate of occupancy (if applicable), for example, where the financing is being provided to the original borrower for the construction and permanent financing of the borrower s residence or place of business, or is not expected to be the owner-occupant of the property, but repayment of the permanent loan will be derived from rental income associated with the property being constructed after receipt of a certificate of occupancy (if applicable) rather 12than from the sale of the property being constructed 6

7 Loans, Classification Priority RCC 1, Loans Secured by Real Estate RCC 1a1, 1-4 Construction Does not include 1-4 vacant land loans unless same loan finances the 1-4 construction Includes loans: to developers secured by land for 1-4 construction to individuals for 1-4 construction Loans secured by manufactured housing Loans secured by duplex units or townhouses Combination construction-perm loans until construction is 13 complete or principal amortization payments begin Loans, Classification Priority RCC 1, Loans Secured by Real Estate RCC 1a1, 1-4 Construction Includes: Combination land & construction loans on 1-4 family residential properties, regardless of the current stage of construction or development Loans secured by apartment buildings undergoing conversion to condominiums, regardless of the extent of planned construction or renovation, where repayment will come from sales of individual condominium dwelling units, which are 1-4 family residential properties Bridge loans to developers on 1-4 property where the buyer will not assume the same loan, even if construction 14 complete or amortization has begun 7

8 Loans, Classification Priority RCC 1a, Construction, land development, vacant land RCC 1a2, All other construction, land development, & vacant land loans: construction loans other than for 1-4 land development loans loans secured by vacant land unless the land is used or could be used for farmland 15 Loans, Classification Priority RCC 1, Loans Secured by Real Estate RCC 1a2, All other construction, land development, vacant land Continue to report as construction, even after construction is completed unless and until the loan is financed into permanent loan, the bank acquires physical possession of underlying collateral, or the loan is charged off. A loan is deemed to be refinanced into a new permanent loan only if the bank:» originates a loan to a new borrower who has purchased the real property, or» has made a prudently underwritten new amortizing permanent loan at market value terms to the original borrower, including an appropriate interest rate, maturity, and LTV ratio, that is no longer dependent on the sale of the property for repayment» should have clearly identified ongoing source of repayment sufficient to service the required P&I over a reasonable and customary period relative to the type of property securing the loan 16 8

9 Loans, Classification Priority RCC 1, Loans Secured by Real Estate RCC 1b, Secured by Farmland (Used or Useable) RCC 1c, Secured by 1-4 residential 1. RCC 1c1, open-end 2. RCC 1c2, closed-end a. RCC 1c2a, First liens b. RCC 1c2b, Junior liens RCC 1d, Secured by multi-family residential Housing 5 or more on a fairly permanent basis 17 Loans, Classification Priority RCC 1, Loans Secured by Real Estate RCC 1e1, Secured by Owner Occupied nonfarm, non-residential loans RCC 1e2, Secured by Non-owner occupied non-farm, non-residential loans 18 9

10 Owner Occupied Non-farm, Non-residential Determination made at origination Once determined don t need to review again Primary source for repayment is cash flow from ongoing operations of property owner or an affiliate rather than rental income (< 50%) or permanent financing of property Payments from hospitals, golf courses, recreational facilities, churches, & car washes are not rents Payments from hotels, dorms, nursing homes, assisted living facilities, & storage facilities ARE rents 19 Loans, Classification Priority Loans to Certain Borrowers RCC 2, Depository Institutions RCC 3, Farmers (exclude security loans, non-farm commercial) all agricultural purpose loans, whether made to farm & ranch owner or non-farmer all other loans made to farmers RCC 7, Foreign Governments 20 10

11 Loans, Classification Priority Loans to Certain Borrowers RC-C 9a, Non-depository financial institutions Non-real estate loans to insurance, finance, factoring, mortgage, or holding companies, REITS, federally sponsored lending agencies (FHLB, FHLMC, Federal Intermediate Credit Banks, Federal Land Banks, the Federal National Mortgage Association, & the Student Loan Marketing Association) RC-C 9b/9b2, Nonprofit organizations Non-real estate secured loans to churches, hospitals, educational & charitable institutions, clubs, similar associations 21 Loans, Classification Priority Loans based on Purpose RCC 4, Commercial Business Non-real estate secured business loans If > $300 in assets, report commercial loans to US and non-us addresses in column A Domicile is determined by the principal residence address of an individual or the principal business address of a corporation, partnership, or sole proprietorship Consider only principal address, even if other addresses are used for correspondence or other purposes US addresses include residents of the 50 states of the United States, the District of Columbia, Puerto Rico, and U.S. territories and possessions 22 11

12 Loans, Classification Priority Loans based on Purpose RCC 6, Individual, Family, Personal Expenditure RCC 6a, Credit Cards RCC 6b, Other Revolving bounce protection, if meets definition contractually binding disclose pay up to dollar amount & not discretionary RCC 6c, Automobile RCC 6d, All Other Consumer 23 Loans, Classification Priority RCC 6c, Automobile Loans Include: Consumer purpose loans to purchase passenger cars, minivans, vans, sport utility vehicles, trucks, and similar light trucks for personal use Secured or unsecured as long as purpose is to purchase auto Report mixed purpose loans based on primary purpose 24 12

13 Loans, Classification Priority RCC 6c, Automobile Loans Exclude: personal cash loans secured by cars already paid for loans for commercial vehicles auto loans to farmers if car is to be used for the operations or maintenance of farm loans for farm equipment auto lease financing fleet sales motorcycles, RV s, golf carts 25 Loans, Classification Priority Loans based on Purpose RCC 6, Individual, Family, Personal Expenditure RCC 6d, All Other Consumer Vacation, debt consolidation, non real estate secured home improvement, medical bills, wedding expenses 26 13

14 Loans, Classification Priority RCC 9, Other Loans RCC 9b/9b1, For purchasing or holding securities Does not have to be collateralized by security RCC 9b/9b2, Unplanned Overdrafts of Individuals or Businesses RCC 9b/9b2, Individuals for Investment Not real estate secured or investment in own business RCC 11, Unearned interest & deferred fees

15 Restructured Loans RC-C & RC-N M1 Includes restructured consumer loans Additional detail added for other loan types M1a-d, Restructured loans secured by real estate, by type M1e, Commercial restructured loans M1f, All other restructured loans, including loans to individuals for household, family, & other expenditures M1f1-1f6, itemize any loan category included in M1f if it exceeds 10% of total restructured loans 29 Restructured Loans Financial condition of borrower has deteriorated and borrower is experiencing financial difficulties Due to the deterioration, the bank grants a concession it will not normally make Reduces rate Reduces payment, principal and/or interest Extends maturity date Do not expect to collect all amounts due Both conditions must exist for a loan to be a TDR If past due 30+ days or nonaccrual, report on RCN M1; do not include in RCC M

16 Item 1 -- Restructured Loans & Leases Not restructured if only reduced rate to current when modified and extended In general, report as TDR until paid off, charged-off, or repossessed Include only in calendar year restructured if restructured terms were current market in compliance with modified terms yields market rate (effective time of restructuring that is > rate willing to accept for new loan with comparable risk) Exclude restructured that are past due or nonaccrual: report on RC-N M1 Prohibited from using the effective interest rate test, included in the TDR guidance for borrowers in ASC , when 31 determining whether the creditor has granted a concession. Subsequent Restructuring of a Troubled Debt (December, 2014 supplemental instructions): When loan previously modified in a troubled debt restructuring (TDR), may enter into another restructuring agreement In certain circumstances may be acceptable NOT to account for subsequent restructuring as a TDR Borrower not experiencing financial difficulties Must be supported by current, well document credit evaluation No concession has been granted to borrower Must be market terms Principal forgiveness on a cumulative basis IS a concession 32 16

17 Subsequent Restructuring of a Troubled Debt Even though may no longer be reported as TDR, the recorded investment in the loan should not change at time of subsequent restructuring unless cash has been advanced or received If interest payments were applied to principal of TDR prior to subsequent restructuring, application of the payments should not be reversed or reported as income at time of subsequent restructuring Guidance effective on or after October 1, 2014 May apply to loans outstanding as of Prior call reports should not be amended 33 Troubled Debt Restructuring: Supplemental Instructions Restructured Loan is an impaired loan. Individually impaired loans are measured as follows: If not collateral dependent, present value of future cash flows discounted at original effective interest rate or loan s observable market price. If collateral dependent, fair value of collateral less costs to sell. A stated interest rate charges on a restructured loan greater than or equal to the rate available in the marketplace for similar types of loans to non-troubled borrowers does not preclude a modification from being a troubled debt restructuring

18 Item 1 -- Restructured Loans & Leases ASU , Creditor s determination of whether a restructuring is a troubled debt restructuring Financial difficulties include: probable that borrower will default on any of their debts in the foreseeable future don t have to be in default at time of modification declared or in process of declaring bankruptcy doubt that entity will be a going concern entity specific cash flow will be insufficient to service the 35 P&I Item 1 -- Restructured Loans & Leases ASU Delay in payment is insignificant and not a concession if amount delayed is insignificant to unpaid principal balance or collateral value delay is insignificant relative to frequency of payments, or original maturity, or original expected duration 36 18

19 FIL , Accounting News: Troubled Debt Restructurings Contractual interest rate not market rate simply because rate not lowered under restructuring if borrower has no access to funds for debt with similar risk characteristics, considered below market rate if terms or conditions outside bank s policies or common practices then may be restructured loan 37 OCC , Troubled Debt Restructurings If no additional underwriting performed when renewing substandard loan and no change in loan pricing or the pricing is not adjusted to reflect risk and borrower gives no additional consideration to compensate for risk, then would be a TDR FIL , Policy Statement on Prudent Commercial Real Estate Loan Workouts, examples & explanations 38 19

20 39 INTEREST RATE RISK CALL REPORT ITEMS FIXED RATE Fixed During Term Predetermined Changes Floating Rate at Floor or Ceiling Credit Cards Where Bank Reserves Right to Change Rate Unplanned Overdrafts 40 20

21 INTEREST RATE RISK CALL REPORT ITEMS FIXED RATE REPORT REMAINING MATURITY Call Report Date to Final Maturity Do NOT Consider: Repayment Schedule Unless Contractual Call Date Unless Called 41 INTEREST RATE RISK CALL REPORT ITEMS FLOATING RATE Variable Based on Index Exact Rate Cannot Be Known in Advance REPORT NEXT REPRICING DATE Call Report Date to Next Repricing Opportunity 42 21

22 INTEREST RATE RISK ITEMS: LOANS SCHEDULE RC-C M2a-M2c Include loans & leases reported in RC-C 1-10 Exclude nonaccruals Loans reported NOT net of unearned unless unearned included in RC-C INTEREST RATE RISK ITEMS: LOANS SCHEDULE RC-C M2a Closed-End 1 st Liens 1-4 Residential (RC-C 1c2a) Remaining Maturity of Fixed Rate Next Repricing Date of Floating Rate 44 22

23 INTEREST RATE RISK ITEMS: LOANS SCHEDULE RC-C M2 a Closed-End 1 st Liens 1-4 Residential (RC-C 1c2a) Fixed rate loans that are held by the bank for sale in the secondary market under the terms of a binding commitment should be reported in M 2a or 2b, on the basis of the time remaining until the delivery date specified in commitment Floating rate loans that are held by the bank for sale in the secondary market are reported based on the date the interest rates on the loans can next change or the delivery date 45 specified in the commitment, whichever is earlier INTEREST RATE RISK ITEMS: LOANS SCHEDULE RC-C M2b All Other Loans (RC-C 1-10 less 1c2a) Remaining Maturity of Fixed Rate Next Repricing Date of Floating Rate 46 23

24 INTEREST RATE RISK ITEMS: LOANS SCHEDULE RC-C M2c Report all loans with a remaining maturity of 1 year or less -- fixed and floating Do NOT include floating loans with repricing 1 year or less, but a maturity of over 1 year Loans and leases that are held by the bank for sale in the secondary market included only if 47 remaining maturity a year or less RC-C Part 1 MEMORANDA Item 3 -- Loans to finance commercial real estate, construction, and land development NOT secured by real estate; would be reported in RC-C 4 or 9 Item 4 -- Adjustable Rate Closed-End, 1-4 First Liens Include even if no longer floats Include fixed rate 1-4 first liens with original maturities of one year or less, with a balloon 48 24

25 49 Purchased Impaired Loans Accounted for under ASC Purchased impaired loans are loans that a bank has purchased, including those acquired in a purchase business combination, where there is evidence of deterioration of credit quality since the origination of the loan and it is probable, at the purchase date, that the bank will be unable to collect all contractually required payments receivable. Loans held for investment are those that the bank has the intent and ability to hold for the foreseeable future 50 or until maturity or payoff. 25

26 RC-C M8 1-4 Mortgage Loans with Negative Amortization RC-C M8a (all banks must report) dollar amount of negative amortization loans contractual payment is less than amount of interest due; difference added to principal balance RC-C M8b, 8c (report if negative amortization loans are $100 million or 5% of total loans) M8b, maximum remaining negative amortization M8c, total negative amortization included in M8a

27 53 RC-C M9 Loans in Process of Foreclosure mortgage loans owned by the bank that are in the process of foreclosure report carrying amount still report on RC-N 54 27

28 RC-C M10, M11 RC-C M10 fair value of loans under a fair value option measured by major loan category RC-C M11 unpaid principal balance of such loans by major loan category Proposing to move RC-C M10 & M11 to RC-Q beginning in September, Column B undiscounted amount of uncollected contractual principal & interest receivable Column C contractual cash flow receivables not expected to be collected 56 28

29 57 RC-C M13, complete if RC-C 1a > 100% RC-R Pt II 35a as of of prior year Interest Reserve Allowed, under terms of the loan contract, to advance funds to pay interest due on the loan 13a, report loans that allow interest reserves 13b, report interest reserves capitalized and included in RI 1a1b during the quarter RC-C M14, complete if pledge loans to secure deposits, repos, or other borrowings Report total amount pledged, regardless of outstanding balance of borrowings 58 29

30 RC-C M15 Reverse Mortgage Loans Report annually with December call report Report proprietary and HECM (Home Equity Conversion Mortgage) products separately RC-C M15a, Reverse mortgages held for investment RC-C M15a1, Home equity conversion mortgages (HECM) RC-C M15a2, Proprietary reverse mortgages RC-C M15b, Number of fee based referrals to other lenders during year RC-C M15b1, Home equity conversion mortgages (HECM) RC-C M15b2, Proprietary reverse mortgages RC-C M15c, Principal amount of reverse mortgages that have been sold during the year RC-C M15c1, Home equity conversion mortgages (HECM) RC-C M15c2, Proprietary reverse mortgages 59 Report each quarter 60 30

31 SCHEDULE RC-C PART II LOANS TO SMALL BUSINESS & SMALL FARMS Do not enter Yes in Item 1 or 5 if balances reported on RC-C Part I divided by number loans reported in Items 2 and 6 are greater than $100,000. Report current balance & number of loans with balance at origination not in excess of: Business (RC-C 1e & 4) $1,000,000 Farm (RC-C 1b & 3) $ 500,

32 SCHEDULE RC-C PART II LOANS TO SMALL BUSINESS & SMALL FARMS Classify Reported Loans by balance at origination, or amount currently outstanding if larger Aggregate Loans to One Borrower if Possible 63 SCHEDULE RC-C PART II LOANS TO SMALL BUSINESS & SMALL FARMS Use Total Amount of Line or Commitment for loan origination amount amount when the line of credit or loan commitment was most recently approved, extended, or renewed prior to report date, unless amount currently outstanding as of report date exceeds this size, then "original amount" is amount currently outstanding on the report date Use Amount Originated by Funding Bank when including participations purchased or sold 64 32

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34 67 SCHEDULE RC-K QUARTERLY AVERAGES Must report a daily or weekly average amount. Loans: Use RC-C Classifications separate line item for 1-4 family residential loans does not include 1-4 construction loans Not all loan types included 68 34

35 69 RC-L, Unused Commitments Unused commitments include: Commitments to make or purchase loans Commitments where you ve charged a commitment fee Commitments that are legally binding Proceeds you are legally obligated to advance: Loan draws, construction progress payments, seasonal advances to farmers under prearranged lines Rotating, revolving open end lines Overdraft protection, where have advised customer of available amount 70 35

36 RC-L, Unused Commitments Unused commitments: Commitments to issue a commitment at some point in the future, where the bank has extended terms, the borrower has accepted the offered terms, and the extension and acceptance of the terms: (a) Are in writing, regardless of whether they are legally binding on the bank and the borrower, or (b) If not in writing, are legally binding on the bank and the borrower, even though the related loan agreement has not yet been signed and even if the commitment to issue a commitment is revocable, provided any revocation has not yet taken effect as of the report date 71 RC-L, Unused Commitments Unused commitments: Report unused commitments gross, but if would not be legally obligated to fund under any circumstances report net of part sold For asset based commitments, report based on amount bank is obligated to lend as of report date difference between lesser of: contractual borrowing base or note commitment and sum of outstanding loans under commitment 72 36

37 SCHEDULE RC-L OFF BALANCE SHEET ITEMS 1a--Unadvanced Portion of Home Equity Lines Unused commitments on reverse mortgages Reported in December only RC-L 1a1, Unused commitments for home equity conversion mortgage reverse mortgages outstanding that are held for investment RC-L 1a2, Unused commitments for proprietary reverse mortgages outstanding that are held for investment 73 SCHEDULE RC-L OFF BALANCE SHEET ITEMS 1b -- Unadvanced Portion of Credit Card Lines Consumer vs all other unused credit card lines to be reported separately RC-L 1b1, unused consumer credit card lines RC-L 1b2, all other unused credit card lines Reported by banks with assets or credit card lines over $300 million 74 37

38 SCHEDULE RC-L OFF BALANCE SHEET ITEMS 1c--Unadvanced commitments to fund loans for the purpose of purchasing, constructing, or developing real estate to finance commercial & multi-family property, land development, and construction (any type of construction); would be reported on RC-C 1a, 1d, 1e 1c1a 1-4 real estate secured construction commitments 1c1b all other real estate secured commitments and commitments for funding commercial & multi-family prop 1c2 non-real estate secured purchase, construction, or development commitment 75 SCHEDULE RC-L OFF BALANCE SHEET ITEMS 1e -- Other unused commitments RC-L 1e1, unused commitments to fund commercial & industrial loans RC-L 1e2, unused commitments to fund loans to financial institutions Depository and non-depository institutions RC-L 1e3, all other unused commitments 1-4 portfolio loans ag & Farmland loans overdraft lines consumer loans 76 38

39 SCHEDULE RC-L Item 2, Financial Standby Letters of Credit Bank pays when purchaser fails to pay. Item 3, Performance Standby Letters of Credit Bank pays when purchaser fails to perform. Item 4, Commercial Letters of Credit Bank pays when transaction is consummated as agreed. RC-L 2a and 3a will only need to be completed by banks with assets greater than $1 billion 77 FASB INTERPRETATION 45 FASB Interpretation No. 45 requires that the liability for the guarantee associated with the sale of a standby letter of credit be recognized at inception. The liability should be the premium or fee received by the bank. Standby Letter of Credit fees are considered commitment fees and income recognition should be in accordance with FAS No. 91: Earn at origination the part that can be offset against direct origination costs. Earn the balance over the life of the commitment

40 79 COMMITMENTS TO ORIGINATE OR PURCHASE MORTGAGE LOANS HELD FOR SALE Accounted for as Derivatives, not unused commitments Over-the-counter written interest rate options Report as Derivatives: Par Value of the Mortgage Loans to be acquired RC-L Item 12.d.(1), Column A RC-L Item 14, Column A Fair Value of the Mortgage Loan Commitments RC-L Item 15.b and RC Accounted for as Derivatives from the time the commitment is made until the loan is funded 80 40

41 INTEREST RATE LOCK COMMITMENTS Same loan may also be Forward Loan Sales Commitment Mandatory Delivery Contract commitment to deliver certain principal amount of loans at specified price by specified date Best Efforts Contract commitment to deliver individual loan of specified amount & quality if loan to borrower closes Commitment in place until the loan(s) are sold to the third party 81 FORWARD LOAN SALES COMMITMENTS Report as Derivatives: Fair Value of the Commitments on Schedule RC Par Value of the Mortgage Loans to be acquired RC-L Item 12b, Column A RC-L Item 14, Column A Fair Value of the Mortgage Loan Commitments RC-L Item 15b, RC 82 41

42 (accounting & reporting mortgage loans held for sale) Interest rate locks reported on RCL 12d1 are NOT included on RC-R

43 SCHEDULE RC-N PAST DUE & NONACCRUAL LOANS Use RC-C Classifications Include OD s 30 or More Days Past Due ALL Overdrafts, including discretionary overdrafts, are subject to the Safety & Soundness guidelines of the ruling. g/2005/ /attachment.pdf or OCC Bulletin BOUNCE PROTECTION PROGRAMS Reported as a loan on RC-C 6b or 9 considered a revolving credit plan and reported on 6b if it s a contractually binding line of credit or you disclose that you will pay up to the limit and payment is not discretionary if report on 6b and they are over their line, then report amount over on RC-C 9 Must be charged off against the RLL charge off uncollected overdraft fees against RLL if the fees are recorded with the OD balances as loans and estimated losses on the fees are provided for in the RLL must be charged off no later than 60 days from the date first overdrawn Report on RI-B 5b or 7 Report as an unused commitment in RC-L 1e report even if still have right not to pay an item 86 43

44 SCHEDULE RC-N PAST DUE & NONACCRUAL LOANS Not nonaccrual if: Borrowers Have Made Cash Payments of Interest and Principal As Agreed for a Minimum of 6 Months Repayment of Remaining Arrearages of Principal and Interest is Reasonably Assured within a Reasonable Period Report Loans that Meet BOTH the Above Conditions as Past Due 90 Days or More and Still Accruing See Glossary on Nonaccrual for Related Instructions 87 SCHEDULE RC-N PAST DUE & NONACCRUAL LOANS If return a loan to accrual status, cannot reverse the application of interest payments made when loan on nonaccrual and apply to principal On nonaccrual because of determination that all principal may not be recovered Previously foregone interest should be recognized when received Interest income is recognized based on the effective yield to maturity Effective rate is discount rate that would equate the present value of future cash payments to the recorded amount of the loan Accrete the amount of interest applied to principal over the 88 remaining term of the loan 44

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47 93 NONACCRUAL LOANS RC-N M7 & M8 M7, Additions to Nonaccrual during the Quarter Include all assets placed in nonaccrual during the quarter, even if sold, paid off, charged off, or returned to accrual M8, Nonaccrual Assets Sold during the Quarter Include the outstanding balance at the time of the sale not sales price do not include any gain/loss report loans sold, not sale of collateral 94 47

48 Report past due and nonaccrual outstanding balance and carrying amount of purchased credit impaired loans accounted for under ASC , (consistent with reporting in RC-C M 7.a and 7.b.) Memo 9.a Undiscounted sum of all amounts owed at report date: principal, interest, fees, penalties, other. Includes amounts not due and charged off. Memo 9.b Carrying amount included in RC-N 1-7, before any allowances booked after acquisition

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50 99 RCR 4, Loans held for sale RCR 5, Portfolio loans Exclude any that qualify as securitization exposures (report in RCR 9) RCR 4a or 5a, Residential mortgage exposures Exclude presold construction loans Include: loans secured by first or junior lien, or loan with an original & outstanding amount of < $1 million that is primarily secured by first or junior lien on non 1-4 property (multifamily) and is managed as part of a segment of exposures with homogeneous risk characteristics and not on an individual basis include above two categories even if past due 90+ or nonaccrual

51 RCR 4a or 5a, Residential mortgage exposures Include: statutory multifamily loans meet LTV guidelines of 80% or 75% if rate changes over loan term are not past due 90+ days or nonaccrual Annual net operating income to required debt servicing of 120% (115% if variable rate) during most recent fiscal year Maximum amortization period of 30 years Minimum original maturity of 7 years Demonstrated timely repayment performance for 12 months; if refinance may consider repayment performance at prior bank Col G, 20% risk Guaranteed portion of FHA & VA mortgage loans reported in RCC 1c 101 RCR 4a or 5a, Residential mortgage exposures Col H, 50% risk 1-4 1st liens on RCC 1c, if prudently underwritten meet LTV guidelines of 90%» may include PMI in LTV calculation not 90+ days past due or nonaccrual have not been restructured or modified, unless under the Treasury s home affordable mortgage program» if modify without updated credit review, will not qualify for 50% risk may include 1-4 junior lien if also hold the 1st lien and there are no intervening liens residential mortgage multifamily loans reported in RCC 1d that qualify for 50% risk (< $1 million) 1 st lien Not 90+ days past due or nonaccrual Have not been restructured 102 statutory multifamily loans reported in RCC 1d (must meet criteria) 51

52 RCR 4a or 5a, Residential mortgage exposures Exclude presold construction loans Col I, 100% risk 1-4 first liens past due 90+ days or on nonaccrual 1-4 junior liens not qualifying for 50% risk Residential mortgage multifamily loans (< $1 million) past due 90+ days or on nonaccrual 103 RCR 4b or 5b, High volatility commercial real estate exposures (HVCRE) Includes HVCRE loans that are past due 90+ days or on nonaccrual HVCRE are loans that finance the acquisition, development, or construction of real property unless the loan finances: 1-4 residential properties real property that would qualify as an investment in community development affordable housing for low/moderate income individuals community services for low/moderate income individuals revitalized or stabilizes low/moderate income areas, designated disaster areas, or underserved areas doesn t have to be in bank s CRA area purchase or development of ag land (land used or usable for ag) provided the value is based on its value for ag purposes, not value based on any potential use of land for non-ag commercial or residential development

53 RCR 4b or 5b, High volatility commercial real estate exposures (HVCRE) HVCRE are loans that finance the acquisition, development, or construction of real property unless the loan finances: commercial real estate projects where: as completed loan to value is < 80% (75% if land development) borrower has contributed capital in form of cash or unencumbered readily marketable asset or has paid out of pocket development expenses of at least 15% of as completed value borrower contribution must be before bank advances funds and contribution remains in project throughout life of project life of project ends when loan is converted to permanent, is sold, or is paid in full» permanent financing may be provided by the bank that provided the ADC facility as long as the permanent financing is subject to the bank s underwriting criteria for long term mortgage loans 105 RCR 4b or 5b, High volatility commercial real estate exposures (HVCRE) Col J, 150% risk HVCRE loans, current and past due 90+ days, nonaccrual (unless collateral or guarantor would qualify for lower risk) Most HVCRE loans will be in RC-C 1a2, but could also be in RC-C 1d or 1e if mini perm or bridge loan to a customer who is waiting for permanent financing

54 Eligible collateral includes: cash gold U.S. certain publicly money government securities other investment grade securities traded equities & convertible bonds market fund shares, if quoted daily must have perfected first lien interest in same currency, revalue at least every 6 months, be subject to collateral agreement for term of the loan 107 Eligible guarantors include: depository institution or holding company FHLB Farmer Mac GNMA FHLMC SBA VA FHA Bureau of Indian Affairs guarantees must be written & either unconditional or a contingent obligation of the US government or its agencies

55 RCR 4c or 5c, Loans past due 90+ days or on nonaccrual Exclude residential loans, HVCRE Col C, 0% risk Portion of loans secured by cash Col C, 20% risk Portion of loans guaranteed by US government, including FDIC loss sharing agreements Col J, 150% risk All other loans past due 90+ days or on nonaccrual 109 RCR 4d or 5d, All other loans Col C, 0% Risk portion of loans with unconditional guarantee SBA guaranteed portion purchased cash collateral in your bank loans secured by treasury or GNMA bond to extent of fair value discounted by 20% Col G, 20% Risk guaranteed portion of SBA loans originated government guaranteed portion of student or farm loans cash collateral in another financial institution if have perfected first lien interest municipal loans if repayment from general tax receipts loans covered by loss sharing agreements with FDIC

56 RCR 4d or 5d, All other loans Col H, 50% Risk presold construction loans to builders meet LTV guidelines of 80% cannot be past due 90+ days or on nonaccrual must be presold with documented contract and loan commitment must be owner occupied; cannot include spec homes municipal loans if repayment from revenues Col I, 100% Risk all other loans not qualifying for lower risk weighting 111 RI 1a1-1a5 includes loan interest and fee income based on RCC loan types. Include all nonrefundable fees associated with loan origination origination and other balance related fees, past due fees, renewal fees, prepayment penalties

57 113 OVERDRAFTS Must be charged off against the RLL charge off uncollected overdraft fees against RLL if the fees are recorded with the OD balances as loans and estimated losses on the fees are provided for in the RLL must be charged off no later than 60 days from the date first overdrawn Report on RI-B 5c or 7 or OCC Bulletin ALL Overdrafts, including discretionary overdrafts, are subject to the Safety & Soundness guidelines of the ruling. Must provide for unplanned overdrafts in the Reserve for Loan Losses and charge off unplanned overdrafts against the reserve

58 SCHEDULE RI -B RE-BOOKING CHARGED-OFF LOANS Reversing a previous write-down and rebooking a charged off asset after the bank concludes that the prospects for recovering the charge-off have improved, regardless of whether the bank assigns a new account number to the asset or the borrower signs a new note, is not an acceptable accounting practice

59 117 END OF PRESENTATION Webinar/Registration Questions: Kyle Bennett Total Training Solutions PO Box 310 Waunakee, WI Upcoming Webinars March 30 th Online Deposit Account Opening: CIP, CDD and Other Compliance Issues March 30 th Opening New Accounts Three Part Series April 5 th Uniform Commercial Code Rules: How to Comply to Attach and Perfect Secured Transactions April 5 th Handling Checks after Death of the Account Holder April 6 th Using Personal Tax Returns for Global Cashflow: What's Cashflow and What Isn't April 7 th Advanced Topics in Commercial Lending April 11 th The Bank CEO Guide to 5 Keys to a High Performing Sales Team April 12 th Flood Insurance Compliance Hot Spots April 12 th Critical Issues on Certificates of Deposit (CDs) April 13 th Fair Credit Reporting Act Compliance 10 Critical Issues THANK YOU FOR YOUR ATTENDANCE AND PARTICIPATION