CALL REPORT PREPARATION

Transcription

1 CALL REPORT PREPARATION Recent Changes, Highlights, Pitfalls 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. 1 This material may not be reproduced without written permission of Thomas Consulting. CALL REPORT REVISIONS & UPDATES Table of Contents Slide FFIEC 041 Cover Page Proposed Changes 5 Accounting Updates 15 Basel III, Risk Based Capital 27 2 REVIEW AND UPDATE 1

2 Average burden associated with call report preparation is 50.4 hours, but hours estimated to vary from 20 to 775 hours per quarter 4 REVIEW AND UPDATE 2

3 Proposed Revisions to September, 2016 Call Report Proposing to remove: RI M14, Other than temporary impairment line items 14a & 14b; will continue to report any OTTI that impacted credit of the security RCC M1 & RCN M1, Certain data on restructured loans M1f2, restructured depository institutions M1f5, foreign governments M1f6, municipalities M1f7 for FFIEC 031 banks 5 Proposed Revisions to September, 2016 Call Report Proposing to remove: RC-M 13a5a-a5e and RC-N, 11e1-11e5, FDIC Loss Sharing agreement detail on all other loans RC-R 18b, Asset backed commercial paper conduits (reported on RC-R 10); line 18c on unused commitments > 1 year will be renumbered to 18b Banks < $1 billion will not be required to complete RC-S M3a1-M3a2 on commercial paper conduits 6 REVIEW AND UPDATE 3

4 Proposed Revisions to September, 2016 Call Report Increase reporting thresholds for several schedules: From $25,000 to $100,000 for: RI-E, Other noninterest income and expense RC-F 6, Other Asset Detail RC-G 6, Other Liability Detail RC-Q M1 & M2, All other assets & liabilities measured at fair value RC-D M9, M10, Other Trading Assets/Liabilities from $25,000 to $1,000,000 7 Proposed Revisions to September, 2016 Call Report Instruction updates: Home equity lines of credit converting from revolving to nonrevolving once convert to closed end should report in RCC 1c2a or 1c2b depending on lien status Net gains/losses and Other than temporary impairment on equity securities without readily determinable fair values should be included in RI 5k Securities for which a fair value option is elected In past if reported at fair value had to be included in trading portfolio; per accounting rules; since rules have changed are not required to report as trading, may report as HTM or AFS as appropriate 8 REVIEW AND UPDATE 4

5 Proposed Revisions to September, 2016 Call Report Increasing deposit size threshold used to report certain deposit information from $100,000 to $250,000 on RC-E, RI, and RC-K RC-E M3a1-M3a4, M3b report time deposits < $250,000 RC-E M4a1-M4a4, M4b report time deposits > $250,000; RC-E M4c will be removed RC-K 11b & RI 2a2b report time deposits < $250,000 RC-K 11c & RI 2a2c report time deposits > $250,000 9 Proposed Revisions to September, 2016 Call Report Adding contact information for CEO Revision of certain securities measured under a fair value option on RC-Q to now include HTM Moving fair value reporting of loans from RC-C M10 & M11 to RC-Q 10 REVIEW AND UPDATE 5

6 Proposed Revisions to September, 2016 Call Report Adding additional preprinted captions: RI-E 1 income & fees from wire transfers RI-E 2 other real estate owned expenses and insurance expenses (excluding employee, occupancy, & OREO) RC-F 6 computer software, accounts receivable, and receivable from foreclosed government guaranteed mortgage loans 11 Proposed Revisions to September, 2016 Call Report Revisions of statements used to describe audit work on RC M1 reported each March Removal of RI 11, Extraordinary Items Revisions to information reported in RI memo items on trading revenues of changes in credit & debit valuation adjustments Revising information reported about supplementary leverage ratio by advanced approaches institutions 12 REVIEW AND UPDATE 6

7 Proposed Revisions to the Call Report The agencies are considering a less burdensome version of the Call Report for institutions that meet certain criteria; plan to complete analysis by year end Any new version would have to be approved by FFIEC and implemented by the Agencies. Agencies are also visiting with limited banks during the third quarter and looking at how banks prepare their call report and where a significant amount of time and/or manual processes are required. 13 Proposed Revisions to the Call Report 14 REVIEW AND UPDATE 7

8 ASU Accounting for Measurement Period Adjustments (December, 2015 supplemental instructions) If initial accounting for business combination is incomplete by end of reporting period in which combination occurs, acquirer reports provisional amounts in financial statements During measurement period, acquirer is required to adjust provisional amounts recognized at acquisition date, with corresponding adjustment to goodwill to reflect new information that if know at acquisition date would have affected measurement of amounts recognized as of that date 15 ASU Accounting for Measurement Period Adjustments At present under Topic 805, an acquirer is required to retrospectively adjust the provisional amounts recognized at the acquisition date to reflect the new information. To simplify the accounting for the adjustments made to provisional amounts, ASU eliminates the requirement to retrospectively account for the adjustments. 16 REVIEW AND UPDATE 8

9 ASU Accounting for Measurement Period Adjustments ASU amends the rules to require an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which adjustment amounts are determined. Under the ASU, the acquirer also must recognize in the financial statements for the same reporting period the effect on earnings, if any, resulting from the adjustments to the provisional amounts as if the accounting for the business combination had been completed as of the acquisition date. 17 ASU Accounting for Measurement Period Adjustments In general, the measurement period in a business combination is the period after the acquisition date during which the acquirer may adjust provisional amounts reported for identifiable assets acquired, liabilities assumed, and consideration transferred for the acquiree for which the initial accounting for the business combination is incomplete at the end of the reporting period in which the combination occurs. Topic 805 provides additional guidance on the measurement period, which shall not exceed one year from the acquisition date, and adjustments to provisional amounts during this period. 18 REVIEW AND UPDATE 9

10 ASU Accounting for Measurement Period Adjustments ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, For institutions that are not public business entities, the ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, ASU Accounting for Measurement Period Adjustments The ASU s amendments to Topic 805 should be applied prospectively to adjustments to provisional amounts that occur after the effective date of the ASU. Thus, institutions with a calendar year fiscal year that are public business entities must apply the ASU to any adjustments to provisional amounts that occur after January 1, 2016, beginning with their Call Reports for March 31, Institutions with a calendar year fiscal year that are private companies must apply the ASU to any adjustments to provisional amounts that occur after January 1, 2017, beginning with their Call Reports for December 31, REVIEW AND UPDATE 10

11 ASU Accounting for Measurement Period Adjustments Early application of ASU is permitted in Call Reports that have not been submitted. 21 ASU Extraordinary Items (June supplemental instructions) Effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2015; will affect March, 2016 Call Report Will report in RI 5l, Other Noninterest Income or RI 7d, Other Noninterest Expense as appropriate Will remove RI 11, Extraordinary Items, in REVIEW AND UPDATE 11

12 ASU , Debt Issuance Costs (June supplemental instructions) Requires debt issuance costs to be recognized as a direct deduction from face amount of the related debt liability Currently reported in Other Assets Effective for public entities for fiscal years and interim periods within those fiscal years beginning after December 15, 2015; will affect March, 2016 Call Report 23 ASU , Debt Issuance Costs Effective for non-public entities for fiscal years after December 15, 2015 and interim periods within those fiscal years beginning after December 15, 2016; will affect December, 2016 Call Report Once adopted debt issuance costs currently reported in other assets should be reported as a direct deduction from carrying amount of the related debt liability and included either in RC 16, Other Borrowings, or RC 19, Subordinated Debt, as appropriate. 24 REVIEW AND UPDATE 12

13 Subsequent Restructuring of a Troubled Debt (12/2014 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 25 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 26 REVIEW AND UPDATE 13

14 Basel III, Risk Based Capital -- Revisions to capital definitions, minimum ratios, & risk weightings Revised the definition of regulatory capital and minimum ratios Redefined tier 1 capital into two components: a new common equity tier 1 capital additional tier 1 capital Created a new capital ratio of Common Equity Tier 1 Capital 27 Basel III, Risk Based Capital -- Revisions to capital definitions, minimum ratios, & risk weightings Requires higher levels of regulatory capital Common equity tier 1 of 4.5% Tier 1 of 6.0% (up from 4.0%) Total capital of 8.0% (unchanged) Also limits a banking organization s capital distributions and certain discretionary bonus payments if the banking organization does not hold a specified amount of common equity tier 1 capital in addition to the amount necessary to meet its minimum risk-based capital 28 requirements REVIEW AND UPDATE 14

15 RCR 1, Common stock & surplus Common stock, RC 24 Related surplus, RC 25 Less items in RC 26c (treasury stock, unearned ESOP) RCR 2, Retained earnings RC 26a 29 RCR 3, Accumulated other comprehensive income (AOCI), RC 26b 3a, AOCI opt out election for non-advanced approach banks that do not want to include most components of AOCI in common equity tier one capital If want to opt out, RCR 3a should be 1, yes Make one time election If opt out will complete RCR 9a-9e If opt in, RCR 3a should be 0, no 30 REVIEW AND UPDATE 15

16 If opt out report amount included in RC 26b: Unrealized gains on AFS equity securities, plus Unrealized gain/loss on AFS debt securities, plus Any amounts in AOCI attributed to defined benefit postretirement plans, plus Accumulated gains/losses on cash flow hedges in AOCI related to items reported at fair value, plus Unrealized gain/loss on HTM securities included in AOCI 31 If opt in: Multiply total by appropriate phase in percentage Report amount of AOCI in RC 26b less amount calculated 32 REVIEW AND UPDATE 16

17 RCR 4, Includable minority interest Portion of equity in bank s subsidiary not attributable, directly or indirectly, to parent bank May only include minority interest if: Subsidiary is depository institution or a foreign bank, and Capital instruments issued by subsidiary meet criteria for common equity tier one capital Will be phase out period for surplus and non-qualifying minority interest; 40% allowed in 2016, 0% by RCR 6, Goodwill net of associated deferred tax liability (DTL) Report amount reported in RC 10a May net DTL specifically related to goodwill 34 REVIEW AND UPDATE 17

18 RCR 7, Intangible assets, other than goodwill and mortgage servicing net of DTL Includes core deposit intangibles, purchased credit card relationships and non-mortgage servicing assets reported on RCM 2b & 2c Reduce amount reported by associated DTL State member banks may exclude remaining book value of intangible assets on balance sheet prior to 2/19/92 Transition provisions: 60% in 2016, 80% in 2017, 100% % risk weight applies to any amount not deducted 35 RCR 8, Deferred tax assets (DTA) that arise from net operating loss and tax credit carryforwards, net of DTL s Rules say that before calculating DTA s subject to DTA limitations for inclusion in Tier 1 capital, a bank may eliminate the deferred tax effect of any net unrealized gain/loss on AFS debt securities Transition provisions: 60% in 2016, 80% in 2017, 100% 2018 Remaining balance will be reported in RCR 24, additional tier 1 capital deductions; if don t have additional tier one capital then report in RCR REVIEW AND UPDATE 18

19 RCR 9, Accumulated other comprehensive income (AOCI) adjustments Complete RCR 9a-9e if entered 1, yes on RCR 3a 9a, net unrealized gain/loss on AFS securities, net of taxes included in RC 26b 9b, net unrealized loss on AFS equity securities 9c, accumulated net gain/loss on cash flow hedges 9d, amounts in AOCI attributed to defined benefit plans 9e, net unrealized gain/loss on HTM securities Complete RCR 9f if entered 0, no, on RCR 3a 9f, less accumulated net gain/loss on cash flow hedges not recognized at fair value on the balance sheet 37 RCR 10, Other deductions from common equity tier 1 capital 10a, unrealized gain/loss related to changes in fair value of liabilities that are due to changes in own credit risk Transition provisions: 60% in 2016, 80% in 2017, 100% 2018 Remaining balance will be reported in RCR 24, additional tier 1 capital deductions 38 REVIEW AND UPDATE 19

20 RCR 10, Other deductions from common equity tier 1 capital 10b, all other deductions from/additions to common equity tier 1 capital Include any after tax gain on sale in connection with securitization exposure (increase in equity capital other than from receipt of cash) Same transition provisions as 10a Investments in own shares to extent not excluded as part of treasury stock if could be contractually obligated to purchase Same transition provisions as RCR RCR 10, Other deductions from common equity tier 1 capital Reciprocal cross holdings in the capital of financial institutions in form of common stock from arrangement between two financial institutions to swap or exchange each other s capital instruments deduction made from tier of capital for which the instrument qualifies Transition provisions, see RCR 11 Equity investments, including retained earnings, in financial subsidiaries bank must deduct aggregate amount of outstanding equity instruments, including retained earnings, in its financial subsidiaries may not consolidate assets & liabilities of financial subsidiary with those of parent institution 40 REVIEW AND UPDATE 20

21 RCR 11, Less non-significant investments in capital of unconsolidated financial institutions in form of common stock exceeding 10% threshold ( RCR 5 less RCR 6, 7, 8, 9, 10) Non-significant means own 10% or less of the issued and outstanding common shares of that institution Consider aggregate of all non-significant investments Transition provisions: 60% in 2016, 80% in 2017, 100% 2018 Report amount not deducted in risk weighted assets 41 RCR 13-16, Items subject to the 10 & 15% common equity tier 1 capital threshold deductions Report amount of items that individually exceed 10% of common equity tier 1 (RCR 12) Aggregate of items not reported in lines may not exceed 15% of common equity tier 1 capital Amount over 15% must be deducted on RCR REVIEW AND UPDATE 21

22 RCR 13, Less significant investments in capital of unconsolidated financial institution in form of common stock exceeding 10% common equity tier 1 deduction threshold Determine amount of significant investments (own more than 10%) in capital of unconsolidated financial institutions If amount > 10% of RCR 12, report difference in RCR 13 If less < 10% or RCR 12, report zero Transition provisions: 60% in 2016, 80% in 2017, 100% 2018 until 1/1/18 report amount remaining in 100% risk weight; after 1/1/18 report in 250% risk weight 43 RCR 14, Less mortgage servicing assets net of DTL that exceed 10% of common equity tier 1 capital Use amount reported in RCM 2a, net of DTL; if amount is > 10% of RCR 12, report difference in RCR 14 If less < 10% of RCR 12, report zero Transition provisions: 60% in 2016, 80% in 2017, 100% 2018 until 1/1/18 report amount remaining in 100% risk weight; after 1/1/18 report in 250% risk weight 44 REVIEW AND UPDATE 22

23 RCR 15, Less deferred tax assets (DTA) arising from temporary differences that could not be realized from net operating loss carrybacks, net of DTL that exceed 10% common equity tier 1 capital threshold If amount is > 10% of RCR 12, report difference in RCR 15 If less < 10% or RCR 12, report zero Transition provisions: 60% in 2016, 80% in 2017, 100% 2018 until 1/1/18 report amount remaining in 100% risk weight; after 1/1/18 report in 250% risk weight DTA s from temporary differences that could be realized through net operating loss carrybacks are not subject to deduction and are risk weighted at 100% If member of holding company, amount of DTA may not exceed amount the institution could reasonably expect to be refunded by holding company 45 RCR 16, Amount of significant investments in capital of unconsolidated financial institutions, mortgage servicing assets, and DTA s arising from temporary differences that can t be realized through net operating loss carrybacks that exceed 15% of common equity tier 1 capital Aggregate of threshold items may not exceed 15% of bank s common equity tier 1 capital 46 REVIEW AND UPDATE 23

24 Until 1/1/18: (1) Add aggregate amount of threshold items before deductions (2) Multiply RCR 12 by 15% (3) Add RCR 13, 14, & 15 (4) Subtract (3) from (1), aggregate amount above (5) Deduct (2) from (4) (6) multiply (5) by transitional percentage from RCR 13 Transition provisions: 60% in 2016, 80% in 2017, 100% 2018 Report amount from (6) in RCR beginning 1/1/18: (1) Add aggregate amount of threshold items before deductions (2) Add amounts of threshold items deducted (3) Subtract (1) from RCR 12 and multiply by 17.65% (4) If amount in (2) is greater than (3), report difference; if less than report zero (5) If amount in (4) is over (3), prorate threshold items; amount from (4) x (threshold item/total of threshold items) 48 REVIEW AND UPDATE 24

25 RCR 17, Deductions applied to common equity tier 1 capital due to insufficient amounts of additional tier 1 & 2 capital to cover deductions Report deductions related to reciprocal cross holdings, non-significant investments in capital of unconsolidated financial institutions, & non-common stock significant investments in capital of financial institutions if bank does not have sufficient amount of additional tier 1 & 2 capital to cover deductions in RCR 24 & REVIEW AND UPDATE 25

26 Additional Tier One Capital: RCR 20, additional tier 1 capital plus related surplus Noncumulative perpetual preferred stock and surplus reported in RC 23 Must satisfy criteria in capital rules Include: Instruments issued under small business job act 2010 or prior to under emergency economic stabilization act and Were included in tier 1 under primary supervisory s risk rules Tarp tier 1 grandfathered permanently SBLF if qualifies for Tier 1 Trups issued prior to by holding companies < $15 billion as of Instruments issued as part of esop, provided repurchase is required solely by virtue of erisa for a bank not publicly 51 traded RCR 21, non-qualifying capital subject to phase out Capital debt or equity issued prior to 9/12/10 not meeting criteria for additional tier 1 or 2 but were included as of 9/12/10 Include up to percentage of outstanding principal amount as of 1/1/15 per transition rules (for nonadvance approach) Amount excluded from tier 1 may be included in tier 2 provided it meets tier 2 criteria Trups issued by holding companies > $15 billion 52 REVIEW AND UPDATE 26

27 RCR 22, Tier 1 minority interest not included in common equity tier 1 capital No requirement that the minority interest be a depository institution or foreign bank See worksheet in RCR instructions, p RCR 24, Less additional tier 1 deductions If not enough additional tier 1 capital to cover deductions, must be subtracted from RCR 17, common equity tier 1 Investments in own additional tier 1 capital instruments Held directly or indirectly Transitional provisions as in RCR 11 Reciprocal cross holdings in the capital of financial institutions investments in additional tier 1 capital of other financial institutions that the institution holds reciprocally crossholdings result from arrangement between two financial institutions to swap or exchange each other s 54 capital instruments REVIEW AND UPDATE 27

28 RCR 24, Less additional tier 1 deductions Non-significant investments in additional tier 1 capital of unconsolidated financial institutions > 10% threshold for non-significant investments Non-significant if own < 10% of issued & outstanding common shares of financial institution (1) Determine aggregate amount of non-significant investments in capital of unconsolidated financial institutions in form of common stock, additional tier 1, and tier 2 capital (2) Determine non-significant investment in capital of unconsolidated financial institutions in form additional tier 1 capital If (1) > 10% threshold for non-significant investments, multiply difference by (2)/(1) If (1) < 10% report zero 55 Same transitional provisions as RCR 11 RCR 24, Less additional tier 1 deductions Significant investments in capital of unconsolidated financial institutions not in form of common stock to be deducted from tier 1 capital Report significant investments in capital of unconsolidated financial institutions in form of additional tier 1 capital Same transitional provisions as RCR REVIEW AND UPDATE 28

29 RCR 24, Less additional tier 1 deductions Other adjustments & deductions Include any adjustments due to insufficient tier 2 capital to cover deductions Include adjustments/deductions related to calculation of DTA (from RCR 8 during transitional years), gain on sale, defined benefit pension fund assets, changes in fair value of liabilities due to change in own credit risk Insured state banks with real estate subsidiaries whose operations have been approved by FDIC should include as a deduction their equity investment in the subsidiary; if have phase out plan don t need to make deduction If insured banks have other subsidiaries approved by FDIC, include as a deduction amount required by order REVIEW AND UPDATE 29

30 RCR 27, Tier 2 capital plus related surplus Instruments issued under small business job act, under emergency stabilization act, and were included in tier 2 capital non-qualifying instruments under primary supervisor s capital rules Trups issued by holding companies > $15 billion Cumulative perpetual preferred RCR 28, Non-qualifying capital instruments subject to phase out Preferred stock with credit sensitive features Use transitional rules from RCR RCR 29, Minority interest not included in tier 1 capital See worksheet in RCR instruction, p.26 Use transitional rules from RCR 4 RCR 30a, Allowance for loan & lease losses Limited to 1.25% of risk weighted assets Include ALLL reported on RC 4c and RCG 3 less allocated transfer risk reserve reported in RIB part II 7 RCR 31, Unrealized gains on AFS equities May include 45% of unrealized gain if opted out If haven t opted out, multiply unrealized gain by allowable transition percentages (18%, 9%, 0% ) 60 REVIEW AND UPDATE 30

31 RCR 33, Less tier 2 capital deductions If not enough tier 2 capital for deductions, must deduct from additional tier 1 (RCR 24) or common equity tier 1 (RCR 17) Investments in own additional tier 2 capital instruments Reciprocal cross holdings in tier 2 capital of financial institutions Non-significant investments in tier 2 capital of unconsolidated financial institutions > 10% threshold Significant investments in capital of unconsolidated financial institutions not in form of capital stock to be deducted from tier 2 capital Follow transition provisions from RCR RCR 36, Average total consolidated assets Report average assets from RCK 9 RCR 37, Deductions from common equity tier 1 & additional tier 1 capital Report sum of RCR 6, 7, 8, & 10b, 11, 13-17, REVIEW AND UPDATE 31

32 RCR 38, Other deductions/additions for leverage ratio purposes If sponsor single employer defined benefit post-retirement plan, adjust for any amounts included in RC 26b as a result of the initial and subsequent application of the funded status of the plan If do not make opt out election: Report deduction/addition the amount needed to adjust AFS debt securities from cost to fair value and AFS equity securities from lower of cost or fair value to fair value (reported differently on RCK 9) If deferred tax effects of unrealized gain/loss on AFS securities were excluded from RCK 9, also include the amount as an adjustment to average assets for leverage purposes 63 Use appropriate transition percentage from RCR 3a 64 REVIEW AND UPDATE 32

33 Also effective for non-advance approach banks in 2016: Revisions to capital definitions & minimum ratios: Implements a capital conservation buffer in order to pay dividends and discretionary bonuses to executive officers RCR 46a equal to lowest of following ratios: RCR 41, common equity tier 1 capital ratio less required ratio of 4.5% RCR 42, tier 1 capital ratio less required ratio of 6.0% RCR 43, total capital ratio less 8% Amount in RCR 46a must be greater than minimum risk based capital requirements plus capital conservation buffer REVIEW AND UPDATE 33

34 Beginning in 2016, must complete RCR 47 & 48 if RCR 46a is < capital conservation buffer RCR 47, Eligible retained earnings Report amount of net income for four calendar quarters preceding current quarter 67 RCR 48, Distributions & discretionary bonus payments during quarter Bonus is payment made to executive officer that: Bank retains discretion of payment & amount until awarded Bank pays without promise or agreement Executive officer has no contractual right to payment Bonus does not include non-cash payments (stock options) Executive Officer: person who holds the title or, without regard to title, salary, or compensation, performs the function of one or more of the following positions: president, chief executive officer, executive chairman, chief operating officer, chief financial officer, chief investment officer, chief legal officer, chief lending officer, chief risk officer, or head of a major business line, and other staff that the board of directors of the FDICsupervised institution deems to have equivalent 68 responsibility REVIEW AND UPDATE 34

35 RCR 48, Distributions & discretionary bonus payments during quarter Distribution Dividend declaration or payment on any tier 1 instrument Dividend declaration or interest payment on any tier 2 capital instrument if bank has discretion to suspend payments without triggering default FIL addresses dividends paid by Sub S corps to their shareholders to cover personal tax liability banks can apply for an exception if meet certain criteria FDIC will provide instructions well in advance of implementation of the buffer 69 New minimum capital ratios Leverage of 4.0% (common equity/average assets) Common equity tier 1 of 4.5% Tier 1 risk based capital of 6.0% Total risk based capital of 8.0% Well capitalized under PCA standards 1/1/15 Leverage > 5.0% Common equity tier 1 > 6.5% Tier 1 risk based capital > 8.0% Total risk based capital > 10.0% Instructions for RCR Part 1 & 2 at: Risk Based Capital Frequently Asked Question, FAQ s issued in FIL REVIEW AND UPDATE 35

36 71 72 REVIEW AND UPDATE 36

37 In general, banks need to risk weight the exposure amount. The exposure amount is defined as follows (see.2 of the regulatory capital rules for additional info): (1) For the on-balance sheet component of an exposure, the bank s carrying value of the exposure. (2) For a security classified as available-for-sale (AFS) or held-tomaturity (HTM) where the bank has made the AOCI opt-out election in Schedule RC-R, Part I 3.a, the carrying value for the exposure (book value) (3) For AFS preferred stock classified as an equity under GAAP where the bank has made the AOCI opt-out election, the carrying value (book value) (4) For the off-balance sheet component of an exposure, the notional amount of the off-balance sheet component multiplied by the appropriate credit conversion factor 73 In general, banks need to risk weight the exposure amount. The exposure amount is defined as follows (see.2 of the regulatory capital rules for additional info): (5) For an exposure that is an OTC derivative contract, the exposure amount is determined under.34 of the regulatory capital rules Current credit exposure fair value if positive, zero if negative Plus Potential future exposure over remaining life of contract Based on type of contract and remaining maturity 74 REVIEW AND UPDATE 37

38 Eligible collateral includes: cash gold U.S. government securities certain other investment grade securities publicly traded equities & convertible bonds money 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 75 Eligible guarantors include: depository institution or holding company FHLB Farmer Mac guarantees must be written & either unconditional or a contingent obligation of the US government or its agencies 76 REVIEW AND UPDATE 38

39 RCR 1, Cash & Due From Additional risk columns only apply if have balances due from foreign central banks and foreign depository institutions; if due from foreign banks, must use applicable Country Risk Classification Code (CRC, see instructions RCR 43) Col C, 0% Risk Cash Collected Federal Reserve balances Collected FDIC insured due from bank balances Col G, 20% Risk Cash Items Due from bank balances over FDIC insurance limits FHLB bank balances 77 RCR 2a, Held to Maturity Securities RCR 2b, Available for Sale Securities Excludes securitization exposures Securitizations are transactions that have been separated into at least two tranches reflecting different levels of seniority for credit risk Amounts risk weighted based on whether bank has made AOCI opt in or opt out election 78 REVIEW AND UPDATE 39

40 RCR 2a, Held to Maturity Securities RCR 2b, Available for Sale Securities Col C, 0% Risk Treasury securities, RCB 1 Guaranteed agency securities, RCB 2a GNMA mortgage back securities, RCB 4a1, 4b1, 4c1a, or 4c2a Col G, 20% Risk Sponsored agencies, RCB 2b General obligation municipals, RCB 3 FNMA or FHLMC mortgage back securities, RCB 4a2, 4b1, 4c1a, 4c2a, or 4b2 Structured financial products, RCB 5b (only include if not securitizations and qualify for 20% risk) 79 RCR 2a, Held to Maturity Securities RCR 2b, Available for Sale Securities Col H, 50% Risk Revenue obligation municipals, RCB 3 Other residential mortgage back securities that qualify for 50% risk in RCB 4a3, 4b2, 4b3 that are not securitizations Col I, 100% Risk Industrial revenue munis reported in RCB 3 Other debt securities reported in RCB 6 Other residential mortgage back securities that qualify for 100% risk in RCB 4a3, 4b2, 4b3 that are not securitizations Other commercial mortgage back in RCB 4c1b All other commercial mortgage back in RCB 4c2b Asset back securities in RCB 5a Structured financial products, that qualify for 100% risk, RCB 80 5b (only include if not securitizations and qualify for 100% risk) REVIEW AND UPDATE 40

41 RCR 2a, Held to Maturity Securities RCR 2b, Available for Sale Securities Pre-refunded municipals may qualify for a lower risk if the muni has the treasuries in trust and have a 1st right claim to those funds, then the muni security could qualify for a lower risk weighting. If all of the muni payments were from the prerefunded treasuries then it was qualify for 0% risk. If most but not all is repaid from the pre-refunded treasuries, then there may be a different risk weighting and will risk information in Columns R&S 81 RCR 2a, Held to Maturity Securities RCR 2b, Available for Sale Securities Col I, 100% Risk Equity securities that are not securitization exposures and not required to be risk weighted higher (see below Col L & N) Mutual funds reported in RCB 7 can be risk weighted using the simple approach (use highest risk weight that would apply to any exposure the fund is permitted to hold and apply to entire balance) or look through approach (considers composition of funds and risk weights accordingly; lowest risk is 20% even if only invested in treasury securities) Col K, 250% Risk Starting in 2018, includes equity securities not qualifying as securitizations that are significant investments in the common stock of unconsolidated financial institutions that are not deducted from capital; 82 Prior to 2018, report in Col I, 100% REVIEW AND UPDATE 41

42 RCR 2a, Held to Maturity Securities RCR 2b, Available for Sale Securities Equity holdings (other than 20% risk weight, community development, significant financial institutions, or 600% risk equities) exceeding 10% of the bank s capital are risk weighted higher depending on type of equity Col L, 300% risk includes publicly traded AFS equity security reported in RCB 7 Col M, 400% risk includes publicly traded AFS equity security reported in RCB 7 report amount in RCB 7 Col D if in a loss position report amount in RCB 7 Col C + unrealized gain in tier 2 capital (up to 45%) Col N, 600% risk includes AFS equity securities to investment firms with readily determinable fair values reported in RCB 7 report amount in RCB 7 Col D if in a loss position report amount in RCB 7 Col C + unrealized gain in tier 2 83 capital (up to 45%) RCR 2a, Held to Maturity Securities RCR 2b, Available for Sale Securities Exposures to Sovereign Entities & Foreign Banks reported in RCB 4a3, 4b3, 4c1b, 4c2b, 5a, 5b, or 6 (that are not securitizations) are risk weighted based on whether exposure is to foreign central government, foreign bank, general or revenue obligation of foreign public sector entity and Country Risk Code Classification (CRC); if no CRC risk is based on whether OECD (organization for economic cooperation & development) member 84 REVIEW AND UPDATE 42

43 RCR 3, Federal Funds Sold Col G, 20% risk 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 85 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 86 REVIEW AND UPDATE 43

44 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 87 statutory multifamily loans reported in RCC 1d (must meet criteria) 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 88 REVIEW AND UPDATE 44

45 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 89 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 90 REVIEW AND UPDATE 45

46 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) 91 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 92 REVIEW AND UPDATE 46

47 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 93 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 94 REVIEW AND UPDATE 47

48 95 96 REVIEW AND UPDATE 48

49 RCR 6, Allowance for loan losses, excluded Report in Col B RCR 7, Trading Assets Report in same risk weighting portfolio assets RCR 8, All Other Assets Include amounts reported on RC 6-11 other than securitizations Banks that make opt out election that have a single employer defined benefit postretirement plan should adjust amount reported in column A for any amounts included in RC 26b (as result of the initial & subsequent application of funded status & measurement date provisions); adjustment should also take into account subsequent amortization of those amounts from AOCI into earnings 97 also report amount as an adjustment in Col B RCR 8, All Other Assets Col B, Adjustments Goodwill reported in RCR Pt I 6 Intangible assets reported in RCR Pt I 7 Fair value of derivative contracts reported in RC 11 Items subject to 10/15% common equity threshold limitations deducted in RCR Pt I Investments in unconsolidated subsidiaries in RCR 8 deducted for risk based capital purposes on RCR Pt 1 33 Col C, 0% Federal Reserve Stock Accrued interest on assets reported at 0% risk on lines 1-7 Carrying amount of gold held in bank s vault Col G, 20% Federal Home Loan Bank Stock Accrued interest on assets reported at 20% risk on lines REVIEW AND UPDATE 49

50 RCR 8, All Other Assets Col H, 50% risk Accrued interest on assets reported at 50% risk on lines 1-7 Col I, 100% risk Accrued interest on assets reported at 100% risk on lines 1-7 Amount of all other assets reported in Col A not qualifying for another risk category Amount of items that do not exceed the 10/15% threshold limitations Bank owned life insurance General account policies Separate account BOLI product (or hybrid with separate features) must risk weight using the look through, simplified, or modified simplified method; report on 8a Col J, 150% risk Accrued interest on assets reported at 150% risk on lines RCR 8, All Other Assets Bank owned life insurance Separate account policy is treated as an exposure to an investment fund; must risk weight using the look through, simplified, or modified simplified approach RCR 8a, Separate account BOLI product Col R is the carrying value of the bank s investments in separate account life insurance products, including hybrid separate account products Col S is the risk-weighted asset amount of these insurance products the portion of the carrying value that represents general account claims on the insurer, including items such as deferred acquisition costs (DAC) and mortality reserves realizable as of the balance sheet date, and any portion of the carrying value attributable to a Stable Value Protection (SVP) contract should be risk weighted at the 100 percent risk weight as claims on the insurer or the SVP provider 100 REVIEW AND UPDATE 50

51 RCR 8, All Other Assets Bank owned life insurance Stable value protection means a contract where the provider of the contract pays to the policy owner of the separate account an amount equal to the shortfall between the fair value and cost basis of the separate account when the policy owner of the separate account surrenders the policy the remaining portion of the investment in separate account life insurance products is an equity exposure to an investment fund that should be measured under the full look-through approach (apply risk weighting for each exposure held by the investment fund), the simple modified look-through approach (apply highest risk weight applicable to any exposure fund is permitted to hold and apply to entire fund), or the alternative modified look-through approach (equal to the sum of each portion of the of the adjusted carrying value assigned to an exposure type multiplied by the applicable risk weight). adjusted carrying value assigned to an exposure type multiplied by the applicable risk weight), all three of which require a minimum risk weight of 20 percent 101 RCR 8, All Other Assets Col M, 400% Equity securities, other than ones issued by investment firms, that do not have readily determinable fair values included in RCF 4; report historical cost Col N, 600% Equity securities issued by investment firms that do not have readily determinable fair values included in RCF 4; report historical cost Col O, 625% DvP and PvP transactions where counterparty has not made delivery or payment within business days after contractual settlement date A DvP transaction refers to a securities or commodities transaction in which the buyer is obligated to make payment only if the seller has made delivery of the securities or commodities and the seller is obligated to deliver the securities or commodities only if the buyer has made payment 102 REVIEW AND UPDATE 51

52 RCR 8, All Other Assets Col O, 625% DvP and PvP transactions where counterparty has not made delivery or payment within business days after contractual settlement date A PvP transaction means a foreign exchange transaction in which each counterparty is obligated to make a final transfer of one or more currencies only if the other counterparty has made a final transfer of one or more currencies Col P, 937.5% DvP and PvP transactions where counterparty has not made delivery or payment within business days after contractual settlement date Col Q, 1250% DvP and PvP transactions where counterparty has not made delivery or payment 46 or more business days after contractual settlement date Non DvP/PvP transactions where bank has not received deliverables 103 from counterparty by 5th business day after delivery was due 104 REVIEW AND UPDATE 52

53 RCR 9, On balance sheet securitization exposures May use simplified supervisory formula approach (SSFA) or gross up approach Must apply either SSFA or gross up approach consistently across all securitization exposures Any individual securitization may be risk weighted at 1250% RCR 9a, Held to maturity securities Amount reported in Col A depends on whether bank has made opt out election Col B report amount included in Col A that will be risk weighted using SSFA or gross up approach Col Q report exposure amount to be risk weighted at 1250% Col T report risk weighted amount for securitizations calculated under SSFA approach Col U report risk weighted amount for securitizations calculated 105 under gross up approach RCR 9b, Available for sale securities Amount reported in Col A depends on whether bank has made opt out election if have not opted out, report fair value of debt securities and adjusted carrying amount of equity securities if have opted out, report book value of debt securities and carrying value of equities less any unrealized gains excluded from capital Col B if opted out, report difference in fair value and book value of securitizations that will be risk weighted at 1250% difference between RCB 4, 5 Col D Col C if fair value more than cost, report positive number if fair value less than cost, report negative number Col B all banks report amount included in Col A that will be risk weighted using SSFA or gross up approach 106 REVIEW AND UPDATE 53

54 RCR 9b, Available for sale securities Col Q report exposure amount to be risk weighted at 1250% Col T report risk weighted amount for securitizations calculated under SSFA approach Col U report risk weighted amount for securitizations calculated under gross up approach RCR 9c, Trading assets that receive standardized charges Amount reported in RC 5 that are securitization exposures RCR 9d, All other on-balance sheet securitization exposures Amount reported in Col A depends on whether bank has made opt out election Include accrued interest receivable on securitizations 107 RCR 10, Off balance sheet securitization exposures If not a repo-style transaction or eligible margin loan, cleared transaction (other than credit derivative), or over the counter derivative (other than credit derivative), the exposure amount is the notional amount of the exposure if bank makes a credit enhancing representation & warranty that is limited or capped (warranty to cover first losses on loans up to set amount that is less than full loan amount) ex. bank sells $100,000 in 1-4 loans and agrees to compensate buyer up to $2,000 if loans default in first 12 months» since 12 months longer than 120 day period meet definition of credit enhancement» securitization because $2,000 is a first loss tranche on a $100,000 transaction» report $100,000 in Col A, adjustment of $98,000 in Col B, $2,000 in Col Q if applying 1250% risk or Col T or U if applying gross up approach or SSFA 108 REVIEW AND UPDATE 54

55 RCR 10, Off balance sheet securitization exposures If securitization exposure to asset back commercial paper program (ABCP), notional amount may be reduced to maximum potential amount bank could be required to fund given the program s current underlying assets exposure amount of eligible ABCP for which SSFA does not apply is the notional amount of exposure multiplied by credit conversion factor of 50% exposure amount of eligible ABCP for which SSFA does apply is the notional amount of exposure multiplied by credit conversion factor of 100% If securitization exposure is repo style transaction or eligible margin loan, calculate exposure based on capital rules in sections 34, 35, or 37 RCR 11, Total Assets Report total of lines 1-9 in Col A Q Sum of Col B-Q must equal Col A REVIEW AND UPDATE 55

56 RCR 12, Financial standby letters of credit Col A -- report amount from RCL 2, unless credit enhancement for assets (if so, multiply by 12.5%) Col B credit converted at 100%, so report amount from Col A Col C 0% risk, report cash secured to extent of cash on deposit Col G 20% risk, ones conveyed to US banks Col I 100%, all others unless must be risk weighted by country risk classification methodology RCR 13, Performance standby letters of credit Col A -- report amount from RCL 3 Col B credit converted at 50%, so report ½ of amount from Col A Col C 0% risk, report cash secured to extent of cash on deposit Col G 20% risk, ones conveyed to US banks Col I 100%, all others unless must be risk weighted by country risk classification methodology 111 RCR 14, Commercial letters of credit Col A -- report amount from RCL 4 with an original maturity of < 1 year if original maturity > 1 year, report on RCR 18c Col B credit converted at 20%, so report 1/5 of amount from Col A Col C 0% risk, report cash secured to extent of cash on deposit Col G 20% risk, ones conveyed to US banks Col I 100%, all others unless must be risk weighted by country risk classification methodology RCR 15, Retained recourse on small business obligations sold with recourse (recourse retained if establish a recourse liability account that is sufficient under GAAP) Col A -- report amount from RCS M1b (exclude securitizations) Col B credit converted at 100%, so report amount from Col A Col I 100% risk 112 REVIEW AND UPDATE 56

57 113 RCR 16, Repo style transactions Include: securities lent reported in RCL 6a securities borrowed reported in RCL 6b securities sold under agreements to repurchase in RC 14b reverse repos reported in RC 3b Col A report fair value of securities involved in transaction Col B credit converted at 100%, so report amount from Col A Col C-J report based on risk category collateral or guarantee qualifies for With a traditional repo, bank borrows cash & posts security (ex. borrow $98, post $100 security; exposure to counterparty is $2) If take cash & give depositor a security because deposit is > FDIC insurance limits, only have exposure if market value of security > than cash from depositor If market value < cash from depositor substitute counterparty exposure with cash 114 received, which is risk weighted at 0%) REVIEW AND UPDATE 57

58 RCR 17, All other off-balance sheet liabilities Include: notional amount of all other off balance sheet items reported in RCL 9 face amount of risk participations in bankers acceptances that have been acquired by the bank and are outstanding full amount of loans sold with credit-enhancing representations and warranties that do not meet definition of a securitization exposure if agree to repurchase loans, report until warranties expire credit enhancing representations & warranties do not include certain early default clauses and similar warranties that permit return of, or premium refund clauses covering 1-4 loans provided the warranty period does not exceed 120 days from the date of transfer notional amount of written option contracts that act as financial guarantees that do not meet definition of securitization 115 RCR 17, All other off-balance sheet liabilities Include: notional amount of all forward agreements (legally binding contractual obligations to purchase assets with certain drawdown at a specified future date) exclude commitments to make 1-4 loans & forward foreign exchange contracts amount of credit derivatives reported in RCL 7 covered by risk rules and not included in any preceding line items Exclude: credit derivatives classified as trading credit derivatives purchased by bank recognized as guarantees of an asset or off balance sheet exposure (for ex. credit derivatives on which bank is beneficiary) Col B credit converted at 100%, so report amount from Col A Col C-J risk weight based on counterparties who meet or have guarantees or collateral that meets the various risk categories 116 REVIEW AND UPDATE 58

59 RCR 18, Unused commitments Exclude commitments that are unconditionally cancelable (bank may cancel at any time for any reason) Must be a legally binding commitment; RC-L may include commitments that are not legally binding Only include the bank s pro rata share of the commitment RCR 18a, Original maturities < 1 year excluding asset backed commercial paper conduits (ABCP) Col B -- credit converted at 20%; report 20% of Col A amount Col C-J report based on risk category collateral or guarantee qualifies for RCR 18b, Original maturities < 1 year to ABCP conduits Col B -- credit converted at 20%; report 20% of Col A amount Col C-J report based on risk category collateral or guarantee qualifies 117 for RCR 18, Unused commitments RCR 18c, Original maturities > 1 year include commercial letters of credit with original maturities of > 1 year Col B -- credit converted at 50%; report 50% of Col A amount Col C-J report based on risk category collateral or guarantee qualifies for 118 REVIEW AND UPDATE 59

60 RC-R 18c Unused commitments with original maturities of more than 1 year "Original maturity" is defined as the length of time between the date a commitment is issued and the date of maturity, or the earliest date on which the bank (1) is scheduled to (and as a normal practice actually does) review the facility to determine whether or not it should be extended and (2) can unconditionally cancel the commitment* * In the case of consumer home equity or mortgage lines of credit secured by liens on 1-4 family residential properties, a bank is deemed able to unconditionally cancel the commitment if, at its option, it can prohibit additional extensions of credit, reduce the credit line, and terminate the commitment to the full extent permitted by relevant federal law. 119 RC-R 18c, Unused commitments with original maturities of more than 1 year Retail credit cards and related plans, including overdraft checking plans and overdraft protection programs, are defined to be shortterm commitments that should be converted at zero percent and excluded from 18c if the bank has the unconditional right to cancel the line of credit at any time in accordance with applicable law RCR 19, Unconditionally cancelable commitments unused commitments unconditionally cancelable at any time by the bank have a 0% credit conversion factor 120 REVIEW AND UPDATE 60

61 RCR 20, Over the counter (OTC) derivatives RCR 21, Centrally cleared derivatives Include amounts reported in RCR Memo 1 Exclude fair value of interest rate lock contracts Col B report credit equivalent amount of centrally cleared derivative contracts covered by risk rules Col C-Col Q Risk weighting based on the counterparty or portion of the exposure covered by financial collateral or an eligible guarantee RCR 23-25, Totals, risk weightings, totals after applying risk weightings 121 RCR 23-25, Totals, risk weightings, totals after applying risk weightings 122 REVIEW AND UPDATE 61

62 123 RCR 26, Risk weighted assets for purposes of calculating allowance for loan loss threshold Report sum of: RCR Part II Items 2b-20, Col S 9a (securitization--htm securities), 9b (securitization--afs securities), 9c (securitization--trading assets), 10 (off balance sheet securitization) Col T &U Item 25, Col C-Q RCR Part I portion of 10b composed of investments in bank s own shares to extent not excluded as part of treasury stock portion of 10b composed of reciprocal holdings in capital of financial institutions in form of stock items 11 (non-significant bankers bank), (10/15% threshold items), 24, 33, (other capital deductions) 124 REVIEW AND UPDATE 62

63 RCR 29, Excess allowance for loan losses RC 4c (on balance sheet allowance) less RIB M1(allocated transfer risk reserve) plus RCG 3 (off balance sheet allowance) less RCR Part I 30a RCR 31, Total Risk Weighted Assets 125 M1 excludes written option contracts or interest rate locks (not covered by regulatory capital rules) Include positive fair value of derivative contracts 126 REVIEW AND UPDATE 63