Regulatory Reporting Training

Transcription

1 Regulatory Reporting Training FR Y-9SP All opinions expressed are those of the presenters and not necessarily those of the Reserve Bank or Board of Governors. May 22, 2012

2 Agenda Reporting Overview Schedule SI - Income Statement and Schedule SC - Balance Sheet Schedule SC-M - Memoranda & Notes to Financial Statements Equity Highlights Common Errors Edits and Data Analysis IESUB Overview and Registration Questions, Closing Comments, and Evaluation 2

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4 Our Role in Regulatory Reporting Data Steward - Collection and timeliness - Analysis for completeness - Analysis for accuracy - Analysis for regional and national performance Packaging for delivery Submission to Washington Ongoing retention and archive 4

5 Report Processing Cycle FRB Quarter-end as-of date Report Preparation Vendor software entry or data entry Data Editing IESUB Submission Reporter Data and explanation analysis Internal editing Data Packaging for internal review Data transmission to the Board Data Review Data Published Board 5

6 Report Submission Order FR Y-9SP Top Tier SLHC FR Y-9SP Lower Tier SLHCs FFIEC 031/041 Thrift(s) ii i 8/14/2012 7/30/2012 Due Dates 6

7 First Quarter 2012 Report Deadlines FR Y-9SP Submission Call Submission 6/30 7/30 8/14 7

8 2012 Report Submission Deadlines FR Y-6 Submission FR Y-9SP Submission Call Submission 6/30 7/30 8/14 12/31 1/30/13 2/14/13 4/1/13 8

9 Reporting Requirements 2012 FR H(b)-11 FR Y-9 Series FR Y-6 - Starting with the 12/31/2012 fiscal year end - Other fiscal year ends will start reporting in FR H(b)-11 FR Y-8 Other required bank holding company reports - Based on size, complexity, and nature of holding company 9

10 Definitions: SLHCs Filing BHC Reports Form and Instructions will be updated later References to BHC should be interpreted as SLHC References to Bank should be interpreted as Thrift Instructions include thrifts as nonbanks for BHCs; thrifts are banks for a SLHC Nonbank subsidiaries should be interpreted as those not held under the thrift 10

11 11 Questions?

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13 Reporting Fact Sheet Reporting Frequency: - Semi-annual, as of the last day of the quarter - June 30 th and December 31 st Reporting Panel: - Filed by the parent company(s) of BHCs and SLHCs with total consolidated assets of less than $500 million Purpose: - The report is used to assess and monitor the financial condition of parent BHCs and SLHCs 13

14 FR Y-9SP Description The report form consists of: Income Statement Schedule SI Balance Sheet Schedule SC - Supporting Schedule collecting certain Memoranda items Schedule SC-M 14

15 Who Must Report: FR Y-9SP A separate FR Y-9SP must be filed for the top-tier SLHC and all lower-tiered SLHCs Top-Tier Holding Company (FRY-9SP) Lower-Tier Holding Company (FR Y-9SP) Thrift Savings Bank (Call Report) 15

16 Report Preparation Report is required to be prepared and filed in accordance with GAAP Equity Method of Accounting should be used when accounting for: - Investments in nonbank subsidiaries - Associated companies - Corporate joint ventures where the SLHC exercises significant influence 16

17 17 Questions?

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19 FR Y-9SP: Income Statement Operating Income - Income from thrift subsidiaries (SI-1a SI-1b) Dividend income from the thrift subsidiary declared or paid to the holding company should be reported in SI-1a - Income from nonbank subsidiaries (SI-2a SI-2b) - Income from subsidiary SLHCs (SI-3a SI-3b) - Other operating income All other income accrued by the SLHC from its direct activities 19

20 Income Statement continued Operating Expenses (SI-6 SI-7) - Interest expense - All other expenses Report the amount of all other parent company only expenses incurred by the SLHC Applicable Income Taxes (SI-10) - Parent company only, not consolidated - Total estimated tax expense or (benefit) 20

21 Subsidiary Thrift s Net Income Equity in undistributed income/(losses) (SI-12(a) SI-12(c)) Example of reporting proportionate share of parent holding company income from thrift subsidiary Facts: - Thrift subsidiary reports $6,500 in net income on Call Report - Thrift pays $3,500 dividend to the holding company Exercise: Reflect the parent holding company reporting of this transaction on the FR Y-9SP report. The holding company ownership in the thrift sub is 100%. 21

22 Example SLHC reports on line SI-1a(1) Dividends Received from sub thrift: $3,500 and SLHC reports on line SI-12a Equity in Undistributed Income: $3,000 *Note SLHC reports their proportionate amount based on their percent ownership in the thrift subsidiary(s). Additionally, if the SLHC owns multiple thrift subsidiaries, the total for all thrift subsidiaries would be reflected in these line items. 22

23 Income Statement Memoranda SI-M1: Cash dividends declared by the SLHC to its shareholders SI-M3: Interest paid to special purpose subsidiaries that issue trust preferred securities - (Included as part of the total reported in SI-7) SI-M4: Net change in fair value of financial instruments accounted for under the fair value option 23

24 FR Y-9SP Balance Sheet: Assets Cash and balances due from depository institutions Securities - Do not report investments in the subsidiary(s) or associated companies held by the parent SLHC Loans and lease financing receivables - Allowance for loan and lease losses should be reported in accordance with GAAP - Exclude intercompany loans from this item 24

25 Balance Sheet Investments in and receivables due from subsidiaries and associated companies Cost of parent s holding of capital stock, including goodwill associated with acquisitions Proportionate share in earnings and losses of investment of common stock Advances made to or receivables due from direct and indirect subs and associated companies 25

26 Investments in Subsidiaries and Associated Companies Equity investments in: Thrift subsidiaries and associated thrift (SC-4a) Nonbank subsidiaries and associated nonbanks (SC-5a) Subsidiary SLHCs (SC-6a) Loans and advances and receivables due from: Thrift subsidiaries and associated thrifts (SC-4c) Nonbank subsidiaries and associated nonbanks (SC-5c) Subsidiary SLHCs (SC-6c) 26

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28 Analysis Example Example of reporting proportionate share of parent holding company equity in thrift sub Facts: Thrift subsidiary reports $320,500 in total equity capital on Call Report Exercise: Reflect the parent holding company reporting of this transaction on the FR Y-9SP report. The holding company ownership in the thrift sub is 80%. 28

29 Example SLHC reports on line SC-4a Equity in subsidiary thrift(s): $256,400 $320,500 * 80% ownership = $256,400 29

30 Definitions For purposes of the FR Y-9SP report: Subsidiary- a company in which the parent holding company, directly or indirectly, owns more than 50 percent of the outstanding voting stock Associated company- a corporation in which the holding company, directly or indirectly, owns 20 to 50 percent of the outstanding voting stock and over which the SLHC exercises significant influence Corporate joint venture- a corporation owned and operated by a group of companies, no one of which has a majority interest, as a separate and specific business or project for the mutual benefit of the joint venturers 30

31 Balance Sheet Other assets - Value of any assets associated with nonbanking activities - Equity securities held by the parent SLHC that do not have readily determinable fair values - Book value of goodwill that is included on the balance sheet of the reporting SLHC and not part of the investment in subs reported in items 4(b), 5(b) or 6(b) Balances due from related institutions other than investments - This item should be completed only by lower-tier parent SLHCs 31

32 FR Y-9SP Balance Sheet: Liabilities Borrowings with a remaining maturity of one year or less Other borrowed money with a remaining maturity of more than one year All interest accrued, but not yet paid, on the total SLHC parent company only borrowings All other liabilities Balances due to subsidiaries and related institutions - If SLHC is a multi-tiered holding company, related institutions include subsidiary SLHCs and their subs - When a subsidiary SLHC is filing, include balances due to its parent and the parent s subs as well as balances due to the respondent s subs 32

33 FR Y-9SP Balance Sheet: Equity Capital Perpetual preferred stock Common stock Retained Earnings Accumulated Other Comprehensive Income (AOCI) - Net unrealized gains/(losses) on available-for-sale securities Including the holding company s proportionate share of its consolidated subsidiaries available-for-sale securities - Accumulated net gains/(losses) on cash flow hedges - Foreign currency translation adjustments - Minimum pension liability adjustments Other equity capital components 33

34 Balance Sheet Memoranda Memoranda items 3(a) and 3(b) are to be completed by SLHCs that have elected to account for financial instruments or servicing assets and liabilities under a fair value option Adopted Fair Value Measurements and Disclosures (ASC topic 820) Have elected to report certain assets and liabilities at fair value with changes recognized in earnings - ASC topic Financial Instruments - ASC topic Derivatives and Hedging - ASC topic Transfers and Servicing 34

35 Mapping TFR: Schedule HC to FR Y-9SP 35

36 Mapping TFR: Schedule HC to FR Y-9SP 36

37 Mapping TFR: Schedule HC to FR Y-9SP 37

38 38 Questions?

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40 Schedule SC-M: Memoranda The Memoranda schedule provides supporting details and breakouts for the Balance Sheet SC-M1: Total consolidated assets of the SLHC - Total consolidated assets of the holding company should be net of any consolidating entries and, in general, are greater than or equal to line RC-12 on the Call Report SC-M2: SLHC (parent only) amount of borrowings from unaffiliated parties guaranteed by the parent with respect to: sub thrift, nonbank subs, and related SLHC (included in Schedule SC, Items 10 & 11) SC-M3: Treasury Stock Treasury stock should be reported here only if the amount exceeds 5% of the total equity capital reported in SC-16f 40

41 Schedule SC-M: Memoranda SC-M5: Total loans from parent SLHC to holding company and non subsidiary(s) to insiders (excluding directors) and their interest SC-M7a & 7b: - Fair value of securities classified as available-for-sale - Amortized cost of securities classified as held-to-maturity SC-M8a & 8b: - Total off-balance-sheet activities conducted either directly or through a non bank subsidiary - Total debt and equity securities (other than Trust Preferred securities) outstanding that are registered with the Securities and Exchange Commission 41

42 Schedule SC-M: Memoranda SC-M9: Balances held by subsidiary banks of the SLHC due from: - Other bank subsidiaries of the SLHC - Nonbank subsidiaries of the SLHC SC-M10: Balances held by subsidiary banks of the SLHC due to: - Other bank subsidiaries of the SLHC - Nonbank subsidiaries of the SLHC SC-M11 & SC-M12: Other Assets and Other Liabilities - Amounts that exceed 25% of SC-7 and SC-13 42

43 Schedule SC-M: Memoranda SC-M13: Notes payable to special purpose subsidiaries that issued trust preferred securities Please leave Schedule SC-M, Item 14 blank: 43

44 Schedule SC-M: Memoranda SC-M15b & 16b: All lower-tier SP filers must complete these items. All single-tier and top-tier SP Filers (i.e. SLHCs with no parent) must leave these items blank. These items are commonly misreported. SC-M17: - For SLHCs, the definition of a nonbank does not include its thrift. Therefore, the SLHC should not report its thrift data in items 17(a) through 17(f). 44

45 Schedule SC-M: Memoranda Please leave Schedule SC-M, Items 18 & 19 blank: SC-M20a & 20b: Has the BHC sold or otherwise liquidated its holding of any nonfinancial equity investment since the previous reporting period? Does the SLHC manage any nonfinancial equity investments for the benefit of others? SC-M21 & 22: SLHCs who have elected to become FHCs Net Assets of broker-dealer subsidiaries in underwriting or dealing securities Net Assets of subsidiaries engaged in insurance or reinsurance underwriting 45

46 Schedule SC-M: Memoranda SC-M23: For SLHCs that participated in the Treasury Capital Purchase Program a. Senior perpetual preferred stock b. Warrants to purchase common stock 46

47 Notes to the Parent Company Only Financial Statement Enter any additional information on specific line items on the financial statements that the SLHC wishes to explain, that has been separately disclosed in the SLHC s quarterly reports to its shareholders, in its press releases, or on its quarterly reports to the Securities and Exchange Commission (SEC) 47

48 48 Questions?

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50 50 Trust Preferred Securities

51 Background Thrift needs capital SLHC is source of strength to thrift, but does not want to dilute its shares Investor willing to invest for high, regular return SPE developed to issue stock and lend" funds SLHC issues "deeply subordinated note" to SPE for amount borrowed SLHC injects"/ downstreams" capital to thrift 51

52 SLHC (Parent over thrift & SPE) << SPE lends* $100,000** to SLHC in exchange for << SPE lends* $100,000** to BHC in exchange for deeply subordinated note** Deeply Subordinated Note** << SLHC invests $3,093 in SPE (C/S) Investor invests $100,000 in return for Trust Preferred Shares >> Investor SLHC pays "Interest Expense (Note: Dividend) on 100k note >> SPE that issues TruPS (Sub of SLHC) << SPE pays "Dividend" to investors Thrift (Sub of SLHC) << SLHC "Downstreams"/"Injects" capital into thrift 52

53 Facts and Circumstances Capital desired: $3,000,000 = 97% of total issuance (Trust Preferred Shares) Total Stock issuance: $3,093,000 = 3,000,000 / 97% (100% -3%) to gross up. SLHCs Investment in SPE: $93,000 = 3% of issuance (Common Shares) 53

54 Reporting TruPS on FR Y-9SP Balance Sheet: - Equity Investment in nonbank sub (SC-5a): $93 - Balances due to nonbank subs (SC-14b): $3,093 - Notes payable to SPEs that issued trust preferred securities (SC-M13): $3,000 Income Statement: - Dividend income from nonbank subsidiaries (SI-2a): $2 - Other Expenses (SI-7): $108 - Interest Paid to SPEs that issue TPS (SI-M3): $58 54

55 Normal Reporting Differences Balance Sheet: - Some holding companies capitalize the SPEs start-up costs and add it to the equity investment (SC-5a) and balances due to nonbank subs (SC-14b) Common Reporting Errors Balance Sheet: - Some holding companies include 3% of the common stock in the SPE when reporting (SC-M13) Income Statement: - Some holding companies report the dividend income from the nonbank (SPE) sub in Other Income (SI-2b) - Some holding companies net their dividend income with the interest expense paid to the SPE (SI-M3) 55

56 56 Common Stock

57 Typical Transactions Initial Issuance of Common Stock: - Institution sells common stock and receives $1M cash DR Cash $1,000 CR Common stock $1,000 Common Stock Repurchase: - Institution buys back stock for $1.2M DR Treasury Stock $1,200 CR Cash $1,200 57

58 Reporting on FR Y-9SP Decrease to cash (Asset) Decrease to Equity: - Treasury stock is a contra-asset account to the equity section of the balance sheet An increase in treasury stock will result in a decrease to Equity - FR Y-9SP reporting: Per reporting instructions, Treasury Stock is reported in SC-16e, Other equity capital components Treasury Stock held by the SLHC as of the reporting date should be reported in SC-M3, Treasury Stock, if the carrying value is > 5% of Total Equity Capital No effect to Retained Earnings, Common Stock, or OCI 58

59 Outcomes for Stock Repurchase Resell Treasury Stock: - Repurchased stock sold to new investors for $1.5M cash DR CR Cash $1,500 Treasury Stock $1,200 Common Stock/Surplus $300 Increase to Cash (Asset) Increase to Equity - Common Stock/Surplus (Equity), reported in SC-16b, Common Stock and related surplus - Decrease to Treasury Stock, contra-asset will result in an increase to Equity 59

60 Outcomes for Stock Repurchase Retire Treasury Stock: - Repurchased certificates cancelled and can no longer be reissued (using $1.2M repurchase example) DR Common Stock/Surplus $1,000 Retained Earnings $200 CR Treasury Stock $1,200 Net effect on Equity is $0 Amount paid above the original issuance is captured in Retained Earnings, reported in SC-16C 60

61 61 Questions?

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63 Common Errors: Suggested Line Items to Review to Eliminate Common Errors and Improve Reporting Accuracy Income Statement: - SI-1a: Dividends from thrift subsidiary should be reported as the amount of the holding company s proportionate share of dividends declared by the thrift subsidiary as reported on lines RI-A8 and RI-A9 of the Call Report* - SI-12a: Equity in undistributed income (loss) of subsidiary thrift should be reported as the income earned by the thrift subsidiary that has not been paid to the holding company via dividends. Note that the sum of SI-1a and SI-12a should equal line RI-12 (multiplied by holding company s percentage of ownership) on the Call Report.* - SI-M1: Cash dividends (or non-taxable distributions) declared by the holding company to its shareholders are often overlooked or reported as the amount of dividends declared by the subsidiary bank. The amount reported should equal year-to-date dividends declared by the holding company. This item includes dividends declared before but not payable until after the reporting date. 63 *Refer to the worksheets included in the Report Instructions for additional guidance.

64 Common Errors: Suggested Line Items to Review to Eliminate Common Errors and Improve Reporting Accuracy Balance Sheet: - SC-4a: Equity investment in thrift subsidiary should equal the holding company s proportionate ownership share of total thrift equity capital on line RC-28 of the Call Report* - SC-4c: Dividends declared by the thrift subsidiary(s), but not yet paid belong in here, NOT in SC-7, Other Assets - SC-16c: Retained earnings should typically change by the yearto-date net income less dividends paid by the holding company - SC-16d: Accumulated other comprehensive income should include the holding company s proportionate share of the thrift subsidiary s accumulated other comprehensive income, as reported on line RC-26b of the Call Report - SC-16e: Other equity components should include the carrying value of treasury stock and should not be netted against lines SC- 16b or SC-16c. Treasury stock should be reported as a negative amount. * Refer to the worksheets included in the Report Instructions for additional guidance. 64

65 Common Errors: Suggested Line Items to Review to Eliminate Common Errors and Improve Reporting Accuracy Memoranda Schedule: - SC-M1: Total consolidated assets of the holding company should be net of any consolidating entries and generally should be greater than or equal to line RC-12 on the Call Report - SC-M3: Treasury stock should be reported here only if the amount exceeds 5% of the total equity capital reported in SC-16f - SC-M11: Individual components of Other Assets should be reported here only if they exceed 25% of SC-7 - SC-M12: Individual components of Other Liabilities should be reported here only if they exceed 25% of SC-13 65

66 Common Errors Reporting Tip: - If changes are made to the Call Report subsequent to the completion of the FR Y-9SP, then FR Y-9SP data will need to be revised to reflect the corresponding changes 66

67 67 Questions?

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69 Resolving Edits Validity Edits: - Flags mathematical discrepancies or factual inconsistencies - Corrections before transmitting the data Quality edits: - Flags unusual conditions in the current reporting period - An explanation is required to explain the condition Intraseries edits: - Flags unusual conditions between report periods - An explanation is required to explain the condition Interseries Edits: - Flags unusual conditions between two different reports - These are explained during analyst follow-up 69

70 Resolving Edits Validity Edits: CFO must not be blank Quality edits: - Total Assets (SC-9) should not be null and should not be negative Intraseries edits: - For December, income from bank subsidiary (SI-1b) should be >= previous Interseries Edits: - Not used in editing software for FR Y-9SP report 70

71 Resolving Edits SLHCs are expected to explain edit exceptions in a clear, complete, and accurate manner Explain how an event has contributed to the condition identified by an edit The explanation should clearly define the connection between the cause and the condition to which the edit message refers The edit explanation should provide enough detail to minimize follow-up discussions Visit Guidelines to Resolving BHC Edits for further details and examples 71

72 Edit Examples Quality Edit: - If the sum of short term and long term borrowings (SC- 10a, SC-10b & SC-11) is > $50K, then interest expense (SI-6) should be > $0. - Good Explanation: This variance is due to the timing of a holding company borrowing with Not Our Savings & Loan that was written on 6/25/2011 for $500K. The first interest payment has not been made as-of the reporting date therefore, the interest expense at quarter end was $0. Includes the amount Includes the date Includes who participated in the transaction - Bad Explanation: Our CPA has found nothing wrong with the reported data. - Really Bad Explanation: Confirmed. 72

73 Types of Analysis Interseries comparisons - Tip: Use worksheets located in the back of the FR Y-9SP instructions Period-over-period consistency checks Large Fluctuations Application of accounting rules Application of reporting instructions Consistent with safe and sound practices 73

74 Advanced Analysis: Interseries Edit 74

75 Advanced Analysis: Consistency Check 75

76 Advanced Analysis: Large Fluctuations Large increases Large decreases Items historically reported are now $0 Items historically $0 reported > $0 Line switch errors 76

77 Current Analysis Efforts Using the TFR, Schedule HC to fill in the FR-Y9SP Using the mapped FR-Y9SP to project and compare future FR-Y9SP data Using projected and future data to generate edits 77

78 78 Questions?

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80 IESUB Demo 80

81 IESUB Demo 81

82 IESUB Demo 82

83 IESUB Demo 83

84 Submitting via Data Entry 84

85 Submitting via Data Entry 85

86 Submitting via Data Entry 86

87 Submitting via Data Entry 87

88 Submitting via Data Entry 88

89 Submitting Data through File Transfer 89

90 Submitting Data through File Transfer 90

91 Submitting Data through File Transfer 91

92 Submitting Data through File Transfer 92

93 Edit Error Report 93

94 Deleting Edit Failures 94

95 IESUB Demo 95

96 96 Questions?

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