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Inactive Financial Institution Letters 


                                                 December 15, 1995

          REVISIONS TO THE REPORTS OF CONDITION AND INCOME
                        (CALL REPORTS) FOR 1996

Deletions and Reductions in Detail

Certain deletions and reductions in detail will be made to the Call
Report in 1996.

The level of detail will be reduced in two areas for banks with
foreign offices or with $100 million or more in total assets that
file the FFIEC 031, 032, and 033 report forms. (Smaller banks that
file the FFIEC 034 report forms do not provide these detailed data.)
First, the breakdown of nontransaction accounts by type of depositor
in Schedule RC-E, "Deposit Liabilities," will contain fewer
categories. As shown below, the separate items for nontransaction
accounts of "U.S. branches and agencies of foreign banks" and "Other
commercial banks in the U.S." in column C will be combined into a
single item (item 4). Similarly, the separate items for
nontransaction accounts of "Foreign branches of other U.S. banks"
and "Other banks in foreign countries" in column C will be combined
(item 6).


Revised format:


Second, a single item for trading revenue will replace items 5.c,
"Trading gains (losses) and fees from foreign exchange
transactions," and 5.e, "Other gains (losses) and fees from trading
assets and liabilities," in Schedule RI, "Income Statement."  The
income statement memorandum items (Memorandum items 8.a through 8.d)
providing a four-way breakdown of trading revenue by risk exposure
(interest rate, foreign exchange, equity, and commodity and other),
which were added in March 1995, will continue to be collected. The
sum of the memorandum items will equal the new single income
statement item, which will be designated item 5.c.


Revised format:


Call Report items in the four following areas will be deleted:

(1) The memorandum items for total deposits, total demand deposits,
and total time and savings deposits (in domestic offices) that have
been collected in the deposit schedule for deposit insurance
assessment purposes (Schedule RC-E, Memorandum items 4, 4.a, and
4.b).

(2) The deposit schedule memorandum item for total deposits (in
domestic offices) denominated in foreign currencies (Schedule RC-E,
Memorandum item 1.d).

(3) The income statement memorandum item for foreign tax credits
(Schedule RI,      Memorandum item 3). This item has been completed
only by banks with foreign offices or with $100 million or more in
total assets that file the FFIEC 031, 032, and 033 report forms.

(4) The income statement memorandum item for the taxable equivalent
adjustment to pretax income (Schedule RI, Memorandum item 4). This
item has been applicable only to banks with foreign offices and $1
billion or more in total assets that file the FFIEC 031 report
forms.

New Call Report Items

New items will be added to the Call Report forms beginning March 31,
1996, to disclose certain capital and asset amounts that are used in
calculating regulatory capital ratios and to provide better data on
short-term liabilities and assets for liquidity analysis. Other new
items involve small business obligations sold with recourse and
credit losses on off-balance sheet derivative contracts. For larger
banks, the frequency of reporting on securitized credit card
receivables will be changed from annually to quarterly. For the
March 31, 1996, report date, banks may report a reasonable estimate
for any new Call Report item for which the requested information is
not readily available. A more detailed description of these new
items follows. Illustrations of the new items are also presented,
although the actual format in which they will appear in the March
31, 1996, Call Report forms may differ from the illustrations.

Capital and Asset Amounts Used in Calculating Regulatory Capital
Ratios

At present, the Call Report includes a variety of items in several
schedules which the agencies use to calculate the leverage and risk-
based capital ratios for individual banks. However, a comparison of
the agencies' regulatory capital standards to the information
currently reported in the Call Report reveals that the Call Report
does not collect all of the information that the agencies need to
calculate each bank's Tier 1, Tier 2, and total capital in strict
accordance with the definitions in the agencies' capital standards.
Nevertheless, informal input from bankers indicates that banks
routinely calculate their regulatory capital ratios at least
quarterly for internal management purposes.

Thus, rather than introducing new Call Report items for specific
elements of the regulatory capital ratio calculations that are not
currently reported to enable the banking agencies to further refine
their formulas for calculating capital ratios, all banks will begin
to report the end results of their own internal regulatory capital
analyses. Six new items will be added to the regulatory capital
schedule, Schedule RC-R, and will cover (1) Tier 1 capital (the
numerator of the Tier 1 risk-based and Tier 1 leverage capital
ratios, i.e., net of deductions), (2) Tier 2 capital, (3) total
risk-based capital (the numerator of the total risk-based capital
ratio, i.e., net of deductions), (4) the excess amount of the
allowance for loan and lease losses (if any), (5) total risk-
weighted assets (the denominator of the risk-based capital ratio,
i.e., net of deductions), and (6) "average total assets" (the
denominator of the Tier 1 leverage capital ratio, i.e., net of
deductions).

      3.  Amounts used in calculating regulatory capital ratios (report
      amounts determined by the bank for its own internal regulatory capital
      analyses):                                     _____________
       a. Tier 1 capital                             |___|___|___|
       b. Tier 2 capital                             |___|___|___|
       c. Total risk-based capital                   |___|___|___|
       d. Excess allowance for loan and lease losses |___|___|___|
       e. Risk-weighted assets                       |___|___|___|
       f. "Average total assets"                     |___|___|___|

Banks that already calculate their capital ratios for internal
management purposes generally will not be required to go to greater
lengths to identify and determine the amounts to be reported in the
six new capital-related items. Beginning to collect the six
regulatory capital items in 1996 may provide a basis for eliminating
at a later date some items now reported in the Call Report solely
for risk-based capital calculation purposes. To assist banks in
accurately reporting these capital items, an optional regulatory
capital worksheet would be developed, provided regularly to banks,
and updated as necessary.

In addition, the agencies understand that bankers and other
interested parties have found it difficult and time-consuming to
calculate the regulatory capital ratios for other banks using
existing Call Report data. Consequently, the addition of these six
items should simplify bankers' calculations of other banks' capital
ratios as well as regulatory capital calculations made by other
public users of bank Call Reports.

Short-Term Liabilities and Assets

The banking agency staffs plan to revise the liquidity ratios in the
Uniform Bank Performance Report (UBPR) to focus on short-term and
total non-core liabilities (instead of so-called "volatile
liabilities") as well as short-term assets and liabilities. As a
result, changes will be made to the reporting of maturity and
repricing data for certain categories of liabilities and assets. The
following changes will be implemented:

Other borrowed money -- On the Call Report balance sheet, the two-
way breakdown of "Other borrowed money" based on the original
maturity of the borrowing will be changed to a breakdown based on
remaining maturity (Schedule RC, item 16).

Time deposits -- For commercial banks, a number of changes will be
made in the reporting of the maturity and repricing data in
Memorandum items 5 and 6 of Schedule RC-E, "Deposit Liabilities."
Memorandum items 5 and 6 are not applicable to FDIC-supervised
savings banks that must complete the Call Report's supplemental
Schedule RC-J, "Repricing Opportunities for Selected Balance Sheet
Categories." Changes in the reporting of time deposit data by
savings banks that must complete Schedule RC-J are discussed after
the illustration of the changes for commercial banks. For purposes
of these new memorandum items (and for those discussed below for
brokered deposits and foreign office time deposits), "remaining
maturity" is defined as the amount of time remaining from the report
date until the final contractual maturity of a time deposit.

For commercial banks, first, the maturity and repricing data for
open-account time deposits of $100,000 or more, which are currently
included with the maturity and repricing data for time deposits of
less than $100,000 (in Schedule RC-E, Memorandum item 5), will be
switched so that these data are included with the maturity and
repricing data for time certificates of deposit of $100,000 or more
(in Schedule RC-E, Memorandum item 6).

Second, the maturity and repricing data for fixed rate and floating
rate time deposits of less than $100,000, which are currently
reported on a combined basis (in Schedule RC-E, Memorandum item 5),
will be split so that the remaining maturity of fixed rate time
deposits of less than $100,000 will be reported separately from the
repricing frequency of floating rate time deposits of less than
$100,000. A new time interval will also be added for these time
deposits. Fixed rate time deposits of less than $100,000 will
contain a remaining maturity category of over one year and floating
rate time deposits of less than $100,000 will include a repricing
interval of less frequently than annually.

Third, two new memorandum items will be collected in the deposit
schedule for floating rate time deposits of less than $100,000 with
a remaining maturity of one year or less and for floating rate time
deposits of $100,000 or more with a remaining maturity of one year
or less.

     Memoranda

     5. Maturity and repricing data for time deposits of less than
$100,000
        (sum of Memorandum items 5.a.(1) through 5.b.(3) must equal
         Memorandum item 2.b above):*1
        a. Fixed rate time deposits of less than $100,000 with a
           remaining maturity of:                   _____________
           (1) Three months or less                 |___|___|___|
           (2) Over three months through 12 months  |___|___|___|
           (3) Over one year                        |___|___|___|
        b. Floating rate time deposits of less than $100,000 with a
           repricing frequency of:                  _____________
           (1) Quarterly or more frequently         |___|___|___|
           (2) Annually or more frequently, but less frequently
                                                    _____________
               than quarterly                       |___|___|___|
           (3) Less frequently than annually        |___|___|___|
        c. Floating rate time deposits of less than $100,000 with a
           remaining maturity of one year or less (included in
           Memorandum items 5.b.(1) through 5.b.(3) _____________
           above)                                   |___|___|___|

     6.  Maturity and repricing data for time deposits of $100,000 or more
         (i.e., time certificates of deposit of $100,000 or more and
         open-account time deposits of $100,000 or more) (sum of Memorandum
         items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum items
         2.c and 2.d above):*1
        a. Fixed rate time deposits of $100,000 or more with a remaining
           maturity of:                               _____________
           (1) Three months or less                   |___|___|___|
           (2) Over three months through 12 months    |___|___|___|
           (3) Over one year through five years       |___|___|___|
           (4) Over five years                        |___|___|___|
        b. Floating rate time deposits of $100,000 or more with a
           repricing frequency of:                    _____________
           (1) Quarterly or more frequently           |___|___|___|
           (2) Annually or more frequently, but less frequently
                                                      _____________
               than quarterly                         |___|___|___|
           (3) Every five years or more frequently, but less
               frequently
                                                      _____________
               than annually                          |___|___|___|
           (4) Less frequently than every five years  |___|___|___|
        c. Floating rate time deposits of $100,000 or more with a
           remaining maturity of one year or less (included in
           Memorandum items 6.b.(1) through 6.b.(4)   _____________
           above)                                     |___|___|___|

*1 Memorandum items 5 and 6 are not applicable to savings banks that
must complete supplemental Schedule RC-J.



For FDIC-supervised savings banks, two new memorandum items will be
collected in supplemental Schedule RC-J for time deposits of less
than $100,000 with a remaining maturity of one year or less and for
time deposits of $100,000 or more with a remaining maturity of one
year or less.

  Part II. Memoranda

     2. Time deposits of less than $100,000 with a remaining maturity
        of one year or less (included in Part II,     _____________
        item 6.b above)                               |___|___|___|
     3.  Time deposits of $100,000 or more with a remaining maturity
         of one year or less (included in Part II, items 6.a and 6.b
         above)                                 _____________
                                                |___|___|___|


Brokered deposits -- In Schedule RC-E, "Deposit Liabilities," new
Memorandum items 1.d.(1) and 1.d.(2) will be created for brokered
deposits issued in denominations of less than $100,000 with a
remaining maturity of one year or less and brokered deposits issued
in denominations of $100,000 or more with a remaining maturity of
one year or less.


        d. Maturity data for brokered deposits:
           (1) Brokered deposits issued in denominations of less than
               $100,000 with a remaining maturity of one year or less
               included in                            _____________
               Memorandum item 1.c.(1) above)         |___|___|___|
           (2) Brokered deposits issued in denominations of $100,000
               or more with a remaining maturity of one year or less
               (included in                           _____________
               Memorandum item 1.b above)             |___|___|___|


Foreign office time deposits --  For banks with foreign offices that
file the FFIEC 031 report forms, a new memorandum item will be added
to Schedule RC-E, Part II, "Deposits in Foreign Offices," for time
deposits in foreign offices with a remaining maturity of one year or
less.

Part II. Deposits in Foreign Offices (including Edge and Agreement
subsidiaries and IBFs)


Memorandum

1. Time deposits with a remaining maturity of one year or less
   (included in Part II, item 7 above)                ____________
                                                      |___|___|___|



Loans -- For commercial banks, a single memorandum item for floating
rate loans with a remaining maturity of one year or less will be
added to Schedule RC-C, Part I, "Loans and Leases." This new
memorandum item will provide maturity data for the floating rate
loans that are reported by repricing frequency in Memorandum item
2.b on the FFIEC 034 report forms and Memorandum item 3.b on the
FFIEC 031, 032, and 033 report forms. For purposes of this new
memorandum item, the definition of "remaining maturity" will be the
same as the definition that is used for reporting the remaining
maturity of fixed rate loans in Memorandum item 2.a on the FFIEC 034
report forms and Memorandum item 3.a on the FFIEC 031, 032, and 033
report forms.

NOTE:  Maturity and repricing data for loans and leases are reported
in Memorandum item 2 on the FFIEC 034 report forms and in Memorandum
item 3 on the FFIEC 031, 032, and 033 report forms.

d. Floating rate loans with a remaining maturity of
one year or less (included in Memorandum items 2.b.(1)_____________
through 2.b.(4) above)                                |___|___|___|

For FDIC-supervised savings banks, a single memorandum item for
loans and leases with a remaining maturity of one year or less will
be added to supplemental Schedule RC-J. This new memorandum item
will provide maturity data for the loans and leases that are
reported in items 1 through 3 of Part I of Schedule RC-J. For
purposes of this new memorandum item, "remaining maturity" is
defined as the amount of time remaining from the report date until
the final contractual maturity of a loan or lease without regard to
the loan's or lease's repayment schedule, if any. This is consistent
with the manner in which fixed rate loans and leases are currently
reported in items 1 through 3 of Part I of Schedule RC-J. The new
memorandum item is illustrated on the next page with the new debt
securities memorandum item for savings banks.

Debt securities -- For FDIC-supervised savings banks, a single
memorandum item for debt securities with a remaining maturity of one
year or less will be added to supplemental Schedule RC-J. Savings
banks will begin to complete this new item instead of existing
Memorandum item 6 in Schedule RC-B, "Securities," on floating rate
debt securities with a remaining maturity of one year or less.
Commercial banks will continue to complete existing Memorandum item
6 in Schedule RC-B.

In the new memorandum item for savings banks, held-to-maturity
securities would be reported at amortized cost and available-for-
sale securities would be reported at fair value, consistent with the
method of reporting these two categories of securities in Schedule
RC-B, Memorandum item 6. The definition of "remaining maturity" will
be the same as has been used for Schedule RC-B, Memorandum item 6.

       Part I. Memoranda

       5. Loans and leases with a remaining maturity of one year or
          less (included in Part I, items 1 through 3 _____________
          above)                                      |___|___|___|
       6. Debt securities with a remaining maturity
          of one year or less                         _____________
          (included in Part I, item 4 above)          |___|___|___|

Small Business Obligations Sold with Recourse

The banking agencies recently issued rules to implement section 208
of the Riegle Community Development and Regulatory Improvement Act
of 1994. Section 208 provides that a qualifying insured depository
institution that sells small business loans and leases on personal
property with recourse is required to include only the amount of the
retained recourse in its risk-weighted assets when calculating its
risk-based capital ratios, provided two conditions are met. First,
the transaction must qualify as a sale under generally accepted
accounting principles (GAAP). Second, the selling institution must
establish a non-capital reserve sufficient to meet its reasonably
estimated liability under the recourse arrangement. Therefore, qualifying 
institutions should report these transactions in
accordance with GAAP in the Call Report.

To be a qualifying institution, a bank must be well capitalized
based on capital ratio calculations made without regard to the
preferential capital treatment that Section 208 authorizes for these
transactions. In addition, in general, for purposes of determining a
bank's capital category under the prompt corrective action rules,
the capital ratio calculations must be made without regard to the
preferential Section 208 treatment.

The Glossary entry for "sales of assets" in the Call Report
instructions will be revised to incorporate the GAAP reporting
treatment for sales of small business obligations with recourse by
qualifying institutions. Additionally, to enable the agencies to
determine the capital ratios of institutions that have engaged in
transactions covered by Section 208 on the "without regard to" basis
mentioned above, new items 9.d.(1) and 9.d.(2) will be added to
Schedule RC-L, "Off-Balance Sheet Items," for (1) the outstanding
principal balance of small business obligations sold with recourse
and (2) the amount of retained recourse on these obligations as of
the report date.

9. Loans transferred (i.e., sold or swapped) with recourse that have
been treated as sold for Call Report purposes:

     d. Small business obligations transferred with recourse under
        Section 208 of the Riegle Community Development and Regulatory
        Improvement Act of 1994:
           (1) Outstanding principal balance of small business obligations
               transferred as of the report date     _____________
                                                     |___|___|___|
           (2) Amount of retained recourse on these obligations as of the
               report date                           |___|___|___|



Credit Losses on Off-Balance Sheet Derivative Contracts

Banks with foreign offices or with $300 million or more in total
assets that file the FFIEC 031 and 032 report forms began to report
information about past due derivatives in the Call Report in 1994.
However, some banks have incurred credit losses on their derivative
contracts, but the agencies cannot track these losses for individual
institutions or for the industry as a whole. Therefore, a new
Memorandum item 6 will be added to Schedule RI-B, Part I, "Charge-
offs and Recoveries," on the FFIEC 031 and 032 report forms in which
banks will report their year-to-date credit losses on derivatives.
The instructions will indicate that banks should include such credit
losses in Memorandum item 6 regardless of whether, under the bank's
accounting policies, the losses were charged directly to operating
income or to another account (e.g., the allowance for loan and lease
losses). This new memorandum item will not be collected from banks
that file the FFIEC 033 and 034 report forms.

Part I. Memoranda

       6. Credit losses on off-balance sheet          _____________
          derivatives                                 |___|___|___|

 On a related matter, the Call Report instructions for reporting
amounts associated with derivatives that are past due 90 days or
more in Memorandum item 4 on Schedule RC-N, "Past Due and Nonaccrual
Loans, Leases, and Other Assets," on the FFIEC 031 and 032 report
forms will be revised. As part of the information they report on 90-
day-or-more past due derivatives, larger banks will now be required
to include asset amounts and positive replacement costs for
derivatives that, while not technically 90 days past due, are with
counterparties that are not expected to pay the full amounts owed to
the institution under the derivative contracts.

Change in Frequency of Reporting on Securitized Credit Card
Receivables

Banks with foreign offices or with $300 million or more in total
assets that file the FFIEC 031 and 032 report forms report annually
as of September 30 the outstanding amount of "Credit cards and
related plans" that have been securitized and sold without recourse
with servicing retained (Schedule RC-L, Memorandum item 5.b). In
order to better evaluate the financial performance of banks with
extensive credit card operations that have securitized and sold such
receivables in light of the growth in the volume of securitizations,
banks filing the FFIEC 031 and 032 report forms will begin to report
the outstanding amount of securitized credit card receivables that
they service on a quarterly rather than annual basis.

        Memoranda

       5. Installment loans to individuals for household, family,
and other personal expenditures that have been securitized and sold
without recourse (with servicing retained), amounts outstanding by
type of loan:
          a.  Loans to purchase private passenger automobiles (to be
              completed                               _____________
              for the September report only)          |___|___|___|
          b.  Credit cards and related plans (TO BE
              COMPLETED QUARTERLY)                    |___|___|___|
          c.  All other consumer installment credit (including mobile home
              loans) (to be completed                 _____________
              for the September report only)          |___|___|___|

Instructional Matters

The Examination Council has approved a number of instructional
changes for 1996. Existing Call Report instructions for mortgage
servicing rights and trading accounts will be revised to bring them
into conformity with GAAP. New or revised Call Report instructions
also will address the reporting of low-level recourse transactions
and accrued receivables related to derivatives for risk-based
capital purposes, quarterly averages following the application of
push down accounting, the determination of past due status for
residential mortgages, the separate entity method of accounting for
income taxes, checks or drafts drawn on zero-balance and similar
accounts, and capitalization of interest cost. A more detailed
discussion of these instructional matters follows. Revisions to
certain other Call Report instructions that are not discussed below
are also under consideration.

Mortgage Servicing Rights

In May 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 122, "Accounting for Mortgage Servicing Rights."  This
new accounting standard amended FASB Statement No. 65, "Accounting
for Certain Mortgage Banking Activities," and is effective for
fiscal years beginning after December 15, 1995. Statement No. 122
must be adopted for Call Report purposes as of its effective date
based on each bank's fiscal year. Early adoption is also permitted
to the extent allowable under Statement No. 122.

The existing Glossary entry for "mortgage servicing rights" was
written based on the provisions of Statement No. 65. It will be
revised to incorporate the amendments to Statement No. 65 that were
made by Statement No. 122.

In addition, Statement No. 122 requires that mortgage servicing
rights be considered impaired whenever their fair value is less than
their amortized cost. A valuation allowance is required for the
amount of any impairment, which must be measured by stratifying
mortgage servicing rights based on one or more of the predominant
risk characteristics of the underlying loans. These characteristics
may include loan type, size, note rate, date of origination, term,
and geographic location. This differs from the impairment guidance
currently set forth in the Call Report instructions for Schedule RC-
M, item 6.a, "Mortgage servicing rights."  These instructions call
for a writedown of the book value of mortgage servicing rights if
the discounted amount of future net cash flows is less than the
carrying amount of the servicing rights. The discount rate used for
this calculation must not be less than the original discount rate
inherent in the servicing rights at the time of acquisition. The
Call Report instructions on impairment of mortgage servicing rights
will be revised to conform to the impairment provisions of Statement
No. 122.

"Trading Account" Glossary Entry

This Glossary entry's discussion on the accounting for transfers to
or from a trading account reflects the accounting guidance that was
in effect prior to FASB Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."  The discussion of
transfers will be revised to conform with the requirements of
Statement No. 115. The Glossary entry also will be updated to
incorporate Call Report changes implemented since 1994 with respect
to the reporting of trading assets and liabilities and the treatment
of off-balance sheet derivatives held for trading purposes.

Reporting of Low-Level Recourse Transactions for Risk-Based Capital
Purposes

The three banking agencies amended their risk-based capital
standards earlier this year to incorporate the so-called "low-level
recourse" rule. Under this rule, when a bank has transferred assets
with recourse, the amount of risk-based capital that must be
maintained is limited to the bank's maximum contractual exposure
under the recourse agreement if this is less than the amount of
capital that would have to be held against the outstanding amount of
the transferred assets.

In the Supplemental Instructions that have been included in the Call
Report materials distributed to banks for the first three quarters
of this year, interim guidance has been provided on how low-level
recourse transactions should be reported in the risk-based capital
schedule (Schedule RC-R). Under this interim guidance, a bank's
maximum contractual exposure in a low-level recourse transaction is
multiplied by a factor that is a function of the risk weight
category applicable to the transferred assets. The resulting amount
is then reported in the Schedule RC-R item for the applicable risk
weight and is thereby included in the bank's risk-weighted assets.
This interim guidance will now be formally incorporated into the
Call Report instructions.

Please refer to the Supplemental Instructions your bank has received
as part of the March, June, and September 1995 Call Report materials
for this interim guidance. This guidance will also be included in
the Supplemental Instructions that will accompany the December 31,
1995, Call Report forms.

Reporting Accrued Receivables Related to Derivatives for Risk-Based
Capital Purposes

The instructions for Schedule RC-R, item 8, "On-balance sheet asset
values excluded from the calculation of the risk-based capital
ratio," currently indicate that the amount reported in item 8 should
include any positive fair values carried on the balance sheet for
interest rate, foreign exchange, equity derivative, and commodity
and other contracts that are treated as off-balance sheet
instruments for risk-based capital purposes. Because the fair values
of such contracts, if positive, are included in the calculation of
their credit equivalent amounts for risk-based capital purposes, the
reporting of these amounts in item 8 ensures that they are not
"double counted" when the agencies calculate a bank's risk-weighted
assets.

In contrast, the existing instructions indicate that accrued
receivables associated with off-balance sheet derivative contracts
are to be excluded from item 8 and assigned to the appropriate risk
weight category in the same manner as other on-balance sheet items.
However, consistent with GAAP, institutions may include accrued
receivables related to derivative contracts in the fair value of
such contracts. Thus, the Schedule RC-R instructions will be revised
to permit institutions to report accrued receivables in item 8 when
these amounts are included in a bank's credit equivalent amount
calculations.

Reporting of Quarterly Averages in a Quarter When Push Down
Accounting Has Been Applied

The instructions for the quarterly average calculations in Schedule
RC-K will be clarified to indicate that banks acquired in push down
transactions should calculate quarterly averages using only the
dollar amounts for the days since the acquisition in the numerator
and the number of days since the acquisition in the denominator.

Past Due Status for Residential Mortgages

The definition of past due in the instructions for Schedule RC-N,
"Past Due and Nonaccrual Loans, Leases, and Other Assets," indicates
that amortizing loans secured by real estate are to be reported as
past due when the borrower is in arrears two or more monthly
payments. The definition also states that banks may use 30 days as a
proxy for a month if they prefer, but this option has apparently not
been fully understood by banks. As a result, this 30-day language
will be replaced with a statement to the effect that, at a bank's
option, loans and leases with payments scheduled monthly may be
reported as past due when one scheduled payment is due and unpaid
for 30 days or more.

Separate Entity Method of Accounting for Income Taxes

The section of the Glossary entry for "income taxes" that discusses
income taxes of a bank subsidiary of a holding company states that a
bank should generally report income tax amounts in its Call Report
as if it were a separate entity. When the reporting bank has
subsidiaries of its own, there have been questions about how the
separate entity method should be applied. In this situation, the
bank, together with its consolidated subsidiaries, is treated as a
separate taxpayer for purposes of computing the bank's applicable
income taxes and the amount of any disallowed deferred tax assets.
The "income taxes" Glossary entry will be clarified in this manner.

Checks or Drafts Drawn on Zero-Balance and Similar Accounts

The instructions for Schedule RC-E, "Deposit Liabilities," were
revised in 1993 to describe how funds received or held in connection
with checks or drafts drawn by the reporting bank and drawn on, or
payable at or through, another institution on a zero-balance or
similar account should be reported. When this revision was made, the
instructions for the balance sheet items for "Other borrowed money"
(Schedule RC, item 16) and "Cash and balances due from depository
institutions" (Schedule RC, item 1) and the Glossary entry for
"overdraft" were not also updated to describe the treatment of any
zero-balance or similar accounts that the reporting bank maintains
at other institutions. Appropriate changes to these instructions
will now be made.

Capitalization of Interest Cost

Both GAAP and the Call Report instructions require material interest
costs associated with the construction of a building to be
capitalized as part of the cost of the building. When a bank has a
specific borrowing to finance the construction of a building,
interest expense is reduced by the amount of capitalized interest.
However, for internally-financed projects, the Call Report
instructions currently require banks to report the credit resulting
from the capitalization of imputed interest as a reduction of "Other
noninterest expense."  This reporting treatment for imputed interest
does not appear to be consistent with GAAP. Accordingly, the
instructions advising banks to credit "Other noninterest expense"
for the amount of capitalized imputed interest will be eliminated.
Last Updated 07/17/1999 communications@fdic.gov