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.