# FDIC FIL-41-2019: Consolidated Reports of Condition and Income

> Federal · Agency guidance · Superseded

URL: https://www.frixlaw.com/law-library/statutes/FDIC_FIL19041

## Section

- **Citation:** FDIC FIL-41-2019
- **Heading:** Consolidated Reports of Condition and Income
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** Superseded
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** FDIC Financial Institution Letters / Consolidated Reports of Condition and Income

## Text

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FFIEC
Federal Financial Institutions Examination Council
Arlington, VA 22226
CALL REPORT DATE: June 30, 2019

SECOND 2019 CALL, NUMBER 288

SUPPLEMENTAL INSTRUCTIONS

June 2019 Call Report Materials

There are no new or revised Call Report data items this quarter. One new topic has been added to the
Supplemental Instructions for June 2019: “Goodwill Impairment Testing.” The topic on “Accounting for
Leases” has been updated in response to questions the banking agencies have received. The topic on
“Reporting Reciprocal Deposits” has been removed from the Supplemental Instructions this quarter;
instructional revisions addressing this topic were included in the Call Report instruction book updates for
March 2019. The topic on “Accounting for Measurement-Period Adjustments Related to a Business
Combination” also has been removed; information on this topic will be included in the Call Report instruction
book updates for June 2019.

Separate updates to the instruction book for the FFIEC 051 Call Report and the instruction book for the
FFIEC 031 and FFIEC 041 Call Reports for June 2019 are available for printing and downloading from
the FFIEC’s website (https://www.ffiec.gov/ffiec_report_forms.htm) and the FDIC’s website
(https://www.fdic.gov/callreports). Sample FFIEC 051, FFIEC 041, and FFIEC 031 Call Report forms,
including the cover (signature) page, for June 2019 also can be printed and downloaded from these websites.
In addition, institutions that use Call Report software generally can print paper copies of blank forms from their
software. Please ensure that the individual responsible for preparing the Call Report at your institution has
been notified about the electronic availability of the June 2019 report forms, instruction book updates, and
these Supplemental Instructions
nloaded from these websites.
In addition, institutions that use Call Report software generally can print paper copies of blank forms from their
software. Please ensure that the individual responsible for preparing the Call Report at your institution has
been notified about the electronic availability of the June 2019 report forms, instruction book updates, and
these Supplemental Instructions. The locations of changes to the text of the previous quarter’s Supplemental
Instructions (except references to the quarter-end report date) are identified by a vertical line in the right
margin.

Submission of Completed Reports

Each institution’s Call Report data must be submitted to the FFIEC's Central Data Repository (CDR), an
Internet-based system for data collection (https://cdr.ffiec.gov/cdr/), using one of the two methods described
in the banking agencies' Financial Institution Letter (FIL) for the June 30, 2019, report date. The CDR Help
Desk is available from 9:00 a.m. until 8:00 p.m., Eastern Time, Monday through Friday, to provide assistance
with user accounts, passwords, and other CDR system-related issues. The CDR Help Desk can be reached
by telephone at (888) CDR-3111, by fax at (703) 774-3946, or by e-mail at CDR.Help@ffiec.gov.

Institutions are required to maintain in their files a signed and attested hard-copy record of the Call Report data
file submitted to the CDR. The appearance of this hard-copy record of the submitted data file need not match
exactly the appearance of the sample report forms on the FFIEC’s website, but the hard-copy record should
show at least the caption of each Call Report item and the reported amount. A copy of the cover page printed
from Call Report software or from the FFIEC’s website should be used to fulfill the signature and attestation
requirement. The signed cover page should be attached to the hard-copy record of the Call Report data file
that must be placed in the institution's files
rd-copy record should
show at least the caption of each Call Report item and the reported amount. A copy of the cover page printed
from Call Report software or from the FFIEC’s website should be used to fulfill the signature and attestation
requirement. The signed cover page should be attached to the hard-copy record of the Call Report data file
that must be placed in the institution's files.

Currently, Call Report preparation software products marketed by (in alphabetical order) Axiom Software
Laboratories, Inc.; DBI Financial Systems, Inc.; Fed Reporter, Inc.; FIS Compliance Solutions; FiServ, Inc.;
KPMG LLP; SHAZAM Core Services; Vermeg (formerly Lombard Risk); and Wolters Kluwer Financial Services
meet the technical specifications for producing Call Report data files that are able to be processed by the
CDR. Contact information for these vendors is provided on the final page of these Supplemental Instructions.

Reporting High Volatility Commercial Real Estate (HVCRE) Exposures

Section 214 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), which
was enacted on May 24, 2018, adds a new Section 51 to the Federal Deposit Insurance Act governing the
risk-based capital requirements for certain acquisition, development, or construction (ADC) loans. EGRRCPA
provides that, effective upon enactment, the banking agencies may only require a depository institution to
conomic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), which
was enacted on May 24, 2018, adds a new Section 51 to the Federal Deposit Insurance Act governing the
risk-based capital requirements for certain acquisition, development, or construction (ADC) loans. EGRRCPA
provides that, effective upon enactment, the banking agencies may only require a depository institution to

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assign a heightened risk weight to an HVCRE exposure if such exposure is an “HVCRE ADC Loan,” as
defined in this new law. Accordingly, an institution is permitted to risk weight at 150 percent only those
commercial real estate exposures it believes meet the statutory definition of an “HVCRE ADC Loan.” When
reporting HVCRE exposures in the Call Report regulatory capital schedule (Schedule RC-R) as of June 30,
2018, and subsequent report dates, institutions may use available information to reasonably estimate and
report only “HVCRE ADC Loans” held for sale and held for investment in Schedule RC-R, Part II, items 4.b
and 5.b, respectively. Any “HVCRE ADC Loans” held for trading would be reported in Schedule RC-R, Part II,
item 7. The portion of any “HVCRE ADC Loan” that is secured by collateral or has a guarantee that qualifies
for a risk weight lower than 150 percent may continue to be assigned a lower risk weight when completing
Schedule RC-R, Part II. Institutions may refine their estimates of “HVCRE ADC Loans” in good faith as they
obtain additional information, but they will not be required to amend Call Reports previously filed for report
dates on or after June 30, 2018, as these estimates are adjusted.

Alternatively, institutions may continue to report and risk weight HVCRE exposures in a manner consistent
with the current Call Report instructions for Schedule RC-R, Part II, until the agencies take further action
obtain additional information, but they will not be required to amend Call Reports previously filed for report
dates on or after June 30, 2018, as these estimates are adjusted.

Alternatively, institutions may continue to report and risk weight HVCRE exposures in a manner consistent
with the current Call Report instructions for Schedule RC-R, Part II, until the agencies take further action.
For more detail, see the agencies’ proposal to amend their regulatory capital rules to revise the definition of an
HVCRE exposure to conform to the statutory definition of an “HVCRE ADC loan,” which was published on
September 28, 2018.

Section 214 of EGRRCPA, which includes the definition of “HVCRE ADC Loan,” is provided in the Appendix to
these Supplemental Instructions for your reference.

Goodwill Impairment Testing

In January 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-04, “Simplifying the Test for
Goodwill Impairment,” to address concerns over the cost and complexity of the two-step goodwill impairment
test in Accounting Standards Codification (ASC) Subtopic 350-20, Intangibles‒Goodwill and Other ‒ Goodwill,
that applies to an entity that has not elected the private company alternative for goodwill (which is discussed in
the Glossary entry for “Goodwill” in the Call Report instructions). Thus, the ASU simplifies the subsequent
measurement of goodwill by eliminating the second step from the test, which involves the computation of the
implied fair value of a reporting unit’s goodwill. Instead, under the ASU, when an entity tests goodwill for
impairment, which must take place at least annually, the entity should compare the fair value of a reporting unit
with its carrying amount. In general, the entity should recognize an impairment charge for the amount, if any,
by which the reporting unit’s carrying amount exceeds its fair value. However, the loss recognized should not
exceed the total amount of goodwill allocated to that reporting unit
nt, which must take place at least annually, the entity should compare the fair value of a reporting unit
with its carrying amount. In general, the entity should recognize an impairment charge for the amount, if any,
by which the reporting unit’s carrying amount exceeds its fair value. However, the loss recognized should not
exceed the total amount of goodwill allocated to that reporting unit. This one-step approach to assessing
goodwill impairment applies to all reporting units, including those with a zero or negative carrying amount.
An entity retains the option to perform the qualitative assessment for a reporting unit described in ASC
Subtopic 350-20 to determine whether it is necessary to perform the quantitative goodwill impairment test.

For an institution that is a public business entity and is also a U.S. Securities and Exchange Commission
(SEC) filer, as both terms are defined in U.S. generally accepted accounting principles (GAAP), the ASU is
effective for goodwill impairment tests in fiscal years beginning after December 15, 2019. For a public
business entity that is not an SEC filer, the ASU is effective for goodwill impairment tests in fiscal years
beginning after December 15, 2020. For all other institutions, the ASU is effective for goodwill impairment
tests in fiscal years beginning after December 15, 2021. Early adoption is permitted for goodwill impairment
tests performed on testing dates after January 1, 2017. For Call Report purposes, an institution should apply
the provisions of ASU 2017-04 to goodwill impairment tests on a prospective basis in accordance with the
applicable effective date of the ASU. An institution that early adopts ASU 2017-04 for U.S. GAAP financial
reporting purposes should early adopt the ASU in the same period for Call Report purposes.

For additional information, institutions should refer to ASU 2017-04, which is available at
https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176168778106&acceptedDisclaimer=true
th the
applicable effective date of the ASU. An institution that early adopts ASU 2017-04 for U.S. GAAP financial
reporting purposes should early adopt the ASU in the same period for Call Report purposes.

For additional information, institutions should refer to ASU 2017-04, which is available at
https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176168778106&acceptedDisclaimer=true.

Accounting and Reporting Implications of the Tax Cuts and Jobs Act

On January 18, 2018, the banking agencies issued an Interagency Statement on Accounting and Reporting
Implications of the New Tax Law. The tax law was enacted on December 22, 2017, and is commonly known
as the Tax Cuts and Jobs Act (the Act). U.S. GAAP requires the effect of changes in tax laws or rates to be

SUPPLEMENTAL INSTRUCTIONS – JUNE 2019

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recognized in the period in which the legislation is enacted. Thus, in accordance with ASC Topic 740, Income
Taxes, the effects of the Act were to be recorded in an institution’s Call Report for December 31, 2017,
because the Act was enacted before year-end 2017. Changes in deferred tax assets (DTAs) and deferred tax
liabilities (DTLs) resulting from the Act’s lower corporate income tax rate and other applicable provisions of the
Act were to be reflected in an institution’s income tax expense in the period of enactment, i.e., the year-end
2017 Call Report. Institutions should refer to the Interagency Statement for guidance on the remeasurement
of DTAs and DTLs, assessing the need for valuation allowances for DTAs, the effect of the remeasurement of
DTAs and DTLs on amounts recognized in accumulated other comprehensive income (AOCI), the use for Call
Report purposes of the measurement period approach described in the Securities and Exchange
Commission’s Staff Accounting Bulletin No. 118 and a related FASB Staff Q&A, and regulatory capital effects
of the new tax law
need for valuation allowances for DTAs, the effect of the remeasurement of
DTAs and DTLs on amounts recognized in accumulated other comprehensive income (AOCI), the use for Call
Report purposes of the measurement period approach described in the Securities and Exchange
Commission’s Staff Accounting Bulletin No. 118 and a related FASB Staff Q&A, and regulatory capital effects
of the new tax law.

The Interagency Statement notes that the remeasurement of the DTA or DTL associated with an item reported
in AOCI, such as unrealized gains (losses) on available-for-sale (AFS) securities, results in a disparity
between the tax effect of the item included in AOCI and the amount recorded as a DTA or DTL for the tax
effect of this item. However, when the new tax law was enacted, ASC Topic 740 did not specify how this
disproportionate, or “stranded,” tax effect should be resolved. On February 18, 2018, the FASB issued
ASU No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,”
which allows institutions to eliminate the stranded tax effects resulting from the Act by electing to reclassify
these tax effects from AOCI to retained earnings. Thus, this reclassification is permitted, but not required.
ASU 2018-02 is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods
within those fiscal years. Early adoption of the ASU is permitted, including in any interim period, as specified
in the ASU. An institution electing to reclassify its stranded tax effects for U.S. GAAP financial reporting
purposes should also reclassify these stranded tax effects in the same period for Call Report purposes. For
additional information, institutions should refer to ASU 2018-02, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176170041017&acceptedDisclaimer=true
he ASU. An institution electing to reclassify its stranded tax effects for U.S. GAAP financial reporting
purposes should also reclassify these stranded tax effects in the same period for Call Report purposes. For
additional information, institutions should refer to ASU 2018-02, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176170041017&acceptedDisclaimer=true.

An institution that elects to reclassify the disproportionate, or stranded, tax effects of items within AOCI to
retained earnings should not report any amounts associated with this reclassification in Call Report
Schedule RI-A, Changes in Bank Equity Capital, because the reclassification is between two accounts within
the equity capital section of Schedule RC, Balance Sheet, and does not result in any change in the total
amount of equity capital.

When discussing the regulatory capital effects of the new tax law, the Interagency Statement explains that
temporary difference DTAs that could be realized through net operating loss (NOL) carrybacks are treated
differently from those that could not be realized through NOL carrybacks (i.e., those for which realization
depends on future taxable income) under the agencies’ regulatory capital rules. These latter temporary
difference DTAs are deducted from common equity tier 1 (CET1) capital if they exceed certain CET1 capital
deduction thresholds. However, for tax years beginning on or after January 1, 2018, the Act generally
removes the ability to use NOL carrybacks to recover federal income taxes paid in prior tax years. Thus,
except as noted in the following sentence, for such tax years, the realization of all federal temporary difference
DTAs will be dependent on future taxable income and these DTAs would be subject to the CET1 capital
deduction thresholds
ginning on or after January 1, 2018, the Act generally
removes the ability to use NOL carrybacks to recover federal income taxes paid in prior tax years. Thus,
except as noted in the following sentence, for such tax years, the realization of all federal temporary difference
DTAs will be dependent on future taxable income and these DTAs would be subject to the CET1 capital
deduction thresholds. Nevertheless, consistent with current practice under the regulatory capital rules, when
an institution has paid federal income taxes for the current tax year, if all federal temporary differences were to
fully reverse as of the report date during the current tax year and create a hypothetical federal tax loss that
would enable the institution to recover federal income taxes paid in the current tax year, the federal temporary
difference DTAs that could be realized from this source may be treated as temporary difference DTAs
realizable through NOL carrybacks as of the regulatory capital calculation date.

Presentation of Net Benefit Cost in the Income Statement

In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost
and Net Periodic Postretirement Benefit Cost,” which requires an employer to disaggregate the service cost
component from the other components of the net benefit cost of defined benefit plans. In addition, the ASU
requires these other cost components to be presented in the income statement separately from the service
cost component, which must be reported with the other compensation costs arising during the reporting period.
efit Cost,” which requires an employer to disaggregate the service cost
component from the other components of the net benefit cost of defined benefit plans. In addition, the ASU
requires these other cost components to be presented in the income statement separately from the service
cost component, which must be reported with the other compensation costs arising during the reporting period.

SUPPLEMENTAL INSTRUCTIONS – JUNE 2019

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For institutions that are public business entities, as defined under U.S. GAAP, ASU 2017-07 is currently in
effect. For institutions that are not public business entities (i.e., that are private companies), the ASU is
effective for fiscal years beginning after December 15, 2018, and interim periods beginning after December 15,
2019. Early adoption is permitted as described in the ASU. Refer to the Glossary entries for “public business
entity” and “private company” in the Call Report instructions for further information on these terms.

For Call Report purposes, an institution should apply the new standard prospectively to the cost components
of net benefit cost as of the beginning of the fiscal year of adoption. The service cost component of net benefit
cost should be reported in Schedule RI, item 7.a, “Salaries and employee benefits.” The other cost
components of net benefit cost should be reported in Schedule RI, item 7.d, “Other noninterest expense.”

For additional information, institutions should refer to ASU 2017-07, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176168888120&acceptedDisclaimer=true.

Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments,”
which introduces the current expected credit losses methodology (CECL) for estimating allowances for credit
losses
SU 2017-07, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176168888120&acceptedDisclaimer=true.

Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments,”
which introduces the current expected credit losses methodology (CECL) for estimating allowances for credit
losses. Under CECL, an allowance for credit losses is a valuation account, measured as the difference
between the financial assets’ amortized cost basis and the net amount expected to be collected on the
financial assets (i.e., lifetime credit losses). To estimate expected credit losses under CECL, institutions will
use a broader range of data than under existing U.S. GAAP. These data include information about past
events, current conditions, and reasonable and supportable forecasts relevant to assessing the collectability
of the cash flows of financial assets.

The ASU is applicable to all financial instruments measured at amortized cost (including loans held for
investment and held-to-maturity debt securities, as well as trade receivables, reinsurance recoverables, and
receivables that relate to repurchase agreements and securities lending agreements), a lessor’s net
investments in leases, and off-balance-sheet credit exposures not accounted for as insurance, including loan
commitments, standby letters of credit, and financial guarantees. The new standard does not apply to trading
assets, loans held for sale, financial assets for which the fair value option has been elected, or loans and
receivables between entities under common control.

The ASU also modifies the treatment of credit impairment on AFS debt securities. Under the new standard,
institutions will recognize a credit loss on an AFS debt security through an allowance for credit losses, rather
than the current practice required by U.S. GAAP of write-downs of individual securities for other-than-
temporary impairment
eceivables between entities under common control.

The ASU also modifies the treatment of credit impairment on AFS debt securities. Under the new standard,
institutions will recognize a credit loss on an AFS debt security through an allowance for credit losses, rather
than the current practice required by U.S. GAAP of write-downs of individual securities for other-than-
temporary impairment.

For institutions that are public business entities and are also U.S. Securities and Exchange Commission (SEC)
filers, as both terms are defined in U.S. GAAP, the ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods within those fiscal years. For public business entities that are
not SEC filers, the ASU is effective for fiscal years beginning after December 15, 2020, including interim
periods within those fiscal years. For institutions that are not public business entities (i.e., that are private
companies), the FASB issued ASU 2018-19 in November 2018 to amend the effective date of ASU 2016-13.
As amended, ASU 2016-13 is effective for such entities for fiscal years beginning after December 15, 2021,
including interim periods within those fiscal years. For all institutions, early application of the new standard is
permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years. Institutions must apply ASU 2016-13 for Call Report purposes in accordance with the effective dates
set forth in the ASU as amended. An institution that early adopts ASU 2016-13 for U.S. GAAP financial
reporting purposes should also early adopt the ASU in the same period for Call Report purposes.

The agencies revised several Call Report schedules as of the March 31, 2019, report date in response to the
revised accounting for credit losses under ASU 2016-13 (see FIL-10-2019, dated March 6, 2019)
th in the ASU as amended. An institution that early adopts ASU 2016-13 for U.S. GAAP financial
reporting purposes should also early adopt the ASU in the same period for Call Report purposes.

The agencies revised several Call Report schedules as of the March 31, 2019, report date in response to the
revised accounting for credit losses under ASU 2016-13 (see FIL-10-2019, dated March 6, 2019). The
Call Report revisions also included reporting changes to Call Report Schedule RC-R, Regulatory Capital, to
align the schedule with the agencies’ final rule that amends their regulatory capital rule for the implementation
of and capital transition for CECL. This final capital rule for CECL was published on February 14, 2019.

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For additional information, institutions should refer to the agencies’ Frequently Asked Questions on the New
Accounting Standard on Financial Instruments – Credit Losses, which were most recently updated on April 3,
2019; the agencies’ June 17, 2016, Joint Statement on the New Accounting Standard on Financial Instruments
– Credit Losses; and ASU 2016-13, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176168232528&acceptedDisclaimer=true.
Institutions also may refer to ASU 2018-19, which is available at
https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176171644373&acceptedDisclaimer=true
17, 2016, Joint Statement on the New Accounting Standard on Financial Instruments
– Credit Losses; and ASU 2016-13, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176168232528&acceptedDisclaimer=true.
Institutions also may refer to ASU 2018-19, which is available at
https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176171644373&acceptedDisclaimer=true.
Since the issuance of ASU 2016-13 and ASU 2018-19, the FASB has published the following additional
amendments to the new credit losses accounting standard: ASU 2019-04, “Codification Improvements to
Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825,
Financial Instruments,” which is available at
https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176172541591&acceptedDisclaimer=true;
and ASU 2019-05, “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief,” which is
available at
https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176172668879&acceptedDisclaimer=true.

Accounting for Hedging Activities

In August 2017, the FASB issued ASU No. 2017-12, “Targeted Improvements to Accounting for Hedging
Activities.” This ASU amends ASC Topic 815, Derivatives and Hedging, to “better align an entity’s risk
management activities and financial reporting for hedging relationships through changes to both the
designation and measurement guidance for qualifying hedging relationships and the presentation of hedge
results.”

For institutions that are public business entities, as defined under U.S. GAAP, the ASU is effective for fiscal
years beginning after December 15, 2018, including interim periods within those fiscal years. For institutions
that are not public business entities (i.e., that are private companies), the ASU is effective for fiscal years
beginning after December 15, 2019, and interim periods beginning after December 15, 2020
ublic business entities, as defined under U.S. GAAP, the ASU is effective for fiscal
years beginning after December 15, 2018, including interim periods within those fiscal years. For institutions
that are not public business entities (i.e., that are private companies), the ASU is effective for fiscal years
beginning after December 15, 2019, and interim periods beginning after December 15, 2020.

Early application of the ASU is permitted for all institutions in any interim period or fiscal year before the
effective date of the ASU. Further, the ASU specifies transition requirements and offers transition elections for
hedging relationships existing on the date of adoption (i.e., hedging relationships in which the hedging
instrument has not expired, been sold, terminated, or exercised or for which the institution has not removed
the designation of the hedging relationship). These transition requirements and elections should be applied on
the date of adoption of the ASU and the effect of adoption should be reflected as of the beginning of the fiscal
year of adoption (i.e., the initial application date). Thus, if an institution early adopts the ASU in an interim
period, any adjustments shall be reflected as of the beginning of the fiscal year that includes the interim period
of adoption, e.g., as of January 1 for a calendar year institution. An institution that early adopts ASU 2017-12
in an interim period for U.S. GAAP financial reporting purposes should also early adopt the ASU in the same
period for Call Report purposes.

The Call Report instructions, including the Glossary entry for “Derivative Contracts,” will be revised to conform
to the ASU at a future date.

For additional information, institutions should refer to ASU 2017-12, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176169282347&acceptedDisclaimer=true.

Premium Amortization on Purchased Callable Debt Securities

In March 2017, the FASB issued ASU No
the Glossary entry for “Derivative Contracts,” will be revised to conform
to the ASU at a future date.

For additional information, institutions should refer to ASU 2017-12, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176169282347&acceptedDisclaimer=true.

Premium Amortization on Purchased Callable Debt Securities

In March 2017, the FASB issued ASU No. 2017-08, “Premium Amortization on Purchased Callable Debt
Securities.” This ASU amends ASC Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs
(formerly FASB Statement No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating
or Acquiring Loans and Initial Direct Costs of Leases”), by shortening the amortization period for premiums on
callable debt securities that have explicit, non-contingent call features and are callable at fixed prices and on
preset dates. Under existing U.S. GAAP, the premium on such a callable debt security generally is required to
be amortized as an adjustment of yield over the contractual life of the debt security. Under the ASU, the
excess of the amortized cost basis of such a callable debt security over the amount repayable by the issuer at
the earliest call date (i.e., the premium) must be amortized to the earliest call date (unless the institution

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applies the guidance in ASC Subtopic 310-20 that allows estimates of future principal prepayments to be
considered in the effective yield calculation when the institution holds a large number of similar debt securities
for which prepayments are probable and the timing and amount of the prepayments can be reasonably
estimated). If the call option is not exercised at its earliest call date, the institution must reset the effective
yield using the payment terms of the debt security.

The ASU does not change the accounting for debt securities held at a discount
holds a large number of similar debt securities
for which prepayments are probable and the timing and amount of the prepayments can be reasonably
estimated). If the call option is not exercised at its earliest call date, the institution must reset the effective
yield using the payment terms of the debt security.

The ASU does not change the accounting for debt securities held at a discount. The discount on such debt
securities continues to be amortized to maturity (unless the Subtopic 310-20 guidance mentioned above is
applied).

For institutions that are public business entities, as defined under U.S. GAAP, the new standard is effective for
fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For
institutions that are not public business entities (i.e., that are private companies), the new standard is effective
for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after
December 15, 2020.

Early application of the new standard is permitted for all institutions, including adoption in an interim period of a
year before the applicable effective date for an institution. If an institution early adopts the ASU in an interim
period, the cumulative-effect adjustment shall be reflected as of the beginning of the fiscal year of adoption.

An institution must apply the new standard on a modified retrospective basis as of the beginning of the period
of adoption. Under the modified retrospective method, an institution should apply a cumulative-effect
adjustment to affected accounts existing as of the beginning of the fiscal year the new standard is first adopted
for Call Report purposes. The cumulative-effect adjustment to retained earnings for this change in accounting
principle should be reported in Call Report Schedule RI-A, item 2
od
of adoption. Under the modified retrospective method, an institution should apply a cumulative-effect
adjustment to affected accounts existing as of the beginning of the fiscal year the new standard is first adopted
for Call Report purposes. The cumulative-effect adjustment to retained earnings for this change in accounting
principle should be reported in Call Report Schedule RI-A, item 2.

For additional information, institutions should refer to ASU 2017-08, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176168934053&acceptedDisclaimer=true.

Recognition and Measurement of Financial Instruments: Investments in Equity Securities

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and
Financial Liabilities.” This ASU makes targeted improvements to U.S. GAAP. As one of its main provisions,
the ASU requires investments in equity securities, except those accounted for under the equity method and
those that result in consolidation, to be measured at fair value with changes in fair value recognized in net
income. Thus, the ASU eliminates the existing concept of AFS equity securities, which are measured at
fair value with changes in fair value generally recognized in other comprehensive income. To be classified
as AFS under current U.S. GAAP, an equity security must have a readily determinable fair value and not be
held for trading. In addition, for an equity security that does not have a readily determinable fair value, the
ASU permits an entity to elect to measure the security at cost minus impairment, if any, plus or minus changes
resulting from observable price changes in orderly transactions for the identical or a similar investment of the
same issuer. When this election is made for an equity security without a readily determinable fair value, the
ASU simplifies the impairment assessment of such an investment by requiring a qualitative assessment to
identify impairment
minus impairment, if any, plus or minus changes
resulting from observable price changes in orderly transactions for the identical or a similar investment of the
same issuer. When this election is made for an equity security without a readily determinable fair value, the
ASU simplifies the impairment assessment of such an investment by requiring a qualitative assessment to
identify impairment.

The ASU’s measurement guidance for investments in equity securities also applies to other ownership
interests, such as interests in partnerships, unincorporated joint ventures, and limited liability companies.
However, the measurement guidance does not apply to Federal Home Loan Bank stock and Federal Reserve
Bank stock.

For institutions that are public business entities, as defined under U.S. GAAP, ASU 2016-01 is currently in
effect. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2018, and
interim periods within fiscal years beginning after December 15, 2019. Early application of the ASU is
permitted for all institutions that are not public business entities as of the fiscal years beginning after
December 15, 2017, including interim periods within those fiscal years. Institutions must apply ASU 2016-01
for Call Report purposes in accordance with the effective dates set forth in the ASU.

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7
With the elimination of AFS equity securities upon an institution’s adoption of ASU 2016-01, the amount of
net unrealized gains (losses) on these securities, net of tax effect, that is included in AOCI on the Call Report
balance sheet (Schedule RC, item 26.b) as of the adoption date will be reclassified (transferred) from AOCI
into the retained earnings component of equity capital on the balance sheet (Schedule RC, item 26.a).
Thereafter, changes in the fair value of (i.e., the unrealized gains and losses on) an institution’s equity
securities that would have been classified as AFS under existing U.S
l Report
balance sheet (Schedule RC, item 26.b) as of the adoption date will be reclassified (transferred) from AOCI
into the retained earnings component of equity capital on the balance sheet (Schedule RC, item 26.a).
Thereafter, changes in the fair value of (i.e., the unrealized gains and losses on) an institution’s equity
securities that would have been classified as AFS under existing U.S. GAAP will be recognized through net
income rather than other comprehensive income (OCI). For an institution’s holdings of equity securities
without readily determinable fair values as of the adoption date for which the measurement alternative is
elected, the measurement provisions of the ASU are to be applied prospectively to these securities.

For additional information, institutions should refer to ASU 2016-01, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176167762170&acceptedDisclaimer=true.

Recognition and Measurement of Financial Instruments: Fair Value Option Liabilities

In addition to the changes in the accounting for equity securities discussed in the preceding section of these
Supplemental Instructions, ASU 2016-01 requires an institution to present separately in OCI the portion of the
total change in the fair value of a liability resulting from a change in the instrument-specific credit risk
(“own credit risk”) when the institution has elected to measure the liability at fair value in accordance with the
fair value option for financial instruments. Until an institution adopts the own credit risk provisions of the ASU,
U.S. GAAP requires the institution to report the entire change in the fair value of a fair value option liability in
earnings. The ASU does not apply to other financial liabilities measured at fair value, including derivatives.
For these other financial liabilities, the effect of a change in an entity’s own credit risk will continue to be
reported in net income
it risk provisions of the ASU,
U.S. GAAP requires the institution to report the entire change in the fair value of a fair value option liability in
earnings. The ASU does not apply to other financial liabilities measured at fair value, including derivatives.
For these other financial liabilities, the effect of a change in an entity’s own credit risk will continue to be
reported in net income.

The change due to own credit risk, as described above, is the difference between the total change in fair value
and the amount resulting from a change in a base market rate (e.g., a risk-free interest rate). An institution
may use another method that it believes results in a faithful measurement of the fair value change attributable
to instrument-specific credit risk. However, it will have to apply the method consistently to each financial
liability from period to period.

The effective dates of ASU 2016-01 are described in the preceding section of these Supplemental Instructions.
Notwithstanding these effective dates, early application of the ASU’s provisions regarding the presentation in
OCI of changes due to own credit risk on fair value option liabilities is permitted for all entities for financial
statements of fiscal years or interim periods that have not yet been issued or made available for issuance, and
in the same period for Call Report purposes.

When an institution with a calendar year fiscal year adopts the own credit risk provisions of ASU 2016-01, the
accumulated gains and losses as of the beginning of the fiscal year due to changes in the instrument-specific
credit risk of fair value option liabilities, net of tax effect, are reclassified from Schedule RC, item 26.a,
“Retained earnings,” to Schedule RC, item 26.b, “Accumulated other comprehensive income.” If an institution
with a calendar year fiscal year chooses to early apply the ASU’s provisions for fair value option liabilities in an
interim period after the first interim period of its fiscal year, any unrealized gains a
tion liabilities, net of tax effect, are reclassified from Schedule RC, item 26.a,
“Retained earnings,” to Schedule RC, item 26.b, “Accumulated other comprehensive income.” If an institution
with a calendar year fiscal year chooses to early apply the ASU’s provisions for fair value option liabilities in an
interim period after the first interim period of its fiscal year, any unrealized gains and losses due to changes in
own credit risk and the related tax effects recognized in the Call Report income statement during the interim
period(s) before the interim period of adoption should be reclassified from earnings to OCI. In the Call Report,
this reclassification would be from Schedule RI, item 5.l, “Other noninterest income,” and Schedule RI, item 9,
“Applicable income taxes,” to Schedule RI-A, item 10, “Other comprehensive income,” with a corresponding
reclassification from Schedule RC, item 26.a, to Schedule RC, item 26.b.

Additionally, for purposes of reporting on Schedule RC-R, Part I, institutions should report in item 10.a, “Less:
Unrealized net gain (loss) related to changes in the fair value of liabilities that are due to changes in own credit
risk,” the amount included in AOCI attributable to changes in the fair value of fair value option liabilities that are
due to changes in the institution’s own credit risk. Institutions should note that this AOCI amount is included in
the amount reported in Schedule RC-R, Part I, item 3, “Accumulated other comprehensive income (AOCI).”

For additional information, institutions should refer to ASU 2016-01, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176167762170&acceptedDisclaimer=true.
in the institution’s own credit risk. Institutions should note that this AOCI amount is included in
the amount reported in Schedule RC-R, Part I, item 3, “Accumulated other comprehensive income (AOCI).”

For additional information, institutions should refer to ASU 2016-01, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176167762170&acceptedDisclaimer=true.

SUPPLEMENTAL INSTRUCTIONS – JUNE 2019

8
New Revenue Recognition Accounting Standard

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which added
ASC Topic 606, Revenue from Contracts with Customers. The core principle of Topic 606 is that an entity
should recognize revenue at an amount that reflects the consideration to which it expects to be entitled
in exchange for transferring goods or services to a customer as part of the entity’s ordinary activities.
ASU 2014-09 also added Topic 610, Other Income, to the ASC. Topic 610 applies to income recognition that
is not within the scope of Topic 606, other Topics (such as Topic 840 on leases), or other revenue or income
guidance. As discussed in the following section of these Supplemental Instructions, Topic 610 applies to an
institution’s sales of repossessed nonfinancial assets, such as other real estate owned (OREO). The sale of
repossessed nonfinancial assets is not considered an “ordinary activity” because institutions do not typically
invest in nonfinancial assets. ASU 2014-09 and subsequent amendments are collectively referred to herein
as the “new standard.” For additional information on this accounting standard and the revenue streams to
which it does and does not apply, please refer to the Glossary entry for “Revenue from Contracts with
Customers,” which was included in the Call Report instruction book updates for September 2018.

For institutions that are public business entities, as defined under U.S. GAAP, the new standard is currently in
effect
additional information on this accounting standard and the revenue streams to
which it does and does not apply, please refer to the Glossary entry for “Revenue from Contracts with
Customers,” which was included in the Call Report instruction book updates for September 2018.

For institutions that are public business entities, as defined under U.S. GAAP, the new standard is currently in
effect. For institutions that are not public business entities (i.e., that are private companies), the new standard
is effective for fiscal years beginning after December 15, 2018, and interim reporting periods within fiscal years
beginning after December 15, 2019. Early application of the new standard is permitted. If an institution
chooses to early adopt the new standard for financial reporting purposes, the institution should implement the
new standard in its Call Report for the same quarter-end report date.

For Call Report purposes, an institution must apply the new standard on a modified retrospective basis as of
the effective date of the standard. Under the modified retrospective method, an institution should apply a
cumulative-effect adjustment to affected accounts existing as of the beginning of the fiscal year the new
standard is first adopted for Call Report purposes. The cumulative-effect adjustment to retained earnings for
this change in accounting principle should be reported in Call Report Schedule RI-A, item 2. An institution that
early adopts the new standard must apply it in its entirety. The institution cannot choose to apply the guidance
to some revenue streams and not to others that are within the scope of the new standard.

For additional information, institutions should refer to the new standard, which is available at
http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176156316498.

Revenue Recognition: Accounting for Sales of OREO

As stated in the preceding section, Topic 610 applies to an institution’s sale of repossessed nonfinancial
assets, such as OREO
that are within the scope of the new standard.

For additional information, institutions should refer to the new standard, which is available at
http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176156316498.

Revenue Recognition: Accounting for Sales of OREO

As stated in the preceding section, Topic 610 applies to an institution’s sale of repossessed nonfinancial
assets, such as OREO. When the new standard becomes effective at the dates discussed above, Topic 610
will eliminate the prescriptive criteria and methods for sale accounting and gain recognition for dispositions of
OREO currently set forth in Subtopic 360-20, Property, Plant, and Equipment – Real Estate Sales. Under the
new standard, an institution will recognize the entire gain or loss, if any, and derecognize the OREO at the
time of sale if the transaction meets certain requirements of Topic 606. Otherwise, an institution will generally
record any payments received as a deposit liability to the buyer and continue reporting the OREO as an asset
at the time of the transaction.

The following paragraphs highlight key aspects of Topic 610 that will apply to seller-financed sales of OREO
once the new standard takes effect. When implementing the new standard, an institution will need to exercise
judgment in determining whether a contract (within the meaning of Topic 606) exists for the sale or transfer of
OREO, whether the institution has performed its obligations identified in the contract, and what the transaction
price is for calculation of the amount of gain or loss. For additional information, please refer to the Glossary
entry for “Foreclosed Assets” in the Call Report instruction books, which was updated in March 2017 to
incorporate guidance on the application of the new standard to sales of OREO
ther the institution has performed its obligations identified in the contract, and what the transaction
price is for calculation of the amount of gain or loss. For additional information, please refer to the Glossary
entry for “Foreclosed Assets” in the Call Report instruction books, which was updated in March 2017 to
incorporate guidance on the application of the new standard to sales of OREO.

Under Topic 610, when an institution does not have a controlling financial interest in the OREO buyer under
Topic 810, Consolidation, the institution’s first step in assessing whether it can derecognize an OREO asset
and recognize revenue upon the sale or transfer of the OREO is to determine whether a contract exists under
the provisions of Topic 606. In order for a transaction to be a contract under Topic 606, it must meet five
criteria. Although all five criteria require careful analysis for seller-financed sales of OREO, two criteria in

SUPPLEMENTAL INSTRUCTIONS – JUNE 2019

9
particular may require significant judgment. These criteria are the commitment of the parties to the transaction
to perform their respective obligations and the collectability of the transaction price. To evaluate whether a
transaction meets the collectability criterion, a selling institution must determine whether it is probable that it
will collect substantially all of the consideration to which it is entitled in exchange for the transfer of the OREO,
i.e., the transaction price. To make this determination, as well as the determination that the buyer of the
OREO is committed to perform its obligations, a selling institution should consider all facts and circumstances
related to the buyer’s ability and intent to pay the transaction price. As with the current accounting standards
governing seller-financed sales of OREO, the amount and character of a buyer’s initial equity in the property
(typically the cash down payment) and recourse provisions remain important factors to evaluate
obligations, a selling institution should consider all facts and circumstances
related to the buyer’s ability and intent to pay the transaction price. As with the current accounting standards
governing seller-financed sales of OREO, the amount and character of a buyer’s initial equity in the property
(typically the cash down payment) and recourse provisions remain important factors to evaluate. Other factors
to consider may include, but are not limited to, the financing terms of the loan (including amortization and any
balloon payment), the credit standing of the buyer, the cash flow from the property, and the selling institution’s
continuing involvement with the property following the transaction.

If the five contract criteria in Topic 606 have not been met, the institution generally may not derecognize the
OREO asset or recognize revenue (gain or loss) as an accounting sale has not occurred. In contrast, if an
institution determines the contract criteria in Topic 606 have been met, it must then determine whether it has
satisfied its performance obligations as identified in the contract by transferring control of the asset to the
buyer. For seller-financed sales of OREO, the transfer of control generally occurs on the closing date of the
sale when the institution obtains the right to receive payment for the property and transfers legal title to the
buyer. However, an institution must consider all relevant facts and circumstances to determine whether
control of the OREO has transferred.

When a contract exists and an institution has transferred control of the asset, the institution should
derecognize the OREO asset and recognize a gain or loss for the difference between the transaction price and
the carrying amount of the OREO asset. Generally, the transaction price in a sale of OREO will be the
contract amount in the purchase/sale agreement, including for a seller-financed sale at market terms
ists and an institution has transferred control of the asset, the institution should
derecognize the OREO asset and recognize a gain or loss for the difference between the transaction price and
the carrying amount of the OREO asset. Generally, the transaction price in a sale of OREO will be the
contract amount in the purchase/sale agreement, including for a seller-financed sale at market terms.
However, the transaction price may differ from the amount stated in the contract due to the existence of off-
market terms on the financing. In this situation, to determine the transaction price, the contract amount should
be adjusted for the time value of money by using as the discount rate a market rate of interest considering the
credit characteristics of the buyer and the terms of the financing.

As stated in the preceding section on the new revenue recognition accounting standard, for Call Report
purposes, an institution must apply the new standard on a modified retrospective basis. To determine the
cumulative-effect adjustment for the change in accounting for seller-financed OREO sales, an institution
should measure the impact of applying Topic 610 to the outstanding seller-financed sales of OREO currently
accounted for under Subtopic 360-20 using the installment, cost recovery, reduced-profit, or deposit method
as of the beginning of the fiscal year the new standard is first adopted for Call Report purposes. The
cumulative-effect adjustment to retained earnings for this change in accounting principle should be reported in
Call Report Schedule RI-A, item 2.

Accounting for Leases

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which added ASC Topic 842, Leases. Once
effective, this guidance, as amended by certain subsequent ASUs, supersedes ASC Topic 840, Leases
Report purposes. The
cumulative-effect adjustment to retained earnings for this change in accounting principle should be reported in
Call Report Schedule RI-A, item 2.

Accounting for Leases

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which added ASC Topic 842, Leases. Once
effective, this guidance, as amended by certain subsequent ASUs, supersedes ASC Topic 840, Leases.

Topic 842 does not fundamentally change lessor accounting; however, it aligns terminology between lessee
and lessor accounting and brings key aspects of lessor accounting into alignment with the FASB’s new
revenue recognition guidance in Topic 606. As a result, the classification difference between direct financing
leases and sales-type leases for lessors moves from a risk-and-rewards principle to a transfer of control
principle. Additionally, there is no longer a distinction in the treatment of real estate and non-real estate leases
by lessors.

The most significant change that Topic 842 makes is to lessee accounting. Under existing accounting
standards, lessees recognize lease assets and lease liabilities on the balance sheet for capital leases, but do
not recognize operating leases on the balance sheet. The lessee accounting model under Topic 842 retains
the distinction between operating leases and capital leases, which the new standard labels finance leases.
However, the new standard requires lessees to record a right-of-use (ROU) asset and a lease liability on the
balance sheet for operating leases. (For finance leases, a lessee’s lease asset also is designated an ROU
the balance sheet. The lessee accounting model under Topic 842 retains
the distinction between operating leases and capital leases, which the new standard labels finance leases.
However, the new standard requires lessees to record a right-of-use (ROU) asset and a lease liability on the
balance sheet for operating leases. (For finance leases, a lessee’s lease asset also is designated an ROU

SUPPLEMENTAL INSTRUCTIONS – JUNE 2019

10
asset.) In general, the new standard permits a lessee to make an accounting policy election to exempt leases
with a term of one year or less at their commencement date from on-balance sheet recognition. The lease
term generally includes the noncancellable period of a lease as well as purchase options and renewal options
reasonably certain to be exercised by the lessee, renewal options controlled by the lessor, and any other
economic incentive for the lessee to extend the lease. An economic incentive may include a related-party
commitment. When preparing to implement Topic 842, lessees will need to analyze their existing lease
contracts to determine the entries to record on adoption of this new standard.

For a sale-leaseback transaction to qualify for sales treatment, Topic 842 requires certain criteria within
Topic 606 to be met. Topic 606 focuses on the transfer of control of the leased asset from the seller/lessee to
the buyer/lessor. A sale-leaseback transaction that does not transfer control is accounted for as a financing
arrangement. For a transaction currently accounted for as a sale-leaseback under existing U.S. GAAP, an
entity is not required to reassess whether the transaction would have qualified as a sale and a leaseback
under Topic 842 when it adopts the new standard.

Leases classified as leveraged leases prior to the adoption of Topic 842 may continue to be accounted for
under Topic 840 unless subsequently modified
r a transaction currently accounted for as a sale-leaseback under existing U.S. GAAP, an
entity is not required to reassess whether the transaction would have qualified as a sale and a leaseback
under Topic 842 when it adopts the new standard.

Leases classified as leveraged leases prior to the adoption of Topic 842 may continue to be accounted for
under Topic 840 unless subsequently modified. Topic 842 eliminates leveraged lease accounting for leases
that commence after an institution adopts the new accounting standard.

For institutions that are public business entities, as defined under U.S. GAAP, ASU 2016-02 is effective for
fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years.
For institutions that are not public business entities, the new standard is effective for fiscal years beginning
after December 15, 2019, and interim reporting periods within fiscal years beginning after December 15, 2020.
Early application of the new standard is permitted for all institutions. An institution that early adopts the new
standard must apply it in its entirety to all lease-related transactions. If an institution chooses to early adopt
the new standard for financial reporting purposes, the institution should implement the new standard in its
Call Report for the same quarter-end report date.

Under ASU 2016-02, an institution must apply the new leases standard on a modified retrospective basis for
financial reporting purposes. Under the modified retrospective method, an institution should apply the leases
standard and the related cumulative-effect adjustments to affected accounts existing as of the beginning of the
earliest period presented in the financial statements
ort date.

Under ASU 2016-02, an institution must apply the new leases standard on a modified retrospective basis for
financial reporting purposes. Under the modified retrospective method, an institution should apply the leases
standard and the related cumulative-effect adjustments to affected accounts existing as of the beginning of the
earliest period presented in the financial statements. However, as explained in the “Changes in accounting
principles” section of the Glossary entry for “Accounting Changes” in the Call Report instructions, when a new
accounting standard (such as the leases standard) requires the use of a retrospective application method,
institutions should instead report the cumulative effect of adopting the new standard on the amount of retained
earnings at the beginning of the year in which the new standard is first adopted for Call Report purposes (net
of applicable income taxes, if any) as a direct adjustment to equity capital in the Call Report. For the adoption
of the new leases standard, the cumulative-effect adjustment to bank equity capital for this change in
accounting principle should be reported in Schedule RI-A, item 2, and disclosed in Schedule RI-E, item 4.b,
“Effect of adoption of lease accounting standard - ASC Topic 842.” In July 2018, the FASB issued
ASU 2018-11, “Targeted Improvements,” which provides an additional and “optional transition method” for
comparative reporting purposes at adoption of the new leases standard. Under this optional transition method,
an institution initially applies the new leases standard at the adoption date (e.g., January 1, 2019, for a public
business entity with a calendar year fiscal year) and, for Call Report purposes, the institution should recognize
and report a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption
consistent with the Glossary instructions described above
n institution initially applies the new leases standard at the adoption date (e.g., January 1, 2019, for a public
business entity with a calendar year fiscal year) and, for Call Report purposes, the institution should recognize
and report a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption
consistent with the Glossary instructions described above.

For Call Report purposes, all ROU assets for operating leases and finance leases, including ROU assets for
operating leases recorded upon adoption of ASU 2016-02, should be reflected in Schedule RC, item 6,
“Premises and fixed assets.”

The agencies have received questions from institutions concerning the reporting of lease liabilities for
operating leases by a bank lessee. These institutions indicated that reporting operating lease liabilities as
other liabilities instead of other borrowings would better align the reporting of the single noninterest expense
item for operating leases (required by the standard and discussed below) with their balance sheet
classification and would be consistent with how these institutions report these lease liabilities internally. The
agencies plan to request public comment on this proposed change in reporting. However, until that process is
complete, the agencies will permit institutions to report the lease liability for operating leases in either

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11
Schedule RC-G, item 4, “All other liabilities,” or Schedule RC-M, item 5.b, “Other borrowings.” If an institution
chooses the latter reporting treatment, the amount of operating lease liabilities reported in Schedule RC-M,
item 5.b, should also be reported in Schedule RC-M, item 10.b, “Amount of ‘Other borrowings’ that are
secured,” consistent with the current Call Report instructions for reporting obligations under capital leases, and
this amount should not be reported in Schedule RC-O, item 7, as “Unsecured ‘Other borrowings’.” An
institution may choose to amend the
ease liabilities reported in Schedule RC-M,
item 5.b, should also be reported in Schedule RC-M, item 10.b, “Amount of ‘Other borrowings’ that are
secured,” consistent with the current Call Report instructions for reporting obligations under capital leases, and
this amount should not be reported in Schedule RC-O, item 7, as “Unsecured ‘Other borrowings’.” An
institution may choose to amend the reporting of operating lease liabilities in its Call Report for March 31,
2019, consistent with this supplemental instruction. The agencies do not plan to make any changes to the
reporting for a lessee’s finance leases, the lease liabilities for which should be reported in Schedule RC-M,
items 5.b and 10.b.

Regardless of a lessee institution’s balance sheet treatment of operating lease liabilities, a lessee should
report a single lease cost for an operating lease in the Call Report income statement, calculated so that the
cost of the lease is allocated over the lease term on a generally straight-line basis, in Schedule RI, item 7.b,
“Expenses of premises and fixed assets.” For a finance lease, a lessee should report interest expense on the
lease liability separately from the amortization expense on the ROU asset. The interest expense should be
reported on Schedule RI in item 2.c, “Other interest expense,” on the FFIEC 051 and in item 2.c, “Interest on
trading liabilities and other borrowed money,” on the FFIEC 031 and the FFIEC 041. The amortization
expense should be reported on Schedule RI in item 7.b, “Expenses of premises and fixed assets.”

The agencies have also received questions regarding how lessee institutions should treat ROU assets under
the agencies’ regulatory capital rules (12 CFR Part 3 (OCC); 12 CFR Part 217 (Board); and 12 CFR Part 324
(FDIC)). Those rules require that most intangible assets be deducted from regulatory capital. However, some
institutions are uncertain whether ROU assets are intangible assets
ts.”

The agencies have also received questions regarding how lessee institutions should treat ROU assets under
the agencies’ regulatory capital rules (12 CFR Part 3 (OCC); 12 CFR Part 217 (Board); and 12 CFR Part 324
(FDIC)). Those rules require that most intangible assets be deducted from regulatory capital. However, some
institutions are uncertain whether ROU assets are intangible assets. The agencies are clarifying that, to the
extent an ROU asset arises due to a lease of a tangible asset (e.g., building or equipment), the ROU asset
should be treated as a tangible asset not subject to deduction from regulatory capital. An ROU asset not
subject to deduction must be risk weighted at 100 percent under Section 32(l)(5) of the agencies’ regulatory
capital rules and included in a lessee institution’s calculations of total risk-weighted assets. In addition, such
an asset must be included in a lessee institution’s total assets for leverage capital purposes. The agencies
believe this treatment is consistent with the current treatment of capital leases under the rules, whereby a
lessee’s lease assets under capital leases of tangible assets are treated as tangible assets, receive a
100 percent risk weight, and are included in the leverage ratio denominator. This treatment is also consistent
with the approach taken by the Basel Committee on Banking Supervision
(https://www.bis.org/press/p170406a.htm).

For additional information on ASU 2016-02, institutions should refer to the FASB’s website at:
http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FCompl
etedProjectPage&cid=1176167904031, which includes a link to the new accounting standard
nsistent
with the approach taken by the Basel Committee on Banking Supervision
(https://www.bis.org/press/p170406a.htm).

For additional information on ASU 2016-02, institutions should refer to the FASB’s website at:
http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FCompl
etedProjectPage&cid=1176167904031, which includes a link to the new accounting standard.

Amending Previously Submitted Report Data

Should your institution find that it needs to revise previously submitted Call Report data, please make the
appropriate changes to the data, ensure that the revised data passes the FFIEC-published validation criteria,
and submit the revised data file to the CDR using one of the two methods described in the banking agencies'
FIL for the June 30, 2019, report date. For technical assistance with the submission of amendments to the
CDR, please contact the CDR Help Desk by telephone at (888) CDR-3111, by fax at (703) 774-3946, or by
e-mail at CDR.Help@ffiec.gov.

Other Reporting Matters

For the following topics, institutions should continue to follow the guidance in the specified Call Report
Supplemental Instructions:

•
“Purchased” Loans Originated By Others – Supplemental Instructions for September 30, 2015
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201509.pdf)
•
True-up Liability under an FDIC Loss-Sharing Agreement – Supplemental Instructions for June 30, 2015
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201506.pdf)
Call Report
Supplemental Instructions:

•
“Purchased” Loans Originated By Others – Supplemental Instructions for September 30, 2015
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201509.pdf)
•
True-up Liability under an FDIC Loss-Sharing Agreement – Supplemental Instructions for June 30, 2015
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201506.pdf)

SUPPLEMENTAL INSTRUCTIONS – JUNE 2019

12
•
Troubled Debt Restructurings, Current Market Interest Rates, and ASU No. 2011-02 – Supplemental
Instructions for December 31, 2014
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201412.pdf)
•
Determining the Fair Value of Derivatives – Supplemental Instructions for June 30, 2014
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201406.pdf)
•
Indemnification Assets and ASU No. 2012-06 – Supplemental Instructions for June 30, 2014
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201406.pdf)
•
Other-Than-Temporary Impairment of Debt Securities – Supplemental Instructions for June 30, 2014
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201406.pdf)
•
Small Business Lending Fund – Supplemental Instructions for March 31, 2013
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201303.pdf)
•
Reporting Purchased Subordinated Securities in Schedule RC-S – Supplemental Instructions for
September 30, 2011
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201109.pdf)
•
Treasury Department’s Capital Purchase Program – Supplemental Instructions for September 30, 2011
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201109.pdf)
•
Deposit insurance assessments – Supplemental Instructions for September 30, 2009
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_041_suppinst_200909.pdf)
•
Accounting for share-based payments under FASB Statement No
Treasury Department’s Capital Purchase Program – Supplemental Instructions for September 30, 2011
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_FFIEC041_suppinst_201109.pdf)
•
Deposit insurance assessments – Supplemental Instructions for September 30, 2009
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_041_suppinst_200909.pdf)
•
Accounting for share-based payments under FASB Statement No. 123 (Revised 2004), Share-Based
Payment – Supplemental Instructions for December 31, 2006
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_041_suppinst_200612.pdf)
•
Commitments to originate and sell mortgage loans – Supplemental Instructions for March 31, 2006
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_041_suppinst_200603.pdf) and June 30, 2005
(https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_041_suppinst_200506.pdf)

Call Report Software Vendors

For information on available Call Report preparation software products, institutions should contact:

Axiom Software Laboratories, Inc.
67 Wall Street, 17th Floor
New York, New York 10005
Telephone: (212) 248-4188
http://www.axiomsl.com

DBI Financial Systems, Inc.
P.O. Box 14027
Bradenton, Florida 34280
Telephone: (800) 774-3279
http://www.e-dbi.com
Fed Reporter, Inc.
28118 Agoura Road, Suite 202
Agoura Hills, California 91301
Telephone: (888) 972-3772
http://www.fedreporter.net

FIS Compliance Solutions
16855 West Bernardo Drive,

Suite 270
San Diego, California 92127
Telephone: (800) 825-3772
http://www.callreporter.com

FiServ, Inc
O. Box 14027
Bradenton, Florida 34280
Telephone: (800) 774-3279
http://www.e-dbi.com
Fed Reporter, Inc.
28118 Agoura Road, Suite 202
Agoura Hills, California 91301
Telephone: (888) 972-3772
http://www.fedreporter.net

FIS Compliance Solutions
16855 West Bernardo Drive,

Suite 270
San Diego, California 92127
Telephone: (800) 825-3772
http://www.callreporter.com

FiServ, Inc.
1345 Old Cheney Road
Lincoln, Nebraska 68512
Telephone: (402) 423-2682
http://www.premier.fiserv.com

KPMG LLP
303 Peachtree Street, Suite 2000
Atlanta, Georgia 30308
Telephone: (404) 221-2355
https://advisory.kpmg.us/risk-
consulting/frm/capital-
management.html

SHAZAM Core Services
6700 Pioneer Parkway
Johnston, Iowa 50131
Telephone: (888) 262-3348
http://www.cardinal400.com
Vermeg
(formerly Lombard Risk)
205 Lexington Avenue,

14th floor
New York, New York 10016
Telephone: (212) 682-4930
http://www.vermeg.com
Wolters Kluwer Financial Services
130 Turner Street, Building 3,

4th Floor
Waltham, Massachusetts 02453
Telephone (800) 261-3111
http://www.wolterskluwer.com

SUPPLEMENTAL INSTRUCTIONS – JUNE 2019

13
APPENDIX

Section 214 of EGRRCPA, which includes the definition of “HVCRE ADC Loan,” is as follows:

SEC. 214. PROMOTING CONSTRUCTION AND DEVELOPMENT ON MAIN STREET.

The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by adding at the end the following
new section:

‘‘SEC. 51. CAPITAL REQUIREMENTS FOR CERTAIN ACQUISITION, DEVELOPMENT, OR
CONSTRUCTION LOANS
13
APPENDIX

Section 214 of EGRRCPA, which includes the definition of “HVCRE ADC Loan,” is as follows:

SEC. 214. PROMOTING CONSTRUCTION AND DEVELOPMENT ON MAIN STREET.

The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by adding at the end the following
new section:

‘‘SEC. 51. CAPITAL REQUIREMENTS FOR CERTAIN ACQUISITION, DEVELOPMENT, OR
CONSTRUCTION LOANS.

‘‘(a) IN GENERAL.—The appropriate Federal banking agencies may only require a depository institution to
assign a heightened risk weight to a high volatility commercial real estate (HVCRE) exposure (as such term is
defined under section 324.2 of title 12, Code of Federal Regulations, as of October 11, 2017, or if a successor
regulation is in effect as of the date of the enactment of this section, such term or any successor term
contained in such successor regulation) under any risk-based capital requirement if such exposure is an
HVCRE ADC loan.

‘‘(b) HVCRE ADC LOAN DEFINED.—For purposes of this section and with respect to a depository
institution, the term ‘HVCRE ADC loan’—

‘‘(1) means a credit facility secured by land or improved real property that, prior to being reclassified by

the depository institution as a non-HVCRE ADC loan pursuant to subsection (d)—

‘‘(A) primarily finances, has financed, or refinances the acquisition, development, or construction

of real property;

‘‘(B) has the purpose of providing financing to acquire, develop, or improve such real property into

income-producing real property; and

‘‘(C) is dependent upon future income or sales proceeds from, or refinancing of, such real property

for the repayment of such credit facility;

‘‘(2) does not include a credit facility financing—

‘‘(A) the acquisition, development, or construction of properties that are—

‘‘(i) one- to four-family residential properties;

‘‘(ii) real property that would qualify as an investment in community development; or

‘‘(iii) agri
refinancing of, such real property

for the repayment of such credit facility;

‘‘(2) does not include a credit facility financing—

‘‘(A) the acquisition, development, or construction of properties that are—

‘‘(i) one- to four-family residential properties;

‘‘(ii) real property that would qualify as an investment in community development; or

‘‘(iii) agricultural land;

‘‘(B) the acquisition or refinance of existing income-producing real property secured by a mortgage

on such property, if the cash flow being generated by the real property is sufficient to support the debt

service and expenses of the real property, in accordance with the institution’s applicable loan

underwriting criteria for permanent financings;

‘‘(C) improvements to existing income-producing improved real property secured by a mortgage

on such property, if the cash flow being generated by the real property is sufficient to support the debt

service and expenses of the real property, in accordance with the institution’s applicable loan

underwriting criteria for permanent financings; or

‘‘(D) commercial real property projects in which—

‘‘(i) the loan-to-value ratio is less than or equal to the applicable maximum supervisory loan-to-

value ratio as determined by the appropriate Federal banking agency;

‘‘(ii) the borrower has contributed capital of at least 15 percent of the real property’s appraised,

‘as completed’ value to the project in the form of—

‘‘(I) cash;

‘‘(II) unencumbered readily marketable assets;

‘‘(III) paid development expenses out-of-pocket; or

‘‘(IV) contributed real property or improvements; and

‘‘(iii) the borrower contributed the minimum amount of capital described under clause (ii)

before the depository institution advances funds (other than the advance of a nominal sum made

in order to secure the depository institution’s lien aga
ets;

‘‘(III) paid development expenses out-of-pocket; or

‘‘(IV) contributed real property or improvements; and

‘‘(iii) the borrower contributed the minimum amount of capital described under clause (ii)

before the depository institution advances funds (other than the advance of a nominal sum made

in order to secure the depository institution’s lien against the real property) under the credit facility,

and such minimum amount of capital contributed by the borrower is contractually required to

SUPPLEMENTAL INSTRUCTIONS – JUNE 2019

14

remain in the project until the credit facility has been reclassified by the depository institution as a

non-HVCRE ADC loan under subsection (d);

‘‘(3) does not include any loan made prior to January 1, 2015; and

‘‘(4) does not include a credit facility reclassified as a non-HVCRE ADC loan under subsection (d).

‘‘(c) VALUE OF CONTRIBUTED REAL PROPERTY.—For purposes of this section, the value of any real
property contributed by a borrower as a capital contribution shall be the appraised value of the property as
determined under standards prescribed pursuant to section 1110 of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (12 U.S.C. 3339), in connection with the extension of the credit facility
or loan to such borrower.

‘‘(d) RECLASSIFICATION AS A NON-HVRCE ADC LOAN.—For purposes of this section and with respect
to a credit facility and a depository institution, upon—

‘‘(1) the substantial completion of the development or construction of the real property being financed

by the credit facility; and

‘‘(2) cash flow being generated by the real property being sufficient to support the debt service and

expenses of the real property, in accordance with the institution’s applicable loan underwriting criteria for

permanent financings, the credit facility may be reclassified by the depository institution as a Non-HVCRE

ADC loan
property being financed

by the credit facility; and

‘‘(2) cash flow being generated by the real property being sufficient to support the debt service and

expenses of the real property, in accordance with the institution’s applicable loan underwriting criteria for

permanent financings, the credit facility may be reclassified by the depository institution as a Non-HVCRE

ADC loan.

‘‘(e) EXISTING AUTHORITIES.—Nothing in this section shall limit the supervisory, regulatory, or
enforcement authority of an appropriate Federal banking agency to further the safe and sound operation of an
institution under the supervision of the appropriate Federal banking agency.’’.

## Nearby sections

- [FDIC FIL-1-2002 FOREIGN ASSETS CONTROL ACT](https://www.frixlaw.com/law-library/statutes/FDIC_FIL02001.md)
- [FDIC FIL-1-2010 Employee Compensation Advance Notice of Proposed Rulemaking](https://www.frixlaw.com/law-library/statutes/FDIC_FIL10001.md)
- [FDIC FIL-1-2015 DEPOSITORY INSTITUTION REPORTS](https://www.frixlaw.com/law-library/statutes/FDIC_FIL15001.md)
- [FDIC FIL-1-2018 DEPOSITORY INSTITUTION REPORTS](https://www.frixlaw.com/law-library/statutes/FDIC_FIL18001.md)
- [FDIC FIL-1-2024 Consolidated Reports of Condition and Income for Fourth Quarter 2023](https://www.frixlaw.com/law-library/statutes/FDIC_FIL24001.md)
- [FDIC FIL-2-2019 DEPOSITORY INSTITUTION REPORTS](https://www.frixlaw.com/law-library/statutes/FDIC_FIL19002.md)
- [FDIC FIL-2-2020 Consolidated Reports of Condition and Income for Fourth Quarter 2019](https://www.frixlaw.com/law-library/statutes/FDIC_FIL20002.md)
- [FDIC FIL-3-2017 Community Banking Conference 2016 Highlights](https://www.frixlaw.com/law-library/statutes/FDIC_FIL17003.md)
- [FDIC FIL-4-2015 The FDIC Launches Web Page to Support Marketing of Failing Financial Institutions](https://www.frixlaw.com/law-library/statutes/FDIC_FIL15004.md)
- [FDIC FIL-4-2018 Revisions to the Consolidated Reports of Condition and Income (Call Report) for March and June 2018](https://www.frixlaw.com/law-library/statutes/FDIC_FIL18004.md)
- [FDIC FIL-4-2019 Banker Webinar: Update on the Standardized Export of Imaged Loan Documents Initiative](https://www.frixlaw.com/law-library/statutes/FDIC_FIL19004.md)
- [FDIC FIL-4-2021 Revised Guidelines for Appeals of Material Supervisory Determinations](https://www.frixlaw.com/law-library/statutes/FDIC_FIL21004.md)
- [FDIC FIL-4-2023 Guidance to Help Financial Institutions and Facilitate Recovery in Areas of California Affected by Severe Winter Storms, Flooding, Landslides and Mudslides](https://www.frixlaw.com/law-library/statutes/FDIC_FIL23004.md)
- [FDIC FIL-4-2025 FDIC Statement of Policy on Bank Merger Transactions](https://www.frixlaw.com/law-library/statutes/FDIC_FIL25004.md)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FDIC_FIL19041. Check the current official text before relying on it. Not legal advice.