On November 21, 2011, the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation jointly issued a proposal calling for new information to be included in the Consolidated Reports of Condition and Income (Call Report). The new data would offer the agencies better understanding of institutions’ lending activities and credit exposures. All of the proposed changes would take effect with the June 30, 2012, Call Report.
New Schedule RI-C
In July 2010, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. This ASU’s primary objective was to offer greater transparency to financial statement users about an entity’s allowance for loan and lease losses (ALLL) and the credit quality of its financing receivables. Consistent with these new disclosure requirements, the agencies are proposing Call Report revisions to capture disaggregated detail of institutions’ ALLL and related recorded investments for loans and leases from institutions with at least $1 billion in total assets.
Consistent with ASU 2010-20 disclosures by portfolio segment, the agencies’ proposal would require institutions with $1 billion or more in total assets to provide disaggregated allowance and recorded investment data on the basis of impairment method—either collectively evaluated, individually evaluated or acquired with deteriorated credit quality. The disaggregation of data would be reported for key loan categories for which the recorded investments are reported in Schedule RC-C, Part I, Loans and Leases.
Public financial institutions already report this information in their quarterly regulatory filings with the U.S. Securities and Exchange Commission (SEC). Nonpublic institutions (with a calendar year-end) will be adopting this ASU and disclosing this information in their December 31, 2011, audited financial statements. As this information is now being proposed for quarterly disclosure, nonpublic institutions with at least $1 billion in total assets should determine if the information is readily available and potentially modify information technology systems to support the effort.
New Schedule RC-U
For the agencies to better understand origination activity, institutions with $300 million or more in total assets will have to provide quarterly loan origination information for those loan categories reported in Schedule RC-C, Loan and Lease Financing Receivables. This information would comprise Column A of the new Schedule RC-U.
In addition, institutions with $1 billion or more in total assets also would report the amount in each category originated under a newly established commitment and the portion not originated under a commitment. This information would be reported in Columns B and C, respectively, of the new Schedule RC-U. However, three Schedule RC-C categories—closed-end loans secured by first liens on 1-4 family residential properties, closed-end loans secured by junior liens on 1-4 family residential properties and consumer automobile loans—would be excluded from reporting. Also, two RC-C categories—consumer credit card loans and revolving, open-end loans secured by 1-4 family residential properties and extended under lines of credit—only will be reported in column B, as it is assumed such loans are always extended under commitment.
New Memorandum Items in Schedule RC-N
For the agencies to distinguish what growth in past due categories is related to the purchase of credit-impaired loans versus deterioration in the credit quality of the loans originated by the institution, the agencies will require additional information in schedule RC-N. The agencies will add new memorandum items to schedule RC-N to separately collect from all institutions three pieces of data:
- The total outstanding balance of purchased credit-impaired loans past due 30–89 days and still accruing
- Loans 90 days or more past due and still accruing
- Loans in nonaccrual status
New Items in Schedule RC-P
The current schedule RC-P is required from all institutions with $1 billion or more in assets or smaller institutions with significant 1-4 family residential mortgage banking activities. The schedule reports the amount of 1-4 family residential mortgage loans previously sold subject to an obligation to repurchase or indemnify that were repurchased or indemnified during the quarter. Based on SEC feedback to certain public institutions, the agencies believe additional information related to the reserves for these representations and warranties is necessary. To this end, the agencies are proposing institutions that are required to complete this schedule should add the quarter-end amount of representation and warranty reserves. The amount of reserves would be separately disclosed to government-sponsored institutions and other parties.
The Federal Register Notice also discussed two Call Report revisions related to savings institutions that take effect starting with the March 31, 2012, Call Report.
The agencies are requesting comments on or before January 20, 2012. The Federal Register Notice, as well as instructions on how to leave a comment, is available here.
If you have additional questions on implementing these changes, contact your BKD advisor.
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