Consolidated Financial Statements for Holding Companies (non AA HCs)

Board of Governors of the Federal Reserve System

Supplemental Instructions

June 2018

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 (FDI
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 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.
To avoid the regulatory burden associated with applying different definitions for HVCRE exposures
within a single organization, the Federal Reserve will not take action to require a BHC, savings and loan
holding company, or intermediate holding company of a foreign bank to estimate and report HVCRE on
Schedule HC-R, Part II, items 4.b, 5.b, and 7 of the FR Y-9C consistent with the existing regulatory
requirements and reporting form instructions if the holding company reports HVCRE in a manner
consistent with its subsidiary depository institution(s) on the Call Report. A holding company may also
continue to report and risk-weight HVCRE exposures in a manner consistent with the current instructions
to Schedule HC-R, Part II of the FR Y-9C.
Section 214 of EGRRCPA, which includes the definition of “HVCRE ADC Loan,” is provided in the
Appendix to these Supplemental Instructions for your reference.
Reporting Reciprocal Deposits
Section 202 of EGRRCPA amends Section 29 of the FDI Act to exclude a capped amount of reciprocal
deposits from treatment as brokered deposits for qualifying institutions, effective upon enactment. The
current Call Report instructions, consistent with the law prior to the enactment of EGRRCPA, treat all
reciprocal deposits as brokered deposits. Institutions that wish to report pursuant to the new law for the
June 30, 2018, Call Report should apply the newly defined terms and other provisions of Section 202 of
EGRRCPA (provided in the Appendix to these Supplemental Instructions for your reference) to
determine whether an institution and its reciprocal deposits are eligible for the statutory exclusion.
Qualifying institutions may use available information to then reasonably estimate and report as brokered
deposits (in Schedule RC-E, Memorandum items 1.b through 1.d), and reciprocal brokered deposits (in

Schedule RC-O, item 9 and, if applicable, item 9.a), only those reciprocal deposits that are still considered
brokered deposits under the new law. Alternatively, when reporting as of June 30, 2018, institutions may
continue to report reciprocal deposits in Schedules RC-E and RC-O consistent with the current Call
Report instructions (i.e., those instructions in effect prior to passage of EGRRCPA).
To avoid the regulatory burden associated with applying different definitions for brokered deposits within
a single organization, the Federal Reserve will not take action to require a BHC, savings and loan holding
company, or intermediate holding company of a foreign bank to estimate and report brokered deposits on
Schedule HC-E, Memorandum items 1 and 2 of the FR Y-9C consistent with the existing regulatory
requirements and reporting form instructions if the holding company reports brokered deposits in a
manner consistent with its subsidiary depository institution(s) on the Call Report. A holding company
may also continue to report brokered deposits in a manner consistent with the current instructions to
Schedule HC-E, Memorandum items 1 and 2 of the FR Y-9C.
The Federal Reserve anticipates issuing additional instructions regarding the application of Section 202 to
reciprocal deposits for purposes of reporting in the FR Y-9C Report for September 30, 2018. HCs may
use these additional instructions as the basis for amending their reporting of reciprocal deposits still
considered brokered deposits in their reports as originally filed for June 30, 2018.
Section 202 of EGRRCPA, which sets forth the limited exception for reciprocal deposits, is presented in
the Appendix to these Supplemental Instructions for your reference.
Accounting and Reporting Implications of the New Tax Law
On January 18, 2018, the banking agencies issued an Interagency Statement on Accounting and Reporting
Implications of the New Tax Law which 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
recognized in the period in which the legislation is enacted. Thus, in accordance with Accounting
Standards Codification (ASC) Topic 740, Income Taxes, the effects of the Act were to be recorded in a
holding company’s FR Y-9C Report for December 31, 2017, because the Act was enacted before yearend 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 FR Y-9C report. HCs
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 FR Y-9C
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. The Interagency
Statement reported that the FASB had approved issuing an Exposure Draft of a proposed Accounting
Standards Update (ASU) that would allow reclassification of the disproportionate tax effect from AOCI to
retained earnings in financial statements that had not yet been issued. The Interagency Statement advised
institutions that they were permitted to apply the guidance proposed in the ASU to remedy the
disproportionate tax effects of items reported in AOCI when they prepared their Call Reports for
December 31, 2017.

On February 18, 2018, the Financial Accounting Standards Board (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. A holding company 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
FR Y-9C 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=t
rue.
A holding company 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 the FR
Y-9C Report Schedule HI-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 differences 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. Nevertheless, consistent with current practice under the
regulatory capital rules, when a holding company has paid federal income taxes for the current tax year, if
all federal temporary differences were to fully reverse as of 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.
For holding companies that are public business entities, as defined under U.S. GAAP, ASU 2017-07 is
effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal
years. For holding companies 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 FR Y-9C Report instructions for further
information on these terms.
For FR y-9C purposes, a holding company 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 HI, item 7.a, “Salaries and employee
benefits.” The other cost components of net benefit cost should be reported in Schedule HI, 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=t
rue.

Credit Losses on Financial Instruments
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(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, the 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, holding companies will use a
broader range of data than under existing U.S. generally accepted accounting principles (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, net investment in leases, and held-to-maturity debt securities, as well as trade and reinsurance
receivables and receivables that relate to repurchase agreements and securities lending agreements) 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 available-for-sale (AFS) debt securities.
Under the new standard, holding companies 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 holding companies 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 holding companies that are not public
business entities (i.e., that are private companies), the ASU is effective for fiscal years beginning after
December 15, 2020, and for interim periods of fiscal years beginning after December 15, 2021. For all
holding companies, 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 FR Y-9C purposes in accordance with the effective dates set forth in the ASU. A holding
company that early adopts ASU 2016-13 for U.S. GAAP financial reporting purposes should also early
adopt the ASU in the same period for FR Y-9C purposes.

The FR Y-9 forms and instructions will be revised to conform to the ASU at a future date, and the Federal
Reserve will request comment on the proposed revisions through a Federal Register notice.
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 September 6, 2017, 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=t
rue.
Accounting for Hedging Activities
In August 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” This ASU amends
Accounting Standards Codification (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 holding companies that are public business entities, as defined under U.S. generally accepted
accounting principles (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. Refer to the Glossary entries for “public
business entity” and “private company” in the FR Y-9C instructions for further information on these
terms.
Early application of the ASU is permitted for all holding companies 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 data 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 a
holding company 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. A holding company 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 FR Y-9C
purposes.
The FR Y-9C instructions, including the Glossary entry for “Derivative Contracts,” will be revised to
conform to the ASU at a future date.
For additional information, holding companies should refer to ASU 2017-12, which is available at
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176169282347&acceptedDisclaimer=t
rue.
Regulatory Capital Treatment of Certain Centrally-Cleared Derivative Contracts

On August 14, 2017, the banking agencies issued supervisory guidance on the regulatory capital treatment
of certain centrally-cleared derivative contracts in light of recent changes to the rulebooks of certain
central counterparties. Under the previous requirements of these central counterparties’ rulebooks,
variation margin transferred to cover the exposure that arises from marking cleared derivative contracts,
and netting sets of such contracts, to fair value was considered collateral pledged by one party to the
other, with title to the collateral remaining with the posting party. These derivative contracts are referred
to as collateralized-to-market contracts. Under the revised rulebooks of certain central counterparties,
variation margin for certain centrally-cleared derivative contracts, and certain netting sets of such
contracts, is considered a settlement payment for the exposure that arises from marking these derivative
contracts and netting sets to fair value, with title to the payment transferring to the receiving party. In
these circumstances, the derivative contracts and netting sets are referred to as settled-to-market contracts.
Under the agencies’ regulatory capital rules, in general, an institution must calculate the trade exposure
amount for a cleared derivative contract, or a netting set of such contracts, by using the methodology
described in section 34 of the rules to determine (i) the current credit exposure and (ii) the potential future
exposure of the derivative contract or netting set of such contracts for purposes of the standardized
approach risk-based capital calculation and the supplementary leverage ratio calculation. The riskweighted asset calculations under the advanced approaches capital framework have similar requirements.
Current credit exposure is determined by reference to the fair value of each derivative contract as
measured under U.S. GAAP. Potential future exposure is determined, in part, by multiplying each
derivative contract’s notional principal amount by a conversion factor. The conversion factors vary by
the category (for example, interest rate, equity) and remaining maturity of the derivative contract. The
regulatory capital rules provide that, for a derivative contract that is structured such that on specified dates
any outstanding exposure is settled and the terms are reset so that the fair value of the contract is zero, the
remaining maturity equals the time until the next reset date.
For the purpose of the regulatory capital rules, the August 2017 supervisory guidance states that if, after
accounting and legal analysis, an institution determines that (i) the variation margin payment on a
centrally cleared settled-to-market contract settles any outstanding exposure on the contract, and (ii) the
terms are reset so that the fair value of the contract is zero, the remaining maturity on such a contract
would equal the time until the next exchange of variation margin on the contract. In conducting its legal
analysis to determine whether variation margin may be considered settlement of outstanding exposure
under the regulatory capital rules, an institution should evaluate whether the transferor of the variation
margin has relinquished all legal claims to the variation margin and whether the payment of variation
margin constitutes settlement under the central counterparty’s rulebook, any other applicable agreements
governing the derivative contract, and applicable law. Among other requirements, a central
counterparty’s rulebook may require an institution to satisfy additional obligations, such as payment of
other expenses and fees, in order to recognize payment of variation margin as satisfying settlement under
the rulebook. The legal and accounting analysis performed by the institution should take all such
requirements into account.
Holding companies should refer to the supervisory guidance in its entirety for purposes of determining the
appropriate regulatory capital treatment of settled-to-market contracts under the regulatory capital rules.
This guidance is available at https://www.fdic.gov/news/news/financial/2017/fil17033a.pdf.
Premium Amortization on Purchased Callable Debt Securities
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2017-08, “Premium Amortization on Purchased Callable Debt Securities.” This ASU amends
Accounting Standards Codification (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. generally accepted accounting principles
(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 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. The discount on such debt
securities continues to be amortized to maturity (unless the Subtopic 310-20 guidance mentioned above is
applied).
For holding companies 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. Refer to the Glossary entries for “public business entity” and
“private company” in the FR Y-9C instructions for further information on these terms.
Early application of the new standard is permitted for all holding companies, including adoption in an
interim period of 2017 or a subsequent year before the applicable effective date for a holding company. If
a holding company 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.
A holding company must apply the new standard on a modified retrospective basis as of the beginning of
the period of adoption. Under the modified retrospective method, a holding company should apply a
cumulative-effect adjustment to affected accounts existing as of the beginning of the fiscal year the new
standard is adopted. The cumulative-effect adjustment to retained earnings for this change in accounting
principle should be reported in FR Y-9C Report Schedule HI-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=t
rue.
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 available-for-sale (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.
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 and Federal Reserve
Bank stock.
For holding companies that are public business entities, as defined under U.S. GAAP, ASU 2016-01 is
effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal
years. 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 holding companies that are not public business entities as of the fiscal years beginning
after December 15, 2017, including interim periods within those fiscal years. Holding companies must
apply ASU 2016-01 for FR Y-9C purposes in accordance with the effective dates set forth in the ASU.
With the elimination of AFS equity securities upon a holding company’s adoption of ASU 2016-01, the
amount of net unrealized gains (losses) on these securities, net of tax effect, that is included in
accumulated other comprehensive income (AOCI) on the FR Y-9C report balance sheet (Schedule HC,
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 HC, item 26(a)). Thereafter, changes in the
fair value of (i.e., the unrealized gains and losses on) an holding company’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. For holding company’s holdings of equity securities without readily
determinable fair values as of the adoption date, 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=t
rue.
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 No. 2016-01 requires a holding company to present separately in
other comprehensive income (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 holding company has
elected to measure the liability at fair value in accordance with the fair value option for financial
instruments. Until a holding company adopts the own credit risk provisions of the ASU, U.S. GAAP
requires the holding company 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). A
holding company 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 holding companies 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 FR Y-9C Report purposes.
When a holding company 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 HC, item 26(a), “Retained earnings,” to Schedule HC, item 26(b), “Accumulated other
comprehensive income” (AOCI). If a holding company 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 FR Y-9C Report income statement during the interim period(s) before the
interim period of adoption should be reclassified from earnings to OCI. In the FR Y-9C Report, this
reclassification would be from Schedule HI, item 5.l, “Other noninterest income,” and Schedule HI, item
9, “Applicable income taxes,” to Schedule HI-A, item 12, “Other comprehensive income,” with a
corresponding reclassification from Schedule HC, item 26(a), to Schedule HC, item 26(b).
Additionally, for purposes of reporting on Schedule HC-R, Part I, holding companies 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 holding company’s own credit risk. Holding
companies should note that this AOCI amount is included in the amount reported in Schedule HC-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=t
rue.
New Revenue Recognition Accounting Standard
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2014-09, “Revenue from Contracts with Customers,” which added Topic 606, Revenue from
Contracts with Customers, to the Accounting Standards Codification (ASC). 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 a holding company’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 holding companies do not typically invest in nonfinancial assets. ASU 201409 and subsequent amendments are collectively referred to herein as the “new standard.”
The new standard specifically excludes financial instruments and other contractual rights or obligations
within the scope of Topic 310, Receivables; Topic, 320, Investments – Debt Securities; Topic 321,
Investments – Equity Securities; Topic 815, Derivatives and Hedging; and certain other ASC Topics.
Therefore, many common revenue streams in the financial sector, such as interest and dividend income,
fair value adjustments, gains and losses on sale of financial instruments, and loan origination fees, are not
within the scope of the new standard. The new standard may change the timing for the recognition of,

and the presentation of any revenue streams within the scope of ASC Subtopic 606-10, such as certain
fees associated with credit card arrangements, underwriting fees and costs, and deposit-related fees.
For holding companies that are public business entities, as defined under U.S. generally accepted
accounting principles (GAAP), the new standard is effective for fiscal years beginning after December 15,
2017, including interim reporting periods within those fiscal years. For holding companies 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 for all holding companies for
fiscal years beginning after December 15, 2016, and interim reporting periods as prescribed in the new
standard. If a holding company chooses to early adopt the new standard for financial reporting purposes,
the holding company should implement the new standard in its FR Y-9C for the same quarter-end report
date.
For FR Y-9C purposes, a holding company must apply the new standard on a modified retrospective basis
as of the effective date of the standard. Under the modified retrospective method, a holding company
should apply a cumulative-effect adjustment to affected accounts existing as of the beginning of the fiscal
year the new standard is adopted. The cumulative-effect adjustment to retained earnings for this change in
accounting principle should be reported in the FR Y-9C Schedule HI-A, item 2. A holding company that
early adopts the new standard must apply it in its entirety. The holding company 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, holding companies 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 a holding company’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 ASC Subtopic 360-20, Property, Plant, and
Equipment – Real Estate Sales. Under the new standard, a holding company will recognize the entire
gain, if any, and derecognize the OREO at the time of sale if the transaction meets the requirements of
Topic 606. Otherwise, a holding company will 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, a holding company
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 holding company 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 FR Y-9C
instructions, which has been updated this quarter to incorporate guidance on the application of the new
standard to sales of OREO.
Under Topic 610, a holding company’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 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 holding company
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 holding company 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 sellerfinanced 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
holding company’s continuing involvement with the property following the transaction.
If the five contract criteria in Topic 606 have not been met, the holding company may not derecognize the
OREO asset or recognize revenue (gain or loss) as an accounting sale has not occurred. In contrast, if the
holding company 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, indicators of which are identified in the new standard. For seller-financed sales of
OREO, the transfer of control generally occurs on the closing date of the sale when the holding company
obtains the right to receive payment for the property and transfers legal title to the buyer. However, a
holding company must consider all relevant facts and circumstances to determine whether control of the
OREO has transferred.
When a contract exists and a holding company has transferred control of the asset, the holding company
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
financed at market terms. However, the transaction price may differ from the amount stated in the
contract due to the existence of below market terms on the financing. In this situation, the contract
amount should be adjusted for the time value 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, for FR Y-9C purposes, holding companies 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, holding companies should measure the impact of applying
Topic 610 to the outstanding seller-financed sales of OREO currently accounted for under Subtopic 36020 using the installment, cost recovery, reduced-profit, or deposit method as of the beginning of the fiscal
year the new standard is adopted. The cumulative-effect adjustment to retained earnings for this change in
accounting principle should be reported in FR Y-9C Schedule HI-A, item 2.
Accounting for Leases
In February 2016, the FASB issued ASU 2016-02, “Leases,” which added ASU Topic 842, Leases. This
guidance, once effective, 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 ASC 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 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
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 entity adopts the new accounting standard.
For holding companies that are public business entities, as defined by U.S. generally accepted accounting
principles (GAAP), ASU 2016-02 is effective for fiscal years beginning after December 15, 2018,
including interim reporting periods within those fiscal years. For holding companies 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 holding companies. A holding company that early adopts the new
standard must apply it in its entirety to all lease-related transactions. If a holding company chooses to
early adopt the new standard for financial reporting purposes, the holding company should implement the
new standard in its FR Y-9C report for the same quarter-end report date.
For FR Y-9C purposes, a holding company must apply the new standard on a modified retrospective
basis. Under the modified retrospective method, a holding company should apply a cumulative-effect
adjustment to affected accounts existing as of the beginning of the fiscal year the new standard is adopted.
The cumulative-effect adjustment to retained earnings for this change in accounting principle should be
reported in Schedule HI-A, item 2. The ROU asset recorded upon adoption should be reflected in
Schedule HC, item 6, “Premises and fixed assets” and the related lease liability recorded upon adoption
should be reflected in Schedule HC-M, item 14, “Other borrowed money.” These classifications are
consistent with the current FR Y-9C instructions for reporting lessee capital leases.
For additional information on ASU 2016-02, holding companies should refer to the FASB’s website at:
http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2F
CompletedProjectPage&cid=1176167904031, which includes a link to the new accounting standard.
Classification and Measurement of Financial Instruments: Fair Value Option Liabilities

In January 2016 FASB completed its Classification and Measurement of Financial Instruments project by
issuing ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.
This ASU makes targeted improvements to U.S. generally accepted accounting principles (GAAP). It
includes requiring a holding company to present separately in other comprehensive income (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 holding company has elected to measure the liability at fair value in
accordance with the fair value option for financial instruments. Prior to the new ASU, U.S. GAAP
required holding companies to report the entire change in fair value of such an instrument in earnings.
The effect of a change in an entity’s own credit risk for other financial liabilities measured at fair value,
including derivatives, 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). A
holding company 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.
For public business entities, as defined under U.S. GAAP, the ASU is effective for fiscal years beginning
after December 15, 2017, including interim periods within those fiscal years. For all other holding
companies, 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
holding companies that are not public business entities as of the fiscal years beginning after December 15,
2017, including interim periods within those fiscal years. Additionally, early application of the provisions
regarding the presentation in OCI of changes due to own credit risk, as described above, is permitted for
all holding companies 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 FR Y-9C Report purposes.
When a holding company with a calendar year fiscal year adopts 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 HC, item 26(a), “Retained
earnings,” to Schedule HC, item 26(b), “Accumulated other comprehensive income” (AOCI). If a
holding company 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 FR Y-9C
Report income statement during the interim period(s) before the interim period of adoption should be
reclassified from Schedule RI, item 5(l), “Other noninterest income,” and Schedule HI, item 9,
“Applicable income taxes,” to Schedule HI-A, item 12, “Other comprehensive income,” with a
corresponding reclassification from Schedule HC, item 26(a) to Schedule HC, item 26(b).
Additionally, for purposes of reporting on Schedule HC-R, Part I, holding companies 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 holding company’s own credit risk. Holding
companies should note that this AOCI amount is included in the amount reported in Schedule HC-R, Part
I, item 3, “Accumulated other comprehensive income (AOCI).”
For additional information, holding companies should refer to ASU 2016-01, which is available at
http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176156316498.
Accounting for Measurement-Period Adjustments Related to a Business Combination

In September 2015, FASB issued Accounting Standards Update ASU No. 2015-16, “Simplifying the
Accounting for Measurement-Period Adjustments.” Under Accounting Standards Codification Topic
805, Business Combinations (formerly FASB Statement No. 141(R), “Business Combinations”), if the
initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the acquirer reports provisional amounts in its financial statements for the items for
which the accounting is incomplete. During the measurement period, the acquirer is required to adjust the
provisional amounts recognized at the acquisition date, with a corresponding adjustment to goodwill, to
reflect new information obtained about facts and circumstances that existed as of the acquisition date that,
if known, would have affected the measurement of the amounts recognized as of that date. At present
under Topic 805, an acquirer is required to retrospectively adjust the provisional amounts recognized at
the acquisition date to reflect the new information. To simplify the accounting for the adjustments made
to provisional amounts, ASU 2015-16 eliminates the requirement to retrospectively account for the
adjustments. Accordingly, the ASU amends Topic 805 to require an acquirer to recognize adjustments to
provisional amounts that are identified during the measurement period in the reporting period in which
adjustment amounts are determined. Under the ASU, the acquirer also must recognize in the financial
statements for the same reporting period the effect on earnings, if any, resulting from the adjustments to
the provisional amounts as if the accounting for the business combination had been completed as of the
acquisition date.
In general, the measurement period in a business combination is the period after the acquisition date
during which the acquirer may adjust provisional amounts reported for identifiable assets acquired,
liabilities assumed, and consideration transferred for the acquiree for which the initial accounting for the
business combination is incomplete at the end of the reporting period in which the combination occurs.
Topic 805 provides additional guidance on the measurement period, which shall not exceed one year from
the acquisition date, and adjustments to provisional amounts during this period.
For institutions that are public business entities, as defined under U.S. GAAP, ASU 2015-16 is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. 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, 2016, and interim periods within fiscal years beginning after
December 15, 2017. The ASU’s amendments to Topic 805 should be applied prospectively to
adjustments to provisional amounts that occur after the effective date of the ASU. Thus, holding
companies with a calendar year fiscal year that are public business entities must apply the ASU to any
adjustments to provisional amounts that occur after January 1, 2016, beginning with their FR Y-9C report
for March 31, 2016. Holding companies with a calendar year fiscal year that are private companies must
apply the ASU to any FR Y-9C Reports for December 31, 2017. Early application of ASU 2015-16 is
permitted in FR Y-9C reports that have not been submitted.
For additional information, institutions should refer to ASU 2015-16, which is available at
http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176156316498.
Other Reporting Matters
For the following topics, holding companies should continue to follow the guidance in the specified FR
Y-9C Supplemental Instructions:
Reporting Exposures Hedged with Cleared Eligible Credit Derivatives in Schedule HC-R
Holding companies should continue to follow the guidance for Reporting Exposures Hedged with Cleared
Eligible Credit Derivatives in Schedule HC-R that was included in the FR Y-9C Supplemental

Instructions for December 2016. These instructions can be accessed via the Federal Reserve’s website
(http://www.federalreserve.gov/reportforms/supplemental/SI_FRY9_201612.pdf)
Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share
Holding companies should continue to follow the guidance for Disclosures for Investments in Certain
Entities that Calculate Net Asset Value per share that was included in the FR Y-9C Supplemental
Instructions for December 2016. These instructions can be accessed via the Federal Reserve’s website
(http://www.federalreserve.gov/reportforms/supplemental/SI_FRY9_201612.pdf)
Debt Issuance Cost
Holding companies should continue to follow the guidance for Debt Issuance Cost that was included in
the FR Y-9C Supplemental Instructions for September 2016. These instructions can be accessed via the
Federal Reserve’s website
(http://www.federalreserve.gov/reportforms/supplemental/SI_FRY9_201609.pdf
Accounting for Subsequent Restructuring of a Troubled Debt Restructuring
Holding companies should continue to follow the guidance for Accounting for Subsequent Restructuring
of a Troubled Debt Restructuring that was included in the FR Y-9C Supplemental Instructions for
September 2016. These instructions can be accessed via the Federal Reserve’s website
(http://www.federalreserve.gov/reportforms/supplemental/SI_FRY9_201609.pdf)
Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon a
Foreclosure
Holding companies should continue to follow the guidance for Reclassification of Residential Real Estate
Collateralized Consumer Mortgage Loans Upon a Foreclosure that was included in the FR Y-9C
Supplemental Instructions for September 2016. These instructions can be accessed via the Federal
Reserve’s website (http://www.federalreserve.gov/reportforms/supplemental/SI_FRY9_201609.pdf)
Reporting Certain Government-Guaranteed Mortgage Loans upon Foreclosure
Holding companies should continue to follow the guidance for Reporting Certain GovernmentGuaranteed Mortgage Loans upon Foreclosure that was included in the FR Y-9C Supplemental
Instructions for September 2016. These instructions can be accessed via the Federal Reserve’s website
(http://www.federalreserve.gov/reportforms/supplemental/SI_FRY9_201609.pdf)
Secured Consumer Debt Discharged in a Chapter 7 Bankruptcy Order
Holding companies should continue to follow the guidance for Secured Consumer Debt Discharged in a
Chapter 7 Bankruptcy Order that was included in the FR Y-9C Supplemental Instructions for December,
2015. These instructions can be accessed via the Federal Reserve’s Web site
(http://www.federalreserve.gov/reportforms/supplemental/SI_FRY9_201512.pdf
True Up Liability under an FDIC Loss-Sharing Agreement
Holding companies should continue to follow the guidance for True up liability under an FDIC losssharing agreement that was included in the FR Y-9C Supplemental Instructions for September, 2015.
These instructions can be accessed via the Federal Reserve’s Web site
(http://www.federalreserve.gov/reportforms/supplemental/SI_FRY9_201509.pdf)

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) 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 against the real property) under the credit facility, and such minimum
amount of capital contributed by the borrower is contractually required to 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.
‘‘(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.’’.

* * * * * * * * * * *

Section 202 of EGRRCPA, which creates a limited exception for certain reciprocal deposits, is as follows:
SEC. 202. LIMITED EXCEPTION FOR RECIPROCAL DEPOSITS.
(a) IN GENERAL.—Section 29 of the Federal Deposit Insurance Act (12 U.S.C. 1831f) is amended by
adding at the end the following:
‘‘(i) LIMITED EXCEPTION FOR RECIPROCAL DEPOSITS.—
‘‘(1) IN GENERAL.—Reciprocal deposits of an agent institution shall not be considered to be funds
obtained, directly or indirectly, by or through a deposit broker to the extent that the total amount of such
reciprocal deposits does not exceed the lesser of—
‘‘(A) $5,000,000,000; or
‘‘(B) an amount equal to 20 percent of the total liabilities of the agent institution.
‘‘(2) DEFINITIONS.—In this subsection:
‘‘(A) AGENT INSTITUTION.—The term ‘agent institution’ means an insured depository institution that
places a covered deposit through a deposit placement network at other insured depository institutions in
amounts that are less than or equal to the standard maximum deposit insurance amount, specifying the
interest rate to be paid for such amounts, if the insured depository institution—
‘‘(i)(I) when most recently examined under section 10(d) was found to have a composite condition of
outstanding or good; and
‘‘(II) is well capitalized;
‘‘(ii) has obtained a waiver pursuant to subsection (c); or
‘‘(iii) does not receive an amount of reciprocal deposits that causes the total amount of reciprocal deposits
held by the agent institution to be greater than the average of the total amount of reciprocal deposits held
by the agent institution on the last day of each of the 4 calendar quarters preceding the calendar quarter
in which the agent institution was found not to have a composite condition of outstanding or good or was
determined to be not well capitalized.
‘‘(B) COVERED DEPOSIT.—The term ‘covered deposit’ means a deposit that—
‘‘(i) is submitted for placement through a deposit placement network by an agent institution; and

‘‘(ii) does not consist of funds that were obtained for the agent institution, directly or indirectly, by or
through a deposit broker before submission for placement through a deposit placement network.
‘‘(C) DEPOSIT PLACEMENT NETWORK.—The term ‘deposit placement network’ means a network in
which an insured depository institution participates, together with other insured depository institutions, for
the processing and receipt of reciprocal deposits.
‘‘(D) NETWORK MEMBER BANK.—The term ‘network member bank’ means an insured depository
institution that is a member of a deposit placement network.
‘‘(E) RECIPROCAL DEPOSITS.—The term ‘reciprocal deposits’ means deposits received by an agent
institution through a deposit placement network with the same maturity (if any) and in the same aggregate
amount as covered deposits placed by the agent institution in other network member banks.
‘‘(F) WELL CAPITALIZED.—The term ‘well capitalized’ has the meaning given the term in section
38(b)(1).’’.
(b) INTEREST RATE RESTRICTION.—Section 29 of the Federal Deposit Insurance Act (12 U.S.C.
1831f) is amended by striking subsection (e) and inserting the following:
‘‘(e) RESTRICTION ON INTEREST RATE PAID.—
‘‘(1) DEFINITIONS.—In this subsection—
‘‘(A) the terms ‘agent institution’, ‘reciprocal deposits’, and ‘well capitalized’ have the meanings given
those terms in subsection (i); and
‘‘(B) the term ‘covered insured depository institution’ means an insured depository institution that—
‘‘(i) under subsection (c) or (d), accepts funds obtained, directly or indirectly, by or through a deposit
broker; or ‘‘(ii) while acting as an agent institution under subsection (i), accepts reciprocal deposits while
not well
capitalized.
‘‘(2) PROHIBITION.—A covered insured depository institution may not pay a rate of interest on funds or
reciprocal deposits described in paragraph (1) that, at the time that the funds or reciprocal deposits are
accepted, significantly exceeds the limit set forth in paragraph (3).
‘‘(3) LIMIT ON INTEREST RATES.—The limit on the rate of interest referred to in paragraph (2) shall
be—
‘‘(A) the rate paid on deposits of similar maturity in the normal market area of the covered insured
depository institution for deposits accepted in the normal market area of the covered insured depository
institution; or
‘‘(B) the national rate paid on deposits of comparable maturity, as established by the Corporation, for
deposits
accepted outside the normal market area of the covered insured depository institution.’’.