Consolidated Reports of Condition and Income (Call Report)

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Draft Instructions

for New and Revised Call Report Items
for June 30, 2009

DRAFT
Draft Instructions

for New and Revised Call Report Items
for June 30, 2009

Contents

Items 8 and 9 1

Schedule RC - Balance Sheet

Schedule RC-B - Securities

Items
4
through
4.c.(2)
2
Items
5
through
5.b.(3)
5
Memorandum items 6 through 6.g 6

Schedule RC-C, part i - Loans and Leases

Memorandum items 13 and 14 7

Schedule RC-D - Trading Assets and Liabilities

Items
4
through
4.d
8
Items
5
through
5.b
9
Memorandum items 3 through 3.g 9
Memorandum items 4 through 4.b 10

Items 10 through 17 11

Schedule RC-H - Selected Balance Sheet Items for Domestic Offices (FFIEC 031)

Schedule RC-L - Derivatives and Off-Balance Sheet Items

Items 7 through 7 .d.(2)(b) 13

Item
Items 113
and18
12 19

Items 16 through 16.b.(8) 16
Schedule RC-M - Memoranda

Memorandum item 6 20

Schedule RC-N - Past Due and Nonaccrual Loans, Leases, and Other Assets

Items
7 through
through 8.d
7.d 21
20
Items 8

Schedule RC-O - Other Data for Deposit Insurance and FICO Assessments

Entire Schedule 21

Schedule RC-Q - Assets and Liabilities Measured at Fair Value on a Recurring Basis

Schedule RC-R - Regulatory Capital

Derivatives and Off-Balance Sheet Items 25

Items 53 through
53.b
25
Memorandum
item
1
28
Memorandum items 2.g through 2.g.(2) 29

DRAFT
Draft Instructions

for New and Revised Call Report Items
for June 30, 2009
Schedule RC - Balance Sheet

Item No. Caption and Instructions
8 Investments in unconsolidated subsidiaries and associated companies. Report the

amount of the bank's investments in subsidiaries that have not been consolidated; associated
companies; and corporate joint ventures, unincorporated joint ventures, general partnerships,
and limited partnerships over which the bank exercises significant influence (collectively
referred to as "investees"), excluding those that represent direct and indirect investments in

real estate venture (which are to be reported in Schedule RC, item 9). Include loans and
advances to investees and holdings of their bonds, notes, and debentures.

Investments in investees shall be reported using the equity method of accounting. Under the
equity method the carrying value of the bank's investment in an investee is originally recorded
at cost but is adjusted periodically to record as income the bank's proportionate share of the
investee's earnings or losses and decreased by the amount of any cash dividends or similar
distributions received from the investee. For purposes of these reports, the date through
which the carrying value of the bank's investment in an investee has been adjusted should, to
the extent practicable, match the report date of the Report of Condition, but in no case differ
by more than 93 days from the report date.
Unconsolidated subsidiaries include those majority-owned subsidiaries that do not meet the
significance standards for required consolidation that the bank chooses not to consolidate
under the optional consolidation provisions. Refer to the General Instructions section of this
book for a detailed discussion of consolidation. See also the Glossary entry for

"subsidiaries."
9 Direct and indirect investments in real estate ventures. Report the amount of the bank's

direct and indirect investments in real estate ventures.

limits the authority of national banks to hold real estate. State member
banks are not authorized to invest in real estate except with the prior approval of the Board of
Governors of the Federal Reserve System under Federal Reserve Regulation H (12 CFR
NOTE: 12 USC 29

Part 208). In certain states, nonmember banks may invest in real estate.
Include as direct and indirect investments in real estate ventures:

(1) Any real estate acquired, directly or indirectly, by the bank or a consolidated subsidiary
and held for development, resale, or other investment purposes. (Do not include real
estate acquired in any manner for debts previously contracted, including, but not limited
to, real estate acquired through foreclosure or acquired by deed in lieu of foreclosure.
Report such real estate in Schedule RC-M, item 3.)
(2) Real estate acquisition, development, or construction (ADC) arrangements which are
accounted for as direct investments in real estate or real estate joint ventures in
accordance with guidance prepared by the American Institute of Certified Public
Accountants (AICPA) in Notices to Practitioners issued in November 1983, November
1984, and February 1986.

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Schedule RC - Balance Sheet (cont.)
Item No.

9
(cont.)

Caption and Instructions
(3) Real estate acquired and held for investment by the bank or a consolidated subsidiary

that has been sold under contract and accounted for under the deposit method of
accounting in accordance with FASB Statement No. 66, Accounting for Sales of Real
Estate. Under this method, the seller does not record notes receivable, but continues to
report the real estate and any related existing debt on its balance sheet. The deposit
method is used when a sale has not been consummated and is commonly used when
recovery of the carrying value of the property is not reasonably assured. If the full
accrual, installment, cost recovery, reduced profit, or percentage-of-completion method of
accounting under FASB Statement No. 66 is being used to account for the sale, the
receivable resulting from the sale of the real estate should be reported as a loan in
Schedule RC-C and any gain on the sale should be recognized in accordance with
FASB Statement No. 66.

(4) Any other loans secured by real estate and advanced for real estate acquisition,

development, or investment purposes if the reporting bank in substance has virtually the
same risks and potential rewards as an investor in the borrower's real estate venture.

(5) Investments in subsidiaries that have not been consolidated; associated companies; and
corporate joint ventures, unincorporated joint ventures, general partnerships, and limited
partnerships over which the bank exercises significant influence (collectively referred to
as "investees") that are primarily engaged in the holding of real estate for development,
resale, or other investment purposes. Investments by the bank in these investees may
be in the form of common or preferred stock, partnership interests, loans or other
advances, bonds, notes, or debentures. Such investments shall be reported using the
equity method of accounting. For further information on the equity method, see the
instruction to Schedule RC, item 8, above.

(6) Investments in corporate joint ventures, unincorporated joint ventures, and general or

limited partnerships that are primarily engaged in the holding of real estate for
development, resale, or other investment purposes and over which the bank does not
exercise significant influence.

Schedule RC-B - Securities
Item No. Caption and Instructions
4 Mortgage-backed securities (MBS). Report in the appropriate columns of the appropriate
subitems the amortized cost and fair value of all residential and commercial mortgage-backed
securities, including mortgage pass-through securities, collateralized mortgage obligations
(CMOs), real estate mortgage investment conduits (REMICs), CMO and REMIC residuals,
stripped mortgage-backed securities (such as interest-only strips (las), principal-only strips
(Pas), and similar instruments), and mortgage-backed commercial paper not held for trading.
Exclude from mortgage-backed securities:

(1) Securities backed by loans extended under home equity lines, i.e., revolving open-end
lines of credit secured by 1-4 family residential properties (report as asset-backed
securities in Schedule RC-B, item 5, and, if applicable, in Schedule RC-B, Memorandum
item 5.b, "Home equity lines").

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Schedule RC-B - Securities (cont.)
Item No.

Caption and Instructions

4
(cont.)

(2) Bonds issued by the Federal National Mortgage Association (FNMA) and the
Federal Home Loan Mortgage Corporation (FHLMC) that are collateralized by
mortgages, i.e., mortgage-backed bonds, (report in Schedule RC-B, item 2.b, Obligations

"Issued by U.S. Government-sponsored agencies") and mortgage-backed bonds issued
by non-U.S. Government issuers (report in Schedule RC-B, item 6, "Other debt
securities," below).

(3) Participation certificates issued by the Export-Import Bank and the General Services
Administration (report in Schedule RC-B, item 2.a, Obligations "lssued by U.S.

Government agencies").
(4) Participation certificates issued by a Federal Intermediate Credit Bank (report in
Schedule RC-F, item 4, "Equity securities that do not have readily determinable fair
values").
4.a Residential mortgage pass-through securities. Report in the appropriate columns of the

appropriate subitems the amortized cost and fair value of all holdings of residential mortgage

pass-through securities that are not held for trading. In general, a residential mortgage passthrough security represents an undivided interest in a pool of loans secured by 1-4 family
residential properties that provides the holder with a pro rata share of all principal and interest
payments on the residential mortgages in the pool, and includes certificates of participation in

pools of residential mortgages.
Include certificates of participation in pools of 1-4 family residential mortgages even though

the reporting bank was the original holder of the mortgages underlying the pool and holds the
instruments covering that pool, as may be the case with GNMA certificates issued by the
bank and swaps with FNMA and FHLMC. Also include U.S. Government-issued participation
certificates (PCs) that represent a pro rata share of all principal and interest payments on a
pool of resecuritized participation certificates that, in turn, are backed by 1-4 family residential
mortgages, e.g., FHLMC Giant PCs.
Exclude all holdings of commercial mortgage pass-through securities, including pass-through
securities backed by loans secured by multifamily (5 or more) residential properties (report in
Schedule RC-B, item 4.c.(1), below). Also exclude all collateralized mortgage obligations
(CMOs), real estate mortgage investment conduits (REMICs), CMO and REMIC residuals,
stripped mortgage-backed securities (such as interest-only strips (las), principal-only strips
(Pas), and similar instruments), and mortgage-backed commercial paper (report in
Schedule RC-B, item 4.b or 4.c.(2), below, as appropriate).

4.a.(1)

Guaranteed by GNMA. Report in the appropriate columns the amortized cost and fair value
of all holdings of 1-4 family residential mortgage pass-through securities guaranteed by the
Government National Mortgage Association (GNMA) that are not held for trading. Exclude
1-4 family residential mortgage pass-through securities issued by FNMA and FHLMC (report
in Schedule RC-B, item 4.a.(2), below).

4.a.(2)

Issued by FNMA and FHLMC. Report in the appropriate columns the amortized cost and
fair value of all holdings of 1-4 family residential mortgage pass-through securities issued by
the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage
Corporation (FHLMC) that are not held for trading. Exclude 1-4 family residential mortgage
pass-through securities that are guaranteed by the Government National Mortgage
Association (GNMA) (report in Schedule RC-B, item 4.a.(1), above).

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Schedule RC-B - Securities (cont.)

Item No. Caption and Instructions
4.a.(3) Other pass-through securities. Report in the appropriate columns the amortized cost and

fair value of all holdings of 1-4 family residential mortgage pass-through securities issued by
others (e.g., other depository institutions, insurance companies, state and local housing
authorities in the U.S.) that are not guaranteed by the U.S. Government and are not held for

trading.
If the bank has issued pass-through securities backed by a pool of its own 1-4 family
residential mortgages and the certificates are not guaranteed by the U.S. Government, any
holdings of these pass-through securities (not held for trading) are to be reported in this item.
4.b Other residential mortgage-backed securities. Report in the appropriate columns of the

appropriate subitems the amortized cost and fair value of all 1-4 family residential
mortgage-backed securities other than pass-through securities that are not held for trading.
Other residential mortgage-backed securities include:

(1) All classes of collateralized mortgage obligations (CMOs) and real estate mortgage
investments conduits (REMICs) backed by loans secured by 1-4 family residential

properties.
(2) CMO and REMIC residuals and similar interests backed by loans secured by 1-4 family

residential properties.

(3) Stripped 1-4 family residential mortgage-backed securities (such as interest-only strips
(las), principal-only strips (Pas), and similar instruments).
(4) Commercial paper backed by loans secured by 1-4 family residential properties.

4.b.(1)

Issued or guaranteed by FNMA. FHLMC, or GNMA. Report in the appropriate columns the
amortized cost and fair value of all classes of CMOs and REMICs, CMO and REMIC
residuals, and stripped mortgage-backed securities issued by the Federal National Mortgage
Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC) or
guaranteed by the Government National Mortgage Association (GNMA) that are backed by
loans secured by 1-4 family residential properties. For purposes of these reports, also
include REMICs issued by the U.S. Department of Veterans Affairs (VA) that are backed by
1-4 family residential mortgages in this item.

4.b.(2)

Collateralized by MBS issued or guaranteed by FNMA. FHLMC, or GNMA. Report in the
appropriate columns the amortized cost and fair value of all classes of CMOs, REMICs, CMO
and REMIC residuals, and stripped mortgage-backed securities issued by non-U.S.
Government issuers (e.g., other depository institutions, insurance companies, state and local
housing authorities in the U.S.) for which the collateral consists of GNMA (Ginnie Mae)
residential pass-through securities, FNMA (Fannie Mae) residential pass-through securities,
FHLMC (Freddie Mac) residential participation certificates, or other residential mortgagebacked securities (i.e., classes of CMOs or REMICs, CMO or REMIC residuals, and stripped
mortgage-backed securities) issued or guaranteed by FNMA, FHLMC, GNMA, or VA.

4.b.(3)

All other residential mortgage-backed securities. Report in the appropriate columns the

amortized cost and fair value of all CMOs, REMICs, CMO and REMIC residuals, stripped
mortgage-backed securities, and commercial paper backed by loans secured by 1-4 family
residential properties (or by securities collateralized by such loans) that have been issued by

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Schedule RC-B - Securities (cont.)
Item No.

Caption and Instructions

4.b.(3)
(cont.)

non-U.S. Government issuers (e.g., other depository institutions, insurance companies, state
and local housing authorities in the U.S.).
Exclude residential mortgages for which the collateral does not consist of GNMA (Ginnie
Mae) residential pass-through securities, FNMA (Fannie Mae) residential pass-through
securities, FHLMC (Freddie Mac) residential participation certificates, or other residential
mortgage-backed securities (i.e., classes of CMOs or REMICs, CMO or REMIC residuals,
and stripped mortgage-backed securities) issued or guaranteed by FNMA, FHLMC, GNMA,
or

4.c

VA.

Commercial mortaaae-backed securities. Report in the appropriate columns of the
appropriate subitems the amortized cost and fair value of all holdings of commercial
mortgage-backed securities issued by U.S. Government-sponsored agencies or by others

that are not held for trading. In general, a commercial mortgage-backed security represents
an interest in a pool of loans secured by properties other than 1-4 family residential

properties.

4.c.(1)

Commercial mortaaae pass-through securities. Report in the appropriate columns the
amortized cost and fair value of all holdings of commercial mortgage pass-through securities
issued by the U.S. Government-sponsored agencies or by others. In general, a commercial
mortgage pass-through security represents an undivided interest in a pool of loans secured
by properties other than 1-4 family residential properties that provides the holder with a pro
rata share of all principal and interest payments on the mortgages in the pool.

4.c.(2)

Other commercial mortgage-backed securities. Report in the appropriate columns the
amortized cost and fair value of all CMOs, REMICs, CMO and REMIC residuals, stripped
mortgage-backed securities, and commercial paper backed by loans secured by properties
other than 1-4 family residential properties that have been issued by U.S. Governmentsponsored agencies or by others. Exclude commercial mortgage pass-through securities
(report in Schedule RC-B, item 4.c.(1), above).

5

Asset-backed securities and structured financial products:

5.a

Asset-backed securities. Report in the appropriate columns the amortized cost and fair
value of all asset-backed securities (other than mortgage-backed securities), including
asset-backed commercial paper, not held for trading. For banks with $1 billion or more in
total assets, this item must equal Schedule RC-B, sum of Memorandum items 5.a through 5.f.

5.b

Structured financial products. Report in the appropriate columns of the appropriate

subitems the amortized cost and fair value of all structured financial products not held for
trading according to whether the product is a cash, synthetic, or hybrid instrument.
Structured financial products generally convert a pool of assets (such as whole loans,
securitized assets, and bonds) and other exposures (such as derivatives) into products that
are tradable capital market debt instruments. Some of the more complex financial product
structures mix asset classes in order to create investment products that diversify risk. One of
the more common structured financial products is referred to as a collateralized debt

obligation (CDO). Other products include synthetic structured financial products (such as
synthetic CDOs) that use credit derivatives and a reference pool of assets, hybrid structured
products that mix cash and synthetic instruments, collateralized bond obligations (CBOs),
resecuritizations such as CDOs squared or cubed (which are CDOs backed primarily by the

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Schedule RC-B - Securities (cont.
Item No.

5.b
(cont. )

Caption and Instructions
tranches of other CDOs), and other similar structured financial products. For each column,
the sum of items 5.b.(1) through 5.b.(3) must equal the sum of Memorandum items 6.a

through 6.g.
Exclude from structured financial products:
(1) Mortgage-backed pass-through securities (report in Schedule RC-B, item 4, above).

(2) Collateralized mortgage obligations (CMOs), real estate mortgage investment conduits
(REMICs), CMO and REMIC residuals, stripped mortgage-backed securities, and
mortgage-backed commercial paper (report in Schedule RC-B, item 4, above).
(3) Asset-backed commercial paper not held for trading (report in Schedule RC-B, item 5.a,

above).
(4) Asset-backed securities that are primarily secured by one type of asset (report in
Schedule RC-B, item 5.a, above).

5.b.(1)

Cash instruments. Report in the appropriate columns the amortized cost and fair value of
structured financial products (as defined in Schedule RC-B, item 5.b, above) that are cash

instruments. A cash instrument means that the instrument represents a claim against a
reference pool of assets.

5.b.(2)

Synthetic instruments. Report in the appropriate columns the amortized cost and fair value
of structured financial products (as defined in Schedule RC-B, item 5.b, above) that are

synthetic instruments. A synthetic instrument means that the investors do not have a claim
against a reference pool of assets; rather, the originating bank merely transfers the inherent
credit risk of the reference pool of assets by such means as a credit default swap, a total
return swap, or another arrangement in which the counterparty agrees upon specific
contractual covenants to cover a predetermined amount of losses in the loan pool.

5.b.(3)

Hybrid instruments. Report in the appropriate columns the amortized cost and fair value of
structured financial products (as defined in Schedule RC-B, item 5.b, above) that are hybrid

instruments. A hybrid instrument means that the instrument is a mix of both cash and
synthetic instruments.
Schedule RC-B - Securities

Memoranda

Item No. Caption and Instructions
6 Structured financial products by underlvino collateral or reference assets. Report in

the appropriate columns of the appropriate subitems the amortized cost and fair value of all
structured financial products (as defined in Schedule RC-B, item 5.b, above) not held for
trading by the predominant type of collateral or reference assets supporting the product. For
each column, the sum of Memorandum items 6.a through 6.g must equal the sum of
Schedule RC-B, items 5.b.(1) through 5.b.(3).

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Schedule RC-B - Securities (cont.)
Memoranda

Item No. Caption and Instructions
6.a Trust preferred securities issued by financial institutions. Report in the appropriate

columns the amortized cost and fair value of structured financial products supported
predominantly by trust preferred securities issued by financial institutions.
6.b Trust preferred securities issued by real estate investment trusts. Report in the

appropriate columns the amortized cost and fair value of structured financial products
supported predominantly by trust preferred securities issued by real estate investment trusts.

6.c Corporate and similar loans. Report in the appropriate columns the amortized cost and fair
value of structured financial products supported predominantly by corporate and similar

loans.
Exclude securities backed by commercial and industrial loans that are commonly regarded as
asset-backed securities rather than collateralized loan obligations in the marketplace (report
in Schedule RC-B, item 5.a).
6.d 1-4 family residential MBS issued or guaranteed by U.S. government-sponsored

enterprises (GSEs). Report in the appropriate columns the amortized cost and fair value of
structured financial products supported predominantly by 1-4 family residential mortgagebacked securities issued or guaranteed by U.S. government-sponsored enterprises.
6.e 1-4 family residential MBS not issued or guaranteed by GSEs. Report in the appropriate

columns the amortized cost and fair value of structured financial products supported
predominantly by 1-4 family residential mortgage-backed securities not issued or guaranteed
by U.S. government-sponsored enterprises.
6.f Diversified (mixed) pools of structured financial products. Report in the appropriate

columns the amortized cost and fair value of structured financial products supported
predominantly by diversified (mixed) pools of structured financial products. Include such
products as CDOs squared and cubed (also known as "pools of pools").
6.g Other collateral or reference assets. Report in the appropriate columns the amortized cost

and fair value of structured financial products supported predominantly by other types of
collateral or reference assets not identified above.

Schedule RC-C, part i - Loans and Leases
Memoranda

Item No. Caption and Instructions
13 Construction, land development, and other land loans (in domestic offices) with
interest reserves. Memorandum items 13.a and 13.b are to completed by banks that had
construction, land development, and other land loans (in domestic offces) (as reported in
Schedule RC-C, part I, item 1.a, column B) that exceeded 100 percent of total risk-based
capital (as reported in Schedule RC-R, item 21) as of December 31,2008.

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Schedule RC-C. part i - Loans and Leases (cont.)

Memoranda

Item No. Caption and Instructions
13.a Amount of loans that provide for the use of interest reserves. Report the amount of
construction, land development, and other land loans (in domestic offices) included in
Schedule RC-C, part I, item 1.a, column B, for which the loan agreement with the borrower
provides for the use of interest reserves. An interest reserve is often included in the amount
of the loan commitment to the borrower and it allows the lender to periodically advance loan
funds to pay interest charges on the outstanding balance of the loan. The interest is
capitalized and added to the loan balance. Also include in this item loans granted for the
purpose of paying interest on construction, land development, and other land loans (in
domestic offices).

13.b Amount of interest capitalized from interest reserves on construction, land
development. and other land loans that is included in interest and fee income on loans
during the quarter. Report the amount of interest advanced to borrowers on construction,

land development, and other land loans (in domestic offices) (as defined for Schedule RC-C,
part i, item 1.a, column B) that has been capitalized into the borrowers' loan balances
through the use of interest reserves (or loans granted for the purpose of paying interest) and
included in interest and fee income during the quarter on "All other loans secured by real
estate" (Schedule RI, item 1.a.(1)(b), on the FFIEC 041; Schedule RI, item 1.a.(1 )(a)(2) on
the FFIEC 031). The amount of capitalized interest included in interest income during the
quarter should be reduced by amounts reversed against interest during the quarter.

14 Pledged loans. Report the amount of all loans included in Schedule RC-C, part I, above that
are pledged to secure deposits, repurchase transactions, or other borrowings (regardless of
the balance of the deposits or other liabilities against which the loans are pledged) or for any
other purpose. Include loans that have been transferred in transactions that are accounted
for as secured borrowings with a pledge of collateral because they do not qualify as sales

under FASB Statement No. 140. In general, the pledging of loans is the act of setting aside
certain loans to secure or collateralize bank transactions with the bank continuing to own the
loans unless the bank defaults on the transaction.

Schedule RC-D - Trading Assets and Liabilties
Item No. Caption and Instructions
4 Mortgage-backed securities (MBS). Report in the appropriate subitem the total fair value of
all mortgage-backed securities held for trading.
4.a Residential mortgage pass-through securities issued or guaranteed by FNMA. FHLMC,

or GNMA. Report the total fair value of all residential mortgage pass-through securities
issued or guaranteed by FNMA, FHLMC, or GNMA (as defined for Schedule RC-B, item
4.a.(1), Residential pass-through securities "Guaranteed by GNMA," and item 4.a.(2),
Residential pass-through securities "Issued by FNMA and FHLMC") held for trading.
4.b Other residential MBS issued or guaranteed by FNMA. FHLMC, or GNMA. Report the

total fair value of all other residential mortgage-backed securities issued by FNMA, FHLMC,
or GNMA (as defined for Schedule RC-B, item 4.b.(1), Other residential mortgage-backed
securities "Issued or guaranteed by FNMA, FHLMC, or GNMA") held for trading.

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Schedule RC-D - Trading Assets and Liabilities (cont.

Item No. Caption and Instructions
4.c All other residential MBS. Report the total fair value of all other residential mortgagebacked securities (as defined for Schedule RC-B, item 4.a.(3), "Other (residential) passthrough securities," item 4.b.(2), Other residential mortgage-backed securities "Collateralized
by MBS issued or guaranteed by FNMA, FHLMC, or GNMA," and item 4.b.(3), "AII other
residential MBS") held for trading.

4.d Commercial MBS. Report the total fair value of all commercial mortgage-backed securities
(as defined for Schedule RC-B, item 4.d, "Commercial MBS") held for trading.

5 Other debt securities:

5.a Structured financial products. Report in the appropriate subitem the total fair value of all
structured financial products (as defined for Schedule RC-B, item 5.b, "Structured financial
products") held for trading according to whether the product is a cash, synthetic, or hybrid

instrument.

5.a.(1) Cash instruments. Report the total fair value of structured financial products that are cash
instruments (as defined for Schedule RC-B, item 5.b.(1)) held for trading.

5.a.(2) Synthetic instruments. Report the total fair value of structured financial products that are
synthetic instruments (as defined for Schedule RC-B, item 5.b.(2)) held for trading.

5.a.(3) Hybrid instruments. Report the total fair value of structured financial products that are
hybrid instruments (as defined for Schedule RC-B, item 5.b.(3)) held for trading.
5.b All other debt securities. Report the total fair value of all other debt securities (as defined

for Schedule RC-B, item 5.a, "Asset-backed securities," and item 6, "Other debt securities")

held for trading.

Schedule RC.D - Trading Assets and Liabilties
Memoranda

Item No. Caption and Instructions
3 Structured financial products by underlvinQ collateral or reference assets. Report in

the appropriate subitem the total fair value of all structured financial products held for trading
by the predominant type of collateral or reference assets supporting the product. The sum of
Memorandum items 3.a through 3.g must equal the sum of Schedule RC-D, items 5.a.(1)

through 5.a.(3).

3.a Trust preferred securities issued by financial institutions. Report the total fair value of
structured financial products held for trading that are supported predominantly by trust
preferred securities issued by financial institutions.
3.b Trust preferred securities issued by real estate investment trusts. Report the total fair

value of structured financial products held for trading that are supported predominantly by
trust preferred securities issued by real estate investment trusts.

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Schedule RC-D - Trading Assets and Liabilities (cont.
Memoranda

Item No. Caption and Instructions
3.c Corporate and similar loans. Report the total fair value of structured financial products held
for trading that are supported predominantly by corporate and similar loans.
Exclude securities backed by commercial and industrial loans that are commonly regarded as
asset-backed securities rather than collateralized loan obligations in the marketplace (report
in Schedule RC-B, item 5.a).
3.d 1-4 family residential MBS issued or guaranteed by U.S. government-sponsored

enterprises (GSEs). Report the total fair value of structured financial products held for
trading that are supported predominantly by 1-4 family residential mortgage-backed securities
issued or guaranteed by U.S. government-sponsored enterprises.
3.e 1-4 family residential MBS not issued or guaranteed by GSEs. Report the total fair value

of structured financial products held for trading that are supported predominantly by
1-4 family residential mortgage-backed securities not issued or guaranteed by U.S.

government-sponsored enterprises.
3.f Diversified (mixed) pools of structured financial products. Report the total fair value of

structured financial products held for trading that are supported predominantly by diversified
(mixed) pools of structured financial products. Include such products as CDOs squared and
cubed (also known as "pools of pools").

3.g Other collateral or reference assets. Report the total fair value of structured financial
products held for trading that are supported predominantly by other types of collateral or
reference assets not identified above.

4 Pledged trading assets:

4.a Pledged securities. Report the total fair value of all securities held for trading included in
Schedule RC-D above that are pledged to secure deposits, repurchase transactions, or other
borrowings (regardless of the balance of the deposits or other liabilities against which the
securities are pledged); as performance bonds under futures or forward contracts; or for any
other purpose. Include as pledged securities any securities held for trading that have been
"loaned" in securities borrowing/lending transactions that do not qualify as sales under FASB
Statement No. 140.
Also include securities held for trading owned by consolidated insurance subsidiaries and
held in custodial trusts (that are reported as securities held for trading in Schedule RC-D) that
are pledged to insurance companies external to the consolidated bank.
loans held for trading included in
Schedule RC-D above that are pledged to secure deposits, repurchase transactions, or other
borrowings (regardless of the balance of the deposits or other liabilities against which the
loans are pledged) or for any other purpose. Include loans held for trading that have been
transferred in transactions that are accounted for as secured borrowings with a pledge of
collateral because they do not qualify as sales under FASB Statement No. 140. In general,
the pledging of loans is the act of setting aside certain loans to secure or collateralize bank
transactions with the bank continuing to own the loans unless the bank defaults on the

4.b Pledged loans. Report the total fair value of all

transaction.

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DRAFT
Schedule RC-H - Selected Balance Sheet Items for Domestic Offices (FFIEC 031
only)
NOTE: Items 10 through 17 have two columns for information on securities in domestic offces, one
column for held-to-maturity securities and one column for available-for-sale securities. Report the
amortized cost of held-to-maturity securities in column A and report the fair value of available-for-sale
securities in column B. Information on equity securities with readily determinable fair values is reported in
the column for available-for-sale securities only (column B). Amounts reported in column A will have
been included in the amounts reported in Schedule RC-B, column A. Amounts reported in column B will
have been included in the amounts reported in Schedule RC-B, column D.
Exclude from items 10 through 17 all securities held for trading in domestic offices and securities in
domestic offices the bank has elected to report at fair value under a fair value option even if bank
management did not acquire the securities principally for the purpose of selling them in the near term.
Securities held for trading and securities reported under a fair value option are to be reported in
Schedule RC, item 5, "Trading assets," and, for certain banks, in Schedule RC-D - Trading Assets and
Liabilities.

Item No. Caption and Instructions
10 U.S. Treasury securities. Report in the appropriate columns the amortized cost of held-to-

maturity and the fair value of available-for-sale U.S. Treasury securities (as defined for
Schedule RC-B, item 1) held in domestic offices of the reporting bank.

11 U.S. Government agency obligations. Report in the appropriate columns the amortized
cost of held-to-maturity and the fair value of available-for-sale U.S. Government agency
obligations (as defined for Schedule RC-B, items 2.a and 2.b) held in domestic offices of the
reporting bank. Exclude mortgage-backed securities (report in Schedule RC-H, item 13
below).

12 Securities issued by states and political subdivisions in the U.S. Report in the
appropriate columns the amortized cost of held-to-maturity and the fair value of available-forsale securities issued by states and political subdivisions in the U.S. (as defined for
Schedule RC-B, item 3) held in domestic offices of the reporting bank.
13 Mortgage-backed securities:
13.a Pass-through securities. Report in the appropriate columns of the appropriate subitems

the amortized cost of held-to-maturity and the fair value of available-for-sale mortgage passthrough securities (as defined for Schedule RC-B, items 4.a and 4.c.(1)) held in domestic
offices of the reporting bank.

13.a.(1) Issued or guaranteed by FNMA, FHLMC, or GNMA. Report in the appropriate columns the
amortized cost of held-to-maturity and the fair value of available-for-sale pass-through
securities issued or guaranteed by the Federal National Mortgage Association (FNMA), the
Federal Home Loan Mortgage Corporation (FHLMC), or the Government National Mortgage
Association (GNMA) (as defined for Schedule RC-B, items 4.a.(1), 4.a.(2), and 4.c.(1)) held in

domestic offices of the reporting bank.
13.a.(2) Other pass-through securities. Report in the appropriate columns the amortized cost

of held-to-maturity and the fair value of available-for-sale mortgage pass-through securities
issued by non-U.S. Government issuers (as defined for Schedule RC-B, items 4.a.(3) and

4.c.(1)) held in domestic offices of the reporting bank.

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Schedule RC-H - Selected Balance Sheet Items for Domestic Offices (cont.

Item No. Caption and Instructions
13.b Other mortaaae-backed securities. Report in the appropriate columns of the appropriate
subitems the amortized cost of held-to-maturity and the fair value of available-for-sale
mortgage pass-through securities other than pass-through securities (as defined for
Schedule RC-B, items 4.b and 4.c.(2)) held in domestic offices of the reporting bank.

13.b.(1) Issued or guaranteed by FNMA, FHLMC, or GNMA. Report in the appropriate columns the
amortized cost of held-to-maturity and the fair value of available-for-sale collateralized
mortgage obligations (CMOs), real estate mortgage investment conduits (REMICs), CMO
and REMIC residuals, and stripped mortgage-backed securities issued by the Federal
National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation
(FHLMC) or guaranteed by the Government National Mortgage Association (GNMA) (as
defined for Schedule RC-B, items 4.b.(1) and 4.c.(2)) held in domestic offices of the reporting
bank. Also include REMICs issued by the U.S. Department of Veterans Affairs (VA) held in

domestic offices of the reporting bank.
13.b.(2) All other mortgage-backed securities. Report in the appropriate columns the amortized

cost of held-to-maturity and the fair value of available-for-sale collateralized mortgage
obligations (CMOs), real estate mortgage investment conduits (REMICs), CMO and REMIC
residuals, and stripped mortgage-backed securities issued non-U.S. Government issuers (as
defined for Schedule RC-B, items 4.b.(2), 4.b.(3), and 4.c.(2)) held in domestic offices of the

reporting bank.

14 Other domestic debt securities. Report in the appropriate columns the amortized cost of
held-to-maturity and the fair value of available-for-sale asset-backed securities (as defined for
Schedule RC-B, item 5.a) issued by issuers in the U.S., structured financial products (as
defined for Schedule RC-B, item 5.b) issued by issuers in the U.S., and "Other domestic debt
securities" (as defined for Schedule RC-B, item 6.a) held in domestic offices of the reporting

bank.

15 Foreign debt securities. Report in the appropriate columns the amortized cost of held-tomaturity and the fair value of available-for-sale asset-backed securities (as defined for
Schedule RC-B, item 5.a) issued by non-U.S. issuers, structured financial products (as
defined for Schedule RC-B, item 5.b) issued by non-U.S. issuers, and foreign debt securities
(as defined for Schedule RC-B, item 6.b) held in domestic offices of the reporting bank.

16 Investments in mutual funds and other equity securities with readily determinable fair
values. Report in column B the fair value of all investments in mutual funds and other equity
securities with readily determinable fair values (as defined for Schedule RC-B, item 7) held in

domestic offices of the reporting bank.

17 Total held-to-maturity and available-for-sale securities. Report the sum of items 10
through 16. The total of column A for this item must be less than or equal to Schedule RC-B,
item 8, column A. The total of column B for this item must be less than or equal to
Schedule RC-B, item 8, column D.

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Schedule RC-L - Derivatives and Off-Balance Sheet Items
Item No. Caption and Instructions
7 Credit derivatives. In general, credit derivatives are arrangements that allow one party

(the "protection purchaser" or "beneficiary") to transfer the credit risk of a "reference asset"
or "reference entity" to another party (the "protection seller" or "guarantor"). Banks should
report the notional amounts of credit derivatives by type of instrument in Schedule RC-L,
items 7 .a.(1) through 7 .a.(4). Banks should report the gross positive and negative fair values
of all credit derivatives in Schedule RC-L, items 7.b.(1) and 7.b.(2). For both the notional
amounts and gross fair values, report credit derivatives for which the bank is the protection
seller in column A, "Sold Protection," and those on which the bank is the protection purchaser
in column B, "Purchased Protection." Banks should report the notional amounts of credit
derivatives by regulatory capital treatment in Schedule RC-L, items 7.c.(1 Ha) through
7.c.(2Hc). Banks should report the notional amounts of credit derivatives by remaining
maturity in Schedule RC-L, items 7.d.(1 Ha) through 7.d.(2)(b).

All credit derivative transactions within the consolidated bank should be reported on a net
basis, i.e., intrabank transactions should not be reported in this item. No other netting of

contracts is permitted for purposes of this item. Therefore, do not net the notional amounts or
fair values of: (1) credit derivatives with third parties on which the reporting bank is the
protection purchaser against credit derivatives with third parties on which the reporting bank
is the protection seller, or (2) contracts subject to bilateral netting agreements. The notional
amounts of credit derivatives should not be included in Schedule RC-L, items 12 through 14,
and the fair values of credit derivatives should not be included in Schedule RC-L, item 15.

7.a

Notional amounts. Report in the appropriate subitem and column the notional amount
(stated in U.S. dollars) of all credit derivatives. For tranched credit derivative transactions
that relate to an index, e.g., the Dow Jones CDX NA index, report as the notional amount the
dollar amount of the tranche upon which the reporting bank's credit derivative cash flows are

based.
7.a.(1)

Credit default swaps. Report in the appropriate column the notional amount of all credit
default swaps. A credit default swap is a contract in which a protection seller or guarantor (risk
taker), for a fee, agrees to reimburse a protection purchaser or beneficiary (risk hedger) for any
losses that occur due to a credit event on a particular entity, called the "reference entity." If
there is no credit default event (as defined by the derivative contract), then the protection seller
makes no payments to the protection purchaser and receives only the contractually specified
fee. Under standard industry definitions, a credit event is normally defined to include
bankruptcy, failure to pay, and restructuring. Other potential credit events include obligation
acceleration, obligation default, and repudiation/moratorium.

7.a.(2)

Total return swaps. Report in the appropriate column the notional amount of all total return
swaps. A total return swap transfers the total economic performance of a reference asset,
which includes all associated cash flows, as well as capital appreciation or depreciation. The
protection purchaser (beneficiary) receives a floating rate of interest and any depreciation on
the reference asset from the protection seller. The protection seller (guarantor) has the

opposite profile. The protection seller receives cash flows on the reference asset, plus any
appreciation, and it pays any depreciation to the protection purchaser, plus a floating interest

rate. A total return swap may terminate upon a default of the reference asset.

13

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Schedule RC-L - Derivatives and Off-Balance Sheet Items (cont.)

Item No. Caption and Instructions
7.a.(3) Credit options. Report in the appropriate column the notional amount of all credit options. A

credit option is a structure that allows investors to trade or hedge changes in the credit quality
of the reference asset. For example, in a credit spread option, the option writer (protection
seller or guarantor) assumes the obligation to purchase or sell the reference asset at a
specified "strike" spread leveL. The option purchaser (protection purchaser or beneficiary)
buys the right to sell the reference asset to, or purchase it from, the option writer at the strike
spread leveL.
7.a.(4) Other credit derivatives. Report in the appropriate column the notional amount of all other

credit derivatives. Other credit derivatives consist of any credit derivatives not reportable as
a credit default swap, a total return swap, or a credit option. Credit linked notes are cash
securities and should not be reported as other credit derivatives.

7.b Gross fair values. Report in the appropriate subitem and column the gross fair values of all
credit derivatives.
As defined in FASB Statement No. 157, fair value for an asset or liability is the price that
would be received to sell the asset or paid to transfer the liability in an orderly transaction
between market participants (not a forced liquidation or distressed sale) in the asset's or
liability's principal (or most advantageous) market at the measurement date. For further
information, see the Glossary entry for "fair value." For purposes of this item, the reporting
bank should determine the fair value of its credit derivative contracts in the same manner that
it determines the fair value of these contracts for other financial reporting purposes.
7.b.(1) Gross positive fair value. Report in the appropriate column the total fair value of those

credit derivatives reported in Schedule RC-L, items 7.a.(1) through 7.a.(4), above, with

positive fair values.

7.b.(2) Gross negative fair value. Report in the appropriate column the total fair value of those
credit derivatives reported in Schedule RC-L, items 7.a.(1) through 7.a.(4), above, with

negative fair values. Report the total fair value as an absolute value; do not enclose the total
fair value in parentheses or use a minus (-) sign.

7.c Notional amount of all credit derivatives by regulatory capital treatment. Report in the
appropriate subitem the notional amount of all credit derivative contracts according to the
reporting bank's treatment of the derivative for regulatory capital purposes. Because each
subitem under item 7.c is mutually exclusive, each credit derivative contract should be
reported in only one subitem..
7.c.(1) Positions covered under the Market Risk Rule. For banks subject to the Market Risk

Rule, report in the appropriate subitem the notional amount of covered positions.
7.c.(1)(a) Sold protection. For those credit derivatives that are covered positions under the Market

Risk Rule, report the notional amount of credit derivative contracts where the bank is the

protection seller (guarantor).
7.c.(1 )(b) Purchased protection. For those credit derivatives that are covered positions under the

Market Risk Rule, report the notional amount of credit derivative contracts where the bank is
the protection purchaser (beneficiary).

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DRAFT
Schedule RC-L - Derivatives and Off-Balance Sheet Items (cont.)

Item No. Caption and Instructions
7.c.(2)(a) Sold protection. Report the notional amount of credit derivative contracts where the

reporting bank is the protection seller (guarantor).

7.c.(2)(b) Purchased protection that is recognized as a guarantee for regulatory capital
purposes. Report the notional amount of credit derivative contracts where the bank is the
protection purchaser (beneficiary) and the protection is recognized as a guarantee for
regulatory capital purposes. The credit derivative contracts to be reported in this item are
limited to those providing purchased protection where an underlying position (usually an
asset of the bank) is being hedged by the protection and credit derivative contract meets the
criteria for recognition as a guarantee under the regulatory capital standards of the bank's
primary federal regulator.

7.c.(2)(c) Purchased protection that is not recognized as a guarantee for regulatory capital
purposes. Report the notional amount of credit derivative contracts where the bank is the
protection purchaser (beneficiary) and the protection is not recognized as a guarantee for
regulatory capital purposes. The credit derivative contracts to be reported in this item are
limited to those providing purchased protection where the protection is not being used to
hedge an underlying position or where the "hedging" credit derivative contract does not meet
the criteria for recognition as a guarantee under the regulatory capital standards of the bank's

primary federal regulator. These "naked" purchased protection positions sometimes arise
when a bank has sold the asset that was being hedged by the credit derivative contract while

retaining the credit derivative contract.
7.d Notional amounts by remaining maturity. Report in the appropriate subitem and column

the notional amount of all credit derivative contracts. Report notional amounts in the column
corresponding to the contract's remaining term to maturity from the report date. Remaining
maturities are to be reported as (1) one year or less in column A, (2) over one year through
five years in column B, or (3) over five years in column C.
7.d.(1) Sold credit protection. Report the notional amount of all credit derivative contracts where

the bank is the protection seller (guarantor).

7.d.(1)(a) Investment grade. Report the remaining maturities of credit derivative contracts where the
underlying reference asset is rated investment grade or, if not rated, is the equivalent of
investment grade under the bank's internal credit rating system.

7.d.(1)(b) Subinvestment grade. Report the remaining maturities of credit derivative contracts where
the underlying reference asset is rated below investment grade, i.e., subinvestment grade, or,
if not rated, is the equivalent of below investment grade under the bank's internal credit rating

system.
7.d.(2) Purchased protection. Report the notional amount of all credit derivative contracts where
the bank is the protection purchaser (beneficiary).

7.d.(2)(a) Investment grade. Report the remaining maturities of credit derivative contracts where the
underlying reference asset is rated investment grade or, if not rated, is the equivalent of
investment grade under the bank's internal credit rating system

15

DRAFT
Schedule RC-L - Derivatives and Off-Balance Sheet Items (cont.)

Item No. Caption and Instructions
7.d.(2)(b) Subinvestment grade. Report the remaining maturities of credit derivative contracts where
the underlying reference asset is rated below investment grade, i.e., subinvestment grade, or,
if not rated, is the equivalent of below investment grade under the bank's internal credit rating

system.

**************
Schedule RC-L - Derivatives and Off-Balance Sheet Items

Item No. Caption and Instructions
16 Over-the-counter derivatives. Items 16.a and 16.b.(1) through (8) are to be completed only
by banks with total assets of $10 billion or more. Include all over-the-counter (OTC) interest
rate, foreign exchange, commodity, equity, and credit derivative contracts that are held for
trading and held for purposes other than trading.

Column Instructions for items 16.a and 16.b.(1) through (8):
Column A, Banks and Securities Firms: Banks include U.S. banks and foreign banks as
defined in the Glossary entry for "Banks, U.S. and Foreign." Securities firms include brokerdealers that are registered with the U.S. Securities and Exchange Commission (SEC), firms
engaged in securities activities in the European Union (EU) that are subject to the EU's
Capital Adequacy Directive, and other firms engaged in securities activities.

Column B, Monoline Financial Guarantors: Monoline financial guarantors are companies
that are primarily engaged in the business of providing credit enhancement in the form of a
"guarantee" of payment of principal and interest to bond issuers when an issuer defaults. In
essence, these companies provide a back-up guarantee, which generally increases the bond
rating of debt issued by lower-rated borrowers, in exchange for insurance premiums.
Monoline financial guarantors provide guarantees on securities that range from municipal
bonds to structured financial products such as collateralized debt obligations (CDOs).

Column C, Hedge Funds: Hedge funds are generally privately-owned investment funds
with a limited range of investors. Hedge funds are not required to register with the SEC,
which provides them with an exemption in many jurisdictions from regulations governing short
selling, derivative contracts, leverage, fee structures, and the liquidity of investments in the
fund.

Column D, Sovereign Governments: Sovereign governments are the central governments
of foreign countries.

Column E, Corporations and All Other Counterparties: Corporations and all other
counterparties include all counterparties other than those included in columns A through D

above.

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Schedule RC-L - Derivatives and Off-Balance Sheet Items (cont.)

Item No. Caption and Instructions
16.a Net current credit exposure. Report in the appropriate column the sum of the net current

credit exposures on OTC derivative contracts by type of counterparty. The sum of the net
current credit exposures reported in columns A through E for this item may not equal the
amount reported in Schedule RC-R, Memorandum item 1, "Current credit exposure across all
derivative contracts covered by the risk-based capital standards," because the amount
reported in Schedule RC-R, Memorandum item 1, excludes, for example, OTC derivatives
not covered by the risk-based capital standards. All transactions within the consolidated

bank should be reported on a net basis.
The current credit exposure (sometimes referred to as the replacement cost) is the fair value
of a derivative contract when that fair value is positive. The current credit exposure is zero
when the fair value is negative or zero. For purposes of this item, the net current credit
exposure to an individual counterparty should be derived as follows: Determine whether a
legally enforceable bilateral netting agreement is in place between the reporting bank and the
counterparty. If such an agreement is in place, the fair values of all applicable derivative
contracts with that counterparty that are included in the scope of the netting agreement are

netted to a single amount, which may be positive, negative, or zero.
16.b

Fair value of collateraL. Report in the appropriate subitem and column the total fair value of
the collateral pledged by counterparties to secure OTC derivative transactions by type of
counterparty, even if the fair value of the collateral as of the report date exceeds the net
current credit exposure to a counterparty or the current credit exposure to a counterparty is
zero. Include the fair value of collateral in the reporting bank's possession and collateral held

on the bank's behalf by third party custodians.
16.b.(1)

Cash - U.S. dollar. Report in the appropriate counterparty column the total of all cash
denominated in U.S. dollars held on deposit in the bank or by third party custodians on behalf
of the bank that provide protection to the bank against counterparty risk on OTC derivatives.

16.b.(2)

Cash - Other currencies. Report in the appropriate counterparty column in U.S. dollar
equivalents the total of all cash denominated in non-U.S. currency held on deposit in the bank
or by third party custodians on behalf of the bank that provide protection to the bank against
counterparty risk on OTC derivatives.

16.b.(3)

U.S. Treasury securities. Report in the appropriate counterparty column the fair value of
U.S. Treasury securities held directly by the bank or by third party custodians on behalf of the
bank that provide protection to the bank against counterparty risk on OTC derivatives.

16.b.(4)

U.S. Government agency and U.S. Government-sponsored agency debt securities.
Report in the appropriate counterparty column the fair value of U.S. Government agency and
U.S. Government-sponsored agency debt securities held directly by the bank or by third party
custodians on behalf of the bank that provide protection to the bank against counterparty risk
on OTC derivatives.

16.b.(5)

Corporate bonds. Report in the appropriate counterparty column the fair value of corporate
bonds held directly by the bank or by third party custodians on behalf of the bank that provide
protection to the bank against counterparty risk on OTC derivatives.

16.b.(6)

Equity securities. Report in the appropriate counterparty column the fair value of equity
securities held directly by the bank or by third party custodians on behalf of the bank that
provide protection to the bank against counterparty risk on OTC derivatives.

17

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Schedule RC-L - Derivatives and Off-Balance Sheet Items (cont.)

Item No. Caption and Instructions
16.b.(7) All other collateraL. Report in the appropriate counterparty column the fair value of collateral

that cannot properly be reported in Schedule RC-L, item 16.b.(1) through item 16.b.(7), held
directly by the bank or by third party custodians on behalf of the bank that provide protection
to the bank against counterparty risk on OTC derivatives.
16.b.(8) Total fair value of collateraL. For each column, report the sum of items 16.b.(1) through

16.b.(7).

Schedule RC-M - Memoranda
Item No. Caption and Instructions
3 Other real estate owned. Report in the appropriate subitem the net book value of all real
estate other than (1) bank premises owned or controlled by the bank and its consolidated
subsidiaries (which should be reported in Schedule RC, item 6) and (2) direct and indirect
investments in real estate ventures (which should be reported in Schedule RC, item 9). Do
not deduct mortgages or other liens on such property (report mortgages or other liens in
Schedule RC, item 16, "Other borrowed money"). Amounts should be reported net of any

applicable valuation allowances.
Include as all other real estate owned:

(1) Foreclosed real estate, i.e.,
(a) Real estate acquired in any manner for debts previously contracted (including, but
not limited to, real estate acquired through foreclosure and real estate acquired by
deed in lieu of foreclosure), even if the bank has not yet received title to the property.
(b) Real estate collateral underlying a loan when the bank has obtained physical
possession of the collateral, regardless of whether formal foreclosure proceedings
have been instituted against the borrower.
Foreclosed real estate received in full or partial satisfaction of a loan should be recorded

at the fair value less cost to sell of the property at the time of foreclosure. This amount
becomes the "cost" of the foreclosed real estate. When foreclosed real estate is received
in full satisfaction of a loan, the amount, if any, by which the recorded amount of the loan
exceeds the fair value less cost to sell of the property is a loss which must be charged to
the allowance for loan and lease losses at the time of foreclosure. The amount of any
senior debt (principal and accrued interest) to which foreclosed real estate is subject at
the time of foreclosure must be reported as a liability in Schedule RC, item 16, "Other
borrowed money."
After foreclosure, each foreclosed real estate asset must be carried at the lower of (1) the
fair value of the asset minus the estimated costs to sell the asset or (2) the cost of the
asset (as defined in the preceding paragraph). This determination must be made on an
asset-by-asset basis. If the fair value of a foreclosed real estate asset minus the
estimated costs to sell the asset is less than the asset's cost, the deficiency must be
recognized as a valuation allowance against the asset which is created through a charge

18

DRAFT
Schedule RC-M - Memoranda (cont.
Item No.

3

(cont.)

Caption and Instructions
to expense. The valuation allowance should thereafter be increased or decreased (but
not below zero) through charges or credits to expense for changes in the asset's fair
value or estimated selling costs. (For further information, see the Glossary entries for
"foreclosed assets" and "troubled debt restructurings.")
(2) Foreclosed real estate backing mortgage loans insured by the Federal Housing
Administration (FHA) or the Farmers Home Administration (FmHA) or guaranteed by the
Veterans Administration (VA) that back Government National Mortgage Association
(GNMA) securities, i.e., "GNMA loans."

(3) Property originally acquired for future expansion but no longer intended to be used for
that purpose.
(4) Foreclosed real estate sold under contract and accounted for under the deposit method
of accounting in accordance with FASB Statement No. 66, Accounting for Sales of Real
Estate. Under this method, the seller does not record notes receivable, but continues to
report the real estate and any related existing debt on its balance sheet. The deposit
method is used when a sale has not been consummated and is commonly used when
recovery of the carrying value of the property is not reasonably assured. If the full
accrual, installment, cost recovery, reduced profit, or percentage-of-completion method of
accounting under FASB Statement No. 66 is being used to account for the sale, the
receivable resulting from the sale of the foreclosed real estate should be reported as a
loan in Schedule RC-C and any gain on the sale should be recognized in accordance

with FASB Statement No. 66. For further information, see the Glossary entry for
"foreclosed assets."

Property formerly but no longer used for banking may be reported either in this item as "AII
other real estate owned" or in Schedule RC, item 6, as "Premises and fixed assets."

NOTE: Items 3.b.(1) through 3.b.(6) and item 3.c of Schedule RC-M on the FFIEC 041 report will be
renumbered as items 3.a through 3.g. Items 3.b.(1) though 3.b.(7) and item 3.c of Schedule RC-M on the
FFIEC 031 report will be renumbered as items 3.a through 3.h. The current instructions for these items
are not being revised.

**************
Schedule RC-M - Memoranda (cont.)

Item No. Caption and Instructions
11 Does the bank act as trustee or custodian for Individual Retirement Accounts, Health
Savings Accounts, and other similar accounts? Indicate whether the institution acts as
trustee or custodian for Individual Retirement Accounts (IRAs), Health Savings Accounts
(HSAs), or other similar accounts. Other similar accounts include Roth IRAs, Coverdell
Education Savings Accounts, and Archer Medical Savings Accounts. State-chartered
institutions are allowed, under certain circumstances, to act as trustee or custodian for these
types of accounts without obtaining trust powers. In addition, national banks can serve as
custodian to IRAs, HSAs, and other similar accounts without obtaining trust powers. Place an
"X" in the box marked "Yes" if the reporting institution acts as trustee or custodian for these
types of accounts, regardless of whether it has trust powers. Otherwise, place an "X" in the
box marked "No."

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Schedule RC-M - Memoranda (cont.)

Item No. Caption and Instructions
12 Does the bank provide custody. safekeeping, or other services involving the
acceptance of orders for the sale or purchase of securities? Indicate whether the

institution takes orders from customers for the sale or purchase of securities, regardless of
whether this activity occurs in a custody or safekeeping account or elsewhere in the
institution as an accommodation to the customer. Place an "X" in the box marked "Yes" if the
reporting institution takes securities sale or purchase orders from customers. Otherwise,
place an "X" in the box marked "No."

Schedule RC-N - Past Due and Nonaccrual Loans, Leases, and Other Assets
Memoranda

Item No. Caption and Instructions
NOTE: On the FFIEC 041, Memorandum item 6 is not applicable to banks that have less than
$300 million in total assets.
6 Derivative contracts: Fair value of amounts carried as assets. Report in the appropriate

column the fair value of all credit derivative contracts (as defined for Schedule RC-L, item 7)
and all interest rate, foreign exchange rate, equity, and commodity and other derivative
contracts (as defined for Schedule RC-L, item 12) on which a required payment by the bank's
counterparty is past due 30 days or more as of the report date.

Schedule RC-O - Other Data for Deposit Insurance and FICO Assessments
Item No. Caption and Instructions
7 Unsecured "Other borrowings" with a remaining maturity of. Report the amount of the
bank's unsecured "Other borrowings" (as defined for Schedule RC-M, item 5.b) in the
appropriate subitems according to the amount of time remaining until their final contractual

maturities. In general, "Other borrowings" are unsecured if the bank (or a consolidated
subsidiary) has not pledged securities, loans, or other assets as collateral for the borrowing.
Include both fixed rate and floating rate "Other borrowings" that are unsecured.

The sum of Schedule RC-M, items 7.a through 7.d, must equal Schedule RC-M,

items 5.b.(1 )(a) through (d) minus item 10.b.
7.a One year or less. Report all unsecured "Other borrowings" with a remaining maturity of one

year or less. The unsecured "Other borrowings" that should be included in this item will also
have been reported in Schedule RC-M, item 5.b.(2), "Other borrowings with a remaining
maturity of one year or less."
7.b Over one year through three years. Report all unsecured "Other borrowings" with a

remaining maturity of over one year through three years.
7.c Over three years through five years. Report all unsecured "Other borrowings" with a

remaining maturity of over three years through five years.

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Schedule RC-O - Other Data for Deposit Insurance and FICO Assessments (cont.)

Item No. Caption and Instructions
7.d Over five years. Report all unsecured "Other borrowings" with a remaining maturity of over

five years.
8 Subordinated notes and debentures with a remaining maturity of. Report the amount of

the bank's subordinated notes and debentures (as defined for Schedule RC, item 19) in the
appropriate subitems according to the amount of time remaining until their final contractual
maturities. Include both fixed rate and floating rate subordinated notes and debentures.
The sum of Schedule RC-M, items 8.a through 8.d, must equal Schedule RC, item 19,
"Subordinated notes and debentures."
8.a One year or less. Report all subordinated notes and debentures with a remaining maturity

of one year or less.
8.b Over one year through three years. Report all subordinated notes and debentures with a

remaining maturity of over one year through three years.
8.c Over three years through five years. Report all subordinated notes and debentures with a

remaining maturity of over three years through five years.
8.d Over five years. Report all subordinated notes and debentures with a remaining maturity of

over five years.

SCHEDULE RC.Q - ASSETS AND LIABILITIES MEASURED AT FAIR
VALUE ON A RECURRING BASIS
General Instructions
Schedule RC-Q is to be completed by banks that: (1) have total assets of $500 million or more as of the
beginning of their fiscal year, (2) have elected to report financial instruments or servicing assets and

liabiliies at fair value under a fair value option with changes in fair value recognized in earnings, or (3) are
required to complete Schedule RC-D, Trading Assets and Liabilities. Banks should report all assets and
liabilities that are measured at fair value in the financial statements on a recurring basis (at least

annually).

Column Instructions
Column A. Total Fair Value Reported on Schedule RC
Report in Column A the total fair value, as defined by FASB Statement No. 157, "Fair Value
Measurements" (FAS 157), of those assets and liabilities reported on Schedule RC, Balance Sheet, that
the bank reports at fair value on a recurring basis.

Columns B through E. Fair Value Measurements and Netting Adjustments
For items reported in Column A, report in Columns C, D, and E the fair value amounts which fall in their
entirety in Levels 1, 2, and 3, respectively. The level in the fair value hierarchy within which a fair value
measurement in its entirety falls should be determined based on the lowest level input that is significant to

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DRAFT
Schedule RC-Q - Assets and Liabilties Measured at Fair Value on a Recurring Basis (cont.
Column Instructions (cont.)
the fair value measurement in its entirety. Thus, for example, if the fair value of an asset or liability has
elements of both Level 2 and Level 3 measurement inputs, report the entire fair value of the asset or
liability in Column D or Column E based on the lowest level measurement input with the most significance
to the fair value of the asset or liability in its entirety as described in FAS 157. For assets and liabilities
that the bank has netted under legally enforceable master netting agreements in accordance with FASB
Interpretation No. 39, "Offsetting of Amounts Related to Certain Contracts," or FASB Interpretation
No. 41, "Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase Agreements,"
report the gross amounts in Columns C, D, and E and the related netting adjustment in Column B. For
more information on Level 1, 2, and 3 measurement inputs, see the Glossary entry for "fair value."

Schedule RC-Q - Assets and Liabilities Measured at Fair Value on a Recurring Basis (cont.
Item Instructions

For each item in Schedule RC-Q, the sum of columns C, D, and E less column B must equal column A.

Item No. Caption and Instructions
1 Available-tor-sale securities. Report in the appropriate column the total fair value of

available-for-sale debt and equity securities as reported in Schedule RC, item 2.b; the fair
values determined using Level 1, Level 2, and Level 3 measurement inputs; and any netting

adjustments.
2 Federal tunds sold and securities purchased under agreements to reselL. Report in the

appropriate column the total fair value of those federal funds sold and securities purchased
under agreements to resell reported in Schedule RC, items 3.a and 3.b, that the bank has
elected to report under the fair value option; the fair values determined using Level 1, Level 2,
and Level 3 measurement inputs; and any netting adjustments.

3 Loans and leases held tor sale. Report in the appropriate column the total fair value of
those loans held for sale reported in Schedule RC-C, part i, that the bank has elected to
report under the fair value option; the fair values determined using Level 1, Level 2, and
Level 3 measurement inputs; and any netting adjustments. Loans held for sale that the bank
has elected to report under the fair value option are included in Schedule RC-C, part I, and
Schedule RC, item 4.a. Exclude loans held for sale that are reported at the lower of cost or
fair value in Schedule RC, item 4.a, and loans that have been reported as trading assets in
Schedule RC, item 5. Leases are generally not eligible for the fair value option.

4 Loans and leases held tor investment. Report in the appropriate column the total fair
value of those loans held for investment reported in Schedule RC-C, part I, that the bank has
elected to report under the fair value option; the fair values determined using Level 1, Level 2,
and Level 3 measurement inputs; and any netting adjustments. Loans held for investment
that the bank has elected to report under the fair value option are included in Schedule RC-C,
part i, and Schedule RC, item 4.b. Leases are generally not eligible for the fair value option.

5 Trading assets:
5.a Derivative assets. Report in the appropriate column the total fair value of derivative assets
held for trading purposes as reported in Schedule RC, item 5; the fair values determined
using Level 1, Level 2, and Level 3 measurement inputs; and any netting adjustments.

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Schedule RC-Q - Assets and Liabilities Measured at Fair Value on a Recurring Basis (cont.)

Item No. Caption and Instructions
5.b Other trading assets. Report in the appropriate column the total fair value of all trading
assets, except for derivatives, as reported in Schedule RC, item 5; the fair values determined
using Level 1, Level 2, and Level 3 measurement inputs, including the fair values of loans
that have been reported as trading assets; and any netting adjustments.

5.b.(1) Nontrading securities at fair value with changes in fair value reported in current
earnings. Report in the appropriate column the total fair value of those securities the bank
has elected to report under the fair value option that is included in Schedule RC-Q, item 5.b
above; the fair values determined using Level 1, Level 2, and Level 3 measurement inputs;
and any netting adjustments. Securities that the bank has elected to report at fair value

under the fair value option are reported as trading securities pursuant to FAS 159 even
though management did not acquire the securities principally for the purpose of trading.
6 All other assets. Report in the appropriate column the total fair value of all other assets that

are required to be measured at fair value on a recurring basis or that the bank has elected to
report under the fair value option that is included in Schedule RC, Balance Sheet, and is not
reported in Schedule RC-Q, items 1 through 5 above; the fair values determined using
Level 1, Level 2, and Level 3 measurement inputs; and any netting adjustments.
Include derivative assets held for purposes other than trading, interest-only strips receivable
(not in the form of a security) held for purposes other than trading, and other categories of
assets required to be measured at fair value on the balance sheet on a recurring basis under
applicable accounting standards.
7 Total assets measured at fair value on a recurring basis. Report the sum of items 1

through 6.

8 Deposits. Report in the appropriate column the total fair value of those deposits reported in
Schedule RC, items 13.a and 13.b, that the bank has elected to report under the fair value
option; the fair values determined using Level 1, Level 2, and Level 3 measurement inputs;
and any netting adjustments. Deposits withdrawable on demand (e.g., demand and savings
deposits in domestic offices) are generally not eligible for the fair value option.
9 Federal funds purchased and securities sold under agreements to repurchase. Report

in the appropriate column the total fair value of those federal funds purchased and securities
sold under agreements to repurchase reported in Schedule RC, items 14.a and 14.b, that the
bank has elected to report under the fair value option; the fair values determined using
Level 1, Level 2, and Level 3 measurement inputs; and any netting adjustments.

10 Trading liabilities:
10.a Derivative liabilities. Report in the appropriate column the total fair value of derivative
liabilities held for trading purposes as reported in Schedule RC, item 15; the fair values
determined using Level 1, Level 2, and Level 3 measurement inputs; and any netting

adjustments.

10.b Other trading liabilities. Report in the appropriate column the total fair value of trading
liabilities, except for derivatives, as reported in Schedule RC, item 15; the fair values
determined using Level 1, Level 2, and Level 3 measurement inputs; and any netting

adjustments.

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Schedule RC-Q - Assets and Liabilities Measured at Fair Value on a Recurring Basis (cont.

Item No. Caption and Instructions
11 Other borrowed money. Report in the appropriate column the total fair value of those
Federal Home Loan Bank advances and other borrowings reported in Schedule RC, item 16,
that the bank has elected to report under the fair value option; the fair values determined
using Level 1, Level 2, and Level 3 measurement inputs; and any netting adjustments.

12 Subordinated notes and debentures. Report in the appropriate column the total fair value
of those subordinated notes and debentures (including mandatory convertible debt) reported
in Schedule RC, item 19, that the bank has elected to report under the fair value option; the
fair values determined using Level 1, Level 2, and Level 3 measurement inputs; and any

netting adjustments.

13 All other liabilities. Report in the appropriate column the total fair value of all other liabilities
that are required to be measured at fair value on a recurring basis or that the bank has
elected to report under the fair value option that is included in Schedule RC, Balance Sheet,
and is not reported in Schedule RC-Q, items 8 through 12 above; the fair values determined
using Level 1, Level 2, and Level 3 measurement inputs; and any netting adjustments.
Include derivative liabilities held for purposes other than trading and other categories of
liabilities required to be measured at fair value on the balance sheet on a recurring basis
under applicable accounting standards.

liabilities measured at fair value on a recurring basis. Report the sum of items 8

14 Total

through 13.
Schedule RC-Q - Assets and Liabilities Measured at Fair Value on a Recurring Basis

Memoranda

Item No. Caption and Instructions
1 All other assets. Disclose in Memorandum items 1.a through 1.f each component of all

other assets, and the dollar amount of such component, that is greater than $25,000 and
exceeds 25 percent of the amount reported in Schedule RC-Q, item 6, column A. For each
component of all other assets that exceeds this disclosure threshold for which a preprinted
caption has not been provided in Memorandum items 1.a and 1.b, describe the component
with a clear but concise caption in Memorandum items 1.c through 1.f. These descriptions
should not exceed 50 characters in length (including spacing between words).
Preprinted captions have been provided for the following categories of all other assets:

. Memorandum item 1.a, "Mortgage servicing assets," and
. Memorandum item 1.b, "Nontrading derivative assets."
2 All other liabilties. Disclose in Memorandum items 2.a through 2.f each component of all

other liabilities, and the dollar amount of such component, that is greater than $25,000 and
exceeds 25 percent of the amount reported in Schedule RC-Q, item 13, column A. For each
component of all other liabilities that exceeds this disclosure threshold for which a preprinted
caption has not been provided in Memorandum items 2.a and 2.b, describe the component
with a clear but concise caption in Memorandum items 2.c through 2.f. These descriptions
should not exceed 50 characters in length (including spacing between words).

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Schedule RC-Q - Assets and Liabilities Measured at Fair Value on a Recurring Basis
Memoranda

Item No. Caption and Instructions
2 Preprinted captions have been provided for the following categories of all other liabilities:
(cont.)
. Memorandum item 2.a, "Loan commitments (not accounted for as derivatives)," and
. Memorandum item 2.b, "Nontrading derivative liabilities."

Schedule RC-R - Regulatory Capital
Derivatives and Off-Balance Sheet Items
(Page RC-R-22c of the Call Report instructions)

Banks should refer to the supervisory guidance issued by their primary federal supervisory authority for
information on how they should treat credit derivatives for risk-based capital purposes and, as a
consequence, for purposes of completing the section of Schedule RC-R for derivatives and off-balance
sheet items.

Treatment of Liquidity Facilities for Asset-Backed Commercial Paper Programs - Banks that provide
liquidity facilities to asset-backed commercial paper (ABCP) programs, whether or not they are the
program sponsor, must report these facilities in the following manner in Schedule RC-R (unless the bank
is a sponsor and has chosen to consolidate the ABCP program assets onto its balance sheet for riskbased capital purposes).1 The full amount of the unused portion of an eligible liquidity facility with an
original maturity exceeding one year should be reported in item 53.a, column A. The full amount of the
unused portion of an eligible liquidity facility with an original maturity of one year or less should be
reported in item 53.b, column A. For ineligible liquidity facilities (both direct credit substitutes and recourse
obligations), banks should report the full amount of the unused portion of the facility in Schedule RC-R,
item 51, column A.

**************
Schedule RC-R - Regulatory Capital

Item No. Caption and Instructions
53 Unused commitments:
53.a With an original maturity exceeding one year. Report in column A the unused portion of

commitments to make or purchase extensions of credit in the form of loans or participations
in loans, lease financing receivables, or similar transactions as reflected in Schedule RC-L,
item 1, that have an original maturity exceeding one year and are subject to the risk-based
capital guidelines. Under the risk-based capital guidelines, the unused portion of
commitments (facilities) with an original maturity of one year or less (other than eligible assetbacked commercial paper liquidity facilities) or which are unconditionally cancelable (without

1 For further guidance on eligible and ineligible liquidity facilities, banks should refer to the "Interagency Guidance on
the Eligibility of Asset-Backed Commercial Paper Liquidity Facilities and the Resulting Risk-Based Capital Treatment"
issued August 4,2005 (FDIC Financial
Institution Letter 74-2005, Federal Reserve Supervision and Regulation Letter
05-13, and acc Bulletin 2005-26).

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DRAFT
Schedule RC-R - Regulatory Capital (cont.)
Item No.

53.a
(cont.)

Caption and Instructions
cause) at any time by the bank, provided a separate credit decision is made before each
drawing, have a zero percent conversion factor. The unused portion of such commitments
should be excluded from this item and from item 53.b. "Original maturity" is defined as the
length of time between the date a commitment is issued and the date of maturity, or the
earliest date on which the bank (1) is scheduled to (and as a normal practice actually does)
review the facility to determine whether or not it should be extended and (2) can
unconditionally cancel the commitment. Also include in column A all revolving underwriting
facilities (RUFs) and note issuance facilities (NIFs), regardless of maturity.
In the case of consumer home equity or mortgage lines of credit secured by liens on
1-4 family residential properties, a bank is deemed able to unconditionally cancel the
commitment if, at its option, it can prohibit additional extensions of credit, reduce the credit
line, and terminate the commitment to the full extent permitted by relevant federal law.
Retail credit cards and related plans, including overdraft checking plans and overdraft
protection programs, are defined to be short-term commitments that should be converted at
zero percent and excluded from this item 53.a if the bank has the unconditional right to
cancel the line of credit at any time in accordance with applicable law.

For commitments providing for increases in the dollar amount of the commitment, the amount
to be converted to an on-balance sheet credit equivalent amount and risk weighted is the
maximum dollar amount that the bank is obligated to advance at any time during the life of

the commitment. This includes seasonal commitments where the dollar amount of the
commitment increases during the customer's peak business period. In addition, this riskbased capital treatment applies to long-term commitments that contain short-term options
which, for a fee, allow the customer to increase the dollar amount of the commitment. Until
the short-term option has expired, the reporting bank must convert and risk weight the
amount which it is obligated to lend if the option is exercised. After the expiration of a
short-term option which has not been exercised, the unused portion of the original amount of
the commitment is to be used in the credit conversion process.
. In column B, report 50 percent of the amount of unused commitments reported in

column A.

· In column C-O% risk weight, include the credit equivalent amount of unused
commitments for extensions of credit to counterparties who meet, or that have
guarantees or collateral that meets, the criteria for the zero percent risk weight category
as described in the instructions for Risk-Weighted Assets and for Schedule RC-R,

items 34 through 42, above.

. In column 0-20% risk weight, include the credit equivalent amount of unused
commitments for extensions of credit to counterparties who meet, or that have
guarantees or collateral that meets, the criteria for the 20 percent risk weight category as
described in the instructions for Risk-Weighted Assets and for Schedule RC-R, items 34
through 42, above. Include commitments that have been conveyed to U.S. and other
OECD depository institutions.

. In column E-50% risk weight, include the credit equivalent amount of unused
commitments for extensions of credit to counterparties who meet, or that have
guarantees or collateral that meets, the criteria for the 50 percent risk weight category as

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DRAFT
Schedule RC-R - Regulatory Capital (cont.
Item No.

Caption and Instructions

53.a
(cont.)

described in the instructions for Risk-Weighted Assets and for Schedule RC-R, items 34

through 42, above.
. In column F-100% risk weight, include the portion of the credit equivalent amount
reported in column B that is not included in columns C through E.

53.b With an original maturity of one year or less to asset-backed commercial paper

conduits. Report in column A the unused portion of eligible asset-backed commercial paper
(ABCP) liquidity facilities with an original maturity of one year or less.
Under the risk-based capital guidelines, the unused portion of commitments (facilities) with an
original maturity of one year or less (other than eligible ACBP liquidity facilities) or which are
unconditionally cancelable (without cause) at any time by the bank, provided a separate

credit decision is made before each drawing, have a zero percent conversion factor. The
unused portion of such commitments should be excluded from this item.

.

In column B, report 10 percent of the amount of unused commitments reported in
column A.

.

In column C-O% risk weight, include the credit equivalent amount of unused eligible
ABCP liquidity facilities to counterparties who meet, or that have guarantees or collateral
that meets, the criteria for the zero percent risk weight category as described in the
instructions for Risk-Weighted Assets and for Schedule RC-R, items 34 through 42,

above.

.

In column 0-20% risk weight, include the credit equivalent amount of unused eligible
ABCP liquidity facilities to counterparties who meet, or that have guarantees or collateral
that meets, the criteria for the 20 percent risk weight category as described in the
instructions for Risk-Weighted Assets and for Schedule RC-R, items 34 through 42,

above.

.

In column E-50% risk weight, include the credit equivalent amount of unused eligible
ABCP liquidity facilities to counterparties who meet, or that have guarantees or collateral
that meets, the criteria for the 50 percent risk weight category as described in the
instructions for Risk-Weighted Assets and for Schedule RC-R, items 34 through 42,

above.

.

In column F-100% risk weight, include the portion of the credit equivalent amount
reported in column B that is not included in columns C through E.

**************

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Schedule RC-R - Regulatory Capital
Memoranda

Item No. Caption and Instructions
1 Current credit exposure across all derivative contracts covered by the risk-based

capital standards. Report the total current credit exposure amount for all interest rate,
foreign exchange, commodity, and equity derivative contracts covered by the risk-based
capital standards after considering applicable legally enforceable bilateral netting
agreements. Banks that are subject to the market risk capital guidelines should exclude all
covered positions subject to these guidelines, except for foreign exchange derivatives that

are outside of the trading account and all over-the-counter (OTC) derivatives. Foreign
exchange derivatives that are outside of the trading account and all OTC derivatives continue
to have a counterparty credit risk capital charge and, therefore, a current credit exposure
amount for these derivatives should be reported in this item.
Include the current credit exposure arising from credit derivative contracts where the bank is
the protection purchaser (beneficiary) and the credit derivative contract is either (a) defined
as a covered position under the market risk rule or (b) not defined as a covered position
under the market risk rule and is not recognized as a guarantee for risk-based capital

purposes.
The following types of derivative contracts are not covered by the risk-based capital

standards:
(1) interest rate, foreign exchange, equity, commodity and other derivative contracts traded
on exchanges that require daily payment of variation margin,

(2) foreign exchange contracts with an original maturity of fourteen calendar days or less,

and

(3) all written option contracts except for those that are, in substance, financial guarantees.
Purchased options held by the reporting bank that are traded on an exchange are covered by
the risk-based capital standards unless such options are subject to a daily variation margin.
Variation margin is defined as the gain or loss on open positions, calculated by marking to
market at the end of each trading day. Such gain or loss is credited or debited by the
clearing house to each clearing member's account, and by members to their customers'

accounts.
If a written option contract acts as a financial guarantee, then it will be treated as a direct
credit substitute for risk-based capital purposes and the notional amount of the option should
be included in Schedule RC-R, item 52, column A, as an "other off-balance sheet liabiliy."
An example of such a contract occurs when the reporting bank writes a put option to a
second bank which has a loan to a third party. The strike price would be the equivalent of the
par value of the loan. If the credit quality of the loan deteriorates, thereby reducing the value
of the loan to the second bank, the reporting bank would be required by the second bank to
take the loan onto its books.

Current credit exposure (sometimes referred to as the replacement cost) is the fair value of a
contract when that fair value is positive. The current credit exposure is zero when the fair
value is negative or zero. Current credit exposure should be derived as follows: Determine
whether a legally enforceable bilateral netting agreement is in place between the reporting
bank and a counterparty. If such an agreement is in place, the fair values of all applicable

28

DRAFT
Schedule RC-R - Regulatory Capital (cont.)
Memoranda
Item No.
1

(cont.)

Caption and Instructions
derivative contracts with that counterparty that are included in the netting agreement are
netted to a single amount. Next, for all other contracts covered by the risk-based capital
standards that have positive fair values, the total of the positive fair values is determined.
Then, report in this item the sum of (i) the net positive fair values of applicable derivative
contracts subject to legally enforceable bilateral netting agreements and (ii) the total positive
fair values of all other contracts covered by the risk-based capital standards. The current
credit exposure reported in this item is a component of the credit equivalent amount of
derivative contracts that is to be reported in Schedule RC-R, item 54, column B.
Consistent with the risk-based capital guidelines, if a bilateral netting agreement covers
off-balance sheet derivative contracts that are normally not covered by the risk-based capital
standards (e.g., foreign exchange contracts with an original maturity of 14 calendar days or
less and contracts traded on exchanges that require daily payment of variation margin), the
reporting bank may elect to consistently either include or exclude the fair values of all such
derivative contracts when determining the net current credit exposure for that agreement.

The definition of a legally enforceable bilateral netting agreement for purposes of this item is
the same as that set forth in the risk-based capital rules. These rules require a written
bilateral netting contract that creates a single legal obligation covering all included individual
contracts and that does not contain a walkaway clause. The bilateral netting agreement must
be supported by a written and reasoned legal opinion representing that an organization's
claim or obligation, in the event of a legal challenge, including one resulting from default,
insolvency, bankruptcy, or similar circumstances, would be found by the court and
administrative authorities of all relevant jurisdictions to be the net sum of all positive and
negative fair values of contracts included in the bilateral netting contract.

**************
Schedule RC.R - Regulatory Capital
Memoranda

Item No. Caption and Instructions
2.9 Credit derivative contracts: Purchased credit protection that (a) is a covered position

under the market risk rule or (b) is not a covered position under the market risk rule
and is not recognized as a guarantee for risk-based capital purposes. Report in the
appropriate subitem the remaining maturities of credit derivative contracts where the bank is
the protection purchaser (beneficiary) and the credit derivative contract is either (a) defined
as a covered position under the market risk rule or (b) not defined as a covered position
under the market risk rule and is not recognized as a guarantee for risk-based capital
purposes. Banks should report the full gross notional amount of all such credit derivative
contracts in the appropriate subitem.

2.9.(1) Investment grade. Report the remaining maturities of those credit derivative contracts
described in Schedule RC-R, Memorandum item 2.g, above, where the underlying reference
asset is rated investment grade or, if not rated, is the equivalent of investment grade under
the bank's internal credit rating system.

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Schedule RC-R - Regulatory Capital (cont.
Memoranda

Item No. Caption and Instructions
2.g.(2) Subinvestment grade. Report the remaining maturities of those credit derivative contracts
described in Schedule RC-R, Memorandum item 2.g, above, where the underlying reference
asset is rated below investment grade, i.e., subinvestment grade, or, if not rated, is the
equivalent of below investment grade under the bank's internal credit rating system.

30