Consolidated Financial Statements for Holding Companies, Exercises of Accounting

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Board of Governors of the Federal Reserve System

Instructions for Preparation of

Consolidated Financial Statements for

Holding Companies

Reporting Form FR Y-9C

Effective September 2019

Contents for

Y-9C Instructions

Organization of the Instruction Book

The instruction book is divided into three sections:

(1) The General Instructions describing overall report- ing requirements.

(2) The Line Item Instructions for each schedule of the report for the consolidated holding company.

(3) The Glossary presenting, in alphabetical order, defi- nitions and discussions of accounting treatments under generally accepted accounting principles (GAAP) and other topics that require more extensive treatment than is practical to include in the line item instructions or that are relevant to several line items or to the overall preparation of these reports.

In determining the required treatment of particular trans- actions or portfolio items or in determining the defini-

tions and scope of the various items, the General Instruc- tions, the line item instructions, and the Glossary (all of which are extensively cross-referenced) must be used jointly. A single section does not necessarily give the complete instructions for completing all the items of the reports. The instructions and definitions in section (2) are not necessarily self-contained; reference to more detailed treatments in the Glossary may be needed. However, the Glossary is not, and is not intended to be, a com- prehensive discussion of accounting principles or reporting.

Additional copies of this instruction book may be obtained from the Federal Reserve Bank in the district where the reporting holding company submits its FR Y-9C reports, or may be found on the Federal Reserve Board’s public website (www.federalreserve.gov).

FR Y-9C (^) Contents- Contents March 2013

LINE ITEM INSTRUCTIONS FOR THE CONSOLIDATED FINANCIAL STATEMENTS

Contents

Contents

INSTRUCTIONS FOR PREPARATION OF

Financial Statements for

Holding Companies

For purposes of this report, all references to ‘‘bank(s)’’ and ‘‘associated bank(s)’’ are

inclusive of ‘‘savings association(s)’’ unless otherwise noted.

GENERAL INSTRUCTIONS

Who Must Report

A. Reporting Criteria

All bank holding companies, savings and loan holding companies,^1 securities holding companies and U.S. inter- mediate holding companies (collectively “holding com- panies”), regardless of size, are required to submit finan- cial statements to the Federal Reserve, unless specifically exempted (see description of exemptions below). Certain SLHCs are exempt from filing the FR Y-9C and the FR Y-9SP report and would file the FR 2320 report.^2

The specific reporting requirements for each holding company depend upon the size of the holding company, or other specific factors as determined by the appropriate Federal Reserve Bank. Holding companies must file the appropriate forms as described below:

(1) Holding Companies with Total Consolidated Assets of $3 billion or More. Holding companies with total consolidated assets of $3 billion or more (the top tier of a multi-tiered holding company, when applicable) must file:

(a) the Consolidated Financial Statements for Hold- ing Companies (FR Y-9C) quarterly, as of the last calendar day of March, June, September, and December.

(b) the Parent Company Only Financial Statements for Large Holding Companies (FR Y-9LP) quar- terly, as of the last calendar day of March, June, September, and December.

Each holding company that files the FR Y-9C must submit the FR Y-9LP for its parent company.

For tiered holding companies. When holding com- panies with total consolidated assets of $3 billion, or more, own or control, or are owned or controlled by, other holding companies (i.e., are tiered holding companies), only the top-tier holding company must file the FR Y-9C for the consolidated holding com- pany organization unless the top-tier holding com- pany is exempt from reporting the FR Y-9C. If a top-tier holding company is exempt from reporting the FR Y-9C, then the lower-tier holding company (with total consolidated assets of $3 billion or more) must file the FR Y-9C.

In addition, such tiered holding companies, regard- less of the size of the subsidiary holding companies, must also submit, or have the top-tier holding com- pany subsidiary submit, a separate FR Y-9LP for each lower-tier holding company of the top-tier holding company.

(2) Holding Companies that are Employee Stock Own- ership Plans. Holding companies that are employee stock ownership plans (ESOPs) as of the last calendar day of the calendar year must file the Financial Statements for Employee Stock Ownership Plan Hold- ing Companies (FR Y-9ES) on an annual basis, as of December 31. No other FR Y-9 series form is required. However, holding companies that are subsidiaries of

1. Savings and loan holding companies (SLHCs) do not include any trust (other than a pension, profit-sharing, stockholders’ voting, or business trust) which controls a savings association if such trust by its terms must terminate within 25 years or not later than 21 years and 10 months after the death of individuals living on the effective date of the trust, and (a) was in existence and in control of a savings association on June 26, 1967, or, (b) is a testamentary trust. See Section 238.2 of the interim final rule for more information.
2. The following SLHCs are exempt: (1)any grandfathered unitary SLHC with primarily commercial assets and thrifts that make up less than 5 percent of its consolidated assets; and (2) any SLHC that primarily holds insurance-related assets and does not otherwise submit financial reports with the SEC pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934.

FR Y9C GEN-

General Instructions September 2019

ESOP holding companies (i.e., a tiered holding com- pany) must submit the appropriate FR Y-9 series in accordance with holding company reporting require- ments.

(3) Holding Companies with Total Consolidated Assets of Less Than $3 billion. Holding companies with total consolidated assets of less than $3 billion must file the Parent Company Only Financial Statements for Small Holding Companies (FR Y-9SP) on a semiannual basis, as of the last calendar day of June and December.^3

For tiered holding companies. When holding com- panies with total consolidated assets of less than $3 billion, own or control, or are owned or controlled by, other holding companies (i.e., are tiered holding companies), the top-tier holding company must file the FR Y-9SP for the top-tier parent company of the holding company. In addition, such tiered holding companies must also submit, or have the holding company subsidiary submit, a separate FR Y-9SP for each lower-tier holding company.

When a holding company that has total consolidated assets of less than $3 billion is a subsidiary of a holding company that files the FR Y-9C, the holding company that has total consolidated assets of less than $3 billion would report on the FR Y-9LP rather than the FR Y-9SP.

The instructions for the FR Y-9LP, FR Y-9ES, and the FR Y-9SP are not included in this booklet but may be obtained from the Federal Reserve Bank in the district where the holding company files its reports, or may be

found on the Federal Reserve Board’s public website (www.federalreserve.gov/apps/reportforms).

B. Exemptions from Reporting the Holding Company Financial Statements The following holding companies do not have to file holding company financial statements: (1) a holding company that has been granted an exemp- tion under Section 4(d) of the Bank Holding Com- pany Act; or (2) a ‘‘qualified foreign banking organization’’ as defined by Section 211.23(a) of Regulation K (12 CFR 211.23(a)) that controls a U.S. subsidiary bank. Holding companies that are not required to file under the above criteria may be required to file this report by the Federal Reserve Bank of the district in which they are registered.

C. Shifts in Reporting Status A top-tier holding company that reaches $3 billion or more in total consolidated assets as of June 30 of the preceding year must begin reporting the FR Y-9C and the FR Y-9LP in March of the current year, and any lower- tier holding companies must begin reporting the FR Y-9LP in March of the current year. If a top-tier holding company reaches $3 billion or more in total consolidated assets due to a business combination, a transaction between entities under common control, or a branch acquisition that is not a business combination, then the holding company must begin reporting the FR Y-9C and the FR Y-9LP with the first quarterly report date follow- ing the effective date of the business combination, a transaction between entities under common control, or branch acquisition, and any lower-tier holding companies must begin reporting the FR Y-9LP with the first quar- terly report date following the effective date. In general, once a holding company reaches or exceeds $3 billion in total consolidated assets and begins filing the FR Y-9C and FR Y-9LP, it should file a complete FR Y-9C and FR Y-9LP going forward (and any lower-tier holding com- panies should file a complete FR Y-9LP going forward). If a holding company’s total consolidated assets should subsequently fall to less than $3 billion for four consecu- tive quarters, then the holding company may revert to

3. The Reserve Bank with whom the reporting holding company files its reports may require that a holding company with total consolidated assets of less than $3 billion submit the FR Y-9C and the FR Y-9LP reports to meet supervisory needs. Reserve Banks will consider such criteria includ- ing, but not limited to, whether the holding company (1) is engaged in significant nonbanking activities either directly or through a nonbank subsidiary; (2) conducts significant off-balance-sheet activities, including securitizations or managing or administering assets for third parties, either directly or through a nonbank subsidiary; or (3) has a material amount of debt or equity securities (other than trust preferred securities) outstanding that are registered with the Securities and Exchange Commission. In addition, any holding company that is not subject to the Federal Reserve’s Capital Adequacy Guidelines, but nonetheless elects to comply with the guidelines, are required to file a complete FR Y-9C and FR Y-9LP report, and generally would not be permitted to revert back to filing the FR Y-9SP report in any subsequent periods.

General Instructions

GEN-2 FR Y9C

General Instructions September 2018

for its annual reports to the SEC or, for those holding companies that do not file reports with the SEC, on the same basis as described in generally accepted accounting principles (GAAP). Generally, under the rules for con- solidation established by the SEC and by GAAP, holding companies should consolidate any company in which it owns more than 50 percent of the outstanding voting stock.

Each holding company shall account for any investments in unconsolidated subsidiaries, associated companies, and those corporate joint ventures over which the holding company exercises significant influence according to the equity method of accounting, as prescribed by GAAP. The equity method of accounting is described in Sched- ule HC, item 8. (Refer to the Glossary entry for ‘‘subsid- iaries’’ for the definitions of the terms subsidiary, associ- ated company, and corporate joint venture.)

Rules of Consolidation

For purposes of these reports, all offices (i.e., branches, subsidiaries, VIEs, and IBFs) that are within the scope of the consolidated holding company as defined above are to be reported on a consolidated basis. Unless the instruc- tions specifically state otherwise, this consolidation shall be on a line-by-line basis, according to the caption shown. As part of the consolidation process, the results of all transactions and all intercompany balances (e.g., outstanding asset/debt relationships) between offices, subsidiaries, and other entities included in the scope of the consolidated holding company are to be eliminated in the consolidation and must be excluded from the Consoli- dated Financial Statements for Holding Companies. (For example, eliminate in the consolidation (1) loans made by the holding company to a consolidated subsidiary and the corresponding liability of the subsidiary to the hold- ing company, (2) a consolidated subsidiary’s deposits in another holding company consolidated subsidiary and the corresponding cash or interest-bearing asset balance of the subsidiary, and (3) the intercompany interest income and expense related to such loans and deposits of the holding company and its consolidated subsidiary.)

Exception: For purposes of reporting the total assets of captive insurance and reinsurance subsidiaries in Sched- ule HC-M, Memoranda, items 7(a) and 7(b), only, hold- ing companies should measure the subsidiaries’ total assets before eliminating intercompany transactions between the consolidated subsidiary and other offices or

subsidiaries of the consolidated holding company. Other- wise, captive insurance and reinsurance subsidiaries should be reported on a consolidated basis as described in the preceding paragraph. Subsidiaries of Subsidiaries. For a subsidiary of a hold- ing company that is in turn the parent of one or more subsidiaries: (1) Each subsidiary shall consolidate its majority-owned subsidiaries in accordance with the consolidation requirements set forth above. (2) Each subsidiary shall account for any investments in unconsolidated subsidiaries, corporate joint ventures over which the holding company exercises signifi- cant influence, and associated companies according to the equity method of accounting. Noncontrolling (minority) interests. A noncontrolling interest, sometimes called a minority interest, is the portion of equity in a holding company’s subsidiary not attributable, directly or indirectly, to the parent holding company. Report noncontrolling interests in the reporting holding company’s consolidated subsidiaries in Schedule HC, item 27(b), ‘‘Noncontrolling (minority) interests in consolidated subsidiaries.’’ Report the portion of consoli- dated net income reported in Schedule HI, item 12, that is attributable to noncontrolling interests in consolidated subsidiaries of the holding company in Schedule HI, item 13.

Reporting by type of office (for holding companies with foreign offices)

Some information in the Consolidated Financial State- ments for Holding Companies are to be reported by type of office (e.g., for domestic offices or for foreign offices) as well as for the consolidated holding company. Where information is called for by type of office, the information reported shall be the office component of the consoli- dated item unless otherwise specified in the line item instructions. That is, as a general rule, the office informa- tion shall be reported at the same level of consolidation as the fully consolidated statement, shall reflect only transactions with parties outside the scope of the consoli- dated holding company, and shall exclude all transactions between offices of the consolidated holding company as defined above. See the Glossary entries for ‘‘domestic office’’ and ‘‘foreign office’’ for the definitions of these terms.

General Instructions

GEN-4 FR Y9C

General Instructions December 2014

Exclusions from coverage of the

consolidated report

Subsidiaries where control does not rest with the par- ent. If control of a majority-owned subsidiary by the holding company does not rest with the holding company because of legal or other reasons (e.g., the subsidiary is in bankruptcy), the subsidiary is not required to be consoli- dated for purposes of the report.^3 Thus, the holding company’s investments in such subsidiaries are not elimi- nated in consolidation but will be reflected in the reports in the balance sheet item for ‘‘Investments in unconsoli- dated subsidiaries and associated companies’’ (Schedule HC, item 8) and other transactions of the holding com- pany with such subsidiaries will be reflected in the appropriate items of the reports in the same manner as transactions with unrelated outside parties. Additional guidance on this topic is provided in accounting stan- dards, including ASC Subtopic 810-10, Consolidation – Overall (formerly FASB Statement No. 94, Consolida- tion of All Majority-Owned Subsidiaries ).

Custody accounts. All custody and safekeeping activities (i.e., the holding of securities, jewelry, coin collections, and other valuables in custody or in safekeeping for customers) should not to be reflected on any basis in the balance sheet of the Consolidated Financial Statements for Holding Companies unless cash funds held by the bank in safekeeping for customers are commingled with the general assets of the reporting holding company. In such cases, the commingled funds would be reported in the Consolidated Financial Statements for Holding Com- panies as deposit liabilities of the holding company.

For holding companies that file financial statements with the Securities and Exchange Commission (SEC), major classifications including total assets, total liabilities, total equity capital and net income should generally be the same between the FR Y-9C report filed with the Federal Reserve and the financial statements filed with the SEC.

B. Report Form Captions, Non-applicable

Items and Instructional Detail

No caption on the report forms shall be changed in any way. An amount or a zero should be entered for all items except in those cases where (1) the reporting holding company does not have any foreign offices; (2) the reporting company does not have any depository institu- tions that are subsidiaries other than commercial banks;

or (3) the reporting holding company has no consoli- dated subsidiaries that render services in any fiduciary capacity and its subsidiary banks have no trust depart- ments. If the reporting holding company has only domes- tic offices, Schedule HC, items 13(b)(1) and 13(b)(2), and Schedule HI, items 1(a)(2) and 2(a)(2) should be left blank. If the reporting company does not have any depository institutions that are subsidiaries other than commercial banks, then Schedule HC-E, items 2(a) through 2(e) should be left blank. If the reporting com- pany does not have any trust activities, then Schedule HI, item 5(a) should be left blank. A holding company should leave blank memorandum items 9(a) through 9(d) of Schedule HI if the reporting holding company does not have average trading assets of $2 million or more (reported on Schedule HC-K, item 4(a)) as of the March 31st report date of the current calendar year. Holding companies who are not required to report Sched- ule HC-D or Schedule HC-Q may leave these schedules blank. Savings and loan holding companies who are not required to report Schedule HC-L, item 7(c)(1)(a) through item 7(c)(2)(c), or all of Schedule HC-R may leave these items blank. There may be areas in which a holding company wishes more technical detail on the application of accounting standards and procedures to the requirements of these instructions. Such information may often be found in the appropriate entries in the Glossary section of these instructions or, in more detail, in the GAAP standards. Selected sections of the GAAP standards are referenced in the instructions where appropriate. The accounting entries in the Glossary are intended to serve as an aid in specific reporting situations rather than a comprehensive statement on accounting for holding companies. Questions and requests for interpretations of matters appearing in any part of these instructions should be addressed to the appropriate Federal Reserve Bank (that is, the Federal Reserve Bank in the district where the holding company submits this report).

C. Rounding For holding companies with total assets of less than $ billion, all dollar amounts must be reported in thousands, with the figures rounded to the nearest thousand. Items less than $500 will be reported as zero. For holding companies with total assets of $10 billion or more, all dollar amounts may be reported in thousands, but each

General Instructions

FR Y9C GEN-

General Instructions December 2014

(24) Schedule HC-R, Part I item 10(a) Unrealized net gain(loss) related to changes in the fair value of liabilities that are due to changes in own credit risk.

(25) Schedule HC-R, Part I item 10(b) ‘‘All other deduc- tions from (additions to) common equity tier 1 capital before threshold-based deductions.’’

(26) Schedule HC-R, Part I item 12, ‘‘Subtotal,’’

(27) Schedule HC-R, Part I item 19, ‘‘Common Equity Tier 1 capital’’

(28) Schedule HC-R Part I item 26, ‘‘Tier I Capital’’

(29) Schedule HC-R Part I item 35(a) and 35(b) ‘‘Total Capital’’

(30) Schedule HC-R Part I item 38, ‘‘Other deductions from (additions to) assets for leverage ratio pur- poses’’

(31) Schedule HC-R Part I item 41 through 44, Risk- based and leverage capital ratios, and

(32) Schedule HC-R Part II column B, ‘‘Adjustments to Totals Reported in Column A,’’ for the asset cate- gories in items 1 through 11’’

When negative entries do occur in one or more of these items, they shall be recorded with a minus ( 2 ) sign rather than in parenthesis.

On the Consolidated Report of Income (Schedule HI), negative entries may appear as appropriate. Income items with a debit balance and expense items with a credit balance must be reported with a minus ( 2 ) sign.

E. Confidentiality

The completed version of this report generally is avail- able to the public upon request on an individual basis with the exception of any amounts reported in Schedule HI, memoranda item 7(g), ‘‘FDIC deposit insurance assessments,’’ for report dates beginning June 30, 2009, and in Schedule HC-P, item 7(a), ‘‘Representation and warranty reserves for 1-4 family residential mortgage loans sold to U.S. government agencies and government- sponsored agencies,’’ and item 7(b), ‘‘Representation and warranty reserves for 1-4 family residential mortgage loans sold to other parties.’’ However, a reporting holding company may request confidential treatment for the Consolidated Financial Statements for Holding Compa- nies (FR Y-9C) if the holding company is of the opinion

that disclosure of specific commercial or financial infor- mation in the report would likely result in substantial harm to its competitive position, or that disclosure of the submitted information would result in unwarranted inva- sion of personal privacy. A request for confidential treatment must be submitted in writing prior to the electronic submission of the report. The request must discuss in writing the justification for which confidentiality is requested and must demonstrate the specific nature of the harm that would result from public release of the information. Merely stating that competitive harm would result or that information is personal is not sufficient. Information for which confidential treatment is requested may subsequently be released by the Federal Reserve System if the Board of Governors determines that the disclosure of such information is in the public interest.

F. Verification and Signatures Verification. All addition and subtraction should be double-checked before reports are submitted. Totals and subtotals in supporting materials should be cross-checked to corresponding items elsewhere in the reports. Before a report is submitted, all amounts should be compared with the corresponding amounts in the previous report. If there are any unusual changes from the previous report, a brief explanation of the changes should be provided to the appropriate Reserve Bank. Signatures. The Consolidated Financial Statements for Holding Companies must be signed by the Chief Finan- cial Officer of the holding company (or by the individual performing this equivalent function). By signing the cover page of this report, the authorized officer acknowl- edges that any knowing and willful misrepresentation or omission of a material fact on this report constitutes fraud in the inducement and may subject the officer to legal sanctions provided by 18 USC 1001 and 1007. Holding companies must maintain in their files a manu- ally signed and attested printout of the data submitted. The cover page of the Reserve Bank-supplied, holding company’s software, or from the Federal Reserve’s web- site report form should be used to fulfill the signature and attestation requirement and this page should be attached to the printout placed in the holding company’s files.

G. Amended Reports When the Federal Reserve’s interpretation of how GAAP or these instructions should be applied to a specified

General Instructions

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General Instructions March 2015

event or transaction (or series of related events or trans- actions) differs from the reporting holding company’s interpretation, the Federal Reserve may require the hold- ing company to reflect the event(s) or transaction(s) in its FR Y-9C in accordance with the Federal Reserve’s interpretation and to amend previously submitted reports. The Federal Reserve will consider the materiality of such event(s) or transaction(s) in making a determination about requiring the holding company to apply the Federal Reserve’s interpretation and to amend previously submit- ted reports. Materiality is a qualitative characteristic of accounting information that is addressed in Financial Accounting Standards Board (FASB) Concepts State- ment No. 8, ‘‘Conceptual Framework for Financial Reporting,’’ as follows: ‘‘Information is material if omit- ting it or misstating it could influence decisions that users make on the basis of the financial information of a specific reporting entity.’’ In other words, materiality is an entity-specific aspect of relevance based on the nature or magnitude or both of the items to which the informa- tion relates in the context of an individual entity’s financial report.

The Federal Reserve may require the filing of amended Consolidated Financial Statements for Holding Compa- nies if reports as previously submitted contain significant errors. In addition, a holding company should file an amended report when internal or external auditors make audit adjustments that result in a restatement of financial statements previously submitted to the Federal Reserve.

The Federal Reserve also requests that holding compa- nies that have restated their prior period financial state- ments as a result of an acquisition submit revised reports for the prior year-ends. While information to complete all schedules to the FR Y-9C may not be available, holding companies are requested to provide the Consolidated Balance Sheet (Schedule HC) and the Consolidated Report of Income (Schedule HI) for the prior year-ends. In the event that certain of the required data are not available, holding companies should contact the appropri- ate Reserve Bank for information on submitting revised reports.

General Instructions

GEN-8 FR Y9C

General Instructions March 2015

some cases, GAAP requires a particular method of interest income recognition when the fair value option is elected. For example, when the fair value option has been applied to a beneficial interest in securitized financial assets within the scope of ASC Subtopic 325-40, Investments-Other – Beneficial Interests in Securitized Financial Assets (formerly Emerging Issues Task Force Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Inter- ests in Securitized Financial Assets), interest income should be measured in accordance with the consensus in this issue. Similarly, when the fair value option has been applied to a purchased impaired loan or debt security accounted for under ASC Subtopic 310-30, Receivables

• Loans and Debt Securities Acquired with Deteriorated Credit Quality (formerly AICPA Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer), interest income on the loan or debt security should be measured in accordance with this Subtopic when accrual of income is appropriate. For holding companies that have adopted Accounting Stan- dards Update No. 2016-13 (ASU 2016-13), which gov- erns the accounting for credit losses, when the fair value option has been applied to an acquired loan or debt security under ASC 326-20, “Financial Instruments- Credit Losses—Measured at Amortized Cost,” interest income on the loan or debt security should be measured in accordance with Subtopic 310-10, “Receivables— Overall,” regardless of whether or not management has determined the asset to be purchased credit deteriorated (PCD).

Revaluation adjustments, excluding amounts reported as interest income and interest expense, to the carrying value of all assets and liabilities reported in Schedule HC at fair value under a fair value option (excluding servic- ing assets and liabilities reported in Schedule HC, item 10, “Intangible assets,” and Schedule HC, item 20, “Other liabilities,” respectively, and assets and liabilities reported in Schedule HC, item 5, ‘‘Trading assets,’’ and Schedule HC, item 15, ‘‘Trading liabilities,’’ respec- tively) resulting from the periodic marking of such assets and liabilities to fair value should be reported as “Other noninterest income” in Schedule HI, item 5(l).

Line Item 1 Interest income.

Line Item 1(a) Interest and fee income on loans.

Report in the appropriate subitem all interest, fees, and similar charges levied against or associated with all

assets reportable as loans in Schedule HC-C, items 1 through 9.

Deduct interest rebated to customers on loans paid before maturity from gross interest earned on loans; do not report as an expense.

Include as interest and fee income on loans:

(1) Interest on all assets reportable as loans extended directly, purchased from others, sold under agree- ments to repurchase, or pledged as collateral for any purpose.

(2) Loan origination fees, direct loan origination costs, and purchase premiums and discounts on loans held for investment, all of which should be deferred and recognized over the life of the related loan as an adjustment of yield under ASC Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs (formerly FASB Statement No. 91, Accounting for Nonrefundable Fees and Costs Associated with Origi- nating or Acquiring Loans and Initial Direct Costs of Leases) as described in the Glossary entry for ‘‘loan fees.’’ See exclusion (3) below.

For holding companies that have adopted ASU 2016- 13, which governs the accounting for credit losses, the purchase premiums and discounts on loans held for investment that management has determined to be PCD and are measured at amortized cost, should be adjusted to exclude the acquisition date allowance for credit loss from the amortized cost basis of the loans. For further information, see the Glossary entry “Purchased Credit Deteriorated (PCD) loans and debt securities.”

(1) Loan commitment fees (net of direct loan origination costs) that must be deferred over the commitment period and recognized over the life of the related loan as an adjustment of yield under ASC Subtopic 310- as described in the Glossary entry for ‘‘loan fees.’’ (2) Investigation and service charges, fees representing a reimbursement of loan processing costs, renewal and past-due charges, prepayment penalties, and fees charged for the execution of mortgages or agree- ments securing the holding company’s loans.

(3) Charges levied against overdrawn accounts based on the length of time the account has been overdrawn, the magnitude of the overdrawn balance, or which

Schedule HI

HI-2 FR Y-9C

Schedule HI March 2019

are otherwise equivalent to interest. See exclusion (6) below.

(4) The contractual amount of interest income earned on loans that are reported at fair value under a fair value option.

Exclude from interest and fee income on loans:

(1) Fees for servicing real estate mortgages or other loans that are not assets of the holding company (report in Schedule HI, item 5(f), “Net servicing fees”).

(2) Charges to merchants for the holding company’s handling of credit card or charge sales when the holding company does not carry the related loan accounts on its books (report as ‘‘Other noninterest income’’ in Schedule HI, item 5(l)). Holding compa- nies may report this income net of the expenses (except salaries) related to the handling of these credit card or charge sales.

(3) Loan origination fees, direct loan origination costs, and purchase premiums and discounts on loans held for sale, all of which should be deferred until the loan is sold (rather than amortized). The net fees or costs and purchase premium or discount are part of the recorded investment in the loan. When the loan is sold, the difference between the sales price and the recorded investment in the loan is the gain or loss on the sale of the loan. See exclusion (4) below.

(4) Net gains (losses) from the sale of all assets report- able as loans (report in Schedule HI, item 5(i), ‘‘Net gains (losses) on sales of loans and leases’’). Refer to the Glossary entry for ‘‘transfers of financial assets.’’

(5) Reimbursements for out-of-pocket expenditures (e.g., for the purchase of fire insurance on real estate securing a loan) made by the holding company for the account of its customers. If the holding com- pany’s expense accounts were charged with the amount of such expenditures, the reimbursements should be credited to the same expense accounts.

(6) Transaction or per item charges levied against deposit accounts for the processing of checks drawn against insufficient funds that the holding company assesses regardless of whether it decides to pay, return, or hold the check, so-called ‘‘NSF check charges’’ (report as ‘‘Service charges on deposit accounts (in domestic offices),’’ in Schedule HI, item 5(b), or, if

levied against deposit accounts in foreign offices, as ‘‘Other noninterest income’’ in Schedule HI, item 5(l)). See inclusion (5) above. (7) Interchange fees earned from credit card transactions (report as ‘‘Other noninterest income’’ in Schedule HI, item 5(l)).

Line Item 1(a)(1) Interest and fee income on loans in domestic offices. Report all interest, fees, and similar charges levied against or associated with all loans in domestic offices reportable in Schedule HC-C, items 1 through 9, col- umn B for holding companies with foreign offices and reportable in Schedule HC-C, items 1 through 9, for holding companies with domestic offices only.

Line Item 1(a)(1)(a) Interest and fee income on loans secured by 1-4 family residential properties. Report all interest, fees, and similar charges levied against or associated with all loans secured by 1-4 family residential properties (in domestic offices) reportable in Schedule HC-C, item 1(c), column B.

Line Item 1(a)(1)(b) Interest and fee income on all other loans secured by real estate. Report all interest, fees, and similar charges levied against or associated with all loans secured by real estate (in domestic offices) reportable in Schedule HC-C, items 1(a), 1(b), 1(d), and 1(e), column B. Include interest and fee income on loans secured by 1-4 family residential construction loans, but exclude such income on all other loans secured by 1-4 family residential properties.

Line Item 1(a)(1)(c) Interest and fee income on all other loans. Report all interest, fees, and similar charges levied against or associated with all other loans (in domestic offices) (other than loans secured by real estate in domes- tic offices) reportable in Schedule HC-C, items 2 through 9, column B.

Line Item 1(a)(2) Interest and fee income on loans in foreign offices, Edge and Agreement subsidiaries, and IBFs. Report all interest, fees, and similar charges levied against or associated with all loans in foreign offices,

Schedule HI

FR Y-9C HI-

Schedule HI March 2013