Board of Governors of the Federal Reserve System

Data Dictionary

Item Number 5262

Call confidentiality applies to FFIEC 031/041.

Data Description:

Includes Tier 1 (core) capital which is reduced by the thrift's investment in, advances to, and guaranteed obligations of certain nonincludable subsidiaries regardless of the method used in accounting for those subsidiaries (i.e., consolidation, equity, or cost).

In consolidation, the investment and intercompany loan accounts of subsidiaries have been eliminated on Schedule SC; therefore, the amount of the investment and advances must be obtained fromt he parent' books prior to consolidation. The investment must be calculated using the equity method as prescribed by GAAP plus any loans, advances, guaranteed obligations, or other extenions of credit, whether secured or unsecured. Negative investments can be used to offset loans, guaranteed obligations, or advances to the same subsidiary, but may not reduce this line to a negative amount. If you have a nonincludable subsidiary and the result on this line rounds to zero or ia a negative amount, report a "1" to indicate that you have reported you nonincludable subsidiary.

Note that savings associations with investments in subsidiaies and/or equity investments where the investments are fully covered by the FDIC report such investment in item no. 5318 regardless of the busines activity of the entity in which the investment is made.

"Nonincludable" Subsidiaries

"Nonincludable" subsidiaries are defined by Section 5(f) of the HOLA as subsidiaries of a savings association that engage in activities impermissible for a national bank with the following exeptions:

1. Subsidiaries only engage in impermissible activities as an agent for its customers where the subsidiary has no risk of loss;

2. Subsidiaries engaged solely in mortgage banking activities;

3. Subsidiaries that are insured depository institutions that were acquired prior to May 1, 1989;

4. Subsidiaries of federal associations that existed on August 8, 1989, and were chartered prior to October 15, 1982, as a savings bank or cooperative bank under state law; and

5. Subsidiaries of federal savings associations that existed on August 8, 1989, that acquired their principal assets from a savings association that was chartered prior to October 15, 1982 as a savings bank or cooperative bank under state law.           

A subsidiary of a savings association generally is deemed "nonincludable' if any of its unconsolidated assets are impermissible for a national bank. If any lower-tier subsidiary (see definition in the general instructions to this schedule) engages in impermissible activities or invests in an entity that engages in impermissible activities, but the first-tier subsidiary owned by the parent savings association does not directly engage in impermissible activities, the first-tier subsidiary is an includable subsidiary (as revised by December 1996 Subsidiary and Equity Investments Rule). Only the investment of the first-tier subsidiary (or intermediate tier) in the nonincludable lower-tier subsidiary is deducted in computing the capital of the first-tier subsidiary (or intermediate tier) on an unconsolidted basis and the capital of the consolidated savings association in computing the consolidated savings association's capital. Equity investments of first-tier subsidiaries in lower-tier subordinate organizations not consulting subsidiaries are deducted from total capital if those investments are not permissible for national banks.

Savings assocations should report 100% of their investments in and advances to "nonincludable" subsidiaries, net of all general valuation allowances, specific valuation allowances and charge-off (all of which have already reduced equity capital).

A subsidiary is defined as an entity in which the thrift has made an investment of at least 5% ownership. Subsidiaries include corporations, business trusts, joint ventures, associations, pools, syndicates or other similar organizations. Equity investments of less than 5% ownership are deducted from capital in item 5313 in accordance with the percentage prescribed in OTS Regulation 567.5(c). The amount of equity investments not deducted in item 5313 is included in the 100% risk-weight category in item 5336.

Report this line as a positive amount since it will be deducted from equity capital in calculating tangible capital.

NOTE:

Beginning September 30, 2000 the second paragraph was revised.