Any projected shortfall is divided by current domestic deposits to obtain an end-of-period loss severity ratio. Any such brokered deposit adjustment shall be made after any adjustment under paragraphs (b)(3), (d)(1), and (d)(2) of this section. (iv) Large and highly complex institutions total base assessment rate schedule. The sample may contain both foreign and domestic loans. 1 Average of five quarter-end total assets (most recent and four prior quarters). If, during an assessment period, a ROCA rating change occurs that results in an insured branch of a foreign bank moving from Risk Category II, III or IV to Risk Category I, the institution's assessment rate for the portion of the assessment period that it was in Risk Category I shall equal the rate determined as provided using the weighted average ROCA component rating. The term Paycheck Protection Program means the program of that name that was created in section 1102 of the Coronavirus Aid, Relief, and Economic Security Act. Pricing Multipliers Applicable When the Reserve Ratio as of the End of the Prior Assessment Period Is Equal to or Greater Than 2 Percent but Less Than 2.5 Percent, Pricing Multipliers Applicable When the Reserve Ratio as of the End of the Prior Assessment Period Is Greater Than or Equal to 2.5 Percent. The annual initial base assessment rates for all established small institutions with a CAMELS composite rating of 4 or 5 shall range from 13 to 25 basis points. Commercial Real Estate Loans, excluding C&D, Subordinated Debt and Limited Liability Preferred Stock, Federal Funds Sold and Repurchase Agreements, Income (before applicable income taxes and discontinued operations) for the most recent twelve months divided by total assets. The annual total base assessment rates for all institutions in Risk Category I shall range from 2.5 to 9 basis points. The amount of long-term unsecured debt issued by another insured depository institution shall be calculated using the same valuation methodology used to calculate the amount of such debt for reporting on the asset side of the balance sheets, The brokered deposit adjustment shall be determined by multiplying 25 basis points by the ratio of the difference between an insured depository institution's brokered deposits and 10 percent of its domestic deposits to its assessment base. 0000008472 00000 n Each insured depository institution subject to the surcharge shall pay to the Corporation any surcharge imposed under paragraph (a) of this section in compliance with and subject to the provisions of 327.3, 327.6 and 327.7. Beginning on the date of the CAMELS component rating change, the initial base assessment rate for the remainder of the assessment period shall be determined under the financial ratios method using the CAMELS component ratings in effect after the change, again subject to adjustment under paragraphs (e)(1) and (2) of this section, as appropriate. A bank may not develop PD estimates for unscorable loans based on internal data. (i) Calculation of average tangible equity. Exclude from C&I loan growth rate the outstanding amount of loans provided under the Paycheck Protection Program. When a bank acquires loans from another entity on a recurring or programmatic basis, however, the acquiring bank may determine whether the loan meets the definition of a nontraditional mortgage loan using the origination criteria and analysis performed by the original lender only if the acquiring bank verifies the information provided. (B) Loss severity score. (A dealer statement is the standard format financial statement issued by Original Equipment Manufacturers (OEMs) and used by nationally recognized automobile dealer floor plan lenders. In addition, the bank must place a hold on the deposit account that alerts the bank's employees to an attempted withdrawal. The following linear interpolation converts loss severity scores between the cutoffs into a loss severity factor: (Loss Severity Factor = 0.8 + [0.005 * (Loss Severity Score 5)]. Loans Originated or Refinanced Before April 1, 2013, and all Acquired Loans. The total exposure amount is equal to the sum of the institution's exposure amounts to one counterparty (or borrower) for derivatives, securities financing transactions (SFTs), and cleared transactions, and its gross lending exposure (including all unfunded commitments) to that counterparty (or borrower). An office is considered closed if there are no transactions posted to the general ledger as of that date. You can learn more about the process The FDIC's denial of applications for exemption will be final and not subject to further agency review. In the event of failure of an insured depository institution, any amount of its prepaid assessment remaining (other than any amounts needed to satisfy its assessment obligations not yet offset against the prepaid amount) will be refunded to the institution's receiver. The resulting total score after adjustment cannot be less than 30 or more than 90. Monthly inventory agings must be received in sufficient detail to allow the bank to compute the required ineligibles. (l) Risk assignment. A small institution that is established under 327.8(k)(4) or (5) shall be assessed as follows: (A) If the institution does not have a CAMELS composite rating, its initial base assessment rate shall be 2 basis points above the minimum initial base assessment rate applicable to established small institutions until it receives a CAMELS composite rating. (ii) CAMELS composite 3-rated established small institutions initial base assessment rate schedule. (a) Assessment base for all insured depository institutions. (i) To compute the score for the weighted average CAMELS rating, a weighted average of an institution's CAMELS component ratings is calculated using the following weights: (i) The ability to withstand asset-related stress score is a weighted average of the scores for four measures: Leverage ratio; concentration measure; ratio of core earnings to average quarter-end total assets; credit quality measure and market risk measure. (i) Any request for review under this paragraph must be submitted within 30 days from, (A) The initial notice provided by the FDIC to the insured depository institution under paragraph (c)(7) of this section stating the FDIC's preliminary estimate of an eligible institution's assessment credit and the manner in which the assessment credit was calculated; or. Floor plan loans may include, but are not limited to, loans to finance the purchase of various vehicles or equipment including automobiles, boat or marine equipment, recreational vehicles (RV), motorized watersports vehicles such as jet skis, or motorized lawn and garden equipment such as tractor lawnmowers. Tangible equity is defined as Tier 1 capital. The FDIC will evaluate the proposed methodology and may request additional information from the bank, which the bank must provide. Concentration Measure for Highly Complex Institutions. 1821(n) and institutions for which the Corporation has been appointed or serves as conservator shall, in all cases, be assessed at the minimum initial base assessment rate applicable to established small institutions, which shall not be subject to adjustment under paragraph (b)(3) or (e)(1), (2), or (3) of this section. (3) Notification of surcharge. The brokered deposit adjustment includes all brokered deposits as defined in Section 29 of the Federal Deposit Insurance Act (12 U.S.C. (ii) The six financial ratios and the weighted average CAMELS component rating will be multiplied by the respective pricing multiplier, and the products will be summed. (5) Effect of merger or consolidation on assessment credit base. (i) Well Capitalized. (3) Supervisory evaluations. The debt-to-EBITDA ratio must be calculated using the consolidated financial statements of the borrower. (iii) Undercapitalized. A small insured depository institution in Risk Category I shall have its initial base assessment rate determined using the financial ratios method. (3) Supervisory evaluations for insured branches of foreign banks. At a minimum, ineligible inventory must include: (i) Slow moving, obsolete inventory and items turning materially slower than industry average; (ii) Inventory with value to the client only, which is generally work in process, but may include raw materials used solely in the client's manufacturing process; (iii) Consigned inventory or other inventory where a perfected security interest cannot be obtained; (iv) Off-premise inventory subject to a mechanic's or other lien; and. While the range of acceptable approaches is potentially broad, any proposed methodology must meet the following requirements: (a) The bank must use data on a sample of loans for which both the one-year Basel II PDs and two-year final rule PDs can be calculated. - Regulations and Statements of General Policy, https://www.ecfr.gov/current/title-12/chapter-III/subchapter-B/part-327/subpart-A. (vi) The score for each measure in the table in paragraph (b)(1)(ii)(A)(2)(v) of this section is multiplied by its respective weight and the resulting weighted score is summed to arrive at the score for an ability to withstand asset-related stress, which can range from 0 to 100, where a score of 0 reflects the lowest risk and a score of 100 reflects the highest risk. (ii) Shortfall assessment base if surcharges have not been in effect. The loss severity measure is an average loss severity ratio for the three most recent quarters of data available. An insured depository institution shall pay a 50 basis point adjustment on the amount of unsecured debt it holds that was issued by another insured depository institution to the extent that such debt exceeds 3 percent of the institution's Tier 1 capital. [71 FR 69277, 69326, Nov. 30, 2006, as amended at 75 FR 79293, Dec. 20, 2010; 76 FR 10704, Feb. 25, 2011; 81 FR 32201, May 20, 2016]. (ii) The scorecard for highly complex institutions produces two scores: performance and loss severity. Minimum Rate is the minimum initial base assessment rate then in effect (expressed in basis points). Exclude from the assessment base the outstanding balance of loans provided under the Paycheck Protection Program and the quarterly average amount of assets purchased under the Money Market Mutual Fund Liquidity Facility. The FDIC will subtract the offset amount described in 327.17(d)(1) from an insured depository institution's total assessment amount, consistent with 327.3(b)(1). (iii) Mergers and consolidations. (i) CAMELS composite 1- and 2-rated established small institutions total base assessment rate schedule. (h) Increasing or decreasing the interest rate. learn more about the process here. (C) $10 billion; provided, however, that an institution's surcharge base for an assessment period cannot be negative. 0000006195 00000 n 1 The applicable portions of the current expected credit loss methodology (CECL) transitional amounts attributable to the allowance for credit losses on loans and leases held for investment and added to retained earnings for regulatory capital purposes pursuant to the regulatory capital regulations, as they may be amended from time to time (12 CFR part 3, 12 CFR part 217, 12 CFR part 324, 85 FR 61577 (Sept. 30, 2020), and 84 FR 4222 (Feb. 14, 2019)), will be removed from the sum of Tier 1 capital and reserves throughout the large bank and highly complex bank scorecards, including in the ratio of Higher-Risk Assets to Tier 1 Capital and Reserves, the Growth-Adjusted Portfolio Concentrations Measure, the ratio of Top 20 Counterparty Exposure to Tier 1 Capital and Reserves, the Ratio of Largest Counterparty Exposure to Tier 1 Capital and Reserves, the ratio of Criticized and Classified Items to Tier 1 Capital and Reserves, and the ratio of Underperforming Assets to Tier 1 Capital and Reserves. The pricing multipliers are also determined by minimum and maximum downgrade probability cutoff values, which will be computed as follows: The minimum downgrade probability cutoff value will be the maximum downgrade probability among the twenty-five percent of all small insured institutions in Risk Category I (excluding new institutions) with the lowest estimated downgrade probabilities, computed using values of the risk measures as of June 30, 2008.1[2] The minimum downgrade probability cutoff value is 0.0182. If the institution requesting review disagrees with that determination, it may appeal to the FDIC's Assessment Appeals Committee. Borrowers must submit Covenant Compliance Certificates, generally on a monthly or quarterly basis (depending on the terms of the loan agreement) to monitor compliance with the covenants outlined in the loan agreement. To the extent that the outstanding balance of loans provided under the Paycheck Protection Program exceeds an established small institution's balance of commercial and industrial loans, as reported on the Consolidated Report of Condition and Income, the FDIC will exclude any remaining balance of these loans from the balance of agricultural loans, up to the amount of agricultural loans, in the calculation of the loan mix index. An insured depository institution shall pay a 50 basis point adjustment on the amount of unsecured debt it holds that was issued by another insured depository institution to the extent that such debt exceeds 3 percent of the institution's Tier 1 capital. [74 FR 9557, Mar. Notice of the procedures applicable to reviews will be included with the notice of assessment risk assignment provided pursuant to paragraph (a) of this section. (g) A loan is to be considered in default when it is 90 + days past due, charged-off, or the borrower enters bankruptcy. Initial base assessment rates are subject to adjustment pursuant to paragraphs (b)(3), (d)(1), (d)(2), of this section; large institutions that are not well capitalized or have a CAMELS composite rating of 3, 4 or 5 shall be subject to the adjustment at paragraph (d)(3); these adjustments shall result in the institution's total base assessment rate, which in no case can be lower than 50 percent of the institution's initial base assessment rate. (Other construction loans and all land development and other land loans), and RC-O M.10.a (Total unfunded commitments to fund construction, land development, and other land loans secured by real estate), and exclude RC-O M.10.b (Portion of unfunded commitments to fund construction, land development and other loans that are guaranteed or insured by the U.S. government, including the FDIC), RC-O M.13.a (Portion of funded construction, land development, and other land loans guaranteed or insured by the U.S. government, excluding FDIC loss sharing agreements), RC-M 13a.1.a.1 (1-4 family construction and land development loans covered by loss sharing agreements with the FDIC), and RC-M 13a.1.a.2 (Other construction loans and all land development loans covered by loss sharing agreements with the FDIC). Monthly accounts payable agings must be received to monitor payable performance and anticipated working capital needs. Once set, rates will remain in effect until changed by the Board. (i) Uniform amount. If an over advance (including a seasonal over advance) causes the LTV to exceed 100 percent, the loan may not be excluded from higher-risk C&I loans owed by a higher-risk C&I borrower. 2 The applicable portions of the current expected credit loss methodology (CECL) transitional amounts attributable to the allowance for credit losses on loans and leases held for investment and added to retained earnings for regulatory capital purposes pursuant to the regulatory capital regulations, as they may be amended from time to time (12 CFR part 3, 12 CFR part 217, 12 CFR part 324, 85 FR 61577 (Sept. 30, 2020), and 84 FR 4222 (Feb. 14, 2019)), will be removed from the sum of Tier 1 capital and reserves. (ii) CAMELS composite 3-rated established small institutions total base assessment rate schedule. (3) Prepaid assessment base. The total score can be up to 20 percent higher or lower than the performance score but cannot be less than 30 or more than 90. (c) Requests for review. (2) Payment of deposits; certification to Corporation. For institutions that begin operating during the calendar quarter, the amounts to be reported as daily averages are the sum of the gross amounts of consolidated total assets for each calendar day the institution was operating during the quarter divided by the number of calendar days the institution was operating during the quarter. The dependent variable takes a value of 1 if a downgrade occurs and 0 if it does not. (i) If an insured depository institution, through merger or consolidation, acquires another insured depository institution that paid surcharges for one or more assessment periods, the acquirer will be subject to a shortfall assessment and its average surcharge base will be increased by the average surcharge base of the acquired institution, consistent with paragraph (b)(5) of this section. (g) New and established institutions and exceptions -. 1 All amounts for all risk categories are in basis points annually. 1 The ratio of Net Income before Taxes to Total Assets is bounded below by (and cannot be less than) -25 percent and is bounded above by (and cannot exceed) 3 percent. 1 All amounts for all risk categories are in basis points annually. 0000027325 00000 n (2) Ability to withstand asset-related stress score. An active loan is defined as any loan that was open and not in default as of the observation date, and on which a payment was made within the 12 months prior to the observation date. Exclude from an institution's balance of commercial and industrial loans the outstanding balance of loans provided under the Paycheck Protection Program. The monthly average data for these subsidiaries, however, may be calculated for the current quarter or for the prior quarter consistent with the method used to report average consolidated total assets and in conformity with Consolidated Reports of Condition and Income requirements. (a) Definition of Loan Mix Index. Applicable beginning April 1, 2020, the FDIC will take the following actions when calculating the assessment rate for large institutions and highly complex institutions under 327.16: (1) Exclusion of Paycheck Protection Program loans from average short-term funding ratio, core earnings ratio, growth-adjusted portfolio concentration measure, and trading asset ratio. (1) Bankers bank defined. (2) Underperforming Assets/Tier 1 Capital and Reserves. Any assessment risk assignment provided to a depository institution under this part 327 is for purposes of implementing and operating the FDIC's risk-based assessment system. The Corporation will pay interest on any overpayment by the institution of its assessment. The Statistical Model uses ordinary least squares (OLS) regression to estimate downgrade probabilities. The table gives the weighted average charge-off rate for each category of loan. Sum of total loans and lease financing receivables past due 90 or more days and still accruing interest and total nonaccrual loans and lease financing receivables (excluding, in both cases, the maximum amount recoverable from the U.S. Government, its agencies or government-sponsored enterprises, under guarantee or insurance provisions) divided by gross assets. (iii) Determination whether to adjust downward; effective period of adjustment. Quarterly FICO payments shall be collected by the FDIC without interruption during the assessment system transitional period in 2007. Constructions and land development (C&D), (4) Three-year merger-adjusted portfolio growth rates are then scaled to a growth factor of 1 to 1.2 where a 3-year cumulative growth rate of 20 percent or less equals a factor of 1 and a growth rate of 80 percent or greater equals a factor of 1.2. (a) Requirement to prepay assessment. Cutoff Values and Weights for Measures To Calculate Ability To Withstand Asset-Related Stress Score. Counterparty exposure excludes all counterparty exposure to the U.S. Government and departments or agencies of the U.S. Government that is unconditionally guaranteed by the full faith and credit of the United States. The allocation depends on the ratio of average trading assets to the sum of average securities, loans and trading assets (trading asset ratio) as follows: (1) Weight for credit quality score = 35 percent * (1 - trading asset ratio); and, (2) Weight for market risk score = 35 percent * trading asset ratio. An institution's initial base assessment rate, subject to adjustment pursuant to paragraphs (d)(1), (2), and (3) of this section, as appropriate (resulting in the institution's total base assessment rate, which in no case can be lower than 50 percent of the institution's initial base assessment rate), and adjusted for the actual assessment rates set by the Board under 327.10(f), will equal an institution's assessment rate. Criticized and classified items include items an institution or its primary federal regulator have graded Special Mention or worse and include retail items under Uniform Retail Classification Guidelines, securities, funded and unfunded loans, other real estate owned (ORE), other assets, and marked-to-market counterparty positions, less credit valuation adjustments. Quarterly certified statement invoices provided by the Corporation may reflect adjustments, initiated by the Corporation or an institution, resulting from such factors as amendments to prior quarterly reports of condition, retroactive revision of the institution's assessment risk assignment, and revision of the Corporation's assessment computations for prior quarters. (v) The following table shows the cutoff values and weights for the measures used to calculate the ability to withstand asset-related stress score. The annual total base assessment rates for all established small institutions with a CAMELS composite rating of 4 or 5 shall range from 9 to 28 basis points. The official, published CFR, is updated annually and available below under Total loans and lease financing receivables past due 30 through 89 days and still accruing interest divided by gross assets (gross assets equal total assets plus allowance for loan and lease financing receivable losses and allocated transfer risk). All insured depository institutions shall make scheduled quarterly FICO payments on January 2, 2007 (unless prepaid on December 30, 2006), and March 30, 2007, based upon, respectively, their September 30, 2006, and December 31, 2006 reported assessment bases, which shall be the final assessment bases calculated pursuant to 12 CFR 327.5(a) and (b) (2006). Foreign deposits are treated as fully secured because of the potential for ring fencing. The FDIC may grant a bank tentative approval to use the methodology while the FDIC considers it in more detail. The maximum brokered deposit adjustment will be 10 basis points; the minimum brokered deposit adjustment will be 0. Otherwise, the total outstanding balance of unscorable consumer loans of a particular product type will not be considered higher risk. (iv) In the case of the assessment payment for the quarter that begins on October 1, the payment date is the following March 30. In cases in which a securitization is required to be consolidated on the balance sheet as a result of SFAS 166 and SFAS 167, and a bank has access to the necessary information, a bank may opt for an alternative method of evaluating the securitization to determine whether it is higher risk.