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Cracking the Code of CECL Reporting: A Tale of Numbers, Noodles, and Nervous Laughter

Uncategorized Jan 19, 2024
Picture this: A room filled with bankers, accountants, and auditors huddled together,
their brows furrowed in confusion, as they attempt to unravel the enigmatic mysteries of
CECL reporting in the Call Report. It's a tale of numbers and noodles, of calculations and
contemplations, all while trying not to lose their sanity (or their appetite). Join us as we
dive into the quirky world of CECL reporting, where even the most seasoned financial
experts find themselves in a puzzling predicament.
The Confusing Chronicles of CECL: Once upon a time, in a land of balance sheets and
ledgers, a group of financial professionals embarked on a quest to master the art of
CECL reporting. Armed with calculators and cups of coffee, they delved into the world of
expected credit losses, hoping to emerge victorious and unscathed.
As they grappled with economic forecasts and pondered over portfolio trends, our
heroes discovered that deciphering CECL was a bit like untangling a bowl of spaghetti.
Just when they...
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Quarterly Average Assets and Monster Movies

rc-k Aug 30, 2023

Schedule RC-K of the Call Report requires banks to report certain quarterly average balance sheet figures. The main purpose of this schedule is to provide data for the calculation of yields and costs of funds for the bank’s Uniform Bank Performance Report (UBPR or “beeper” report as all the kids call it). It also feeds the FFIEC’s statistics machine for the calculation of financial performance figures for the industry as whole.

 Most of the averages for loans and deposits are easy enough to find in the bank’s quarterly general ledger or other reports. The total average asset figure, however, can be trickier than it looks. The Call Report instructions start off by saying that the definition of “Total assets” is the same as for Schedule RC item 12, “except that…”.  It is in the “except that’s” wherein lies the gotcha.

 “Except that” #1: “All debt securities not held for...

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Tangible Equity Two-Step for RC-O Line 5

rc-o line 5 Mar 25, 2023

For those who don’t already know, the Texas Two-Step is a simple dance that is perennially popular at country dances. It has the virtue of being learnable even by the clumsiest cowpoke with two left feet. Figuring and reporting Average Tangible Equity is like that. Once you get it down it’s easy.

 The reason that the FDIC wants to know your bank’s Average Tangible Equity is to help them figure out how much to charge for deposit insurance. Premiums are no longer based on total deposits, but on total liabilities less tangible assets. They need the number to calculate the tab.

 The mistakes we see sometimes are that banks either don’t follow the definition in the instructions on what constitutes tangible equity, or they use and averaging method that is incorrect. Now let’s get to the step-by-step dance instructions.


Step One

 Calculate the tangible equity as of quarter end. The instructions say that it is the same definition as for...

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It’s 8:42, Do You Know Where Your Operating Leases Are?

Uncategorized Jan 07, 2023

In years past (yes, I am old.) there was a public service announcement that would appear on television late in the evening. A stern voice would ask, “It’s ten o’clock, do you know where your children are?” Parents of teenagers know that they get to the point where they may not know, or even want to know. But sooner or later, youthful indiscretions will come out and must be dealt with.

Likewise, some banks are still behind the curve on their ASC 842 accounting. Banks are required now to account for leases using this standard, but it has been a change that some have ignored. But like teenage hijinks, accountability for the accounting will eventually come around.

I will leave it to the accounting profession to explain why this rule is useful and important. Your local CPA will be happy to explain and audit it for you. Practically, what it means is that the fair value of the liability for an operating lease must be booked as an intangible “Right of...

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"Sweeping" Reporting Changes

Uncategorized Sep 16, 2022

If you are one of those Call Report preparers who hopes that the regulators will add more reporting items accompanied by vague instructions, well you have got your wish! All banks are now required to report data on sweep deposits twice a year in their December and June reports. This requirement became effective for the December 2021 report for all filers.


The instructions define Sweep Deposits as, “A deposit held at the reporting institution by a customer or

counterparty through a contractual feature that automatically transfers to the reporting institution from

another regulated financial company at the close of each business day amounts under the agreement

governing the account from which the amount is being transferred.” I am glad that they make it so clear.


“Sweep Deposits” to be reported are a different animal from the kind of sweep arrangement where money is swept between deposit accounts within the same institution (“Retail...

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Risky Business: Weighing in on Schedule RC-R Part II

Uncategorized Mar 22, 2022

Call Report preparers for banks that cannot opt for the Community Bank Leverage Ratio (“CBLR”) option get to experience the joys of Schedule RC-R Part II. I think it is the schedule we all love to hate more than any other. After slogging our way through schedules RI through RC-O at the end we are rewarded with the most tedious and arcane part of the Call Report.


3PR Inc. is often engaged to review banks’ call reports, including the infamous Schedule RC-R. Here are some of the more common issues we have seen:


Misstating the risk of due from depository institution balances. Balances due from depository institutions are generally weighted at 20%, but the first $250,000 in deposits at each institution are FDIC insured and may be weighted at 0%. But, if the bank’s outstanding cash items in process are included in the general ledger balance for a correspondent bank, that amount should be considered separately and weighted at 20%. Deposits at Federal...

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Escrow Accounts - Loans, Deposits, or Liabilities ???

Uncategorized Feb 25, 2022

In the current economic climate, more banks have decided to retain mortgage loans on the bank’s books rather than originating them and selling them shortly thereafter. Many mortgage loans have a requirement for escrow. The question then arises about how to handle escrow accounts for Call Report purposes. 

 Let’s first think about some definitions:

 Escrow-Funds held by the bank for the ultimate benefit of a person, or most likely, a taxing authority or insurance company. 

 Deposit-The Call Report documentation generally describes a deposit as “money held for others.”  Further, 12.CFR Part 204.2(a)(1)(ii) defines deposits as “Money received or held by a depository institution, or the credit given for money or its equivalent received or held by the depository institution in the usual course of business for a special or specific purpose, regardless of the legal relationships established thereby, including escrow funds...

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The Loan Arranger: Call Report Coding Unmasked

Uncategorized Nov 14, 2021

Early in my career I was the Call Report preparer in a small Texas country bank. The young woman who coded the loans was born and raised in the area and she habitually mis-coded loans secured by livestock. Her explanation was that they were not agriculture loans since they were made to ranchers and not to farmers, a clear distinction to her way of thinking. I had to convince her that the folks at the FDIC in Washington didn’t understand the difference, and that we had to go along with their definition.


At 3PR Inc. we occasionally do loan coding reviews for clients. While there is essentially no limit to the number of ways things can get messed up, we have noticed some patterns. Often it is the inconsistency between the different codes assigned to loans that is the culprit. In the Call Report preparer’s perfect world, the core system’s Call Report codes, general ledger codes, type codes, and collateral codes would be perfectly and consistently mapped to each...

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Schedule RC-B Tips from an Antique Banker

Uncategorized Jul 28, 2021

My friend Fritz is Cashier at a bank in a tiny Texas town that the highway department left off their maps about thirty years ago. Every day they close the bank for an hour at lunchtime. Everyone in the bank then walks across the street, stepping around the sleeping dogs, and has lunch in the café. They eat the same thing every day because, well, there is really only one thing on the menu.


Fritz was complaining to me the other day about the problems working in an antique bank. “Back in 1907, whoever set up the general ledger decided that the bank just needed two accounts for investment securities. To make it worse, the chairman’s ex-brother-in-law, Bubba, comes in part-time every afternoon to post the transactions. You never know what that knucklehead is going to book.”


Fritz shared with me some tips on how he copes when preparing the Call Report. The first thing he does is to reconcile the investment accounting reports from his correspondent...

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June 30, 2021 Call Report – What to report for IRTs?

Uncategorized Jun 30, 2021

Well, we are going to get some relief regarding reporting International Remittance Transfers (IRTs) for the remainder of this year.  The items that were typically required for the June reporting period will be pushed to December 31, 2021 given the new threshold that is now effective for additional reporting.


Revisions related to reporting international remittance transfers (IRT) in RC-M item 16:

  • The reporting revisions to Schedule RC-M will take effect March 31, 2021.
  • Prior to the March 31, 2021 report date, both 041 and 051 filers were required to answer 4 questions.  The revision will reduce reporting to 2 questions: 16.a and 16.b, but 16.b will have 3 sub-questions so we still have 4 data points.
  • The reporting items are renamed as “estimated” and revised item 16.b will only be required if revised item 16.a reported 501 or greater IRT in the current quarter or in the last year-end report.


What to look for?

  • March 31, 2021 instructions and...
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