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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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Two Step

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