Regulatory & Monetary Reporting

Reporting of Trust Preferred Securities

FR Y-9LP, FR Y-9C and FR Y-11 || FR Y-9SP and FR Y-11S

Reporting of Trust Preferred Securities
(FR Y-9LP, FR Y-9C and FR Y-11)

The following is line item reporting guidance for the FR Y-9LP, FR Y-9C and FR Y-11 reporting instructions for subsidiaries issuing trust preferred securities and the bank holding company¹. Line items are as of the March 2006 reporting period.

Nonbank subsidiary (NBS) issues trust preferred securities (TPS) to investors (and establishment of the trust)

FR Y-9LP		- PI-A, Part II, line 3 "Payments for Investments in and Advance to Subs" (Note: This line item is applicable only when the NBS is first established.) - PC-A2a1 "Investment in Nonbank Subsidiaries" (also included in PC-5)
FR Y-9C		- HC-8 "Investment in Unconsolidated Subsidiaries" (if the NBS is not consolidated) - HC-R42, Column B "All Other Assets" (report the investment in unconsolidated subsidiaries)
FR Y-11		- IS-A-3 "Sale Conversion, Acquisition or Retirement of Common Stock and Preferred Stock" (Note: This line item is only applicable when the TPS are first issued.) - IS-A7 "Equity Capital" - BS-18a "Stock" - BS-M13 "Perpetual Preferred Stock" (does not include any interest receivable)
The proceeds from securities are lent to parent BHC
FR Y-9LP		- PI-A, III, line 3 "Proceeds from Advances from Subsidiaries" (Note: This line item is used only when TPS is first issued and the proceeds are lent to the parent.) - PC-18b "Balances due to Nonbank Subsidiaries" (includes accrued interest) - PC-B5b "Borrowings by the Parent from Nonbank Subsidiary" (does not include accrued interest) - PC-B15a, PC-B15c and PC-B15f (Complete only if the subsidiary is consolidated); do not report PC-B15b as it captures loans that are reflected as loans on the FR Y-11. - PC-B16 "Notes Payable to Special Purpose Subs that Issue Trust Preferred Securities" (Note: Report only the TPS portion. Also, does not include accrued interest)
FR Y-9C		- HC-19b "Subordinated Notes Payable to Unconsolidated Trusts Issuing TPS, or TPS Issued by Consolidated Special Purpose Entities" (Accrued interest on subordinated notes should be reported on HC-20 and HC-G4.) - HC-R6b "Qualifying Trust Preferred Securities" (Report the qualifying amount the note payable net of the investment in the unconsolidated trust, or the qualifying amount of TPS issued by the consolidated trust) and/or, - HC-R16 "Other Tier 2 Capital Components" (Report the excess that is eligible for inclusion in Tier 2 capital.)
FR Y-11		- BS-9 "Balances due from Related Institutions, Gross" (includes any accrued interest receivable) - BS-M8a "Balances due from BHC, Gross" (includes any interest receivable)
If the proceeds are used by the BHC to inject capital into its bank subsidiary(s) (Note: These items would be impacted additionally if the proceeds are injected/invested into the bank subsidiary(s))
FR Y-9LP		- PI-A, Part II, item 3 "Payments for investments in and advances to subsidiaries" - PC-A1a1"Equity investments in bank subs: Common and preferred stock" - PC-5 "Investments in and receivable due from subsidiaries"
BHC pays interest to NBS on balance due to NBS
FR Y-9LP		- PI-2d "All Other Expenses" - PI-memo 4 "Interest Expense Paid to Special Purpose Subsidiaries that Issue Trust Preferred Securities"
FR Y-9C		- HI-2e "Other Interest Expense"
FR Y-11		- IS-1b "Interest and Fee Income from Related Organizations" - BS-9 "Balances due from Related Organizations" (includes interest if accrued) - BS-M8a "Balances due from Bank Holding Company (Parent Companies Only) Gross" (includes interest if accrued)
NBS declares dividends to common stock and/or preferred stock investors from the interest payment received from BHC
FR Y-11		- IS-A4 "Cash Dividends Declared" and - BS-14 "Other Liabilities" (if dividends declared are not paid yet)
BHC receives dividend income, if declared, on NBS common stock (Note: These items apply only if dividend is declared on NBS common stock)
FR Y-9LP		- PI-1b1 "Income from Nonbank Dividends" (Report only dividends on common stock)
FR Y-9C		- HI-5l "Other Noninterest Income" (Report only if not consolidated, and only if dividends are declared on NBS common stock)

Reporting of Trust Preferred Securities—Example

The following is an example of TPS reporting with appropriate dollar amounts carried throughout the FR Y-9LP, FR Y-9C and FR Y-11, upon establishing the trust. Line items are as of the March 2006 reporting period. The example below includes:

• TPS issued by the nonbank subsidiary ("NBS") is equal to 10,000.
• Common stock issued by the nonbank (purchased by the parent) equals 300.
• Subordinated debt issued by the parent to the nonbank equals 10,300. (In many cases, the equity portion is financed and included in the subordinated debt.)
• The BHC uses the funds for a $10,000 capital injection into its bank subsidiary(s).
• Quarterly interest paid on the subordinated debt equals 15.
• Dividends declared to investors (i.e., preferred stock portion) by the nonbank subsidiary equals 13.
• Dividends declared to the BHC (i.e., common stock portion) by nonbank subsidiary equals 2.

If the subsidiary issuing TPS is not consolidated (as per FIN 46):

FR Y-9LP
PI-1b1 = 2 (Report only if the NBS declares dividends on its common stock)
PI-2d = 15
PI memo 4 = 15
PI-A, Part II, line 3 = 300 for NBS investment (additional 10,000 for capital injection)
PI-A, Part III, line 3 = 10,300 (upon issuance of subordinated debt)
PC-A1a1 and PC-5 (increases by 10,000 upon capital injection into bank subsidiary(s))
PC-A2a1 = 300
PC-18b = 10,300
PC-B5b = 10,300
PC-B15a-f = Do not report (since subsidiary is not consolidated)
PC-B16 = 10,000 (amount that is "directly related"—or "equal" to—amount of TPS issued)

FR Y-9C

HI-2e = 15
HI-5l = 2 (report only if the NBS declares dividends on its common stock)
HC-8 = 300
HC-19b = 10,300
HC-R6b = 10,000	(Note: 1) When deconsolidated, it is subordinated debt that is reported on this line; 2) The investment in the trust portion of the subordinated debt does not qualify for Tier 1 capital treatment; 3) As before FIN 46, the amount may be less due to Tier 1 capital limits. Please see instructions.)
HC-R16 = 0 (if all qualifies for Tier 1; otherwise, report Tier II portion here)
HC-R42, Column B = 300

FR Y-11
IS-1b = 15
IS-A3 = 10,300 (upon issuance)
IS-A4 = 15
IS-A7 = 10,300
BS-9 = 10,300
BS-14 = 15 (if dividend declared is not immediately paid)
BS-18a = 10,300
BS-memo 8a = 10,300
BS-memo13 = 10,000

If the subsidiary issuing TPS is consolidated (statements issued prior to adoption of FIN 46), the following line items would be reported differently as shown below:

FR Y-9LP
PC-B15a = 10,300
PC-B15c = 15
PC-B15f = 1

FR Y-9C
HI-5l = 0
HC-8 = 0 (since the trust is a consolidated subsidiary)
HC-19b = 10,000
HC-R42, Column B = 0 (since the trust is a consolidated subsidiary)

FR Y-11
Note: The FR Y-11 is not affected by consolidation or deconsolidation.

The views and understandings expressed in this article are those of individual staff members and do not reflect those of any Federal Reserve Bank or the Federal Reserve System. This information represents the author's best interpretation of GAAP and is not an attempt to create new GAAP.

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Reporting of Trust Preferred Securities
(FR Y-9SP and FR Y-11S)

The following is line item reporting guidance for the FR Y-9SP and FR Y-11S reporting instructions for subsidiaries issuing trust preferred securities and the bank holding company². Line items are as of the June 2005 (FR Y-9SP) and December 2005 (FR Y-11S) reporting periods.

Nonbank subsidiary (NBS) issues trust preferred securities (TPS) to investors (and establishment of the trust)

FR Y-9SP		- SC-5a "Equity Investment in Nonbank Subsidiary"
FR Y-11S		- 4c "Equity Capital"
The proceeds from securities are lent to parent BHC
FR Y-9SP		- SC-14b "Balances Due to Nonbank Subsidiaries" (Includes any accrued interest.) - SC-M13 "Notes Payable to Subs that Issue TPS" (Report only the TPS portion.) - SC-M17a, SC-M17c and SC-M17e (Complete only if the trust subsidiary is consolidated. Note: The majority of TPS subsidiaries are now deconsolidated as per FIN 46.)
FR Y-11S		- 4b "Total Assets"
If the proceeds are used by the BHC to inject capital into its bank subsidiary(s) (Note: These items would be impacted additionally if the proceeds are injected/invested into the bank subsidiary(s))
FR Y-9SP		- SC-4a "Equity investment in bank subsidiary(s)"
BHC pays interest to NBS on balances due to NBS
FR Y-9SP		- SI-7 "Other Expense" - SI-memo item 3, "Interest Expense Paid to Special-Purpose Subsidiaries that Issue Trust Preferred Securities"
FR Y-11S		- 4a "Net Income"
If BHC receives dividend income, if declared, from NBS common stock (Note: these items apply only if dividend is declared on common stock)
FR Y-9SP		- SI-2a "Dividend Income from Nonbank Subsidiary" - SC-5 "Loans & Advances to and Receivables Due from Nonbank Subsidiary(s)" (Include dividends declared but not yet paid)
FR Y-11S		- 4c "Equity Capital" (Usually unchanged after formation; usually the net income received and the dividends paid offset one another.)

Reporting of Trust Preferred Securities—Example

The following is an example of TPS reporting with appropriate dollar amounts carried throughout the FR Y-9SP and FR Y-11S. Line items are as of the June 2005 (FR Y-9SP) and December 2005 (FR Y-11S) reporting periods.

In this example,

• TPS issued by the nonbank subsidiary ("NBS") is equal to 3,000.
• Common stock issued by the nonbank (purchased by the parent) equals 90.
• Subordinated debt issued by the parent to the nonbank equals 3,090. (In many cases, the equity portion is financed and included in the subordinated debt.)
• The BHC uses the funds for a $3,000 capital injection into its bank subsidiary(s).
• Quarterly interest paid on the subordinated debt equals 5.
• Dividends declared to investors (i.e., preferred stock portion) by the nonbank subsidiary equals 4.
• Dividends declared to the BHC (i.e., common stock portion) by nonbank subsidiary equals 1.

If subsidiary issuing TPS would not be consolidated (as per FIN 46):

FR Y-9SP
SI-2a = 1 (report only if the NBS declares dividents on its common stock)
SI-7 = 5
SI-M-3 = 5
SC-4a (increases by 3,000 upon capital injection into bank subsidiary(s))
SC-5a = 90
SC-5c = 1 (report common stock dividends declared but not paid)
SC-14b = 3,090
SC-M13 = 3,000 (amount that is "directly related"—or "equal" to—amount of TPS issued)
SC-M17a-f = Do not report (because the TPS subsidiary is not consolidated)

FR Y-11S
4a = 5
4b = 3,090
4c = 3,090

For financial statements (prior to adoption of FIN 46) where the subsidiary issuing TPS would be consolidated:

FR Y-9SP
SI-2a = 1 (report only if the NBS declares dividends on its common stock)
SI-7 = 5
SI-M-3 = 5
SC-5a = 90
SC-5c = 1 (report common stock dividends declared but not paid)
SC-14b = 3,090
SC-M13 = 3,000 (amount that is "directly related"—or "equal" to—amount of TPS issued)
SC-M17a = 3,090
SC-M17c = 5
SC-M17e = 1

FR Y-11S
4a = 5
4b = 3,090
4c = 3,090

The views and understandings expressed in this article are those of individual staff members and do not reflect those of any Federal Reserve Bank or the Federal Reserve System. This information represents the author's best interpretation of GAAP and is not an attempt to create new GAAP.

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