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Pt. 325, App. A12 CFR Ch. III (1–1–17 Edition)bank over the planning horizon, and anexplanation of the most significantcauses for the changes in regulatorycapital ratios.(c) Information to be disclosed in thesummary. A covered bank must disclosethe following information regardingthe severely adverse scenario if it isnot a consolidated subsidiary of a parent bank holding company or savingsand loan holding company that haselected to make its disclosure undersection 203(d):(1) A description of the types of risksincluded in the stress test;(2) A summary description of themethodologies used in the stress test;(3) Estimates of aggregate losses, preprovision net revenue, provision forloan and lease losses, net income, andpro forma capital ratios (including regulatory and any other capital ratiosspecified by the FDIC); and(4) An explanation of the most significant causes for the changes in theregulatory capital ratios.(d) Content of results. (1) The disclosure of aggregate losses, pre-provisionnet revenue, provisions for loan andlease losses, and net income under thissection must be on a cumulative basisover the planning horizon.(2) The disclosure of regulatory capital ratios and any other capital ratiosspecified by the Corporation under thissection must include the beginningvalue, ending value, and minimumvalue of each ratio over the planninghorizon.[77 FR 62424, Oct. 15, 2012, as amended at 79FR 69369, Nov. 21, 2014]jstallworth on DSK7TPTVN1PROD with CFRAPPENDIX A TO PART 325—STATEMENTOF POLICY ON RISK-BASED CAPITALCapital adequacy is one of the critical factors that the FDIC is required to analyzewhen taking action on various types of applications and when conducting supervisory activities related to the safety and soundnessof individual banks and the banking system.In view of this, the FDIC’s Board of Directors has adopted part 325 of its regulations,which sets forth (1) minimum standards ofcapital adequacy for insured state nonmember banks and (2) standards for determining when an insured bank is in an unsafeor unsound condition by reason of theamount of its capital.This capital maintenance regulation wasdesigned to establish, in conjunction withother Federal bank regulatory agencies, uniform capital standards for all federally-regulated banking organizations, regardless ofsize. The uniform capital standards werebased on ratios of capital to total assets.While those leverage ratios have served as auseful tool for assessing capital adequacy,the FDIC believes there is a need for a capital measure that is more explicitly and systematically sensitive to the risk profiles ofindividual banks. As a result, the FDIC’sBoard of Directors has adopted this Statement of Policy on Risk-Based Capital to supplement the part 325 regulation. This statement of policy does not replace or eliminatethe existing part 325 capital-to-total assetsleverage ratios.The framework set forth in this statementof policy consists of (1) a definition of capitalfor risk-based capital purposes, and (2) a system for calculating risk-weighted assets byassigning assets and off balance sheet itemsto broad risk categories. A bank’s risk-basedcapital ratio is calculated by dividing itsqualifying total capital base (the numeratorof the ratio) by its risk-weighted assets (thedenominator). 1 Table I outlines the definition of capital and provides a general explanation of how the risk-based capital ratio iscalculated, Table II summarizes the riskweights and risk categories, and Table IIIsets forth the credit conversation factors foroff-balance sheet items. Additional explanations of the capital definitions, the riskweighted asset calculations, and the minimum risk-based capital ratio guidelines areprovided in Sections I, II and III of thisstatement of policy.In addition, when certain banks that engage in trading activities calculate theirrisk-based capital ratio under this appendixA, they must also refer to appendix C of thispart, which incorporates capital charges forcertain market risks into the risk-based capital ratio. When calculating their risk-basedcapital ratio under this appendix A, suchbanks are required to refer to appendix C ofthis part for supplemental rules to determinequalifying and excess capital, calculate riskweighted assets, calculate market riskequivalent assets and add them to riskweighted assets, and calculate risk-basedcapital ratios as adjusted for market risk.This statement of policy applies to allFDIC-insured state-chartered banks (excludinginsured branches of foreign banks) that arenot members of the Federal Reserve System,hereafter referred to as state nonmember1 Period-end amounts, rather than averagebalances, normally will be used when calculating risk-based capital ratios. However, ona case-by-case basis, ratios based on averagebalances may also be required if supervisoryconcerns render it appropriate.432VerDate Sep 11 201410:20 Mar 27, 2017Jkt 241039PO 00000Frm 00442Fmt 8010Sfmt 8002Y:\SGML\241039.XXX241039

Federal Deposit Insurance CorporationPt. 325, App. Abanks, regardless of size, and to all circumstances in which the FDIC is required toevaluate the capital of a banking organization. Therefore, the risk-based capital framework set forth in this statement of policywill be used in the examination and supervisory process as well as in the analysis ofapplications that the FDIC is required to actupon.The risk-based capital ratio focuses principally on broad categories of credit risk,however, the ratio does not take account ofmany other factors that can affect a bank’sfinancial condition. These factors includeoverall interest rate risk exposure, liquidity,funding and market risks; the quality andlevel of earnings; investment, loan portfolio,and other concentrations of credit risk, certain risks arising from nontraditional activities; the quality of loans and investments;the effectiveness of loan and investmentpolicies; and management’s overall ability tomonitor and control financial and operatingrisks, including the risk presented by concentrations of credit and nontraditional activities. In addition to evaluating capital ratios, an overall assessment of capital adequacy must take account of each of theseother factors, including, in particular, thelevel and severity of problem and adverselyclassified assets as well as a bank’s interestrate risk as measured by the bank’s exposureto declines in the economic value of its capital due to changes in interest rates. For thisreason, the final supervisory judgment on abank’s capital adequacy may differ significantly from the conclusions that might bedrawn solely from the absolute level of thebank’s risk-based capital ratio.In light of these other considerations,banks generally are expected to operateabove the minimum risk-based capital ratio.Banks contemplating significant expansionplans, as well as those institutions with highor inordinate levels of risk, should hold capital commensurate with the level and natureof the risks to which they are exposed.that represent a segregation of undividedprofits, and foreign currency translation adjustments, less net unrealized holding losseson available-for-sale equity securities withreadily determinable fair values);ii. Noncumulative perpetual preferredstock, 2 including any related surplus; andiii. Minority interests in the equity capitalaccounts of consolidated subsidiaries.(a) At least 50 percent of the qualifyingtotal capital base should consist of Tier 1capital. Core (Tier 1) capital is defined as thesum of core capital elements minus all intangible assets (other than mortgage servicing assets, nonmortgage servicing assetsand purchased credit card relationships eligible for inclusion in core capital pursuant to§ 325.5(f)), 3 minus credit-enhancing interestonly strips that are not eligible for inclusionin core capital pursuant to § 325.5(f), minusany disallowed deferred tax assets, andminus any amount of nonfinancial equity investments required to be deducted pursuantto section II.B.(6) of this Appendix.(b) Although nonvoting common stock,noncumulative perpetual preferred stock,and minority interests in the equity capitalaccounts of consolidated subsidiaries arenormally included in Tier 1 capital, votingcommon stockholders’ equity generally willbe expected to be the dominant form of Tier1 capital. Thus, banks should avoid undue reliance on nonvoting equity, preferred stockand minority interests.(c) Although minority interests in consolidated subsidiaries are generally included inregulatory capital, exceptions to this generalrule will be made if the minority interestsfail to provide meaningful capital support tothe consolidated bank. Such a situationcould arise if the minority interests are entitled to a preferred claim on essentially lowrisk assets of the subsidiary. Similarly, although credit-enhancing interest-only stripsand intangible assets in the form of mortgage servicing assets, nonmortgage servicingassets and purchased credit card relationships are generally recognized for risk-basedcapital purposes, the deduction of part or allof the credit-enhancing interest-only strips,I. DEFINITION OF CAPITAL FOR THE RISKBASED CAPITAL RATIOA bank’s qualifying total capital base consists of two types of capital elements: corecapital elements (Tier 1) and supplementarycapital elements (Tier 2). To qualify as an element of Tier 1 or Tier 2 capital, a capital instrument should not contain or be subject toany conditions, covenants, terms, restrictions, or provisions that are inconsistentwith safe and sound banking practices.jstallworth on DSK7TPTVN1PROD with CFRA. The Components of Qualifying Capital (seeTable I)1. Core capital elements (Tier 1) consists of:i. Common stockholders’ equity capital(includes common stock and related surplus,undivided profits, disclosed capital reserves2 Preferred stock issues where the dividendis reset periodically based, in whole or inpart, upon the bank’s current credit standing, including but not limited to, auctionrate, money market or remarketable preferred stock, are assigned to Tier 2 capital,regardless of whether the dividends arecumultive or noncumulative.3 An exception is allowed for intanglble assets that are explicitly approved by the FDICas part of the bank’s regulatory capital on aspecific case basis. These intangibles will beincluded in capital for risk-based capitalpurposes under the terms and conditionsthat are specifically approved by the FDIC.433VerDate Sep 11 201410:20 Mar 27, 2017Jkt 241039PO 00000Frm 00443Fmt 8010Sfmt 8002Y:\SGML\241039.XXX241039

jstallworth on DSK7TPTVN1PROD with CFRPt. 325, App. A12 CFR Ch. III (1–1–17 Edition)mortgage servicing assets, nonmortgageservicing assets and purchased credit cardrelationships may be required if the carryingamounts of these assets are excessive in relation to their market value or the level of thebank’s capital accounts. Credit-enhancinginterest-only strips, mortgage servicing assets, nonmortgage servicing assets, purchased credit card relationships and deferredtax assets that do not meet the conditions,limitations and restrictions described in§ 325.5(f) and (g) of this part will not be recognized for risk-based capital purposes.(d) Minority interests in small business investment companies, investment funds thathold nonfinancial equity investments (as defined in section II.B.(6)(ii) of this appendixA), and subsidiaries that are engaged in nonfinancial activities are not included in thebank’s Tier 1 or total capital base if thebank’s interest in the company or fund isheld under one of the legal authorities listedin section II.B.(6)(ii) of this appendix A.2. Supplementary capital elements (Tier 2)consist of:i. Allowance for loan and lease losses, up toa maximum of 1.25 percent of risk-weightedassets;ii. Cumulative perpetual preferred stock,long-term preferred stock (original maturityof at least 20 years), and any related surplus;iii. Perpetual preferred stock (and any related surplus) where the dividend is reset periodically based, in whole or part, on thebank’s current credit standing, regardless ofwhether the dividends are cumulative ornoncumulative;iv. Hybrid capital instruments, includingmandatory convertible debt securities;v. Term subordinated debt and intermediate-term preferred stock (original average maturity of five years or more) and anyrelated surplus; andvi. Net unrealized holding gains on equitysecurities (subject to the limitations discussed in paragraph I.A.2.(f) of this section).The maximum amount of Tier 2 capitalthat may be recognized for risk-based capitalpurposes is limited to 100 percent of Tier 1capital (after any deductions for disallowedintangibles and disallowed deferred tax assets). In addition, the combined amount ofterm subordinated debt and intermediateterm preferred stock that may be treated aspart of Tier 2 capital for risk-based capitalpurposes is limited to 50 percent of Tier 1capital. Amounts in excess of these limitsmay be issued but are not included in thecalculation of the risk-based capital ratio.(a) Allowance for loan and lease losses. Allowances for loan and lease losses are reserves that have been established through acharge against earnings to absorb futurelosses on loans or lease financing receivables. Allowances for loan and lease lossesexclude allocated transfer risk reserves, 4 andreserves created against identified losses.This risk-based capital framework providesa phasedown during the transition period ofthe extent to which the allowance for loanand lease losses may be included in an institution’s capital base. By year-end 1990, theallowance for loan and lease losses, as an element of supplementary capital, may constitute no more than 1.5 percent of riskweighted assets and, by year-end 1992, nomore than 1.25 percent of risk-weighted assets. 5(b) Preferred stock. Perpetual preferredstock is defined as preferred stock that doesnot have a maturity date, that cannot be redeemed at the option of the holder, and thathas no other provisions that will require future redemption of the issue. Long-term preferred stock includes limited-life preferredstock with an original maturity of 20 yearsor more, provided that the stock cannot beredeemed at the option of the holder prior tomaturity, except with the prior approval ofthe FDIC.Cumulative perpetual preferred stock andlong-term preferred stock qualify for inclusion in supplementary capital provided thatthe instruments can absorb losses while theissuer operates as a going concern (a fundamental characteristic of equity capital) andprovided the issuer has the option to deferpayment of dividends on these instruments.Given these conditions, and the perpetual orlong-term nature of the intruments, there isno limit on the amount of these preferredstock instruments that may be included withTier 2 capital.Noncumulative perpetual preferred stockwhere the dividend is reset periodicallybased, in whole or in part, on the bank’s current credit standing, including auction rate,money market, or remarketable preferredstock, are also assigned to Tier 2 capitalwithout limit, provided the above conditionsare met.4 Allocated transfer risk reserves are reserves that have been established in accordance with section 905(a) of the InternationalLending Supervision Act of 1983 against certain assets whose value has been found bythe U.S. supervisory authorities to have beensignificantly impaired by protracted transferrisk problems.5 The amount of the allowance for loan andlease losses that may be included as a supplementary capital element is based on apercentage of gross risk-weighted assets. Abank may deduct reserves for loan and leaselosses that are in excess of the amount permitted to be included in capital, as well asallocated transfer risk reserves, from grossrisk-weighted assets when computing the denominator of the risk-based capital ratio.434VerDate Sep 11 201410:20 Mar 27, 2017Jkt 241039PO 00000Frm 00444Fmt 8010Sfmt 8002Y:\SGML\241039.XXX241039

jstallworth on DSK7TPTVN1PROD with CFRFederal Deposit Insurance CorporationPt. 325, App. A(c) Hybrid capital instruments. Hybrid capital instruments include instruments thathave certain characteristics of both debt andequity. In order to be included as supplementary capital elements, these instrumentsshould meet the following criteria:(1) The instrument should be unsecured,subordinated to the claims of depositors andgeneral creditors, and fully paid-up.(2) The instrument should not be redeemable at the option of the holder prior to maturity, except with the prior approval of theFDIC. This requirement implies that holdersof such instruments may not accelerate thepayment of principal except in the event ofbankruptcy, insolvency, or reorganization.(3) The instrument should be available toparticipate in losses while the issuer is operating as a going concern. (Term subordinateddebt would not meet this requirement.) Tosatisfy this requirement, the instrumentshould convert to common or perpetual preferred stock in the event that the sum of theundivided profits and capital surplus accounts of the issuer results in a negative balance.(4) The instrument should provide the option for the issuer to defer principal and interest payments if: (a) The issuer does notreport a profit in the preceding annual period, defined as combined profits (i.e., net income) for the most recent four quarters, and(b) the issuer eliminates cash dividends onits common and preferred stock.Mandatory convertible debt securities,which are subordinated debt instrumentsthat require the issuer to convert such instruments into common or perpetual preferred stock by a date at or before the maturity of the debt instruments, will qualify ashybrid capital instruments provided the maturity of these instruments is 12 years or lessand the instruments meet the criteria setforth below for ‘‘term subordinated debt.’’There is no limit on the amount of hybridcapital instruments that may be includedwithin Tier 2 capital.(d) Term subordinated debt and intermediateterm preferred stock. The aggregate amount ofterm subordinated debt (excluding mandatory convertible debt securities) and intermediate-term preferred stock (including anyrelated surplus) that may be treated as Tier2 capital for risk-based capital purposes islimited to 50 percent of Tier 1 capital. Termsubordinated debt and intermediate-termpreferred stock should have an original average maturity of at least five years to qualifyas supplementary capital and should not beredeemable at the option of the holder priorto maturity, except with the prior approvalof the FDIC. For state nonmember banks, aterm subordinated debt instrument is an obligation other than a deposit obligation that:(1) Bears on its face, in boldface type, thefollowing: This obligation is not a depositand is not insured by the Federal Deposit Insurance Corporation;(2)(i) Has a maturity of at least five years;or(ii) In the case of an obligation or issuethat provides for scheduled repayments ofprincipal, has an average maturity of atleast five years; provided that the Directorof the Division of Supervision and ConsumerProtection (DSC) may permit the issuance ofan obligation or issue with a shorter maturity or average maturity if the Director hasdetermined that exigent circumstances require the issuance of such obligation orissue; provided further that the provisions ofthis paragraph I.A.2.(d)(2) shall not apply tomandatory convertible debt obligations orissues;(3) States express that the obligation:(i) Is subordinated and junior in right ofpayment to the issuing bank’s obligations toits depositors and to the bank’s other obligations to its general and secured creditors;and(ii) Is ineligible as collateral for a loan bythe issuing bank;(4) Is unsecured;(5) States expressly that the issuing bankmay not retire any part of its obligationwithout the prior written consent of theFDIC or other primary federal regulator; and(6) Includes, if the obligation is issued to adepository institution, a specific waiver ofthe right of offset by the lending depositoryinstitution.Subordinated debt obligations issued prior toDecember 2, 1987 that satisfied the definitionof the term ‘‘subordinated note and debenture’’ that was in effect prior to that datealso will be deemed to be term subordinateddebt for risk-based capital purposes. An optional redemption (‘‘call’’) provision in asubordinated debt instrument that is exercisable by the issuing bank in less than fiveyears will not be deemed to constitute a maturity of less than five years, provided thatthe obligation otherwise has a stated contractual maturity of at least five years; thecall is exercisable solely at the discretion oroption of the issuing bank, and not at thediscretion or option of the holder of the obligation; and the call is exercisable only withthe express prior written consent of theFDIC under 12 U.S.C. 1828(i)(1) at the timeearly redemption or retirement is sought,and such consent has not been given in advance at the time of issuance of the obligation. Optional redemption provisions will beaccorded similar treatment when determining the perpetual nature and/or maturityof preferred stock and other capital instruments.(e) Discount of limited-life supplementarycapital instruments. As a limited-life capitalinstrument approaches maturity, the instrument begins to take on charcteristics of ashort-term obligation and becomes less like435VerDate Sep 11 201410:20 Mar 27, 2017Jkt 241039PO 00000Frm 00445Fmt 8010Sfmt 8002Y:\SGML\241039.XXX241039

Pt. 325, App. A12 CFR Ch. III (1–1–17 Edition)a component of capital. Therefore, for riskbased capital purposes, the outstandingamount of term subordinated debt and limited-life preferred stock eligible for inclusionin capital will be adjusted downward, or discounted, as the instruments approach maturity. Each limited-life capital instrumentwill be discounted by reducing the outstanding amount of the capital instrumenteligible for inclusion as supplementary capital by a fifth of the original amount (less redemptions) each year during the instrument’s last five years before maturity. Suchinstruments, therefore, will have no capitalvalue when they have a remaining maturityof less than a year.(f) Unrealized gains on equity securities andunrealized gains (losses) on other assets. Up to45 percent of pretax net unrealized holdinggains (that is, the excess, if any, of the fairvalue over historical cost) on available-forsale equity securities with readily determinable fair values may be included in supplementary capital. However, the FDIC mayexclude all or a portion of these unrealizedgains from Tier 2 capital if the FDIC determines that the equity securities are not prudently valued. Unrealized gains (losses) onother types of assets, such as bank premisesand available-for-sale debt securities, are notincluded in supplementary capital, but theFDIC may take these unrealized gains(losses) into account as additional factorswhen assessing a bank’s overall capital adequacy.B. Deductions from Capital and OtherAdjustmentsjstallworth on DSK7TPTVN1PROD with CFRCertain assets are deducted from a bank’scapital base for the purpose of calculatingthe numerator of the risk-based capitalratio. 6 These assets include:(1) All intangible assets other than mortgage servicing assets, nonmortgage servicingassets and purchased credit card relationships. 7 These disallowed intangibles are de6 Any assets deducted from capital whencomputing the numerator of the risk-basedcapital ratio will also be excluded from riskweighted assets when computing the denominator of the ratio.7 In addition to mortgage servicing assets,nonmortgage servicing assets and purchasedcredit card relationships, certain other intangibles may be allowed if explicitly approved by the FDIC as part of the bank’s regulatory capital on a specific case basis. Inevaluating whether other types of intangibles should be recognized for regulatory capital purposes on a specific case basis, theFDIC will accord special attention to thegeneral characteristics of the intangibles, including: (1) The separability of the intangible asset and the ability to sell it separateand apart from the bank or the bulk of theducted from the core capital (Tier 1) elements.(2) Investments in unconsolidated bankingand finance subsidiaries. 8 This includes anyequity or debt capital investments in banking or finance subsidaries if the subsidiariesare not consolidated for regulatory capitalrequirements. 9 Generally, these investmentsinclude equity and debt capital securitiesbank’s assets, (2) the certainty that a readilyidentifiable stream of cash flows associatedwith the intangible asset can hold its valuenotwithstanding the future prospects of thebank, and (3) the existence of a market ofsufficient depth to provide liquidity for theintangible asset.8 For risk-based capital purposes, thesesubsidiaries are generally defined as anycompany that is primarily engaged in banking or finance and in which the bank, eitherdirectly or indirectly, owns more than 50percent of the outstanding voting stock butdoes not consolidate the company for regulatory capital purposes. In addition to investments in unconsolidated banking and finance subsidiaries, the FDIC may, on a caseby-case basis, deduct investments in associated companies or joint ventures, which aregenerally defined as any companies in whichthe bank, either directly or indirectly, owns20 to 50 percent of the outstanding votingstock. Alternatively, the FDIC may, in certain cases, apply an appropriate risk-weighted capital charge against a bank’s proportionate interest in the assets of associatedcompanies and joint ventures. The definitions for subsidiaries, associated companiesand joint ventures are contained in the instructions for the preparation of the Consolidated Reports of Condition and Income.9 Consolidationrequirements for regulatory capital purposes generally follow theconsolidation requirements set forth in theinstructions for preparation of the consolidated Reports of Condition and Income. However, although investments in subsidiariesrepresenting majority ownership in anotherFederally-insured depository institution arenot consolidated for purposes of the consolidated Reports of Condition and Income thatare filed by the parent bank, they are generally consolidated for purposes of determining FDIC regulatory capital requirements. Therefore, investments in these depository institution subsidiaries generallywill not be deducted for risk-based capitalpurposes; rather, assets and liabilities ofsuch subsidiaries will be consolidated withthose of the parent bank when calculatingthe risk-based capital ratio. In addition, although securities subsidiaries establishedpursuant to 12 CFR 337.4 are consolidated forReport of Condition and Income purposes,they are not consolidated for regulatory capital purposes.436VerDate Sep 11 201410:20 Mar 27, 2017Jkt 241039PO 00000Frm 00446Fmt 8010Sfmt 8002Y:\SGML\241039.XXX241039

Federal Deposit Insurance CorporationPt. 325, App. Aand any other instruments or commitmentsthat are deemed to be capital of the subsidiary. These investments are deductedfrom the bank’s total (Tier 1 plus Tier 2) capital base.(3) Investments in securities subsidiaries established pursuant to 12 CFR 337.4. The FDICmay also consider deducting investments inother subsidiaries, either on a case-by-casebasis or, as with securities subsidiaries,based on the general characteristics or functional nature of the subsidiaries.(4) Reciprocal holdings of capital instruments of banks that represent intentionalcross-holdings by the banks. These holdingsare deducted from the bank’s total capitalbase.(5) Deferred tax assets in excess of the limitset forth in § 325.5(g). These disallowed deferred tax assets are deducted from the corecapital (Tier 1) elements.On a case-by-case basis, and in conjunctionwith supervisory examinations, other deductions from capital may also be required, including any adjustments deemed appropriatefor assets classified as loss.priate risk weight for any asset or creditequivalent amount that does not fit whollywithin one of the risk categories set forth inthis Appendix A or that imposes risks on abank that are not commensurate with therisk weight otherwise specified in this Appendix A for the asset or credit equivalentamount. In addition, the Director of the Division of Supervision and Consumer Protection (DSC) may, on a case-by-case basis, determine the appropriate credit conversionfactor for any off-balance sheet item thatdoes not fit wholly within one of the creditconversion factors set forth in this AppendixA or that imposes risks on a bank that arenot commensurate with the credit conversion factor otherwise specified in this Appendix A for the off-balance sheet item. In making such a determination, the Director of theDivision of Supervision and Consumer Protection (DSC) will consider the similarity ofthe asset or off-balance sheet item to assetsor off-balance sheet items explicitly treatedin sections II.B and II.C of this appendix A,as well as other relevant factors.4. The Director of the Division of Supervision and Consumer Protection (DSC) may,on a case-by-case basis, determine that theregulatory capital treatment for an exposureor other relationship to an entity that is notsubject to consolidation on the balance sheetis not commensurate with the risk of the exposure and the relationship of the bank tothe entity. In making this determination,the Director of DSC may require the bank totreat the entity as if it were consolidated onthe balance sheet of the bank for risk-basedcapital purposes and calculate the appropriate risk-based capital ratios accordingly.5. Optional Transition Provisions Relatedto the Implementation of Consolidation Requirements Under FAS 167Section II.A.5 of this appendix provides optional transition provisions for a State nonmember bank that is required for financialand regulatory reporting purposes, a

rate, money market or remarketable pre-ferred stock, are assigned to Tier 2 capital, regardless of whether the dividends are cumultive or noncumulative. 3An exception is allowed for intanglble as-sets that are explicitly approved by the FDIC as part of the bank's regulatory capital on a specific case basis. These intangibles will be