Small Bank Holding Companies
- Small Bank Holding Company Policy Statement (Regulation Y, Appendix C) governs the treatment of subordinated debt associated with
trust preferred securities ("TPS") for bank holding companies ("BHCs") with less than $500 million in assets.
- Bank holding companies with assets less than $500 million generally are not required to consult the Federal Reserve prior to issuing TPS.
- For purposes of the Small Bank Holding Company Policy Statement, a small BHC may exclude from debt an amount of subordinated debt associated with trust preferred securities up to 25 percent of the holding company's equity (as defined in Regulation Y, Appendix C), less goodwill. Here is an example:
|
Total stockholders' equity |
$15,000,000 |
|
Minus Goodwill |
($500,000) |
|
Adjusted equity |
$14,500,000 |
|
25% of adjusted equity |
$3,625,000 |
|
Proposed TPS issuance |
$5,000,000 |
|
Amount of TPS that may be excluded from debt |
$3,625,000 |
|
Amount of TPS that is included as debt |
$1,375,000 |
- In addition, a small BHC that has not issued subordinated debt associated with a new issuance of TPS after December 31, 2005, may exclude from debt any subordinated debt associated with TPS until December 31, 2010. Also until December 31, 2010, small BHCs may also exclude from debt any refinanced issuances of TPS that were originally issued on or prior to December 31, 2005, provided that the amount of issuance does not increase.
- If your lead bank is a state member bank, or your proposed TPS issuance will result in a debt-to-equity ratio that approaches or exceeds 100%, please notify the Examination & Inspections Department at your Federal Reserve office regarding the proposed issuance:
Denver (800) 333-1020, (303) 572-2300
Kansas City (800) 333-1010, (816) 881-2000
Oklahoma City (800) 333-1030, (405) 270-8400
Omaha (800) 333-1040, (402) 221-5500 - Regulation Y, Appendix C provides more information on this topic. Please contact Nancy Fitzgerald at 800-333-1010, extension 16847, or 816-881-6847, with any questions regarding the capital treatment of TPS.