23 Va. Admin. Code § 10-330-20

Current through Register Vol. 41, No. 8, December 2, 2024

Section 23VAC10-330-20 - Computation of net capital

A. Generally. The net capital of a bank is computed as follows:

1. Compute gross capital by adding the following accounts as reported on the report of condition:

(i) preferred stock,

(ii) common stock,

(iii) surplus,

(iv) undivided profits and reserve for contingencies and other capital reserves, and

(v) one half of any reserve for loan losses net of applicable deferred tax.

2. Deducting from the gross capital:

(i) assessed value of real estate as set forth in 23VAC10-330-30,

(ii) book value of certain tangible personal property as set forth in 23VAC10-330-30,

(iii) the pro rata share of capital attributed to U.S. government obligations as set forth in 23VAC10-330-30,

(iv) certain capital accounts of bank subsidiaries as set forth in 23VAC10-330-30,

(v) the applicable amount of any reserve for marketable securities valuation as regulated in this section, and

(vi) the value of goodwill as defined by subdivision B 8 of this section.

B. Terms used in this section. The terms used in this section, requiring further explanation, and that are not regulated elsewhere are as follows:

1. "Capital stock" shall include all outstanding shares of capital stock of all classes as shown on the official report of condition of the bank or trust company.

2. "Surplus" shall be the amount as shown on the official report of condition of the bank or trust company and shall include, if any, reserves for contingencies and other capital account reserves.

3. "Undivided profits" shall be the amount as shown on the official report of condition of the bank or trust company.

4. "Gross capital" shall be the total of capital stock, surplus, undivided profits, and one half of any reserve for loan losses net of applicable deferred tax as regulated in this section.

5. Reserve for loan losses. An addition to gross capital must be made equal to one half of the reserve for loan losses net of applicable deferred tax.

a. "Reserve for loan losses" is the amount of the reserve for loan losses as shown on the bank's official report of condition.

b. "Applicable deferred tax" equals the "reserve for loan losses" divided by two and then multiplied by the bank's effective federal and state income tax rates that were used to calculate any deferred tax amounts included in the bank's official report of condition, but not less than zero.

6. Valuation reserve for marketable securities. For purposes of computing net taxable capital, an established reserve carried on the books of the bank for valuation of marketable securities is allowable to the extent that such valuation reserve does not decrease the carrying value of securities (gross value of securities included in report of condition less valuation reserve) below the current market value of the securities on December 31 next preceding the due date for filing the bank franchise tax return.

If any portion of such allowable reserve is included in total capital accounts on the bank's report of condition, such portion may be deducted from total capital in computing net taxable capital.

Any portion of a valuation reserve included in computing total capital accounts which is in excess of an allowable reserve must be added to total capital in computing net taxable capital.

7. Official report of condition. "Official report of condition" shall be the report of condition required by the Comptroller of the Currency, Department of the Treasury, or the Bureau of Financial Institutions, State Corporation Commission.

8. "Goodwill" shall be determined using generally accepted accounting principles.

23 Va. Admin. Code § 10-330-20

Derived from VR630-15-1205, eff. January 1, 1985; Amended, Virginia Register Volume 33, Issue 25, eff. 10/23/2017.

Statutory Authority: § 58.1-203 of the Code of Virginia.