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:
(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.