Income Capital Certificates can be included in net worth only for accounting reports filed with the Board in accordance with RAP. Income Capital certificates may not be included in the equity section in financial statements filed in accordance with generally accepted accounting principles.

In our opinion the proposal from Muldoon, Murphy, Bray and Faucette with respect to the 40-year amortization and the inclusion of Income Capital Certificates in equity for GAAP is considered to be unacceptable.

Muldoon, Murphy, Bray and Faucette indicated in their memorandum that they would be willing to consider an alternative proposal if this one is deemed unacceptable. We recommend that you schedule a meeting with the applicants and their representatives since time is of the essence.

Robert More

Deputy Director

Field Support and Systems

CFS:LCC:3lh

We are concerned that we are unable to complete our review of Columbia First FS&LA's Form 10, and Amendment No. 1, in a timely manner because we have been unable to complete our review of their conversion.

We still, after several phone calls to Mr. Murphy (and our memo to J. Larry Fleck, see attached) by my staff and by your staff, have not received marked copies of Amendments 5, 6, 7 and 8 to their Conversion Application.

As I am sure you can appreciate, we just don't have the luxury of staffing sufficient to review unmarked mendments.

It

A reminder this filing contains the first, and only, example of treatment
of non-mandatorily redeemable ICCs as GAAP net worth in a filing with us.
would behoove us all to assure that this filing is appropriately reviewed and
documented.

Attachment

Сва

OES:REW:njw

Deputy Director
Field Support and
Systems

NON-PUBLIC INFORMATION
DISCLOSURE PROHIBITED

We have completed our review of Columbia First FS&LA's Amendment Nos. 4, 5, 6, 7, and 8 dated September 25, 1985; October 22, 1985; November 4, 1985; November 20, 1985 and November 26, 1985, respectively and we have no

accounting comments.

Bust

Manager, Corporate Finance

OES:REW: nju,

NON-PUBLIC INFORMATION
DISCLOSURE PROHIBITED

I contacted George Murphy regarding restatement of the financial statements of Columbia First to reflect the FASB's recent decision regarding ICCs. George indicated that the Association would have no problem doing this since they did not believe that the public considers the accounting for the ICCs as a material disclosure item.

ITEM 2

NON-PUBLIC INFORMATION
DISCLOSURE PROHIBITED

Mr. WYDEN. If Mr. Moore can write that analysis, why can't you? Mr. SAMPSON. With respect to the income capital certificate, that is one which has a maturity date. The SEC position on the accounting for that was it could not be shown in the stockholder's equity, but could be shown not, as a liability, more like a preferred stock would be shown, between liabilities and equity, redeemable and preferred stock with, a maturity date, but the one here has no maturity date.

One could have argued it could be put in net worth. Mr. Moore doesn't deal with that type of instrument in that memorandum.

Mr. WYDEN. Mr. Moore doesn't argue it that way.

Mr. SAMPSON. I believe he is talking about a different type of security.

Mr. WYDEN. It is the security that is listed on the balance sheet. Mr. SAMPSON. Yes.

Mr. WYDEN. How can it be different?

Mr. SAMPSON. There have been three kinds of securities issued by the regulators in this context, the first one was the net worth certificate, where the note was not negotiable, and it could not be shown on the balance sheet. It was offset.

The second one was an income capital certificate which had a maturity date and the note receivable was negotiable. One could have argued, before the FASB spelled out their view of the account, that could have been shown as an asset.

The third one was permanent income capital certificate, no maturity date, and prior to the FASB's dealing with this, it could have been argued that those could have been shown, the note receivable could have been shown as an asset, and the permanent income capital certificate shown as part of net worth, and this is a permanent income capital certificate.

Mr. WYDEN. You know that that is just not correct. I have a memo from the Financial Accounting Standards Board, which was written to you personally on March 28, 1986.

I wanted to read you a portion of it.

While certain characteristics of the promisory note and the PICC involving the arrangement specified below, FASB staff understands FSLIC contemplates each arrangement might have different specific terms resulting from negotiations of the parties.

The staff does not believe that the particular terms of the promisory note and PICC, such as interest rates, maturity dates, stated amounts, annual income payment raised, call dates necessarily influence the accounting conclusion?

Mr. SAMPSON. I understand that March 28, 1986-prior to that time this had not been spelled out by the FASB or any one else. They told me they were looking at the question, and when we got involved with Citizens Savings, we told them we would want to consult with the FASB and see what their review of the transaction was.

The result was the March 28 letter.

Mr. WYDEN. You are the SEC's observer of the FASB?

Mr. SAMPSON. Correct.

Mr. WYDEN. You had no idea they were going to see it this way?