Investment in Bank Premises Booklet

Investment in Bank Premises Comptroller’s Licensing Manual Washington, DC December 2005 Investment in Bank Premises Table of Contents Introduction............................................................................................................. 1 Multiple Transactions ................................................................................... 1 Key Policies............................................................................................................. 2 Decision Criteria........................................................................................... 2 Special Conditions........................................................................................ 2 Application and Notice............................................................................................ 3 After-the-Fact Notice..................................................................................... 3 Standard Processing...................................................................................... 4 Timing Considerations.................................................................................. 4 Specific Requirements ............................................................................................. 4 Investment in Real Estate .............................................................................. 4 Transactions with Insiders............................................................................. 5 Accounting ................................................................................................... 6 Appraisal ...................................................................................................... 6 Options to Purchase ..................................................................................... 6 Procedures............................................................................................................... 8 After-the-Fact Notice..................................................................................... 8 Application................................................................................................... 9 Glossary ................................................................................................................ 11 References............................................................................................................. 13 ii Investment in Bank Premises Introduction A national bank may hold property directly or invest in bank premises indirectly through a subsidiary, such as a bank premises corporation (that is, by owning the stock, bonds, or debentures

of such a corporation). Loans to a bank premises corporation or upon the security of its stock also are considered to be investments in bank premises. A bank premises corporation is a statutory subsidiary under 12 USC 371d, not an operating subsidiary. Accordingly, a national bank may establish a subsidiary to hold bank premises in another corporate entity without seeking the Comptroller of the Currency’s (OCC’s) prior approval, subject to capital limitations. Any bank having a composite CAMELS rating of 1 or 2 that also is well capitalized, as defined in 12 CFR 6.4(b)(1), may make an aggregate investment in bank premises of up to 150 percent of its capital and surplus without OCC’s prior approval. However, the OCC does require an after-the-fact notice in certain circumstances (see After-the-Fact Notice section for complete discussion). A bank that intends to invest an amount greater than its capital stock in its bank premises, directly or indirectly, must file and obtain the OCC’s prior approval, unless it satisfies certain requirements (see the Exception section). This booklet contains policies and procedures to guide a bank in requesting an additional investment in bank premises. Investments in real estate necessary for the transaction of the bank’s banking business must comply with 12 USC 29 and 12 CFR 7.100. A bank should contact the appropriate supervisory office or district counsel if it has questions whether or not an investment in real estate would comply. (Refer to Investment in Real Estate section for details.) This booklet should be used together with other booklets of the Comptroller’s Licensing Manual; for example, the “General Policies and Procedures” booklet for a discussion of general filing instructions. Users also should refer to the “Business Combinations” and “Branches and Relocations” booklets for additional discussion of filing instructions and procedures, if an investment in bank premises is related to one of those filings. There is also a step-by-step procedures section for applicants and the OCC to follow and a glossary of the terms used in this booklet. The reference section includes applicable laws, regulations, and OCC issuances to assist applicants in completing the filing process. Throughout the booklet, there are hyperlinks to other related booklets and to filing samples. Multiple Transactions 1 A bank may submit a request for an investment in bank premises with an application for a business combination (12 CFR 5.33), branch or branch relocation (12 CFR 5.30), change in main...

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