Real Estate Holdings

TITLE 26 BANKS AND BANKING CHAPTER 7 LIMITATIONS ON LOANS, INVESTMENTS, AND PRACTICES 26-707. Real estate holdings. A bank may purchase, acquire, hold and convey real estate for the following purposes only: (1)  Such as shall be necessary for the convenient transaction of its business, including at the same location as its banking offices’ other property to rent as a source of income; provided however, that no bank shall invest in buildings, lots, furniture, fixtures and equipment in an amount greater than fifty percent (50%) of the capital structure of such bank. (2)  Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of business. (3)  Such as it shall purchase at sale on judgments, decrees, mortgage foreclosures or trustee’s sale for debts previously contracted, but a bank shall not bid at such sale a larger amount than is necessary to satisfy all debts and costs necessary to obtain clear title. Real estate acquired for debts previously contracted shall be carried on the books of the bank at the lower of cost or market value. Market value shall be determined by: (a)  An appraisal prepared by a state-certified or state-licensed appraiser; or (b)  An appropriate evaluation when the recorded investment is equal to or less than two hundred fifty thousand dollars ($250,000). If a bank has a valid appraisal or an appropriate evaluation that was previously obtained in connection with a real estate loan, a new appraisal or evaluation is not required at the time the bank acquires the property to determine the market value of real estate acquired for debts previously contracted. A bank may defer obtaining an appraisal or evaluation for a period not to exceed three (3) months following acquisition of the real estate if the bank documents a reasonable expectation that a sale of the real estate, other than in a transaction involving an affiliated party, will be consummated during a period of three (3) months following the acquisition of the property. If the property is not sold during the expected three (3) month period, a new appraisal or appropriate evaluation as set forth in paragraphs (a) and (b) of this subsection must be obtained. Thereafter, the director may in his discretion require an appraisal or evaluation if the director believes it is necessary to address safety and soundness concerns. A bank shall develop and maintain prudent real estate appraisal and evaluation policies and procedures to monitor the market value of real estate acquired for debts previously contracted, in accordance with applicable real estate appraisal and evaluation guidelines. (4)  No real estate acquired under subsections (2) and (3) of this section may be held for a longer period than five (5) years, provided however, that upon application by the bank, the director shall approve the continued holding of any such real estate by the bank for an additional period of five (5) years upon the bank’s showing of its good faith attempt to dispose of the real estate within the first five (5) year period or showing that disposal within the first five (5) year period would be detrimental to the bank. Nothing in this section shall be construed to prevent a bank from making loans secured by real estate as provided in this act, or a trust department holding and conveying real estate in trust. (5)  A bank may, with the approval of the director and the board of governors of the federal reserve system or the federal deposit insurance corporation, invest in bank premises or in the stock, bonds, debentures, or other obligations of any corporation holding the banking buildings, lots, furniture, fixtures and equipment of such bank in an amount not to exceed the capital and surplus of the bank.