412:5-305. Permitted investments
(a) To the extent specified in this subsection, a bank may invest its own assets in:
(1) Securities and obligations of the United States
government and any agency of the United States government whose debt
obligations are fully and explicitly guaranteed as to the timely payment of
principal and interest by the full faith and credit of the United States,
including without limitation Federal Reserve Banks, the Government National
Mortgage Association, the Department of Veterans Affairs, the Federal Housing
Administration, the United States Department of Agriculture, the Export-Import
Bank, the Overseas Private Investment Corporation, the Commodity Credit
Corporation, and the Small Business Administration;
(2) Bonds, notes, mortgage backed securities, and
other debt obligations of the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, and the Federal Home Loan Banks;
(3) Securities and obligations of United States
government-sponsored agencies which are originally established or chartered by
the United States government to serve public purposes specified by the Congress
but whose debt obligations are not explicitly guaranteed by the full faith and
credit of the United States, including without limitation Banks for
Cooperatives, Federal Agricultural Mortgage Corporation, Federal Farm Credit
Banks, Federal Intermediate Credit Banks, Federal Land Banks, Financing
Corporation, Resolution Funding Corporation, Student Loan Marketing
Association, Tennessee Valley Authority, the United States Postal Service, and
securities and obligations of the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, and the Federal Home Loan Banks that are
not bonds, notes, mortgage backed securities, or other debt obligations of the
Federal Home Loan Mortgage Corporation, the Federal National Mortgage
Association, and the Federal Home Loan Banks; provided that the total amount
invested in obligations of any one issuer shall not exceed twenty per cent of
the bank's capital and surplus; and
(4) Securities and obligations of quasi-United States
governmental institutions, including without limitation the International Bank
for Reconstruction and Development (World Bank), the Inter-American Development
Bank, the Asian Development Bank, the African Development Bank, the European
Investment Bank, and other multilateral lending institutions or regional
development institutions in which the United States government is a shareholder
or contributing member; provided that the total amount invested in obligations
of any one issuer shall not exceed twenty per cent of the bank's capital and
surplus.
(b) A bank may invest its own assets in bonds,
securities, or similar obligations issued by this State or any county of this
State, through an appropriate agency or instrumentality.
(c) To the extent specified in this
subsection, a bank may invest its own assets in bonds or similar obligations
issued by any state of the United States other than this State, the District of
Columbia, or any territory or possession of the United States, by municipal
governments of such states, territories or possessions or by any foreign
country or political subdivision of such country; provided that:
(1) The bond, note, or warrant has been issued in
compliance with the constitution and laws of any such government;
(2) There has been no default in payment of either
principal or interest on any of the general obligations of such government for
a period of five years immediately preceding the date of the investment; and
(3) The total amount invested in such obligations of
any one issuer by a bank shall not exceed twenty per cent of the bank's capital
and surplus.
(d) To the extent specified in this
subsection, a bank may invest its own assets in notes, bonds, and other
obligations of any corporation that at the time of the investment is
incorporated under the laws of the United States or any state or territory thereof
or the District of Columbia; provided that the aggregate amount invested by a
bank under this subsection and subsection (e) in any one corporation shall not
exceed twenty per cent of the bank's capital and surplus.
(e) To the extent specified in this
subsection, a bank may invest its own assets in securities of an investment
grade. "Investment grade" means notes, bonds, certificates of
interest or participation, beneficial interests, mortgage or receivable-related
securities, and other obligations that are commonly understood to be of
investment grade quality, including without limitation those securities that
are rated within the four highest grades by any nationally-recognized rating
service or unrated securities of similar quality as reasonably determined by
the bank in its prudent banking judgment, which may be based in part upon
estimates that it believes to be reliable. "Investment grade" does
not include investments that are predominantly speculative in nature. The
aggregate amount invested by a bank under this subsection and subsection (d) in
any one company or other issuer shall not exceed twenty per cent of the bank's
capital and surplus.
(f) To the extent specified in this
subsection, a bank may purchase, hold, convey, sell, or lease real or personal
property as follows:
(1) The real property in or on which the business of
the bank is carried on, including its banking offices; other space in the same
property to rent as a source of income; permanent or vacation residences or
recreational facilities for its officers and employees; other real property
necessary to the accommodation of the bank's business, including but not
limited to parking facilities, data processing centers, and real property held
for future banking use where the bank in good faith expects to use the property
as bank premises; provided that if the bank ceases to use any real property and
improvements thereon for one of the foregoing purposes, it shall, within five
years thereafter, sell the real property, cease to carry it or them as an
asset, or transfer the real property to an operating subsidiary of the bank;
provided further that the bank's investment in an operating subsidiary shall
not exceed fifteen per cent of the bank's tier one capital; provided further that
the property shall not, without the approval of the commissioner, exceed
seventy-five per cent of the bank's capital and surplus;
(2) Personal property used in or necessary to the
accommodation of the bank's business, including but not limited to furniture,
fixtures, equipment, vaults, and safety deposit boxes. The bank's investment
in furniture and fixtures shall not, without the approval of the commissioner,
exceed twenty-five per cent of the bank's capital and surplus;
(3) Personal property and fixtures that the bank
acquires for purposes of leasing to third parties, and real property interests
as shall be incidental thereto;
(4) Real property or tangible personal property as
may come into its possession as security for loans or in the collection of
debts; or as may be purchased by or conveyed to the bank in satisfaction of or
on account of debts previously contracted in the course of its business, when
the property was held as security by the bank; and
(5) The seller's interest under an agreement of sale,
as that term is defined in sections 501-101.5 and 502-85, including without
limitation the reversionary interest in the real estate and the right to income
under the agreement of sale, with or without recourse to the seller.
Except as otherwise authorized in this section,
any tangible personal property acquired by a bank pursuant to subsection (f)(4)
shall be disposed of as soon as practicable and shall not, without the written
consent of the commissioner, be considered a part of the assets of the bank
after the expiration of two years from the date of acquisition.
Except as otherwise authorized in this section,
any real property acquired by a bank pursuant to subsection (f)(4) shall be
sold or exchanged for other real property by the bank within five years after
title thereto has vested in it by purchase or otherwise, or within a later time
as may be granted by the commissioner.
Any bank acquiring any real property in any
manner other than provided by this section shall immediately, upon receiving
notice from the commissioner, charge the same to profit and loss, or otherwise
remove the same from assets, and when any loss impairs the capital and surplus
of the bank the impairment shall be made good in the manner provided in this
chapter.
For purposes of this subsection, "tier one
capital" has the same meaning as "tier 1 capital" as set forth
in title 12 Code of Federal Regulations section 325.2(v).
(g) A bank may own or control:
(1) Operating subsidiaries, or the parent of the
operating subsidiary, as set forth in this article;
(2) A corporation, partnership, or limited liability
company, organized and existing for the ownership of real or personal property
used or which the bank in good faith expects to be used in the bank's business
or used for a permissible purpose under title 12 Code of Federal Regulations
part 362;
(3) The capital stock of the Federal National
Mortgage Association, the Student Loan Marketing Association, Federal Home Loan
Mortgage Corporation, or of any other corporation organized for substantially
the same purposes; provided that this subsection shall be deemed to authorize
subscription for as well as purchase of the stock;
(4) A small business investment company operating
under the Federal Small Business Investment Act of 1958;
(5) Bank service corporations, subject to the Bank
Service Company Act, 12 United States Code sections 1861-1862;
(6) A corporation whose stock is acquired or
purchased to save a loss on a preexisting debt secured by the stock; provided
that the stock shall be sold within twelve months of the date acquired or
purchased, or within a later time as may be granted by the commissioner;
(7) An international banking corporation established
pursuant to article 5A or an Edge corporation or an Agreement corporation
established or authorized pursuant to section 25a of the Federal Reserve Act,
12 United States Code section 631;
(8) A captive insurance company incorporated under
the laws of the United States, or any state or territory thereof, or the
District of Columbia;
(9) A company transacting a business of insurance or
the sale of annuities pursuant to the authority conferred in section 412:5-205.5;
and
(10) A company engaging in securities activities
pursuant to the authority conferred in section 412:5-205.7.
(h) To the
extent specified in this subsection, a bank may invest its own assets in
limited partnerships, limited liability partnerships, limited liability
companies, or corporations formed to invest in residential properties that
will qualify for the low income housing tax
credit under section 42 of the Internal Revenue Code of 1986, as amended, and
under chapters 235 and 241; provided that the bank may invest in an aggregate
amount of up to fifteen per cent of the bank's capital and surplus without the
prior approval of the commissioner or any after-the-fact notice.
(i) An eligible bank may make an investment
that exceeds fifteen per cent, but does not exceed twenty per cent, of the bank's
capital and surplus without prior notification to, or approval by, the
commissioner if the eligible bank submits an after-the-fact notice of the
investment to the commissioner. The after-the-fact notice shall include:
(1) A description of the eligible bank's investments;
(2) The amount of the investment;
(3) The percentage of the eligible bank's capital and
surplus represented by the investment that is the subject of the notice and the
eligible bank's aggregate outstanding low-income housing commitments, including
the investment that is the subject of the notice; and
(4) A statement certifying that the investment
complies with the requirements of subsection (h).
(j) For the purposes of this section:
"Eligible bank" means a bank that:
(1) Is well capitalized;
(2) Has a composite rating of 1 or 2 under the
Uniform Financial Institutions Rating System;
(3) Has a Community Reinvestment Act rating of
outstanding or satisfactory; and
(4) Is not subject to a cease and desist order,
consent order, formal written agreement, or Prompt Corrective Action directive
or, if subject to any such order, agreement, or directive, is informed in
writing by the commissioner or appropriate federal regulator that the bank may
be treated as an "eligible bank" for purposes of this subsection.
"Well capitalized" has the same
meaning as defined under title 12 Code of Federal Regulations section 6.4.
[L
1993, c 350, pt of §1; am L 1995, c 48, §1; am L 1996, c 225, §3; am L 1997, c
258, §14; am L 2001, c 170, §7; am L 2006, c 228, §32; am L 2009, c 107, §2; am
L 2013, c 172, §6; am L 2017, c 12, §1; am L 2023, c 96, §1]
