§412:5-305 - Permitted investments.

§412:5-305  Permitted investments.  (a) To the extent specified herein, a bank may invest its own assets in:

(1)  Securities and obligations of the United Statesgovernment and any agency of the United States government whose debtobligations are fully and explicitly guaranteed as to the timely payment ofprincipal and interest by the full faith and credit of the United States,including without limitation Federal Reserve Banks, the Government NationalMortgage Association, the Veterans Administration, the Federal HousingAdministration, the United States Department of Agriculture, the Export-ImportBank, the Overseas Private Investment Corporation, the Commodity CreditCorporation, and the Small Business Administration;

(2)  Bonds, notes, mortgage backed securities, andother debt obligations of the Federal Home Loan Mortgage Corporation, theFederal National Mortgage Association, and the Federal Home Loan Banks;

(3)  Securities and obligations of United Statesgovernment-sponsored agencies which are originally established or chartered bythe United States government to serve public purposes specified by the Congressbut whose debt obligations are not explicitly guaranteed by the full faith andcredit of the United States, including without limitation Banks forCooperatives, Federal Agricultural Mortgage Corporation, Federal Farm CreditBanks, Federal Intermediate Credit Banks, Federal Land Banks, FinancingCorporation, Resolution Funding Corporation, Student Loan MarketingAssociation, Tennessee Valley Authority, the United States Postal Service, andsecurities and obligations of the Federal Home Loan Mortgage Corporation, theFederal National Mortgage Association, and the Federal Home Loan Banks that arenot bonds, notes, mortgage backed securities, or other debt obligations of theFederal Home Loan Mortgage Corporation, the Federal National MortgageAssociation, and the Federal Home Loan Banks; provided that the total amountinvested in obligations of any one issuer shall not exceed twenty per cent ofthe bank's capital and surplus; and

(4)  Securities and obligations of quasi-United Statesgovernmental institutions, including without limitation the International Bankfor Reconstruction and Development (World Bank), the Inter-American DevelopmentBank, the Asian Development Bank, the African Development Bank, the EuropeanInvestment Bank, and other multilateral lending institutions or regionaldevelopment institutions in which the United States government is a shareholderor contributing member; provided that the total amount invested in obligationsof any one issuer shall not exceed twenty per cent of the bank's capital andsurplus.

(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 herein, a bank mayinvest its own assets in bonds or similar obligations issued by any state ofthe United States other than this State, the District of Columbia, or any territoryor possession of the United States, by municipal governments of such states,territories or possessions or by any foreign country or political subdivisionof such country; provided, that:

(1)  The bond, note, or warrant has been issued incompliance with the constitution and laws of any such government;

(2)  There has been no default in payment of eitherprincipal or interest on any of the general obligations of such government fora period of five years immediately preceding the date of the investment; and

(3)  The total amount invested in such obligations ofany one issuer by a bank shall not exceed twenty per cent of the bank's capitaland surplus.

(d)  To the extent specified herein, a bank mayinvest its own assets in notes, bonds, and other obligations of any corporationwhich at the time of the investment is incorporated under the laws of theUnited States or any state or territory thereof or the District of Columbia;provided, that the aggregate amount invested by a bank under this subsectionand subsection (e) in any one corporation shall not exceed twenty per cent ofthe bank's capital and surplus.

(e)  To the extent specified herein, a bank mayinvest its own assets in securities of an investment grade.  The term"investment grade" means notes, bonds, certificates of interest orparticipation, beneficial interests, mortgage or receivable-related securities,and other obligations that are commonly understood to be of investment gradequality, including without limitation those securities that are rated withinthe four highest grades by any nationally-recognized rating service or unratedsecurities of similar quality as reasonably determined by the bank in itsprudent banking judgment (which may be based in part upon estimates which itbelieves to be reliable).  Investment grade does not include investments whichare predominantly speculative in nature.  The aggregate amount invested by abank under this subsection and subsection (d) in any one company or otherissuer shall not exceed twenty per cent of the bank's capital and surplus.

(f)  To the extent specified herein, a bank maypurchase, hold, convey, sell or lease real or personal property as follows:

(1)  The real property in or on which the business ofthe bank is carried on, including its banking offices, other space in the sameproperty to rent as a source of income; permanent or vacation residences orrecreational facilities for its officers and employees; other real propertynecessary to the accommodation of the bank's business, including but notlimited to parking facilities, data processing centers, and real property heldfor future banking use where the bank in good faith expects to utilize theproperty as bank premises; provided, if the bank ceases to use any realproperty and improvements thereon for one of the foregoing purposes, it shall,within five years thereafter, sell the real property or cease to carry it orthem as an asset; provided further, such property shall not without theapproval of the commissioner exceed seventy-five per cent of the bank's capitaland surplus;

(2)  Personal property used in or necessary to theaccommodation of the bank's business, including but not limited to furniture,fixtures, equipment, vaults and safety deposit boxes.  The bank's investment infurniture and fixtures shall not without the approval of the commissionerexceed twenty-five per cent of the bank's capital and surplus;

(3)  Personal property and fixtures which the bankacquires for purposes of leasing to third parties and such real propertyinterests as shall be incidental thereto;

(4)  Such real property or tangible personal propertyas may come into its possession as security for loans or in the collection ofdebts; or as may be purchased by or conveyed to the bank in satisfaction of oron account of debts previously contracted in the course of its business, whensuch 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 withoutlimitation the reversionary interest in the real estate and the right to incomeunder the agreement of sale, with or without recourse to the seller.

Except as otherwise authorized in this sectionany 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 writtenconsent of the commissioner be considered a part of the assets of the bankafter the expiration of two years from the date of acquisition.

Except as otherwise authorized in this sectionany real property acquired by a bank pursuant to subsection (f)(4) shall besold or exchanged for other real property by the bank within five years aftertitle thereto has vested in it by purchase or otherwise, or within such furthertime as may be granted by the commissioner.

Any bank acquiring any real property in anymanner other than provided by this section shall immediately, upon receivingnotice from the commissioner, charge the same to profit and loss, or otherwiseremove the same from assets, and when any loss impairs the capital and surplusof the bank the impairment shall be made good in the manner provided in thischapter.

(g)  A bank may own or control the capitalstock:

(1)  Of operating subsidiaries as set forth in thisarticle;

(2)  Of a corporation organized and existing for theownership of real or personal property used or which the bank in good faithexpects to be used in the bank's business;

(3)  Of the Federal National Mortgage Association, theStudent Loan Marketing Association, Federal Home Loan Mortgage Corporation, orof any other corporation organized for substantially the same purposes;provided that this subsection shall be deemed to authorize subscription for aswell as purchase of the stock;

(4)  Of small business investment companies operatingunder the Federal Small Business Investment Act of 1958;

(5)  Of bank service corporations, subject to the BankService Corporation Act, 12 U.S.C. §§1861-1862;

(6)  Of a corporation whose stock is acquired orpurchased to save a loss on a preexisting debt secured by such stock; provided,that the stock shall be sold within twelve months of the date acquired orpurchased, or within such further time as may be granted by the commissioner;

(7)  Of an international banking corporationestablished pursuant to article 5A of this chapter or an Edge corporation or anAgreement corporation established or authorized pursuant to section 25a of theFederal Reserve Act, 12 U.S.C. §631;

(8)  Of a captive insurance company incorporated underthe laws of the United States, or any state or territory thereof, or theDistrict of Columbia;

(9)  Of a company transacting a business of insuranceor the sale of annuities pursuant to the authority conferred in section412:5-205.5; and

(10)  Of a company engaging in securities activitiespursuant to the authority conferred in section 412:5-205.7.

(h)  To theextent specified herein, a bank may invest its own assets in limitedpartnerships, limited liability partnerships, limited liability companies, orcorporations formed to invest in residential properties that will qualify for the low income housing taxcredit under section 42 of the Internal Revenue Code of 1986, as amended, andunder chapters 235 and 241; provided that the total amount invested by a bankunder this subsection in any one limited partnership, limited liabilitypartnership, limited liability company, or corporation shall not, without theprior approval of the commissioner, exceed two per cent of the bank's capitaland surplus and the aggregate amount invested under this subsection shall not,without the prior approval of the commissioner, exceed five per cent of thebank's capital and surplus.  In no case shall the aggregate amount invested bya bank under this subsection exceed ten per cent of the bank's capital andsurplus. [L 1993, c 350, pt of §1; am L 1995, c 48, §1; am L 1996, c225, §3; am L 1997, c 258, §14; am L 2001, c 170, §7; am L 2006, c 228, §32; amL 2009, c 107, §2]