12 CFR 7.1024 – National bank or Federal savings association ownership of property
(a) Investment in real estate necessary for the transaction of business—(1) In general. A national bank or Federal savings association may invest in real estate that is necessary for the transaction of its business.
Terms Used In 12 CFR 7.1024
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- National Bank: A bank that is subject to the supervision of the Comptroller of the Currency. The Office of the Comptroller of the Currency is a bureau of the U.S. Treasury Department. A national bank can be recognized because it must have "national" or "national association" in its name. Source: OCC
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
(2) Type of real estate. Real estate investments permissible under this section include:
(i) Premises that are owned and occupied (or to be occupied, if under construction) by the national bank or Federal savings association, or its respective branches or consolidated subsidiaries;
(ii) Real estate acquired and intended, in good faith, for use in future expansion;
(iii) Parking facilities that are used by customers or employees of the national bank or Federal savings association, or its respective branches or consolidated subsidiaries;
(iv) Residential property for the use of officers or employees of the national bank or Federal savings association who are:
(A) Located in remote areas where suitable housing at a reasonable price is not readily available; or
(B) Temporarily assigned to a foreign country, including foreign nationals temporarily assigned to the United States; and
(v) Property for the use of national bank or Federal savings association officers, employees, or customers, or for the temporary lodging of such persons in areas where suitable commercial lodging is not readily available, provided that the purchase and operation of the property qualifies as a deductible business expense for Federal tax purposes.
(3) Permissible means of holding. (i) A national bank or Federal savings association may acquire and hold real estate under this paragraph (a) by any reasonable and prudent means, including ownership in fee, a leasehold estate, or in an interest in a cooperative. The national bank or Federal savings association may hold this real estate directly or through one or more subsidiaries. The national bank or Federal savings association may organize a banking premises subsidiary as a corporation, partnership, or similar entity (e.g., a limited liability company).
(ii) A Federal savings association also may acquire and hold banking premises through a service corporation in accordance with 12 CFR 5.59.
(b) Fixed assets. A national bank or Federal savings association may own fixed assets necessary for the transaction of its business, such as fixtures, furniture, and data processing equipment.
(c) Investment in banking premises—(1) Investment limitation. Twelve CFR 5.37(d)(1)(i) and (d)(3)(i) provide quantitative investment limitations that govern when OCC approval is required for a national bank or Federal savings association to invest in banking premises.
(2) Premises approval. (i) A national bank or Federal savings association must seek approval from the OCC in accordance with 12 CFR 5.37(d).
(ii) A Federal savings association that invests in banking premises through a service corporation must comply with the quantitative limitations in 12 CFR 5.37(d) and, to the extent applicable, 12 CFR 5.59.
(3) Option to purchase. An unexercised option to purchase banking premises or stock in a corporation holding banking premises is not an investment in banking premises. However, a national bank or Federal savings association seeking to exercise such an option must comply with the requirements in 12 CFR 5.37(d).
(d) Future national bank or Federal savings association expansion. A national bank or Federal savings association normally should use real estate acquired for future national bank or Federal savings association expansion within five years. After holding such real estate for one year, the national bank or Federal savings association must state, by resolution of its board of directors or an appropriately authorized bank or savings association official or subcommittee of the board, definite plans for its use. The resolution or other official action must be available for inspection by OCC examiners.
(e) Transition. If, on May 18, 2015, a Federal savings association holds an investment in real estate, fixed assets, banking premises, or other real property that complies with the legal requirements in effect prior to May 18, 2015, but would violate any provision of this section or § 5.37, the savings association may continue to hold such investment in accordance with the prior legal requirements. However, a Federal savings association that holds such an investment may not modify, expand or improve this investment, except for routine maintenance, without the prior approval of the appropriate OCC supervisory office.