La. Admin. Code tit. 10 § III-315

Current through Register Vol. 50, No. 12, December 20, 2024

Section III-315 - Regulation

A. Any state bank may provide financing to facilitate the sale of other real estate, in excess of lending limits as established in R.S. 6:415(A), provided prior written approval of the commissioner has been obtained and, subject to compliance with provisions of this regulation, the extension of credit will be in accordance with all other applicable state or federal laws.

B. Submission of requests for the commissioner's approval must be in writing. Requests must have the prior approval of, and be detailed in the minutes of a meeting held by, the bank's board of directors. Approved transactions shall apply only to purchase money mortgages taken by a state bank in consideration for the sale of other real estate owned by the bank.

C. Approval of requests will be based on all relevant factors surrounding individual transactions; however, the following shall be required and will receive consideration.

1. A demonstration by the requesting bank that attempts to participate the proposed loan portion that is in excess of the bank's current lending limit have proven unsuccessful.

2. Copies of the original record of acquisition must be given. Should acquisition of other real estate have originated from a partnership or corporation, the state bank shall provide the names of the partnership or corporation principals.

3. Proposed transactions must be accompanied by documentation, which shall include accounting entries, indicating that the accounting treatment to be employed has been reviewed and approved by a certified public accountant for compliance with generally accepted accounting principles.

4. Other real estate to be used as supporting collateral for proposed transactions should be appraised, and copies of current appraisals (less than one year old) shall be submitted with each request. The buyer's anticipated use of the property must be indicated.

5. Before approval by the bank's directors, the bank shall have performed an appropriate credit analysis which shall indicate the potential borrower's ability to repay the extension of credit. A copy of the analysis shall be provided with each request, along with the bank's stated justification for engaging in the proposed transaction. The analysis must include a written summary of findings and disclose the names and financial information of the borrower(s) and any guarantor or endorser, as well as the terms of the proposed transaction. Directors, executive officers, and principal shareholders of the originating bank, and of other corporations, partnerships, associations, joint ventures, or other unincorporated entities, having related interests in the proposed extension of credit must be revealed. Previous business relationships with the potential borrower shall be disclosed, with a summary of the borrower's current and related debts, if any, given. All prior losses, renegotiations, or delinquencies related to the potential borrower must be shown.

6. The structure of any proposed transaction shall conform with prudent underwriting standards. Justification of all special terms and lending policy exceptions must be disclosed.

7. If other real estate proposed for sale has been marketed, the bank should provide information detailing how, and for how long, the property has been offered, including original and subsequent asking prices. Additional information should be given listing all offers received and details of subsequent counter-offers made. The bank must disclose if potential buyers have withdrawn offers. If offers were rejected by the bank, the bank shall provide its reasons for the rejection.

8. Changes in the book value and a history of the bank's expenses and income associated with the other real estate identified for sale must be provided.

9. Each bank shall be subject to requests for additional information, as needed, in order to facilitate an appropriate review of all transactions presented for the commissioner's approval.

D. Each request shall be accompanied by a nonrefundable fee to be set by the commissioner.

E. This regulation shall become effective upon final publication in the Louisiana Register.

La. Admin. Code tit. 10, § III-315

Promulgated by the Department of Economic Development, Office of Financial Institutions, LR 19:36 (January 1993).

AUTHORITY NOTE: Promulgated in accordance with Act 1129 of 1992.