La. Admin. Code tit. 10 § III-325

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

Section III-325 - Regulation

A. A bank, solely for the purpose of minimizing potential loss, may exchange property which is complex (including an undivided interest), difficult and/or uneconomical to maintain for property which is less complex, less difficult and/or more economical to maintain. This would include residential property exchanged for residential property of a lesser value.

1. Any such exchange must have prior approval of the bank's board of directors. The approval must be documented in the board minutes and contain the rationale to support the exchange.

2. The exchange must be supported by current appraisals of both the exchanged property and the property acquired in the exchange. The appraisals must be performed by an independent appraiser and contain sufficient documentation to support the value derived.

3. The bank must maintain on file for examiner review, supporting documentation of any exchange made since the previous examination, including the bank's marketing efforts to dispose of the previously held and exchanged parcel of real estate.

4. The 10-year divestiture period as required by R.S. 6:243(B)(1) shall begin on the original date of acquisition of the exchanged property, not the date of exchange. As allowed by R.S. 6:243(B)(2), a bank may choose to reduce the value of immovable property by at least one-tenth of the original book value each year that the property is held. If the bank has chosen this option for the exchanged property, the property acquired from the exchange must be reduced by at least an equal rate each year to insure a zero balance at the end of the divestiture period.

5. The book value of the property acquired in the exchange cannot exceed either the book value of the exchanged property or appraised value, whichever is less.

B. In an attempt to achieve its strategic plan, a bank may exchange property held in another real estate account for property to be used as premises or for future expansion. However, the approval of the commissioner must be obtained prior to the exchange of the properties. Also, the exchange must comply with the provisions of §325. A 1

C. All requests for prior written approval of the commissioner must contain sufficient documentation to support the bank's request. Transactions requiring prior written approval of the commissioner include:

1. transactions which directly or indirectly involve insiders, affiliates, or their related interests, as defined by Federal Reserve Board's Regulation O and Section 23 A of the Federal Reserve Act. A request for approval must include documentation to show the transaction is an arms-length transaction and will not violate state or federal laws, rules or regulations;

2. transactions which include any additional cash investment made by the bank to facilitate the exchange;

3. transactions which include the exchange of other real estate for property which is not in the bank's normal trade area, as defined by the bank's board of directors policy.

D. Property exchanged in violation of this rule, in addition to any other actions authorized by law or regulation, may result in the following:

1. a requirement that the bank remove the exchanged real estate from its books and the citation of violation of R.S. 6:243 until such time as the bank disposes of the exchanged real estate;

2. a requirement that the directors directly responsible for the exchange in violation of this rule be required to purchase or otherwise dispose of the property and be responsible for any loss sustained by the bank.

E. The commissioner has the authority to either waive or grant an exception to any provision of this rule provided a request is first made in writing.

La. Admin. Code tit. 10, § III-325

Promulgated by the Department of Economic Development, Office of Financial Institutions, LR 19:35 (January 1993), amended LR 21:675 (July 1995).

AUTHORITY NOTE: Promulgated in accordance with R.S. 6:243(B)(5).