TCA § 45-2-607 — Investments

Investments by state banks shall be limited to: Obligations that satisfy the requirements of this chapter and chapter 1 of this title for loans; Obligations of the United States, a state of the United States or the Dominion of Canada; Obligations of the International Bank for Reconstruction and Redevelopment or the African Development Bank; Obligations of a territory of the United States, a province of the Dominion of Canada, a subdivision or instrumentality of a state or territory of the United States, an authority organized under state law, an interstate compact or by substantially identical legislation adopted by two (2) or more states; Obligations of a corporation chartered by the United States or a state thereof doing business in the United States; The stock of one (1) or more banks or corporations chartered or incorporated under the laws of the United States, or of any state of the United States, and principally engaged in international or foreign banking, or banking in a dependency or insular possession of the United States, either directly or through the agency, ownership or control of local institutions in foreign countries, or in the dependencies or insular possessions, including the stock of one (1) or more banks or corporations chartered or incorporated under § 25a of the Federal Reserve Act, as approved December 24, 1919. Any state bank shall have the power to acquire and hold directly or indirectly stock or other evidences of ownership in one (1) or more banks organized under the law of a foreign country or dependency or insular possession of the United States and not engaged directly or indirectly in any activity in the United States, except that which is incidental to the international and foreign business of the foreign bank and to make loans or extension of credit to or for the account of the bank. Investments in the stock of banks or corporations under this subdivision (a)(6) shall not exceed in the aggregate ten percent (10%) of the state bank's paid-in capital stock and surplus; The capital stock of joint stock land banks for carrying on the business of lending money on farm mortgage security created and organized under the act of congress of the United States, approved July 17, 1916, and known as the Federal Farm Loan Act. Any bank, firm, person, or corporation doing a banking business may invest its funds and accumulations in stocks, notes, bonds, debentures, or other obligations issued under the act of congress of the United States entitled the Federal Home Loan Bank Act approved July 22, 1932, and in notes, bonds, debentures, or other obligations issued under title IV of the act of congress of the United States entitled the National Housing Act, approved June 27, 1934; Stock, debentures, and other obligations of national mortgage associations or similar institutions now or hereafter organized under title III of the National Housing Act, to the same extent as national banks are now or hereafter permitted to invest in the stock and/or obligations; Real property to the extent that the total depreciated value thereof does not exceed the capital and surplus of the bank; Personal property acquired for lease to customers; The stock of any other bank located in this state; provided, that the investment in the stock of all the banks shall not exceed ten percent (10%) of the capital, surplus, and undivided profits of the investing bank; and provided further, that if the stock is voting stock, the investment shall not exceed five percent (5%) of the total of the voting stock. The investment shall be made only upon thirty (30) days' prior written notice to the commissioner of financial institutions, and any investment that is consummated without giving notice shall be void. The commissioner shall have the right to disapprove the investment if the commissioner finds that the investment does not conform with the standards set forth in §§ 45-1-102 and 45-1-107, and gives written notice detailing the reasons for disapproval on or before the end of the thirty-day period. If the commissioner disapproves the transaction, the bank shall have a right to a hearing before the commissioner under the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. This investment shall be in addition to the right of any bank to invest in the stock of a banker's bank otherwise permitted under this section; Adjustable rate preferred stock of any publicly held corporation created or existing under the laws of the United States or any state, district, or territory of the United States that is rated in one (1) of the four (4) highest investment grades by one (1) or more recognized investment rating services approved by the commissioner for rating the investments. The bank's investment in adjustable rate preferred stock shall be permitted to the same extent the investments are permitted to national banks domiciled in Tennessee, subject to regulation by the commissioner for the purpose of maintaining the state bank's safety and soundness; Shares or certificates in any open-end management investment company that is registered with the securities and exchange commission under the Investment Company Act of 1940, and the portfolio of which is restricted by the management company's investment policy, changeable only if authorized by shareholder vote, solely to any investments in which a bank by law or regulation may invest; The bank's investment in the shares or certificates of the open-end investment companies shall be permitted to the same extent the investments are permitted to national banks domiciled in Tennessee, subject to limiting regulations promulgated by the commissioner pursuant to the Uniform Administrative Procedures Act, for the purpose of safety and soundness; Other investments that are authorized national banks or member banks of the federal reserve system; Subject to regulations promulgated by the commissioner for the purpose of maintaining the state bank's safety and soundness, a bank may invest in a Tennessee business and industrial development corporation (BIDCO) as provided in § 45-8-203; provided, that the investment in the stock of the BIDCO shall not exceed ten percent (10%) of the capital, surplus, and undivided profits of the investing bank. The investment shall be made only upon thirty (30) days' prior written notice to the commissioner and an investment that is consummated without giving notice shall be void. The commissioner shall have the right to disapprove the investment if the commissioner finds that the investment does not conform to the standards set forth in §§ 45-1-102 and 45-1-107 and gives written notice detailing the reasons for the disapproval on or before the end of the thirty-day period. If the commissioner disapproves the transaction, the bank shall have a right to a hearing under the Uniform Administrative Procedures Act. This investment shall be in addition to the right of any bank to invest in the stock of a bankers' bank, otherwise permitted under this section and in the stock of any other bank located in Tennessee, otherwise permitted by this section; and Stock, debentures, and other obligations of community development corporations subject to the rules the commissioner may prescribe. Any investment in property that is not authorized by subsection (a) may be acquired by any state bank to satisfy or protect a loan previously made in good faith and in the ordinary course of business. Property acquired in satisfaction of a loan shall be held subject to the following limitations: All property except real property shall be sold within six (6) months or such additional period as the commissioner may allow; and Except as provided in subdivision (b)(2)(B), real property shall be sold within ten (10) years; If the bank holds the real property for a period longer than five (5) years, then after an initial five-year period, the bank, in reporting its financial status to the department, shall write off twenty percent (20%) of the appraised value of the real property each subsequent year it is held until the real property is either sold or the ten-year period has elapsed. Upon application of the bank, the commissioner may, in extraordinary circumstances, adjust or waive the percentage a bank shall write off the real property each year, may extend the period in which the real property may be held beyond ten (10) years, or any combination of the foregoing. If the commissioner reduces, waives, or adjusts the amount of write-off, the real property may not be carried at more than the appraised value of the property; Real property which has been written off but not disposed of shall be maintained on the bank's books at some nominal value; If the bank's board of directors deems the real property owned to be a prudent investment for income or appreciation for the bank, the board may take action to maintain the real property on the bank's books as an investment, pursuant to subdivision (a)(9); Not more than one hundred twenty (120) days before or thirty (30) days after the date the parcel is acquired by the bank as real property owned, or from the date on which the bank legally acquires the real property for investment purposes, the bank shall obtain from an independent, qualified appraiser an appraisal of the parcel; provided, however, that: For parcels whose book value is two hundred fifty thousand dollars ($250,000) or less, the bank may obtain an evaluation in lieu of an appraisal; and For parcels whose book value is one hundred thousand dollars ($100,000) or less, no appraisal or evaluation shall be required; and Within twelve (12) months from the date the bank acquires the real property, and every twelve (12) months thereafter for as long as the bank owns the real property, the bank shall obtain another appraisal or evaluation, whichever is appropriate as provided for in subdivision (b)(2)(E). As used in this section, “investment” means the purchase of any interest in any property of any nature principally for the purpose of deriving profit from changes in the value of the property or from dividends, interest or rent thereon, as distinguished from the purpose of using the property in the conduct of the business of a bank. Notwithstanding the foregoing, the investment by a bank or trust company in one (1) or more subsidiaries, or the underwriting of or dealing in certificates of deposit, bankers' acceptances or those securities that are permissible investments for a bank under subdivisions (a)(1)-(14), shall not constitute an investment within the meaning of this section. In addition to the other provisions of this section, upon thirty (30) days' prior written notice to the commissioner, providing such detail as the commissioner may require, a bank may invest, in the aggregate, up to seventy-five percent (75%) of its unimpaired capital, surplus and undivided profits in the stock or purchase the assets of other corporations, firms, partnerships or companies, including limited liability corporations and limited liability partnerships, which are or will be: Primarily engaging in activities permissible for federally chartered financial institutions, their authorized subsidiaries or bank holding companies under applicable laws, rules, regulations or orders; Primarily engaging in activities of a financial nature, including, but not limited to, the transmission or processing of information, data or payments relating to the activities, all forms of securities activities not otherwise authorized, together with other activities that the commissioner shall determine and that may be permissible for other bank and non-bank financial institutions chartered by Tennessee or other states by regulation or order; or Engaging in any other activities approved by the commissioner. Unless denied by the commissioner within thirty (30) days following receipt of the written notice or upon approval prior to the expiration of the thirty (30) days, a bank may complete its investment in the stock or purchase the assets of the other corporation, firm, partnership or company, or commence a new activity through an existing subsidiary. The commissioner may extend the thirty-day period for approval or denial, for an additional thirty-day period, by notifying the applicant if the commissioner determines that the proposed investment or activity raises issues that require additional information or additional time for analysis. The commissioner shall monitor the impact of activities and investments of banks approved under this section on the safety and soundness of the banks. Any stocks owned or hereafter acquired in excess of the limitations herein imposed shall be disposed of at public or private sale within six (6) months after the date of acquiring the stocks, and if not so disposed of, they shall be charged to profit and loss account, and no longer carried on the books as an asset. The limit of time in which the stocks shall be disposed of or charged off the books of the bank may be extended by the commissioner if, in the commissioner's judgment, it is for the best interest of the bank that the extension be granted. The commissioner may, as a condition of approving an investment under this section, impose limits on the loans that each bank can make to the corporation, firm or partnership. The commissioner shall maintain a public file, available for inspection at the department's offices, which shall contain a summary or synopsis of any application submitted under this subsection (d). The summary shall include only the name of the institution applying, the proposed activity and the decision of the commissioner. Any state or national bank or subsidiary that engages in an activity that subjects it to licensure and/or regulation under other than title 45, chapter 2, shall be subject to licensure and/or regulation on a basis that does not discriminate by the appropriate regulatory agency that licenses and/or regulates non-banks that engage in the same activity.