6.2-874 - (Effective October 1, 2010) Prohibited uses of bank's own stock; other investments or loans.
§ 6.2-874. (Effective October 1, 2010) Prohibited uses of bank's own stock;other investments or loans.
A. No bank shall:
1. Acquire or own its own stock except to protect itself against loss fromdebts previously contracted, in which case the stock shall be disposed ofwithin 12 months after it is acquired, and except as herein permitted;
2. Make loans collaterally secured by the stock of the bank, except that thissection shall not affect the validity of any such security agreement betweenthe bank and its borrower; or
3. Invest any of its funds in:
a. Shares of stock of any other corporation;
b. Any security of a limited liability company; or
c. Any notes or other obligations that are secured by real estate on whichthe bank is prohibited by § 6.2-878 from making any loans secured thereby.
B. The prohibitions in subsection A shall not prevent any bank from:
1. Acquiring any such stock, notes, or other obligations to protect itself orany fund in its custody or possession against loss from debts theretoforecontracted;
2. Acquiring, owning, and holding stock of a building corporation or securityof a limited liability company of the character and to the amount provided by§ 6.2-870;
3. Acquiring, owning, and holding stock of an agricultural credit corporationorganized under the laws of the Commonwealth, provided that the total amountof such stock shall not exceed 20 percent of the amount of the capital stockof the bank actually paid in and unimpaired, plus the amount of itsunimpaired surplus fund;
4. Acquiring, owning, and holding stock of the Federal National MortgageAssociation, the Government National Mortgage Association, or the FederalHome Loan Mortgage Corporation;
5. Acquiring, holding, and owning stock in any corporations or securities oflimited liability companies which have as their purpose the operation ofparking lots or parking garages, provided that no bank shall own, at any onetime, stock in such corporations exceeding two percent of the amount of thecapital stock of such bank actually paid in and unimpaired, plus the amountof its unimpaired surplus fund;
6. Acquiring, owning, and holding stock of a small business investmentcompany as defined by the Federal Small Business Investment Act of 1958;
7. Acquiring, owning, and holding stock of an industrial development companyorganized under the provisions of the Virginia Industrial DevelopmentCorporation Act (§ 13.1-981 et seq.);
8. Acquiring, owning, and holding stock of a bank service corporation orsecurity of a controlled subsidiary corporation, subject to § 6.2-871 or6.2-885, or from investing in a limited liability company, provided suchinvestment conforms to § 6.2-871 or 6.2-885;
9. Acquiring, owning, and holding stock of the Student Loan MarketingAssociation, a corporation organized under the Higher Education Act of 1965,as amended;
10. Acquiring, owning, and holding stock of a "clearing corporation" asdefined in § 8.8A-102;
11. Acquiring, owning, and holding stock of a trust subsidiary as defined in§ 6.2-1000;
12. Investing up to four percent of its capital and surplus, includingundivided profits, in shares of any bankers' bank organized under § 6.2-809or in any bank holding company wherein the ownership of shares in such bankholding company is restricted to (i) financial institutions which have or areeligible for insurance of deposits by a federal agency or (ii) a financialinstitution holding company as defined in § 6.2-700 or a savings institutionholding company as defined in § 6.2-1100;
13. Acquiring its own stock, with the book value of all such stock held notto exceed in the aggregate five percent of the book value of all sharesissued and outstanding, including capital, surplus, and undivided profits asof the time of the purchase being made. In computing such capital surplus andundivided profits for purposes of this section, amounts received for resaleof any repurchased stock shall be added back to capital, surplus, andundivided profits for purposes of computation of the five percent limitation.Such purchase may be without the written consent of the Commission, unlessthe Commission or Commissioner has previously notified the bank in writingthat it may not utilize this subdivision until further notice. The Commissionmay further allow purchases of such stock in excess of such five percentcriterion if the Commission finds that the purchase (i) will not impair thesafety and solvency of the bank and (ii) is otherwise appropriate. TheCommission may require the divestiture of any shares held if deemed necessaryand appropriate;
14. Acquiring, owning, and holding, subject to such conditions as theCommissioner may prescribe, shares of investment companies;
15. Acquiring, owning, and holding, subject to such conditions as theCommissioner may prescribe, shares of stock in a community developmentcorporation;
16. Acquiring, owning, and holding shares of the Federal AgriculturalMortgage Corporation; or
17. Acquiring, owning, and holding shares of a Federal Home Loan Bank.
C. The provisions of this section shall not be construed to require a bank todispose of any preferred stocks lawfully acquired as an investment prior toJanuary 1, 1940.
(1982, c. 185, § 6.1-6.1-60.1; 1985, c. 339; 1986, c. 269; 1987, c. 297;1988, c. 464; 1989, cc. 377, 650; 1992, c. 366; 1993, c. 186; 1994, c. 119;1996, c. 27; 2010, c. 794.)