SECTION 6.2-874. 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 from debts previously contracted, in which case the stock shall be disposed of within 12 months after it is acquired, and except as herein permitted;

2. Make loans collaterally secured by the stock of the bank, except that this section shall not affect the validity of any such security agreement between the 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 which the 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 or any fund in its custody or possession against loss from debts theretofore contracted;

2. Acquiring, owning, and holding stock of a building corporation or security of a limited liability company of the character and to the amount provided by § 6.2-878 ;

3. Acquiring, owning, and holding stock of an agricultural credit corporation organized under the laws of the Commonwealth, provided that the total amount of such stock shall not exceed 20 percent of the amount of the capital stock of the bank actually paid in and unimpaired, plus the amount of its unimpaired surplus fund;

4. Acquiring, owning, and holding stock of the Federal National Mortgage Association, the Government National Mortgage Association, or the Federal Home Loan Mortgage Corporation;

5. Acquiring, holding, and owning stock in any corporations or securities of limited liability companies which have as their purpose the operation of parking lots or parking garages, provided that no bank shall own, at any one time, stock in such corporations exceeding two percent of the amount of the capital stock of such bank actually paid in and unimpaired, plus the amount of its unimpaired surplus fund;

6. Acquiring, owning, and holding stock of a small business investment company as defined by the Federal Small Business Investment Act of 1958;

7. Acquiring, owning, and holding stock of an industrial development company organized under the provisions of the Virginia Industrial Development Corporation Act (§ 6.2-878 et seq.);

8. Acquiring, owning, and holding stock of a bank service corporation or security of a controlled subsidiary corporation, subject to § 6.2-878 or 6.2-878 , or from investing in a limited liability company, provided such investment conforms to § 6.2-878 or 6.2-878 ;

9. Acquiring, owning, and holding stock of the Student Loan Marketing Association, a corporation organized under the Higher Education Act of 1965, as amended;

10. Acquiring, owning, and holding stock of a "clearing corporation" as defined in § 6.2-878 ;

11. Acquiring, owning, and holding stock of a trust subsidiary as defined in § 6.2-878 ;

12. Investing up to four percent of its capital and surplus, including undivided profits, in shares of any bankers' bank organized under § 6.2-878 or in any bank holding company wherein the ownership of shares in such bank holding company is restricted to (i) financial institutions which have or are eligible for insurance of deposits by a federal agency or (ii) a financial institution holding company as defined in § 6.2-878 or a savings institution holding company as defined in § 6.2-878 ;

13. Acquiring its own stock, with the book value of all such stock held not to exceed in the aggregate five percent of the book value of all shares issued and outstanding, including capital, surplus, and undivided profits as of the time of the purchase being made. In computing such capital surplus and undivided profits for purposes of this section, amounts received for resale of any repurchased stock shall be added back to capital, surplus, and undivided profits for purposes of computation of the five percent limitation. Such purchase may be without the written consent of the Commission, unless the Commission or Commissioner has previously notified the bank in writing that it may not utilize this subdivision until further notice. The Commission may further allow purchases of such stock in excess of such five percent criterion if the Commission finds that the purchase (i) will not impair the safety and solvency of the bank and (ii) is otherwise appropriate. The Commission may require the divestiture of any shares held if deemed necessary and appropriate;

14. Acquiring, owning, and holding, subject to such conditions as the Commissioner may prescribe, shares of investment companies;

15. Acquiring, owning, and holding, subject to such conditions as the Commissioner may prescribe, shares of stock in a community development corporation;

16. Acquiring, owning, and holding shares of the Federal Agricultural Mortgage 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 to dispose of any preferred stocks lawfully acquired as an investment prior to January 1, 1940.

1982, c. 185, § 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. 6.2-878 ; 1996, c. 6.2-878 ; 2010, c. 6.2-878 .