W. Va. Code R. § 106-16-3

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 106-16-3 - Authority to Engage in Leasing Transactions

3.1. Investment in Personal Property

(a) A bank may (1) become the legal or beneficial owner and lessor of specific, personal property or otherwise acquire property only after the bank has entered into a legally binding written commitment to lease the personal property on terms which comply with the provisions of this regulation; (2) become the owner and lessor of personal property by purchasing the property from another lessor in connection with the purchase of the related lease; and (3) incur obligations incidental to its position as the legal or beneficial owner and lessor of the leased property; provided the lease is a net basis lease representing a noncancelable obligation of the lessee, notwithstanding the possible early termination of the lease.

(b) Prior to entering into a lease financing transaction, a bank must reasonably expect to realize a return of its full investment in the leased property, plus the estimated cost of financing the property over the term of the lease from:

(1) Rentals;

(2) Estimated tax benefits; and

(3) The estimated residual value of the leased property at the expiration of the initial term of the lease.

(c) The aggregate book value of all tangible personal property held for lease by a bank pursuant to the provisions of this regulation shall not exceed ten percent (10%) of the consolidated assets of the bank.

(d) At the expiration of the lease (including any renewals or extensions with the same lessee), or in the event of a default on a lease agreement prior to the expiration of the lease term, all of the bank's interest in the property shall either be liquidated or re-leased in conformance with this regulation as soon as practicable, but in any event no later than one (1) year from the expiration of the lease. Provided, that under exceptional circumstances and in response to a written request by the bank, the Commissioner of Banking may extend the time for the liquidating or re-leasing the leased property. Property which the bank retains in anticipation of re-leasing the leased property. Property which the bank retains in anticipation of re-leasing must be re-valued at the lower of current fair market value or book value prior to any subsequent lease, for the purpose of determining the applicable maximum estimated residual value.

(e) Notwithstanding the provisions of paragraph (d) of this section, on the return of leased property, at the expiration of a conforming lease term, or on the default of a lessee, a short term bridge or interim lease is permissible if it otherwise conforms with the requirements of this section. Banks may only use short term bridge or interim leases to facilitate conforming long term lease financing transactions.

W. Va. Code R. § 106-16-3