KRS 286.3-100: Investment of bank funds -- Property that may be held -- Accounting

standards.

(1) A bank may do any or all of the following:

(a) Hold personal property that has been transferred to it as collateral for the

payment of any debt;

(b) Acquire and hold title to real estate if:

1. The real estate is necessary or appropriate for the transaction of

legitimate business; and

2. Except with prior written approval of the commissioner, the cost of the

real estate, including furniture and fixtures, less accumulated

depreciation does not exceed forty percent (40%) of the bank's total

paid-in capital, unimpaired surplus, and undivided profits determined on

accrual basis;

(c) Acquire and hold title to real estate if:

1. The title is held for not longer than ten (10) years; and

2. The real estate is conveyed to the bank in satisfaction of debts:

a. Previously contracted in the course of its business; or

b. That it purchases under a judgment in its favor;

(d) Invest in obligations issued separately or collectively by or for federal land

banks, federal intermediate credit banks, and banks for cooperatives under the

Farm Credit Act of 1971, 12 U.S.C. sec. 2001 et seq., as amended;

(e) Invest, subject to the appro val of the commissioner, in the capital stock or

bonds or both of any domestic realty corporation organized or existing for the

sole purpose of acquiring and holding title to real property used by the bank,

through lease or otherwise, for the transaction o f the bank's legitimate

business;

(f) Purchase, hold, and convey the shares of any open end registered investment

company registered under the Investment Company Act of 1940, or a series of

the company, whose shares are registered under the Securities Act of 1933

and whose investments are limited to any or all of the following:

1. Bonds or other interest-bearing obligations of the United States, or those

for the payment of the principal and interest on which the faith and

credit of the United States is pledged;

2. Stocks, bonds, or other interest -bearing or dividend-yielding obligations

issued or guaranteed as to the payment of principal and interest or

dividends by any instrumentality presently or hereafter incorporated by

authority of an Act of Congress;

3. General obligation bonds or revenue bonds issued and guaranteed as to

payment of principal and interest by any state, county, or municipal

governments legally authorized to issue these instruments of

indebtedness; or

4. Any other obligations in which nat ional banks are permitted to invest in

directly;

(g) Purchase and hold shares of a bank service corporation, as that term is used in

the Bank Service Company Act, 12 U.S.C. sec. 1861 et seq., as amended;

(h) Invest in any or all of the following:

1. Bonds of any federal home loan bank;

2. Bonds or other interest-bearing obligations:

a. Of the United States; or

b. For the payment of the principal and interest on which the faith

and credit of the United States is pledged;

3. Stocks, bonds, or other interest -bearing or dividend-yielding obligations

issued or guaranteed as to the payment of principal and interest or

dividends by any instrumentality presently or hereafter incorporated by

authority of an Act of Congress; or

4. General obligation bonds or revenue b onds issued and guaranteed as to

payment of principal and interest by any state, county, or municipal

governments legally authorized to issue such instruments of

indebtedness;

(i) 1. Invest in real estate in the bank's generally accepted banking market if

the investment does not exceed ten percent (10%) of the bank's actual

paid-in capital and surplus, calculated at the time the investment is

made, for each real estate investment.

2. As used in this paragraph, "the bank's generally accepted banking

market" means the bank's geographic banking market, as determined by

the federal reserve bank in the federal reserve district in which the bank

is located, at the time the investment is made;

(j) Invest in other real estate acquired in satisfaction of a debt previ ously

contracted by the bank if:

1. The investment is for the purpose of improving the real estate for sale;

and

2. The real estate is disposed of within five (5) years of the date of

acquisition, except the commissioner may extend the disposition upon

written request of the bank for good cause shown on a year-to-year basis

not exceeding an additional five (5) years;

(k) Own or operate, either through the bank or a bona fide subsidiary of the bank,

any or all of the following:

1. A discount brokerage service;

2. A travel agency; or

3. A courier service;

(l) Invest, with the prior approval of the commissioner, in the capital stock or

bonds of a trust company;

(m) Engage, either through the bank or a bona fide subsidiary of the bank, in the

sale of insurance; or

(n) Except for real estate provided in paragraph (c) of this subsection, acquire and

hold for not more than one (1) year, or for an additional period allowe d in

writing by the commissioner, any assets taken as security for debts previously

contracted in the ordinary course of business.

(2) Investments made in accordance with subsection (1)(f) or (1)(h)2., 3., or 4. of this

section are subject to KRS 286.3-280 and 286.3-290.

(3) (a) Except as provided in paragraph (b) of this subsection, for purposes of

computing the maximum investment of a bank in bonds, notes, and other

investments, book value shall be used.

(b) For deep discount bonds or zero coupon bonds, a ccreted book value shall be

used.

(4) (a) Except as provided in paragraph (b) of this subsection, when accounting for

real estate acquired under subsection (1)(c) or (j) of this section, a bank shall

comply with the other real estate owned, or OREO, accoun ting standards

established under federal law, including federal regulations and other

guidance, for national banks.

(b) When accounting for real estate acquired under subsection (1)(c) of this

section, a bank may, in lieu of complying with paragraph (a) of this

subsection, elect to write down the acquisition at ten percent (10%) per year.