Iowa Administrative Code › Agency 187 - Banking Division › Chapter 9 - Investment and Lending Powers › Rule 187-9.3 - Leasing

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Definitions.
For
			 purposes of this rule, the term:
"Aggregate rentals payable"
shall include the
				total of minimum lease payments (net of unearned income) that the lessee is
				obligated to make or can be required to make plus any guarantee of the residual
				value or of rental payments beyond the lease term by an eligible guarantor,
				provided the guarantor is financially capable of discharging the
				obligation.
"Bank officer"
means an administrative
				official of the bank elected by the state bank's board of directors to carry
				out the bank's operating rules, including the bank's loan and lease
				policies.
"Full payout lease"
shall be one in which the
				lessor's service is limited to the financing of the asset, with the lessee
				paying all other costs, including maintenance and taxes, and has the option of
				purchasing the asset at the end of the lease for a nominal price. The lease
				shall be fully amortized over the term of the lease or lifetime of the asset,
				whichever is less.
"Inception of the lease"
means the date of the
				lease agreement or commitment, if earlier, or the date the lease is purchased
				by the state bank. For purposes of this definition, a commitment shall be in
				writing, signed by the parties in interest to the transaction, and shall
				specifically set forth the principal terms of the transaction. However, if the
				property covered by the lease is a fixture yet to be constructed or has not
				been acquired by the lessor at the date of the lease agreement or commitment,
				the inception of the lease shall be the date that construction of the property
				is completed or the property is acquired by the lessor. The inception date of a
				lease assumed in a business combination accounted for as a purchase is the date
				the combination is recorded for accounting purposes.
"Independent third-party appraiser"
means an
				individual not involved with the lease transaction, except as the appraiser,
				with no direct or indirect interest, financial or otherwise, in the property
				appraised or the parties involved with the transaction. The bank shall take
				appropriate steps to ensure the appraiser exercises independent judgment and
				that the appraisal is adequate.
"Lease servicer"
means an entity that collects
				monthly principal and interest payments from the lessee and then forwards the
				payments to the purchasing institution or maintains lease records for a
				fee.
"Leasing company"
means an enterprise that
				makes leases or assembles leases for resale to a bank. Leases acquired by a
				state bank from an affiliated leasing company will be treated for purposes of
				this rule the same as if the lease was originated by the bank itself. In
				determining if an affiliate relationship exists, the provisions of Iowa Code
				section 524.1101 shall apply.
"Lessee"
means the party using the leased
				property.
"Lessor"
means the party owning the leased
				property.
"Residual value"
means the estimated fair
				value of the leased property at the end of the lease term.
(2)
General direct and purchased
			 lease guidelines.
a. The board of
			 directors of the state bank shall formulate and maintain a written lease policy
			 that is appropriate for the size, nature and scope of the bank's operation.
			 Each policy must be comprehensive and consistent with safe and sound banking
			 practices. The standards and limits established in the policy must be reviewed
			 and approved at least annually by the board. The bank's lease policy, at a
			 minimum, should:
(1) Identify acceptable lease
			 servicers and lessors (purchased leases only).
(2) Establish aggregate volume of paper to be
			 purchased from approved servicers and lessors (purchased leases
			 only).
(3) Identify geographic area
			 where the bank will consider purchasing or originating leases.
(4) Establish lease portfolio diversification
			 standards.
(5) Set appropriate
			 terms and conditions by type of leases.
(6) Establish lease origination and approval
			 procedures.
(7) Establish prudent
			 underwriting standards.
(8)
			 Establish lease administration procedures.
(9) Establish appraisal and evaluation
			 programs.
(10) Monitor the
			 portfolio and provide timely reports to the board of directors.
(11) Set forth permitted exceptions to the
			 policy.
When formulating the lease policy, the board should consider
				both internal and external factors, such as size and condition of the state
				bank, expertise of the lending staff, avoidance of undue concentrations of
				risk, and general market conditions.