§ 34.81 12 CFR Ch. I (1–1–04 Edition)

Other acceptable collateral means any col- Condition and Income filed under 12 lateral in which the lender has a perfected U.S.C. 161; plus security interest, that has a quantifiable (2) The balance of a bank’s allowance value, and is accepted by the lender in ac- cordance with safe and sound lending prac- for loan and lease losses not included tices. Other acceptable collateral should be in the bank’s Tier 2 capital, for pur- appropriately discounted by the lender con- poses of the calculation of risk-based sistent with the lender’s usual practices for capital under Appendix A to 12 CFR making loans secured by such collateral. part 3, based upon the bank’s Consoli- Other acceptable collateral includes, among dated Report of Condition and Income other items, unconditional irrevocable filed under 12 U.S.C. 161. standby letters of credit for the benefit of (b) Debts previously contracted (DPC) the lender. Owner-occupied, when used in conjunction real estate means real estate (including with the term 1- to 4-family residential prop- capitalized and operating leases) ac- erty means that the owner of the underlying quired by a national bank through any real property occupies at least one unit of means in full or partial satisfaction of the real property as a principal residence of a debt previously contracted. the owner. (c) Former banking premises means Readily marketable collateral means insured real estate (including capitalized and deposits, financial instruments, and bullion operating leases) for which banking use in which the lender has a perfected interest. Financial instruments and bullion must be no longer is contemplated. This in- salable under ordinary circumstances with cludes real estate originally acquired reasonable promptness at a fair market for future expansion that no longer will value determined by quotations based on ac- be used for expansion or other banking tual transactions, on an auction or similarly purposes. available daily bid and ask price market. (d) Market value means the value de- Readily marketable collateral should be ap- termined in accordance with subpart C propriately discounted by the lender con- of this part. sistent with the lender’s usual practices for making loans secured by such collateral. (e) Other real estate owned (OREO) Value means an opinion or estimate, set means: forth in an appraisal or evaluation, which- (1) DPC real estate; and ever may be appropriate, of the market value (2) Former banking premises. of real property, prepared in accordance with (f) Recorded investment amount means: the agency’s appraisal regulations and guid- (1) For loans, the recorded loan bal- ance. For loans to purchase an existing prop- erty, the term ‘‘value’’ means the lesser of ance, as determined by generally ac- the actual acquisition cost or the estimate of cepted accounting principles; and value. (2) For former banking premises, the 1- to 4-family residential property means net book value. property containing fewer than five indi- vidual dwelling units, including manufac- § 34.82 Holding period. tured homes permanently affixed to the un- derlying property (when deemed to be real (a) Holding period for OREO. A na- property under State law). tional bank shall dispose of OREO at the earliest time that prudent judg- [57 FR 62896, Dec. 31, 1992; 58 FR 4460, Jan. 14, ment dictates, but not later than the 1993] end of the holding period (or an exten- sion thereof) permitted by 12 U.S.C. 29. Subpart E—Other Real Estate (b) Commencement of holding period. Owned The holding period begins on the date that: SOURCE: 61 FR 11301, Mar. 20, 1996, unless (1) Ownership of the property is origi- otherwise noted. nally transferred to a national bank; (2) A bank completes relocation from § 34.81 Definitions. former banking premises to new bank- (a) Capital and surplus means: ing premises or ceases to use the (1) A bank’s Tier 1 and Tier 2 capital former banking premises without relo- as calculated under the OCC’s risk- cating; or based capital standards set out in ap- (3) A bank decides not to use real es- pendix A to part 3 of this chapter based tate acquired for future bank expan- upon the bank’s Consolidated Report of sion.

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