Chapter 1301:2-3 - Reserve Funds
(A) A service corporation organized pursuant to division (B) of section 1151.344 of the Revised Code may perform directly or through one or more wholly-owned subsidiaries the following activities and any activity reasonably incidental thereto:
(1) Originating, investing in, purchasing, selling, servicing, or otherwise dealing in (including brokering and warehousing), any of the following:
(a) Loans, and participations in loans, on a prudent basis secured by real estate or liens on mobile homes;
(b) Loans, with or without security, for altering, repairing, improving, equipping, or furnishing real estate;
(c) Loans to finance the inventory of a dealer in goods to be sold for personal, family, or household purposes;
(d) Loans for business purposes secured in part by real estate and insured or guaranteed by an agency of the United States;
(e) Educational loans; or
(f) Consumer loans. As herein used the term "consumer loan" means a loan to one or more individuals which is either unsecured or which is secured by consumer goods used or bought primarily for personal, family or household purposes.
(2) Performing the following services, primarily for financial institutions:
(a) Credit information, appraising, construction loan inspection, and abstracting;
(b) Development and administration of personnel benefit programs, including life insurance, health insurance, and pension or retirement plans;
(c) Research, studies, and surveys;
(d) Purchasing or leasing of office supplies, furniture, and equipment;
(e) Development and operation of storage facilities for microfilm or other duplicate records;
(f) Advertising, brokerage and other services to procure and retain both savings accounts and loans;
(g) Serving as escrow agent, or as trustee under deeds of trust, including executing and delivering conveyances, reconveyances, and transfers of title;
(h) Providing liquidity management, investment and advisory services;
(i) Establishing, owning, leasing, operating, or maintaining remote service units; or
(j) Providing clerical, accounting, data processing and internal auditing services to any financial institution.
(3) Maintaining and managing real estate;
(4) Managing owners' associations for condominium, cooperative, planned unit development and other rental real estate projects;
(5) Homeownership and financial counseling;
(6) Preparing tax returns;
(7) Serving as insurance broker or agent for liability, casualty, automobile, life, health, accident, and title insurance, but excluding private mortgage insurance;
(8) Providing trust services upon application to the superintendent in accordance with the procedures therefor applicable to savings and loan associations;
(9) Providing relocation services;
(10) Providing real estate brokerage services;
(11) Acquisition of unimproved real estate for development and/or subdivision for construction of improvements, for resale to others for such construction, or for use as mobile home sites;
(12) Development, subdivision and construction of improvements for sale, or rental on, real estate; provided, that such development, subdivision, and construction of improvements is completed within five years after acquisition of the real estate;
(13) Acquisition of improved real estate or mobile homes to be held for rental or resale;
(14) Acquisition of improved real estate for remodeling, rehabilitation, modernization, renovation, or demolition and rebuilding for sale or for rental;
(15) Real estate maintenance, management and services;
(16) Acquisition, maintenance, and management of real estate (improved or unimproved) to be used for offices and related facilities of a stockholder of a service corporation. Such real estate may include facilities for sale or for rental;
(17) Participation in any manner (without regard to the requirement that activities be performed directly or through a wholly-owned subsidiary) with any service corporation which meets the requirements of section 1151.344 of the Revised Code, with any nonprofit organization, or with any corporation organized pursuant to Chapters 1724., 1726., and 1728. of the Revised Code in any of the activities referred to in paragraphs (A)(12) to (A)(16) of this rule;
(18) Participating and engaging in urban renewal and low-cost housing programs of federal, state, or local governments on behalf of the association;
(19) Making any investment of the types specified in section 1151.34 of the Revised Code;
(20) Mortgage-futures transactions:
(a) Engaging in mortgage-futures transactions, provided that such transactions are matched directly against the service corporation's firm commitments, or against anticipated reinvestment in mortgages and mortgage-related securities of its expected mortgage repayments over the forthcoming twelve-month period. Such matching need not include matching of maturities;
(b) For the purposes of paragraph (A)(20)(a) of this rule, the following definitions will apply:
(i) "Firm commitment" means written commitment to make, purchase, issue, or deliver mortgage loans or mortgage-related securities at fixed interest rates on or before the date specified in the commitment.
(ii) "Mortgage-futures transaction" means the purchase of or sale of a mortgage-futures contract under the terms and conditions approved by the commodity futures trading commission.
(iii) "Mortgage-related security" includes GNMA guaranteed mortgage-backed securities, mortgage participation certificates of the federal home loan mortgage corporation, and similar obligations secured by mortgages in which the association is authorized to invest.
(iv) "Mortgage repayment" includes principal and interest, but excludes expected prepayments and penalties.
(21) Investing in tax exempt bonds issued by a state or local governmental authority to finance housing;
(22) Issuing notes, bonds, debentures, or other obligations or securities;
(23) Issuing credit cards, extending credit in connection therewith, and otherwise engaging in or participating in credit card operations;
(24) Investing in savings accounts in an institution that is a stockholder of the service corporation; provided, that the service corporation receives no consideration, other than interest at the current market rate, for opening or maintaining any such account;
(25) Investing in the capital of a small business investment company or minority enterprise small business investment company licensed pursuant to section 301(d) of the Small Business Investment Act of 1958 by the United States small business administration to invest in small businesses engaged exclusively in the activities listed in this rule; or
(26) Engaging in a joint venture in any activity specified in paragraph (A) of this rule.
(B) A service corporation may file a letter of intent to engage in an activity not otherwise authorized by this rule, including a joint venture in such other activity. Such activity shall not be permitted until the expiration of thirty days after the filing thereof unless the superintendent gives his prior written consent to the corporation.
(1) If the superintendent is not satisfied within the thirty-day period that any such activity is a proper incident to the business of a savings and loan association pursuant to division (B) of section 1151.344 of the Revised Code, he shall so notify the corporation of the basis for the disapproval, and it shall thereafter be an unauthorized practice for the corporation to engage in said activity.
(2) The superintendent upon conclusion of an adjudication hearing pursuant to section 119.06 of the Revised Code may withdraw his approval of any activity of a service corporation granted by this rule upon at least ninety days' written notice. Any action taken by the superintendent may be appealed by the corporation pursuant to section 119.12 of the Revised Code.
(C) Without the prior written approval of the superintendent, a service corporation may not acquire troubled assets, as defined by the superintendent, from a savings and loan association, except that any real estate owned by any such association may be acquired by a service corporation to provide housing.
(D) The term "joint venture" as used in this rule means any joint undertaking with one or more persons or legal entities in any form, including a joint tenancy, tenancy in common, partnership, or investment in a corporation other than a wholly-owned subsidiary.
Five Year Review (FYR) Dates:
Promulgated Under: 119.03
Statutory Authority: 1155.20
Rule Amplifies: 1151.344
Prior Effective Dates: 7/21/75, 1/29/76, 12/1/79, 8/10/81, 1/17/92, 6/3/04
(A) A savings and loan association may enter repurchase or reverse repurchase agreements, including those involving government securities, in accordance with the written guidelines adopted by the board of directors. Such guidelines must provide for the safe and sound investment in securities under repurchase or reverse repurchase agreements, be reviewed and adopted annually by the board of directors, and require:
(1) That transactions involving repurchase or reverse repurchase agreements be conducted in accordance with all applicable securities laws, including those laws relating to the licensing of securities brokers and salespersons;
(2) That the investment in repurchase or reverse repurchase agreements not exceed a stated percentage of the savings and loan association's assets;
(3) That the savings and loan association list the brokers through which it intends to transact business and that any changes to this list must be approved by the superintendent;
(4) That the savings and loan association enter a repurchase or reverse repurchase agreement only pursuant to a written contract with a broker;
(5) That the savings and loan association may transact no more than a stated amount of business through each broker; and
(6) That the savings and loan association maintain in its files, the most recent unconsolidated audited financial statement for each broker.
(B) The written contract required by division (A)(4) of this section shall specify whether the collateral shall be controlled by physical possession or otherwise and that the savings and loan association shall not offer more collateral than is required by prudent industry practice, with consideration given to the length of the contract and the type of underlying security.
(C) Any savings and loan association which collateralizes a reverse repurchase agreement with obligations of the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA), or the Federal Home Loan Mortgage Corporation (FHLMC) at greater than one hundred eight per cent of market value, or United States Government Treasury Securities at greater than one hundred two per cent of market value, shall detail the reasons for such excess collateralization in the minutes of the next meeting of the savings and loan association's board of directors.
(D) Any savings and loan association that collateralizes a reverse repurchase agreement with GNMA, FNMA or FHLMC obligations at greater than one hundred ten per cent of market value, or United States Government Treasury Securities at greater than one hundred five per cent of market value, shall report such excess collateralization together with the reasons therefore, to the superintendent within three business days.
(E) The superintendent may deny permission to engage in repurchase and reverse repurchase agreements, if, in his discretion, the savings and loan association's investments therein have been made in an unsafe and unsound manner.
(A) Subject to the requirements and limitations of this rule, a savings and loan association may, through an operating subsidiary, exercise all powers, except for deposit taking, a savings and loan association may exercise directly in accordance with Chapter 1151. of the Revised Code.
(B) A savings and loan association that intends to establish, acquire, or engage in new activities in an operating subsidiary shall give to the superintendent not less than thirty days prior notice of that intention. The notice shall include all of the following:
(1) A description of the activity the operating subsidiary will be engaging in and the statutory authority for the activity;
(2) The amount of the savings and loan association's existing or proposed direct or indirect investment in the operating subsidiary with calculations showing the investment as a percentage of the savings and loan association's capital and the effect of the proposed investment on the savings and loan association's capital adequacy;
(3) A copy of the savings and loan association's business plan for the operating subsidiary;
(4) A description of the savings and loan association's expertise in the activity; and
(5) A copy of the savings and loan association's policy and practice regarding any anticipated involvement in the operating subsidiary's activities by a director, executive officer, or principal shareholder of the savings and loan association or any of their related interests.
(C) Upon receipt of a notice required by paragraph (B) of this rule, the superintendent shall, in writing, accept the notice as sufficiently complete to commence consideration, request additional information, or return the notice as substantially incomplete. The superintendent may request any additional information the superintendent finds relevant to the savings and loan association's proposed establishment or acquisition of or engaging in additional activities in an operating subsidiary. A savings and loan association may establish, acquire, or engage in new activities in an operating subsidiary thirty days after the date the superintendent accepts the notice as sufficiently complete to commence consideration unless, within that time, the superintendent either disapproves or advises the savings and loan association in writing the superintendent will take additional time to make a determination. The superintendent may affirmatively approve a savings and loan association's establishment or acquisition of or engaging in new activities in an operating subsidiary, and may condition the approval as the superintendent determines is appropriate.
(D) An operating subsidiary is subject to all of the following limitations and requirements:
(1) An operating subsidiary must be in a business form that provides limited liability for its equity holders, such as a corporation or limited liability company;
(2) The savings and loan association must own, directly or indirectly, more than fifty percent of the operating subsidiary's voting equity interests;
(3) No person other than the savings and loan association may exercise effective operating control over the operating subsidiary;
(4) An operating subsidiary may only engage in activities a savings and loan association is authorized to engage in pursuant to Chapter 1151. of the Revised Code.
(1) Unless otherwise provided by statute, rule, or administrative guideline, all provisions of the Revised Code, the Administrative Code, and the administrative guidelines of the division of financial institutions shall apply to a savings and loan association and its operating subsidiaries to the same extent, and a savings and loan association and its operating subsidiaries shall be treated as a unit for purposes of statutory and regulatory requirements and limitations.
(2) The limitations on a savings and loan association's loans to a single borrower and investments in the securities of a single issuer do not apply to a savings and loan association's loans to and investment in its operating subsidiaries.
(F) The superintendent's authority to examine a savings and loan association extends to the examination of its operating subsidiaries, and the superintendent's authority to take any supervisory or enforcement action against a savings and loan association extends to an action against the savings and loan association's operating subsidiaries.
(G) A savings and loan association that controls a service corporation that satisfies the limitations and requirements of paragraph (D) of this rule may give notice in accordance with paragraph (B) of this rule of its intention to establish the service corporation as an operating subsidiary. The superintendent may excuse any of the elements of the notice that are otherwise required in the case of a savings and loan association that intends to establish an entity that is presently a service corporation as an operating subsidiary.
A savings and loan association may make loans permissible under section 1151.30 of the Revised Code of up to thirty per cent of the savings and loan association's assets provided that the savings and loan association maintains its reserves in accordance with the following schedule. For the purpose of the commercial lending limits, reserves means net worth as defined in rule 1301:2-2-01 of the Administrative Code :
Net Worth Schedule