Missouri Code of State Regulations
Title 20 - DEPARTMENT OF COMMERCE AND INSURANCE
Division 1140 - Division of Finance
Chapter 23 - Association's Service Corporations
Section 20 CSR 1140-23.010 - Service Corporations

Universal Citation: 20 MO Code of State Regs 1140-23.010

Current through Register Vol. 49, No. 6, March 15, 2024

PURPOSE: This rule authorizes investments by associations in service corporations, specifies the powers of service corporations and establishes the limitations on and conditions of such investments and powers.

(1) Definitions. As used in this regulation-

(A) Aggregate outstanding investment means the sum of amounts paid to acquire capital stock or securities and amounts invested in obligations of service corporations less amounts received from the sale of capital stock or securities of service corporations and amounts paid to the association to retire obligations of service corporations. It also includes all nonconforming loans and conforming loans to the extent that they exceed the amounts specified in subsection (4)(B) of this regulation;

(B) Conforming loan means a loan or portion of a loan which an association may make under Chapter 20 except unsecured construction loans. A guarantee or takeout commitment with respect to a loan which could have been made by an association as a conforming loan may be deemed a conforming loan for purposes of this regulation, if the association complies with all requirements for such loans, including appraisal and recordkeeping requirements, as though it were itself making the loan subject to its guarantee or take-out commitment;

(C) Joint venture means any joint undertaking by a service corporation or a wholly-owned subsidiary thereof with one (1) or more persons or legal entities in any form, including a joint tenancy, tenancy in common or partnership and including investment in a corporation other than a wholly-owned subsidiary; and

(D) Subsidiary includes a wholly-owned subsidiary and any joint venture in which a service corporation or wholly-owned subsidiary thereof owns, controls or holds with power to vote more than twenty-five percent (25%) of the capital stock, is a general partner or is a limited partner and has contributed more than twenty-five percent (25%) of the limited partnership's capital.

(2) General. An association may invest in service corporations organized under the laws of this state, provided that-

(A) The association provides written notification to the director prior to the establishment of the service corporation;

(B) The service corporation's activities, performed directly or through one (1) or more wholly-owned subsidiaries or joint ventures, consist of one (1) or more of the activities set forth in section (3) of this regulation or are otherwise specifically approved by the director subsequent to review of an application;

(C) Approval of the director is obtained before any activity of the service corporation is performed through one (1) or more joint ventures if a director, officer or controlling person of any stockholder of the service corporation has a direct or indirect beneficial interest in the joint venture;

(D) If all of the capital stock is held by fewer than five (5) savings and loan associations, or more than forty percent (40%) of such stock is held by one (1) savings and loan association with a home office in this state, then the consolidated debt outstanding at any one (1) time (to holders of its capital stock and to others) of the service corporation and its subsidiaries may not exceed-
1. Ten (10) times the total of the service corporation's consolidated net worth and its unsecured debt (excluding accounts payable incurred in the ordinary course of business and paid within sixty (60) days) to holders of at least twenty-five percent (25%) of its capital stock; or

2. Twenty (20) times such total if the service corporation is engaged solely in the activities set forth in paragraph (3)(A)1. of this regulation. The consolidated debt of the service corporation and its subsidiaries shall include the entire amount of any obligation of the service corporation or subsidiary resulting from the sale of loans with recourse;

(E) The service corporation must agree in writing to permit and to pay the cost of such examinations as the director deems necessary;

(F) The director may limit service corporation activities or refuse to permit activities, for supervisory reasons; and

(G) Prior approval of the director must be obtained for investment in a service corporation or for investment by a service corporation in a joint venture or subsidiary if the purpose of the investment is to acquire a going business for an amount exceeding the fair market value of the tangible net assets of that business from a director or officer of an association which owns any of the capital stock of the service corporation or from an entity in which a director or officer of the association has a direct or indirect beneficial interest or is a director, officer, controlling person, partner or trustee.

(3) Permitted Activities. A service corporation in which an association may invest is permitted to engage in activities reasonably related to the activities of associations as the director may approve. Applications for approval to engage in such activities shall be made to the director. In addition, a service corporation may engage in the following activities without prior approval:

(A) Loans. Originating, investing in, selling, purchasing (including purchasing participations in), servicing or otherwise dealing in (including brokerage or warehousing) any of the following:
1. Loans and participations in loans on a prudent basis and secured by real estate or liens on manufactured homes;

2. Loans and participations in loans, with or without security, for altering, repairing, improving, equipping or furnishing real estate;

3. Loans and participations in loans for business purposes secured in part by real estate and insured or guaranteed by an agency of the United States;

4. Educational loans and participations therein;

5. Consumer loans, including loans for inventory financing, floor planning and leasing and participations therein;

6. Loans to finance insurance premiums secured by the unearned premiums of such policy of insurance; and

7. Commercial loans and participations therein provided, that such commercial loans, not secured by real estate, together with commercial loans made by the parent association do not exceed fifteen percent (15%) of the assets of the parent. Where a service corporation is owned by more than one (1) association, each parent for purposes of this calculation shall include a portion of the subsidiary's commercial loans in the proportion of that parent's investment in the service corporation;

(B) Services Primarily for Financial Institutions. Performing any of the following services, primarily for financial institutions:
1. Credit analysis, appraising, construction loan inspection and abstracting;

2. Developing and administering personnel benefit programs, including life insurance, health insurance and pension or retirement plans;

3. Research, studies and surveys;

4. Developing and operating storage facilities for microfilm or other duplicate records;

5. Advertising, brokerage and other services to procure and retain both savings accounts and loans, but not pooling savings accounts or soliciting or promoting pooled savings accounts;

6. Serving as escrow agent or as trustee under deeds of trust, including executing and delivering conveyances, reconveyances and transfers of title;

7. Providing liquidity management, investment, advisory and consulting services;

8. Providing clerical, accounting and internal auditing services;

9. Establishing, owning, leasing, operating or maintaining remote service units; and

10. Purchase of office supplies, furniture and equipment;

(C) Real Estate Services.
1. Maintaining and managing real estate, including real estate used for agricultural purposes;

2. Managing owners' associations for condominium, cooperative, planned unit development or other rental real estate projects;

3. Providing home ownership and financial counseling;

4. Providing relocation services;

5. Providing real estate brokerage services for property owned by an association, its service corporation or by others;

6. Acquiring real estate for prompt development or subdivision, for construction of improvements, for resale or leasing to others for such construction or for use as manufactured home sites, provided that any development, subdivision and construction of improvements is to be completed within eleven (11) years after acquisition of the real estate, unless such period is extended by the director upon written application by the service corporation, which application shall be supported by information evidencing that the service corporation will proceed or has proceeded in accordance with a prudent development plan and has not caused undue delay in the completion of construction, and provided further that acquisition of an option to purchase is not an acquisition for the purpose of determining the periods provided for in this paragraph;

7. Acquiring improved real estate or manufactured homes to be held for rental or resale or for remodeling, renovating or demolishing and rebuilding for sale or rental; and

8. Acquiring, maintaining and managing real estate (improved or unimproved) to be used for offices and related facilities of a stockholder of the service corporation or for such offices and related facilities and for rental or sale, if such acquisition, maintenance and management is performed under a prudent program of property acquisition to meet either the stockholder's present needs or reasonable future needs for office and related facilities provided that, without prior approval of the director, no service corporation shall acquire such real estate if, as a result of the acquisition, the outstanding aggregate book value of all such real estate owned by the stockholder and its service corporations would exceed its consolidated net worth;

(D) Other Investments.
1. Making investments in securities and in corporations or partnerships authorized by Title IX of the Housing and Urban Development Act of 1968;

2. Investing in any savings accounts in any insured association, provided that the service corporation receives no consideration, other than interest at the current market rate, for opening or maintaining any such account;

3. Investing in the capital stock or in the accounts of an interim association that has been chartered solely for the purpose of becoming a constituent in a merger that will result in the acquisition of a stock association by a savings and loan holding company or by a company which will, after the acquisition, be a savings and loan holding company;

4. Investing in tax-exempt bonds of state governments or political subdivisions thereof used to finance residential real property for family units and issued pursuant to section 103 of the Internal Revenue Code, and tax-exempt obligations of public housing agencies used to finance housing projects with rental assistance subsidies and issued pursuant to section 11(b) of the United States Housing Act of 1937;

5. 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 subsections (3)(A)-(E) of this regulation;

6. Engaging in interest rate futures transactions and financial options trading subject to the provisions of 4 CSR 140-21.031, but not subject to any notification requirements therein; and

7. Making investments to the same extent as authorized for associations in 4 CSR 140-21.021;

(E) Other Services.
1. Preparing state and federal tax returns for individuals or other entities;

2. Serving as insurance broker or agent, or serving as agent for the procurement of judicial bonds (other than bail bonds), fidelity bonds and surety bonds, and organizing, purchasing or owning insurance companies either solely or with others for liability, casualty, credit, automobile, life, health, accident or title insurance, including reinsurance, but not private mortgage insurance;

3. Providing fiduciary services upon application to the director pursuant to 4 CSR 140-27.010;

4. Issuing notes, bonds, debentures or other obligations or securities;

5. Issuing credit cards, extending credit in connection therewith and otherwise engaging in or participating in credit card operations;

6. Acquiring personal property, including office equipment, for the purpose of selling or leasing such property or obtaining an assignment of a lessor's interest in a lease of such property;

7. Providing data processing services to the extent permitted to the parent association;

8. Issuing letters of credit;

9. Serving as broker, dealer or exchange for the sale, purchase or transfer of loans authorized for service corporations or any negotiable instrument or evidence of indebtedness for which the security is such loans, in accordance with other provisions of law;

10. Offering for sale and selling debt instruments secured by loans authorized for service corporations held for the account of the service corporation, in accordance with other provisions of law;

11. Making political contributions as otherwise authorized by law;

12. Engaging in the conduct of a safe deposit vault business;

13. Engaging in the conduct of a money market fund;

14. Acting as securities dealer and to conduct stock, bond and security business;

15. Serving as an agent for collection of funds due any utility as otherwise authorized by law; and

16. Purchasing and selling gold coins minted and issued by the United States Treasury; and

(F) Activities reasonably incident to those listed in subsections (3)(A)-(E) of this regulation.

(4) Amount of Investment.

(A) An association may invest in the capital stock, obligations or other securities of service corporations provided that its aggregate outstanding investment does not exceed twenty percent (20%) of the association's assets.

(B) In addition to amounts which it may invest under subsection (4)(A) of this regulation, an association that meets the minimum net worth requirement for that association as set forth in applicable federal regulations may lend additional amounts as follows:
1. An amount not to exceed net worth may be invested in conforming loans and functionally equivalent leases made to each service corporation of which the association owns or holds with power to vote not more than ten percent (10%) of the capital stock and to each joint venture, in which a service corporation of which the association is a stockholder, including subsidiaries of such service corporation, owns or holds with power to vote not more than a total of ten percent (10%) of the capital stock or is a limited partner and has contributed not more than ten percent (10%) of such joint venture's capital; and

2. An aggregate outstanding amount not to exceed fifty percent (50%) of net worth may be invested in conforming loans and functionally equivalent leases to all service corporations in which the association owns more than ten percent (10%) of the capital stock and to all joint ventures in which service corporations in which the association is a stockholder, including subsidiaries of such service corporations, own or hold with power to vote more than a total of ten percent (10%) of the capital stock or are partners.

(C) The limitation in subsection (4)(A) of this regulation does not apply to conforming loans to any service corporation in which the lending association does not have any investment made under authority of this regulation or to conforming loans to a statewide service corporation in which-
1. All of the capital stock is available for purchase by, and only by, any and all savings and loan associations with a home office in such state;

2. No savings and loan association owns, or may own, more than ten percent (10%) of the service corporation's outstanding capital stock, except that in any state in which the home offices of fewer than fifteen (15) savings and loan associations are located, no association owns or may own more than one-third (1/3) of such stock; and

3. Every eligible savings and loan association may own an equal amount of capital stock or may, on such uniform basis as the service corporation may determine, own an amount of such stock equal to a stated percentage of its assets or savings capital at the time the stock is purchased, but capital stock outstanding on December 31, 1964, may be disregarded in determining compliance with this requirement.

(D) The loans-to-one-borrower limitations of applicable federal regulations shall not apply to loans to a service corporation.

(5) Disposal of Investment. Whenever a service corporation, including any subsidiary thereof, engages in an activity which is not permissible for, or exceeds limitations on, a service corporation in which an association may invest or whenever the capital stock ownership requirements of this regulation are not met, an association having an interest in the corporation, including any of its subsidiaries, shall dispose of its investment promptly unless, within ninety (90) days after the director mails written notice to the association, the impermissible activity is discontinued, the limitation is complied with or the capital stock ownership requirements are met.

Copies of all referenced federal regulations are available to any interested party at the Division of Finance, Room 630, 301 West High Street, Jefferson City, Missouri or the Office of the Secretary of State at a cost established by state law.

*Original authority: 369.219, RSMo 1971, amended 1983, 1989, 1994 and 369.299, RSMo 1971, amended 1994.

Disclaimer: These regulations may not be the most recent version. Missouri may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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