Sale and Lease Back of Bank Premises

3/18/2010

By Rocky Levkulich, CPA

When a bank and its holding company deal with selling or leasing a bank’s building to the holding company, here are three scenarios that will impact how a transaction is handled.

Scenario #1
Situation: The bank sells its building to its holding company at a gain, and then leases the building back.
How it is handled: The gain on the property is deferred over the term of the lease.

Scenario #2
Situation: The lease, because the bank and the holding company are related parties, is for an unusually short period of time.
How it is handled: Regulators can require that the gain be amortized over the economic life of the building.

Scenario #3
Situation: The holding company purchases the building for net book value, instead of fair value.
How it is handled: The bank would have to record a non-cash dividend to a deferred gain equal to the difference between the net book value and fair value of the building.