LAC 61:V.3301 — Guidelines for Ascertaining the Fair Market Value of Financial Institutions

A. The shares of stock of all banks, banking companies, firms, associations or corporations doing a banking business in this state, chartered by the laws of this state or of the United States are hereby declared subject to taxation for all purposes in this state. (R.S. 47:1967)
B. The shares of stock of all capital stock associations are hereby declared subject to taxation for all purposes in this state. (R.S. 6:942)
C. The basis for arriving at the valuation of the shares of stock in any such bank or capital stock association engaged in the banking or capital stock association business shall be the stockholder equity capital, which shall be determined by the addition of paid-in common stock, surplus, undivided profits and all capital reserves, excluding those reserves for loan losses as allowed by the United States Internal Revenue Service. Equity capital shall be adjusted to remove that portion of equity capital based on United States obligations by deducting a percentage of equity capital based on the ratio of U.S. obligations to total assets. Borrowed money and the value of the preferred stock issued by any such bank or capital stock association and actually owned by the United States of America, or any agency thereof, shall not be construed as equity for the purpose of this Section.
D. For the purposes of determining the fair market value of bank stock, the following criteria shall be used: stockholder equity shall serve as a four times factor, 80 percent and annual net earnings of the individual banking institution shall serve as a onetime factor, 20 percent. Annual net earnings shall be adjusted to remove that portion of earnings based on United States obligations by deducting a percentage of annual net earnings based on the ratio of interest on United States obligations to total operating income. Negative earnings shall be included in this formula, but there shall be no earnings loss carried forward or backward. For the purpose of computing the one time, 20 percent earnings factor, the earnings shall be capitalized by multiplying the annual net earnings or net loss of the banking institution by the average price earnings ratio for such institutions as published by a nationwide recognized bond and securities rating firm.
1. The price earnings ratio to be used for this purpose shall be computed based on the quarterly average of the previous seven years of the index selected by the Tax Commission by dropping the highest and lowest ratio years and averaging the remaining five years.
2. The calculated price earnings ratio, to be used to compute bank shareholders assessments, shall not change, up or down, by more than 1.5 points from the ratio used in the previous year.
E. For the purpose of arriving at fair market value of shares of stock in the formula previously outlined above, the Tax Commission or its successor shall compute the formula as follows:
1. in the case of banks, banking companies, firms, associations or corporations created under the laws of the United States, from the statements made to the Comptroller of the Currency, and required to be published as of December 31 of each year;
2. in the case of banks, banking companies, firms, associations or corporations created under the laws of this state, from the statement made to the Commissioner of Financial Institutions, and required to be published as of December 31 of each year;
3. in the case of capital stock associations created under the laws of the United States, from the statements made to the Comptroller of the Currency, and required to be published as of December 31 of each year;
4. in the case of capital stock associations created under the laws of this state, from the statement made to the Commissioner of Financial Institutions, and required to be published as of December 31 of each year.
F. From the assessment determined by the application of the 15 percent of fair market value provided for above, there shall be deducted 50 percent of the assessed value of real estate, improvements, buildings, furniture and fixtures owned by the institution. If such real estate, improvements, buildings, furniture and fixtures are owned by a separate corporation, the deduction will be allowed provided all the capital stock (except directors' qualifying shares, if any) is owned by the institution.
1. For the purpose of defining a property eligible for credit, the bank must have:
a. owned the property as reflected in its year end Statement of Condition; and
b. paid the previous year taxes on the property.
2. The tax notice may be in the name of another party who actually owned the property on the assessment date of record and still be an allowable credit to the bank as along as both Subparagraphs 1.a and b above have been satisfied.