Bank Acquisition Investment Portfolio Restrictive Covenant
(Pro-Buyer)

Summary

These sample bank acquisition investment portfolio restrictive covenant (pro-buyer) clauses provide that the target bank holding company in a bank acquisition agrees not to engage in certain activities with respect to its investment portfolio. This template includes practical guidance and drafting notes. This pro-buyer template addresses credit risk by limiting the types of securities that may be purchased and addresses interest rate risk by limiting purchases to shorter maturities. The impact of these restrictions may be lower interest income, as the seller would be required to replace maturing and called securities with the lower risk, shorter term securities described in this clause, which are likely to offer lower yields. For the pro-seller version, see Bank Acquisition Investment Portfolio Restrictive Covenant (Pro-Seller). For discussion of other acquisition agreement considerations specific to a bank acquisition, see Bank M&A Practice Guide.