(a) An association may make, invest in, sell, purchase, participate in, or otherwise deal in secured or unsecured loans for agricultural, business, commercial, or corporate purposes, provided that the total investment in such loans does not exceed 10 percent of the assets of the association.
(b) An association may invest in, sell, purchase, participate in, or otherwise deal in loans specified in subdivision (a) which are originated by any savings association, federal association, holding company of a federally insured savings association, commercial bank, bank holding company, subsidiary of a bank holding company, or insurance company, provided that the total investment in such loans shall not exceed 10 percent of the association’s assets.
(c) For the purposes of this section, the term “loan” does not include any corporate debt security unless it is rated in one of the four highest rating categories by at least one nationally recognized rating service.
(d) No association shall make, invest in, purchase, or participate in a loan for agricultural, business, commercial, or corporate purposes to one borrower, except as the commissioner may approve in writing, if the sum of the amount of the association’s interest in the loan and the total balance of the association’s interest in all outstanding loans for those purposes owed to the association by that borrower exceed the greater of (1) the amount a national bank having an identical total capital and surplus could lend to one borrower, or (2) the amount a commercial bank, as defined in Section 105, having an identical total shareholders’ equity, capital notes, and debentures, could lend to one borrower. This subdivision shall not apply to loans (1) secured by real property, (2) sold without recourse, (3) on the security of the association’s deposit accounts, or (4) of unsecured day funds, including federal funds or similar unsecured loans.
(e) As used in this section the term “one borrower” means:
(1) Any person that is, or upon the making of a loan will become, an obligor on the loans. However, a guarantor shall not be included within the meaning of “obligor” if, in connection with a loan the association has determined, in good faith, that the primary obligor has qualified for the loan irrespective of the existence of the guarantor. In the case of a loan that has been assumed by a third party with the consent of the association, the former debtor and any guarantor shall not be deemed to be an “obligor.”
(2) Nominees of the obligor.
(3) All persons, trusts, syndicates, partnerships and corporations of which the obligor is a nominee, a beneficiary, a member, a general partner, a limited partner owning an interest of 10 percent or more based on the value of his or her capital contribution, or a record or beneficial stockholder owning 10 percent or more of the capital stock.
(4) If the obligor is a trust, syndicate, partnership or corporation, all trusts, syndicates, partnerships and corporations of which any beneficiary, member, general partner, limited partner owning an interest of 10 percent or more based on the value of his or her capital contribution, or record or beneficial stockholder owning 10 percent or more of the capital stock, is also a beneficiary, member, general partner, limited partner owning an interest of 10 percent or more based on the value of his or her capital contribution, or record or beneficial stockholder owning 10 percent or more of the capital stock of the obligor.
(Amended by Stats. 1990, Ch. 1118, Sec. 43.)
Last modified: October 25, 2018