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H0524aaS........................................................by BUSINESS
BANKING - LOANS/EXTENSIONS OF CREDIT - Amends and repeals existing law
relating to banking to revise definitions; to revise provisions applicable
to real estate loans offered by banks; to repeal sections applicable to
mortgage insurance, government guaranteed loans, commercial loans and
construction loans; to provide that the total loans and extensions of
credit to persons shall be limited; to provide that certain items do not
constitute loans or extensions of credit; to exempt certain loans or
extensions of credit from lending limits; to provide for the combination of
loans or extensions of credit under certain outlined conditions; to provide
for calculation of lending limits; to set forth conditions under which
loans shall be considered nonconforming; and to provide that banks shall
not invest in certain real estate holdings in amounts greater than fifty
percent of the capital structure of the bank.
01/22 House intro - 1st rdg - to printing
01/23 Rpt prt - to Bus
02/04 Rpt out - rec d/p - to 2nd rdg
02/05 2nd rdg - to 3rd rdg
02/09 3rd rdg - PASSED - 68-0-2
AYES -- Andersen, Barraclough, Barrett, Bauer, Bayer, Bedke, Bell,
Black, Block, Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins,
Cuddy, Deal, Denney, Douglas, Eberle, Edmunson, Ellsworth, Eskridge,
Field(18), Field(23), Gagner, Garrett, Harwood, Henbest, Jaquet,
Jones, Kellogg, Kulczyk, Lake, Langford, Langhorst, Martinez,
McKague, Meyer, Miller, Mitchell, Moyle, Naccarato, Nielsen,
Pasley-Stuart, Raybould, Ridinger, Ring, Ringo, Roberts, Robison,
Rydalch, Sali, Sayler, Schaefer, Shepherd, Shirley, Skippen,
Smith(30), Smith(24), Smylie, Snodgrass, Stevenson, Trail, Wills,
Wood, Mr. Speaker
NAYS -- None
Absent and excused -- Crow, McGeachin
Floor Sponsor - Meyer
Title apvd - to Senate
02/10 Senate intro - 1st rdg - to Com/HuRes
02/20 Rpt out - to 14th Ord
03/02 Rpt out amen - to 1st rdg as amen
03/03 1st rdg - to 2nd rdg as amen
03/04 2nd rdg - to 3rd rdg as amen
03/10 3rd rdg as amen - PASSED - 34-0-1
AYES -- Andreason(Andreason), Bailey, Bunderson, Burkett, Burtenshaw,
Calabretta, Cameron, Compton, Darrington, Davis, Gannon, Geddes,
Goedde, Hill, Ingram, Kennedy, Keough, Little, Lodge, Malepeai,
Marley, McKenzie, McWilliams, Noble, Noh, Pearce, Richardson,
Schroeder, Sorensen, Stegner, Stennett, Sweet, Werk, Williams
NAYS -- None
Absent and excused -- Brandt
Floor Sponsor - Cameron
Title apvd - to House
03/11 House concurred in Senate amens - to engros
03/12 Rpt engros - 1st rdg - to 2nd rdg as amen
03/15 2nd rdg - to 3rd rdg as amen
03/16 3rd rdg as amen - PASSED - 66-0-4
AYES -- Andersen, Barrett, Bauer, Bayer, Bedke, Bell, Black, Block,
Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins, Crow, Cuddy,
Deal, Denney, Douglas, Eberle, Edmunson, Ellsworth, Field(18),
Field(23), Gagner, Garrett, Harwood, Henbest, Jaquet, Jones, Kellogg,
Kulczyk, Lake, Langford, Langhorst, Martinez, McGeachin, Meyer,
Miller, Mitchell, Moyle, Naccarato, Nielsen, Pasley-Stuart, Raybould,
Ridinger, Ring, Ringo, Roberts, Robison, Rydalch, Sali, Sayler,
Schaefer, Shepherd, Shirley, Skippen, Smith(30), Smith(24), Smylie,
Stevenson, Trail, Wills, Wood, Mr. Speaker
NAYS -- None
Absent and excused -- Barraclough, Eskridge, McKague, Snodgrass
Floor Sponsor - Meyer
Title apvd - to enrol
03/17 Rpt enrol - Sp signed
03/18 Pres signed - To Governor
03/23 Governor signed
Session Law Chapter 159
Effective: 07/01/04
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 524
BY BUSINESS COMMITTEE
1 AN ACT
2 RELATING TO BANKS AND BANKING; AMENDING SECTION 26-106, IDAHO CODE, TO REVISE
3 DEFINITIONS AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 26-703,
4 IDAHO CODE, TO REVISE PROVISIONS APPLICABLE TO REAL ESTATE LOANS OFFERED
5 BY BANKS; REPEALING SECTIONS 26-704, 26-705, 26-706 AND 26-707, IDAHO
6 CODE, RELATING TO MORTGAGE INSURANCE, GOVERNMENT GUARANTEED LOANS, COMMER-
7 CIAL LOANS AND CONSTRUCTION LOANS; AMENDING SECTION 26-708, IDAHO CODE, TO
8 REDESIGNATE THE SECTION AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SEC-
9 TION 26-709, IDAHO CODE, TO REDESIGNATE THE SECTION, TO PROVIDE THAT THE
10 TOTAL LOANS AND EXTENSIONS OF CREDIT TO PERSONS SHALL BE LIMITED, TO
11 DEFINE "LOANS AND EXTENSIONS OF CREDIT," TO PROVIDE THAT CERTAIN ITEMS DO
12 NOT CONSTITUTE LOANS OR EXTENSIONS OF CREDIT, TO EXEMPT CERTAIN LOANS OR
13 EXTENSIONS OF CREDIT FROM LENDING LIMITS, TO PROVIDE FOR THE COMBINATION
14 OF LOANS OR EXTENSIONS OF CREDIT UNDER CERTAIN OUTLINED CONDITIONS, TO
15 DEFINE TERMS, TO PROVIDE FOR CALCULATION OF LENDING LIMITS, TO SET FORTH
16 CONDITIONS UNDER WHICH LOANS SHALL BE CONSIDERED NONCONFORMING, TO PROVIDE
17 CORRECT TERMINOLOGY AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION
18 26-710, IDAHO CODE, TO REDESIGNATE THE SECTION; AMENDING SECTION 26-711,
19 IDAHO CODE, TO REDESIGNATE THE SECTION AND TO PROVIDE THAT BANKS SHALL NOT
20 INVEST IN CERTAIN REAL ESTATE HOLDINGS IN AMOUNTS GREATER THAN FIFTY PER-
21 CENT OF THE CAPITAL STRUCTURE OF THE BANK AND TO MAKE A TECHNICAL CORREC-
22 TION; AMENDING SECTIONS 26-712, 26-713, 26-714, 26-715 AND 26-716, IDAHO
23 CODE, TO REDESIGNATE THE SECTIONS; AMENDING SECTION 26-717, IDAHO CODE, TO
24 REDESIGNATE THE SECTION AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SEC-
25 TIONS 26-718 AND 26-719, IDAHO CODE, TO REDESIGNATE THE SECTIONS; AMEND-
26 ING SECTION 26-801, IDAHO CODE, TO REVISE TERMINOLOGY REFERRING TO THE
27 CAPITAL STRUCTURE OF BANKS AND TO MAKE TECHNICAL CORRECTIONS; AND AMENDING
28 SECTION 26-107, IDAHO CODE, TO PROVIDE CORRECT CODE CITATIONS.
29 Be It Enacted by the Legislature of the State of Idaho:
30 SECTION 1. That Section 26-106, Idaho Code, be, and the same is hereby
31 amended to read as follows:
32 26-106. DEFINITIONS. As used in this act, unless the context or subject
33 matter otherwise requires:
34 (1) "Bank" means any person engaged in soliciting, receiving or accepting
35 money or its equivalent on deposit as a regular business whether or not such
36 deposit, however evidenced, is made subject to check or draft or other order.
37 (2) "Banking business" means the soliciting, receiving or accepting of
38 money or its equivalent on deposit as a regular business whether such deposit
39 is made subject to check or draft or is evidenced by a certificate of deposit,
40 a passbook, a note, a receipt, or other writing; provided, that nothing herein
41 shall apply to or include money or its equivalent left in escrow or left with
42 an agent pending investment in real estate or securities for or on account of
43 his principal.
2
1 (3) "Banking facility" means a place of business of a bank which performs
2 activities limited to:
3 (a) tTaking applications for loans, accepting deposits, issuing receipts
4 therefor, and transmitting such deposits to the bank maintaining such
5 facility;
6 (b) cCarrying and disbursing cash change, cashing checks, accepting
7 checks;
8 (c) iIssuing checks drawn on or certified by the bank operating the
9 facility, renting safety deposit boxes, keeping necessary accounts of all
10 transactions; and carrying out such other transactions as the director may
11 allow by regulation.
12 (4) "Bank service corporation" means a corporation organized to perform
13 bank services for two (2) or more banks, each of which owns part of the capi-
14 tal stock of such corporation, and which are subject to examination by either
15 the department of finance of the state of Idaho or a federal bank supervisory
16 agency.
17 For the purpose of this definition "bank services" means services such as
18 check and deposit sorting and posting, computation and posting of interest and
19 other credits and charges, preparation and mailing of checks, statements,
20 notices, and similar items, or any other clerical, bookkeeping, accounting,
21 statistical, or similar functions performed for a bank.
22 (5) "Borrowing" means any nondeposit liability.
23 (6) "Branch" means any location except a bank facility or customer-bank
24 communication terminal or bank service corporation at which a bank performs
25 any or all functions of a bank.
26 (7) "Capital" means the amount of unimpaired paid-up common stock plus
27 the amount of paid-up preferred stock issued and unimpaired.
28 (8) "Capital note" means a convertible or nonconvertible note of a bank
29 subordinated as to principal and interest to the depositors of the bank and
30 containing such conditions as the director may require.
31 (9) "Capital structure" means the total of the capital, surplus, undi-
32 vided profits and subordinated capital notes and contingency reserves of the
33 bank or such other account as determined by the director of the department of
34 finance, less intangible assets.
35 (10) "Common stock" means the stock of a banking corporation other than
36 preferred stock.
37 (11) "Commercial paper" means a short term negotiable instrument arising
38 out of a commercial transaction; provided, however, that commercial paper
39 shall not be construed to be a deposit as defined in this act.
40 (12) "Converting bank" means a bank converting from a state to a national
41 bank, or the reverse.
42 (13) "Demand deposit" means all deposits except time deposits.
43 (14) "Deposit" means the act of placing or lodging money in the custody of
44 a person, for safety or convenience whether interest-bearing or not, to be
45 withdrawn at the will of the depositor or under rules, terms and regulations
46 agreed upon by the depositor and the depository. If the context requires,
47 deposit may also mean the money so deposited or the credit the depositor
48 receives for it.
49 (15) "Depositor" means any person who deposits money.
50 (16) "Director" means the director of the department of finance.
51 (17) "Dissenting stockholder" means a stockholder dissenting and voting
52 his dissent as provided in this act.
53 (18) "Executive officer" means each officer of a bank, who by virtue of
54 his position, has both voice in the formulation of the policy of the bank and
55 responsibility for the implementation of such policy.
3
1 (19) "Federal funds" means member bank deposits at federal reserve banks.
2 (20) "Federal reserve act" means and includes the act of congress of the
3 United States approved December 23, 1913, as amended.
4 (21) "Federal reserve bank" means a federal reserve bank created and orga-
5 nized under the authority of the Federal Reserve Act.
6 (22) "Federal reserve board" means the board of governors of the Federal
7 Reserve System created and described in the Federal Reserve Act.
8 (23) "Federal bank supervisory agency" means the comptroller of the cur-
9 rency, the board of governors of the Federal Reserve System, or the board of
10 directors of the Federal Deposit Insurance Corporation.
11 (24) "Fiduciary" means trustee, agent, executor, administrator, personal
12 representative, committee, guardian or conservator for a minor or other incom-
13 petent person, receiver, trustee in bankruptcy, assignee for creditors or any
14 holder of a similar position of trust.
15 (25) "Member bank" means any national bank or state bank which has become
16 or which becomes a member of one (1) of the federal reserve banks created by
17 the Federal Reserve Act.
18 (26) "Merger" means the union of two (2) or more bank corporations by the
19 transfer of property of all to one (1) of them. As used in this act "merger"
20 includes a consolidation.
21 (27) "Merging bank" means a party to a merger.
22 (28) "Mobile facility" means a banking facility which is moved from place
23 to place and not permanently attached to real property.
24 (29) "National bank" means a bank organized under the laws of the United
25 States and issued an organization certificate by the comptroller of the cur-
26 rency.
27 (30) "Net demand deposits" means the total of the bank's demand deposits
28 after subtracting from the deposit balance due to any bank the deposit balance
29 due from the same bank (other than trust funds deposited by either bank) and
30 any cash items in the process of collection due from or due to such banks
31 shall be included in determining such net balance, except that balances of
32 time deposits of any bank and any balances standing to the credit of private
33 banks, of banks in foreign countries, of foreign branches of other American
34 banks, and of American branches of foreign banks shall be reported gross with-
35 out any such subtraction, and excluding any deposits received in any office of
36 the bank for deposits in any other office of the bank. The amount of trust
37 funds held in the bank's own trust department, which the bank keeps segregated
38 and apart from its general assets and does not use in the conduct of its busi-
39 ness, shall not be included as net deposits.
40 (31) "Net profits" means profits remaining after the deduction of all
41 expenses including depreciation, losses, or doubtful assets, as required by
42 the director of the department of finance, interest, and taxes accrued or due.
43 (32) "Person" means a natural person, corporation an individual, sole pro-
44 prietorship, partnership, joint venture, association, cooperative association,
45 unincorporated association, trust, estate, business trust, corporation, lim-
46 ited liability company, not-for-profit corporation, sovereign government or
47 agency, instrumentality, or political subdivision thereof, or any other legal
48 or commercial similar entity or organization.
49 (33) "Preferred stock" means a class of the stock of a banking corporation
50 issued in accordance with section 26-206, Idaho Code, which is accorded a
51 preference or priority over the common stock of the corporation.
52 (34) "Resulting bank" means the bank resulting from a merger or conver-
53 sion.
54 (35) "Savings deposit" means a deposit:
55 (a) tThat consists of funds deposited to the credit of or in which the
4
1 entire beneficial interest is held by one (1) or more individuals, or a
2 corporation, association, or other organization operated primarily for
3 religious, philanthropic, charitable, educational, fraternal, or other
4 similar purposes and not operated for profit; or that consists of funds
5 deposited to the credit of or in which the entire beneficial interest is
6 held by the United States, any state of the United States, or any county,
7 municipality, or political subdivision thereof, the District of Columbia,
8 the Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, Guam,
9 or political subdivision thereof; or that consists of funds deposited to
10 the credit of, or in which any beneficial interest is held by a corpora-
11 tion, association, or other organization not qualifying above to the
12 extent such funds do not exceed one hundred fifty thousand dollars
13 ($150,000) per such depositor at a bank; and
14 (b) wWith respect to which the depositor is not required by the deposit
15 contract but may at any time be required by the bank to give notice in
16 writing of an intended withdrawal not less than thirty (30) days before
17 such withdrawal is made and which is not payable on a specified date or at
18 the expiration of a specified time after the date of deposit.
19 (36) "State bank" means any bank chartered by the state of Idaho.
20 (37) "Temporary banking facility" means a banking facility which is oper-
21 ated for less than thirty (30) days and is established for the purpose of pro-
22 viding bank facility services for a specific occasion.
23 (38) "Time certificate of deposit" means a deposit evidenced by a negotia-
24 ble on non-negotiable or nonnegotiable instrument which provides on its face
25 that the amount of such deposit is payable to bearer or to any specified per-
26 son or to his order:
27 (a) oOn a certain date, specified in the instrument, not less than thirty
28 days (30) after the date of the deposit; or
29 (b) aAt the expiration of a certain specified time not less than thirty
30 (30) days after date of the instrument; or
31 (c) uUpon notice in writing which is actually required to be given not
32 less than thirty (30) days before the date of repayment; and
33 (d) iIn all cases only upon presentation and surrender of the instrument.
34 (39) "Time deposit" means time certificates of deposit, time deposits open
35 account, and savings deposits.
36 (40) "Time deposits open account" means a deposit, other than a time cer-
37 tificate of deposit, with respect to which there is in force a written con-
38 tract with the depositor that neither the whole nor any part of such deposit
39 may be withdrawn, by check or otherwise, prior to the date of maturity, which
40 shall be not less than thirty (30) days after the date of the deposit, or
41 prior to the expiration of the period of notice which must be given by the
42 depositor in writing not less than thirty (30) days in advance of withdrawal.
43 (41) "Trust department" means the division of a bank which has been
44 granted trust powers by the director of finance.
45 SECTION 2. That Section 26-703, Idaho Code, be, and the same is hereby
46 amended to read as follows:
47 26-703. REAL ESTATE LOANS. Any bank may make real estate loans secured by
48 first liens upon improved real estate, including improved farm land and
49 improved business and residential properties, as are consistent with safe and
50 sound banking practices. A loan secured by real estate within the meaning of
51 this section shall be in the form of an obligation or obligations secured by
52 mortgage, trust deed, or other such instrument which shall constitute a lien
53 upon real estate., and any bank may purchase any obligation so secured when
5
1 the entire amount of such obligation is sold to the bank. The amount of any
2 such loan hereafter made shall not exceed ninety percent (90%) of the
3 appraised value of the real estate offered as security and no such loan shall
4 be made for a longer term than thirty (30) years. The foregoing limitations
5 and restrictions shall not prevent the renewal or extension of loans hereto-
6 fore made and shall not apply to:
7 (a) real estate loans which are insured under the provisions of the
8 National Housing Act, act of congress of June 27, 1934, and
9 (b) amendatory and supplemental legislation relating to loans insured by
10 the federal housing administration.
11 No such bank shall hold on its books real estate loans in an aggregate sum
12 in excess of the amount of the capital and capital notes of such bank, plus
13 the amount of its unimpaired surplus fund, or in excess of sixty percent (60%)
14 of the amount of its savings and time deposits, whichever is the greater
15 except with the consent of the director.
16 SECTION 3. That Sections 26-704, 26-705, 26-706 and 26-707, Idaho Code,
17 be, and the same are hereby repealed.
18 SECTION 4. That Section 26-708, Idaho Code, be, and the same is hereby
19 amended to read as follows:
20 26-7084. DETERMINATION OF LIMITS OF LOANS AND INVESTMENTS OF BANKS. For
21 the purpose of determining limitations on loans and investments the following
22 items are to be disregarded:
23 (a1) tThe sale of excess reserve funds by one (1) bank to another bank;
24 (b2) tThe purchase of securities by a bank, under an agreement to resell
25 at the end of a stated period; and
26 (c3) tThe purchase of mortgage loans by a bank, under agreement to resell
27 at the end of a stated period.
28 The director may, upon application by a bank, approve loans and investments in
29 excess of the limitations provided in this chapter.
30 SECTION 5. That Section 26-709, Idaho Code, be, and the same is hereby
31 amended to read as follows:
32 26-7095. LOANS TO ONE PERSON. (1) The total liabilities to any bank of
33 any loans and extensions of credit by a bank to a person for money borrowed
34 outstanding at one (1) time, shall at no time exceed twenty percent (20%) of
35 the aggregate paid-in capital, surplus and capital notes structure of such
36 bank.
37 (2) "Loans and extensions of credit" means a bank's direct or indirect
38 advance of funds to or on behalf of a borrower based upon an obligation of the
39 borrower to repay the funds, or repayable from specific property pledged by or
40 on behalf of the borrower, and includes:
41 (a) A contractual commitment to advance funds;
42 (b) A maker or endorser's obligation arising from a bank's discount of
43 commercial paper;
44 (c) A bank's purchase of securities subject to an agreement that the
45 seller shall repurchase the securities at the end of a stated period, but
46 not including a bank's purchase of type I securities, as defined in 12 CFR
47 part 1, subject to a repurchase agreement, where the purchasing bank has
48 assured control over or has established its rights to the type I securi-
49 ties as collateral;
50 (d) A bank's purchase of third-party paper subject to an agreement that
6
1 the seller shall repurchase the paper upon default or at the end of a
2 stated period. The amount of the bank's loan is the total unpaid balance
3 of the paper owned by the bank less any applicable dealer reserves
4 retained by the bank and held by the bank as collateral security. Where
5 the seller's obligation to repurchase is limited, the bank's loan is mea-
6 sured by the total amount of the paper the seller may ultimately be obli-
7 gated to repurchase. A bank's purchase of third party paper without direct
8 or indirect recourse to the seller is not a loan or extension of credit to
9 the seller;
10 (e) An overdraft, whether or not prearranged, but not an intra-day over-
11 draft for which payment is received before the close of business of the
12 bank that makes the funds available;
13 (f) The sale of federal funds with a maturity of more than one (1) busi-
14 ness day, but not federal funds with a maturity of one (1) day or less or
15 federal funds sold under a continuing contract; and
16 (g) Loans or extensions of credit that have been charged off on the books
17 of the bank in whole or in part, unless the loan or extension of credit:
18 (i) Is unenforceable by reason of discharge in bankruptcy;
19 (ii) Is no longer legally enforceable because of expiration of the
20 statute of limitations or a judicial decision; or
21 (iii) Is no longer legally enforceable for other reasons, provided
22 that the bank maintains sufficient records to demonstrate that the
23 loan is unenforceable.
24 (3) The following items do not constitute loans or extensions of credit
25 for purposes of this section:
26 (a) Additional funds advanced for the benefit of a borrower by a bank for
27 payment of taxes, insurance, utilities, security, and maintenance and
28 operating expenses necessary to preserve the value of real property secur-
29 ing the loan, consistent with safe and sound banking practices, but only
30 if the advance is for the protection of the bank's interest in the collat-
31 eral, and provided that such amounts must be treated as an extension of
32 credit if a new loan or extension of credit is made to the borrower;
33 (b) Accrued and discounted interest on an existing loan or extension of
34 credit, including interest that has been capitalized from prior notes and
35 interest that has been advanced under terms and conditions of a loan
36 agreement;
37 (c) Financed sales of a bank's own assets, including other real estate
38 owned, if the financing does not put the bank in a worse position than
39 when the bank held title to the assets;
40 (d) A renewal or restructuring of a loan as a new loan or extension of
41 credit, following the exercise by a bank of reasonable efforts, consistent
42 with safe and sound banking practices, to bring the loan into conformance
43 with the lending limit, unless new funds are advanced by the bank to the
44 borrower (except as permitted by this section), or a new borrower replaces
45 the original borrower, or unless the director determines that a renewal or
46 restructuring was undertaken as a means to evade the bank's lending limit;
47 (e) Amounts paid against uncollected funds in the normal process of col-
48 lection; and
49 (f) (i) That portion of a loan or extension of credit sold as a partic-
50 ipation by a bank on a nonrecourse basis, provided that the partici-
51 pation results in a pro rata sharing of credit risk proportionate to
52 the respective interests of the originating and participating lend-
53 ers. Where a participation agreement provides that repayment must be
54 applied first to the portions sold, a pro rata sharing shall be
55 deemed to exist only if the agreement also provides that, in the
7
1 event of a default or comparable event defined in the agreement, par-
2 ticipants must share in all subsequent repayments and collections in
3 proportion to their percentage participation at the time of the
4 occurrence of the event.
5 (ii) When an originating bank funds the entire loan, it must receive
6 funding from the participants before the close of business of its
7 next business day. If the participating portions are not received
8 within that period, then the portions funded shall be treated as a
9 loan by the originating bank to the borrower. If the portions so
10 attributed to the borrower exceed the originating bank's lending
11 limit, the loan may be treated as nonconforming, rather than a viola-
12 tion, if:
13 1. The originating bank had a valid and unconditional partici-
14 pation agreement with a participating bank or banks that was
15 sufficient to reduce the loan to within the originating bank's
16 lending limit;
17 2. The participating bank reconfirmed its participation and the
18 originating bank had no knowledge of any information that would
19 permit the participant to withhold its participation; and
20 3. The participation was to be funded by close of business of
21 the originating bank's next business day.
22 (4) The following loans or extensions of credit are not subject to the
23 lending limits of this section:
24 (a) The discount of bills of exchange drawn in good faith against actual
25 existing values,;
26 (b) Tthe discount of bankers' acceptances of other banks,;
27 (c) Tthe discount of commercial or business paper actually owned by the
28 person negotiating the same, and;
29 (d) Tthe obligations of the United States or general obligations of any
30 state or of any political subdivision thereof, or obligation issued under
31 authority of the Ffederal Ffarm Lloan Aact;, shall not be considered as
32 money borrowed, nor shall the foregoing limitations apply to
33 (e) Lloans made on warehouse receipts and bills of lading, when such
34 warehouse receipts and bills of lading cover nonperishable commodities of
35 the marketable value of at least one hundred twenty percent (120%) of the
36 amount loaned thereon.;
37 (f) Loans or obligations shall not be subject under this section to any
38 limitation based upon such capital and surplus and extensions of credit to
39 the extent that such loans or obligations are secured or covered by guar-
40 anties, or by commitments or agreements to take over or to purchase, made
41 by any Federal Reserve Bank or by the United States or any department,
42 bureau, board, commission, or establishment of the United States, includ-
43 ing any corporation wholly owned directly or indirectly by the United
44 States; or
45 (g) Loans, including portions thereof, secured by a segregated deposit
46 account in the lending bank, provided a security interest in the deposit
47 has been perfected under applicable law.
48 The combined liabilities of the several members of any firm, copartnership
49 or unincorporated association to the loaning bank shall be included in the
50 liabilities of such firm, copartnership or unincorporated association and
51 shall be included in the liabilities of any member thereof in determining the
52 foregoing limitations.
53 (5) Combination. Loans or extensions of credit to one (1) borrower shall
54 be attributed to another person and each person shall be deemed a borrower
55 when proceeds of a loan or extension of credit are to be used for the direct
8
1 benefit of the other person, to the extent of the proceeds so used, or when a
2 common enterprise is deemed to exist between the persons.
3 (a) Direct benefit. The proceeds of a loan or extension of credit to a
4 borrower shall be deemed to be used for the direct benefit of another per-
5 son and shall be attributed to the other person when the proceeds, or
6 assets purchased with the proceeds, are transferred to another person,
7 other than in a bona fide arm's length transaction where the proceeds are
8 used to acquire property, goods or services.
9 (b) Common enterprise. A common enterprise shall be deemed to exist and
10 loans to separate borrowers shall be aggregated:
11 (i) When the expected source of repayment for each loan or exten-
12 sion of credit is the same for each borrower and neither borrower has
13 another source of income from which the loan (together with the
14 borrower's other obligations) may be fully repaid. An employer shall
15 not be treated as a source of repayment under this paragraph because
16 of wages and salaries paid to an employee unless the standards of
17 paragraph (b)(ii) of this subsection are met;
18 (ii) When loans or extensions of credit are made:
19 1. To borrowers who are related directly or indirectly through
20 common control, including where one (1) borrower is directly or
21 indirectly controlled by another borrower; and
22 2. Substantial financial interdependence exists between or
23 among the borrowers. Substantial financial interdependence is
24 deemed to exist when fifty percent (50%) or more of one (1)
25 borrower's gross receipts or gross expenditures (on an annual
26 basis) are derived from transactions with the other borrower.
27 Gross receipts and expenditures include gross revenues/expenses,
28 intercompany loans, dividends, capital contributions, and simi-
29 lar receipts or payments;
30 (iii) When separate persons borrow from a bank to acquire a business
31 enterprise of which those borrowers will own more than fifty percent
32 (50%) of the voting securities or voting interests, in which case a
33 common enterprise is deemed to exist between the borrowers for pur-
34 poses of combining the acquisition loans; or
35 (iv) When the director determines, based upon an evaluation of the
36 facts and circumstances of particular transactions, that a common
37 enterprise exists.
38 (c) Loans to a corporate group.
39 (i) Loans or extensions of credit by a bank to a corporate group
40 may not exceed fifty percent (50%) of the bank's capital and surplus.
41 A corporate group includes a person and all of its subsidiaries. For
42 purposes of this paragraph, a corporation or a limited liability com-
43 pany is a subsidiary of a person if the person owns or beneficially
44 owns directly or indirectly more than fifty percent (50%) of the vot-
45 ing securities or voting interests of the corporation or company.
46 (ii) Except as provided in paragraph (c)(i) of this subsection,
47 loans or extensions of credit to a person and its subsidiary, or to
48 different subsidiaries of a person, are not combined unless either
49 the direct benefit or the common enterprise test is met.
50 (d) Loans to partnerships, joint ventures, and associations.
51 (i) Partnership loans. Loans or extensions of credit to a partner-
52 ship, joint venture or association are deemed to be loans or exten-
53 sions of credit to each member of the partnership, joint venture or
54 association. This rule does not apply to limited partners in limited
55 partnerships or to members of joint ventures or associations if the
9
1 partners or members, by the terms of the partnership or membership
2 agreement, are not held generally liable for the debts or actions of
3 the partnership, joint venture or association, and those provisions
4 are valid under applicable law.
5 (ii) Loans to partners.
6 1. Loans or extensions of credit to members of a partnership,
7 joint venture or association are not attributed to the partner-
8 ship, joint venture or association unless either the direct ben-
9 efit or the common enterprise test is met. Both the direct bene-
10 fit and common enterprise tests are met between a member of a
11 partnership, joint venture or association and such partnership,
12 joint venture or association, when loans or extensions of credit
13 are made to the member to purchase an interest in the partner-
14 ship, joint venture or association.
15 2. Loans or extensions of credit to members of a partnership,
16 joint venture or association are not attributed to other members
17 of the partnership, joint venture or association unless either
18 the direct benefit or common enterprise test is met.
19 (e) Loans to foreign governments and their agencies and instrumentali-
20 ties.
21 (i) Aggregation. Loans and extensions of credit to foreign govern-
22 ments and their agencies and instrumentalities shall be aggregated
23 with one another only if the loans or extensions of credit fail to
24 meet either the means test or the purpose test at the time the loan
25 or extension of credit is made.
26 1. The means test is satisfied if the borrower has resources or
27 revenue of its own sufficient to service its debt obligations.
28 If the government's support (excluding guarantees by a central
29 government of the borrower's debt) exceeds the borrower's annual
30 revenues from other sources, it shall be presumed that the means
31 test has not been satisfied.
32 2. The purpose test is satisfied if the purpose of the loan or
33 extension of credit is consistent with the purposes of the
34 borrower's general business.
35 (ii) Documentation. In order to show that the means and purpose
36 tests have been satisfied, a bank must, at a minimum, retain in its
37 files the following items:
38 1. A statement (accompanied by supporting documentation)
39 describing the legal status and the degree of financial and
40 operational autonomy of the borrowing entity;
41 2. Financial statements for the borrowing entity for a minimum
42 of three (3) years prior to the date the loan or extension of
43 credit was made or for each year that the borrowing entity has
44 been in existence, if less than three (3) years;
45 3. Financial statements for each year the loan or extension of
46 credit is outstanding;
47 4. The bank's assessment of the borrower's means of servicing
48 the loan or extension of credit, including specific reasons in
49 support of that assessment. The assessment shall include an
50 analysis of the borrower's financial history, its present and
51 projected economic and financial performance, and the signifi-
52 cance of any financial support provided to the borrower by third
53 parties, including the borrower's central government; and
54 5. A loan agreement or other written statement from the bor-
55 rower that clearly describes the purpose of the loan or exten-
10
1 sion of credit. The written representation will ordinarily con-
2 stitute sufficient evidence that the purpose test has been sat-
3 isfied. However, when, at the time the funds are disbursed, the
4 bank knows or has reason to know of other information suggesting
5 that the borrower will use the proceeds in a manner inconsistent
6 with the written representation, it may not, without further
7 inquiry, accept the representation.
8 (6) Calculation. For purposes of determining compliance with this sec-
9 tion, a bank shall determine its lending limit as of the last day of the pre-
10 ceding calendar quarter. A bank's lending limit calculated in accordance with
11 this section shall be effective on the date that the limit is to be calcu-
12 lated. If the director determines for safety and soundness reasons that a bank
13 should calculate its lending limit more frequently than required by this sub-
14 section, the director may provide written notice to the bank directing the
15 bank to calculate its lending limit at a more frequent interval, and the bank
16 shall thereafter calculate its lending limit at that interval until further
17 notice from the director.
18 (7) Nonconforming loans. A loan, within a bank's legal lending limit when
19 made, shall not be deemed a violation but shall be treated as nonconforming if
20 the loan is no longer in conformity with the bank's lending limit because:
21 (a) The bank's capital has declined, borrowers have subsequently merged
22 or formed a common enterprise, lenders have merged, or the lending limit
23 or capital rules have changed. A bank must use reasonable efforts to bring
24 a loan that is nonconforming under this subsection into conformity with
25 the bank's lending limit unless to do so would be inconsistent with safe
26 and sound banking practices.
27 (b) Collateral securing the loan to satisfy the requirements of a lending
28 limit exception has declined in value. A bank must bring a loan that is
29 nonconforming under this subsection into conformity with the bank's lend-
30 ing limit within thirty (30) calendar days, except when judicial proceed-
31 ings, regulatory actions or other extraordinary circumstances beyond the
32 bank's control prevent the bank from taking action.
33 (8) When in the judgment of the director the liabilities of any corpora-
34 tion loans and extensions of credit to any person, or the combined liabilities
35 of loans and extensions of credit to any corporation and one (1) or more of
36 its stockholders to any bank are excessive, he shall require the reduction
37 thereof to such limits and within such time as he shall prescribe.
38 Provided, further, that the director may compel the reduction of any loan
39 which shall in his judgment appear excessive or dangerous.
40 SECTION 6. That Section 26-710, Idaho Code, be, and the same is hereby
41 amended to read as follows:
42 26-7106. LOANS TO OFFICERS. Except as authorized under this section, no
43 bank may extend credit in any manner to any of its own executive officers.
44 Any extension of credit under this section must be approved by the board of
45 directors of the bank, and may be made only if such credit extension comports
46 with the principles of safety and soundness and is in compliance with regula-
47 tion O of the board of governors of the federal reserve system, 12 C.F.R. 215.
48 SECTION 7. That Section 26-711, Idaho Code, be, and the same is hereby
49 amended to read as follows:
50 26-71107. REAL ESTATE HOLDINGS. A bank may purchase, acquire, hold and
51 convey real estate for the following purposes only:
11
1 (1) Such as shall be necessary for the convenient transaction of its
2 business, including at the same location as its banking offices other property
3 to rent as a source of income; provided, however, that no bank shall invest in
4 buildings and lots and furniture, fixtures and equipment in an amount greater
5 than fifty per cent percent (50%) of the capital, surplus and capital notes
6 structure of such bank.
7 (2) Such as shall be conveyed to it in satisfaction of debts previously
8 contracted in the course of business.
9 (3) Such as it shall purchase at sale on judgments, decrees, mortgage
10 foreclosure or trustees sale for debts previously contracted, but a bank shall
11 not bid at such sale a larger amount than is necessary to satisfy all debts
12 and costs necessary to obtain clear title. Such real estate shall be carried
13 on the books of the bank at the lower of cost or market value. Market value
14 shall be determined by a current appraisal prepared by an independent quali-
15 fied appraiser approved by the director. Thereafter, but no more frequently
16 than annually, the director may in his discretion request that the bank obtain
17 from an independent qualified appraiser approved by the director, a further
18 appraisal of market value or certification by the appraiser that the market
19 value has not declined.
20 (4) No real estate acquired under subsections (2) and (3) of this section
21 may be held for a longer period than five (5) years, provided, however, that
22 upon application by the bank, the director shall approve the continued holding
23 of any such real estate by the bank for an additional period of five (5) years
24 upon the bank's showing of its good faith attempt to dispose of the real
25 estate within the first five (5) year period, or that disposal within the
26 first five (5) year period would be detrimental to the bank; and provided fur-
27 ther that the bank shall, during the second five (5) year period, at the end
28 of each year beginning at the end of the sixth year in which the property is
29 held, write down the value of such real estate by twenty percent (20%) of the
30 value at which such real estate is carried on its books at the beginning of
31 the second five (5) year period. Value at the beginning of the second five (5)
32 year period shall be the lower of cost or market value as determined pursuant
33 to appraisal as provided in subsection (3) of this section. Nothing in this
34 section shall be construed to prevent a bank from making loans secured by real
35 estate as provided in this act, or a trust department holding and conveying
36 real estate in trust.
37 (5) A bank may, with the approval of the director and the board of gover-
38 nors of the Federal Reserve System or the Federal Deposit Insurance Corpora-
39 tion invest in bank premises or in the stock, bonds, debentures, or other
40 obligations of any corporation holding the banking buildings, lots and furni-
41 ture, fixtures and equipment of such bank in an amount not to exceed the capi-
42 tal and surplus of the bank.
43 SECTION 8. That Section 26-712, Idaho Code, be, and the same is hereby
44 amended to read as follows:
45 26-71208. VALUATION OF ASSETS. No bank shall enter or at any time carry
46 on its books any of its assets at a valuation exceeding their actual cost to
47 the bank; nor shall the value of any of its assets be increased on the books
48 of the bank without the written consent of the director. Additional charges,
49 delinquency charges and other similar charges on consumer credit transactions
50 permitted by and made in compliance with the Uniform Consumer Credit Code and
51 added to the principal balance of the loan, shall not come within the prohibi-
52 tion of this section.
12
1 SECTION 9. That Section 26-713, Idaho Code, be, and the same is hereby
2 amended to read as follows:
3 26-71309. STATUTORY BAD DEBT. Every bank carrying any bad debt, or a debt
4 of doubtful value, as an asset shall, upon the request or demand of the direc-
5 tor, collect the same or put it in good bankable condition or charge it out of
6 its books. Any debt on which interest is past due and unpaid for a period of
7 six (6) months, unless the same is well secured and in process of collection,
8 shall be considered a bad debt within the meaning of this section.
9 SECTION 10. That Section 26-714, Idaho Code, be, and the same is hereby
10 amended to read as follows:
11 26-7140. OWNERSHIP AND LEASING OF PROPERTY FOR CUSTOMERS. A bank may
12 become the owner and lessor of personal property acquired upon the specific
13 request and for the use of a customer and may incur such additional obliga-
14 tions as may be incident to becoming an owner and lessor of such property.
15 SECTION 11. That Section 26-715, Idaho Code, be, and the same is hereby
16 amended to read as follows:
17 26-7151. LENDING OF CREDIT -- SURETYSHIP AND GUARANTYSHIP. A bank may
18 lend its credit, bind itself as a surety to indemnify another, or otherwise
19 become a guarantor, only if it has a substantial interest in the performance
20 of the transaction involved or has a segregated deposit sufficient in amount
21 to cover the bank's total potential liability.
22 SECTION 12. That Section 26-716, Idaho Code, be, and the same is hereby
23 amended to read as follows:
24 26-7162. VALIDITY OF TRANSACTIONS. Nothing in any law of this state shall
25 in any manner whatsoever affect the validity of, or render void or voidable,
26 the payment, certification or acceptance of a check or other negotiable
27 instrument, or any other transaction by a bank in this state, because done or
28 performed during any time other than regular banking hours.
29 SECTION 13. That Section 26-717, Idaho Code, be, and the same is hereby
30 amended to read as follows:
31 26-7173. ADVERSE CLAIM TO BANK DEPOSIT. Notice to any bank of an adverse
32 claim to a deposit standing on its books to the credit of any person shall not
33 require the bank to recognize the adverse claim unless the adverse claimant
34 shall:
35 (a1) pProcure a restraining order, injunction or other appropriate proc-
36 ess against the bank from a court of competent jurisdiction wherein the
37 person to whose credit the deposit stands is made a party and served with
38 summons,; or
39 (b2) eExecute to said bank, in a form and with sureties acceptable to the
40 bank, a bond indemnifying the bank from any and all liability, loss, dam-
41 age, costs and expenses for and on account of the payment of such adverse
42 claim or the dishonor of the check or other order of the person to whose
43 credit the deposit stands on the books of the bank.
44 This section shall not apply in any instance where the person to whose
45 credit the deposit stands is a fiduciary for such adverse claimant, and the
46 facts constituting such relationship and the facts showing reasonable cause
13
1 for belief on the part of the claimant that the fiduciary is about to
2 misappropriate the deposit, are made to appear by the affidavit of the claim-
3 ant.
4 SECTION 14. That Section 26-718, Idaho Code, be, and the same is hereby
5 amended to read as follows:
6 26-7184. ACCOUNT OF PERSON UNDER DISABILITY. Whenever any minor or any
7 person under disability shall become a depositor, as defined in section
8 26-106, Idaho Code, in any bank in his or her name, such bank may pay such
9 money on the check, order or endorsement of such depositor the same as in
10 cases of depositors not under disability, and such payment shall be in all
11 respects valid in law.
12 SECTION 15. That Section 26-719, Idaho Code, be, and the same is hereby
13 amended to read as follows:
14 26-7195. BRANCH OR OFFICE AT WHICH INSTRUMENTS ARE TO BE PRESENTED MUST
15 BE INDICATED. All checks, drafts, bills of exchange or other orders for the
16 payment of money drawn against any bank operating branch banks shall indicate
17 the particular bank and branch at which the same are to be presented for pay-
18 ment or acceptance.
19 SECTION 16. That Section 26-801, Idaho Code, be, and the same is hereby
20 amended to read as follows:
21 26-801. BORROWING MONEY -- LIMITATIONS. At no time shall the total bor-
22 rowings of any bank exceed in the aggregate an amount equal to the capital and
23 surplus structure of the bank, except with the consent of the director.
24 For the purpose of computing total borrowings the following items shall
25 not be included:
26 (a1) Federal funds purchased.
27 (b2) The sale of securities by a bank, under an agreement to repurchase
28 at the end of a stated period.
29 (c3) Borrowings from the Federal Reserve System.
30 (d4) The sale of mortgage loans by a bank, under agreement to repurchase
31 at the end of a stated period.
32 (e5) Money borrowed to meet seasonal requirements.
33 (f6) Money borrowed to meet unexpected withdrawals.
34 (g7) Capital notes issued in accordance with section 26-802, Idaho Code.
35 The total of all borrowings by a bank including those items excluded from
36 the computation of total borrowings may not exceed in the aggregate an amount
37 equal to two and one-half (2 1/2) times the capital and surplus structure of
38 the bank, except with the consent of the director.
39 Whenever it shall appear to the director that a bank is borrowing money in
40 excess of the above limitation, or for purposes other than as specified above,
41 he may require it to reduce such borrowings within a time to be fixed by him.
42 SECTION 17. That Section 26-107, Idaho Code, be, and the same is hereby
43 amended to read as follows:
44 26-107. SECTIONS APPLICABLE TO NATIONAL BANKS. The provisions of sections
45 26-215, 26-301 through and including, 26-309, 26-311, 26-7162, 26-7173,
46 26-7184, 26-1203, 26-1206, 26-1207, 26-1208, and 26-1209, 26-1601 through
47 26-1605, 26-2601 through 26-2612, Idaho Code, shall also apply to national
14
1 banks.
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
Moved by Cameron
Seconded by Goedde
IN THE SENATE
SENATE AMENDMENT TO H.B. NO. 524
1 AMENDMENT TO SECTION 5
2 On page 5 of the printed bill, in line 40, following "includes" insert: ",
3 for the purposes of this section".
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 524, As Amended in the Senate
BY BUSINESS COMMITTEE
1 AN ACT
2 RELATING TO BANKS AND BANKING; AMENDING SECTION 26-106, IDAHO CODE, TO REVISE
3 DEFINITIONS AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 26-703,
4 IDAHO CODE, TO REVISE PROVISIONS APPLICABLE TO REAL ESTATE LOANS OFFERED
5 BY BANKS; REPEALING SECTIONS 26-704, 26-705, 26-706 AND 26-707, IDAHO
6 CODE, RELATING TO MORTGAGE INSURANCE, GOVERNMENT GUARANTEED LOANS, COMMER-
7 CIAL LOANS AND CONSTRUCTION LOANS; AMENDING SECTION 26-708, IDAHO CODE, TO
8 REDESIGNATE THE SECTION AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SEC-
9 TION 26-709, IDAHO CODE, TO REDESIGNATE THE SECTION, TO PROVIDE THAT THE
10 TOTAL LOANS AND EXTENSIONS OF CREDIT TO PERSONS SHALL BE LIMITED, TO
11 DEFINE "LOANS AND EXTENSIONS OF CREDIT," TO PROVIDE THAT CERTAIN ITEMS DO
12 NOT CONSTITUTE LOANS OR EXTENSIONS OF CREDIT, TO EXEMPT CERTAIN LOANS OR
13 EXTENSIONS OF CREDIT FROM LENDING LIMITS, TO PROVIDE FOR THE COMBINATION
14 OF LOANS OR EXTENSIONS OF CREDIT UNDER CERTAIN OUTLINED CONDITIONS, TO
15 DEFINE TERMS, TO PROVIDE FOR CALCULATION OF LENDING LIMITS, TO SET FORTH
16 CONDITIONS UNDER WHICH LOANS SHALL BE CONSIDERED NONCONFORMING, TO PROVIDE
17 CORRECT TERMINOLOGY AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION
18 26-710, IDAHO CODE, TO REDESIGNATE THE SECTION; AMENDING SECTION 26-711,
19 IDAHO CODE, TO REDESIGNATE THE SECTION AND TO PROVIDE THAT BANKS SHALL NOT
20 INVEST IN CERTAIN REAL ESTATE HOLDINGS IN AMOUNTS GREATER THAN FIFTY PER-
21 CENT OF THE CAPITAL STRUCTURE OF THE BANK AND TO MAKE A TECHNICAL CORREC-
22 TION; AMENDING SECTIONS 26-712, 26-713, 26-714, 26-715 AND 26-716, IDAHO
23 CODE, TO REDESIGNATE THE SECTIONS; AMENDING SECTION 26-717, IDAHO CODE, TO
24 REDESIGNATE THE SECTION AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SEC-
25 TIONS 26-718 AND 26-719, IDAHO CODE, TO REDESIGNATE THE SECTIONS; AMEND-
26 ING SECTION 26-801, IDAHO CODE, TO REVISE TERMINOLOGY REFERRING TO THE
27 CAPITAL STRUCTURE OF BANKS AND TO MAKE TECHNICAL CORRECTIONS; AND AMENDING
28 SECTION 26-107, IDAHO CODE, TO PROVIDE CORRECT CODE CITATIONS.
29 Be It Enacted by the Legislature of the State of Idaho:
30 SECTION 1. That Section 26-106, Idaho Code, be, and the same is hereby
31 amended to read as follows:
32 26-106. DEFINITIONS. As used in this act, unless the context or subject
33 matter otherwise requires:
34 (1) "Bank" means any person engaged in soliciting, receiving or accepting
35 money or its equivalent on deposit as a regular business whether or not such
36 deposit, however evidenced, is made subject to check or draft or other order.
37 (2) "Banking business" means the soliciting, receiving or accepting of
38 money or its equivalent on deposit as a regular business whether such deposit
39 is made subject to check or draft or is evidenced by a certificate of deposit,
40 a passbook, a note, a receipt, or other writing; provided, that nothing herein
41 shall apply to or include money or its equivalent left in escrow or left with
42 an agent pending investment in real estate or securities for or on account of
43 his principal.
2
1 (3) "Banking facility" means a place of business of a bank which performs
2 activities limited to:
3 (a) tTaking applications for loans, accepting deposits, issuing receipts
4 therefor, and transmitting such deposits to the bank maintaining such
5 facility;
6 (b) cCarrying and disbursing cash change, cashing checks, accepting
7 checks;
8 (c) iIssuing checks drawn on or certified by the bank operating the
9 facility, renting safety deposit boxes, keeping necessary accounts of all
10 transactions; and carrying out such other transactions as the director may
11 allow by regulation.
12 (4) "Bank service corporation" means a corporation organized to perform
13 bank services for two (2) or more banks, each of which owns part of the capi-
14 tal stock of such corporation, and which are subject to examination by either
15 the department of finance of the state of Idaho or a federal bank supervisory
16 agency.
17 For the purpose of this definition "bank services" means services such as
18 check and deposit sorting and posting, computation and posting of interest and
19 other credits and charges, preparation and mailing of checks, statements,
20 notices, and similar items, or any other clerical, bookkeeping, accounting,
21 statistical, or similar functions performed for a bank.
22 (5) "Borrowing" means any nondeposit liability.
23 (6) "Branch" means any location except a bank facility or customer-bank
24 communication terminal or bank service corporation at which a bank performs
25 any or all functions of a bank.
26 (7) "Capital" means the amount of unimpaired paid-up common stock plus
27 the amount of paid-up preferred stock issued and unimpaired.
28 (8) "Capital note" means a convertible or nonconvertible note of a bank
29 subordinated as to principal and interest to the depositors of the bank and
30 containing such conditions as the director may require.
31 (9) "Capital structure" means the total of the capital, surplus, undi-
32 vided profits and subordinated capital notes and contingency reserves of the
33 bank or such other account as determined by the director of the department of
34 finance, less intangible assets.
35 (10) "Common stock" means the stock of a banking corporation other than
36 preferred stock.
37 (11) "Commercial paper" means a short term negotiable instrument arising
38 out of a commercial transaction; provided, however, that commercial paper
39 shall not be construed to be a deposit as defined in this act.
40 (12) "Converting bank" means a bank converting from a state to a national
41 bank, or the reverse.
42 (13) "Demand deposit" means all deposits except time deposits.
43 (14) "Deposit" means the act of placing or lodging money in the custody of
44 a person, for safety or convenience whether interest-bearing or not, to be
45 withdrawn at the will of the depositor or under rules, terms and regulations
46 agreed upon by the depositor and the depository. If the context requires,
47 deposit may also mean the money so deposited or the credit the depositor
48 receives for it.
49 (15) "Depositor" means any person who deposits money.
50 (16) "Director" means the director of the department of finance.
51 (17) "Dissenting stockholder" means a stockholder dissenting and voting
52 his dissent as provided in this act.
53 (18) "Executive officer" means each officer of a bank, who by virtue of
54 his position, has both voice in the formulation of the policy of the bank and
55 responsibility for the implementation of such policy.
3
1 (19) "Federal funds" means member bank deposits at federal reserve banks.
2 (20) "Federal reserve act" means and includes the act of congress of the
3 United States approved December 23, 1913, as amended.
4 (21) "Federal reserve bank" means a federal reserve bank created and orga-
5 nized under the authority of the Federal Reserve Act.
6 (22) "Federal reserve board" means the board of governors of the Federal
7 Reserve System created and described in the Federal Reserve Act.
8 (23) "Federal bank supervisory agency" means the comptroller of the cur-
9 rency, the board of governors of the Federal Reserve System, or the board of
10 directors of the Federal Deposit Insurance Corporation.
11 (24) "Fiduciary" means trustee, agent, executor, administrator, personal
12 representative, committee, guardian or conservator for a minor or other incom-
13 petent person, receiver, trustee in bankruptcy, assignee for creditors or any
14 holder of a similar position of trust.
15 (25) "Member bank" means any national bank or state bank which has become
16 or which becomes a member of one (1) of the federal reserve banks created by
17 the Federal Reserve Act.
18 (26) "Merger" means the union of two (2) or more bank corporations by the
19 transfer of property of all to one (1) of them. As used in this act "merger"
20 includes a consolidation.
21 (27) "Merging bank" means a party to a merger.
22 (28) "Mobile facility" means a banking facility which is moved from place
23 to place and not permanently attached to real property.
24 (29) "National bank" means a bank organized under the laws of the United
25 States and issued an organization certificate by the comptroller of the cur-
26 rency.
27 (30) "Net demand deposits" means the total of the bank's demand deposits
28 after subtracting from the deposit balance due to any bank the deposit balance
29 due from the same bank (other than trust funds deposited by either bank) and
30 any cash items in the process of collection due from or due to such banks
31 shall be included in determining such net balance, except that balances of
32 time deposits of any bank and any balances standing to the credit of private
33 banks, of banks in foreign countries, of foreign branches of other American
34 banks, and of American branches of foreign banks shall be reported gross with-
35 out any such subtraction, and excluding any deposits received in any office of
36 the bank for deposits in any other office of the bank. The amount of trust
37 funds held in the bank's own trust department, which the bank keeps segregated
38 and apart from its general assets and does not use in the conduct of its busi-
39 ness, shall not be included as net deposits.
40 (31) "Net profits" means profits remaining after the deduction of all
41 expenses including depreciation, losses, or doubtful assets, as required by
42 the director of the department of finance, interest, and taxes accrued or due.
43 (32) "Person" means a natural person, corporation an individual, sole pro-
44 prietorship, partnership, joint venture, association, cooperative association,
45 unincorporated association, trust, estate, business trust, corporation, lim-
46 ited liability company, not-for-profit corporation, sovereign government or
47 agency, instrumentality, or political subdivision thereof, or any other legal
48 or commercial similar entity or organization.
49 (33) "Preferred stock" means a class of the stock of a banking corporation
50 issued in accordance with section 26-206, Idaho Code, which is accorded a
51 preference or priority over the common stock of the corporation.
52 (34) "Resulting bank" means the bank resulting from a merger or conver-
53 sion.
54 (35) "Savings deposit" means a deposit:
55 (a) tThat consists of funds deposited to the credit of or in which the
4
1 entire beneficial interest is held by one (1) or more individuals, or a
2 corporation, association, or other organization operated primarily for
3 religious, philanthropic, charitable, educational, fraternal, or other
4 similar purposes and not operated for profit; or that consists of funds
5 deposited to the credit of or in which the entire beneficial interest is
6 held by the United States, any state of the United States, or any county,
7 municipality, or political subdivision thereof, the District of Columbia,
8 the Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, Guam,
9 or political subdivision thereof; or that consists of funds deposited to
10 the credit of, or in which any beneficial interest is held by a corpora-
11 tion, association, or other organization not qualifying above to the
12 extent such funds do not exceed one hundred fifty thousand dollars
13 ($150,000) per such depositor at a bank; and
14 (b) wWith respect to which the depositor is not required by the deposit
15 contract but may at any time be required by the bank to give notice in
16 writing of an intended withdrawal not less than thirty (30) days before
17 such withdrawal is made and which is not payable on a specified date or at
18 the expiration of a specified time after the date of deposit.
19 (36) "State bank" means any bank chartered by the state of Idaho.
20 (37) "Temporary banking facility" means a banking facility which is oper-
21 ated for less than thirty (30) days and is established for the purpose of pro-
22 viding bank facility services for a specific occasion.
23 (38) "Time certificate of deposit" means a deposit evidenced by a negotia-
24 ble on non-negotiable or nonnegotiable instrument which provides on its face
25 that the amount of such deposit is payable to bearer or to any specified per-
26 son or to his order:
27 (a) oOn a certain date, specified in the instrument, not less than thirty
28 days (30) after the date of the deposit; or
29 (b) aAt the expiration of a certain specified time not less than thirty
30 (30) days after date of the instrument; or
31 (c) uUpon notice in writing which is actually required to be given not
32 less than thirty (30) days before the date of repayment; and
33 (d) iIn all cases only upon presentation and surrender of the instrument.
34 (39) "Time deposit" means time certificates of deposit, time deposits open
35 account, and savings deposits.
36 (40) "Time deposits open account" means a deposit, other than a time cer-
37 tificate of deposit, with respect to which there is in force a written con-
38 tract with the depositor that neither the whole nor any part of such deposit
39 may be withdrawn, by check or otherwise, prior to the date of maturity, which
40 shall be not less than thirty (30) days after the date of the deposit, or
41 prior to the expiration of the period of notice which must be given by the
42 depositor in writing not less than thirty (30) days in advance of withdrawal.
43 (41) "Trust department" means the division of a bank which has been
44 granted trust powers by the director of finance.
45 SECTION 2. That Section 26-703, Idaho Code, be, and the same is hereby
46 amended to read as follows:
47 26-703. REAL ESTATE LOANS. Any bank may make real estate loans secured by
48 first liens upon improved real estate, including improved farm land and
49 improved business and residential properties, as are consistent with safe and
50 sound banking practices. A loan secured by real estate within the meaning of
51 this section shall be in the form of an obligation or obligations secured by
52 mortgage, trust deed, or other such instrument which shall constitute a lien
53 upon real estate., and any bank may purchase any obligation so secured when
5
1 the entire amount of such obligation is sold to the bank. The amount of any
2 such loan hereafter made shall not exceed ninety percent (90%) of the
3 appraised value of the real estate offered as security and no such loan shall
4 be made for a longer term than thirty (30) years. The foregoing limitations
5 and restrictions shall not prevent the renewal or extension of loans hereto-
6 fore made and shall not apply to:
7 (a) real estate loans which are insured under the provisions of the
8 National Housing Act, act of congress of June 27, 1934, and
9 (b) amendatory and supplemental legislation relating to loans insured by
10 the federal housing administration.
11 No such bank shall hold on its books real estate loans in an aggregate sum
12 in excess of the amount of the capital and capital notes of such bank, plus
13 the amount of its unimpaired surplus fund, or in excess of sixty percent (60%)
14 of the amount of its savings and time deposits, whichever is the greater
15 except with the consent of the director.
16 SECTION 3. That Sections 26-704, 26-705, 26-706 and 26-707, Idaho Code,
17 be, and the same are hereby repealed.
18 SECTION 4. That Section 26-708, Idaho Code, be, and the same is hereby
19 amended to read as follows:
20 26-7084. DETERMINATION OF LIMITS OF LOANS AND INVESTMENTS OF BANKS. For
21 the purpose of determining limitations on loans and investments the following
22 items are to be disregarded:
23 (a1) tThe sale of excess reserve funds by one (1) bank to another bank;
24 (b2) tThe purchase of securities by a bank, under an agreement to resell
25 at the end of a stated period; and
26 (c3) tThe purchase of mortgage loans by a bank, under agreement to resell
27 at the end of a stated period.
28 The director may, upon application by a bank, approve loans and investments in
29 excess of the limitations provided in this chapter.
30 SECTION 5. That Section 26-709, Idaho Code, be, and the same is hereby
31 amended to read as follows:
32 26-7095. LOANS TO ONE PERSON. (1) The total liabilities to any bank of
33 any loans and extensions of credit by a bank to a person for money borrowed
34 outstanding at one (1) time, shall at no time exceed twenty percent (20%) of
35 the aggregate paid-in capital, surplus and capital notes structure of such
36 bank.
37 (2) "Loans and extensions of credit" means a bank's direct or indirect
38 advance of funds to or on behalf of a borrower based upon an obligation of the
39 borrower to repay the funds, or repayable from specific property pledged by or
40 on behalf of the borrower, and includes, for the purposes of this section:
41 (a) A contractual commitment to advance funds;
42 (b) A maker or endorser's obligation arising from a bank's discount of
43 commercial paper;
44 (c) A bank's purchase of securities subject to an agreement that the
45 seller shall repurchase the securities at the end of a stated period, but
46 not including a bank's purchase of type I securities, as defined in 12 CFR
47 part 1, subject to a repurchase agreement, where the purchasing bank has
48 assured control over or has established its rights to the type I securi-
49 ties as collateral;
50 (d) A bank's purchase of third-party paper subject to an agreement that
6
1 the seller shall repurchase the paper upon default or at the end of a
2 stated period. The amount of the bank's loan is the total unpaid balance
3 of the paper owned by the bank less any applicable dealer reserves
4 retained by the bank and held by the bank as collateral security. Where
5 the seller's obligation to repurchase is limited, the bank's loan is mea-
6 sured by the total amount of the paper the seller may ultimately be obli-
7 gated to repurchase. A bank's purchase of third party paper without direct
8 or indirect recourse to the seller is not a loan or extension of credit to
9 the seller;
10 (e) An overdraft, whether or not prearranged, but not an intra-day over-
11 draft for which payment is received before the close of business of the
12 bank that makes the funds available;
13 (f) The sale of federal funds with a maturity of more than one (1) busi-
14 ness day, but not federal funds with a maturity of one (1) day or less or
15 federal funds sold under a continuing contract; and
16 (g) Loans or extensions of credit that have been charged off on the books
17 of the bank in whole or in part, unless the loan or extension of credit:
18 (i) Is unenforceable by reason of discharge in bankruptcy;
19 (ii) Is no longer legally enforceable because of expiration of the
20 statute of limitations or a judicial decision; or
21 (iii) Is no longer legally enforceable for other reasons, provided
22 that the bank maintains sufficient records to demonstrate that the
23 loan is unenforceable.
24 (3) The following items do not constitute loans or extensions of credit
25 for purposes of this section:
26 (a) Additional funds advanced for the benefit of a borrower by a bank for
27 payment of taxes, insurance, utilities, security, and maintenance and
28 operating expenses necessary to preserve the value of real property secur-
29 ing the loan, consistent with safe and sound banking practices, but only
30 if the advance is for the protection of the bank's interest in the collat-
31 eral, and provided that such amounts must be treated as an extension of
32 credit if a new loan or extension of credit is made to the borrower;
33 (b) Accrued and discounted interest on an existing loan or extension of
34 credit, including interest that has been capitalized from prior notes and
35 interest that has been advanced under terms and conditions of a loan
36 agreement;
37 (c) Financed sales of a bank's own assets, including other real estate
38 owned, if the financing does not put the bank in a worse position than
39 when the bank held title to the assets;
40 (d) A renewal or restructuring of a loan as a new loan or extension of
41 credit, following the exercise by a bank of reasonable efforts, consistent
42 with safe and sound banking practices, to bring the loan into conformance
43 with the lending limit, unless new funds are advanced by the bank to the
44 borrower (except as permitted by this section), or a new borrower replaces
45 the original borrower, or unless the director determines that a renewal or
46 restructuring was undertaken as a means to evade the bank's lending limit;
47 (e) Amounts paid against uncollected funds in the normal process of col-
48 lection; and
49 (f) (i) That portion of a loan or extension of credit sold as a partic-
50 ipation by a bank on a nonrecourse basis, provided that the partici-
51 pation results in a pro rata sharing of credit risk proportionate to
52 the respective interests of the originating and participating lend-
53 ers. Where a participation agreement provides that repayment must be
54 applied first to the portions sold, a pro rata sharing shall be
55 deemed to exist only if the agreement also provides that, in the
7
1 event of a default or comparable event defined in the agreement, par-
2 ticipants must share in all subsequent repayments and collections in
3 proportion to their percentage participation at the time of the
4 occurrence of the event.
5 (ii) When an originating bank funds the entire loan, it must receive
6 funding from the participants before the close of business of its
7 next business day. If the participating portions are not received
8 within that period, then the portions funded shall be treated as a
9 loan by the originating bank to the borrower. If the portions so
10 attributed to the borrower exceed the originating bank's lending
11 limit, the loan may be treated as nonconforming, rather than a viola-
12 tion, if:
13 1. The originating bank had a valid and unconditional partici-
14 pation agreement with a participating bank or banks that was
15 sufficient to reduce the loan to within the originating bank's
16 lending limit;
17 2. The participating bank reconfirmed its participation and the
18 originating bank had no knowledge of any information that would
19 permit the participant to withhold its participation; and
20 3. The participation was to be funded by close of business of
21 the originating bank's next business day.
22 (4) The following loans or extensions of credit are not subject to the
23 lending limits of this section:
24 (a) The discount of bills of exchange drawn in good faith against actual
25 existing values,;
26 (b) Tthe discount of bankers' acceptances of other banks,;
27 (c) Tthe discount of commercial or business paper actually owned by the
28 person negotiating the same, and;
29 (d) Tthe obligations of the United States or general obligations of any
30 state or of any political subdivision thereof, or obligation issued under
31 authority of the Ffederal Ffarm Lloan Aact;, shall not be considered as
32 money borrowed, nor shall the foregoing limitations apply to
33 (e) Lloans made on warehouse receipts and bills of lading, when such
34 warehouse receipts and bills of lading cover nonperishable commodities of
35 the marketable value of at least one hundred twenty percent (120%) of the
36 amount loaned thereon.;
37 (f) Loans or obligations shall not be subject under this section to any
38 limitation based upon such capital and surplus and extensions of credit to
39 the extent that such loans or obligations are secured or covered by guar-
40 anties, or by commitments or agreements to take over or to purchase, made
41 by any Federal Reserve Bank or by the United States or any department,
42 bureau, board, commission, or establishment of the United States, includ-
43 ing any corporation wholly owned directly or indirectly by the United
44 States; or
45 (g) Loans, including portions thereof, secured by a segregated deposit
46 account in the lending bank, provided a security interest in the deposit
47 has been perfected under applicable law.
48 The combined liabilities of the several members of any firm, copartnership
49 or unincorporated association to the loaning bank shall be included in the
50 liabilities of such firm, copartnership or unincorporated association and
51 shall be included in the liabilities of any member thereof in determining the
52 foregoing limitations.
53 (5) Combination. Loans or extensions of credit to one (1) borrower shall
54 be attributed to another person and each person shall be deemed a borrower
55 when proceeds of a loan or extension of credit are to be used for the direct
8
1 benefit of the other person, to the extent of the proceeds so used, or when a
2 common enterprise is deemed to exist between the persons.
3 (a) Direct benefit. The proceeds of a loan or extension of credit to a
4 borrower shall be deemed to be used for the direct benefit of another per-
5 son and shall be attributed to the other person when the proceeds, or
6 assets purchased with the proceeds, are transferred to another person,
7 other than in a bona fide arm's length transaction where the proceeds are
8 used to acquire property, goods or services.
9 (b) Common enterprise. A common enterprise shall be deemed to exist and
10 loans to separate borrowers shall be aggregated:
11 (i) When the expected source of repayment for each loan or exten-
12 sion of credit is the same for each borrower and neither borrower has
13 another source of income from which the loan (together with the
14 borrower's other obligations) may be fully repaid. An employer shall
15 not be treated as a source of repayment under this paragraph because
16 of wages and salaries paid to an employee unless the standards of
17 paragraph (b)(ii) of this subsection are met;
18 (ii) When loans or extensions of credit are made:
19 1. To borrowers who are related directly or indirectly through
20 common control, including where one (1) borrower is directly or
21 indirectly controlled by another borrower; and
22 2. Substantial financial interdependence exists between or
23 among the borrowers. Substantial financial interdependence is
24 deemed to exist when fifty percent (50%) or more of one (1)
25 borrower's gross receipts or gross expenditures (on an annual
26 basis) are derived from transactions with the other borrower.
27 Gross receipts and expenditures include gross revenues/expenses,
28 intercompany loans, dividends, capital contributions, and simi-
29 lar receipts or payments;
30 (iii) When separate persons borrow from a bank to acquire a business
31 enterprise of which those borrowers will own more than fifty percent
32 (50%) of the voting securities or voting interests, in which case a
33 common enterprise is deemed to exist between the borrowers for pur-
34 poses of combining the acquisition loans; or
35 (iv) When the director determines, based upon an evaluation of the
36 facts and circumstances of particular transactions, that a common
37 enterprise exists.
38 (c) Loans to a corporate group.
39 (i) Loans or extensions of credit by a bank to a corporate group
40 may not exceed fifty percent (50%) of the bank's capital and surplus.
41 A corporate group includes a person and all of its subsidiaries. For
42 purposes of this paragraph, a corporation or a limited liability com-
43 pany is a subsidiary of a person if the person owns or beneficially
44 owns directly or indirectly more than fifty percent (50%) of the vot-
45 ing securities or voting interests of the corporation or company.
46 (ii) Except as provided in paragraph (c)(i) of this subsection,
47 loans or extensions of credit to a person and its subsidiary, or to
48 different subsidiaries of a person, are not combined unless either
49 the direct benefit or the common enterprise test is met.
50 (d) Loans to partnerships, joint ventures, and associations.
51 (i) Partnership loans. Loans or extensions of credit to a partner-
52 ship, joint venture or association are deemed to be loans or exten-
53 sions of credit to each member of the partnership, joint venture or
54 association. This rule does not apply to limited partners in limited
55 partnerships or to members of joint ventures or associations if the
9
1 partners or members, by the terms of the partnership or membership
2 agreement, are not held generally liable for the debts or actions of
3 the partnership, joint venture or association, and those provisions
4 are valid under applicable law.
5 (ii) Loans to partners.
6 1. Loans or extensions of credit to members of a partnership,
7 joint venture or association are not attributed to the partner-
8 ship, joint venture or association unless either the direct ben-
9 efit or the common enterprise test is met. Both the direct bene-
10 fit and common enterprise tests are met between a member of a
11 partnership, joint venture or association and such partnership,
12 joint venture or association, when loans or extensions of credit
13 are made to the member to purchase an interest in the partner-
14 ship, joint venture or association.
15 2. Loans or extensions of credit to members of a partnership,
16 joint venture or association are not attributed to other members
17 of the partnership, joint venture or association unless either
18 the direct benefit or common enterprise test is met.
19 (e) Loans to foreign governments and their agencies and instrumentali-
20 ties.
21 (i) Aggregation. Loans and extensions of credit to foreign govern-
22 ments and their agencies and instrumentalities shall be aggregated
23 with one another only if the loans or extensions of credit fail to
24 meet either the means test or the purpose test at the time the loan
25 or extension of credit is made.
26 1. The means test is satisfied if the borrower has resources or
27 revenue of its own sufficient to service its debt obligations.
28 If the government's support (excluding guarantees by a central
29 government of the borrower's debt) exceeds the borrower's annual
30 revenues from other sources, it shall be presumed that the means
31 test has not been satisfied.
32 2. The purpose test is satisfied if the purpose of the loan or
33 extension of credit is consistent with the purposes of the
34 borrower's general business.
35 (ii) Documentation. In order to show that the means and purpose
36 tests have been satisfied, a bank must, at a minimum, retain in its
37 files the following items:
38 1. A statement (accompanied by supporting documentation)
39 describing the legal status and the degree of financial and
40 operational autonomy of the borrowing entity;
41 2. Financial statements for the borrowing entity for a minimum
42 of three (3) years prior to the date the loan or extension of
43 credit was made or for each year that the borrowing entity has
44 been in existence, if less than three (3) years;
45 3. Financial statements for each year the loan or extension of
46 credit is outstanding;
47 4. The bank's assessment of the borrower's means of servicing
48 the loan or extension of credit, including specific reasons in
49 support of that assessment. The assessment shall include an
50 analysis of the borrower's financial history, its present and
51 projected economic and financial performance, and the signifi-
52 cance of any financial support provided to the borrower by third
53 parties, including the borrower's central government; and
54 5. A loan agreement or other written statement from the bor-
55 rower that clearly describes the purpose of the loan or exten-
10
1 sion of credit. The written representation will ordinarily con-
2 stitute sufficient evidence that the purpose test has been sat-
3 isfied. However, when, at the time the funds are disbursed, the
4 bank knows or has reason to know of other information suggesting
5 that the borrower will use the proceeds in a manner inconsistent
6 with the written representation, it may not, without further
7 inquiry, accept the representation.
8 (6) Calculation. For purposes of determining compliance with this sec-
9 tion, a bank shall determine its lending limit as of the last day of the pre-
10 ceding calendar quarter. A bank's lending limit calculated in accordance with
11 this section shall be effective on the date that the limit is to be calcu-
12 lated. If the director determines for safety and soundness reasons that a bank
13 should calculate its lending limit more frequently than required by this sub-
14 section, the director may provide written notice to the bank directing the
15 bank to calculate its lending limit at a more frequent interval, and the bank
16 shall thereafter calculate its lending limit at that interval until further
17 notice from the director.
18 (7) Nonconforming loans. A loan, within a bank's legal lending limit when
19 made, shall not be deemed a violation but shall be treated as nonconforming if
20 the loan is no longer in conformity with the bank's lending limit because:
21 (a) The bank's capital has declined, borrowers have subsequently merged
22 or formed a common enterprise, lenders have merged, or the lending limit
23 or capital rules have changed. A bank must use reasonable efforts to bring
24 a loan that is nonconforming under this subsection into conformity with
25 the bank's lending limit unless to do so would be inconsistent with safe
26 and sound banking practices.
27 (b) Collateral securing the loan to satisfy the requirements of a lending
28 limit exception has declined in value. A bank must bring a loan that is
29 nonconforming under this subsection into conformity with the bank's lend-
30 ing limit within thirty (30) calendar days, except when judicial proceed-
31 ings, regulatory actions or other extraordinary circumstances beyond the
32 bank's control prevent the bank from taking action.
33 (8) When in the judgment of the director the liabilities of any corpora-
34 tion loans and extensions of credit to any person, or the combined liabilities
35 of loans and extensions of credit to any corporation and one (1) or more of
36 its stockholders to any bank are excessive, he shall require the reduction
37 thereof to such limits and within such time as he shall prescribe.
38 Provided, further, that the director may compel the reduction of any loan
39 which shall in his judgment appear excessive or dangerous.
40 SECTION 6. That Section 26-710, Idaho Code, be, and the same is hereby
41 amended to read as follows:
42 26-7106. LOANS TO OFFICERS. Except as authorized under this section, no
43 bank may extend credit in any manner to any of its own executive officers.
44 Any extension of credit under this section must be approved by the board of
45 directors of the bank, and may be made only if such credit extension comports
46 with the principles of safety and soundness and is in compliance with regula-
47 tion O of the board of governors of the federal reserve system, 12 C.F.R. 215.
48 SECTION 7. That Section 26-711, Idaho Code, be, and the same is hereby
49 amended to read as follows:
50 26-71107. REAL ESTATE HOLDINGS. A bank may purchase, acquire, hold and
51 convey real estate for the following purposes only:
11
1 (1) Such as shall be necessary for the convenient transaction of its
2 business, including at the same location as its banking offices other property
3 to rent as a source of income; provided, however, that no bank shall invest in
4 buildings and lots and furniture, fixtures and equipment in an amount greater
5 than fifty per cent percent (50%) of the capital, surplus and capital notes
6 structure of such bank.
7 (2) Such as shall be conveyed to it in satisfaction of debts previously
8 contracted in the course of business.
9 (3) Such as it shall purchase at sale on judgments, decrees, mortgage
10 foreclosure or trustees sale for debts previously contracted, but a bank shall
11 not bid at such sale a larger amount than is necessary to satisfy all debts
12 and costs necessary to obtain clear title. Such real estate shall be carried
13 on the books of the bank at the lower of cost or market value. Market value
14 shall be determined by a current appraisal prepared by an independent quali-
15 fied appraiser approved by the director. Thereafter, but no more frequently
16 than annually, the director may in his discretion request that the bank obtain
17 from an independent qualified appraiser approved by the director, a further
18 appraisal of market value or certification by the appraiser that the market
19 value has not declined.
20 (4) No real estate acquired under subsections (2) and (3) of this section
21 may be held for a longer period than five (5) years, provided, however, that
22 upon application by the bank, the director shall approve the continued holding
23 of any such real estate by the bank for an additional period of five (5) years
24 upon the bank's showing of its good faith attempt to dispose of the real
25 estate within the first five (5) year period, or that disposal within the
26 first five (5) year period would be detrimental to the bank; and provided fur-
27 ther that the bank shall, during the second five (5) year period, at the end
28 of each year beginning at the end of the sixth year in which the property is
29 held, write down the value of such real estate by twenty percent (20%) of the
30 value at which such real estate is carried on its books at the beginning of
31 the second five (5) year period. Value at the beginning of the second five (5)
32 year period shall be the lower of cost or market value as determined pursuant
33 to appraisal as provided in subsection (3) of this section. Nothing in this
34 section shall be construed to prevent a bank from making loans secured by real
35 estate as provided in this act, or a trust department holding and conveying
36 real estate in trust.
37 (5) A bank may, with the approval of the director and the board of gover-
38 nors of the Federal Reserve System or the Federal Deposit Insurance Corpora-
39 tion invest in bank premises or in the stock, bonds, debentures, or other
40 obligations of any corporation holding the banking buildings, lots and furni-
41 ture, fixtures and equipment of such bank in an amount not to exceed the capi-
42 tal and surplus of the bank.
43 SECTION 8. That Section 26-712, Idaho Code, be, and the same is hereby
44 amended to read as follows:
45 26-71208. VALUATION OF ASSETS. No bank shall enter or at any time carry
46 on its books any of its assets at a valuation exceeding their actual cost to
47 the bank; nor shall the value of any of its assets be increased on the books
48 of the bank without the written consent of the director. Additional charges,
49 delinquency charges and other similar charges on consumer credit transactions
50 permitted by and made in compliance with the Uniform Consumer Credit Code and
51 added to the principal balance of the loan, shall not come within the prohibi-
52 tion of this section.
12
1 SECTION 9. That Section 26-713, Idaho Code, be, and the same is hereby
2 amended to read as follows:
3 26-71309. STATUTORY BAD DEBT. Every bank carrying any bad debt, or a debt
4 of doubtful value, as an asset shall, upon the request or demand of the direc-
5 tor, collect the same or put it in good bankable condition or charge it out of
6 its books. Any debt on which interest is past due and unpaid for a period of
7 six (6) months, unless the same is well secured and in process of collection,
8 shall be considered a bad debt within the meaning of this section.
9 SECTION 10. That Section 26-714, Idaho Code, be, and the same is hereby
10 amended to read as follows:
11 26-7140. OWNERSHIP AND LEASING OF PROPERTY FOR CUSTOMERS. A bank may
12 become the owner and lessor of personal property acquired upon the specific
13 request and for the use of a customer and may incur such additional obliga-
14 tions as may be incident to becoming an owner and lessor of such property.
15 SECTION 11. That Section 26-715, Idaho Code, be, and the same is hereby
16 amended to read as follows:
17 26-7151. LENDING OF CREDIT -- SURETYSHIP AND GUARANTYSHIP. A bank may
18 lend its credit, bind itself as a surety to indemnify another, or otherwise
19 become a guarantor, only if it has a substantial interest in the performance
20 of the transaction involved or has a segregated deposit sufficient in amount
21 to cover the bank's total potential liability.
22 SECTION 12. That Section 26-716, Idaho Code, be, and the same is hereby
23 amended to read as follows:
24 26-7162. VALIDITY OF TRANSACTIONS. Nothing in any law of this state shall
25 in any manner whatsoever affect the validity of, or render void or voidable,
26 the payment, certification or acceptance of a check or other negotiable
27 instrument, or any other transaction by a bank in this state, because done or
28 performed during any time other than regular banking hours.
29 SECTION 13. That Section 26-717, Idaho Code, be, and the same is hereby
30 amended to read as follows:
31 26-7173. ADVERSE CLAIM TO BANK DEPOSIT. Notice to any bank of an adverse
32 claim to a deposit standing on its books to the credit of any person shall not
33 require the bank to recognize the adverse claim unless the adverse claimant
34 shall:
35 (a1) pProcure a restraining order, injunction or other appropriate proc-
36 ess against the bank from a court of competent jurisdiction wherein the
37 person to whose credit the deposit stands is made a party and served with
38 summons,; or
39 (b2) eExecute to said bank, in a form and with sureties acceptable to the
40 bank, a bond indemnifying the bank from any and all liability, loss, dam-
41 age, costs and expenses for and on account of the payment of such adverse
42 claim or the dishonor of the check or other order of the person to whose
43 credit the deposit stands on the books of the bank.
44 This section shall not apply in any instance where the person to whose
45 credit the deposit stands is a fiduciary for such adverse claimant, and the
46 facts constituting such relationship and the facts showing reasonable cause
13
1 for belief on the part of the claimant that the fiduciary is about to
2 misappropriate the deposit, are made to appear by the affidavit of the claim-
3 ant.
4 SECTION 14. That Section 26-718, Idaho Code, be, and the same is hereby
5 amended to read as follows:
6 26-7184. ACCOUNT OF PERSON UNDER DISABILITY. Whenever any minor or any
7 person under disability shall become a depositor, as defined in section
8 26-106, Idaho Code, in any bank in his or her name, such bank may pay such
9 money on the check, order or endorsement of such depositor the same as in
10 cases of depositors not under disability, and such payment shall be in all
11 respects valid in law.
12 SECTION 15. That Section 26-719, Idaho Code, be, and the same is hereby
13 amended to read as follows:
14 26-7195. BRANCH OR OFFICE AT WHICH INSTRUMENTS ARE TO BE PRESENTED MUST
15 BE INDICATED. All checks, drafts, bills of exchange or other orders for the
16 payment of money drawn against any bank operating branch banks shall indicate
17 the particular bank and branch at which the same are to be presented for pay-
18 ment or acceptance.
19 SECTION 16. That Section 26-801, Idaho Code, be, and the same is hereby
20 amended to read as follows:
21 26-801. BORROWING MONEY -- LIMITATIONS. At no time shall the total bor-
22 rowings of any bank exceed in the aggregate an amount equal to the capital and
23 surplus structure of the bank, except with the consent of the director.
24 For the purpose of computing total borrowings the following items shall
25 not be included:
26 (a1) Federal funds purchased.
27 (b2) The sale of securities by a bank, under an agreement to repurchase
28 at the end of a stated period.
29 (c3) Borrowings from the Federal Reserve System.
30 (d4) The sale of mortgage loans by a bank, under agreement to repurchase
31 at the end of a stated period.
32 (e5) Money borrowed to meet seasonal requirements.
33 (f6) Money borrowed to meet unexpected withdrawals.
34 (g7) Capital notes issued in accordance with section 26-802, Idaho Code.
35 The total of all borrowings by a bank including those items excluded from
36 the computation of total borrowings may not exceed in the aggregate an amount
37 equal to two and one-half (2 1/2) times the capital and surplus structure of
38 the bank, except with the consent of the director.
39 Whenever it shall appear to the director that a bank is borrowing money in
40 excess of the above limitation, or for purposes other than as specified above,
41 he may require it to reduce such borrowings within a time to be fixed by him.
42 SECTION 17. That Section 26-107, Idaho Code, be, and the same is hereby
43 amended to read as follows:
44 26-107. SECTIONS APPLICABLE TO NATIONAL BANKS. The provisions of sections
45 26-215, 26-301 through and including, 26-309, 26-311, 26-7162, 26-7173,
46 26-7184, 26-1203, 26-1206, 26-1207, 26-1208, and 26-1209, 26-1601 through
47 26-1605, 26-2601 through 26-2612, Idaho Code, shall also apply to national
14
1 banks.
STATEMENT OF PURPOSE
RS 13498
The Idaho Bank Act contains limitations on amounts of certain types
of loans that may be made by Idaho state-chartered banks. The
Department regularly receives requests from banks to exceed these
limits, primarily because the limits are outdated and inconsistent
with limits imposed by other states and the federal government.
The legislation would reduce the regulatory burden for Idaho state-
chartered banks by revising the limitations to clarify them,
raising the amounts, and making the definitions used to determine
the limitations more uniform with those applicable to banks in
other states and national banks.
FISCAL IMPACT
No fiscal impact.
CONTACT
Name: Mary Hughes
Agency: Department of Finance
Phone: 208-332-8030
Statement of Purpose/Fiscal Impact H 524