§ 6013 — Loans to one borrower

(a) Except as provided in subsection (c), the total loans and extensions of credit, both direct and indirect, by a savings bank to any person, other than a municipal corporation for money borrowed, outstanding at one time shall not exceed 25% of the savings bank's total capital plus general loan loss reserves. (b) Except as provided in subsection (c), the total loans and extensions of credit, both direct and indirect, by a savings bank to any person outstanding at one time and at least 100% secured by readily marketable collateral having a market value, as determined by reliable and continuously available price quotations, shall not exceed 10% of the savings bank's total capital plus general loan loss reserves. This limitation shall be separate from and in addition to the limitation contained in subsection (a). (c) If the limit under subsection (a) or (b) on total loans to one borrower is less than $500,000, a savings bank that meets its minimum capital requirement under this Act may have loan and extensions of credit, both direct and indirect, outstanding to any person at one time not to exceed $500,000. With the prior written approval of the Commissioner, a savings bank that has capital in excess of 6% of assets may make loans and extensions of credit to one borrower for the development of residential housing properties, located or to be located in this State, not to exceed 30% of the savings bank's total capital plus general loan loss reserves. (d) For purposes of this Section, the term "person" shall be deemed to include an individual, firm, corporation, business trust, partnership, trust, estate, association, joint venture, pool, syndicate, sole proprietorship, unincorporated association, any political subdivision, or any similar entity or organization. (e) For the purposes of this Section any loan or extension of credit granted to one person, the proceeds of which are used for the direct benefit of a second person, shall be deemed a loan or extension of credit to the second person as well as the first person. In addition, a loan or extension of credit to one person shall be deemed a loan or extension of credit to others when a common enterprise exists between the first person and such other persons. (f) For the purposes of this Section, the total liabilities of a firm, partnership, pool, syndicate, or joint venture shall include the liabilities of the members of the entity. (g) For the purposes of this Section, the term "readily marketable collateral" means financial instruments or bullion that are salable under ordinary circumstances with reasonable promptness at a fair market value on an auction or a similarly available daily bid-and-ask price market. "Financial instruments" include stocks, bonds, notes, debentures traded on a national exchange or over the counter, commercial paper, negotiable certificates of deposit, bankers' acceptances, and shares in money market or mutual funds. (h) Each savings bank shall institute adequate procedures to ensure that collateral fully secures the outstanding loan or extension of credit at all times. (i) If collateral values fall below 100% of the outstanding loan or extension of credit to the extent that the loan or extension of credit no longer is in conformance with subsection (b) and exceeds the 25% limitation of subsection (a), the loan must be brought into conformance with this Section within 5 business days except where judicial proceedings or other similar extraordinary occurrences prevent the savings bank from taking action. (j) This Section shall not apply to loans or extensions of credit to the United States of America or its agencies or this State or its agencies or to any loan, investment, or extension of credit made pursuant to Section 6003 of this Act. (k) This Section does not apply to the obligations as endorser, whether with or without recourse, or as guarantor, whether conditional or unconditional, of negotiable or nonnegotiable installment consumer paper of the person transferring the same if the bank's files or the knowledge of its officers of the financial condition of each maker of those obligations is reasonably adequate and if an officer of the bank, designated for that purpose by the board of directors of the bank, certifies that the responsibility of each maker of the obligations has been evaluated and that the bank is relying primarily upon each maker for the payment of the obligations. The certification shall be in writing and shall be retained as part of the records of the bank. (l) The Commissioner may prescribe rules to carry out the purposes of this Section and to establish limits or requirements other than those specified in this Section for particular types of loans and extensions of credit.

Legislative History

(Source: P.A. 92-483, eff. 8-23-01; 92-700, eff. 7-19-02.)