2023 New Mexico Statutes › Chapter 58 - Financial Institutions and Regulations › Article 1 - Banking Generally › Section 58-1-24 - Diversification of loans and investments.

A. A state bank shall not extend credit directly by means of discount notes, issuance of letters of credit, acceptance of drafts or otherwise, or purchase any bond, note, bill of exchange or any evidence of indebtedness, when by reason of such extension of credit or purchase, the totals of the obligations so acquired that are held by the state bank will exceed:
(1) sixty percent of total deposits or seventy-five percent of savings, whichever is greater, for obligations secured by real estate, together with the current market value of any real estate owned by the bank and not used in its banking business; or
(2) thirty-five percent of capital and surplus for obligations of the same obligor.
B. The limitations of Paragraph (2) of Subsection A of this section shall not apply to loans and investments otherwise authorized by the Banking Act if the obligations are:
(1) obligations of the United States, general obligations of a state or a political subdivision thereof or of a federal reserve bank;
(2) secured as to principal and interest by the guarantee, insurance or other like commitment of the United States, an agency of the United States or a federal reserve bank, whether the commitment provides for payment in cash or in obligations of the United States;
(3) secured by obligations of the United States, a state or a political subdivision thereof having a value of one hundred percent of the amount thereof;
(4) upon notes or drafts having a maturity of not more than twelve months exclusive of days of grace, drawn in good faith against actually existing values and secured by an instrument transferring or securing title to goods in process of shipment or to livestock, or creating a lien on livestock to the amount of the value of the security, but the limitation on such obligations shall be thirty percent of capital and surplus;
(5) upon notes or drafts secured by trust receipts, shipping documents or receipts of a licensed or bonded warehouse or elevator transferring or securing title to readily marketable, nonperishable staples to the amount of eighty percent of the value of the security, and this exemption shall not apply:
(a) unless the staples are insured, if it is customary to insure them; or
(b) for more than ten months to obligations of the same obligor arising from the same transaction or secured by the same staples;
(6) secured by the assignment of accounts receivable to the extent of eighty percent of the amount of such accounts not overdue, but the limitation of these obligations shall be thirty percent of capital and surplus;
(7) those arising out of the daily transaction of the business of any clearinghouse association; or
(8) obligations that are fully secured by a pledge of a time certificate of deposit issued by the same state-chartered bank in an amount equal to or exceeding the amount of the obligation.
C. In calculating, for the purposes of this section, the obligations of a single obligor or the obligations of a specified class, there shall be included:
(1) the direct liability of the maker; the amount of a loan made to a corporation to the extent that the proceeds of the loan directly or indirectly are to be loaned to the individual;
(2) in the case of obligations of a partnership or association, the obligations of each general partner or of each member of the association; the amount of a loan made to a corporation to the extent that the proceeds of the loan directly or indirectly are to be loaned to the partnership or association;
(3) in the case of obligations of a general partner or a member of an association, the obligations of the partnership or association;
(4) in the case of obligations of a corporation, the obligations of any subsidiaries in which it owns, directly or indirectly, a majority of the outstanding voting stock;
(5) in the case of obligations of a corporation, the amount of a loan made to any other person to the extent that the proceeds of the loan directly or indirectly are to be:
(a) loaned to the corporation;
(b) used for the acquisition from the corporation of any securities issued by the corporation, other than securities acquired by an underwriter for public offering; or
(c) transferred to the corporation without fair and adequate consideration; and
(6) the discharge of an equivalent amount of debt previously incurred in good faith or value shall be deemed fair and adequate consideration.
History:
1953 Comp., § 48-22-24, enacted by Laws 1963, ch. 305, § 24; 1975, ch. 330, § 16; 1983, ch. 102, § 1; 1999, ch. 213, § 3; 2005, ch. 90, § 1.
ANNOTATIONS
The 2005 amendment,
effective June 17, 2005, changes the percentage in Subsection A(2) of capital and surplus for obligations of the same obligor from twenty percent to thirty-five percent.
The 1999 amendment,
effective June 18, 1999, substituted "sixty percent" for "thirty percent" at the beginning of Paragraph A(1) and made minor stylistic changes.
Am. Jur. 2d, A.L.R. and C.J.S. references. —
Powers of banking corporation to loan money for others, 33 A.L.R. 597.
Bad loans, liability of bank directors for losses on, 45 A.L.R. 678, 77 A.L.R. 543, 11 A.L.R. Fed. 606.
Liability of bank for losses incurred on loans or investments made on recommendation of its officers or employees, 113 A.L.R. 246.
Noncompliance by bank with statutory provisions relating to loans or discounts as defense to recovery of loan or enforcement of its security, 125 A.L.R. 1512.
Rights and liabilities of bank paying or giving credit for personal check of own officer whose account is not good, 171 A.L.R. 880.
9 C.J.S. Banks and Banking § 639.