Ohio Administrative Code › Title 1301:1 - Division of Financial Institutions: Banks › Chapter 1301:1-3 - Lending Limits and Standards › Section 1301:1-3-01 - Lending limits

Current through all regulations passed and filed through July 1, 2024
(A) As used in this rule:
(1) "Borrower" means a person who is named as
			 a borrower or debtor in a loan or extension of credit, or any other person,
			 including a drawer, endorser, or guarantor, who is deemed to be a borrower
			 under the "direct benefit" or the "common enterprise" tests set forth in
			 paragraph (D) of this rule.
(2)
			 "Capital" has the same meaning as in rule 1301:1-2-01 of  the Administrative Code.
(3)
			 "Close of business" means the time at which a state bank closes its accounting records for the
			 business day.
(4) "Consumer" means
			 the user of any products, commodities, goods or services, whether leased or
			 purchased, but does not include any person who purchases products or
			 commodities for resale or fabrication into goods for sale.
(5) "Consumer paper" means paper relating to
			 automobiles, mobile homes, residences, office equipment, household items,
			 tuition fees, insurance premium fees, and similar consumer items. Consumer
			 paper also includes paper covering the lease, where the state bank is not the owner or lessor, or purchase of
			 equipment for use in manufacturing, farming, construction, or
			 excavation.
(6)
(a) "Contractual commitment to advance funds"
			 includes a state bank's obligation to do any of
			 the following:
(i) A bank's obligation to make
			 payment, directly or indirectly, to a third person contingent upon default by a
			 customer of the state bank in performing an
			 obligation in keeping with the agreed upon terms of the customer's contract
			 with the third person, or to make payments upon some other stated
			 condition;
(ii) A
			 state bank's obligation to guarantee or act as
			 surety for the benefit of a person;
(iii) A state
			 bank's obligation to advance funds under a qualifying commitment to lend, as
			 defined in paragraph (A)(12) of this rule;
(iv) A state
			 bank's obligation to advance funds under a standby letter of credit as defined
			 in paragraph (A)(16) of this rule, a put, or other similar
			 arrangement.
(b)
			 "Contractual commitment to advance funds" does not include commercial letters
			 of credit and similar instruments where the issuing bank expects the
			 beneficiary to draw on the issuer, that do not guarantee payment, and that do
			 not provide for payment in the event of a default by a third party.
(7) "Control" is presumed to exist
			 when, directly or indirectly or acting through or together with one or more
			 persons, any of the following occurs:
(a) A
			 person owns, controls, or has the power to vote twenty-five per cent or more of
			 any class of voting securities of another person;
(b) A person controls, in any manner, the
			 election of a majority of the directors, trustees, or other persons exercising
			 similar functions of another person;
(c) A person has the power to exercise a
			 controlling influence over the management or policies of another
			 person.
(8) "Current
			 market value" means the bid or closing price listed for an item in a regularly
			 published listing or an electronic reporting service.
(9) "Financial instrument" means stocks,
			 notes, bonds, and debentures traded on a national securities exchange,
			 over-the-counter margin stocks as defined in   12 C.F.R. 221, as in
			 effect on January 16, 1998, commercial paper, negotiable certificates of
			 deposit, bankers' acceptances, and shares in money market and mutual funds of
			 the type that issue shares in which banks may perfect a security interest.
			 Financial instruments may be denominated in foreign currencies that are freely
			 convertible to United States dollars. The term "financial instrument" does not
			 include mortgages.
(10) "Loans and
			 extensions of credit" means a state bank's direct
			 or indirect advance of funds to or on behalf of a borrower based on an
			 obligation of the borrower to repay the funds or repayable from specific
			 property pledged by or on behalf of the borrower.
(a) Loans or extensions of credit for
			 purposes of section
			  1109.22 
			 of the Revised Code and this rule include any of the following:
(i) A contractual commitment to advance
			 funds, as defined in paragraph (A)(6) of this rule;
(ii) A maker's or endorser's obligation
			 arising from a state bank's discount of
			 commercial paper;
(iii) A
			 state bank's purchase of securities subject to an
			 agreement that the seller will repurchase the securities at the end of a stated
			 period, but not including a state bank's purchase
			 of securities that are both of the following:
(a) Securities that are any of the following:
(i) Securities a state bank may invest in pursuant to divisions (A)(1)
			 to (A)(4) of section
			  1109.32 
			 of the Revised Code;
(ii)
			 Securities a state bank may underwrite and deal
			 in pursuant to section
			  1109.36 
			 of the Revised Code;
(iii) Other
			 securities the superintendent of financial institutions determines to be
			 eligible;
(b) Subject to
			 a repurchase agreement, where the purchasing bank has assured control over or
			 has established its rights to the securities as collateral;
(iv) A state
			 bank's purchase of third-party paper subject to an agreement that the seller
			 will repurchase the paper upon default or at the end of a stated period. The
			 amount of the state bank's loan is the total
			 unpaid balance of the paper owned by the bank less any applicable dealer
			 reserves retained by the state bank and held by
			 the state bank as collateral security. Where the
			 seller's obligation to repurchase is limited, the state bank's loan is measured by the total amount of
			 the paper the seller may ultimately be obligated to repurchase. A
			 state bank's purchase of third party paper
			 without direct or indirect recourse to the seller is not a loan or extension of
			 credit to the seller;
(v) An
			 overdraft, whether or not pre-arranged, but not an intra-day overdraft for
			 which payment is received before the close of business of the
			 state bank that makes the funds
			 available;
(vi) The sale of federal
			 funds with a maturity of more than one business day, but not federal funds with
			 a maturity of one day or less or federal funds sold under a continuing
			 contract;
(vii) Loans or extensions
			 of credit that have been charged off on the books of the
			 state bank in whole or in part, unless the loan
			 or extension of credit is any of the following:
(a) Is unenforceable by reason of discharge
			 in bankruptcy;
(b) Is no longer
			 legally enforceable because of expiration of the statute of limitations or a
			 judicial decision;
(c) Is no longer
			 legally enforceable for other reasons, provided that the
			 state bank maintains sufficient records to
			 demonstrate that the loan is unenforceable.
(b) The following items do not constitute
			 loans or extensions of credit for purposes of section
			  1109.22 
			 of the Revised Code and this rule:
(i)
			 Additional funds advanced for the benefit of a borrower by a
			 state bank for payment of taxes, insurance,
			 utilities, security, and maintenance and operating expenses necessary to
			 preserve the value of real or personal property securing the loan, consistent
			 with safe and sound banking practices, but only if the advance is for the
			 protection of the state bank's interest in the
			 collateral, and provided that the amounts advanced must be treated as an
			 extension of credit if a new loan or extension of credit is made to the
			 borrower;
(ii) Accrued and
			 discounted interest on an existing loan or extension of credit, including
			 interest that has been capitalized from prior notes and interest that has been
			 advanced under terms and conditions of a loan agreement;
(iii) Financed sales of a
			 state bank's own assets, including other real
			 estate owned, if the financing does not put the state bank in a worse position than when the
			 state bank held title to the assets;
(iv) A renewal or restructuring of a loan as
			 a new loan or extension of credit, following the exercise by a
			 state bank of reasonable efforts, consistent with
			 safe and sound banking practices, to bring the loan into conformance with the
			 lending limit, unless any of the following apply:
(a) New funds are advanced by the
			 state bank to the borrower, except as permitted
			 by paragraph (B)(2)(e) of this rule;
(b) A new borrower replaced the original
			 borrower;
(c) The superintendent
			 determines that a renewal or restructuring was undertaken as a means to evade
			 the state bank's lending limit;
(v) Amounts paid against
			 uncollected funds in the normal process of collection;
(vi)
(a)
			 That portion of a loan or extension of credit sold as a participation by a
			 state bank on a non-recourse basis, provided that
			 the participation results in a pro rata sharing of credit risk proportionate to
			 the respective interests of the originating and participating lenders. Where a
			 participation agreement provides that repayment must be applied first to the
			 portions sold, a pro rata sharing will be deemed to exist only if the agreement
			 also provides that, in the event of a default or comparable event defined in
			 the agreement, participants must share in all subsequent repayments and
			 collections in proportion to their percentage participation at the time of the
			 occurrence of the event.
(b) When
			 an originating state bank funds the entire loan,
			 it must receive funding from the participants before the close of business of
			 its next business day. If the participating portions are not received within
			 that period, then the portions funded will be treated as a loan by the
			 originating state bank to the borrower. If the
			 portions so attributed to the borrower exceed the originating
			 state bank's lending limit, the loan may be
			 treated as nonconforming subject to paragraph (E) of this rule, rather than a
			 violation, if all of the following apply:
(i)
			 The originating state bank had a valid and
			 unconditional participation agreement with a participating bank or banks that
			 was sufficient to reduce the loan to within the originating
			 state bank's lending limit;
(ii) The participating bank reconfirmed its
			 participation and the originating state bank had
			 no knowledge of any information that would permit the participant to withhold
			 its participation;
(iii) The
			 participation was to be funded by close of business of the originating
			 state bank's next business day.
(11)
			 "Person" means an individual; sole proprietorship; partnership; joint venture;
			 association; trust; estate; business trust; corporation; limited liability
			 company; not-for-profit corporation; sovereign government or agency,
			 instrumentality, or political subdivision of a sovereign government; or any
			 similar entity or organization.
(12) "Qualifying commitment to lend" means a
			 legally binding written commitment to lend that, when combined with all other
			 outstanding loans and qualifying commitments to a borrower, was within the
			 state bank's lending limit when entered into, and
			 has not been disqualified.
(a) In determining
			 whether a commitment is within the state bank's
			 lending limit when made, the bank may deduct from the amount of the commitment
			 the amount of any legally binding loan participation commitments that are
			 issued concurrent with the state bank's
			 commitment and that would be excluded from the definition of loan or extension
			 of credit under paragraph (A)(10)(b)(vi) of this rule.
(b) If the state bank subsequently chooses to make an additional
			 loan and that subsequent loan, together with all outstanding loans and
			 qualifying commitments to a borrower, exceeds the state bank's applicable lending limit at that time,
			 the state bank's qualifying commitments to the
			 borrower that exceed the state bank's lending
			 limit at that time are deemed to be permanently disqualified, beginning with
			 the most recent qualifying commitment and proceeding in reverse chronological
			 order. When a commitment is disqualified, the entire commitment is disqualified
			 and the disqualified commitment is no longer considered a loan or extension of
			 credit. Advances of funds under a disqualified or non-qualifying commitment may
			 only be made to the extent that the advance, together with all other
			 outstanding loans to the borrower, do not exceed the state bank's lending limit at the time of the advance,
			 calculated pursuant to paragraph (C) of this rule.
(13) "Readily marketable collateral" means
			 financial instruments and bullion that are salable under ordinary market
			 conditions with reasonable promptness at a fair market value determined by
			 quotations based upon actual transactions on an auction or similarly available
			 daily bid and ask price market.
(14) "Readily marketable staple" means an
			 article of commerce, agriculture, or industry, such as wheat and other grains,
			 cotton, wool, and basic metals such as tin, copper, and lead, in the form of
			 standardized interchangeable units, that is easy to sell in a market with
			 sufficiently frequent price quotations.
(a) An
			 article comes within this definition if both of the following apply:
(i) The exact price is easy to
			 determine;
(ii) The staple itself
			 is easy to sell at any time at a price that would not be considerably less than
			 the amount at which it is valued as collateral.
(b) Whether an article qualifies as a readily
			 marketable staple is determined on the basis of the conditions existing at the
			 time the loan or extension of credit that is secured by the staple is
			 made.
(15) "Sale of
			 federal funds" means any transaction between depository institutions involving
			 the transfer of immediately available funds resulting from credits to deposit
			 balances at federal reserve banks, or from credits to new or existing deposit
			 balances due from a correspondent depository institution.
(16) "Standby letter of credit" means any
			 letter of credit, or similar arrangement, that represents an obligation to the
			 beneficiary on the part of the issuer to do any of the following:
(a) To repay money borrowed by or advanced to
			 or for the account of the account party;
(b) To make payment on account of any
			 indebtedness undertaken by the account party;
(c) To make payment on account of any default
			 by the account party in the performance of an obligation.