Opinion ID: 1282412
Heading Depth: 1
Heading Rank: 6

Heading: First Loan

Text: The first loan arose from a transaction which began on April 22, 1985, when Northern Bank advanced $200,000 on a loan Fairfield Bank had arranged for the Co-op, which was evidenced by a promissory note payable to Fairfield Bank in the amount of $200,000, bearing interest at the rate of 13.75 percent per annum. On the same day, the two banks executed the first of the described participation agreements, which gave Northern Bank the right to all of the principal amount of the loan at an interest rate of 12.5 percent. On May 30, 1985, the Co-op issued a check in repayment of the loan, which was drawn on and was payable to Fairfield Bank in the amount of $202,863.01, the total amount of principal and interest which had accrued under the aforedescribed note. In exchange, Fairfield Bank stamped the note paid and returned it to the Co-op. As the repayment had been made by a check drawn on the Co-op's checking account with Fairfield Bank, the bank, on that same day, charged the amount of the repayment against the Co-op's checking account, thereby reducing Fairfield Bank's demand deposit liability to the Co-op by $202,863.01. Because Fairfield Bank needed liquidity to assure that its checks would clear, it had borrowed $500,000 from the then First National Bank, Lincoln, Nebraska, where Fairfield Bank maintained an account. On the same day that the Co-op repaid its loan, Fairfield Bank requested that the Lincoln bank wire transfer, in effect immediately, $202,671.24 to Northern Bank and charge that amount against Fairfield's account, but the Lincoln Bank chose not to honor the request. (The difference between the amount of the requested transfer and the amount of the repayment constituted the servicing fee Fairfield Bank was entitled to receive for the services it had performed as the lead bank.)