Rule 80-1-5-.01 - Loans Generally, Interpretations and Rulings(1) "Indirect" loans as used in Code Section 7-1-285 shall mean loans made for the substantial benefit of a third party where repayment of the loan is dependent on activities of the third party rather than solely dependent on the resources of the borrower and subject to the provisions of Rule 80-1-5-.11.(2) Loans extended to any Industrial Development Authority domiciled in Georgia which are dependent upon revenues obtained under an assigned lease contract naming the Authority as lessor shall be considered as loans to the lessee in calculating legal loan limitations.(3) Loans by a bank to any wholly-owned subsidiary of the bank, which subsidiary is located within an approved office of the bank and which has agreed to abide by all laws, rules and regulations applicable to the bank shall be exempt from the twenty-five (25) percent maximum lending limit of the bank. In addition, to the extent allowed by other applicable law and with the prior written approval of the Department, this exemption from the twenty-five (25) percent maximum lending limit may be extended to loans from a bank to a wholly owned subsidiary of an affiliated bank.(4) In determining amounts loaned, all amounts guaranteed or insured by any instrumentality of the United States government shall be deducted to the extent of the guaranty or insurance coverage. Immediate and deferred participations on loans by an instrumentality of the United States government shall also be excluded. Where the source of repayment of a loan, i.e. lease payments, is guaranteed by an instrumentality of the United States government and such guarantee is assignable and has been assigned to the bank, such loan may be excluded to the extent of the guarantee.(5) In determining whether or not a loan in excess of the fifteen (15) percent limitation is secured by "good collateral and other ample security," the lack of a perfected lien, inadequate insurance, and insufficient margins between collateral value and the amount of the loan shall be prima facie evidence of inadequate security to the debt.(6) A borrower's savings accounts or certificate of deposits in the lending bank will be regarded as collateral to a loan when they are not subject to check or withdrawal, mature on or after the loan which is secured, are under the sole control of the bank, and are properly assigned. Where, according to the terms of the deposit contract, the deposit is eligible for withdrawal before the secured loan matures, the bank must establish internal procedures to prevent release of the security without the lending bank's prior consent. If proper procedures are in place, such deposits will be considered as collateral. Where deposit balances are properly taken as collateral to a loan, the loan may be reduced to the extent of the deposit in determining the amounts loaned for either secured or unsecured legal lending limitations, as applicable.(7) Except as provided in this paragraph, exposures in the form of insufficient funds checks held beyond the permissible return date and overdrafts shall be considered "extensions of credit" solely for the purpose of determining compliance with the legal limitation as it applies to the maker of the check or owner of the overdraft. Such exposures shall also be subject to the requirements for prior written approval and ample collateral where the total indebtedness of the borrower exceeds fifteen (15) percent of the statutory capital base. Such exposures will not be considered extensions of credit for purposes of compliance with the above legal loan limitations and requirements, provided that the exposure is inadvertent, which requires that: (a) The exposure(s) does not exceed the aggregate amount of $1,000 at any one time; and(b) The account is not overdrawn or the insufficient funds check held for more than five (5) business days.(8) Wherever approval of the Board of Directors or Loan Committee is required, such approval must be specific, prior, written approval of each extension of credit, except that advances made under a master note covering a specific purpose or project need not receive specific approval where such approval was accorded the master note. Annual approval of a line of credit may be used where interest rate, repayment terms, and anticipated collateral are clearly identified and current credit information is on file. Commodity, floor-plan and discount lines of credit which are anticipated to exceed fifteen (15) percent of the statutory capital base may be approved annually to be deemed appropriate by the Board of Directors without each transaction receiving specific prior approval. For those lines that are expressly authorized by statute or regulation to exceed twenty-five (25) percent of the statutory capital base, the line must be reviewed quarterly by the Board of Directors or Loan Committee when the line is in fact in excess of twenty-five (25) percent of the statutory capital base.(9) In determining the primary collateral basis upon which a loan is granted, that portion of the collateral having the greatest market value shall be assumed to be the primary collateral.(10) Extensions of credit to political subdivisions of the State of Georgia authorized to levy taxes or backed by the taxing authority of another political subdivision shall qualify for exemption from the twenty-five (25) percent loan limitation under the provisions of O.C.G.A. § 7-1-285(c)(1)(B), only where such extension of credit otherwise conforms with the provisions of Georgia Constitution, Article 9, Section 5.(11) Where the "statutory capital base" as defined in O.C.G.A. § 7-1-4(35)is reduced by operating losses, loan losses, or for other reasons approved by the department, existing debt which was in conformity with the legal limitations at the time it originated shall not be construed to be non-conforming with new legal limitations resulting from the reduced statutory capital base.(12) Pursuant to O.C.G.A. § 7-1-285(e), a loan or extension of credit to a leasing company for the purpose of purchasing equipment for lease shall be considered a loan to the lessee, provided that: (a) The bank documents the basis for its reliance on the lessee as the primary source of repayment before the loan is extended to the leasing company;(b) The loan is made without recourse to the leasing company;(c) The bank receives a security interest in the equipment and, in the event of default, may proceed directly against the equipment and the lessee for any deficiency resulting from the sale of the equipment;(d) The leasing company assigns all of its rights under the lease to the bank;(e) The lessee's lease payments are assigned and paid to the bank directly by the lessee; and(f) The lease terms are subject to the same limitations that would apply to a bank acting as a lessor.(13) The Department shall promulgate a form which may be used to document compliance with the requirements for approval of loans, obligations, and credit exposures in excess of 15 percent of the statutory capital base by members of the board of directors or authorized committee of the board of directors as set forth in O.C.G.A. § 7-1-285 (a.1).(14) In determining whether the common equity tier 1 capital has increased or decreased by 5% or more for purposes of the "statutory capital base" as defined in O.C.G.A. § 7-1-4(35), each bank will utilize the dollar amount reported on the applicable Consolidated Report of Condition and Income and recalculate its statutory capital base if the dollar amount increases or decreases by 5% or more during the applicable time period.Ga. Comp. R. & Regs. R. 80-1-5-.01
O.C.G.A. §§ 7-1-61; 7-1-285.
Original Rule entitled "Analysis" adopted. F. and eff. June 30, 1965.Repealed: New Rule of the same title adopted. F. June 9, 1972; eff. June 29, 1972.Repealed: New Rule of the same title adopted. F. July 5, 1973; eff. July 25, 1973.Repealed: New Rule entitled "Loans Generally, Interpretations and Rulings" adopted. F. Aug. 28, 1975; eff. Sept. 17, 1975.Amended: F. Jan. 31, 1978; eff. Feb. 20, 1978.Amended: F. Aug. 22, 1980; eff. Sept. 11, 1980.Amended: F. July 13, 1981; eff. August 2, 1981.Amended: F. Aug. 17, 1983; eff. Sept. 6, 1983.Amended: F. June 28, 1984; eff. August 1, 1984, as specified by the Agency.Amended: F. Nov. 2, 1994; eff. Nov. 22, 1994.Amended: F. Sept. 26, 1995; eff. Oct. 16, 1995.Amended: F. Dec. 6, 1999; eff. Dec. 26, 1999.Amended: F. Dec. 18, 2000; eff. Jan. 7, 2001.Amended: F. Aug. 17, 2009; eff. Sept. 6, 2009.Amended: F. Mar. 3, 2011; eff. Mar. 23, 2011.Amended: F. Aug. 29, 2014; eff. Sept. 18, 2014.Amended: F. June 29, 2017; eff. July 19, 2017.Amended: F. June 27, 2018; eff. July 17, 2018.