Current through Register Vol. XLI, No. 50, December 13, 2024
Section 106-9-7 - Miscellaneous7.1. Obligations of accommodation parties. -- The liability of a drawer, endorser or guarantor who does not receive any of the proceeds, or the benefit of the proceeds, of the loan or extension of credit is not a loan or extension of credit to that person for purposes of this rule unless either the direct benefit or the common enterprise test is met. However, no person shall serve as an accommodation party on loans exceeding fifty percent (50%) of a state-chartered banking institution's unimpaired capital and unimpaired surplus.7.2. Sale of federal funds and limitations on interbank liabilities. (a) For purposes of this section of the rule, "Sale of Federal Funds" means any transaction among depository institutions involving the transfer of immediately available funds resulting from credits to deposit balances at federal reserve banks or from credits to deposit balances due from a correspondent depository institution.(b) Immediately available balances may be sold for one business day, under a continuing contract, or for more than one business day.(c) For purposes of this section of the rule, a "Continuing Contract" means an agreement that remains in effect for more than one business day but has no specified maturity and requires no advance notice for termination.(d) Sales of federal funds to other banking or depository institutions, regardless of maturity, are subject to a maximum limitation equal to twenty-five percent (25%) of the bank's unimpaired capital and unimpaired surplus.7.3. Purchase of third-party paper. -- Where a state-chartered banking institution_purchases third-party paper subject to an agreement that the seller will repurchase the paper upon default or at the end of a stated period after default, the seller's obligation to repurchase is subject to W. Va. Code '31A-4-26(a)(1) and is measured by the total unpaid balance of the paper owned by the bank less any applicable dealer reserves. Where the seller's obligation to repurchase is limited, the seller's total loans or extensions of credit, for the purpose of W. Va. Code '31A-4-26(a)(1) are measured by the total amount of paper the seller may ultimately be obligated to repurchase. Where no more than an agreed percentage of the purchase price is retained by the bank and credited to a reserve to be held as a form of collateral security, but the bank has no direct or indirect recourse to the seller, the loans or extensions of credit do not constitute loans or extensions of credit to the seller subject to the expanded limitations of subdivision 6.8(a) of this rule.7.4. Overdrafts. -- Overdrafts, whether or not prearranged, are loans and extensions of credit for purposes of this rule. This rule does not apply to intra-day or daylight overdrafts.7.5. Loans charged off, in whole or in part.-- The legal lending limits apply to all existing loans or extensions of credit to a person by the bank, including loans or extensions of credit that have been charged off the books of the bank in whole or in part. Loans or extensions of credit that have become unenforceable by reason of discharge in bankruptcy or are no longer legally enforceable for other reasons are not loans and extensions of credit for purposes of this rule.7.6. Sale of loan participation. (a) When a state-chartered banking institution sells a participation in a loan or extension of credit, including the discount of the bank's own applicable acceptance, that portion of the loan that is sold on a nonrecourse basis shall not be applied to the bank's lending limit. In order to remove the sold, nonrecourse portion of a loan or extension of credit from a bank's lending limit, that state-chartered banking institution shall have a written commitment to purchase from the participating bank prior to loan closing and shall remove the disallowed portion of the loan from the books within ten (10) business days of closing. In addition, the participation must result in a pro rata sharing of credit risk proportionate to the respective interests of the originating and participating lenders. A pro rata sharing of credit risk is required even if the participation agreement provides that repayment shall be applied first to the shares sold. In that case, the pro rata sharing may only be accomplished if the agreement also provides that, in case of a default or comparable event defined in the agreement, participants shall share in all subsequent repayments and collections in proportion to the percentage of participation at the time of the occurrence of the event.(b) The provisions of subdivision 7.6(a) of this rule apply to all loans and extensions of credit including contractual commitments to advance funds.7.7. Interest or discount on loans. -- The legal lending limits do not apply to the portion of a loan or extension of credit that represents accrued or discount interest.7.8. Loans to industrial development authorities. -- A loan or extension of credit to an industrial development authority or similar public entity created for the purpose of constructing and leasing a plant facility, including a health care facility, to an industrial occupant is not a loan or extension of credit to the authority for the purposes of W. Va. Code '31A-4-26(a) if the following criteria is met. However, if a loan or extension of credit meets all of the following criteria, it shall be considered a loan or extension of credit to the lessee and shall be combined with other obligations of the lessee for the purposes of W. Va. Code '31A-4-26(a). (a) The bank relies on the credit of the industrial occupant in making the loan;(b) The authority's liability with respect to the loan is limited solely to whatever interest it has in the particular facility;(c) The authority's interest is assigned to the bank as security for the loan or a promissory note from the lessee to the bank provides a higher order of security than the assignment of a lease; and(d) The industrial occupant's lease rentals are assigned and paid directly to the bank. A loan or extension of credit meeting the above criteria shall be considered a loan or extension of credit to the lessee and shall be combined with other obligations of the lessee for the purposes of W. Va. Code '31A-4-26(a).7.9. Loans to leasing companies. -- A loan or extension of credit to a leasing company for the purpose of purchasing personal property for lease shall be considered a loan to the lessee, provided that the following criteria are met: (a) The bank evaluates the creditworthiness of the lessee before the loan is extended to the leasing corporation;(b) The loan is without recourse to the leasing corporation;(c) The bank is given a security interest in the personal property and in the event of default, may proceed directly against the property and the lessee for any deficiency resulting from the sale of the property;(d) The leasing corporation assigns all of its rights under the lease to the bank;(e) The lessee's lease payments are assigned and paid to the bank; and(f) The lease terms are subject to the same limitations that would apply to a state bank acting as the originating lessor.7.10. Separate limitations for W. Va. Code '31A-4-26(a). -- The legal lending limits prescribed by W. Va. Code '31A-4-26(a) are separate and distinct from the investment limits prescribed by W. Va. Code '31A-4-26(b). Accordingly, a state-chartered banking institution may make loans or extensions of credit to one borrower up to the full amount permitted by W. Va. Code '31A-4-26(a) and also hold eligible investment securities of the same obligor up to the full amount permitted by W. Va. Code '31A-4-26(b). In order for a security to be an investment security, it must be eligible for investment by a state-chartered banking institution in accordance with the standards set forth in W. Va. Code '31A-4-26(b).