(a) General rule. A loan or extension of credit to
one borrower is attributed to another person, and each person will
be considered a borrower, if:
(1) proceeds of the loan or extension of credit are
to be used for the direct benefit of the other person, to the extent
of the proceeds so used, as provided by subsection (b) of this section;
(2) a common enterprise is deemed to exist between
the persons as provided by subsection (c) of this section; or
(3) the expected source of repayment for each loan
or extension of credit is the same for each person as provided by
subsection (d) of this section; or
(4) notwithstanding another provision of this section,
the banking commissioner determines that a loan should be attributed
to another person pursuant to the Finance Code, §34.201(c).
(b) Direct benefit. The proceeds of a loan or extension
of credit to a borrower is considered used for the direct benefit
of another person and attributed to the other person if the proceeds,
or assets purchased with the proceeds, are transferred in any manner
to or for the benefit of the other person, other than in a bona fide
arm's length transaction where the proceeds are used to acquire property,
goods, or services.
(c) Common enterprise.
(1) A common enterprise is considered to exist and
loans to separate borrowers will be aggregated in the case of:
(A) loans or extensions of credit made to affiliated
borrowers if substantial financial interdependence exists between
or among the borrowers; or
(B) loans made to separate persons for the purpose
of acquiring more than 50% of the voting securities or voting interests
of a business enterprise, in which case the acquisition loans are
aggregated and attributed to the business enterprise.
(2) For purposes of paragraph (1)(A) of this subsection,
borrowers are affiliated if one borrower directly or indirectly controls,
is controlled by, or is under common control with another borrower.
Substantial financial interdependence exists if 50% or more of one
borrower's gross receipts or gross expenditures (on an annual basis)
are derived from transactions with the other borrower and is presumed
to exist, subject to rebuttal, if 25% or more of one borrower's gross
receipts or gross expenditures (on an annual basis) are derived from
transactions with the other borrower. Gross receipts and expenditures
include gross revenues and expenses, intercompany loans, dividends,
capital contributions, and similar receipts or payments.
(d) Source of repayment. The expected source of repayment
for each loan or extension of credit is considered the same if the
primary source of repayment is the same for each borrower. An employer
will not be considered a primary source of repayment under this subsection
solely because of wages and salaries paid to an employee, unless the
standards of subsection (c)(1) of this section are met.
(e) Loans to a corporate group. Pursuant to the Finance
Code, §34.201(c), loans or extensions of credit by a bank to
a corporate group may not exceed 60% of the bank's Tier 1 capital.
This limitation applies only to loans subject to the general lending
limit. For purposes of this subsection, a corporate group is comprised
of a person and all of its subsidiaries, and a corporation or other
entity is a subsidiary of a person if the person owns or beneficially
owns directly or indirectly more than 50% of the voting securities
or voting interests of the corporation or other entity. Subject to
the special limit of this subsection, loans or extensions of credit
to a person and its subsidiary, or to different subsidiaries of a
person, are not aggregated or attributed to other members of the corporate
group unless either the direct benefit, common enterprise, or source
of repayment test is met.
(f) Loans to partnerships or partners.
(1) A loan or extension of credit to a partnership,
joint venture, or association is considered to be a loan or extension
of credit to each member of the partnership, joint venture, or association
other than those partners or members that, by the terms of the partnership
or membership agreement, are not held generally liable for the debts
or actions of the partnership, joint venture, or association, provided
those provisions are valid against third parties under applicable
law, and that have not otherwise agreed to guarantee or be personally
liable on the loan or extension of credit.
(2) A loan or extension of credit to a member of a
partnership, joint venture, or association is generally not attributed
to the partnership, joint venture, or association, or to other members
of the partnership, joint venture, or association, except as otherwise
required by subsections (b) - (d) of this section, provided that a
loan or extension of credit made to a member of a partnership, joint
venture or association for the purpose of purchasing an interest in
the partnership, joint venture or association, is attributed to the
partnership, joint venture or association.
(g) Guarantors and accommodation parties. The derivative
obligation of a drawer, endorser, or guarantor of a loan or extension
of credit, including a contingent obligation to purchase collateral
that secures a loan, is not aggregated with direct loans or extensions
of credit to such drawer, endorser, or guarantor if the lending bank
is relying primarily on the creditworthiness of the primary obligor
and none of the tests set forth in this section are satisfied. The
reliance of the lending bank on the primary obligor must be evidenced
by the certification of an officer of the bank that the bank is, on
stated facts, relying primarily on the responsibility and financial
condition of the primary obligor for payment of the loan or extension
of credit and not on the guarantee, or commitment in whatever form,
of the guarantor, drawer, or endorser. In the event that the loan
or extension of credit to the primary obligor, considered by the bank
to be of sufficient credit quality at its inception, experiences subsequent
deterioration to the point that the primary obligor is no longer performing
in accordance with the terms of the initial loan agreement, such event
will not result in a lending limit violation on behalf of the guarantor
by virtue of the primary obligator's nonperformance. However, the
total amount of the deteriorated loans guaranteed by such accommodating
person must be combined with all other obligations of such guarantor
in determining whether the guarantor may obtain additional loans or
extensions of credit from the bank.
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