R331-24-2. Definitions

(1) "Accrual basis of accounting" means the accounting method in which expenses are recorded when incurred, whether paid or unpaid, and income is recorded when earned, whether or not received.

(2) "Business credit card" means a credit card extended to a person for business purposes with a sponsoring company directly or indirectly obligated for payment of any advances.

(3) "Commissioner" means the Commissioner of Financial Institutions.

(4) "Consumer loan" means credit extended for household, family, and personal expenditures, including credit cards, and loans secured by one to four-family residential properties.

(5)(a) "Contractual commitment to advance funds" means:

(i) an obligation on the part of the bank or industrial loan corporation to make payments to a third party contingent upon default by the bank's or industrial loan corporation's customer in the performance of an obligation under the terms of that customer's contract with the third party or upon some other stated condition, or

(ii) an obligation to guarantee or stand as surety for the benefit of a third party.

(b) The term includes standby letters of credit, guarantees, puts, and other similar arrangements. A binding, written commitment to lend is a "contractual commitment to advance funds" if it and all other outstanding loans to the borrower are within the bank's or industrial loan corporation's lending limit on the date of the commitment.

(6) "In process of collection" means collection of the debt is proceeding in due course either through legal action, including judgment enforcement procedures, or, in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future.

(7) "Loans and extensions of credit" means any direct or indirect advance of funds in any manner whatsoever to a person. This is made on the basis of any obligation of that person to repay the funds, or repayable from specific property pledged by or on behalf of a person. Loans and extensions of credit includes:

(a) A purchase under repurchase agreement of securities, other assets, or obligations other than investment grade securities in which the purchasing bank or industrial loan corporation has a perfected security interest with regard to the seller but not as an obligation of the underlying obligor of the security;

(b) An advance by means of an overdraft, cash item, or otherwise;

(c) A contractual commitment to advance funds;

(d) An acquisition by discount, purchase, exchange, or otherwise of any note, draft, or other evidence of indebtedness upon which a person may be liable as maker, drawer, endorser, guarantor, or surety;

(e) A participation without recourse with regard to the participating bank or industrial loan corporation, but not the originating bank or industrial loan corporation; and

(f) Existing loans, leases, or advances which have been charged off on the books of the bank or industrial loan corporation in whole or in part and which is legally enforceable, including statutory bad debt under Section 7-3-25 or 7-8-15 respectively.

(8) "Loans or extensions of credit" does not include:

(a) A receipt by a bank or an industrial loan corporation of a check deposited in or delivered to the bank or industrial loan corporation in the usual course of business, unless it results in the carrying of a cash item for the granting of an overdraft, other than an inadvertent overdraft in a limited amount that is promptly repaid;

(b) An acquisition of a note, draft, bill of exchange, or other evidence of indebtedness through a merger or consolidation of financial institutions or a similar transaction by which an institution acquires assets and assumes liabilities of another institution, or foreclosure on collateral or similar proceeding for the protection of the bank or industrial loan corporation, provided that the indebtedness is not held for a period of more than three years from the date of the acquisition, unless permission to extend the period is granted by the commissioner on the basis that holding the indebtedness beyond three years is not detrimental to the safety and soundness of the acquiring bank or industrial loan corporation;

(c) An endorsement or guarantee for the protection of a bank or industrial loan corporation of any loan or other asset previously acquired by the bank or industrial loan corporation in good faith, or any indebtedness to a bank or industrial loan corporation for the purpose of protecting the bank or industrial loan corporation against loss or of giving financial assistance to it;

(d) Non-interest bearing deposits to the credit of the bank or industrial loan corporation;

(e) The giving of immediate credit to a bank or industrial loan corporation upon uncollected items received in the ordinary course of business;

(f) The purchase of investment grade securities subject to repurchase agreement in which the purchasing bank or industrial loan corporation has a perfected security interest, or where the securities are purchased from the state or any political subdivision thereof;

(g) The sale of federal funds; or

(h) Loans or extensions of credit which have become unenforceable by reason of discharge in bankruptcy or are no longer legally enforceable for other reasons.

(9) "Standby letter of credit" means any letter of credit, or similar arrangement however named or described, that represents an obligation to the beneficiary on the part of the issuer:

(a) To repay money borrowed by or advanced to or for the account of the account party; or

(b) To make payment on account of any indebtedness undertaken by the account party; or

(c) To make payment on account of any default by the account party in the performance of an obligation.

(10) "Well-secured" means a debt that is secured by:

(a) Collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt in full, including accrued interest; or

(b) The guarantee of a financially responsible party.