Guam § 106175 - Diversification of Loans and Investments.

§ 106175. Diversification of Loans and Investments.

(a) A territorial bank shall not extend credit directly by means of discount of notes, issuance of letters

of credit, acceptance of drafts or otherwise, or purchase any bond, note, bill of exchange or similar evidence

of indebtedness, when by reason of such extension of credit or purchase the totals of such obligations so

acquired which are held by such bank will exceed the limitations prescribed in the following table:

(1) Loans for a period not longer than 18

months to finance the construction of residential

or farm buildings (50% of capital and surplus)

(2) Obligations maturing more than 10

years thereafter, except government obligations,

corporate bonds, or obligations secured by real

property (100% of capital and surplus)

(3) Obligations secured by real estate

together with the current market value of any

real estate owned by the bank and not used in its (100% of capital and surplus or 75% of time

banking business deposits whichever is greater)

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(4) Unsecured obligations of the same

obligor (20% of capital and surplus)

(b) The limitation of Paragraph (4) hereof shall not apply to loans and investments otherwise

authorized by this Title when the obligations are:

(1) Obligations of the United States, of a state or territory or of a Federal Reserve Bank.

(2) Obligations to the extent that they are secured as to principal and interest by the guarantee,

insurance or other like commitment of the United States, an agency of the United States or a Federal

Reserve Bank, whether the commitment provides for payment in cash or in obligations of the United

States.

(3) Obligations secured by obligations of the United States or of a state or territory having a value

of 100% of the amount thereof.

(4) Obligations secured by assignment of a life insurance policy to the extent of the cash surrender

value thereof less the amount of one annual premium, but the limitation on such obligations shall be

25% of capital and surplus.

(5) Obligations to the extent that they are secured by pledge of a deposit in a savings bank, but

the limitation on such obligations shall be 25% of capital and surplus.

(6) Obligations arising from acceptance of drafts to the extent of 85% of the security, if such

security is derived from the transaction financed by the acceptance, but the limitation on such

obligations shall be 25% of capital and surplus.

(7) Obligations upon a banker’s acceptances to the extent that the obligations of the acceptor to

the bank do not exceed in amount 30% of the capital and surplus.

(8) Obligations upon notes or drafts having a maturity of not more than 6 months exclusive of

days of grace, drawn in good faith against actually existing values and secured by an instrument

transferring or securing title to goods in process of shipment or to livestock or creating a lien on

livestock to the amount of 85% of the value of the security, but the limitation on such obligations shall

be 25% of capital and surplus.

(9) Obligations upon notes or drafts secured by trust receipts, shipping documents or receipts of

a licensed or bonded warehouse or elevator transferring or securing title to readily marketable, non-

perishable staples to the amount of 80% of the value of the security, but the limitation on these

obligations shall be 25% of capital and surplus and this exemption shall not apply (a) unless such

staples are insured, if it is customary to insure them; or (b) for more than 10 months to obligations of

the same obligor arising from the same transaction or secured by the same staples.

(10) Obligations upon loans approved by the Board to a bank located within Guam or to a receiver

or conservator thereof or to the Commissioner when he has taken possession thereof, but the limitation

on these obligations shall be 25% of capital and surplus.

(11) Obligations secured by the assignment of accounts receivable to the extent of 80% of the

amount of such accounts not overdue, but the limitation on these obligations shall be 25% of capital

and surplus.

(12) Obligations secured by readily marketable stocks or bonds to the extent of 85% of the current

value of the security, but the limitation on the obligations shall be 25% of capital and surplus.

(13) Obligations arising out of the daily transaction of the business of any clearing house

association.

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(c) In calculating for the purposes of this section the obligations of a single obligor or the obligations

of a specified class there shall be included:

(1) The direct liability of the maker or acceptor of paper discounted or purchased and the liability

of the endorser, drawer or guarantor who obtains a loan or discounts or sells paper under his guaranty.

This Section excludes contingent liability created by purchase of commercial paper covering sale of

goods.

(2) In the case of obligations of a partnership or association, the obligations of each general

partner and of each member of the association.

(3) In the case of obligations of a general partner or a member of an association, the obligations

of the partnership or association.

(4) In the case of obligations of a corporation, the obligations of any subsidiaries in which it owns,

directly or indirectly, a majority of the outstanding voting stock.

(5) In the case of obligations of a corporation, the amount of a loan made to any other person to

the extent that the proceeds of such loan directly or indirectly are to be (a) loaned to the corporation;

(b) used for the acquisition from the corporation of any securities issued by the corporation, other than

securities acquired by an underwriter for public offering; or (c) transferred to the corporation without

fair and adequate consideration. The discharge of an equivalent amount of debt previously incurred in

good faith for value shall be deemed fair and adequate consideration.

(d) No provision in this section shall be construed to prohibit refinancing of any loan when the security

appearing at the time of refinancing is sufficient to meet the provisions of this section.