48.24 RESTRICTIONS UPON TOTAL LIABILITIES TO A BANK.
Subdivision 1. Total liabilities of any individual.
The total liabilities to any such bank, as
principal, guarantor or endorser of any individual, including the liabilities of any corporation
or limited liability company which the individual owns or controls a majority interest, any
partnership, unincorporated association, limited liability company, or corporation, including the
liabilities of the several members of an unincorporated association and including the liabilities of
the general partners but not the limited partners of a partnership, and in case of a corporation or
limited liability company of all subsidiaries thereof in which such corporation or limited liability
company owns or controls a majority interest, shall never exceed 20 percent of its capital actually
paid in cash and of its actual surplus fund, except that obligations not to exceed 25 percent of said
capital and surplus to any one borrower shall not be included as liabilities for the purposes of
this section, but shall be liabilities of the borrowers, provided they are secured by not less than a
like amount of any one of the various types of obligations of the United States or which are fully
guaranteed as to principal and interest by the United States, and providing that such bonds or
obligations have a market value of at least ten percent in excess of the amount loaned thereon at
the time each loan is made.
For the purpose of this section the members of a family living together in one household, if
borrowed funds are to be used in the conduct of a common enterprise, shall be regarded as one
person and the total liabilities of the members of the family shall be limited as herein provided.
The endorser or guarantor of any obligation which is exempt from loaning limits according to
the provisions of this section shall also be exempt from such loaning limits to the extent of
the amount of liability on such obligations for the purposes of this section but shall be liable
thereon. Individual extensions of credit which result in liabilities of individuals, corporations, or
limited liability companies exceeding the limitations set forth in this section shall be construed to
conform to the provisions of this subdivision upon reduction in an amount sufficient to reduce
the total liability to not more than the legal amount, but until paid in full shall not exempt the
officer or employee of the bank from being personally liable to the bank for the amount of the
original excess portion of the loan as set forth in subdivision 8.
Subd. 2. Loan liabilities.
Loans not exceeding 25 percent of such capital and surplus made
upon first mortgage security on improved real estate in any state in which the bank or a branch
established under section
is located, or in any state adjoining a state in which the bank or a
branch established under section
is located, shall not constitute a liability of the maker
of the notes secured by such mortgages within the meaning of the foregoing provision limiting
liability, but shall be an actual liability of the maker. These mortgage loans shall be limited to,
and in no case exceed, 50 percent of the cash value of the security covered by the mortgage,
except mortgage loans guaranteed as provided by the Servicemen's Readjustment Act of 1944,
as now or hereafter amended, or for which there is a commitment to so guarantee or for which
a conditional guarantee has been issued, which loans shall in no case exceed 60 percent of the
cash value of the security covered by such mortgage. For the purposes of this subdivision, real
estate is improved when substantial and permanent development or construction has contributed
substantially to its value, and agricultural land is improved when farm crops are regularly raised
on such land without further substantial improvements.
Subd. 3. Treatment of certain sales or lease agreements.
Conditional sales contracts
or other paper evidencing an agreement to purchase or lease personal property owned and
guaranteed by the person discounting same, not to exceed 30 percent of the capital stock and
surplus, taken from any one person, shall not constitute a liability within the meaning of this
section, but the actual liabilities on such agreements are not to be construed as affected by the
provisions of this subdivision: Provided, however, if information as to the financial condition of
each purchaser or lessee is reasonably adequate by reason of the bank's own records or actual
knowledge of an officer of the bank and, upon written certification by an officer appointed by the
bank's board of directors for that purpose, that the responsibility of each purchaser or lessee has
been evaluated and the bank is relying primarily upon the purchaser or lessee for the payment of
the obligation, the limitations of subdivision 1 as to each purchaser or lessee shall be the sole
applicable loan limitation.
Subd. 4.[Repealed, 1993 c 257 s 49
Subd. 5. Treatment of secured or guaranteed loans.
Loans or obligations shall not be
subject under this section to any limitation based upon such capital and surplus to the extent
that they are secured or covered by guarantees, or by commitments or agreements to take over
or to purchase the same, made by:
(1) the commissioner of agriculture on the purchase of agricultural land;
(2) any Federal Reserve bank;
(3) the United States or any department, bureau, board, commission, or establishment of the
United States, including any corporation wholly owned directly or indirectly by the United States;
(4) the Minnesota Employment and Economic Development Department; or
(5) a municipality or political subdivision within Minnesota to the extent that the guarantee
or collateral is a valid and enforceable general obligation of that political body.
Subd. 6. Treatment of discounts of certain classes of paper.
The discount of the following
classes of paper shall not be regarded as creating liability within the meaning of this section:
(1) Bonds, orders, warrants, or other evidences of indebtedness of the United States, of
federal land banks, of this state or of any county, city, town, hospital district, or school district in
this state, or of the bonds, representing general obligation of any other state in the United States,
or bonds and obligations of the federal home loan banks established by act of Congress known
as the Federal Home Loan Bank Act, approved July 23, 1932, and acts amendatory thereto, or
debentures and other obligations of the federal intermediate credit banks established by act of
Congress known as the Federal Intermediate Credit Banks Act, approved March 4, 1923, and
acts amendatory thereto, in obligations issued by the banks for cooperatives or any of them, and
in bonds and obligations of the home owners' loan corporation established by act of Congress,
known as the Home Owners' Loan Act of 1933, and acts amendatory thereto, in exchange for
mortgages on homes, or contracts for deed, or real estate held by it.
(2) Bills of exchange drawn in good faith against actually existing values, including bills
which are secured by shipping documents conveying or securing title to goods shipped, and which
are not to be surrendered until such bills are paid in cash or solvent credits. This includes bankers'
acceptances or participations in bankers' acceptances of the kind and maturities made eligible by
law for rediscount with, or purchase by, Federal Reserve banks, providing the same are accepted
or endorsed by a bank or trust company incorporated under the laws of this state; or by any bank
or trust company in the United States which is a member of the Federal Reserve system.
(3) Paper based upon the collateral security of warehouse receipts covering agricultural or
manufactured products stored in elevators or warehouses under the following conditions:
First, when the actual market value of the property covered by such receipts at all times
exceeds by at least ten percent the amount loaned thereon, and
Second, when the full amount of every such loan is at all times covered by fire insurance in
duly authorized companies, within the limit of their ability to cover such amounts, and the excess,
if any, in companies having sufficient paid-up capital to authorize their admission, and payable,
in case of loss, to the bank or holder of the warehouse receipt.
(4) Total loans to an obligor secured by segregated deposit accounts in the lending bank,
provided that a security interest in the deposit has been perfected. Where the deposit is eligible
for withdrawal before the secured loan matures, the bank shall establish internal procedures to
prevent release of the deposit without the lending bank's prior consent.
(5) Debentures issued under the authority of the federal National Mortgage Association.
(6) Obligations representing loans from one business day to the next to any state bank or
national banking association of excess reserve balances from time to time maintained under the
provisions of section
, or of section 19 of the Federal Reserve Act, as amended, United
States Code, title 12, sections 461 et seq.
Subd. 7. Treatment of feeder livestock loan security instruments.
Obligations of any
individual or organization, however organized, in the form of notes or drafts secured by shipping
documents or instruments transferring or securing title covering feeder livestock which is free
from all other encumbrances, when the market value of the livestock securing the obligation at
the time of the making of the loan is not less than 115 percentum of the face amount of the
notes covered by such documents, shall be subject under this subdivision to a limitation of 20
percent of capital and surplus in addition to 20 percent of capital and surplus as included in
provisions of subdivision 1. Feeder livestock loans as referred to in this subdivision is defined to
include only obligations secured by liens or giving title to cattle, sheep, goats, hogs or poultry
being fattened for market, but excluding dairy cattle, milk goats, poultry used for production of
eggs, or barnyard or work animals.
Subd. 7a. Treatment of certain insurance liability.
Pursuant to such rules as the
commissioner of commerce finds to be necessary and proper, if any, the liability or obligation
to a bank of any insurance company admitted and authorized to do business in this state shall
not be subject under this section to any limitation based upon such capital and surplus to the
extent that such insurance company issues policies or certificates of indemnity of mortgage
For the purposes of this subdivision "mortgage guaranty insurance" shall mean insurance
against financial loss by reason of nonpayment of principal, interest and other sums agreed to
be paid under the terms of any note, bond, mortgage, security agreement, or other instrument
constituting a first lien, security interest or charge on real property or manufactured homes.
Subd. 8. Criminal liability for permitting or approving loan in excess of allowable
When a bank shall allow any individual, partnership, limited liability company,
unincorporated association, or corporation, or any officer or director of the bank, to become
indebted to it, directly or indirectly, in excess of the amount, exclusive of interest permitted by the
laws of this state, the officer or employee of the bank willfully permitting or approving the loan
shall be guilty of a gross misdemeanor and, in addition thereto, shall be personally liable to the
bank for the amount of the loan in excess of the statutory limit.
Subd. 9. Right to act to avoid loss.
This section does not prohibit the bank from advancing
funds that may be reasonably necessary to avoid loss on a loan or investment made subject to this
section or an obligation created in good faith. The rights under this subdivision are in addition to
and not inconsistent with section
Subd. 10. Treatment of grain forward sale contracts.
Obligations of any individual or
organization, however organized, where the note is secured by a perfected first lien on stored
grain and a perfected assignment of the proceeds of a forward contract for sale of the grain (1)
with a recognized commodity buyer or broker, reasonably satisfactory to the bank, (2) where the
delivery of grain under the contract will occur within 270 days, (3) where the grain is insured for
full value against loss by fire or other casualty, and (4) where the value of the forward contract
exceeds 115 percent of the face amount of the secured note, is subject under this subdivision to
a limitation of ten percent of capital and surplus in addition to the 20 percent of capital and
surplus as included in subdivision 1.
History: (7677) RL s 2993; 1907 c 156 s 1; 1911 c 160 s 1; 1919 c 103 s 1; 1927 c 258 s 1;
1931 c 9 s 1; Ex1934 c 70 s 1; 1943 c 23 s 1; 1945 c 62 s 1; 1947 c 82 s 1; 1957 c 601 s 13-16;
1959 c 88 s 8,9,17; 1963 c 153 s 6; 1965 c 171 s 15-17; 1967 c 102 s 7,8; 1969 c 438 s 1,2; 1969
c 772 s 3; 1971 c 100 s 1; 1973 c 35 s 18; 1973 c 123 art 5 s 7; 1976 c 210 s 11; 1980 c 523 s 1;
1981 c 365 s 9; 1983 c 289 s 114 subd 1; 1984 c 576 s 13; 1984 c 655 art 1 s 92; 1985 c 248 s 70;
1986 c 353 s 2; 1986 c 444; 1987 c 349 art 1 s 15; 1987 c 384 art 2 s 1; 1988 c 631 s 2,3; 1993 c
137 s 1-3; 1993 c 257 s 18-20; 1995 c 202 art 2 s 15; 1997 c 157 s 24,25; 1999 c 151 s 21,22;
2002 c 379 art 1 s 18; 2002 c 380 art 2 s 1; 2003 c 51 s 8; 1Sp2003 c 4 s 1