An act TO AMEND THE LAW CONCERNING LOANS INVOLVING 10 THE STOCK OF A STATE BANK, the official text

Stricken language would be deleted from and underlined language would be added to present law.

1 State of Arkansas             As Engrossed: S3/5/25
2 95th General Assembly
                                     A Bill

3 Regular Session, 2025                                        SENATE BILL 242

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5 By: Senator Hill

6 By: Representative Beaty Jr.

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8                               For An Act To Be Entitled

9   AN ACT TO AMEND THE LAW CONCERNING LOANS INVOLVING

10  THE STOCK OF A STATE BANK; AND FOR OTHER PURPOSES.

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13                              Subtitle

14                       TO AMEND THE LAW CONCERNING LOANS

15                       INVOLVING THE STOCK OF A STATE BANK.

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17 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:

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19  SECTION 1. Arkansas Code � 23-47-503 is amended to read as follows:

20  23-47-503. Loans involving stock of state bank -- Definition.

21  (a) It Except as provided in subsections (b) and (c) of this section,

22 it shall be unlawful for any a state bank to knowingly:

23  (1) Loan its funds to its stockholders on its own stock, or

24 stock in its bank holding company, as collateral security;

25  (2) Make any a loan, the proceeds of which are used to purchase

26 its own stock or stock of its bank holding company; or

27  (3)(A) Carry as an asset any a loan representing, either

28 directly or indirectly, an investment in its own stock or that of its bank

29 holding company.

30                       (B) Provided, however, that there shall be no It is not a

31 violation of this subdivision (a)(3) when a bank acquires its own stock or

32 stock in its bank holding company in the regular course of collecting a debt

33 previously contracted in good faith if the bank:

34                              (i) complied Complied with subdivisions (a)(1) and

35 (2) of this section at the time the loan was made; and

36                              (ii) if the bank divests Divests the stock within

    *ANS109*                                                   03-05-2025 14:21:28 ANS109
    As Engrossed: S3/5/25                                                    SB242

1 two (2) years.

2   (b)(1) In connection with the merger of a target institution with a

3 state bank or a similar transaction as determined by the Bank Commissioner, a

4 state bank may acquire a loan or other extension of credit that is secured,

5 in whole or in part, by the state bank's own stock or its bank holding

6 company stock.

7   (2) A state bank may maintain a loan or other extension of

8 credit that is secured, in whole or in part, by its own stock or its bank

9 holding company stock that it has acquired under subdivision (b)(1) of this

10 section, including by renewing, extending, modifying, or refinancing the loan

11 or other extension of credit, if:

12                (A) The state bank does not increase the committed amount

13 of the loan or other extension of credit above the committed amount as of the

14 time at which it was acquired; and

15                (B) Each renewal, extension, modification, or refinancing

16 of the loan or other extension of credit is undertaken on substantially the

17 same terms and following credit underwriting procedures that are no less

18 stringent than those prevailing at the time for comparable transactions by

19 the state bank for which the state bank's own stock or its bank holding

20 company stock does not serve as collateral security.

21  (c) This section does not prohibit a state bank from making or

22 maintaining a loan or other extension of credit that is secured, in whole or

23 in part, by a securities account, notwithstanding that the state bank's own

24 stock or its bank holding company stock is credited to the securities

25 account, if:

26  (1) The state bank or bank holding company whose stock is

27 credited to the securities account is exempted by � 23-48-316(b)(3);

28  (2) The state bank maintains written policies and procedures

29 that require the exclusion of the state bank's own stock or its bank holding

30 company stock from consideration during the state bank's credit underwriting

31 of the loan or other extension of credit; and

32  (3) The state bank complies with other applicable laws or rules.

33  (d)(1) Any An officer or director of any a state bank or any a

34 stockholder violating the provisions of this section shall be subject to

35 civil money penalties of one thousand dollars ($1,000) per day, up to a

36 maximum of one hundred thousand dollars ($100,000) in the aggregate, for each

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    As Engrossed: S3/5/25                                                  SB242

1 violation.

2             (2) The civil penalties may be imposed by the commissioner

3 pursuant to his or her power to and the procedure for issuing cease and

4 desist orders.

5   (e) As used in this section, "target institution" means:

6             (1) A state bank;

7             (2) An out-of-state state-chartered bank;

8             (3) A national bank; or

9             (4) Another depository institution or financial institution.

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11                               /s/Hill

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