KRS 286.3-280: Maximum debt of persons to bank or trust company.

(1) Except as provided in subsection (2) of this section:

(a) Subject to paragraph (b) of this subsection, a bank or trust company shall not

permit any person to become indebted to it or become obligated as guarantor

or surety to it in an amount exceeding twen ty percent (20%) of the bank's or

trust company's capital stock actually paid in and actual amount of surplus,

unless the person pledges, for any amount that exceeds the twenty percent

(20%) limit, good collateral security or a mortgage upon real or person al

property, which at the time is of more than the cash value of the indebtedness

or obligation required to be secured under this paragraph above all other

encumbrances;

(b) In no event shall the indebtedness or obligation of any person exceed thirty

percent (30%) of a bank's or trust company's capital stock actually paid in and

actual amount of surplus; and

(c) When computing the total of a bank's or trust company's capital stock actually

paid in and actual amount of surplus, any negative balance of a bank 's or trust

company's undivided profits account shall be deducted.

(2) A bank or trust company may, in lieu of complying with subsection (1) of this

section, elect to comply with the legal lending limits applicable to national banks,

as set forth in 12 U.S.C. sec. 84 and 12 C.F.R. pt. 32, as amended.

(3) A bank or trust company shall not permit any of its directors or executive officers to

become indebted to it or become obligated as guarantor or surety to it in an amount

that exceeds the amount that any ot her person is authorized by this section to

become indebted or obligated to the bank or trust company.

(4) In computing the indebtedness of any person:

(a) The liability of any partnership in which the person acts as a general partner,

and any obligation e ntered into for the benefit of a person, partnership, or

association, shall be included in the total liabilities of the person, partnership,

or association; and

(b) 1. Any credit exposure arising from a derivative transaction, repurchase

agreement, reverse purchase agreement, securities lending transaction,

or securities borrowing transaction shall be included.

2. For the purposes of this paragraph, the term "derivative transaction"

includes any transaction that is a contract, agreement, swap, warrant,

note, or option that is based, in whole or in part, on the value of, any

interest in, or any quantitative measure or the occurrence of any event

relating to, one (1) or mor e commodities, securities, currencies, interest

or other rates, indices, or other assets.

(5) Except as otherwise provided in this section, the same security, both in kind and

amount, shall be required from stockholders as from nonstockholders.

(6) The dis count of bills of exchange drawn against actually existing value, and the

purchase or discounting of commercial or business paper actually owned by the

person negotiating the paper, shall not be considered as borrowed money within the

meaning of this secti on in fixing the limit of indebtedness or obligation of any

person selling or negotiating the paper to a bank.

(7) (a) Except as provided in paragraph (b) of this subsection, a bank shall not make

any loan or discount on the security of, or be the purchase r or holder of, the

shares of its own capital stock, or the shares of stock of a bank holding

company that controls the bank, in an amount that exceeds the amounts

permitted by 12 U.S.C. sec. 371c, as that section read on July 15, 1986.

(b) A bank may take property of any kind to satisfy or protect a loan previously

made in good faith and in the ordinary course of business.

(c) Any stock purchased or acquired under paragraph (b) of this subsection that

exceeds the amount permitted under paragraph (a) of thi s subsection shall,

within six (6) months from the time of purchase or acquisition, be sold or

disposed of at public or private sale.

(d) This subsection shall not be construed to affect or modify KRS 386.025.