[Anonymous]

I thought I had asked this before, but don’t see any information on it; so I am trying again.

If we determine that a director’s loan meets the requirements of the “tangible economic benefit” rule, do we have to include the loan amount in calculating his/her legal lending limit total (at closing and as long as the loan is open)? They would not be a guarantor/borrower on the loan. We are getting the necessary prior board approval.

[rcooper]

The prior question and answer you mention as via email. I have resent that to you. But if the transaction is deemed to be an extension of credit under the Tangible Economic Benefit rule then, yes, you would include it. Here is the section on Tangible Economic Benefit – also review 215.4.

215.3(f) Tangible economic benefit rule–(1) In general. An extension of credit is considered made to an insider to the extent that the proceeds are transferred to the insider or are used for the tangible economic benefit of the insider.
(2) Exception. An extension of credit is not considered made to an insider under paragraph (f)(1) of this section if:
(i) The credit is extended on terms that would satisfy the standard set forth in Sec. 215.4(a) of this part for extensions of credit to insiders; and
(ii) The proceeds of the extension of credit are used in a bona fide transaction to acquire property, goods, or services from the insider.

[Author]

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