I have a question about a national bank's lending limit. I reviewed 12 USC 84, but I am still unclear.

Scenario: John and Jane each own 50% in a partnership. Their partnership gets a fully secured $1,000,000 loan from a national bank that is collateralized by commercial real estate and equipment, and both John and Jane sign the note as partners. However, John personally guarantees 80% of the note and Jane personally guarantees 20% of the note. The loan will be repaid by income generated from the business and the bank is not "dependant" on the personal guarantees.

Assume the national bank has a $1,000,000 lending limit.

Questions: How much of the $1,000,000 loan is counted against the bank's legal lending limit for John and Jane separately? Does the partnership note and guarantee agreements mean that both John and Jane have direct and indirect advances that count against the bank's lending limit?

try 12 USC 32.5 - the combination rules - looks as though the guaranties would be combined into the "common enterprise" of the partnership - thoughts?

... I left something out ... the persons are limited partners ...

Phoenix ... I will check the citation you posted ... thanks ...

It may be 12 CFR 32.5 - sorry if the first reference were wrong....

This is always a touchy issue with the OCC, with wide latitude granted to the individual EICs on what they think is appropriate. You should technically be able to assign $0.00 to each if you properly document the lack of dependence and the SOR from the company itself. However, we've never been comfortable with the potential for an OCC overide of our decision (and the probable lending limit violation that would come with it) and, in general, have assigned 800M to John and 200M to Jane without a problem (though external loan review doesn't seem to like it).

I'll be intereste to read what others are doing / have done in such circumstances.