NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

The LFC is only preparing FIRs on bills referred to the Senate Finance Committee, the Senate Ways and Means Committee, the House Appropriations and Finance Committee and the House Taxation and Revenue Committee. The chief clerks are responsible for preparing and issuing all other bill analyses.

Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Room 416 of the State Capitol Building.

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates/Conflicts with/Companion to/Relates to

SOURCES OF INFORMATION

LFC Files

State Land Office (SLO)

Regulation and Licensing Department (RLD)

Administrative Office of the Courts (AOC)

SUMMARY

Synopsis of SCORC Amendment

The Senate Corporations and Transportation Committee amendment simply clarifies the definition of improved farmland.

Synopsis of Bill

Senate Bill 459 amends 10 sections of the Banking Act relating to financial institutions; changing certain provisions and amending and repealing sections. The bill would create parity in regulation for state-chartered banks (i.e., locally owned, community operated) with federally-chartered banks (i.e., large nationwide operators).

The bill improves definitions and clarifies financial terms in the definitions Section 58-1-3, adds a definition for improved farm land in Section 58-1-21. SB 459 increases the book value benchmark for annual appraisal requirement from $50,000 to $75,000 for other real estate owned by state banks. The bill also eliminates a bank's requirement to observe national holidays.

Significant Issues

SB 459 includes an added qualification for loans secured by real estate. However, the manner in which the new language is written makes it difficult to determine the intent of the language.

If the intent of the language is to limit the use of leasehold as collateral to leases whose term does not expire at least ten years beyond the maturity date of the loan, then there would clearly be an impact on agricultural leases that currently rely on five-year leases as collateral. In such a case, leasehold collateral would no longer be an option with five-year leases.

The bill also increases the amount a state bank may lend for real estate secured loans by changing the obligations secured by real estate from 30 to 60 percent of total deposits.

MV/gm