1. (a) A state bank is not authorized to be an accommodation guarantor.
2. (b) An accommodation guaranty by a state bank is void and ultra vires.
3. (c) A state bank can execute a valid guaranty agreement if such action is necessary or advisable to protect an economic interest of the bank.

4. (d)

   1. (1) In Bank of Morrilton v. Skipper, Tucker & Co., 165 Ark. 49, the bank executed an agreement guaranteeing the payment of certain liabilities by one (1) of its customers.
   2. (2) The purpose of the guaranty was to enable the customer (who was indebted to the bank) to collect funds under an improvement district contract that would enable the customer to pay the debt to the bank.
   3. (3) The case was remanded for a new trial, but the Supreme Court recognized that a guaranty executed for the purpose stated would be binding on the bank.

5. (e)

   1. (1) In Wasson v. American Can Co., 189 Ark. 354, the bank guaranteed the payment of certain drafts by one (1) of its customers that owed it about three thousand dollars ($3,000).
   2. (2) The guaranty by the bank was intended to enable the customer to purchase cans for tomato canning purposes, and the intention of the bank was that this guaranty would enable the customer to continue business operations and pay part or all of the indebtedness to the bank, held that this guaranty was to protect an economic interest of the bank and was binding on the bank.
6. (f) The same principle of law was recognized in Citizens Bank of Booneville v. Clements, 172 Ark. 1023.
7. (g) See also Merchants & Planters Bank & Trust Company v. Deaton, 200 Ark. 828, also Nakdimen v. First National Bank, 177 Ark. 303.

Codification Notes: This section was promulgated as Section 47-101.5 of the State Bank Department Rules prior to codification into the Code of Arkansas Rules. This section as promulgated prior to codification into the Code of Arkansas Rules provided as follows: "(Reference A.C.A. § 23-47-101)"