# Title 13 — Department of Financial Institutions

## Article 13-02 — Banking and Savings and Loan Associations

## Chapter 13-02-11 — Minimum Guidelines for Report of Examining Committee

### § 13-02-11-01. Purpose.

This chapter is intended to establish minimum guidelines for the report of examining committee or
examination by the board of directors, annual independent certified public accountant audit, or auditors
of the bank holding company, or examination by internal audit control system for report of examining
committee pursuant to section 6-03-69. While the guidelines set forth in this chapter are deemed to be
minimum procedures, additional procedures may be deemed prudent as determined to meet the
individual needs of the bank by its directors. This chapter is further intended to safeguard the
depositors of state banking associations by the establishment of procedures and provide accurate
evaluations of the assets and liabilities of the bank.
History: Effective April 1, 1989.
General Authority: NDCC 6-01-04
Law Implemented: NDCC 6-03-69
### § 13-02-11-02. Report of examining committee.

Examinations conducted by the board of directors, its examining committee, or auditors of the bank
holding company, or examination by an internal audit control system for its annual report, may include
the following minimum procedures to comply with the report requirement of section 6-03-69. An
independent certified public accountant or accounting firm retained by the bank to perform the annual
report of examining committee examination requirement, may review bank internal procedures or
controls covering the following minimum procedures. In the absence of any internal procedures or
controls, the determination or review of the following minimum procedures may be performed by the
board of directors or its examining committee, auditors of the bank holding company, or internal audit
control system:
1. Bank operations and asset accounts:
a. Determine if bank reconciliations of all general ledger accounts are performed on a timely
basis and are accurate for all major accounts.
b. Determine if the bank has written policies and procedures that are periodically reviewed
and are being followed concerning major areas of bank operations. Also determine if
internal controls are adequate and are being following.
c. Balance nonledger assets and review files.
d. Determine if other real estate owned (OREO) was written to its value at the time title of
property was taken, and is currently carried at an amount not in excess of the value of
the property. Review all transactions to ensure they are proper.
2. Loans, leases and discounts, and allowance for loan and lease losses:
a. Determine if the bank has written policies that are being reviewed and approved at least
annually and are being adhered to.
b. Determine that an internal "watch list" is accurate and loans that are not "bankable" are
eliminated by charge-off in a timely manner. In the absence of an internal "watch list",

review and determine the value of collateral and other credit information existing to
support the carrying amount of the loan.
c. Review the portfolio to ensure that applicable rules and regulations are being adhered to,
inclusive of loans to directors, officers, and other insiders.
d. Determine if the allowance for loan and lease losses is reviewed by management or the
board of directors, or both, at least quarterly to coincide with the call reporting
requirements and accurately reflects the risk in the loan portfolio.
3. Security investments and trading accounts:
a. Determine that investment policies are adequate for the needs of the bank and are being
adhered to.
b. Review the portfolio to ensure that all applicable rules and regulations are being adhered
to.
c. Determine if any investments exist that are carried in excess of the net value.
4. Liquidity capital accounts and income and expenses:
a. Review all capital account entries to determine appropriateness and compliance with
rules and regulations, if applicable.
b. Review income and expense items to ensure they are appropriate and properly recorded.
5. Trust department (if applicable): review internal controls and procedures to determine that
such controls and procedures are in place and are being adhered to.
6. Bank subsidiaries (if applicable): determine that the value of the subsidiary supports the value
that the bank is carrying as its investment in the subsidiary.
History: Effective April 1, 1989.
General Authority: NDCC 6-01-04
Law Implemented: NDCC 6-03-69
