# Title 6 — Banks and Banking

## Chapter 6-03 — Powers, Management, and Operation of Banks

### § 6-03-01. Powers before receipt of certificate of authority.

No association may transact any business, except such as is incidental and necessarily
preliminary to its organization, until it has been authorized by the secretary of state to
commence the business of banking and has received a certificate of authorization, and such
certificate has been returned by the commissioner with the commissioner's certificate that the
capital stock and required surplus have been paid in full, that federal deposit insurance
corporation insurance of deposits has been secured, and that all conditions of the law have
been strictly complied with.
### § 6-03-02. Powers.

After an association has made and filed articles of association and an organization
certificate, it becomes a body corporate, and as such, and in the name designated in the
certificate, it, subject to section 6-03-01, has the power to:
1. Have a perpetual existence, unless it is sooner dissolved according to the provisions
of this title, or unless its franchise becomes forfeited by a violation of law.
2. Make contracts.
3. Sue and be sued.
4. Elect or appoint directors, such board to consist of any number of members, not less
than three nor more than twenty-five, at least two-thirds of whom must be citizens of
the United States, and, by such board of directors, to appoint a president, who must be
a member of said board, and such other employees as may be required, to define their
duties, to require bonds of them and fix the penalty thereof, and to dismiss such
officers and employees, or any of them, and appoint others to fill their places. This
subsection does not apply to a cooperative financial institution.
5. Provide, by its board of directors, bylaws not inconsistent with the laws of this state to
regulate the manner in which its directors and officers must be elected or appointed.
Vacancies in the board of directors, not exceeding one-third of the whole membership
thereof in any calendar year, must be filled by a majority vote of the remaining
members. The bylaws must provide a method for filling vacancies exceeding that
number. This subsection does not apply to a cooperative financial institution.
6. Provide, by its board of directors, bylaws not inconsistent with the laws of this state to
regulate the manner in which its stock and property must be transferred, its business
conducted, and the privileges granted to it by law exercised and enjoyed. This
subsection does not apply to a cooperative financial institution.
7. Exercise, as determined by the board or commissioner by order or rule, all the
incidental powers as are necessary to carry on the business of banking, including
discounting and negotiating promissory notes, bills of exchange, drafts, and other
evidences of debt; receiving deposits; buying and selling exchange, coin, and bullion;
loaning money upon real or personal security, or both; soliciting and receiving deposits
in the nature of custodial accounts for the purpose of health savings or similar health
care cost funding accounts, retirement fund contracts, or pension programs, and such
custodial accounts are exempt from chapter 6-05; and providing services to its
customers involving electronic transfer of funds to the same extent that other financial
institutions chartered and regulated by an agency of the federal government are
permitted to provide those services within this state. A bank that provides electronic
funds transfer equipment and service to its customers, at premises separate from its
main banking house or duly authorized facility approved by the state banking board,
must make the equipment and service available for use by customers of any other
bank upon the request of the other bank to share its use and the agreement of the
other bank to share pro rata all costs incurred in connection with its installation and
operation, and the electronic operations are not deemed to be the establishment of a
branch, nor of a separate facility. The electronic operations at premises separate from
its banking house or duly authorized facility must be considered a customer electronic

funds transfer center and may be established subject to rules that the state banking
board adopts.
8. Enter into contracts, incur obligations, and generally to perform all acts necessary or
appropriate to take advantage of any and all memberships, loans, subscriptions,
contracts, grants, rights, or privileges which may be or become available or may inure
to banking institutions or to their depositors, creditors, stockholders, conservators,
receivers, or liquidators under the provisions of the federal Act creating the federal
deposit insurance corporation or under any other Act or regulation of Congress to aid,
regulate, or safeguard banking institutions and their depositors, including any
amendments thereto or substitution therefor, when authorized so to do by its board of
directors.
9. Subscribe for and acquire any stock, debentures, bonds, or other types of securities of
the federal deposit insurance corporation and to comply with the lawful regulations and
requirements from time to time issued or made by such corporation.
10. Take, receive, and hold United States postal savings deposits and to take any action
necessary to procure the deposit of the same.
11. Enter into the business of dealing in securities and stock for the purpose of purchasing
and selling such securities and stock without recourse, solely upon the order, and for
the account of individual and institutional customers and to provide portfolio
investment advisory, management, information, forecasting, and research services to
such customers in combination with or separate from such purchases and sales.
12. Exercise fiduciary powers upon application as provided under section 6-05-01 as the
board may prescribe by rule.
13. Invest all moneys received by it in a trust, in authorized securities, and be responsible
to the owner or a third-party beneficiary for the validity, regularity, quality, value, and
genuineness of these investments and securities at the time made and for the
safekeeping of these securities and the evidences of the securities. When special
directions are given in any order, judgment, decree, will, or other written instrument as
to the particular manner or the particular class or kind of securities or property in which
any investment may be made, a bank shall follow this direction and, in such case, it is
not further responsible by reason of the performance of the trust. A bank may retain
and continue any investment and security or securities coming into its possession in
any fiduciary capacity. For the faithful discharge of its duties and the discharge of its
trust, it is entitled to reasonable compensation or an amount as has been or may be
agreed upon by the parties and all necessary expenses, with legal interest on those
amounts. The trustee may acquire and retain securities of any open-end or closed-end
management type investment company or investment trust registered under the
Federal Investment Company Act of 1940 [Pub. L. 76-686; 54 Stat. 789; 15 U.S.C.
80a-1 - 80a-52]. The fact that the banking institution, or an affiliate of the banking
institution, is providing services to the investment company or trust as investment
advisor, sponsor, broker, distributor, custodian, transfer agent, registrar, or otherwise
and receiving compensation for the services does not preclude the trustee from
investing in the securities of that investment company or trust. The banking institution
and trust shall disclose to all current income beneficiaries of the trust the rate, formula,
and method of the compensation, and the relationship of ownership. No compensation
or commission paid or agreed to be paid to it for the negotiation of a loan or the
execution of a trust may be deemed interest within the meaning of the law, nor may
any excess thereof over the legal rate be deemed usury.
### § 6-03-02.1. Indemnification by banking association.

Each banking association has the same power to indemnify as provided for business
corporations in section 10-19.1-91.
### § 6-03-02.2. Issuance of certificates of deposit - Penalty.

Certificates of deposit, as defined in section 41-03-04, may only be issued in this state by
financial institutions authorized to issue certificates of deposit and chartered to do business in

this state under this chapter or as authorized under section 6-06-06.1. Any person violating this
section is subject to a civil penalty not to exceed five thousand dollars.
### § 6-03-02.3. Parity for state and national banks.

Subject to authorization by the state banking board, acting by order or rule, a state bank has
the same powers as a national bank and may engage directly or indirectly in any activity in
which a bank could engage if the state bank were nationally chartered.
### § 6-03-03. Directors - Qualifying shares - Issue and transfer.

Repealed by S.L. 1985, ch. 116, § 2.
### § 6-03-04. Director's oath of office - Filing.

Every director, when elected or appointed, shall take an oath that the director shall, so far
as the duty devolves upon a director, diligently and honestly administer the affairs of the
association and will not knowingly violate or willingly permit to be violated any of the provisions
of this title. Such oath, subscribed by the director making it and certified by the officer before
whom it was taken, at once must be transmitted to the commissioner to be filed in the
commissioner's office.
### § 6-03-04.1. Standard of conduct for directors of financial institutions.

1. A director shall discharge the duties of the position of director in good faith, in a
manner the director reasonably believes to be in the best interests of the financial
institution, and with the care an ordinarily prudent person in a like position would
exercise under similar circumstances. A person who so performs those duties is not
liable by reason of being or having been a director of the financial institution.
2. A director is entitled to rely on information, opinions, reports, or statements, including
financial statements and other financial data, in each case prepared or presented by:
a. One or more officers or employees of the financial institution whom the director
reasonably believes to be reliable and competent in the matters presented;
b. Counsel, public accountants, or other persons as to matters the director
reasonably believes are within the person's professional or expert competence;
or
c. A committee of the board upon which the director does not serve, duly
established by the board as to matters within its designated authority, if the
director reasonably believes the committee to merit confidence.
3. Subsection 2 does not apply to a director who has specialized knowledge concerning
the matter in question that makes the reliance otherwise permitted by subsection 2
unwarranted.
4. A director who is present at a meeting of the board when an action is approved by the
affirmative vote of a majority of the directors present is presumed to have assented to
the action approved, unless the director:
a. Objects at the beginning of the meeting to the transaction of business because
the meeting is not lawfully called or convened and does not participate thereafter
in the meeting, in which case the director shall not be considered to be present at
the meeting for any purpose;
b. Votes against the action at the meeting; or
c. Is prohibited from voting on the action:
(1) By the articles;
(2) By the bylaws;
(3) As the result of a decision to approve, ratify, or authorize a transaction that
meets the standards and follows the process stated in section 10-19.1-51
for a business corporation; or
(4) By a conflict of interest policy adopted by the board.

5. A director's personal liability to the financial institution or its shareholders for monetary
damages for breach of fiduciary duty as a director may be eliminated or limited in the
articles. The articles may not eliminate or limit the liability of a director:
a. For any breach of the director's duty of loyalty to the financial institution or its
shareholders;
b. For acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law;
c. For illegal distributions which a director who is present and not disqualified from
acting has voted for or failed to vote against;
d. For any transaction from which the director derived an improper personal benefit;
or
e. For any act or omission occurring prior to the date when the provision in the
articles eliminating or limiting liability becomes effective.
6. In discharging the duties of the position of director, a director may, in considering the
best interests of the financial institution, consider the interests of the financial
institution's employees, customers, suppliers, and creditors; the economy of the state
and nation; community and societal considerations; and the long-term and short-term
interests of the financial institution and its shareholders, including the possibility these
interests may be best served by the continued independence of the financial
institution.
### § 6-03-05. Loans on real estate - Regulation - Limitation.

1. Before any real estate loan equal to or more than four hundred thousand dollars is
made, an appraisal must be conducted by a licensed or certified appraiser if required
by the federal Financial Reform, Recovery, and Enforcement Act of 1989 [Pub. L.
101-73; 103 Stat. 512; 12 U.S.C. 3332 et seq.].
2. Before any real estate loan that does not meet the requirements of subsection 1 is
made, a bank must obtain an appropriate evaluation of real property collateral for
transactions if an appraisal by a licensed or certified appraiser is not obtained.
3. Regardless of the value of a real estate loan, the commissioner may issue an order
requiring an appraisal by a licensed or certified appraiser when necessary to address
safety and soundness concerns. Any real estate loan made must conform to
loan-to-value limits as established by rule by the state banking board under chapter
28-32.
### § 6-03-05.1. Additional optional loans and advances.

Repealed by S.L. 1991, ch. 84, § 1.
### § 6-03-05.2. Agricultural loan amortization and deferral.

Expired under S.L. 1989, ch. 99, § 3.
### § 6-03-06. Sale of real estate loans.

In selling or disposing of loans made upon real estate security, no association has power to
guaranty the payment or collection thereof except as necessary to sell residential mortgage
loans on the secondary market, and any such guaranty made in violation of this provision is not
binding on the association but is upon the officer or other person making the same.
### § 6-03-07. Investment in banking facility, furniture, and fixtures - Limitation.

A state banking association may not invest more than sixty-five percent of the amount of its
unimpaired capital stock, surplus, and undivided profits in a banking facility, furniture, fixtures,
and equipment without the approval of the commissioner or the state banking board.
### § 6-03-08. Powers as to other real estate.

Every state banking association has the power to purchase, hold, and convey other real
estate as herein provided, and not otherwise:

1. Such as is mortgaged to it in good faith by way of security for loans or for debts
previously contracted.
2. Such as is conveyed to it in good faith in satisfaction of debts previously contracted in
the course of its dealings.
3. Such as it purchases at sales under judgments, decrees, or mortgages held by the
association or purchases to secure debts due to it.
Upon transfer to other real estate owned, a current appraisal must be conducted by an
individual who is independent of the transaction. Notwithstanding other sections of this chapter,
a bank may apply to the commissioner for authority to exchange its interest in real property
acquired in satisfaction of a debt previously contracted for an interest in an entity that would
dispose of the real property. If the commissioner's decision with respect to an application is
unfavorable, the applicant bank may appeal the decision to the state banking board by filing a
notice of appeal with the commissioner within twenty business days after the commissioner has
notified the applicant bank of the decision.
### § 6-03-09. Holding of real estate - Limitation.

No banking association may hold the possession of any real estate under mortgage, nor
title and possession of any real estate purchased to satisfy indebtedness, for a longer period
than five years from the date of acquiring title thereto unless such time has been extended by
certificate of the commissioner.
### § 6-03-10. Violation of powers - Penalty.

Any banking association violating the provisions of the preceding sections of this chapter
relating to powers, at the discretion of the state banking board, shall forfeit its charter. Any
officer, director, or employee who knowingly violates or permits the violation of any of such
provisions is guilty of a class B misdemeanor.
### § 6-03-11. Conversion, consolidation, or merger.

1. Any two or more banking institutions upon making application to the commissioner or
the state banking board may consolidate or merge if authorized by the commissioner
or board into one banking institution under the charter of either existing banking
institution on such terms and conditions as lawfully may be agreed upon by a majority
of the board of directors of each banking institution proposing to consolidate or merge
subject to rules adopted by the state banking board.
2. Before becoming final, such consolidation or merger must be ratified and confirmed by
the:
a. Vote of the shareholders of each such banking institution owning at least
two-thirds of its capital stock outstanding at a meeting to be held on the call of the
directors. Notice of such meeting and of the purpose thereof must be given to
each shareholder of record by registered or certified mail at least ten days prior to
the meeting. The shareholders may unanimously waive such notice and may
consent to such meeting and consolidation or merger in writing; or
b. Vote of the members of a cooperative financial institution.
(1) The proposition for a merger first must be approved by the board of
directors, and on a date set for a vote by the members either at a meeting or
by written ballot filed on or before the date, by a majority of the directors of
the organization which seeks the merger. Written notice of the proposition
and the date set for the vote must be delivered in person to each member or
mailed to each member at the address appearing on the records of the
organization. The notice must be mailed between seven and thirty days
before the date of the merger. Approval of the proposition for merger must
be made by the affirmative vote of two-thirds of the members participating in
the meeting.

(2) Each member of the cooperative financial institution is entitled to one vote
during a regular or special meeting of the membership. Voting rights for a
banking institution or financial institution are determined by applicable law.
(3) At least forty-five days before consideration of a merger, the membership
and board acting upon the proposed change must be made aware of the
merger under consideration and day and time of the meeting the change will
be acted upon.
(4) Promptly after the vote, and in no event later than ninety days thereafter, if
the proposition for merger was approved, the organization seeking the
merger shall provide the state banking board with the results of the vote,
verified by the affidavits of the president or vice president and secretary.
3. The capital stock and surplus of such consolidated banking institution must not be less
than that required under this title for the organization of a banking institution of the
class of the largest consolidating banking institution.
4. Immediately after the consolidation or merger a full report thereof, including a
statement of the assets and liabilities of the consolidated banking institution, must be
made to the commissioner by the surviving banking institution.
5. Any banking institution may without approval by any state authority convert into or
merge or consolidate with a national banking association as provided by federal law.
6. A national bank proposing to merge into a state-chartered bank shall grant the
commissioner discretionary authority to conduct an examination. The commissioner
shall set fees for such examination at an hourly rate sufficient to cover all reasonable
expenses of the department of financial institutions associated with the examination.
Fees must be collected by the commissioner and deposited in the financial institutions
regulatory fund.
### § 6-03-12. Transfer of assets on consolidation or merger.

All of the rights, property, franchises, and interests of the consolidating or merging bank or
trust company are deemed to be transferred to and vested in the bank or trust company into
which it is consolidated or merged without other instrument of transfer. The consolidated bank or
trust company shall hold and enjoy the same and all rights, property, franchises, and interests in
the same manner and to the same extent as were held and enjoyed by the bank or trust
company so consolidated or merged therewith, including the holding and performing by any
bank or trust company of any and all trust and fiduciary relations whatsoever as to and for which
either or any of the banks or trust companies so consolidating or merging may have been
appointed, nominated, or designated by any will, agreement, conveyance, or otherwise, whether
or not such trust or fiduciary relationship has come into being or has taken effect at the time of
the consolidation or transfer. The merging bank or trust company, however, shall transfer all of
its real property to the consolidated bank or trust company by good and sufficient deed of
conveyance, and for that and other purposes, it remains a body corporate until dissolved in the
manner provided in chapter 6-07.2, or if no assets or liabilities remain, until the certificate is
canceled by the secretary of state.
### § 6-03-13. Conversion to national bank - Sale of bank - Removal to new location.

An association organized to do business in any city in this state, and which has sold or
converted its business to a national bank or to any other banking association which is continued
at the same place, may not use its charter to recommence business at another place without
first obtaining the consent of the state banking board. When a banking association which has
not so converted or sold its business is located at a place where there is not, or can reasonably
project that there will not be, sufficient business for the profitable conduct of a bank, such
association may apply to the state banking board for authority to remove its business to some
other place within the state and to change its name if desired, and upon the approval of such
application, by the board and the proper amendment of the articles of incorporation, the board
may issue authority for such removal and change. No such association, however, is permitted to
remove its business to any city unless it has the full amount of capital stock and surplus
required by this title for a new organization in such city. A banking association may apply to the

state banking board for authority to move its main office to any location currently being operated
by the banking association as a facility or to another location within the same corporate city
limits.
### § 6-03-13.1. Separate facilities authorized.

Upon compliance with section 6-03-13.3, any bank organized under chapter 6-02 or 6-06.2
and under the supervision of the state banking board, and any national bank doing business in
this state, may maintain and operate separate and apart from its banking house facilities, in
addition to such service at its main banking house. Any activity incidental to the business of
banking may be transacted at a separate facility, including receiving deposits of every kind and
nature, cashing checks or orders to pay, issuing exchange, making loans, renting safe deposit
boxes, exercising fiduciary powers if authorized by the board, and receiving payments payable
at the bank. Whenever any banking institution that has been granted approval to establish and
maintain a facility deems it advisable to discontinue the maintenance of the facility, the banking
institution may apply to the commissioner or state banking board for cancellation and the
commissioner or board may order the cancellation approval within the time the board specifies.
The banking institution shall provide notice of the application as required by the board by rule.
### § 6-03-13.2. Further limitations upon facility.

Repealed by S.L. 1991, ch. 86, § 4.
### § 6-03-13.3. Facts considered for approval.

1. Whenever any bank desires to maintain and operate a facility separate and apart from
its banking house, pursuant to section 6-03-13.1, or to move a facility previously
established to another location, it shall apply to the commissioner or the comptroller of
the currency, as the case may be, for such authority and provide the commissioner
with such relevant information as the commissioner may reasonably request. In
determining whether to approve the application for such facility, the commissioner shall
take into consideration:
a. The convenience, needs, and welfare of the people of the community and area
served; and
b. The financial strength of the bank in relation to the cost of establishing and
maintaining such separate facility.
2. Upon approval by the commissioner or state banking board of a merger application
under section 6-03-11, the former main office and facilities of the banking institutions
being merged will become facilities of the surviving banking institution and the banking
institution is not required to file an application under this section.
3. If the commissioner's decision with respect to an application is unfavorable, the
applicant bank may appeal the decision to the state banking board by filing a notice of
appeal with the commissioner within twenty days after the commissioner has notified
the applicant bank of the decision.
### § 6-03-13.4. Effect of authority.

Every paying and receiving station, banking house or office, or drive-in and walkup facility
existing on August 1, 1996, must be considered a separate facility approved by the state
banking board or the comptroller of the currency, as the case may be, under this chapter. A
facility approved under this section may continue to provide from the facility those services or
functions as were permitted to be provided before August 1, 1996. National banking
associations located in this state have the same, but no greater, right by virtue of sections
### § 6-03-13.5. National bank, federal savings association, or state savings and loan

association conversion to state bank.
A national bank, federal savings association, or state savings and loan association located
in this state which follows the procedure prescribed by federal law to convert into a state bank

must be granted a state charter if it meets the provisions of the North Dakota Century Code for
the incorporation and chartering of a new state bank. Any requirement that shares must be paid
in cash may be satisfied by the exchange of shares of the converted state bank for those of the
converting national bank, federal savings association, or state savings and loan association,
which may be valued at no more than their fair cash market value. The procedure for
incorporation of a state bank may be modified by the board to the extent made necessary by the
difference between an ordinary incorporation and a conversion and no public hearing need be
held on a conversion application. A national bank, federal savings association, or state savings
and loan association proposing to convert into a state-chartered bank shall grant the
commissioner discretionary authority to conduct an examination. The commissioner shall set
fees for the examination at an hourly rate sufficient to cover all reasonable expenses of the
department of financial institutions associated with the examination. Fees must be collected by
the commissioner, transferred to the state treasurer, and deposited in the financial institutions
regulatory fund.
### § 6-03-13.6. Branch conversions.

Notwithstanding section 6-03-13.1, any bank organized under chapter 6-02, any national
bank doing business in this state, or any bank established in this state by any bank holding
company doing business in this state as of January 1, 1995, may convert a branch of a federal
savings and loan association located in this state which was in existence as of March 1, 1995,
purchased by the bank between January 1, 1995, and August 1, 1996, into a facility of the bank
to be maintained at the same branch location if the acquisition and conversion does not violate
the deposit limitations provisions contained in sections 6-08-30 and 6-08.3-03.1 and the
acquisition and conversion of the branch is approved by the appropriate regulatory agencies.
### § 6-03-14. Paying and receiving stations authorized.

Repealed by S.L. 1995, ch. 79, § 24.
### § 6-03-14.1. Maintenance of facilities of merged banks.

Repealed by S.L. 1995, ch. 79, § 24.
### § 6-03-14.2. Subsidiary depository institutions as agents.

Any bank subsidiary of a bank holding company may receive deposits, renew time deposits,
close loans, service loans, and receive payments on loans and any other obligations as an
agent for a depository institution affiliate, subject to any requirements established by the board
by rule. Notwithstanding any other law, a bank acting as an agent under this section may not be
considered to be a branch of the affiliate. However, a depository institution may not conduct any
activity as an agent that it is prohibited from conducting as a principal under any federal or state
law.
### § 6-03-15. Application to state banking board to establish stations.

Repealed by S.L. 1995, ch. 79, § 24.
### § 6-03-15.1. Temporary relocation of bank operations.

In the event of an emergency or other temporary relocation, a bank shall notify the
commissioner to relocate its main banking house or facility until the former location is repaired
to allow bank operations to resume. No notice or public hearing need be held to act upon the
temporary relocation request. The bank shall give the commissioner notice of the bank's
decision to relocate promptly and in any case within three days in the event of an emergency,
and at least thirty days prior for other temporary relocations. The notice must describe the
bank's actions and the expected duration of the bank's relocation. Unless extended by the
commissioner, a bank's authority to change the bank's location under this section may not
exceed sixty days. Notice of the bank's intention to temporarily relocate must be provided to
customers at least ten days before the relocation.

### § 6-03-15.2. Operations during epidemic or emergency - Notice to commissioner.

A bank that operates physical facilities in any area that is experiencing an epidemic or other
emergency may adjust the bank's operations in any manner that is reasonable to protect the
bank's customers, employees, assets, or business. Under this section a bank may temporarily
close or relocate offices, employees, or operations; restrict access to offices or services; and
change the manner in which the bank provides banking services. A bank shall notify the
commissioner of any actions the bank takes under the authority of this section. The bank shall
give the commissioner notice promptly and in any case within three business days of the bank's
decision to adjust the bank's operations. The notice must describe the bank's actions and the
expected duration of the bank's adjusted operations. Unless extended by the commissioner, a
bank's authority to change the bank's operations under this section may not exceed sixty days.
### § 6-03-16. Investigation and procedure on application to establish station.

Repealed by S.L. 1995, ch. 79, § 24.
### § 6-03-17. Transaction of business at and regulation of station.

Repealed by S.L. 1995, ch. 79, § 24.
### § 6-03-18. When station must be discontinued - Revocation of permit.

Repealed by S.L. 1995, ch. 79, § 24.
### § 6-03-19. Cancellation of station permit on application to board.

Repealed by S.L. 1995, ch. 79, § 24.
### § 6-03-20. Impairment of capital - Notice to commissioner - Penalty.

The president, cashier, or other officer in active charge of any state banking association
shall notify the commissioner immediately by certified mail of any impairment of capital or
reduction of capital stock thereof, and any such officer failing so to do is guilty of a class B
misdemeanor.
### § 6-03-21. Impairment of capital - Dividends stopped - Action by board - Restoration.

Whenever the capital of any state banking association becomes impaired or the capital
stock reduced below the amount required by this title or by the articles of incorporation, no
dividend may be declared nor distribution of profits made thereafter while any debts of the
association remain unsatisfied, nor until the impairment or deficiency is made good. Whenever it
appears that the capital of any state banking association has become impaired or its capital
stock reduced, the commissioner shall report the same to the state banking board immediately.
The commissioner thereupon shall issue and enforce the necessary order restraining the
declaring of dividends and requiring that the impairment or deficiency be made good. The
impairment or deficiency must be made good within sixty days thereafter, or the commissioner,
upon the order or direction of the state banking board, may take charge of the state banking
association and proceed to liquidate the association as in case of insolvency.
### § 6-03-22. Impairment of capital - Stock assessments - Notice and limitation.

When the capital of any association becomes impaired or when its capital stock is reduced
below the amount required by this title or its articles of incorporation, the board of directors of
the association has the power, and it is its duty, immediately to make a pro rata assessment
upon all the outstanding stock of the association to make good such impairment or deficiency,
and to serve notice thereof by registered or certified mail upon each stockholder of record,
directed to such stockholder at the stockholder's address last known to the board. Any such
assessment or assessments may not exceed in the aggregate one hundred percent of the face
value of the stock in the first year and may not exceed twenty-five percent in any succeeding
year. The notice must specify the date on which the assessment is due and payable, and such
date may not be less than ten days nor more than thirty days after the date of mailing the notice
of assessment.

### § 6-03-23. Capital stock may be increased.

Any association may provide, either by its articles of incorporation, by subsequent
resolution, or by written agreement of the holders of a majority of its stock, for an increase in its
capital stock from time to time subject to the limitations of this title. No increase in capital stock
is valid until the whole amount has been paid in, in cash, and such payment certified under oath
by the president or cashier of the association to the secretary of state, nor until the secretary of
state executes a certificate specifying that this chapter has been complied with, the amount of
the increase in capital stock, and that the increase has been paid in as part of the capital of the
association, nor until a copy of such certificate has been filed with the state banking board.
### § 6-03-24. Capital stock may be reduced.

Any association may reduce its capital stock to any sum not less than the amount required
to authorize the formation of any association by vote of its shareholders owning two-thirds of its
stock. No such reduction may be made, however, until the amount thereof proposed is reported
to the state banking board and its approval in writing obtained. No such reduction may affect the
liability of shareholders for any debts of the association incurred prior to the reduction, and
every such reduction must be certified to and a copy of the certificate filed in the same manner
as for an increase of capital stock before it becomes valid.
### § 6-03-25. Approval of increase or reduction by stockholders - Notice of stockholders'

meeting.
An increase or reduction of the capital stock of any association is not valid unless approved
by the stockholders of the association at a meeting called for that purpose. Notice of the time
and place of the meeting stating its object and the amount to which it is proposed to increase or
reduce the capital stock of the association must be served personally or by registered or by
certified mail on each stockholder of the association at least thirty days prior to the time set for
such meeting. The notice must be given to stockholders whose places of residence are
unknown or who are not residents of this state by publication of the notice at least once prior to
the meeting in a legal newspaper of the county in which the principal office of the association is
situated. A vote in favor of an increase in capital stock is not effective until the proceedings of
the meeting showing the names of all of the stockholders voting for the increase and the amount
of stock owned by each have been entered upon the records of the association.
### § 6-03-26. Meeting not required when all stockholders agree in writing to increase or

reduction.
If all the stockholders of an association agree in writing to an increase or reduction in its
capital stock, no meeting need be called for the purpose of effecting the increase or reduction.
The directors shall file such written agreement, together with the certificate required under
sections 6-03-23 and 6-03-24, with the secretary of state, who thereupon shall issue the
secretary of state's certificate that the provisions of this title have been complied with.
### § 6-03-27. List of shareholders to be kept and filed.

1. The president of every banking institution formed pursuant to the provisions of this
title, at all times, shall keep a true and correct list of the names and post-office
addresses of all shareholders of such banking institution, with the amount of stock held
by each, the date of transfer, and to whom transferred, which list shall be verified on
the thirty-first day of December of each year. A copy of the verified list shall be filed in
the office of the commissioner on the same date.
2. The commissioner may request at least annually a list of all shareholders of a bank
holding company controlling a state-chartered banking institution.
### § 6-03-28. Shares - Value and transfer - Shareholder's obligation.

The capital stock of each association must be divided into shares of not less than ten
dollars each and is deemed personal property and transferable on the books of the association
in such manner as may be prescribed by its bylaws or articles of incorporation. A transfer of

shares is not valid except between the parties to the transfer until the transfer is entered upon
the books of the association and is not valid against the association or any creditor of the
association while the registered holder of the shares is indebted to the bank as principal debtor,
surety, guarantor, or otherwise. No dividend, interest, or profit may be paid on any stock of the
bank or bank holding company as long as any past-due liability of the shareholder continues,
but such dividend, interest, or profit must be retained by the association and applied to the
discharge of the past-due liability. Every person or corporation becoming a shareholder by any
transfer shall succeed, in proportion to the shares acquired by that shareholder, to all rights and
liabilities of prior holders of the shares existing by reason of ownership of the shares and no
change may be made in the articles of incorporation or bylaws of the association by which the
rights, remedies, or security of its existing creditors shall be impaired.
### § 6-03-29. Responsibility of shareholders - Double liability.

Repealed by S.L. 1953, ch. 96, § 3.
### § 6-03-29.1. Responsibility of shareholders.

Repealed by omission from this code.
### § 6-03-30. Shareholder's liability - Limitation - Publication of notice.

Repealed by omission from this code.
### § 6-03-31. Delinquent stock - Sale - Notice.

Whenever any shareholder or shareholder's assignee fails to pay any assessment of the
stock when the assessment is required to be paid, the board of directors of the association may
sell at public or private sale, whichever appears to it best for all concerned, so much of the
stock, at the best price obtainable, as is necessary to pay the assessment and costs of the sale.
The sale must be made on a day certain to be fixed by the board not less than thirty days after
the day set for the payment of the assessment. Notice of the time and place of the sale must be
given to the shareholder in the manner following:
1. In the event of a private sale, by forwarding the notice to the person or persons in
whose name the stock stands on the books of the association, at least twenty days
prior to the date fixed for the sale, by registered or certified mail addressed to the
shareholder's address last known to the board of directors.
2. In the event of a public sale, by one publication of a notice thereof, at least twenty
days prior to the date fixed for such sale, in a newspaper published in the county
wherein the association is located.
A sale of stock as herein provided effects an absolute cancellation of the outstanding certificate
or certificates in the hands of the delinquent shareholder, or the delinquent shareholder's
assignee or pledgee, and a new certificate must be issued by the association and delivered to
the purchaser for the number of shares purchased, and a new certificate for the remaining
shares, if any, must be issued to the shareholder and delivered to the shareholder, or the
shareholder's assignee or pledgee, upon the surrender of the original certificate or certificates
involved. Any proceeds of such sale remaining after the delinquent assessment and the
expenses of the sale have been fully paid must be paid over to the shareholder, or the
shareholder's assignee or pledgee.
### § 6-03-32. When no bids for purchase of delinquent stock.

If no bidder who will pay to the association the amount due on the stock and the costs and
expenses of sale for the transfer of the stock to that person appears at the time and place set
for the sale, no sale may be made, and all the shares of the shareholder must be forfeited to the
association together with all amounts previously paid thereon. The association forthwith shall
cancel such shares upon its books and records and shall deduct the same from its capital stock
and immediately shall notify the commissioner in writing of the action taken. The record of the
association's stock book showing the sale or cancellation of stock is prima facie evidence of the
regularity of the proceedings of the sale or cancellation.

### § 6-03-33. Loans on shares prohibited - Disposal of stock acquired.

No association or banking institution may make any loan or discount on the security of the
shares of its own stock or of the stock of any holding company which controls the association or
banking institution, nor be a purchaser or holder of any such shares, unless such security or
purchase is necessary to prevent loss upon a debt previously contracted in good faith. Stock so
acquired must be sold or disposed of at public or private sale within thirty days after it is
acquired, and if not sold within such time, it must be canceled and deducted from the capital
stock of the association, banking institution, or holding company, and the association, banking
institution, or holding company shall notify the commissioner in writing of such cancellation. For
the purpose of this section, "control" means ownership, or control directly, indirectly, or through
the actions of one or more persons of the power to vote twenty-five percent or more of any class
of voting securities of the association or banking institution, of the power to control in any
manner the election of a majority of the directors of the association or banking institution, or to
direct the management or policies of the association or banking institution.
### § 6-03-34. Surplus fund required - Dividends only out of earnings not required for

surplus.
The board of directors of any association organized under this title may declare and pay
dividends out of the net profits of the association subject to the limitations of this chapter. Except
for cooperative financial institutions, every such association, as its board of directors deems
advisable, shall ascertain, set apart, and convert into a surplus fund at least fifty percent of its
net earnings until such surplus fund equals one hundred percent of its common stock, and no
dividend may be declared upon its stock except from the remaining fifty percent of its net
earnings.
### § 6-03-35. Surplus fund exempt from taxation.

The surplus fund of any association organized under this title, in an amount not exceeding
one hundred percent of its capital stock, is exempt from taxation and must not be taken into
account in determining the taxable value of the shares of stock of the association.
### § 6-03-36. Capital must be maintained - Dividends prohibited under certain conditions.

1. No director or officer of an association may permit the impairment of an association's
capital by the payment of dividends or otherwise.
2. Except as provided in subsection 4, no dividend may be paid which exceeds the
following amount:
a. An association's net profits for the period beginning January first of the year for
which the proposed dividends are declared and ending as reported in the most
recent quarter-end call report; plus
b. The association's net profits for the preceding two calendar years as reported in
the year-end call report; less
c. Any required transfers to:
(1) Surplus; and
(2) Funds for the retirement of preferred stock, capital notes, and debentures.
3. For the purpose of this section, "net profits" means the institution's net profits after
taxes prior to extraordinary items less dividends as reported on the call reports.
4. Payment of a dividend which exceeds the calculated amount in subsection 2 may be
made only with prior approval of the commissioner or state banking board.
### § 6-03-37. Reserve funds.

Every banking association shall have on hand at all times in available funds an amount
which meets the requirements of the board of governors of the federal reserve system.
### § 6-03-37.1. Bank loans of excess reserves.

Obligations representing loans from one business day to the next to any state-chartered
bank or national banking association of excess reserve balances from time to time maintained

under the provisions of section 6-03-37, as amended, may not be deemed loans or additions to
any loans for the purposes of section 6-03-59.
### § 6-03-38. Assets not to be used in other business - Exceptions - Penalty.

Except as otherwise authorized under this title, a bank may not employ its money or other
assets as principal, directly or indirectly, in trade or commerce, nor may a bank employ or invest
any of its assets or funds in the stock of any corporation, limited liability company, bank,
partnership, firm, or association. However, to the extent a bank subject to the laws of the federal
government is permitted to do so, a state bank may purchase shares of stocks, or any other
type of securities offered by small business investment companies organized and licensed
under Public Law No. 85-699, known as the Small Business Investment Company Act of 1958
[72 Stat. 689; 15 U.S.C. 661 et seq.], and the Small Business Equity Enhancement Act of 1992
[Pub. L. 102-366; 106 Stat. 1007-1020; 15 U.S.C. 661 et seq.], and any amendments thereto, or
chapter 10-30, but in no event may any state bank hold securities of small business investment
companies in an amount determined by the state banking board, but in no event more than ten
percent of the bank's capital and surplus. A bank may not invest the bank's assets or funds in
speculative margins of stock, bonds, grain, provisions, produce, or other commodities, except
that it is lawful for a bank to make advances for grain or other products in store or in transit to
market. A bank may invest in subsidiary organizations, when the activities of such organizations
are incidental or complementary to the bank's activities, with the specific approval of the state
banking board for each such subsidiary. The state banking board has the same power to make
rules for the subsidiary organizations, and to examine the organizations' records and affairs, as
it has for other financial corporations under section 6-01-04. If the state banking board
determines that such investments would be detrimental to the interests of a bank's depositors,
the state banking board may direct the bank to divest itself of such subsidiary investments. Any
officer, director, or employee of any bank who invests or uses the bank's funds contrary to this
title is guilty of a class A misdemeanor.
### § 6-03-39. Investment in federal reserve bank stock authorized.

A bank shall have authority to invest such part of its funds in stock of the federal reserve
bank of this district as may be necessary to permit the bank to become a member of the federal
reserve association, and such stock may be carried as a part of the bank's assets.
### § 6-03-40. Investment in capital stock of certain agricultural credit corporations

authorized - Limitations.
Repealed by S.L. 1947, ch. 108, § 1.
### § 6-03-40.1. Liquidation of investments in agricultural credit corporations - Penalty.

Repealed by S.L. 1969, ch. 108, § 1.
### § 6-03-41. Issuance of capital notes or debentures - Not subject to double liability.

With the approval of the commissioner, any banking institution, through action by its board
of directors taken at any time and without requiring any action by its stockholders, may issue
and sell its capital notes or debentures. All capital notes or debentures are subordinate and
subject to the claims of depositors, and at the time of issue may be subordinated and subjected
to the claims of other creditors, but in no case may be subject to assessment. The holders of
capital notes or debentures as such are not responsible individually for any debts, contracts, or
engagements of the issuing institution.
### § 6-03-42. Capital notes or debentures included in capital - Retirement.

The term "capital" as used in this title embraces the amount of outstanding capital notes and
debentures legally issued by any banking institution. The capital stock of a banking institution is
unimpaired when the amount of such capital notes and debentures as represented by sound
assets exceeds the impairment as found by the commissioner. The commissioner must approve

of any retirement of any capital notes or debentures and may require the bank to issue some
other form of capital before retiring the capital notes or debentures.
### § 6-03-43. Preferred stock authorized - Notice to and consent of stockholders.

Any banking institution, with the consent of the commissioner and upon the written consent
of all of its stockholders, or by vote of its stockholders owning a majority of the stock of such
institution, may issue preferred stock of one or more classes in such amount, upon such
conditions and limitations and with such par value as shall be approved by the commissioner.
When it is necessary to call a meeting of the stockholders to approve the issuance of preferred
stock, the board of directors of the institution shall cause notice of the meeting to be served on
each stockholder by registered or certified mail addressed to the stockholder's last-known
post-office address at least sixty days prior to the meeting. After an institution has been
authorized to issue preferred stock, its board of directors may make necessary amendments to
the articles of incorporation of the institution. Notice to and approval by the stockholders of an
institution which has not issued common stock is not required before preferred stock may be
issued.
### § 6-03-44. Preferred stock included in capital - Reduction of common stock.

The preferred stock lawfully issued by a banking institution must be included in determining
whether such banking institution has complied with the minimum capital stock requirements
provided in this title. Such preferred stock may be used in the capital structure of such institution
in the reduction of the common stock or in addition thereto. This section may not be construed
as in any manner decreasing the amount of capital required of an institution under the laws of
this state.
### § 6-03-45. Preferred stock - Rights of holders - Nonassessable.

The holders of preferred stock are entitled to all rights and privileges and are subject to all
limitations and restrictions with respect to dividends, voting, conversion rights, control of
management, retirement and replacement of stock, rights and preferences in case of liquidation,
and such other rights or privileges as may be fixed and provided in the articles of incorporation
of the issuing institution. Preferred stock is nonassessable, and the holders thereof individually
are not responsible as such holders for any debts, contracts, or engagements of the bank.
### § 6-03-46. Exchange of preferred stock for capital notes or debentures.

Any banking institution, after first obtaining the consent and approval of the commissioner,
may exchange its preferred stock for its capital notes or debentures.
### § 6-03-47. Investment in loans and obligations secured by federal or state government.

Banks, trust companies, the Bank of North Dakota, building and loan associations,
insurance companies, and other organizations in this state whose mortgage lending is regulated
by law, or that are duly qualified federal housing administration mortgagees, are authorized to
make, buy, or sell any loan, advances of credit, and obligations representing loans and
advances of credit that are insured or guaranteed, or where there is a commitment to insure or
guarantee, in part or in full, or conditionally, by the United States, its instrumentalities, this state,
or its instrumentalities.
### § 6-03-47.1. Investment in loans secured by federal or state government.

Repealed by S.L. 1969, ch. 112, § 1.
### § 6-03-47.2. Investments of state banks.

In addition to the other powers authorized by law under this title, any state banking
association may invest its funds in:
1. Bonds, notes, or debentures of any corporation that have been rated in one of the four
highest rating categories by a nationally recognized statistical rating organization
registered with the securities and exchange commission. In the case of different

ratings from different rating organizations, the lower rating applies. If a nationally
recognized statistical rating organization has not rated the security, the bank shall
determine that the security is the credit equivalent of a security rated in the four
highest rating categories by a nationally recognized statistical rating organization. This
includes documentation demonstrating that the issuer of the security has an adequate
capacity to meet financial commitments under the security for the projected life of the
asset or exposure and the issuer has adequate capacity to meet financial
commitments if the risk of default by the obligor is low and the full and timely
repayment of principal and interest is expected. The aggregate par value of
investments issued by any one corporation may not exceed twenty-five percent of
unimpaired capital and surplus at the time of purchase.
2. Equity and debt instruments of corporations or projects designed primarily to promote
community welfare such as economic rehabilitation and development of low-income
areas, subject to approval and regulation of the state banking board but not to exceed
for the total of all investments under this subsection, ten percent of the combined
capital and surplus of the banking association.
3. Investments, in either equity or debt instruments or securities, offered by small
business investment companies organized and licensed by the small business
administration under the Small Business Investment Company Act of 1958 [Pub. L.
85-699; 72 Stat. 689; 15 U.S.C. 661 et seq.], and the Small Business Enhancement
Act of 1992 [Pub. L. 102-366; 106 Stat. 1007-1020; 15 U.S.C. 661 et seq.], and any
amendments thereto.
### § 6-03-47.3. Bank investment in investment company shares.

Financial institutions under the jurisdiction of the state banking board may invest in shares
of investment companies registered under the Investment Companies Act of 1940 and which
invest only in investments otherwise permitted under this chapter. The state banking board may
issue rules and regulations governing investments by North Dakota financial institutions in
shares of registered investment companies.
### § 6-03-47.4. Bank investment in federal agricultural mortgage corporation stock.

Financial institutions under the jurisdiction of the state banking board may invest in stock
and equity instruments of the federal agricultural mortgage corporation. The state banking board
may adopt rules governing investments by North Dakota financial institutions in the stock and
equity instruments of the federal agricultural mortgage corporation.
### § 6-03-48. Investment in notes or bonds secured by insured mortgage - Debentures of

federal housing administrator authorized.
Banks, savings banks, trust companies, savings and loan associations, executors,
administrators, guardians, trustees, and other fiduciaries, the state of North Dakota and its
political subdivisions, institutions, and agencies thereof, and all other persons, associations, and
corporations subject to the laws of this state may invest the funds and moneys in their custody
or possession eligible for investment in notes or bonds secured by mortgage or deed of trust
insured by the federal housing administrator, in debentures issued by the federal housing
administrator, and in securities issued by national mortgage associations.
### § 6-03-49. Federal housing administrator - Insured bonds and notes - Debentures -

Security for deposits.
Notes and bonds insured and debentures issued by the federal housing administrator are
eligible as collateral to secure the deposit of public or other funds, as deposits with any public
official or department, and for investment of capital, surplus, reserve, or other funds where such
investment is limited to designated securities.

### § 6-03-49.1. Bank investment in service corporation - Service corporation services and

activities.
1. Subject to the approval of the state banking board, any bank may invest in a service
corporation and provide services and activities through the service corporation, if:
a. The service corporation is a United States corporation and is organized as a bank
service corporation having its principal place of business in the United States.
b. The investment in stocks, bonds, debentures, or other obligations does not
exceed ten percent of paid-in and unimpaired capital and unimpaired surplus in
each corporation.
c. The service corporation is operated exclusively for the purpose of providing for
such bank and one or more other banks, bank services which the banks would
otherwise be required or permitted to provide for on an individual bank basis. The
term bank services in this section includes:
(1) Check and deposit sorting and posting.
(2) Computation and posting of interest and other credits and charges.
(3) Preparation and mailing of checks, statements, notices, and similar items.
(4) Any other clerical, bookkeeping, accounting, statistical, or similar functions
performed by a bank.
(5) Owning and administering a credit card program for customers of banks.
(6) Engaging in activities incidental to banking services.
(7) Other activities that further or facilitate the corporate purposes of a bank or
subsidiaries of a bank, if the services may be lawfully performed by both its
national bank shareholders under the laws of the United States and its state
bank shareholders under the laws of this state.
2. Payment for rent earned, goods sold and delivered, or services rendered prior to the
making of the payment is not an investment under this subsection. A bank service
corporation may not accept deposits.
### § 6-03-50. Exceptions from restrictive provisions.

No law of this state requiring security upon which loans or investments may be made, or
limiting the making of loans to shareholders or members of the lender, or prescribing the nature,
amount or forms of such security, or prescribing or limiting interest rates upon loans or
investments, or prescribing or limiting the period for which loans or investments may be made,
may be deemed to apply to loans or investments made pursuant to sections 6-03-47, 6-03-48,
and 6-03-49.
### § 6-03-51. Borrowing, normal and emergency - Limitations.

Any state banking association has power to borrow money subject to the limitations of this
chapter. Money borrowed from correspondent banks must be evidenced by the promissory note
or notes of the borrowing association, and no such association may issue its certificate of
deposit for money so borrowed or otherwise conceal the true nature of the transaction. Nothing
herein affects the right of a state banking association to receive bona fide deposits from banks
or other persons.
### § 6-03-52. Borrowing and rediscounting - Authorization by directors.

No banking association may borrow money, rediscount paper with recourse on it, or pledge
securities for money borrowed or rediscounted paper, except in accordance with express
authority conferred by resolution of its board of directors indicating the officer or officers who are
authorized to borrow, rediscount, and pledge and the extent of their authority. Every such
resolution must be entered in the minute book of the association, but a copy of such resolution
certified as such by an officer of the association, authenticated by the seal of the association
and accepted and acted upon by another bank or other lender in good faith is conclusive
evidence of the existence and terms of the resolution.

### § 6-03-53. Borrowing and rediscounting - Report required.

Whenever a state banking association borrows money or rediscounts with recourse such
association shall immediately make a full written report of the transaction to the commissioner
upon the commissioner's request, which report must include a full description of all collateral
security given or to be given by such association for the credit obtained.
### § 6-03-54. Pledge - Ratio to assets.

It is unlawful for any state banking association to pledge or hypothecate more than one and
one-half dollars of the face value of any of its assets for each one dollar of money borrowed,
except with written authority from the commissioner.
### § 6-03-54.1. Pledges of bank securities to secure repayment of deposits by a federally

recognized Indian tribe.
A bank, upon the deposit with it of funds by a federally recognized Indian tribe, or an officer,
employee, or agent thereof in that person's official capacity, may give security for the
safekeeping and repayment of the funds deposited by a pledge of securities of the same kind
and to the same extent as is authorized by section 21-04-09 in the case of deposits of public
funds by public corporations.
### § 6-03-55. Powers of pledgee of bank assets.

Holders of pledged or hypothecated notes or other evidences of indebtedness pledged by
state banking associations have the right to collect and enforce payment, and to renew or
extend the time of payment thereof for a period not longer than fifteen months, if no endorser,
guarantor, or joint maker would be released by such renewal or extension. Such holders also
have the right:
1. To accept from the makers of such pledged or hypothecated notes or other evidences
of debt, security, or additional security for the payment thereof.
2. To execute and give discharges and releases of instruments and securities to the
maker upon payment in full thereof.
3. To sell, assign, and transfer any note with the security pledged therefor.
The pledgee is entitled to be reimbursed from the pledged assets, or from the proceeds of the
sale thereof, for the reasonable and necessary expenses incurred and expended in collecting,
renewing, securing, and otherwise protecting the assets pledged or hypothecated to the
pledgee.
### § 6-03-56. Unlawful borrowing, rediscounting, endorsing, pledging by officers,

employees, and accessories - Penalty.
Any officer, director, agent, or employee of any state banking association who borrows
money for, or on behalf or in the name of such association or obligates any such association
upon rediscounted paper, or pledges any of the assets of such association in violation of the
provisions of this chapter is guilty of a class A misdemeanor and is personally liable to the
association for any loss it sustains on account of such illegal action, but no such violation may
affect the validity of any loan, endorsement, or pledge in the hands of any federal reserve bank
or federal lending agency or commercial bank correspondent who loaned money to the
association or discounted its paper in good faith and in reliance upon a certified copy of a
resolution complying with section 6-03-52.
### § 6-03-57. Foreclosure of pledge contracts.

Except as otherwise provided in chapter 6-07.2, no pledge made by an association may be
foreclosed except by an action in equity brought in the district court of the county in which the
pledgor association is located, except where assets are pledged by a state banking association
in order to secure borrowed money or the obligation of the association on rediscounted paper,
the rights of the pledgee must be determined by the terms of the agreement of pledge, and if the
pledged assets are outside of this state, the foreclosure of the pledge is governed by the laws of
the state where the pledge is located.

### § 6-03-58. Unlawful rediscounts, borrowings, and pledgings.

It is unlawful for any state banking association, either directly or indirectly, to make any
rediscount or contract to borrow money, nor may it borrow money, nor pledge or hypothecate,
nor contract to pledge or hypothecate, any of its assets except in accordance with the provisions
of this chapter.
### § 6-03-59. Loan limitation to one borrower or concern.

The total direct, indirect, or contingent liability of any borrower to any state banking
association shall not exceed at any time twenty-five percent of the association's tier 1 capital as
of the most recent report of condition and income. For the purpose of this section, the total
liability of a borrower includes the liabilities of any separate borrowers for which the repayment
of separate loans or extensions of credit is substantially from the same source and any credit
exposure to a borrower arising from a derivative transaction, repurchase agreement, reverse
repurchase agreement, securities lending transaction, or securities borrowing transaction
between the state banking association and the borrower.
### § 6-03-59.1. Leasing of personal property - Limitation on term and amount.

A bank may become the owner and lessor of personal property upon the specific request of
and for the use of a customer. The term of the lease may not exceed twenty years and all such
leases must provide for the payment of at least annual rentals, the total of which must at least
equal the cost to the bank of the personal property so leased. The total leasing obligation or
rentals to a bank will be a part of the total liability limitations of any borrower as set forth in
section 6-03-59.
### § 6-03-59.2. Lease financing of public facilities.

A state-chartered bank may purchase or construct a municipal building, school building, or
other similar public facility and, as holder of legal title, lease the facility to a municipality or other
public authority having resources sufficient to make all rental payments as they become due.
The lease agreement must provide that the lessee will become the owner of the building or
facility upon the expiration of the lease. All leases provided in accordance with this section must
be subject to the bank's legal lending limit.
### § 6-03-60. Loans to and purchases from directors, executive officers, and principal

shareholders - Restrictions - Conditions - Penalty - Civil liability.
At no time may any combination of loans or extensions of credit or both made by a state
banking association to an officer of that association exceed the limitation on loans to one person
or concern specified in section 6-03-59, federal law, or federal rule.
No director, officer, or employee of a bank shall sell to such bank, directly or indirectly, any
mortgage, bond, note, stock, or other property whatsoever without first obtaining the written
approval of the board of directors. The action of the board of directors in connection with the
loans and discounts required under this section shall be made a matter of permanent record in
the minute books of the banking association. Any shareholder, officer, or director of any banking
association who knowingly shall violate the provisions of this section shall be held liable in the
person's personal and individual capacity for all loss or damage which the association or any
person shall sustain in consequence thereof and shall be guilty of a class B misdemeanor. The
commissioner may require, at any time, the payment or repurchase of loans, securities, or
obligations herein referred to.
### § 6-03-61. Excessive loan - Validity - Penalty - Personal liability.

Whenever a state banking association allows any person, copartnership, or corporation to
become indebted to it, directly or indirectly, in excess of the amount, exclusive of interest,
permitted by this title, the officer, director, or employee thereof willfully permitting or approving
such loan is guilty of a class B misdemeanor, and in addition thereto, is liable personally to the
association for the amount of such loan in excess of the statutory limit. Unauthorized loans,
however, are not invalid.

### § 6-03-62. Interest on loans - Rate.

An association may demand and receive for loans on personal security, or for discounting
notes, bills, or other evidences of debt, such rate of interest as may be agreed upon, not
exceeding the amount authorized by law to be contracted for, and it may receive such interest
according to the ordinary usage of banking associations and for not more than one year in
advance.
### § 6-03-63. Interest on deposits - Rates payable - Penalty.

No state banking association may pay interest on deposits, directly or indirectly, at rates
greater than authorized by the state banking board. The board's authorization of interest rates is
not subject to the public notice and public hearing requirements of chapter 28-32. Any officer,
director, or employee of any association violating the provisions of this section, directly or
indirectly, is guilty of a class B misdemeanor.
### § 6-03-64. Payment of deposits made by fiduciaries, officers, minors, and associations.

Deposits made by a person as executor, administrator, guardian, conservator, or in any
other representative capacity or official position, with a bank, are payable to that person in such
capacity, or if made to an account upon which a minor may order payments as an account
owner, may be paid to the minor although the minor has no guardian or conservator or if the
minor has a guardian or conservator, it is not necessary to obtain the consent of the guardian or
conservator to such payment, but a payment order or receipt or acquittance authorized by the
minor is valid and binding. Deposits made by a corporation, association, or society are payable
to any person authorized by its board of directors or trustees to receive the same.
### § 6-03-65. Deposit in trust - To whom paid.

Whenever any deposit is made with any banking association by any person in trust for
another and no other or further notice of the existence and terms of a legal and valid trust has
been given in writing to the bank, in the event of the death of the trustee, the deposit, or any part
thereof, together with the dividends or interest thereon, may be paid to the person for whom the
deposit was made.
### § 6-03-66. Deposit in two or more names - To whom paid.

Repealed by S.L. 1973, ch. 257, § 82.
### § 6-03-67. Appropriation of deposits unlawful - Exception - Liability therefor.

Except as provided in sections 6-07.2-09 and 30.1-31-20, it is unlawful for any banking
association to charge any claim which it might have, or the claim of any other person, against a
deposit made with the association, or to appropriate a deposit or any part of the deposit to the
payment of any debt to the association, without legal process or the consent of the depositor.
Any banking association that violates this section is liable to the party aggrieved for any
damages caused by the violation.
### § 6-03-67.1. Operation without federal deposit insurance prohibited - Liability - Penalty.

No state banking association shall, after July 1, 1978, engage in the business of banking
without securing and continuing in force federal deposit insurance corporation insurance of
deposits. Any officer or director of any state banking association who violates this section is
guilty of a class A misdemeanor and shall be personally liable to any person aggrieved for any
damages caused by the violation.
### § 6-03-68. Collection of negotiable instruments by bank - Liability for negligence.

Repealed by S.L. 1965, ch. 296, § 32.

### § 6-03-68.1. Settlement of check presented by or through federal reserve bank or Bank

of North Dakota.
Except as to any check sent to it as a special collection item, no bank may settle any check
drawn on it otherwise than at par when such check is presented by or through a federal reserve
bank or the Bank of North Dakota.
### § 6-03-69. Report of examining committee.

The board of directors shall submit to the commissioner a report of the examining
committee on forms provided by the commissioner. The report must reflect the results of a
careful and thorough examination of the assets of the bank, including loans and discounts of
every nature and the securities and collaterals belonging to the bank. The valuation of the
assets of the bank must be compared with the records of the bank. The report must be made a
part of the minutes of a regular meeting of the board of directors. The commissioner may refuse
to accept the report if found to be not in accordance with acceptable accounting principles.
Any of the following methods may be used to conduct the examination required by this
section:
1. Examination by the board of directors or its examining committee. When this method is
employed, the examination must be conducted and the report submitted in July of
each year.
2. Examination on an annual basis by an independent certified public accountant or firms
composed of such accountants, or auditors of the bank's holding company, if any.
3. Examination by an autonomous internal audit control system. The individual directing
the internal audit control system shall submit to the board of directors each quarter an
interim report as to the degree of compliance with the internal audit control system and
shall express an opinion as to the adequacy of the internal controls. A complete report
must be submitted annually to the board of directors.
### § 6-03-70. Reports - Regular and special - Publication - Penalty.

Every state banking association shall respond to calls each year, the number to be
determined by the commissioner. The commissioner shall prescribe the forms for such reports
which must be the same forms as those for similar reports called by the federal deposit
insurance corporation. The reports must exhibit in detail, under appropriate headings, the
resources and liabilities of the association at the close of business on a past day specified by
the commissioner, which must be the same day on which similar reports are required by the
federal deposit insurance corporation. Each report must be verified by the oath of the president
or the cashier and attested as correct by at least two of the directors and must be transmitted to
the commissioner within thirty days after receipt of the request for the same. The commissioner
may request an amended call for reports filed in error and may require republication of the call
report containing material errors. At the discretion of the commissioner, a call may be complied
with by submission of a photocopy of the call report submitted to the federal deposit insurance
corporation or federal reserve bank or a printout retrieved from computer facilities in the
department of financial institutions and connected to those of the federal deposit insurance
corporation. The commissioner may call for a special report from any association whenever in
the commissioner's judgment the same is necessary to obtain complete knowledge of the
condition of the association. Every association which fails to make and transmit any report
required by this section shall forfeit and pay to the state treasurer for deposit in the financial
institutions regulatory fund a penalty of two hundred dollars for each delinquency. The
commissioner may waive the penalty for reports filed late, not exceeding three business days
beyond the due date required by this section.
### § 6-03-71. Bonds of officers and employees.

All officers and employees of any state banking association, before entering upon their
duties, shall furnish a bond to the association in the sum and upon the conditions as required by
the board of directors in keeping with rules established by the state banking board. All bonds
must be approved by the board of directors of the association and are subject to the approval of

the commissioner. A record of the approval of the bonds by the board of directors of the
association must be made on the records of the bank, and the bonds must be filed with the
commissioner. Stockholders of the banks are not eligible as bondsmen for the officers.
### § 6-03-72. Certification of checks, drafts, and orders - Penalty.

It is unlawful for an officer, clerk, or agent of any state banking association to certify any
check, draft, or order drawn upon the association unless the person drawing the same has on
deposit with the association at the time of such certification an amount of money equal to the
amount specified therein, and upon such certification, the amount of such certified check, draft,
or order must be immediately charged against the account of such drawer. Any officer or
employee of any banking association who willfully violates the provisions of this section is guilty
of a class B misdemeanor.
### § 6-03-73. Deferred posting authorized.

Repealed by S.L. 1965, ch. 296, § 32.
### § 6-03-74. Definitions.

Repealed by S.L. 1965, ch. 296, § 32.
### § 6-03-75. Varied by agreement.

Repealed by omission from this code.
### § 6-03-76. Records search reimbursement.

Any financial institution authorized to do business in this state must be reimbursed as
follows for all records searches done at the request of any state agency or any branch of the
state government except the department of health and human services. Further, any federal
agency or any branch of the federal government must also make such reimbursement if
authorized to do so:
1. For search and processing time at the rate of thirty dollars per hour per person,
computed on the basis of seven dollars and fifty cents per quarter hour, limited to the
total amount of personnel time spent in locating, retrieving, reproducing, packaging,
and preparing for shipment documents or information requested.
2. For making copies of duplicates of required or requested documents at the rate of
fifteen cents per page.
3. For making copies of photographs, films, and other materials at the actual cost
incurred by the financial institution.
The financial institution must be reimbursed for all actual mailing or transportation expenses
incurred in conveying the requested or required materials to the requesting agency. The
reimbursement provisions of this section shall not apply to standard confirmations.
