TITLE 26

BANKS AND BANKING

CHAPTER 7

LIMITATIONS ON LOANS, INVESTMENTS, AND PRACTICES

26-702.  Bank stock. (1) Except as provided in subsection (2) of this section, no bank shall accept as collateral, nor make any loans or discounts on the security of nor purchase any shares of its own capital stock. No bank shall purchase the shares of any other bank wherever organized, or situated, except stock of federal reserve banks. A bank may acquire a security interest in or purchase its own stock if the acquisition is necessary to prevent loss upon a debt previously contracted in good faith and the stock so purchased or acquired shall within six (6) months from the date of acquirement be sold or disposed of at public or private sale. After the expiration of six (6) months any such stock shall not be considered as a part of the assets of such bank.

(2)  With the written approval of the director, a bank may redeem or otherwise purchase shares of its own capital stock if the director finds that such redemption or purchase does not impair the capital structure of the bank as required by section 26-205, Idaho Code, is for legitimate corporate purposes and not for speculation, is not for an unreasonable price, does not conflict with the articles of incorporation or the bylaws of the bank, and is not otherwise detrimental to the bank or to the public interest. Legitimate corporate purposes for acquiring and holding of treasury stock may include:

(a)  To have shares available for use in connection with employee stock option, bonus, purchase or similar plans;

(b)  To sell to a director for the purpose of acquiring qualifying shares;

(c)  To purchase a director’s qualifying shares upon cessation of the director’s service in that capacity if there is no ready market for the shares;

(d)  To reduce the number of shareholders to qualify as a subchapter S corporation;

(e)  To reduce costs associated with shareholder communications and meetings;

(f)  To facilitate a bank’s shareholder dividend reinvestment plan; or

(g)  Any other legitimate corporate purpose as may be approved by the director.

History:

[26-702, added 1979, ch. 41, sec. 2, p. 88; am. 1986, ch. 58, sec. 1, p. 167; am. 2008, ch. 140, sec. 7, p. 405.]