RCW ch. 30A.04 — Revised Code of Washington Chapter 30A.04 RCW — General Provisions

RCW 30A.04.002 Short title. This title may be known and cited as the Washington commercial bank act. [ 2014 c 37 s 101.] RCW 30A.04.005 Legislative declarations. The legislature declares that: (1) Banking institutions and trust companies provide essential and valuable fiduciary management services to consumers, businesses, and nonprofit organizations in the state of Washington; (2) There is a critical public need to encourage and promote the revitalization and growth of the state's financial sector and realize its potential as an alternative global financial services hub; (3) The fulfillment of this potential can best be achieved by taking measures to: (a) Clarify prudential standards of professional fiduciary management to provide assurances to state, national, and international owners and managers of wealth; (b) Promote flexibility in the management of asset portfolios to respond to ever-changing global conditions; and (c) Provide certainty and clear expectations for owners of wealth, asset managers, and their respective advisors; (4) Banking institutions and nondepositary trust companies in the state of Washington will be better prepared to continue providing professional fiduciary management services effectively if laws of the state's banking institutions and nondepositary trust companies are modernized, clarified, reorganized and, with respect to some situations, amended; (5) There is a need for improved services and reduced costs for trust institution clients and customers and other consumers in this state through modernization of state law to clarify and thereby promote the delegation by trust institutions of fiduciary functions to qualified third-party professionals, to authorize clients to designate any trust institution to act for them, and to protect the public from excessive fees or undisclosed conflicts of interest of trust institutions and their affiliates; (6) Properly capitalized and professionally managed trusts and trust companies serving only family members and their affiliated entities, which operate privately and do not hold themselves out to, nor provide services to, the general public, should continue to operate without the necessity of being chartered or regulated by the department of financial institutions; (7) The authority of the department of financial institutions needs to be clarified, preserved, and assured as the primary instrument of assuring the safety and soundness of banking institutions and nondepositary trust companies acting as fiduciaries and engaging in trust business in this state; (8) Nondepository trust companies should continue to act as fiduciaries and otherwise engage in trust business in this state, so long as they are properly capitalized, competently managed by persons of integrity, and supervised by the department of financial institutions so as to ensure that such trust companies are operated in compliance with law, in a safe and sound manner, and in a manner which protects trust settlors, trust beneficiaries, and the general public in this state; and (9) The creation of a comprehensive trust institutions act serves the convenience and advantage of Washington state trust settlors and trust beneficiaries, and the state's general public, and preserves and maintains the fairness of competition and parity between Washington state-chartered banking institutions and trust companies, and federally chartered and out-of-state state-chartered banking institutions and trust companies. [ 2014 c 37 s 1.] RCW 30A.04.007 Notice—Use of internet—Rules. (1) Notwithstanding any provisions of this title, wherever notice by publication is required by a bank, such notice may be undertaken by internet publication upon terms and conditions that the director may adopt by rule. (2) Notice to shareholders required under this title may be undertaken by electronic means in the same manner as permitted for general business corporations under RCW 23B.01.410. [ 2014 c 37 s 149.] RCW 30A.04.010 Definitions. Unless the context clearly requires otherwise, the definitions in this section apply throughout this title. (1) "Adequately capitalized," "critically undercapitalized," "significantly undercapitalized," "undercapitalized," and "well-capitalized," respectively, have meanings consistent with the definitions these same terms have under the prompt corrective action provisions of the federal deposit insurance act, 12 U.S.C. Sec. 1831o, and applicable enabling rules of the federal deposit insurance corporation. (2) "Bank," unless a different meaning appears from the context, means any corporation organized under the laws of this state engaged in banking, other than a trust company, savings association, or a mutual savings bank. (3) "Bank holding company" means a bank holding company under authority of the federal bank holding company act. (4) "Banking" includes the soliciting, receiving or accepting of money or its equivalent on deposit as a regular business. (5) "Branch" means any established office of deposit, domestic or otherwise, maintained by any bank other than its head office. "Branch" does not mean a machine permitting customers to leave funds in storage or communicate with bank employees who are not located at the site of the machine, unless employees of the bank at the site of the machine take deposits on a regular basis. An office or facility of an entity other than the bank shall not be deemed to be established by the bank, regardless of any affiliation, accommodation arrangement, or other relationship between the other entity and the bank. (6) "Corporation," in reference to a bank authorized under this title, means either a corporation operating as a bank authorized under this title or a limited liability company operating as a bank under this title pursuant to the requirements of RCW 30A.08.025. (7) "Department" means the Washington state department of financial institutions. (8) "Director" means the director of the department. (9) "Financial holding company" means a financial services holding company under authority of the federal bank holding company act. (10) "Foreign bank" and "foreign banker" includes: (a) Every corporation not organized under the laws of the territory or state of Washington doing a banking business, except a national bank; (b) Every unincorporated company, partnership or association of two or more individuals organized under the laws of another state or country, doing a banking business; (c) Every other unincorporated company, partnership or association of two or more individuals, doing a banking business, if the members thereof owning a majority interest therein or entitled to more than one-half of the net assets thereof are not residents of this state; or (d) Every nonresident of this state doing a banking business in his or her own name and right only. (11) "Holding company" means a bank holding company or financial holding company of a bank organized under chapter 30A.08 RCW or converted to a state bank under chapter 30A.49 RCW. (12) "Law firm" means a partnership, professional limited liability corporation, professional limited liability partnership, or similar entity whose partners, members, or shareholders are exclusively attorneys-at-law. (13) "Person" means an individual or an entity including, but not limited to, a sole proprietorship, firm, association, general partnership or joint venture, limited liability company, limited liability partnership, trust, or corporation, or the plural thereof, whether resident, nonresident, citizen, or not. (14) The term "trust business," in relation to a bank, shall include the business of doing any or all of the things specified in *RCW 30B.08.080(1) (b) through (k), together with any other activity authorized for a state trust company by the director pursuant to *RCW 30B.08.080(1)(q) that the director designates as trust business. (15) "Trust company," unless a different meaning appears from the context, means any corporation or limited liability company, other than a bank, savings bank, or savings association, organized and chartered as a trust company under Title 30B RCW for the purpose of engaging in trust business. [ 2014 c 37 s 102; 2013 c 76 s 1; 2010 c 88 s 3; 1997 c 101 s 3; 1996 c 2 s 2; 1994 c 92 s 7; 1959 c 106 s 1; 1955 c 33 s 30.04.010. Prior: 1933 c 42 s 2; 1917 c 80 s 14; RRS s 3221. Formerly RCW 30.04.010.] NOTES: *Reviser's note: RCW 30A.04.017 Director's subpoenas—Unauthorized banking activity. (1) The director or authorized assistants may apply for and obtain a superior court order approving and authorizing a subpoena in advance of its issuance. The application may be made in the county where the subpoenaed person resides or is found, or the county where the subpoenaed documents, records, or evidence are located, or in Thurston county. The application must: (a) State that an order is sought under this section; (b) Adequately specify the documents, records, evidence, or testimony; and (c) Include a declaration made under oath that an investigation is being conducted for a lawfully authorized purpose related to an investigation within the department's authority and that the subpoenaed documents, records, evidence, or testimony are reasonably related to an investigation within the department's authority. (2) When an application under this section is made to the satisfaction of the court, the court must issue an order approving the subpoena. An order under this subsection constitutes authority of law for the agency to subpoena the documents, records, evidence, or testimony. (3) The director or authorized assistants may seek approval and a court may issue an order under this section without prior notice to any person, including the person to whom the subpoena is directed and the person who is the subject of an investigation. An application for court approval is subject to the fee and process set forth in RCW 36.18.012(3). (4) Subsections (1) through (3) of this section are applicable to the director's enforcement authority under this title against persons engaged in unauthorized banking activity and persons, other than a bank authorized under this title, whom the director has reason to believe are in violation of this title. This section does not limit the authority of the director to investigate or examine a bank authorized under this title without applying for or obtaining a superior court order or issuing a subpoena pursuant to this section. [ 2014 c 37 s 261.] RCW 30A.04.020 Use of words indicating bank or trust company—Penalty. (1) The name of every bank shall contain the word "bank" and the name of every trust company shall contain the word "trust," or the word "bank." Except as provided in RCW 33.08.030 or as otherwise authorized by this section or approved by the director, only a national bank, federal savings bank, a bank or trust company, savings bank under Title 32 RCW, bank holding company or financial holding company, a holding company authorized by this title or Title 32 RCW, or a foreign or alien corporation or other legal person authorized by this title to do so, shall: (a) Use as a part of his or her or its name or other business designation, as a prominent syllable within a word comprising all or a portion of its name or other business designation, or in any manner as if connected with his or her or its business or place of business any of the following words or the plural thereof, to wit: "bank," "banking," "banker," "bancorporation," "bancorp," or "trust," or any foreign language designations thereof, including, by way of example, "banco" or "banque." (b) Use any sign, logo, or marketing message, in any media, or use any letterhead, billhead, note, receipt, certificate, blank, form, or any written, printed, electronic or internet-based instrument or material representation whatsoever, directly or indirectly indicating that the business of such person is that of a bank or trust company. (2) A foreign corporation or other foreign domiciled legal person, whose name contains the words "bank," "banker," "banking," "bancorporation," "bancorp," or "trust," or the foreign language equivalent thereof, or whose articles of incorporation empower it to engage in banking or to engage in a trust business, may not engage in banking or in a trust business in this state unless the corporation or other legal person (a) is expressly authorized to do so under this title, under federal law, or by the director, and (b) complies with all applicable requirements of Washington state law regarding foreign corporations and other foreign legal persons. If an activity would not constitute "transacting business" within the meaning of RCW 23B.15.010(1) or chapter 23B.18 RCW, then the activity shall not constitute banking or engaging in a trust business. Nothing in this subsection shall prevent operations by an alien bank in compliance with chapter 30A.42 RCW. (3) This section shall not prevent a lender approved by the United States secretary of housing and urban development for participation in any mortgage insurance program under the National Housing Act from using the words "mortgage banker" or "mortgage banking" in the conduct of its business, but only if both words are used together in either of the forms which appear in quotations in this sentence. (4) Any individual or legal person, or director, officer, or manager of such legal person, who knowingly violates any provision of this section shall be guilty of a gross misdemeanor. [ 2014 c 37 s 103; 2010 c 88 s 4; 1994 c 256 s 32; 1986 c 284 s 15; 1983 c 42 s 2; 1981 c 88 s 1; 1955 c 33 s 30.04.020. Prior: 1925 ex.s. c 114 s 1; 1917 c 80 s 18; RRS s 3225. Formerly RCW 30.04.020.] NOTES: Effective date— RCW 30A.04.025 Financial institutions—Loan charges—Out-of-state national banks. Notwithstanding any restrictions, limitations, requirements, or other provisions of law, a financial institution, as defined in RCW 30A.22.040(8), may charge, take, receive, or reserve interest, discount or other points, finance charges, or other similar charges on any loan or other extension of credit, at a rate or amount that is equal to, or less than, the maximum rate or amount of interest, discount or other points, finance charges, or other similar charges that national banks located in any other state or states may charge, take, receive, or reserve, under 12 U.S.C. Sec. 85, on loans or other extensions of credit to residents of this state. However, this section does not authorize any subsidiary of a bank, of a savings bank, of a savings and loan association, or of a credit union to charge, take, receive, or reserve interest, discount or other points, finance charges, or other similar charges on any loan or other extension of credit, unless the subsidiary is itself a bank, savings bank, savings and loan association, or credit union. [ 2014 c 37 s 104; 2003 c 24 s 3. Formerly RCW 30.04.025.] RCW 30A.04.030 Rules—Administration and interpretation of title. (1) The director shall have power to adopt uniform rules in accordance with the administrative procedure act, chapter 34.05 RCW, to govern examinations and reports of banks, trust companies, and holding companies and the form in which they shall report their assets, liabilities, and reserves, charge off bad debts and otherwise keep their records and accounts, and otherwise to govern the administration of this title. (2) The director shall have the power, and broad administrative discretion, to administer and interpret the provisions of this title to facilitate the delivery of financial services to the citizens of the state of Washington by the banks, trust companies, and holding companies subject to this title. [ 2014 c 37 s 105; 2010 c 88 s 5; 1994 c 92 s 8; 1986 c 279 s 1; 1955 c 33 s 30.04.030. Prior: 1917 c 80 s 58, part; RRS s 3265, part. Formerly RCW 30.04.030.] NOTES: Effective date— RCW 30A.04.045 Director—Powers under chapter 19.144 RCW. The director or the director's designee may take such action as provided for in this title to enforce, investigate, or examine persons covered by chapter 19.144 RCW. [ 2008 c 108 s 15. Formerly RCW 30.04.045.] NOTES: Findings— RCW 30A.04.050 Duty to comply—Violations—Penalty. (1) Each bank and its directors, officers, employees, and agents, shall comply with: (a) This title and Title 30B RCW as applicable to each of them; (b) The rules adopted by the department with respect to banks and trust companies; (c) Any lawful direction or order of the director; (d) Any lawful supervisory agreement with the director; and (e) The applicable statutes, rules, and regulations administered by the board of governors of the federal reserve system, the federal deposit insurance corporation, or their successor agencies, with respect to banks or trust companies. (2) Each holding company, and its directors, officers, employees, and agents, shall comply with: (a) The provisions of this title that are applicable to each of them; (b) The rules adopted by the department with respect to holding companies; (c) Any lawful direction or order of the director; (d) Any lawful supervisory agreement with the director; and (e) The applicable statutes, rules, and regulations administered by the board of governors of the federal reserve system, or its successor agency, with respect to holding companies, the violation of which would result in an unsafe and unsound practice or material violation of law with respect to the subsidiary bank of the holding company. (3) The violation of any supervisory agreement, direction, order, statute, rule, or regulation referenced in this section, in addition to any other penalty provided in this title, shall, at the option of the director, subject the offender to a penalty of up to ten thousand dollars for each offense, payable upon issuance of any order or directive of the director, which may be recovered by the attorney general in a civil action in the name of the department. [ 2014 c 37 s 106; 2010 c 88 s 6; 1955 c 33 s 30.04.050. Prior: 1917 c 80 s 58, part; RRS s 3265, part. Formerly RCW 30.04.050.] NOTES: Effective date— RCW 30A.04.060 Examinations directed—Cooperative agreements and actions. (1) The director, assistant director, program manager, or an examiner shall visit each bank at least once every eighteen months, and oftener if necessary, or as otherwise required by the rules and interpretations of applicable federal banking examination authorities, for the purpose of making a full investigation into the condition of such corporation, and for that purpose they are hereby empowered to administer oaths and to examine under oath any director, officer, employee, or agent of such corporation. (2) The director may make such other full or partial examinations as deemed necessary and may examine any bank holding company that owns any portion of a bank chartered by the state of Washington and obtain reports of condition for any bank holding company that owns any portion of a bank chartered by the state of Washington. (3) The director may visit and examine into the affairs of any nonpublicly held corporation in which the bank or bank holding company has an investment or any publicly held corporation the capital stock of which is controlled by the bank or bank holding company; may appraise and revalue such corporations' investments and securities; and shall have full access to all the books, records, papers, securities, correspondence, bank accounts, and other papers of such corporations for such purposes. (4) The director may, in his or her discretion, accept in lieu of the examinations required in this section the examinations conducted at the direction of the federal reserve board or the federal deposit insurance corporation. (5) Any willful false swearing in any examination is perjury in the second degree. (6) The director may enter into cooperative and reciprocal agreements with the bank regulatory authorities of the United States, any state, the District of Columbia, or any trust territory of the United States for the periodic examination of domestic bank holding companies owning banking institutions in other states, the District of Columbia, or trust territories, and subsidiaries of such domestic bank holding companies, or of out-of-state bank holding companies owning a bank the principal operations of which are conducted in this state. The director may accept reports of examination and other records from such authorities in lieu of conducting his or her own examinations. The director may enter into joint actions with other regulatory bodies having concurrent jurisdiction or may enter into such actions independently to carry out his or her responsibilities under this title and assure compliance with the laws of this state. (7) Copies from the records, books, and accounts of a bank or holding company shall be competent evidence in all cases, equal with originals thereof, if there is annexed to such copies an affidavit taken before a notary public or clerk of a court under seal, stating that the affiant is the officer of the bank or holding company having charge of the original records, and that the copy is true and correct and is full so far as the same relates to the subject matter therein mentioned. [ 2014 c 37 s 107; 2010 c 88 s 7; 1994 c 92 s 9; 1989 c 180 s 1; 1985 c 305 s 3; 1983 c 157 s 3; 1982 c 196 s 6; 1955 c 33 s 30.04.060. Prior: 1937 c 48 s 1; 1919 c 209 s 5; 1917 c 80 s 7; RRS s 3214. Formerly RCW 30.04.060.] NOTES: Effective date— RCW 30A.04.070 Costs of examination, filing, and other service fees—Nondirect expenses. (1) In order to cover the costs of the operation of the department's division of banks and to establish and maintain a reasonable reserve for the division of banks, the department may charge and collect the costs of examination, filing and other service fees, and semiannual charges for recoupment of nondirect expenses related to the examination of financial institutions regulated by the department, as provided for in this section. (2) The director shall collect from each bank, savings bank, trust company, savings association, holding company under this title, holding company under Title 32 RCW, business development company under chapter 31.24 RCW, agricultural lender under chapter 31.35 RCW, and small business lender under chapter 31.40 RCW: (a) For each examination of its condition the estimated actual cost of such examination; and (b) For services in relation to required filings, applications, requests for waiver, investigations, approvals, determinations, certifications, agreements, actions, directives, and orders made by or to the director. (3) In addition to collecting the estimated actual cost of examination and other fees authorized by subsection (2) of this section, the director may collect a semiannual charge for recoupment of nondirect expenses related to the examination of a bank under this title, a trust company, a savings bank under Title 32 RCW, and a savings association under Title 33 RCW, based upon the assets of the bank, savings bank, or savings association, or assets under management of the trust company, which shall be computed upon the asset value reflected in the institution's most recent report of condition. The rate must be the same for banks, savings banks, and savings associations, and there may be a separate rate for trust companies that must be the same for all trust companies. (4) Every bank or trust company, savings bank, savings association, holding company, business development company, state agricultural lender, or state small business lender shall also pay to the secretary of state for filing any instrument the same fees as are required of general corporations for filing corresponding instruments, and also the same license fees as are required of general corporations. (5) The director shall establish, set, and adjust by rule the amount of all fees and charges authorized by subsections (2) and (3) of this section. [ 2014 c 37 s 108; 2013 c 76 s 2; 2010 c 88 s 8; 1994 c 92 s 10; 1955 c 33 s 30.04.070. Prior: 1929 c 73 s 1; 1923 c 172 s 16; 1921 c 73 s 1; 1917 c 80 s 8; RRS s 3215. Formerly RCW 30.04.070.] NOTES: Effective date— RCW 30A.04.075 Examination reports and information—Confidentiality—Disclosure—Penalty. (1) All examination reports and all information obtained by the director and the director's staff in conducting examinations of banks, trust companies, or alien banks, and information obtained by the director and the director's staff from other state or federal bank regulatory authorities with whom the director has entered into agreements pursuant to RCW 30A.04.060(6), and information obtained by the director and the director's staff relating to examination and supervision of bank holding companies owning a bank in this state or subsidiaries of such holding companies, is confidential and privileged information and shall not be made public or otherwise disclosed to any person, firm, corporation, agency, association, governmental body, or other entity. (2) Subsection (1) of this section notwithstanding, the director may furnish all or any part of examination reports, work papers, supervisory agreements or directives, orders, or other information obtained in the conduct of an examination or investigation prepared by the director's office to: (a) Federal agencies empowered to examine state banks, trust companies, or alien banks; (b) Bank regulatory authorities with whom the director has entered into agreements pursuant to RCW 30A.04.060(6), and other bank regulatory authorities who are the primary regulatory authority or insurer of accounts for a bank holding company owning a bank, trust company, or national banking association the principal operations of which are conducted in this state or a subsidiary of such holding company; provided that the director shall first find that the reports of examination to be furnished shall receive protection from disclosure comparable to that accorded by this section; (c) Officials empowered to investigate criminal charges subject to legal process, valid search warrant, or subpoena. If the director furnishes any examination report to officials empowered to investigate criminal charges, the director may only furnish that part of the report which is necessary and pertinent to the investigation, and the director may do this only after notifying the affected bank, trust company, or alien bank and any customer of the bank, trust company, or alien bank who is named in that part of the examination or report ordered to be furnished unless the officials requesting the report first obtain a waiver of the notice requirement from a court of competent jurisdiction for good cause; (d) The examined bank, trust company, or alien bank, or holding company thereof; (e) The attorney general in his or her role as legal advisor to the director; (f) Liquidating agents of a distressed bank, trust company, or alien bank; (g) A person or organization officially connected with the bank as officer, director, attorney, auditor, or independent attorney or independent auditor; (h) The Washington public deposit protection commission as provided by RCW 39.58.105; (i) Organizations insuring or guaranteeing the shares of, or deposits in, the bank or trust company; or (j) Other persons as the director may determine necessary to protect the public interest and confidence. (3) All examination reports, work papers, supervisory agreements or directives, orders, and other information obtained in the conduct of an examination or investigation furnished under subsections (2) and (4) of this section shall remain the property of the department of financial institutions, and be confidential and no person, agency, or authority to whom reports are furnished or any officer, director, or employee thereof shall disclose or make public any of the reports or any information contained therein except in published statistical material that does not disclose the affairs of any individual or corporation: PROVIDED, That nothing herein shall prevent the use in a criminal prosecution of reports furnished under subsection (2) of this section. (4) The examination report made by the department of financial institutions is designed for use in the supervision of the bank, trust company, or alien bank. The report shall remain the property of the director and will be furnished to the bank, trust company, or alien bank solely for its confidential use. Under no circumstances shall the bank, trust company, or alien bank or any of its directors, officers, or employees disclose or make public in any manner the report or any portion thereof, to any person or organization not connected with the bank as officer, director, employee, attorney, auditor, or candidate for executive office with the bank. The bank may also, after execution of an agreement not to disclose information in the report, disclose the report or relevant portions thereof to a party proposing to acquire or merge with the bank. (5) Examination reports and information obtained by the director and the director's staff in conducting examinations, or obtained from other state and federal bank regulatory authorities with whom the director has entered into agreements pursuant to RCW 30A.04.060(6), or relating to examination and supervision of bank holding companies owning a bank, trust company, or national banking association the principal operations of which are conducted in this state or a subsidiary of such holding company, or information obtained as a result of applications or investigations pursuant to RCW 30A.04.230, shall not be subject to public disclosure under chapter 42.56 RCW. (6) In any civil action in which the reports are sought to be discovered or used as evidence, any party may, upon notice to the director, petition the court for an in camera review of the report. The court may permit discovery and introduction of only those portions of the report which are relevant and otherwise unobtainable by the requesting party. This subsection shall not apply to an action brought or defended by the director. (7) This section shall not apply to investigation reports prepared by the director and the director's staff concerning an application for a new bank or trust company or an application for a branch of a bank, trust company, or alien bank: PROVIDED, That the director may adopt rules making confidential portions of the reports if in the director's opinion the public disclosure of the portions of the report would impair the ability to obtain the information which the director considers necessary to fully evaluate the application. (8) Notwithstanding any other provision of this section or other applicable law, a bank, trust company, alien bank, or holding company is not in violation of this section on account of its compliance with required reporting to the federal securities and exchange commission, including the disclosure of any order of the director. (9) Every person who violates any provision of this section shall be guilty of a gross misdemeanor. [ 2014 c 37 s 109; 2010 c 88 s 9; 2005 c 274 s 251; 1994 c 92 s 11; 1989 c 180 s 2; 1986 c 279 s 2; 1977 ex.s. c 245 s 1. Formerly RCW 30.04.075.] NOTES: Effective date— RCW 30A.04.111 Limit on loans and extensions of credit to one person—Exceptions—Definitions—Rules—Nonconforming loans and extensions of credit. (1) The total loans and extensions of credit by a bank to a person outstanding at any one time shall not exceed twenty percent of the capital and surplus of such bank. A loan or extension of credit made by a bank does not violate this section if the loan or extension of credit would qualify for an exception to the lending limit for a national bank under rules adopted by the United States office of the comptroller of the currency, or successor federal agency with authority over national banks and federal savings associations. (2) For the purposes of this section, the terms "borrower," "capital and surplus," "derivative transaction," "loans and extensions of credit," and "person" shall have the same meaning as those terms are defined in section 32.2 of Title 12 of the United States Code of Federal Regulations, 12 C.F.R. Sec. 32.2, except that "loans and extensions of credit" also includes repurchase agreements, reverse repurchase agreements, securities lending transactions, or securities borrowing transactions between a bank and a borrower if the federal deposit insurance corporation requires such treatment for a state insured bank or the board of governors of the federal reserve system requires such treatment for member state banks. (3) The director may prescribe rules to administer and carry out the purposes of this section, including without limitation rules (a) to define or further define terms used in this section, (b) to establish limits or requirements other than those specified in this section for particular classes or categories of loans and extensions of credit, (c) to determine when a loan putatively made to a person shall, for purposes of this section, be attributed to another person, (d) to set standards for computation of time in relation to determining limits on loans and extensions of credit, and (e) to implement and incorporate other changes in limits on loans and extensions of credit necessary to conform to federal statute and rule required or otherwise authorized by this section. In adopting the rules, the director shall be guided by rulings of the United States comptroller of the currency, or successor federal banking regulator, that govern limits on loans and extensions of credit applicable to national banks and federal savings associations. In lieu of the adoption by the department of a rule applicable to specific types of transactions, a bank, unless otherwise approved by the director, shall conform to all applicable rulings of the comptroller of the currency, or successor federal banking regulator, which (i) relate to national banks and federal savings associations, (ii) govern such specific types of transactions or circumstances, and (iii) are consistent with this section and the department's adopted rules. (4)(a) A loan or extension of credit that was within the limit on loans and extensions of credit when made is not a violation but will be treated as nonconforming if the loan or extension of credit is no longer in conformity with the bank's limit on loans and extensions of credit because: (i) The bank's capital has declined, borrowers have subsequently merged or formed a common enterprise, lenders have merged, or the limit on loans and extensions of credit or capital rules have changed; or (ii) Collateral securing the loan or extension of credit, in order to satisfy the requirements of an exception to the limit, has declined in value. (b) A bank shall make reasonable efforts to bring a loan or extension of credit that is nonconforming under (a)(i) of this subsection into conformity with the bank's limit on loans and extensions of credit unless to do so would be inconsistent with safe and sound banking practices. (c) A bank must bring a loan or extension of credit that is nonconforming under (a)(ii) of this subsection into conformity with the bank's limit on loans and extensions of credit within thirty calendar days, except when judicial proceedings, regulatory actions, or other extraordinary circumstances beyond the bank's control prevent the bank or trust company from taking action. (d) Notwithstanding any provision of this subsection (4), the director may by rule or interpretation prescribe standards for treatment of nonconforming extensions of credit that are derivatives transactions, repurchase agreements, reverse repurchase agreements, securities lending transactions, or securities borrowing transactions, and may, if required for state insured banks or member state banks, rely upon rules or interpretations of the federal deposit insurance corporation or the board of governors of the federal reserve system, as applicable. (5) Notwithstanding any provision of this section to the contrary, in the event that a bank's capital declines sufficiently to seriously impair the bank's ability to effectively operate in its marketplace or serve the needs of its customers or the community in which it is located, the director may, upon written application and in the exercise of the director's discretion, grant the bank temporary permission to fund loans and extensions of credit in excess of the bank's limit on loans and extensions of credit under this section. In the exercise of discretion, the director may further specify conditions for granting such emergency exception and may limit emergency lending authority under this section to particular types or classes of loans and extensions of credit. (6) Notwithstanding any provision of this section to the contrary, the director, in the exercise of discretion, may grant an exception to the limit on loans and extensions of credit otherwise required by this section, based on extenuating facts and circumstances. In deciding whether to grant an exception under this subsection, the director shall consider: (a) The proposed transaction for which the exception is sought; (b) How the requested exception would affect the capital adequacy and safety and soundness of the requesting bank if the exception is not granted or, if the exception is granted, if the proposed borrower should ultimately default; (c) How the requested exception would affect the loan portfolio diversification of the requesting bank; (d) The competency of management to handle the proposed transaction and any resulting safety and soundness issues; (e) The marketability and value of the proposed collateral; and (f) The extenuating facts and circumstances that warrant an exception in light of the purpose of limit on loans and extensions of credit set forth in this section. [ 2014 c 37 s 110; 2013 c 76 s 3; 2010 c 88 s 10; 1995 c 344 s 1; 1994 c 92 s 12; 1986 c 279 s 3. Formerly RCW 30.04.111.] NOTES: Effective date— RCW 30A.04.112 "Loans or obligations" and "liabilities" limited for purposes of RCW 30.04.111. Sales of federal reserve funds with a maturity of one business day or under a continuing contract are not "loans or obligations" or "liabilities" for the purposes of the loan limits established by *RCW 30.04.111. However, sales of federal reserve funds with a maturity of more than one business day are subject to those limits. For the purposes of this section, "sale of federal reserve funds" means any transaction among depository institutions involving the disposal of immediately available funds resulting from credits to deposit balances at federal reserve banks or from credits to new or existing deposit balances due from a correspondent depository institution. [ 1989 c 220 s 1; 1983 c 157 s 2. Formerly RCW 30.04.112.] NOTES: *Reviser's note: RCW 30A.04.120 Loans on own stock prohibited—Shares of other corporations. The shares of stock of every bank shall be deemed personal property. No such corporation shall hereafter make any loan or discount on the security of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith; in which case the stocks so purchased or acquired shall be sold at public or private sale, or otherwise disposed of, within six months from the time of its purchase or acquisition. Except as hereinafter provided or otherwise permitted by law, nothing herein contained shall authorize the purchase by any such bank for its own account of any shares of stock of any corporation, except a federal reserve bank of which such corporation shall become a member, and then only to the extent required by such federal reserve bank: PROVIDED, That any bank may purchase, acquire and hold shares of stock in any other corporation which shares have been previously pledged as security to any loan or discount made in good faith and such purchase shall be necessary to prevent loss upon a debt previously contracted in good faith and stock so purchased or acquired shall be sold at public or private sale or otherwise disposed of within two years from the time of its purchase or acquisition. Any time limit imposed in this section may be extended by the director upon cause shown. Banks are authorized to make loans on the security of the capital stock of a bank other than the lending corporation. [ 2014 c 37 s 111; 1994 c 92 s 13; 1986 c 279 s 4; 1973 1st ex.s. c 104 s 1; 1955 c 33 s 30.04.120. Prior: 1943 c 187 s 1; 1933 c 42 s 9; 1929 c 73 s 5; 1917 c 80 s 36; Rem. Supp. 1943 s 3243. Formerly RCW 30.04.120.] RCW 30A.04.125 Investment in corporations—Authorized businesses. Unless otherwise prohibited by law, any state bank may invest in the capital stock of corporations organized to conduct the following businesses: (1) A safe deposit business: PROVIDED, That the amount of investment does not exceed fifteen percent of its capital stock and surplus, without the approval of the director; (2) A corporation holding the premises of the bank or its branches: PROVIDED, That without the approval of the director, the investment of such stock shall not exceed, together with all loans made to the corporation by the bank, a sum equal to the amount permitted to be invested in the premises by RCW 30A.04.210; (3) Stock in a small business investment company licensed and regulated by the United States as authorized by the small business act, Public Law 85-536, 72 Statutes at Large 384, in an amount not to exceed five percent of its capital and surplus without the approval of the director; (4) Capital stock of a banking service corporation or corporations. The total amount that a bank may invest in the shares of such corporation may not exceed ten percent of its capital and surplus without the approval of the director. A bank service corporation may not engage in any activity other than those permitted by the bank service corporation act, 12 U.S.C. Sec. 1861, et seq., as subsequently amended and in effect on December 31, 1993. The performance of any service, and any records maintained by any such corporation for a bank, shall be subject to regulation and examination by the director and appropriate federal agencies to the same extent as if the services or records were being performed or maintained by the bank on its own premises; (5) Capital stock of a federal reserve bank to the extent required by such federal reserve bank; (6) A corporation engaging in business activities that have been determined by the board of governors of the federal reserve system or by the United States congress to be closely related to the business of banking, as of December 31, 1993; (7) A governmentally sponsored corporation engaged in secondary marketing of loans and the stock of which must be owned in order to participate in its marketing activities; (8) A corporation in which all of the voting stock is owned by the bank and that engages exclusively in nondeposit-taking activities that are authorized to be engaged in by the bank or trust company; (9) A bank may purchase for its own account shares of stock of a bank or a holding company that owns or controls a bank if the stock of the bank or company is owned exclusively, except to the extent directly qualifying shares are required by law, by depository institutions and the bank or company and all subsidiaries thereof are engaged exclusively in providing services for other depository institutions and their officers, directors, and employees. In no event may the total amount of such stock held by a bank in any bank or bank holding company exceed at any time ten percent of its capital stock and paid-in and unimpaired surplus, and in no event may the purchase of such stock result in a bank acquiring more than twenty-five percent of any class of voting securities of such bank or company. Such a bank or bank holding company shall be called a "banker's bank." [ 2014 c 37 s 112. Prior: 1994 c 256 s 33; 1994 c 92 s 14; 1986 c 279 s 5. Formerly RCW 30.04.125.] NOTES: Findings— RCW 30A.04.127 Formation, incorporation, or investment in corporations or other entities authorized—Approval—Exception. (1) A bank, alone or in conjunction with other entities, may form, incorporate, or invest in corporations or other entities, whether or not such other corporation or entity is related to the bank's business. The aggregate amount of funds invested, or used in the formation of corporations or other entities under this section shall not exceed ten percent of the assets or fifty percent of the net worth, whichever is less, of the bank. For purposes of this subsection, "net worth" means the aggregate of capital, surplus, undivided profits, and all capital notes and debentures which are subordinate to the interest of depositors. (2) A bank may engage in an activity permitted under this section only with the prior authorization of the director and subject to such requirements, restrictions, or other conditions as the director may adopt by rule, order, directive, standard, policy, memorandum, or other written communication with regard to the activity. In approving or denying a proposed activity, the director shall consider the financial and management strength of the institution, the convenience and needs of the public, and whether the proposed activity should be conducted through a subsidiary or affiliate of the bank. The director may not authorize under this section and no bank may act as an insurance or travel agent unless otherwise authorized by state statute. [ 2014 c 37 s 113; 2010 c 88 s 11; 1994 c 92 s 15; 1987 c 498 s 1. Formerly RCW 30.04.127.] NOTES: Effective date— RCW 30A.04.129 Investment in obligations issued or guaranteed by multilateral development bank. Any bank may invest in obligations issued or guaranteed by any multilateral development bank in which the United States government formally participates. Such investment in any one multilateral development bank shall not exceed five percent of the bank's paid-in capital and surplus. [ 2014 c 37 s 114; 1985 c 301 s 2. Formerly RCW 30.04.129.] RCW 30A.04.130 Defaulted debts, judgments to be charged off—Valuation of assets. Based on examinations directed pursuant to RCW 30A.04.060 or other appropriate information, all assets or portion thereof that the director may have required a bank to charge off shall be charged off. No bank shall enter or at any time carry on its books any of its assets or liabilities at a valuation contrary to generally accepted accounting principles. [ 2014 c 37 s 115. Prior: 1994 c 256 s 34; 1994 c 92 s 16; 1986 c 279 s 6; 1955 c 33 s 30.04.130; prior: 1937 c 61 s 1; 1919 c 209 s 15; 1917 c 80 s 47; RRS s 3254. Formerly RCW 30.04.130.] NOTES: Findings— RCW 30A.04.140 Pledge of securities or assets prohibited—Exceptions. No bank shall pledge or hypothecate any of its securities or assets to any depositor, except that it may qualify as depositary for United States deposits, or other public funds, or funds held in trust and deposited by any public officer by virtue of his or her office, or as a depository for the money of estates under the statutes of the United States pertaining to bankruptcy or funds deposited by a trustee or receiver in bankruptcy appointed by any court of the United States or any referee thereof, or funds held by the United States or the state of Washington, or any officer thereof in trust, or for funds of corporations owned or controlled by the United States, and may give such security for such deposits as are required by law or by the officer making the same; and it may give security to its trust department for deposits with itself which represent trust funds invested in savings accounts or which represent fiduciary funds awaiting investment or distribution. [ 2014 c 37 s 116; 2011 c 336 s 744; 1986 c 279 s 7; 1983 c 157 s 6; 1967 c 133 s 2; 1955 c 33 s 30.04.140. Prior: 1933 c 42 s 24, part; 1917 c 80 s 54, part; RRS s 3261, part. Formerly RCW 30.04.140.] NOTES: Severability— RCW 30A.04.180 Dividends. No bank shall declare or pay any dividend to an amount greater than its retained earnings, without approval from the director. The director shall in his or her discretion have the power to require any bank to suspend the payment of any and all dividends until all requirements that may have been made by the director shall have been complied with; and upon such notice to suspend dividends no bank shall thereafter declare or pay any dividends until such notice has been rescinded in writing. A dividend is payable in cash, property, or capital stock, but the restrictions on the payment of a dividend (other than restrictions imposed by the director pursuant to his or her authority to require the suspension of the payment of any or all dividends) do not apply to a dividend payable by the bank solely in its own capital stock. For purposes of this section, "retained earnings" shall be determined by generally accepted accounting principles. [ 2014 c 37 s 117. Prior: 1994 c 256 s 35; 1994 c 92 s 17; 1986 c 279 s 8; 1981 c 89 s 1; 1969 c 136 s 2; 1955 c 33 s 30.04.180; prior: 1933 c 42 s 7; 1931 c 11 s 1; 1917 c 80 s 33; RRS s 3240. Formerly RCW 30.04.180.] NOTES: Findings— RCW 30A.04.210 Real estate holdings. A bank may purchase, hold, and convey real estate for the following purposes: (1) Such as shall be necessary for the convenient transaction of its business, including with its banking offices other space in the same building to rent as a source of income: PROVIDED, That any bank shall not invest for such purposes more than the greater of: (a) Fifty percent of its capital, surplus, and undivided profits; or (b) one hundred twenty-five percent of its capital stock without the approval of the director. (2) Such as shall be purchased or conveyed to it in satisfaction, or on account of, debts previously contracted in the course of its business. (3) Such as it shall purchase at sale under judgments, decrees, liens, or mortgage foreclosures, from debts owed to it. (4) Such as a trust company receives in trust or acquires pursuant to the terms or authority of any trust. (5) Such as it may take title to or for the purpose of investing in real estate conditional sales contracts. (6) Such as shall be purchased, held, or conveyed in accordance with RCW 30A.04.212 granting banks the power to invest directly or indirectly in unimproved or improved real estate. [ 2014 c 37 s 118. Prior: 1994 c 256 s 36; 1994 c 92 s 18; 1986 c 279 s 9; 1985 c 329 s 4; 1979 c 142 s 1; 1973 1st ex.s. c 104 s 2; 1955 c 33 s 30.04.210; prior: 1947 c 149 s 1; 1917 c 80 s 37; Rem. Supp. 1947 s 3244. Formerly RCW 30.04.210.] NOTES: Findings— RCW 30A.04.212 Real property and improvements thereon. (1) In addition to the powers granted under RCW 30A.04.210 and subject to the limitations and restrictions contained in this section and in RCW 30A.60.010 and 30A.60.020, a bank: (a) May acquire any interest in unimproved or improved real property; (b) May construct, alter, and manage improvements of any description on real estate in which it holds a substantial equity interest. (2) The powers granted under subsection (1) of this section do not include, and a bank may not: (a) Manage any real property in which the bank does not own a substantial equity interest; (b) Engage in activities of selling, leasing, or otherwise dealing in real property as an agent or broker; or (c) Acquire any equity interest in any one to four-family dwelling that is used as a principal residence by the owner of the dwelling; however, this shall not prohibit a bank from making loans secured by such dwelling where all or part of the bank's anticipated compensation results from the appreciation and sale of such dwelling. (3) The aggregate amount of funds invested under this section shall not exceed two percent of a bank's capital, surplus, and undivided profits. Such percentage amount shall be increased based upon the most recent community reinvestment rating assigned to a bank by the director in accordance with RCW 30A.60.010, as follows: (a) Excellent performance: Increase to 10% (b) Good performance: Increase to 8% (c) Satisfactory performance: Increase to 6% (d) Inadequate performance: Increase to 3% (e) Poor performance: No increase (4) For purposes of this section only, each bank will be deemed to have been assigned a community reinvestment rating of "1" for the period beginning with January 1, 1986, and ending December 31, 1986. Thereafter, each bank will be assigned an annual rating in accordance with RCW 30A.60.010, which rating shall remain in effect for the next succeeding year and until the director has conducted a new investigation and assigned a new rating for the next succeeding year, the process repeating on an annual basis. (5) No bank may at any time be required to dispose of any investment made in accordance with this section due to the fact that the bank is not then authorized to acquire such investment, if such investment was lawfully acquired by the bank at the time of acquisition. (6) The director shall limit the amount that may be invested in a single project or investment and may adopt any rule necessary to the safe and sound exercise of powers granted by this section. [ 2014 c 37 s 119; 1994 c 92 s 19; 1985 c 329 s 5. Formerly RCW 30.04.212.] NOTES: Legislative intent— RCW 30A.04.214 Qualifying community investments. (1) An amount equal to ten percent of the aggregate amount invested in real estate in accordance with RCW 30A.04.212 shall be placed in qualifying community investments as defined in subsection (2) of this section. (2) "Qualifying community investment" means any direct or indirect investment or extension of credit made by a bank in projects or programs designed to develop or redevelop areas in which persons with low or moderate incomes reside, designed to meet the credit needs of such low or moderate-income areas, or that primarily benefits low and moderate-income residents of such areas. The term includes, but is not limited to, any of the following within the state of Washington: (a) Investments in governmentally insured, guaranteed, subsidized, or otherwise sponsored programs for housing, small farms, or businesses that address the needs of the low and moderate-income areas. (b) Investments in residential mortgage loans, home improvements loans, housing rehabilitation loans, and small business or small farm loans originated in low and moderate-income areas, or the purchase of such loans originated in low and moderate-income areas. (c) Investments for the preservation or revitalization of urban or rural communities in low and moderate-income areas. The term does not include personal installment loans, loans made to purchase, or loans secured by an automobile. (3) A qualifying community investment made by an entity that wholly owns a bank, is wholly owned by a bank, or is wholly owned by an entity that wholly owns the bank is deemed to have been made by a bank to satisfy the requirements of subsection (1) of this section. [ 2014 c 37 s 120; 1985 c 329 s 6. Formerly RCW 30.04.214.] NOTES: Legislative intent— RCW 30A.04.215 Engaging in other business activities. (1) Notwithstanding any other provisions of law, in addition to all powers enumerated by this title, and those necessarily implied therefrom, a bank may engage in other business activities that have been determined by the board of governors of the federal reserve system or by the United States Congress to be closely related to the business of banking, as of July 28, 2013. (2) A bank that desires to perform an activity that is not expressly authorized by subsection (1) of this section shall first apply to the director for authorization to conduct such activity. Within thirty days of the receipt of this application, the director shall determine whether the activity is closely related to the business of banking, whether the public convenience and advantage will be promoted, whether the activity is apt to create an unsafe and unsound practice by the bank and whether the applicant is capable of performing such an activity. If the director finds the activity to be closely related to the business of banking and the bank is otherwise qualified, he or she shall immediately inform the applicant that the activity is authorized. If the director determines that such activity is not closely related to the business of banking or that the bank is not otherwise qualified, he or she shall promptly inform the applicant in writing. The applicant shall have the right to appeal from an unfavorable determination in accordance with the procedures of the Administrative Procedure Act, chapter 34.05 RCW. In determining whether a particular activity is closely related to the business of banking, the director shall be guided by the rulings of the board of governors of the federal reserve system and the comptroller of the currency in making determinations in connection with the powers exercisable by bank holding companies, and the activities performed by other commercial banks or their holding companies. (3) Notwithstanding any restrictions, limitations, and requirements of law, in addition to all powers, express or implied, that a bank has under the laws of this state, a bank shall have the powers and authorities conferred as of July 28, 1985, or as of any subsequent date not later than July 28, 2013, upon any federally chartered bank doing business in this state. A bank may exercise the powers and authorities conferred on a federally chartered bank after July 28, 2013, only if the director finds that the exercise of such powers and authorities: (a) Serves the convenience and advantage of depositors, borrowers, or the general public; and (b) Maintains the fairness of competition and parity between state-chartered banks and federally chartered banks. (4) Notwithstanding any other provisions of law, a bank has the powers and authorities that an out-of-state state bank operating a branch in Washington has if the director finds that the exercise of such powers and authorities serves the convenience and advantage of depositors and borrowers, or the general public, and maintains the fairness of competition and parity between state-chartered banks and out-of-state state banks. (5) As used in this section, "powers and authorities" include without limitation powers and authorities in corporate governance and operational matters. (6) The restrictions, limitations, and requirements applicable to specific powers and authorities of federally chartered banks and out-of-state state banks, as applicable, shall apply to banks exercising those powers and authorities permitted under this section but only insofar as the restrictions, limitations, and requirements relate to exercising the powers and authorities granted banks solely under this section. (7) The director may require a bank to provide notice to the director prior to implementation of a plan to develop, improve, or continue holding real estate, including capitalized and operating leases, acquired through any means in full or partial satisfaction of a debt previously contracted, under circumstances which a national bank would be required to provide notice to the comptroller of the currency prior to implementation of such a plan. The director may adopt rules or issue orders, directives, standards, policies, memoranda, or other official communications to specify guidance with regard to the exercise of the powers and authorities to expend such funds as are needed to enable a bank to recover its total investment to the fullest extent authorized for a national bank under the national bank act, 12 U.S.C. Sec. 29. (8) Any activity which may be performed by a bank, except the taking of deposits, may be performed by (a) a corporation or