*******************************************= ************************************

The Arkansas Code of 1987, as amended<= /o:p>

(including the Arkansas Banking Code

A.C.A. § 23-45-101 through A.C.A. § 23-50-110)

is accessed

Online

= www.arkleg.state.ar.us

*******************************************= ************************************

TABLE OF CONTENTS

ARKANSAS STATE BANK DEPARTMENT

www.accessarkansas.org/bank

STATE BANK DEPARTMENT-GENERAL PROVISIONS

RULES AND REGULATIONS

Request for documents...................= ...........................................................................= ........... 1.1

Fees for copies provided pursuant to request....................................................................= ..... 1.1

Confidential or non-confidential status of Bank Department records....................................... 1.1

Legal holidays; Applicable law........= ...........................................................................= ........... 1.2

Certified copies and certificates of good standing fees............................................................ 1.2

Interest in state banks; Participation in= ...........................................................................= ........ 1.3

PROCEEDINGS BEFORE THE BOARD AND COMMISSIONER

Applications..........................................= ...........................................................................= .... 1.3

Applications. Facsimile..........................................= ............................................................... 1.3<= /p>

Meetings of the Board; Regular meeting dates....................................................................... = 1.3

Publication requirements (applications before Board)............................................................. 1.4

Application filing fees (filed with Boar= d)..........................................= ....................................... 1.4

Application filing fees(not filed with Board)..........................= .................................................. 1.4

Hearings. Filing fees for written/official protests..................................................................= .... 1.5

Adjudicative Hearings........................= ...........................................................................= ........ 1.5

Rehearing modifications...................= ...........................................................................= .......... 1.7

Assessment Fees...............................................................= ................................................... 1.7

Retention of Records......................= ...........................................................................= ........... 1.8

Appeal of Commissioner decision on minimum capital requirements to Board......................... 1.11

GENERAL POWERS OF BANKS

Warehousing mortgages and other loans.......= ......................................................................... <= /span>2.1

Incidental powers..........................= ...........................................................................= ............ 2.1

Gift Cards...........................= ...........................................................................= ...................... 2.1

Wild card statute....................= ...........................................................................= ................... 2.4

Disposition of income from sale of credit life insurance or debt cancellation contracts= .............. 2.4

Guaranties..........................................= ...........................................................................= ....... 2.5

Computer services of bank or operating subsidiary................................................................ 2.6

Messenger service.........................= ...........................................................................= ............ 2.6

Power to borrow.......................= ...........................................................................= ................ 2.6

Charter Amendment Application f= or Change of Bank Corporate Name...= .............................. 2.7

Reservation of Bank Corporate Na= me..........................................= ........................................ 2.7

Capital notes...........................= ...........................................................................= .................. 2.8

Federal regulations.....................= ...........................................................................= ................ 2.8

INVESTMENTS

Investment, corporate debt obligation= ..........................................= .......................................... 4.1

Permissible exceptions. Common stock. Trust preferred securities......................................... 4.1

Investment--Consumer paper..........................................= ...................................................... 4.2

Revenue obligations.....................= ...........................................................................= .............. 4.2

Trading account.........................= ...........................................................................= ................ 4.3

State Banking Board requirements......= ...........................................................................= ....... 4.3

Bank service companies...............= ...........................................................................= .............. 4.5

Limitation on investment...................= ...........................................................................= .......... 4.5

LOAN LIMITS

Certificates of reliance--Endorsed or guaranteed obligations.................................................. 5.1

Combining loans to parent corporation and subsidiary; loans to separate subsidiaries<= /a>.............. 5.1

Drafts or bills of exchange............= ...........................................................................= .............. 5.2

Obligations drawn against existing values..........................................= ..................................... 5.2

Obligations secured by certain transferable documents of title..............= ................................... 5.2

Obligations guaranteed by Farm Service = Agency..........................................= ......................... 5.2

Loans secured by certificate of deposit..........................................................................= ........ 5.3

Loan commitments and standby letters of credi= t..........................................= ........................... 5.3

TRUST POWERS

Activities not requiring trust powers......= ...........................................................................= ...... 7.1

Federal Deposit Insurance Corporation and Federal Reserve approval.................................. = 7.1

Title to trust securities in name of nominee........................................................................= ..... 7.1

Common trust fund......................= ...........................................................................= .............. 7.1

Individual retirement account..............= ...........................................................................= ........ 7.2

Keogh plan............................= ...........................................................................= .................... 7.2

Trust deposits awaiting investment....= ...........................................................................= .......... 7.2

Bank as trustee; voting of own shares= ...........................................................................= ......... 7.3

Trust policies........................= ...........................................................................= ..................... 7.3

FIDUCIARY POWERS OF STATE BANKS

Fiduciary powers of state banks and colle= ctive investment funds................= ............................. 7.4

Definitions..........................................= ...........................................................................= ....... 7.4

Account..........................................= ...........................................................................= .......... 7.4

Custodian under Uniform Gifts to Minors Act........................................................................ <= /span>7.4

Fiduciary..........................................= ...........................................................................= ......... 7.4

Fiduciary powers.................................................................= ................................................. 7.4

Fiduciary records.................................................................= ................................................. 7.4

Guardian..........................................= ...........................................................................= ......... 7.4

Investment authority.......................= ...........................................................................= ............ 7.4

Local law.............................= ...........................................................................= ..................... 7.4

Managing agent...........................= ...........................................................................= .............. 7.4

State bank............................= ...........................................................................= ..................... 7.4

Trust department......................= ...........................................................................= ................. 7.5

Adoption of Policies and Procedures with Respect to Brokerage Placement Practices............ 7.5

Administration of Fiduciary Powers..........................................= ............................................. 7.5

Books and Accounts....................= ...........................................................................= ............. 7.6

Audit of Trust Department.............= ...........................................................................= ............ 7.7

Investment of Funds Held as Fiduciary......= ...........................................................................= . 7.7

Self-dealing..........................................= ...........................................................................= ..... 7.7

Custody of Investments..................= ...........................................................................= ............ 7.8

Deposit of Securities with State Authorities.......................................................................= ..... 7.9

Compensation of Bank.........................= ...........................................................................= ..... 7.9

Receivership of Voluntary Liquidation of Bank= ...................................................................... 7.9

Surrender or Revocation of Fiduciary Powers....................................................................... 7.10

COLLECTIVE INVESTMENT FUNDS

Collective Investment......................= ...........................................................................= ........... 7.10

CHANGE IN CONTROL

Transfers affecting change in control.....= ...........................................................................= ...... 8.1

Time for Commissioner’s ruling.= ...........................................................................= ................. 8.1

Anti-competitive Acquisitions....................= ...........................................................................= . 8.1

DIVIDENDS

Dividends; Prior approval;.................= ...........................................................................= ........ 8.2

STOCK ISSUE AND TRANSFER

ISSUE OF STOCK

Payment for stock.......................= ...........................................................................= ............... 8.2

Discriminatory sale of stock..........................................= ........................................................ 8.2

Common and preferred; Voting, nonvoting= ...........................................................................= . 8.2

Fractional shares; Scrip...................= ...........................................................................= ........... 8.3

Preemptive rights..........................= ...........................................................................= ............. 8.3

Waiver of preemptive rights............= ...........................................................................= ........... 8.4

Stock issuance to be reported.........= ...........................................................................= ........... 8.4

Transfers to be reported..................= ...........................................................................= .......... 8.4

Information required on reported transfers..= ...........................................................................= 8.4

STOCKHOLDERS’ MEETINGS

Proxy voting..........................= ...........................................................................= .................... 8.5

Notice of meeting......................= ...........................................................................= ................ 8.5

Cumulative voting..........................= ...........................................................................= ............ 8.5

DIRECTORS AND STOCKHOLDERS

Board of directors....................= ...........................................................................= ................. 8.6

Officers or director removal..........................................= ........................................................ 8.6

Officers or director removal – Cease & Desist....................= .................................................. 8.6

Directors meetings........................= ...........................................................................= ............. 8.6

RESERVES OF BANKS

Penalty--Failure to maintain reserve.............= .......................................................................... = 8.7

BRANCH BANKS

= Bank Fictitious N= ames..............= ...........................................................................= ................. 9.1

FULL SERVICE BRANCHES;

LIMITED PURPOSE OFFICES

Healthy BankRelocation of Existing Full Service Branch<= span style=3D'color:black'>..............= ............................................................... 9.2<= o:p>

Short Distance Relocation..............= ...........................................................................= ............ 9.3

Limited purposes offices..............= ...........................................................................= .............. 9.4

Expedited, Standard, and Mobile Branch Application Procedures..........= ................................ 9.5

Mobile Branch.......................................................................= ............................................... 9.7

Protest.......= ...........................................................................= ............................................... 9.7

PLAN OF EXCHANGE

Authority to adopt plan of exchange--Notice--Court reporter................................................ 11.1=

Court reporter required..........................................= ............................................................... 11.1=

DISSOLUTION AND LIQUIDATION

Execution and filing articles with Department. Certificate of Dissolution. Fees......................... 11.1=

Voluntary liquidation..............= ...........................................................................= .................... 11.1

Voluntary liquidation. Surrender of chart= er..............= ............................................................... 11.1=

POLICY REQUIREMENTS

Loan policy..........................................= ...........................................................................= ..... 12.1

LOAN PARTICIPATION POLICY

Loan participation policy..............= ...........................................................................= .............. 12.1

Guidelines when purchasing..............= ...........................................................................= .......... 12.2

Independent credit analysis..............= ...........................................................................= .......... 12.2

Transfers of credit information..............= ...........................................................................= ...... 12.2

Recourse arrangements..............= ...........................................................................= ................ 12.3

Loan loss reserve required..............= ...........................................................................= ........... 12.4

Investment policy.............................= ...........................................................................= .......... 12.4

Asset/Liability management policy..............= ...........................................................................= 12.4

POLICY STATEMENTS – ORDER OF THE BANK COMMISSIO= NER

Financial Subsidiary – May 3, 2000= ..........................................= ............................................ 13.1<= /p>

Bank Purchases of Life Insurance – Apri= l 7, 2003............................= ..................................... 13.2

Debt Cancellation Contracts & Debt Suspension Agreements – July 14, 2003= ....................... 13.18

Merger or Consolidation – December 12, 2006..........................................= .......................... 13.28

Bank Investment in Limited Liability Companies or Limited Liability

= Partnerships - July 20, 2007<= span style=3D'mso-tab-count:1 dotted'>..........................................= ............................................. 13.29

Loan Production Office – Activities Permitted – July 20, 2007.= .............................................. 13.30

Indemnification of Officers, Directors R= 11; July 20, 2007...................= ......................................... 13.32

Definition of Capital, Surplus, and Undivided P= rofits

= (Legal Lending Limits) – July 20, 2007..............= .......................................................... 13.35

ADMINISTRATIVE POLICIES

Administrative Policy #001..............= ...........................................................................= .......... 14.1

Administrative Policy #002 - Revised..............= ...................................................................... 14.4

Administrative Policy #003 - Revised..............= ...................................................................... 14.6

Administrative Policy #004..............= ...........................................................................= .......... 14.12

Administrative Policy #005..............= ...........................................................................= .......... 14.14

Administrative Policy #006..............= ...........................................................................= .......... 14.17

Administrative Policy #007 - Revised..............= ...................................................................... 14.23

Administrative Policy #008..........................................= ......................................................... 14.25=

COUNTY AND REGIONAL

INDUSTRIAL DEVELOPMENT CORPORATIONS=

A.C.A. § 15-4-1201 through A.C.A. § 15-4-12= 28

Purpose....= ...........................................................................= ................................................. 15.1

Information....................................................................= ....................................................... 15.1

Definition of Impairment of Assets or Capital= ..............= ........................................................... 15.2

Assessment fees..............= ...........................................................................= .......................... 15.2

Application Requirements..........................................= ........................................................... 15.2

= TRUST INSTITUTIONS REGULATIONS

A.C.A. &sec= t; 23-51-101 through A.C.A. § 23-51-211

Fees..........................................= ...........................................................................= ................ 16.1

Assessments, Examination Fees..............= ...........................................................................= ... 16.1

Confidential Information..............= ...........................................................................= ............... 16.1

Bonding Requirements – State Chartered Trust Com= pany..............= ........................................ 16.2

Transfer of Stock – State Chartered Trust Compa= ny..............= ............................................... 16.2

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SECTION 1

&= nbsp; STATE BANK DEPARTMENT - GENERAL PROVISIONS

46-101.1 - REQUESTS FOR DOCUMENTS (<= /b>Reference A.C.A. § 23-46-101)

  = ;        Requests for non-confidential documents may be made by filling out a request form provided by the department. Telephone requests may be accepted.

46-101.2 - FEES FOR COPIES PROVIDED PURSUAN= T TO REQUEST (Reference A.C.A. § 23-46.101)=

  = ;        Copies of documents provided pursuant to request from the public or in the case of subpoena (if the copies are of confidential records) will be provided based upon the following fee schedule:

·      = regular copies - $ .50 per page;

·      = certif= ied copies - $1.00 per page;

·      = microf= ilm copies - $1.00 per page;

·      = faxed = copies - $ .50 per page extra.

46-101.3 - CONFIDENTIAL OR NON-CONFIDENTIAL STATUS OF BANK

        =           DEPARTMENT RECORDS (Reference A.C.A. § 23-46-101)

A.  = ;    The names of stockholders of a bank or bank holding company will not = be regarded as confidential. The stockholder’s list of a bank or bank holding company will not be rega= rded as confidential.

B.      Articles of Agreement and Incorporation and all amendments are not confidential.

C.      Stock Trans= fers. A one‑page request form submitted to the Commissioner requesting a tran= sfer of bank stock from one stockholder to another. However, any information submitted to the Commissioner, including any personal financial statements, along with the request will be regarded as confidenti= al and is not subject to disclosure.

D.<= span style=3D'mso-tab-count:1'>      Application= s. All applications submitted to the Commissioner may be disclosed to anyone with the exception that personal financial statements submitted in support of such applications shall be regarded as confidential and are not subject to disclosure.

=

E.      Examination Reports. Examination reports are highly confidential and are not subject to public disclosure. Such examination reports are regul= arly submitted to the federal regulatory authorities and/or other state financial institution regulatory authorities, as well as to the

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  = ;        examined bank as a matter of regulatory process. However, the examination reports re= main the property of the Department and, as such, the report, as well as all correspondence between regulatory authorities and the examined bank in resp= ect to the examination report, is confidential, A.C.A. § 23-46-101.

F.      Investigati= on Reports. An investigation made by a bank ex= aminer assigned to investigate the merits of an application, or other bank matter,= is generally considered as confidential. The exception being that the Commissioner, in his/her discretion, reserves the right to permit an investigation on the merits of an applicati= on to be reviewed by the applicant and an official protestant to an application and permit introduction into evidence, by a party to the proceeding, those portions of the investigation which may be necessary and relevant to that proceeding.

G.      Corporate "File". A bank's corporate file contains t= he following: Articles of Incorporation, Amendments to Articles of Incorporati= on, Oaths of Directors, list of stockholders.&= nbsp; The file is subject to disclosure with the exception of any informat= ion in support of a petition for a stock transfer since such supportive informa= tion is confidential.

H.      Financial Statements. Personal financial statements shal= l not be exhibited to the public.

LEGAL HOLIDAY (BANK)

48-103.1. - L= EGAL HOLIDAY; APPLICABLE LAW (Referenc= e A.C.A. § 23-48-103)

The legal holidays applicable to state banks shall be those holidays set forth = in A.C.A. § 1-5-101 and such other holidays as shall be established from = time to time by the Board of Governors of the Federal Reserve System. A state bank is not required to cl= ose on any legal holiday. A bank may= close one business day of each week in which event the day of such closing is dee= med a legal holiday and not a business day. Business transacted on a holiday is binding and shall have the same effect as if transacted on the next succeed= ing business day. All items payab= le on a legal holiday shall be deemed to be payable on the day next succeeding the holiday.

46-203 - CERTIFIED COPIES AND CERTIFICATES = OF GOOD STANDING FEES (Refere= nce A.C.A. § 23-46-203)

  = ;        Certified copies of records and papers furnished to an individual by the State Bank Department will be charged at a rate of $1.00 per page.
  = ;        Certificates of Good Standing provided by the State Bank Department will be charged at $50.00 per certificate.

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<= /o:p>

SECTION 2

GENERAL POWERS OF BANKS

= 47-101.1. - WAREHOUSING MORTGAGES AND OTHER LOANS (Reference A.C.A. § 23-47-101)

A.C.A. § 23-47-101(a)(14)= permits state banks “to warehouse or act as agent in warehousing mortgages and other loans;”. The aggr= egate of mortgages or other loans shall not be applied against the legal lending limit if the state bank is acting as agent in warehousing mortgages or other loans for a subsidiary.

47-101.2 - INCIDENTAL POWERS (Refere= nce A.C.A. 23-47-101)

A.C.A. §23-47-101(b) reads: "In addition to t= he foregoing, a bank may exercise any other powers which are incidental to the business of banking.” T= his statutory reference to incidental powers is very similar to the National Banking Act. The Commissioner and the Banking Board may give consideration = to the interpretations of similar words in the National Bank Act by the Comptroller of the Currency, but shall not utilize this section to permit t= he exercise of any power or performance of any activity which is beyond the reasonable progression of the business of banking as authorized in the Arka= nsas Code.

47-101.2(a) Gift Card Disclosures (Refere= nce OCC Bulletin 2006-34).

The State Banking Board, = pursuant to Act 304 of 2007, adopts the following guidance on disclosure and marketi= ng issues for the sale of gift cards issued by the Office of the Comptroller of the Currency, August 14, 2006:

PURPOSE AND SCOPE

This bulletin is intended= to provide guidance to national banks on a number of disclosure and marketing issues presented by gift cards, so that national banks that issue gift card= s do so in a manner in which both purchasers and recipients of gift cards are fu= lly informed of the terms and conditions of the product.[1]

BACKGROUND

A gift card is a type of = prepaid or stored value card that is designed to be purchased by one consumer (purchaser) and presented as = a gift to a second consumer (recipie= nt).[2] The terms and

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conditions of different g= ift card products can vary significantly, but gift cards are generally divided into = two main categories: retail gift = cards and bank-issued gift cards. A retail gift card is typically offered by a major retail, entertainment, or = food service company, to be used at establishments owned and operated by that company. A bank-issued gift c= ard is typically issued by a financial institution, carries the logo of a payment = card network such as VISA, MasterCard, or American Express, and can be used at t= he various locations that accept cards from that network.[3]

A bank-issued gift card is typically a bank product, and not merely an arrangement through which a thi= rd party can facilitate the use of its product in a payment card network. When a gift card is a bank product= , the consumer’s agreement is with the bank, and the gift card and the rela= ted disclosures, the cardholder agreement, and other documentation will specifi= cally identify the bank as the issuer of the card. In addition, the bank generally wi= ll establish and impose the fees and other terms associated with the card and control the net proceeds of such fees; will be the party with the financial responsibility to merchants that honor the card; and will hold for its own account, or for the account of the consumer, the pool of funds used to pay merchants when consumers present gift cards to pay for goods or services.[4]

Industry studies and medi= al reports suggest that the gift card market is growing rapidly, and will cont= inue to do so over the next several years. This rapid growth – together with the diversity of fees and ot= her terms and conditions among different gift card products – shows that = it is important for national banks that offer these products to adopt sound disclosure practices to help ensure that consumers understand the gift card products they are purchasing and using.

CONSUMER DISCLOSURES

Because the purchaser and= the recipient of a gift card typically are not the same person, gift cards pres= ent unique disclosure challenges. In particular, providing disclosures to a gift card purchaser may not be sufficient to avoid compliance and reputation risks related to misunderstan= ding by a recipient about material costs, terms, and conditions of the gift card. In these circumstances,= the OCC expects national bank gift card issuers to take appropriate actions to ensure that critical information is provided in a form that is likely to be readily available to recipients, as well as purchasers, of gift cards. Accordingly, with respect to gift = cards that are bank products, the OCC would expect to see the following disclosur= es:

= · &nb= sp; Disclosures on Gift Cards. Basic information that is most ess= ential to a gift card recipient’s decisions about when and how to use the ca= rs should be provided on the gift card itself, or on a sticker or tape affixed= to the gift card. In light of the terms and provisions of most bank gift cards, this information generally wi= ll include disclosures relating to the following matters:

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§ &n= bsp; The expiration date of the card (which, consistent with existing practices for credit and debit cards, should be presented clearly on the front of the card);

&n= bsp;

§ &n= bsp; The amount or the existence of any monthly maintenance, dormancy, usage, or similar fees; and

&n= bsp;

§ &n= bsp; How consumers may obtain additional informat= ion about their cards or other customer service (for example, by providing a toll-free number or Web site address).

= · &nb= sp; Disclosures Accompanying Gift Cards.<= span style=3D'mso-spacerun:yes'> Other information that is importan= t to a gift care recipient’s decisions and actions should be provided in a f= orm that is designed to be passed on with the card to the recipient, and issuers should encourage card purchasers to provide this information to gift card recipients. For example, the = card could be carried in promotional packaging that contains this material information, or inserted into a sleeve that sets forth or is attached to th= ese disclosures. Depending on the= terms of the gift card product, this information may include:

§ &n= bsp; The name of the bank that issued the card;

&n= bsp;

§ &n= bsp; Any other fees that may apply to the card, including card replacement or reissuance fees, balance inquiry fees, foreign currency conversion fees, and cash redemption fees, and how they will be collected (for example, by debits to the card balance);

&n= bsp;

§ &n= bsp; Whether and how consumers can receive a replacement card in the event that their card is lost or stolen, the information that consumers need to retain in order to do so, and responsibi= lity for unauthorized transactions;

&n= bsp;

§ &n= bsp; Where the card can be used, including, if applicable, suggestions for using the card as gas stations, hotels, restaurants, or other locations that may seek payment authorization in an amount greater than the consumer’s actual purchase;

&n= bsp;

§ &n= bsp; The issuer’s obligation to authorize transactions through use of the card, and examples of the circumstances und= er which it may refuse to do so;

&n= bsp;

§ &n= bsp; The importance of tracking the balance remai= ning on the card;[5]

&n= bsp;

§ Whether, and if so, how the card may be used= in “split payment” transactions (when the card is used in conjunct= ion with another form of payment) and the process for redeeming de minimis remaining balances:

&n= bsp;

§ How consumers can resolve problems and complaints and receive balance and other information about their cards; and=

&n= bsp;

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§ When applicable, the issuer’s ability = to revoke or change the terms of the gift card agreement.

PRACTICES TO AVOID

National bank gift card i= ssuers should take appropriate steps to avoid engaging in marketing or promotional practices that could mislead a reasonable consumer about the terms, conditi= ons, or limitations of the bank gift card product they are offering. For example, issuers should not advertise a gift card as having “no expiration date” if monthly service or maintenance fees, dormancy fees, or similar charges can consume = the card balance and thereby have the same practical effect as an expiration date. Similarly, if such fees= may consume the card balance before the stated expiration date for the card arr= ives, disclosures relating to that expiration date (other than the disclosure on = the front of the card) should explain that possibility. Issuers also should generally avoid describing gift card products in terms suggesting that they are similar to = gift certificates or other payment instruments with which consumers may be more familiar, or as products that carry federal deposit insurance when such insurance does not apply.

47-101.3. – WILD CARD STATUTE (Refere= nce A.C.A. § 23-47-101)

Pursuant to the power granted = to the Commissioner by A.C.A. §23-47-101(c), the Commissioner, by written order, may authorize state banks to engage in any banking activity then permitted to national banks. = Such authority may be subject to such conditions and restrictions as the Commissioner may determine to be appropriate, whether or not any such conditions or restrictions are applicable to national banks.

(Reference = A.C.A. § 23-47-101)

(a) Individual employees, officers, directors, and principal shareholders of a state bank shall not personally profit by retaining commissions or other income (including experience rating credits and other rebates, but not including any portion of a premium requi= red to cover the underwriting risk) from the sale of credit life, health and accident, and mortgage life insurance ("credit life insurance") or debt cancellation contracts to the institution's loan customers. However, employees and officers may participate in a bonus or incentive plan based in whole or in part on sales= of credit life insurance or debt cancellation contracts under which payments the state bank in any ye= ar may not exceed 5% of the recipient's annual salary. Alternatively, bonuses paid to any individual during the year for sales of credit life insurance or debt cancellation contract may not exceed 5% of the average salary of all loan officers participating in the p= lan. Payments may not be made to employ= ees and officers more frequently than quarterly.

(b) Income derived from the sales of c= redit life insurance or debt cancellation contracts to loan customers shall be credited to the income accounts of the state bank and not to the individual employees, officers, directors, or principal shareholders, their interests,= or other affiliates. However, such income may be credited to an affiliate operating under the Bank

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Holding Company Act or to a tr= ust for the benefit of all shareholders, provided that the state bank receives reasonable compensation in recognition of the role played by its personnel, premises and goodwill in credit life insurance and debt cancellation sales. As a general rule, "reasonable compensation" means an amount equivalent to at least = 20% of the affiliate's net income attributable to the state bank's credit life insurance or debt cancellation sales.

(c) Where other legal considerations preclude a bank from using a particular procedure for selling credit life insurance or debt cancellation contracts or from disposing of the income in= a particular manner, a state bank that wishes to provide this service to its = loan customers shall seek and utilize an alternative method that complies with (= a) and (b) above.

(d) The distribution to shareholders of income derived from the sale of credit life insurance and debt cancellation contracts shall be accomplished through a declaration of dividends in conformity with law, rule, regulation and prudent financial practices.

(e) Nothing in this section shall be construed to prohibit a bank employee, officer, director, or principal shareholder who holds an insurance agent's license from agreeing to compens= ate the bank for the use of its premises, employees, and goodwill; provided, th= at all income directly received by such employee, officer, director, or princi= pal shareholder from this activity is remitted to the bank as compensation.

RIGHT OF BANK TO EXECUTE GUARANTY

47-101.5. - GUARANTIES= (Reference A.C.A. § 23-47-101)<= /p>

A state bank is not authorized to be an accommodation guarantor. An accommodation guaranty by a state bank is void and ultra vires. A state bank can execute a valid guaranty agreement if such action is necessary or advisable to protect an economic interest of the bank. In Bank of Morrilton v. Skipper, Tucker & Co., 165 <= st1:State w:st=3D"on">Ark. 49, the bank executed an agreement guaranteeing the payment of certain liabilities by one of its customers. The purpose of the guaranty was to enable the customer (who was indebted to the bank) to collect funds under an improvement district contract that would enable the customer to pay the deb= t to the bank. The case was remand= ed for a new trial; but the Supreme Court recognized that a guaranty executed for = the purpose stated would be binding on the bank. In Wasson v. American Can Co., 189 Ark. 354, the bank guaranteed the paym= ent of certain drafts by one of its customers that owed it about $3,000. The guaranty by the bank was inten= ded to enable the customer to purchase cans for tomato canning purposes and the intention of the bank was that this guaranty would enable the customer to continue business operations and pay part or all of the indebtedness to the bank, held that this guaranty was to protect an economic interest of the ba= nk and was binding on the bank. = The same principle of law was recognized in Citizens Bank of Booneville v. Clements, 172 Ark. 1023. See also Merchants &= amp; Planters Bank & Trust Company v. Deaton, 200 Ark. 828; also Nakd= imen v. First National Bank, 177 Ark. 303.

= September 1, 2005 &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = Agency # 210.00=

= TRUST INSTITUTIONS REGULATIONS

SECTION 1