§1233. Effect of unauthorized investments

A. Every loan or other investment made in violation of this Chapter shall be due and payable according to its terms, and the obligation thereof shall not be impaired.

B. Every director or officer of a savings bank who knowingly shall violate, participate in, or assent to, or who knowingly shall permit any of the officers or agents of the savings bank to make investments not authorized by this Chapter, shall be liable individually for all damage which the savings bank may sustain in consequence of such violation, in addition to any criminal penalties prescribed by this Title.

C.(1) The commissioner may require every director or officer of a savings bank who knowingly shall violate, participate in, or assent to, or who to knowingly shall permit any of the officers or agents of the savings bank to make investments not authorized by this Chapter, to deposit with the savings bank an indemnity bond, insurance, or collateral of a kind and amount sufficient to indemnify the savings bank against damages which the savings bank may sustain in consequence of such violation.

(2) The amount considered sufficient to indemnify the savings bank shall, in the case of an unauthorized investment, be the difference between the book value and the market value of the investment at the time the commissioner makes his determination that such investment is unauthorized. The amount considered sufficient to indemnify the savings bank, in the case of an unauthorized loan, shall be the difference between the book value of the loan and the amount that could have been made under the provisions of this Chapter.

(3) Whenever an unauthorized investment has been sold or disposed of without recourse, the commissioner shall release all or such part of the indemnity after deducting any loss. Whenever the balance of an unauthorized loan has been reduced to an amount which would permit such loan to be made under the provisions of this Chapter, the indemnity shall be released, provided that the commissioner in making such determination may require an independent appraisal of the security.

Acts 1990, No. 816, §1, eff. Sept. 1, 1990.