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17. EXAMINATION OF STATE BANK CONVERTING.
When an application to convert is forwarded it should be accompanied by a draft for $100, payable to the order of the Comptroller of the Currency, to cover the expense of examination. Upon receipt of this draft the chief national-bank examiner for the district is directed to detail an examiner to make the investigation, the examiner being instructed to arrange with the officers of the bank as to the date when the examination is to be made. The examiner investigates the character and financial standing of the officers and directors, and reports on the manner in which the State bank has been managed, what the officers have accomplished in the community, and also as to the probability of the success of the bank as a national bank. The examiner is also instructed to prepare a list of the assets of the State bank that do not conform to the provisions of the national-bank act or the Federal reserve act.
Under the national banking laws any association may make loans on personal security, and any national banking association not situated in a central reserve city is authorized by section 24 of the Federal reserve act to make loans secured by improved and unencumbered farm land situated within its Federal reserve district or within a radius of 100 miles of the place in which such bank is located, irrespective of district lines, and may also make loans secured by improved and unencumbered real estate located within 100 miles of the place in which such bank is located, irrespective of district lines; but no loan made upon the security of such farm land shall be made for a longer time than five years, and no loan made upon the security of such real estate as distinguished from farm land shall be made for a longer time than one year, nor shall the amount of any such loan, whether upon such farm land or upon such real estate, exceed 50 per cent of the actual value of the property offered as security. Any such bank may make such loans, whether secured by such farm land or such real estate, in an aggregate sum equal to 25 per cent of its capital and surplus or to one-third of its time deposits, and such banks may continue hereafter as heretofore to receive time deposits and to pay interest on the same.
The Federal Reserve Board has power from time to time to add to the list of cities in which national banks shall not be permitted to make loans secured by real estate in the manner described in this section.
National banks are prohibited from investing in real estate other than that necessary to the conduct of the business of the bank, and are restricted in the volume of accommodations to any one person, company, corporation, or firm, etc., to 10 per cent of the capital stock
of the association actually paid and unimpaired and 10 per cent of the unimpaired surplus fund. The courts have held that it is ultra vires of a national banking association to invest in the stock of another corporation.
The restrictions of law relative to excessive loans, loans secured by real estate, and stocks of other corporations, are held to apply to a State bank proposing to convert into a national association, and where assets of the character in question are found, conversion may be expedited by obtaining an agreement signed by the directors and sent with the report to the effect that such assets will be immediately collected or disposed of otherwise.
In addition to securing the report from the examiner, the Comptroller will also obtain a report from the Federal reserve bank of the district; from the State banking department; and from such other sources as he may deem advisable.
18. APPROVAL OF APPLICATION TO CONVERT INSTRUCTION.
When the application to convert has received the Comptroller's approval, a meeting of the shareholders of the State bank should be called, the notice of the meeting required by the laws of the State or the articles of association or incorporation having been given. At this meeting a resolution should be adopted by a vote representing not less than 51 per cent of the capital stock of the bank authorizing the board of directors to change and convert the bank into a national banking association under the provisions of section 5154, U. S. R. S., and acts amendatory thereof; also authorizing the directors, or a majority thereof, to make and execute the articles of association and organization certificate, and all other papers and certificates, and to do all acts necessary to conversion of the bank into a national banking association.
If it is desired, or is necessary, to increase the capital stock of the State bank, or change the par value of the shares before conversion, the increase or change must be legally effected under the laws of the State, and a certificate from the proper State official obtained showing the increase in capital stock to have been legally effected prior to the date on which the resolution authorizing conversion is adopted by the shareholders.
The minimum number of directors by which the affairs of a national bank can be lawfully managed is five and, if the State bank has less than that number, an increase should be effected under the laws of the State, prior to the execution of any conversion papers other than the application.
19. AUTHORITY FOR CONVERSION.
AUTHORITY FOR CONVERSION OF STATE BANK.
At a meeting of the shareholders of
notice of the proposed meeting required by the laws of the State or the articles of association or incorporation of said bank having been given, it was resolved that the board of directors of this bank be authorized to change and convert said bank into a national banking association under the provisions of section 5154 of the Revised Statutes of the United States, or of acts amendatory thereof; and we do also authorize the said directors, or majority thereof, to make and execute the articles of association and organization certificate required to be made or contemplated by said statutes; and also to make and execute all other papers and certificates and to do all acts necessary to convert the said bank into a national banking association; and to do and perform all such acts as may be necessary to transfer the assets of every description and character of the said State bank to the national banking association into which it is to be converted, so that the said conversion may be absolute and complete; and we do hereby assume, and authorize the said directors to assume, as the name of the national banking association into which the said State bank is to be converted, "The -;" and we do hereby appoint who are now the directors of the said State bank, to be the directors of the said national bank, to hold their offices as such directors until the regular annual election of directors is held, pursuant to the provisions of said Revised Statutes, and until their successors are chosen and qualified; and we do hereby authorize the said directors of the said national bank to continue in office the officers of the said State bank, or to appoint or elect others, as to them may seem best.
The foregoing resolution was adopted by the following vote, representing not less than 51 per cent of the capital stock of no one having acted
as proxy who is not authorized to so act under the laws of the State.
Name of shareholder.
Name of proxy.
No. of shares.
Total number of shares voted in favor of the resolution,
I hereby certify that this is a true and correct report of the vote and of the resolution adopted at a meeting of the shareholders of this bank held on the date mentioned.
The shareholders of a State bank having authorized its conversion into a national banking association, the directors should execute the
articles of association and organization certificate as per the following forms, the signatures of a majority of the directors being required:
ARTICLES OF ASSOCIATION.
[Executed in duplicate.]
We, the undersigned, directors of the having been authorized by a vote of shareholders owning not less than fifty-one per cent of the capital stock of said bank to change and convert the said bank into a national banking association, under the provisions of section 5154 of the Revised Statutes of the United States, or of acts amendatory thereof, and to execute articles of association, do hereby, in our own behalf, and in behalf of the stockholders whom we represent, make and execute the following articles of association:
First. The title of the association into which the said State bank is to be changed and converted shall be "The
Second. The place where its banking house or office shall be located, and its operations of discount and deposit carried on, and its general business conducted shall be the -, county of State of
Third. The board of directors shall consist of
Fourth. The regular annual meetings of the shareholders for the election of directors shall be held at the banking house of this association on the second Tuesday of January of each year; but if no election shall be held on that day it may be held on any other day, according to the provisions of section 5149 of the Revised Statutes of the United States, and all elections shall be held according to such regulations as may be prescribed by the board of directors not inconsistent with the provision of the national banking law and of these articles.
Fifth. The capital stock of this association shall be into shares of dollars each; but the capital may, with the approval of the Comptroller of the Currency, be increased at any time by shareholders owning two-thirds of the stock, according to the provisions of an act of Congress approved May 1, 1886; and in case of the increase of the capital of the association each shareholder shall have the privilege of subscribing for such number of shares of the proposed increase of the capital stock as he may be entitled to according to the number of shares owned by him before the stock is increased. Sixth. The board of directors, a majority of whom shall be a quorum to do business, shall elect one of its members president of this association, who shall hold his office (unless he shall be disqualified or be sooner removed by a majority vote of the board) for the term for which he was elected a director. The directors shall have power to elect a vice president, who shall also be a member of the board of directors, and who shall be authorized, in the absence or inability of the president from any cause, to perform all acts and duties pertaining to the office of president, except such as the president only is authorized by law to perform, and to elect or appoint a cashier and such other officers and clerks as may be required to transact the business of the association; to fix the salaries to be paid to them and continue them in office, or to dismiss them, as, in the opinion of a majority of the board, the interests of the association may demand. The directors shall have power to define the duties of the officers and clerks of the association; to require bonds from them and to fix the penalty thereof; to regulate the manner in which elections of directors shall be held, and to appoint judges of the elections; to make all by-laws that it may be proper for them to make, not inconsistent with law, for the general regulation of the business of the association and the management of its affairs, and generally to
do and perform all acts that it may be legal for a board of directors to do and perform under the Revised Statutes aforesaid.
Seventh. This association shall continue for the period of twenty years from the date of the execution of its organization certificate unless sooner placed in voluntary liquidation by the act of its shareholders owning at least two-thirds of its stock, or otherwise dissolved by authority of law.
Eighth. These articles of association may be changed or amended at any time by shareholders owning a majority of the stock of the association in any manner not inconsistent with law; and the board of directors or any three shareholders may call a meeting of the shareholders for this or any other purpose, not inconsistent with law, by publishing notice thereof for thirty days in a newspaper published in the town, city, or county where the bank is located, or by mailing to each shareholder notice in writing thirty days before the time fixed for the meeting.
In witness whereof, we have hereunto set our hands this
21. ORGANIZATION CERTIFICATE.
We, the undersigned directors of the -, having been duly authorized by a vote of shareholders owning not less than fifty-one per cent of its capital stock to change and convert said bank into a national banking association, and to make the necessary organization certificate, under the provisions of section 5154 of the Revised Statutes of the United States, or of acts amendatory thereof, do sign and execute the following organization certificate, which we hereby declare we are authorized to make by a vote of shareholders owning not less than fifty-one per cent of the capital stock of the said State bank. First. The title of this association shall be "The
Second. The said association shall be located and continued in the where its operations of discount
-, county of —, and State of
and deposit are to be carried on.
Third. The capital stock of this association shall be divided into
dollars each, as it is now divided in the
said State bank.
Fourth. The name and residence of each of the stockholders of the said State bank, which is to become a national bank under the provisions of the Revised Statutes aforesaid, and the number of shares of held by each stockholder are as follows:
No. of shares.
Fifth. This certificate is made in order that the said State bank and the stockholders thereof may avail themselves of the advantages of the aforesaid