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Cornell University Library 
 HG 2547.A6 1919 
 
 Instructions of the comptroller of the c 
 
 3 1924 013 951 763 
 
Cornell University 
 Library 
 
 The original of tiiis book is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924013951763 
 
INSTRUCTIONS 
 
 OF THE 
 
 COMPTROLLER .OF THE CURRENCY 
 
 RELATIVE TO THE 
 
 ORGANIZATION AND POWERS 
 OF 'NATIONAL BANKS' 
 
 1919 
 
 WASHINGTON 
 
 GOVERNMENT PRINTING OFFICE 
 
 1919 
 
INSTRUCTIONS 
 
 OF THE 
 
 COMPTROLLER OF THE CURRENCY 
 
 RELATIVE TO THE 
 
 ORGANIZATION AND POWERS 
 OF NATIONAL BANKS 
 
 1919 
 
 WASHINGTON 
 
 GOVERNMENT PRINTING OITICE 
 
 1919 
 
CHAPTER 1. 
 ORGANIZATION OF NATIONAL BANKS. 
 
 1. Application to organize. 
 
 2. Capital required. 
 
 3. Investigation by national-bank ex- 
 
 aminer. 
 
 4. Approval of application — ^Instruc- 
 
 tions. 
 
 5. Subscriptions to stock. 
 
 6. Articles of association. 
 
 7. Organization certificate. 
 
 8. Election and oaths of directors. 
 
 ' 9. Appointment of ofiScers. 
 
 10. Payment of capital. 
 
 11. Certifieate of authority to com- 
 
 mence business. 
 
 12. Commencement of business. 
 
 J3. Payment of deferred installments 
 
 on capital. 
 14. Organization of national bank to 
 ' succeed a State bank. 
 
 1. Application to Organize. 
 
 The preliminary proceeding in connection with the organization of 
 a national bank is to write to the Comptroller of the Currency re- 
 questing the reservation of the desired title and stating the location 
 and the proposed capital. 
 
 It is the practice to reserve a title for 15 days, during which time 
 it is expected a formal application will be filed. 
 
 If the nationalization of a State bank is contemplated, the request 
 should indicate whether the bank is to be converted into a national 
 bank or placed in liquidation and a national bank organized as its 
 successor. If the State bank is to continue in existence and a sepa- 
 rate national bank is to be organized, that fact should be stated. 
 
 The application must be signed by at least five persons who are 
 prospective shareholders of the association, and preferably by indi- 
 viduals who are also to be officers or directors. It should be indorsed 
 by three prominent public officials, preferably the mayor and the 
 postmaster of the place where the bank is to be located, and a judge 
 of court. 
 
 The exclusion of any professional promoters from the organization 
 will be required, as an application to receive favorable consideration 
 must represent a local demand for banking accommodations. 
 
 The following formal application for reservation of title and au- 
 thority to organize a national bank will be furnished upon request : 
 
 Application to Okganize a National Bank. 
 
 , 19—. 
 
 To tlie Comptroller of the Currency, 
 
 Washington. 
 Sir: We, the undersigned, prospective shareholders, being natural persons 
 and of lawful age, intend, with others, to organize a national banking associa- 
 tion, under the title of " The ," to be located at , 
 
OEGANIZATION OF NATIOlSrAL BANKS. 
 
 county of 
 
 State of 
 
 -, with a capital of $- 
 
 -, to succeed the 
 
 bank of • 
 
 Population, 
 
 We request that the title be reserved for a period of sixty days and organiza- 
 tion blanks and instructions be sent to , who is an actual resident 
 
 of the place where the proposed bank is to be' located. 
 
 signatures of applicants. 
 
 Residences. 
 
 Business. 
 
 Financial 
 
 strength, In 
 
 figures. 
 
 Shares sub- 
 scribed. 
 
 The signers of this application are known by me to be reputable citizens; the 
 information in reference to their business and financial standing is in my opin- 
 ion correct, the statement as to population authentic, and I am of the belief 
 that the conditions locally are such as to insure success if the bank is organized 
 and properly managed. 
 
 : , Judge of Court. 
 
 , Postmaster. 
 
 , Mayor. 
 
 KEAD THESE INSTRUCTIONS CAREFULLY. 
 
 The name of the place should form a part of the title, thus, " The First 
 National Bank of A ," but the name of the State should not be included. 
 
 Consideration will not be given to an application for a title including the 
 word " First," if a national bank exists at the given locality; nor to an iipplica- 
 tion for a title identical with Unit of a national bank heretofure in existence, 
 nor to one materiiilly siuiiliir to that of a national, State, or other bank existing 
 in the place. 
 
 The application must be signed by at least five prospective shareholders, and 
 should be indorsed by three prominent persons, judge of court, postmaster, and 
 mayor, or other public officials. 
 
 The correspondent should be a resident of the place where the bank is to be 
 located, a prospective shareholder, and, if possible, an oflicer or director of the 
 proposed bank. 
 
 The following shows the national. State, or private bank with which the ap- 
 plicants are, or have been, connected. 
 
 (Date) 
 
 (Signed) 
 
 * Correspondent. 
 
 • N. B. — The correspondent Is requested to furnish, as early as possible, a list of the 
 prospective oflacers and directors of the proposed organization and a statement showing 
 their previous connection, if any, with other banltlng Institutions. 
 
ORGANIZATION OF NATIONAL BANKS. 7 
 
 Care must be exercised in giving information called for on the 
 back of the application. The capacity in which the applicants were 
 connected with other banks should be stated. The list of officers 
 and directors should be promptly furnished as soon as the 'organiza- 
 tion has progressed sufficiently to permit of their determination. 
 
 Organization expenses should not include any commissions paid for 
 the sale of stock, or promotion fees, but only such legitimate other 
 expenses as are incident to the actual organization of banks. The 
 capital and surplus must be paid in money and in money only. If 
 any agreement, whether verbal or written, exists to use subsequently 
 any part of the capital stock, surplus, or undivided profits to pay 
 promoters' expenses, or commissions contracted prior to organization, 
 this fact must be reported with the application for charter, as favor- 
 able consideration will not be given to any application if there is 
 an agreement to pay expenses not properly allowable. 
 
 Information is also desired whether any of the applicants or other 
 persons interested in any manner in the proposed organization have 
 at any time been connected with, or interested in, the organization 
 or attempted organization of any bank, either State or national ; if 
 so, the name of the bank or banks and the conditions under which 
 they were organized should be stated. 
 
 If the organization is effected, the president and a majority of the 
 directors should be residents of the place where the bank is located. 
 
 To avoid delay and unnecessary letter writing all correspondence 
 relating to official matters should be conducted by the local corre- 
 spondent directly with the Comptroller's office. 
 
 Printed headings on the stationery of the organizing bank should 
 indicate clearly that the bank is " organizing " or bear the heading 
 " Organizing Committee." 
 
 As the charter number should appear on the bank's permanent 
 letterhead, stationery should not be ordered until the bank is char- 
 tered and the charter number obtained. Special numbers can not be 
 reserved and the number can not be determined until the charter is 
 issued. 
 
 2. Capital Kequired. 
 
 National banks with a minimum capital of $25,000 may be organ- 
 ized in places the population of which does not exceed 3,000; with 
 minimum capital of $60,000 in places the population of which does 
 not exceed 6,000; with minimum capital of $100,000 in places the 
 population of which does not exceed 50,000 ; and with minimum capi- 
 tal of $200,000 in cities with population of over 50,000. 
 
 National banks organized in suburban districts included within the 
 political boundaries of a city must have the amount of capital re- 
 
.8 OBGANIZATION OP NATIONAL BANKS. 
 
 quired by law by a bank organized in the city in question. (Opinion 
 of Attorney General, June 6, 1913.) 
 
 3. Investigation by National-Bank Examinee. 
 
 When an application is transmitted it should be accompanied by 
 a draft for $100, payable to the order of the Comptroller of the Cur- 
 rency, to cover the expense of investigation. Upon receipt of this 
 draft the chief national-bank examiner for the district will be 
 directed to detail an examiner to make the investigation, the ex- 
 aminer being requested to arrange with the local correspondent in 
 the case as to the date when the investigation is to be made. 
 
 In making this investigation the examiner is instructed to give full 
 consideration to all factors entering into the proposition. Among 
 other matters to be considered are : First, the general character and 
 experience of the organizers and of the proposed officers of the new 
 bank ; second, the adequacy of existing banking facilities and the need 
 of further banking capital; third, the outlook for the growth and 
 development of the town or city in which the bank is to be located ; 
 fourth, the methods and banking practices of the existing bank or 
 banks, the interest rates which they charge to customers, and the 
 character of the service which as quasi-public institutions they are 
 rendering to their community ; fifth, the reasonable prospects for suc- 
 cess of the new bank if efficiently managed. 
 
 In every case where there is a protest, the examiner is directed to 
 see and personally interview those for and against the proposition. 
 
 In addition to securing a report from the examiner, made after a 
 personal investigation, the Comptroller obtains a report from the 
 Federal reserve bank of the district ; from the State banking depart- 
 ment, and from such other sources as he may deem advisable- 
 
 4. Approval, of Appmcation — Instructions, 
 
 If the application receives the approval of the Comptroller he will 
 furnish all necessary blanks for use in connection with effecting the 
 organization, with instructions for their proper execution, and the 
 title applied for will be reserved for 60 days, during which it is ex- 
 pected the organization of the bank will be completed. When the 
 papers are transmitted the directors should submit over their signa- 
 tures a statement showing the amounts collected on subscriptions 
 and the expenditures which have been made from the funds col- 
 lected. The balance remaining, after the purchase of the necessary 
 bonds to secure circulation, if circulation is to be issued, must be de- 
 posited with some disinterested bank and the president or cashier of 
 the depositary bank requested to certify to this office the amount on 
 
ORGANIZATION OF NATIONAL BANKS. 9 
 
 deposit to the credit of the organizing bank. The depositary bank 
 should also be required to accompanj^ the certification with a state- 
 ment as to whether any part of the amount so deposited is represented 
 by loans made to any of the subscribers to stock secured by shares of 
 stock in the proposed national bank or on other security. 
 
 5. S'UBSCRIPTIOXS TO StOCK. 
 
 When the proposed incorporators have received advice of the ap- 
 proval of their application to organize, there may be formulated a 
 subscription contract to be signed by the prospective shareholders, 
 which, in addition to the signatures, should give each subscriber's 
 occupation, address, net financial worth, and the number of shares 
 subscribed. . (Blanks for this purpose are not furnished by this 
 office.) 
 
 The law requires that 50 per cent of the capital stock of a national 
 bank shall be paid in cash and permits the payment of the additional 
 50 per cent in five equal monthly installments, but there would appear 
 to be no objection to. the incorporation in the subscription contract of 
 a provision that the entire amount due on each share shall be paid at 
 the call of the directors. 
 
 The Comptroller earnestly recommends to all organizing banks 
 the advisability of selling the capital stock at a premium of 10 per 
 cent or more for the purpose of creating a surplus from which m&j 
 be paid the necessary expenditures for organization, which, together 
 with the salaries of officers and employees, frequently result in an 
 impairment of capital during the first year or two of a bank's 
 existence. 
 
 In this connection emphasis is laid upon the desirability of re- 
 stricting the investment in a bank building to. economical. and pru- 
 dent limits and to an amount not out of proportion to the capital of 
 the bank. 
 
 Where a surplus is not created by the payment of a premium on 
 the stock, it is recommended that no dividends be paid until a sub- 
 stantial surplus has been acciunulated from the earnings of the bank. 
 
 Where the stock is sold at a premium of 20 per cent, a bank is 
 enabled at the first dividend period to distribute the net earnings 
 without carrying any portion thereof to the surplus fund as pro- 
 vided by section 5199. 
 
 In case, subscriptions to stock are paid in installments, temporary 
 certificates may be issued and the amount of each payment credited 
 thereon. When all installments have been paid the temporary cer- 
 tificates should be surrendered and canceled and permanent certifi- 
 cates of stock issued in lieu thereof. 
 
10 
 
 OBGANIZATION OF NATIONAL BANKS. 
 
 The following is a form of temporary certificate in general use : 
 
 No. . Tempokabt Ceetificate. shares. 
 
 shares of the capital stock 
 , and that upon payment of 
 
 This is to certify that is entitled to — 
 
 of the National Bank of , capital $- 
 
 all installments, amounting to $ , and surrender of this temporary certifi- 
 cate, a certificate of stock will be issued. 
 
 Witness the seal and the signatures of the president and cashier of the bank. 
 
 Dated , 19—. 
 
 The National Bank of 
 
 By , , 
 
 Cashier. 
 
 President. 
 
 First installment, • 
 
 Second 
 
 Third 
 
 Fourth 
 
 Fifth 
 
 Sixth 
 
 Payments on Account of Capital. 
 - per cent, amounting to $ , paid — 
 
 -, 19—. 
 
 - 19- 
 
 - 19 
 
 -, 19—. 
 -, 19—. 
 -, 19 
 
 Cashier. 
 
 Cashier. 
 
 Cashier. 
 
 Cashier, 
 
 Cashier. 
 
 Cashier, 
 
 Assignment. 
 
 For value received I hereby transfer and assign to 
 certificate and hereby appoint and constitute 
 
 this temporary 
 
 my true and lawful 
 
 attorney to transfer said certificate, with full power of subsltution in the 
 premises. 
 Dated at , this day of • , 19 — . 
 
 Witness : 
 
 6. Articles of Association. 
 
 Five persons at least are required to sign the articles of association, 
 and those who sign the articles must sign and acknowledge the organ- 
 ization certificate. If a majority of the applicants are not interested 
 in the bank as shareholders, a new application will be required. The 
 organization certificate should be executed at the same time as the 
 articles of association or subsequent thereto. 
 
 The articles of association and organization certificate, forms of 
 which follow, should be executed in duplicate, one copy of each to be 
 filed in the office of the Comptroller of the Currency and the other 
 retained by the association. 
 
 The persons uniting to organize a national bank must be natural 
 persons — that is, individuals who can legally hold and control prop- 
 erty in their individual right — and not corporations, firms, or asso- 
 ciations of any character. 
 
 The proportion of capital required for organization — ^that is, one- 
 half — must be paid in money, and each subsequent installment must 
 
ORGANIZATION OF NATIONAL BANKS. 11 
 
 be SO paid until all the capital is paid in. Promissory notes or other 
 evidences of debt can not be taken in payment for subscriptions to 
 capital stock. 
 
 Instead of providing, in section 3 of the articles of association, 
 for the election of the first board of directors, the names of the direc- 
 tors may be given therein if the stockholders are agreed as to the 
 persons vrho are to constitute the board. In this event the third 
 article should read as follows : 
 
 The board of directors shall consist of shareholders, and the following 
 
 persons (here insert their names) are hereby appointed directors of this asso- 
 ciation, to hold their offices as such until the regular annual election takes 
 place, pursuant to the fourth article of these articles of association, and until 
 their successors are chosen and have qualified. 
 
 The third section, if desired, may be made to provide for vrhat is 
 termed a sliding scale instead of a fixed number of directors ; in other 
 words, a minimum and maximum number of directors, in which 
 event the section should read as follows : 
 
 The board of directors shall consist of not fewer than (insert minimum 
 number) nor more than (insert maximum number) shareholders; and the 
 following persons (here insert their names) are hereby appointed directors of 
 this association, to hold their offices as such until the regular annual election 
 takes place, pursuant to the fourth article of these articles of association, and 
 until their successors are chosen and have qualified. The number of directors 
 elected at each annual meeting shall constitute the board for the year, all 
 vacancies to be filled in accordance with the provisions of section 5148. 
 
 It will be seen that the only advantage of a sliding scale is that 
 the shareholders are enabled to elect annually any number of direc- 
 tors within the limits of the scale. If a vacancy occurs it must be 
 filled the same as though the articles called for a fixed number of 
 directors. 
 
 ARTICLES OF ASSOCIATION. 
 [Executed in duplicate.] 
 
 For the purpose of organizing an association to carry on the business of bank- 
 ing under the laws of the United States, the undersigned subscribers for the 
 stock of the association hereinafter named do enter into the following articles 
 of association : 
 
 First. The title of this association 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 con- 
 ducted, shall be . 
 
 Third. The board of directors shall consist of shareholders. The first 
 
 meeting of the shareholders for the election of directors shall be held at 
 
 on the , or at such other place and time as a majority of the undersigned 
 
 shareholders may direct. 
 
 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 
 
12 ORGANIZATION OF NATIONAL BANKS. 
 
 the Revised Statutes of the United States, and all elections shall be held ac- 
 cording to such regulations as may be prescribed by the board of directors not 
 inconsistent with the provisions of the national-banking law and of these 
 articles. 
 
 Fifth. The capital stock of this association shall be dollars, divided 
 
 into shares of one hundred 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 Con- 
 gress 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 major- 
 ity 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 inabil- 
 ity 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 
 c-,lerks 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 busi- 
 ness of the association and the management of its affairs, and generally to do 
 Hnd 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 for any other 
 purpose, not inconsistent with law, by publishing notice thereof for thirty day& 
 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 day of „ 
 
 (To be signed by at least five natural persons, preferably the applicants.) 
 
ORGANIZATION OF NATIONAL BANKS. 
 7. Organization Certificate. 
 
 13 
 
 ORGANIZATION CEKTIFICATE. 
 
 [Executed In duplicate.] 
 
 We, the undersigned, whose names are specified in article fourth of this cer- 
 tificate, having associated ourselves for the purpose of organizing an association 
 for carrying on the business of banlsing, under the laws of the United States, 
 do make and execute the following organization certificate : 
 
 First. The title of the association shall be " The ." 
 
 Second. The said association shall be located in the of , county 
 
 of . and State of . where its operations of discount and deposit 
 
 are to be carried on. 
 
 Third. The capital stoclj of this association shall be dollars ($ ) , 
 
 and shall be divided into shares of one hundred dollars each. 
 
 Fourth. The name, financial worth — net, and the residence of each share- 
 holder of this association, with the number of shares held, are as follows : 
 
 Name. 
 
 Financial worth— net. 
 
 Residence. 
 
 No. of shares. 
 
 Note. — The names, etc., of all the shareholders must be given. 
 
 Fifth. This certificate is made in order that we may avail ourselves of tht- 
 advantages of the aforesaid laws of the United States. 
 
 In witness whereof we have hereunto set our hands this day ot . 
 
 (To be signed and acknowledged by those who have signed the articles of 
 ■issociatlon. ) 
 
 (Acknowledgment must be made before judge of court or notary public and 
 authenticated by the seal of such court or notary. ) 
 
 State of 
 
 County of . ss: 
 
 Before the undersigned, a - 
 
 of- 
 
 -, personally appeared ■ 
 
 to me well known, who severally acknowledged that they executed the fore- 
 going certificate for the purposes therein mentioned. 
 Witness my hand and seal of office this day of . 
 
 [OFFICIAL SEAL OP OFFICEE.] 
 
 The association will have succession for a period of 20 years from 
 the date of the execution of the organization certificate, and not 
 from the date of the certificate of the Comptroller of the Currency 
 authorizing the bank to commence business. (See sec. 5136.) 
 
14 ORGANIZATION OF NATIONAL BANKS. 
 
 The name, etc., of each subscriber to the stock is required to be 
 given in the fourth subdivision. Signatures are not desired and the 
 names should be typewritten if practicable. Each person who signs 
 the articles of association is also required to sign the organization 
 certificate and make acknowledgment before a judge of court of 
 record or a notary public having a seal. 
 
 Inasmuch as the laws of the several States differ as to the rights of 
 married women in regard to their separate estates and property, and 
 as to the effect of covenants and agreements made by them, and also 
 as to the forms of acknowledgment of instruments executed by them, 
 any organization papers bearing the signatures of women must be 
 accompanied by evidence that under the laws of the State they have 
 the power to be parties to the organization. 
 
 The authority of a guardian or trustee to subscribe for stock must 
 be shown in every case, giving, if necessary, the order of court author- 
 izing such subscriptions. In cases where a guardian subscribes for a 
 ward, the name of the ward should be given, and in the case of a 
 trustee subscribing for stock the name of the beneficiary of the trust 
 should be given. Stock subscriptions should not be taken in the 
 name of an estate. If the heirs of an estate subscribes for stock, it 
 should be taken in their individual names. If it is subscribed for 
 by the executor, his authority to make such subscription should be 
 shown. An administrator has no authority to subscribe for stock, 
 as his duty is merely to close up the estate and to distribute the 
 property among the heirs, and he has no authority to make invest- 
 ments. No subscriptions to stock should be received in the name of 
 any State, county, township, or municipality. 
 
 Where stock is subscribed for in the name of an order or associa- 
 tion, it will be necessary to furnish evidence that said order or society 
 is authorized by its articles or charter to subscribe for the stock and 
 also that it is legally and financially responsible for assessment 
 thereon in case one become necessary under the national-bank act. 
 
 When the organization of a bank is effected and stock subscriptions 
 paid, certificates should be issued in the names of the shareholders 
 and for the numbers of shares of stock listed in the organization 
 certificate, transfers to be' made in the regular manner in the case of 
 any stock which changes ownership. 
 
 8. Election and Oaths of Directors. 
 
 After the execution of the organization certificate, if the directors 
 are not designated in the articles of association, the shareholders 
 should proceed to elect directors as provided in section 5145. Each 
 director must, after his election or appointment (but not prior to the 
 date of acknowledgment of the organization certificate), take an 
 oath of the following form : 
 
ORGANIZATION OP NATIONAL BANKS. 15 
 
 OATH OF DIHECTOB. 
 
 State or , 
 
 County of , ss: 
 
 I, the undersigned, director of The , located at , being a citizen 
 
 of the United States, and resident of the State of , do solemnly swear 
 
 (affirm) that I will, so far as the duty devolves on me, diligently and honestly 
 administer the affairs of said association ; that I will not knowingly violate, or 
 willingly permit to be violated, any of the provisions of the statutes of the 
 United States under which this association has been organized ; and that I am 
 the owner in good faith and in my own right, of the number of shares of stock 
 required by said statutes, subscribed by me or standing in my name on the books 
 of the said association ; and that the same is not hypothecated or in any way 
 pledged as security for any loan or debt. 
 
 Subscribed and sworn (affirmed) to before the undersigned this day 
 
 of , 19—. 
 
 [OFFICIAI, SEAL OF OFFICEE.] . 
 
 Notary Public. 
 
 Note. — 'Each director when elected must take oath of office, and, under section 
 5147, U. S. R. S., the oath should be transmitted to the Comptroller of the Cur- 
 rency immediately after the election. If the officer administering the oath has 
 no seal, a certificate of the proper State, county, or court official,, to the effect 
 that such officer is authorized to take acknowledgments, must be attached. 
 
 In case two or more directors qualify jointly the following form 
 should be used : 
 
 oath of dikectobs. 
 
 State of , 
 
 County of , ss: 
 
 We, the undersigned, directors of The , located at . being citizens 
 
 of the United States, and all residents of the State of , do, each for 
 
 himself, and not one for the other, solemnly swear (affirm) that we will sever- 
 ally, so far as the duty devolves on us, diligently and honestly administer the 
 affairs of said association ; and that we will not knowingly violate, or willingly 
 permit to be violated, any of the provisions of the statutes of the United States 
 under which said association has been organized ; and each, for himself, does 
 solemnly swear (affirm) that he is the owner in good faith, and in his own 
 right, of the number of shares of stock required by said statutes, subscribed by 
 him or standing in his name on the books of the said association ; and that the 
 same is not hypothecated, or in any way pledged as security for any loan or 
 debt. 
 
 Signature. 
 
 Signature. 
 
 Subscribed and sworn (affirmed) to before the undersigned this day of 
 
 , 19—. 
 
 [OFFICIAL SEAL OF OFFICER.] 
 
 Notary Public. 
 
16 OBGANIZATION OF NATIONAL BANKS. 
 
 Every director must own in his own right at least 10 shares of the 
 capital stock of the association of which he is a director, unless the 
 capital of the bank shall not exceed $25,000, in which case he must 
 own in his own right at least 5 shares of such capital stock. Any 
 director who ceases to be the owner of the required number of shares 
 of the stock, or who becomes in any other manner disqualified, 
 thereby vacates his place under section 5146 as amended February 
 28, 1905, and the vacancy should be at once filled by the remaining 
 directors under section 5148. The former director may be re- 
 appointed if his disqualification has been removed. 
 
 At least three-fourths of the directors must have resided in the 
 State, Territory, or District in which the association is located for a 
 year or more immediately preceding their election, and must be resi- 
 dents therein during their continuance in office. 
 
 9. Appointment of OrncEES. 
 
 The directors having been elected, made payment of at least 50 
 per cent on the requisite number of shares, and taken the required 
 oath, should, as soon as practicable, elect a president and vice presi- 
 dent of the association, a cashier, and such other officers as may be 
 desired, a report of the election, with signatures, of officers being 
 required, in the following form : 
 
 OFFICIAL SIGNATURES OP OFFICERS OF THE , LOCATED AT 
 
 THE STATE OF . 
 
 [SEAL OF BANK.] 
 
 IMPORTANT. 
 
 The following instructions should be observed to avoid return of paper for 
 correction: (1) Insert title and place of location of bank. (2) Give the signa- 
 tures of officers, with date of election or appointment. (3) In case of a vacancy, 
 the word " None " should appear in the space for the signature of the officer. 
 (4) Affix seal of bank in the space designated. (5) The signatures of all of the 
 officers, with date of election or apijointment of each, and name of predecessor, 
 in case of a change, are required. 
 
 10. Payment of Capital. 
 
 When at least 50 per cent of the capital stock of the association is 
 paid in cash, not in assets of another corporation, notes, or other like 
 
OBGANIZATION OP; NATIONAL BANKS. 
 
 17 
 
 evidences of debt, each shareholder or his assignee having paid not 
 less than one-half on each share subscribed (certifications need not 
 be confined originally to 60 per cent, and subsequently to 10 per cent 
 of capital stock, larger payments and in advance of the prescribed 
 time being permissible), and all other legal requirements complied 
 with, a certificate, in substantially the following form, should be 
 executed and sworn to by the president, or cashier, and a majority 
 of the directors and sent to the Comptroller. The certificate should 
 cover all amounts paid in on capital, but should not include any 
 amount paid in as surplus, or any interest which may have been re- 
 ceived on funds collected. 
 
 CERTIFICATE OF PAYirE?iT OF CAPITAL STOCK AND COMPLIANCE WITH LEGAL . 
 
 BEQUIKEilENTS. 
 
 The undersigned officers and directors of Tlie 
 
 , located at 
 
 , now organizing under the provisions of the Revised Statutes of the 
 
 United States authorizing the organization of national banking associations, 
 
 do hereby certify that of the authorized capital stock of $ there has 
 
 been paid into said bank in cash, as permanent capital, $ , exclusive of 
 
 any payments on surplus, and that no part of this sum is represented by 
 pronaissory notes or other evidences of debt; and that each shareholder has 
 individually paid in cash fifty per cent of his stock subscription ; also, that the 
 name and place of residence of each director, and the amount of stock indi- 
 vidually owned in good faith, are as follows : 
 
 Name of flirector.a 
 
 Place of residence. 
 (Town or city and State.) 
 
 Number of 
 shares of stock. 
 
 aThe names, etc., of all the directors of the association must appear on this page. A majority of the 
 directors, exclusive of the president or cashier, must sign on the following page and make acknowledgment. 
 
 It is further certified that the association has in good faith complied with all 
 of the provisions that are required to be complied with before receiving 
 authority to commence the business of banking. 
 
 Directors. 
 
 State of 
 
 County of 
 Before the undersigned, a 
 
 of 
 
 President, or OasMer. 
 
 personally appeared the above- 
 
 named directors and other officers of the aforesaid national bank, and made 
 115635—19 2 
 
18 ORGANIZATION OF NATIONAL BANKS. 
 
 oath that the foregoing certificate and the matters and things therein set forth 
 are true, to the best of their knowledge and belief. 
 
 Witness my hand and seal of office this day of , 19 — . 
 
 [official seal of officee.] 
 
 It will also be necessary to send to this office a statement showing the total 
 amount collected on stock subscriptions. The difCerence between this amount 
 and the expenditures in connection with the organization should be deposited 
 with a disinterested bank, and the president or cashier of the depositary bank 
 requested to certify to this office the amount on deposit to the credit of the 
 organizing bank. The depositary bank should also be requested to advise this 
 office whether any loan was made to any of the officers, directors, or stock- 
 holders of the new institution, and, if so, on what security. 
 
 11. Certificate of Authobitt to Commence Business. 
 
 All organization papers having been filed, the Comptroller of the 
 Currency, if satisfied from the examiner's report that the association 
 has complied with the requirements of law, and that the shareholders 
 have, in good faith, organized for the legitimate objects contem- 
 plated by the bank act, will give to the association a certificate 
 authorizing it to commence the business of banking,;(^ecs. 5168, 5169) . 
 This certificate, upon its receipt, must be published^ in a local or 
 county newspaper for a period of 60 days, as required by section 
 5170, and proof of publication sent to the Comptroller at the proper 
 time. 
 
 This and other certificates referred to elsewhere may be published 
 for the period of time required by law, either in a weekly newspaper, 
 a weekly edition of a daily newspaper, or in every issue of a daily 
 having no weekly edition. 
 
 The certificate of authority to commence business or, as is gen- 
 erally understood, the charter issued to a national banking associa- 
 tion reads as follows : 
 
 No. ■ . 
 
 Treasury Department, 
 Office or Comptroller of the Cubkency, 
 
 Washington, , 19 — . 
 
 Whereas, by satisfactory evidence presented to the undersigned, it has been 
 made to appear that — 
 
 The , located in the of , in the county of 
 
 and State of , has complied with all the provisions of the statutes of the 
 
 United States required to be complied with before an association shall be 
 authorized to commence the business of banking. 
 
 Now, therefore, I, , Comptroller of the Currency, do hereby 
 
 certify that^ 
 
 The . located in the of , in the county of 
 
 and State of , is authorized to commence the business of banking, as 
 
 provided in section fifty-one hundred and sixty-nine of the Revised Statutes of 
 the United States. 
 
ORGANIZATION OF NATIONAL BANKS. 19 
 
 In testimony whereof witness my hand and seal of office this day of 
 
 ,19—. 
 
 [SEAL.] , 
 
 Comptroller of the Currency. 
 12. Commencement of Business. 
 
 The association having received authority to commence the busi- 
 ness of banking, it is presumed that a suitable banking house or room 
 has been secured, and also a burglar and fire proof vault or safe. In 
 ordering stationery, provision should be made for the printing of 
 the charter number of the bank on letter heads. The Comptroller 
 should be promptly advised of the date on which the bank begins 
 business. Notification blank for the purpose is furnished. 
 
 13. Payment of Defereed Installments on Capital. 
 
 The certificate of officers and directors, a form for which is given 
 elsewhere, is the certificate of the payment in cash of the first install- 
 ment of the capital. The five remaining installments must also be 
 paid in money and certified to 'the Comptroller by the president or 
 cashier, under seal of the bank. Installments are due monthly from 
 the date of the issuance of his certificate of authority to commence 
 business (sec. 5140). 
 
 The form of installment certificate is as follows : 
 
 CEETincATE OF PAYMENT Or CAPITAL STOCK. 
 
 , 19—. 
 
 To the COMPTKOLLEK OF THE CURRENCY, 
 
 WO'SMfirgton, D. C. 
 
 Sir: It is hereby certified that the installment, amounting to 
 
 dollars, has been paid in cash on account of the capital stock of The 
 
 , located at , the certification of payments to date 
 
 being as follows : 
 
 First installment (at organization), $ . 
 
 Second installment, $ . 
 
 Third installment, $ . 
 
 Fourth installment, $ . 
 
 Fifth installment, $ . 
 
 Sixth installment, $ . 
 
 Total, $ . 
 
 ~- , 
 
 Cashier. 
 
 State of , 
 
 County of , ss: 
 
 Subscribed and sworn to this day of , 19 — . 
 
 [OFFICIAL SEAL OF OFFICER.] 
 
 Notary Public. 
 
20 ORGANIZATION OF NATIONAL BANKS. 
 
 Note. — The second and subsequent payments need not be restricted to 10 
 per cent each, as the capital stock of the bank may be paid, if desired, in ad- 
 vance of the time required by law. Do not include in certificates a fraction 
 of a dollar or any payments on surplus. 
 
 No payments on account of subscriptions to the capital stock should be car- 
 ried to stock account, or entered in reports of condition as capital stock, until 
 date of certification to this office. Pending such certification payments should 
 be carried in a separate account to the credit of shareholders and entered in 
 reports to this office as " Liabilities other than those stated." 
 
 For the legal method of enforcing the payment of subscriptions to 
 capital stock see section 5141, U. S. E. S. 
 
 14. Oegan'ization of a National, Bank to Succeed a State Bank. 
 
 Occasionally it is deemed advisable by directors and other share- 
 holders of a State bank to enter the national banking system by re- 
 organization rather than by conversion. The controlling motive in 
 reorganizing rather than converting in such case is generally the 
 desire to effect such a distribution of stock as will result in the best 
 interests of the bank, and occasionally to provide for a more satis- 
 factory investment of capital and other loanable funds. 
 
 The course of procedure in reorganizing in so far as incorporation 
 is concerned is identical with that required in original organization 
 of a national bank. The capital must be paid in cash and not in 
 any assets of the bank the national bank is organized to succeed. 
 Fifty per cent, however, only is required to be paid at reorganiza- 
 tion, and the remainder may be paid in installments as provided by 
 the national-bank act. 
 
 When the application is forwarded it should be accompanied, as 
 in other cases, by a draft for $100, payable to the order of the Comp- 
 troller of the Currency, to cover the expense of investigation. Upon 
 receipt of this draft the chief national-bank examiner for the district 
 will be directed to detail an examiner to make the investigation, the 
 examiner being instructed to arrange with the local correspondent in 
 the case as to the date when the investigation is to be made. The 
 examiner will be instructed to make a thorough examination of the 
 condition of the bank which the national bank is to succeed, and to 
 report upon the character of its assets and the manner in which its 
 business has been conducted. He will also be required to report upon 
 the character and financial standing of the applicants, the ability of 
 the active executive officers of the bank to be succeeded, whether they 
 have the confidence of the community, and the prospect of success of 
 the new bank. 
 
 In addition to securing a report from the examiner, the Comp- 
 troller 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. 
 
OEGANIZATION OF NATIONAL BANKS. 21 
 
 Upon receipt of charter, the authority to begin business, the direc- 
 tors have authority to enter into a contract with the directors or 
 liquidating agent of the State bank which the national bank has 
 been organized to succeed for the purchase of assets and assumption 
 of liabilities to depositors and other creditors of the State institu- 
 tion, with the understanding, however,that no assets can be acquired 
 which are not of satisfactory value and which do not conform in 
 character to the requirements of the national bank and Federal re- 
 serve bank acts. A duly executed and properly signed copy of the 
 contract in question should be filed with the Comptroller of the Cur- 
 rency together with an agreement signed by the directors to the 
 effect that no assets, the holding of which would contravene the pro- 
 visions of the national and Federal banking laws will be acquired, a 
 statement of the directors according to the following form to be filed : 
 
 We, the undersigned, a majority of the board of directors of the Na- 
 tional Bank of , In the of , State of . hereby certify 
 
 that any assets which may be purchased or otherwise acquired by said na- 
 tional banli from the Banl?; of , will not include real estate, except bank- 
 ing premises, stocks, loans secured by real estate, except such as are per- 
 mitted by section 24 of the Federal reserve act, nor any loan in excess of 10 
 per cent of the capital stock of the national bank actually paid in and unim- 
 paired, and 10 per cent of unimpaired surplus fund. 
 
 Directors. 
 
 Subscribed and sworn to before me, this day of , 19 — . 
 
 [Notary seal.] , 
 
 Notarj/ Puilio. 
 
CHAPTER 2. 
 
 CONVERSION OF STATE BANKS. 
 
 15. Instructions relative to conversion 
 
 of State baates into national 
 banks. 
 
 16. Application to convert a State bank 
 
 Into a national banking associa- 
 tion. 
 
 17. Examination of State bank con- 
 
 verting. 
 
 18. Approval of application to con- 
 
 vert — Instructions. 
 
 19. Authority for conversion. 
 
 20. Ai'ticles of association. 
 
 21. Organization certificate. 
 
 22. Certificate of payment of capital. 
 
 23. Directors and officers. 
 
 15. Instructions Relative to Conversion of State Banks into 
 
 National Banks. 
 
 Section 5154, U. S. E. S., as amended by section 8 of the Federal 
 reserve act, provides that — 
 
 Any bank incorporated by special lav? of any State or of the United States 
 or organized under the general laws of any State or of the United States and 
 hTaving an unimpaired capital sufficient to entitle it to become a national bank- 
 ing association under the provisions of the existing laws may, by the vote of 
 the shki-ehOlders owning not less than flfty-one per centum of the capital stock 
 of such bank or banking association, with the approval of the Comptroller of 
 the Currency, be converted into a national banking association, with any name 
 approved by the Comptroller of the Currency : Provided, however, That said 
 conversion shall not be in contravention of the State law. In such case the 
 articles of association and organization certificate may be executed by n 
 majority of the directors of the bank or banking institution, and the certifi- 
 cate shall declare that the Owners of fifty-one per centum of the capital stock 
 h^-ve authorized the directors to make such certificate and to change or convert 
 the bank or banking institution into a national association. A majority of the 
 directors, after executing the articles of association and the organization cer- 
 tificate, shall have power to execute all other papers and to do whatever 
 may be required to make its organization perfect and complete as a national 
 association. 
 
 The shares of any such bank may continue to be for the same amount each 
 as they were before the conversion, and the directons may continue to be 
 directors of the association until others are elected or appointed in accordance 
 with the provisions of the statutes of the United States. When the Comptroller 
 has given to such bank or banking associiition a certificate that the provisions 
 of this act have been complied with, such bank or banking association, and all 
 its stockholders, officers and employees, shall have the same powers and privi- 
 leges, and shall be subject to the same duties, liabilities, and regulations, in all 
 respects, as shall have been prescribed by the Federal Reserve act and by the 
 national banking act for associations originally organized as national banking 
 associations. 
 
 The Solicitor of the Treasury has held that a trust company or- 
 ganized under State laws may be permitted to convert into a national 
 bank under the provisions of this section, provided it complies with 
 
 22 
 
CONVERSION OF STATE BANKS. 23 
 
 all the conditions of law, and divests itself of all its trust company 
 business, except such as the Federal Eeserve Board might specifically 
 authorize it to retain as provided by the Federal reserve act. 
 
 In the conversion of a State bank there is not a dissolution of the 
 State corporation, but merely a change of title and governmental 
 supervision; the bank is liable for all obligations and may enforce 
 all contracts made with it while a State corporation. (See Michigan 
 Insurance Bank v. Eldred, 143 U. S. 293, and Metropolitan National 
 Bank v. Claggett, 141 U. S., 520.) In the case of Casey v. Galli 
 (94 U. S., 673) the Supreme Court of the United States held that 
 no authority from a State is necessary to enable a State bank to 
 become a national banking association. However, under the provi- 
 sions of section 5154, U. S. R. S., as amended by the Federal reserve 
 act, a State bank can not be converted into a national bank if such 
 conversion is forbidden by the laws of the State. 
 
 16. Application to Convert a State Bank into a National Bank- 
 ing Association. 
 
 The following is the form of notice to be submitted of intention to 
 convert a State bank into a national banking association : 
 
 The name of the place should form a part of the title, thus, " The First Na- 
 tional Bank of A ," but the name of the State should not be included. 
 
 Consideration will not be given to an application for a title Including the 
 word " First," if a national bank exists at the given locality ; nor to an applica- 
 tion for a title identical with that of a national bank heretofore in existence, 
 nor to one materially similar to that of a National, State, or other bank existing 
 in the place. 
 
 -. 19—. 
 
 To the COMPTKOLLER OP THE CUEBENCT, 
 
 Washington. 
 
 Snt : Notice is hereby given that we, the undersigned, being a majority of 
 the board of directors of " The ," having a paid in and unim- 
 paired capital of $ , intend to convert the said bank into a national bank- 
 ing association, In accordance with the provisions of section 5154 of the 
 Revised Statutes of the United States as amended by section 8 of the Federal 
 
 reserve act, under the title " The ," to be located at , 
 
 county of , State of , with capital of $ . Population . 
 
 We request that the title be reserved for a period of sixty days and the 
 
 necessary conversion papers and instructions sent to , at 
 
 . hereby agreeing that any assets of the State bank which can not be 
 
 legally held by a national bank will be disposed of before certificate authoriz- 
 ing conversion and the commencement of business as a national banking asso- 
 ciation is Issued. 
 
 Signatures ol directors. 
 
 Residences. 
 
24 CONYEESION OF STATE BANKS. 
 
 17. Examination of State Bank Converting. 
 
 When an application to convert is forwarded it should be accom- 
 panied 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 di- 
 rected 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 re- 
 ports 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 ex- 
 aminer 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 sit- 
 uated in a central reserve city is authorized by section 24 of the Fed- 
 eral reserve act to make loans secured by improved and unencum- 
 bered 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 im- 
 proved 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 sucK 
 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 Eeserve Board has power from time to time to add ta 
 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 conducjt of the business of the bank, and 
 are restricted in the volume of accommodations to any one i^erson,. 
 company, corporation, or firm, etc., to 10 per cent of the capital stock 
 
CONVERSION OF STATE BANKS. 25 
 
 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 an- 
 other corporation. 
 
 The restrictions of law relative to excessive loans, loans secured by 
 I'eal 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 Comp- 
 troller 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. AppRovAii or 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 61 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. E. 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 certij&cates, 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 show- 
 ing 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. 
 
26 
 
 CONVERSION OF STATE BANKS. 
 
 19. AirrHGRiTY foe Conversion. 
 
 AUTHORITY FOR CONVERSION OF STATE BANK. 
 
 At a meeting of the shareholders of 
 
 held on 
 
 — , the 
 
 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' theboard'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 con- 
 verted, 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 direc- 
 tors 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 suc- 
 cessors 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 prosy who is not authorized to so act under the laws of the State. 
 
 Name of shareholder. 
 
 Residence. 
 
 Name of proxy. 
 
 No. of 
 shares. 
 
 Total number of shares voted in favor of the resolution, . 
 
 Total number of shares voted against the resolution, . 
 
 Total number of shares represented at the meeting, . 
 
 Total number of shares of capital stock, . 
 
 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. 
 
 [SEAL or BANK.] 
 
 Subscribed and sworn to before me this 
 
 [SEAL OF NOTARY.] 
 
 President or Cashier. 
 day of , A. D. . 
 
 20. Articles of Association. 
 
 Notary Public. 
 
 The shareholders of a State bank having authorized its conversion 
 into a national banking association, the directors should execute the 
 
CONVERSION OF STATE BANKS. 27 
 
 articles of association and organization certificate as per the follow- 
 ing forms, the signatures of a majority of the directors being 
 required : 
 
 ARTICLES OF ASSOCIATION. 
 [Executed In duplicate.] 
 
 we; the undel-siguecl, directors of the ^, haviDg> been aiithorized 
 
 ■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 associa- 
 tion, 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 shareholders. 
 
 Fourth. The regular annual meetings of the shareholders for the election ©f 
 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 dollars, divided 
 
 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 stoclc, according to the provisions of an act of Congress ap- 
 proved 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 iix the penalty thereof ; 
 to regulate the manner in which elections of directors shall be held, and to 
 appoint judges of the elections ; to juake 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 
 
28 CONVERSION OF STATE BANKS. 
 
 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 pur- 
 pose, 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 day of . 
 
 21. Organization Certificate. 
 
 ORGANIZATION CEETrFlCATB. 
 
 We, the undersigned directors of the , having been duly au- 
 thorized 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 associa-, 
 tion, and to make the necessary organization certificate, under the provisions of 
 section 5154 of the Revised Statutes of the United States, or of acts amenda- 
 tory thereof, do sign and execute the following organization certificate, which 
 we hereby declare we are authorized to make by a vote of shareholders own- 
 ing 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 of 
 
 , county of , and State of , where its operations of discount 
 
 and deposit are to be carried on. 
 
 Third. The capital stock of this association shall be dollars ($ ), 
 
 divided into shares of 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 dollars each 
 
 held by each stockholder are as follows : 
 
 Fifth. This certifloate is made in order that the said State bank and the 
 stockholders thereof may avail themselves of the advantages of the aforesaid 
 
CONVEBSION OF STATE BANKS. 29 
 
 Kevised Statutes, and that the said State bank may be changed and converted 
 Into a national banking association under the foregoing title. 
 
 In witness whereof we have hereunto set our hands this day of 
 
 The signatures of a majority of directors required. 
 
 AckhdWledgement must be before a notary public or judge of court, and 
 authenticated by the seal of such notary or court. 
 
 State of , 
 
 County of , ss: 
 
 Before the undersigned, a of , personally appeared 
 
 ■directors of the aforesaid State bank, to me well known, who severally ac- 
 knowledged that they executed the foregoing certificate for the purposes therein 
 mentioned. 
 
 AYitness my hand and seal of office this day of . 
 
 [official SEAl OF OFFICER.] — ■ — ■ — • , 
 
 22. Certificate or Patment of Capital. 
 
 CEKTIFICATE RELATIVE TO PAYMENT OF CAPITAL STOCK OF STATE BANK CONVERTING 
 
 INTO NATIONAL BANK. 
 
 It is hereby certified that the Bank of , which is 
 
 to be converted into " The National Bank of • — •," in con- 
 formity with the provisions of section 5154 of the Revised Statutes of the 
 United States, and acts amendatory thereof, authorizing the conversion of 
 " any bank incorporated by special law or any banking institution organized 
 under a general law of any State," has a paid in and unimpaired capital of 
 ^- . 
 
 President or Cashier. 
 
 State of , 
 
 County of , ss; 
 
 Subscribed and sworn to before the undersigned, a of the said county, 
 
 this day of , 19 — . 
 
 [official seal or officer.] ■ , 
 
 [Official title.] . 
 
 23. Directors and Officers. 
 
 Duly qualified directors of a State bank- being converted* into a 
 national bank may continue as directors, regardless of the number 
 of shared owned, until the first annual election is held when, to be 
 ' eligible for reelection, they must own the number of shares required 
 by the national-bank act. The oaths should be taken as directors 
 of the national bank. Unless officers are reappointed by the direc- 
 tors of the national bank subsequent to their qualification, the form 
 requiring the signatures of the officers of the national bank (a copy 
 
30 
 
 CONVERSION OF STATE BANKS. 
 
 of which follows) should show date of appointment by the directors 
 of the State bank and the following explanatory clause should be- 
 added : " Appointed at a meeting of the directors of the State bank." 
 
 OFFICIAL SIGNATURES OF OFFICERS OF THE - 
 
 STATE OF 
 
 , LOCATED AT ■ 
 
 [SEAL OF BANK.] 
 
 IMPORTANT. 
 
 The following instructions should be observed to avoid return of paper for 
 correction: (1) Insert title and place of location of bank. (2) Give the sig- 
 natures of officers, with date of election or appointment. (3) In case of a 
 vacancy, the word " None," should appear in the space for the signature of 
 the officer. (4) Affix seal of bank in the space designated, (o) The signatures 
 of all of the officers withdate of election or appointment of each and name of 
 predecessor, in case of a change, are required. 
 
CHAPTER 3. 
 
 BONDS AND CIRCULATION. 
 
 24. Deposit of bonds to secure circu- 
 
 lation. 
 
 25. AVlthdrawal of bonds. 
 
 26. Authority to withdraw bonds. 
 
 27. Withdrawal of bonds under section 
 
 18 of the Federal reserve act. 
 
 28. Circulating hdtes. 
 
 24. Deposit of Bonds to Secure Circulation. 
 
 Under section 17 of the Federal reserve act approved December 23, 
 1913, and the amendment of June 21, 1917, a national banking asso- 
 ciation is not required to deposit United States bonds with the Treas- 
 urer of the United States as a condition precedent to beginning busi- 
 ness, nor is a bank required to maintain a deposit of such bonds unless 
 it is desired to exercise or continue to exercise the circulation privi- 
 lege. 
 
 If it is the purpose to issue circulation. United 'States interest-bear- 
 ing bonds should be sent to the Comptroller of the Currency for 
 transfer to and deposit with the Treasurer of the United States in 
 trust for the association to the account of which they are to be 
 credited. In assigning bonds care should be exercised to enter the 
 exact corporate title of the association and to follow instructions on 
 the bonds relative to their assignment. 
 
 Coupon bonds received will be exchanged for registered bonds, but 
 should be accompanied by a request for their exchange and that the 
 registered bonds be issued to and deposited with the Treasurer of 
 the United States in trust for the association interested. 
 
 The Comptroller will authorize the payment of interest on bonds 
 to the bank depositing them, and the Treasurer of the United States 
 will pay the interest, by check, to the order of the bank, at the office 
 of any United States assistant treasurer or at any United States 
 depository. 
 
 Bonds to be deposited as security for circulation can not be pro- 
 cured from the Treasury Department, but may be purchased at pre- 
 vailing prices from dealers in securities of that character. Circula- 
 tion secured by United States 2 per cent " consols " of 1930, and 2 
 per cent Panama Canal bonds is subject to a semiannual tax of one- 
 fourth of 1 per cent. Circulation secured by bonds bearing a higher 
 rate of interest than 2 per cent is subject to a semiannual tax of one- 
 half of 1 per cent, as provided by section 5214. The only bonds now 
 acceptable as security for national-bank circulation are the 2 per cent 
 consols, 2 per cent Panama Canal bonds, and the 4 per cent bonds 
 
 of 1925. 
 
 31 
 
32 bonds and circulation, 
 
 25. Withdrawal of Bonds. 
 
 The law permits national banking associations to retire their cir- 
 culating notes and withdraw bonds held by the Treasurer of the 
 United States in trust, with the consent of the Comptroller of the 
 Currency and the approval of the Secretary of the Treasury, upon 
 deposit of a like amount of lawful money with the Treasurer or an 
 assistant treasurer of the United States to provide for the redemp- 
 tion of the currency secured by such bonds. 
 
 Authority to withdraw the bonds must be conferred upon the 
 Comptroller of the Currency by the board of directors, and some one 
 other than a Government oiBcial designated to sell and assign them. 
 If an official of the bank is authorized to dispose of the bonds, the 
 resolution should be certified by some officer of the association other 
 than the one empowered to assign the bonds. 
 
 A copy of the resolution adopted by the directors authorizing the 
 withdrawal of bonds should be sent to the office of the Comptroller 
 of the Currency, accompanied by the Treasurer's duplicate receipts 
 for the securities. If the receipts have been lost or destroyed an 
 affidavit to that effect must be sent with the resolution. 
 
 26. Authority to Withdraw Bonds. 
 
 AUTHOKITY TO WITHDBAW BONDS. 
 
 , 19—. 
 
 At a meeting of the board of directors of the Bank of , held at 
 
 their banking house, , 19 — , the following resolution was adopted : 
 
 Resolved, That the Comptroller of the Currency be, and he is hereby, au- 
 thorized to withdraw $ — U. S. bonds deposited with the Treasury of 
 
 the United States by this bank to secure circulation, and described as follows : 
 
 $ of the loan of — 
 
 $ of the loan of ^ 
 
 $ of the loan of 
 
 $ of the loan of 
 
 and that — ■ be, and is hereby authorized to sell, assign, and trans- 
 fer, the bonds, and to appoint one or more attorneys for that purpose. 
 
 I hereby certify that the foregoing is a true extract from the minutes of 
 said meeting. 
 
 Cashier, and Secretary of the Board of Directors. 
 [seal of bank.] 
 Note.— The Treasurer's receipts for the bonds proposed to be withdrawn 
 must be forwarded" (with this form properly filled) to the Comptroller of the 
 Currency. 
 
 27. Withdrawal or Bonds Under Section 18 of the Federal 
 
 Reserve Act. 
 Section 18 of the Federal reserve act provides that any member 
 bank desiring to retire the whole or any part of its circulating notes 
 
BONDS AND CIRCULATION. 
 
 33 
 
 may file with the Treasurer of the United States an application to 
 sell for its account, at par and accrued interest, United States bonds 
 securing circulation to be retired. 
 
 The Federal Eeserve Board is permitted in its discretion to re- 
 quire Federal reserve banks to purchase such bonds from the banks 
 whose applications have been filed with the Treasurer of the United 
 States, the Federal reserve banks, however, not being permitted to 
 purchase an amount to exceed $25,000,000 of such bonds in any one 
 year. 
 
 28. ClHCTJLATING NoTES. 
 
 National banking associations are entitled to receive and issue 
 circulating notes equal to the par value of the bonds deposited, not 
 exceeding the amount of the paid-in capital stock, but no bank shall 
 receive or have in circulation at any one time more than $25,000 in 
 notes of the denominations of $1 and $2. 
 
 For information as to taxation of circulating notes see "Deposit 
 of bonds." 
 
 OEIGINAI ORDER FOR PLATES AND CIRCULATION. 
 
 Charter No. . 
 
 National 
 
 Bank of 
 
 19- 
 
 To ttie Comptroller of the Cubrency. 
 
 Snt : You are requested to have plates engraved for this bank, and circulating 
 notes printed therefrom, as follows : 
 
 No. of sheets ordered. 
 
 Denominations on sheets. 
 
 Value per 
 sheet. 
 
 Amount of order. 
 
 $1, SI, SI, $1 
 
 S2,$2,$2,S2 
 
 J5, 15, $5, S5 
 
 510, SIO, $10, SIO. . 
 SIO, SIO, $10, $20. . 
 S50, 850, f50, SIOO. 
 
 Total 
 
 20 
 
 40 
 
 50 
 
 230 
 
 Respectfully, 
 
 Cashier. 
 
 Note. — The act of October 5, 1917, provides for the issuance of $1 and $2 notes, re- 
 pealing the act of June 3, 1864, which prohibited national banks from being furnished 
 ■with notes of less denomination than $5 after the resumption of specie payments. 
 
 Circulation may be ordered from any one or more of the plates listed above, but no 
 bank shall receive or have in circulation at any one time more than $25,000 in notes 
 •of the denominations of $1 and $2. 
 
 The restriction as to the issue of $5 notes to one-third of a bank's circulation has been 
 repealed, and notes of that denomination may be issued in any amount desired not in 
 «xcess of the capital stock against the deposit of bonds. 
 
 It will ordinarily require about 40 days to engrave the plate and to print circulating 
 notes, but the order will not be acted upon until either bonds are deposited for circulation 
 or a draft in payment of cost of engraving is received by the Comptroller. 
 
 Bank plates cost $130 each for originals and $120 each for duplicates when the 
 originals are worn out. 
 
 115635—19 3 
 
CHAPTER 4. 
 
 DUTIES AND LIABILITIES OF DIRECTORS. 
 
 29^8. Provisions of law defining du- 
 ties of directors and prescrib- 
 ing penalties for neglect of 
 such duties. 
 
 49, 50. Interlocliingdirectorates — Wlien 
 forbidden. 
 
 51. By-laws to be adopted by direc- 
 tors. 
 
 52. Examination by directors. 
 
 53. Liability of directors for making 
 
 and publishing false reports. 
 
 54. Liability of directors for misman- 
 
 agement — Degree of care re- 
 quired. 
 
 55. Liability of directors for assenting 
 
 to excessive loans. 
 
 Provisions of Law Defining Duties of Directors and Prescribing 
 Penalties for Neglect of Such Duties. 
 
 2 9- appointment AND POWERS OF DIRECTORS. 
 
 (Sec. 5136, IJ. S. R. S.). Fifth. To elect or appoint directors, and 
 by its board of directors to appoint a president, vice president, 
 cashier, and other officers, define their duties, require bonds of them, 
 and fix the penalty thereof, dismiss such officers or any of them at 
 pleasure, and appoint others to fill their places. 
 
 Sixth. To prescribe, by its board of directors, by-laws not incon- 
 sistent with law, regulating the manner in which its stock shall be 
 transferred, its directors elected or appointed, its officers appointed, 
 its property transferred, its general business conducted, and the 
 privileges granted to it by law exercised and enjoyed. 
 
 Seventh. To exercise by its board of directors, or duly authorized 
 officers or agents, subject to law, all such incidental powers as shall 
 be necessary to carry on the business of banking ; by discounting and 
 negotiating promissory notes, drafts, bills of exchange, and other 
 evidences of debt; by receiving deposits; by buying and selling ex- 
 change, coin, and bullion; by loaning money on personal security; 
 and by obtaining, issuing, and circulating notes according to the 
 provisions of this title. 
 
 dO. NUMBER AND ELECTION OF DIRECTORS TERM OF OFFICE. 
 
 (Sec 5145, U. S. E-. S.) The affairs of each association shall be 
 managed by not less than five directors, who shall be elected by the 
 shareholders at a meeting to be held at any time before the associa- 
 tion is authorized by the Comptroller of the Currency to commence 
 the business of banking; and afterward at meetings to be held on 
 such day in January of each year as is specified therefor in the arti- 
 34 
 
DUTIES AND LIABILITIES OF DIRECTORS. 35 
 
 cles of association. The directors shall hold oiRce for one year, and 
 until their successors are elected and have qualified. 
 
 31. QUALIFICATIONS OF DIRECTORS. 
 
 (Sec. 5146, U. S. R. S.) Every director must, during his whole term 
 of service be a citizen of the United States, and at least three-fourths 
 of the directors must have resided in the State, Territory, or Dis- 
 trict in which the association is located, for at least one year imme- 
 diately preceding their election, and must be residents therein dur- 
 ing their continuance in office. Every director must own, in his own 
 right, at least ten shares of the capital stock of the association of 
 which he is a director unless the capital of the bank shall not exceed 
 twenty-five thousand dollars, in which case he must own in his own 
 right at least five shares of such capital stock. Any director who 
 ceases to be the owner of the required number of shares of the stock, 
 or who becomes in any other manner disqualified, shall thereby vacate 
 his place. 
 
 3 2. OATH REQUIRED FROM DIRECTORS. 
 
 (Sec. 6147, U. S. R. S.) Each director, when appointed or elected, 
 shall take an oath that he will, so far as the duty devolves on him, 
 diligently and honestly administer the affairs of such association, 
 and will not knowingly violate, or willingly permit to be violated, 
 any of the provisions of this title, and that he is the owner in good 
 faith, and in his own right, of the number of shares of stock re- 
 quired by this title, subscribed by him, or standing in his name on 
 the books of the association, and that the same is not hypothecated, or 
 in any way pledged, as security for any loan or debt. Such oath, 
 subscribed by the director making it, and certified by the officer 
 before whom it is taken, shall be immediately transmitted to the 
 Comptroller of the Currency, and shall be filed and preserved in his 
 office. 
 
 33. VACANCIES, HOW FILLED. 
 
 (Sec. 5148, U. S. R. S.) Any vacancy in the board shall be filled by 
 appointment by the remaining directors, and any director so ap- 
 pointed shall hold his place until the next election. 
 
 CORPORATION FOR MONEr BORROWED THE DISCOUNT OF BILLS OF EX- 
 CHANGE, ETC., NOT MONET BORROWED. 
 
 (Sec. 5200, U. S. R. S.) The total liabilities to any association, ot 
 any person, or of any company, corporation, or firm for money bor- 
 rowed, including in the liabilities of a company or firm the liabilities 
 
36 DUTIES AND LIABILITIES OF DIEECTOBS. 
 
 of the several members thereof, shall at no time exceed 10 per centum 
 of the amount of the capital stock of such association, actually paid in 
 and unimpaired, and 10 per centum of its unimpaired surplus fund : 
 Provided, hovtever, That (1) the discount of bills of exchange drawn 
 in good faith against actually existing values, (2) the discount of 
 commercial or business paper actually owned by the person, com- 
 pany, corporation, or firm negotiating the same, and (3) the pur- 
 chase or discount of any note or notes secured by not less than a like 
 face amount of bonds of the United States issued since April 24, 1917, 
 or certificates of indebtedness of the United States, shall not be con- 
 sidered as money borrowed within the meaning of this section; but 
 the total liabilities to any association, of any person or of any com- 
 pany, corporation, or firm, upon any note or notes purchased or dis- 
 counted by such association and secured by such bonds or certificates 
 of indebtedness, shall not exceed (except to the extent permitted by 
 lules and regulations prescribed by the Comptroller of the Currency, 
 with the approval of the Secretary of the Treasury) 10 per centum of 
 such capital stock and surplus fund of such association. 
 
 Note. — See act of March 3, 1919, " Victory Liberty loan act," which provides 
 tliat the word " Bonds," where it appears in section 5200 of the Revised Statutes 
 as amended, shall be deemed to include notes Issued under the " Victory Liberty 
 loan act." 
 
 ."..'1. DEPOSITS WITH NON MEMBER BANKS SUBJECT TO LIMIT (SEC. 19, FED- 
 ERAL RESERVE ACT). 
 
 No member bank shall keep on deposit with any State bank or 
 trust company which is not a member bank a sum in excess of ten per 
 centum of its own paid-up capital and surplus. No member bank 
 shall act as the medium or agent of a nonmember bank in applying 
 for or receiving discounts from a Federal reserve bank under the 
 provisions of this act, except by permission of the Federal Reserve 
 Board. 
 
 3 6. DIVIDENDS AND SURPLUS FUND. 
 
 (Sec. 5199, U. S. R. S.) The directors of any association may, semi- 
 annually, declare a dividend of so much of the net profits of the asso- 
 ciation as they shall judge expedient; but each association shall, 
 before the declaration of a dividend, carry one-tenth part of its net 
 profits of the preceding half year to its surplus fund until the same 
 shall amount to twenty per centum of its capital stock. 
 
 3 7. WITHDRAWAL OF CAPITAL PROHIBITED DIVIDEND NOT TO EXCEED NET 
 
 PROFITS BAD DEBTS DEFINED. 
 
 (Sec. 5204, U. S. E. S.) No association, or any member thereof, 
 shall, during the time it shall continue its banking operations, with- 
 
DUTIES AND LIABILITIES OF DIEECTOKS. 37 
 
 dra^Y, or permit to be withdrawn, either in the form of dividends or 
 otherwise, any portion of its capital. If losses have at any time been 
 sustained by any such association, equal to or exceeding its undivided 
 profits then on hand, no dividend shall be made; and no dividend 
 shall ever be made by any association, while it continues its banking 
 operations, to an amount greater than its net profits then on hand, 
 deducting therefrom its losses and bad debts. All debts due to any 
 association, on which interest is past due and unpaid for a period of 
 six months, unless the same are well secured, and in process of collec- 
 tion, shall be considered bad debts within the meaning of this sec- 
 tion. But nothing in this section shall prevent the reduction of the 
 capital stock of the association under section fifty-one hundred and 
 forty-three. 
 
 3 8. PENALTY FOB VIOLATION OF PROVISIONS OF THIS TITLE VIOLATION, 
 
 HOW DETEEMINED LIABILITY OF. DIRECTORS FOE VIOLATION. 
 
 (Sec. 5239, U. S. E. S.) If the directors of any national banking 
 association shall knowingly violate, or knowingly permit any of the 
 officers, agents, or servants of the association to violate any of the 
 provisions of this title, all the rights, privileges, and franchises of 
 the association shall be thereby forfeited. Such violation shall, how- 
 ever, be determined and adjudged by a proper circuit, district, or ter- 
 litorial, court of the United States, in a suit brought for that purpose 
 by the Comptroller of the Currency, in his own name, before the asso- 
 ciation shall be declared dissolved. And in cases of such violation, 
 every director who participated in or assented to the same shall be 
 held liable in his personal and individual capacity for all damages 
 which the association, its shareholders, or any other person shall have 
 sustained in consequence of such violation. 
 
 39. PENALTY FOR FALSELY CERTIFYINCi CHECK. 
 
 (Sec. 5208, IT. S. R. S.) It shall be unlawful for any offinv, dij-cc- 
 tor, agent, or employee of any Federal reserve bank, or of any mt'iuber 
 bank as defined in the act of December twenty-third, nineteen hun- 
 dred and thirteen, known as the Federal reserve act, to certify any 
 check drawn upon such Federal reserve bank or member bank unless 
 the person, firm, or corporation drawing the check has on deposit with 
 such Federal reserve bank or membei' bank, at the time such check is 
 certified, an amount of money not less than the amount specified in 
 such check. Any check so certified by a duly authorized officer, di- 
 rector, agent, or employee shall be a good and valid obligation 
 against such Federal reserve bank or member bank; but the act of 
 any officer, director, agent, or employee of any such Federal reserve 
 bank or member bank in violation of this section shall, in the discre- 
 
38 DUTIES AND LIABILITIES OF DIKECTOES. 
 
 tion of the Federal Eeserve Board, subject such Federal reserve bank 
 to the penalties imposed by section eleven, subsection (h), of the 
 Federal reserve act, and shall subject such member bank if a national 
 bank to the liabilities and proceedings on the part of the Comptroller 
 of the Currency provided for in section fifty-two hundred and thirty- 
 four, Revised Statutes, and shall, in the discretion of the Federal 
 Eeserve Board, subject any other member bank to the penalties im- 
 posed by section nine of said Federal reserve act for the violation of 
 any of the provisions of said act. Any officer, director, agent, or em- 
 ployeeof any Federal reserve bank or member bank who shall will- 
 fully violate the provisions of this section, or who shall resort to any 
 device, or receive any fictitious obligation, directly or collaterally, in 
 order to evade the provisions thereof, or who shall certify a check 
 before the amount thereof shall have been regularly entered to the 
 credit of the drawer upon the books of the bank, shall be deemed 
 guilty of a misdemeanor and shall, on conviction thereof in any 
 district court of the T%ited States, be fined not more than $5,000, 
 or shall be imprisoned for not more than five years, or both, in the 
 discretion of the court. 
 
 4 0. PKNALTY FOE EMBEZZLEMENT, MAKIXG FALSE ENTRIES IN BOOKS, RE- 
 PORTS, ETC. 
 
 (Sec. 5209, U. S. R. S.) Any officer, director, agent, or employee of 
 any Federal reserve bank, or of any member bank as defined in the 
 act of December twenty-third, nineteen hundred and thirteen, known 
 as the Federal reserve act, who embezzles, abstracts, or willfully mis- 
 applies any of the moneys, funds, or credits of such Federal reserve 
 bank or member bank, or who, without authority from the directors 
 of such Federal reserve bank or member bank, issues or puts in cir- 
 culation any of the notes of such Federal reserve bank or member 
 bank, or who, without such authority, issues or puts forth any certi- 
 ficate of deposit, draws any order or bill of exchange, makes any ac- 
 ceptance, assigns any note, bond, draft, bill of exchange, mortgage, 
 judgment, or decree, or who makes any false entry in any book, re- 
 port, or statement of such Federal reserve bank or member bank, 
 with intent in any case to injure or defraud such Federal reserve 
 bank or member bank, or any other company, body politic or cor- 
 porate, or any individual person, or to deceive any officer of such 
 Federal reserve bank or member bank, or the Comptroller of the 
 Currency, or any agent or examiner appointed to examine the af- 
 fairs of sucli Federal reserve bank or member bank, or the Federal 
 Eeserve Board ; and every receiver of a national banking associa- 
 tion AA'ho, with like intent to defraud or injure, embezzles, abstracts, 
 purloins, or willfully misapplies any of the moneys, funds, or as- 
 
DUTIES AND LIABILITIES OF DIKECTOES. 39 
 
 sets of his trust, and every person who, with like intent, aids or 
 abets, any officer, director, agent, employee, or receiver in any viola- 
 tion of this section shall be deemed guilty of a misdemeanor, and 
 upon conviction thereof in any district court of the United States 
 shall be fined not more than $5,000 or shall be imprisoned for not 
 more than five years, or both, in the discretion of the court. 
 
 Any Federal reserve agent, or any agent or employee of such 
 Federal reserve agent, or of the Federal Eeserve Board, who em- 
 bezzles, abstracts, or willfully misapplies any moneys, funds, or se- 
 curities intrusted to his care, or without complying with or in viola- 
 tion of the provisions of the Federal reserA^e act, issues or puts in 
 circulation any Federal reserve notes shall be guilty of a misde- 
 meanor and upon conviction in any district court of the United 
 States shall be fined not more than $5,000 or imprisoned for not 
 more than five j'ears, or both, in the discretion of the court. 
 
 41. PENALTY FOR MAKING POUTICAL CONTRIBUTIONS, ACT JANUARY 26. 
 
 1907. 
 
 That it shall be unlawful for any national bank, or any corporation 
 organized by authority of any laws of Congress, to make a money 
 contribution in connection with any election to any political office. 
 It shall also be unlawful for any corporation whatever to make a 
 money contribution in connection with any election at which presi- 
 dential and vice presidential electors or a Eepresentative in Congress 
 is to be voted for or any election by any State legislature of a United 
 States Senator. Every corporation which shall make any contribu- 
 tion in violation of the foregoing provisions shall be subject to a fine 
 not exceeding five thousand dollars, and every officer or director of 
 any corporation who shall consent to any contribution by the cor- 
 poration in violation of the foregoing provisions shall upon convic- 
 tion be punished by a fine of not exceeding one thousand and not less 
 than two hundred and fifty dollars, or by imprisonment for a term 
 of not more than one year, or both such fine and imprisonment in the 
 discretion of the court. 
 
 42. LOANS TO BANK EXAMINERS PROHIBITED. 
 
 (Sec. 5, Act Sept. 26, 1918.) That section twenty-two of the Fed- 
 eral reserve act, as amended by the act of June twenty-first, nineteen 
 hundred and seventeen, be further amended and reenacted to read 
 as follows: 
 
 (a) No member bank and no officer, director, or employee thereof 
 shall hereafter make any loan or grant any gratuity to any bank 
 examiner. Any bank officer, director, or employee violating this 
 l^rovision shall be deemed guilty of a misdemeanor and shall be im- 
 prisoned not exceeding one year or fined not more than $5,000, or 
 
40 DUTIES AND LIABILITIES OF DIEECTORS. 
 
 both ; and may be fined a further sum equal to the money so loaned 
 or gratuity given. 
 
 Any examiner accepting a loan or gratuity from any bank exam- 
 ined by hiin or from an officer, director, or employee thereof shall be 
 deemed guilty of a misdemeanor and shall be imprisoned one year 
 or fined not more than $5,000, or both, and may be fined a further 
 sum equal to the money so loaned or gratuity given, and shall forever 
 thereafter be disqualified from holding office as a national bank 
 examiner. 
 
 43. BANK EXAMINERS FORBIDDEN TO PERrOHM ANY SERVICE FOR COMPEN 
 SATION FOR ANY BANK OR OFFICER, OR TO DISCLOSE INFORMATIOK 
 ABOUT BANK AVITHOTJT PERMISSION OF COMPTROLLER. 
 
 (b) No national bank examiner shall perform any other service 
 for compensation while holding such office for any bank or officer, 
 director, or employee thereof. 
 
 No examiner, public or private, shall disclose the names of 
 borrowers or the collateral for loans of a member bank to other than 
 the proper officers of such bank without first having obtained the 
 express permission in writing from the Comptroller of the Currency, 
 or from the board of directors of such bank, except when ordered to 
 do so by a court of competent jurisdiction, or by direction of the 
 Congress of the United States, or of either House thereof, or any 
 committee of Congress, or of either House duly authorized. Any 
 bank examiner violating the provisions of this subsection shall be 
 imprisoned not more than one year or fined not more than $5,000, 
 or both. 
 
 4 4. PENALTY FOR OFFICER, DIRECTOR, OR EMPLOYEE RECEIVING ANY FEE OR 
 COMMISSION FOR MAKINO LOANS, ETC. 
 
 (c) Except as herein provided, any officer, director, employee, or 
 attorney of a member bank who stipulates for or receives or consents 
 or agrees to receive any fee, commission, gift, or thing of value from 
 any person, firm, or corporation, for procuring or endeavoring to 
 procure for such person, firm, or corpoation, or for any other person, 
 firm, or corporation, any loan from or the purchase or discount of 
 any paper, note, draft, check, or bill of exchange by such member 
 bank shall be deemed guilty of a misdemeanor and shall be imprisoned 
 not more than one year or fined not more than $5,000, or both. 
 
 45. PURCHASE OF OE SALE TO DIRECTORS OF SECURITIES., ETC., BY BANK. 
 
 (d) Any member bank may, contract for, or purchase from, any 
 of its directors or from any firm of which any of its directors is a 
 
DUTIES AND LIABILITIES OF DIRECTORS. 41 
 
 member, any securities or other property, when (and not otherwise) 
 such purchase is made in the regular course of business upon terms 
 not less favorable to the bank than those offered to others, or when 
 such purchase is authorized by a majority of the board of directors 
 not interested in the sale of such securities or property, such authority 
 to be evidenced by the affirmative vote or written assent of such 
 directors: Provided, however, That when any director, or firm of 
 which any director is a member, acting for or on behalf of others, sells 
 securities or other property to a member bank, the Federal Reserve 
 Board by regulation may, in any or all cases, require a full disclosure 
 to be made, on forms to be prescribed by it, of all commissions or 
 other considerations received, and whenever such director or firm, 
 acting in his or its own behalf, sells securities or other property to 
 the bank the Federal Reserve Board, by regulation, may require a 
 full disclosure of all profit realized from such sale. 
 
 Any member bank may sell securities or other property to any 
 of its directors, or to a firm of which any of its directors is a member, 
 in the regular course of business on terms not more favorable to such 
 director or firm than those offered to others, or when such sale is 
 authorized by a majority of the board of directors of a member bank 
 to be evidenced by their affirmative vote or written assent : Provided, 
 however, That nothing in this subsection contained shall be construed 
 as authorizing member banks to purchase or sell securities or other 
 property which such banks are not otherwise authorized by law to 
 purchase or sell. 
 
 4 6. PAYMEKT OF INTEREST ON DEPOSITS TO DIREOTOES TO BE AT A RATE NO 
 GREATER THAN PAID TO OTHER DEPOSITORS. 
 
 (e) No member bank shall pay to any director, officer, attorney, 
 or employee a greater rate of interest on the deposits of such director, 
 officer, attorney, or employee than that paid to other depositors on 
 similar deposits with such member bank. 
 
 47. PENALTY TOR VIOLATION OF PROVISIONS OF SECTION 2 2 OF FEDERAL RE- 
 SERVE ACT. 
 
 (f ) If the directors or officers of any member bank shall knowingly 
 violate or permit any of the agents, officers, or directors of any mem- 
 ber bank to violate any of the provisions of this section or regulations 
 of the board made under authority thereof, every director and officer 
 participating in or assenting to such violation shall be held liable in 
 his personal and individual capacity for all damages which the 
 member bank, its shareholders, or any other persons shall have 
 sustained in consequence of such violation. 
 
42 DUTIES AND LIABILITIES OP DIEBCTOES. 
 
 4S. LOANS OF TRUST FUNDS TO DIEECTOES, ETC., PROHIBITED. 
 
 Section Ilk of the Federal re-sei've act x:)rovides that it shall be 
 unlawful for national banking associations to lend any officer, direc- 
 tor, or employee any funds held in trust under the powers conferred 
 by that section, and that any officer, director, or employee making 
 such loan, or to whom such loan is made, may be fined not more than 
 $5,000 or imprisoned not more than five years, or may be both fined 
 aJid imprisoned in the discretion of the court. 
 
 49. Interlocking Directorates. — When Foebidden (Act Oct. 15, 
 1914, AS Amended Br Act May 15, 1916). 
 
 (Sec. 8.) That from and after two years from the date of the ap- 
 pioval of this act no person shall at the same time be a director or 
 other officer or employee of more than one bank, banking association, 
 or trust company organized or operating under the laws of the 
 United States, either of which has deposits, capital, surplus, and un- 
 divided profits aggregating more than $5,000,000; and no private 
 banker or person who is a director in any bank or trust company 
 organized and operating under the laws of a State, having deposits, 
 capital, surplus, and undivided profits aggregating more than 
 $5,000,000, shall be eligible to be a director in any bank or banking 
 iassociation organized or operating under the laws of the United 
 States. The eligibility of a director, officer, or employee under the 
 foregoing provisions shall be determined by the average amount of 
 deposits, capital, surplus, and undivided profits as shown in the 
 official statements of such bank, banking association, or ti'ust com- 
 pany filed as provided by law during the fiscal year next preceding 
 the date set for the annual election of directors, and when a director, 
 officer, or employee has been elected or selected in accordance with 
 the provisions of this act it shall be lawful for him to continue as 
 such for one year thereafter under said election or employment. 
 
 No bank, banking association, or trust company organized or 
 operating under the laws of the United States, in any city or incor- 
 porated town or village of more than two hundred thousand in- 
 habitants, as shown by the last preceding decennial census of the 
 United States, shall have as a director or other officer or employee 
 any private banker or any director or other officer or employee of 
 any other bank, banking association, or trust company located in 
 the same place: Provided, That nothing in this section shall apply 
 to mutual savings banks not having a capital stock represented by 
 shares : Provided further, That a director or other officer or employee 
 of such bank, banking association, or trust company may be a 
 director or other officer or employee of not more than one other bank 
 
DUTIES AND LIABILITIES OF DIBECTORS. 43 
 
 or trust company organized under the laws of the United States or 
 any State where the entire capital stock of one is oAvned by stock- 
 holders in the other: And provided further, That nothing contained 
 in this section shall forbid a director of class A of a Federal reser\e 
 bank, as defined in the Federal reserve act, from being an officer or 
 director, or both an officer and director, in one member bank: And 
 provided further, That nothing in this act shall prohibit any officer, 
 director, or employee of any member bank or class A director of a 
 Federal reserve bank, who shall first procure the consent of the Fed- 
 eral Reserve Board, which board is hereby authorized, at its discre- 
 tion, to grant, withhold, or revoke such consent, from being an 
 officer, director, or employee of not more than tv^-o other banks, 
 banking associations, or trust companies, whether organized under 
 the laws of the United States or any State, if such other bank, bank- 
 ing association, or trust company is not in substantial competition 
 with such member bank. 
 
 The consent of the Federal Reserve Board may be procured before 
 the person applying therefor has been elected as a class A director 
 
 of a F'ederiil reserA'e bank or as a director of any member bank. 
 * * * 
 
 When any person elected or chosen as a director or officer or se- 
 lected as an employee of any bank or other corporation subject to the 
 proA'isions of this act is eligible at the time of his election or selection 
 to act for such bank or other corporation in such capacity his eligi- 
 bility to act in such capacity shall not be affected, and he shall not 
 become or be deemed amenable to any of the provisions hereof by 
 leason of any change in the affairs of such bank or other corporation 
 from whatsoever cause, whether specifically excepted by any of the 
 provisions hereof or not, until the expiration of one year from the 
 date of his election or employment. 
 
 •oO. DIEECTOES OE OTHEE OFEICEES OF BANK OE CORPOEATIOX INC0EP0EATj:n 
 UNDER THE LAWS OF THE UNITED STATES OE OF ANY STATE AND EN- 
 GAGED IN FOEEIGN BANKING WHO MAY BE. 
 
 Under the act of September 7, 1916, any director or other officer, 
 agent, or employee of any member bank may, with the approval of 
 the Federal Reserve Board, be a director or other officer, agent, or 
 employee of any bank or corporation chartered or incorporated under 
 the laws of the United States or of any State thereof and principally 
 engaged in international or foreign banking or banldng in a de- 
 pendency or insular possession of the United States either directly 
 or through the agency, ownership, or control of local institutions in 
 foreign countries or in such dependencies or insular possessions in 
 the capital stock of which such meniber bank shall have invested 
 
44 DUTIES AND LIABILITIES OF DIKECTOES. 
 
 without being subject to the provisions of section 8 of the act ap- 
 proved October 15, 1914, entitled "An act to supplement existing laws 
 against unlawful restraints and monopolies, and for other purposes." 
 
 51. Bt-Laws to be Auoptf,d bt Directors. 
 
 BY-LAWS. 
 
 When a bank is organized the board of directors should adopt by- 
 laws, and send a copy to the Comptroller of the Currency. (Sec. 
 5136, U. S. R. S.) The following is submitted as a general form that 
 may be modified in any manner deemed expedient, but not in conflict 
 with law or the articles of association : 
 
 Geneeai, Form of By-Laws of National Banks. 
 
 By-laws of the [here insert the title of the ianlc], organized under the national- 
 banking laws of the United States. 
 
 ANNUAL MEETING. 
 
 Section 1. The regular annual meetings of tlie shareholders of this bank for 
 the election of directors shall be held at its banking house on the day in Janu- 
 ary of each year provided in the articles of association, between the hours of 
 10 and 4 of said day. It shall be the duty of the board of directors, within one 
 month prior to the time of said election, to appoint three shareholders to be 
 judges of said election, who shall hold and conduct the same, and who shall, 
 after the election has been held, notify under their hands the cashier of this 
 bank of the result thereof and the names of the directors elect. 
 
 Sec. 2. The cashier, upon receiving the returns of the judges of the elections 
 as aforesaid, shall cause the same to be recorded upon the minute book of the 
 bank, and shall notify the directors elect of their election and of the time at 
 which they are required to meet at the banking house of the bank for the pur- 
 pose of organizing the new board. If at the time fixed for the meeting of the 
 directors elect there is not a quorum in attendance, the members present may 
 adjourn from time to time until a quorum is secured, and no business shall be 
 transacted prior to taking the oath of office as prescribed by law. 
 
 Sec. 3. If, for any cause, the annual election of directors Is not held on the 
 date fixed in the articles of association, the directors in office shall order an 
 election to be held on some other day, of vi'hich special election notice shall be 
 given in accordance with the requirements of section 5149, United States Re- 
 vised Statutes, judges appointed, returns made and recorded, and the directors 
 elect notified, according to the provisions of sections one and two of these 
 by-laws. 
 
 OFFICEKS. 
 
 Sec. 4. The oflicers of this bank shall be a president, vice president (who 
 shall be members of the board of directors), cashier, and such other oflicers 
 as may be from time to time required for the prompt and orderly transaction 
 of its business, to be elected or appointed by the board of directors, by whom 
 their several duties shall be prescribed. 
 
 Sec. 5. The president shall hold his office for the current year for which 
 the board of which he shall be a member was elected, unless he shall resign. 
 
DUTIES AND LIABILITIES OF DIBECTOBS. 45 
 
 become dlsquaUfled, or be removed ; and any vacancy occurring in the office 
 of president or in tbe board of directors shall be filled by the remaining 
 members. 
 
 Sec. 6. The cashier and the subordinate officers and clerks shall be appointed 
 to hold their offices, respectively, during the pleasure of the board of directors. 
 
 Sec. 7. The cashier of this bank shall be responsible for all the moneys, 
 funds, and valuables of the bank, and shall give bond, with security to be 
 
 approved by the board, in the penal sum of dollars, conditioned for the 
 
 faithful and honest discharge of his duties as such cashier, and that he will 
 faithfully apply and account for all such moneys, funds, and valuables, and 
 deliver the same to the order of the board of directors of this bank, or to the 
 person or persons authorized to receive them. 
 
 Sec. 8. The president of this bank shall be responsible for all such sums of 
 money and property of every kind as may be intrusted to his care or placed 
 in his hands by the board of directors or by the cashier, or otherwise come into 
 his hands as president, and shall give bond, with security to be approved by 
 the board, in the penal sum of dollars, conditioned for the faithful dis- 
 charge of his duties as such president, and that he will faithfully and honestly 
 apply and account for all sums of money and other property of this bank that 
 may come into his hands as such president, and pay over and deliver the same 
 to the order of the board of directors, or to any other person or persons author- 
 ized by the board to receive the same. 
 
 Sec. 9. The teller shall be responsible for all such sums of money, property, 
 and funds of every description as may from time to time be placed in his 
 hands by the cashier, or otherwise come into his possession as teller ; and 
 shall give bond, with security to be approved by the board, in the penalty of 
 
 dollars, conditioned for the honest and faithful discharge of his duties 
 
 as teller, and that he ^\'ill faithfully apply, account for, and pay over all 
 moneys, property, and funds of every description that may come into his hands, 
 by virtue of his office as teller, to the order of the board of directors aforesaid, 
 or to such person or persons as may be authorized to demand and receive the 
 same. 
 
 SEAI^. 
 
 Sec. 10. The following is an impression of the seal adopted by the board of 
 directors of this bank : 
 
 (Impression ' 
 I of seal. 
 
 CONVEYANCE OF REAL ESTATE. 
 
 Sec 11. All transfers and conveyances of real estate shall be made by the 
 association, under seal, in accordance with the orders of the board of directors, 
 and shall be signed by the president or cashier. 
 
 INCREASE OF STOCK. 
 
 Sec. 12. Whenever an increase of stock shall be determined upon, in accord- 
 ance with law, it shall be the duty of the board to notify all the shareholders of 
 the same, and to cause a subscription to be opened for such Increase of capital. 
 In the increase of capital each shareholder shall have the privilege of subscrib- 
 ing for such number of shares of the new stock as he may be entitled to sub- 
 scribe for, according to his existing stock in the bank. If any shareholder fails 
 
46 DUTIES AND LIABILITIES OF DIRECTORS. 
 
 to subscribe for the amount of stock to which he may be entitled, the board of 
 directors may determine what disposition shall be made of the privilege of 
 subscribing for the unsubscribed stock. 
 
 BANKING HOaKS. 
 
 Sec. 13. This bank shall be opened for business from o'clock a. m. to 
 
 o'clock p. m. of each day of the year, excepting Sundays and days recognized by 
 the laws of this State as holidays. 
 
 DIRECTOES' MEETINGS, 
 
 Sec. 14. The regular meetings of the board of directors shall be held on tiie 
 
 of each month. When any regular meeting of the board of directors falls 
 
 upon a holiday, the meetings shall be held on such other day as the board may 
 previously designate. Special meetings may be called by the president, cashier, 
 or at the request of three or more directors. 
 
 DISCOUNT COMMITTEE. 
 
 Sec. ]5. There shall be a committee, to be known as the discount committee, 
 
 consisting of the president, cashier, and directors appointed liy the board 
 
 every months, to continue to act until succeeded, who shall Iiave power to 
 
 discount and purchase bills, notes, and other evidences of debt, and to buy and 
 sell bills of exchange ; and who shall, at each regular meeting of the board of 
 directors, submit in writing a report of all bills, notes, and other enaences of 
 debt discounted and i^urchased by them for the bank since their last report. 
 The board of directors shall approve or disapprove the report of the discount 
 committee, such action to be recorded in the minutes of the meeting. 
 
 MINUTE BOOK. 
 
 Sec. 16. The organization papers of this bank, the returns of the judges of 
 the elections, the proceedings of all regular and special meetings of the direc- 
 tors and of the shareholders, the by-laws and any amendments thereto, and 
 reports of the committees of directors shall be recorded in the minute book ; and 
 the minutes of each meeting shall be signed by the president and attested by 
 the cashier. 
 
 TKAXSKERS OF STOCK. 
 
 Sec. it. The stock of this bank shall be assignable and transfei-ahlc cmly on 
 the books of this bank, subject to the restrictions and provisions of the national 
 banking laws; and a transfer book shall be provided in which all assignments 
 and transfers of stock shall be made. 
 
 Sec. 18. Transfers of stock sliall not be suspended preparatory to the declara- 
 tion of dividends ; and, unless an agreement to the contrary shall be expressed 
 in the assignments, dividends shall be paid to the shareholders in whose name 
 the stock shall stand at the date of the declaration of dividends. 
 
 Sec. 19. Certificates of stock, signed by the president and cashier, may be 
 issued to shareholders, and the certificates shall state upon the face tliereof 
 that the stock is transferable only upon the books of the bank ; and when stock 
 is transferred, the certificates thereof shall be returned to the bank, canceled, 
 preserved, and new certificates issued. 
 
DUTIES AND LIABILITIES OF DIRECTORS. 47 
 
 Expenses. 
 
 Sec. 20. All the current expenses of the bank shall be paid by the cashier, 
 who shall every six months, or oftener if required, make to the board a detailed 
 statement thereof. 
 
 CONTKACTS. 
 
 Sec. 21. All contracts, checks, drafts, etc., and all receipts for circulating 
 notes received from the Comptroller of the Currency shall be signed by the 
 president or cashier. 
 
 EXAMINATIONS. 
 
 Sec. 22. There shall be appointed by the board of directors a committee of 
 
 members, exclusive of the president and cashier, whose duty it shall be 
 
 to examine every six months the affairs of this bank, count its cash, and com- 
 pare its assets and liabilities with the accounts of the general ledger, ascertain 
 whether the accounts are correctly kept, and the condition of the bank corre- 
 sponds therewith, and whether the bank is in a sound and solvent condition, 
 and to recommend to the board such changes in the manner of doing business, 
 etc., as shall seem to be desirable ; the result of which examination sliall be 
 reported in writing to the board at the next regular meeting thereafter; 
 
 Sec. 23. The iioard of directors shall have power to change the form of the 
 books and accoimts when deemed expedient and define the manner in which the 
 affairs of the bank shall be conducted. 
 
 QXJOBUM. 
 
 Sec. 24. A majority of all the directors is required to constitute a quorum to 
 do business. Should there be no quorum at any regular or special meeting, 
 the members present may adjourn from day to day until a quorum is in attend- 
 ance. In the absence of a quorum no business shall be transacted. 
 
 CHANGES IN BY-LAWS. 
 
 Sec. 25. These by-laws may be changed or amended by the vote of a majority 
 of the directors. 
 
 52. Examination bt Directors. 
 
 In connection Avith the annual or semiannual examinations made 
 b}' examining committees or by accountants at the instance of the 
 board of directors, the following suggestions are made as to the 
 general points that should be covered : 
 
 (1) The cash should be counted and the total compared with the 
 books of the bank. Cash items should be carefully scrutinized, and 
 any improper items, such as unposted checks held for the purpose of 
 not showing overdrafts, and other items that can not be readily 
 converted into cash, should be reported. 
 
 (2) The bonds and other securities of the bank should be examined 
 and those not on hand should be verified by reference to the receipts 
 of the parties with whom they are deposited, and if the receipts are 
 old they should be verified by correspondence. The market value and 
 
48 DUTIES AND LIABILITIES OF DIEBCTOBS. 
 
 the amount at which carried on. the books in the aggregate should be 
 shown, and any stocks held by the bank should be listed, with a 
 statement showing the reason the securities were taken by the bank. 
 
 (3) The notes should be carefully checked and their total com- 
 pared with the general ledger. The genuineness, value, and security 
 of each note, and of any collateral thereto, should be carefully deter- 
 mined, and any losses ascertained, or probable, in the judgment of the 
 committee, should be noted. The liabilities of each of the larger bor- 
 rowers and loans to affiliated interests should be aggregated and 
 carefully considered. The report should also show the general charac- 
 ter of the loans — whether well distributed ; the general character of 
 the collaterals ; whether corporations in which officers or directors are 
 interested borrow to an undue extent ; also any large liabilities of the 
 officers or directors. It should also be shown whether all paper 
 claimed by the bank as its own property, including collaterals, is 
 properly indorsed or assigned to it, and all mortgages recorded. 
 Any loans exceeding 10 per cent of the capital and surplus of the 
 bank should be reported. The signatures of all note makers and 
 indorsers should be carefully scrutinized, and any erasures and altera- 
 lions or any indications of manipulation should be carefully investi- 
 gated and reported to the full board. All overdue paper should be 
 listed and comment made as to its collectibility. 
 
 (4) The certificates of deposit and the cashier's checks should be 
 verified by totaling those outstanding as shown by the register and 
 comparing with the general ledger, and also by comparing the can- 
 celed certificates and checks with the register and checking them 
 against the stubs. 
 
 (5) The copy retained by the bank of the report of condition made 
 to the Comptroller at the last call should be compared with the bank's 
 books at that date, particularly with reference to the excessive loans 
 and directors' and officers' liabilities reported. 
 
 (6) The bank's last reconcilements of accounts with correspondent 
 banks should be compared with the bank's books, and a transcript of 
 the bank's account from the date of the last reconcilement to the date 
 of the examination sent to the correspondent bank with a request for 
 verification. Balances with nonmember banks in excess of 10 per 
 cent of the capital and .surplus should be reported. 
 
 (7) Individual ledger balances should be verified in such manner 
 as the directors may deem advisable, by calling in pass books, by send- 
 ing out reconcilements of certain accounts selected by the directors, 
 or in some other suitable way. A trial balance of the ledger should 
 be taken by some member of the committee, or at least by some person 
 other than the clerk engaged on the ledger. 
 
 (8) Overdrafts should be totaled and carefully considered, and the 
 report should show any estimated losses. 
 
DUTIES AND LIABILITIES OF DIRECTORS. 49 
 
 (9) The committee should consider carefully the " profit and loss " 
 and the " expense " accounts, with a view of determining whether the 
 charges against those accounts are proper, whether the earnings of 
 the bank warrant the expense charges, and whether the bank is 
 making a legitimate profit. 
 
 (10) The examining committee should inquire carefully into the 
 arrangement of the working affairs of the bank and ascertain whether 
 any employee who keeps the individual ledger receives deposits or 
 balances pass books ; and whether the employees are properly bonded, 
 and in whose custody the bonds are lodged. 
 
 (11) Any liability of the bank for borrowed money should be 
 listed, and the proper authority and the necessity for such borrowing 
 ascertained. The total amount of the present liabilities of that nature 
 should be reported to the board, including money borrowed from 
 other banks on certificates of deposit. 
 
 The report of the directors or the examining committee sjiould show 
 that these points have been covered, and should recite any deficiencies 
 discovered. 
 
 The report should also contain a complete statement of the total 
 assets and liabilities of the bank, with any additions or deductions 
 that in the judgment of the directors should be made as a result of 
 their investigation. There should also be included a detailed state- 
 ment of the loans which the directors estimate as worthless, doubtful, 
 or insufficiently secured, giving reasons therefor, and as nearly as 
 possible the real value. 
 
 A statement should also be made of any matters which in the opin- 
 ion of the committee affect in any way the bank's solvency, stability, 
 or prosperity. 
 
 It is believed that there are few instances where the examining com- 
 mittee can not, if they will take the necessary time, cover these points 
 fully and satisfactorily. 
 
 An examination twice a year, along the lines indicated, by a com- 
 mittee of the directors who will give sufficient time to the work to 
 make it thorough and complete, can not fail to be of great benefit to 
 all concerned, and this the directors owe to the shareholders who have 
 placed them in their positions of trust. 
 
 A complete report of each examination should be preserved in the 
 files of the bank and be accessible to the bank examiner when examin- 
 ing the bank. 
 
 53. LiABiLiTT OF Directors For Making and Publishing False 
 
 Report. 
 
 Under the decisions of the Supreme Court of the United States in 
 Thomas v. Taylor (224 U. S., 73) and of the United States Circuit 
 Court of Appeals in Chesbrough et al. v. Woodworth (195 Fed. Rep., 
 115635—19 i 
 
50 DUTIES AND LIABILITIES OE DIEECTOES. 
 
 875), when the Comptroller of the Currency has notified directors to 
 collect or charge off certain assets it is a warning that those assets are 
 doubtful, and to disregard such a notice and represent the assets in 
 a statement to be good is a violation of law and renders the directors 
 making the statement liable for damages to one deceived thereby. 
 
 The Circuit Court of Appeals in the latter case held that while the 
 duty of charging off such worthless paper was that of the board of 
 directors as an entity, and in such matter the board had a reasonable 
 discretion, yet when the duty existed and was wholly unperformed an 
 individual director who is engaged generally in the performance of 
 his functions may be personally liable because of his participation in 
 the failure to act by failing to make reasonable personal efforts to 
 induce the proper action. 
 
 In the case referred to (Chesbroughetal. -w. Woodworth) the plain- 
 tiff bought stock in the bank in reliance upon a false report of its 
 condition and had suffered damage thereby. He was held to have a 
 right of action against any officer or director who knowing its falsity 
 had authorized such a report. The court held that the measure of the 
 plaintiff's recovery would be the difference in the fair valuation of his 
 stock if all of the paper had been of a character entitling it to be 
 reported as assets and that sum which would have been a fair mini- 
 mum valuation if the directors in the exercise of due care and good 
 faith had charged off' the books and not reported so much of the paper 
 as they knew or had good reason to believe was not good and collectible. 
 
 54. Liability or Directors for Mismanagement — Degree or Care 
 Required of Directors. 
 
 The Supreme Court of the United States has held (Briggs v. 
 Spaulding, 141 U. S., 132) that directors of a national bank must ex- 
 ercise ordinary care and prudence in the administration of the af- 
 fairs of a bank, and this includes something more than officiating as 
 figureheads. They are entitled under the law to commit the banking 
 business, as defined, to their duly authorized officers; but this does 
 not absolve them from the duty of reasonable supervision nor ought 
 they to be permitted to be shielded from liability because of want of 
 knowledge of wrongdoing, if that ignorance is the result of gross in- 
 attention. 
 
 It was further held in the same case that the degree of care re- 
 quired of directors of corporations depends upon the subject to which 
 it is to be applied, and each case is to be determined in view of all 
 the circumstances; that the directors of a corporation are not in- 
 surers of the fidelity of the agents whom they appoint and they can 
 not be held responsible for losses resulting from the wrongful acts or 
 
JJUTIJSS AWD LIABILITIES OF DIRECTORS. 51 
 
 omissions of other directors or agents unless the loss is a consequence 
 of their own neglect of duty. 
 
 The United States Supreme Court in a decision rendered June 9, 
 1919, in the case of Bowerman v. Hamner, held that a director who 
 had never attended a meeting during fire years' connection with the 
 hank, and who lived 200 miles from the place where the bank was 
 located,, was liable for mismanagement because he did not exercise 
 the diligence which a prudent man would usually exercise in ascer- 
 taining the condition of the business of the bank or a reasonable con- 
 trol and supervision over its affairs, and that he could not be shielded 
 from liability because of want of knowledge of wrongdoing on his 
 part, since that ignorance was the result of gross inattention in the 
 discharge of his voluntarily assumed and sworn duty. 
 
 55. Liability of Directors for Assenting to Excessive Loans. 
 
 The United States Circuit Court held (Rankin v. Cooper et al., 
 149 Fed. Rep., 1010) that it is the duty of directors of a national 
 bank to exercise reasonable control and supervision over its affairs, 
 and to use ordinary care and diligence in ascertaining the condition 
 of its business, which is such care as an ordinarily prudent and dili- 
 gent man would exercise in view of all the circumstances; and that 
 where the directors of a national bank became aware through the re- 
 port of a committee of their number, and also by notices sent them in- 
 dividually by the Comptroller of the Currency, that the bank had been 
 making excessive loans to its president and to other persons, firms, 
 and corporations with which he was associated, but took no effective 
 steps to reduce such loans, or to prevent their increase, which con- 
 tinued until the bank became insolvent, they will be held jointly and 
 severally liable for all losses which the bank sustained through sub- 
 sequent transactions, and which could have been prevented by a 
 proper discharge of their duties. 
 
 The United States Circuit Court has held (Witters, Receiver, etc., 
 V. Sowles et al., 31 Fed. Rep., 1) that under Revised Statutes, section 
 5200, directors of a national bank who make or assent to the mak- 
 ing of a loan to any one person of a sum exceeding the legal limit be- 
 come personally and individually liable for all loss sustained thereby ; 
 but where the borrower in such a case is also one of the directors he 
 is not so liable, but simply as a debtor to the bank. 
 
 The United States Circuit Court of Appeals in McCormick v. 
 King et al, 241 Fed. Rep., 737, held that directors responsible for 
 excess loans were liable not only for the excess of such loans above 
 the legal limit, but for the entire loss thereon with interest, and this 
 case was affirmed by the Supreme Court of the United States on 
 June 9, 1919, in Bowerman v. Hamner. 
 
CHAPTER 5. 
 
 CHANGES IN CAPITAL— EXTENSION AND REEXTENSION 
 OF CHARTER — CHANGE OF NAME AND LOCATION — 
 AMENDMENTS TO ARTICLES — MEETINGS OF SHARE- 
 HOLDERS. 
 
 •")(>. Iiici-ease of capital stock — Instruc- 
 tions. 
 
 ~u. Ri slits of shareholders in connec- 
 tion with increase of capital. 
 
 5S. Form of resolution of shareholders 
 providing for increase of capital. 
 
 ."'>n. Form of certificate of increase of 
 capital. 
 
 ()0. Reduction of capital-stock.- 
 
 01. Resolution providing for reduction 
 of capital stock. 
 
 02-60. Restoration of impaired capital. 
 
 67. Extension of corporate existence. 
 
 68. Withdrawal of dissenting share- 
 
 holders. 
 
 69. Reextension of corporate exist- 
 
 ence. 
 
 70. Change of name or of name and 
 
 location. 
 -71. Amendments to articles. — 
 72. Meetings of shareholders. 
 73-77. Reports to Comptroller. 
 
 56. Increase of Capital Stock — ItvSteuctioxs. 
 
 A national banking association may, witli the consent of the Comp- 
 troller of the Currency and by a vote of shareholders owning two- 
 thirds of the shares, increase its capital stock to any sum approved by 
 the Comptroller. 
 
 An association that contemplates increasing its capital stock should 
 advise the Comptroller before formally submitting the question to 
 the shareholders, and if the proposition is approved he will furnish 
 necessary blanks and instructions. 
 
 The application to increase capital should be made on the follow- 
 ing form, which will be furnished on request : 
 
 APPLICATION TO INCREASE CAPITAL, 
 
 -, 19- 
 
 TO the C'oitPTEOLI.ER OP THE OXJKRENCY. 
 
 WOHllillfltO}!. 1). (' 
 
 Sir: 
 
 ActiuK under the authority of a resolution of the board of directors, I request 
 appi'oval of this appUcation to increase the capital stock of The Na- 
 tional Bank of from .f to if , and that the proper, blanks and 
 
 instructions be furnished. 
 
 The stock is to be sold at $ per share, and the present shareholdei-s 
 
 will be permitted to subscribe for new stock in proportion to the amount of 
 stock now held by them. 
 
 It is proposed to declare a dividend of per cent to enable 
 
 shareholders to make payment on the new stock. 
 52 
 
INCKEASE IN CAPITAL. 53 
 
 Tlie purchase of the business of the Bank Is contemplated In 
 
 <:onneetion with this increase. 
 
 On this date the bool^s of this hanls show the following: 
 
 Capital .$ 
 
 Surplus if, 
 
 Undivided profits ,$ 
 
 Total deposits $ 
 
 Total resources .$ 
 
 President or Cashier. 
 When the Comptroller has advised the bank that the proposition 
 to increase meets with his approval, a meeting of the shareholders 
 should be called after giving the notice required by the articles of 
 association of the national bank ; this period is usually 30 days. This 
 notice must state specifically the business to come before the meeting, 
 and should be made in the following form : 
 
 You are hereby notified that a special meeting of the stockholders of the 
 
 Bank will be held at its banking rooms in , on — , at o'clock 
 
 , to consider and vote upon the question of increasing the capital stock 
 
 of the bank from $ to $ , and for the transaction of such other 
 
 business as may properly come before the meeting. 
 
 , Cashier. 
 
 Shareholders Avho are unable to be present at the meeting may be 
 represented by proxy, but no officer, director, or employee of the 
 association can act as proxy. The following form of proxy may be 
 used : 
 
 PROXY FOR SPECIAL MEETING OF STOCKHOLDEES. 
 
 Know all men by these presents, that I, the undersigned stockholder in 
 the , do hereby constitute and appoint my true and lawful at- 
 torney with power of substitution for and in my name to vote upon all the stock 
 
 Of said , standing in my name, at the special meeting of the stockholders 
 
 of said bank, to be held at its banking rooms in . on , at ■ 
 
 o'clock , or at any adiournment thereof, on the question of the proposed 
 
 increase in capital stock of said national bank, with all the powers the under- 
 signed should possess if present personally at said meeting, or any adjournment 
 thereof, hereby revoking all previous proxies. 
 
 In witness whereof, I hereunto set my hand this day of . 19 . 
 
 Witness to signature : 
 
 Number of shares . 
 
 After the resolution has been adopted by the shareholders, it is 
 suggested that it would be advisable to adjourn the meeting to a fixed 
 date, or to meet at call of the officers of the bank, so that, if upon 
 examination of the resolution it is found to be in any way informal, 
 a new resolution can be adopted without the necessity of again giving 
 the 30 days' notice. 
 
54 INCREASE IN CAPITAL. 
 
 No increase is valid until the whole amount is paid in cash, certified 
 to the Comptroller, and his certificate of approval is issued. (Sec. 
 5142; also act of Congress approved May 1, 1886.) 
 
 A portion of a proposed increase will not be approved. The whole 
 amount, as stated in the resolution adopted by the vote of the share- 
 holders, must be paid in and the payment certified to the Comptroller. 
 The increase becomes valid upon the issuance of the Comptroller's 
 certificate of approval, prior to which no change should be made in ■ 
 the capital stock account nor certificates of stock issued. If any 
 assets of another bank are to be taken over in connection with the in- 
 crease an examination to determine their character and value will 
 be required, and no assets may be purchased that are not in con-' 
 formity with law and of satisfactory value. 
 
 57. Eights of Sharehgldees in Connection with Increase of 
 
 Capital. 
 
 While there is no provision in the national-bank act covering this 
 question, under the common law when the capital stock of a corpora- 
 tion is increased by the issuance of new stock each holder of the 
 original stock has the right to offer to subscribe for and to demand 
 from the corporation such a proportion of the new stock as the number 
 of shares already owned by him bears to the whole number of shares 
 before the increase. This right must be exercised within a fixed or 
 reasonable time, and if a shareholder fails to avail himself of it he 
 is barred by laches or acquiescence of his right to contest the disposi- 
 tion of the stock to some one else. The New York Court of Appeals 
 held (Stokes ». Continental Trust Co. of New York, 186 N. Y., 285) 
 that Avhere a stockholder in a domestic corporation consented to an 
 increase of capital stock, but protested against the acceptance of a 
 proposition to sell the new stock, when issued, to a third party at a 
 fixed price, and demanded the right to subscribe and pay for his 
 proportionate share of the new stock at par, which demand was 
 refused by the corporation and a resolution thereafter adopted direct- 
 ing the sale of all the new stock, when issued, to a third party at a 
 fixed price, which was less than the market value of such stock at the 
 time it was issued and delivered, such stockholder, by demanding his 
 proportionate share of the new stock at par, did not thereby waive his 
 right to take it at the fixed price at which it was sold to the outside 
 party, since the price was not fixed until after he had made his 
 demand. After the price was fixed it was the duty of the, directors 
 of the corporation to give him an opportunity to purchase at that 
 price before they could sell his property to a third party, even with 
 the approval of a large majority of the stockholders. The stock 
 having been sold to a third party without any opportunity being 
 given to the stockholder to take it at the fixed price, he can recover 
 
INCREASE IN CAPITAL. 55 
 
 from the corporation the difference between the value of his stock at 
 that price and the market value of the stock upon the day it was 
 delivered to the third party. 
 
 It will thus be seen that, if the courts follow the decision of the 
 New York Court of Appeals, the officers of a bank would be incurring 
 risks in selling stock to third parties at less than its market value, 
 unless they had previously secured a waiver of the stockholders whose 
 proportion of the new stock was being sold. 
 
 If the stock of a national bank is worth more than par, and the 
 new issue is being sold at par, the issuance of new stock naturally 
 will depreciate the book value of all the stock of the bank. The share- 
 holder who does not desire to subscribe to the new stock, but wishes to 
 protect his equity in the assets of the bank, should be given the right 
 to subscribe and be permitted to assign this right to other parties for 
 such consideration as he may be able to obtain therefor. This is the 
 course followed in other corporations. The following is a form for 
 such assignment: 
 
 ASSIGNMENT OP EIGHT TO SUBSCEIBE TO NEW CAPITAL STOCK. 
 
 The National Bank of . 
 
 Suhscription warrant. 
 
 This is to certify that • , a stockholder of record of the ■ 
 
 National Bank of on this date, holding ^ shares of the 
 
 National Bank of . is entitled to subscribe for shares of the in- 
 creased capital stock of said bank at $ — per share on , and up to and 
 
 including . Not valid after . 
 
 This right may be assigned by properly witnessed signature on the form 
 printed below. 
 
 The National Bank of , 
 
 By , Cashier. 
 
 For value received, hereby sell, assign, and transfer unto 
 
 all my rights to subscribe for the within shares of the increased capital stock 
 
 of the National Bank of , subject to the conditions attached by 
 
 said bank to said rights. 
 
 Witness : ' 
 
 In the event that the shareholder desires to subscribe to the stock 
 his subscription can be made on a form similar to the following: 
 
 SUBSCBIPTION TO NEW CAPITAL STOCK. 
 
 Date 
 
 Cashieb 
 
 The undersigned hereby subscribes for ( ) shares of the capital 
 
 stock of the of the issue of capital stock authorized by the stockholders 
 
 of the said bank at a special meeting held on ; and the undersigned 
 
 hereby agrees to cause payment for such shares of stock to be made to said 
 
 bank at — at the rate of per share on or before • . In the 
 
 event of failure to make said payment in the said time as herein specified, 
 
56 INCREASE IS CAPITAL. 
 
 then this subscription and any rights I may have to subscribe for the said 
 new stock shall be canceled and void. 
 
 (Signed) , 
 
 Street 
 
 City . State . 
 
 There is no authority in law for the declaration of a stock dividend 
 by a national bank. Neither the surplus fund nor the undivided 
 profits can be used, except by the declaration of a dividend by the 
 board of directors in the regular course, in which event the share- 
 holders, if they so desire, may use the dividend checks in payment 
 to the extent of their subscriptions to the additional capital. Such 
 portion only of the surplus fund as exceeds the amount required by 
 law to be accumulated, 20 per cent of the capital, can be capitalized 
 in the manner indicated. If the dividend checks are accepted in 
 payment of subscriptions to the stock, the certificate covering pay- 
 ment of the money should be accompanied by a complete report of 
 the dividend, and advice that all dividend checks have been indorsed 
 by the shareliolders and returned to the bank. In order to facilitate 
 matters, if desired, authority may be obtained from the shareholders 
 in advance of the issuance of the dividend checks "to credit the divi- 
 dend upon subscriptions to the new capital stock. If it is desired to 
 do this a form similar to the following should be used : 
 
 AUTHORITY TO CREDIT DIVIDEND UPON SUBSCRIPTION ¥0R NEW CAPITAL STOCK. 
 
 Know all men by these presents, that , cashier of , is hereby 
 
 authorized and instructed to credit upon the subscription of the undersigned 
 
 to the increased capital stock of the authorized at the stockholders' 
 
 meeting on the sum of dollars ($ ), which the undersigned 
 
 is entitled to receive in accordance with vote of board of directors of said bank 
 
 passed , declaring a dividend of ($ ) per share upon the 
 
 outstanding capital stock of said bank. 
 
 And said is hereby further authorized to indorse for me the check in 
 
 payment of said dividend to be issued in my name by said , and to apply 
 
 the proceeds in payment of said subscription to capital stock. 
 
 [seal.] 
 
 Date 
 
 Witness : 
 
 58. Form of Eesolution of 'Shareholders Providing for Increase 
 
 IN Capital. 
 
 RESOLUTION TO INCREASE CAPITAL STOCK. 
 No. . 
 
 At a meeting of the shareholders of The National Bank of 
 
 , held on , thirty days' notice of the proposed business having 
 
 been given, it was 
 
REDUCTION IN CAPITAL. 
 
 57 
 
 Resolred. That, under tlie provisions of tlie act of May 1, 1886, the capital 
 
 stoclv of this association be increased in the sum of $ , malting the total 
 
 capital $ . 
 
 The foregoing resolution was adopted by the following \ote, representing 
 not less than two-thirds of the capital stock of the association, no director, 
 other officer, or employee having acted as proxy : 
 
 Name of shareholder. 
 
 Residence. 
 
 Name ot proxy. 
 
 Number of 
 • shares. 
 
 Total number of shares voted in favor of the resolution 
 Total number of shares voted against the resolution... 
 Total number of shares represented at the meeting — 
 Total number of shares of capital stock 
 
 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. 
 
 [SEAL OF BANK.] , 
 
 President or Cashier. 
 day of , A. D. 19—. 
 
 Subscribed and sworn to before me, this — 
 
 [SEAL OE NOTARY.] , 
 
 Notary Public. 
 59. Form of Certificate of Increase of Capital. 
 
 , CERTIFICATE OF INCREASE OF CAPITAL STOCK. 
 
 No. 
 
 National 
 
 Ba>-k of 
 
 19—. 
 
 To the Comptroller of the Currency, 
 
 Washington, D. C. 
 
 It is hereby certified that the capital stock of National Bank 
 
 of ■ has been increased pursuant to the provisions of the act of Congress 
 
 — dollars, all of which has been paid 
 
 approved May 1, 1886, in the sum of — 
 
 in cash, not in promissory notes or other like evidences of debt, and that the 
 
 paid-up capital stock of the bank now amounts to dollars. 
 
 [SEAL OF HANK.] 
 
 President or Cashier. 
 
 State of 
 
 County of , ss: 
 
 Subscribed and sworn to before me, this 
 [seal oe sotary.] 
 
 day of ■ 
 
 A. D. 19—. 
 
 Notary Piiblic. 
 
 60. Reduction or Capital. Stock. 
 
 A national banking association may, with the consent of the Comp- 
 troller of the Currency and of the Federal Eeserve Board, and by 
 a vote of shareholders owning not less than two-thirds of the shares, 
 reduce its capital stock to any sum not below the minimum amount 
 required by the national-bank act. 
 
58 REDUCTION IN CAPITAL. 
 
 An association that contemplates reducing its capital stock should 
 advise the Federal reserve bank and the Comptroller of the proposed 
 action before formally submitting the question to the shareholders, 
 and the application for authority to reduce the capital should be 
 accompanied by a letter from the Federal reserve bank of the district 
 giving its views with reference to the proposed reduction. 
 
 On receipt of the application the Comptroller will advise the 
 bank what conditions, if any, it will be necessary to comply with 
 before the reduction can be approved. If the bank has not been 
 examined within a brief period before the time the application is 
 made, or if the last examination did not show it to be in a satisfactory 
 condition, the Comptroller may order a special examination before 
 passing upon the application to reduce the capital stock. 
 
 Any losses which may have been sustained must be charged off, 
 and if the bank has any loans which are excessive or will become 
 excessive by reason of the reduction, they must be reduced to the limit 
 prior thereto, advice of charging off losses and reduction of loans 
 being required. The Comptroller would require the correction of 
 any other conditions that are shown to be unsatisfactory by the ex- 
 aminer's report. 
 
 If the proposition is approved the necessary blanks and instruc- 
 tions will be furnished by the Comptroller. It will be necessary to 
 call a special meeting of the shareholders, giving them notice of the 
 date and object of such meeting, in conformity with the articles of 
 association of the bank, unless said notice is unanimously waived. 
 At this meeting no director, other oflBicer, or employee can legally act 
 as proxy and vote the stock of another shareholder. The following 
 is a form of notice of the meeting which may be used : 
 
 NOTICE OF MEETING OF SHABEHOLDERS. 
 
 You are hereby notified that a special meeting of the stockholders of 
 
 the Bank, will be held at its banking rooms in on , at 
 
 o'clock to consider and vote upon the question of reducing the capital 
 
 stock of the bank from .$ , to $ , and for the transaction of such 
 
 other business as may properly come before the meeting. 
 
 Cashier. 
 The following form of proxy may be used : 
 
 PROXY FOB SPECIAI^ MEETING OF STOCKHOLDERS. 
 
 Know all men by these presents, that I, the undersigned stockholder in 
 
 the , do hereby constitute and appoint , my true and lawful 
 
 attorney with power of substitution for, and In my name to vote upon all 
 
 the stock of said, , standing in my name at the special meeting of the 
 
 stockholders of said bank, to be held at its banking rooms in , on , 
 
 at • o'clock , or at any adjournment thereof, on the question of the 
 
 proposed reduction in capital stock of said national bank, with all the powers 
 
BEDTJCTION IN CAPITAL. 59 
 
 the undersigned should possess if present personally at said meeting, or auy 
 adjournment thereof, hereby revoking all previous proxies. 
 
 In vritness whereof, I hereunto set my hand this day of -, 19 . 
 
 Witness to signature : 
 
 Number of shares 
 
 After the resolution has been adopted by the shareholders, it is 
 suggested that it would be advisable to adjourn the meeting to a 
 fixed date, or to meet at call of the officers of the bank, so that, if 
 upon examination of the resolution it is found to be in any way in- 
 formal, a new resolution can be adopted without the necessity of 
 again giving the 30 days' notice. 
 
 The reduction becomes operative upon the issuance of the Comp- 
 troller's certificate of approval, prior to which the circulation of the 
 bank must be reduced (if excessive) to not more than the amount of 
 the capital after reduction, by a deposit of lawful money with the 
 Treasurer of the United States and the withdrawal of a like amount 
 of bonds. 
 
 Upon transmitting a copy of the resolution adopted by the direc- 
 tors authorizing the withdrawal of bonds it should be accompanied 
 by the Treasurer's duplicate receipts for the securities. If the re- 
 ceipts have been lost or destroyed an affidavit to that effect must be 
 sent with the resolution. 
 
 Each shareholder has the right to participate in the reduction in 
 proportion to the number of shares now held, and receive cash for 
 the stock surrendered, unless, as a condition precedent thereto, the 
 whole or a portion of the amount is to be used to charge off losses, 
 in which event the assets so charged off should be trusteed and the 
 proceeds distributed among the shareholders of record at the time of 
 the reduction ; or, with the consent of all the shareholders, the assets 
 may be realized upon by the bank and the proceeds carried to profit 
 account. 
 
 61. Resolution to Reduce Capitai/ Stock. 
 
 The following is a form for reporting the resolution of share- 
 holders : 
 
 EBSOLTJTION TO KEDUCE CAPITAI, STOCK. 
 No. . 
 
 The National Bank or , 
 
 (Date.) . 
 
 At a meeting of the shareholders of The National Bank of 
 
 , held on , thirty day.s' notice of the proposed business having 
 
 been given, at which shareholders were present representing shares of 
 
 stock of this association, it was 
 
60 
 
 RESTORATION OF IMPAIRED CAPITAL. 
 
 Resolved, That, under the provisions of section 5143, United States Revised 
 Statutes, and of the acts amendatory thereof, the capital stock of this associ- 
 ation be reduced in the sum of .$ , leaving the total capital after said 
 
 reduction $ . 
 
 The foregoing resolution was adopted by the following vote, representing 
 not less than two-thirds of the capital stock of the association, no director, 
 other officer, or employee having acted as proxy. 
 
 Name of shareholder. 
 
 Residence. 
 
 Name of proxy. 
 
 Number of 
 shares. 
 
 Total number of shares voted in favor of the resolution 
 
 Total number of shares voted against the resolution 
 
 Total number of shares represen ted at the meeting 
 
 Total number of shares of capital stock 
 
 I hereby certify that the foregoing 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 . 
 
 [SEAL OF BANK.] , 
 
 Subscribed and sworn to before me this - 
 
 [OFFICIAL SEAL OF OFFICER.] 
 
 President or Cashier. 
 ■ day of , A. D. . 
 
 Notary Public. 
 
 No part of the capital set free by reduction can be carried to sur- 
 plus or to undivided profits without the unanimous consent of the 
 shareholders. When the reduction is made the shareholders should 
 return their old stock certificates. New certificates for the capital as 
 reduced should then be issued. The issuance of fractional shares is 
 not unlawful, but is a matter for determination by the board of di- 
 rectors. 
 
 E.E8T0EATI0N OF IMPAIRED CAPITAL. 
 
 G2. NOTICE TO BANK OF IJIPAIRMENT OF CAPITAL. 
 
 If an examination of a national bank discloses losses exceeding 
 the amount of surplus and undivided profits and thus shows an 
 impairment of capital, the bank is written and advised that the 
 losses should be charged off without delay, the formal notice of 
 impairment of capital being inclosed with instructions to make the 
 deficiency good by assessment of the stock or to place the associa- 
 tion in voluntary liquidation as required by la-w. 
 
 If the directors or shareholders will unconditionally purchase for 
 cash sufficient of the worthless assets to restore the capital, the for- 
 mal notice of impairment will be withdrawn. 
 
 The following is the form of notice sent to the bank : 
 
RKSTOEATION OF IMPAIRED CAPITAL. 61 
 
 notice of impaibment of capital. 
 
 Teeasuby Department, 
 Office of Comptbollee of the Cubeency, 
 
 Washington, , 191 — . 
 
 Whereas the capital stock of The has become impaired to the 
 
 extent of dollars ($ ) ; and 
 
 AVhereas section 5205 of the Revised Statutes of the United States provides 
 that every association whose capital stock shall have become impaired by 
 losses or otherwise, shall, within three months after receiving notice thereof 
 frow the Couiptroller of the Currency, pay the deOciency in the capital stock 
 by Mssessment upon the shareholders pro rata for the amount of capital stock 
 held by each : 
 
 X(i«', therefore, notice is hei-eliy given said association to pay the said defi- 
 ciency in its capital stock in the manner provided by said section of the 
 Revised Statutes ; and if such deficiency shall not be paid, and said bank shall 
 refuse to go into liquidation, as provided by law, for three months after this 
 notice shall have been received Ijy it, a receiver will be appointed to close up 
 the business of the association, according to tlie provisions of section 5234 of 
 ' the Revised Statutes of the United States. 
 
 In testimony whereof, I have hereunto subscribed my name and caused my 
 seal of office to be affixed to these presents, at the Treasury Department, in 
 
 the city of Washington, and District of Columbia, this day of , 
 
 A. D. . 
 
 [SEAl.] 
 
 Comptroller of the Currency. 
 C3. NOTICE TO SHAREHOLDERS OF IMPAIRMENT OF CAPITAL. 
 
 As section 5205, United States Eevised Statutes, requires an as- 
 sessment of the stock to make good an impairment of capital to be 
 collected within three months from the date of the receipt of the 
 Comptroller's notice of such impairment, the directors should give 
 each and eveiy shareholder of the association immediate notice of a 
 meeting to be held in 30 days for the purpose of voting on the 
 question of the payment of the assessment or the placing of the as- 
 sociation in liquidation, in order that they may be in a position at the 
 end of three months from the date of the receipt of this notice, to ad- 
 vertise as provided by section 4 of the act of June 30, 1876, the sale 
 of the stock of any delinquent shareholder to make good his propor- 
 tion of the assessment. 
 
 At the shareholders' meeting no director, other officer or employee, 
 can act as proxy and vote the stock of another stockholder. 
 
 The following is the form of notice to be sent to shareholders : 
 
 notice to shaeeholdebs of i.mpaiement of capital. 
 
 , 19—. 
 
 Sib : You are hereby notified that this association has received notice from the 
 Comptroller of the Currency that its capital stock has become impaired and 
 that under the provisions of section 5205, United States Revised Statutes, this 
 
62 RESTORATION OF IMPAIRED CAPITAL. 
 
 deficiency in the capital stock must be made good by assessment upon the share- 
 holders pro rata to the amount of capital stock held by each, or the bank 
 placed In liquidation. 
 
 You are hereby notified that a meeting of the shareholders of this associa- 
 tion will be held on the day of at for the purpose of consid- 
 ering and voting upon the question of paying the assessment or placing the bank 
 in liquidation. If an assessment Is determined upon, it must be paid in within 
 
 three months from the date of the Comptroller's notice, , 19 — . 
 
 Section 5205, United States Revised Statutes, provides that — 
 " Every association which shall have failed to pay up its capital stock, as 
 required by law, and every association whose capital stock shall have become 
 impaired by losses or otherwise, shall, within three months after receiving 
 notice thereof from the Comptroller of the Currency, pay the deficiency in the 
 capital stock, by assessment upon the shareholders pro rata for the amount 
 of capital stock held by each; and the Treasurer of the United States shall 
 withhold the interest upon all bonds held by him In trust for any such associa- 
 tion, upon notification from the Comptroller of the Currency, until otherwise 
 notified by him. If any such association shall fail to pay up its capital stock, 
 and shall refuse to go into liquidation, as provided by law, for three months 
 after receiving notice from the Comptroller, a receiver may be appointed to 
 close up the business of the association, according to the provisions of section 
 fifty-two hundred and thirty-four." 
 This section was amended by section 4, act of June 30, 1876, as follows : 
 " That the last clause of section fifty-two hundred and five of said statutes is 
 hereby amended by adding to the said section the following proviso : 
 
 " 'AnA 'provided, That if any shareholder or shareholders of such bank shall 
 neglect or refuse, after three months' notice, to pay the asse.ssment, as pro- 
 vided in this section, it shall be the duty of the board of directors to cause a 
 sufficient amount of the capital stock of such shareholder or shareholders to be 
 sold at public auction (after thirty days' notice shall be given by posting such 
 notice of sale in the office of the bank, and by publishing such notice In a news- 
 paper of the city or town In which the bank is located, or In a newspaper pub- 
 lished nearest thereto) to make good the deficiency, and the balance, If any, 
 shall be returned to such delinquent shareholder or shareholders.' " 
 
 Directors of ■ 
 
 64. RESOLUTION TO RESTORE IMPAIRED CAPITAL. 
 
 If the shareholders at the meeting vote an assessment upon the 
 stock for the purpose of restoring said impaired capital a report of 
 the resolution should be sent to the Comptroller. 
 
 The following is the form for such report : 
 
 Office of the Comptroller of the Currency. 
 
 EESOLTITION TO RESTORE IMPAIRED CAPITAL. 
 
 No. . 
 
 At a meeting of the shareholders of the National 
 
 Bank of ^, held on , 19 — , due notice of the proposed business 
 
EESTOEATION OF IMPAIBED CAPITAL. 63 
 
 having been given, at which shareholders were present in person or by proxy, 
 representing shares of the stock of this Association, it was — 
 
 Resolved, That, under the provisions of section 5205, XJ. S. Revised Statutes, 
 
 the deficiency in the capital stock of this association amounting to $ shall 
 
 be made good by assessment upon the shareholders pro rata on the amount of 
 capital stock held by each. 
 
 The resolution was adopted by the following vote : 
 
 * No director, other officer, or employee of the association can legally vote the st oclc oJ any other share- 
 holder. 
 
 Number of shares voted in favor of the resolution, in person 
 
 Number of shares voted in favor of the resolution, by proxy 
 
 Total - 
 
 Number of shares voted against the resolution, in person 
 
 Number of shares voted against the resolution, by proxy 
 
 Total , 
 
 Total number of shares represented at the meeting 
 
 I hereby certify that the above is a true and correct report of the resolution 
 
 adopted and vote at a meeting of the shareholders of this bank held on . 
 
 [Seal of bank.] , 
 
 President or Cashier. 
 
 Subscribed and sworn to before me, this day of , A. D. — . 
 
 [Seal of notary.] , 
 
 Notary Puilic. 
 
 65. CERTIFICATE OF PAYMENT OF ASSESSMENT. 
 
 When the amount of the assessment has been entirely paid in it 
 should be certified to the Comptroller on the following form : 
 
 National Bank of , 
 
 , , 191-. 
 
 To the CoMPTKOLiEK or the Cueeency, 
 
 Washington, D. C. 
 
 It Is hereby certified that the sum of dollars, necessary to make good 
 
 an impairment of the capital stock of The , notice of which, 
 
 dated , 191-, was given by the Comptroller of the Currency under the 
 
 provisions of section 5205, United States Revised Statutes, has been fully paid 
 
 in cash, and that the paid-up capital stock of said bank noAV amounts to 
 
 dollars. 
 
 [Seal of Bank.] > 
 
 Cashier. 
 
64 EXTENSION OF COEPOBATE EXISTENCE. 
 
 State of , 
 
 County of , ss. 
 
 I, , cashier of " The National Bank of 
 
 ," in the State of , do solemnly swear that the foregoing certificate 
 
 by me subscribed is true. 
 
 Subscribed and sworn to before me this day of , 191-. 
 
 [Official seal of officer.] 
 
 Treasuky Dbpaetment, 
 
 Office of Comptroller of the Currency, 
 
 Form 2203. — 12-4-13--300. 
 
 6G. SALE OF STOCK OF DELINQUENT SHAREHOLDERS. 
 
 Section 5205, United States Kevised Statutes, provides that if any 
 shareholder or shareholders of such bank shall neglect or refuse, after 
 three months' notice, to pay the assessment, as provided in that sec- 
 tion, it shall be the duty of the board of directors to cause a sufficient 
 amount of the capital stock of such shareholder or shareholders to be 
 sold at public auction (after 30 days' notice shall be given by posting 
 such notice of sale in the office of the bank, and by publishing such 
 notice in a newspaper of the cit;y or town in which the bank is located, 
 or in a newspaper published nearest thereto), to make good the 
 deficiency, and the balance, if any, shall be returned to such delin- 
 quent shareholder or shareholders. 
 
 67. ExnsNSioN of Corporate Existence. 
 
 The act of Congress approved July 12, 1882, authorizes the exten- 
 sion of the corporate existence of national banking associations 
 whose periods of succession are about to expire. Section 5136 pro- 
 vides that all associations organized under the national-bank act 
 shall have succession for 20 years from the date of the execution of 
 their organization certificates. 
 
 The officers of a national bank can therefore ascertain the date of 
 the expiration of the corporate existence of the association from the 
 date of the last acknowledgment in the organization certificate. If 
 the certificate has been lost or the date is uncertain, information can 
 be obtained upon application to the Comptroller. Under the act of 
 July 12, 1882, shareholders owning at least two-thirds of capital 
 stock are authorized to give their written consent to extension of 
 corporate exis-tence at any time within two years prior to the expi- 
 ration of existing charter, and under the regulations of the Comp- 
 troller's office the necessary blanks and instructions will be sent a 
 sufficient time in advance to enable them to do so. While no meet- 
 ing of shareholders is necessary, the law only requiring the written 
 consent of the owners of two-thirds of the capital stock, there is no 
 legal objecti'on to the holding of a meeting of shareholders for the 
 purpose of considering the propriety of extending charter prior to 
 
EXTENSION OE COBPOBATB EXISTEHCE. 
 
 65 
 
 <he signing of the amendment. The formal amendment, certificate 
 relative thereto, and request for approval to be executed and filed with 
 the Comptroller are as follows: 
 
 AMENDMENT OF ARTICLES OF ASSOCIATION OF NATIONAL BANK. 
 
 In accordance with and in pursuance of the provisions of " An act to enable 
 national banking associations to extend their corporate existence, and for 
 other purposes," approved July 12, 1882, we, the undersigned, shareholders of 
 
 " The '■ ," located at , In the county of and State of 
 
 , owning the number of shares of the capital stock of said association 
 
 set opposite our respective names, aggregating not less than two-thirds of the 
 
 stock of said association, do hereby consent and agree that the article 
 
 of the articles of association of said national banking association be, and is 
 hereby, amended to read as follows : 
 
 " This association shall continue until close of business on , 
 
 19 — , unless sooner placed in voluntary liquidation by the act of its share- 
 holders owning at least two-thirds of its stock, or otherwise dissolved by 
 authority of law." 
 
 In witness whereof we, the undersigned, have hereto set our hands. 
 
 Date of 
 signing. 
 
 Signature of share- 
 holder. 
 
 Address. 
 
 Signature of proxy, 
 
 Number of 
 shares. 
 
 CEBTIFICATE. 
 
 To the COMPTEOIXEB OF THE CUEEENCT, 
 
 WasMngton, D. C. 
 
 Sir: In pursuance of the provisions of "An act to enable national banking 
 associations to extend their corporate existence, ' and for other purposes," ap- 
 proved July 12, 1882, I hereby certify that shareholders owning not less than 
 two-thirds of the capital stock of " The — " have consented in writ- 
 ing to the extension of the charter of said association ; that the signatures to 
 the attached amendment of the articles of association, executed in duplicate, 
 are the true and correct signatures of said shareholders, or of their lawfully 
 appointed attorneys, and that one of the instruments, in all respects like the 
 other, is on flle in the bank. 
 
 The foregoing certificate is made under seal of the association In accordance 
 with a resolution of the board of directors adopted at a meeting held on the 
 day of , 19 — , in which the president or cashier was also au- 
 thorized to make an application for the approval of the amended articles of 
 association, a copy of which resolution has been recorded on the minute book 
 of the bank. 
 
 [SEAL OF BANK.] , 
 
 President or Cashier. 
 (The above certificate should not be made prior to date on which the amend- 
 ment is last signed.) 
 115635—19 5 
 
66 EXTENSION OF CORPORATE EXISTENCE. 
 
 REQUEST FOB APPBOVAL. 
 
 The Comptroller of the Currency is hereby requested to approve the foregoing 
 amendment of the articles of association of said bank, extending its corporate 
 existence for twenty years, pursuant to the act of Congress entitled "An act to 
 enable national banking associations to extend their corporate existence, and 
 for other purposes," approved July 12, 1882, 
 
 President or Cashier. 
 
 PBOXY FOE USE IN EXTENDING COEPORATE EXISTENCE OF NATIONAL BANKS. 
 
 Know all men by these presents, that I, , of . hereby 
 
 constitute and appoint irrevocably my true and lawful attorney, 
 
 for me and in my name and stead to sign all necessary papers in connection 
 
 with the extension of the corporate existence of the , under the 
 
 act of Congress approved July 12, 1882, or any amendment of said act, and I 
 
 hereby consent that the article of the articles of association of the 
 
 — be so amended as to read as follows : 
 
 " This association shall continue until close of business on . 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." 
 
 I further grant unto my said attorney full power and authority to act in and 
 concerning the premises as fully and effectually as I might do if personally 
 present. 
 
 In witness whereof I have hereunto set my hand this day of , 
 
 in the year one thousand nine hundred and . 
 
 Signed in the presence of two witnesses: 
 
 AUTHOBITY OF BEPEESENTATIVE OF OTHEE COEPOBATION CONSENTING TO EXTENSION 
 OF COEPOEATE EXISTENCE OF NATIONAL BANK. 
 
 At a meeting of the of the of , held on the day of 
 
 , it was voted that be, and ho is hereby, appointed irrev- 
 
 ocably as its attorney, with power of substitution, to consent to and sign, in 
 
 its behalf, the amendment of the article of the articles of association of 
 
 The National Bank , said amendment reading as follows : 
 
 " This association shall continue until close of business on . unless 
 
 sooner placed in voluntary liquidation by the act of its shareholders owning 
 at least two-thirds of its stock, or othervnse dissolved by authority of law." 
 
 A true copy from the records. 
 
 Attest: . [Affix seal.] 
 
 EXTENSION OF CHAETEB — OEDEE FOB PLATES AND OIBCULATION. 
 
 Charter No. . 
 
 National Bank of , 
 
 , 19—. 
 
 To the COMPTEOLLEE OF THE CUEEENCT. 
 
 SiB : As the corporate existence of this bank Is to be legally extended for 20 
 years, you are requested to have new plates engraved, the cost to be paid upoQ 
 demand, and circulating notes printed therefrom, as follows: 
 
EXTENSION OP CORPOEATB EXISTENCE. 
 
 67 
 
 No. of sheets ordered. 
 
 DenominationS'On sheets. 
 
 Value per 
 sheet. 
 
 Amount of order. 
 
 SI, SI, $1,51 
 
 $2,S2,$2,$2 
 
 S5, S5,S5, S5 
 
 $10, $10, $10, $10.. 
 $10, $10, $10, $20.. 
 $50, $50, $50, SIOO. 
 
 Total. 
 
 $4 
 8 
 20 
 40 
 50 
 250 
 
 Respectfully, 
 
 Cashier. 
 
 Note. — The act of July 12, 1882, requires that circulating notes issued to banks subse- 
 quent to extension of corporate' existence shall bear such devices as shall make them 
 readily distinguishable from prior issues. 
 
 The act of October 5, 1917, provides for the issuance of $1 and $2 notes, repealing 
 the act of June 3, 1864, which prohibited national banks from b.eing furnished with 
 notes of less denomination than $5 after the resumption of specie payments. 
 
 Circulation may be ordered from any one or more of the plates listed above, but no 
 bank shall receive or have in circulation at any one time more than $25,000 in notes of 
 the denominations of $1 and $2. 
 
 The restriction as to the Issue of $5 notes to one-third of a bank's circulation has been 
 repealed, and notes of that denomination may be Issued In any amount desired not In 
 excess of the capital stock against the deposit of bonds. 
 
 It will ordinarily require about 40 days to engrave the plate and to print circulating 
 notes, but the order will not be acted upon until either bonds are deposited for circula- 
 tion or a draft in payment of cost of engraving is received by the Comptroller. 
 
 Bank plates cost $130 each for originals and $120 each for duplicates when the 
 originals are worn out. 
 
 This order should accompany the amendment providing for the extension of 
 the corporate existence of the association. 
 
 The following instructions should be strictly observed : The date on 
 which each shareholder or his attorney signs the amendment should 
 be entered in the column for that purpose. An attorney representing 
 several shareholders need sign but once on a page, if the names of 
 shareholders are bracketed. Residence and number of shares of each 
 shareholder consenting to the extension must be given. 
 
 When the owners of at least two-thirds of the stock have signed the 
 amendment, in person or by proxy, a meeting of directors should be 
 held and a resolution adopted directing the president or cashier to 
 make the necessary certification to the Comptroller of the Currency 
 and request the approval of the amendment as provided by law. The 
 amendment, with appended certificate, and request for approval 
 should be transmitted to the Comptroller at least two months prior to 
 the expiration of the corporate existence of the bank in order to allow 
 sufficient time to cause the special examination to be made as required 
 by law. If any shares of stock standing in the names of administra- 
 tors, executors, trustees, or guardians are represented, certified copies 
 of the legal appointment of such administrators, executors, trustees, 
 or guardians should be furnished to the bank. In order that stock 
 held by an assignee may be represented, the shares must have been 
 
68 EXTENSION OF CORPORATE EXISTENCE. 
 
 formally transferred to him on the books of the bank. If the amend- 
 ment is signed by attorneys acting for shareholders or by an officer 
 of another corporation, properly executed powers of attomej' or 
 other authority should be required and retained for the files of the 
 bank. 
 
 Subsequent to the receipt of extension papers in due form, the 
 Comptroller will order the special examination required by law, the 
 expense of which must be paid by the bank. If it then appears to 
 the Comptroller that the bank is in a satisfactory condition he will, 
 at the date of expiration of existing charter, issue the certificate of 
 extension. 
 
 The law requires that circulating notes issued to the bank after the 
 date at which the period of succession begins shall be of different 
 devices from thpse issued before. This necessitates the procuring of 
 new plates, which are prepared at the expense of the bank. A blank 
 to enable a bank to order the engraving of plates and the printing of 
 new circulars will be furnished. The order should be transmitted 
 with the amendment. 
 
 N"o transfer of bonds is necessary, as the extended association is, in 
 all respects, the same as before extension. The new circulating notes 
 will be issued as the old issues are received for redemption. 
 
 68. Withdrawal of Dissenting Shareholders. 
 
 Some shareholders may not assent to the extension, and may wish 
 to withdraw from the association. Section 5 of the act of July 12, 
 1882, provides what may be done in such cases, as follows : 
 
 That when any national banking association has amended its articles of asso- 
 ciation as provided in this act, and the Comptroller has granted his certificate 
 of approval, any shareholder not assenting to such amendment may give notice 
 in writing to the directors, within thirty days from the date of the certificate of 
 approval, of his desire to withdraw from said association, in which case he shall 
 be entitled to receive from said banking association the value of the shares so 
 held by him, to be ascertained by an appraisal made by a committee of three 
 persons, one to be selected by such shareholder, one by the directors, and the 
 third by the first two ; and in case the value so fixed shall not be satisfactory to 
 any such shareholder he may appeal to the Comptroller of the Currency, who 
 shall cause a reappraisal to be made, which shall be final and binding; and if 
 said reappraisal shall exceed the value fixed by said committee, the bank shall 
 pay the expenses of said reappraisal, and otherwise the appellant shall pay said 
 expenses ; and the value so ascertained and determined shall be deemed to be a 
 debt due, and be forthwith paid, to said shareholder, from said bank ; and the 
 shares so surrendered and appraised shall, after due notice, be sold at public 
 sale, within thirty days after the final appraisal provided in this section. 
 
 The United States Circuit Court of Appeals in the case of J. W. 
 Conway v. First National Bank of Rome, Ga. (decided on Mar. 1, 
 1919) held that the notice of a nonassenting shareholder of a national 
 
EEEXTENSION OF COEPORATE EXISTENCE. 
 
 69 
 
 banking association amending its articles of association to extend its 
 period of succession, provided for in section 5 of the act of July 12, 
 1882, must be given to the directors after the Comptroller of the 
 Currency has certified his approval of the amended articles and within 
 30 days of the date of such approval. The court, after stating that 
 notice must be given to the directors, held that the president could 
 neither receive nor waive the notice for them, and that it would not 
 be competent for the directors to vest the president with authority to 
 waive the statutory requirements of notice in advance. 
 
 69. Reextension of Coeporate Existence. 
 
 The act of Congress approved April 12, 1902, provides that the 
 Comptroller of the Currency may, in the manner provided by and 
 under the conditions and limitations of the act of July 12, 1882, 
 extend for a further period of 20 years the charter of any national 
 banking association extended under said act which shall desire to 
 continue its existence after the expiration of its charter. The form 
 of amendment and certificate follows : 
 
 EEEXTENSION OF CHARTER — AMENDMENT OF ARTICLES OF ASSOCIATION OF 
 
 NATIONAL BANK. 
 
 In accordance with and in pursuance of tlie provisions of "An act to enable 
 national banking associations to extend their corporate existence, and for other 
 purposes," approved July 12, 1882, and the amendment approved April 12, 1902, 
 
 we, the undersigned, shareholders of " The ," located at , 
 
 in the county of and State of , ovifning the number of shares of the 
 
 capital stock of said association set opposite our respective names, aggregating 
 not less than two-thirds of the stock of said association, do hereby consent and 
 
 agree that the article of the articles of association of said national 
 
 banking association be, and is hereby, amended to read as follows : 
 
 " This association shaU continue until close of business on , 19 — , 
 
 unless sooner placed in voluntary liquidation by the act of its shareholders own- 
 ing at least two-thirds of its stock, or otherwise dissolved by authority of law." 
 In witness whereof we, the undersigned, have hereto set our hands. 
 
 Date ot 
 signing. 
 
 Signature of 
 shareholder. 
 
 Address. 
 
 Signature of proxy. 
 
 Number of 
 shares. 
 
 ,19—. 
 
 To THE Comptroller of the Currenct, 
 
 Washington, D. C. 
 Sib: In pursuance of the provisions of "An act to enable national banking 
 associations to extend their corporate existence, and for other purposes," ap- 
 proved July 12, 1882, and the amendment approved April 12, 1902, I hereby 
 certify that shareholders owning not less than two-thirds of the capital stoclc 
 
70 CHANGE OF NAME AND LOCATION. 
 
 of " The '■ ," have consented in writing to the reextension of the 
 
 charter of said association; that the signatures to the attached amendment 
 of the articles of association, executed in duplicate, are the true and correct 
 signatures of said shareholders, or of their lawfully appointed attorneys, and_ 
 that one of the instruments, in all respects like the other, is on file in the 
 bank. 
 
 The foregoing certificate is made under seal of the association in accordance 
 with a resolution of the board of directors adopted at a meeting held on the 
 day of , 19 — , in which the president, or cashier, was also author- 
 ized to make an application for the approval of the amended articles of associa- 
 tion, a copy of which resolution has been recorded on the minute book of the 
 bank. 
 
 [seal'of bank.] , 
 
 President or Cashier. 
 
 (The above certificate should not be made prior to date on which the amend- 
 ment is last signed.) 
 
 The Comptroller of the Currency is hereby requested to approve the foregoing 
 amendment of the articles of association of said bank, reextending its corporate 
 existence for twenty years, pursuant to the act of Congress entitled "An act 
 to provide for the extension of the charters of national banks," approved April 
 12, 1902. 
 
 [SEAL OF BANK.] , 
 
 President or Cashier. 
 
 The other forms are similar to those used in connection with the 
 original or first extension of charter. 
 
 70. Change of Name or of Name and Location. 
 
 A national banliing association may, with the consent of the Comp- 
 troller of the Currency and by the vote of shareholders owning at 
 least two-thirds of the stock of the association, change its name or 
 place where its operations are carried on to any other locality in the 
 same State not more than 30 miles distant. 
 
 When an association desires to change its title or location, the 
 proposition should be submitted to the Comptroller of the Currency 
 for consideration; and, when approved, a meeting of shareholders 
 called that the required vote may be obtained. 
 
 Due notice of the meeting must be given and a certified copy of the 
 resolution, under seal of the bank, sent to the Comptroller of the 
 Currency, accompanied by a copy of the resolution of the board of 
 directors authorizing the Treasurer of the United States to assign to 
 the bank under its new title any bonds held by him as security for 
 circulation, together with the Treasurer's duplicate receipts for the 
 securities. An order for plate or plates and circulation to conform 
 to change of title, etc., should also be submitted. 
 
 No change of name or location is valid until the Comptroller's cer- 
 tificate of approval is issued. (Act May 1, 1886.) 
 
 The removal of a bank to a different street location but within the 
 limits of the place where it was organized does not require any action 
 
AMENDHKNTS TO AETICLES. 71 
 
 by the shareholders or the approval of the Co'mptroUer, it being en- 
 tirely within the control of the board of directors unless the specific 
 location is fixed by the articles of association, in which event action 
 by the shareholders is necessary. When the " place " in which a bank 
 was organized has been annexed to another municipality the removal 
 of the bank beyond the limits of the place in which it was organized 
 into the municipality to which the former place has been annexed 
 requires the vote of shareholders owning not less than two-thirds of 
 the stock of the association and the approval of the Comptroller. 
 This approval will not be given when the capital of a bank is less 
 than that required by law for the organization of an association in 
 the municipality into which it is proposed to move. 
 
 The position taken by the Comptroller in these cases is sustained 
 by the decision of the United States Circuit Court of Appeals in the 
 case of Murray v. First National Bank of Capitol Hill, Okla. (212 
 Fed. Eep., 140.) 
 
 71. Amendments to Akticles. 
 
 Section 5139 of the Kevised Statutes provides that no change shall 
 be made in the articles of association of a national bank by which 
 the rights, remedies, or security of the existing creditors of the asso- 
 ciation shall be impaired; which, by implication, authorizes amend- 
 ments not contravening the rights of creditors. The nationail bank- 
 ing law specifically provides for amendments of the articles of asso- 
 ciation changing corporate title, location of bank, increasing and 
 reducing capital stock, consolidation, and extension of corporate exist- 
 ence. Amendment of the last-named character requires the written 
 consent of shareholders owning two-thirds of the stock of an associa- 
 tion, but the other changes require authorization by a vote of not less 
 than two-thirds of the stock of the bank at a meeting of shareholders 
 called for the purpose. 
 
 Ordinarily a provision is written into the articles of association of 
 national banks authorizing amendment, in any respect not conflicting 
 with law, by a majority stock vote. Where this provision exists the 
 right is recognized to amend the articles by such a vote, relating 
 to the number of directors, the time of holding annual elections (in 
 the month of January) , but under the ruling of the Solicitor of the 
 Treasury the shareholders have no authority to amend the articles 
 of association to provide that less than a majority of the directors 
 shall constitute a quorum. 
 
 In the interest of banks concerned, and in accordance with the 
 rulings of the office, a proposition to amend the articles of association 
 of a bank in any particular should be submitted to the Comptroller 
 of the Currency, for approval and specific instructions, in advance of 
 action by stockholders. 
 
72 meetings of shareholders. 
 
 72. Meetings of Shareholders. 
 
 There is nothing in the national bank act regarding notice of the 
 annual meeting of the shareholders of national bankiag associations 
 when held at the time specified in the articles of association. If the 
 articles of association and by-laws are silent the usual notice of the 
 meeting should be given, shareholders being entitled, no doubt, to 
 advice of the meeting notwithstanding the fact that the time is fixed 
 by the articles. 
 
 For an annual meeting, at which business of an unusual or extraor- 
 dinary character, such as the amendment of articles of association, 
 is to be considered, and for all special meetings of shareholders, notice 
 should be given as required by the articles of association of the bank. 
 Unless provision is made therein, 30 days' notice of meeting and 
 business to be transacted should be given. If for any cause the elec- 
 tion of directors is not made at the time appointed and the annual 
 meeting is not regularly adjourned, an election must be held on a 
 subsequent day designated by the directors, 30 days' notice of meeting 
 to be given in a newspaper published in the city, town, or county in 
 which the association is located, and if no newspaper is published in 
 such city, town, or county, such notice shall be published in a news- 
 paper published nearest thereto. (Sec. 5149, U. S. E. S.) 
 
 In all elections of directors, and in deciding all questions at meet- 
 ings of shareholders, each shareholder shall be entitled to one vote on 
 each share of stock held by him. Under section 5144, shareholders 
 may vote by proxies duly authorized in writing, but no officer, clerk, 
 teller, or bookkeeper of the association can act as proxy, and no share- 
 holder whose liability is past due and unpaid shall be allowed to vote. 
 The Comptroller, supported by certain decisions of the courts, holds 
 that " a director is an officer within every sense and meaning of the 
 word officer," and, furthermore, that the prohibition with regard to 
 the voting of stock by a shareholder who is liable to the bank merely 
 applies to subscriptions to capital stock. 
 
 Cumulative voting at meetings of shareholders is not authorized by 
 the national-bank act. For instance, if a shareholder is the owner- of 
 10 shares of stock and 7 directors are to be elected, he can not cast 70 
 votes in favor of any one person as a director, but is at liberty only 
 to cast 10 votes for each of the 7 candidates. 
 
 FOKM OF PKOXY. 
 
 Know all men by these presents that I, . do hereby constitute 
 
 and appoint attorney and agent for me, and in my name, place, 
 
 and stead to vote as ray proxy at any and all elections of directors of ■ 
 
 according to the number of votes I should be entitled to vote if there 
 
 personally present. 
 
MEETINGS OF SHAREHOLDERS. 73 
 
 In witness whereof I have hereunto set my hand this day of , 
 
 one thousand nine hundred and . 
 
 Signed in presence of — 
 
 A proxy, however, while it must be in writing, need not be in any 
 particular form, nor need it be acknowledged or proved, but it must 
 be in such shape as reasonably to satisfy the inspectors of election as 
 to its genuineness and validity, and to this end the corporate officers 
 may insist upon reasonable evidence of the regularity and the genu- 
 ineness of the proxy before allowing it to be voted. The proxy 
 should be dated. 
 
 When certificates of proxy are destroyed after use parol evidence 
 is admissible to prove their former existence and sufficiency. A 
 stockholder who signs a form of proxy in blank and hands it over 
 to another to be used in the ordinary way impliedly authorizes that 
 other to fill up the blank with his own name. Although a proxy con- 
 tains blanks as to the hour and day of the meeting, yet this may be 
 filled in by the party using the proxy. 
 
 The ordinary proxy being intended for an election merely, does not 
 enable the proxy to vote to increase the capital stock of the bank, to 
 consolidate it with another national bank, or to place it in liquidation, 
 unless the proxy itself in general or special terms gives the proxy 
 the power to vote on such question. The proxy can not vote when the 
 owner of the stock is present and votes. A proxy is always revocable, 
 even when by its terms it is made " irrevocable," and the law allows 
 a stockholder to revoke it. Frequently an attempt is made to per- 
 manently unite the voting power of several stockholders and thus 
 control the corporation by giving irrevocable proxies to specified per- 
 sons, but the common law allows a stockholder to revoke a proxy 
 at any time. 
 
 The date of the annual meeting of the shareholders of a national 
 bank is fixed in the articles of association, and those stockholders 
 who attend this meeting may transact the business of that meeting, 
 that is, elect directors, although stockholders representing a ma- 
 jority in interest are not present. Where the articles provide for a 
 scale, the shareholders should first adopt a resolution fixing the 
 number to be elected under the scale, and then proceed with the 
 election. Only stockholders will be elected directors who receive a - 
 majority of all the votes cast at the election. Thus, if the articles 
 should provide for a scale of from five to seven, and seven stock- 
 holders should receive votes for director, but only five receive a vote 
 of the majority of the stock represented, these five alone would be 
 elected. If any questions arise as to the validity of proxies, or any 
 other questions relative to the election of directors, the matter would 
 
74 REPORTS TO COMPTROLLER. 
 
 have to be settled in the courts, as the Comptroller has no power to 
 pass thereon. 
 
 At all meetings of shareholders, where the articles are amended, 
 a majority vote of all the stock of the bank must be cast for the 
 amendment, except where a larger proportion of the stock is required 
 by law. A resolution providing for an increase or reduction of 
 capital, consolidation of the bank with another national bank, or 
 liquidation of the association requires the affirmative vote of two- 
 thirds of the stock of the bank. 
 
 Reports to Comptroller. 
 
 73. LISTS or SHAREHOLDERS. 
 
 (Sec. 5210, U. S. R. S.) The president and cashier of every national 
 banking association shall cause to be kept at all times a full and 
 correct list of the names and residences of all the shareholders in the 
 association, and the number of shares held by each, in the office where 
 its business is transacted. Such list shall be subject to the inspection 
 of all the shareholders and creditors of the association, and the 
 officers authorized to assess taxes under State authority, during 
 business hours of each day in which business may be legally trans- 
 acted. A copy of such list, on the first Monday of July of each year, 
 verified by the oath of such president or cashier, shall be transmitted 
 to the Comptroller of the Currency. 
 
 7 4. REPORT or CONDITION. 
 
 Sec. 5211, U. S. R. S. [as amended 1877]. Every association shall 
 make to the Comptroller of the Currency not less than five reports 
 during each year, according to the form which may be prescribed 
 by him, verified by the oath or affirmation of the president or cashier 
 of such association, and attested by the signature of at least three of 
 the directors. Each such report shall exhibit, in detail and under 
 appropriate heads, the resources and liabilities of the association at 
 the close of business on any past day by him specified ; and shall be 
 transmitted to the comptroller within five days after the receipt of 
 a request or requisition therefor from him, and in the same form in 
 which it is made to the comptroller shall be published in a newspaper 
 published in the place where such association is established, or if 
 there is no newspaper in the place, then in the one published nearest 
 thereto in the same county, at the expense of the association; and 
 such proof of publication shall be furnished as may be required by the 
 comptroller. The comptroller shall also have power to call for 
 special reports from any particular association whenever in his judg- 
 ment the same are necessary in order to a full and complete knowl- 
 edge of its condition. 
 
REPORTS TO COMPTROLLER. 75 
 
 7 5. REPORT OF DIVIDENDS. 
 
 (Sec. 5212, U. S. R. S.) In addition to the reports required by the 
 preceding section, each association shall report to the Comptroller of 
 the Currency, within ten days after declaring any dividend, the 
 amount of such dividend, and the amount of net earnings in excess 
 of such dividend. Such reports shall be attested by the oath of the 
 president or cashier of the association. 
 
 7fi. VERIFICATION or REPORTS (ACT FEBRUARY 26, 1881). 
 
 That the oath or affirmation required by section fifty-two hun- 
 dred and eleven of the Revised Statutes, verifying the returns made 
 by national banks to the Comptroller of the Currency, when taken 
 before a notary public properly authorized and commissioned by the 
 State in which such notary resides and the bank is located, or any 
 other officer having an official seal, authorized in such State to ad- 
 minister oaths, shall be a sufficient verification as contemplated by 
 said section fifty-two hundred and eleven : Provided, That the officer 
 administering the oath is not an officer of the bank. 
 
 7 7. PENALTY FOR FAILURE TO MAKE REPORTS. 
 
 (Sec. 5213, U. S. R. S.) Every association which fails to make and 
 transmit any report required under either of the two preceding sec- 
 tions shall be subject to a penalty of one hundred dollars for each 
 day after the periods, respectively, therein mentioned, -that it delays 
 to make and transmit its report. Whenever any association delays 
 or refuses to pay the penalty herein imposed, after it has been assessed 
 by the Comptroller of the Currency, the amount thereof may be re- 
 tained by the Treasurer of the United States, upon the order of the 
 Comptroller of the Currency, out of the interest, as it may become 
 due to the association, on the bonds deposited with him to secure 
 circulation. All sums of money collected for penalties under this 
 section shall be paid into the Treasury of the United States. 
 
CHAPTER 6. 
 
 POWERS AND LIMITATIONS— GENERAL STATUTORY 
 POWERS AND LIMITATIONS. 
 
 Note. — See also chapter 3, Bonds and circulation; chapter 8, Branch banks; 
 chapter 9, Trust and savings departments ; chapter 10, Authority for banks to 
 act as insurance agent or as broker and agent in making and procuring loans 
 on real estate; and chapter 32. deposits and rediscounts with Federal Reserve 
 Banks. 
 
 SOa. 
 
 81 
 
 78. Corporate powers of associations. 
 
 79. Loans on improved real estate. 
 
 80. Acceptance of drafts or bills of 
 
 exchange. 
 
 Acceptance of drafts or bills of 
 exchange upon national banks 
 b.v banks or bankers in. foreign 
 countries or dependencies of the 
 United States. 
 Power to hold real property. 
 82. National banking associations to be 
 
 depositaries of public moneys. 
 8.3. Reserve requirements under sec- 
 tion 19 of Federal Reserve act as 
 .amended — Section 20 of Federal 
 Reserve act and act April 24, 
 1917. 
 
 84. Rate of interest vehich may be 
 
 charged. 
 
 85. Penalty for usury— Jurisdiction of 
 
 suits by or against national 
 banks. 
 
 86. Declaration of dividends. 
 
 87. 
 
 97. 
 
 Liabilities to an association which 
 may be incurred by any one per- 
 son, company, etc. 
 
 Loans on or purchase of their own 
 stock forbidden. 
 
 Purchase of stock in other corpo- 
 rations. 
 
 Banks indebtedness. 
 
 Use of circulating notes. 
 
 Withdrawal of capital — Unearned 
 dividends prohibited. 
 
 Issue of uncurrent notes. 
 
 United States notes not to be held 
 as collateral. 
 
 Falsely certifying checks. 
 
 Penalty for embezzlement, abstrac- 
 tion, willful misapplication, false 
 entries, etc. 
 
 Political contributions. 
 
 Penalty for violation of the na- 
 tional-bank act — Forfeiture of 
 charter — Individual liability of 
 directors. 
 
 78. CoRPOBATE Powers of Association. 
 
 (Sec. 5136, U. S. E. S.) Upon duly making and filing articles 
 ■ji association and an organization certificate, the association shall be- 
 come, as from the date of the execution of its organization certificate, 
 a body corporate, and as such, and in the name designated in the or- 
 ganization certificate, it shall have power — 
 
 First. To adopt and use a corporate seal. 
 
 Second. To have succession for the period of twenty years from its 
 organization, unless it is sooner dissolved according to the provisions 
 of its articles of association, or by the act of its sliareholders owning 
 two-thirds of its stock, or unless its franchise becomes forfeited by 
 some violation of law. 
 
 Third. To make contracts. 
 76 
 
POWERS AND LIMITATIONS. 77 
 
 Fourth. To sue and be sued, complain and defend, in any court of 
 law and equity, as fully as natural persons. 
 
 Fifth. To elect or appoint directors, and by its board of directors 
 to appoint a president, vice president, cashier, and other officers, de- 
 fine their duties, require bonds of them and fix the penalty thereof, 
 dismiss such officers or any of them at pleasure, and appoint others 
 to fill their places. 
 
 Sixth. To prescribe, by its board of directors, by-laws not incon- 
 sistent with law, regulating the manner in which its stock shall be 
 transferred, its directors elected or appointed, its officers apppinted, 
 its property transferred, its general business conducted, and the 
 privileges granted to it by law exercised and enjoyed. 
 
 Seventh. To exercise by its board of directors, or duly authorized 
 officers or agents, subject to law, all such incidental powers as shall 
 be necessary to carry on the business of banking ; by discounting and 
 negotiating promissory notes, drafts, bills of exchange, and other evi- 
 dences of debt; by receiving deposits; by buying and selling ex- 
 change, coin, and bullion; by loaning money on personal security; 
 and by obtaining, issuing, and circulating notes according to the pro- 
 visions of this Title. 
 
 But no association shall transact any business except such as is in- 
 cidental and necessarily preliminary to its organization, until it has 
 been authorized by the Comptroller of the Currency to commence the 
 business of banking. 
 
 79. Loans on Improved Keal Estate. 
 
 Sec. 24, Federal Reserve Act. — Any national banking association 
 not situated in a central reserve city may make loans secured by 
 improved and unencumbered farm land situated within its Federal 
 reserve district or within a radius of one hundred 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 one hundred 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 fifty per centum 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 twenty-five per centum 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. 
 
78 POWERS AND LIMITATI02SrS. 
 
 The Federal Eeserve Board shall have power from time to timfc 
 to add to the list of cities in which national banks shall not be per- 
 mitted to make loans secured upon real estate in the manner described 
 in this section. 
 
 80. Acceptance of Drafts or Bills of Exchange. 
 
 Sec. 13 of Federal Reserve Act as amended 1915, 1916, and 
 1917. — Any member bank may accept drafts or bills of exchange 
 drawn upon it having not more than six months' sight to run, exclu- 
 sive of days of grace, which grow out of transactions involving the im- 
 portation or exportation of goods ; or which grow out of transactions 
 involving the domestic shipment of goods provided shipping docu- 
 ments conveying or securing title are attached at the time of accept- 
 ance ; or which are secured at the time of acceptance by a warehouse 
 receipt or other such document conveying or securing title covering 
 readily marketable staples. No member bank shall accept, whether 
 in a foreign or domestic transaction, for any one person, company, 
 firm, or corporation to an amount equal at any time in the aggregate 
 to more than ten per centum of its paid-up and unimpaired capital 
 stock and surplus, unless the bank is secured either by attached docu- 
 ments or by some other actual security growing out of the same 
 transaction as the acceptance ; and no bank shall accept such bills to 
 an amount equal at any time in the aggregate to more than one-half 
 of its paid-up and unimpaired capital stock and surplus: Provided, 
 hoivever, That the Federal Eeserve Board, under such general regu- 
 lations as it may prescribe, which shall apply to all banks alike re- 
 gardless of the amount of capital stock and surplus, may authorize 
 any member bank to accept such bills to an amounut not exceeding 
 at any time in the aggregate one hundred per centum of its paid-up 
 and unimpaired capital stock and surplus: Provided, further. That 
 the aggregate of acceptances growing out of domestic transactions 
 shall in no event exceed fifty per centum of such capital stock and 
 surplus. 
 
 80a. Acceptance of Drafts or Bills of Exchange Drawn Upon 
 National Banks by Banks or Bankers in Foreign Cottntkies or 
 Dependencies of the United States — Act Septejibee 7, 1916. 
 
 Any member bank may accept drafts or bills of exchange drawn 
 upon it having not more than three months' sight to run, exclusive 
 of days of grace, drawn under regulations to be prescribed by the 
 Federal Reserve Board by banks or bankers in foreign countries or 
 dependencies or insular possessions of the United States for the pur- 
 pose of furnishing dollar exchange as required by the usages of trade 
 in the respective countries, dependencies, or insular possessions. 
 
POWERS AND LIMITATIONS. 79 
 
 Such drafts or bills may be acquired by Federal reserve banks in 
 such amounts and subject to such regulations, restrictions, and limi- 
 tations as may be prescribed by the Federal Reserve Board : Pro- 
 vided, however. That no member bank shall accept such drafts or 
 bills of exchange referred to this paragraph for any one bank to an 
 amount exceeding in the aggregate ten per centum of the paid-up 
 and unimpaired capital and surplus of the accepting bank unless the 
 draft or bill of exchange is accompanied by documents conveying or 
 securing title or by some other adequate security : Provided further. 
 That no member bank shall accept such drafts or bills in an amount 
 exceeding at any time the aggregate of one-half of its paid-up and 
 unimpaired capital and surplus. 
 
 81. Power to Hold Real Property. 
 
 Sec. 5137, U. S. R. S. — A national banking association may pur- 
 chase, hold, and convey real estate for the following purposes, and 
 for no others : 
 
 First. Such as shall be necessary for its immediate accommodation 
 in the transaction of its business. 
 
 Second. Such as shall be mortgaged to it in good faith by way of 
 security for debts previously contracted. 
 
 Third. Such as shall be conveyed to it in satisfaction of debts pre- 
 viously contracted in the course of its dealings. 
 
 Fourth. Such as it shall purchase at sales under judgments, de- 
 crees, or mortgages held by the association, or shall purchase to secure 
 debts due to it. 
 
 But no such association shall hold the possession of any real estate 
 under moi'tgage, or the title and possession of any real estate pur- 
 chased to secure any debts due to it, for a longer period than five 
 years. 
 
 82. National Banking Associations to be Depositaries or Public 
 
 Moneys. 
 
 (Sec. 5153, U. S. R. S., as amended 1907.)— All national banking 
 associations, designated for that purpose by the Secretary of the 
 Treasury, shall be depositaries of public money, under such regula- 
 tions as may be prescribed by the Secretary ; and they may also be 
 employed as financial agents of the Government; and they shall 
 perform all such reasonable duties, as depositaries of public money 
 and financial agents of the Government, as may be required of 
 them. The Secretary of the Treasury shall require the associations 
 thus designated to give satisfactory security, by the deposit of 
 United States bonds and otherwise, for the safe-keeping and prompt 
 payment of the public money deposited with them, and for the 
 
80 POWERS AND LIMITATIONS. 
 
 faithful performance of their duties as financial agents of the Gov- 
 ernment: Provided^ That the Secretary shall, on or before the first 
 of January of each year, make a public statement of the securities 
 required during that year for such deposits. And every association 
 so designated as receiver or depositary of the public money shall, 
 take and receive at par all of the national currency bills, by what- 
 ever association issued, which have been paid into the Government 
 for internal revenue, or for loans or stocks: Provided, That the 
 Secretary of the Treasury shall distribute the deposits herein pro- 
 vided for, as far as practicable, equitably between the different 
 States and sections. 
 
 83. Reserve Eequieements Under Section 19 of Federal Reserve 
 Act as Amended — Section 20 of Federal Reserve Act and Act 
 April 24, 1917. 
 
 demand and time deposits defined. reserve requirements. 
 
 Demand deposits within the meaning of this act shall comprise 
 all deposits payable within thirty days, and time deposits shall com- 
 prise all deposits payable after thirty days, all savings accounts and 
 certificates of deposit which are subject to not less than thirty days' 
 notice before payment, and all postal savings deposits. 
 
 Every bank, banking association, or trust company which is or 
 which becomes a member of any Federal reserve bank shall establish 
 and maintain reserve balances with its Federal reserve bank as 
 follows : 
 
 83a. Reserve Reqxtirements for Banks Not in Reserve Cities. 
 
 (a) If not in a reserve or central reserve city, as now or hereafter 
 defined, it shall hold and maintain with the Federal reserve bank of 
 its district an actual net balance equal to not less than seven per 
 centum of the aggregate amount of its demand deposits and three 
 per centum of its time deposits. 
 
 83b. Reserve Requirements for Banks in Reserve Cities. 
 
 (&) If in a reserve city, as now or hereafter defined, it shall hold 
 and maintain with the Federal reserve bank of its district an actual 
 net balance equal to not less than ten per centum of the aggregate 
 amount of its demand deposits and three per centum of its time de- 
 posits : Provided, however, That if located in the outlying distmsts of 
 a reserve city or in territory added to such a city by the extension of 
 its corporate charter, it may, upon the affirmative vote of five mem- 
 bers, of the Federal Reserve Board, hold, and maintain the reserve 
 balances specified in paragraph {a) hereof. 
 
POWERS AND LIMITATIONS. 81 
 
 83c. Reserve Requirements for Banks in Central Reserve Cities. 
 
 (e) If in a central reserve city, as novr or hereafter defined, it 
 shall hold and maintain with the Federal reserve bank of its district 
 an actual net balance equal to not less than thirteen per centum of the 
 aggregate amount of its demand deposits and three per centum of its 
 time deposits: Provided, however. That if located in the outlying 
 districts of a central reserve city or in territory added to such city by 
 the extension of its corporate charter, it may, upon the affirmative 
 vote of five members of the Federal Reserve Board, hold and main- 
 tain the reserve balances specified in paragraphs {a) gr (&) thereof. 
 
 83d. Member Bank Forbidden to Keep on Deposit With Nonmem- 
 BER Bank a Sum in Excess or Ten Per Centum of Its Own 
 Capital and Surplus or to Secure Discounts for Nonmember 
 Bank. 
 
 No member bank shall keep on deposit with any State bank or 
 trust company which is not a member bank a sum in excess of ten 
 per centum of its own paid-up capital and surplus. No member 
 bank shall act as the medium or agent of a nonmember bank in ap- 
 plying for or receiving discounts from a Federal reserve bank under 
 the provisions of this act, except by permission of the Federal Reserve 
 Board. 
 
 83e. Withdrawal of Reserve by Member Bank. 
 
 The required balance carried by a member bank with a Federal 
 reserve bank may, under the regulations and subject to such penal- 
 ties as may be prescribed by the Federal Reserve Board, be checked 
 against and withdrawn by such member bank for the purpose of 
 meeting existing liabilities : Provided, however. That no bank shall 
 at any time make new loans or shall pay any dividends unless and 
 until the total balance required by law is fully restored. 
 
 83f. Reserve Requirements — How Estimated. 
 
 In estimating the balances required by this act the net difference 
 of amounts due to and from other banks shall be taken as the basis 
 for ascertaining the deposits against which required balances with 
 Federal reserve banks shall be determined. 
 
 83g. Reserve Requirements for National Banks Located in 
 Alaska or Outside the Continental United States. 
 
 National banks, or banks organized under local laws, located in 
 Alaska or in a dependency or insular possession or any part of the 
 United States outside the continental United States may remain 
 nonmember banks, and shall in that event maintain reserves and com- 
 ply with all the conditions now provided by law regulating them; 
 115635—19 r, 
 
82 POWERS AND LIMITATIONS. 
 
 or said banks may, with the consent of the Eeserve Board, become 
 member banks of any one of the reserve districts, and shall in that 
 event take stock, maintain reserves, and be subject to all the other 
 provisions of this act. 
 
 83h. Eedemption Fund Not Cotjnted as Reserve. 
 (Sec. 20, Federal Eeserve Act.) So much of sections two and 
 three of the act of June twentieth, eighteen hundred and seventy- 
 four, entitled "An act fixing the amount of United States notes, pro- 
 viding for a redistribution of the national-banis: currency, and for 
 other purposes;" as provides that the fund deposited by any national 
 banking association with the Treasurer of the United States for the 
 redemption of its notes shall be counted as a part of its lawful 
 reserve as provided in the act aforesaid, is hereby repealed. And 
 from and after the passage of this act such fund of five per centum 
 shall in no case be counted by any national banking association as a 
 part of its lawful reserve. 
 
 83i. No Eeserve Eequired to be Held Against United States 
 
 Deposits. 
 
 (Section 7, act April 24, 1917.) That the provisions of section 
 fifty -one hundred and ninety-one of the Eevised Statutes, as amended 
 by the Federal reserve act and the amendments thereof, with refer- 
 ence to the reserves required to be kept by national banking associa- 
 tions and other member banks of the Federal Eeserve System, shall 
 not apply to deposits of public moneys by the United States in desig- 
 nated depositaries. 
 
 84. Rate of Interest Which Mat be Charged. 
 (Sec. 5197, U. S. R. S.) Any association may take, receive, reserve, 
 and charge on any loan or discount made, or upon any note, bill of 
 exchange, or other evidences of debt, interest at the rate allowed by 
 the laws of the State, Territory, or District where the bank is located, 
 and no more, except that where by the laws of any State a different 
 rate is limited for banks of issue organized under State laws, the 
 rate so limited shall be allowed for associations organized or existing 
 in any such State under this Title. When no rate is fixed by the laws 
 of the State, or Territory, or District, the bank may take, receive, 
 reserve, or charge a rate not exceeding seven per centum, and such 
 interest may be taken in advance, reckoning the days for which the 
 note, bill, or other evidence of debt has to run. And the purchase, 
 discount, or sale of a bona fide bill of exchange, payable at another 
 place than the place of such purchase, discount, or sale, at not more 
 than the current rate of exchange for sight drafts in addition to the 
 interest, shall not be considered as taking or receiving a greater rate 
 of interest. 
 
powers and limitations. 83 
 
 85. Penalty fob Ustjrt — Jurisdictioic of Suits by oe Against 
 
 National Banks. 
 
 (Sec. 5198 U. S. E. S., as amended 1875.) The taking, receiving, 
 reserving, or charging a rate of interest greater than is allowed by 
 the preceding section, vt^hen knowingly done, shall be deemed a for- 
 feiture of the entire interest which the note, bill, or other evidence of 
 debt carries with it, or which has been agreed to be paid thereon. In 
 case the greater rate of interest has been paid, the person by whom 
 it has been paid, or his legal representative, may recover back, in an 
 action in the nature of an action of debt, twice the amount of the 
 interest thus paid from the association taking or receiving the same ; 
 provided such action is commenced within two years from the time 
 the usurious transaction occurred. That suits, actions, and proceed- 
 ings against any association under this Title may be had in any cir- 
 cuit, district, or territorial court of the United States held within the 
 district in which such association may be established, or in any State, 
 county, or municipal court in the county or city in which said asso- 
 ciation is located having jurisdiction in similar cases. 
 
 86. Declaration of Dividends. 
 
 (Sec. 5199, U. S. E. S.) The directors of any association may, 
 semiannually, declare a dividend of so much of the net profits of the 
 association as they shall judge expedient; but each association shall, 
 before the declaration of a dividend, carry one-tenth part of its net 
 profits of the preceding half year to its surplus fund until the same 
 shall amount to twenty per centum of its capital stock. 
 
 87. Liabilities to an Association Which may be Inctteeed by any 
 One Person, Company, etc. 
 
 (Sec. 5200, U. S. R. S., as amended 1918.) The total liabilities to 
 any association, of any person, or of any company, corporation, or firm 
 for money borrowed, including in the liabilities of a company or 
 firm the liabilities of the several members thereof, shall at no time 
 exceed ten per centum of the amount of the capital stock of such as- 
 sociation, actually paid in and unimpaired, and ten per centum of its 
 unimpaired surplus fund: Provided,^ however. That (1) the discount 
 of bills of exchange drawn in good faith against actually existing 
 values, (2) the discount of commercial or business paper actually 
 owned by the person, company, corporation, or firm negotiating the 
 same, and (3) the purchase or discount of any note or notes secured 
 by not less than a like face amount of bonds of the United States 
 issued since April 24, 1917, or certificates of indebtedness of the 
 United States, shall not be considered as money borrowed within the 
 
84 POWERS AND LIMITATIONS. 
 
 meaning of this section; but the total liabilities to any association, 
 of any person or of any company, corporation, or firm, upon any note 
 or notes purchased or discounted by such association and secured by 
 such bonds or certificates of indebtedness, shall not exceed (except to 
 the extent permitted by rules and regulations prescribed by the 
 Comptroller of the Currency, with the approval of the Secretary of 
 the Treasury) ten per centum of such capital stock and surplus fund 
 of such association. 
 
 Note. — See act March 3, 1919, " Victory Liberty loan Act," which provides 
 that the word " bonds " where it appears in section 5200 of the Revised Statutes 
 as amended shall be deemed to include notes issued under the " Victory Liberty 
 loan act." 
 
 88. Loans on or Purchase or Their Own Stock Forbidden. 
 
 (Sec. 5201, U. S. R. S.) No association shall make any loan or dis- 
 count on the security of the shares of its own capital stock, nor be the 
 purchaser or holder of any such shares, unless such security or pur- 
 chase shall be necessary to prevent loss upon a debt previously con- 
 tracted in good faith ; and stock so purchased or acquired shall, within 
 ■six months from the time of its purchase, be sold or disposed of at 
 public or private sale; or, in default thereof, a receiver may be ap- 
 pointed to close up the business of the association, according to sec- 
 tion fifty -two hundred and thirty-four. 
 
 89. Purchase of Stock in Other Corporations. 
 
 The Supreme Court of the United States held in the case of the 
 California National Bank v. Kennedy (167 U. S., 362) that the 
 power to purchase or deal in stock of another corporation is not ex- 
 pressly conferred upon national banks, nor is it an act which may be 
 exercised as incidental to the powers expressly conferred. A dealing 
 in stocks is consequently an ultra vires act, and being such it is with- 
 out efficacy. 
 
 90. Banks Indebtedness. 
 
 (Sec. 5202, U. S. E. S.) No national banking association shall at 
 any time be indebted, or in any way liable, to an amount exceeding 
 the amount of its capital stock at such time actually paid in and re- 
 maining undiminished by losses or otherwise, except on account of 
 demands of the nature following : 
 
 First. Notes of circulation. 
 
 Second. Moneys deposited with or collected by the association. 
 
 Third. Bills of exchange or drafts drawn against money actually 
 on deposit to the credit of the association, or due thereto. 
 
 Fourth. Liabilities to the stockholders of the association for divi- 
 dends and reserve profits. 
 
POWEBS AND LIMITATIONS. 85 
 
 Fifth. Liabilities incurred under the provisions of the Federal 
 reserve act. 
 
 Sixth. Liabilities incurred under the provisions of the War 
 Finance Corporation act. 
 
 91. Use or CniCULATiNO Notes. 
 
 (Sec. 6203, U. S. R. S.) No association shall, either directly or 
 indirectly, pledge or hypothecate any of its notes or circulation, for 
 the purpose of procuring money to be paid in on its capital stock, or 
 to, be used in its banking operations, or otherwise; nor shall any 
 association use its circulating notes, or any part thereof, in any man- 
 ner or form, to create or increase its capital stock. 
 
 92. Withdrawal of Capital — Unearned Dividends Prohibited. 
 
 (Sec. 5204, U. S. R. S.) No association, or any member thereof, 
 shall, during the time it shall continue its banking operations, with- 
 draw, or permit to be withdrawn, either in the form of dividends or 
 otherwise, any portion of its capital. If losses have at any time been 
 sustained by any such association, equal to or exceeding its undivided 
 profits then on hand, no dividend shall be made; and no dividend 
 shall ever be made- by any association, while it continues its banking 
 operations, to an amount greater than its net profits then on hand, 
 deducting therefrom its losses and bad debts. All debts due to any 
 association, on which interest is past due and unpaid for a period of 
 six months, unless the same are well secured, and in process of collec- 
 tion, shall be considered bad debts within the meaning of this section. 
 But nothing in this section shall prevent the reduction of the capital 
 stock of the association under section fifty-one hundred and forty- 
 three. 
 
 93. Issue of Uncurrent Notes. 
 
 (Sec. 5206, U. S. R. S.) No association shall at any time pay out 
 on loans or discounts, or in purchasing drafts or bills of exchange, or 
 in payment of deposits, or in any other mode pay or put in circulation, 
 the notes of any bank or banking association which are not, at any 
 such time, receivable, at par, on deposit, and in payment of debts by 
 the association so paying out or circulating such notes ; nor shall any 
 association knowingly pay out or put in circulation any notes issued 
 by any bank or banking association which at the time of such paying 
 out or putting in circulation is not redeeming its circulating notes in 
 lawful money of the United States. 
 
 94. United States Notes Not to be Held as Collateral. 
 
 (Sec. 5207, U. S. R. S.) No association shall hereafter offer or receive 
 United States notes or national-bank notes as security or as collateral 
 
86 POWERS AND LIMITATIONS. 
 
 security for any loan of money, or for a consideration agree to with- 
 hold the same from use, or offer or receive the custody or promise of 
 custody of such notes as security, or as collateral security, or consid- 
 eration for any loan of money. Any association offending against 
 the provisions of this section shall be deemed guilty of a misde- 
 meanor, and shall be fined not more than one thousand dollars and 
 a further sum equal to one-third of the money so loaned. The officer 
 or officers of any association who shall make any such loan shall be 
 liable for a further sum equal to one-quarter of the money loaned; 
 and any fine or penalty incurred by a violation of this section shaH be 
 recoverable for the benefit of the party bringing such suit. 
 
 95. Falsely Certifytng Checks. 
 
 (Sec. 5208, U. S- E. S.) It shall be unlawful for any officer, director, 
 agent, or employee of any Federal reserve bank, or of any member 
 bank as defined in the act of December twenty-third, nineteen hun- 
 dred and thirteen, known as the Federal reserve act, to certify any 
 check drawn upon such Federal reserve bank or member bank unless 
 the person, firm, or corporation drawing the check has on deposit 
 with such Federal reserve bank or member bank, at the times such 
 check is certified, an amount of money not less than the amount speci- 
 fied in such check. Any check so certified by a duly authorized 
 officer, director, agent, or employee shall be a good and valid obliga- 
 tion against such Federal reserve bank or member bank ; but the act 
 of any officer, director, agent, or employee of any such Federal re- 
 serve bank or member bank in violation of this section shall, in the 
 discretion of the Federal Eeserve Board, subject such Federal re- 
 serve bank to the penalties imposed by section eleven, subsection 
 (h) , of the Federal reserve act, and shall subject such member bank 
 if a national bank to the liabilities and proceedings on the part of 
 the Comptroller of the Cvirrency provided for in section fifty-two 
 hundred and thirty-four. Revised Statutes, and shall, in the dis- 
 cretion of the Federal Reserve Board, subject any other member 
 bank to the penalties imposed by section nine of said Federal reserve 
 act for the violation of any of the provisions of said act. Any officer, 
 director, agent, or employee of any Federal reserve bank or member 
 bank who shall willfully violate the provisions of this section, or 
 who shall resort to any device, or receive any fictitious obligation, 
 directly or collaterally, in order to evade the provisions thereof, or 
 who shall certify a check before the amount thereof shall have been 
 regularly entered to the credit of the drawer upon the books of the 
 bank, shall be deemed guilty of a misdemeanor and shall, on convic- 
 tion thereof in any district court of the United States, be fined not 
 more than $5,000, or shall be imprisoned for not more than five 
 years, or both, in the discretion of the court. 
 
POWERS AND LIMITATIONS. 87 
 
 96. Penalty for Embezzlement, Abstraction, Willful Misappli- 
 cation, False Entries, Etc. 
 
 (Sec. 5209, U. S. E.. S.) Any officer, director, agent, or employee 
 of any Federal reserve bank, or of any member bank as defined in 
 the act of December twenty-third, nineteen hundred and thirteen, 
 known as the Federal reserve act, who embezzles, abstracts, or will- 
 fully misapplies any of the moneys, funds, or credits of such Federal 
 reserve bank or member bank, or who, without authority from the 
 directors of such Federal reserve bank or member bank, issues or puts 
 in circulation any of the notes of such Federal reserve bank or mem- 
 ber bank, or who, without such authority, issues or puts forth any 
 certificate of deposit, draws any order or bill of exchange, makes any 
 acceptance, assigns any note, bond, draft, bill of exchange, mort- 
 gage, judgment, or decree, or who makes any false entry in any 
 book, report, or statement of such Federal reserve bank or member 
 bank, with intent in any case to injure or defraud such Federal 
 reserve bank or member bank, or any other company, body politic 
 or corporate, or any individual person, or to deceive any officer of 
 such Federal reserve bank or member bank, or the Comptroller of 
 the Currency, or any agent or examiner appointed to examine the 
 affairs of such Federal reserve bank or member bank, or the Federal 
 Eeserve Board; and every receiver of a national banking associa- 
 tion who, with like intent to defraud or injure, embezzles, abstracts, 
 purloins, or willfully misapplies any of the moneys, funds, or assets 
 of his trust, and every person who, with like intent, aids or abets 
 any officer, director,' agent, employee, or receiver in any violation 
 of this section shall be deemed guilty of a misdemeanor, and upon 
 conviction thereof in any district court of the United States shall 
 be fined not more than $5,000 or shall be imprisoned for not more 
 than five years, or both, in the discretion of the court. 
 
 Any Federal reserve agent, or any agent or employee of such Fed- 
 eral reserve agent, or of the Federal Eeserve Board, who embezzles, 
 abstracts, or willfully misapplies any moneys, funds, or securities 
 intrusted to his care, or without complying with or in violation of 
 the provisions of the Federal reserve act, issues or put in circulation 
 any Federal reserve notes shall be guilty of a misdemeanor and upon 
 conviction in any district court of the United States shall be fined 
 not more than $5,000 or imprisoned for not more than five years, or 
 both, in the discretion of the court. 
 
 97. Political Contributions. 
 
 (Act Jan. 26, 1907.) That it shall be unlawful for any national 
 bank, or any corporation organized by authority of any laws of 
 
88 POWERS AND LIMITATIONS. 
 
 Congress, to make a money contribution in connection with any elec- 
 tion to any political office. It shall also be unlawful for any corpora- 
 tion whatever to make a money contribution in connection with any 
 election at which Presidential and Vice Presidential electors or a 
 Representative in Congress is to be voted for or any election by any 
 State legislature of a United States Senator. Every corporation 
 which shall make any contribution in violation of the foregoing pro- 
 visions shall be subject to a fine not exceeding five thousand dollars, 
 and every officer or director of any corporation who shall consent to 
 any contribution by the corporation in violation of the foregoing 
 provisions shall upon conviction be punished by a fine of not exceed- 
 iiig one thousand and not less than two hundred and fifty dollars, or 
 by imprisonment for a term of not more than one year, or both such 
 fine and imprisonment in the discretion of the court. 
 
 98. Penalty foe Violation of the National Bank Act — For- 
 feiture or Charter — Individual Liability of Dieectoes. 
 
 (Sec. 5239, U. S. R. S.) If the directors of any national banking 
 association shall knowingly violate, or knowingly permit any of the 
 officers, agents, or servants of the association to violate any of the 
 provisions of this title, all the rights, privileges, and franchises of the 
 association shall be thereby forfeited. Such violation shall, however, 
 be determined and adjudged by a proper circuit, district, or Terri- 
 torial court of the United States, in a suit brought for that purpose by 
 the Comptroller of the Currency, in his own name, before the associa- 
 tion shall be declared dissolved. And in cases of such violation, every 
 director who participated in or assented to the same shall be held 
 liable in his personal and individual capacity for all damages which 
 the association, its shareholders, or any other person, shall have sus- 
 tained in consequence of such violation. 
 
CHAPTER 7. 
 
 CONSOLIDATION OF NATIONAL BANKS. 
 
 99. Instructions and form of agree- 
 ment under act of November 7, 
 1918. 
 100. Resolution of shareholders under 
 act of November 7, 1918. 
 
 101. Transfer of bonds under act of 
 
 November 7, 1918. 
 
 102. Consolidation when one bank is 
 
 placed in liquidation. 
 
 103. Assumption of liability for circu- 
 
 lation. 
 
 99. Consolidation of National Banks Under the Act or November 
 7, 1918 — Instructions and Form or Agreement. 
 
 National banks proposing to consolidate under the act of Novem- 
 ber 7, 1918, should advise the Comptroller of the plan of consolida- 
 tion under consideration and apply for his approval. If the condi- 
 tion of the banks is such as to warrant approval of the consolidation 
 and the terms of consolidation are unobjectionable, instructions rela- 
 tive to the course of procedure, together with forms to be executed in 
 connection therewith, will be furnished. The initial proceeding 
 under the act, after the plan adopted has received the approval of 
 the Comptroller, is to have the directors of the two associations enter 
 into an agreement covering the terms of the consolidation. The fol- 
 lowing is a form of agreement for adoption by the directors of the 
 associations. If the form of agreement submitted does not include 
 all that may be desired to be included in the proposed consolidation, 
 the Comptroller should be advised of desired changes or additions, 
 and if they meet with approval an amended form, providing for such 
 changes or additions, will be furnished. 
 
 AGEBEMENT OF CONSOLIDATION BETWEEN THE — — AND THE 
 
 UNDEE THE TITLE OF THE . 
 
 This agreement made between the • ■ and the — , each 
 
 located in , and each acting pursuant to a resolution of Its board of 
 
 directors and by a majority of said boards, pursuant to the authority given 
 by, and in accordance with the provisions of an act of the Congress of the United 
 States entitled, " An act to provide for the consolidation of national banking 
 associations," approved on the 7th day of November, 1918, witnesseth as 
 follows : 
 
 1. The (hereafter referred to as the ) and the 
 
 (hereafter referred to as the ) are hereby consolidated under. 
 
 the charter of the said first-named association as hereby modified. 
 2. The name of the consolidated association shall be " 
 
 3. The amount of capital stock of the consolidated association shall be 
 
 dollars ($ ), divided into shares ( ) of one hundred dollars 
 
 ($100.00) each, subject to the right to change the amount of said capital here- 
 after as is now or shall hereafter be , authorized by law. On the date of con- 
 
 89 
 
90 CONSOLIDATION OF NATIONAL BANKS. 
 
 solidation its surplus shall be — dollars ($ ). Said capital, surplus, 
 
 and undivided profits at the date of consolidation shall then aggregate 
 
 dollars ($ ). Of this capital ( ) shares shall be allotted to 
 
 the present shareholders of the . being shares for each share now 
 
 held by them, and ( ) shall be allotted to the present shareholders 
 
 of the , being for each share now held by them. The assets con- 
 tributed by each of said associations shall, upon the effective date of the con- 
 solidation, be passed upon and be acceptable to a committee of six, three to be 
 appointed by the board of directors of each association, and the shareholders 
 of the present shall furnish net assets above all liabilities of that as- 
 sociation equal to — of the capital and surplus of the consolidated bank, 
 
 and the present shareholders of the shall furnish net assets equal to 
 
 . Such assets of either association as it shall not consider desirable to 
 
 carry into the consolidation, or as shall not be necessary to make up its con- 
 tribution to the capital, surplus, and undivided profits, as aforesaid, shall be 
 transferred by it, before the effective date of the consolidation, to a trustee 
 or trustees for the ultimate benefit of its shareholders, upon whatever terms 
 and under whatever conditions shall be deemed proper. In the event that 
 there is not sufficient net assets in either association to make good its propor- 
 tion of capital and surplus of ($ ) herein provided for, the share- 
 holders of the association not having sufficient assets to make good its pro- 
 portion shall pay the difference in cash. 
 
 4. The directors of the consolidating associations shall constitute the board of 
 directors of the consolidated bank for the remainder of the current year. 
 
 5. This consolidation shall become effective when it shall have been ratified 
 and confirmed by the affirmative vote of the shareholders of each of said asso- 
 ciations owning at least two-thirds of its capital stock outstanding, at a meet- 
 ing to be held pursuant to a call by the directors heretofore made, and shall have 
 been approved by the Comptroller of the Currency of the United States. 
 
 Witness the signatures and seals of said associations, this — day of , 
 
 1919, each hereunto set by the president and attested by its cashier, pursuant to 
 a resolution of its board of directors, acting by a majority thereof, and witness 
 the signatures hereto of a majority of each of said boards of directors. 
 
 The , 
 
 By , 
 
 President. 
 Attest : 
 
 Cashier. 
 
 Directors of the National Bank of 
 
 The 
 
 By 
 
 President. 
 Attest : 
 
 Cashier. 
 
 Directors of the National Bank of 
 
CONSOLIDATION OF NATIONAL BANKS. 91 
 
 State of , 
 
 County of , ss: 
 
 On this day of , 191-, before me, a notary public for the State 
 
 and county aforesaid, personally came . as president, and , as 
 
 cashier of the National Bank of , and each in his said capacity 
 
 acknowledged the foregoing instrument to be the act and deed of said associa- 
 tion and the seal affixed thereto to be its seal ; and came also , 
 
 . , being a majority of the board of directors of 
 
 said association, and each of them acknowledged said instrument to be the act 
 and deed of said association and of himself as a director thereof. 
 Witness my official soal and signature this day and year aforesaid. 
 
 Notary Piibllc, County. 
 
 My commission expires . 
 
 State of . 
 
 County of ■ , ss: 
 
 On this day of , 191-, before me, a notary public for the State 
 
 and county aforesaid, personally came , as president, and , as 
 
 cashier of the National Bank of , and each in his said capacity 
 
 acknowledged the foregoing instrument to be the act and deed of said associa- 
 tion and the seal affixed thereto to be its seal ; and came also , 
 
 , , being a majority of the board of directors of 
 
 said association, and each of them acknowledged said instrument to be the 
 act and deed of said association and of himself as a director thereof. 
 
 Witness my official seal and signature this day and year aforesaid. 
 
 Notary Public, County. 
 
 My commission expires . 
 
 If an increase in capital is provided for, by the agreement between 
 the directors of the associations, of an amount in excess of the total 
 capital of the existing banks, or if there is a provision in the agree- 
 ment requiring the paying in of cash in addition to the transfer of 
 assets to equalize the value of capital stock, or for other reason, it 
 will be necessary to furnish a certificate sworn to by the president or 
 "cashier of the consolidated associations, showing that such increase 
 has been paid in cash. In the event that the capital of the consoli- 
 dated association is less than the capital of either one of the existing 
 associations, it will be necessary to secure the consent of the Federal 
 Reserve Board to such reduction, in the same manner as in case of 
 reduction of capital of national banks. 
 
 100. Resolution of Shareholders Under Act of Xotember 7, 1918. 
 
 When the approval of the Comptroller has been secured to the pro- 
 visions of the agreement for consolidation of the associations, and 
 the agreement has been signed by the directors of each association 
 and acknowledged before a notary public, it may be submitted to the 
 shareholders. Notice of the meeting of the shareholders of each asso- 
 
92 CONSOLIDATION OF NATIONAL BANKS. 
 
 ciation to vote upon this agreement must be published for four con- 
 secutive weeks in some newspaper published in the place where the 
 associations are located, and if no newspaper is published in the 
 place, then in a paper published nearest thereto, and this notice must 
 state the time, place, and object of the meeting. In addition to this 
 published notice, the law requires a notice to be sent to each share- 
 holder of record by registered mail at least 10 days prior to said 
 meeting. When the agreement between the directors is ratified and 
 confirmed by the affirmative vote of the shareholders of each such 
 association owning at least two-thirds of its capital stock, a certified 
 copy of the resolution evidencing ratification and confirmation, 
 should be sent to the Comptroller. Upon receipt of the resolution, 
 evidencing compliance with the requirements of law, etc., the Comp- 
 troller will issue his certificate approving the consolidation. The 
 agreement between the directors of the associations must be recited 
 in full in the resolution of the shareholders, and the names of all the 
 directors who sign the agreement and the officers before whom they 
 acknowledge it should be typewritten. 
 
 The following is a form of resolution for adoption by the share- 
 holders : 
 
 RESOLUTION PKOVIDING TOE THE CONSOLIDATION' OF THE NATIONAL BANK OF 
 
 , NO. , AND THE NATIONAL BANK OF , NO. . 
 
 At a meeting of the shareholders of the held on , at the hour 
 
 of , at the banking house of the association in the town or city of — , 
 
 notice having been given of the time, place and object of the meeting for four 
 
 consecutive weeks in the , a newspaper published in the place where 
 
 said association is located, and notice having been sent to each shareholder of 
 record by registered mail at least 10 days prior to said meeting, the following 
 
 resolution v/as adopted by the vote of shareholders of the , owning at 
 
 least two-thirds of its outstanding capital stock: 
 
 " Whereas, the directors of the , located in the town or city of , 
 
 county of , and State of , have entered into an agreement vrith 
 
 the board of directors of the , located in the town or city of , 
 
 county of , and State of , providing for the consolidation of the 
 
 two associations into one national bank under the charter of the , and 
 
 under the title of ' ' in accordance with the provisions of the act of 
 
 Congress approved November 7, 1918, said agreement entered into between the 
 two boards of directors reading as follows : : Therefore be it 
 
 "Resolved, Thiat the agreement entered into between the directors of 
 
 the National Bank of and the National Bank of be 
 
 ratified and confirmed, and that these banks be consolidated under the charter 
 
 of the , and under the title of ' ,' with capital stock of 
 
 ($ ), such consolidation to become effective immediately upon its approval 
 
 by the Comptroller of the Currency." 
 
 The foregoing resolution was adopted by the following vote representing 
 two-thirds or more of the capital stock of the association outstanding, no direc- 
 tor, other officer, or employee having acted as proxy. 
 
CONSOLIDATION OF NATIONAL BANKS. 
 Stock voted for resolution. 
 
 93 
 
 Name of shareholder. 
 
 Residence. 
 
 Name of proxy. 
 
 Number of 
 shares. 
 
 
 
 
 
 Stock voted againut resolution. 
 
 Name of shareholder. 
 
 Residence. 
 
 Number o 
 shares. 
 
 RECAPITULATION. 
 
 Total number of shares voted in favor of resolution 
 
 Total number of shares voted against resolution ; • 
 
 Total number of shares represented at meeting 
 
 Total number of shares of capital stock • 
 
 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. 
 
 [SEAL OF BANK.] , 
 
 President. 
 Subscribed ami sworn to before me this day of , A. D. 191-. 
 
 [SEAL OF NOTAJBY.] , 
 
 Notary Public, County. 
 
 My commission expires . 
 
 101. Traksfer or Bonds Under Act 015" November 7, 1918. 
 
 Bonds held by either bank contemplating consolidation under this 
 act in excess of the amount of capital of the consolidated bank must 
 be withdrawn prior to the date on which the consolidation is ap- 
 proved by the Comptroller's Office. These bonds will be released 
 upon the deposit of lawful money to retire outstanding circulation, 
 provided the resolution of the directors authorizing the withdrawal 
 and the Treasurer's duplicate receipts for the bonds have been 
 furnished. 
 
 If bonds are to be transferred to the consolidated association it 
 will be necessary to furnish the Treasurer's receipts therefor, and 
 the bonds will be transferred to the Treasurer of the United States 
 in trust as security for circulation of the consolidated bank without 
 other authority than that contained in the agreement and resolution 
 for consolidation. 
 
94 CONSOLIDATION OF NATIONAL BANK6. 
 
 In order that there may be no delay in transferring bonds after 
 certificate approving the consolidation has been issued by this office, 
 the Treasurer's duplicate receipts should be promptly furnished. 
 
 102. Consolidation When One Bank is Placed in Liquidation. 
 
 Consolidation under this plan can only be effected by pursuing one 
 of the following methods : 
 
 First. Without an increase of capital the directors of the absorb- 
 ing bank may enter into a contract with the directors or agents of 
 the liquidating association to purchase its assets, assume liabilities 
 to depositors and other creditors, and to pay the value of assets pur- 
 chased in excess of liabilities to depositors and other creditors, less 
 any expenses incident to liquidation. 
 
 Second. By increasing the capital stock of the absorbing bank by 
 an amount equal to that of the liquidated bank, the additional shares 
 may be sold to stockholders of the latter, consent thereto having been 
 previously obtained from shareholders of the absorbing association. 
 
 The national banli act makes no provision for the allotment of new 
 stock when a bank increases its capital; but under the common law, 
 where it has not been modified by statute, when a corporation has 
 adopted a resolution to increase its capital the shareholders of the 
 corporation have the right to participate in the increase in propor- 
 tion to the number of shares held by each, and waiver of that right 
 should be obtained before allotting any of the shares to others. 
 
 Provision having thus been made for shareholders of the closed 
 bank, the directors of the continuing bank are at liberty to contract 
 for the purchase of assets and the assumption of liabilities to deposi- 
 tors and other creditors of the liquidated bank. 
 
 As the law is construed as requiring the payment of capital, origi- 
 nal or on account of increase, in money, and not in " notes or like 
 evidences of debt," the right to accept stock or assets representing 
 stock of the closed bank and to issue therefor certificates in the con- 
 tinuing bank is not recognized. In every such case shareholders of 
 the closed association should be paid the value of their stock either in 
 cash or cashier's checks, the proceeds being available in payment of 
 shares to which they may be entitled in the absorbing corporation. 
 
 Third. The remaining method is to place the interested banks in 
 voluntary liquidation, under section 5220 of the United States Ke- 
 vised Statutes, organize anew under a different corporate title, and 
 acquire, in the manner hereinbefore outlined, the business of the 
 liquidating associations. This method enables the incorporators to 
 place the stock as they may determine. 
 
 In any event, there should be a contract covering the transfer of 
 assets and assumption of liabilities, and an examination of the assets 
 
CONSOLIDATION OF NATIONAL BANKS. 95 
 
 to be taken over will be made by a national bank examiner at the 
 expense of the bank acquiring the assets. 
 
 103. Assumption of Liability foe Cieculation. 
 
 Section 5223, United States Revised Statutes, provides that a 
 national bank which is in good faith winding up its business for the 
 purpose of consolidating with another national bank shall not be re- 
 quired to deposit lawful money for its outstanding circulation. 
 
 When it is desired to take advantage of this section, in addition to 
 the adoption of the resolution by the directors of the liquidating 
 bank authorizing the assignment of its bonds to the national bank 
 with which it is to be consolidated, the Comptroller requires the 
 directors of the continuing bank to adopt a formal resolution by 
 which they assume the liability for the outstanding circulation of the 
 liquidating bank. 
 
CHAPTER 8. 
 LIQUIDATION. 
 
 104. Instructions relative to liquida- 
 
 tion. 
 
 105. Resolution for voluntary liquida- 
 
 tion. 
 
 106. Notice of liquidatioii. 
 
 107. Liquidating agent — appointment 
 
 and powers. 
 
 108. Forms of reports to be rendered 
 
 by liquidating agent. 
 
 109. Election of officers during liquida- 
 
 tion. 
 
 110. Liquidation at expiration of 
 
 charter. 
 
 104. Instructions Relative to Liquidation. 
 
 A national banking association may, under section 5220, be placed 
 in voluntary liquidation by a vote of the owners of two-thirds of the 
 stock. Before calling a meeting of shareholders, however, for the 
 jjurpose of voting upon the proposition, application should be made 
 to the Comptroller for the necessary blanks and instructions. 
 
 Before the meeting is held the shareholders should be given the 
 notice required by the articles of association. 
 
 When a meeting has been held and a resolution adopted by the 
 required vote, it is the duty of the board of directors to cause notice 
 of the fact to be certified, under seal of the association, to the Comp- 
 troller of the Currency by the president or cashier, and publication 
 thereof to be made for a period of two months in a newspaper pub- 
 lished in the city of New York and also in the place in which the 
 association is located, or if no newspaper is published in such place, 
 then in a newspaper published nearest thereto, that the association 
 is closing up its affairs, and notifying note holders and other creditors 
 to present the notes and other claims against the association for pay- 
 inent. Lawful money to provide for the redemption of circulation 
 must be deposited within six months from date of liquidation. 
 
 When an association goes into liquidation, its affairs pass into the 
 hands of its shareholders for such legal disposition as may be deemed 
 proper ; and, unless a liquidating agent is elected by the shareholders 
 (Solicitor's op., ilar. 7, 1906), the settlement of the affairs of the 
 bank would appear to devolve upon the directors, who will be at 
 liberty to continue one or more of the officers or, in lieu thereof, to 
 appoint an agent, for the purpose of conducting liquidating proceed- 
 ings. 
 
 After a national bank has gone into voluntary liquidation no 
 further supervision of its affairs is conferred upon the Comptroller 
 by law. It is usual, however, for the shareholders to adopt a reso- 
 lution providing for the appointment of a liquidating agent or 
 
 36 
 
LIQUIDATION. 97 
 
 committee and that the liquidating agent or committee shall render 
 quarterly reports to the Comptroller showing the progress of the 
 liquidation until it is completed. The filing of these reports is of 
 advantage to all interested, as it makes a permanent record of the 
 liquidation. 
 
 A creditor of a national bank in liquidation has the right to enforce 
 the individual liability of shareholders provided for by section 2, 
 act June 30, 1876, by filing a bill in equity in the nature of a creditor's 
 bill against the shareholders of the bank in any court of the United 
 States having original jurisdiction for the district in which the bank 
 may have been located or established. 
 
 Any shareholder of a national bank in liquidation, who is dissatis- 
 fied with the manner in which liquidation is conducted, has the right 
 to go into court and ask for the appointment of a receiver in the same 
 manner as a shareholder of any State corporation would be so 
 authorized. 
 
 105. Resolution foe Voluntary Liquidation. 
 
 The following is a form of resolution for adoption by th6 share- 
 holders of a national bank in the event it is decided to place the 
 association in voluntary liquidation : 
 
 EESOLTJTION FOR VOLUNTAET LIQUIDATION. 
 
 At a meeting of the shareholders of the National Bank , located 
 
 at , held on , 30 days' notice of the proposed business having 
 
 been given, it was 
 
 Resolved, That the be placed in voluntary liquidation under the 
 
 provisions of sections 5220 and 5221 of the United States Revised Statutes, to 
 
 take effect , and that be appointed liquidating agent or 
 
 liquidating committee of said bank ; that liquidation shall be conducted in ac- 
 cordance with law and under the supervision of the board of directors, who 
 shall require a suitable bond to be given by the said agent or committee in an 
 amount to be fixed by the board of directors ; that the said liquidating agent or 
 committee shall render quarterly reports to the Comptroller of the Currency on 
 the 1st of January, April, July, and October of each year showing the progress 
 of said liquidation until said liquidation is completed; that said liquidating 
 agent or committee shall render an annual report to the shareholders on the 
 date fixed in the articles of association for said annual meeting, at which meet- 
 ing the shareholders may, if they see fit, by a vote representing a majority of 
 the entire stock of the bank, remove the liquidating agent or committee and 
 appoint another in place thereof; that a special meeting of the shareholders 
 may be called at any time in the same manner as if the bank continued an 
 active bank, and at said meeting the shareholders may, by a vote of the majority 
 of the stock, remove the liquidating agent or committee; that the Comptroller 
 of the Currency is authorized to have an examination made at any time into 
 the affairs of the liquidating bank until the claims of all creditors have been 
 satisfied, and that the national bank examiner will be compensated for his time 
 and expense in making the examination in question. 
 115635—19 7 
 
98 
 
 LIQUIDATIOlir. 
 
 The foregoing resolution was adopted by tlie following vote, representing at 
 least two-thirds of the capital stock of the association, no director, other officer, 
 or employee having acted as proxy : 
 
 Name of shareholder. 
 
 Residence. 
 
 Name of proxy. 
 
 Number of 
 shares. 
 
 
 
 
 
 Stock voted against resolution. 
 
 Name of shareholder. 
 
 Besidence. 
 
 Name of proxy. 
 
 Number of 
 shares. 
 
 
 
 
 
 Stock not represented at meeting. 
 
 Name of shareholder. 
 
 Residence. 
 
 Number of 
 shares. 
 
 
 
 
 Total number of shares voted in favor of the resolution, . 
 
 Total number of shares voted against the resolution, . 
 
 Total number of shares represented at the meeting, . 
 
 Total number of shares not represented at the meeting, . 
 
 Total number of sharfes of capital stock, . 
 
 I hereby certify, under authority of the board of directors, that the fore- 
 going is a true and correct report of the vote and of the resolution adopted 
 at a meeting of the shareholders of the aforesaid bank on the date mentioned. 
 
 [SEAL OF BANK.] 
 
 President or Cashier. 
 
 Subscribed and sworn to before me, this day of • 
 
 [SEAL OF NOTARY.] 
 
 106. Notice 01* Liquidation. 
 
 -, A. D. 
 
 Notary Public. 
 
 Notice in the following form must be published for a period of two 
 months from date on which resolution to liquidate takes effect, in a 
 newspaper in the city of New York and in one published in the place 
 in which the bank is located. If the notices are published in daily 
 newspapers they must appear in each issue for the period of two 
 months, or, if published in weekly newspapers, they must appear in 
 9 consecutive issues. When publication has been made, as required by 
 
LIQUIDATION. 99 
 
 section 5221, affidavits of the publishers to that effect should be sent 
 to the Comptroller of the Currency, together with a slip containing 
 notice from one issue of each paper. 
 The form of notice follows : 
 
 The National Bank , located at , in the State of 
 
 , is closing its affairs. All note holders and other creditors of the asso- 
 
 ciation are therefore hereby notified to present the notes and other claims for 
 payment. 
 
 President or Cashier. 
 Dated, , 19—. 
 
 107. Liquidating Agent — Appointment and Powers. 
 
 When a national bank has been placed in voluntary liquidation the 
 settlement of its affairs devolves by law upon its shareholders. 
 
 The national-bank act contains no provision stating the specific 
 manner in which the affairs of a national bank shall be liquidated, 
 and no reference is made in the law to the appointment of an agent 
 or trustee in liquidation, except when a national bank has been placed 
 in the hands of a receiver and the claims of all creditors other than 
 shareholders have been satisfied. 
 
 Quite frequently the shareholders in voting to place the bank in 
 liquidation, also appoint a liquidating agent or committee, whose 
 powers are not always clearly defined. 
 
 The United States Circuit Court of Appeals has held (Jewett v. 
 United States, 100 Fed. Eep., 832) that while no such office as an 
 agent in liquidation was known to the statutes, yet it was one that 
 has long been recognized as permitted by law. 
 
 Questions have been raised as to the extent of the authority of the 
 liquidating agent or committee and whether the appointment of such 
 agent or committee divests the directors of their general power and 
 control over the management of the bank. 
 
 Judge Lacombe, of the United States Circuit Court for the South- 
 ern District of New York, held in 1899, in the case of the liquida- 
 tion of the Franklin National Bank of New York, that the vote to 
 liquidate and the appointment of a committee by the shareholders to 
 liquidate the bank did not divest the directors of their general power 
 and control over the management of the bank. This case, however, 
 has never been officially reported. 
 
 In recent years this office has submitted to banks proposing to liqui- 
 date a form of resolution which, after providing for the appointment 
 of a liquidating committee, provides that liquidation shall be con- 
 ducted in accordance with the laws of the State and under the general 
 supervision of the board of directors. This form of resolution also 
 provides that the liquidating agent or committee shall render quar- 
 terly reports to the Comptroller during the progress of liquidation. 
 
100 
 
 LIQUIDATION. 
 
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LIQUIDATION. 103 
 
 After a national bank has gone into liquidation the officers have 
 no authority to bind the shareholders by the transaction of any 
 business except that necessarily involved in the winding up of its 
 affairs unless such authority has been expressly conferred by the 
 shareholders. (Schrader v. Manufacturers National Bank, 133 U. S., 
 67; Eichmond v. Irons, 121 U. S., 27.) 
 
 WhUe the matter does not appear to be provided for by law, it 
 would seem advisable in all cases to have the liquidating agent or 
 committee secure the authority of the board of directors before dis- 
 posing of real estate or other assets of the bank. 
 
 109. Election of Officers Dtteing LiQtnDATioN. 
 
 A national bank that has voted to go into liquidation may continue 
 to elect officers and directors for the purpose of effecting liquidation, 
 but after the expiration of the term of its charter the stock is not 
 transferable so as to give the transferee the right to share in the 
 election of directors, and such transferee not being a shareholder is 
 ineligible as a director under section 5145, TJnited States Revised 
 Statutes. (Eichards v. Attleboro National Bank, 148 Mass., 187; 
 3 N. B. C, 495.) 
 
 110. Liquidation at Expieation of Charter. 
 
 Section 7 of the act of July 12, 1882, provides that national bank- 
 ing associations, the corporate existence of which has expired or shall 
 hereafter expire, and which do not avail themselves of the provisions 
 of this act, shall be required to comply with the provisions of sections 
 5221 and 5222 in the same manner as if the shareholders had voted 
 to go into liquidation, as provided in section 6220 ; and the provisions 
 of sections 5224 and 6225 shall also be applicable to such associations, 
 except as modified by this act ; and the franchise of such associations 
 is extended for the sole purpose of liquidating their affairs until such 
 affairs are finally closed. 
 
 While, under the act, no meeting of shareholders is necessary for 
 the purpose of voting on the question of expiration of charter (the 
 corporate existence expiring by limitation, if not extended as pro- 
 vided by law), it would seem advisable to call the shareholders to- 
 gether before date of expiration of charter, for exchange of views 
 and the taking of such action as may be deemed necessary with regard 
 to closing the affairs of the bank after the charter has expired. 
 
 After the charter of a bank is permitted to expire, the president 
 or cashier should execute and forward to the Comptroller of the 
 Currency certificate to that effect, in the following form: 
 
104 LIQUIDATION. 
 
 ceetificatb of expiration of corpokate existence. 
 National Bank ■ 
 
 To the Comptroller of the Currency, 
 
 Washington. 
 
 Sir : It Is hereby certified that the corporate existence of , located at 
 
 , in the State of , having expired at close of business on the 
 
 day of , . the bank is now closing its affairs under the provisions of 
 
 section 7 of the act of July 12, 1882. 
 
 In testimony whereof I have, by instruction of the board of directors of said 
 association, hereto subscribed my name and affixed the seal of said association 
 at , aforesaid, the day and year above written. 
 
 [seal OF BANK.] • — , 
 
 President or Cashier. 
 
 Notice of liquidation by reason of expiration of corporate existence 
 must be published for a period of two months in a newspaper in the 
 city of New York, and also in a newspaper published in the place in 
 which the bank is located. (See sec. 5221, Eev. Stat.) Certificates 
 of the publishers that the required publication has been made, together 
 with a slip containing notice from one issue of each paper, should be 
 sent to the Comptroller of the Currency. Form for use in this con- 
 nection follows: 
 
 The National Bank , located at , in the State of 
 
 , is closing up its affairs, its corporate existence having expired at close 
 
 of business on the day of ■ — , . All note holders and others, cred- 
 itors of said association, are therefore hereby notified to present the notes and 
 other claims against the association for payment. 
 
 President or Cashier. 
 Dated , . 
 
 The settlement of the affairs of a bank, at expiration of charter, 
 should be effected in the same manner as in the case of liquidation by 
 resolution of shareholders. 
 
CHAPTER 9. 
 
 BRANCH BANKS. 
 
 111. Domestic branch banks. | 112. Foreign branch banks. 
 
 111. Domestic Branch Banks. 
 
 The only provision in the national-bank act relating to branch 
 banks is found in section 5155, United States Eevised Statutes, and 
 reads as follows : 
 
 It shall be lawful for any bank or banking association, organized under State 
 laws and having branches, the capital being joint and assigned to and used by 
 the mother bank and branches in definite proportions, to become a national 
 banking association in conformity with existing laws and to retain and keep 
 in operation its branches, or such one or more of them as It may elect to 
 retain. * * * 
 
 The granting of this special privilege to converting State banks 
 and the absence of any similar provision in the law with respect to 
 domestic branches of national banks of primary organization have 
 always been construed by the Comptroller to imply that banks of the 
 latt«r class were not permitted to have domestic branches. The sec- 
 tion cited absolutely restricts branch banks of converted associations 
 to such as have a definite proportion of the capital of the parent bank 
 assigned to them, and it is not to be assumed that the law contem- 
 plated that associations of primary organization should be permitted 
 to assign any portion of their capital to and operate domestic 
 branches. 
 
 This fact is further to be inferred from section 5138, United States 
 Eevised Statutes, which prohibits the formation of associations with 
 less capital than $200,000 in cities of population exceeding 50,000, 
 and with less than a specified capital in places with population less 
 than 50,000. 
 
 To permit the establishment of domestic branch banks would not 
 only render possible an evasion of the provisions of section 5138, but 
 tend to discourage the organization of banking associations which, in 
 the absence of such branches, might be formed. 
 
 Section 5134 provides in part that the organization certificate of a 
 national bank shall show " the place where its operations of discount 
 and deposit are to be carried on," and section 5190 that " the usual 
 business of each national banking association shall be transacted at 
 an office or banking house (not offices or banking houses) located in 
 the place (not places) specified in its organization certificate." 
 
 105 
 
106 BRANCH BANKS. 
 
 The words "place" and "at an oflSce or banking house" have 
 always been construed by the Comptroller to mean the legal domicile 
 of the corporation, and this construction is sustained by the Solicitor 
 of the Treasury in an opinion rendered August 10, 1899, on the ques- 
 tion of the right of a national bank to establish and maintain an 
 auxiliary cash room at some point distant from its banking house, 
 for the purpose of receiving deposits and paying checks. The solici- 
 tor says : 
 
 This section (5190, tJ. S. Rev. Stat.) contemplates that the usual business of a 
 national banking association shall be transacted at one office or banking house, 
 and as receiving deposits and paying checks belong to the " usual business " 
 of a bank, I am of the opinion that the statute does not authorize the estab- 
 lishment of an auxiliary cash room in a different part of the city' for the pur- 
 pose proposed. Besides, it may be observed that if a national banking asso- 
 ciation can lawfully establish and maintain a separate office for receiving 
 deposits and paying checks, it could as well establish as many such auxiliary 
 cash rooms in the city of its corporate residence as its business might require ; 
 and, indeed, the entire business of the bank might be parceled out and conducted 
 In the same way all over the city. 
 
 The District Court of the United States, in the case of Armstrong 
 V. Second National Bank of Springfield (38 Fed. Eep., 883), involv- 
 ing among other things the question of the right of a national bank 
 to cash a check elsewhere than at its banking house, held that — 
 
 Under this section (5190) it certainly would not be competent for a national 
 bank to provide for the cashing of checks upon it at any other place than at its 
 office or banking house. 
 
 If, therefore, it is unlawful for a national bank to cash a check 
 elsewhere than at its banking house, it is likewise unlawful for it to 
 discount notes or to receive deposits elsewhere, for one is as much 
 a part of the " usual business " of a bank as the other. As it is ob- 
 viously impossible for a bank to transact its entire business within 
 the four walls of any single building, it is not held that the law con^ 
 templates that the " entire business," as distinguished from its " usual 
 business," shall be transacted in its banking house. 
 
 In the case of The Merchants National Bank of Boston v. The 
 State National Bank (10 Wall., 604) it was held in this connection 
 that — 
 
 The provision requiring the " usual business " of the association to be trans- 
 acted " at an office or banking house specified in its organization certificate " 
 must be construed reasonably, and a part of the legitimate business of the 
 association which can not be transacted at the banking house may be done 
 elsewhere. 
 
 The question involved in this case was the right of the bank's 
 officers to purchase gold elsewhere than at its banking house, and 
 the court held that — 
 
BEANCH BANKS. 107 
 
 The gold must necessarily have been bought, if at all, at the buying or selling 
 bank or at some third locality. The power to pay was vital to the power to 
 buy, and inseparable from it. 
 
 The "legitimate business" of a bank, therefore, which a reason- 
 able construction of the law would permit to be done elsewhere than 
 at its banking house would seem to be restricted to transactions simi- 
 lar in character to that involved in the decision quoted, and not the 
 ordinary and usual business of receiving deposits and cashing checks. 
 
 While the national-bank act does not expressly prohibit the es- 
 tablishment and maintenance of domestic branch banks or agencies 
 by associations of primary organization, the implication to that 
 effect is clear, and the Attorney General of the United States, in an 
 opinion rendered on May 11, 1911 (before the passage of the Federal 
 reserve act, authorizing the establishment of branches in foreign 
 countries, dependencies or insular possessions of the United States) , 
 in the case of the Lowry National Bank of Atlanta, Ga., which 
 desired to establish branch banks within the limits of that city, held 
 that — 
 
 First. Independently of section 5190, Revised Statutes, a national bank is 
 not, under its charter, authorized to establish a branch or coordinate oflBce for 
 the purpose of carrying on a general banking business in the place designated in 
 its certificate of organization ; and. 
 
 Second. That section 5190, Revised Statutes, properly construed, restricts 
 the carrying on of the general banking business by a national bank to one 
 office or banking house in the place designated in the association's certificate 
 of organization. 
 
 That the act does not contemplate the operation of domestic branch 
 banks by national banks of primary organization is evidenced by the 
 fact that in 1892 a special act was approved authorizing the operation 
 of a branch by a Chicago national bank on the World's Fair grounds. 
 In 1901 similar legislation was enacted by Congress in connection 
 with the Louisiana Purchase Exposition, held in 1904. 
 
 112. Foreign Branch Banks. 
 
 Section 25 of the Federal reserve act, as amended by the act of 
 September 7, 1916, contains the following provision : 
 
 Any national banking association possessing a capital and surplus of 
 $1,000,000 or more may file application with the Federal Reserve Board for 
 permission to exercise, upon such conditions and under such regulations as 
 may be prescribed by the said board, either or both of the following powers : 
 
 First. To establish branches in foreign countries or dependencies or insular 
 possessions of the United States for the furtherance of the foreign commerce 
 of the United States, and to act if required to do so as fiscal agents of the 
 United States. 
 
 Second. To invest an amount not exceeding in the aggregate ten per centum 
 of its paid-in capital stock and surplus in the stock of one or more banks or 
 
108 BEANCH BANKS. 
 
 corporations chartered or incorporated under the laws of the United States or 
 of any State thereof, and principally engaged In International or foreign 
 banking, or banking in a dependency or insular possession of the United States 
 either directly or through the agency, ownership, or control of local institutions 
 in foreign countries, or in such dependencies or insular possessions. 
 
 Such application shall specify the name and capital of the banking associa- 
 tion filing it, the powers applied for, and the place or places where the banking 
 operations proposed are to be carried on. The Federal Reserve Board shall have 
 power to approve or to reject such application in whole or in part if for any 
 reason the granting of such application is deemed Inexpedient, and shall also 
 have power from time to time to increase or decrease the number of places 
 where such banking operations may be carried on. 
 
 Every national banking association operating foreign branches shall be re- 
 quired to furnish information concerning the condition of such branches to the 
 Comptroller of the Currency upon demand, and every member bank investing 
 In the capital stock of banks or corporations described under subparagraph two 
 of the first paragraph of this section shall be required to furnish information 
 concerning the condition of such banks or corporations to the Federal Reserve 
 Board upon demand, and the Federal Reserve Board may order special exami- 
 nations of the said branches, banks, or corporations at such time or times as 
 It may deem best. 
 
 Before any national bank shall be permitted to purchase stock in any such 
 corporation the said corporation shall enter into an agreement or undertaking 
 with the Federal Reserve Board to restrict its operations or conduct its business 
 in such manner or under such limitations and restrictions as the said board may 
 prescribe for the place or places wherein such business is to be conducted. If at 
 any time the Federal Reserve Board shall ascertain that the regulations pre- 
 scribed by it are not being complied with, said board is hereby authorized and 
 empowered to institute an investigation of the matter, and to send for persons 
 and papers, subpoena witnesses, and administer oaths In order to satisfy itself 
 as to the actual nature of the transactions referred to. Should such investiga- 
 tion result in establishing the failure of the corporation in question, or of the 
 national bank or banks which may be stockholders therein, to comply with 
 regulations laid down by the said Federal Reserve Board, such national banks 
 may be required to dispose of stockholdings in the said corporation upon reason- 
 able notice. 
 
 Every such national banking association shall conduct the accounts of each 
 foreign branch independently of the accounts of other foreign branches estab- 
 lished by it and of its home office, and shall at the end of each fiscal period 
 transfer to its general ledger the profit or loss accrued at each branch as a 
 separate item. 
 
 Any director or other officer, agent, or employee of any member bank may, 
 vsdth the approval of the Federal Reserve Board, be a director or other officer, 
 agent, or employee of any such bank or corporation above mentioned in the 
 capital stock of which such member bank shall have invested as hereinbefore 
 provided, without being subject to the provisions of section eight of the act 
 approved October fifteenth, nineteen hundred and fourteen, entitled "An act 
 to supplement existing laws against unlawful restraints and monopolies, and 
 for other purposes." 
 
CHAPTER IX. 
 
 TRUST AND SAVINGS DEPARTMENTS. 
 
 115. Form used in connection with 
 
 the granting of trust company 
 powers. 
 
 116. Savings departments of national 
 
 banks. 
 
 113. Trust powers of national banks — 
 
 Statutory provisions and regu- 
 lations of the Federal Reserve 
 Board. 
 
 114. Issuance of permit to exercise 
 
 trust company powers to trust 
 company converting into na- 
 tional bank. 
 
 113. Trust Powers of National Banks — Statutory Provisions and 
 Regulations of the Federal Reserve Board. 
 
 i. statutorr provisions. 
 
 The Federal reserve act as amended by the act of September 26, 
 1918, provides in part: 
 
 (Sec. 11.) The Federal Reserve Board shall be authorized and em- 
 powered : 
 
 (k) To grant by special permit to national banks applying there- 
 for, when not in contravention of State or local law, the right to act 
 as trustee, executor, administrator, registrar of stocks and bonds, 
 guardian of estates, assignee, receiver, committee of estates of luna- 
 tics, or in any other fiduciary capacity in which State banks, trust 
 companies, or other corporations which come into competition with 
 national banks are permitted to act under the laws of the State in 
 which the national bank is located. 
 
 Whenever the laws of such State authorize or permit the exercise 
 of any or all of the foregoing powers by State banks, trust compa- 
 nies, or other corporations which compete with national banks, the 
 granting to and the exercise of such powers by national banks shall 
 not be deemed to be in contravention of State or local law within the 
 meaning of this act. 
 
 National banks exercising any or all of the powers enumerated in 
 this subsection shall segregate all assets held in any fiduciary ca- 
 pacity from the general assets of the bank and shall keep a separate 
 set of books and records showing in proper detail all transactions 
 engaged in under authority of this subsection. Such books and rec- 
 ords shall be open to inspection by the State authorities to the same 
 extent as the books and records of corporations organized under 
 State law which exercise fiduciaiy powers, but nothing in this act 
 shall be construed as authorizing the State authorities to examine 
 the books, records, and assets of the national bank which are not held 
 in trust under authority of this subsection. 
 
 109 
 
110 TRUST AND SAVINGS DEPARTMENTS. 
 
 No national bank shall receive in its trust department deposits of 
 current funds subject to check or the deposit of checks, drafts, bills 
 of exchange, or other items for collection or exchange purposes. 
 Funds deposited or held in trust by the bank awaiting investment 
 shall be carried in a separate account and shall not be used by the 
 bank in the conduct of its business unless it shall first set aside in the 
 trust department United States bonds or other securities approved by 
 the Federal Reserve Board. 
 
 In the event of the failure of such bank the owners of the funds 
 held in trust for investment shall have a lien on the bonds or other 
 securities so set apart in addition to their claim against the estate of 
 the bank. 
 
 Whenever the laws of a State require corporations acting in a 
 fiduciary capacity to deposit securities with the State authorities for 
 the protection of private or court trusts, national banks so acting 
 shall be required to make similar deposits and securities so deposited 
 shall be held for the protection of private or court trusts, as provided 
 by the State law. 
 
 National banks in such cases shall not be required to execute the 
 bond usually required of individuals if State corporations under 
 similar circumstances are exempt from this requirement. 
 
 National banks shall have power to execute such bond when so re- 
 quired by the laws of the State. 
 
 In any case in which the laws of a State require that a corporation 
 acting as trustee, executor, administrator, or in an^' capacity specified 
 in this section, shall take an oath or make an affidavit, the president, 
 vice president, cashier, or trust officer of such national bank may take 
 the necessary oath or execute the necessary affidavit. 
 
 It shall be unlawful for any national banking association to lend 
 any officer, director, or employee any funds held in trust under the 
 powers conferred by this section. Any officer, director, or employee 
 making such loan, or to whom such loan is made, may be fined not 
 more than $5,000, or imprisoned not more than five years, or may h& 
 both fined and imprisoned, in the discretion of the court. 
 
 In passing upon applications for permission to exercise the powers 
 enumerated in this subsection, the Federal Reserve Board may take 
 into consideration the amount of capital and surplus of the applying 
 bank, whether or not such capital and surplus is sufficient under the 
 circumstances of the case, the needs of the community to be served, 
 and any other facts and circumstances that seem to it proper, and 
 may grant or refuse the application accordingly : Provided, That no 
 permit shall be issued to any national banking association having a 
 capital and surplus less than the capital and surplus required by" 
 State law of State banks, trust compsinies. and corporations exercis- 
 ing such powers. 
 
TRUST AND SAYINGS DBPAETMENTS. Ill 
 
 II. APPLICATIONS. 
 
 A national bank desiring to exercise any or all of the powers 
 authorized by section 11 (k) of the Federal reserve act, as amended 
 by the act of September 26, 1918, shall make application to the Federal 
 Eeserve Board, on a form approved by said board, for a special per- 
 mit authorizing it to exercise such powers. In the case of an original 
 application — that is, where the applying bank has never been granted 
 the right to exercise any of the powers authorized by section 11 {k), 
 the application should be made on Form 61. In the case of a supple- 
 mental application — that is, where the applying bank has already 
 been granted the right to exercise one or more of the powers author- 
 ized by section 11 (A;), the application should be made on Form 61-b. 
 Both forms are made a part of this regulation and may be obtained 
 from the Federal Reserve Board or any Federal reserve bank. 
 
 III. SEPARATE DEPAETMENTS. 
 
 Every national bank permitted to act under this section shall estab- 
 lish a separate trust department, and shall place such department 
 under the management of an officer or officers, whose duties shall be 
 prescribed by the board of directors of the bank. 
 
 rv. CUSTODY OF TRUST SECUIIITIES AND INVESTMENTS. 
 
 The securities and investments held in each trust shall be kept 
 separate and distinct from the securities owned by the bank and sepa- 
 rate and distinct one from another. Trust securities and investments 
 shall be placed in the joint custody of two or more officers or other 
 employees designated by the board of directors of the bank and all 
 such officers and employees shall be bonded. 
 
 V. DEPOSIT OF FUNDS AWAITING INVESTMENT OR DISTRIBUTION. 
 
 Funds received or held in the trust department of a national bank 
 awaiting investment or distribution may be deposited in the com- 
 mercial department of the bank to the credit of the trust department, 
 provided that the bank first delivers to the trust department, as col- 
 lateral security, United States bonds, or other readily marketable 
 securities owned by the bank, equal in market value to the amount 
 of the funds so deposited. 
 
 VI. INVESTMENT OF TRUST FUNDS. 
 
 (a) Private trusts. — Funds held in trust must be invested in strict 
 accordance with the terms of the will, deed, or other instrument 
 creating the trust. Where the instrument creating the trust contains 
 
112 TRUST AND SAVINGS DEPARTMENTS. 
 
 provisions authorizing the bank, its officers, or its directors to exercise 
 their discretion in the matter of investments, funds held in trust may 
 be invested only in those classes of securities which are approved by 
 the directors of the bank. Where the instrument creating the trust 
 does not specify the character or class of investments to be made and 
 does not expressly vest in the bank, its officers, or its directors a dis- 
 cretion in the matter of investments, funds held in trust shall be 
 invested in any securities in which corporate or individual fiduciaries 
 in the State in which the bank is located may lawfully invest. 
 
 (b) Court trusts. — Except as hereinafter provided, a national bank 
 acting as executor, administrator, or in any other fiduciary capacity, 
 under appointment by a court of competent jurisdiction, shall make 
 all investments under an order of that court, and copies of all such 
 orders shall be filed and preserved with the records of the trust 
 department of the bank. If the court by general order vests a dis- 
 cretion in the national bank to invest funds held in trust, or, if under 
 the laws of the State in which the bank is located corporate fiduciaries 
 appointed by the court are permitted to exercise such discretion, the 
 national bank so appointed may invest such funds in any securities 
 in which corporate or individual fiduciaries in the State in which the 
 bank is located may lawfully invest. 
 
 Vn.. BOOKS AND ACCOTTNTS. 
 
 All books and records of the trust department shall be kept separate 
 and distinct from other books and records of the bank. All accounts 
 opened shall be so kept as to enable the national bank at any time to 
 furnish information or reports required by the Federal or State au- 
 thorities, and such books and records shall be opened to the inspection 
 of such authorities. 
 
 Vlir. EXAMINATIONS. 
 
 Examiners appointed by the Comptroller of the Currency or desig- 
 nated by the Federal Reserve Board will be instructed to make thor- 
 ough and complete audits of the cash, securities, accounts, and in- 
 vestments of the trust department of the bank at the same time that 
 examination is made of the banking department. 
 
 IX. CONFORMITY WITH STATE LAWS. 
 
 Nothing in these regulations shall be construed to give a national 
 bank exercising the powers permitted under the provisions of section 
 11 (k) of the Federal reserve act, as amended, any rights or privileges 
 in contravention of the laws of the State in which the bank is located 
 within the meaning of that act. 
 
TRUST AND SAVINGS DEPARTMENTS. 113 
 
 X. REVOCATION OF PERMITS. 
 
 The Federal Eeserve Board reserves the right to revoke permits 
 granted under the provisions of section 11 (k) , as amended, in any 
 case where in the opinion of the board a bank has willfully violated 
 the provisions of the Federal reserve act or of these regulations or the 
 laws of any State relating to the operations of such bank when acting 
 in any of the capacities permitted under the provisions of section 11 
 (k), as amended. 
 
 XI. CHANGES IN REGULATIONS. 
 
 These regulations are subject to change by the Federal Eeserve 
 Board; provided, however, that no such change shall prejudice any 
 obligation undertaken in good faith under regulations in effect at the 
 time the obligation was assumed. 
 
 114. Issuance of Permit to Exercise Trust Company Powers to 
 
 Trust Company Converting Into National Bank. 
 
 If a trust company converting into a national bank desires to have 
 the Federal Eeserve Board issue to it a permit to exercise trust 
 powers, under the provisions of section 11 {k) of the Federal reserve 
 act, simultaneously with the issue by the Comptroller of certificate 
 authorizing the commencement of business as a national bank, it is 
 essential that the trust company shall file an application with the 
 Federal Eeserve Board through the Federal reserve bank of its dis- 
 trict, at or about the same time that the application is made to the 
 Comptroller for conversion, in order that the board may determine 
 in advance whether it may properly issue the desired permit. 
 
 In a case of this character the application blank and the resolu- 
 tion of the board of directors of the applying institution should be 
 so amended as to indicate that the permit of the Federal Eeserve 
 Board is to be issued* coincidently with the issuance of the Comp- 
 troller's certificate authorizing the trust company to begin business 
 as a national bank. 
 
 115. Forms Used in Connection With the Granting op Trust 
 
 Company Powers. 
 
 The following are the forms used in connection with application 
 for and issuance of a permit by the Federal Eeserve Board to exer- 
 cise trust powers : 
 
 Note. — This application, when executed, should he mailed to the Chairman of the 
 Board of Directors of the Federal Reserve Bank of your district and will be transmitted 
 to the Federal Reserve Board by him. 
 
 District No. . State of . 
 
 APPLICATION OF NATIONAL BANK 
 
 For permission to act as trustee, executor, administrator, registrar of stocks and 
 bonds, guardian of estates, assignee, receiver, committee of estates of 
 115635—19 8 
 
114 
 
 TBUST AND SAVINGS DEPAETMENTS. 
 
 lunatics, or any other fiduciary capacity, under authority of section 11 (fc) 
 
 of the Federal reserve act, as amended by the act of September 26, 1918. 
 
 Under authority of a resolution of the board of directors of this bank, duly 
 
 adopted and spread on the minutes of a meeting held on the day of , 
 
 19—, application is hereby made for a permit to act as (specify 
 
 the powers to be exercised) or to exercise as many of these powers as the 
 Federal Reserve Board may allow. 
 
 [Seal of bank.] of , 
 
 (Name of bank.) (City or town.) 
 By , 
 
 President or Vice President. 
 
 Attest : 
 
 Secretary or Cashier. 
 
 To the Fedeeal Reserve Boaed, 
 
 Washington, D. C. 
 
 Statement of conditions as at close of business on ■ 
 
 -.19- 
 
 Name of bank . 
 
 Location (No.) (Street)- 
 
 Population of city or town (census of 1910)- 
 
 ASSETS. 
 
 -(City or town)- 
 
 -( State). 
 
 Loans : 
 
 On real estate $ 
 
 On other collateral 
 
 Unsecured — 
 
 Customers' paper 
 
 Purchased paper 
 
 Acceptances (drafts ac- 
 cepted for customers 
 
 per contract) 
 
 Investments : 
 
 United States bonds 
 
 Other bonds and war- 
 rants 
 
 Stocks 
 
 Real estate owned 
 
 Cash due from banks and 
 
 trust companies 
 
 All other assets 
 
 Total 
 
 LIABILITIES. 
 
 Capital stock 
 
 Surplus 
 
 Undivided profits 
 
 Deposits : 
 
 Due to banks and trust 
 
 companies 
 
 Demand (individual) 
 
 Savings ^ 
 
 Other time 
 
 Liability on drafts, accepted 
 payable at a future date 
 
 (per contract) 
 
 All other liabilities 
 
 Total- 
 
 BESOLUTION OP BOABD OF DIEECTOES. 
 
 At a meeting of the board of directors of the 
 
 of (City or town and State), duly called 
 
 — (Name of bank) 
 and held on the 
 
TRUST AND SAVINGS DEPARTMENTS. 115 
 
 day of , 19 — , the following resolution was offered, seconded, and 
 
 adopted : 
 
 " Whereas it is the sense of this meeting that application should be made on 
 behalf of this association to the Federal Reserve Board for a permit to act 
 
 as (Specify powers applied for) as provided in section 11 (Zc) 
 
 of the Federal reserve act, as amended by the act approved September 26, 1918. 
 
 "Now, therefore, he it resolved, That the president or vice president and the 
 cashier or secretary of this association be and they are hereby authorized, 
 empowered, and directed to make application to the Federal Reserve Board 
 
 for a permit giving to this association the right to act as (Specify 
 
 powers applied for) or to exercise as many of these powers as the Federal 
 Reserve Board may allow, under such rules and regulations as the Federal Re- 
 serve Board may prescribe." 
 
 I hereby certify that the foregoing is a true and correct copy of a resolution 
 passed by the board of directors of this association on the date specified, and 
 that the foregoing statement correctly shows the condition of this bank as: 
 shown by its books on the date indicated. 
 
 Secretary or Cashier. 
 of 
 
 (Name of bant.) (City or town.) 
 
 Note. — Powers that may be applied for under the statue are trustee, executor, ad- 
 ministrator, registrar of stocks and bonds, guardian of estate, assignee, receiver, com- 
 mittee of estates of lunatics, or In any other fiduciary capacity In which State banks, 
 trust companies, or other corporations which come Into competition with national banks 
 are permitted to act under the laws of the State in which the national bank is located. 
 
 Note. — This application, when executed, should be mmled to the Chairman of the 
 Board of Directors of the Federal Reserve Bank of your district and will be transmitted 
 to the Federal Reserve Board by him. 
 
 District No. State of 
 
 STTPPLEMENTABT APPLICATION OF NATIONAL BANK FOB ADDITIONAL FIDUCIARY 
 
 POWERS. 
 
 Under authority of a resolution of the board of directors of this bank, duly 
 
 adopted and spread on the minutes of a meeting held on the day of , 
 
 19 — .application is hereby made for a permit to act as (specify 
 
 the powers to be exercised) or to exercise as many of these powers as the Fed- 
 eral Reserve Board may allow, in addition to the right to act as 
 
 (specify powers previously granted) heretofore granted by a permit of the 
 
 board dated , 19 — . 
 
 [Seal of bank] of 
 
 (Name or bank.) (City or town.) 
 
 By 
 
 President or Vice President. 
 Attest : 
 
 Secretary or Cashier. 
 To the Federal Reserve Board, 
 
 Washington, D. C. 
 
116 
 
 TBUSX AND SAVINGS DEPAETMENTS. 
 
 Statement of condition as at close of business on 
 
 . 19—. 
 
 Name of bank 
 
 Location (No.) 
 
 (Street) 
 
 Population of city or town (census of I&IO) 
 
 (City or town) 
 
 (State). 
 
 ASSETS. 
 
 Loans : 
 
 On real estate 
 
 On other collateral 
 
 Unsecured — 
 
 Customers' paper 
 
 Purchased paper 
 
 Acceptances (drafts ac- 
 cepted for customers 
 
 per contract) 
 
 Investments : 
 
 United States bonds 
 
 Other bonds and war- 
 rants 
 
 Stockis 
 
 Real estate owned 
 
 Cash due from banks and 
 
 trust companies 
 
 All other assets 
 
 Total . 
 
 LIABIUTIES. 
 
 Capital stock 
 
 Surplus , 
 
 Undivided profits 
 
 Deposits : 
 
 Due to banks and trust 
 
 companies 
 
 Demand (individual) 
 
 Savings 
 
 Other time 
 
 Liability on drafts, accepted 
 payable at a future date 
 
 (per contract) 
 
 All other liabilities 
 
 Total - 
 
 RESOLUTION OF BOARD OF DIRECTORS. 
 
 At a meeting of the board of directors of the (name of bank) 
 
 of (city or town and State), duly called and held on the day 
 
 of , 19 — , the following resolution was offered, seconded, and adopted : 
 
 " Whereas by permit dated 
 
 -, 19 — . the Federal Reserve Board granted 
 
 to this association the right to act as ■ 
 
 (specify powers previously 
 
 granted) under authority of section 11 (fc) of the Federal reserve act; 
 
 " And whereas it is the sense of this meeting that application should be 
 made on behalf of this association to the Federal Reserve Board for a permit 
 to act as — (specify new powers applied for), as provided in sec- 
 tion 11 (fc)of the Federal reserve act, as amended by the act approved Septem- 
 ber 26, 1918 ; 
 
 " Now, therefore, be it resolved, That the president or vice president and the 
 cashier or secretary of this association be and they are hereby authorized, 
 empowered, and directed to make application to the Federal Reserve Board for 
 
 a permit giving to this association the right to act as (specify new 
 
 powers applied for), or to exercise as many of these powers as the Federal 
 Reserve Board may allow, in addition to those heretofore granted, under such 
 rules and regulations as the Federal Reserve Board may prescribe." 
 
 I hereby certify that the foregoing is a true and correct copy of a resolution 
 passed by the board of directors of this association on the date specified, and 
 
TRUST AND SAVINGS DEPARTMENTS. 117 
 
 that the foregoing statement correctly shows the condition of this bank as shown 
 by its books on the date indicated. 
 
 Secretary or cashier. 
 of 
 
 (Name of bank.) (City or town.) 
 
 Note. — Powers that may be applied for under the statute as amended are trustee, 
 executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, 
 receiver, committee of estates of lunatics, or in any other fiduciary capacity in which 
 State banks, trust companies, or other corporations which come into competition with 
 national banks are permitted to act under the laws of the State in which the national 
 bank Is located. 
 
 PERMITS ISSUED BY FEDEKAL EESEEVE BOARD. 
 
 Form of permit ivhen all powers authorized by the act are granted. 
 
 Federal Reserve Board, 
 
 Washington, D. C, , 19- — 
 
 Pursuant to authority vested in the Federal Reserve Board by the act of 
 Congress approved December 23, 1913, known as the Federal reserve act, 
 
 as amended by the act of September 26, 1918, the , has been 
 
 granted the right to act, when not in contravention of State or local law, as 
 trustee, executor, administrator, registrar of stocks and bonds, guardian of 
 estates, assignee, receiver, committee of estates of lunatics, or in any other 
 flduciary capacity in which State banks, trust companies or other corporations 
 which come into competition with national banks, are permitted to act 
 
 under the laws of the State of . The exercise of such rights shall 
 
 be subject to regulations prescribed by the Federal Reserve Board. 
 
 Federal Reserve Board, 
 
 By . 
 
 Oovernor. 
 Attest : 
 
 Secretary. 
 
 Form of permit when only a portion of the powers authorized &/; the act 
 
 are granted. 
 
 Washington, D. C, , 19 — 
 
 Pursuant to authority vested in the Federal Reserve Board by the act of 
 Congress approved December 23, 1913, known as the Federal reserve act, as 
 
 amended by the act of September 26, 1918, the . has been 
 
 granted the right to act, when not in contravention of State or local law, as- 
 
 The exercise of such rights shall be subject to regulations prescribed by the- 
 
 Federal Reserve Board. 
 
 Federal Reserve Board, 
 
 By , 
 
 Oovernor. 
 
 Attest : 
 
 Secretary. 
 
118 teust and savings depaktments. 
 
 116. Savings Department. 
 
 There is nothing in the national-bank act or the Federal reserve 
 act authorizing the operation of a savings department, and as the 
 capital, deposits, and all other funds of a national bank may be 
 loaned or otherwise invested only in conformity with the provisions 
 of law, it follows that the sole business of a savings bank which can 
 be legally transacted by a national bank is the paying of interest on 
 deposits. 
 
 The counsel for the Federal Reserve Board has rendered an 
 opinion that the Federal law relating to the establishment and opera- 
 tion of national banks is superior to and controlling over a State law 
 which might otherwise apply to or govern the operation of national 
 banks. Congress having conferred on national banks the power to 
 pay interest on time deposits, it is evident that the right to advertise 
 and solicit such savings accounts is a necessary incident to the exer- 
 cise of that power, and that no State law can interfere with its 
 exercise. 
 
CHAPTER 11. 
 
 BANKS ACTING AS INSURANCE AGENTS AND AS 
 BROKERS AND AGENTS MAKING OR PROCURING 
 LOANS ON REAL ESTATE. 
 
 117. Statutory provisions. 
 
 lis. National bank as Insurance agent. 
 
 119. Regulations governing national 
 
 banks in acting as insurance 
 agents. 
 
 120. Form for certificate covering in- 
 
 surance agency. 
 
 121. National bank as broker or agent 
 
 in making or procuring loans 
 on real estate. 
 
 122. Regulations prescribed by the 
 
 Comptroller for national banks 
 which may undertake to act as 
 agents or brokers in making or 
 procuring loans on real estate. 
 
 123. Application of bank to be per- 
 
 mitted to act as broker or agent 
 in procuring loans on real es- 
 tate. 
 
 117. Statutory Provision. 
 
 An amendment to the Federal reserve act approved September 7, 
 1916, provides: 
 
 " That in addition to the powers now vested by law in national 
 banking associations organized under the laws of the United States 
 any such association located and doing business in any place the 
 population of which does not exceed five thousand inhabitants, as 
 shown by the last preceding decennial census, may, under such rules 
 and regulations as may be prescribed by the Comptroller of the Cur- 
 rency, act as the agent for any fire, life, or other insurance company 
 authorized by the authorities of the State in which said bank is 
 located to do business in said State, by soliciting and selling insur- 
 ance and collecting premiums on policies issued by such company; 
 and may receive for services so rendered such fees or commissions as 
 may be agreeed upon between the said association and the insurance 
 company for which it may act as agent; and may also act as the 
 broker or agent for others in making or procuring loans on real 
 estate located within one hundred miles of the place in which said 
 bank may be located, receiving for such services a reasonable fee or 
 commission : Provided, however, That no such bank shall in any case 
 guarantee either the principal or interest of any such loans or assume 
 or guarantee the payment of any premium on insurance policies is- 
 sued through its agency by its principal : And provided further, That 
 the bank shall not guarantee the truth of any statement made by an 
 assured in filing his application for insurance." 
 
 119 
 
120 BANKS ACTING AS INSUEANCE AGENTS AND AS BEOKEES. 
 
 118. National Bank as Instjeance Agent. 
 
 In order to avail itself of the provisions of this act relative to 
 acting as agent for an insurance company : 
 
 (a) The bank must be located in a place the population of which 
 does not exceed 5,000 as shown by the last preceding decennial census. 
 
 (h) The insurance company for which the bank acts as agent must 
 have been authorized by the authorities of the State in which the 
 bank is located to do business in that State. 
 
 {g) The activities of the bank as such agent must be restricted to 
 the soliciting and selling of insurance and the collection of premiums 
 on policies issued by the insurance company. 
 
 (d) The bank may receive for services so rendered such lawful fees 
 or commissions as may be agreed upon between the bank and the in- 
 surance company for which it may act as agent. 
 
 (e) The bank is prohibited from assuming or guaranteeing the 
 payment of any premium on insurance policies issued, through its 
 agency, by its principal. 
 
 (/) The bank is prohibited from guaranteeing the truth of any 
 statement made by an assured in filing his application for insurance. 
 
 (g) The powers conferrred are to be exercised under such regula- 
 tions as may be prescribed by the Comptroller of the Currency. 
 
 119, Eegulations Governing National Banks in Acting as Insuk- 
 
 ance Agents. 
 
 In pursuance of the act of September 7, 1916, the Comptroller 
 prescribed the following regulations for national banks which may 
 undertake to act as agents for insurance companies : 
 
 1. Each contract of agency must be formally accepted by the 
 board of directors of the agent bank by a resolution spread upon the 
 minutes in the following form : 
 
 Be It resolved that the contract of agency entered into on , 191 — , 
 
 between the Insurance Company and the National Bank of 
 
 , by president (or vice president) and cashier, a copy of 
 
 which is on file in this bank, is hereby ratified and approved. 
 
 2. A certified copy of such resolution, attested by the president or 
 vice president and by the cashier and by a majority of the directors 
 of the bank, must be forwarded to this office on forms to be furnished 
 by this office. 
 
 3. There should be on file in the bank, available for inspection by 
 the examiner, the following documents: 
 
 (a) An authoritative statement showing the population of the 
 town according to the last preceding decennial census. 
 
BANKS ACTING AS INSUKANCE AGENTS AND AS BBOKEBS. 121 
 
 (b) A proper certificate from the authorities of the State in which 
 the bank is located showing as to each insurance company for which 
 the bank is acting as agent that such company has received authority 
 from the said State to transact business in that State. 
 
 (c) A proper certificate or other writing of each insurance com- 
 pany for which the bank acts, authorizing the bank to act as its 
 agent, setting forth that the bank does not guarantee the payment of 
 any premium on insurance policies issued through its agency by its 
 principal, and stating that the bank is not to be held responsible 
 for the truth of any statement made by an assured in filing his 
 application for insurance. 
 
 (d) Copies of all reports made by the agent bank to each insur- 
 ance company which it represents. 
 
 4. The bank will be required to keep a record as to each company 
 for which it acts as agent, showing : For fire insurance : The amount 
 of each policy, the rate and premium, date of commencement, term, 
 and date of expiration, as well as a description of property insured 
 with name of assured and to whom loss is payable. As to life insur- 
 ance : Amount and date of policy, with premium, and a statement as 
 to under what form the insurance is written, giving also name of 
 assured and beneficiary. As to any and all other forms of insur- 
 ance: The fullest possible particulars as to amounts, dates, rates, 
 premiums, and what is insured by the policy, and of collection of 
 all premiums collected for account of the company, refunds made, 
 the proportion of premium credited to the profits of the bank under 
 its agreement with the company, the proportion due the company, 
 the amounts and dates of all remittances made to the insurance com- 
 pany on account of premiums collected, and the balance, if any, 
 due from the bank to the insurance company. 
 
 5. The bank will be required to carry on its general ledger an ac- 
 count which will, at all times, show the amount due to insurance, 
 companies for which it is acting as agent, on account of premiums 
 collected but not remitted, and this liability must be shown in re- 
 ports of condition and in the published statements of the bank under 
 the heading " other liabilities — on account of insurance premiums 
 collected and not remitted," unless specifically provided for in the 
 report. 
 
 6. The bank should also keep such records as may be required by 
 each insurance company in the manner and under the forms pre- 
 scribed by the various companies; all of which should be available 
 for inspection by the examiner on request. 
 
 7. The agent bank must not assume any responsibility or liability 
 for either the adjustment, settlement, or payment of losses under any 
 policy issued by or through its agency. 
 
122 BANKS ACTING AS INSUEANCE AGENTS AND AS BEOKBES. 
 
 8. The records of all profits derived from the insurance agency 
 should be carried in a separate account on the books of the bank, 
 and the records should be so kept as to enable the examiner readily 
 to trace to the source all items of profit derived in this connection. 
 
 120. Form for Certificate Covering Insurance Agencx. 
 
 NATIONAL BANK DESIEINQ TO ACT AS AGENT FOE INSUBANCE COMPANIES. 
 
 ,19 
 
 The Comptroller of the Ourhenct, 
 
 Washington, D. O. 
 
 Sir: The (title and location of bant) being located in a town 
 
 the population of which does not exceed 5,000, as shown by the last preceding 
 
 decennial census, desires to act as agent for the Insurance Company, 
 
 under authority of section 13 of the Federal reserve act, as amended September 
 7, 1916. 
 
 Therefore, we, directors and oflScers of this bank, in conformity with the 
 rules prescribed by the Comptroller of the Currency, certify that the following 
 is a true and complete copy of resolution adopted by the directors at a meeting 
 held — and spread upon the minutes : 
 
 " Be it resolved, That the contract of agency entered into on , 19 , 
 
 between the Insurance Company and the National Bank of , 
 
 by , president (or vice president) and , cashier, a copy of which 
 
 is on file in this bank, is hereby ratified and approved." 
 Respectfully, 
 
 [SEAL OF BANK.] , 
 
 President or Vice President. 
 
 Cashier. 
 
 Directors. 
 (A majority must sign.) 
 (A certificate must be furnished to this office in connection with' each Insurance com- 
 pany for which the bank will act as agent.) 
 
 121. National Bank as Broker or Agent in Making or Procuring 
 Loans on Real Estate. 
 
 In order to avail itself of this privilege: 
 
 (a) The bank must be located in a place the population of which 
 does not exceed 5,000 as shown by the last preceding decennial census. 
 
 (6) The real estate by which the loans negotiated are secured must 
 be located within 100 miles of the place in which the negotiating 
 bank is located. 
 
 (c) The bank may receive for such services a reasonable fee or 
 commission. 
 
BANKS ACTING AS INSURANCE AGENTS AND AS BBOKEES. 123 
 
 {d) The bank shall in no case guarantee either the principal or 
 interest of any such loans. 
 
 (e) The powers conferred are to be exercised under such regula- 
 tions as may be prescribed by the Comptroller of the Currency. 
 
 122. Eegitlations Peesceibed by the Compteollee foe National 
 Banks Which May Undeetake to Act as Agents oe Beokees in 
 Making oe Peooueing Loans on Eeal Estate. 
 
 1. A bank intending to avail itself of this provision of the law 
 must adopt by its board of directors a resolution in the following 
 form: 
 
 Be it resolved. That the officers of the National Bank of — are 
 
 hereby authorized and empowered on behalf of this bank, as broker or agent, 
 to accept from customers of this bank deposits of funds to be invested for ac- 
 count of said customers, in loans secured by real estate, and to procure, as 
 broker or agent, for customers of this bank loans which shall be secured by 
 real estate, under the provisions of the act approved September 7, 1916: 
 Provided, That the investment of such funds as stated, and all such procuring 
 of loans or lending of funds for clients shall be undertaken only under written 
 instructions from the customer for whom this bank, through its officers, may 
 act as broker or agent, such written instructions in each case to be first de- 
 livered to an officer of this bank. Such instructions shall, in all cases, state 
 clearly that the bank in acting as broker or agent in no way guarantees pay- 
 ment of either the principal or interest of any loan so negotiated. 
 
 2. A certified copy of such resolution, attested by the president or 
 vice president and cashier and by a majority of the directors of the 
 bank, must be forwarded to this office, on forms to be furnished by 
 this office. 
 
 3. No bank shall charge more than one commission or brokerage 
 on the making of any loan ; that is to say, if it shall charge a broker- 
 age or commission to the party borrowing the money, it shall not 
 charge a brokerage or commission to the party to whom money is so 
 loaned, and vice versa. 
 
 4. Each bank acting under this provision of law will be required to 
 keep a record showing as to each loan negotiated by the bank — 
 
 {a) The name and address of the principal for whom the bank is 
 acting, 
 
 (&) Date of written instructions from the principal, 
 
 {c) Name and address of maker of note, 
 
 {d) Date of note, 
 
 (e) Date of maturity of note, 
 
 (/) Brief description of property securing note, showing location 
 and distance from place in which bank is located, 
 
 {g) Character of improvements, etc., 
 
124 BANKS ACTING AS INSURANCE AGENTS AND AS BEOKBKS. 
 
 (h) Name and address of party to whom note was transferred or 
 delivered by the bank, 
 
 (i) Date of such transfer or delivery, 
 
 (j) Amount of principal of note, 
 
 (k) Rate of interest or discount, 
 
 (l) Rate of commission or brokerage charged by bank for acting 
 as broker or agent, and 
 
 (m) Amount of such commission or brokerage, and whether said 
 commission was paid by borrower of the money or by the party for 
 whom it was loaned. 
 
 5. A book should be kept showing the date on which each mortgage 
 or deed of trust negotiated by the bank has been admitted to record, 
 the court in which the same is recorded, and the recordation fees paid 
 in each case. 
 
 6. The records of all profits derived from acting as broker or agent 
 in negotiating loans on real estate should be carried in a separate 
 account on the books of the bank, and the records should be so kept 
 as to enable the examiner readily to trace to the source all items of 
 profit derived in this connection. 
 
 7. Deposits of money received by the bank as broker or agent' to be 
 invested in loans secured by real estate as prescribed by law, must be 
 treated as trust funds and kept separate and apart from the other 
 assets of the bank. Such funds must in no case be permitted to pass 
 from the possession of the bank until the loan for which they are to 
 be paid out is formally accepted by or in behalf of the party for 
 whose account negotiated. 
 
 8. No bank shall advance or use its own funds in connection with 
 real estate loans negotiated as broker or agent. 
 
 9. No loans secured by real estate, which the bank has negotiated 
 as broker or agent, should become a part of the assets of the bank 
 even temporarily, unless such loans conform to the provisions of 
 section 24 of the Federal reserve act, as amended. 
 
 10. There should be available in the bank for inspection by the 
 national bank examiner — 
 
 (a) An authoritative statement showing the population of the 
 town according to the last preceding decennial census. 
 
 (5) All records pertaining to the negotiation of real estate loans 
 as broker or agent. 
 
 123. Application of Bank to be Permitted to Act as Broker or 
 Agent in Procuring Loans on Real Estate. 
 
 National banks acting as broker for the placing of loans should 
 prepare blank forms of application to be executed by applicants for 
 loans. These applications should show — 
 
BANKS ACTING AS INSUEANCE AGENTS AND AS BROKERS. 125 
 
 (a) Location of property. 
 (6) Acreage. 
 
 (c) Assessed valuation. 
 
 (d) Estimated present value. 
 
 (e) Brief descriptions of buildings thereon and estimated value of 
 them. 
 
 (/) Whether buildings are insured, and, if so, for what amounts 
 and in what companies. 
 
 (g) Whether property is already incumbered, and, if so, for what 
 amount. 
 
 (h) If property is farm property applicant should state whether 
 or not the dwelling is provided with sanitary arrangements approved 
 by the local board of health, and, if not, what sanitary arrangements 
 there are. 
 
 At the foot of this application should be printed below the signa- 
 ture of the applicant a statement to the effect that " The statements 
 in the foregoing application have been submitted to this bank by 
 the applicant for the loan, but this bank does not undertake to guar- 
 antee the correctness of any of the statements made by the applicant." 
 
 If any applicant for a loan makes statements in his application 
 which any oflScers of the bank before whom the application may come 
 may have reason to think are not correct, the attention of the appli- 
 cant should be called to the possible discrepancy. 
 
 NATIONAL BANK DESIEIN6 TO ACT AS BEOKEB OK AGENT IN MAKING OR PKOCURINQ 
 
 LOANS ON EEAL ESTATE. 
 
 , 19 . 
 
 The Comptkollee or the Ctjkeency, 
 
 Washington, D. C. 
 
 Sie: The (title and location of bank) doing business in a town 
 
 having a population which does not exceed 5,000, as shown by the last preced- 
 ing decennial census, desires to undertake the business of acting as agent or 
 broker in the making or procuring of loans on real estate, under authority 
 of section 13 of the Federal reserve act, as amended September 7, 1916. 
 
 Therefore, we, directors and officers of this bank, in conformity with the rules 
 prescribed by the Comptroller of the Currency, certify that the following is a 
 true and complete copy of resolution adopted by the directors at a meeting 
 held and spread upon the minutes : 
 
 " Be it resolved, That the officers of the National Bank of are 
 
 hereby authorized and empowered on behalf of this bank, as broker or agent, 
 to accept from customers of this bank deposits of funds to be Invested for ac- 
 count of said customers, in loans secured by real estate, and to procure, as 
 broker or agent for customers of this bank, loans which shall be secured by real 
 estate under the provisions of the act approved September 7, 1916 : Provided, 
 That the investment of such funds as stated, and all such procuring of loans or 
 lending of funds for clients, shall be undertaken only under written instructions 
 from the customer for whom this bank, through its officers, may act as brokesr 
 
126 BANKS ACTING AS INStTKANCE AGENTS AND AS BEOKBES. 
 
 or agent, such written instructions in each case to be first delivered to an officer 
 of this bank. Such instructions shall, in all cases, state clearly that the bank 
 in acting as broker or agent in no way guarantees payment of either the prin- 
 cipal or interest of any loan so negotiated." 
 Eespectfully, 
 
 [seal or BANK.] , 
 
 President or Vice President. 
 
 Cashier. 
 
 Directors. 
 (A majority must sign.) 
 
CHAPTER 12. 
 
 DEPOSITS AND REDISCOUNTS WITH FEDERAL RESERVE 
 
 BANKS. 
 
 124. Deposit of funds or of notes and 
 
 bills for collection by member 
 bank in Federal reserve bank. 
 
 125. Rediscount of notes, drafts, and 
 
 bills of exchange by Federal 
 reserve bank for member bank. 
 
 126. Acceptances and limitations 
 
 thereof— Rediscount of by Fed- 
 eral reserve bank for member 
 bank. 
 
 127. Rediscount of paper secured by 
 
 bonds or notes of the United 
 States issued since April 24, 
 1917. 
 
 128. Acceptance of drafts or bills of 
 
 exchange upon national banks 
 by banks or bankers in foreign 
 countries or dependencies of the 
 United States. 
 
 129. Purchase and discount by Federal 
 
 reserve banks of obligations se- 
 cured by bonds of War Finance 
 Corporation. 
 
 130. Loans by Federal reserve bank to 
 
 member bank. 
 
 124. Deposit of Funds or of Notes and Bills for Collection bt 
 Member Bank in Federal Reserve Bank. 
 
 (Act Dec. 23, 1913, sec. 13, as amended Sept. 7, 1916, and June 
 21, 1917.) Any Federal reserve bank may receive from any of 
 its member banks, and from the United States, deposits of current 
 funds in lawful money, national-bank notes, Federal reserve notes, 
 or checks, and drafts, payable upon presentation, and also, for collec- 
 tion, maturing notes and bills; or, solely for purposes of exchange 
 or of collection, may receive from other Federal reserve banks de- 
 posits of current funds in lawful money, national-bank notes, or 
 checks upon other Federal reserve banks, and checks and drafts, 
 payable upon presentation within its district, and maturing notes 
 and bills payable within its district; or, solely for the purposes of 
 exchange or of collection, may receive from any nonmember bank 
 or trust company deposits of current funds in lawful money, national- 
 bank notes. Federal reserve notes, checks and drafts payable upon 
 presentation, or maturing notes and bills: Provided^ Such non- 
 member bank or trust company maintains with the Federal reserve 
 bank of its district a balance sufficient to offset the items in transit 
 held for its account by the Federal reserve bank : Provided, further, 
 That nothing in this or any other section of this act shall be con- 
 strued as prohibiting a member or nonmember bank from making 
 reasonable charges, to be determined and regulated by the Federal 
 Reserve Board, but in no case to exceed 10 cents per $100 or fraction 
 
 127 
 
128 DEPOSITS AND EEDISCOUNTS WITH FBDBBAL EESBRVB BANKS. 
 
 thereof, based on the total of checks and drafts presented at any one 
 time, for collection or payment of checks and drafts and remission 
 therefor by exchange or otherwise; but no such charges shall be 
 made against the Federal reserve banks. 
 
 125. Rediscount of Notes, Drafts, and Bills of Exchange by Fed- 
 
 eral Reserve Bank for Member Bank. 
 
 (Act Dec. 23, 1913, sec. 13, as amended Sept. 7, 1916.) Upon 
 the indorsement of any of its member banks, which shall be deemed 
 a waiver of demand, notice and protest by such bank as to its own 
 indorsement exclusively, any Federal reserve bank may discount 
 notes, drafts, and bills of exchange arising out of actual commercial 
 transactions; that is, notes, drafts, and bills of exchange issued or 
 drawn for agricultural, industrial, or commercial purposes, or the 
 proceeds of which have been used, or are to be used, for such pur- 
 poses, the Federal Reserve Board to have the right to determine 
 or define the character of the paper thus eligible for discount, within 
 the meaning of this act. Nothing in this act contained shall be con- 
 strued to prohibit such notes, drafts, and bills of exchange, secured 
 by staple agricultural products, or other goods, wares, or merchan- 
 dise from being eligible for such discount ; but such definition shall 
 not include notes, drafts, or bills covering merely investments or 
 issued or drawn for the purpose of carrying or trading in stocks, 
 'bonds, or other investment securities, except bonds and notes of the 
 Government of the United States. Notes, drafts, and bills admitted 
 to discount under the terms of this paragraph must have a maturity 
 at the time of discount of not more than ninety days, exclusive of 
 days of grace: Provided, That notes, drafts, and bills drawn or 
 issued for agricultural purposes or based on live stock and having 
 a maturity not exceeding six months, exclusive of days of grace, 
 may be discounted in an amount to be limited to a percentage of the 
 assets of the Federal reserve bank, to be ascertained and fixed by the 
 Federal Reserve Board. 
 
 The aggregate of such notes, drafts, and bills bearing the signa- 
 ture or indorsement of any one borrower, whether a person, com- 
 pany, firm, or corporation, rediscounted for any one bank shall at 
 no time exceed 10 per centum of the unimpaired capital and surplus 
 of said bank; but this restriction shall not apply to the discount of 
 bills of exchange drawn in good faith against actually existing 
 values. 
 
 126. Acceptances and Limitations Thereof — Rediscount of bx 
 
 Federal Reserve Bank for Member Bank. 
 
 (Act Dec. 23, 1913, sec. 13, as amended Mar. 3, 1915, Sept. 7, 
 1916, and June 21, 1917.) Any Federal reserve bank may discount 
 
DEPOSITS AND EEDISCOUNTS WITH FEDERAL RESERVE BANKS. 129 
 
 acceptances of the kinds hereinafter described, which have a maturity 
 at the time of discount of not more than three months' sight, exclu- 
 sive of days of grace, and which are indorsed by at least one member 
 bank. 
 
 Any member bank may accept drafts or bills of exchange drawn 
 upon it having -not more than six months' sight to run, exclusive of 
 days of grace, which grow out of transactions involving the im- 
 portation or exportation of goods ; or ^Yhich grow out of transactions 
 involving the domestic shipment of goods provided shipping docu- 
 ments conveying or securing title are attached at the time of accept- 
 ance ; or which are secured at the time of acceptance by a warehouse 
 receipt or other such document conveying or securing title covering 
 readily marketable staples. No member bank shall accept, whether 
 in a foreign or domestic transaction, for any one person, company, 
 firm, or corporation to an amount equal at any time in the aggregate 
 to more than ten per centum of its»paid-up and unimpaired capital 
 stock and surplus, unless the bank is secured either by attached 
 documents or by some other actual security growing out of the same 
 transaction as the acceptance; and no bank shall accept such bills 
 to an amount equal at any time in the aggregate to more than one- 
 half of its paid-up and unimpaired capital stock and surplus: 
 Provided, however, That the Federal Reserve Board, under such 
 general regulations as it may prescribe, which shall apply to all 
 banks alike regardless of the amount of capital stock and surplus,- 
 may authorize any member bank to accept such bills to an amount 
 not exceeding at any time in the aggregate one hundred per centum 
 of its paid-up and unimpaired capital stock and surplus: Provided 
 further, That the aggregate of acceptances growing out of domestic 
 transactions shall in no event exceed fifty per centum of such capital 
 stock and surplus. 
 
 ******* 
 
 The discount and rediscount and the purchase and sale by any 
 Federal reserve bank of any bills receivable and of domestic and 
 foreign bills of exchange, and of acceptances authorized by this act, 
 shall be subject to such restrictions, limitations, and regulations as 
 may be imposed by the Federal Reserve Board. 
 
 l-Zl. Rediscount of Papers Secured by Bonds or Notes or the 
 United States Issued Since April 24, 1917. 
 
 (Act Mar. 3, 1919, amending sec. 11, Federal reserve act.) (m) 
 Upon the affirmative vote of not less than five of its members, 
 the Federal Reserve Board shall have power to permit Federal 
 reserve banks to discount for any member bank notes, drafts, or bills 
 of exchange bearing the signature or indorsement of any one bor- 
 115635—19 9 
 
130 DEPOSITS AND REDISCOUNTS WITH FEDEKAL EBSERVE BANKS. 
 
 rower in excess of the amount permitted by section nine and section 
 thirteen of this act, but in no case to exceed twenty per centum of the 
 member bank's capital and surplus:' Provided, however, That all such 
 notes, drafts, or bills of exchange discounted for any member bank 
 in excess of the amount permitted under such sections shall be secured 
 by not less than a like face amount of bonds or notes of the United 
 States issued since April twenty-fourth, nineteen hundred and seven- 
 teen, or certificates of indebtedness of the United States: Provided 
 fwrther. That the provisions of this subsection (m) shall not be, 
 operative after December thirty-first, nineteen himdred and twenty. 
 
 128. Acceptance of Drafts oe Bills of Exchange tjpon National 
 Banks bt Banks or Bankers in Foreign Countries or Dependen- 
 cies OF the United States. 
 
 (Sec. 13 of Federal reserve act as amended Sept. 7, 1913.) Any 
 member bank may accept drafts "or bills of exchange drawn upon it 
 having not more than three months' sight to run, exclusive of days 
 of grace, drawn under regulations to be prescribed by the Federal 
 Reserve Board by banks or bankers in foreign countries or de- 
 pendencies or insular possessions of the United States for the 
 purpose of furnishing dollar exchange as required by the usages of 
 trade in the respective countries, dependencies, or insular possessions. 
 Such drafts or bills may be acquired by Federal reserve banks in 
 such amounts and subject to such regulations, restrictions, and lim- 
 itations as may be prescribed by the Federal Reserve Board: 
 Provided, however, That no member bank shall accept such drafts 
 or bills of exchange referred to this paragraph for any one bank 
 to an amount exceeding in the aggregate ten per centum of the 
 paid-up and unimpaired capital and surplus of the accepting bank 
 unless the draft or bill of exchange is accompanied by documents 
 conveying or securing title or by some other adequate security: 
 Provided further. That no member bank shall accept such drafts or 
 bills in an amount exceeding at any time the aggregate of one-half 
 of its paid-up and unimpaired capital and surplus. 
 
 129. Purchase and Discount by Federal Reserve Banks of Obliga- 
 
 tions Secured bt Bonds of War Finance Corporation. 
 
 (Sec. 13, act of Apr. 5, 1918, War Finance Corporation act.) That 
 the Federal reserve banks shall be authorized, subject to the maturity- 
 limitations of the Federal reserve act and to regulations of the 
 Federal Reserve Board, to discount the direct obligations of member 
 banks secured by such bonds of the corporation and to rediscount 
 eligible paper secured by such bonds and indorsed by a member 
 bank. No discount or rediscount under this section shall be granted 
 
DEPOSITS AKD REDISCOUNTS WITH FEDERAL RESERVE BANKS. 131 
 
 at a less interest charge than one per centum per annum above the 
 prevailing rates for eligible commercial paper of corresponding 
 maturity. 
 
 130. Loans bt Federal Reserve Bank to Member Bank. 
 
 (Sec. 13 of Federal reserve act as amended Sept. 7, 1916.) Any 
 Federal reserve bank may make advances to its members banks on 
 their promissory notes for a period not exceeding fifteen days at 
 rates to be established by such Federal reserve banks, subject to the 
 review and determination of the Federal Reserve Board, provided 
 such promissory notes are secured by such notes, drafts, bills of 
 exchange, or bankers' acceptances as are eligible for rediscount or 
 for purchase by Federal reserve banks under the provisions of this 
 act, or by the deposit or pledge of bonds or notes of the United 
 States. 
 
INDEX. 
 
 Page. 
 
 Acceptances 78, 129 
 
 Acknowledgment : 
 
 organization certificate 13, 29 
 
 Amendments : 
 
 requirements relative to 71 
 
 Application : 
 
 agent or broker in making loans on real estate, application for 124 
 
 capital, application to increase 52 
 
 convert State bank Into national bank 23 
 
 organize national bank 5 
 
 trust company powers, application for 111 
 
 Appointment : 
 
 directors 14, 15 
 
 liquidating agent 99 
 
 officers of association 16 
 
 Articles of association : 
 
 amendment of, for extension of charter 65 
 
 amendment of, for reextension of charter 69 
 
 converted State banks, form of 27 
 
 form of . 11 
 
 requisites of 10 
 
 Assignment : 
 
 form of assignment of temporary certificate of stock 10 
 
 Authority : 
 
 commencement of business or charter 18 
 
 Bonds : 
 
 assigned to treasurer in trust 31 
 
 coupon may be exchanged ^ 31 
 
 exchange of 31 
 
 extension of charter, need not be transferred 68 
 
 interest on, how paid 1 31 
 
 of officers 45 
 
 procured, how 31 
 
 withdrawal of portion 32 
 
 withdrawal of, under section 18 of Federal Reserve Act 32 
 
 Branch banks : 
 
 domestic 105 
 
 foreign 107 
 
 Broker — Real estate loans : 
 
 application of bank to be permitted to act as broker or agent in pro- 
 curing loans on real estate 124 
 
 broker — when national bank may act as broker or agent In making 
 
 or procuring loans on real estate 122 
 
 regulations governing national banks acting as agent or broker in 
 
 making or procuring loans on real estate 123 
 
 statutory provisions ' 119 
 
 By-laws ; 
 
 form of 44^7 
 
 132 
 
INDEX. 133 
 
 Capital stock: Page. 
 
 impaired capital, restoration of 60-64 
 
 assessment certificate of payment of 63 
 
 notice to bank of impairment of capital 60 
 
 notice to shareholders of impairment of capital 61 
 
 resolution to restore impaired capital 62 
 
 shareholders' sale of stock of delinquent shareholders 64 
 
 increase of capital — 
 
 application to Increase capital 52 
 
 certificate of increase of capital 57 
 
 instructions for increase of capital 52 
 
 proxy for special meeting of shareholders 53 
 
 resolution of shareholders providing for increase of capital 56 
 
 shareholders' rights of, in connection with increase of capital 54t-56 
 
 dividend authority to credit dividend upon subscription to 
 
 new stock 56 
 
 subscription to new stock, form for 55 
 
 subscription to new stock, right to subscribe 55 
 
 subscription warrants 55 
 
 subscription warrants, assignment of 55 
 
 organization of national bank — 
 
 capital, minimum ; 7 
 
 cash, payment to be in : ^^ 16 
 
 certificate, form of certificate of first installment 17 
 
 certificate of stock, issuance of, to whom and when 9 
 
 certificate of stock, temporary 10 
 
 payment of capital or converted State bank, form of 29 
 
 payment of first installment 16 
 
 payment of other installments 19 
 
 payment of subscriptions, enforcement of ^ 20 
 
 reduction of capital ^7-60 
 
 instructions for reduction of capital 57 
 
 notice of meeting of shareholders 58 
 
 proxy for special meeting of shareholders 58 
 
 resolution for reduction of capital 59 
 
 Certificates : 
 
 capital impairment of, certificate covering payment of assessment 63 
 
 capital increase of, form of certificate 57 
 
 capital payment of, certificate of 17 
 
 capital payment of installments, certificate of- 19 
 
 commencement of business, comptroller's certificate authorizing 18 
 
 comptroller's certificate, publication of 18 
 
 expiration of corporate existence, certificate of 104 
 
 insurance agency, certificate covering 122 
 
 officers' and directors', before commencing business 17 
 
 stock certificates — to whom issued 14 
 
 Change of name and location : 
 
 provisions relative to 70 
 
 Charter. {See Certificate, Corporate Existence, Extension of Corporate 
 
 Existence, and Liquidation.) 
 Circulating notes : 
 
 denominations and amounts issuable 33 
 
 order for 83, 68 
 
134 INDEX. 
 
 Circulating notes — Continued. Page.. 
 
 plates, cost of 33 
 
 retirement of, under section 18, Federal Reserve Act 32 
 
 tax on 31 
 
 Collection : 
 
 deposit of bills for collection with Federal Reserve Bank 127 
 
 Commencement of business: 
 
 certificate of authority to 18 
 
 Consolidation of national banlis : 
 
 consolidation under act of Nov. 7, 1918 89-93 
 
 agreement to consolidate . 89 
 
 bonds — transfer of 93 
 
 instructions 89 
 
 resolution of shareholders 91 
 
 consolidation when one bank is placed in liquidation — instruction 94 
 
 circulation — assumption of liability for 95 
 
 Conversion of State banks : 
 
 application to convert State bank into a national bank 23 
 
 approval of application to convert. Instructions 25 
 
 articles of association 26 
 
 authority for conversion 26 
 
 certificate of payment of capital 29 
 
 directors and officers 29 
 
 examination of State bank converting 24 
 
 instructions relative to conversion of State banks into national banks 22 
 
 organization certificate 28 
 
 Corporate existence : 
 
 certificate of expiration of 104 
 
 extension of 64-69 
 
 liquidation upon expiration of 103 
 
 reextension of 1 69, 70 
 
 Cumulative voting: 
 
 not permissible 72 
 
 Deposits : 
 
 funds, notes or bills by member bank with Federal Reserve Bank 127 
 
 payment of interest on authorized 118 
 
 Directors ; 
 
 appointment of directors 34 
 
 articles of association may name board 11 
 
 articles of association must specify number 11 
 
 by-laws, general form of, to be adopted by 44 
 
 dividends, declaration of, by 36, 83 
 
 election of directors 34 
 
 examination by directors . 47 
 
 interest on deposits. Directors to receive no greater interest than 
 
 paid to other depositors 41 
 
 interlocking directorates. When forbidden 42, 43 
 
 liability of directors for assenting to excessive loans 51 
 
 liability of directors for making and publishing false reports 49, 
 
 liability of directors for mismanagement 50 
 
 liquidating agent under directors 99 
 
 loans by bank to any one person, firm, or corporation, limit of 35 
 
 number of directors 11, 34 
 
INDEX. 135 
 
 Directors — Continued. r.-vge. 
 
 oath of directors 35 
 
 officers, appointment of 34 
 
 officers, , directors are 72 
 
 Penalties — 
 
 embezzlement 38 
 
 fee or commission for making loan, penalty for taking 40 
 
 false entries 38 
 
 falsely certifying check 37 
 
 loans to national bank examiners 39 
 
 political contribution, making 89 
 
 trust funds, loan of 42 
 
 violation of provisions of National Bank act 37 
 
 violation of provisions of section 22, Federal Reserve act 41 
 
 powers of directors 34 
 
 qualifications of directors 35 
 
 quorum of 71 
 
 Securities purchase or sale to directors of securities by bank 40 
 
 shareholders' votes of, in election of directors of association 72 
 
 State banks, power and duties of, on conversion 22 
 
 term of office 35 
 
 vacancies, how filled 35 
 
 Dividends : 
 
 declaration of 36, 83 
 
 Election : 
 
 directors by shareholders 14, 72 
 
 officers by directors 16 
 
 Examinations : 
 
 directors, examination by 47-49 
 
 extension examination for 68 
 
 foreign branches examination of 108 
 
 organizing bank examination of 8 
 
 State bank converting examination of 24 
 
 trust department examination of 112 
 
 Examiners : 
 
 compensation, examiner not to perform any service for compensa- 
 tion for any bank or officer 40 
 
 embezzlement, abstraction, or willful misapplication of funds by 
 
 penalty for 38 
 
 gratuity to examiner proliibited 39 
 
 information about bank not to be disclosed by examiner without per- 
 mission of comptroller 40 
 
 loans to examiner prohibited 39 
 
 Expense : 
 
 examination, special '. 68 
 
 plates 33,67 
 
 Expiration of charter : 
 
 certificate of 104 
 
 liquidation as a result of 103 
 
 publication of notice of_, 104 
 
 Extension of corporate existence : 
 
 administrators, executors, trustees, guardians, or corporation signing 
 
 for 67 
 
 amendments for 65 
 
136 INDEX. 
 
 Extension of corporate existence Continued. Page. 
 
 attorney power of form for 66 
 
 attorney power of shareholders may authorize by 08 
 
 bonds transfer of not necessary in ease of 68 
 
 circulation, notes issuance of in case of 68 
 
 examination before 68 
 
 reextension authorized 69 
 
 shareholders owning at least two-thirds of stock must consent to 64 
 
 shareholders not consenting to be paid for their stock 68 
 
 shareholders dissenting withdrawal of 68 
 
 Shares, fractional 60 
 
 Federal Reserve Banks, deposits and rediscounts with : 
 
 acceptances and limitations thereof; rediscounts of by Federal Re- 
 serve Bank for member bank 128 
 
 acceptance of foreign drafts or bills of exchange 130 
 
 deposit of bills for collection by member bank in Federal Reserve 
 
 Bank ^ 120 
 
 deposit of funds by member bank in Federal Reserve Bank 127 
 
 deposit of notes by member bank in Federal Reserve Bank 127 
 
 Loan.s by Federal Reserve Bank to member bank 131 
 
 Rediscounts by Federal Reserve Bank for member bank 128, 129 
 
 Rediscount of paper secured by bonds or notes of the United States 
 
 issued since April 24, 1917 129 
 
 War Finance Corporation, purchase and discount by Federal Reserve 
 
 Banks of obligations secured by bonds of 130 
 
 Increase of capital — See Capital, Increase of. 
 
 Insurance agency : 
 
 certificate covering insurance agency 122 
 
 insurance agent, when national bank may act as 120 
 
 regulations governing national banks 120 
 
 statutory provisions 119 
 
 Interest : 
 
 bonds deposited, how paid , 31 
 
 deposits, interest on authorized 118 
 
 directors, interest paid on deposits of 41 
 
 rate of which may be charged 82 
 
 Lawful money to be deposited : 
 
 liquidating associations, when 96 
 
 Liquidating bank: 
 
 assumption of liability for circulation of 95 
 
 Liquidation : 
 
 agent, appointment and powers of f)9 
 
 consolidation, liquidation for 91 
 
 corporate existence, expiration of 103 
 
 instructions for 1 96 
 
 notice of 98 
 
 officers, election of 103 
 
 reports of liquidating agent, forms for lOO 
 
 resolution for 97 
 
 Loans by Federal Reserve Banks to member banks: 131 
 
 Location, change of 70 
 
 Meetings : 
 
 shareholders 72 
 
 notice of 72 
 
INDEX. 137 
 
 Minimum : - Pago. 
 
 capital stock, amount of 7 
 
 Name: 
 
 change of 70 
 
 Notice : 
 
 liquidation yg 
 
 meetings, general 72 
 
 Oath. (See Directors.) 
 Officers of association : 
 
 bonds of 45 
 
 election of 14, 15, 16, 44 
 
 proxy officer, can not act as 72 
 
 certificate of, before bank authorized to commence business 17 
 
 certificate of, form of 37 
 
 Organization of national bank : 
 
 application to organize 5 
 
 appointment of officers 16 
 
 approval of application. Instructions 8 
 
 articles of association 10 
 
 articles of association, parties to, to be natural persons 10 
 
 capital, payment of 10 
 
 capital required 7 
 
 certificate of authority to commence business IS 
 
 commencement of business 19 
 
 directors, election and oath of 14 
 
 Investigation by national bank examiner S 
 
 organization certificate — 
 
 acknowledgment of 13 
 
 association to have succession for 20 years from date of 13 
 
 execution of, in duplicate 13 
 
 form of! 13 
 
 guardian or trustee, parties to - 14 
 
 order or association, parties to 14 
 
 women, married, parties to 14 
 
 organization of national bank to succeed a State bank 20 
 
 payment of deferred installments on capital 39 
 
 promoters, no fees allowed to 5, 7 
 
 .subscriptions to stock 9 
 
 Penalties : 
 
 embezzlement 38 
 
 fee or commission for making loan, penalty for taking 40 
 
 false entries 38 
 
 falsely certifying check 37, 86 
 
 loans to national bank examiners 39 
 
 political contribution, making 39 
 
 reports, penalty for failure to make 75 
 
 violation of provisions of national bank act 37 
 
 violation of provisions of section 22 Federal reserve act 41 
 
 Plates, cost of 33, 67 
 
 Powers of national banks: 
 
 abstraction, penalty for 87 
 
 bills of exchange, acceptance of 78, 129 
 
 bonds, authority to withdraw 32 
 
138 INDEX. 
 
 Powers of national banks — Continued. Page. 
 
 bonds, withdrawal of 1 32 
 
 capital, withdrawal of, unearned dividends prohibited 85 
 
 charter, forfeiture of 88 
 
 checks, false certification of 86 
 
 Circulating notes, issuance of 33 
 
 circulating notes, use of 85 
 
 contributions, political 87 
 
 corporate powers of associations 76 
 
 depositaries of public moneys. National banking associations to be — 79 
 
 directors, individual liability of 88 
 
 dividends, declaration of 83 
 
 drafts or bills of exchange, acceptance of 78, 129 
 
 embezzlement, penalty for 87 
 
 false entries, penalties for 87 
 
 indebtedness of bank 84 
 
 insurance agent, national bank acting as 119-122 
 
 interest, rate of, which may be charged , 82 
 
 jurisdiction of suits by or against national banks 83 
 
 liabilities to an association which may be incurred by any one person, 
 
 company, etc 83 
 
 notes, issuance of uncurrent ^ 85 
 
 notes. United States not to be held as collateral 85 
 
 real estate, loans on improved 77 
 
 real estate, national bank as broker or agent in making or procuring 
 
 loans on real estate 122-126 
 
 real property, power to hold , 79 
 
 reserve requirements under section 19 of Federal Reserve act as 
 amended. Section 20 of Federal Reserve act and act of April 
 
 24, 1917 80-82 
 
 Alaska — Reserve requirements for national banks located in 
 
 Alaska or outside the continental United States 81 
 
 demand and time deposits defined. Reserve requirements 80 
 
 member bank forbidden to keep on deposit with nonmember bank a 
 sum in excess of 10 per cent of its own capital and surplus or to 
 
 secure discounts for nonmember banks 81 
 
 redemption fund not counted as reserve 82 
 
 reserve requirements for banks in reserve cities 80 
 
 reserve requirements for banks in central reserve cities 81 
 
 reserve requirements for banks not in reserve cities 80 
 
 reserve requirements — how estimated 81 
 
 United States deposits, no reserve required to be held against 82 
 
 withdrawal of reserve by member bank 81 
 
 savings department 118 
 
 stock — Loans on or purchase of own stock forbidden 84 
 
 stock — Purchase of stock in other corporations unlawful 84 
 
 trust company powers of national banks 109-117 
 
 usury, penalty for 83 
 
 violation of the national bank act, penalty for 88 
 
 willful misapplication, penalty for 87 
 
 Promoters, no fees allowed 5, 7 
 
INDEX. 139 
 
 Proxy : Page, 
 
 director, officer, clerk, teller, and bookkeeper not competent to act as_ 72 
 
 form of 72 
 
 shareholders may vote by 53, 58, 72 
 
 Publication : 
 
 certificate of authority to commence business 18 
 
 liquidation, notice of 98 
 
 meetings of shareholders 72 
 
 Qualifications : 
 
 directors of association 16 
 
 ' Rediscounts by Federal Reserve Bank for member bank 128, 129, 130 
 
 Reduction of capital. (See Capital, reduction of.) 
 
 Reextension of charter : 
 
 laws and instructions relative to 69 
 
 Reports to comptroller: 
 
 condition, report of 74 
 
 dividends, report of 75 
 
 penalty for failure to make reports 75 
 
 shareholders, lists of 74 
 
 verification of reports 75 
 
 Reserve requirements under section 19 of Federal Reserve act as amended. 
 Section 20 of Federal Reserve act and act April 24, 1917 : 
 Alaska — Reserve requirements for national banks located in Alaska 
 
 or outside the continental United States 81 
 
 demand and time deposits defined. Reserve requirements 80 
 
 member bank forbidden to keep on deposit with nonmember bank a 
 sura in excess of 10 per cent of its own capital and surplus or to 
 
 secure discounts for nonmember banks 81 
 
 redemption fund not counted as reserve 82 
 
 reserve requirements for banks in reserve cities 80 
 
 reserve requirements for banks in central reserve cities 81 
 
 reserve requirements for banks not in reserve cities 80 
 
 reserve requirements — how estimated 81 
 
 United States deposits — no reserve required to be held against 82 
 
 withdrawal of reserve by member bank 81 
 
 Savings department : 
 
 operation of 118 
 
 Shareholders : 
 
 delinquent, sale of stock of 64 
 
 disqualified from voting when 72 
 
 dissenting to extension or reextension may withdraw 68 
 
 extension of corporate existence by 64 
 
 guardians as shareholders 14 
 
 lists of, to be filed with comptroller 74 
 
 meetings of 72 
 
 proxy may vote* by 72 
 
 reextension of corporate existence by 69 
 
 rights of shareholders in connection with increase of capital 54-56 
 
 shares fractional 60 
 
 shares of shareholders dissenting from extension to be paid for 68 
 
 trustees, as shareholders 14 
 
 votes of shareholders 72 
 
 women, married, as shareholders 14 
 
140 INDKX. 
 
 State banks : Page. 
 
 conversion of 22-30 
 
 purchase of assets from 21 
 
 reorganization of, as national banlts 20 
 
 Stock subscription : ^ 
 
 suggestion relative to 9, 10 
 
 Succession : 
 
 period of 13 
 
 Surplus. (iSee also Increase of capital; Reduction of capital.) 
 
 use of, and of other profits, on increase of capital 56 
 
 Taxes : ' 
 
 circulation 31 
 
 Temporary certificate of stock: 
 
 assignment of 10 
 
 form of 10 
 
 Title : 
 
 application for reservation of 5 
 
 reservation of, for applicants 5 
 
 change of 70 
 
 Trust companies : 
 
 conversion of 22 
 
 Trust company powers of national bank 
 
 Application of national bank 113 
 
 Application (supplementary) of national bank 115 
 
 Issuance of permit ; instructions 113 
 
 Loans of trust funds to directors, etc 42, 110 
 
 Permit issued by Federal Reserve Board 117 
 
 Regulations of Federal Reserve Board — 
 
 Applications 111 
 
 Books and accounts 112 
 
 Custody of trust securities and investments 111 
 
 Departments, separate 111 
 
 Deposit of funds awaiting investment or distribution 111 
 
 Examinations 112 
 
 Investment of trust funds 111 
 
 Permits, revocation of 113 
 
 Regulations, changes in 113 
 
 State laws, conformity with 112 
 
 Statutory provisions 109 
 
 Voluntary liquidation — see Liquidation. 
 Voting : 
 
 Elections and voting at meetings of shareholders 72 
 
 War Finance Corporation : 
 
 purchase and discounts by Federal Reserve Bank of obligations se- 
 cured by bonds of 130 
 
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