(f) Additional procedural steps are necessary where the new bank contemplates exercising fiduciary powers. In such case it is necessary for the bank to obtain a permit from the Board of Governors of the Federal Reserve System and this office must be notified that such permit has been granted, as a condition precedent to the issuance of a charter.

(g) Upon issuance of a charter, the Federal Deposit Insurance Corporation is informed that the requirements of law have been complied with and that the designated bank has been authorized to commence business as of a specified date.

§ 4.2 Supervision of financial institution. (a) By statute, each national bank must be examined not less than twice a year, except that the Comptroller, in the exercise of his discretion, may waive one such examination not more frequently than once during any twoyear period, and except that the trust departments of banks having fiduciary powers need not be examined more than once a year. The examinations are made by national bank examiners operating under a District Chief Examiner, of whom there are twelve, one for each Federal Reserve district. The report of examination is submitted to the District Chief Examiner, and by him to the Washington office, where it is analyzed in the Examination Division. Supervisory action is taken by the Comptroller or one of his Deputy Comptrollers on the basis of the information thus obtained.

(b) In the Fifth Federal Reserve District, the Comptroller's supervisory powers extend to state banks located and doing business in the District of Columbia.

[11 F. R. 177A-14, Sept. 11, 1946, as amended at 23 F. R. 9690, Dec. 16, 1958]

§ 4.3

Conversions of state banks into national banks.

(a) A state bank desiring to convert into a national bank is requested to execute an application to convert a state bank into a national banking association (Form 1988). It is similar in substance to the application for organization of a new national bank but must be executed by the directors of the state bank. When this form, properly executed, is received, the District Chief Examiner is directed to make an examination of the applicant bank, taking into consideration the fac

tors which would be considered on the application for the creation of a new national bank, and in addition the factor of the financial history and condition of the state bank. Generally, the appropriate Federal Reserve bank is consulted and, in addition, if the state bank is not a member of the Federal Reserve System, the Federal Deposit Insurance Corporation is consulted.

(b) When the report and other data are received, they are analyzed, briefed, and routed in the same manner as in the case of an application for a national bank charter.

(c) If the decision is unfavorable the state bank is so notified. If the decision is favorable the bank is furnished with: (1) A suggested resolution to be passed by the shareholders of the state bank authorizing the conversion (Form 1945, No. 2); (2) Standard Articles of Association for a national bank formed by the conversion of a state bank (Form 1945), which are substantially the same as the articles of association in the case of a new national bank; (3) the organization certificate for a converting bank (Form 1947), which is substantially the same as the organization certificate in the case of a new national bank; (4) the required oaths of directors (Form 1900), the same form as in the case of a new national bank; (5) the form (Form 1902) on which appear the official signatures of the officers of the bank and the dates of their appointment; (6) the certificate (Form 1919), which certifies that the converting bank has a paid-in and unimpaired capital of a certain specified amount; (7) Standard Bylaws (Form 2054) identical with those forwarded to new national banks; (8) an outline of the general procedure to be followed in executing and submitting the papers mentioned in this paragraph, and a letter reciting any conditions which must be complied with before authorization to begin business as a national bank. There are many variations to these conditions, dependent upon circumstances in each case; hence no standard form is possible.

(d) Upon receipt of the forms, properly executed, and approval thereof, the Comptroller issues to the applicant bank a Charter (Form 1998), which is substantially the same as in the case of a new bank and authorizes the bank to commence the business of banking as a national banking association on a specified date. This charter is forwarded to the

bank, accompanied by an Affidavit of Publication of Charter (Form 1951) and a form letter to be returned to the Comptroller advising him that the bank did commence the business of banking as a national bank on the date specified.

(e) There may be additional procedural steps in certain cases of conversions where, for instance, the converted bank will have branches, in which case a formal approval of the operation of the specific branches is forwarded to the bank, or where there is an increase in capital or change of location coincidental with the conversion, necessitating specific approval of this office. If the state bank was not insured by the Federal Deposit Insurance Corporation, that Corporation is notified that the bank has been authorized to commence the business of banking as a national bank and that consideration was given to the applicable statutory requirements.

(f) If the state bank was exercising fiduciary powers and contemplates continuing such activity as a national bank, it must obtain a permit so to do from the Board of Governors of the Federal Reserve System, and the Comptroller must be notified that such permit has been issued, as one of the conditions for authorizing the bank to commence the business of banking as a national bank.

§ 4.4

Consolidation of national banks, and state and national banks.

(a) of necessity, consolidations are handled on a case-by-case basis. The Bureau assists the banks concerned in formulating a plan of consolidation and drafting a consolidation agreement. Where one of the consolidating banks is a state bank, it is examined by a national bank examiner. When the consolidation agreement has been agreed to by the board of directors of each bank, it is submitted to the Comptroller. The plan is analyzed and briefed by the Organization Division and routed in the same manner as an application for a charter.

(b) If the decision of the Comptroller is unfavorable, the banks are so notified. If the decision of the Comptroller is favorable, the consolidating banks are advised of any conditions precedent to final approval, as, for instance, the concurrence of the Federal Deposit Insurance Corporation if any of the consolidating banks are uninsured.

(c) When the consolidation agreement has been executed by the boards of direc

tors of the consolidating banks, one executed copy thereof is submitted to the Comptroller. The banks are furnished with instructions as to the procedure to be followed in obtaining the consent of their shareholders, together with suggested forms of notice to shareholders. When the plan has been approved by the shareholders of the consolidating banks, certified copies of their resolutions are submitted to the Comptroller, together with, among other things, a copy of the form of proxy used by each bank, a copy of the notice of meeting given to the shareholders of each bank by registered mail with advice of the date when same was mailed, and a copy of any other letter which may have been sent to the shareholders of each bank relating to the proposed consolidation. Proof of publication of notices of meetings of the shareholders is required. Also, each bank must certify the amount of its contribution to the capital structure of the consolidated bank.

(d) When the documents referred to in paragraphs (a), (b), and (c) of this section, properly executed, are submitted to the Comptroller along with proof of compliance with any conditions imposed by him, he issues a certificate certifying that the named banks have been consolidated under the charter of one of said national banks and under the title specified. The certificate recites the amount of capital stock and the date when the consolidation is to be effective.

(e) There are additional procedural steps in some cases, as where the consolidated bank will operate branches formerly operated by one of the consolidating banks or will establish new branches, in which cases formal approval by the Comptroller is necessary. In addition, the rights of dissenting shareholders are protected in accordance with specific statutory procedure.

§ 4.5 Authorizing branches and seasonal agencies.

(a) Branch banks. (1) Under the provisions of R.S. 5155, as amended; 12 U.S.C. 36, national banks may, subject to the approval of the Comptroller of the Currency, establish and operate branches and seasonal agencies. Upon receipt of an application form a national bank or any bank operating in the District of Columbia, for a branch or seasonal agency, the appropriate District Chief Examiner is instructed to make an

investigation, taking into consideration the financial history and condition of the bank, the adequacy of its capital structure, its future earnings prospects, the general character of its management, the number of branches now in operation and their location, the proposed location of the new branch and the distance from the head office, the nearest banking facilities, the convenience and needs of the communitey to be served by the new branch, the nature of the potential clientele and possible business available, including an estimate of contemplated volume within a reasonable period of time and the prospects of successful operation of the branch, together with any other pertinent factors.

(2) The examiner's report is subImitted to the District Chief Examiner who forwards it to this office with his own comments and recommendation. The information and data is analyzed, briefed and routed in the same way as an application for a charter.

(3) If the decision is unfavorable the applicant bank is so notified. If the decision is favorable the Comptroller issues a formal certificate evidencing his approval and consent to the establishment and operation of a branch bank at the designated location.

or

(b) Removal of branch banks branch offices. A branch of a national banking association may not be moved from one location to another without first obtaining the consent and approval of the Comptroller. The procedure for obtaining consent to such a moving of the location of a branch follows the same general course as that of the application for a branch, although the information required on any investigation made will vary with the circumstances and reasons given for the proposed move. If the approval is granted the Comptroller executes a formal statement to that effect, which is forwarded to the bank applying therefor.

§ 4.6 Changes in capital structure.

Under the provisions of R. S. 5142, as amended, 24 Stat. 18, R. S. 5143, as amended; 12 U. S. C. 57-59, increases and decreases in the capital stock of banks under the Comptroller's jurisdiction are subject to his approval.

(a) Increases and decreases in capital. Upon receipt of an application to increase or decrease capital stock, the Organization Division prepares an anal

ysis of the condition of the bank, which is routed through the staff as in the case of an application for a charter. If the proposed capital change is disapproved, the bank is so notified. If the plan is approved, the bank is furnished with the necessary forms and instructions, including the notice to shareholders, proxies, resolution, and, in the case of issuance of new stock, the form of certificate. If new stock is to be sold for cash, the bank is also furnished with a form of certificate of payment, which is in substance a letter addressed to the Comptroller, signed by the president or cashier of the bank, certifying that the specified amount of the increase in capital stock has been paid in at the specified purchase price and reciting the aggregate par value of the common capital stock outstanding, including the increase. If the increase is to be achieved by the declaration of a stock dividend, the certification form to be signed by the president or cashier varies accordingly. In the case of reductions of capital stock, the disposition to be made of the capital released by the reduction is subject to the approval of the Comptroller, under the provision of R. S. 5143, as amended; 12 U. S. C. 59.

(b) Preferred stock. (1) Section 301, 48 Stat. 5, as amended: 12 U. S. C. 51a, authorizes national banks to issue preferred stock, with the approval of the Comptroller. The procedure is similar to that in the case of an increase of capital stock by the sale of common stock, with variations appropriate to the status of the preferred stock, and the rights of the prospective purchasers thereof.

(2) The retirement of preferred stock held by national banks is achieved under the general supervision of this office, and in cooperation with the Reconstruction Finance Corporation, where that Corporation is the owner of the stock or is otherwise interested financially in the particular bank.

§ 4.7 Changes of name or location.

Under sec. 2, 24 Stat. 18; 12 U.S.C. 30, a change in name or location of a national bank requires the approval of the Comptroller. Upon receipt of an application for such a change, an investigation is made to ascertain whether there would be any objections thereto, such as undue similarity of the proposed new name to the name of any other bank in the vicin

ity. These findings are briefed in the Organization Division and routed in the same manner as application for changes in capital. If the application is approved, the bank is furnished with necessary instructions for calling a meeting of shareholders and having the appropriate resolution adopted. When informed that the shareholders have adopted the resolution, the Comptroller issues a certificate of change of name or location, as the case may be.

§ 4.8 Reports of condition.

(a) Commercial department reports. Under the provisions of R.S. 5211, as amended; 12 U.S.C. 161, every national bank is required to submit to the Comptroller not less than three reports during each year according to the form prescribed by him. Each report must exhibit in detail the resources and liabilities of the bank at the close of business on any past day specified by the Comptroller and must be submitted within five days after receipt of the Comptroller's request therefor. These forms (Form 2130-A and Form 2130-A (short form)) call for statements of assets, liabilities, pledged assets and capital accounts; schedules of loans and discounts, United States Government obligations held, cash balances with other banks, demand deposits, time deposits, contingent liabilities, other liabilities, and other assets; and a statement of the affiliates and holding company affiliates of the bank. When these report forms are sent out to the banks they are accompanied by instructions (Form 2130-C) which cover the forms item by item and schedule by schedule. The bank is also furnished with the form of publisher's certificate (Form 2139) of publication of the report of condition of the bank, which must be published in accordance with the provisions of R.S. 5211, as amended; 12 U. S. C. 161.

(b) Trust department reports. Each national bank which exercises fiduciary powers is required annually to submit Form 2130-D, reflecting the balance sheet of its trust department as of the date specified.

(c) Affiliate reports. Each national bank which has affiliates (including holding company affiliates), as defined by statutes, must accompany each report of condition of the bank on Form 2130-A with a report (Form 2131) of its loans

and advances to affiliates and loans secured by obligations of affiliates. At the same time, each affiliate must file Form 2130-E, which shows the nature of the affiliation, its financial relations with the bank, and the degree of control of the affiliate by the bank or of the bank by the affiliate. However, such reports may be waived by the Comptroller. Where reports by affiliates on Form 2130-E are required, there must be the same publication of those reports on Form 2130E-1 as is required in the case of the bank's reports of condition. The instructions for the preparation of reports of affiliates on Forms 2130-E and 2130E-1 are contained in Form 2130-E-2.

§ 4.8a

Procedures applicable to applications received by the Comptroller of the Currency.

(a) This section shall apply to applications for approval by the Comptroller of the Currency of new charters, branches, mergers, consolidations, purchases of assets, assumptions of liabilities, change of name or location, and conversions from state to national banks. Notice of all such applications received shall be published weekly in a Bulletin issued by the Comptroller of the Currency.

(b) With respect to any such application or any aspect thereof, the comptroller of the Currency, in his sole discretion, either upon request of any interested person or otherwise, may order a public hearing. Public hearings ordered by the Comptroller shall be held at the time and place fixed by him, and shall be conducted by the Comptroller, a Deputy Comptroller, or such other person as the Comptroller may designate. At any such hearing, any interested person may be permitted to submit any testimony, evidence, data or other material pertinent to the pending application. The officer conducting the hearing shall have authority to determine who may appear, the order of appearance, what testimony, evidence, data, or other material offered by any person shall be received, and all other procedural matters arising during the course of, or otherwise in connection with, any hearing.

(c) No person shall be deemed to have become a party to any matter pending before the Comptroller solely because of being permitted to appear or to submit testimony, evidence, data or other mate

rial at a hearing held pursuant to this section.

(d) Hearings ordered by the Comptroller pursuant to this section are not required by statute and shall not be subject to the provisions of the Administrative Procedure Act. Nothing in this section shall be deemed to require the holding of a hearing on any matter subject to the jurisdiction of the Comptroller, nor shall the validity of the Comptroller's decision on any such matter be affected because a hearing was not held, whether or not such a hearing was requested by any person, nor by the procedures adopted at any such hearing.

(e) Decisions of the Comptroller on all matters committed by law to his discretion shall be made on the basis of information developed by him through investigation, hearings, or otherwise, and in the light of national aims and policy. All such decisions of the Comptroller shall be final and binding on all persons. (f) All decisions of the Comptroller on applications subiect to the provisions of this section shall be published weekly in a Bulletin issued by the Comptroller of the Currency.

[26 F.R. 11353, Dec. 1, 1961]

§ 4.9 Reports of earnings and dividends. Under the general power conferred upon the Comptroller under R.S. 5211, as amended; 12 U.S.C. 161, to call for special reports, the Comptroller requires that reports of earnings and dividends for the six months ending June 30 be submitted on Form 2129, and for the six months and twelve months ending December 31 on Form 2129-1. These reports recite the dividends declared in the current period, the capital structure of the bank, the earnings from current operations, current operating expenses, recoveries and profits, losses and chargeoffs and taxes on net income as well as undivided profits at the beginning of the period, net profits for current period, credits to undivided profits and deductions from undivided profits. The above two forms are accompanied by instructions contained in Form 2129-A. There is also required of banks a formal notification to the Comptroller of dividends declared, pursuant to R. S. 5212; 12 U. S. C. 163, on Form 2133 (or Form 2133-A, where retirement of preferred stock is involved).

§ 4.10 Reports from financial institutions in the District of Columbia sub

ject to the supervision of the Comptroller.

(a) Nonmember banks. Under the provisions of section 26-102 of the District of Columbia Code (1940) each bank and trust company doing business in the District of Columbia and not a member of the Federal Reserve System, must maintain reserves on the same basis and subject to the same conditions as prescribed for national banks located in the District of Columbia, except that such reserves must be established and maintained at such agency as may have the approval of the Comptroller. Form F2150-1 covers a report by such institutions of net deposits and reserves required. These reports are submitted weekly. The institutions where the reserve funds are held also furnish this office with weekly reports of the reserves held, on Form F-2150-2.

(b) Pledge of assets. Financial institutions in the District of Columbia doing a fiduciary business must pledge assets with the Comptroller for the faithful performance of their duties.

[11 F. R. 117A-14, Sept. 11, 1946, as amended at 23 F. R. 9691, Dec. 16, 1958]

§ 4.11 Miscellaneous procedures.

(a) In connection with the annual meetings which national banks are required by statute to hold, this office forwards general instructions furnishing information regarding the manner in which such meetings should be called, the use of proxies, the voting rights of owners of stock and limitations thereon, the procedure for the meeting, the record of proceedings, the subsequent organization meeting of directors elected, and the annual meeting reports to be submitted to the Comptroller.

(b) Under R. S. 5240, as amended; 12 U. S. C. 481, the Comptroller has the power to make such examinations of affiliates of national banks as shall be necessary to disclose the relations between such banks and affiliates.

§ 4.12 Voluntary liquidations.

(a) A national bank wishing to go into voluntary liquidation under R.S. 5220, as amended; 12 U. S. C. 181, is furnished with a set of instructions as to the procedure to follow, a form of notice of meeting of shareholders, a proxy to be used for