of a Mortgage Investment Fund, such moneys may be invested temporarily in obligations of the United States or of the State in which the bank is located or for the payment of the principal and interest of which the faith and credit of the United States or of such State shall be pledged, and which are legal for investment of trust funds under the laws of the State in which the bank is located. As soon as obligations secured by real estate in which the moneys of the Mortgage Investment Fund may be invested are available, such securities shall be disposed of and the proceeds invested in such obligations if this can be accomplished without disadvantage to the Mortgage Investment Fund.

(9) Management of mortgage investment fund and fees. Each Mortgage Investment Fund shall be subject to the provisions of paragraph (c) (8) of this section.

(10) Effect of mistakes. Each Mortgage Investment Fund shall be subject to the provisions of paragraph (c) (9) of this section.

of the Office of the Comptroller of the Currency and no provision of the regulations in Parts 10, 11 and 12 of this chapter is intended to confer any private right of action on any stockholder or other person against a national bank. $ 10.3 Information to be furnished stockholders.

The Annual Report shall bear the written, printed or facsimile signature of the chairman of the board, president or other executive officer of the bank and shall include, as a minimum, the following information:

(a) Comparative balance sheets as of the close of the last calendar or fiscal year and as of the close of the preceding calendar or fiscal year.

(b) Comparative statements disclosing net operating income after applicable federal income taxes, net operating income per share, and cash dividends paid per share for the last calendar or fiscal year and the preceding calendar or fiscal year.

(c) A comparative reconciliation of capital accounts which summarizes the changes in the capital accounts for the last calendar or fiscal year and the preceding calendar or fiscal year.

§ 10.4 Report to be filed.

A copy of the annual report shall be kept on file at the main office of the bank for the inspection of the examiner at any regular or special examination.

PART 11-SOLICITATION OF PROXIES

AUTHORITY: §§ 10.1 to 10.4 issued under R.S. 324 et seq., as amended; 12 U.S.C. 1 et seq.

SOURCE: $ 10.1 to 10.4 appear at 27 F.R. 12811, Dec. 28, 1962.

holders.

11.4

11.5

§ 10.1 Scope and application.

Every national banking association with deposits of $25,000,000 or more at the close of the preceding calendar year shall furnish to each of its stockholders not later than 60 days after the close of such calendar year a written report containing as a minimum the financial and other information called for by this regulation.

§ 10.2 No private right of action hereunder.

The enforcement of Parts 10, 11 and 12 of this chapter shall be a function solely

Material required to be filed.
Examination of proxy statements.

11.6 Special circumstances.

Schedule A.

Schedule B.

AUTHORITY: §§ 11.1 to 11.6 issued under R.S. 324 et seq., as amended; 12 U.S.C. 1 et seq. SOURCE: §§ 11.1 to 11.6 appear at 27 F.R. 12812, Dec. 28, 1962.

§ 11.1 Scope and application.

The rules contained in this part apply to every solicitation of a proxy with respect to stock of a national banking association which has total deposits of

(a) The term "principal officer" as used in this Part 11 means any officer who received in salary from the bank $35,000 or more during the calendar year preceding the meeting for which proxies are being solicited.

(b) (1) The terms "solicit" and "solicitation" include:

(i) Any request for a proxy whether or not accompanied by or included in a form of proxy;

(ii) Any request to execute or not to execute, or to revoke, a proxy; or

(iii) The furnishing of a form of proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy. (2) The terms do not include:

(i) Any solicitation by a person in respect of stock of which he is the beneficial owner;

(ii) The action of a broker or other person in respect to stock carried in his name or in the name of his nominee, in forwarding to the beneficial owner of such stock, soliciting material received from the bank, or impartially instructing such beneficial owner to forward a proxy to the person, if any, to whom the beneficial owner desires to give a proxy, or impartially requesting from the beneficial owner instructions as to the aut thority to be conferred by the proxy and stating that a proxy will be given if the instructions are received by a certain date.

(c) The term "person" as used in this Part II is not limited to natural persons, but also includes corporations, partnerships, pension funds, profit-sharing funds and any other organization of whatever nature.

§ 11.3 Information to be furnished stockholders.

(a) No solicitation subject to this part shall be made unless each person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the applicable information specified in Schedules A and B.

(b) Means shall be provided in the form of proxy whereby the person solicited is afforded an opportunity to specify a choice between approval or dis

approval of each matter or group of related matters referred to therein as intended to be acted upon. The proxy may provide that if the signer does not indicate a choice, the shares represented thereby will be voted in favor of the matters set forth therein.

(c) A proxy may confer discretionary authority with respect to matters which may come before the meeting other than those matters listed in the notice of meeting and proxy statement, provided that the persons on whose behalf the solicitation is made are not aware, a reasonable time prior to the time the solicitation is made, that any such other matters are to be presented for action at the meeting, and provided further that a specific statement to that effect shall be made in the proxy statement or in the form of proxy.

(d) No proxy shall confer authority (1) to vote for the election to any office for which a proposed nominee is not named in the proxy statement, or (2) to vote at any meeting other than the next meeting (or any adjournment thereof) to be held after the date on which the proxy statement and form of proxy are first sent or given to stockholders.

(e) Any person or group of persons, including directors or attorneys for the bank may be designated to act as proxy but not officers, clerks, tellers or bookkeepers of the bank.

SCHEDULE A

Item 1. Amount of oustanding stock and principal holders thereof. (a) State the total number of shares of each class outstanding and the number of shares of each class entitled to vote.

(b) State the date as of which the list of stockholders entitled to vote at the meeting will be determined. If the right to vote is not limited to stockholders of record on that date, indicate the conditions under which other stockholders may be entitled to vote. Item 2. Nominees for directors. If action is to be taken with respect to the election of directors, furnish the following information, to the extent practicable, with respect to each person nominated for election as a director.

(a) Name each such person, state his age and the principal office, if any, with the bank presently held by him.

(b) State his present principal occupation or employment.

If the Articles of Association permit the board of directors to increase the number of directors between stockholders' meetings and fill vacancies created thereby, state the number of vacancies which may be so filled.

Item 3. Remuneration of management. If directors are to be elected at the meeting in question, furnish the following information as to all direct remuneration paid by the bank during the last calendar year to the following persons for services in all capacities:

(a) The direct aggregate remuneration paid to all principal officers of the bank as a group, without naming them.

(b) The amount set aside or accrued during the last calendar year for all pension or retirement benefits to be paid under an existing plan in the event of retirement with respect to all principal officers as a group, without naming them, except where the amount so set aside or accrued is computed on an actuarial basis under any plan which provides for fixed benefits in the event of retirement at a specified age or after a specified number of years of service.

SCHEDULE B

Item 4. Bonus, profit sharing, and other remuneration plans. If action is to be taken with respect to any bonus, profit sharing, or other remuneration plan, furnish the following information:

(a) Describe briefly the material features of the plan, identify each class of persons who will participate therein, indicate the approximate number of persons in each such class, and state the basis of such participation.

(b) State separately the amounts which would have been distributable under the plan during the last calendar year to (1) directors and principal officers as a group, and (2) to all other employees as a group, if the plan had been in effect.

(c) If the plan to be acted upon may be amended otherwise than by a vote of stockholders to materially increase the cost thereof to the bank or to materially alter the allocation of the benefits as between the groups specified in paragraph (b), state the nature of the amendments which may be so made.

Item 5. Pension and retirement plans. If action is to be taken with respect to any pension or retirement plan, describe briefly the material features of the plan with an indication of the estimated cost of funding past services and the estimated annual payments with respect to current services.

Item 6. Options, warrants, and rights. If action is to be taken with respect to the granting or extension of any options, warrants, or rights to purchase stock of the bank, other than warrants or rights issued to all stockholders on a pro rata basis, furnish the following information:

(a) State (1) the title and amount of stock called for or to be called for by such options, warrants, or rights; (2) the prices, expiration dates, and other material conditions upon which the options, warrants, or rights may be exercised; and (3) the market price of the stock called for or to be called for by the options, warrants, or rights as of the latest practicable date.

(b) If known, state separately the amount of stock called for or to be called for by options, warrants, or rights received or to be received by the following persons, naming each such person: (1) each director of the bank or each nominee for election as a director of the bank, and (2) each other person who will be entitled to acquire 5 percent or more of the stock called for or to be called for by such options, warrants, or rights. If known, state also the total amount of the stock called for or to be called for by such options, warrants, or rights received or to be received by all directors and principal officers of the bank as a group, without naming them.

Item 7. Authorization or issuance of securities. If action is to be taken with respect to the authorization or issuance of any security, furnish the following information:

(a) State the title and amount of securities to be authorized or issued.

(b) If the securities are other than additional shares of common stock of a class outstanding, furnish the applicable information with respect to (1) dividend rights, (2) voting rights, (3) liquidation rights, (4) pre-emptive rights, (5) conversion rights, (6) redemption provisions, (7) sinking fund provisions, (8) interest rate and (9) maturity.

Instruction: This item requires only a brief summary of the provisions. A complete legal description of the provisions referred to is not required and should not be given. It is not necessary to set forth the provisions of the governing instruments verbatim; only a succinct resume is required

(c) If the securities to be authorized or issued are other than additional shares of common stock of a class outstanding, the Comptroller may require financial statements comparable to those contained in the Annual Report prescribed in 12 CFR Part 10 to be furnished.

Item 8. Amendment of Articles of Association. If action is to be taken with respect to any amendment of the Articles of Association, or other organizational instrument as to which information is not required above, state briefly the reasons for and general effect of such amendment and the vote needed for its approval.

Item 9. Mergers, consolidations, acquisitions, and similar matters. If action is to be taken with respect to a merger, consolidation, acquisition, or similar matter, furnish such information as the Comptroller may prescribe in the instructions to the appropriate form of application for the Comptroller's approval of the transaction concerned.

Item 10. Other proposed action. If action is to be taken with respect to any matter not specifically referred to above, describe briefly the substance of each such matter, and the vote needed for its approval.

(a) On and after the date hereof, each national bank shall promptly notify the Comptroller of the Currency whenever a change occurs in the ownership of its outstanding voting stock of sufficient magnitude to effect a change in control of the bank. It shall be the duty of the president or other chief executive officer of the bank to submit such a report whenever he has reason to believe that such a change has taken place. If there is any doubt concerning whether a particular change in ownership is sufficient to effect a change in control, such doubt shall be resolved in favor of submitting a report to the Comptroller. The report shall be in letter form and shall contain the number of shares involved, the identity of the sellers and purchasers of record, the identity of the beneficial owners of the shares involved, if such information is known to the reporting officer, the purchase price if known to the reporting officer, the total number of shares owned by the sellers and purchasers of record both immediately prior to and after the transaction being reported and the total number of shares

AUTHORITY: §§ 13.1 to 13.3 issued under R.S. 324 et seq., as amended; 12 U.S.C. 1 et seq.

SOURCE: §§ 13.1 to 13.3 appear at 27 F.R. 12813, Dec. 28, 1962.

§ 13.1 Scope and application.

Any national banking association may grant options to purchase, sell, or enter into agreements to sell shares of its capital stock to its employees, for a consideration of not less than 100 percent of the fair market value of the shares on the date the option is granted or, if pursuant to a stock purchase plan, 85 percent of the fair market value on the date the purchase price is fixed, pursuant to the terms of an employee restricted stock option plan or employee stock purchase plan which has been adopted by the board of directors of the bank and approved by the holders of at least two-thirds of the outstanding shares of the bank entitled to vote and by the Comptroller of the Currency. Stock options issued hereunder shall not extend beyond a period of ten years from date of issuance and shall otherwise qualify as restricted stock options under section 421 of the Internal Revenue Code of 1954, as it may be amended from time to time.

§ 13.3

Terms and procedure. Employee stock options and stock purchase agreements may provide that options may be exercisable or that shares may be purchased on any business day. A notorized notice specifying the number of shares issued pursuant to option and stock purchase plans and the amount paid in therefor shall be executed by the president, vice president or cashier of the bank and filed with the Comptroller not later than the tenth day of the following month and no stock shall be deemed validly issued until the Comptroller has issued his certificate specifying the amount of stock so purchased, the purchase price thereof having been duly paid into the capital of the bank, and his approval thereof.

The Comptroller of the Currency will not hereafter rely on the ratios of capital to risk assets and to total deposits in assessing the adequacy of capital of national banking associations. These formulae, although of some value in assessing capital adequacy, do not take into account other factors of equal or greater importance. Henceforth, the capital position of the bank will be analyzed and appraised in relation to the character of its management and its asset and deposit position as a going institution under normal conditions, with due allowance for a reasonable margin of safety, and with due regard to the bank's capacity to furnish the broadest service to the public. These factors, which are necessarily imprecise, cannot be directly interpolated into any specific formula. The following factors will be considered by the Comptroller in assessing the adequacy of capital:

(a) The quality of management; (b) The liquidity of assets; (c) The history of earnings and of the retention thereof;

(d) The quality and character of ownership;

(e) The burden of meeting occupancy expenses;

(f) The potential volatility of deposit structure;

(g) The quality of operating procedures; and

(h) The bank's capacity to meet present and future financial needs of its trade area, considering the competition it faces.

§ 14.2

Authorized but unissued stock.

Any national banking association, with the approval of the Comptroller and by vote of stockholders owning two-thirds of the stock of the bank entitled to vote, may authorize an increase in the common stock of the bank in the category of authorized but unissued stock. Such authorized but unissued stock may be issued from time to time to employees of the bank pursuant to a stock option or stock purchase plan adopted in accordance with Part 13 of this chapter, or in exchange for convertible preferred stock or convertible capital debentures in accordance with the terms and provisions of such securities. Authorized but unissued stock may also be issued from time to time for such other purposes and considerations as may be approved by the board of directors of the bank, and by the Comptroller.

(a) It is the policy of the Comptroller of the Currency not to discourage the retention of earnings by national banking associations in the form of stock dividends. Accordingly, stock dividends, whether on a recurring or nonrecurring basis, will not be subject to disapproval, except in rare or unusual circumstances.

(b) Subject to the provisions of 12 U.S.C. 57, any national banking association may increase its capital stock by the declaration of a stock dividend, with the approval of the Comptroller. For such approval, applications on Form 1904-C shall be filed with the appropriate Regional Chief National Bank Examiner. The Regional Chief National Bank Examiner will communicate his written approval to the bank within 15 days after