SECTION 18. Transfers of stock shall not be suspended preparatory to the declaration 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. SECTION 19. Certificates of stock, signed by the president and cashier, may be issued to shareholders, and the certificates shall state upon the face thereof 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. Expenses SECTION 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. Contracts SECTION 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 SECTION 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 compare its assets and liabilities with the accounts of the general ledger, ascertain whether the accounts are correctly kept, and the condition of the bank corresponds 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 shall be reported in writing to the board at the next regular meeting thereafter. SECTION 23. The board of directors shall have power to change the form of the books and accounts when deemed expedient and define the manner in which the affairs of the bank shall be conducted. Quorum SECTION 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 attendance. In the absence of a quorum no business shall be transacted. Changes in By-Laws SECTION 25. These by-laws may be changed or amended by the vote of a majority of the directors. SUCCESSION OF A STATE BANK BY TH A NATIONAL BANK HERE are two ways in which a state bank may enter the national banking system: Re-organization. 1. Re-organization-When it is deemed advisable by the directors and stockholders to transform their bank into a national association by re-organization, the dominant motive is normally the desire to effect a re-distribution of stock, and sometimes to provide for a more satisfactory investment of loanable funds. In re-organization proceedings, the method of incorporation is precisely the same as that followed in organizing a new bank, outlined step by step in the preceding chapter. After it has received its authority from the Comptroller to begin business, the re-organized bank is privileged to enter into a contract to purchase the assets of the liquidating state bank, and to assume its liabilities to depositors and other creditors, providing that all assets so acquired are of a satisfactory value, and conform to the requirements of the National Bank and the Federal Reserve Acts. A copy of this contract, properly signed and executed, is forwarded to the Comptroller's office, together with an agreement signed by the directors of the re-organized bank, to the effect that the assets to be acquired from the state bank will not include real estate, except banking premises; stocks; loans secured by real estate, except those permitted by Sec. 24 of the Federal Reserve Act; nor any loans in excess of 10% of the capital stock of the national bank actually paid-in and unimpaired, and 10% of unimpaired surplus fund, except as authorized by the amendments of October 22, 1919, to Section 5200 U. S. R. S. (See Loans, pages 60, 61.) The law does not provide for the conversion of private banks into national banks. If it is desired to effect a re-organi zation, as in the case of a state bank liquidated for that purpose, an organization from the beginning must be undertaken as provided in the previous chapter. 2. Conversion-In converting a state bank into a national bank, there is not a dissolution of the state institution, but merely a change of title and whatever re-arrangements in the converting bank's affairs are necessary to make its banking practices conform to the National Bank and Federal Reserve Laws. The national bank is liable for all contracts of the former state institution, and may enforce all previous contracts. The preliminary conditions necessary to the initial move where a state bank wishes to convert into a national bank are: (a) That the laws of the state in which the bank is located shall not forbid conversion of a state into a national banking association. (b) That the bank's unimpaired capital shall be sufficient to entitle it to become a national banking association (see "Capital," page 24). Where it is necessary to increase the capital stock of a state bank to make it eligible as a national bank, or change the par value of shares, the change must be legally effected under the laws of the state, and a certificate to this effect must be obtained from the proper state authority. (c) That shareholders owning at least 51% of the state bank's stock shall have voted in favor of the proposed conversion. These conditions obtaining, the bank notifies the Comptroller of its purpose to enter the national banking system, asks for a reservation of title for 60 days, and agrees that any assets which cannot be legally held by a national bank will be disposed of before authorization to begin business as a national bank is given (see "Loans," pages 60-63). Form for this application is furnished by the Comptroller. Accompanying the application to convert should be a draft for $100, (see "Organization Application," pages 24-26) to cover the expense of examination. When the Comptroller has approved the application, he will so notify the bank, and a meeting of its shareholders should be called, at which a resolution should be adopted by a vote representing at least 51% of the capital stock of the bank, authorizing the directors to convert the bank into a national association, as provided for in Sec. 5154 United States Revised Statutes, and acts amendatory thereof. The directors, or a majority of them, must be authorized also to execute Articles of Association, Organization Certificate, all other necessary papers, and to perform all the neces sary acts required in the process of conversion. Forms for the Articles of Association, the Organization Certificate, and the Certificate of Payment of Capital, are furnished by the Comptroller, and the procedure is the same as that outlined under these heads in the preceding chapter (see pages 26, 27, 29, 30). Since the directors of every national bank must number at least five, if the board of a converting state bank is composed of less than that number, an increase must be effected under the laws of the state, prior to the execution of any conversion papers other than the application. Duly qualified directors of a state bank may continue as directors of a national bank, regardless of the number of shares owned by each, until the first annual election is held. Then, to be eligible for re-election, each must own the number of shares required by the National Bank Act (see "Directors," page 28). Oaths as directors of a national bank must be taken. It has been held by the Solicitor of the Treasury that a trust company organized under state laws may convert into a national bank, providing it complies with all conditions of the law, divesting itself of all trust business except such as the Federal Reserve Board may authorize it to retain under the Federal Reserve Act. Fo CIRCULATION OR nearly half a century it was obligatory upon every national bank to keep a certain amount of government bonds on deposit with the Treasurer of the United States, regardless of whether or not the bank desired to issue circulation. But with the passage of the Federal Reserve Act, this requirement-hitherto an outstanding feature of the national banking system-was eliminated, except where a bank wished to circulate its notes. Although the Federal Reserve Act provides for the issuance of currency by the Federal Reserve Banks (secured by either government bonds or by other collateral), there is nothing in the Act as it now stands which would abrogate the right of the national banks to issue currency secured by government bonds. It appears that the purpose of those who drafted the Federal Reserve Act was that the Federal Reserve Banks should ultimately share with the Government the sole right of currency issue, but up to the present there has been only one official step to bring about this situation. Under Section 18 of the Federal Reserve Act, the volume of 2% gold bonds eligible for national bank circulation has been reduced by $56,256,500. Bonds to this amount have been acquired by the Federal Reserve Banks, and converted into 3% bonds and 3% one year notes, without the circulation privilege. Every national bank is entitled to issue circulating notes to the amount of its paid in capital. These notes are secured by United States interest bearing bonds which are deposited with the Treasurer of the United States. Circulation is issued not on the basis of the market value of these bonds, but on the basis of their par value. There are at the present time three classes of government bonds which are acceptable as security for national bank circulation, viz.: |