Untitled Texas Attorney General Opinion

November 22, 1962 Honorable J. M. Falkner Opinion No. WW- 1479 Banking Commissioner State Department of Banking Re: Whether the Banking Board May Capital National Bank Bldg. Conditionally Approve an Appli- Austin, Texas cation to Convert a National Bank to a State Bank Under the Stated Facts. Dear Mr. Falkner: Your letter requests the opinion of this office on the question of whether or not the State Banking Board may conditionally approve an application by,a national bank, located in a town with a population of less than one thousand, for conversion to a state bank when such national bank currently has a capital stock of $25,000.00, surplus of $25,000.00, and undivided profits of approximately $26,000. 00. Your specific question is whether or not the Banking Board may conditionally approve this application, upon the assurance in writing by each stockholder of the national bank that immediately after such approval by the Board, $12,500.00 %ewt* money,and $12,500.00 from the undivided profits account will be transferred to the capital account, making a total capital of $50,000.00. Art. 342-314 of the Banking Code of 1943 (added Acts 1955, 54th Leg., p. 663, ch. 234, § 1) provides for the conversion of national banks into state banks and reads, in part, as follows: “A national bank or association located in this state which follows the procedures prescribed by ,the laws of the United States to convert into a state bank, shall be granted a cer- tificate of incorporation when the State Banking Board finds that the bank meets the standards as to location of office, capital structure and business experience of officers and directors for the incorporation of a state bank. In consid- ering the application for conversion from a national bank Hon. J. M. Falkner, page 2 (WW-1479) into a state bank the Board shall consider and deter- mine that the new bank meets with all the requirements of a new state bank applicant. . .‘I Turning to the requirements for incorporation of state banks, we find the following standard in Art. 342-303 of the Banking Code: “No State bank shall be hereafter chartered with capital less than the following recpirements, nor shall any State bank be permitted to reduce its capital below such requirements s said requirements to be determined by the last Federal Census preceding the granting of the charter or the reduction in capital: (a) If domiciled in a city or town with not over six thousand (6, 000) population, a minimum capital of Fifty .Thousand Dollars ($50,000). I1 In considering an application filed for a new state bank charter, the,State Banking Board, under Article 342-305 of the Banking Code, is to determine (among other issues) whether or not 19[t] he proposed capital structure is adequate. ‘1 Article 342- 305 continues: “Should the State Banking Board determine any of the above issues adversely to the applicants, it shall reject the application. Otherwise such Board shall approve the application and the Commissioner shall, when the capital has been paid in in cash and the franchise tax paid, deliver to the incorporators a certified copy of the articles of association, and the bank shall come into corporate exist- ence. . . ‘I (Emphasis supplied) Specific authority for the conditional approval of applications is found in the last sentence of Article 342-305, reading as follows: ‘1. . . Provided, however, that the State Banking Board may make its approval of any application conditional, and in such event shall set out such condition in the resolution granting the charter, and the Commissioner shall not de- liver the certified copy of the articles of association until such condition has been met, after which the Commissioner Hon. J. Id. Falkner, page 3 ,(WW4479): : shan in writing inform tlieSi+ Banking Board as to compliance with such +nn%ion and delivery, of the arti- cles Of~assuGiat.ien. . .” >* + .i ~‘~ :. We are of the opinion that :the.foregoiag previsions of Article 342- 305 apply DOthe coawersim hape coasidered .and that ,tbey authoriae the conditional apprwal ,af the application by the ELoard. ‘St& approval violates neither Art. 342-303, sups, :tior :Sectiam 16 ‘of Article 16 ~of the~Constitution ,of Texas, which, pr,ovides that no state bank,, “shall be chartered until all of the,,authorized capital stock has been subscribed and paid for in fall in cash. ” The bank here considered will not be “chartered” as a~State bank until a certified copy of the articles of as,- sociation has been delivered to the dire,ctors by the Banking Commissicmat~. “The laws under which a’bankfng corporation is formed, together with its articles of incorporation. constitute. its charter.” 9 C. J.S. 79, Banks .and Banking, ,Sec. 42. In State Banking Board of Texas v. Mc~CuIloch, 316s. W. 2d 259, (Civ. A@. 1,958. error ref., n. r. e. ), the court had be- fore it the question of whether a Board order of AuguBt lst, apprwing a chatter, became fiil before an order ,of Augusi 2nd reversed it. The court etated: “The rule applicable here is stated by Judge Speer in his .Law of Banks and Banking in Texas, Sec. 28, to be that: ‘The Banking Baar~dmay rescind its order apprwing and authorizing the delivery~ of a charter at any ‘time be- : fore the actual delivery has ‘been made by the Commissioner..’ “Here no charter had been delivered. ” ,,, ,, In view of thes.e authorities and the language of Art: .3&Z- 305 prwiding that a~bank shall not come into existence until a certified copy of the articles of association has been derivered by the Commissioner to the incorpora- tors (or the directors in this case), we are ,of the opinion that the Board may ,conditionally apprwe the application here considered. This opinion is~limited solely to the facts stated in your request with regar~d to the capital structure of ~the applicant land does not relieve the applicant of satisfying all other requirements of state and federal law. Hon. J. M. Falkner, page 4 (Ww-1479) SUMMARY ,. The State Banking Board may approve an ap- plication for .conversion from a national bank to a state bank status upon condition that the full amount of the required capital shall have been paid in, in cad, prior to the, time the dir.ectorB are delivered a certified copy,of the articles of association’by the Banking Commis,sioner. .Your~ very truly, WILL WILSON Attorney General of Texas BY Id& Dudley D. $+f&alla Assistant: Attorney ,General DDM: lmc APPROVED: OPINION COMMITTEE: W. ,V. Geppert, Chairman Iola Wilcox L. P. Lollar REVIEWED FOR THE ATTORNEY GENERAL BY: Leonard Passmorc