The 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