November 22, 1962

Honorable J. M. Falkner Banking Commissioner Opinion No. WW- 1479 State Department of Banking Capital National Bank Bldg. Austin, Texas Re: Whether the Banking Board May Conditionally Approve an Application 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 ofthe 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 ofthe United States to convert into a state bank, shall be granted a certificate 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 considering the application for conversion from anational bankHon. J. M. Falkner, page 2 (WW-1479)

into a state bank the Board shall consider and determine 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 ofthe 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) Ifdomiciled in a city or town with not over six thousand 

### (6, 000) population, aminimum 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 ofthe articles of association, and the bank shall come into corporate existence. . .‘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 deliver the certified copy ofthe articles of association until such condition has been met, after which the CommissionerHon. J. Id. Falkner, page 3 ,(WW4479): :

shan in writing inform tlieSi+ Banking Board as to compliance with such +nn%ion and delivery, ofthe articles Of~assuGiat.ien.

. .” >*+ .i ~‘~ :. 

### We are 

### oftheopinionthat:the.foregoiag previsions ofArticle 

### 342-305 applyDO

thecoawersim hape coasidered .andthat,tbey authoriae the conditional **apprwal** ,afthe application by the ELoard. ‘St& approval 

### violates neither Art. 342-303, sups, :tior:Sectiam16‘ofArticle 16~of the~Constitution ,ofTexas, 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 ofthe 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.” 

### 9C. J.S. 79, Banks .andBanking, ,Sec. 42. InState Banking Board of Texas v. Mc~CuIloch, 316s. W. 2d 259, (Civ. A@. 1,958. error ref., n. r. e. ), the court had before it the question 

### of whether a Board order of AuguBt lst, apprwing a **chatter,** became fiil before an order ,ofAugusi 2nd reversed it. The court 

### etated:

“The rule applicable here is stated by Judge Speer 

### inhis .Lawof 

### Banks andBankingin Texas, Sec. 28, to be that:

‘The 

### BankingBaar~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. ”

,,, ,, Inview 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 ofthe articles of association has been derivered by the Commissioner to the incorporators (or the directors in this case), we are ,ofthe opinion that the Board may ,conditionally apprwe 

### theapplication here considered.

This **opinion** is~limited solely to the facts stated in **your** request with regar~d to the capital structure of~theapplicant landdoes not relieve the applicant of satisfying all other requirements of state and federal law.

### Hon. J. M. Falkner, page 4 (Ww-1479)

**SUMMARY ,.**  

### TheState Banking Board may approve anapplication for .conversion from anational bankto astate bankstatusupon condition thatthefull amount oftherequired capital shall havebeen paidin, in **cad,** 

### prior tothe,time the **dir.ectorB** 

### are delivered acertified copy,of thearticles of association’by theBanking Commis,sioner.
**.Your~** 

### very truly, WILL WILSON Attorney General ofTexas

**BY Id&**  

### Dudley D. $+f&alla Assistant: Attorney ,General DDM:lmc APPROVED: OPINIONCOMMITTEE: W. ,V. Geppert, Chairman Iola Wilcox L. P. Lollar REVIEWED FOR THE ATTORNEY GENERAL BY: Leonard Passmorc