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 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 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 a national bank 
Hon. 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 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 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 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 articles Of~assuGiat.ien. . .” >* + .i ~‘~ :. 

We are of the opinion that :the.foregoiag previsions of Article 

342- 305 apply DO the 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 before 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~d may 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 incorporators (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 application 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