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March 6,





As soon as possible,

and i n any event not l a t e r than June 30, 191+0,

Bank of America, National Trust & Savings Association w i l l add
130,000,000 o f a d d i t i o n a l c a p i t a l funds by the issuance of common
or p r e f e r r e d stock, or both, and the Bank w i l l ,

p r i o r to A p r i l 1,

191+0, apply f o r the approval of the Comptroller o f the Currency to
such increase.

The Bank w i l l endeavor t o obtain a commitment from

the Reconstruction Finance Corporation to purchase or lend upon
p r e f e r r e d stock i n the amount o f #30,000,000 p r i o r to A p r i l 1, 19l+0#
and i f

p r e f e r r e d stock i s to be sold, w i l l endeavor to obtain an

agreement w i t h the Comptroller of the Currency upon the terms of
the amendments to the a r t i c l e s o f association by A p r i l 1,



Immediately upon obtaining the new c a p i t a l the Bank s h a l l set up
an unallocated reserve of $6,900*000.


The Bank s h a l l obtain a d d i t i o n a l s e c u r i t y s a t i s f a c t o r y to the
Comptroller of the Currency to secure the contracts of


Lands, I n c . and Capital Company with the Bank, and the contracts
of Capital Company with Merchants National Realty


Such a d d i t i o n a l s e c u r i t y s h a l l be i n an amount equal i n value
to the d i f f e r e n c e between the unpaid purchase price upon such
contracts and the value of the property thereunder,

as such

value appears i n the schedule contained i n the report o f exami n a t i o n begun August 31$ 1939«

A l l of such contracts s h a l l be




eliminated from the assets of the Bank and Merchants National
Realty Corporation by December 15* 19-U3*

A l l premiums on bonds i n the Bank's investment p o r t f o l i o


be amortized out of current earnings (other than bond p r o f i t s )

or to c a l l date, i f any, and amortization



reserved on bonds s o l d at book value or higher may be returned to
the undivided p r o f i t s account.

Current bond p r o f i t s

s h a l l be used

to take care of current losses, and any bond p r o f i t s not so used
s h a l l be passed to a reserve f o r losses of any character u n t i l


the opinion of the Comptroller of the Currency such reserve i s

However, t h i s reserve f o r losses, plus the amortiza-

t i o n reserve need not exceed the t o t a l premium account®


The Bank s h a l l ,

as soon as p o s s i b l e ,

f u r n i s h to a committee

composed o f the Vice President i n Charge o f Examinations o f the
Federal Reserve Bank o f San Francisco,

or some o f f i c e r o f the Bank

designated by him, the Supervising Examiner o f the Federal Deposit
Insurance Corporation for the Twelfth D i s t r i c t ,

and the Chief

National Bank Examiner f o r the Twelfth Federal Reserve D i s t r i c t ,
a l l obtainable records and information with respect to the
a c q u i s i t i o n of each banking premise c r i t i c i s e d i n the report of
examination o f August 31, 1939* i n c l u d i n g those shown on the Bank f s
books and i n i t s

investment i n Merchants National Realty Corporation,

dating back to the time such premise was acquired e i t h e r by the Bank
or any member ( e i t h e r bank or company) of the group p r e s e n t l y or then
comprising the Transamerica organization*




The committee shall consider the f a i r value of each premise at
the time of such acquisition, and the special conditions which
had to be met in fixing the price paid.

From these considerations,

the committee shall determine the amount which shall be used by the
committee as the estimated cost amount of each premise to the Bank®
The value of each premise shall then be established at such
estimated cost amount, plus the amount of any expenditures subsequent to acquisition found by the committee to have been appropriately capitalized, less the appropriate amount of depreciation
at the depreciation rate allowed by the Bureau of Internal Revenue
for each year of ownership®

The unallocated reserve set up by

the Bank shall be reduced by the difference between the present
carrying value of each such premise and the value of such promise
as determined by the committee in the manner hereinabove stated®
The decision of a majority of the members of the committee shall
be binding®

The remainder of such reserve, i f any, may be

returned to the undivided profits account®

A partial release

of the reserve, or a decrease in the amount of the reserve to
be set up, may be made as soon as that procedure is j u s t i f i e d ,
i n the opinion of the committee®

The aggregate amount of obligations, as defined i n Section 5200
United States Revised Statutes, of Transamerica Corporation and
a l l subsidiaries in which i t owns or controls a majority interest,
to the Batik, w i l l be brought within the limitations and exceptions




of Section 5200, United States Revised Statutes, for any one borrower
by July 15, 19h2$ and thereafter the aggregate amount of such
obligations w i l l not be permitted to exceed such limitations and

The existing obligations of Transamerica or its

subsidiaries now held by the Bank w i l l be eliminated by July 15, 1914-5,
and no new loans w i l l be made to Transamerica or its subsidiaries
secured by the stock of subsidiaries of Transamerica.

This paragraph

shall not apply to obligations of Capital Company and California Lands,
Inc. arising out of real estate sales contracts, which contracts are
covered i n numbered paragraph (3) hereof•
The Bank may accept Transamerica shares as security for small loans
for business purposes where the borrower demonstrates a capacity
to liquidate the loan otherwise than through the sale of such shares.
No loans for speculative purposes w i l l be made on the security of
such shares.

The Bank shall eliminate the amount of investment in stock under
option on the basis of the program now in effect.


The Bank shall give vigorous attention to the elimination or correction of any real estate holdings or real estate loans that may not
conform to statutory requirements.


The Bank shall i n i t i a t e steps to ascertain whether i t is entitled
to recover any part of the sums paid by i t to Transamerica General




Corporation i n connection with f i d e l i t y losses, and i f i t is concluded the Bank is entitled to recover, i t shall take steps to
recover the same.

The Board of Directors of the Bank w i l l approve the foregoing by
April 1, 19U0.

This memorandum i s submitted without prejudice to the
right to require f u l l and complete compliance with the Comptroller's
criticisms and suggestions, to resort to sanotions provided by
law, or to continue to l i s t in reports of examination assets that
are subject to criticism u n t i l such criticisms have been corrected
or eliminated. Neither this memorandum nor its contents shall
be used by the Bank or anyone else on its behalf without the
consent of the Comptroller of the Currency for any purpose except
for i t s information, unless and u n t i l the provisions hereof are
accepted and complied with by the Bank.