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61s t

C

o ng ress

2d Session

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SEN AIK

l

(D

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ocum ent

No. iS
3

NATIONAL MONETARY COMMISSION

Digest of

State Banking Statutes
COMPILED BY

SAMUEL A. WELLDON
O f the N *m York Bar

Presented by Mr. A l d r ic h , from the Monetary Commission
F e b r u a r y 8,1910.—Ordered to be printed

Washington




:

:

: Government Printing Office

:

:

;

1U
10




61s t C o n g r e s s \
2d Session
/

c - '-vt A'T'tT'
e

bJsN AIh,

/ D ocum ent

j

No. 353

NATIONAL MONETARY COMMISSION

Digest of

State Banking Statutes
COMPILED BY

SAMUEL A. WELLDON
Of the New York Bar

Presented by M r. A l d r i c h , from the Monetary Commission
F e b r u a r y 8 ,1910-—Ordered to be printed

Washington




:

:

: Government Printing Office

:

:

:

1910

NATIONAL MONETARY COMMISSION

N e l s o n W . A l d r ic h , Rhode Island, Chairman.
E d w a r d B . V r e e l a n d , N ew York, Vice-Chairman.
J u l iu s C. B u r r o w s , Michigan.

J e s s e O v e r s t r e e t , Indiana.

E u g e n e H a l e , M aine.

J ohn W . W

eeks,

P h il a n d e r C. K

R obert W

B o n y n g e . Colorado.

nox,

P en n sylvan ia.

M assachusetts.

T h e o d o r e E . B u r t o n , Ohio.

S y l v e s t e r C. S m it h , C alifornia.

J o h n W . D a n i e l , V irginia.

L e m u e l P . P a d g e t t , Tennessee.

H e n r y M. T e l l e r , Colorado.

G e o r g e F . B u r g e s s , T e x as.

H e r n a n d o D . M o n e y , Mississippi.

A r s e n E P . P u jo , L ou isian a.

J o se p h W. B a i l e y , Texas.

A r t h u r B. S h e l t o n , Secretary .




A . P ia t t A n d r e w , Special Assistant to Commission.

CONTENTS.
Page.
I n t r o d u c t o r y ________________
T able

33

A.— T a b u l a r S u m m ar y fo r B a n k s .
B.

— T a b u l a r S u m m ar y fo r S a v in g s B a n k s .

C.

— T a b u l a r S u m m ar y fo r T r u st C o m p a n ie s .

Alabam a:
Introductory_____ _____________

41

General provisions—
I.— Terms of incorporation______________________

42

II.— Liability of stockholders_____________________

42

I II.

— Supervision____________

42

R eports---------------------IV .

43

Exam inations__________________________

43

— Reserve requirements__________

44

V .— Discount and loan restrictions________________

44

V I.— Investm ents_______________________________

45

X .— Unauthorized ban kin g_______________________
X I .— Penalties-................................

45
45

Trust companies—
I.— Terms of incorporation...............................

46

III.— Supervision________________________________

46

X .— Unauthorized trust com pany business__________

46

A r iz o n a :
Introductory............................

47

Banks—
III.

48

R eports_______________________________

49

Exam inations...........................
IV .

— Supervision______________________________

50

— Reserve requirements----------------------------------------

V .— Discount and loan restrictions________________
V I.— Investm ents_______________________________

51
51
51
52

V I I I .— Branches----------X .— Unauthorized banking_______________________
X I .— Penalties------------------------

52
52

Savings banks—




I.— Terms of incorporation------------------------------------------

53

II.— Liabilities and duties of stockholders and directors.

54

3

N at ion a l

M onet ary

Commission

A rizona — Continued.
Savings banks— Continued.
III.— Supervision......................
Reports____________________________
Examinations_______________________
V.— Discount and loan restrictions_______________
V I.— Investments____________________________
V III.— Branches______________________________
X .— Unauthorized banking----------------------------------X I.— Penalties________________
A rkansas ..... ................................
C alifornia :
Introductory--------------------------------------- ---------------------Banks—
I.— Terms of incorporation------- ---------II.— Liabilities and duties of stockholders and directors.
III. — Supervision__________________________
Reports____________________________
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions_______________
VI.— Investments____________________________
V II.— Overdrafts_____________________________
VIII.— Branches______________________________
X .— Unauthorized banking____________________
X I.— Penalties______________________________
Savings banks—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision__________________________
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount, loan, deposit restrictions, etc________
VI.— Investments____________________________
X .— Unauthorized banking____________________
X I.— Penalties______________________________
Trust companies—
I.— Terms of incorporation____________________
III.— Supervision____________________________
Reports_____
VI.— Investments____________________________
X-— Unauthorized trust company business_________
X I.— Penalties.....................................




4

page.
54
54
55
55
56
56
57
57
58
60
62
63
63
65
67
68
69
71
72
72
72
73
75
76
76
76
76
77
79
80
80
81
81
81
82
82
82

Digest

of

State

Banking

Statutes

Co lo r a d o :

p age.

Introductory______________________________________
83
General provisions—
I.— Terms of incorporation______________________
84
II.— Liabilities and duties of stockholders and directors.
84
III.— Supervision______________________________
84
Reports.___ ________________
Examinations_________________________
86
V.— Discount and loan restrictions________________
87
VI.— Investments______________________________
87
V II.— Overdrafts_______________________________
88
V III.— Branches________________________________
88
X .— Unauthorized banking______________________
88
X I.— Penalties________________________________
88
Banks—
I.— Terms of incorporation....................................
II.— Liabilities and duties of directors____________
90
III. — Supervision__________________________
90
IV. — Reserve requirements_____________________
91
V.:— Discount and loan restrictions__________________ 91
VI.— Investments______________________________
91
Savings banks—
I.— Terms of incorporation______________________
92
II.— Liabilities and duties of directors_______________
92
IV.— Reserve requirements_______________________
92
V.— Discount and loan restrictions_________________
92
VI.— Investments______________________________
93
X .— Unauthorized banking______________________
93
Trust companies—
I.— Terms of incorporation______________________
93
II.— Liabilities and duties of stockholders and directors.
94
V.— Discount and loan restrictions___ 1 __________
94
VI.— Investments___________________
64
X .— Unauthorized trust company business_________
95
Co n n e c t ic u t :

Introductory...................................
Banks and trust companies—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision..... ..............................
Reports___________
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions________________




5

96
97
97
97
98
99
100
100

86

90

N at ion a l

Commission

Connecticut — Continued.
Page.
Banks and trust companies— Continued.
V I.— Investments____________________________
io i
V I11.— B ranches.............
102
X .— Unauthorized banking____________________ # 102
102
X I.— Penalties................................
Savings banks—
I.— Terms of incorporation____________________
103
II.— Liabilities and duties of directors__________ . . .
103
III. — Supervision__________________
103
Reports____________________________
104
Examinations__________________
104
105
V.— Discount, loan, and deposit restrictions________
VI.— Investments.................... ............^....... ........... ...........
105
X I.— Penalties______________________________
106
D elaw are :
108
Introductory____________________________________
General provisions—
I.— Terms of incorporation____________________
108
III.— Supervision_____________________________
108
Reports____________________________
109
Examinations____ _______
no
IV. — Reserve requirements__________________
no
V II.— Overdrafts _______
in
V III.— B ranches_____________________________
in
in
X . — Unauthorized banking______
X I.— Penalties______________________________
in
D istrict of C olumbia :
Introductory____________________________________
113
Savings Banks—
III.— Supervision____________________________
114
R ep o rts__________
114
Exam inations_______________________
114
X I.— Penalties________
115
Trust Companies—
I.— Terms of incorporation___________________
II5
II. — Liabilities and duties of stockholders and directors.
116
III. — Supervision____________________ :______
R eports___________________________
117
Exam inations_______________________
ll7
V I.— Investments___________________________
IX7
X .— Unauthorized trust company business--------------118
X I. — Penalties.................
” 8




_

.

M on e t a r y

6

r

Digest

of

State

Banking

Statutes

F l o r id a :

Page.

Introductory_______________________________
General provisions—
I.— Terms of incorporation_____________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision_____________________ '.______
Reports____________________________
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions_______________
V I.— Investments__________
V III.— Branches______________________________
X .— Unauthorized banking____________________
X I.— Penalties....................................
Savings banks—
I.— Terms of incorporation------- ------III.— Supervision, exam inations_________________
V.— Discount, loan, and deposit restrictions_ _ ____
_
VI.— Investments.,___________________________
X I.— Penalties....................

119
120
121
121
122
123
124
124
124
125
125
125
125
126
126
126
128

G e o r g ia :

Introductory...............................................
Banks—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision__________________________
Reports______________________
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions-------- ------VI.— Investments. ---------V III.— Branches-----------X I.— Penalties______________
Savings banks----------------------------Trust companies—
I.— Terms of incorporation________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision------------IV. — Reserve requirements------------------V.— Discount and loan restrictions_______________
VI.— Investments____________________________
X I.— Penalties______________________________




7

129
130
130
131
132
133
133
134
134
134
135
136
136
137
137
137
138
138
138

N at ion a l

M on e t a r y

Commission

Idaho:

Page.

Introductory____________________________________
Banks—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision__________________________
Reports___________________________
Examinations---------IV. — Reserve requirements___________________
V.— Discount and loan restrictions______________
VI.— Investments_________________
X I.— Penalties____________
Savings banks—
VI.— Investments____________________________
Trust companies—
I.— Terms of incorporation____________________
VI.— Investments____________________________

139
140
141
141
141
142
143
143
143
144
144
145
145

I l l in o is :

Introductory____________________________________
Banks—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III.— Supervision__________
Reports............................
Examinations_______________________
V.— Discount and loan restrictions_________
V I.— Investments____________________________
X I.— Penalties____________
Savings banks___________________________________
Trust companies—
III.— Supervision__________
Reports____________________________
Examinations_______________________
V.— Discount, loan, and depositrestrictions________
X I.— Penalties........................................................................

146
147
147
148
148
149
149
149
150
150
150
151
152
152
152

I n d ia n a :




Introductory____________
Banks—
I.— Terms of incorporation------------II.— Liabilities and duties of stockholders and directors.
III.— Supervision....... ..................- .......................................
Reports____________________________
Examinations---------------------------------------V.— Discount and loan restrictions------------------------VI.— Investments..................

8

*53
x53
154
L54
x55
155
156
156

Digest

of

State

Banking

Statutes

I ndiana — Continued.
Page.
Banks— Continued.
V II.— Overdrafts_____________________________
156
V III.— Branches______________________________
156
X I.— Penalties______
156
Private ban ks.________
157
Savings banks—
I.— Terms of incorporation____________________
158
II.— Liabilities and duties of trustees_____________
159
III. — Supervision__________________________
160
Reports.___ _______________________
161
Examinations_______________________
161
IV. — Reserve requirements___________________
162
V.— Discount, loan, and deposit restrictions________
162
VI.— Investments. ______
163
X I.— Penalties______________________________
164
Trust companies—
I.— Terms of incorporation____________________
164
II.— Liabilities and duties of stockholders and directors.
165
III.— Supervision_____________________________
165
Reports____________________________
165
Examinations_______________________
166
V.— Discount and loan restrictions_______ 1 ______
166
VI.— Investments____________________________
166
166
VII.— Overdrafts----- -----------------------------------X .— Unauthorized banking____________________
166
X I.— Penalties. .........................
167
I ow a :
Introductory--- --------------- . ----------------- ----------------------168
General provisions applicable to banks and savings banks—
II.— Liabilities and duties of stockholders and directors.
169
III. — Supervision__________________________
169
Reports__________
170
171
Examinations---------V.— Discount and loan restrictions_______________
172
X .— Unauthorized banking______
172
X I.— Penalties__________— -------------- --------------173
Banks—
I.— Terms of incorporation---------------------------------174
II.— Liabilities and duties of stockholders and directors.
174
IV. — Reserve requirements............
174
X .— Unauthorized banking................................................
175
Savings banks—
I.— Terms of incorporation---------175
II.— Liabilities and duties of stockholders and directors.
176




9

—

—
—

N at i o n a l

M o n et a r y

Commission

I owa— Continued.
Savings banks— Continued.
Page.
III. — Supervision, examinations________________
176
IV. — Reserve requirements___________________
176
V.— Discount, loan, and deposit restrictions________
177
VI.— Investments____________________________
177
X .— Unauthorized banking____________________
178
Trust companies_________________________________
178
K ansas :
Introductory___________________________________
179
Banks—
I.— Terms of incorporation____ ____
180
II.— Liabilities and duties of stockholders and directors.
181
III. — Supervision__________________________
181
Reports.............. ..................................... - ...........
183
184
Examinations_______________________
IV. — Reserve requirements___________________
185
V .— Discount, loan, and deposit restrictions________
185
V I.— Investments_______
186
187
V II.— Overdrafts_____________________________
X .— Unauthorized banking____________________
187
X I.— Penalties______________________________
187
X II.— Depositors’ guaranty system________________
189
Savings banks___________________________________
193
Trust companies—
I.— Terms of incorporation____________________
194
II.— Liabilities and duties of stockholders and directors.
194
III. — Supervision__________________________
195
IV. — Reserve requirements________
195
V.— Discount and loan restrictions_______________
195
195
V I.— Investments.......................
X .— Unauthorized trust company business_________
196
196
X I.— Penalties______________________________
K en tu ck y :
Introductory___________________________________
197
Banks and savings banks—
I.— Terms of incorporation____________________
*97
II.— Liabilities and duties of stockholders and directors.
198
III. — Supervision---------*99
Reports____________________________
200
IV. — Reserve requirements--------------------------------200
V .— Discount and loan restrictions------------------------200
V I.— Investments____________________________
201
X .— Unauthorized banking ................ - ..........................
201
X I.— Penalties______________________________
201




D igest

of

State

Banking

Statutes

K entucky — Continued.
Trust companies—
Page.
I.— Terms of incorporation____________________
202
II.— Liabilities and duties of stockholders__________
202
III.— Supervision____________________________
203
Reports___________________________
203
V.— Discount and loan restrictions_______________
203
VI.— Investments____________________________
204
X I.— Penalties______________ , _______________
_
204
L ouisiana :
Introductory_____
205
Banks, savings banks, and trust companies—
I. — Terms of incorporation__________________
206
II.— Liabilities and duties of stockholders and directors.
207
III. — Supervision.................................
208
Reports___________ , --------------------------210
Examinations_______________________
211
IV. — Reserve requirements___________________
212
V.— Discount and loan restrictions_______________
213
VI.— Investments____________________________
213
V II.— Overdrafts___________
214
V III.— Branches______________________________
215
215
X .— Unauthorized banking____________________
X I.— Penalties____ __________________________
215
Ma in e :
Introductory_ _ ________________________________
_
218
Savings banks—
I.— Terms of incorporation____________________
219
II.— Liabilities and duties of trustees_____________
220
III.— Supervision____________________________
221
Reports____________________________
222
Examinations_______________________
223
V.— Discount, loan, and deposit restrictions________
223
VI.— Investments-_____________________
224
X .— Unauthorized b a n k i n g ___ _
_
227
X I.— Penalties______________________________
227
Trust and banking companies—
I.— Terms of incorporation____________________
229
II. — Liabilities and duties of stockholders and directors.
229
III. — Supervision____________
230
Reports.................... — .............
231
Examinations_______________________
232
232
IV . — Reserve requirements.______
V.— Discount and loan restrictions _.................................
233




11

N at ion a l

M onet ary

Commission

Maine — Continued.
Trust and banking companies— Continued.
VI.— Investments____________________________
V III.— Branches______________________________
X .— Unauthorized trust company business_________
X I.— Penalties______________________________
•Maryland :
Introductory________________
Banks—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III.— Supervision____ ________
Reports____________________________
Examinations_______________________
V.— Discount and loan restrictions_______________
VI.— Investments____________________________
X I.— Penalties______________________________
Savings banks—
Terms of incorporation_________________________
Reports and examinations_______________________
Loans______________________________________
Penalties___ ____________
Trust companies—
Stockholders’ liability__________________________
Supervision_____
Reports___ ______
Examinations_____________________________
Loans, deposits, and investments__________________
Massachusetts :
Introductory__________
Banks—
I-— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision__ _______
Reports____________________________
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions------------VI.— Investments____________________________
V III.— Branches________________
IX .— Occupation of the same building---------------------X .— Unauthorized banking----------------------------------X I.— Penalties______________________________




It

Page.
234
234
234
235
236
237
238
238
239
239
240
240
240
241
241
242
242
243
243
244
244
245
246
247
248
249
251
252
253
254
255
255
255
256
256

Digest

of

State

Banking

Statutes

Massachusetts— Continued.
Savings banks—
Page.
I. — Terms of incorporation__________________
257
II.— Liabilities and duties of trustees_____________
259
260
III.— Supervision____________________________
261
Reports____________________________
263
Examinations-------------- ------------------------263
V.— Discount, loan, and deposit restrictions________
264
VI.— Investments____________________________
272
V III.— Branches______________________________
272
IX .— Occupation of the same building_____________
X .— Unauthorized banking____________________
273
X I.— Penalties______________________________
273
Trust companies—
I.— Terms of incorporation---------------------------------274
II.— Liabilities and duties of stockholders and directors.
276
276
III. — Supervision__________________________
Reports____________________________
277
Examinations__ _____________________
279
280
IV. — Reserve requirements___________________
281
V.— Discount and loan restrictions______________
282
V I.— investments____________________ _______
283
V III.— Branches______________________________
IX .— Occupation of the same building_____________
283
X .— Unauthorized trust company business_________
283
X I.— Penalties______________________________
284
Michigan :
Introductory------------- ---------------- --------------- --------- ----285
Banks and savings banks—
I. — Terms of incorporation__________________
286
II. — Liabilities and duties of stockholders and directors. 287
III. — Supervision__________________________
288
Reports____________________ _______
290
Examinations__________________ :.____
291
IV. — Reserve requirements___________________
291
V.— Discount, loan, and deposit restrictions________
292
V I.— Investments___________ _________ _______
293
V II.— Overdrafts_____________________________
296
V III.— Branches...................... .............. ......................... .......
296
X .— Unauthorized banking____________________
267
X I.— Penalties______________________________
297
Trust companies—
299
I.— Terms of incorporation---------------------------------II. — Liabilities and duties of stockholders and directors. 300




13

National

i

Monetary

Commission

Michigan — Continued.
Trust companies— Continued.
Page.
III. — Supervisio n__________________________
300
R ep orts___________________________
301
Examinations_______________________
302
IV. — Reserve requirements___________________
302
V.— Discount and loan restrictions______________
302
VI.— Investments____________________________
302
X I.— Penalties______________________________
303
Minnesota :
Introductory_________
305
General provisions—
II.— Liabilities and duties of directors_____________
306
III.— Supervision____________________________
306
Reports____________________________
308
Examinations_______________________
309
V II.— Overdrafts-------------------------------------------------309
X I.— Penalties______________________________
310
Banks—
3 11
I.— Terms of incorporation___________________
II.— Liabilities and duties of stockholders and directors.
312
III. — Supervision__________________________
312
Reports____________________________
313
Exam inations_______________________
313
IV . — Reserve requirements___________________
313
V.— Discount and loan restrictions_______________
313
314
VI.— Investments____________________________
X.— Unauthorized banking____________________
314
314
X I.— Penalties______________________________
Savings banks—
I.— Terms of incorporation___________________
315
II.— Liabilities and duties of trustees_____________
315
III.— Supervision___________
316
Reports____________________________
316
Exam inations_______________________
316
V.— Discount, loan, and deposit restrictions-------------317
VI.— Investments____________________________
317
X .— Unauthorized banking----------------------------------319
X I.— Penalties______________________________
319
Trust companies—
I.— Terms of incorporation---------------------------------319
II.— Liabilities and duties of directors---------------------320
III.— Supervision______________ ____- ......... .........
320
Reports..................
320
V.— Discount ajid loan restrictions------------------------^2i




14

Digest

of

State

Banking

Statutes

Minnesota — Continued.
Trust companies— Continued.
Page.
321
VI.— Investm ents___________________________
VII.— Overdrafts_____________________________
321
X .— Unauthorized trust companybusiness__________
321
321
X I.— Penalties______________________________
Mississippi :
Introductory____________________________________
322
General provisions—
I.— Terms of incorporation____________________
322
II.— Liabilities and duties of stockholders and directors.
323
III.— Supervision______
323
R eports___________________________
323
Exam inations.___ __________________
324
V.— Discount and loan restrictions_______________
324
VI.— Investments____________________________
324
V III.— Branches______________________________
324
X .— Unauthorized banking____________________
325
X I.— Penalties______________________________
325
Missouri :
Introductory____________________________________
326
Banks—
I.— Terms of incorporation____________________
327
II.— Liabilities and duties of stockholders and directors_ 328
III. — Supervision__________________________
329
Reports____________________________
330
Examinations_______________________
332
IV. — Reserve requirements___________________
332
333
V.— Discount and loan restrictions______________
VI.— Investments_________________
333
V II.— Overdrafts_____________________________
334
334
V III.— Branches_________________ 1_________ . . .
X .— Unauthorized banking____________________
334
X I.— Penalties______________________________
334
Savings banks—
I.— Terms of incorporation___________________
335
II.— Liabilities and duties of stockholders and directors.
337
III. — Supervision__________________________
338
Reports____________________________
338
Examinations_______________________
339
IV . — Reserve requirements___________________
339
V.— Discount, loan, and deposit restrictions________
340
V I.— Investments________ , __________________
340
X I.— Penalties.___ __________________________
342




15




N ation a l

M onet ary

Commission

M isso u ri —

Page.

Trust companies—
I.— Terms of incorporation_________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision__________________________
Reports____________________________
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions______________
VI.— Investments__________
VII.— Overdrafts_____________________________
X I.— Penalties..................................

342
343
344
344
344
345
345
345
345
346

Mo n t a n a :

Introductory____________________________________
Banks—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision----------Reports____________________________
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions_______________
VI.— Investments____________________________
X .— Unauthorized banking____________________
X I.— Penalties______________________________
Savings banks—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision__________________________
IV. — Reserve requirements__________ ________ —
V.— Discount and loan restrictions______________
VI.— Investments_________________________ ^.
VII.— Overdrafts_____________________________
X.— Unauthorized banking............ — ........... .............. .
X I.— Penalties______________________________
Trust companies—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision__________________________
IV. — Reserve requirements------------------V.
— Discount and loan restrictions.................
VI.— Investments____________________________
X .— Unauthorized trust company business---------------X I.— Penalties______________________________

16

347
348
349
350
351
35!
352
352
353
354
354
356
356
357
358
358
358
359
359
359
359
360
361
362
362
362
363
363

D igest

of

St at e

Banki ng

St at ut es

Nebr a sk a :

Introductory....................................................................
Banks—
I.— Terms of incorporation______________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision_____
Reports______
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions_______________
VI.— Investments. __________
VII.— Overdrafts_________________
X .— Unauthorized banking____________________
X I.— Penalties______________________________
X II.— Depositors’ guaranty system__________
Savings banks—
Capital......................
Directors_________________
Reserves..... ...............................................................................
Loans and investments_________________________
Penalties___ ________________________________
Trust companies__________________________________

Page.
364
365
366
366
368
369
370
370
371
372
372
373
374
377
377
377
378
379
379

Nevada:

Introductory____________________________________
Banks—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision_____________ — ................. ...........
Reports....................................
Examinations_______________________
IV. — Reserve requirements.---------V.— Discount and loan restrictions______________
V I.— Investments-.............................
V II.— Overdrafts_____________________________
V III.— Branches__________ _________ _______ —
X .— Unauthorized banking----------------------------------X I.— Penalties...............................................
Savings banks. -------Trust companies. ----------

380
381
382
383
385
385
386
386
387
388
389
389
389
391
392

N e w H a m p s h ir e :

I ntroductory........................
Banks—
I.— Terms of incorporation____________
II.— Liabilities and duties of stockholders and directors.

S. Doc. 3S3, 61—
3----- a .




17

393
393
394

N a t io n a l

M on e t a r y

Commission

N ew H ampshire— Continued.
Banks— Continued
Page.
III.— Supervision--------------395
Reports____________________________
396
Examinations_______________________
397
V.— Discount and loan restrictions______________
397
VI.— Investments____________________________
398
X .— Unauthorized banking____________________
398
X I.— Penalties________________________
398
Savings banks—
I.— Terms of incorporation____________________
399
II.— Liabilities and duties of stockholders and directors.
401
III.— Supervision____________________________
401
Reports________________________
402
403
Examinations_______________________
V.— Discount and loan restrictions______________
404
V I.— Investments_______
404
409
IX .— Occupation of the same building_____________
X . — Unauthorized banking__________________
409
X I.— Penalties______________________________
409
Trust companies—
I.— Terms of incorporation____________________
411
II.— Liabilities and duties of stockholders and directors.
411
III.— Supervision____________________________
412
V.— Discount and loan restrictions______________
412
V I.— Investments_________________
412
413
X I. — Penalties___________________________
N ew J e r se y :
Introductory____________________________________
414
Banks—
I.— Terms of incorporation____________________
414
II.— Liabilities and duties of stockholders and directors.
415
III. — Supervision_________________
415
Reports.__________
417
Examinations_______________________
417
IV. — Reserve requirements.................
417
V.— Discount and loan restrictions______________
418
V I.— Investments____ ____— ................... ......... .........
418
V II.— Overdrafts_____________________________
419
X .— Unauthorized banking____________________
419
X I.— Penalties______________________________
419
Savings banks—
I-— Terms of incorporation__ ^________________
420
— Liabilities and duties of managers............................
421




D igest

of

State

Banking

Statutes

N ew Jersey — Continued.
Savings banks— Continued.
Page.
III.— Supervision____________________________
421
Reports____________________________
422
Examinations_______________________
424
V.— Discount, loan, and deposit restrictions________
424
V I.— Investments____________________________
425
X .— Unauthorized banking____________________
427
427
X I.— Penalties______________________________
Trust companies—
I.— Terms of incorporation____________________
428
II.— Liabilities and duties of stockholders and directors.
428
III. — Supervision______
429
430
Reports._____
Examinations_______________________
430
IV. — Reserve requirements.______
431
V .— Discount and loan restrictions______________
431
V I.— Investments_____________
432
V II.— Overdrafts_____________________________
432
X .— Unauthorized trust company business_________
432
X I.— Penalties.______
432
N ew Mexico :
Introductory______ I _________________________ ___
434
Banks—
I.— Terms of incorporation____________________
435
II.— Liabilities and duties of stockholders and directors.
436
III.— Supervision____________________________
437
437
Reports____ _____
Examinations__________________
438
V.— Discount and loan restrictions__________
439
V I.— Investments. _______
440
V III.— Branches_______
440
X .— Unauthorized banking____________________
441
X I.— Penalties..____ __________
441
Savings banks—
I.— Terms of incorporation___________
442
II.— Liabilities and duties of stockholders and directors.
443
III.— Supervision__________
443
Reports----------444
Examinations_______________________
445
V.— Discount and loan restrictions_______________
446
V I — Investments_____________
447
V III.— Branches------- ------448
X I.— Penalties........................................................................
448




*9

National

M on e t a r y

Commission

N ew Mexico — Continued.
Trust companies—
I.— Terms of incorporation___________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision__________________________
Reports____________________________
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions________ ____ —
VI.— Investments________
V III.— Branches.......................
X I.— Penalties. __________
N ew Y o r k :
Introductory____________________________________
Banks—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision__________________________
Reports____________________________
Examinations___________
IV. — Reserve requirements................
V.— Discount and loan restrictions_______________
VI.— Investments________________
V II.— Overdrafts..... ............
V III.— Branches________________ '_____________
IX .— Occupation of the same building_____________
X .— Unauthorized banking____________________
X I.— Penalties..........................
Savings banks—
I.— Terms of incorporation..................
II.— Liabilities and duties of trustees..............
III. — Supervision..... .........................................................
Reports____________________________
Examinations............................. — ...................
IV. — Reserve requirements___________________
V.— Deposit, discount, and loan restrictions..... .............
VI.— Investments____________________________
V III.— Branches ...................
IX .— Occupation of the same building---------------------X .— Unauthorized banking........................................
X I.— Penalties____________________
Trust companies—
I-— Terms of incorporation____________________
IE— Liabilities and duties of stockholders and directors..




Page.
449
450
450
452
453
454
454
455
455
455
457
457
458
459
460
462
463
463
466
466
466
467
467
468
470
470
471
471
473
473
474
474
479
479
479 .
479
480
480

20

1

Di g e s t

of

St at e

Ba n k i n g

St at ut es

New Y ork — Continued.
Trust companies— Continued.
Page.
III. — Supervision__________________________
481
Reports____________________________
482
Examinations ....................................... . .............
482
483
IV. — Reserve requirements___________________
V. — Discount and loan restrictions_____________
484
VI.— Investments____________________________
485
VII.— Overdrafts_________ ___________________
485
V III.— Branches______________________________
485
IX .— Occupation of the same building...................
486
X .— Unauthorized trust company business_________
486
X I.— Penalties.________
486
North C arolina :
Introductory____ ___________
487
Banks, savings banks, and trust companies—
I. — Terms of incorporation..... ..........
488
II.— Inabilities and duties of stockholders and directors.
488
III. — Supervision_________
489
Reports____________________________
490
Examinations------- --------------------------------491
IV. — Reserve requirements___________________
491
V.— Discount and loan restrictions______________
492
VI.— Investments____________________________
492
X I.— Penalties------ ------------493
North D akota :
Introductory...............
494
Banks—
I .— Terms of incorporation-----------------495
II. — Liabilities and duties of stockholders and directors.
495
III. — Supervision__ _____
496
Reports.......................
497
Examinations_____________
498
IV. — Reserve requirements....................
499
V.— Discount and loan restrictions_______________
499
VI. — Investments. ............ ........
500
500
V II.— Overdrafts______________
X .— Unauthorized banking.---------501
X I.— Penalties-................................ — ----------------------501
Savings banks___________________________________
502
Trust companies—
I.— Terms of incorporation___________
502
II.— Liabilities and duties of stockholders and directors.
503
III.— Supervision........................................
503
R eports...........................................................—
504
Examinations......... ............
504




21

N at ion a l

M on e t a r y

Commission

N orth D akota — Continued.
Trust companies— Continued.
Page.
V.— Discount and loan restrictions______________
504
VI.— Investments____________________________
504
V II.— Overdrafts__ ____
505
O hio :
Introductory____________________________________
506
General provisions—
I.— Terms of incorporation____ _______________
507
II.— Liabilities and duties of stockholders and directors.
508
III. — Supervision__________________________
508
Reports____ _______________________
510
Examinations___________
510
V.— Discount and loan restrictions_______________
511
V I.— Investments____________________________
511
V II.— Overdrafts_____________________________
51*
X .— Unauthorized banking____________________
512
X I.— Penalties______________________________
512
Banks—
IV. — Reserve requirements___________________
513
V.— Discount and loan restrictions_______________
513
VI.— Investments______ _____ 1 ......... .........................
514
Savings banks—
IV.— Reserve requirements_____________________
515
V.— Discount, loan, and deposit restrictions..... ..............
515
516
VI.— Investments____________________________
Trust companies—
I.— Terms of incorporation____________________
517
III. — Supervision__________________________
517
Examinations_______________________
517
IV. — Reserve requirements...................................
517
V.— Discount and loan restrictions______
518
VI.— Investments_________
518
O klahoma :
Introductory_______
519
Banks—
I.— Terms of incorporation____________________
520
II.— Liabilities and duties of stockholders and directors.
521
III. — Supervision__________________________
521
Reports____________________________
522
Examinations_______________________
523
IV. — Reserve requirements___________________
524
V.— Discount, loan, and deposit restrictions-------------525
VI.— Investments____________________________
526




22

Digest

of

State

B an k i n g

Statutes

Oklahoma— Continued.
Banks— Continued.
VII.— Overdrafts_____________________________
X .— Unauthorized banking__________
X I.— Penalties____ ._________________________
X II.— Depositors’ guaranty system________ *.-----------Savings banks_________________ ‘__________________
Trust companies—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision___________________
Reports--------_ .------------------------------------Examinations__________
V.— Discount and loan restrictions_______ _____—
VI.— Investments____________________
VII.— Overdrafts_____________________________
X .— Unauthorized banking_________
X I.— Penalties----------------------------------------------------X II.— Depositors’ guaranty system________
Oregon :
Introductory...............
Banks—
I.— Terms of incorporation______________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision.......................
Reports--------------------------------------Examinations_____________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions..... ......................
VI.— Investments____________ *
......... ............. ...........
V III.— Branches.......................................................................
X .— Unauthorized banking...................
X I.— Penalties........................................
Savings banks. ________
Trust companies................................................................................
P ennsylvania :
Introductory...................................................
Banks—
I.— Terms of incorporation..............................................
II.— Liabilities and duties of stockholders and directors .
III. — Supervision..............
Reports--- --------Examinations..................................
IV. — Reserve requirements_____
V.— Discount and loan restrictions..... ..........................




23

Page.
526
526
527
528
530
531
532
532
533
533
534
534
535
535
535
535
536
537
538
538
539
540
541
541
542
542
542
543
544
544
545
546
548
550
552
554
555
556

National

Monetary

Commi s s i o n




_

P ennsylvania — Continued.
Banks— Continued.
VI.— Investments____________________________
V III.— Branches............
X.— Unauthorized banking._____
X I.— Penalties._____
Savings banks—
I.— Terms of incorporation____ ____
II.— Liabilities and duties of stockholders and trustees.
III. — Supervision__________
Reports______________
Examinations_______________________
IV. — Reserve requirements._____
V .— Discount, loan, and deposit restrictions________
V I.— Investments_______
X .— Unauthorized banking____________________
X I.— Penalties_______________
Trust companies—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision______
IV. — Reserve requirements___________________
V.— Discount and loan restrictions______________
V I.— Investments____________________________
X .— Unauthorized trust company business________
X I.— Penalties______________________________
R hode I sland :
Introductory____________________________________
Banks—
I.— Terms of incorporation__________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision__________________________
Reports.................................................................
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount, loan, and deposit restrictions..... ............
V I.— Investments____________________________
V II.— Overdrafts_____________________________
V III.— Branches______________________________
X .— Unauthorized banking----------------------------------X I.— Penalties______________________________
Savings banks—
I.— Terms of incorporation---------------------------------II.— Liabilities and duties of trustees_____________

24

Page.
558
560
560
560
563
564
565
567
568
569
569
569
571
571
572
573
573
573
574
574
574
575
576
576
576
577
578
579
580
581
' 582
582
583
583
583
584
585

Digest

of

State

Banking

Statutes

R hode I sland — Continued.
Savings banks— Continued.
Page,
III.— Supervision____________
585
Reports____________________________
586
Examinations_______________________
587
V.— Discount and loan restrictions_______________
588
V I.— Investments. _____
588
V III.— Branches__________________
594
X . — Unauthorized banking.....................
594
X I.— Penalties______________________________
594
Trust companies—
I.— Terms of incorporation____________________
595
II.— Liabilities and duties of stockholders and directors.
595
III. — Supervision__________________________
595
IV. — Reserve requirements___________________
595
V.— Discount, loan, and deposit restrictions________
596
V I.— Investments........................
596
V II.— Overdrafts_________
596
South C arolina :
Introductory____________________________________
597
I.— Terms of incorporation____________________
597
II.— Liabilities and duties of stockholders and directors.
597
III.— Supervision____________________________
598
598
Reports..............
Examinations_______________________
599
V.— Discount and loan restrictions______________
599
V I.— Investments____________________________
599
X I.— Penalties____ ____________
600
South D akota :
Introductory____________________________________
601
Banks—
I.— Terms of incorporation..................................
602
II.— Liabilities and duties of stockholders and directors.
603
III. — Supervision_______
605
Reports____________________________
607
Examinations____ ______
608
IV. — Reserve requirements._______
609
V.— Discount, loan and deposit restrictions________
609
V I.— Investments____________________________
610
V II.— Overdrafts_____________________ _______
611
V III.— Branches_____________ ________________
611
612
X .— Unauthorized b an k in g ..__________________
X I. — Penalties____________________________
612
X II.— Depositors’ guaranty system_______
614
Savings banks___________________________________
617




25

N a t i on a l

M on e t a r y

Commission

S outh D akota — Continued.
Trust companies—
Page.
I.— Terms of incorporation____________________
617
II.— Liabilities and duties of stockholders and directors,
6x7
III. — Supervision______
618
Reports___________________________
618
Examinations____ ____
619
IV. — Reserve requirements___________________
619
V.— Discount and loan restrictions______________
620
V I.— Investments___________________________
620
X .— Unauthorized trust company business.....................
620
X I.— Penalties________________
621
X II.— Depositors’ guaranty system............
621
T e n n essee:

Introductory____________________________________
Banks—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III.— Supervision__________
Reports--------------------------------- • _______
Examinations________
V.— Discount and loan restrictions______________
VI.— Investments______________
V III.— Branches______________________________
X.— Unauthorized banking____________________
X I.— Penalties...............
Savings banks—
I.— Terms of incorporation________________
III.— Supervision
Reports_______________
Examinations_______________________
V.— Discount, loan, and deposit restrictions--------------V I.— Investments.................
X I.— Penalties______________________________

622
623
623
624
624
625
625
626
626
626
626
627
628
628
628
628
628

Texas:




Introductory____________________________________
Banks—
I.— Terms of incorporation____________________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision---------------Reports...............
Examinations_____ 1 ................... ...................
IV. — Reserve requirements---------V.— Discount and loan restrictions-------------VI.— Investments_________

629
629
631
632
635
636
636
637
638

D igest

of

State

Banking

Statutes

T exas — Continued.
Banks— Continued.
Page.
V II.— Overdrafts_______
640
V III.— Branches____ :_________________________
640
640
X .— Unauthorized banking____________________
X I.— Penalties______________________________
641
X II.— Depositors’ guaranty system________________
643
Savings banks—
I.— Terms of incorporation___ ______
648
II.— Liabilities and duties of stockholders and directors.
649
III. — Supervision__________
650
Reports________
651
Examinations_______________________
651
IV. — Reserve requirements___________________
652
V.— Discount, loan, and deposit restrictions________
652
VI.— Investments__________
653
653
V III.— Branches_________
X .— Unauthorized banking____________________
654
X I.— Penalties...............
654
Trust companies—
I. — Terms of incorporation__________________
654
II.— Liabilities and duties of stockholders and directors.
654
III. — Supervision__________________________
655
IV. — Reserve requirements___________________
655
V.— Discount and loan restrictions_______________
655
656
VI.— Investments___________________
V II.— Overdrafts..... ................................
656
656
V III.— Branches____________________
X .— Unauthorized trust company business_________
656
656
X I.— Penalties__________
X II.— Depositors’ guaranty system........................
656
Ut a h :

Introductory _____
Banks and savings banks—
I.— Terms of incorporation____________________
II. — Liabilities and duties of stockholders and directors.
III. — Supervision..... ................................
Reports_____________________
Examinations____________
IV. — Reserve requirements------V.— Discount and loan restrictions_______________
VI.— Investments____________________________
X I.— Penalties-----------Private bankers..... ......................................................................—




27

657
658
658
658
659
660
660
660
661
661
662

National

Monetary

Commi s s i on

U tah — Continued.
Trust companies—
Page.
I.— Terms of incorporation____________________
662
II.— Liabilities and duties of stockholders and directors.
662
III.— Supervision____________________________
662
V. — Discount and loan restrictions_____________
662
V I. — Investments_________
662
V ermont :
Introductory_________
663
Savings banks—
I.— Terms of incorporation_____________ ____—
664
II.— Liabilities and duties of trustees....... ............
665
III.— Supervision____________________________
666
Reports__________________ - ...................
667
Examinations_______________________
669
V.— Discount, loan, and deposit restrictions________
670
V I.— Investments____________________________
671
IX .— Occupation of the same building_____________
673
X I.— Penalties________________________ ; _____
673
Trust companies—
I.— Terms of incorporation____________________
673
II.— Liabilities and duties of stockholders and directors.
674
III.— Supervision____________________________
674
V.— Discount and loan restrictions______________
675
VI.— Investments____________________________
675
IX .— Occupation of the same building. ............................
676
X I.— Penalties______________________________
676
V irginia :
Introductory____________________________________
677
Banks—
I.— Terms of incorporation____________________
678
II.— Liabilities and duties of stockholders and directors.
678
III.— Supervision____________________________
679
Reports____ _____
679
Examinations_______________________
680
V.— Discount and loan restrictions..............
680
VI.— Investments____________________________
680
X .— Unauthorized banking.................
681
X I.— Penalties__________________________
681
Savings banks—
I.— Terms of incorporation---------------------------------681
II.— Liabilities and duties of directors— ...................
682
III.— Supervision____________________________
682
682
V.— Discount and loan restrictions........... ........................
VI.— Investments____________________________
683
. X I.— Penalties______ L_______________________
683




28

Digest

of

State

Banking

Statutes

V irginia — Continued.
Trust companies—
I.— Terms of incorporation____________________
III.— Supervision____________
Reports________
X I.— Penalties._______
W ashington :
Introductory_________
Banks—
I.— Terms of incorporation___________
II.— Liabilities and duties of stockholders and directors.
III. — Supervision______
Reports.___ ______
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions______________
VI.— Investments____________________________
V III.— Branches_________
X .— Unauthorized banking____________________
X I.— Penalties________
Savings banks—
I.— Terms of incorporation____________________
III.— Supervision, reports______________________
X I.— Penalties..............
Trust companies—
I.— Terms of incorporation____ _______
II.— Liabilities and duties of stockholders and directors.
III.— Supervision............
Reports____________________________
Examinations_______________________
V.— Discount and loan restrictions______________
V I.— Investments._______
X .— Unauthorized trust company business_________
X I.— Penalties__________
W est V irginia :
Introductory...................
Banks—
I.— Terms of incorporation____ ______
II.— Liabilities and duties of stockholders and directors.
III. — Supervision...........
Reports________
Examinations_______________________
IV. — Reserve requirements___________________
V.— Discount and loan restrictions_______________
VI.*—Investments. ................................................................




29

Page.
683
684
684
685
686
687
689
689
691
691
692
692
692
693
693
693
694
695
695
695
696
696
697
698
698
698
698
699
700
701
702
702
703
704
705
705
705

N at ion a l

M on e t a r y

Commission

W est V irginia — Continued.
Banks— Continued.
Page.
VII.— Overdrafts______________________________
706
X .— Unauthorized banking______________________
706
X I.— Penalties_______________________________
706
Savings banks—
707
I.— Terms of incorporation______
II.— Liabilities and duties of members and directors__
708
III.— Supervision_____________________________
708
709
Reports_____________________________
Examinations_____________________
709
V.— Discount and loan restrictions________________
710
V I.— Investments___________________
710
X .— Unauthorized banking____________________
711
X I .— Penalties___________________
711
Trust companies—
I.— Terms of incorporation____________________
712
III.— Supervision____________________________
712
V.— Discount and loan restrictions________________
712
V I.— Investments_____________________________
712
V II.— Overdrafts______________________________
713
X .— Unauthorized banking___________________
713
713
X I.— Penalties...............................
W isconsin :
Introductory--------------------------------------------714
Banks—
I.— Terms of incorporation_______________
715
II.— Liabilities and duties of stockholders and directors.
716
III. — Supervision___________________
717
Reports___________________
719
Examinations................................................
720
IV. — Reserve requirements____________________
720
V .— Discount and loan restrictions________________
720
V I.— Investments...................................................
721
V II.— Overdrafts....... ....................................................
722
V III.— Branches______________________
722
IX .— Occupation of the same building.........................
722
X .— Unauthorized banking___________________
722
X I.— Penalties_________________________
723
Savings banks—
I.— Terms of incorporation_____________________
724
725
II.— Liabilities and duties of trustees......... ....................
III. — Supervision____________________________
725
IV. — Reserve requirements_________________
726
V.— Discount, loan, and deposit restrictions_________
726




30

I

Digest

of

State

Banking

Statutes

W isconsin — Continued.
Savings banks— Continued.
Page.
V I.— Investments. ...................
726
IX .— Occupation of the same building.................. ...........
727
X I.— Penalties______________________________
727
Trust companies—
I.— Terms of incorporation____________________
727
III. — Supervision__ _______ ________ ________
728
IV . — Reserve requirements___________________
728
V .— Discount and loan restrictions______________
729
V I.— Investments____________________________
729
V II.— Overdrafts_______ _____________________
730
V III.— Branches____________ ____ ____________
730
X .— Unauthorized trust-company business_________
730
W yoming :
731
Introductory____________________________________
Banks—
I.— Terms of incorporation____________________
731
II.— Liabilities and duties of stockholders and directors.
732
III.— Supervision____________________________
733
Reports-----------------------------------------------733
Examinations_______________________
734
V.— Discount and loan restrictions______________
735
V I.— Investments. --------- ------------------------------------736
X .— Unauthorized banking...............................................
737
737
X I.— Penalties.--------- ----------------------------------------Savings banks—
I.— Terms of incorporation........... ................. .................
738
II.— Liabilities and duties of stockholders and directors.
739
III. — Supervision__________________________
739
IV. — Reserve requirements___________________
740
V .— Discount and loan restrictions______ _____ __
740
V I.— Investments____________________________
741
X .— Unauthorized banking____________________
741
X I.— Penalties................................. ......... ............... ...........
742
Trust companies—
I.— Terms of incorporation------- ----------- --------------742
II.— Liabilities and duties of stockholders and directors.
743
III. — Supervision------------------ ------------------ -------743
Reports.......................... ............... ............. .........
743
Examinations_________________ _____
744
IV . — Reserve requirements....................... ........... .......
744
V.— Discount and loan restrictions--------------- -------744
V I.— Investments. .............. ....................... .........................
745
X .— Unauthorized trust-company business....................
746
X I.— Penalties.......................................................................
746




31




INTRODUCTORY.

This digest of banking laws, covering the forty-six
States, the District of Columbia, and the Territories of
Arizona and New Mexico, is a digest only of statutes.
Doubts as to the application or interpretation of statutes
might in a few instances be resolved by investigating
decided cases, but the greater volume of a digest includ­
ing such material, and the infinitely greater labor
required to prepare it, forbade any excursion into the
decisions. It is true also that whereas the language of
a statute may be safely condensed, briefly stating the
point of law adjudicated in a particular case is a
hazardous business.
Another matter which must be borne in mind in reading
the digest is that the volume of the legislation covered by
it made condensation constantly a point of the greatest
importance. The statutes of each State are, whenever
possible, divided under the three heads, Banks, Savings
banks, and Trust companies; sometimes when space may
be saved by combining (under such heads as General
Provisions, Banks and trust companies, Banks and sav­
ings banks, etc.) material which applies to more than one
of the three classes, such an arrangement has been adopted.
Under each of the heads, twelve subheads appear (I.
Terms of incorporation— including capital, dividends, sur­
plus, etc.; II. Liabilities and duties of stockholders and
S. D oc. 353, 6 1 - 2 ------ 3




33

N at ion a l

M onetary

Commission

directors; III. Supervision, including reports and exam­
inations; IV. Reserve requirements; V. Discount, Loan,
and sometimes Deposit restrictions; VI. Investments;
VII. Overdrafts; VIII. Branches; IX. Occupation of the
same building; X. Unauthorized banking, Savings bank­
ing, or Trust company business; XI. Penalties; and X II.
Depositors’ Guaranty System); under these heads are
given only the most important points in the statutes
bearing upon the subject under consideration. So many
minor provisions, therefore, are omitted, and the lan­
guage of those which are inserted has been so abbreviated
and popularized, that a lawyer investigating the statutes
of a particular State to determine the course of conduct
of a particular client engaged in banking might find the
digest serviceable merely by way of finding his citations
for him— the particular statute on which each state­
ment in the digest is based being cited in parenthesis
after the statement. The language of the digest, too, is
made, so far as possible, simple and untechnical, since the
purpose is to present an easily intelligible comparative
statement of the statutes, not a legal text-book.
Since the digest is one of banking and not general cor­
poration statutes, the general corporation laws of the
particular States have been gone into only when they were
peculiarly accessible or the banking statutes left blanks
likely to be readily supplied. A digest of corporation
legislation would, of course, be of much greater bulk than
this. Provisions dealing with circulation have been uni­
formly omitted as being of no importance in the present
state of the national banking laws.




34

Digest

of

State

Banking

Statutes

Among the abbreviations to which attention should be
called lest they lead to misunderstanding is the use of the
word “ municipality,” which occurs sometimes to save a
list including perhaps “ city, town, county, school district,
or irrigation district,” etc.; lists of investments are often
shortened— “ United States securities,” for example, is
sometimes employed to save such language as “ stocks,
bonds, public funds, and interest-bearing securities of the
United States.” Among the things omitted may be noted
details of incorporation, what the certificate must recite,
what notice must be given to other institutions in the
neighborhood, whether the charter is lost if business is not
begun within a specified time, etc.; proceedings to increase
and reduce capital stock; details with respect to the depu­
ties and subordinates of the state officials, and the power
of state officials to subpoena, take oaths of witnesses at
examinations, etc.; treatment of minors, married women,
and trustees as depositors and stockholders; fees for exami­
nations ; details of the business trust companies may do as
trustees, guardians, executors, administrators, sureties,
etc.; details with respect to savings-bank pass books;
notice required for withdrawal of savings deposits; pro­
ceedings for assessments against stockholders; bonds and
oaths of officers; embezzlement and perjury with respect
to banks, when these offenses seem not different from the
same offenses with respect to other sorts of business;
directors’ objections, by which they avoid liability for
illegally declared dividends; limits on the time during
which a bank remains liable for payment of forged or




35

N at ion a l

M onet ary

Commission

raised checks; and the order of distribution of assets on
dissolution.
The heading “ X I. Penalties” is a catch-all for offenses
and their punishment not treated under other heads.
Penalties which entail the dissolution of the corporation
and placing it in the hands of a receiver appear under III;
and since the gist of the unauthorized banking provision
is usually the punishment, that penalty is uniformly
given under X. Where offenses— directors’ borrowing,
the making of false reports, etc.— are made misdemeanors
merely, that provision of the statutes is noted under
Penalties.
Wherever a reprint of statutes, collected by the banking
department of the State, has been used as the basis for
the digest of that State instead of the published statutes
of the State themselves, that is noted in the introductory
paragraph under the particular State. Many of these
reprints have been compiled from confused sources and
are of high value. The preliminary paragraph under
each state also indicates the date to which the digest
has been brought, usually through the 1909 legislative
session of the State, if one was held. The material for
each State has been sent to the supervisor of banking
in that State, with a request for his suggestions. The
following officials have been most courteous, and the
digest has profited greatly by their correction and help:
Mr. T. J. Rutledge, state bank examiner of Alabama;
Mr. Wm. T. McGuire, secretary, board of bank commis­
sioners of California; Mr. E. W. Pfeiffer, state bank com­
missioner of Colorado; Mr. Charles H. Noble, bank com-




36

D igest

of

State

Banking

Statutes

missioner of Connecticut; Mr. Charles H. Maull, commis­
sioner, department of insurance and banking, Dela­
ware; Mr. A. C. Croom, comptroller of Florida; Mr.
J. P. Brown, state treasurer of Georgia; Mr. Wm. G.
Cruse, bank commissioner of Idaho; Mr. J. S. Mc­
Cullough, auditor of public accounts of Illinois; Mr.
J. C. Billheimer, auditor of Indiana; Mr. John L. Bleakly,
auditor of Iowa; Mr. William S. Albright, assistant bank
commissioner of Kansas; Mr. Ben L. Bruner, secretary of
state of Kentucky; Mr. W. L. Young, bank examiner of
Louisiana; Mr. William B. Skelton, bank commissioner
of Maine; Mr. Murray Vandiver, treasurer of Maryland;
Mr. Charles L. Burrill, secretary to the bank commissioner
of Massachusetts; Mr. H. M. Zimmermann, commissioner
of banking of Michigan; Mr. A. Schaefer, public examiner
of Minnesota; Mr. E. J. Smith, auditor of Mississippi; Mr.
F. H. Ray, state examiner of Montana; Mr. E. Royse,
secretary of state banking board, Nebraska; Governor
D. S. Dickerson, chairman, and Mr. M. M. Van Fleet,
bank examiner and secretary, state banking board of
Nevada; Mr. Richard M. Scammon, bank commissioner
of New Hampshire; Messrs. D. 0 . Watkins and Vivian
M. Lewis, commissioners of banking of New Jersey;
Mr. C. V. Safford, traveling auditor of New Mexico, and
Mr. A. L. Morrison, jr., chief clerk; Mr. Clark Williams,
superintendent of banks, and Mr. George I. Skinner,
first deputy superintendent of banks, of New York;
Mr. H. C. Brown, clerk of the corporation commission
of North Carolina; Mr. B. B. Seymour, superintendent
of banks of Ohio; Mr. A. M. Young, commissioner of
banking of Oklahoma; Mr. James Steel, state bank ex-




37

N a t io n a l

M onet ary

Commission

aminer of Oregon; Mr. John W. Morrison, deputy com­
missioner of banking of Pennsylvania; Mr. William P.
Goodwin, bank commissioner of Rhode Island; Mr. Giles
L. Wilson, state bank examiner of South Carolina, and
State Senator T. G. Croft, of the same State; Mr. John L.
Jones, public examiner of South Dakota; Mr. Hallum W.
Goodloe, secretary of state of Tennessee; Mr. Thos. B.
Love, commissioner of banking of Texas, and Mr. Charles
V. Johnson, chief clerk; Mr. C. S. Tingey, secretary of
state of Utah; Mr. F. C. Williams, bank commissioner
of Vermont; Mr. Robert R. Prentis, chairman, and Mr.
Richard T. Wilson, clerk, of the state corporation com­
mission of Virginia; Mr. S. V. Matthews, commissioner of
banking of West Virginia; Mr. M. C. Bergh, commissioner
of banking of Wisconsin; and Mr. Harry B. Henderson,
state examiner of Wyoming.
Readers may think the system of references in the digest
is lacking in uniformity. It must be remembered, how­
ever, that the condition of the statutes of the different
States— the frequency of revision, system of chapters and
sections, etc.— is lacking in uniformity also, and, what
has been even more important in arranging the system of
references in parenthesis, it was necessary that the refer­
ences should occupy no more space than necessary. If a
glance is taken in each State at the brief introductory
paragraph, a hint will be found there wdiich will make
the references in parenthesis intelligible.
There follows a tabular summary of the digest. What
has been done is to state in such form as to make them
readily accessible, the few provisions which are law in




3«

D igest

of

State

Banking

Statutes

enough States to make it worth while showing in how
many. The value of even this much summarizing is
problematical, for it has been necessary to consider as
one, provisions which differ in different States; the limit
of individual liability to a bank, for example, may in one
State be a per cent of capital, in another a per cent of
capital and surplus, and in a third a per cent of capital,
surplus, and undivided profits. The tables may, how­
ever, serve to show to what extent these most common
provisions are dealt with in some form or other by the
various States. But the reader is cautioned against rely­
ing on the tables without reference to the digest itself,
except when he is in search of information of a general
sort; when a page of statute has been reduced to a para­
graph or a sentence of digest, and the paragraph or the
sentence has been reduced to a word or two in the table,
the result is a hint, necessarily often an inaccurate one.




39

S. Doc. 353, 61-2.




(To follow page 39.)

No. 10.

“ See Pa*e 60 fo T the impossibility of summarizing Arkansas.
&The equivalent of state bank statutes is, in Maine, under trust companies.
* There is no legislation on state banks in Vermont.
* Where more than one figure is given in answer to the question, it is generally because the statute provides different rules for banks in communities of different sizes.
In reserves the difference is sometimes that between a reserve depositary and a bank not designated as one.

\
I

)
f

%

L

Kansas.

Kentucky.

Louisiana.

Maine. b

5o,ooo_. - $10,000 to $50,000_. _ $15,000 to $100, D O
O-

Maryland.
$50,000 to $300,000;
maximum, $500,000
to $2,000,000.

All............................

Massachusetts, j *
$100,000; maximum,
$1,000,000.

Michigan.

Minnesota.

Mississippi.

$20,000 to $400,000.- $10,000 t0$25,000__

A ll-...........................

$50,000 to $300,000-.

Missouri.

Montana.

Nebraska.

$10,000 to $15,000__

$10,000 to Sioo.ooo;
maximum, $5,000.000

$20,000......................

$10,000 to $200,000..

$10,000 to $15,000__ i 50 per cent................

All..............................

5 months___________
20 per cent_________

New Hampshire.

New Mexico.

New Jersey.

New York.

North Carolina.

$25,000 to $100,000.. $5,000 to $25,000___
All________

All

i year_____________
10 per cent_________

Nevada.

•

2 years (see page 381;

i year_____________
10 per cent_________

10 per cent________

20 per cent_________
Yes

N o.....................

Probably yes_____

Yes........................... Three to twenty-one.
teen.

twelve.
2 to S

county;
holders
each of $500 of
stock.

States, etc.
page 207.)

Stockholders; citi­
zens of Maryland.

(See

y com-

Citizens of Massa­
chusetts ; holders
of 5 shares, etc.

S em ia n n u a lly by

state banks.

Hold $300 to $500 of
stock.

stock.

committee.

Bank commissioner.. Examiner merely___

Bank commissioner.

Superintendent
banks.

States;
3 resi­ ,
dents of Montana;
each holder of 10
shares.

county ; holders of
specified amounts
of stock, etc.

Majority residents of
county; each hold­
er o f specified
amount of stock,
etc.

Hold 5 to 10 shares of
stock.

____________

Majority residents of
New Jersey ; each
holds 5 shares.

o gov-

Biennially to gov­
ernor.
Yes
Yes

. - __ -

Biennially to legisla­
ture.
Yes

______

Annually to governor. Biennially to legisla­
ture.

0f

State banking board
(governor and four
appointees).

Board of bank com­
missioners.

auditor
Commissioner of bank­ Traveling
and bank exam­
ing and insurance.
iner.

Superintendent
banks.

Yes

Annually to governor. Annually to governor.

Y e s ........... ........... .
Yes_________

- ....................

Annually to secre­
tary of state.

Annually to legisla­
ture.

Yes----------- ------------ Annually to legislature.
Y es.................. .........

Yes................. .

Y e s ______________

Yes

Yes___________

Yes.............................

Yes______ .

Yes____________

Two.............. .............

.......................
Apparently seven___

*

3 years____________
Y es; c o r p o r a t io n
commission.

Annually to legisla­
ture.

.

Annually___________

years-----------------

of

Yes; state examiner. Yes; state banking
board (governor,
auditor, and attor­
ney-general).

To a certain extent;
board of bank in­
corporation (bank
comr., treasurer,
receiver genl., and
corporation cotnr.).
Annually to legisla­
ture.

States; t h r e e fourths residents
of New York; hold
certain stock.
Semiannually______

2

Yes; state treasurer.

___

S e m ia n n u a lly by
committee.

Annual examination
by committee of
stockholders.

committee.

C om m ission er of
banking d e p a r t­
ment.

Residents of Missouri; each holder
of 2 shares.

Yes_____ _____

Not more than nine.. At least five.

Four_____ .

Four____________

\nnually............ ....... Annually__________

Report to Commissionerevery 3 years.
At supervisor’s dis­
cretion.

One-----------------------

Two__________

One___________

25 per cent _______
per cent.
md is

20 per cent and 25
per cent.

IS per cent and 25
per cent.
Eight twenty-fifths. .

Three-fourths

___

Seventeen
fifths.

One-half

___ ___ _

______

twenty-

All........................... . A portion at directors’
discretion.

Two-fifths_____
Three-fifths___

25 per cent and 40
per cent (see page
463).

15 per cen t_________

15 per cent _______

Two-fifths, one-half,
three-fifths.

15 per cent and 20
per cent.

25 per cent, 20 per
cent, and 15 per
cent.
Tliree-fifths, one-half,
two-fifths.

.................. i ................. 15 per cent and 25
per cent.

15 per cent and 20
per cent.

10 per cent________

Yes............................

Yes_______ ________

............
50 per
tgage.

10 percent and 20 per 15 per cent and 20
cent on mortgage,etc.
per cent.

cured.
Y e s ............................ Yes____________

Y e s ............................

Restricted_______

Y e s ............................

Yes......... ...................

Yes

Yes________________ Yes________________
Yes_______________

Not over 50 per cent
of capital, etc.

Vm

V pc
*-------




-------------

Yes..............................

Yes_______________

Yes_________ ______

Yes............................. Y e s ............................

Yes________________ Yes

Yes

Yes

Loans, eight times__

Yes-------------------

Loans, eight times__

Yes.........

Yes_
_

___________ Yes-----------------------

Yes_________ ______ Yes............................

Restricted (see page
464).

Land must be worth
twice the loan.

v
Yes________________ Yes________________

Yes............................. Yes_______ ________

Yes________ _______

Y e s ............................

Apparently allowed. _

Yes_______________
Forbidden to officers,
directors, etc.
•

—
i
eThe reports and examinations here tabulated are only the regular reports to state officials and the regular examinations by state officials. The number given is
usually the minimum per year; many States provide for special reports and examinations at the supervisor's discretion.
/ The provisions restricting individual liability vary greatly, as will appear on reference to the body of the digest. The per cent is sometimes of capital, sometimes
of paid-in capital, sometimes of capital and surplus, etc. Liability of an individual firm or corporation frequently includes the liability of members. Commonly liability
is not considered increased by the discount of bills of exchange drawn in good faith against existing values nor by the discount of commercial paper actually owned by
the person negotiating it. Where there are further exceptions (as in statutes which allow liability beyond the per cent named, if security is given), an effort is made in the
table to suggest this.

M lb.
o.

Yes______ _____ ____ Yes_______ _______ _

.Yes_______________
Yes............................. Yes__________
Apparently allowed..

Allowed in home city
on increasing capi­
tal, etc.

C.
O

_ $5.000 to $25,000__

Oklahoma.

$10,000 to $50,000. -

. All .................... ._

..

$25,000 to $50,000..

50 per cent _______

50 per cent_____

6 months__________

S months____

10 per cent _____ -

Citizens of United
States; t h r e e fourths residents
of New York; hold
certain stock.

Two-thirds residents
of North Dakota ;
each holder of 10
shares.

Three-fourths residents of
Ohio; each holder of 5
shares.

Superintendent
banks.

4 years____________
Yes; c o r p o r a t io n
commission.

20 per cent________
Yes______ ______ _

Hold $500 of stock.

Yes

Yes

C o m m is s io n e r of
banking.

Yes

Yes

4 years____________

Annually togovernor. Annually to legislature.

Like national banks. - Tw o_______________

Five_______

Biennially_________

Annually......... .........

One............................

At supervisor’s discretion.

T wo____

7

Two-fifths, one-half,
three-fifths.

All

20 per cent _______

5

Sper cent (see page 678)

1 ..

Y es_______________

Yes

Vf“?

Majority residents of
S o u t h Dakota,
etc.; each holder of
S shares.

To l e g i s l a t u r e
through treasurer.

Stockholders; major­
ity residents of
Wisconsin.

Majority citizens of
Virginia; each own
$100 of stock.

shares, etc.

8

States; majority
residents of Wyo­
ming; owners of
certain stock.

Semiannually
by
committee of di­
rectors or stock­
holders.

Banking department.

An examiner only —

9

10

banking.

banking.

11
Y'es; commissioner
of agriculture, in­
surance, etc.

Biennially to governor.

Annually to legisla­
ture.

Yes; state examiner.. 12

Yes;corporation com­
mission.

Yes; secretary o f
state.

Annually to governor. Annually to governor. Annually to governor. Annually to governor. 13

Biennially to legisla­
ture.

•

Yes
Yes_______ ________
Four............... ...........

Five ....................... .

Yes
Two (see page
624).

Yes

14

Yes________________ Yes

Yes

15
16

Four

17
One............................ Two___

One______ _________
15 per cent and 20
per cent.

18

20 per cent_________

Four; but see
page 625.

19
20

15 per cent and 25
per cent.
One-third__________

One-third of demand
reserve.
All not held in cash
or bonds.

Three-fifths..

21

15 per cent and 25
per cent.

Two-fifths.. .

Two-thirds_________ T wo-thirds_________

20 per cent and 25
per cent.
Two-fifths ........ .

As directors determine.

22

All________________

All

23

cretion.

One-third of both deinand and time re­
serve.

Yes

Yes

Yes

_______

24
10 per cent, with ex­
ceptions.

25 per cent, with ex­
ceptions.

20 per cent, with excep­
tions.

25 per cent and 40
per cent (see page
463).

Yes____________________ Yes________________ Yes............................. Yes......... ................. . Yes________ _____ _
Yes_______________

Yes_______________

Yes......... ...................

25 per cent. .

30 per cent, with ex­
ceptions.

Yes___

Y e s . . . ......................

Yes.........

Restricted (see page 514) . First mortgages for
not longer than 1
year, etc.
Yes. ________

Vm

Apparently allowed,
except to officers,
etc.




........ 1.........

Y e s _____________

The limitations on a bank’s holding its own stock, either as collateral or outright, is commonly subject to the proviso that the stock may be held if it is necessary
to take it to prevent loss on a debt previously contracted on security thought adequate at the time. The statutes allowing stock to be thus taken usually require it to
be sold within a certain time—six months, a year, etc.
* For typical limitations on real estate holding, see the provisions of the New Jersey statutes, on page 418. and of the New York statutes, on page 466.
i Other than the national banking act, there is no statute in force in the District of Columbia providing for the organization of commercial banks.
j The Massachusetts bank statutes here tabulated are obsolete; see page 246.

27

Limited to 50 per
cent of capital and
deposits, with ex­
ceptions.

Y'es______________

Y'es. .

Allowed for 60 days..

1

26

Y e s _______ _______

28

Limited in total
amount and value
(see page 637).

Allowed if capital is
increased.

j

i

Yes----------- ------- ----

Y e s ............................

In effect forbidden_
_

Allowed in home city
on increasing capital, etc.

One-half capital and
one-half deposits
only may be so
loaned.

sylvania land; lim- j
ited in amount.

Yes________ __

Deposits limited (see
page 630).

times.
First lien only, etc_
_

Yes_______________

25
Yes_______________

Y es............................. Y'es_______________
’

Y e s ...... ...............
Y es____
’

Deposits, ten times.
Restricted (see page
464).

6

7

tier cent.... .........

20 per cent and 25
per cent.
One-third---------------

$10,000 to$ioo,ooo._

3
4

1s per cent_________

10 per cent_________

per cent of demand de­
posits and 4 per cent of
time deposits in cash;
the rest deposited.

$10,000 to$50,ooo__

Savings d e p o s its
every 5 years.

15 per cent and 23
per cent.

6

All

Y'es; state examiner. Y es; secretary
’
of state and
comptroller.

Yes___________

Four_____■________
_

Three-fifths, one-half,
two-fifths.

Property
worth
$25,000; maximum,
$10,000 to $100,000.
$500,000.

Yes___________ ____ Yes_______________

Y e s . ................ .........

T wo_______________

Wyoming.

3 years...................... 4 years................. .....
To a certain extent ;
board of bank in­
corporation (com­
missioner, treasur­
er. and attorneygeneral).

Yes_______________

25 per cent, 20 per
cent, and 15 per
cent.

Hold 10 shares of
stock.

Bank commissioner.. Bank examiner____

Yes_______________

___

Wisconsin.

West Virginia.

YVasliington.

Semiannually______

Annually to eommissioners.

Annually to legisla­
ture.

Virginia.

Vermont, c

Utah.

| At least five___

Quarterly.................

4 years..................... -

Texas.

10 per cent_________

At least three______

To a certain extent;
board of commis­
sioners (governor,
secretary of state,
and state treasurer).

Yes; state examiner
and banking board
(governor, secre­
tary of state, and
attorney-general).

10 per cent________

25 per cent_________

Hold $500 of stock. _ Hold $500 of stock.. Citizens of United
States .and Penn­
sylvania: e a c h
holder of 10 shares.

Superintendent of banks. _ Bank commissioner.. Bank examiner____

of

Tennessee.

All________________

Yes_______________
At least three______

South Dakota.

___

ao per cent________

Annually by committee. . Semiannually______

exam•

..

50 per cent . _____

Three to thirteen__

South Carolina.

$10,000 to $100,000-- $10,000 to $100,000;
maximum $1,000,-

10 per cent_________ 10 per cent. ______

Yes_______ ________

Yes...........................

1

Rhode Island.

10 per cent_________

20 per cent. .......... .........
Yes____ _______ _

$10,000 to $50,000__

S months_______________

S months_________
10 per cent_____

Pennsylvania.

$10,000 to $100,000.

Ohio.

North Dakota.

Oregon.

All________________

North Carolina.

New York.

Y'es_______________

Y e s ............ ......... . .

29

Yes________________

30

Allowed for 90 days.

Apparently a l­
lowed.

31

Forbidden__________

Limited to 5 per cent
of deposits.

Apparently allowed..

32

of capital.

_________ ____

33
............

Ic

1

1

1

1

1

Alabama.
No________________

I
1

Arizona.
Yes . . . .

Arkansas.6

__

California.

No __________ ______

Yes...... .......... .

Colorado.
. . Yes

Connecticut.

Delaware.

District of Columbia.

Florida.

Yes

Georgia.

Idaho.

Indiana.

Illinois.

Y e s .......................

No

No

Iowa.
Yes_______ ________

Kansas.
Practically, no . . .

Yes

$10,000 to $50,000---

$10,000 to $50,000__

At least five..............
Must be approved
by a judge.

Hold from 2 to s
shares.

R e s i d e n t s of the
cou n t y ;
each
holder of $500 of
stock.

Quarterly by com­
mittee.

Quarterly________

........ - ......... Yes...... ......................

Y e s ........................

N o____ ___________

Five to thirteen__ .

Annually by com­
mittee.

To a certain extent
(see page 83).

In part------------------- Probably, yes______

$10,000 to $100,000..

Except where legis­
lated for sepa­
rately.

Savings banks subject to the same laws as commercial
banks.

Kentucky.

Yes_______________

Yes

3
4

5

6

In mutual, must be
members and de­
positors.

Must be stockholders-

All citizens of United
S t a t e s ; threefifths residents of
F l o r i d a ; each
holder of 10 shares
of stock.

Hold $500 of stock__

Hold 10 shares of
stock.

Annually through au­
ditors.

J

Yes

_____

Yes
Yes

_____

....

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes.

Yes

Yes........ ..................

Yes

Yes

Annual report
comptroller.

S. Doc. 353, 61-2.

1




(To follow page 39.)

..........................

No. 2a.

1 jMa. ii 1 a

15 per cent of de­
mand liabilities.

Not more than 20
per cent.

_
8 per cent--------------- 20 per cent_

Half cash, half de­
posits.

Cash or deposits___

One-fourth c a s h ,
three-fourths de­
posits.

First liens on land
worth twice the
loan.

First lien on Indiana
realty worth twice
the loan.

First lien on Iowa
land worth twice
the loan.

Fully

..........

Voc
!..........................

Tw o_________

First liens on Florida
realty only, etc.

First liens on Con­
n e c t i c u t land,
worth twice the
loan.
Fully

Y es............................

Every other year___

Yes

At d i s c r e t i o n of
C om p troller of
Currency.

Cash or its equiva­
lent; one-half in
currency.

First liens only, e tc.. First liens on land
w'orth twice the
loan.

•

Two-fifths c a s h ;
three-fifths depos­
its or bonds.

1s per cent of demand
deposits.

So per cent of all
loans must be first
liens on Arizona
land, etc.

F o u r------ --------------

to

At supervisor’s dis­
cretion.

Three-fifths d e ­
posited, two-fifths
cash.

Yes -------- --------------

Y e s ________
F ou r_________

Three

$15,000 to $100,000-.

1
.....................................

....................

Yes

10 per cent........ .......

One-half cash, onehalf bonds.

One-third cash, twothirds deposits.

Y e s ______

Y e s ........... - .............

Yes
Yes

Yes

Y es.. - .......................

I'ABLE B.— TABULAR SUMMARY OF STATE LEGISLATION GOVERNING SAVINGS BANKS.
[General note: In many states the statutes contemplate that savings bank business be done by commercial banks, not by institutions devoted exclusively to savings banking. In such cases the statutes applicable to commercial
banks are again tabulated here, although they may seem in certain respects inapplicable to savings business— as, for example, where reserves are required to be a percentage of demand deposits.)

Kansas.

Kentucky.

Maine.

Louisiana. c

Maryland.

Mississippi.

Minnesota.

Michigan.

Massachusetts.

Missouri.

Montana.

Nebraska.

Nevada.

New Hampshire.

New Jersey.

New Mexico.

North Carolina.

New York.

North Dakota.

(See page

Yes

Ve «5

s _______________

Almost entirely___

$10,000 to $15,000__

$10,000 to $100,coo;
maximum, $5,000,000.

$100,000; maximum
$500,000.

_
$15,000 to $75,000_

Five to thirteen_
_

Not more than thirteen.

Three to fifteen____

Three to thirteen__

Residents in t h e
county, etc.

Stockholders; a majority citizens of
Missouri.

Citizens of United
S t a t e s ; threefourths residents
of Montana; each
holder of 10 shares.

Hold 5 shares of
stock, etc.

Majority residents of
c o u n t y ; each
holder of certain
stock, etc.

Hold 5 to 10 shares
of stock, etc.

Majority residents of
county and free­
holders in New
Jersey, etc.

Residents of New
York; financially
responsible, etc.

Two-thirds residents
of North Dakota;
each holder of 10
shares.

Annually by com­
mittee.

S e m i a n n ually by
committee.

Annually through an
accountant.

Semiannually______

Quarterly__________

Semiannually______

Annually by committee.

S e m i a n n u ally by
committee.

Semiannually______

Y e s ................ .........

Yes________________

§
0
0
b
0
0

Quarterly__________

Yes------------------------

Y es.. _____________ Yes ______________

Four _ _

Four.... ........... ...........
Biennial report to
comptroller.

Yes...........................

Yes______ _________ Y es.. ......................

Yes.............. - .............
u r ---------------------

Before each dividend is declared,
etc.

Four____ _________




15 per cent and 25
per cent.

Y es............................. Yes____

Yes________________ Yes..........................

.

Yes........................... - Yes________________ Yes________

Yes___________

F o u r_____ _____ . .

Five.

____

.

_____

__ _________

Annual report to
superintendent.
Every other year----- O ne_______________

One _____________

5 per cent of all deposits.

Every other year-----

20 per cent of all deposits.

5 per cent---------------

In cash or deposits. - In cash or deposits. . In available funds—

thirds deposits.

$10,000 to $50,000__

Not more than nine.. At least thirteen-----

One____________ .

15 per cent of total
assets.

Yes________________ Yes________________

$5,000 to $25,000___

Every five years____

per cent--------------

1. N o________________

Y e s ................. .........

F o u r---------- ----------- Four...........................

_________ One...................... .....

Report to commis­
sioner every three
years.

One-third cash, twothirds deposits.

Yes...... ......................

Y e s ____ __________ Yes_______ ________

Every other year___

e-half cash, onelalf bonds.

In a few respects___

In a very few respects.
Both______________

Yes................- ...........
0
6
0
0

Stockholders; citi­
zens of Maryland.

Annually by commit­
tee of five.

Almost entirely____

0
0
0
d

Annually by com­
mittee of two.

In part____________

v
j

holding in other
banks.

Only with respect to
supervision, etc.

0
0
0
0
d

: si de n t s of the
rount y;
each
lolder of $500 of
stock.

Perhaps in some matters.

In some m atters__

.......... - - - -

$50,000 to $300,000;
maximum, $500000 to $1,000,000.

0,000 to $50,000----

Yes________________ Y es________________ Yes_____ _____ _____ Yes________________ Yes________________ Practically.no..

Y es._______________ Not mentioned in
statutes.

0
A

V><5

A few provisions___

Hold 10 shares of
stock.

- __________

A few provisions___
Yes________________

Yes
In part.
236).

Yes________________ Yes____ ___________

At least seven______

V ps

actically, n o ___ , .

One-third, cash; twothirds, deposits.

*
•

Cash or deposits__ __ T w o - f i f t h s cash,
three-fifths depos­
*
its.

$4,000-------------------Massachusetts re­
alty, etc.

or New Hamp­
shire realty, etc.

worth twice the
loan.
Fully..........................

Yes

Y e s _______________

Yes____

Yes

__________

First liens only, e tc ..

First liens on Minnesota land, etc.

First liens on land
worth twice the
loan, etc.

First liens on land
worth twice the
loan.

Fully..........................

Fully..........................

Very briefly------------- Briefly........................ Briefly___________

Vm

...... ........... .......

1

Yes.............................

Yes.............................

cases, second liens,
etc.

cases, second liens,
etc.

Jersey land worth
twice loan, etc.
Fu lly..
Yes

* See digest, Page 530, for the difficulty in determining what statutes apply to savings banks in Oklahoma.
For a typical limitation on real estate bolding, see the provisions of the New Jersey statutes on page 426

No. 2b

(See page 475-)
Practically, n o t____

........

Yes.

8 Where more than one figure is given in answer to the question, it is because the statute provides different rules for institutions in communities of different sizes. In reserves, the difference is sometimes that between a reserve
depository and a bank not designated as one.
6 See page 58 for the impossibility of summarizing Arkansas.
♦ The confused condition of the Louisiana statutes has made a summary of savings bank and trust company provisions seem unprofitable; see page 205 of the digest.
d The reports and examinations here tabulated are only the regular reports of state officials and the regular examinations of state officials. The number given is usually the minimum per year; many States provide for special
reports and examinations at the discretion of the supervisor.
t

of the land mort­
gaged (see page
4 4 7 ).
Yes_

Yes

Practically, not .

........ - ........... Yes________________ Y e s ............... .

%
cial

New Mexico.

New York.

Yes________________

Yes________________
In a few respects___

North Carolina.

North Dakota.

Ohio.

Oklahoma.*

Y e s ______ _______ - _

Oregon.

Pennsylvania.

No_
_

Yes_______ _____- . -

Yes______

Yes
_____

____

...

. With respect to su­
pervision, etc.

Y e s ............... ...........
$15,000 to $30,000__

.

Rhode Island.

South Carolina.

Yes.

No

Only with respect to
supervision.

South Dakota.

Tennessee.

Texas.

Utah.

Washington.

Wisconsin.

West Virginia.

In part____________

Are departments of
banks and trust
companies.
Yes________________ Yes________________

Yes

$10,000 to $50,000__

$25,000___________ - ‘

Property w o r t h
$10,000 to $100,000.

$10,000 to $50,000; $io,ccc to $100,00c;
maximum,$1 ,coc, maximum,$5,000. coo.
000.

Not more than nine. - At least thirteen___
of
ew

m-

th

Five to nine________
»

Residents of New
York; financially
responsible, etc.

te -

of North Dakota;
each holder of 10
shares.

Ohio; each holder of 5
shares.

Hold $500 of stock__

sylvania, etc.

Yes_______ _______ -

Yes........ ................... . Yes______

Tw o_______________

Y e s...

______

S e m i a n n ually by
committee; and be­
fore dividends.

. . Yes__________

...

shares of stock.

Citizens of United
States; majority
residents of Wyoming; holders of
certain stock.

ginia.

S e m i a n n ually by
committee.

Y e s .._ ........ - ........... -

Yes

Every other year___

Yes...... ............. .........

Yes________________

Yes________ _______
Four_______________

One_______________

Annually___________

At supervisor’s dis­
cretion.
5 per cent of all de­
posits.

20 per cent of all de­
posits.

15 per cent of all de­
posits.

T w o - f i f t h s cash,
three-fifths depos­
its.

•

Yes------------------------

Yes________________

One_______________

Yes_______________

Yes________________

\

S e m i a n n ually by
committee of di­
rectors or stock­
holders.

Five .............. .........

_

Annual report to
superintendent.

One______________

Yes______________

Majority citizens of
Virginia; e a c h
holder of $100 of
stock.

Two_______________

Annually.. ______

-. - -

No office in another
savings bank, etc.

By committee, before Before each dividend
declaring dividends.
and annually by
committee.

Annually by com­
mittee.

Yes________________ Yes________________ Yes________________ Y e s ___ __ _____

Stockholders; a ma­
jority citizens of
Texas.

stock.

Sem iann ually by
committee.

Yes________________

Wyoming.

Yes________________

A few provisions___

No

Yes.............................
$5,000 to $25,000___

Virginia.

Vermont.

3 per cent of demand and
and 2 per cent of time
in cash; the same in
securities; the rest de­
posited.

15 and 25 per cent of
demand, 10 per
cent of time.
One-half cash, onehalf securities.

thirds deposits.

7

Every other year___
■
20 per cent of de­
mand liabilities.

15 per cent of total
assets.

Cash, deposits, and
not more than onethird bonds.

15 per cent of de­
mand deposits.

5 per cent__________

10 per cent of savings deposits.

Cash, checks,
deposits.

per cent of time
deposits.

T w o - f i f t h s cash;
three-fifths depos­
its.

Cash or deposits____

Cash or deposits__ -

and

$1,000 a year_______
Restricted by value
of the land mort­
gaged (see page
4 4 7 ).

First liens only, etc.
(See page 475.)

First liens only, etc..

amount, etc.

sylvania land; lim­
ited in amount.

First liens only, etc..

Practically, n o t. __

Y es.. _____________
Yes___ ________ - -J Yes________________ Yes________________ Yes................

re
v

ria
l




........

Yes____________

Yes_________

Yes

___

Yes.............................

First lien; loan only
t hr ee- f i f t hs o f
value of land, etc.

Practically, not _ _
Yes

Yes

No. ic.

First liens on land in
certain States, etc.

First liens only_____

Yes.............................

First liens on land
worth twice the
loan.

one-half deposits
may be so loaned.

First liens on land in
West Virginia or
adjoining States,
etc.

Very briefly____

Very briefly______ -

Yes............ ................. Yes________________ Yes...... .....................

Yes________________

Alabama.

Arkansas. 6
Yes. _____

X
1

Arizona.

Colorado.

Yes.. .......................

Yes. _______________

N o.............................. No.............................. Y es_______________

To a certain extent
(see page 83).

Yes________________

Except where legislated for s epa1 rately.

Trust companies subject to laws governing commercial
banks.

Delaware.

California.

Connecticut.

A ll...........................

4

Florida.

$1,000,000
$1,200,000.

Idaho.

No_________ ___

to

A ll.............. .. ............

AH ■

Georgia.

Yes

___

Kentucky.

Louisiana.e

Very briefly________ Yes________________ Yes_______________
Yes______________

$ 25,000; perhaps also
same requirement
as for banks.

$15,000 to $200,000. -

$25,000 to $100,000;
maximum, $2,000000.

$10,000 to $50,000---

$100,000; maximum
$1,000,000.

All, if not
$100,000.

20 per cent; not less
than $15,000.

All________________

20 per cent_________ So per cent-------------

over

6 months___________

One year. ............ .....

5

Kansas.

If they do banking
business.

$25,000: not over
$2,000,000.

Iowa.

Indiana.

Illinois.
Yes

Yes

$50,000 to$ ioo,ooo..

3

District of Columbia.

6
7

1 year--------------------

10 per cent________
50 per cent_________
No .............................

Y es............................

Three-fourths must
be residents of
Connecticut.

8

Stockholders; onehalf citizens of
District of Colum­
bia.

Yes

Ve <5

Yes

______

Y e s _____ ________ Yes________________ Yes------ --------------Five to fifteen______

Nine to thirty______

9
0

Majority residents of
K a n s a s ; each
holder of $1,000
of stock.

Majority citizens of
I n d i a n a ; each
holder of 10 shares.

Hold at least 1 share
of sfock.

Quarterly__________

t

2

Yes

3

Three

Yes

V>«5

Yes

____

Yes.......... ................

Yes...... ....................

Yes........- .................-

Yes________________ Yes________________

Yes

Yes

4

Yes

Four_____ ______—

Five..

Four_______ ______

Four............- ............

5

Two

6
7

At supervisor’s dis­
cretion.

Minimum reserve; 0 What per cent of demand deposits.

See pages 171 and
178.

At comptroller’ s dis­
cretion.

15 per cent and 10
per cent.

S

.....................................

15 per cent or 20
per cent.
•

0

1

Three-fourths...........

All

Eleven-fifteenths___

2

All

Individual borrower’s liability limited to what per cent
of capital.*

See pages 61 and 70.

10 per cent unless
amply secured.
Yes________________ Yes...........................-

Yes

4

Total loans or deposits restricted to what proportion
to capital.

Both, ten times____

Loans on real estate restricted _____ ____

First liens on Colo- ..................................... ..................................... ..................................... ......................................
r a d 0 real estate
only.
Y e s ............................

Real estate holdings limited a ........................................

Yes........ .....................
Only forbidden
officers.

Yes_______________
Only forbidden to
officers, directors,
etc.

to

Permitted if capital
increased.

Yes.............................

Y e s ........ ................. . Y e s...................... .

Corporation forbidden to purchase its own stock / ____

Overdrafts forbidden_______________________________

------------------- ------

.....................................

__________

Allowed on increase
of capital, etc.

___________
S. Doc. 353, 61—
2.




(To follow page 39.)

No. 3a.
.

» Where more than one figure is given in answer to the question, it is generally because the statute provides different rules for corporations in communities of different
sizes. In reserves, the difference is sometimes that between a reserve depository and a corporation not authorized to receive reserves of others on deposit.
6 See page 58 for the impossibility of summarizing Arkansas.
« The confused condition of the Louisiana statutes has made a summary of savings bank and trust company provisions seetn unprofitable; see page 205 of the digest.
d The reports and examinations here tabulated are only the regular reports to state officials and the regular examinations by state officials
The number given
is usually the minimum per year; many States provide for special reports and examinations at the discretion of the supervisor.

TABLE C.— TABULAR SUMMARY OF STATE LEGISLATION GOVERNING TRUST COMPANIES
Kentucky.

Louisiana.e

Yes______________

Maryland.

Maine.
Yes_______________

Yes----------------------

Yes_______

______

Y e s .............. .........

In part ; see page 236-

__

Minnesota.

Mississippi.

Missouri.

Montana.

$50,000 to $300,000 ;
maximum, $500,000 to $2,000,000.

All....... ................. ..

Yes________________

Y e s ........ .................. In respect to super­
vision, etc.

$200,000 ; maximum,
$2,000,000.

$100,000; maximum,
$10,000,000.
A ll.............................. 50 per cent of sub­
scribed capital.

$150,000 to $300,000 ; maximum,
$5,000,000.

Nevada.
No________________

$100,000; 50 per cent.

New Hampshire.
Yes..........

New Jersey.

Y e s _______________ In respect to reports,
examinations, etc.

i year___

New Mexico.

New York.

With respect to su­
pervision, etc.

Yes

$100,000; maximum,
$10,000,000.

$50,000 to $300,000-. All

$100,000 to $200,0 0 0 ; maximum,
$1,000,000.

Nebraska.

!v
Yes________________ 1 Tes________________ No..............................

In some matters___

$25,000 to $150,000;
maximum, $1,000,000.
So per cent____

Michigan.

Massachusetts.

In certain respects . .

Ve*

$100,000 and $250,000 $100,000 to $500,000. $5,000 to $25,000---All.

All

$50,000 and $100,000. All

2 years; see page 381.
10 per cent____ ____

Probably 50 per cent.
Probably 5 months..

10 per cent________

25 per cent_________
Yes-----------

North Carolina.

20 per cent................

Y es........................

Yes........ ............... .

Two-thirds residents
of Maine; e ach
holder of io shares.

Stockholders;
citizens of Maryland.

No..............................

Yes ............ ...............

Probably yes; see
page 360.

Yes

Five to twenty-five..

Annually by committee of two.

Yes_______

Majority residents of
M a s s a c h usetts;
each holder of 10
shares, etc.

stock.

Quarterly
mittee examines
annually.

One_______ ________
Annually___________

One____________

..

O ne................ .........

One_______________

Majority residents of
c o u n t y ; each
holder of specified
amount of stock,
etc.

Four .........................

At supervisor’s dis­
cretion.

of stock, etc.

Hold 5 shares of
stock.

Majority citizens of
New Mexico; each
holder of 10 shares.

Hold 10 shares of
stock.

S e m i a n n u a l l y by
committee.

*
Yes........... .................

Yes...... ......................

Yes____ ___________

Yes._____ _________
Yes____ „•
...................

Four............. .............

Stockholders; a majority citizens of
Montana.

................... Stockholders’ committee examines
annually.

Yes________________ Yes_______________ _ Yes...... .................. ... Yes........ .....................
Yes_________ ______

Four----------

Stockholders, a majority citizens of
Missouri.

Residents of Minne­
sota ; each holder
of 10 shares.

Yes...... ......... .........

Four_______________

F o u r............ .............

Y e s ........

Veq
V ps

Apparently seven__

Reported to commissioner every three
years.
One.......................... . One_______________

15 per cent_________

20 per cent of matured obligations.

per cent.

T' 1 1 1

At supervisor’s dis­
cretion.
15 per cent................

See pages 352 and
362.

15 per cent; and 10
per cent.

•
Two-fifths; and onehalf.
Three-fifths;
one-half.

and

All; two-thirds; and
one-half.
Three-fourths______

A l l . . .......... ...............

None; o n e - t h i r d ;
and one-half.

One-fifth------- ---------

20 per cent.

Yes.........................

Yes

See pages 352 and
362.

10 per cent to 25 per
cent unless secured,
etc.
Yes.............................

Yes............ .................

___

Y e s ........ ...................

Yes------------------------

One branch in home
city.

^ es________________

\ e s.______ ________ Yes............. ..............

Yes.... ......................... Yes------------------------

Forbidden to officers
directors, etc.
Forbidden____ _____

« The provisions restricting individual liability vary greatly, as will appear on reference to the body o
times of paid-in capital, sometimes of capital and surplus, etc. Liability of an individual firm or corporation
liability is not considered increased by the discount of bills of exchange drawn in good faith against existing
owned by the person negotiating it. Where there are still further exceptions (as if the per cent may be exceed
incompleteness.

No. 36.

Yes

Restricted (see pages
464 and 485).

Apparently allowed..

Restricted by location and capital.

Yes .

Yes
Yes

Y«s-............ - .............




Yes.............................

First liens on Montana realty.

Restricted...... ...........

Yes_____

25 per cent and 40
per cent (see page
463).

Allowed in home city
on increasing cap­
ital, etc.
the digest. The per cent is sometimes of capital, some­
frequently includes the liability of members. Commonly,
values, nor by the discount of commercial paper actually
tl in the case of secured loans) the table aims to suggest its

New Jersey.

North Carolina.

New Mexico.

Oklahoma.

Ohio.

North Dakota.

Oregon.

Pennsylvania.

Rhode Island.

South Carolina.

South Dakota.

Yes.

Yes.

No_________

Yes________

Yes___

Yes___________

Y e s .._____ _______

Practically no.

N o.

Y es...............

With respect to supervision, etc.

In certain respects _.

Probably yes.

Probably yes.

In part.

In some matters.

In so far as they do
banking business.

In many respects___

Yes_________

Yes.

Probably not

$100,000____

$100,000.

$100,000 to $200,000;
maximum, $10,000,000.

$10,000 to$so,ooo__

$50,000; maximum,
$2,000,000.

$25,000.

$25,000 to $100,000.

50 per cent.

50 per cent.

50 per cent

All.

Texas.

Virginia.

Vermont.

Utah.

All.

6 months__

Tennessee.*

Washington.

West Virginia.

Wyoming.

Wisconsin.

6 months__

$100,000and$250,0001 $100,000 to $500,000. $5,000 to $25,000 —

$50,000 and$ioo,000. All

Probably 50 per cent. $50,000.

Probably 5 months.. 2 years_____________ 5 months . .

All

No.

Briefly_____________ Yes_______

Yes-

Yes________________I A few provisions

Yes.............................| Yes------

Largely.

In part____________

Yes.

Yes.............................' Yes...........................

Largely___________ I In part.

$50,000; maximum,
$10,000,000.

$25,000 to $100,000-

$50,000.

$25,000 to $100,000-- $100,000.

$50,000 to $100,000;
ma x i m u m , $5,000,000.

A ll.

All.

Yes____

$10,000 to $100,000..

All.

50 per cent.
6 months__

10 per cent_________ 10 per cent.

er cent _

ro per cent.

Probably 10 per cent. 10 per cent.

10 per cent.

10 per cent.

10 per cent.

10 per cent.

er cent -

20 per cent.

Probably 20 per cent. 20 per cent.

20 per cent.

20 per cent.

30 per cent.

50 per cent.

20 per cent_________

20 per cent.

20 per cent.

Yes_______

Y es........... .

Yes.............

Yes.

Yes.

Yes............ .

At least five.

Five to twenty-five..

Majority residents of
S o u t h Dakota;
each holder of 5
shares.

Stockholders; a ma­
jority citizens of
Texas.

No________

Probably yes .

Yes_______

Double unpaid stock

Yes.

?ast five.

At least five.

Thirteen to thirty.

Nine to fifteen.

Five to thirty__________

Five to twenty-five.. At least three____

1 5 shares of

Majority citizens of
New Mexico; each
holder of 10 shares.

Hold 10 shares of
stock.

Majority citizens of
N o r t h Da kota;
each holder of 10
shares.

Three-fourths residents of
Ohio; each holder of
5 shares.

Must be stockholders

Semiannually.

Probably semiannu­
ally.

Annually by committee.

Yes..............

Yes..

act.

liann 1 ally by
1
mmittee.

; Probably yes.

Yes.
Yes..

Y es..

Probably yes .

Two

Four.

Four_______

Five________

Hold 10 shares of
stock.

At least five.
: Majority citizens of
V i r g i n i a ; each
owns $100 of stock.

Yes________________

Yes.

Y es..

Yes____ ___________

Five.

Yes..

Y es..

Like national banks. . Two.

Four.

O ne_______________

Two.

Probably one.

Two.

One.

At supervisor’s discretion.

Two.
15 per cent and 25
per cent.

1S per cent .

15 per cent _

Two.

Four

Four.

Tw o____________

Four.

Two.

One.

One

7Ya per cent.

All; two-thirds; and
one-half.

Two-fifths..

Probably two-fifths.. 3 per cent of demand; 2
per cent of time.

One-third ..

One-third of demand
reserve.

Yes.
Yes.

Y es..

Two_______________

Four

Five.

Two______

Four

■„
j Two_______________ '--------------------------

One.

At supervisor’s discretion.
per cent_________

-fifths.

Three-fifths.

None; o n e - t h i r d ;
and one-half.

Three-fifths

Probably three-fifths .

Two-thirds.

All not held in cash
or bonds.

A ll.

All.

One.

One.
15 per cent.

25 per cent.

Three-fifths

A ll.

A ll.

One-third of both de­
mand and time re­
serves.

3 per cent of demand; 2
per cent of time.
10 per cent.

Probably 15 per cent . 20 per cent.

Probably yes.

Probably yes____

Yes.

30 per cent.

25 percent with ex­
ceptions.

10 per cent with ex­
ceptions.

15 per cent with ex­
ceptions.

25 per cent.

20 per cent.

5 per cent of de­
posits, etc. (see

15 per cent.

20 per cent.

page 670).

Restricted (see pages
464 and 485).

Probably only first
liens, etc.

Yes________________ ! Probably yes .

Probably yes______

Y e s -----------------------------

Yes.

Yes________________ | Yes_________

Yes...... ............. ........

Yes____________________

Apparently allowed.

Forbidden to officers
directors, etc.

Yes............................
Loans, ten times------

Limited in amount, etc.

Yes.

Y es.

Yes..........................
Deposits, ten times.

Yes.

........ | YeS
......................... |..............

One-half capital and
one-half deposits j
may be so loaned.

First mortgages on
Utah land, worth
twice the loan.

Yes.

Yes.

First liens on land
worth twice the
loan.

First lien; loan not
to exceed *“ re<\
fifths value of land.
etc.

dden to officers
ectors, etc.




Allowed in home city
on increasing cap­
ital, etc.

Yes.

Yes________________ Yes_______________
Yes.........

Yes..

Yes........................

Apparently allowed. except to officers,
etc.
■Allowed if capital
increased.

L itedto 5 p rce t
im
e n
o d p sits.
f eo

Forbidden. . . ______

/ The limitations on a bank holding its own stock, either as collateral or outright is commonly subject to the proviso that the stock may be held if it is necessary to
take it to prevent loss on a debt previously contracted on security thought adequate at the time; the statutes allowing stock to be thus taken usually require it to be
sold within a certain time— six months, a year, etc.
9 For a typical limitation on real estate holding, see the provisions of the Michigan statutes on page 302.
* Banks inT n e eapparently d all th trust b sin ssd n inthe State. See Table for banks.
e n sse
o
e
u e oe

Allowed if capital inincreased.

No. 3c.

Y e s _______________

Yes-

Yes.............................

Yes.

Yes.

Apparently allowed..

Allowed.

................. Yes.

Query ..

14
15

Two-fifths..

Three-fifths

Yes________________ Yes-

13
Four.

15 per cen t.

Two-fifths..

25 per cent and 40
per cent (see page
463)-

Yes.

Yes.

10 per cent.

Two-fifths. .

1S per cent of all, minus
6 per c e n t of demand
and 4 per cent of time.

Five to nine----------Citizens of United
States; majority
residents of Wyo­
ming; each holder
of certain stock.

S e m i a n nually by
committee of di­
rectors or stock­
holders.

15 per cent and 25
per cent.

Probably 20 per cent. 15 per cent.

Yes.

E ven ’ 6 years_______________________ j Biennially

25 per cent.

fifth..

percent_________

At least three .

Hold 10 shares of ____________________ Stockholders; ma­
stock.
jority residents of
Wisconsin.

Yes.

Yes-

Yes.

Y es............................. Yes................
Yes.... .....................--

15 per cent..

1o per cent

15 per cent; and 10
per cent.

Seven to thirty.

Quarterly

Biennially__________ Annually___________I Savings deposits
every 5 years.
upervisor’s disition.

Yes...........................

Quarterly.

Yes.

Probably yes .

Hold $500 of stock__

Hold $500 of stock.

Yes.............................

10 per cent.

Yes.

Allowed for 90 days.

Forbidden.

16

STATE BANKING STATUTES.
ALABAMA.
Article X III of the constitution of Alabama, entitled
“ Banks and banking,” contains provisions dealing chiefly
with note issues, redemptions, etc. The Code of Alabama,
which includes all statutes passed prior to the end of the
1907 session, deals with the subject of banks in three arti­
cles of the chapter (No. 69) on “ Corporations.” There are
articles in this chapter also, concerned with mutual aid,
benefit, and industrial companies, building and loan asso­
ciations, etc. The three articles really concerned with
banking are: (9) General provisions as to banks and
banking; (10) Regulation of trust companies; and (11)
Examination and regulation of banks. There is no legis­
lation dealing specifically with savings banks, but by section
3561 the provisions of article 11 are made to apply “ to all
banks except national banks, and to all trust companies
and individuals doing a banking business, whether incorpo­
rated or not.” All the legislation, therefore, for which sec­
tions in the code from 3538 to 3561, inclusive, are cited,
applies according to the terms of section 3561. These sec­
tions, together with a few others, are accordingly grouped
in the first division of this summary of Alabama, as bear­
ing upon all banking institutions, including savings banks,
and trust companies that are engaged in banking. Under




41




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Commission

the second division, headed “ Trust companies,” are merely
inserted those provisions of the statutes which deal with
trust companies. The citations where they are simply
numbers in parenthesis are references to the Code of 1907.
Mr. T. J. Rutledge, state bank examiner of Alabama,
assured the compiler, in a letter dated May 31, 1909, that
at that date there had been no banking legislation subse­
quent to the material included in the digest.
GENERAL PROVISIONS.
I.— T erms

of

I ncorporation.

Banks doing business in Alabama, if in towns of more
than 2,500, must have a capital of not less than $25,000
actually paid in and employed in the business; if in smaller
towns the capital must be not less than $15,000 (3542).
For combining banking with trust business, see VI,
below.
II.— L iability

of

Stockholders.

No stockholder in any corporation is individually liable
for mote than the unpaid stock owned by such stockholder
(3468, and constitution, sec. 236).
III.— Supervision .

*

The officer of the State whose duties are concerned sim­
ply with banks is the state bank examiner. He must be a
competent and experienced accountant and must have no
interest, either pecuniary or as an officer, in any bank
subject to this statute or in any national bank. His sal­
ary is $2,000. His term of office is the same as that of the
state treasurer (3549). Information had on examination,
etc., must not be disclosed except in the course of duty
(3553)*
42

A l a b am a

—

General

Provisions

If the treasurer finds that a bank is not in a solvent
condition, he reports the fact to the governor, who insti­
tutes proceedings for a receivership (3560).
REPORTS.

All banking institutions in the State report to the state
treasurer not less than twice yearly according to the form
prescribed by him (3538). These reports exhibit in detail
and under proper heads the resources and liabilities of each
bank on any past day, specified by the treasurer, and not
more than three days prior to the issue of the call for the
report by the treasurer. The day for reports must be uni­
form throughout the State. The bank must transmit its
report to the treasurer within five days after receiving his
request. The report is published once in a local newspaper
(3539)- The treasurer may call for special reports from
any particular bank in his discretion (3540). State depos­
itaries report daily and monthly to the state treasurer
(647).
From his reports during the year the state bank exam­
iner constructs an annual report, which is published by the
state treasurer as a part of the treasurer’s annual report to
the governor (3557). The report of the examiner and the
treasurer’s report to the governor may always be seen at
the treasurer’s office (3558). If any annual report of the
state bank examiner is deemed of sufficient importance to
the public by the governor, he may require the report to
be published in newspapers (3559).
EXAMINATIONS.

The bank examiner visits all banking institutions once
each year, and twice if it is practicable. The visits are not
at stated times, and the bank must not know when they
will occur. The examiner carefully and thoroughly exam-




43




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Commission

ines the affairs of the bank and reports to the treasurer
immediately. His report covers all the subject-matter
that the law requires banks to report upon and such other
subjects necessary for the protection of depositors and
stockholders as the state treasurer requires. The state
treasurer may require an examiner to visit any bank when­
ever he thinks public interests so demand (3552). The
examiner is prohibited from receiving fees from banks
(3551). He may disclose information had upon ex­
amination only to the state treasurer (3553). He must
never report any list of names of depositors or amounts of
deposits (3554) •
IV.— R eserve R equirements.
No bank, person, firm, or corporation doing a banking
business may reduce its cash on hand below 15 per cent of
demand deposits, but three-fifths of the 15 per cent may
be in the shape of balances due from other banks and
bankers (3543).
V.— D iscount

and

L oan R estrictions.

Loans to any individual, firm, or corporation are limited
to 10 per cent of the capital, surplus, and profits of the
lender, unless the loan is amply secured by good collateral,
or is approved by a majority of the board of directors of
the corporation making the loan (3547).
Loans must not be made to any salaried officer, agent,
or employee of the bank, person, firm, or corporation
making the loan, unless good security is furnished (3546).
If losses impair the capital of a bank, the shrinkage is
chargeable to profit and loss, so that the notes and bills
discounted and the loans made, shown as debts due the
bank, may be collectible assets (3548).

44

Alabama

General

Provisions

VI.— Investments.

Corporations doing a banking business may buy and
sell stocks, bonds, etc.; lend money on personal security
or upon pledges of bonds and stocks; take security, by
mortgage or otherwise, on property, real and personal;
become trustees for any purpose; be appointed and act
as executors, administrators, guardians, and receivers;
and do any business and exercise any powers incident to
the business of trust and banking companies doing a bank­
ing business (3518).
X.— U nauthorized B anking .

No foreign corporations invested with the privilege of
banking may exercise it by agent in this State, except by
the exclusive use of United States currency (3525).
XI.— P enalties .

The penalty for failing for thirty days after notice to
make good impaired reserve is $25 for each day after the
expiration of the thirty (3545).
Any bank failing without satisfactory reasons to fur­
nish a report when requested by the treasurer forfeits $50
(3 5 4 i ) -

Any bank examiner who receives fees from a bank doing
business in Alabama is guilty of a felony punishable by
imprisonment from one to five years. The person, firm,
or corporation offering the fee is similarly punishable
(6362).
If the bank examiner reports a list of depositors he is
guilty of a misdemeanor which is punishable by fine not
exceeding $1,000 and he is also liable to the person, firm,
or corporation whose affairs he has disclosed in the penal
sum of $1,000 (3555).







N at ion a l

M onetary

Commission

Withholding demands upon banking institutions in or­
der to accumulate enough to induce a run is a misde­
meanor, for which the penalty is from $500 to $2,000
(6361).
TRUST COMPANIES.
I.— T erms

of

Incorporation.

Corporations operating as trust companies must have
the word “ trust” as part of their corporate names, are
amenable to the banking law, and are examined like state
banks (3528).
In cities of 5,000 inhabitants or less, trust companies
must have a paid-up capital of not less than $25,000; in
cities from 5,000 to 30,000 the capital must be not less
than $75,000; and in cities of over 30,000 it must be not
less than $100,000 (3529).
I l l .— Supervision .

Trust companies are allowed to deposit with the state
treasurer securities of certain prescribed sorts which are
used to secure the payment of liabilities of the company
in fiduciary capacities and to exempt the company from
giving bond (3531 et seq.). Trust companies are exam­
ined as state banks are (3528).
X .— U nauthorized T rust Company B usiness .
No corporation which is not organized as a trust com­
pany or as a bank or as a combined bank and trust com­
pany, and which has not complied with the statute, may
use “ trust” as part of its name, nor may any partnership
use the word “ trust ” (3530). Corporations that employ
the word “ trust” illegally as part of their name thereby
make their incorporation void and make their members
liable as partners (3530).

I

ARIZONA.
The most recent compilation of the laws of the Territory
of Arizona is the Revised Statutes, 1901. The session
laws have been examined through 1909. The legislation
on the topics covered by the digest is contained, apart
from amendments in the session laws, chiefly in chapter 7
of title 1 of the Revised Statutes, “ Territorial Auditor,”
and in chapter 6 of title 13, “ Savings and Loan Corpora­
tions. ” The contents of this latter chapter are digested
under “ Savings banks;” the companies with which the
chapter deals are defined as “ corporations organized for
the purpose of accumulating and loaning the funds of their
members, stockholders, and depositors” (828, amd. by
1903, chap. 86). Most of the provisions in the chapter
on the territorial auditor apply in terms to “ every building
and loan society or association, savings bank, bank, and
banking company;” these provisions are digested fully
under “ Banks,” and are merely referred to under “ Savings
banks.” The heading “ Trust companies” is omitted
from the digest, since such corporations are mentioned only
in one section, 131 of the Revised Statutes, which provides
for the annual examination of every bank, savings bank,
“ or any trust company receiving any valuable thing in
trust, or money on special deposit. ” It is possible, of
course, that trust companies might be brought within the
general expressions “ banking corporations,” etc., but




47




N at ion a l

M on e t a r y

Commission

since there is no special legislation with respect to them
(except chapter 31 of 1903, which makes certain provision
for fiduciary business), a separate heading including such
sections as might inferentially be made applicable to trust
companies seems of little value. The references, where
they are simply numbers in parenthesis, are to sections
in the Civil Code in the Revised Statutes of 1901; later acts
are cited by year and chapter.
BANKS.
III.— Supervision .
The auditor of the Territory (an official appointed by the
governor for terms of two years, with a salary of $1,000—
107 and 109) is by virtue of his office bank comptroller of
Arizona (129). If on examination of the affairs of any
corporation, firm, or individual doing the business men­
tioned in the chapter on the territorial auditor (the chap­
ter mentions banks, savings banks, and building and loan
societies repeatedly; refers in section 131 to trust com­
panies receiving valuable things in trust or money on
special deposit; and in section 138, amended by 1909,
chapter 90, declares that “ the terms bank or bankers
whenever used in this law are intended to include all per- •
sons, firms, or individuals receiving deposits, buying or
selling exchange, or doing any other kind of business as
bankers”) the bank comptroller finds the bank has vio­
lated any law of the Territory or is conducting its business
unsafely, he orders a discontinuance of the practices and
conformity with the requirements of law and with safety
in its transactions; in case of a failure to comply with his
order, and whenever it appears to him that it is unsafe for
any bank to continue its business, he must then imme­
48

A r i z o n a

S t a t e

B a n k s

diately take possession of the business of the bank and all
its property. He notifies the governor and the attorneygeneral, who causes suit to be instituted to enjoin the in­
stitution from the transaction of any further business. If
the court then finds that it is unsafe for the business to be
continued or that the bank is insolvent, the comptroller
surrenders possession to a receiver, who winds up the
affairs of the bank (139, amd. by 1907, chap. 96, 1). The
bank comptroller may proceed in the same way against any
bank which, after having purchased its own stock under
the law, fails to dispose of it within six months (1907,
chap. 96, 3). He may revoke the license of any bank
which, having neglected to furnish a report, fails to pay
the statutory penalty (1907, chap. 96, 4). He approves
of reserve depositories, and may declare any bank which
fails to maintain its reserve insolvent (138, amd. by 1909,
chap. 90).
REPORTS.

The bank comptroller, not less than once a year and as
often as he thinks necessary, without previous notice,
requires every “ savings bank, banker, or banking asso­
ciation or corporation” to report its condition (130).
Every “ savings bank, bank or banking corporation”
makes not less than three reports to the comptroller
every year, showing the actual financial condition of the
bank at the close of business on a past day specified by
the comptroller; the report includes a statement of the
amount of capital stock, names of directors, number of
shares held by directors, amount paid in in money by
stockholders for capital, amount of reserve, amount due
depositors, and amount and character of liabilities, par­
ticulars with respect to real estate held, amount loaned
on real estate, with details, amount invested in bonds,
with details, amount loaned on stocks and bonds, with







N at ion a l

M on e t a r y

Commission

details, amount loaned on other securities, with details,
amount of money on hand or on deposit and where de­
posited, and a statement of other assets not included in
the above list (136). These reports must be transmitted
to the comptroller within ten days after the receipt of his
request, unless he designates a shorter time; they must be
published in a local newspaper (137). Receivers of in­
solvent banks report to the comptroller as solvent banks
do (139, amd. by 1907, chap. 96, 1).
The bank comptroller reports annually to the governor
a synopsis of reports received from all the institutions
under his control, together with any other proceedings
had by him, the general condition of banking and savings
banking in the territory, etc. (130). After every exami­
nation he reports the condition of the examined institu­
tion to the attorney-general (131). At each legislative
session he reports the business of his office to the legisla­
ture (141). “ The semiannual reports provided for” are
kept on file at his office and open to public inspection (142);
all his books and records are open to public inspection
(i44)EXAMINATIONS.

The bank comptroller or some person appointed by him
must, at least once in each year and as often as he deems
it necessary, without previous notice, visit and thor­
oughly examine each bank and savings bank “ or any trust
company receiving any valuable thing in trust or money
on special deposit” ; he inspects books, papers, etc., and
all securities, to ascertain the condition of the corpora­
tion, its solvency, £tc. (131). It is the duty of the comp­
troller to examine the condition of the affairs of every
bank in liquidation in the same way he examines solvent
banks (139, amd. by 1907, chap. 96, 1).

50

S t a t e

A r i z o n a

B a n k s

IV.— R eserve R equirements .

“ Every bank, banker, or banking association, except
savings banks,” must keep on hand in lawful money of
the United States 15 per cent of the aggregate amount of
its deposits and of any sums or amounts owing on account
of money borrowed; of this reserve two-fifths must be in
cash and three-fifths on deposit with other banks ap­
proved by the comptroller. If a bank fails to keep the
reserve as required the comptroller may prohibit it from
transacting further business and declare it insolvent (138,
amd. by 1909, chap. 90).
V.— Discount

and

L oan R estrictions.

Among the matters required to be reported are amounts
loaned on real estate, amounts loaned on stocks and bonds,
and amounts loaned on other securities (136).
No bank may loan or discount on the security of shares
of its own stock unless accepting such security is neces­
sary to prevent loss of a previous debt, in which case the
stock so acquired must be sold within six months from
its acquisition (1907, chap. 96, 3).
bor provisions whereby territorial banks may become
depositaries of public moneys, see 3770 et seq. and amend­
ments of 1905, chapter 56; also 1909, chapter 96.
V I.— I nvestments.

Among the items required to be reported are “ the
amount at which the lot.and building occupied by the
bank for the transaction of its regular business stands
debited on its books, together with the market value of
all other real estate held, whether acquired in settlement
of loans or otherwise,” with details, and “ the amount
invested in bonds” (136).







N at ion a l

M on e t a r y

Commission

No bank may purchase shares of its own stock unless
the purchase is necessary to prevent loss on a previous
debt, in which case the stock must be sold within six
months from its purchase (1907, chap. 96, 3).
VIII.— B ranches.

Branches are apparently allowed, for the section pre­
scribing compensation for examinations includes the sum
which the comptroller is entitled to receive “ from each
branch or agency of a bank ” (140).
X .— U nauthorized B anking .

No corporation, firm, or individual may use the name
or transact the business of a “ savings bank or bank or
banking corporation ” without the comptroller’s license.
A violation of this provision entails a penalty of $100 per
day during the continuance of the offense; any person
who in any manner attends to such business as manager,
agent, etc., forfeits $100 per day also. Any violation of
this provision is a misdemeanor (134).
X I.— P enalties .

Whoever refuses to testify before the bank comptroller
or his subordinate in the discharge of his duties is guilty
of a misdemeanor punishable by fine not exceeding $5,000,
imprisonment not exceeding one year, or both fine and
imprisonment (132). If the comptroller has knowledge
of the insolvency or unsafe condition of a bank and neg­
lects to report to the attorney-general he is punishable by
a fine of from $5,000 to $10,000, imprisonment for from
one to two years, or both fine and imprisonment; his office
is vacated by the offense (133). If any officer or em­
ployee of a bank or any other person fails to comply with
the provisions relative to dissolution of an insolvent bank
52

A r i z o n a

-

S a v i n g s

B a n k s

or refuses to obey the directions of the bank comptroller
in dissolution proceedings, he is guilty of a misdemeanor
punishable by fine not exceeding $300, imprisonment not
exceeding six months, or both (139, amd. by 1907, chap.
96, 1). If any bank fails to furnish the comptroller,
within the time specified, with a report required by him,
it forfeits $100 per day during the default; failure to pay
the penalty is cause for revocation of license to transact
business (1907, chap. 96, 4). There is a Penal Code pro­
vision making it a misdemeanor for an officer, agent,
teller, or clerk of “ any bank ” to receive deposits knowing
that the bank is insolvent (Penal Code, 506).
vSAVINGS BANKS.
I.— T erms

of

I ncorporation.

It is hinted that savings banks may be incorporated
without capital stock; one section reads: “ When savings
and loan corporations have a capital stock specified in
their articles of incorporation, certificates of the owner­
ship of shares may be issued” (829). Another section
requires “ the directors of any such corporation having
no capital stock” to retain on each dividend day at least
5 per cent of net profits to constitute a reserve fund,
which must be invested like other funds of the corporation
and used to pay losses. A savings bank may provide by
its by-laws for the disposal of any excess reserve fund
over $100,000 and the final disposal of the fund (834).
The directors of savings banks may declare dividends of
so much of the net profits and of the interest arising from
the capital stock and deposits as may be appropriated
for that purpose under the by-laws and under the agree­
ments with depositors. Depositors have priority over
stockholders upon the assets of a savings bank, “ but the




53

^252

N at ion a l

M o n et a r y ' C o m m i s s i o n

by-laws may provide that the same security shall extend
to deposits made by stockholders” (830).
II.— L iabilities

and

D uties

of

Stockholders

and

D irectors.

There is no especial provision for stockholders’ liability
in savings banks.
The directors must not contract any debt or liability
against the corporation for any purpose except deposits
and for necessary current expenses of conducting busi­
ness (830). See also V, infra, for further restrictions on
borrowing by directors (835, amd. by 1905, chap. 13).
III.— S upervision .
The bank comptroller exercises the same authority over
savings banks that he does over banks (129 et seq.).
Savings banks seem clearly within the provisions of the
statutes on procedure for a dissolution. (See Banks, III.)
REPORTS.

See this heading under Banks. The section of the
Revised Statutes making it a duty of the bank comptroller
to call for a report at least annually, includes savings
banks in terms (130). So also does the section requiring
the comptroller to report to the attorney-general after each
examination (131); that requiring not less than three
reports a year including specified items (136); and that
requiring publication of the report (137). The provision
requiring receivers to report to the bank examiner is
applicable to receivers of savings banks, since the section
covers the dissolution of “ any corporation, firm, or indi­
vidual doing business as mentioned in this chapter ” (1907,
chap. 96, 1, amending 139). (See Banks for the various
reports made by the comptroller.)
54 %

—




-A r i z o n a

—

S a v i n g s

B a n k s

EXAMINATIONS.

Savings banks are mentioned in the section digested
under Banks requiring the comptroller, or a person
appointed by him, to make a full examination at least
annually (131). The requirement that he examine the
condition of banks in the hands of receivers in the same
manner in which he examines solvent banks applies to
“ any corporation, firm, or individual doing business as
mentioned in this chapter,” thus clearly including savings
banks (1907, chap. 96, 1, amending 139).
V.— D iscount

and

L oan R estrictions.

No savings bank may receive a license from the bank
comptroller unless at least 50 per cent of its loans are
secured by first mortgage or other prior liens upon real
estate in Arizona, the loans when made not to exceed 60
per cent of the market value of the security, except when
made for the purpose of facilitating the sale of property
owned by the bank. No savings bank may loan on mining
shares (135).
The directors of a savings bank “ must not contract
any debt or liability against the corporation for any pur­
pose whatever, except for deposits and for the necessary
current expenses of conducting the business” (830). No
director or officer of a savings bank may, directly or
indirectly, borrow the deposits or other funds of the bank
except upon real estate security having a market value of
at least one-third more than the amount borrowed or (a
misprint in the statutes makes this provision doubtful)
upon the stock of the bank owned by the director, but in
no case may he borrow upon the stock more than its cash
surrender value, nor may he become an indorser or security
for loans to others, or in any manner become an obligor for
moneys borrowed or loaned by the bank. Upon violation




55




N a tio n a l

M onetary

Commission

of this section the director’s or officer’s office becomes
vacant (835, amd. by 1905, chap. 13).
Savings banks may not loan except upon adequate
security on real or personal property or personal security
with at least two sureties or indorsers; such loans must
not be for a longer period than ten years, and no loan may
be made to one person, firm, or corporation to an amount
exceeding $20,000 (828, amd. by 1903, chap. 86).
See 833 for provisions with respect to the issue of
transferable and nontransferable certificates of deposit.
V I.— INVESTMENTS.

No savings bank may invest its capital or deposits in
mining shares (135).
A savings bank may hold real estate only as follows:
The lot and building in which the bank’s business is carried
on, the cost of which must not exceed $100,000, except
that, on two-thirds vote of stockholders, the bank may
increase the holding to an amount not exceeding $250,000;
such as has been mortgaged to it; such as has been pur­
chased on foreclosure sale under mortgages for money so
loaned; and such as is conveyed to it by borrowers in
satisfaction of loans, the real estate acquired under the
last-mentioned circumstances being required to be sold
within ten years. As to personalty, a savings bank may
hold only such as is requisite for its accommodation in
business, mortgages on real estate, bonds and securities,
gold and silver bullion, United States mint certificates,
and United States securities; no savings bank may hold
securities except bonds of the United States, Arizona, or
Arizona municipalities unless the bank has a capital stock
or reserve fund paid in of not less than $100,000 (831).
V III.— B ranches.
The section cited under Banks, V III, applies to savings
banks also (140).
56

A r i z on a — S a v in g s

Banks

X .— U nauthorized B anking .
The section digested under this heading in Banks is
applicable also to savings banks (134).
9

X I.— P enalties .
See Banks, X I, for the penalty for failing to testify
before the bank comptroller or his subordinate (132); for
the penalty upon the banking comptroller if he fails to
report the insolvency of a bank (133); for the penalty for
failing to comply with the provisions of the section
respecting dissolutions or to obey the directions of the
bank comptroller in pursuance of his power to dissolve
(1907, chap. 96, 1); and for the penalty for failing to fur­
nish the bank comptroller with any report requited by
him (1907, chap. 96, 4): in some of the above provisions
imposing penalties, savings banks are specifically men­
tioned, and in others they are included by reasonable
inference. The provision of the Penal Code making it a
misdemeanor for an officer, agent, etc., to receive deposits,
knowing that the bank is insolvent, applies to “ any bank ”
(Penal Code, 506).
Particular savings bank penalties include the provision
which makes it a felony for any president or managing
officer to violate the provisions of 135, which withhold a
license unless 50 per cent of the bank’s loans are secured
by first mortgage on Arizona real estate, which forbid
taking mining stock as security or investment, etc. (135);
and the provision which makes it a misdemeanor for any
director or officer to violate the statute restricting loans
to officers or directors (835, amd. by 1905, chap. 13).
Also there is a provision in the Penal Code making it a
misdemeanor for an officer, agent, etc., to overdraw his
account knowingly and obtain money (Penal Code, 505).




57




ARKANSAS.
There is practically no banking legislation in this
State. A few scattering provisions appear in the revision
of statutes by Kirby (1904): The most important are
on taxation, reports to the assessors, etc. (sec. 6919,
et seq.); others forbid banking by limited partnerships
(5803); make a willful false report, with intention to
deceive any person as to the condition of the bank,
punishable by fine not exceeding $1,000 and imprison­
ment not exceeding one year (1813); and forbid receipt
of deposits in insolvency, making it a felony on the part
of any officer, director, etc., knowingly to receive these
deposits, punishable by imprisonment of from three to
five years (1814). The session laws of 1905- and 1907
contain no banking legislation. In chapter 31 of the
revision, sections 887-891 deal with trust and surety com­
panies. The most important provisions of these sec­
tions are as follows: No share of stock may be of greater
face value than $1,000 (887). The total paid-up cap­
ital must be not less than $100,000 in a county of
more than 50,000; not less than $75,000 in a county of
40,000 to 50,000; and in no case less than $50,000 (889).
Trust company powers do not in terms include the
power to do a banking business; they may “ exercise
such powers as are usually had and exercised by trust
companies,” may “ loan money upon real estate and
58

I

A r k a n s a s
collateral security,” and may “ buy and sell all kinds of
government, state, municipal, and other bonds and all
kinds of negotiable and nonnegotiable paper, stocks,
and other investment securities” (888). So far as trust
company affairs are not covered by these few sections
they are governed by the laws of the State governing
banks; and trust companies are “ subject to such exam­
inations as banks are now or hereafter may be subjected
to by the laws of this State” (890)— but there is no
statute of the State subjecting banks to examination
at all. Although at the date of making this compilation
the 1909 session laws are not accessible, a reprint of the
corporation laws of Arkansas, published by authority of
the secretary of state and including all 1909 amendments,
contains no material except that digested above; it is
merely noted in the reprint that banks organize under the
laws applicable to manufacturing and other business
corporations.




59




I

CALIFORNIA.
A digest of the statutes of this State was prepared before
the session laws of 1909 were available; it consisted of pro­
visions extracted with some difficulty from the four vol­
umes of Codes (by Kerr), published in 1906, from the
General haws (by Henning), published in 1905, and from
the later statutes and amendments to the Codes, including
legislation of 1906 and 1907. The legislature of 1909
passed a statute, chapter 76 of the 1909 laws, which con­
sists of an article entitled “ General provisions,” one en­
titled “ Savings banks,” one entitled “ Commercial banks,”
one entitled “ Trust companies,” and one entitled “ State
banking department.” The compiler of this digest has
been advised by William T. McGuire, esq., superintendent
of banks of California, that the new.statute, in repealing at
section 146 “ all acts or parts of acts in conflict with this
act,” obliterates all the legislation previously in force.
The new statute does, indeed, cover completely the topics
treated by the digest; it is a well-drawn piece of legisla­
tion defining the three sorts of institutions sharply and
leaving little room for doubt to which of the three each
particular provision of the statute is applicable. The
advice of the superintendent of banks has, therefore, been
acted upon, to exclude from the digest all legislation ex­
cept the 1909 statute. The compiler feels less confidence
in the correctness of this view, however, since a later stat60

California

Statute

of

19 0 9

.

ute of the 1909 session, chapter 453, amends section 290a
of the civil code by altering slightly the provisions with
respect to the affidavit required to be made by the direct­
ors of a newly incorporated trust company that certain
capital has been paid in before a certificate of incorpora­
tion issues.
The statute of 1909 defines “ bank” to include all per­
sons, firms, and corporations receiving money on deposit,
and divides banks into three classes, savings banks, com­
mercial banks, and trust companies (2). The provisions
framed to apply to banks, therefore, and inserted in the
digest only once under “ Banks,” must be remembered to be
applicable to all three sorts of institutions; where the pro­
visions digested under “ Banks” apply only to commercial
banks, that is indicated. The provisions of Article III of
the statute,which is headed “ Commercial banks,” should
no doubt be taken as applicable to commercial banks ex­
clusively. It is to be noted, however, that, although in
that article the term “ commercial bank” is usually used,
one or two provisions contain the language “ each bank,”
which, if the statute is to be read literally, applies to all
three sorts of corporations, because in section 2 “ bank” is
used to include commercial banks, savings banks, and
trust companies. All the provisions under Article V of
the statute, “ State banking department,” are applicable
to all three sorts.
The references, where they are merely numbers in paren­
thesis, are to sections in chapter 76 of 1909.




61

N at ion a l

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Commission

BANKS.
I.— T erms

of

I ncorporation.

Corporations may be formed under the statute, to do
“ any one or a ll” of the three sorts of businesses, savings
banking, commercial banking, and trust company busi­
ness (3). Another section provides that any corporation
may combine the business of “ a commercial bank and sav­
ings bank and trust company, or any or all of them” (22).
The departments must be kept separate (25, 26, and 27).
A bank doing a commercial business must include “ com­
mercial” in its.advertising, etc.; one doing a savings busi­
ness must use “ savings;” and one doing a trust business
must use “ trust” (28). Before a bank begins business
or opens a new department, it must obtain a certificate
from the superintendent (24).
The superintendent passes upon the character and fit-*
ness of the incorporators before issuing a certificate
authorizing them to begin business (128).
Every commercial bank must have a paid-in capital of
$25,000 (82). Every bank doing a departmental business
must have a capital paid up in cash of not less than
$25,000 if it transacts both a commercial and savings
business, and not less than $225,000 if it transacts both a
commercial and trust business, or both a savings and
trust business, or a commercial, savings, and trust busi­
ness (23). Paid-up capital and surplus must always equal
10 per cent of deposit liabilities; deposit liabilities may
not be increased when this proportion is wanting (19).
The directors of any bank having a capital stock may
pay dividends to depositors and stockholders of so much
of the profits as may be appropriated for that purpose
under the by-laws or under the agreements with deposi­
tors, but before a dividend is declared at least one-tenth




62

C a l i f o r n i a

—1

S t a t e

B a n k s

of the net profits for the preceding half year must be car­
ried to surplus, until it amounts to 25 per cent of paid-up
capital. The surplus may be converted into capital, in
which event surplus must be restored. Depositors have
priority upon the assets of the corporation over stock­
holders, but the by-laws may provide that the same se­
curity shall extend to deposits made by stockholders (21).
II. — L iabilities

and

Duties

of

Stockholders

and

D irectors.

There is a constitutional provision that “ each stock­
holder of a corporation or joint-stock association shall be
individually and personally liable for such proportion of
all its debts and liabilities contracted or incurred during
the time he was a stockholder as the amount of stock or
shares owned by him bears to the whole of the subscribed
capital stock or shares of the corporation or association.”
(Art. X II, sec. 3). No bank may make a contract with
its depositors whereby this stockholders’ liability is
waived; any such contract is void (40).
To be a director, one must own shares of the market
value of at least $500. In banks “ organized without
capital stock” (there are a number of provisions framed
in this language which seem designed only for savings
banks) a director must be both a member and a depositor
of the bank (10). The directors must make annual exam­
inations and report the results to the superintendent (see
III, infra).
111.— Supervision .

There is a state banking department, of which the chief
officer is the superintendent of banks, appointed by the
governor for terms of four years. The superintendent
must have had active banking experience, one-half of
which must have been had in California, and must not be




63

N a t io n a l

M on e t a r y

Commission

interested in the business of banking. His salary is
$10,000 a year (120). His deputy, attorney, clerks, and
examiners must not be interested in banks in the State,
and the deputy must have had at least three years’ ex­
perience in a California bank. Neither the superintendent,
his deputy, nor an examiner may be in any way indebted
to a bank under his supervision or subject to his examina­
tion (121). The expenses of the department, including
salaries, are paid out of what is known as the state bank­
ing fund, to which each bank contributes such proportion
as its deposits bear to the aggregate deposits in banks sub­
ject to the supervision of the department (123). The
superintendent, before authorizing a bank to begin busi­
ness, ascertains whether the character and general fitness
of the incorporators are such as to command the confi­
dence of the community (128).
The superintendent notifies a bank or a trust company
whose reserve is below the requirement to make good the
reserve, and if it fails for thirty days to comply it is pro­
ceeded against as insolvent (20). When the superintend­
ent has reason to believe that the capital of a bank is
reduced below the requirement, he requires the deficiency
to be made good within sixty days (133). If it appears to
him that any bank has violated its articles of incorpora­
tion or any statute, he must direct the discontinuance of
the violation, or, if it appears that a bank is conducting its
business in an unsafe manner, he must direct a discon­
tinuance of the injurious practices. If, after a hearing,
he makes such an order final, and if, within ten days, the
bank has not secured an injunction against the enforce­
ment of the order and still fails to comply with it, the
superintendent may take charge of the bank and liquidate
it (134). The provisions for the superintendent’s taking
control and liquidating are elaborate. Whenever he has
reason to think that a bank is in an unsound condition to




64

S t a t e

C a l i f o r n i a

B a n k s

transact its business or that it is unsafe or inexpedient for
it to continue business, he may take possession and retain
possession until the bank resumes business or its affairs are
finally liquidated. He is given various powers and duties
with respect to collection of debts, appointment of special
deputies to assist in liquidating, proof of claims, enforce­
ment of stockholders’ liability, etc. (136). No examiner
may be appointed receiver of a bank which he has ex­
amined (125).
The superintendent has certain supervision over the sale
of the assets of one bank to another and the assumption
by the buyer of the seller’s obligations (31); over the sale
by a director, officer, employee, or controlling stockholder,
to the bank, of a mortgage arising from the sale of real
estate made by a corporation in which such a director,
officer, employee, or controlling stockholder is interested—
this transaction is permitted only upon the superintend­
ent’s consent (35); and over branches, which he must
approve before they may be opened (9). The superin­
tendent passes upon loans by commercial banks to their
directors (33).
The superintendent keeps a bulletin in his office on
which he posts weekly a detailed statement giving general
information in regard to the work in his department and
numerous items specified in the statute (141).
REPORTS.

The superintendent of banks calls for reports at least
three times a year, on the same days, if possible, as those
on which national banks report (131). Whenever re­
quired by the superintendent, every bank must report,
showing the financial condition of the bank at the close
of a past day specified by the superintendent. The fol­
lowing items must be included: Amount of capital and
amount paid in; names of directors and shares held by
S. D oc. 353, 6 1-3 ----- 5




65

,

N a t i on a l

M on et a r y

Commi ssi on

each; capital actually paid in in money; amount of con­
tingent and reserve funds; amount due depositors; amount
and character of other liabilities; real estate held, with
particulars; amount loaned on real estate, with particu­
lars; bond investments; loans on stocks and bonds; loans
on other securities; money on hand or on deposit, and in
what depositories; other property held; other loans, de­
posits, and investments; and any other information re­
quested by the superintendent (130). Banksconducting
a departmental business render a separate report for each
department (129). At the time a report is furnished
each bank publishes a condensed statement of its financial
condition in a local newspaper, showing loans, overdrafts,
investments in securities, amount due from banks, cash
items, cash on hand, capital, surplus, undivided profits,
amounts due other banks, deposits, certified checks,
etc. (132).
Every other year each bank reports to the superintend­
ent the names of depositors who have not deposited or
withdrawn funds for ten years. These statements must
show the amount of the account, the depositor’s last
known residence, and the fact of death, if known. These
deposits must be noticed in a local newspaper (15).
The board of directors of every bank, at least annually,
and at intervals of not less than three months, must
examine the affairs of their bank, especially with a view
to ascertaining the value and security of its loans and dis­
counts. The directors place a report of the examination
on file, which the superintendent of banks may examine.
This report must contain a statement of the assets and
liabilities of the bank, loans which are of doubtful value,
loans on collateral which are insufficiently secured, over­
drafts, with especial reference to those which are doubtful,
and a full statement of whatever other matters affect the
solvency of the bank (139).




6
6

C a l i f o r n i a

S t a t e

B a n k s

In the article on commercial banks and in a section
dealing apparently with commercial banks, it is provided
that “ each bank” having a loan outstanding to any
director must report monthly to the superintendent de­
tails with respect to such loans (83).
Every year the superintendent of banks reports to the
governor, for submission to the next legislature, a sum­
mary of the condition of every bank subject to the control
of the superintendent, a list of new banks and of old banks
which have been closed, recommendations for amend­
ments to the banking law, a list of banks in process of
liquidation, and details of the administration of the bank­
ing department (140). This report must include informa­
tion with respect to deposits which have not been dealt
with for ten years (15).
For reports required of depositories of state funds, see
1907, chapter 50.
EXAMINATIONS,

The superintendent, his deputy, or some examiner
appointed by the superintendent, examines every bank
other than a savings bank twice a year, making inquiry
into the resources of the bank, its mode of conducting its
affairs, the action of its directors, its investments, the
safety and the prudence of its management, the security
afforded to its obligees, its compliance with law, and such
other matters as the superintendent prescribes. Exam­
inations may be oftener if the superintendent thinks them
necessary. When, upon examination, an examiner finds
a bank holds securities which are of doubtful value, the
superintendent may employ appraisers to appraise the
securities (124). When the superintendent has ordered
impaired capital to be restored, he may cause a special
examination to be made to determine whether the de­
ficiency has been made good (133). If a bank fails to




67

N at io n a l

M on et a r y

Commi ssi on

report, its affairs are immediately thoroughly examined
(138). There is a preliminary examination before a cer­
tificate to begin business or open any new department is
granted (24 and 127).
The board of directors of every bank examine it at least
once a year, and file in the bank a record of their exami­
nation, to which record the superintendent has access.
Items with respect to which this examination and report
are made are given above under Reports (139).
Any national bank receiving deposits of state banks
must submit to examination at the request of the super­
intendent. If the national bank refuses, then the superin­
tendent notifies all state banks depositing in this particular
national bank to withdraw, their deposits. Failure to
withdraw is a misdemeanor (48).
IV.— R eserve R equirements.
Every bank other than a savings bank must at all
times keep on hand in money an amount equal to 15 per
cent of its deposits, exclusive of state, county, and mu­
nicipal deposits. Three-fifths of the reserve of any bank
other than a savings bank may consist of deposits in any
bank other than a savings bank. Banks which serve as
reserve depositaries must maintain a reserve of at least 20
per cent of deposits, exclusive of state, county, and mu­
nicipal deposits. When reserves fall below the require­
ment, a bank must not make new loans or discounts ex­
cept by discounting sight exchange and must not make
dividends from profits until the reserve is restored. The
superintendent notifies banks whose reserves are below
the requirement to make good the reserve (20). Banks
doing a departmental business maintain the statutory
reserve for each department separately. No department
may receive deposits of any other department of the same




I

C a l i f o r n i a

—

S t a t e

B a n k s

bank (25). No bank may deposit any of its funds in any
other bank unless the depository has been designated as
such by vote of a majority of the directors of the deposit­
ing bank, exclusive of the vote of any director who is an
officer or director of the depository bank (43).
V.— D iscount

and

L oan R estrictions.

No bank may loan on real estate unless its security is a
first lien; second liens may be taken, however, to secure
the payment of previous debts (47).
No bank may loan on the security of the stock of
another bank if by making the loan the total stock of the
other bank held by the loaning bank as collateral exceeds
10 per cent of the other bank’s stock, and no loan may be
made upon the capital stock of any bank which has not
been in existence for two years and paid a dividend (44).
No bank may loan its capital or the money of its deposit­
ors on shares of its own stock unless accepting this secu­
rity is necessary to prevent loss on a previous debt, in
which case the stock must be disposed of within six
months “ from the time of its purchase” (34). No bank
may loan more than 5 per cent of its assets upon bonds of
any one issue except bonds of the United States, Califor­
nia, or California municipalities (46).
No officer or employee may directly or indirectly bor­
row the funds of the bank, nor may any officer, employee,
or director be an indorser or surety for loans to others or
in any manner be obligor for moneys borrowed or loaned
by the bank (33). Officials of the banking department
may not borrow from banks subject to their supervision
(121). No director, officer, employee, or controlling
stockholder may directly or indirectly sell to his bank,
without the consent of the superintendent of banks, any
mortgage on real estate or contract resulting from the




69

y

N at i on a l

M on et a r y

Commission

sale of real estate made by a corporation or syndicate in
which the director, officer, employee, or controlling stock­
holder is interested (35).
No commercial bank may loan to any person, firm, or
corporation an amount exceeding one-tenth of its capital
paid in and surplus, except that “ a bank” may loan to a
person, firm, or corporation, a sum not exceeding 25 per
cent of its capital paid in and surplus, on security worth
at least 15 per cent more than the loans, or it may loan
10 per cent of capital paid in and surplus, as stated at the
beginning of this paragraph, and a further sum not ex­
ceeding 15 per cent of capital paid in and surplus on secu­
rity worth at least 15 per cent more than the amount of
the loan; but a commercial bank may buy, or discount
or loan upon, bills of lading, warehouse receipts, and bills
of exchange drawn in good faith against existing values,
or commercial paper owned by the person negotiating
it (80).
No loan may be made by a commercial bank on the
securities of one or more corporations, the payment of
which is undertaken, in whole or in part, severally but not
jointly, by two or more individuals, firms, or corpora­
tions: (a) if the borrowers or underwriters are obligated
absolutely or contingently to purchase the collateral se­
curities, unless the borrowers or underwriters have paid
in cash an amount equal to at least 25 per cent of the
amount for which they are still obligated to complete the
purchase; (b) if the commercial bank making the loan is
liable, directly or indirectly, or contingently, for the re­
payment of the loan; (c) if the term of the loan exceeds a
year, including any agreed renewal of it; or (d) to an
amount, under any circumstances, in excess of 25 per
cent of the capital and surplus of the commercial bank
making the loan (81).




7c

C a l i f o r n i a

S t a t e

—

B a n k s

No commercial bank may loan any of its funds to any
of its directors unless the loan has been first approved by a
two-thirds vote of the directors, the borrower not voting;
the loan, name of director, time when the loan is due, rate
of interest, and security pledged, if any, are submitted to
the superintendent of banks, who, if he disapproves, noti­
fies the bank to collect the loan. The total loans to all
directors of a bank must never exceed 30 per cent of capi-'
tal and surplus (83).
V I.— I nvestments.

No bank may invest in shares of corporations unless
the purchase is necessary to prevent loss on a previous
debt, in which case the stock must be disposed of within
six months from the purchase, unless the superintendent
grants permission to hold it longer (37). No bank may
invest more than 5 per cent of its assets in any one bond
issue except bonds of the United States, California, or
California municipalities (46). No bank may purchase
or guarantee any bond issue in excess of 5 per cent of its
assets, except bonds of the United States, California, or
California municipalities (36). No bank may purchase
or invest capital or deposits in shares of its own stock
unless the purchase is necessary to prevent loss on a
previous debt, in which case the stock must be sold within
six months (34). See V, above, for other investment
restrictions, and see IV, above, for provisions respecting
the designation of depositories.
Investments, like all other transactions, must, in the
case of a bank having different departments, be made
separately and accounted separately for each department.
Ihe cash, securities, and property of one department must
not be mingled with those of another (26). The money
belonging to each department and the investments are




71

N at i on a l

M on e t ary

Commission

held solely for the repayment of depositors in that depart­
ment; if after paying the depositors in that department
an overplus remains, it is applied to the other liabilities of
the bank (27).
V II. — Overdrafts .
The report made by the directors at least annually after
an examination ofAthe affairs of their bank must include
“ a statement of overdrafts” (139); and the summary of
each bank’s condition published at the time it reports
to the superintendent must show “ the total amount of
overdrafts” (132). See also the section which makes it a
felony for any officer, employee, director, etc., to over­
draw his account or to accept a bribe for permitting an
overdraft by another (39).
V III. — B ranches.
No bank may open an office other than its principal
place of business without the approval of the superin­
tendent of banks, which is only given if the superintendent
has ascertained that public convenience will be promoted
by opening the office; in any case the paid-in capital must
exceed the ordinary requirement by $25,000 for each
branch opened (9).
X .— U nauthorized B anking .
No person, firm, or corporation not subject to the super­
vision of the superintendent and not reporting to him
may use an office sign having a name or other words on it
indicating that the place is a bank or that banking busi­
ness is done there; no person, firm, or corporation may
use letter heads or other papers showing a corporate name
or other words indicating that the business is that of a
bank, savings bank, or trust company. Violation of this




72

S t a t e

C a l i f o r n i a

B a n k s

section is a misdemeanor (12). It is a misdemeanor also
to transact banking business in the State without the
certificate of the superintendent (127). For restrictions
on banking by foreign corporations, see 7.
Every individual, firm, or corporation doing a banking,
business must on its signs, stationery, advertising, etc.,
use the word “ commercial” if it conducts a commercial
business, “ savings” if it conducts a savings business, and
“ trust” if it conducts a trust company business (28).
X I.— P enalties .
The following are misdemeanors: The purchase by a
director, officer, agent, or servant of a bank, directly or
indirectly, of the assets of a bank for a sum less than their
market value (42); direct or indirect borrowing of the funds
of a bank by an officer or employee, or an officer,
employee, or director becoming in any manner an
obligor for money borrowed or loaned by the bank (33);
failure by a state bank to withdraw its deposits on order
of the superintendent from a national bank which refuses
to be examined (48); advertising by a bank or one of its
officers the authorized or subscribed capital without also
stating how much has been actually paid up (14); unau­
thorized maintenance by a bank or an officer or director
of a bank of a branch office (9); failure by president or
managing officer of a bank to report deposits not dealt with
for ten years (15); failure on the part of a bank to post
conspicuously its last certificate from the superintendent
(50); and failure by the directors of a bank to make an
annual examination and file at the bank a report based on
it (r39)- There seems no reason to suppose that the 1909
statute repeals a section of the Penal Code, formerly in
force, which makes it a misdemeanor for an officer or
employee of a bank to receive deposits knowing the bank
is insolvent (Penal Code, sec. 562).




73

N at i o n a l

M on e t a r y

Commission

The following are felonies: Violation by the officers of a
bank of the section which forbids purchases of and loans
upon shares of a bank’s own capital except when necessary
to prevent loss on a previous debt and requires the stock
thus held to be disposed of within six months (34); viola­
tion by a director, officer, employee, or controlling stock­
holder of a bank of the section forbidding transfers to
the bank of mortgages arising from the sale of real estate
made by a corporation or syndicate in which the offender
is interested (35); violation by the officers of a bank of the
section forbidding investments in shares of corporations
except when necessary to prevent loss on previous debts
and requiring the sale of such stock within six months (37);
neglect by the deputy of the superintendent or any
examiner, with knowledge of the insolvency or unsafe
condition of a bank, to report the fact to the superintend­
ent (126); neglect on the part of the superintendent him­
self, if he has knowledge of the insolvency or unsafe con­
dition of a bank, to take action against it as provided in
the statute (143); and violation by an officer or director
of a commercial bank of the section restricting loans to
directors and requiring them to be approved by the
superintendent and to be monthly reported to him (83).
Any director, officer, agent, or employee of a bank who
takes its property except in payment of a just demand
and, with intent to defraud, omits to make true entry of
the transaction on its books, or concurs in omitting to make
true entry, or concurs in publishing false statements of its
affairs, or fails to make proper entry in the corporation’s
books or to allow them to be inspected by the banking
department, is guilty of a felony (38). Any director,
officer, employee, etc., of a bank who knowingly overdraws
his account and obtains the funds of his bank and asks or
receives a consideration for procuring a loan from or dis-




n

C a lif o r n i a

Savings

—

Banks

count by his bank, or for permitting an overdraft of an
account with the bank, is guilty of a felony (39).
No director, officer, or agent of a bank may be interested
in the purchase of any of its obligations for a less sum than
appears upon their face (41).
Any bank which fails to make its report within ten days
from the day designated for making it or to include in the
report any matter required by law or by the superintend­
ent forfeits $100 for each day’s offense (138).
Banks which fail to contribute their share to the fund
out of which the expenses of the banking department are
paid forfeit their certificates to transact business (123).
SAVINGS BANKS.
I.— T erms

of

I ncorporation.

As noted in Banks, I, savings banking may be combined
with the other sorts of business (3 and 22). The statute,
as was noted in the introductory paragraph, contains cer­
tain provisions applicable to banks organized without
capital stock; it is to be inferred from this that some
savings banks are mutual organizations. “ Savings ” must
appear on all advertising, etc., of a bank conducting a
savings business (28).
See Banks, I, for the requirements for the capital stock
of a bank doing a departmental business. The savings
bank provision is that every savings bank must have,
actually paid in, a capital stock of not less than $25,000;
or, if organized without capital stock, a reserve fund of
at least $1,000,000 (60). In the section requiring paid-up
capital and surplus of every bank to equal 10 per cent of
its deposit liabilities it is provided that no savings bank
may be required to have a paid-up capital and surplus of
more than $1,000,000; or, if organized without capital
stock, a reserve fund of more than $1,000,000 (19).




75

N at i on a l

M o n et a r y

Commission

The directors of a savings bank which has no capital
stock must retain on each dividend day at least io per
cent of the net profits of the bank to constitute a reserve
fund, which must be invested in the same manner as the
other funds of the bank and applied to payment of any
losses (64).
Restrictions on borrowing by savings banks and on
deposits in savings banks are grouped with loans under
V, infra.
II.— L iabilities

and

D uties of Stockholders
D irectors.

and

The only particular provision to be here recorded with
respect to savings banks is that to be a director in a bank
organized without capital stock one must be both a mem­
ber and a depositor of the bank (10).
I l l .— S upervision .

The superintendent of banks has, besides his regular
duties given under Banks, authority with respect to sav­
ings banks to fix the amount which savings banks shall
be allowed to borrow to meet demands of depositors, and
the time and rate of interest on these loans (62).
EXAMINATIONS.

The superintendent must examine banks other than
savings banks at least twice a year, and must examine
savings banks at least annually. He has, of course, the
power stated under Banks, of examining any bank when­
ever, in his judgment, such an examination is necessary
(124).
IV.— R eserve R equirements.
Each savings bank must carry in cash or its equivalent
an amount equal to 4 per cent of its deposit liabilities, of
which 2 per cent of deposit liabilities must be in coin or




76

C a l i f o r n i a

—

Savi ngs

Banks

currency of standard value, in the bank’s own keeping.
No new loan may be made during any deficiency in this
reserve (68). The provisions for the “ reserve fund’’
required of savings banks without capital stock (see I,
above) have no reference to money reserve, but to an
invested fund to take the place of capital stock.
V.— D iscount , L oan , D eposit R estrictions, etc .

No director or officer of a savings bank may directly
or indirectly borrow its funds nor become in any manner
obligor for moneys borrowed of or loaned by the savings
bank (65). No savings bank may loan money except on
adequate security of real or personal property and never
for a longer period than ten years. No loans may be made
on unsecured notes. No savings bank may loan more
than 5 per cent of its assets on bonds of any one issue,
except bonds of the United States, California, or California
municipalities. No savings bank may loan to exceed 90
per cent of the market value of bonds specified in (a), (b),
(c), and (d) of the second paragraph of Investments, below,
n o r m o r e than 85 per cent of the market value of bonds
specified in (e), nor more than 75 per cent of the market
value of bonds specified in (/) and (9), nor more than 65
per cent of the market value of personal property and
stock of corporations or banks; no loan may be made on
the capital stock of a corporation or bank that has not
been in existence for two years and has paid a dividend.
No savings bank may loan on any real-estate security
unless the security is a first lien, and in no event to exceed
60 per cent of the market value of the real estate except
to facilitate the sale of property owned by the savings
bank; a second lien may, however, be accepted to secure
the payment of a previous debt. No savings bank may
loan on shares of mining stock. No savings bank may




77

National

Monetary

Commi ssi on

loan on the security of shares of stock in another bank, if
by making the loan the total stock of the other bank
held as collateral by the loaning bank exceeds io per cent
of the other bank’s stock (67). No savings bank may
loan on the bonds of any corporation if the franchise of
that corporation expires prior to the maturity of the
bonds or if its special franchise granted by some munici­
pality so expires (61).
No savings bank may contract any debt or liability
for any other purpose than deposits, except the following:
It may pay regular depositors by draft on deposits to its
credit with other banks. No savings bank may bor­
row, or pledge its securities, except to meet the imme­
diate demands of its own depositors, and then only by
resolution of the directors and with the approval of
the superintendent of banks, who has authority to fix
the amount, term, and rate of interest of the loan. Sav­
ings banks may, however, without the approval of the
superintendent, borrow the public moneys of the State
and of municipalities, and may receive such public
moneys on deposit (62).
Savings banks may issue transferable certificates of
deposit and, when requested, special nontransferable
certificates (63).
Deposits may be made with commercial banks and
trust companies to facilitate business transactions, and
these are not to be construed as loans. Not more than
5 per cent of the deposits of any savings bank, however,
may be deposited with any one bank (68).
Whenever there is a call by depositors for the pay­
ment of a greater amount than the savings bank has
disposable, the directors must not make new loans or
investments until the excess of call has ceased (64). .




78

C a lif o r n i a

—

Savings

Banks

VI.— I nvestments.

Saving banks may hold real estate only as follows:
(i) The lot and building in which the business is carried
on, their cost not to exceed the amount of capital and
surplus; (2) such realty as has been mortgaged to the
savings bank; (3) such as it has purchased at sales
under mortgages made for its benefit and such as is
conveyed to it in satisfaction of loans. Real estate
acquired under (3) must be sold within ten years unless
permission for longer holding is given by the superin­
tendent.
No savings bank may hold personalty except such as
is required for its accommodation in business, and mort­
gages on real estate, bonds, securities, etc., bullion,
mint certificates, and evidences of debt issued by the
United States. Bonds and securities may be held only
as follows: (a) United States securities; (b) bonds of
California; (c) bonds of any State which has not de­
faulted in principal or interest in five years; (d) bonds
of California municipalities; (e) bonds of any city, town,
or county of 20,000 inhabitants in any other State, pro­
vided the entire bonded indebtedness of the municipality
does not exceed 5 per cent of its taxable property, in­
cluding the issue of bonds under which the investment
is made, and provided that the municipality or the State
in which it is situated has not defaulted on principal or
interest for five years; (/) first mortgage or underlying
bonds of a steam railway in the United States, the in­
come of which pays operating expenses and fixed charges;
(g) bonds of street railroads, water, light, light and
power, gas, and other public utility and industrial cor­
porations. These bonds must be secured by a first or
underlying mortgage of the corporation issuing the
bonds, or by a refunding mortgage to retire all prior




79

N at i on a l

M on et a r y

Commission

debts of the corporation, and the income of the corpo­
ration must have been sufficient to pay operating ex­
penses and fixed charges for three years prior to the
issue of the bonds or else the payment of the bonds must
have been guaranteed by a corporation which has paid
operating expenses and fixed charges for three years
prior to making the guaranty; (h) first mortgage bonds
of real-estate corporations, provided the bond issue does
not exceed 60 per cent of the market value of the real
estate taken as security. No savings bank may pur­
chase bonds of a corporation if the franchise of the cor­
poration expires prior to the maturity of the bonds,
or if the special franchise granted to this corporation
by a municipality so expires (61). No savings bank
may deal or trade in realty or personalty except as pro­
vided in the statute (62). No savings bank may invest
more than 5 per cent of its assets in bonds of any one
issue, except bonds of the United States, California, or
California municipalities. No savings bank may purchase
mining stock (67).
X . — U nauthorized B anking .
No commercial bank, individual banker, trust company,
firm, or corporation may advertise as a savings bank or
in any way solicit or receive deposits as a savings bank,
except savings banks or other banks having savings de­
partments subject to the provisions of the statute (49).
Every individual, firm, or corporation doing a savings
banking business in the State must use the word “ savings ”
on its signs, advertising, stationery, etc. (28).
X I. — P enalties .
Particular provisions with respect to savings banks
make it a misdemeanor for a director or officer to borrow,




80

California

— Trust

Companies

directly or indirectly, the funds of his bank, or be in any
way an obligor for moneys borrowed of or loaned by the
bank; it is similarly a misdemeanor to authorize or consent
to such a loan or to receive it. The officer or director vio­
lating these provisions immediately loses his office (65).
The president or managing officer consenting to a violation
of the section containing most of the restrictions on sav­
ings bank loans (see V, supra) is guilty of a felony (67).
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

Trust-company business may be combined with either
or both of the other two sorts (3 and 22). Trust funds
must of course be kept separate from other assets (32).
“ Trust” must appear in all advertisements, etc., of a bank
doing a trust business (28).
Before the superintendent issues a certificate of author­
ity to transact business, a majority of the board of direc­
tors of the proposed trust company must make affidavit
that at least $200,000 of capital stock has been paid in
(100). See Banks, I, for capital required for departmental
business.
III.— S upervision .
Before doing a trust business, a company must deposit
with the treasurer of the State $100,000 in certain securi­
ties (96, ei seq.). The superintendent supervises the retire­
ment from business of any trust company (102).
REPORTS.

In addition to the items required in the reports of every
bank, a trust company must furnish a list and brief de­
scription of the trusts it holds, etc. (101).
S. Doc. 353, 6 1 -2 ----- 6




81

N at i on a l

Monetary

Commi ssi on

V I.— I nvestments.

Trust companies invest their capital and trust funds in
accordance with the laws relative to the investment of
funds deposited with savings banks, unless a specific
agreement to the contrary is made between the trust com­
pany and the person creating the trust (105).
X.— U nauthorized T rust Company B usiness.

The use of the word “ trust” in connection writh the
words “ company,” “ association,” etc., is prohibited to
everyone except corporations provided for in the statutes.
The use of the word without authority is a misdemeanor.
No corporation may use the word “ trust ” or “ trustee ” as
part of its name unless it is authorized by its articles of
incorporation to act in fiduciary capacities, nor may it
act in such capacities unless it has complied with the
provisions of the statute (104). Every bank conducting
a trust department must use the word “ trust” on its
signs, advertising, and stationery (28).
XI.— P enalties .

The officers of any bank receiving trust funds who min­
gle these funds with other assets of the bank or count them
as part of the reserve are guilty of a felony (32).




COLORADO.
Mills’ Annotated Statutes of Colorado, volumes I and
II, include all statutes in force January i, 1891. Volume
III carries the statutes to January 1, 1905. Subsequent
statutes are in the session laws of Colorado for 1905,
1907, and 1909. In volumes I and II, banks are treated
in a short chapter (12); and in chapter 30 (corporations),
there are provisions, in division 2 (particular corpora­
tions), on first, banks (secs. 510-519), second, savings
banks (secs. 520-530), and third, trust, deposit, and
security associations (secs. 535-544). Volume III, though
it does not alter the law on banks and savings banks,
adds a later act for the regulation of trust companies,
embodied in sections 544a to 544/. In the session laws
of 1907 there is an important act at page 222, providing
for supervision and other regulation, extending, under
section 36 of the act, to all individuals, firms, savings
banks, trust companies, or other corporations engaging
in banking business in Colorado. Since this act applies,
therefore, to all banking institutions, its provisions,
together with those of the former statutes which apply
generally, are grouped in the digest under the title “ Gen­
eral provisions.” Those provisions which apply only to
one of the three classes are later grouped under the respec­
tive titles: “ Banks,” “ Savings banks,” and “ Trust com­
panies.” Where citations are simply numbers in paren­
thesis they are to sections in Mills’ statutes. The act of




83

N at ion a l

M onetary

Commission

1907 is cited by its number in the session laws for that
year (111) and by sections in the act. There is late
legislation dealing with building and loan associations.
GENERAL PROVISIONS.
I.— T erms

of

Incorporation.

The liability of any bank for borrowed money or redis­
counted paper must never exceed the amount of the
actual capital stock paid in (111, 27). Dividends must
be declared only from net earnings (531).
II.— L iabilities

and

D uties of Stockholders
Directors.

and

Shareholders in banks, savings banks, trust, deposit,
and security associations are individually responsible for
the debts of the corporations in an amount double the par
value of their stock (533).
If any director or officer receives deposits or creates
debts with knowledge of the corporation’s insolvency, he
is guilty of larceny; he is also individually responsible for
the deposits received or indebtedness contracted (222,
224, and h i , 31). The executive officers of all corpo­
rations give bonds for the faithful performance of their
duties; breach of these bonds gives a right of action to
whatever persons are damaged (111, 39). No officer of
any banking institution may take compensation as an
inducement to make a loan out of the funds of the bank
(h i , 32).

III.— S upervision.
The official in charge of banking is the state bank com­
missioner, a qualified person who has been for three years
a citizen of Colorado, who has had at least five years’




84

Colorado

General

Provisions

experience in practical banking, and who is not interested
in any banking institution except as a depositor. His
term of office is four years (h i , i). The commissioner’s
salary is $3,600 a year ( h i , 2). He and his deputies
must keep secret whatever information they obtain in the
course of their duties ( h i , 3 and 4).
If a bank refuses to submit its books for the inspection
of the commissioner, or refuses to furnish information,
he institutes proceedings for the appointment of a receiver
(111,7). If he has reason to believe that the capital of
any banking institution is impaired he must examine the
bank to ascertain its true condition; and if he finds the
capital really impaired, he requires the bank to make
good the deficiency. If for sixty days the deficiency is
not made good to his satisfaction, he takes control of the
bank and institutes proceedings for a receivership (111, 8).
When he learns that a banking institution has refused to
pay its depositors, or that it is insolvent, or that it has
returned a false report, he takes charge of the affairs of
the institution until a receiver is appointed (111, 10). A
banking institution may voluntarily put its affairs and
assets under the control of the commissioner. He has
complete control until a receiver is appointed (111, 13).
When the commissioner has taken charge of the affairs
of a banking institution, under any circumstances, he
must apply to the proper court for the appointment of a
receiver as soon as possible (111, 14). If the commis­
sioner finds, after taking control, that the institution is
only temporarily embarrassed, or that whatever impair­
ment there has been will be made good, etc., he may
refrain from applying to the court for a receiver and allow
the bank, upon arranging its affairs with its creditors, to
resume business within sixty days (111, 15). If a bank
exceeds the prescribed loan limit, the commissioner may
order the excess reduced within sixty days (111, 30).




N at ion a l

M on e t a r y

Commission

REPORTS.

Every banking institution makes to the commissioner
not less than three reports a year in the form he prescribes,
exhibiting in detail the resources and liabilities of the
bank at the close of business on a past day specified by
the commissioner. The day must be the same as that
upon which national banks make their reports. Within
ten days after the request of the commissioner, the reports
must be transmitted to him; and they must be published
in a local newspaper. Special reports may be called for
by the commissioner when necessary, but need not be
published ( h i , 17). Receivers of insolvent banks report
as the institutions themselves would (111, 11).
The commissioner makes a report to the governor every
other year, giving details of each institution reporting to
him, general statistics, and such other information con­
cerning the banking situation in the state as he thinks
necessary (111, 23).
Banking associations and trust companies make certain
reports to the assessor for purposes of taxation (3927m).
EXAMINATIONS.

A t least twice a year, and oftener if the commissioner
deems it advisable, he or his deputy examines the cash,
bills, collaterals, books, documents, assets, liabilities, and
other affairs of each banking institution and the methods
it employs (111, 6). Whenever the commissioner has
reason to believe that the capital of a banking institution
is impaired, he must make an examination of the affairs
of the institution (111, 8). The commissioner examines
corporations in the hands of a receiver once every six
months (111, 11).
Before beginning business, banking institutions are
examined by the commissioner to determine if they are
solvent and if they have the required capital (111, 20).




86

Colorado

General

V.— Discount

and

Provisions

L oan R estrictions.

The total liability to any banking institution of one
person, firm, or corporation for money borrowed, includ­
ing in company or firm liabilities those of the members,
must not exceed 20 per cent of the capital and surplus
of the bank; but the discount of bills of exchange, loans
on produce in transit or on warehouse receipts, etc., or
on collateral having a market value in excess of the loan
(this last exception renders the restriction on individual
liability easily avoided), and the discount of commercial
paper generally, are not considered as money borrowed
( h i , 30). No director or officer may borrow over 10
per cent of the capital and surplus of the lending bank
without the consent of a majority of the directors ex­
clusive of the borrower; and all loans to officers must
have the consent of the directors (111, 29). It was law
before the act of 1907, that no corporation could loan to
an officer or director an amount greater than 90 per cent
of the stock in the corporation actually owned by the
borrower, unless he gave security worth 10 per cent more
than the loan (223); but the state bank commissioner
considers this provision repealed by the statute of 1907.
No banking institution may loan upon its own stock
as security unless it is received as collateral or in the
collection of previous debts, in which case it must be
disposed of as soon as conveniently can be done (111, 28).
Limitations on borrowing power are given under I,
supra.
VI.— I nvestments.

Banking institutions must not employ their assets in
trade or commerce nor hold real estate except such as
they occupy in connection with their banking business,
nor may they engage in mining or speculate in unstable




87

N at ion a l

M onetary

Commission

property. They may hold all kinds of property, includ­
ing their own stock, which come into their possession
as collateral or in the collection of debts, but property
so acquired must be disposed of as soon as can conven­
iently be done (h i , 28).
V II. — Overdrafts.
Overdrafts are apparently allowed, for it is provided
that in declaring dividends, all “ losses, overdrafts, and
surplus” must be first deducted from earnings (531).
V III. — B ranches.
No banking association or corporation may establish
any branch office or agency, or employ an agent to make
loans or discounts at any place other than the banking
house of the association (531).
X .— U nauthorized B anking .
It is unlawful for any individual, firm, or corporation
except national banks to do a banking business, or ad­
vertise as though they did a banking business, or use
such words as “ bank,” “ banking,” or “ trust company”
without complying with the provisions of the statute.
Violation of this provision is a misdemeanor entailing
imprisonment for not over one year, or a fine of not over
$1,000 or both ( h i , 34). Individuals and firms doing
banking business under the statute are not allowed to
use the word “ State” as part of the bank or firm name
( h i , 21).
X I.— P enalties .
The director or officer of any banking institution who
receives deposits, knowing the institution is insolvent,
is guilty of larceny, for which the punishment is fine not




8
8

Colorado

General

Provisions

exceeding $5,000, imprisonment not exceeding five years,
or both (222 and 111, 31). If any officer of a bank takes
compensation for inducing the bank to make a loan he
is guilty of a misdemeanor, punishable by a fine of not
over $1,000, imprisonment for not more than twelve
months, or both (111, 32).
If the commissioner or one of his employees discloses
information which he should keep secret he forfeits his
office and is fined from $500 to $1,000, or imprisoned
from six months to two years, or suffers both penalties
(111,4). Any official making an examination who reports
fraudulently in order to aid an insolvent institution or
to injure an institution, or any official making examination
who takes a bribe for any purpose or neglects to examine
an institution by reason of having taken a bribe is guilty
of a felony, punishable by imprisonment for from two to
ten years (111, 6).
Institutions which fail to report are subject to a penalty
of $25 a day during the delay (111, 18). Receivers who
fail to report or submit to examination suffer the same
penalties (111, 11). The executive officers of banking
institutions who fail to file bonds are subject to the pen­
alties provided for failure to make reports (111, 39).
For penalties upon bank officials who fraudulently
issue or transfer stock see 1389 and 1390. Any person
who, with intent to defraud, gives a check on a bank
in which he has not sufficient funds is guilty of a misde­
meanor, punishable by a fine of not less than $200 nor
more than $1,000, or imprisonment for not less than
three months nor more than one year, or both (1397).




89

National

Monetary

Commi ssi on

BANKS.
I.— T erms

of

I ncorporation.

The required capital for banks of discount and deposit
is as follows: In cities and towns having a population of
2,000 or less, at least $10,000; in those of from 2,000 to
5,000, at least $15,000; in those of from 5,000 to 10,000,
at least $25,000; in those of over 10,000, at least $30,000.
At least 50 per cent of the capital must be paid in in cash
before business is begun, and the whole capital must be
paid in in cash within a year (1907, chap. 140). Unin­
corporated banking businesses must have a capital of
at least $10,000 (111, 20).
The directors of every bank declare semiannually
dividends of so much of the net profits as they deem
expedient (516).
Possibly banks may have a savings department,
for it is provided that “ any savings bank or banking
association formed under the provisions of this act ” must
hold a certain per cent of its savings deposits by way of
reserve (526).
II.— L iabilities

and

D uties

of

Directors.

There must be not more than nine directors (512). If
they willfully violate any of the provisions of the banking
act in the general statutes they become personally liable
for all the debts of the bank contracted previous to and
during the period of their neglect (517).
I l l .— Supervision .

The provision of section 516, that a report be submitted
to the state treasurer immediately after the declaration
of a dividend and that it be published seems repealed by
m , 17-




90

C o l o r a d o

S t a t e

B a n k s

IV.— R eserve R equirements.

If a bank has a savings department it must keep at its
own bank or on deposit subject to call at least 20 per cent
of the savings deposits (526).
V.— D iscount

and

Doan R estrictions.

It is provided in chapter 140 of 1907, possibly in con­
flict with h i , 28, which applies to all banking institutions
and is given above under General Provisions, V, that
no bank shall take as security for any loan or discount a
lien on any part of its capital stock. The same security
is required from shareholders as from persons not share­
holders (1907, chap. 140).
The stockholders collectively of any bank must never
be liable to the bank to an amount greater than two-fifths
of the capital (519).
V I.— I nvestments.

A bank may hold real estate only when necessary for its
accommodation in the transaction of its business; when
mortgaged to it in good faith for previously made loans;
when conveyed to satisfy previous debts; and when pur­
chased under judgments or mortgages held by the bank,
but in this last situation the bank must not bid a larger
amount than is necessary to satisfy the debt and cost
(514)*
It is provided in chapter 140 of 1907, possibly in con­
flict with the provision applicable to all banking institu­
tions in section 28 of chapter 111, that no bank shall
hold any portion of its own stock or of the stock of any
other incorporated company unless the purchase is nec­
essary to prevent loss on a debt previously contracted
on security which at the time the loan was made was




91

I

I

N a t io n a l

M onet ary

Commission

thought adequate. Stock so purchased must in no case
be held by the bank longer than six months, if it can be
sold at par or for what it cost (1907, chap. 140).
SAVINGS BANKS.
I.— T erms

of

I ncorporation.

The capital of a savings bank must be not less than
$25,000, paid in in cash (520).
Dividends may be declared out of net profits (534).
II. — L iabilities

and

D uties

of

D irectors.

There must be at least three directors, who must be
stockholders (521).
IV.— R eserve R equirements.
Every savings bank must keep at its bank or on
deposit, subject to call, with some other bank, at least
20 per cent of its savings deposits (526). See, however,
the provision of 523, given below under V, which seems to
look toward the retention of 50 per cent of deposits in the
savings bank itself or on deposit.
V.— Discount

and

L oan R estrictions.

Savings banks may invest one-half of their deposits on
personal security, in securities of Colorado or of the
United States, or in bonds of Colorado municipalities, or
they may loan these funds on bonds secured by mortgage
of unincumbered real estate worth double the loan. The
other half of the deposits they may deposit temporarily
in other banks, though they must never deposit more than
$25,000 in any one bank; or they may keep the whole of
this other half to meet current payments, depositing it,
or handling it otherwise, as seems convenient (523). No




92

Trust

Colorado

Companies

savings bank may take as collateral its own stock (526).
No officer of a savings bank may borrow from the bank,
or be surety for a borrower; nor may a savings bank dis­
count paper of a cashier or clerk in the bank (530).
VI. — I nvestments.
As stated above, under Loans, savings banks may
invest one-half their deposits on personal security, in
Colorado or United States securities, or in securities issued
by municipalities of Colorado (523).
X .— U nauthorized Banking .
Savings bank business may be carried on only by
persons organized under Colorado law (528).
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

Under the provisions of the old statute dealing with
trust, deposit, and security corporations, a corporation
for this purpose had to have a capital of not less than
$50,000; $30,000 had to be paid in before business could
be done (536). Under the later act providing for “ the
incorporation and regulation of trust companies,” found
in Volume III, trust companies are required to have a
capital stock of at least $100,000 in cities of the first class
and $50,000 in cities of the second class, paid in in cash
(5447, amd. by 1909, chap. 215). (For classification of
cities, see 4482 et seq.)
The enumeration of trust company powers does not in­
clude except by rather free inference that to do a banking
business, and it is provided that trust companies may not
do a banking business except in so far as the statutes ex­
pressly authorize it (544c).




93

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Monetary

II.— L iabilities

and

Commission

D uties of Stockholders
Directors.

and

Section 533, stated under II in General provisions,
makes shareholders in trust, deposit, and security associ­
ations liable for double the par value of the stock they own.
The more recent trust company law makes the stockholders
of trust companies individually responsible for debts of
their corporation during the time of their being stock­
holders, “ equally and ratably to the extent of their re­
spective shares of stock in such association and in addition
thereto” (544*7).
There must be not less than three directors of a trust,
deposit, and security association (540).
V.— Discount

and

L oan R estrictions.

Trust companies may not loan to their directors or
officers nor loan upon the stock of the company (544/).
VI.— I nvestments.

The trust, deposit, and security association law pro­
vides that such an association may hold whatever real or
personal estate is necessary to carry on its business, as well
as the real or personal estate it may think it necessary to
acquire in enforcement or settlement of demands arising
out of its business transactions (542). That law author­
ized investment of the capital of such a corporation in
good securities; in bonds and mortgages on unincum­
bered real estate in Colorado; in securities of the States
of the United States or of Colorado municipalities (543).
The later trust company law requires that trust funds
and investments be separated from assets of the company
and investments of them (5441). It gives trust compa­
nies wide latitude in the investment of trust funds, but




94

Colorado

Trust

Companies

forbids them to be invested in the stock or bonds of any
private incorporated company (5440).
X.— U nauthorized T rust Company B usiness .

The word “ trust” must not be used as part of the
name of any institution unless it has organized under the
trust company laws. The penalty for breach of this rule
is found under General provisions ( i n , 34).




95

»

CONNECTICUT.
Title 24 of the revision of 1902 of the general statutes of
Connecticut deals with “ Banking institutions.” It con­
tains five chapters: No. 199, “ State banks and trust com­
panies;” No. 200, “ State banks converted into national
banking associations; ” No. 201, “ Savings banks; ” No. 202,
“ Bank commissioners; ” and No. 203, “ Receivers of banks,
savings banks, and trust companies.” Inasmuch as banks
and trust companies are, as appear from the heading of
chapter 199, legislated for together, the Connecticut laws
are digested under two heads instead of three. The provi­
sions for supervision are, in so far as they are general and
applicable to all three classes of institutions (qualifications
of bank commissioners, salaries, etc.), inserted only once—
that is, under the first heading. The references, where
they are simply numbers in parenthesis, are to sections in
the revision of 1902. Where they are to later enactments,
they are cited by the year in which they were passed and
the chapter in that year’s volume of laws. The statutes
have been examined through the session of 1907; and one
or two minor additions have been made which cover, ac­
cording to the advice of Mr. Charles H. Noble, bank com­
missioner, all the legislation affecting the digest passed
at the session of 1909, the statutes of which are not, at
the time of making this compilation, yet published.




96

Connecticut

State

Banks,

etc.

BANKS AND TRUST COMPANIES.
I.— T erms

of

Incorporation.

Dividends may be declared only from net profits (3413).
Banks and trust companies may conduct savings depart­
ments, as appears from the provision requiring them to
report savings items and to separate the savings-deposit
investments, etc. (1907, 85).
II. — L iabilities

D uties of Stockholders
D irectors.

and

and

Although there is no provision for stockholders’ liability
in the chapters applicable to banks, it is a provision of the
general corporation act that no stockholder shall be liable
for any debt of the corporation after the par value of his
stock has been paid (3369).
Three-quarters of the directors of banks and trust com­
panies must be residents of Connecticut (3410). Not more
than three officers of any one savings bank may be officers
of a bank or trust company; and no cashier of a bank may
be treasurer of a savings bank that has over $500,000 de­
posits (3443). Directors of banks and trust companies
must not receive any compensation for indorsing paper
discounted by the corporation (3412).
III. — S upervision .

The state officials in charge of banking are two bank
commissioners who hold office for four years (3455), and
receive a salary of $3,500 each; these and the other sala­
ries of the commissioners’ office, are apportioned among the
banking institutions of the State (3464; and a 1909 amend­
ment) . Officers of banks, savings banks, and trust com­
panies chartered by Connecticut are ineligible to be bank
commissioners. If a commissioner becomes interested in
S . D o c. 353, 6 1 -2 —




7

Q7

%

National

Monetary

Commi ssi on

the business of banking or negotiating loans he forfeits his
position. When a commissioner becomes indebted to a
bank that bank must notify the governor (3456). The
commissioners must not disclose the information they
acquire, except as their duties demand (3457)- They ap­
prove reserve depositaries (3400).
The commissioners apply for the appointment of a re­
ceiver in case the reserve of a state bank or trust company
falls below 15 per cent and the bank fails for thirty days
to make the deficiency good (3400). When the bank com­
missioners consider the charter of any bank, savings bank,
or trust company forfeited, or the public in danger of be­
ing defrauded, they may institute proceedings in court for
a receivership (3461).
Upon application of the bank commissioners or of the
directors of any bank, savings bank, or trust company, a
court may make an order restraining the bank from pay­
ing out its funds or declaring dividends (3460).
reports.

All banking institutions, immediately after organizing,
report the fact of their organization to the bank commis­
sioners (3463).
State banks and trust companies report to the bank
commissioners at least five times annually, exhibiting in
each report in detail, in a form prescribed by the commis­
sioners, the resources and liabilities of the bank at the
close of business on a past day specified by the commis­
sioners; the report must be sent to the commissioners
within ten days after they request it and must be published
in such form as they prescribe in a local newspaper (3416;
and 1903, 167).
Banks and trust companies that conduct savings de­
partments report to the bank commissioners a statement




98

1

Connecticut

—

State

Banks,

etc.

of the amount of the deposits and the securities in which
they are invested, together with the other information
required to be given in their annual statement (1907, 85).
Receivers of banks, savings banks, and trust companies
appointed under the provisions of chapter 203 report to
the commissioners annually, or oftener if the bank com­
missioners require, on the state of the bank’s affairs
(3472).
The commissioners report annually to the governor the
condition of all institutions examined by them with such
recommendations as they deem proper. They report to
the local state’s attorney any violation of law (3459).
Banks, national banks, and trust companies are re­
quired to file certain annual statements with the tax com­
missioner showing especially the place of residence of all
the stockholders (1905, 54). Section 2332 and following
in the Revised Laws cover taxation of banking corpora­
tions; incidental to the taxation are the returns to the
assessors of towns under section 2336.
EXAMINATIONS.

I hese are semiannual or more frequent, covering books
and papers (3457). Trust companies are specifically
made subject to examination by 1903, 167. Special
examinations of school- fund depositaries are allowed,
and also special examinations by the treasurer of the
State in case stock in the examined bank or trust com­
pany is owned by the State (3405).
Stockholders in a bank or trust company are given au­
thority to examine the books, accounts, securities, and
expenditures of their corporation at an annual meeting or
at a special meeting called for the purpose by five stock­
holders owning not less than 100 shares (3406).




99

National

Monetary

Commission

IV. — R e s e r v e R e q u ir e m e n t s .
Banks and trust companies must maintain a reserve
equal to 15 per cent of their aggregate deposits. Not less
than four-fifteenths of this reserve must consist of gold
and silver coin, the demand obligations of the United
States, or national-bank currency, held by the bank in its
office; the remainder may consist of balances with reserve
agents subject to demand, and of railroad bonds which
are legal investments for savings banks. Ihe reserve
agents must be members of clearing-house associations of
New York, Boston, Philadelphia, Chicago, or Albany, or
else be national banks, state banks, or trust companies in
New Haven, Bridgeport, or Hartford. Each reserve de­
positary must be approved by the bank commissioners.
The amount of reserve held in the form of railroad bonds
must never exceed one-fifth of the whole reserve (3400,
amd. by 1909, 40). This provision for reserve does not
apply to savings deposits in banks and trust companies
(1907, 85).
V .— D isco u n t

and

L oan R e s t r ic t io n s .

The total liabilities to any bank or trust company of
any person, firm, or corporation, including in firm liabili­
ties the liabilities of its members, must not exceed 10 per
cent of the amount of the capital of the bank or trust
company and its surplus and undivided profits, this
restriction, however, is subject to the proviso that the 10
per cent limit of individual loans may be exceeded to a
point not over 20 per cent, provided the loans are secured
by collateral whose market value exceeds by 20 per cent
the liabilities secured. Twenty per cent of capital, sur­
plus, and profits is set as the highest point of a loan to
any individual, firm, or company (3402)-




100

Connecticut

State

Banks,

etc.

Banks and trust companies may not loan to any director
an amount exceeding 5 per cent of capital, surplus, and
undivided profits, and the total of debts due from directors
must not exceed 20 per cent. It is permitted, however, to
exceed the limits thus set if the loans are secured by col­
lateral of a certain market value, etc. (3411).
No bank or trust company may loan or discount on a
pledge of its own stock (3401). No bank or trust com­
pany may discount negotiable instruments made, ac­
cepted, or indorsed by an officer or clerk (3403). No bank
or trust company may loan to parties outside Connecticut
until the loans and discounts to parties within Connecticut
amount to one-half the capital of the corporation (3404).
The provision in the statute prohibiting loans at interest
greater than 15 per cent excepts from that prohibition
loans by and to national banks, state banks, and trust
companies, and excepts also bona fide mortgages of real or
personal property (1907, 238).
V I .— I n v e st m e n t s .

A bank and trust company to which its own stock has
been transferred may cast no vote on it, except that a trust
company holding its own stock in trust may vote the stock
so held (3407). In the general corporation law it is pro­
vided that corporations may hold such stocks and bonds
issued by other corporations “ as the purpose of the cor­
poration shall require” (3355).
Banks and trust companies are allowed to maintain sav­
ings departments, the deposits in which, however, must
be invested according to the statutes prescribing invest­
ments for deposits in savings banks; investments thus
made are for the protection solely of depositors in savings
department (1907, 85).




IO I

National

Monetary

Commission

V III.— B r a n c h e s .
Banks and trust companies are prohibited from estab­
lishing branches or employing agents to do business in
other places than at the home office (3401).
X .— U n au th o rized B a n k in g .
Soliciting deposits as a savings bank or using on a sign
such words as “ bank,” “ trust,” or “ savings,” or any name
indicating that the persons are a bank, savings bank, or
trust company is illegal if the users of the word are not
entitled to do so under the statute. The penalty for such
use must not be more than $1,000. Firms or individuals
who deposit a $10,000 bond with the state treasurer or,
if they choose, acceptable securities to the same value, may
style themselves private bankers (1907, 86).
X I.— P e n a l t ie s .
There is a general provision that if no other penalty is
provided any violation of the law in relation to banks, sav­
ings banks, or trust companies shall be a fine of from $100
to $500 (3454)Banks and trust companies which exceed the loan limit
set by section 3402 forfeit $3,000 (3402). Those that vio­
late the provisions against loans to officers forfeit between
$500 and $1,000 for each offense (3411). Directors who
indorse for a compensation paper discounted by their
bank or trust company forfeit between $500 and $1,000 for
each offense (3412). Directors voting for illegal dividends
forfeit $500 (3413). If a bank or trust company fails to
transmit its report to the commissioners it forfeits $10 a
day (3416).




102

*
Connecticut

Savings

Banks

SAVINGS BANKS.
I.— T erm s

of

I n co r po r atio n .

Savings banks are institutions without capital stock.
The net income of any savings bank in excess of oneeighth per cent of its deposits, actually earned during the
preceding half year, and only such net income, may be
divided semiannually among the depositors. Dividends
ordinarily must not exced 4 per cent a year (3440). Sav­
ings banks are required to hold a surplus of at least 3 per
cent of their deposits as a contingent fund, which must
never exceed 10 per cent of the deposits; any surplus be­
yond that may be divided in sums not less than 1 per cent
of deposits (3441).
Directors of savings banks may discriminate in dis­
tributing dividends between deposits of $1,000 or less, and
those above. Discrimination must not exceed 1 per cent
a year, and if it is necessary it must be in favor of the
smaller deposits (3442).
II.— L ia b il it ie s

and

D u tie s

of

D ir e c t o r s .

Not more than three officers of any one savings bank
may be officers of a bank or trust company, and no cashier
of a bank may be treasurer of a savings bank that has
over $500,000 deposits (3443).
Directors of savings banks appoint annually at least two
auditors not interested in the bank, who examine its books,
accounts, and securities, and file in the bank office a state­
ment, a copy of which is forwarded annually to the com­
missioners (3447).
I l l .— S u p e r v isio n .

.
Seneral provisions concerning the bank commis­
sioners were given under Banks and trust companies.




103

National

Monetary

Commission

The authority of the bank commissioners to apply for
restraining orders or institute receivership proceedings is
the same as it was under Banks and trust companies
(3460 and 3461). They approve of a savings bank’s ex­
penditure for a building (3438).
REPORTS.

The treasurer of each savings bank, yearly, or if
required by the bank commissioners, oftener, reports its
condition to them, giving the par value, cost, and market
value of its assets, besides all information required in the
annual statements of banks and trust companies (3452).
Receivers of savings banks, like receivers of banks and
trust companies, report to the bank commissioners (3472).
The commissioners receive annually a report of the exami­
nation by the two auditors explained above (3447).
Savings banks are also required to report various
matters in connection with taxation (2336; 1903, 189;
and 1907, 204).
The treasurer of each savings bank reports annually to
the comptroller the name of such depositors as have not
dealt with their deposits for twenty years. The state­
ment must include the amount credited to such persons.
No statement need be made, however, where the depositor
is known by the bank to be living. The comptroller
communicates this statement to the general assembly
(345i)EXAMINATIONS.

Savings banks are, like banks and trust companies,
examined semiannually or oftener by the bank com­
missioners (3457). There is also an annual examination
by two auditors, appointed by the directors (3447).




10 4

Connecticut
V .— D is c o u n t , Do a n ,

Savings
and

Banks

D e p o sit R e s t r ic t io n s .

No savings bank, having more than $25,000 of deposits,
may loan on personal security to any one person or com­
pany more than 3 per cent of its deposits (3432), nor
may a savings bank buy an obligation or loan upon it if
only one person or firm is obligated, unless the savings
bank takes additional security equivalent to an indorse­
ment (3433).

No officer of a savings bank may borrow or be surety
for a loan of any of its funds, nor may he take a fee for
procuring a loan from a savings bank or for selling securi­
ties to it (3446).
With minor exceptions savings banks may not receive
interest at more than 6 per cent (3439).
No individual may deposit more than $1,000 annually
in one savings bank (3433).
V I.— I n v e st m e n t s .

No savings bank may expend in a building to accom­
modate its business more than can be taken from the
surplus, after allowing for depreciation of securities and
the 3 per cent contingent fund; this expenditure is in all
cases subject to the approval of the bank commissioners

(3438).
The securities in which savings banks may invest
their deposits and surplus are, omitting minor distinc­
tions, as follows: First, not exceeding 20 per cent of
the deposits and surplus in notes secured by the
pledge of stocks or bonds which have paid dividends
or interest for two years at not less than 3 per cent,
or by the pledge of securities which can be purchased by
savings banks; second, not exceeding 20 per cent in notes
which are the joint and several obligations of two or more
residents of Connecticut; third, in United States bonds,




10 5

National

Monetary

Commission

the bonds of any New England State, and the bonds of
certain other enumerated States; fourth, in the bonds of
any New England city, or any city in New York, or cer­
tain enumerated cities; fifth, in the obligations of munici­
palities of Connecticut; sixth, in the stock of a bank or
trust company located in Connecticut, New York City, or
Boston; seventh, in the bonds of other cities in the States
enumerated before, if the city has not less than 20,000
inhabitants, if the amount of its bonds does not exceed
7 per cent of the taxable value of its property, and if the
city has not defaulted on its debt within fifteen years;
eighth, in the bonds of any railway company in the
enumerated States if the bonds are a first mortgage and if
they are the only mortgage on some portion of the road;
also in the consolidated refunding bonds of Connecticut
railways if in all these cases the railroad has paid for five
years interest and at least 4 per cent dividends on all its
stock and if the stock of the railroad equals at least onethird of the outstanding bond issue; ninth, in the bonds
of enumerated railroads if for five years the railroad has
paid interest and dividends and if the stock of the railroad
equals at least one-third its mortgage debt. All railroad
bonds cease to be legal investments for savings banks
when the railroad ceases to pay dividends on all its stock.
The securities of railroads operated exclusively by elec­
tricity and of street railways are not legal investments.
All other investments must consist of deposits in banks
or trust companies in Connecticut, New York, Massa­
chusetts, or Rhode Island, or of loans secured by mort­
gage on unencumbered real estate in Connecticut worth
double the loan (1905, 231, 184, and 207; 1903, 171).
X I.— P e n a l t ie s .
The general penalty stated under Banks and trust
companies applies to savings banks (3454). The penalty




106

Connecticut

Savings

Banks

for officers who become personally interested in directing
savings bank investments is $1,000 (3446). The penalty
for failure by the treasurer to report unused accounts is
$100 (3451). In case of a violation of the statute, the
officials who assent to the violation are liable to the bank
for the loss it suffers. They are also subject to fine of not
less than $100 or not more than $1,000 (3453).




107

DELAWARE.
The banking statutes of this State are extremely meager.
In the Revised Code as amended to 1893 (this is the
latest revision of the statutes of the State) a chapter
(LXXI) is entitled, “ Of Banks; ” this chapter, with two or
three pages of later acts appended to it in the Code, con­
tains little of importance. The subsequent session laws
have been examined through those of 1909. In 1903 an
act was passed providing for supervision over state banks,
savings banks, trust companies, etc. In 1909 branches
and reserves were provided for. There is not sufficient
separation of the three sorts of business in the statutes
to warrant separate headings.
I.— T erms

of

I n c o r po r a tio n .

Apparently banks in Delaware must still be chartered
by special act of legislature, for the general corporation
law denies to any corporation created under it the power
to carry on the business of discounting bills, notes, or
other evidences of debt, receiving deposits of money,
etc. (1903, chap. 394, 4).
III.— S u p e r v is io n .
The insurance commissioner of Delaware has super­
vision over all banks and trust companies (1903, chap.
330, 1). For the duties he performs as a banking super­
visor he receives $500 a year (1903, chap. 330, 21). When­
ever it appears to him that it is desirable that proceedings




108

D el aw are

General

Provisions

should be brought against “ state banks, savings banks,
trust companies, and safe deposit corporations and other
companies engaged in like business or in any manner
receiving deposits of money, ” if the affairs of any corpora­
tion of these sorts are in an unsound condition from
illegal or unsafe investments, or it appears to him that
its liabilities exceed its assets or that it is violating the
law or that it is inexpedient for it to continue business,
then it is the duty of the insurance commissioner, through
the attorney-general, to institute such proceedings against
the corporation as the situation requires; if from an
examination the commissioner has reason to believe that
the corporation is in an unsafe condition, he may take
possession of the corporation’s property and retain it
until a receiver is appointed (1903, chap. 330, 5). He
proceeds similarly against any bank or trust company of
which the reserve has fallen below the requirement, and
which, after thirty days’ notice from him, has not made
the reserve good. He approves of reserve depositaries
(1909, chap. 162).
REPORTS.

The corporations enumerated in the quotation above
make to the insurance commissioner not less than two
reports each year in the form prescribed by him showing
resources and liabilities at the close of business on a past
day specified by him; each report is transmitted to him
within twenty days after the receipt of his request and an
abstract in the form prescribed by him is published in a
local newspaper. He may call for special reports when he
thinks them necessary for a complete knowledge of the
condition of any corporation (1903, chap. 330, 2).
Every savings bank or other incorporated institution
for savings” must annually publish once a week for three




109

t

N at i on a l

M on e t a r y

C o mmi s s i o n

weeks a statement of its financial condition, presenting
the amount and nature of its business during the preced­
ing year, with assets, liabilities, investments, etc. (Laws
of Delaware, p. 570).
EXAMINATIONS.

Whenever the insurance commissioner deems it expedi­
ent, or at the request of the corporation, he may examine
any of those corporations enumerated above under Super­
vision (1903, chap. 330, 4).
IV. — R e s e r v e R e q u ir e m e n t s .Every bank, and every trust company receiving de­
posits, must, if it does business in a city of over 50,000,
keep a reserve equal to 15 per cent of aggregate deposits,
exclusive of deposits on which there must be thirty days’
notice of withdrawal; one-third of this reserve must be in
money, and the part not held in money must be on deposit
in a Delaware bank or trust company having a capital of
$50,000 and a surplus of $50,000, approved by the com­
missioner, or on deposit in a bank or trust company
approved by him doing business in New York, Philadel­
phia, or Baltimore. Banks and trust companies doing
business elsewhere in the State must keep a reserve equal
to 10 per cent of deposits, exclusive of those on which
there must be thirty days’ notice of withdrawal; the pro­
portion of cash and the designation of depositaries are
the same as in the case of corporations located in cities of
over 50,000. While the reserve is below the requirement,
no new loans or discounts may be made except by dis­
counting sight exchange, and no dividends may be
declared (1909, chap. 162).




D el aw are

General

Provisions

V II.— O v e r d r a f t s .
Among the items required to be reported by the Farmers’
Bank of the State of Delaware, under a special statute,
is “ overdrafts” (Daws of Delaware, p. 589).
V III.— B r a n c h e s .
Branches are allowed only on the approval of the
insurance commissioner, who must ascertain that the bank
has a paid-in capital of $25,000 for each place of business
then established, and for the proposed branch, and a
surplus of $25,000 for each place of business then estab­
lished, and for the proposed branch; this act applies to all
corporations “ possessing banking powers” (1909, chap.
163).
X .— U n au th o rized B a n k in g .
No foreign corporation is deemed to possess the power
of discounting bills, notes, or other evidences of debt, of
receiving deposits, buying and selling exchange, etc.
(1903, chap. 395, 7).
Forming a banking company without incorporation is
forbidden, and any person who receives subscriptions to
the capital stock of such a company, or subscribes, for­
feits $500 to any one who sues, one half to the use of the
State (Daws of Delaware, Chap. DXXI, 1). Any mem­
bers or agents of such an association who loan money on
notes or receive money on deposit also forfeit $500 (Daws
of Delaware, Chap. DXXI, 2).
X I.— P e n a l t ie s .
The act placing banks under the supervision of the in­
surance commissioner provides that failure to report is
punishable by a penalty of $100 a day (1903, chap. 330, 2);




m

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Monetary

Commission

that the making of a report with intent to deceive an ex­
aminer is a misdemeanor on the part of the director,
officer, or employee who does so (1903, chap. 330, 3); and
that any corporation doing business “ in contradiction
of the provisions herein contained” is liable to a fine of
$1,000 (1903, chap. 330, 10). A statute in the amended
Code makes it a misdemeanor, punishable by fine, for
directors or managers of a bank to be concerned in paper
or security on which the bank makes a profit of more than
1 per cent for sixty days; the offending bank forfeits its
charter (Laws of Delaware, p. 588). Savings banks
which fail to publish the annual reports required suffer a
penalty of $200 for each omission (Laws of Delaware,
P- 570).




%

112

DISTRICT OF COLUMBIA.
Most of the banking in the District of Columbia is done
by national banks or by foreign corporations. No dis­
trict banks are provided for in the Code; savings banks
are briefly treated as to reports and examinations; and
only for trust companies is there legislation which is at all.
comprehensive.
The digest is based upon Treasury Document No. 2505,
a pamphlet which reprints the national-bank act and
other laws relating to national banks, together with all
the provisions of the District Code relating to banking.
The pamphlet sets out in full a subchapter of the Code
dealing with the organization in the District of corpora­
tions of various sorts— manufacturing, agricultural, mining,
etc.; savings banks are incorporated under this statute
not by virtue of being expressly named in it, but merely
because they are not provided for separately. The chap­
ter does provide, however, that “ banks of circulation or
discount ” may not be incorporated under it. The head­
ing “ Banks ” is, of course, omited in the digest. Citations
are to sections in the Code according to the numbering
given in the reprint, which, though published in 1908,
includes, according to the assurance received by the com­
piler at the office of the Comptroller of the Currency, all
statutes affecting banking in the District passed previous
to the end of the first session of the Sixty-first Congress.
S. Doc. 353, 61-2-----8




"3

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Monetary

Commission

SAVINGS BANKS.
III.— S u p e r v i s i o n .
The Comptroller of the Currency exercises supervision
over “ all savings banks, or savings companies, or trust
companies, or other banking institutions, organized under
authority of any act of Congress to do business in the
District of Columbia, or organized by virtue of the laws of
any of the States in this Union, and having an office or
banking house located within the District of Columbia
where deposits or savings are received. ” When in his
opinion it is necessary he may take possession of such a
corporation for the same reasons and in the same manner
as is provided with respect to national banks (713).
REPORTS.

The corporations named in the quoted passage in the
paragraph above are required to make to the Comptroller
all the reports which national banks are required to make,
except that banking institutions having offices in foreign
countries as well as in the District of Columbia are only
required to make these reports semiannually. Reports
must be published in Washington newspapers (713). The
national-bank requirement is five reports a year showing
resources and liabilities on a past day, and special reports
when demanded by the Comptroller (R. S., 5211), and a
report after each dividend showing its amount, and net
earnings not divided (R. S., 5212).
EXAMINATIONS.

The Comptroller of the Currency is authorized, when­
ever he deems it useful, to cause an examination to be
made of any of the corporations mentioned in the quoted
passage above (714).
114

D istrict of Columbia

Trust

Companies

X I. — P e n a l t ie s .
The penalty for failure to report is the same as that
imposed on national banks for a like offense (713), $100 a
day during the delay (R. S., 5213).
TRUST COMPANIES.
I.— T erm s

of

I n co r po r atio n .

A corporation may be formed to carry on in the District
of Columbia “ a safe deposit, trust, loan, and mortgage
business,” with a capital of at least $1,000,000, and if the
company also does a storage business a capital of at least
$1,200,000 (715). Trust companies may “ accept deposits
of money for the purposes designated herein, upon such
terms as may be agreed upon from time to time with
depositors” (721). Of the capital stock at least 50 per
cent must be paid in in cash or by the transfer of assets
before business is begun, and within a year after availing
itself of the powers given by the statute each company
must have its entire capital stock paid in (728). Gener­
ally only money may be considered as payment of capital;
but in the case of companies existing when the trust-com­
pany act was passed, and taking new charters under the
statute, the provision given above that assets may be
accepted as payment of capital may be taken advantage
of with respect to the assets of the old company trans­
ferred to the new (735). Shares are of $100 each (729).
See below under III the requirement of a deposit of secu­
rities before the corporation may “ transact the business
o a trust company or any business of a fiduciary char­
acter” (728 and 719).




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I I — L ia b il it ie s

and

Commission

D u tie s of S tockh o ld er s
D ir e c t o r s .

and

Trust company stockholders are individually liable to
the creditors of their company to an amount equal to and
in addition to the stock held, for all debts and contracts
of the company (734).
There must be from 9 to 30 directors, who must be
stockholders and at least one-half of them residents and
citizens of the District (736). In case of failure to make
the annual report provided for in section 730, the directors
are liable for all debts existing at the time of the delin­
quency and for all that are contracted before the report
is made (731). They are liable as guarantors for all debts
existing or afterwards contracted, if a dividend is declared
which renders the company insolvent or creates a debt
against it (739). If liabilities exceed cash value of assets
the directors who assent to this condition are personally
liable for the excess to the creditors (741).
III. — S u p e r v is io n .
The Commissioners of the District of Columbia have
power to grant or withhold the charter of incorporation
(717). Before a corporation is entitled to “ transact the
business of a trust company, or to become and act as an
adminstrator, executor, guardian of the estate of a minor,
or undertake any other kindred fiduciary duty,” it must
deposit in securities with the Comptroller of the Currency
an amount equal to one-fourth of its paid-in capital; the
Comptroller may call for additional deposits not exceed­
ing one-half the paid-in capital. No corporation may
“ transact the business of a trust company or any business
of a fiduciary character” until it has the Comptroller’s
certificate, which will not issue unless the required deposit
has been made (728 and 719).




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D istrict of Columbia

Trust Companies

The Comptroller of the Currency has power, when in
his opinion it is necessary, to take possession of any trust
company, for the same reasons and in the same manner
and to the same extent as is provided with respect to
national banks (713 and 720).
REPORTS.

Trust companies must report to the Comptroller as
national banks do (713 and 720): five times a year, show­
ing resources and liabilities on a past day specified by him,
with special reports when he requires them (R. S., 5211),
and after each dividend a report of its amount and the
amount of net earnings not divided (R. S., 5212). Every
trust company must annually, within twenty days after
the 1st of January, report to the Comptroller stating
amount of capital, proportion paid in, amount of debts,
gross earnings for the previous calendar, year, and ex­
penses; this report, on which the company’s taxes are
based, must be published in a local newspaper (730).
EXAMINATIONS.

The Comptroller of the Currency exercises “ the same
visitorial powers’’ over trust companies as he does over
national banks (720). Trust companies are also men­
tioned in the section which authorizes the Comptroller,
whenever he deems it useful, to cause an examination of
savings banks, etc., to be made (714). The practice is to
examine trust companies which are in satisfactory condi­
tion twice a year.
V I .— I n v e st m e n t s .
A trust com pany m ay hold real estate not exceeding in
value $500,000, and such in addition as it m ay acquire in
satisfaction of debts due it under sales, decrees, judgm ents,




” 7

N at ion a l

M onet ary

Commission

and mortgages; but it may not hold real estate under
foreclosure or real estate purchased to secure debts, for
longer than five years (726).
X .— U n au th o rized T r u st C o m pan y B u sin e s s .
No corporation organized under the laws of any of the
States and having its principal place of business in the
District may carry on any of the business named in the
trust-company chapter without compliance with the pro­
visions of the chapter for the government of corporations
formed under it; each officer of an offending corporation
is punishable by fine not exceeding $1,000, or imprison­
ment not exceeding one year, or both (747).




X I.— P enalties .

Failure to report subjects a trust company to the same
penalty as is imposed upon national banks for the same
offense (720 and 713), $100 a day during the delay (R. S.,
5213). See also 732 for false swearing and misappropria­
tion of trust funds.

FLORIDA.
The General Statutes of Florida include all statutes
through the session of 1903, and in an appendix are
inserted the acts of 1905. Title 3 of the fourth division
of the statutes deals with corporations. In chapter 2 (Cor­
porations for profit) of this title, subchapter 1 contains the
special provisions for banking companies. The first eleven
articles of this subchapter contain provisions applicable
to all banking companies. The twelfth article deals with
savings banks exclusively. The only pertinent later statute
is found at page 197 of the session laws of 1907. This act
also deals generally with banking companies, except in one
or two minor provisions. There is no law applicable to trust
companies as distinguished from other corporations. The
digest is accordingly divided under only two heads, “ Gen­
eral provisions,” which are applicable to all banks, and
Savings banks.” Numbers in parenthesis are citations
to the General Statutes of Florida, 1906; citations to the
later statute are by its number in the laws of 1907— that
is, 92 followed by the section in that law. The digest
includes legislation through the session of 1907; and the
compiler has been advised by Mr. A. C. Croom, comp­
troller of the State, that at the 1909 session of the legisla­
ture no statutes were passed affecting the matters covered
in the digest.




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GENERAL PROVISIONS.
I.— T erms

of

I ncorporation.

Every banking company must have a capital of at least
$50,000, except that, with the approval of the comptroller,
banks may be organized in cities or towns of not more than
3,000 with a capital of at least $15,000, and, with the ap­
proval of the comptroller, they may be organized in cities
or towns of not more than 6,000 with a capital of $25,000.
The capital must be divided into shares of $100 each. Sav­
ings banks are in a measure excepted from this provision—
see I, under Savings banks (2697). At least 50 per cent
of the capital must be paid in in full before business is begun.
The remainder must be paid in in monthly installments
of at least 10 per cent of the whole capital (2698).
Dividends may be declared semiannually from net
profits. Before declaring a dividend one-tenth of the
net profits must be carried to surplus until it amounts to
20 per cent of the capital (2714). The capital must never
be impaired either by withdrawing dividends or other­
wise (2715).
No banking company may ever become indebted to an
amount exceeding its capital stock except on the following
sorts of demands: First, money deposited with or collected
by the company; second, drafts against money due to the
company; third, liabilities to the stockholders for divi­
dends and reserved profits (2712).
Apparently, commercial and savings banking may not
be combined, for the application for incorporation must
specify whether the business contemplated is “ general
banking’’ or “ savings banking” (2694).




Florida

—

II-— L iabilities

General
and

Provisions

D uties of Stockholders
Directors.

and

The stockholders of every banking company are individ­
ually responsible for the debts of the company to the ex­
tent of the amount of their stock at par in addition to the
amount invested in the shares (2700). If a banking com­
pany begins business before authorized by the comptroller,
its stockholders are personally liable as partners (2701).
Banking companies must have a board of not fewer than
five directors (2704). Each director must be a citizen of
the United States, and three-fifths of the directors must be
residents of Florida for at least one year before their elec­
tion and must be residents during their continuance in
office. Each director must own at least ten shares of stock
(27° 5)- Where directors participate in a violation of law,
they become individually liable for all damages which the
company, its stockholders, or any other persons may sus­
tain in consequence of the violation (2724).
III.— Supervision .
1 he real supervision of banks is in the hands of the comp­
troller ; but he has power to employ a discreet and compe­
tent person to make examinations. This inspector may not
be connected with any banking business (92, sec. 1); he
has a salary of $2,000 per year (92, sec. 2).
I he comptroller must approve of the organization of
banks with a capital less than the regular amount, $50,000
(2697). The comptroller examines the condition of each
company before he authorizes it to begin business, with a
view especially to ascertaining the amount paid in on its
capita , the names and residences of the directors, with the
and whether the company has complied
wi
aw. If it appears that the organization is for other




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Monetary

Commission

than legal purposes, the comptroller may withhold his cer­
tificate (2702). The comptroller approves of bonds in
which reserves may be invested (2711).
If he becomes satisfied from the reports furnished him or
from other good proof that a banking company is insolvent
and is in default, or if the directors of a banking company
assent to a violation of any of the provisions of law, the
comptroller applies to the courts for the appointment of a
receiver (2724). In case reserves are impaired the comp­
troller notifies the banking company to make good its re­
serve. If it fails in thirty days, he applies for a receiver
(2710); he does so if a banking company holds its own
stock over the time allowed (2713); or if its capital stock
is impaired, and after notice from him the impairment is
not made good within three months nor liquidation begun
(2716); or if the capital is impaired by cancellation for un­
paid assessments and not increased to the required amount
on thirty days’ notice (2699) J or if any losses or irregulari­
ties apparent from an examination are not made good by
the directors of the banking company to the satisfaction of
the comptroller at once (92, sec. 5); or if a bank fails to
pay its examination fees within sixty days after notifica­
tion of the amount due (92, sec. 6); or if he is dissatisfied
with the report of a banking company going into voluntary
liquidation (92, sec. 4).
REPORTS.

The statute of 1907 provides that every bank, banker,
banking firm, banking company, branch bank, or associa­
tion doing business in this State, except national banks
(this is the phraseology of all the general sections in the
act of 1907), must make complete reports to the comptroller
whenever and in whatever form he prescribes, and must
publish in a local newspaper in January and July of each
year a full statement of assets and liabilities (92, sec. 7).

12
2

Florida

General

Provisions

This act repeals only the laws or parts of laws in conflict
with its provisions. It is worth noticing, therefore, that it
had been provided in the general statutes that every bank­
ing company should make report to the comptroller not
more seldom than twice a year, exhibiting its resources and
liabilities at the close of business on any day specified by
the comptroller, this report to be submitted within five
days after receipt of the comptroller’s request; also, that
the general statutes allowed him to call for special reports,
and provided that all banks, bankers, etc., receiving money
on deposit should advertise every January in a local news­
paper the amount of their capital stock and personal prop­
erty owned and subject to payment of their liabilities (2718
and 2719).
A receiver, within thirty days after taking charge of the
assets of a banking company, must forward to the comp­
troller a full report of its assets and liabilities, including
a list of the stockholders, the number of shares owned by
each, the names of the depositors, the amounts of deposits,
a list of assets, and such other information as the comp­
troller requires. From then on the receiver makes
monthly reports containing complete details (92, sec. 3).
If a banking company goes into voluntary liquidation, it
first furnishes the comptroller with a detailed statement
of its affairs, following this with a similar detailed state­
ment every month until its liabilities have been settled in
full (92, sec. 4).
For the reports required for purposes of taxation, see
43 5>437 (including trust companies), and 2720.
EXAMINATIONS.

All bankers, firms, or companies are examined at least
° ^ e a Year by the person appointed by the comptroller.
1S * subject to a difference in the case of savings
s
banks.) The examinations may be oftener if they are




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deemed necessary (92, secs. 5 and 6). The person making
examination reports in detail to the comptroller the con­
dition of the bank examined (92, sec. 1). There is a pre­
liminary examination before a certificate of incorpora­
tion is granted (2702).
IV.— R eserve R equirements.

Every banking company must keep in lawful money of
the United States a reserve equal to 20 per cent of its
deposits. Three-fifths of this 20 per cent reserve may
consist of balances, payable on demand, due from banks
in other cities with whom the company keeps its current
accounts, or may consist of bonds of the United States,
of Florida, or of municipalities of Florida if these bonds
are approved by the comptroller. When the reserve falls
below 20 per cent, the company must not increase its
liabilities except by discounting or buying sight bills of
exchange, and must not declare dividends (2710 and 2711).
V.— Discount

and

L oan R estrictions .

Banking companies may not make any loan or discount
on security of shares of their own stock unless it is neces­
sary to prevent loss upon a previous debt; if stock is so
acquired it must be gotten rid of within six months
(2713).
For restrictions on borrowing, see I, supra.
VI.— I nvestments .

Banking companies may only hold such real estate as
is necessary for immediate accommodation in the transac­
tion of business; such as is conveyed in satisfaction of
previous debts; and such as is purchased under judg­
ments or mortgages running to the purchaser or is pur­
chased to secure debts due the purchaser (2707).
124

F l o r i d a

S a v i n g s

B a n k s

No banking company may purchase its own shares
unless the purchase is necessary to prevent loss on a pre­
vious debt, in which case the stock must be sold within
six months (2713).
V III.— B ranches.
Any banking company may establish branches or
agencies in any city or town in Florida, the capital being
joint and used by the mother bank and the branches in
definite proportions. Six months’ public notice must be
given of the discontinuance of any branch (2709).
X . — U nauthorized B anking .
Banks not organized and doing business under the laws
of Florida or under the national banking laws, and “ all
persons or corporations doing the business of bankers,
brokers, or savings institutions,” are prohibited from
using the word bank or any other title which would imply
that they are incorporated banking institutions. Illegal
use of words implying that the bank is an incorporated
institution under the statute entails a penalty of $50 a
day (2728).
X I.— P enalties .
Insolvency, or violation of law, entails forfeiture of all
franchises and privileges (2724). Banks failing to report
are subject to a penalty of $100 a day during the delay
(92, sec. 7).
SAVINGS BANKS.
I-

Terms

of

I ncorporation.

I he general amount of capital required of all banking
companies is $50,000, but savings banks may be formed
with a capital of not less than $20,000. The capital of




125

National

Monetary

Commi ssi on

savings banks may be divided into shares of not less than
$10 each (2697).
I l l .— Supervision .
EXAMINATIONS.

Savings banks are examined at least twice a year (92,
sec. 6).
V.— Discount, L oan ,

and

D eposit R estrictions.

A committee or board of investment in each savings
bank, charged with the duty of investing its funds, is
apparently contemplated by the general statutes. No
member of this committee or officer whose duty it is to
invest the bank’s funds may borrow of the savings bank,
or become owner of real estate mortgaged to the bank
(2735)- No savings bank nor any person acting in its
behalf may take a consideration of any sort on account
of a loan made by the savings bank other than appears
on the face of the contract of loan (2736).
Savings banks may receive deposits from any one per­
son until they amount to $2,000, and may allow interest
on the deposits until the principal and accrued interest
amount to $3,000; this limitation, however, does not apply
to deposits by religious and charitable associations (2729).
VI.— Investments.

The capital and deposits of savings banks may be in­
vested only as follows: First, in first mortgages of Florida
real estate to an amount not to exceed 60 per cent of the
valuation of the real estate. Not more than 75 per cent
of the whole amount of deposits may be thus invested,
and no loan on mortgage may be made except on the
report of two members of the board of investment.
Second, in the public funds of the United States, or bonds




126

F l o r i d a

S a v i n g s

B a n k s

of any State, or securities of any American municipality
whose indebtedness does not exceed 5 per cent of the
valuation of its property, or in notes of any citizen of
hlorida with a pledge of the securities just mentioned at
no more than their par value. Third, in first-mortgage
bonds of any railroad incorporated under the laws of one
of the United States and located in that State, if the
railroad is in possession of its'own road and has paid
dividends for two years; or in the first-mortgage bonds
of a railroad, so incorporated and located, guaranteed by
another such railroad; or in the bonds or notes of a rail­
road incorporated under Florida law which is unencum­
bered and has paid 5 per cent dividends for two years;
or in the notes of any Florida citizen with a pledge of
these securities at no more than 80 per cent of their par
value. Fourth, in the stock of any Florida State bank,
or any national bank, or in the notes of a Florida citi­
zen with a pledge of these securities at no more than
80 per cent of their market value and not exceeding their
par value. Savings banks may deposit sums not exceeding 30 per cent of their deposits on call in Florida banks,
national banks, or Florida or United States trust com­
panies; and they may take interest on these deposits.
Fifth, in loans on personal notes of depositors secured by
the depositor’s book; not more than three-fourths of the
amount of the deposit may be thus loaned. Sixth, in
case the funds of the bank can not be conveniently in­
vested as above provided, then not more than one-third
of the funds may be invested in bonds or other personal
security payable in a time not less than a year, with two
sureties, if the principal and sureties are all citizens of
Florida. Seventh, 10 per cent of the deposits of a sav­
ings bank, but not more than $25,000, may be invested
in a building for its business (2733).




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Commission

X I.— Penalties .

The member of the investment committee of a savings
bank, or officer in charge of investments, who borrows
from the bank or becomes owner of real estate on which
the company holds a mortgage, forfeits his office (2735).
Whoever violates the provisions of the section forbidding
savings banks or persons negotiating for savings banks
to take a consideration for procuring a loan from the sav­
ings bank is liable to a penalty of from $100 to $1,000
(2736).

128

GEORGIA.
The last revision of the laws of Georgia is the Code of
1895. In the Code, beginning at section 1903, is an article,
Banks,” many sections of which deal with circulation
and have therefore been omitted. A supplement to the
Code was published in 1901, including all legislation through
the session of 1900; in this are found sections concerned
with banks, many of them dealing with circulation, and
also a chapter, beginning with section 6458, which is con­
cerned with trust companies. The numbers of the sections
in the supplement follow consecutively after those in the
third volume of the Code of 1895; moreover, the supple­
ment has a complete index, to the Code as well as to itself,
which has been used in preparing the digest. In the later
session laws are found a few amendments, culminating in
act No. 84 of 1907, which creates a bank bureau, besides
legislating on many topics with regard to banks; since
this act merely repeals all laws and parts of laws in con­
flict with its own provisions, it is a matter of some doubt
what sections of the Code it supersedes— in clear cases code
sections have been omitted. Savings banks are not sepa­
rately legislated for. Trust companies receiving deposits
are, under 1907, No. 84, 8, subject to all laws regulating
banks. The session laws have been examined through
those of 1908, and the compiler has been assured by Mr.
S. D oc.




3S3.

61-2----- 9

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Monetary

Commission

J. P. Brown, state bank examiner, that at the 1909 ses­
sion no laws were passed affecting the matters covered by
the digest. In the parentheses in the digest the Roman
numeral indicates the volume of the Code, I\ being the
supplement; the Arabic figures following are sections in
the volume given. References to the session laws are by
year, number, and section.
BANKS.
I.— T erms

of

I ncorporation.

The minimum capital for banks is $25,000, of which not
less than 20 per cent, and in no case less than $15,000,
must be paid in in cash before organization (II, 1910).
Dividends may be declared only from net profits (II,
1968); and any shrinkages in capital due to losses are
charged to profit and loss, so that notes and bills dis­
counted shown as debts due the bank are live and col­
lectible assets (II, 1917).
II.— L iabilities

and

D uties of Stockholders
D irectors.

and

Stockholders are individually liable to the amount un­
paid on their shares for all the corporation’s debts, and all
stockholders, above the face value of the shares they hold,
are individually liable to depositors in the bank for all
moneys deposited in an amount equal to the face value
of the shares (II, 1911).
There must be not fewer than three nor more than fif­
teen directors, each the holder of one or more shares of
stock (1903, No. 446). There must be at least one meeting
every three months, and at one meeting every six months
the directors must have a thorough examination made;
130

G e o r S * a

S t a t e

B a n k s

they then require that all back debts be collected or well
secured and that no debt be held twelve months without
interest being paid, or, unless well secured, put in suit or
charged off (1907, No. 84, 25).
I l l .— S upervision .

There is in the department of the treasury a bank bu­
reau charged with supervision of banks and enforcement
of banking laws (1907, No. 84, 1). The treasurer of the
state is also state bank examiner; he holds office for the
same term as his treasurer’s term, and receives a salary of
$2,500 for being examiner (1907, No. 84, 2). Neither the
state bank examiner nor his assistants may be officers or
stockholders of banking corporations or firms or be en­
gaged individually in banking business in the United States
(1907, No. 84, 7).
Whenever it appears that the capital of a bank or trust
company doing business under the banking act has been
impaired over 10 per cent, the examiner notifies the cor­
poration to make the impairment good within ninety days
(1907, No. 84, 15). If any bank or trust company refuses
to comply with requirements of the examiner for thirty
days after his demand, it may be proceeded against by the
examiner for revocation of its authority to do business
(1907, No. 84, 12). The proceedings for forfeiture are be­
gun by the attorney-general at the request of the gov­
ernor, and if the court decrees the bank’s charter to be for­
feited, then a receiver may be appointed (1907, No. 84, 13).
Any bank doing business under the statute of 1907 may
place its affairs voluntarily under the control of the exam­
iner (1907, No. 84, 14). Whenever any officer of a bank
re uses to submit to examination, or obstructs examina­
tion, a receiver may be appointed (1907, No. 84, 16). If
from examination or report it appears that a bank is




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insolvent, it is the duty of the examiner to report the insol­
vency to the governor, and when ordered by the governor,
to take possession of the bank. He then makes a thorough
examination, and if satisfied that the bank can not resume
business or liquidate its debts, he reports again to the gov­
ernor, who then institutes, through the attorney-general,
proceedings for a receiver. When directed by the governor
the state examiner may appoint a special assistant to take
charge of the bank until a receiver is appointed, but in
no case may this official retain possession of the bank’s
affairs for longer than sixty days (1907, No. 84, 27).
R eports .

Every bank and trust company must make at least four
reports a year, and more if called upon by the examiner.
The reports must, in the form prescribed by him, show re­
sources and liabilities at the close of business on a past day
specified by the examiner; must be sent to him within ten
days after receipt of his request; and must be published,
as he prescribes, in a local newspaper (1907, No. 84, 10).
Receivers report and make publication as the banks them­
selves would (1907, No. 84, 17), besides making annual re­
turns of receipts and disbursements to court (1907, No. 84,
13). Once a year a list of names and residences of share­
holders in every bank, with the number of shares held by
each, is transmitted to the examiner (1907, No. 84, 28).
The examiner may call for records of meetings of directors
(1907, No. 84, 25).
The state treasurer, in his capacity of state bank exam­
iner, makes an annual report to the governor (1907, No.
84,18), which includes a summary of the condition of banks
and trust companies doing a deposit business from which
he has had reports, with any other information in relation
to these corporations which he thinks may be useful; a
statement of banks and trust companies whose business
132

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B a n k s

has been closed during the year; suggestions for amend­
ments to banking laws; and details of department admin­
istration (1907, No. 84, 20). If the governor thinks these
reports of sufficient importance he may require them pub­
lished in newspapers of the State (1907, No. 84, 19). Occa­
sions when the examiner is required to report to the gov­
ernor the insolvency of individual institutions against
whom receivership proceedings are to be brought were
stated above (see also 1907, No. 84, 22).
EXAMINATIONS.

The state bank examiner, or his subordinate, visits
every bank and trust company twice each year and oftener, if necessary, in order to make a careful examination
into its condition (1907, No. 84, 23). It is a provision of
the Code, apparently not repealed by the act of 1907, that
the examinations must not be at stated times, and must be
without warning (II, 1922). He must examine also banks
in the hands of receivers once every six months and file
the results with the court (1907, No. 84, 17); but the
compiler is advised by the state bank examiner that this
provision is not enforced, on the theory that the bank in
the receiver’s hands is actually in the custody of the
court appointing him. At a meeting of directors at least
once every six months a thorough examination is made
by the directors or by an auditor, after which the direc­
tors act as stated under II, supra (1907, No. 84, 25).
The special examinations made to determine the solvency
of banks against which receivership proceedings are about
to be brought were explained above.
IV.

R eser ve

R e q u ir e m e n t s .

No bank or corporation doing a banking business”
may re uce its cash on hand, including amount due by
ban s and bankers, and the market value of all stocks




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Commission

and bonds actually owned and held below 25 per cent
of demand deposits” (II, 1915). This is as near as the
statutes come to a reserve requirement.
V.— D iscount

and

L oan R estrictions.

Among the powers given banks is that “ to lend money
upon personal security or upon pledges of bonds, stocks,
or negotiable securities” (II, 1907).
“ No bank or corporation doing a banking business”
may loan to any one person without ample security more
than 10 per cent of its capital and surplus; in this section
surplus is to be construed net profits (IV, 6158).
“ No bank or corporation doing a banking business”
may loan to any officer without good collateral or other
ample security, and if such a loan exceeds 10 per cent of
the capital it must be approved by a majority of the direc­
tors (1905, No. 89). The Criminal Code makes it a mis­
demeanor for an officer or agent of a bank to borrow money
from the bank without permission of a majority of direct­
ors (III, 212), or for an officer or agent of a bank to lend
money to another officer or agent without permission of a
majority of directors (III, 213). In so far as No. 89 of
1905 is in conflict with the two sections of the Criminal
Code last cited, it must, as being later legislation, be
taken to repeal them.
V I. — INVESTMENTS.

Every bank may hold “ such real and personal property
as may be necessary for its uses and business” (II, 1907).
Capital stock must not be applied by any bank to the
purchase of its own shares (II, 1968).
V III.— B ranches.
Bank is defined to include in certain cases “ the parent
bank, its branches, if any,” etc. (II, 1967). As further
evidence that branches are allowed in Georgia, note that
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B a n k s

the bank bureau is created to examine the condition,
among other institutions, of all “ branch banks” (1907,
No. 84, 1).
XI.— P enalties .

Every bank or trust company failing to make and pub­
lish the regular quarterly or special reports is subject to
a penalty of $50 a day (1907, No. 84, 11). Receivers of
insolvent banks failing to report or allow examination are
subject to the penalties provided for officers or employees
of banks (1907, No. 84, 17).
If the state bank examiner or his assistant neglects his
duty, makes a false statement, or is guilty of misconduct
in office, he loses his office and is guilty of a misdemeanor
(1907, No. 84, 32).
It is a misdemeanor for an officer or employee of a bank
to certify a check for which no sufficient funds are on
deposit (1907, No. 84, 25). It is a misdemeanor for an offi­
cer or agent of a bank to borrow money of the bank with­
out permission of a majority of the directors (III, 212), or
to lend the money of the bank to another agent or officer
without permission of a majority of the directors (III,
213); but see V, supra, for the later statute authorizing,
under certain restrictions, loans of this sort to be made.
The Penal Code also makes the following offenses pun­
ishable by imprisonment of from one to ten years:
Violation by a bank director or officer of the provisions of
the bank’s charter (III, 204); fraudulent insolvency in
which the president and directors of the bank are impli­
cated (III, 206); receipt of deposits by officers who know
their bank to be insolvent (III, 207); and purchase with
capital stock of the bank’s own shares (III, 211). The
following offenses are punishable by imprisonment of from
four to ten years: Conveyances, etc., in defraud of credit­
ors by directors or officers of a bank (III, 208); purchase




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by a director, officer, or agent of paper issued by the bank
for a less sum than appears due on its face (III, 209); and
declaration, in which president or directors are implicated,
of a dividend out of any funds except net profits (III, 210).
SAVINGS BANKS.
There is no distinct legislation for savings banks. They
are referred to in the trust company provisions, where it
is provided that “ any savings bank” having a paid-in
capital of not less than $100,000, previously incorporated
by the legislature, with authority to exercise trust powers,
may take advantage of the trust company provisions (IV,
6466); this would imply that savings banks are institu­
tions with capital stock. The only other mention made
of them seems to be in section 2391 of volume II of the
Code, where it provides that “ all the provisions of this
article are to apply to all savings institutions which pay
interest to depositors and whose deposits are not subject
to check.” The article referred to is article 8 of chapter
2 of title second; the article is entitled “ Corporations
created by superior court.” Section 2350 of the article,
however, declares that the superior courts of Georgia
have power to create corporations, except for various
purposes, among which is banking.
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

Trust companies may not receive deposits subject to
check on demand, nor may they discount commercial
paper, until they have complied with the laws regulating
the incorporation of banks; but once those laws have been
complied with, trust companies may acquire all rights
and privileges and “ be subject to the same liabilities and
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Georgia

Trust

Companies

restrictions as apply to banks” (IV, 6462). It is simi­
larly provided in the statute of 1907 that a trust company
receiving deposits under its charter is subject to the
requirements of the state examiner, must make reports,
and must conform “ to all the laws enacted regulating
chartered banks in this State” (1907, No. 84, 8). All
the statutes explained under Banks must, therefore, hold
good for trust companies that do a banking business.
The capital of a trust company must never exceed
$2,000,000 and must be divided into shares of $100 each
(IV, 6465). At least $100,000 of capital must have been
paid in before business is begun (IV, 6462).
II.— L iabilities

and

D uties of Stockholders
Directors.

and

Trust companies doing a banking business are, it ap­
pears, subject to the rule for double liability of stock­
holders.
See also provisions under Banks for directors. It is
provided in the trust company provisions that every trust
company must have a board of trustees of not less than
five nor more than fifteen (IV, 6463).
I l l .— Supervision .

Trust companies that do a banking business are sub­
ject to the same rules for supervision by the examiner, for
reports to him, and examinations by him or by his sub­
ordinate (1907, No. 84, 8). Several of the sections deal­
ing with supervision include trust companies in terms
(1907, Nos. 84, 10, 23, etc.).
IV.— R eserve R equirements.
See the provision given under this head under Banks,
t e anguage of which is ‘‘ bank or corporation doing a
banking business” (II, i 9 i 5).




137

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V.— Discount

and

Commission

L oan R estrictions.

Among trust company powers is that “ to loan money on
real estate or personal securities” (IV, 6461). The pro­
hibition on loans to any one person, unless amply secured,
amounting to more than 10 per cent of capital and sur­
plus (see V, Banks), seems applicable to trust companies
on the strength of its own language, “ bank or corpora­
tion doing a banking business” (IV, 6158). The language
of the prohibition upon loaning to an officer without good
security, and of the requirement that if the loan exceeds
10 per cent of capital it must be approved by a majority
of directors, is the same— “ bank or corporation doing a
banking business” (1905, No. 89). (See also Banks.)
VI.— I nvestments.

Trust companies may hold all real estate necessary in
the transaction of their business or acquired in satisfac­
tion of debts due the corporation under sales, judgments
or mortgages or in settlement of debts due the corpora­
tion. Trust companies may buy and sell “ stocks, bills
of exchange, bonds and mortgages, and other securities”
(IV, 6461). (See also Banks.)
X I.— P enalties .
See X I, Banks, for penalties upon trust companies doing
a banking business. The penalty for failure to report is
framed to include trust companies (1907, No. 84, 11).
Among the penal provisions, that for receiving deposits
while insolvent applies to any bank or “ any company or
individual doing a banking business in this State” (IV,
207); and the provisions against an officer’s or an
employee’s borrowing or loaning to another officer or
employee apply to “ any bank or other corporation” (IV,
212 and 213). But see Banks, V, for the limitation on
this prohibition enacted by act No. 89 of 1905.
138

—




IDAHO.
The bulk of the statute law of Idaho on banking is in
chapter 13, “ Banking corporations,’’ of title 4, “ Corpo­
rations,” of the Civil Code of 1908. Chapter 12 of the
same title, “ Guaranty title and trust companies,” con­
tains a few provisions concerned with trust companies,
and chapter 13 contains some provisions specifically con­
fined to savings banks; but for the most part chapter 13 is
applicable to banks, savings banks, and trust companies.
The first section of the chapter (2968) provides for regard­
ing as a bank any person, firm, or corporation, except
national banks, having a place of business in Idaho where
credits are opened by the deposit or collection of money
or currency, subject to be paid upon order, or where
money is loaned on stocks, bonds, bullion, or commercial
paper, or where stocks, bonds, bullion, or commercial
paper are received for discount or sale. Since the pro­
visions of the chapter apply to all who fall within this
classification, all the provisions of the statute presented
below under the heading “ Banks” must be taken to be
equally applicable to savings banks and trust companies.
Under the headings “ Savings banks” and “ Trust com­
panies,” accordingly, are given only such few provisions as
apply to them exclusively. The digest includes all statutes
through the session of 1909.




139

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BANKS.
I.— T erms

of

I ncorporation.

Banking corporations may have departments for both
regular banking and savings banking (2991). When a
corporation does both regular and savings banking, how­
ever, it must account in separate books for each kind of
business, and its transactions of a savings character will
be governed by the law applicable to savings banks, its
business of an ordinary banking nature by the provisions
in the statute applicable to that sort of bank (2995).
Corporations, firms, and individuals doing a banking
business must have property of a cash value as follows:
In communities of less than 2,000, $10,000; 2,000 to 3,000,
$20,000; 3,000 to 5,000, $25,000; 5,000 to 10,000, $30,000;
10,000 to 25,000, $50,000; over 25,000, $100,000. This
property may be in money, commercial paper, and neces­
sary realty and personalty, which must be unencumbered
(2970). Foreign banks to do business in Idaho must
maintain at their office capital satisfying the above
requirements; they are subject, moreover, to the other
provisions of the chapter (2982 and 2983).
At least 50 per cent of the capital of every bank must
be paid in before it begins business and the remainder
must be paid in monthly installments of 10 per cent of the
whole capital until the amount of property paid in sat­
isfies the requirements given above (2973).
Dividends may be declared out of net profits after pro­
viding for expenses, but before a dividend is declared not
less than one-tenth of the net profits for the preceding
dividend period must be carried to surplus until the sur­
plus amounts to 20 per cent of the paid capital (2981).




140

I d a h o
II.— L iabilities

S t a t e
and

B a n k s

D uties of Stockholders
D irectors.

and

The stockholders of banks in addition to the amount
invested in their stock are liable to the creditors to an
amount equal to the par value of their stock (2979).
Directors, of whom there must be not less than five,
must own $500 par value of stock (2970 and 2980).
Directors who permit officers or employees to borrow in
an excessive or dishonest manner or in a manner that
entails risk of loss are liable individually for the damage
suffered in consequence by the corporation or any person
(2989).
III.— S upervision .
The bank commissioner is the state official overseeing
banking. His term is four years; he must have had at
least five years’ practical experience in banking business
or have served for five years in the banking department of
some State. He must have no interest in any bank in
Idaho (189). His salary is $2,400 a year (192). Neither
he nor his assistants may disclose information obtained
in the business of the department except in the course of
their duty (3008).
Whenever it appears from a report or an examination
that a bank’s capital is impaired the commissioner re­
quires the bank to make good the deficiency. If this is
not done, or if the bank, when given notice of a violation of
law, does not discontinue the violation, or if the commis­
sioner has cause to consider the bank insolvent, he applies
to the court for a receiver (3004 and 3005).
REPORTS.

Banks report at least twice a year to the bank com­
missioner in the form prescribed by him, exhibiting in
detail the resources and liabilities of the bank on some




141

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Commission

past day specified by the commissioner. The report
must be transmitted to the commissioner within ten days
of the receipt of his request for it. An abstract of this
report must be published within thirty days in a local
newspaper. The commissioner may call for special reports
when he thinks them necessary, but not more than three
each year (2999).
Every other year every institution in which deposits
are made makes a statement to the bank commissioner
showing deposits that have been dormant for ten years,
the amount of each deposit of this sort, the residence of
the depositor, and the date of his death, if that is known.
Notices of these deposits must be published in local news­
papers. If the depositor is known by the president of
the bank to be living, or if the deposit is of less than $50,
no report of it need be made to the commissioner. The
material in these reports of unclaimed deposits must
appear in the bank commissioner’s report (2997).
Banks and trust companies may become depositaries
of county or state funds. When serving in that capacity
they are required to make monthly reports to the state
and county financial officials (127-136; and 2013-2022).
The bank commissioner files the reports, furnishes
blank forms for them, and reports annually to the gov­
ernor, with a copy of the published abstract of the last
report of each bank, with a statement of all proceedings
of his, with a general outline of the condition of banking
business in the State, and with such other matters as he
thinks the public are interested in (3000).
EXAMINATIONS.

The bank commissioner examines the condition of each
bank before giving it a certificate to do business (2975).
When he deems it necessary, and at least annually, the
bank commissioner visits all banks without notice. He




142

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S t a t e

B a n k s

examines the affairs of each bank and makes a complete
report of it (3001).
IV.— R eserve R equirements.
Reserves must be not less than fifteen per cent of
demand liabilities, but of this fifteen per cent one-half
may consist of balances due “ from good solvent banks”
(2998).
V.— Discount

and

L oan R estrictions.

The liabilities to a bank of one person, firm, or corpo­
ration, including in the liability of a corporation or
firm the liabilities of its members, must never exceed
25 per cent of the capital, surplus, and undivided profits
of the bank, but discount of commercial paper is not
considered as lending money for this purpose, nor is a
loan counted, where securities representing actual value,
real estate, warehouse receipts, bills of lading, etc., have
been hypothecated (2987).
Firms and individuals may not carry as an asset the
obligation of the firm or individual or a member of the
firm. No employee of a banking corporation may loan
to himself any of the bank funds without the approval
of a majority of the directors (2989).
See VI, below, for the restriction upon a bank’s taking
its own stock as collateral (2976).
VI.— I nvestments.
Banks may purchase real estate only for the following
purposes: First, necessary business use, but real estate
held for this purpose must not exceed 50 per cent of capi­
tal, surplus, and undivided profits; second, real estate re­
ceived in satisfaction of previously contracted debts;
third, real estate purchased by the bank at sale under
judgments or mortgage foreclosures where the bank was
holder of the lien as security (2978).




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Commission

No bank may accept as collateral or purchase its own
capital stock, except when the transaction is necessary to
prevent loss on a previous debt; and in that case the stock
must be sold within twelve months (2976).
X I. — P enalties .
The following are misdemeanors: Failure by the presi­
dent of a banking institution to report unclaimed deposits
(2997); wilful overdraft by an employee of a savings bank
(7118); receipt of deposits with knowledge of the insolvency
of the depositary (7119).
The following are felonies by the bank commissioner:
Malicious institution of proceedings, or institution without
reasonable cause; for this the commissioner answers to
the bank for damages and is also punishable by fine not
over $1,000, imprisonment not over two years, or both
(3°°5): disclosure of official information by the commis­
sioner or an assistant; for this the penalty is forfeiture of
office and a fine of not over $1,000 with imprisonment
until it is paid (3008).
Wilful certification of a check for which no funds are
on deposit entails a fine of $1,000 (2988).
Foreign corporations and their employees who violate
the statute forfeit $1,000 in addition to the regular pen­
alties (2984).
Penalty for fraudulent receipt by the owner or officer
of a bank of deposit with knowledge that the bank is
insolvent is $1,000 fine, imprisonment not exceeding two
years, or both (2985).
SAVINGS BANKS.
VI.— Investments.
Savings banks or other institutions with savings depart­
ments may invest their capital and the money deposited
only as follows: First, in securities of the United States;
1 44

Idaho

—

Trust

Companies

second, in securities of Idaho;* third, in securities of
municipalities of Idaho, but not more than 50 per cent of
the assets of any savings bank may be securities of any
one municipality; fourth, in securities of any State or any
city of any State that has not for three years before the
investment defaulted on any interest payment, but not
more than 50 per cent of the assets of any savings bank
may be invested in securities of any one State, or of any
municipality outside Idaho; fifth, in mortgages on unin­
cumbered real estate worth double the loan; sixth, in real
estate, subject to the other provisions of the statute on
that topic, but no savings bank may have more than 50
per cent of its capital invested in the lot and building in
which it does business; seventh, in dealing in exchange by
purchasing and selling sight and time drafts and notes;
eighth, awaiting opportunity to invest, the deposits may
be loaned on well-secured commercial paper, stocks, and
other securities, but the loan must not exceed 80 per cent
of the market value of the security (2992).
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

Guaranty, title, and trust companies must have a paidup capital of not less than $25,000 (2963).
VI.— I nvestments.

Guaranty, title, and trust companies may hold in trust
and as security estate, real and personal, including the
obligations of corporations. They may invest their funds
in the purchase of real and personal securities and may
oan money on real and personal security; they may pur­
chase and sell real estate (2961).

S P c. 3 3 61-2--. o 5i




*45




ILLINOIS.
In the Revised Statutes of Illinois, 1906, by Hurd, chap­
ter 16a is entitled “ Banks,” although the act which is
made into that chapter was entitled “ An act concerning
corporations with banking powers.” Chapter 160 was
amended by an act found at page 52 of the laws of Illi­
nois for 1907. The digest treats the amendments as
though actually incorporated in the chapter, and refers to
sections in the chapter simply by their number, since
most of the references are within it. In chapter 32,
sections 129-147 deal with trust companies; the act
embodied in those sections was one “ to provide for and
regulate the administration of trusts by trust companies.”
References to these sections and to other sections in the
Revised Statutes not in the chapter on banks are by page
in the Revised Statutes followed by the number of the
section as numbered on that page. The sections dealing
with trust companies have not been amended since the
Revised Laws were published. There is no special legis­
lation for savings banks; the chapter on banks provides
that “ all corporations with banking powers” are subject
to its provisions, and banks organized under it are allowed
to receive savings deposits and to do a trust business.
Trust companies, unless organized as banks, may not do
a banking business.
146

I l l i n o i s

S t a t e

B a n k s

The constitution of the State, Article X I, section 5,
provides that all acts authorizing or creating corporations
or associations with banking powers, and amendments to
such acts, must be approved by a majority of the votes
at the popular election following their passage in the
legislature. The statutes have been examined through
those of 1909.
BANKS.
I.— T erms

of

I ncorporation.

The minimum capital for banks is as follows: In cities
or towns of not more than 5,000, $25,000; in those of from
5,000 to 10,000, $50,000; in those of from 10,000 to 50,000,
$100,000; in those of 50,000 or more, $200,000 (11). The
auditor does not grant his certificate of organization unless
the capital stock has all been fully paid in (5). The
language of sec. 25d on page 671 shows that commercial
banks may receive savings deposits; it provides that no
“ savings bank, individual, or individuals doing banking
business, banking company, or incorporated bank receiving
savings deposits ” may become guarantor. Banks may,
upon qualifying under the trust act and making the
required deposit, accept and execute trusts (1).
L iabilities

and

D uties of Stockholders
Directors.

and

Stockholders are individually responsible to creditors to
an amount equal to the shares held, over and above the
stock itself, for all liabilities accruing while they remain
stockholders (6, and constitution, Art. X I, sec. 6).
Directors must own at least ten shares of stock. They
must hold regular meetings at least as often as monthly
(4)- B directors participate in illegal loans they become




14 7




National

Monetary

Commission

personally liable for damages which anyone may suffer
by their violation of the statute (io).
III. — Supervision .
There is no special banking supervisor; supervision is
in the hands of the auditor of public accounts. He super­
intends authorization to begin business and may withhold
a certificate if he is not satisfied of the personal character
of the incorporators, or if he has reason to believe the bank
is organized for other than a legal purpose (5). When
capital stock becomes impaired, the auditor notifies the
bank to make good the impairment. If, after thirty
days, this has not been done, he must sue stockholders of
the bank for their proportion of the sum necessary to
make the impairment good. If it appears from reports
or examinations that the impairment can not be made
good, or that the bank is conducting business in an unsafe
manner, the auditor may at once, through the attorneygeneral, bring proceedings for a dissolution and the
appointment of a receiver (11). The auditor exercises
supervision over consolidations and voluntary dissolu­
tions (13 and 15). Examiners may not be financially
interested in banks they examine (8).
REPORTS.

At least once every three months (see constitution,
Art. X I, sec. 7) the auditor calls for a report, which must
be transmitted within five days. It must show the re­
sources and liabilities of the bank before beginning busi­
ness on the morning of any day the auditor may choose.
The report is published in a local newspaper (7). Direct­
ors must furnish the auditor with lists of stockholders
and copies of any other records he may require (4). Lists
of stockholders and transfers must be filed with the local
recorder of deeds (6, and constitution, Art. X I, sec. 8).
148

S t a t e

I l l i n o i s

B a n k s

Receivers of banks are required to make report gener­
ally three times a year to the appointing court (p. 1614,
1 and 2). These reports they must send also to the
auditor (u ).
(Tor reports required for purposes of taxation see page
i 648, 35 et seq.)
EXAMINATIONS.

A thorough examination is made by the auditor or a
subordinate before a bank begins business to ascertain
that its capital is paid up, etc. (5). Regular examinations
are made at least once a year, and oftener if the auditor
thinks necessary, by a suitable person appointed by him.
This examiner must not be interested in any bank which
he is directed to examine (8).
V.— Discount

and

Doan R estrictions.

The total liabilities to any bank of a person, corporation,
or firm for money borrowed, including in corporation or
firm liabilities those of the members, must not exceed 15
per cent of capital and 15 per cent of surplus. The total
liabilities of any such person, corporation, or firm must
not exceed 30 per cent of the paid-in capital. Undivided
profits are not to be construed as part of the surplus.
Discount of commercial paper is generally not considered
as money borrowed. No bank may loan to any of its
officers or employees, or to corporations or firms in which
they are actively interested, until the loan has been ap­
proved by the directors (10).
VI.— I nvestments.
Ranks may hold and carry as assets the necessary real
estate in which they do their banking business, and such
othei real estate as is acquired in the collection of debts,




149




N at ion a l

M o n et a r y

Commission

but, except that used as a banking house, real estate must
not be carried as assets for a longer period than five
years (9).
XI.— P enalties .

Directors and employees who make false statements in
order to deceive examiners are punished by imprisonment
of from one to ten years (4). Receipt of deposits with
knowledge of a bank’s insolvency is embezzlement, pun­
ishable by fine of double the amount of the sum embezzled,
and in addition imprisonment of from one to three years
(p. 670, 25a). There is a $100 a day penalty for delay in
reporting (7).
SAVINGS. BANKS.
The only special provisions for savings banks are in the
Criminal Code (p. 671); 25c, on that page, provides that
no loans may be made by savings banks to their officers,
on penalty of forfeiture of charter or fine of twice the
amount of the loan, and that the officers receiving the
loan be punished as for receipt of money under false pre­
tenses; 25d forbids any savings bank to become guarantor
on evidences of indebtedness. (Under an opinion of the
attorney-general of the State, dated January 5, 1906, 25c is
inapplicable to banks created under the general banking
chapter; since there are no “ savings banks” beyond
these, the section becomes practically inoperative.)
TRUST COMPANIES.
I l l .— S upervision .

Trust companies are required to deposit with the
auditor, for the benefit of their creditors, securities to
amounts varying according to the size of the city (p.
539. 6). When it appears to the auditor from examina­
tion or report that a trust company has violated the law
150

Illinois

Trust

Companies

or is conducting its business unsafely, he must direct the
discontinuance of the practices; if the corporation neg­
lects to report or to comply with such an order, or if it
appears to the auditor that the corporation should be
stopped, or that its depositors’ interests are in danger, or
that an officer has been guilty of misconduct, or that a
serious loss has occurred, he institutes, through the
attorney-general, whatever proceedings the case re­
quires (p. 541, 13). If the auditor has evidence that a
report is false, he revokes the certificate of authority of
the corporation (p. 541, 14).
REPORTS.

Trust companies file with the auditor every January a
statement of their condition on December 31 preceding,
showing the following items: Assets, including items of
real estate; cash on hand and on deposit; cash in the
hands of agents; loans on mortgages and bonds consti­
tuting a first lien on real estate on which there is less than
a year’s interest owing, and such loans on which there is
more than a year’s interest owing; amount due on judg­
ments; stocks and bonds of Illinois, of the United States,
of Illinois municipalities, and other stocks and bonds with
values; loans on pledge of securities, particularized; and
other assets. Liabilities, including capital, surplus, undi­
vided profits and deposits; an account of trusts held;
and such other information as the auditor requires (p.
54°> 9) • 1 he auditor causes an abstract of this annual
leport to be published in a Springfield newspaper and in
a local newspaper (p. 541, 16). The auditor may address
any inquiries or ask for any reports; the companies must
act promptly on such requests (p. 540, 11). Every two
years the auditor embodies in his report to the legislature
the result of examinations of trust companies (p. 540, 12).




151




IV a t i o n a l

M o ft c t a r y

Commission

EXAMINATIONS.

The auditor, personally or by an examiner, investigates
the affairs of every trust company annually or, if he
thinks necessary, oftener. Inquiry is made as to the
condition of resources of the corporation; how it conducts
its business; its investments; its safety and prudence;
security given; its obligations; and its compliance with
law (p. 540, 12).
V.— D iscount, L oan ,

and

D eposit R estrictions.

The amount of money which any trust company may
have on deposit at one time must not exceed ten times its
capital and surplus, nor may its outstanding loans at any
time exceed that amount (p. 539, 3).
X I.— P enalties .
Any violation of the act dealing with trust companies
subjects the offender to a penalty of $500 for each offense,
and the additional sum of $100 a day is forfeited for failure
to file a report (p. 541, 15).

I

INDIANA.
All the Indiana statutes, except acts passed at a special
session in 1908 and at the regular session of 1909, during
which two sessions there was no legislation affecting
banks, are in Burns’ Annotated Indiana Statutes, revision
of 1908. Chapter 15, “ Banks,” is divided into four arti­
cles: Article I, “ Banks of discount and deposit;” Article
II, “ Savings banks;” Article III, “ Private banks,” and
Article IV, “ Bank examiners.” Chapter 37 is entitled
“ Corporations— Boan and deposit companies; ” the pro­
visions of this chapter, however, deal in terms with
“ loan and trust and safe deposit companies.” The article
on private bankers is summarized briefly in a paragraph
at the end of “ Banks.” All the references in the digest
are to sections in the revision of 1908.
BANKS.
I-— T erms

of

Incorporation.

Banks are given power to act as trustee (3332), but the
statutes seem silent on the question whether banks of
discount and deposit may receive savings deposits. There
is no requirement that commercial banks receiving interestbearing deposits should handle them subject to savingsbank rules, as trust companies which receive savings
deposits are required to do.
Banks must have a capital of not less than $25,000,
divided into shares of $100 each (3329). Banks must







N at ion a l

M onetary

Commission

not do business until 50 per cent of the capital has been
actually paid in; the rest must be paid within six months
(3332 and 3335).
Ten per cent of the annual net profits of every bank
must be set apart by the directors as a surplus fund until
it amounts to 25 per cent of the capital. Dividends may
be declared semiannually out of net profits, but no capital
may be withdrawn (3337).
II. — L iabilities

and

D uties of Stockholders
D irectors.

and

Shareholders in a bank are individually responsible to
an amount above their stock, equal to its par value, for
all liabilities of the bank (3337, and constitution, Art. XI,
sec. 6).
Directors must each own at least five shares of stock
(3334). There must be not less than three nor more than
nine directors (3343). They must meet at least once a
month (3333).
III. — S upervision.
There is no official in charge merely of banking. The
state auditor performs that duty, assisted by four exam­
iners whose appointment is provided for in the statutes
(3418 et seq.). No examiner may disclose, outside of his
duty, the names of depositors, amounts on deposit,
or other information concerning private accounts of
depositors in banks, savings banks, or trust companies
(3422); nor may any examiner be a director or other
officer in an association he examines (3346).
When the auditor has reason to believe that the capital
stock of any bank is impaired, he requires the deficiency
to be made good. If the bank does not make the impair­
ment good within sixty days by assessment or sale of
stock, the auditor reports to the attorney-general, who
154

I n d i a n a

—

S t a t e

B a n k s

institutes proceedings to wind up the bank (3341). If
it appears from an examination that a bank is insolvent,
or that its assets are being improperly used, the auditor
directs the examiner who has reported the insolvency, or
some other appointee, to take charge of the affairs of the
bank; and he proceeds in court for a receiver. If a bank
fails or suspends between periods of examination, the
auditor proceeds similarly. Failure to pay an assessment
for an examination is cause for the appointment of a
receiver (3346 and 3419).
REPORTS.

A statement of each bank’s financial condition is annu­
ally published for two weeks in a local newspaper (3344).
Not less than five regular reports are made every year, ac­
cording to the form prescribed by the auditor, exhibiting the
resources and liabilities of the bank at the close of business
on a past day specified by the auditor. The report must
be sent to him within five days after receipt of his request.
The report is published in a local newspaper. Special
reports may be called for whenever the auditor desires
(3347)- Banks in the hands of a receiver report as sol­
vent banks do (3346 and 3419). For statements required
for purposes of taxation see 10210.
EXAMINATIONS.

One of the examiners appointed by the auditor examines
each bank as often as is deemed necessary. The exam­
iners report to the auditor, especially in case the bank
is in such condition that he should proceed against it, as
stated above (3346 and 3419). Banks in the hands of
receivers are subject to the same examinations (3346 and
3419)- The auditor examines the affairs of a bank before
it is allowed to reduce its capital stock (3336).




155




N at ion a l

M onetary

V.— D iscount

and

Commission

L oan R estrictions.

It is a felony for a director or employee of a bank to
borrow the bank’s funds without the consent of the
directors (2296).
V I. — Investments.

Banks may hold such real estate as is necessary for
their accommodation in business; such as is mortgaged
to them; such as is conveyed to them in satisfaction of
previous debts; and such as they purchase under judg­
ments or mortgages to secure debts due them. Except
the real estate necessary for their accommodation, banks
must get rid of what they purchase within five years
(3340)V II. — Overdrafts.
Directors, employees, etc., of banks who knowingly
overdraw their accounts without the written consent of
the directors being indorsed on the check are guilty of a
felony (2295).
V III. — B ranches.
The legislature has power to charter “ a
branches” (constitution, Art. XI, sec. 4), but
banking chapter, the articles of association of
of discount and deposit must state “ the place
to be located,” etc., indicating that a single
contemplated (3329).

bank with
under the
each bank
where it is
office was

X I.— P enalties .
Receipt of deposits or other things of value during
insolvency is embezzlement, punishable by a fine of double
the value of the receipt, imprisonment of from two to
fourteen years, disfranchisement, and forfeiture of the
right to hold any office of trust or profit for any determi156

I n d i a n a

P r i v a t e

B a n k s

nate period (2294). Overdrafts by an officer without the
consent of the directors is a felony, punishable by impris­
onment for from two to fourteen years, and fine of double
the amount of the overdraft (2295). The director or
officer who borrows funds of the bank without the con­
sent of the board of directors is guilty of a felony, punish­
able by imprisonment of from two to fourteen years, and
fine of double the amount of the loan (2296).
A bank that fails to transmit a regular or special report
to the auditor suffers a penalty of $100 a day (3347).
The penalty for failure by the president and cashier of a
bank to publish annually for two weeks in a local news­
paper a statement of the bank’s condition is a fine of
from $25 to $1,000 (3345).
The examiner who discloses information had upon ex­
amination is guilty of a misdemeanor, punishable by fine
of not more than $100.
PRIVATE BANKS.
Capital.— Partnerships and individuals transacting a
banking business, or advertising as bankers, must have
at least $10,000 of cash capital, invested in well-secured
notes, in state or municipal bonds, or in bank building
and furniture (3403). An individual or a partnership must
issue certificates of stock to the individual, or the mem­
bers of the firm, as though the organization were a cor­
poration (3405). Individual bankers must be residents
of the State (3404). Supervision.— Partnerships and indi­
viduals must make to the auditor two reports a year, ac­
cording to the forms he prescribes, showing in detail re­
sources and liabilities at the close of business on a past
ay specified by the auditor. They must transmit the
report within five days after receipt of his request,
eports are published in a local newspaper in a form




157




s

National

Monetary

Commi ss i on

similar to reports of incorporated banks. The auditor
may call for special reports (3408). Once in twelve
months, or oftener if necessary, examiners make an ex­
amination of each private bank. If it is found to be
insolvent, or if its assets are being reduced, the examiner
notifies the auditor, who may thereupon direct the ex­
aminer or some other appointee to take charge of the
bank, pending the appointment of a receiver. Failure
between periods of examinations, or suspension, is also
cause for putting the bank into the hands of an appointee
of the auditor, pending the appointment of a receiver.
If a bank fails to pay an assessment for an examination, it
may be put into the hands of a receiver (3409). Loans.—
No private bank may loan to any of its officers an amount
exceeding 30 per cent of its capital (3414). Investments.—
Not more than one-third of the capital may be invested
in real estate, except such as is taken in settlement of
debts or purchased at judicial sales (3403). Penalties.—
Failure to report within five days from the request en­
tails a penalty of not less than $100 nor more than $500
(3408). There is a general penalty for violation of the
provisions dealing with private banks, which is a fine of
not over $1,000, with imprisonment for not longer than
two years for a second offense (3410). The penal pro­
vision for receipt of deposits during insolvency applies
to individual bankers (2294).
SAVINGS BANKS.
I.— T erms

of

I ncorporation.

The incorporators of a savings bank must be voters of
Indiana, citizens of the county where they reside for at least
five years, and severally owners of unincumbered realty
in the county worth at least $5,000 (3348). Apparently,
the statutes contemplate associations without capital
158

I n d i a n

a

S a v i n g s

Banks

stock (3349). A local judge must, after diligent inquiry,
be satisfied of the qualifications of the incorporators as
suitable men to conduct a savings bank (3350).
The trustees of every savings bank must set aside every^
year from gross gains not less than one-half of 1 per cent,
nor more than 3 per cent, of the deposits, as a surplus
fund, until this fund equals 10 per cent of the deposits.
The surplus may accumulate, if the bank desires it, until
equal to 25 per cent of the deposits (3375 and 3381).
Dividends must not be declared except from profits
(3377)- No dividends are declared on deposits of over
$5,000 (3379). The trustees may discriminate so as to
give to deposits under $1,000 a higher interest than to
those over $1,000, and so as to give higher dividends to
depositors who leave their deposits undiminished (3380).
After expenses and surplus contributions have been de­
ducted from profits, all that remains must be, so far as
is practicable, divided among depositors (3381). If any
residue is still undistributed it must be divided among
depositors at least once in every three years as equitably
as possible, as the trustees direct (3382).
*L— L iabilities

and

D uties

of

T rustees . •

Trustees must meet at least every three months (3360).
A local judge must certify to their fitness for the position
(3355)- If a trustee of a savings bank neglects his duties,
or borrows from the corporation, or misses meetings for nine
months, he forfeits his position (3353). Trustees must not
receive pay unless they are engaged in work which requires
t eir regular and faithful attendance at the bank, in which
case t e salary is voted by the trustees, exclusive of the one
interested (3362 and 3396). Also after a savings bank has
accumu ated a surplus of not less than 5 per cent of its deposi s, it nia\ pay the trustees who render special personal
service a compensation determined upon by the trustees




159




N at i on a l

M o n et a r y

Commission

and approved by the auditor. Interested trustees do not
vote. This special pay must not be granted if the sur­
plus is impaired (3397). When a savings bank has ac­
cumulated a surplus of 15 per cent of its deposits it may
pay trustees who have attended every regular meeting
during the year a gratuity of not more than $3 a meeting
(3398). If a trustee or other officer of a savings bank,
by his misconduct, wastes the bank’s assets, he is re­
sponsible for the losses to the depositors and other creditors
(3401).
III.— S upervision .
As before, the auditor is general supervisor. He
appoints examiners as subordinates, who must not dis­
close the information they obtain in examinations (3418
and 3422). The qualifications of incorporators of a
savings bank must be inquired into by a local judge.
They must appear trustworthy to him, or he will not go
through the necessary preliminaries to their getting a
certificate (3350). When extra compensation is given
officers and trustees of savings banks, the auditor must
approve (3396 and 3397). The auditor passes upon the
necessity of extending the time for notice of withdrawal
of deposits (3364) and also passes on the cost of the sav­
ings bank’s building (3372); he may suspend savings
bank trustees (3383), subject to the later action of a
court (3385).
Whenever a savings bank fails for thirty days to pay
its depositors, or when it appears to the satisfaction of
the auditor that its business is being mismanaged, and
that it is insolvent or in danger of insolvency, then it is
the duty of the auditor to institute proceedings for a
dissolution. The court applied to may decree a receiv­
ership (3401).

160

S a v i n g s

I n d i a n a

Banks

REPORTS.

Savings banks make an annual report to the auditor of
their condition on January i, after the dividend of that
day has been allowed (3387). In this report the total
amount of assets are stated: The amount loaned on notes,
bonds, and mortgages; interest on loans; value and rate
of interest on all stock investments; stock investments,
the interest on which is in arrears; bonds, notes, and
mortgages, the interest on which is in arrears; bank
stock held by a savings bank; commercial paper held;
real estate held, and its value; income derived from real
estate; cash on hand or on deposit; names of deposita­
ries and interest received; average monthly balances on
deposit in banks; and any other items of assets. Also
liabilities, including amounts due depositors, dividends,
and any other debts which may become a charge upon
assets. Also the number of open accounts; amounts de­
posited and amounts withdrawn during the year; whole
amount of interest earned; expenses; new accounts
opened and accounts closed (3388 and 3389). The
auditor prescribes the form and may call for other items
(339°) • In years when the legislature is in session the
auditor reports to the legislature the condition of every
savings bank from which he has received a report in two
years; he may suggest amendments to the savings bank
few (3393)EXAMINATIONS.

One of the examiners, as often as is necessary, and at
least every other year, visits every savings bank without
giving it warning of the examination (3394 and 3420).
No compensation may be voted to a trustee of a savings
bank until the auditor has caused an examination of its
affairs to be made, showing that the required surplus has
been accumulated (3397). The trustees of every savings
S . D o c. 353, 6 1 - , —




„

6




iV

d t i on a l

M on et a ry

Commission

bank, by a committee of not less than three of them,
examine its affairs yearly as a preliminary to rendering
the report to the auditor (3395).
IV.— R eserve R equirements.
The trustees may keep in reserve not more than 20 per
cent of total deposits without investment, or they may
deposit that amount on call with or without interest, in
an Indiana bank or a national bank (3369).
V.— Discount , L oan ,

and

D eposit R estrictions.

No trustee or officer of. a savings bank may borrow
any of the funds of the bank, nor may a trustee or officer
indorse loans to others, so as to become in any way an
obligor on a loan by the savings bank. No trustee or
officer may receive any commission for procuring a loan
from the bank (3362). Pending an opportunity to
invest, loans may be made on stocks and securities
which are a proper investment, if the loan is of not
more than 90 per cent of the cash value of the securities (3367)- Loans may not be made, on security of
real estate or on notes or bills without the consent of a
majority of the trustees or the unanimous consent of the
investment committee (3370). (See other loan restric­
tions inserted under VI because so classified in the
statute.)
Savings banks need not receive sums less than $1 or
exceeding $500 in any one year from any one depositor
(3363)- Savings banks may require, < is usually pro­
as
vided in savings bank statutes, certain notice of with­
drawal of deposits. There is the unusual provision here,
however, that, with the consent of the auditor, if it is
necessary to prevent a run, savings banks may require
any time not exceeding six months as notice of with­
drawal (3364).
162

I n d i a n a

—

S a v i n g s

B a n k s

V I.— I N VESTM ENTS.
A savings bank may hold such real estate as is requi­
site for the transaction of its business, and from a portion
of this it may receive an income, such as is mortgaged
to the savings bank, and such as it purchases at judicial
sales on claims in favor of the savings bank, or purchases
to prevent loss on debts due it (3371). The banking
house must not cost more than 5 per cent of the amount
of the deposits of the savings bank, and the estimates for
it must be approved by the auditor (3372). Except its
banking house, every savings bank must, as a rule, dis­
pose of its real estate within three years after acquiring it (3373). There is a prohibition on trade and com­
merce (3374).
Investments for savings banks are as follows: First,
securities of the United States; second, securities of In­
diana; third, securities of municipalities of Indiana;
fourth, securities of any State in the Union that has for
five years paid interest regularly; fifth, bonds or notes
secured by mortgage of unincumbered realty situated in
Indiana, or in a county, in an adjoining State, adjoining
the county where the bank is situated, if the real estate
is worth twice the loan; sixth, commercial paper payable
at an Indiana bank and having not more than twelve
months to run, made or indorsed by at least two free­
holders, one of whom at least is a resident of Indiana,
but no such bill or note may exceed $10,000, and no
more than $10,000 may be loaned on the same security;
seventh, in real estate subject to the limitations in the
prece ing paragraph; eighth, in dealing in sight and
time exchange, payable outside the State; but no draft
may e for more than $10,000, nor may any time draft
paya e outside the State be purchased which has more
ian sixty days to run. Moreover, not more than one




163




N a t i on a l

Monetary

Commissi on

draft may be held by any savings bank at one time,
secured by any of the same indorsers (3366). Pending
an opportunity for investment, money may be loaned on
the stocks and other securities just enumerated, if the
loan does not exceed 90 per cent of the market value of
the securities (3367). Although 3366 provides that only
the securities enumerated are legal investments for sav­
ings banks, the list of assets in savings bank reports
includes stock in other banks (3388).
X I.— P enalties .
If a savings bank fails to report, the employee whose duty
it was to report is fined from $1 to $50 for every day’s
delay (3392). It seems likely that the penal provisions
concerned with receipt of deposits during insolvency,
overdrafts by officers, and loans of funds to officers may
apply to savings banks. The language of these statutes
makes them applicable to persons, firms, corporations, etc.,
“ doing a banking business” (2294, 2295, and 2296, given
under Banks, XI).
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

Trust companies may not only do a commercial banking
business (4953) but may also apparently receive savings
deposits, for it is provided that every loan and trust and
safe deposit company which receives savings deposits
must do so under the regulations to which savings banks
are subject (4962).
The capital stock of corporations organized under the
loan and trust and safe deposit company statute must be
as follows: In cities of over 50,000, not less than $100,000;
in cities of from 25,000 to 50,000, not less than $50,000;
in cities of less than 25,000, not less than $25,000. Shares
164

*

I ndi a n a

—

Trust

Companies

are of $100 each. The capital must never exceed
$2,000,000 (4944). Business must not be begun until the
whole capital, provided it does not exceed $100,000, has
been paid in (4948).
H • L iabilities

and

D uties of Stockholders
Directors.

and

Stockholders are individually liable, in addition to their
holdings of stock, in a sum equal to that amount for the
payment of any debt of the corporation left unpaid after
its assets have been exhausted (4947, and possibly
constitution, Article XI, sec. 6).
There must be not less than six directors, a majority of
whom must be citizens of the State, and each of whom
must own at least ten shares of stock (4949).
I l l .— S upervision .

The auditor and his examiners (see Banks, III) have
supervision of trust companies. If it appears from exami­
nations that a trust company has violated the law, or is
conducting its business unsafely, or is insolvent, the
auditor directs a discontinuance of the unsafe or illegal
practices. If the trust company fails to report after ten
ays notice, or to comply with an order, or if it appears
to nn that the corporation should stop transacting busi­
ness, or that it is insolvent, then the auditor institutes,
rough the local prosecuting attorney, such proceedings as
e institutes against an insolvent corporation (4959).
reports.

Every year each trust company reports a detailed
!nH°Un! , ,‘tS COndition on or W ore April i to the auditor,
and publishes a condensed statement of such account in a
oca newspaper. Statements must be rendered also to




I6 5




t

National

Monetary

Commi ssi on

courts that appoint the company to a fiduciary position
(4957)- Tor tax reports see 10210.
EXAMINATIONS.

These are made by an examiner, without notice to the
company, as often as is necessary, and at least once every
six months (3421 and 4958). The auditor also causes an
examination to be made when the capital stock is reduced
(4945)V.— Discount

and

L oan R estrictions.

Directors, officers, and employees of a trust company
are forbidden to become in any manner indebted to the
trust company (4956 and 2997).
V I. — I nvestments.

A trust company may hold such real and personal
property as is necessary for the convenient transaction
of its business; real estate acquired on foreclosure sale
or in settlement of an obligation may be held for the best
interests of the company; the company may purchase at
foreclosure or judgment sale (4953). There is a provision
against engaging in commerce, manufacture, etc. (4956).
V II. — Overdrafts .

In forbidding directors, officers, and employees to
become indebted to their trust company, the enumeration
of the possible ways in which they may become indebted
includes “ by means of any overdraft ” (4956).
X.— U nauthorized B anking .

All persons and corporations not organized under the
trust-company law are prohibited from using the word
“ trust” in their name. The penalty for violation is $50
a day while the word is used (4960).
166

\

I ndi ana

—

Trust

Companies

X I. — P enalties .
Directors or officers of a loan and trust and safe deposit
company who loan its funds to any director or officer
and any director or officer who borrows from the company
are guilty of a misdemeanor, punishable by a fine of not
less than $100 nor more than $500 and imprisonment of
not less than thirty days nor more than six months (2297).
Trust company directors who loan the company’s funds
to a director, and also the borrowing director himself, are
guilty of a misdemeanor (2297). The fact that this penal
provision, directly following 2294, 2295, and 2296 (receipt
of deposits when insolvent, overdrafts by officers and loans
of funds to officers— see Banks, XI), includes trust com­
panies expressly suggests that the three sections named
may not be applicable to trust companies.




167




IOWA.
The statutes of this State to date are in the Annotated
Code of Iowa, 1897, in the supplement of 1907, and in the
session laws of 1909. Citations in the digest are to sec­
tions in the Code, treating changes made by amendments
which appear in the supplement as incorporated in the
code itself. Three chapters of Title IX (Of corporations)
are concerned with banking: Chapter 10, Of savings banks;
chapter 11, Of state banks; and chapter 12, Of banks.
Trust companies are mentioned only in one or two sections.
Since the whole of chapter 12 applies both to banks and
to savings banks, it has been made the subject of a sepa­
rate heading in the digest, “ General provisions;’’ chap­
ter 11 is digested under the heading “ Banks,” and chapter
10 under the heading “ Savings banks;” the few trust com­
pany provisions are put under a heading, “ Trust com­
panies.”
Constitutional provisions require that an act of assembly
authorizing or creating corporations with banking powers
be passed by a majority of voters at an election (constitu­
tion, art. 8, sec. 5), and make every stockholder “ in a
banking corporation or institution” individually liable in
an amount equal to the shares held, in addition to them,
for all debts accruing while he is a stockholder (constitu­
tion, art. 8, sec. 9). The compiler of the Code, however,
cites cases to the effect that these provisions of the con­
stitution apply only to banks of issue (70 N. W., 752; 63
Iowa, 11).
168

Iowa

—

G en e r al

Provisions

GENERAL PROVISIONS APPLICABLE TO BANKS
AND SAVINGS BANKS.
II.— L iabilities

D uties of Stockholders
D irectors.

and

and

All stockholders of savings and state banks are individ­
ually liable to the creditors of the corporation above the
amount of stock held by them, to an amount equal to their
shares, for all liabilities accruing while they remain stock­
holders (1882). (See statement of the constitutional pro­
vision on this point in the paragraph above.)
Officers may receive a reasonable compensation, but no
director as such may be paid for his services (1869). The
board of directors of every bank must at its annual meeting appoint from its members an examining committee of
not less than two, who make all examinations and report to
the board (1871). If the directors of a bank whose capital
is impaired do not proceed when notified by the auditor to
make it good by assessment and sale, they are individually
liable for the deficiency (1880).
III. — Supervision .
The auditor of the State is in charge of banking. None
of the six examiners (appointed by the auditor with
salaries of $1,800 each per annum) may examine a bank
or loan and trust company in a county in which he is inter­
ested in banking or trust company business (1875, amd. by
I9° 9> chap. 115; and 1876). When it appears to the
auditor that a bank has refused to pay its deposits, or has
become insolvent, or that its capital has become impaired,
or that it has violated the law, or is conducting its busi­
ness in an unsafe manner, he orders a discontinuance of
the illegal and unsafe practices. If the bank refuses to
comply with his orders, or if he becomes satisfied that the




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bank is insolvent or unsafe, or that the interests of creditors
require it to be closed, he authorizes one of his bank exam­
iners to take possession of the bank, and applies to court
for a receiver (1877). When the capital of any bank is
impaired the auditor may require an assessment upon the
stockholders. When so ordered, the directors of the bank
must cause the deficiency to be made good by assessment
and, where that is unpaid, sale of the stock of the share­
holder assessed (1878); if they fail to proceed thus, a
receiver may be appointed (1880). In case a director,
officer, or employee is guilty of intentional fraud, or of de­
ception with regard to means or liabilities, or of partici­
pating in the payment of dividends which leave insufficient
funds to meet liabilities, not only is the guilty person pun­
ished, but the bank may be closed by proceedings in court
(1888). For violations of section 1889 corporations for­
feit their charter (see XI, infra). The auditor exercises
supervision over renewals or extensions of the period of
corporate existence of banks (1618 et seq).
REPORTS.

Banks are required to transmit a statement of their
condition to the auditor within ten days after receiving
his request. The following are the items: Capital paid
in; debts due all persons other than regular depositors;
amount due depositors, including both sight and time
deposits; deposits by the bank subject to draft at sight,
specifying location of depositaries and amounts of de­
posits; coin and bullion; legal tender, national bank notes,
etc.; drafts and checks on other solvent banks, and other
cash items; bills, bonds, and other evidences of debt dis­
counted or purchased by the bank; value of real and per­
sonal property specifying the amount of each; undivided
profits; and the total amount of liabilities of directors to
the bank (1872). Reports must be at least quarterly;
170

Iowa

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Provisions

_____________________________ 5_________ _

but the provision is that the auditor may examine any
bank when he thinks proper or he must call upon it for a
report on a given past day as often as four times a year
and must cause the report to be published in a local news­
paper (1873). He has power to call for special reports
whenever he thinks them necessary to obtain a complete
knowledge of the condition of the bank (1874). The
president and cashier of every bank keep a list of names
and residences of officers, directors, and stockholders,
with the number of shares held by each; they transmit a
copy of this list to the auditor within ten days after each
annual meeting (1889). The examining committee must
make four examinations a year, of which one must be in
June and another in December; the results of these two
examinations are reported to the auditor (1871). For
reports required for purposes of taxation, see 1322.
In his biennial report to the governor, the auditor is
required to state the condition of every bank from which
he has had reports for the past year and to suggest changes
in the laws (1881).
EXAMINATIONS.

The provision for examinations or reports referred to
above reads as follows: “ The auditor of State may, at any
time he may see proper, make or cause to be made an exami­
nation of any savings or state bank, or he.shall call upon
it for a report of its condition upon any given day which
has passed, as often as four times each year,” etc. (1873).
Ihe board of directors of each savings and state bank
shall, at its annual meeting, appoint from its members an
examining committee of not less than two, which shall
examine the condition of the bank, at least every quarter,”
and report to the board; two of these quarterly examina­
tions are reported to the auditor. In case any bank fails
to urnish reports of these two examinations, the auditor




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may have an examination made by one of his regular
examiners (1871).
V.— D iscount

and

L oan R estrictions.

The total liabilities to any bank of a person, company,
or firm, for money borrowed, including in company or
firm liabilities those of the members, must not exceed 20
per cent of the paid-in capital of the bank; but a bank
may loan, in an amount not exceeding one-half its capital,
to any person, company, or firm, on mortgage of unin­
cumbered farm land in Iowa worth at least twice the
amount of the loan, and the discount of bills of exchange
drawn against existing values or of paper owned by those
negotiating it is not considered money borrowed (1870).
Officers and employees of banks must not borrow except
upon the express order of the board of directors made in
the absence of the applicant; the same security must be
required from them as from others. The board of direct­
ors, however, may authorize loans to a director not
holding any other office, nor being an employee, not to
exceed sum at any one time a maximum fixed by the reso­
lution of the board; the director in question must not be
present when the vote is taken, and must give the same
security as is required of others (1869).
State and savings banks may contract indebtedness
only for expenses of transacting business, for deposits,
and to pay depositors; except that by order of the direct­
ors further liabilities not in excess of the capital stock
may be incurred (1855a).
X.— U nauthorized B anking .

No corporation may engage in the banking business,
receive deposits, and transact the business generally done
by banks unless it is subject to the provisions of Title IX
172

Iowa

General

Provisions

(Of corporations), or other banking laws of the State, ex­
cept that loan and trust companies may do certain bank­
ing business. Any corporation violating the section of
which this provision is a part forfeits its charter, and the
corporation, its officers, directors, and agents are punished
by a fine of not less than $500, or imprisonment for not
less than two years, or both (1889).
X I. — P enalties .
An officer or employee of a bank violating the provi­
sions against loans to an officer or employee is guilty of
embezzlement, and suffers imprisonment not exceeding
ten years, or fine not less than the amount embezzled, or
both penalties (1869). Any officer whose duty it is to
make a report is guilty of a misdemeanor if he fails to do
so, punishable by fine of from $100 to $1,000 or imprison­
ment from three months to three years (1886). Directors,
officers, and employees who make false entries or reports
with intent to deceive an examiner, or who divert the
funds of the bank to other objects than those authorized
by law, are fined not more than $10,000, and imprisoned
fiom two to five years (1887). Directors, officers, and
employees who are guilty of intentional fraud, or of deceit
in relation to liabilities, etc., or of assisting in the payment
of excessive dividends, are punished by a fine of not less
than $500, imprisonment of not less than one year, or
both (1888). Section 1889 provides that any corporation
which violates it shall forfeit its charter, and its officers,
irectors, and agents shall be punished by a fine of not
ess t an $500, imprisonment for not less than two years,
or 0 b the provisions of the section include that requir­
ing a list of officers, directors, and stockholders to be kept
and transmitted to the auditor; that forbidding corpo­
ra 10ns o engage in banking business except under the




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Commi ssi on

law; and those subjecting trust companies to the rules
applicable to savings banks and state banks in certain
respects (see Trust companies, infra).
The officer, director, etc., who receives deposits knowing
his bank is insolvent is guilty of a felony punishable by
fine not exceeding $10,000, imprisonment in the peniten­
tiary for not more than ten years, or imprisonment in the
county jail for not more than one year, or both fine and
imprisonment. Among the sorts of institutions subject to
this rule are banks, deposit offices, and corporations
receiving deposits (1884 and 1885).
BANKS.
I.— T erms

of

I ncorporation.

State banks must not be organized with a less paid-up
capital than $50,000, except that in cities or towns of not
more than 3,000 there may be banks with a paid-up
capital of not less than $25,000 (1864). Shares must be
of $100, issued only on .full payment of the sum repre­
sented by them (1865).
II.— L iabilities

and

D uties of Stockholders
Directors.

and

Every state bank is managed by a board of directors
of not less than five, who must be shareholders, as follows:
In banks having a capital of $25,000 to $30,000, two
shares; in those having a capital of $30,000 to $40,000,
three shares; in those having a capital of $40,000 to
$50,000, four shares; and in those having a capital of
$50,000 or over, five shares (1866).
IV.— R eserve R equirements.

All state banks located in cities or towns of less than
3,000 must maintain a reserve of not less than 10 per cent
174

I o wa

S a v i n g s

B a n k s

of their total deposits; all those located in citie£ and
towns of 3,000 or more must maintain a reserve of not
less than 15 per cent. Three-fourths of the reserve may
be on deposit subject to call with other banks organized
under state or national laws (1867).
X . — U nauthorized B anking .
Unless the provisions of the code are complied with, no
association may transact the business of banking, buying
and selling exchange, receiving deposits, and discounting
paper (1861). No unincorporated bank may embrace in
its name the word “ state” (1862), which is required to
be part of the name of banking corporations (1861).
SAVINGS BANKS.
I.— T erms

of

I ncorporation.

Savings banks may do a conhnercial banking business
(i860).
I he paid-up capital of every savings bank must be not
less than $10,000 in cities, towns, or villages of 10,000 or
less, nor less than $50,000 in cities having a greater popu­
lation. the capital must be paid in before business is
begun (1843). Shares must be of $100 each, issued only
on full payment of the sums represented by them. The
provision that stock “ owned by any corporation” may
be transferred by an agent of that corporation indicates
that corporations may be shareholders (1853).
The directors of any savings bank may set apart from
its net earnings any desired sum as a surplus fund to be
kept separate from undivided profits. This surplus may
be transferred back to the undivided profits account and
used to pay expenses and dividends only when deposits
are less than ten times the capital or capital and remain­
ing surplus (1850a). Dividends may be declared only




175




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M one t ary

Commi ssi on

out of net profits, after expenses, including interest tc
depositors, have been paid (1852).
II.— L iabilities

and

Duties oe Stockholders
Directors.

and

There must be not fewer than five nor more than nine
directors, at least three-fourths of them citizens of the
State. The stock required to be held to qualify as a
director is as follows: In a savings bank having a capital
of less than $20,000, one share; in one having a-capital of
$20,000 to $30,000, two shares; in one having a capital
of $30,000 to $40,000, three shares; in one having a capi­
tal of $40,000 to $50,000, four shares; in one having a
capital of $50,000 or over, five shares (1845).
III.— S upervision .
EXAMINATIONS.

The auditor may make a preliminary examination of
the affairs of a savings bank to satisfy himself that the
required capital has been paid in, etc. (1843).
IV.— R eserve R equirements .
Savings banks doing a commercial business located in
towns of less than 3,000 must keep a reserve equal to 15
per cent of their commercial deposits and 8 per cent of
their savings deposits. Savings banks located in cities
and towns of 3,000 or over must keep a reserve equal to
20 per cent of their commercial deposits and 8 per cent of
their savings deposits. Savings banks doing an exclu­
sively savings bank business must keep an 8 per cent
reserve fund. Three-fourths of the reserve may be on
deposit, subject to call, in other banks organized under
state or national laws (i860).
176

I o wa

S a v i n g s

—

V.— Discount , L oan ,

and

B a n k s

D eposit R estrictions.

For certain provisions regarding loans, forbidding loans
on the savings bank’s own stock, etc., see VI, infra.
Every savings bank may receive on deposit money
equal to twenty times its paid-up capital and surplus; no
greater amount of deposits may be received unless the
paid-up capital and surplus are correspondingly increased.
When there are sufficient funds on hand to pay depositors,
the officers of a savings bank may waive the sixty days’
notice requirement. They may issue certificates of de­
posit payable on demand (1848). All accounts upon
which no deposit or draft has been made for ten years are
closed for purposes of interest, unless the deposit is an
endowment for children, a trust estate, or a deposit where
special provision has been made for a longer time (1849).
VI.— I nvestments.

A savings bank may hold real estate only as follows:
The lot and building in which its business is carried on;
such real estate as has been purchased at sales on fore­
closure of mortgages owned by the bank or on judgments
rendered for debts due the bank; such as has been con­
veyed to it in satisfaction of previous debts; and such as
it may obtain by redemption as junior mortgagee or judg­
ment creditor. All apparently but the lot and building
first named must be sold within ten years (1851).
Every savings bank must invest its funds, capital, de­
posits, profits (and surplus— 1850a), as follows: In United
States securities; in securities of Iowa; in bonds or war­
rants of municipalities of Iowa, but not exceeding 25 per
cent of the assets of the bank may be thus invested; in
notes or bonds secured by mortgage of unincumbered real
estate in Iowa worth twice the loan; in dealings in com­
mercial paper, bills of exchange, or any o£her personal or
S- D oc. 353, 6 1 -2 ----- 12




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Monetary

Commi ssi on

public security, but a savings bank must not purchase,
hold, or loan upon shares of its own capital (1850).
X .— U nauthorized B anking .
Any bank or person not incorporated under the pro­
visions of the chapter on savings banks who advertises,
exhibits a sign, etc., as a savings bank, and any savings
bank advertising a greater amount of capital than has
been paid in forfeit $100 a day while the offense is con­
tinued; it is also a misdemeanor for each day (1859).
TRUST COMPANIES.
Trust companies are referred to in the section requiring
reports to the assessors for taxation (1322), and in the
section forbidding examiners to examine institutions in a
county where they are interested in the banking or loan
and trust company business (1875, amd. by 1909, chap.
115; and 1876). The most important trust company
provisions are in section 1889: Corporations are forbidden
to do banking except as authorized by the banking laws,
except that “ loan and trust companies may receive time
deposits subject to the same limitations as are now or
may hereafter be prescribed for the receiving of deposits
by state banks and issue drafts on their depositaries.” All
companies authorized to execute trusts or employing the
word “ trust ” in their name must have a paid-up capital
of not less than that required of savings banks and are
“ subject to examination, regulation, and control of the
auditor of state like savings and state banks.” Their
stockholders are liable to creditors in the terms of section
1882. (See supra for the provisions referred to.) Any
corporation violating section 1889 forfeits its charter, and
the corporation, its officers, directors, and agents are pun­
ished by fine of not less than $500, imprisonment for not
less than two years, or both.
178

KANSAS.
So far as the general banking law of Kansas is concerned,
the digest is based upon the 1908 reprint by the state bank­
ing department, which includes all legislation through
the special session of 1908. The general law is chapter
n a of the General Statutes of 1901, amended by various
later laws; most of the citations in the digest are accordingly simply numbers in parenthesis, which refer to sections
in the General Statutes of 1901, assuming all amendments
incorporated. So far as the trust company law is con­
cerned, the digest is based upon the General Statutes of
1905, in which article 19 of chapter 23 is entitled “ Trust
companies. ” References to that act, therefore, are by
numbers of sections in the General Statutes of 1905, in­
dicating that the section is in those statutes and not in
the statutes of 1901, by prefixing 1905 to the number of
the section, dhe 1909 session laws have also been ex­
amined; an amendatory act, chapter 59 of 1909, and also
the bank depositors’ guaranty law, chapter 61 of 1909,
appear in the digest. References to acts in the 1907 or
1909 session laws are prefixed by 1907 or 1909, as the case
m aybe; note, however, that as explained above, refer­
ences which are prefixed by 1905 are not to the session
laws of that year, but to the edition of General Statutes
then published. There is no special law dealing with




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Commissi on

savings banks. It is a constitutional provision that bank­
ing laws must be submitted to popular vote and approved
by a majority (constitution, Art. X III, sec. 8).
BANKS.
X T erms
.—

of

I ncorporation.

Apparently the business of savings banking and general
banking may be combined, for it is provided that all
savings banks or savings associations which do not trans­
act a general banking business must keep a certain re­
serve (418).
The capital in towns or cities of less than 500 must be
not less than $10,000; in towns of from 500 to 1,000, not
less than $15,000; in all cities of the third class with a popu­
lation of 1,000 and over, not less than $20,000, in all cities
of the second class, not less than $25,000; and in all cities
of the first class, not less than $50,000 (408). (For classi­
fication of cities see i 9° 5»chapter 17#-) Shares must be
of $100 each and all subscriptions paid in in cash (410).
A restriction on the amount of deposits allowed in propor
tion to capital is given under V, infra.
Dividends may be declared out of net profits, but before
any dividend is declared one-tenth of the net profits since
the last dividend must be carried to surplus fund until
it amounts to 50 per cent of capital (438). No capital may
be withdrawn in dividends or otherwise (440).
Banks are forbidden to give preference to depositors or
creditors by pledging the bank’s assets as collateral, but
banks may borrow for temporary purposes not more than
50 per cent of the capital, pledging assets not to exceed by
more than 20 per cent the amount borrowed. This
privilege must not be used habitually for the purpose of
reloaning, however (446).
180

K a n s a s
II.— L iabilities

—

and

S t a t e

B a n k s

Duties of Stockholders
Directors.

and

Shareholders are liable additionally for a sum equal to
the par value of their stock (416).
There must be from five to thirteen directors, a majority
of whom must be residents of the county where the bank
is located or an adjoining county. Each must own at
least $500 of stock. They hold not less than four regular
meetings a year (415, amd. by 1909, chap. 59, 1). Direct­
ors who receive deposits knowing the bank is insolvent are
guilty of a felony (421) and are besides individually re­
sponsible for deposits so received, or debts created under
like circumstances (471). Bank officers who permit the
funds of the bank to be paid on check, order, or draft, the
drawer of which has not on deposit a sum equal to his draft
are personally liable to the bank for the amount paid
(445) III.— Supervision .

The state official is the bank commissioner, who is ap­
pointed for four years; he and his deputies must have had
at least three years’ practical knowledge of banking, or have
served one term as bank commissioner. No commissioner
or deputy may examine a bank in which he is financially
interested (427). The salary of the bank commissioner
is $2,500 a year (463).
I he occasions in which the commissioner takes action
against banks are as follows: If reserves fall below the
required amount, he notifies the bank in question to make
good the reserve, and if it fails to do so for thirty days it is
deemed insolvent; the commissioner then takes possession
and proceeds against the bank for a receiver (418, amd. by
1909, chap. 59, 2). He orders excessive loans reduced
within sixty days (419). When it appears that the capital




181




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Monetary

Commission

of a bank is impaired, the commissioner notifies the bank
to make the impairment good within ninety days (450).
If a bank refuses to be examined, the commissioner re­
vokes the bank’s authority to transact business and insti­
tutes receivership proceedings (454)- When the bank
appears to be habitually borrowing for the purpose of
reloaning, the commissioner requires it to pay off its
debts (446). The commissioner proceeds against a bank
which refuses to comply with any requirement made upon
it for ninety days, to forfeit its franchise and dissolve the
corporation (426). In general, in case of insolvency (de­
fined in 437) shown by examination or report, and in case
of violation of law, the bank commissioner immediately
takes charge of the bank. He may appoint a special
deputy to serve in this capacity, like a receiver, for a
period not longer than ninety days. The commissioner
examines the bank’s affairs thoroughly, and if satisfied that
it can not resume business or liquidate its debts, he then
definitely appoints a receiver. If the holders of more
than 50 per cent of the claims against the bank agree upon
a person for receiver the commissioner must appoint him
(434). There are provisions for the enforcement of the
double stockholders’ liability by receivers (461, amd. by
1909, chap. 59, 7). Banks may voluntarily put themselves
in the commissioner’s hands. (435); he has, besides, super­
vision over voluntary liquidations (436). He approves
reductions of capital stock (449).
After a special examination required to be made under
the guaranty fund act when a bank fails to pay its assess­
ments, the bank commissioner, if he finds the bank insol­
vent, proceeds to liquidate it (1909, chap. 61, 5). If upon
examination a bank is found to be violating the depositors’
guaranty statute, the commissioner, after thirty days’
notice to the bank to comply with the statute, may cancel
182

K •a n s a s

S t a t e

B a n k s

its membership in the fund, and seize for the fund the
deposited bonds. See X II, infra (1909, chap. 61, 11).
If the bank commissioner finds any officer of a bank
dishonest, reckless, or incompetent, he orders the directors
of the bank to remove the officer; failure to comply with
his order cancels the bank’s authority to transact business
till it is complied with (1909, chap. 59, 4).
The commissioner has certain discretion with respect
to reserve depositaries. See IV, infra.
REPORTS.

A preliminary report containing names and residences
of stockholders is transmitted to the bank commissioner
before business is begun (411). Regular reports must be
made at least four times a year and oftener if called for
by the bank commissioner, according to the form he pre­
scribes, exhibiting resources and liabilities at the close of
business on a past day specified by the commissioner.
They must be transmitted to the commissioner within ten
days after receipt of his request, and must be published in
a local newspaper (423 and 432). In addition to these
reports every bank must within ten days after declaring
a dividend forward to the commissioner a statement of
the amount of the dividend and the amount carried
to surplus. Also within ten days after January 1 of
each year a report of receipts and disbursements for the
preceding year must be forwarded to the commissioner
(424)- After each examination made by the directors at
their quarterly meetings a report of the result is forwarded
as a record of the meeting to the commissioner (415, amd.
by 1909, chap. 59, 1). Once a year a list of shareholders,
their addresses, and amounts held is sent to the commis­
sioner (453). Receivers make and publish reports as
banks do (459).




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For special reports required to be made by banks guar­
anteed under the depositors’ guaranty fund statute, see
X II, infra (1909, chap. 61, 7).
Every other year the commissioner reports to the
governor, stating the name, location, and officers of each
bank, number and dates of examinations and reports,
and whatever other information the commissioner thinks
proper (462).
(For reports required for purposes of taxation, see 1905,
8276.)
EXAMINATIONS.

A preliminary examination is made by the commissioner
before business is begun with a view particularly to
ascertaining the amount of capital paid and compliance
with preliminaries (411 and 422). The regular examina­
tions are made semiannually, or oftener if necessary, by
the commissioner or a subordinate, who fully investigates
the condition of the bank (429). Banks in the hands of
receivers are examined in the same way (459). The
commissioner makes an examination of banks in voluntary
dissolution (414 and 436). He examines thoroughly
insolvent banks against which receivership proceedings
are being brought (434).
Before a bank is allowed to become a guaranteed bank
(see X II, infra) it must be rigidly examined by the bank
commissioner (1909, chap. 61, 1). A special examination
is immediately made when a bank fails to pay its assess­
ments to the depositors’ guaranty fund (1909, chap. 61, 5).
Directors at their regular meetings, which are at least
quarterly, make a thorough examination of the affairs
of the bank (415, amd. by 1909, chap. 59, 1).

184

K a n s a s

S t a t e

B a n k s

IV. — R eserve R equirements.
Banks in cities or towns of less than 5,000 must keep
a reserve in available funds equal to 20 per cent of their
entire deposits, and banks in cities over 5,000, 25 per cent
of their entire deposits, three-fourths of which may consist
of balances due from good solvent banks, provided the
depositor bank has no stockholders who are also stock­
holders in the depository, unless the bank commissioner
waives this prohibition in the particular case, and provided
the depositories are banks located at commercial centers
or other places approved by the commissioner; the other
one-fourth must be in cash. A bank which is a deposi­
tary for reserves of other banks must keep a reserve of 25
per cent always. Cash items must not be considered part
of reserves. When the reserve falls below, no new lia­
bilities may be incurred except discount or purchase of
sight exchange and no dividends may be declared. The
commissioner notifies banks whose reserves are below the
requirement, to make the deficiency good. The commis­
sioner may refuse to consider as part of a bank’s reserve
balances due from other banks which neglect to furnish
him with required information (418, amd. by 1909, chap.
59, 2).
V-— D iscount , L oan ,

and

D eposit R estrictions .

The total liability to any bank of a person, firm, or
corporation for money borrowed, including in firm or
corporation liabilities those of the members, must not
exceed 15 per cent of the capital and surplus, but discount
of bills of exchange drawn against existing values and of
commercial paper under most circumstances is not con­
sidered as money borrowed (419).
No bank may loan on the security of shares of its own
stock, unless the security is necessary to prevent loss on




185




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Commission

a previous debt, in which case the stock must be disposed
of within six months (417).
No bank may accept deposits continuously for six
months in excess of ten times its paid up capital and sur­
plus. The violation of this section for thirty days cancels
the bank’s authority to transact business until the section
is complied with (1909, chap. 59, 5). A bank guaranteed
under the depositors’ guaranty fund statute loses its
membership in the fund if its deposits exceed this propor­
tion, and forfeits its deposited securities (1909, chap. 61,
14). See X II, infra.
(For restrictions on banks’ power to borrow, see I,
supra.)
VI.— I nvestments.

Only such real estate may be held as is necessary for the
convenient transaction of the bank’s business (this must
not exceed one-third of the paid in capital), such as is con­
veyed to the bank in satisfaction of previous debts, and
such as the bank purchases under judgments or foreclosures
on liens held by the bank (and the bank must never bid
a larger amount than that necessary to satisfy the debt
and costs). All real estate, except that held for the
accommodation of the bank in its business, must be dis­
posed of within five years and thirty days (456). In the
enumeration of powers of banks it is provided that they
may buy and sell United States bonds, Kansas bonds, and
bonds of Kansas municipalities (407).
No bank may engage in commerce, etc., nor invest in
the stock of any other bank or corporation, nor purchase
its own stock unless that purchase is necessary to prevent
loss upon a previous debt, in which case the stock must be
disposed of within six months. Nevertheless, a bank may
hold and sell all sorts of property which it acquires as
collateral for loans or in the ordinary collection of debts,
186

K a n s a s

—

S t a t e

B a n k s

but such goods must be disposed of as soon as possible
and are not considered as assets for more than six months
after they are acquired (417).
VII.— Overdrafts.
These are not expressly forbidden, but it is provided
that any officer who pays out the funds of the bank upon
a check, order, or draft of one who has not on deposit a
sum equal to the draft is personally liable to the bank for
the amount paid (445).
X . — U nauthorized B anking .
It is unlawful for any individual, firm, or corporation
to do a banking business or receive deposits without hav­
ing received a certificate from the bank commissioner.
Doing business without this certificate, whether indi­
vidually or as an interested party in a firm or corporation,
is a misdemeanor, punishable by fine of from $300 to
$1,000, or by imprisonment of from thirty days to one
year, or by both (422). Doing business after authority
has been revoked is similarly punishable (455). Indi­
viduals, firms, or corporations who advertise themselves
to be engaged in a banking business without having first
obtained authority from the bank commissioner are
guilty of a misdemeanor, punishable by fine not to exceed
$1,000, imprisonment not to exceed one year, or both
(468 and 441). Private bankers must have the capital
required of incorporated banks; they must not use the
word “ State” as part of their name, and in all published
advertisements, etc., they must use the words “ private
bank” (452).
X I.— P enalties .
False reports or entries in books are punished by a fine
of not over $1,000, or imprisonment of from one to five







National

Monetary

Commission

years (420). Receipt of deposits while the bank is insol­
vent is a felony by the officer who does so, punishable by
a fine of not over $5,000, imprisonment of from one to
five years, or both (421). Failure to report entails a
penalty on the bank of $50 per day (425). Receivers of
banks who fail to report or permit themselves to be
examined are subject to the same penalty that banks are
(459). Failure to comply with a requirement made by
the bank commissioner for ninety days entails forfeiture
of the bank’s franchise (426). The bank officer or em­
ployee who certifies a check when the drawer has not the
required funds in the bank is guilty of a misdemeanor,
punishable by the general penalty given below (443).
Refusal to submit the affairs of a bank for examination
may entail revocation of authority to do business (454).
The commissioner or a subordinate of his who neglects his
duty, permits a violation of the statute for ninety days,
makes false statements, etc., loses his office, and is pun­
ished by the general penalty given below (464, amd. by
1909, chap. 59, 3). The general penalty for bankers,
officers of banks, directors, or employees who violate the
banking statutes is a fine of not over $1,000, imprisonment
of not over one year, or both (441).
Every officer, agent, etc., of a bank who embezzles,
issues a certificate of deposit, draws a draft, etc., with
intent to defraud anyone, or to deceive an officer of the
bank or an examining official, and anyone aiding in such an
offense, is guilty of a felony, punishable by imprisonment
for from one to fifteen years (444, amd. by 1909, chap.
59, 6).

For penalties with respect to the guaranty fund sys­
tem see X II infra. Assessments are increased by penal­
ties in case they are not paid on time; various fines and
imprisonments result from a bank’s improperly advertis­
ing itself (1909, chap. 61, 5, 7, etc.).
188

K a n s a s

S t a t e

B a n k s

X II. — D epositors’ G uaranty System .
Any state bank in Kansas having a paid up and unim­
paired surplus equal to io per cent of its capital may par­
ticipate in the assessments and benefits of the bank de­
positors’ guaranty fund of the State of Kansas. The
bank examiner when notified that the directors have re­
solved to participate in the system makes a rigid exami­
nation of the bank, and if it is found to be solvent, prop­
erly managed, and conducted in strict accordance with the
law the commissioner, after the bank has made the re­
quired deposit, issues a certificate stating that its deposits
are guaranteed (1909, chap. 61, 1). Before receiving this
certificate each bank, as an evidence of good faith, must
deposit, and it must at all times maintain a deposit, of
cash, or of United States bonds, Kansas bonds, or bonds
of Kansas municipalities, to the amount of $500 for every
$100,000, or fraction, of average deposits eligible to guar­
anty (less its capital and surplus) as shown by its last
four statements; provided, however, that each bank must
deposit not less than $500. These bonds, or cash in lieu
of them, must not be charged out of the assets of the bank,
but must be carried in its assets as “ guaranty fund with
state treasurer” until such a time as the bank shall de­
fault in payment of assessments. In addition to this de­
posit every bank must pay in cash an amount equal to
one-twentieth of 1 per cent of average deposits eligible to
guaranty (less its capital and surplus), and these assess­
ments must be credited to the bank depositors’ guaranty
fund with the state treasurer, subject to the order of the
bank commissioner. The minimum assessment required
from any bank is $20. Any bank seeking to participate
in the system after the first annual payment, that of 1910,
is assessed an amount approximately equal to its propor­
tionate share of the money then in the fund, the amount




189

N at ion a l

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Commission

of the assessment to be determined by the commissioner
(190$, chap. 61, 2 and 10).
The bank commissioner during January of each year
makes assessments of one-twentieth of 1 per cent of the
average guaranteed deposits, less capital and surplus, of
each bank (the minimum assessment to be $20) until the
cash fund is approximately equal to $500,000 above what­
ever cash may have been deposited in lieu of bonds.
When the fund has reached this point the commissioner
discontinues assessments. If the fund becomes depleted,
the commissioner levies such additional assessments as are
necessary to maintain it, provided that not more than
five assessments of one-twentieth of 1 per cent may be
made in one year. The treasurer holds the fund in state
depository banks, subject to the order of the bank com­
missioner, and credits it quarterly with interest (1909,
chap. 61, 3).
"When any bank is found to be insolvent by the bank
commissioner and he is proceeding to wind up its affairs
(see Banks, III, supra), he issues at the earliest possible
moment to each depositor a certificate bearing interest at
6 per cent, except where a contract rate exists on the de­
posit, in which case the certificate bears interest at the
contract rate. After the officer in charge of the bank
has realized upon the assets of the bank and exhausted
the double liability of its stockholders and has paid all the
funds so collected in dividends to depositors, he then cer­
tifies all balances due on guaranteed deposits, if any such
balances exist, to the bank commissioner, who drawT upon
s
the depositors’ guaranty fund, a check in favor of each
depositor for the balance due him. If the available funds
in the guaranty fund are not sufficient to pay all guaran­
teed deposits of a failed bank and the five assessments
have been made, the commissioner pays to the depositors
pro rata the funds in his hands, and pays the remainder




190

K a n s a s

S t a t e

B a n k s

due them when the next assessment becomes available.
When the commissioner has paid any dividend to depos­
itors out of the fund, the claims of the depositors so paid
revert to the commissioner for the benefit of the fund
until it has been reimbursed for its payments with interest
at 3 per cent (1909, chap. 61, 4).
A penalty of 50 per cent of the amount of an assessment
is added to it when a bank does not remit within thirty
days after receipt of notice, and if a bank after that
notice fails to remit an assessment a sufficient amount of
its bonds are sold by the commissioner to pay the assess­
ment. The remainder of the bonds, or cash deposited in
lieu of them, are forfeited to the guaranty fund if the
bank does not within sixty days from the default in pay­
ment of the assessment remit the full amount of assess­
ment and penalty to date and restore its pledge of bonds
or money. On the bank’s failure to remit its assessments
the commissioner examines it, and if he judges it insol­
vent proceeds to liquidate it. If it is found to be solvent,
he cancels its certificate as a guaranteed bank and posts
a notice that it has withdrawn from the guaranty fund
system. Banks may voluntarily withdraw from the sys­
tem, in which case they receive their pledged bonds when
the affairs of all failed banks in liquidation at the end of
six months after the bank has elected to withdraw have
been closed up and the bank has paid its assessments on
account of these failures (1909, chap. 61, 5).
Only deposits which do not bear interest and the fol­
lowing deposits are guaranteed under the statute: time
certificates payable in from six months to one year, bear­
ing interest at not more than 3 per cent, on which interest
ceases at maturity; savings accounts, not over $100 to
any one person, not subject to check, requiring sixty
days notice of withdrawal, and bearing interest at not




191




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more than 3 per cent. Deposits which are primarily re­
discounts or money borrowed by the bank and all deposits
otherwise secured may not be guaranteed. Deposits not
eligible to guaranty are excluded in computing its assess­
ments (1909, chap. 61, 6).
Each bank guaranteed under the statute keeps a record
of the interest paid to each depositor and makes a quar­
terly statement of this record to the commissioner. If a
bank advertises that its depositors are guaranteed, then
if it pays or agrees to pay interest at- a greater rate than
3 per cent on any deposits it must state on the adver­
tisement that no deposits are guaranteed which bear a
greater rate of interest than 3 per cent. No bank which
pays interest at a greater rate than 3 per cent on any
deposit, or pays interest on short-time savings deposits,
or on time certificates cashed before maturity, may par­
ticipate in the system. Any managing officer of a guar­
anteed bank, or any person acting for the bank who prom­
ises to pay a depositor interest at a higher rate than that
allowed by the statute, or who pledges time certificates
or other obligations of the bank as security for his or
another’s personal obligation, in order to avoid the pro­
visions of the statute, is guilty of misdemeanor, punish­
able by fine of $500 to $5,000, imprisonment not exceeding
one year, or both. Advertising in such a way as to imply
that deposits are guaranteed by the State of Kansas is a
misdemeanor punishable by fine of $500, and advertising
so as to imply that deposits are guaranteed by the system
when the advertising bank is not so authorized to do is
a misdemeanor punishable by fine of $500 to $1,000 (1909,
chap. 61, 7).
Any trust company may reorganize as a state bank so
as to come within the provisions of the depositors’ guaianty fund system, and private banks or national banks
properly qualified may also reorganize as state banks
192

K a n s a s

S a v i n g s

—

Banks

(1909, chap. 61, 8). Any national bank in Kansas, after
an examination resulting in the approval of the bank
commissioner, may participate in the system on the same
terms as state banks, provided it forwards to the com­
missioner detailed reports of its condition on the dates
when they are required of state banks (which reports it
need not publish, however), and provided it submits to
one examination a year by the commissioner, or more at
his discretion (1909, chap. 61, 13).
No guaranteed bank may receive deposits continuously
for six months in excess of ten times its paid-up capital
and surplus; violation of this provision cancels all rights
to participate in the benefits of the fund and forfeits the
deposited bonds (1909, chap. 61, 14). Another statute
provides that if a bank exceeds this deposit limit for
thirty days over the continuous six months, its authority
to transact business is revoked till the excess of deposits
is reduced (1909, chap. 59, 5). If upon examination a
guaranteed bank is found to be violating the statute, the
commissioner notifies it that it has thirty days in which
to comply with the provisions of the statute; if it fails to
do so, it forfeits its membership in the guaranty fund, and
its bonds deposited belong to the fund (1909, chap. 61, 11).

SAVINGS BANKS.
The only special provision for savings banks is that
those which do not transact a general banking business
must keep on hand at all times in actual cash a sum equal
to 10 per cent of their deposits, and keep a like sum in­
vested in good bonds of the United States, or state or
municipal bonds of Kansas worth not less than par (418).

S. D oc. 353, 61




13

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National

Monetary

Commission

TRUST COMPANIES.
I.— T erms

of

I ncorporation.

Trust companies do a general banking business (1907,
p. 629).
The capital must be not less than $100,000 nor more
than $1,000,000, divided into $100 shares. Twenty per
cent must be paid in before the company begins business,
and the entire capital fully paid within six months (1905,
1529)Dividends may be declared not in excess of net profits,
if a sum equal to 10 per cent of the earnings during the
last dividend period has been carried to a surplus account;
this last must be done until the surplus equals one-half
the capital. When the surplus is used in charging off
losses, no dividend may be declared in excess of 50 per
cent of net earnings until the surplus is restored, the other
50 per cent being, at each dividend time, used to replenish
surplus (1905, 1535)II.— L iabilities

and

D uties of Stockholders
Directors.

and

Dues from corporations are secured by individual lia­
bility of the stockholders to an additional amount equal
to the stock owned by each stockholder (constitution,
Art. X II, sec. 2).
There must be from five to fifteen directors, a majority
of them residents of Kansas, and each a stockholder to an
amount not less than $1,000 (1905, 1533). They must
hold at least four regular meetings a year, making a
thorough examination of the affairs of the company at
each meeting (1905, 1534). If they pay an illegal dividend,
they are liable to the company or to creditors for that
amount (1905, 1535).
194

K a n s a s

Trust

Companies

III. — Supervision .
Trust companies are under the supervision of the
bank commissioner. The provisions of the banking law
relating to impairment of capital, insolvency, and the
duty of the bank commissioner in such cases, apply also to
trust companies. They make four R eports like banks,
and are subject to the same sort of E xaminations
(I9°5» j 538 and 1540). The directors at their quarterly
meeting examine the affairs of the company (1905, 1534).
IV. — R eserve R equirements.
Trust companies that receive deposits must keep a sum
equal to 25 per cent of the deposits that are subject to
check, and 10 per cent of the time deposits, “ in the same
manner and subject to the same rules as is provided for
state banks,” but United States bonds, and demand loans,
secured by United States, state, or municipal bonds of the
cash value of the loans, may be accepted as part of the
reserve in lieu of deposits in banks (1905, 1528).
V. — Discount

and

L oan R estrictions.

A trust company may loan on “ real estate, chattel,
collateral, or personal security,” but no trust company
may loan on its own stock. The latter restriction seems
not even subject to the exception of necessity to secure
an old debt, for the exception is phrased to include
“ purchase,” but not taking as security. (1907, p. 628.)
VI.— I nvestments.

Trust companies may own buildings suitable for the
conduct of their business and may hold real estate acquired
in the collection of debts, but the real estate so owned
must not exceed 50 per cent of the capital of the company
for a longer period than six months (1905, 1537).




19 5




N at ion a l

M on e t a r y

Commission

A trust company may buy and sell all kinds of govern­
ment, municipal, and corporation bonds, and “ all kinds
of negotiable and non-negotiable paper, securities, and
stocks;” but the total investment of any trust company
in bank stock must not exceed one-fourth of its paid up
capital, and no trust company may purchase its own
stock unless necessary to prevent loss on a previous debt,
in which case the stock must be disposed of within six
months. (1907, p. 628.)
X .— U nauthorized T rust Company B usiness.
The name of every trust company must end with the
words “ trust company” (1905, 1532). No corporation
not organized under the Kansas law relating to trust
companies may use the word “ trust” as part of its name.
Illegal use of the word is a misdemeanor, entailing a fine
of not less than $300 nor more than $1,000, or imprison­
ment for not less than thirty days nor more than one year,
or both; each day during which the word is used being a
separate offense. (1907, p. 629.)
X I.— P enalties .

All the penalties provided in the banking law for failure
to report or permit examinations or to comply with
requirements of the bank commissioner, penalties for
frauds, etc., and those for receiving deposits when insol­
vent, apply to trust companies, their officers, directors,
and employees (1905, 1539).

19 6

KENTUCKY.
In the revisal of the Kentucky statutes issued in 1903,
chapter 32 deals with “ Corporations— private.” Of this
chapter Article II is entitled “ Banks and banking” and
is divided into two subdivisions, “ Incorporated banks
and “ Private bankers,” of which the latter was repealed
in 1906. Article III of chapter 32 treats of “ Trust com­
panies;” and Article VII, of “ Building and loan associa­
tions.” Since this arrangement groups banks and savings
banks together, the digest discusses them under one head,
treating trust companies separately. It must be noted,
however, that under 612a, the second and third clauses of
which seem still to be in effect, trust companies, in so far
as they do a banking business, are subject to the laws
applicable to banks. Numbers in parenthesis refer to
sections in the Kentucky statutes of 1903, and later
legislation is referred to by chapters of the session laws,
which have been examined through 1908.
BANKS AND SAVINGS BANKS.
I.— T erms

of

I ncorporation.

Any number of persons, not less than five, may establish
a commercial bank, or a savings bank, or a bank with de­
partments for both classes of business (577). A bank
combining the business of a commercial and savings bank
must keep separate books for each kind of business (590).




19 7




N a tio n a l

M o n et a r y

Commi ssi on

The capital stock of any bank must be at least $15,000,
and in cities having a population of fifty thousand or
more, at least $100,000 (577). At least 50 per cent of
the capital must be paid in in money before business is
begun. The remainder must be paid in in money within
a year (580).
To combine the business of a bank and a trust company,
not less than seven persons may associate with a capital
stock of not less than $50,000 all paid in in money before
the corporation begins business, except that if the capital
equals or exceeds $100,000, then only one-half of it need
be paid in before business is begun, and the rest must be
paid in within twelve months. One-half of the capital
stock must be securely invested for the trust business and
kept separate; this is primarily liable for trust obliga­
tions. The rest of the capital may be used in banking
business. The books must always show this separation
(1906, chap. 146). The statutes governing banks apply to
the banking department of such a corporation, and those
governing trust companies apply to the trust company
department (612a), unless the second and third clauses of
612a were repealed by chapter 146 of 1906, which seems
unlikely.
Dividends may be declared out of net profits, but before
declaring any dividend not less than one-tenth of the net
profits for the preceding dividend period must be carried
to a surplus fund until the surplus amounts to 20 per cent
of the capital stock (596).
II.— L iabilities

and

D uties of Stockholders
D irectors.

and

Stockholders are liable for all contracts and liabilities
of their bank to the extent of the amount of their stock at
par, in addition to the amount of the stock (595). No per198

Kentucky

State

Banks,

etc.

son may hold more than one-half the capital stock of a
bank exclusive of stock held as collateral (581).
Directors or other officers of any bank who receive
deposits with knowledge that the bank is insolvent are
individually responsible for the deposits (597)- Directors
who knowingly violate or permit their bank to violate any
provisions of the statutes are liable to creditors and stock­
holders for any loss resulting from the violation (598).
III.— Supervision .
There appears to be no officer of the State charged with
the duty of supervising banks alone. It is the secretary
of state who performs the functions of a bank supervisor.
If the reserve of any bank falls below the required amount,
the secretary of state notifies the bank to make the re­
serve good, and if it fails to do so for thirty days the sec­
retary of state, with the consent of the attorney-general,
institutes proceedings for a receivership (585). If the
capital stock of a bank becomes impaired, the secretary of
state notifies the bank to make it good, and if the bank
fails to do so for thirty days the secretary of state may
institute proceedings necessary to wind up the affairs
of the bank (580 and 586). In general, the secretary of
state, when satisfied that any bank or corporation is
insolvent or that its capital is impaired, or that it has
violated any of the provisions of the law under which it
was organized, may, with the approval of the attorneygeneral, apply to the court for the appointment of a
receiver (616); and in case directors who violate the law
fail to make good within a reasonable time whatever
loss their violation occasions, the secretary of state
institutes proceedings for forfeiture of the bank’s charter
(598). The secretary of state has authority to pass upon
proposed reductions in the capital stock of any bank (587).




199

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Monetary

Commi ssi on

REPORTS.

Once in every three months, and oftener if required,
each bank reports its condition to the secretary of state
at such times and according to such forms as he prescribes.
Each alternate report is published in the county news­
paper having the largest circulation (593). In January
of each year the directors of every bank file with the
secretary of state a list of stockholders and officers (595).
Twice in each January every bank publishes a state­
ment of deposits, dividends, and interest which have been
unclaimed by the person to whom they are due for five
years (592).
(For reports due from state depositaries, see 4691 and
1906, chap. 5; for reports required for purposes of taxa­
tion, see 4092, etc., and 1906, p. 134.)




IV.— R eserve R equirements.
Banks must keep on hand at least 15 per cent of their
total deposits, and in cities with a population of 50,000
at least 25 per cent. One-third of this reserve must be
in money, and the balance may be in demand deposits
in other banks. No bank, however, is required to keep
on hand more than 10 per cent of savings deposits— that
is, deposits on which the depositor has not the right to
check except upon giving at least thirty days’ notice (1906,
chap. 155).
V.— Discount

and

L oan R estrictions.

No bank may permit any of its stockholders or any
person, company, or firm, including in company or firm
liabilities those of the individual members, to become
indebted to the bank in an amount exceeding 20 per cent
of its capital and surplus, unless the borrower pledges
good collateral security, or executes a mortgage which is

'

Kentucky

—

I
State

Banks,

etc.

of more than the cash value of the loan above all other
incumbrances. If the borrower is a director or officer
his indebtedness must not exceed io per cent of the
capital of the bank, unless he pledges property worth
double the amount of the excess. In no case may the
indebtedness of a person, company, or firm, including in
company or firm liabilities those of the members, exceed
30 per cent of capital and surplus (583). There must be
no privileges given stockholders in making loans over
persons not stockholders (581).
No bank is allowed to take as security its own stock
(581).
VI.— I nvestments.

Banks may hold such real estate as may be necessary
for the transaction of their business; and, for a period
not longer than five years, such other real estate as is
received in satisfaction of previous debts, or such as is
purchased under a judgment in favor of the purchasing
bank (582).
No bank may hold any of its own capital stock unless
the purchase is necessary to prevent loss on previous
debt. Stock so purchased must not be held for a longer
time than one year (581).
X .— U nauthorized Banking .
Individuals and partnerships may not engage in bank­
ing; violation of this rule is a misdemeanor, for which
the penalty is from $20 to $50 a day while the illegal
business is conducted (1906, chap. 44).
X I.— P enalties .
Any bank which fails to make reports within five days
after they are due, or which fails to publish them, forfeits
$200 (594). Officers of banks who receive deposits with




201




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Monetary

Commi ssi on

knowledge of the bank’s insolvency (and the same rule
prevails in the case of individual bankers) are guilty of a
felony, for which the punishment is from one to ten years’
imprisonment (597). If directors of a bank allow a viola­
tion of law and the damage occasioned is not made good
within a reasonable time, the secretary of state institutes
proceedings for forfeiture of the bank’s charter (598).
TRUST COMPANIES.
I.— T erms

oe

I ncorporation.

Any number of persons, not less than seven, may
incorporate a trust company with a capital of not less
than $15,000 in counties having a population of over
25,000 and under 40,000; with a capital of not less
than $100,000 in counties of over 40,000 and less than
100,000; and with a capital of not less than $200,000 in
counties of over 100,000. In counties of 25,000 or more,
however, where there are cities belonging to certain
classes (see statutory classification in 2740), a trust com­
pany may be organized in one of those cities with a capital
of not less than $25,000 (1904, chap. 78). At least 50
per cent of the capital stock must be paid in in money
before the trust company begins business. The remainder
must be paid in in money within a year (607).
For the combination of trust company and banking
business see I, under Banks and savings banks. Trust
companies are forbidden to engage in banking business
except under the provisions of chapter 146 of 1906, and
612a, for the combination of banking and trust company
business (612).
II.— L iabilities

and

D uties

of

Stockholders.

The stockholders of trust companies are liable for all
contracts and liabilities of their corporation to an amount
equal to their stock at par in addition to the amount of

22
0

Trust

Kentucky

Companies

the stock (613). No person may hold more than onehalf the stock of any trust company, exclusive of stock
held as collateral (609).
III.— Supervision.
The secretary of state has authority, with the advice and
consent of the attorney-general, to withhold the certificate
allowing the company to begin business if he thinks it
has been formed for an illegitimate purpose (608).
On becoming satisfied that a trust company h£^ become
insolvent or that its capital is impaired, or that it has
violated the law, he may apply for the appointment of a
receiver (607 and 616).
REPORTS.

Trust companies report their condition as often and
on the same dates and in the same manner as banks do
(615). A list of the stockholders and officers must be
filed with the secretary of state in January of each year
(613). (For reports for purposes of taxation see 4092,
etc., and 1906, p. 134.)
V.— Discount

and

L oan R estrictions.

No stockholder or any person, company, or firm,
including in company or firm liabilities those of the
members, may be indebted to a trust company in a sum
exceeding 10 per cent of its capital and surplus, unless
the borrower deposits good collateral security, or executes
a mortgage worth more than the cash value of the loan
above all other incumbrances. If the borrower is a
director or officer he must not become indebted in excess
of 10 per cent of the capital stock without pledging
property worth double the excess. In no event may the
indebtedness of one person, company, or firm, including
in company or firm liabilities those of the members,




203




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exceed 20 per cent of capital and surplus (610). The
same security is required of stockholders as of persons not
stockholders (609).
Trust companies are not allowed to take their own
stock as security (609).
VI.— I nvestments.

Trust companies may acquire land only for the trans­
action of their business, and, for a period not longer than
five ye^rs, such other land as may be conveyed to them
in satisfaction of previous debts, or such as may be pur­
chased under a judgment in favor of the company; this
does not prevent trust companies from holding land in
trust, however (612).
Trust companies may not hold their own stock, unless
the purchase is necessary to prevent loss upon a previous
debt, and in that case the stock must be disposed of at
the end of a year (609).
The capital of trust companies doing a banking business
must be invested by halves, one-half for the trust-company
business and the other for the banking business (1906,
ch. 146).
X I.— P enalties .
Failure to make or publish reports entails the same
penalty that is imposed upon banks for a like offense
(615); and in general trust companies are subject, when
engaged in the banking business, to all the provisions of
law regarding banks (612a).

204

LOUISIANA.
The statute law of this State on banking is in a very con­
fused condition because so many recent statutes, in­
stead of repealing former statutes specifically, have only
repealed such laws or parts of laws as are consistent with
the recent enactments. The revision of 1904 recognizes
this difficulty, and so does the reprint of banking statutes
on which this digest is based— a compilation, including
all legislation through the session of 1908, prepared by
L. E. Thomas, formerly state examiner of state banks.
Mr. Thomas calls act No. 179 of 1902, as amended by act
No. 140 of 1906, the general banking act, and act No. 45 of
1902 the trust company act. This, however, by no means
makes it clear to which classes of business each of these
two statutes applies, for No. 179 is framed to cover “ bank­
ing associations and savings banks ” and No. 45 to cover
“ banks ” organized “ for the purpose of conducting a sav­
ings, safe-deposit, and trust banking business in any of its
branches.” Owing to the difficulty occasioned by this
phraseology in determining to which of our three classes, viz,
banks, savings banks, or trust companies, the various pro­
visions apply, the digest is not arranged according to those
three classes, but in stating each provision tries to point its
application merely by using the language of the clause on
which it is based. The matter is further complicated be­
cause section 32 of 179 provides that in case of conflict with




205

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Commission

45, 45 is to control so far as concerns savings, safe-deposit,
and trust banks; whereas section 7 of 45 provides that banks
organized under that law shall, except as provided in it,
have the powers and be subject to the regulations of banks
organized under the general banking laws. All pertinent
provisions of acts Nos. 45 and 179 of 1902 are here presented,
citing those acts simply as “ 45 ” and “ 179 ” , with sections.
Other acts are inserted which seem clearly not repealed;
they are cited either by year and number, or, where the
abbreviation R. S. is used, by sections in the revised laws
of Louisiana, 1904.
I.— T erms

of

Incorporation.

The regular amount of capital prescribed for banking
associations and savings banks is $100,000 (179, sec. 28).
Outside any incorporated town of 250 or more inhabitants,
however, the corporation need have a cash capital of only
$10,000 (179, sec. 2). There are the following rules for
smaller capital, also: Banking associations other than
savings banks may be organized in incorporated towns
of less than 2,500 with a capital of $10,000; in incorporated
cities or towns of from 2,500 to 10,000, with $30,000; and
in those between 10,000 and 20,000, with $50,000. Also
savings banks may be established in towns of not more
than 15,000 with a capital of $30,000; and in towns from
15,000 to 30,000, with $50,000 (179, sec. 28).
Banks organized under the act relating to savings, safedeposit, and trust banking business must have a cash paidin capital of at least $100,000 (45, sec. 6). It has been
enacted, however, that savings and safe-deposit banks
may be organized with a cash capital of not less than
$30,000 in incorporated towns of not more than 20,000
(R. S. 277, as amended by 189 of 1902).




206

Louisiana

—

General

Provisions

Banking associations and savings banks must not begin
business until one-half of the subscribed capital has been
paid in in cash. The remainder must be paid up within
ninety days after the business has been begun (179, sec. 8).
The directors of every banking association and savings
bank must set aside one-tenth of the annual profits, until
this surplus equals 20 per cent of the capital; no divi­
dends may be paid unless they have been earned within
the preceding dividend period, and in case there are debts
on which payments of principal or interest have been
overdue for twelve months, no dividends may be declared
till the debts in question have been charged off or reduced
in value after an appraisement by the state bank examiner
and two stockholders of the bank (179, sec. 30, and see
also act 65 of 1900).
Banks may apparently combine general banking, sav­
ings bank, and trust company business (45, sec. 5).
II.— L iabilities

and

Duties of Stockholders
Directors.

and

The liability of a shareholder in any banking association
or savings bank is limited to the unpaid portion of the
original purchase price of his stock (179, sec. 10).
There must be not fewer than seven nor more than
fifteen (though note that under 45 the number of direct­
ors may be whatever the articles of incorporation pre­
scribe) directors of a banking association or savings bank;
at least three-fourths of the directors, officers, and em­
ployees of every banking association and savings bank
must be citizens of Louisiana; all directors of banking
associations and savings banks must be citizens of the
United States (179, sec. 4); a majority of the directors of
a corporation organized under the savings, safe-deposit,
and trust banking act must be citizens of Louisiana (45,
sec. 1). Directors of banking associations and savings




207




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Monetary

Commission

banks must meet once a month, at which meeting the
cashier reports a statement of the condition of the com­
pany to the directors (179, sec. 25).
If directors consent to dealing in any merchandise,
except such as is necessary to secure previously contracted
debts, they become personally responsible for all damages
and losses (179, sec. 11). If they assent to declare a divi­
dend in excess of net profits, or a dividend which impairs the
capital and surplus, they are liable to the creditors of the
company for whatever loss occurs thereby (act 65 of 1900).
In case a banking association or savings bank after having
committed a continuing act of insolvency assigns its prop­
erty, those officers who assist in such assignment are per­
sonally liable for the corporation’s debts (179, sec. 18).
Directors who participate in the reduction of reserves
below the required amount are probably liable for the debts
of the banking company (R. S., 301). It is a crime for a
director or other officer of a banking institution or other
corporation accepting deposits or loans to accept deposits
or create debts with a knowledge that the corporation is
insolvent. The director or officer makes himself indi­
vidually responsible for such deposits or debts (constitu­
tion, art. 269, and act 108, 1884).
III.— S upervision.
The official in charge of banking in Louisiana is the
state examiner of state banks. He must be an expert
accountant and familiar with banking transactions; he
is appointed for a term of four years (constitution, art. 194,
and act 198 of 1898, sec. 1); his salary is $2,500 a year
(act 198 of 1898, sec. 1); he may not receive any compen­
sation or gift beyond this (act 198 of 1898, sec. 2).
Before doing business, every banking association and
savings bank procures a certificate from the examiner, to
obtain which it must furnish him with satisfactory proof of
208

L o u i s ian a

General

Provisions

compliance with the statutory requirements (179, sec. 8).
The articles of association under which a banking associa­
tion or savings bank organizes are published in the local
newspaper for four weeks (179, sec. 5); they contain such
items as the domicile of the banking association or savings
bank, the amount of its capital, number of shares, the
names and addresses of subscribers, and the names of
directors (179, sec. 7).
Whenever the examiner believes the capital of a banking
association or savings bank to be impaired, he proceeds,
with the assistance of two stockholders, to make an esti­
mation of resources and liabilities; if he is then of the opin­
ion that the capital is impaired to the amount of 20 per
cent he reports the result of his findings to the auditor,
who directs the banking association or savings bank to
make good the impairment within two months (sec. 179,
sec. 17). When the reserve of a banking association car­
rying on the business of a bank of discount, deposit,
exchange, and circulation falls below the required amount,
and remains so for ten days, the president must notify the
state examiner within twenty-four hours of the end of the
tenth day (179, sec. 15). This reduction of reserve prob­
ably warrants proceedings by the auditor for a liquidation
of the bank’s affairs (R. S., 301).
An act of insolvency or violation of law is ground for
forfeiture of charter and a receivership (R. S., 284, and 179,
sec. 13). Various acts of insolvency are defined. One is
refusal to pay demand obligations, but the proviso is
added that with the consent of the governor or the auditor
of public accounts, any clearing-house association may agree
to suspend payment of demand obligations when this is
deemed necessary by a majority of the banks or bankers
forming the association, in order to protect stockholders
and creditors or avert financial panic (179, sec. 16).
S. D oc. 353, 6 1-2




14

209




National

Monetary

Commission

REPORTS.

Four times a year the examiner announces to each bank­
ing association and savings bank a certain past day on
which the condition of each corporation is to be reported to
him (179, sec. 19); each corporation within seven days after
the notice reports the condition of its business on the date
specified, which report is published by the examiner in
such manner as to secure the greatest possible publicity,
and by the banking association or savings bank in a local
newspaper (179, sec. 20). The form which is furnished
by the examiner includes the following items: Resources—
Demand loans, loans secured by mortgage, other loans
and discounts, overdrafts secured and unsecured, United
States bonds, Louisiana state bonds, other bonds, stocks,
securities, etc., banking-house furniture and fixtures, other
real estate owned, due from banks and bankers, checks
for the clearing house, checks and other cash items, lawful
money reserved in bank, gold coin, silver, nickel, and copper
coin, national-bank notes, and all issues of the United
States Government, and suspense account. Liabilities—
Capital stock paid in, surplus, undivided profits less ex­
penses and taxes paid, due to other banks and bankers,
dividends unpaid, individual savings deposits, individual
deposits subject to check, time certificates of. deposit,
demand certificates of deposit, certified checks, cashier’s
checks outstanding, bills payable, notes and bills redis­
counted, certificates of deposit for borrowed money, and
amounts due to persons not included in the foregoing
(179, sec. 21 and 22).
At the monthly directors’ meeting of banking associa­
tions and savings banks the cashier reports to the directors
a statement of the company’s condition (179, sec. 25).
Certain reports of banking institutions are required to be
made for purposes of taxation ^act 170 of 1898, sec. 27).
210

Louisiana

General

Provisions

All incorporated institutions in Louisiana receiving
deposits or declaring dividends on money or evidences of
indebtedness publish annually in the official journal of the
State, once a week for four weeks in succession, a complete
list of unclaimed deposits or other claims, of more than
$10, whenever these deposits or claims are of three years’
standing. When unclaimed for seven years these funds
are administered as vacant estates (act h i , 1874). It is
provided in a later statute (which is thought to repeal
act h i of 1874 only with respect to banking associations)
that the bank examiner reports to the auditor all balances
on the books of banks and trust companies that have
remained uncalled for and unnoticed by the depositors for
ten years (act 288 of 1908).
The examiner reports biennially to the legislature at the
commencement of each session a summary of the condi­
tion of state banks, banking associations, and savings
banks from which he has had reports, with an abstract of
total capital, total debts and liabilities, total resources
and assets, total specie held, and other useful information;
suggestions with regard to the banking laws; and a state­
ment of the banks, banking associations, and savings banks
that have closed business during the preceding two years
(act 198 of 1898, sec. 5).
EXAMINATIONS.

The examiner must examine all state banks at least twice
every year (constitution, art. 194), when he believes the
capital of any banking association or savings bank to be
impaired he examines with two stockholders as described
above (179, sec. 17). When in the examiner’s opinion,
after the examination, there is good cause to believe that
any bank, banking association, or savings bank has made an
incorrect quarterly return, or is not in a sound condition,
or has not conformed to law, it is the examiner’s duty to







N ational

M on e t a r y

Commission

examine its affairs fully and if necessary close the opera­
tions of the institution while making a complete investiga­
tion, the results of which the examiner reports to the gov­
ernor (act 198 of 1898, sec. 4, as amd. by 149 of 1900).
When a corporation organized under the act relating to
savings, safe deposit and trust banking business is acting
as fiduciary, the court appointing it may, if it thinks neces­
sary, require the examiner to investigate the affairs and
management of the corporation (45, sec. 2).
IV.— R e s e r v e R e q u i r e m e n t s .
In the act for banking associations and savings banks it
is provided that “ every banking association carrying on
the business of a bank of discount, deposit, exchange, and
circulation,” must keep in its office in lawful money of the
United States an amount equal to 8 per cent of its demand
deposits; it must also keep in lawful money on deposit,
subject to sight draft, an additional amount equal to 17
per cent of its demand deposits. The remaining 75 per
cent of its deposits it must keep in lawful money or in cash
balances in other solvent banks, or in discounted paper
having not more than twelve months in which to mature,
or in such bonds as are described in section 3 of 179, given
below under VI (179, sec. 14).
If the reserve falls below the requirement and remains
so ten days, the president must notify the examiner.
Thereafter it is not lawful for the bank to discount any
new paper until the reserve has been reestablished. This,
in section 15, is the only consequence (prescribed in
179) of failure to preserve the reserve. It was law before
the passage of 179, however, that a violation of the re­
serve provisions of the Revised Statutes should be an act
of insolvency for which the affairs of the company might
be liquidated (R. S., 301). If R. S. 301 has been repealed,
212

Lo ui s i ana

—

Ge n e r a l

Pr ovi si ons

it is by virtue of sec. 16 of 179, as amended by act 140
of 1906.
Banks organized under the act dealing with savings,
safe deposit and trust banking must maintain a reserve
in lawful money of the United States or in cash due from
other banks or bankers equal to 25 per cent of demand
deposits; 8 per cent of demand deposits must be kept on
the premises in cash; for the remainder of demand deposits
there must be kept on hand lawful money of the United
States or cash due from other banks, or bills of exchange,
or discounted paper maturing within a year, or securities
of the United States, any state, or any American public or
private corporation (No. 45, sec. 5).
V.— D iscount

and

L o a n R estrictions .

No banking association or savings bank may loan to any
one borrower more than 20 per cent of its stock, surplus,
and undivided profits unless the loans are secured by good
collateral or solvent endorsements (179, sec. 26).
No banking association or savings bank may lend to any
officer or employee of the corporation engaged in its active
management unless the loan is approved by the directors
by a vote in which the applicant for the loan does not par­
ticipate (179, sec. 26).
No banking association or savings bank may loan on a
pledge of its own stock (179, sec. 9).
VI.— In v e s t m e n t s .

Banking associations and savings banks may only hold
real estate when necessary for the transaction of their
business; when mortgaged to them to secure loans; when
conveyed to them to satisfy previously contracted debts;
and when purchased at sales under judgment or mortgage
in favor of themselves (179, sec. 3).




213




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M on et a r y

Commi ssi on

Banking' associations and savings banks may invest in
bonds of the United States, of Louisiana, of levee districts
in Louisiana, and of such municipalities of Louisiana as
have not defaulted in interest on their bonds for five years
preceding (179, sec. 3). No banking association or savings
bank may hold its own stock for a longer time than six
months (179, sec. 9). Banking associations and savings
banks are prohibited from dealing in cotton, sugar, or any
kind of merchandise except to secure a debt previously
contracted (179, sec. 11). Savings banks may buy and
sell such promissory notes as are secured by good and
sufficient collateral securities worth 50 per cent more than
the loan (179, sec. 3).
Banks organized to conduct a savings, safe deposit, and
trust banking business may hold only such real estate as
is necessary for their business, or has been mortgaged to
secure loans, or has been conveyed to satisfy previously
contracted debts, or has been bought at a sale under judg­
ment or mortgage. With the exception of real estate held
in trust or for the transaction of their business, they may
not hold real estate for a longer period than ten years.
These corporations may hold such personal property,
including securities of the United States or of any State
of the United States or of any public or private corporation,
as may be necessary or convenient to the objects of the
corporations (45, sec. 1).
VII.— O v e r d r a f t s .

Overdrafts are allowed, for they are referred to in the
list of resources in reports (179, sec. 22) and also in an­
other enumeration of assets of banking corporations (179,
sec. 30).

214

L o u is i a n a

General

Provisions

V III.— B ranches.
Corporations organized under the savings, safe deposit,
and trust banking law may have “ one or more offices of
discount and deposits” in the municipality or parish
where the company is located (45, sec. 7).
X.— U nauthorized B anking .

The business of banking may be carried on only by cor­
porations organized under the laws of Louisiana or of the
United States, by individual citizens of Louisiana, and by
firms domiciled in Louisiana whose active members are
citizens of Louisiana. Unless incorporated no banker shall
use the title “ banking association,” or “ savings bank”
(179, sec. 1). Every savings bank must make use of the
words “ savings bank” in its title (179, sec. 3).
XI.— P enalties .

If a banking association or savings bank begins busi­
ness without authority from the examiner, or without its
capital having been paid up, it is punished by a fine not
exceeding $500 laid upon the directors and managers
(179, sec. 8). Moreover, banking associations and sav­
ings banks that do not complete their required capital
may lose their charters (179, sec. 29). The banking asso­
ciation or savings bank that violates the rule requiring a
surplus, or that forbidding the payment of dividends
unless earned forfeits $500 (179, sec. 30). The banking
association which is guilty of a continuing act of insol­
vency forfeits its corporate rights (179, sec. 13). If the
president of a banking association carrying on the business
of a bank of discount, etc., does not report an impairment
of reserve within eleven days, the banking association
forfeits $10 per day (179, sec. 15).




215




National

Monetary

Commi ssi on

The banking association or savings bank which fails to
transmit its report to the examiner, publish it, and furnish
proof of the publication, becomes liable to a penalty of
$50 (179, sec. 20). A further provision of the same act
makes it the duty of the district attorney of the local parish
to sue the banking association or savings bank that fails
to furnish its report on time for a penalty of $100 (179,
sec. 23). Any incorporated institution receiving deposits or
declaring dividends on money or evidences of indebtedness
must, if it fails to publish its unclaimed deposits, etc., pay
a penalty of $1,000; if, after suit for this $1,000 has been
begun, the institution still fails to publish, it becomes sub­
ject to a further penalty of $2,000 a month (act 111 of
1874, sec. 3). So far as it relates to state banking asso­
ciations this penalty for not publishing unclaimed deposits
is thought to be repealed by act 288 of 1908.
A banking association or savings bank that holds its
own stock for a longer period than six months forfeits $10
per month per share (179, sec. 9). The banking associa­
tion or savings bank that deals illegally in merchandise
forfeits not more than $1,000 (179, sec. 11).
The director or other officer who receives deposits after
a banking institution has become insolvent is liable to
imprisonment of from five to ten years (act 108 of 1884,
sec. 2). The director or officer of a banking association or
savings bank who assents to a violation of the section deal­
ing with the limit of loans to individuals and to officers is
fined $500 (179, sec. 26). The directors, officers, etc., of
banking companies, who perpetrate various frauds, among
them concealment of the condition of the bank from
the examiner, are liable to imprisonment of from one to
three years (R. S., 877) . The cashier of any banking asso­
ciation or savings bank who fails to notify stockholders
and directors of meetings, or to present to the directors a
statement of the affairs of the corporation at the monthly
216

Louisiana

—

General

Provisions

meeting, suffers a penalty of $25 (179, sec. 25). Officers
of a banking association or savings bank who fail to keep
proper accounts are subject to a penalty of $25 per month
(179, sec. 27).
Any examiner who receives extra compensation is
guilty of a misdemeanor, punishable by $500 fine, in de­
fault of payment of which he is imprisoned from six months
to one year (act 198 of 1898, sec. 2).
Any person who maliciously circulates false statements
attacking the financial condition of any bank organized
under Louisiana law is guilty of a misdemeanor punishable
by fine, imprisonment, or both (act 251 of 1908.)




217




»

MAINE.
The digest for Maine is based upon a compilation of the
statutes issued by the banking department of the State,
including all laws through the session of 1907. This com­
pilation has been compared with the statutes themselves
and found to include all material laws, except a few sec­
tions; these are added in the digest, together with amend­
ments contained in two short statutes of 1909. Chapter 48
of the Revised Statutes, which include legislation through
the session of 1905, is entitled “ Savings banks, Loan and
building associations, Trust and banking companies,
Foreign banking corporations.” Many of the provisions
of chapter 48 apply clearly to savings banks. Those
which apply to building and loan associations, etc., are
omitted from the digest. The remaining sections apply
to “ trust and banking companies.” These sections are
supplemented by an act passed in 1907 which states in its
title that it is additional to and amendatory of chapter 48,
and that it relates to the organization and management
of trust companies. Under it, trust companies are all
given banking powers, and by one of its sections, a section
of chapter 48 dealing with banking and trust companies
is amended, using in the amendment the words simply
“ trust companies.” It is believed, therefore, that none
of the provisions of the Maine statutes applies simply to
banks; so the digest is arranged under the heads simply
218

M a i n e

—

S a v i n g s

B a n k s

of “ Savings banks” and “ Trust companies.” The refer­
ences in the digest are either to the Revised Statutes, in
which case they begin with the letters R. S., or to the
public laws of 1905 or 1907, in which case the year is indi­
cated. Where statutes of 1905, 1907, or 1909 amend
directly a section in the Revised Statutes, the section is,
for the sake of saving space, cited by its number in the
Revised Statutes simply, considering the amendment as
incorporated in it. The chapter is given in each case, and
the number following is the section in the chapter.
SAVINGS BAN KS.'
I.— T erms

of

I ncorporation.

The statute contemplates savings banks without capital
stock (R. S., chap. 48, 3). Three-fourths of the incor­
porators must reside in the county where the bank is to
be located, and all members added to the number of
original incorporators must be citizens of that county or
one adjoining it (R. S., chap. 48, 4 and 12). There must
be at least thirty members; removal from the State or
failure for two successive years to attend annual meetings
is equivalent to resignation' (R. S., chap. 48, 12).
Dividends must not exceed 2% per cent semiannually,
except as appears below. After passing the required
amount to reserve fund (one-fourth of 1 per cent of the
average deposits for the preceding six months) the trustees
accord dividends to depositors of three months’ standing
at least, unless the by-laws provide that the period be
shorter. When the reserve fund amounts to 10 per cent
of the average deposits for the six months previous to the
declaration of a dividend, all net profits still remaining are
divided every three years among depositors of one, two,




219




and three full years’ standing as extra dividends. Divi­
dends must always be within the amount of actual
earnings (R. S., chap. 48, 28). No deposits may be
received under an agreement to pay a specified sum of
interest (R. S., chap. 48, 30).
The assets of a savings bank that is connected with a
“ national or stock bank’’ must be kept separate from the
assets of the national or stock bank (R. S., chap. 48, 34).
This reference to a “ stock bank’’ is the only intimation in
the statutes of the possibility of such a bank as different
from a trust and banking company.
II.— L iabilities

and

D uties

of

T rustees .

There must be not less than five trustees, not more than
two of whom are allowed to be directors in any one national
bank, trust company, or other banking institution (R. S.,
chap. 48, 13). There are restrictions upon the positions
in other banking institutions which savings bank officers
may hold; and it is provided that if the treasurer of a
savings bank having deposits not exceeding $150,000 is
cashier of a national bank or a trust and banking company,
the board of trustees of the savings bank must not include
more than one director nor more than two stockholders
in the national bank or trust and banking company thus
connected with the savings bank (R. S., chap. 48, 14). A
trustee who becomes a trustee or officer of another savings
corporation vacates his office (R. S., chap. 48, 15). The
trustees may receive such compensation for their services
in making examinations and returns as may be fixed by
the corporation in meeting (R. S., chap. 48, 16). It is the
duty of at least two of the trustees once a year to make the
examination described below (R. S., chap. 48, 39). No
officer of a savings bank may take a fee or commission on
account of a transaction to which the bank is a party
(R. S., chap. 48, 40).

M a i n e

—

S a v i n g s

B a n k *

III.— Supervision .

The state officer who supervises banking is the bank
commissioner, who holds office for three years and must
not be an officer in any bank in thew
State (R. S., chap.
48,1). His salary is $2,500 a year (1905,chap. 159). The
bank commissioner approves of the place chosen to deposit
the securities held by savings banks; they must be kept
within the State (R. S., chap. 48, 35).
Before granting permission to a savings bank to do busi­
ness, the commissioner determines whether there will be
greater access to a savings bank afforded a considerable
number of people by opening the one. proposed, and
whether the responsibility, character, etc., of the incor­
porators are such as to command confidence (R. S., chap.
48, 7). He does not grant a certificate unless satisfied of
these points and that the organization as proposed will
be a public benefit (R. S., chap. 48, 8). He may require
a savings bank to charge down its investments on its books
to what he considers a proper value (1909, chap. 149,
amending R. S., chap. 48, 23).
If upon examination the commissioner is of opinion that
any savings bank is insolvent or that its condition is such as
to make its further proceedings hazardous, he must apply
for an injunction to stop its business. If he is of opinion
that it has exceeded its powers or has failed to comply
with law, he may apply for the injunction. The court may
grant such decrees as the case warrants, including the
appointment of receivers (R. S., chap. 48, 44). Their con­
duct of the liquidation is detailed (R. S., chap. 48, 45, 46,
and 47). If a savings bank is insolvent on account of
depletion in its assets without fault of its trustees, then,
on petition of a majority of the trustees and the bank
commissioner, the court may set a time for examination,
and, on being satisfied that the corporation has complied




221

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with law, may decree a reduction of deposits of each deposi­
tor so as to divide the loss pro rata. The savings bank then
proceeds with its business with the deposits as reduced,
although if such a sum is realized from the assets as to make
it possible to set the deposits at their original figure or
raise them toward it, that is done (R. S., chap. 48, 48).
The court may grant orders restraining the paying out of
funds, the declaration of dividends, etc. (R. S., chap. 48,
49). Voluntary liquidation under order of court is pro­
vided for at the request of the commissioner and a
majority of the trustees (1907, chap. 128).
REPORTS.

After the annual election a list is published of officers
and incorporators; the same list is transmitted to the com­
missioner (R. S., chap. 48,17). The treasurer of every sav­
ings bank, on forms furnished by the commissioner, annu­
ally reports its condition at such time as the commissioner
designates, transmitting the report to him within fifteen
days after receipt of his request (R. S., chap. 48, 37). At
least two trustees annually, after examining the affairs of the
savings bank and settling the treasurer’s account, report
the condition of the bank to the commissioner, on blanks
furnished by him, and after notice from him (R. S., chap.
48, 39). The treasurer publishes annually in a local news­
paper a statement of the name, the amount standing to
his credit, residence and fact of death, if known, of every
depositor who has not dealt with his deposit for more than
twenty years, this does not apply if the treasurer knows
the depositor to be living. A copy of this statement is
sent to the commissioner (R. S.,chap. 48,38). Receivers
of savings banks report annually to the commissioner, or
oftenerif he requires (R. S., chap. 48, 44).
(For reports required of savings banks for purposes of
taxation, see R. S., chap. 8, 53 et seq.)
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B a n k s

Annually the commissioner reports to the governor and
council the condition of all savings banks he has examined,
with such suggestions as he deems expedient (R. S.,
chap. 48, 50).
EXAMINATIONS.

Weekly balances and annual statements of the amount
of individual deposits, with the aggregate of deposits, are
required of the treasurer (R. S., chap. 48, 36). At least
two of the trustees once a year examine the affairs of the
savings bank, settle the treasurer’s account, and report to
the bank commissioner the condition of the savings bank
as he requires (R. S., chap. 48, 39). The commissioner or
one of his clerks as deputy visits every savings bank once
a year, and oftener if he deems it expedient, to inspect
its affairs, its ability to fulfill its engagements, and its
compliance with law. A copy of the commissioner’s
statement is published in a local newspaper (R. S., chap.
48, 1 and 42).
V.— Discount, L oan ,

and

D eposit R estrictions.

No loan may be made to any officer of a savings bank
or a firm of which he is a member (R. S., chap. 48, 27).
No savings bank may hold as security for loans more
than one-fifth of the capital stock of any corporation
(R. S., chap. 48, 25).
Savings banks must not receive from any one depositor
over $2,000, no interest is allowed to be paid to any
depositor if his deposits, including dividends, exceed
that sum, except in the case of deposits of widows,
orphans, etc., charitable institutions, and trust funds
(R. S., chap. 48, 19). Deposits may not be received
under agreement for a specified rate of interest (R. S.,
chap. 48, 30). No savings bank is required to pay any
depositor more than $50 at a time or in any month until
after ninety days’ notice (R. S., chap. 48, 31).




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Monetary

Commission

(For other provisions concerning loans, see VT, Invest­
ments, infra.)
VI.— I nvestments.
Real estate in the city or town in which a savings bank
is located may be held by the savings bank to an amount
not exceeding 5 per cent of its deposits, or to an amount
not exceeding its reserve fund (R. S., chap. 48, 24).
Deposits may be invested only as follows: First— (a) In
public funds of the United States and the District of
Columbia; (b) in the public funds of any of the New
England States and of certain other enumerated States.
Second— (a) In the bonds of municipalities of New Eng­
land States; (b) in the bonds of cities and districts of
enumerated States having a population of 75,000 or more,
if issued for municipal purposes and a direct obligation on
all taxable property; (c) in bonds of counties of 20,000
inhabitants or more in enumerated States if issued for
municipal purposes and a direct obligation on all taxable
property and not issued in aid of railroads, provided that
the net indebtedness of the county does not exceed 5 per
cent of the valuation of its property for taxes; (d) in
bonds of any city of 10,000 or more, in enumerated States,
if issued for municipal purposes and a direct obligation on
all taxable property and not issued in aid of railroads,
provided that the net indebtedness of the city does not
exceed 5 per cent of the valuation of its property for
taxes; (e) in refunding bonds of counties and cities above
enumerated issued to take up legally issued bonds, pro­
vided interest has been fully paid on the original bonds
for five years prior to the refunding, and provided the
counties and cities can otherwise meet the foregoing con­
ditions; (/) in bonds and obligations of school district
boards, boards of education, etc., “ in such cities,” author­
ized to issue bonds payable from taxes levied on all the
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e

—

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B a n k s

property in the district, provided the population of the
district is 10,000 or more, and the population and assessed
valuation of the district are at least 90 per cent of popu­
lation and valuation of the city in which the district is
located, and provided the net indebtedness of the district
does not exceed 5 per cent of its property as valued for
taxes; (g) in bonds or obligations of municipal or quasi­
municipal corporations of Maine if a direct obligation on
all the taxable property of the corporation. Third— (a) In
railroad bonds of Maine; (b) in first-mortgage bonds of
railroads in enumerated States; (c) in first-mortgage
bonds of three named railroads; (d) in mortgage bonds of
a railroad leased to a dividend-paying railroad in New
England, if the lessee guarantees dividends and interest
of the lessor; (e) street railroad companies are not rail­
road companies for investment purposes; (/) in bonds of
street railroads in Maine and in first-mortgage bonds of
street railroads in other enumerated States, provided in
general, with certain minor distinctions, that the paid in
capital stock equals 33^ per cent of the mortgage debt and
has been expended on the road, or that annual dividends
of 5 per cent have been paid for five years on an amount
of capital stock equal to one-third of the bonded debt;
no bonds secured by an open mortgage are legal under this
provision unless the mortgage provides that the total
outstanding bonds shall never exceed 75 per cent of the
cash expended on the road; (g) in refunding bonds which
are of an issue to retire the entire funded debt under the
conditions as applied to first-mortgage bonds in (6), (c),
and (/) of the above, and which are secured by a first
mortgage on the whole or any part of the system.
Fourth— In the mortgage bonds of New England water
companies earning more than fixed charges, interest on
debts, and running expenses. Fifth— In bonds of other
corporations of Maine paying 5 per cent dividends.
S- Doc. 353. 61-3---- 15




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Sixth— (a) In stock of any bank or banking association
incorporated under the laws of Maine; (b) in the stock of
national banks in New England; (c) in the stock of rail­
road companies of Maine unincumbered by mortgage;
(d) in the bonds, stocks, or notes of any New England
railroad which has paid annual dividends of 5 per cent on
capital equal to one-third of its funded debt for ten years,
and in the stock or notes of four enumerated railroads;
(e) in the stock of any railroad leased to a dividend-paying
railroad in New England, if the lessee guarantees divi­
dends and interest of the lessor; (/) in the stock of other
Maine corporations earning regular dividends of not less
than 5 per cent a year. Seventh— (a) In loans secured
by first mortgages of real estate in Maine and New Hamp­
shire to an amount not exceeding 60 per cent of the value
of the real estate; (6) in notes with a pledge as collateral
of securities in which the bank might invest, provided the
market value of the collateral is equal to the amount of
the loan; (c) in notes with a pledge as collateral of any
savings bank deposit book issued by a Maine savings
bank; (d) in notes with a pledge as collateral of such
funds, bonds, notes, or stocks as in the judgment of the
trustees it is for the interest of the bank to accept, to an
amount not exceeding 75 per cent of their market value;
(e) in loans to municipal corporations of Maine; (/) in
loans secured by a mortgage of personal property, if the
trustees approve; (g) in loans to corporations owning
real estate in Maine and conducting their business in
Maine. Ninth— There are provisions for valuing invest­
ments on the bank’s books, under supervision of the com­
missioner, who may also require reports of corporations
whose securities are, or are likely to become, savings bank
investments (R. S., chap. 48, 23).
No savings bank may hold more than one-fifth of the
capital stock of any corporation; no savings bank may
226

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S a v i n g s

B a n k s

invest more than io per cent of its deposits, nor exceeding
$60,000 in the stock or notes of any corporation; no sav­
ings bank may have more than 50 per cent of its deposits
in mortgages of real estate. The provisions of this para­
graph, however, and of the two preceding paragraphs, do
not apply to real estate or other assets acquired by fore­
closure or judgment, or in settlements to secure debts, nor
does this paragraph apply to bonds enumerated under
First, Second, Third, Fourth, and Fifth of the paragraph
above (R. S., chap. 48, 25).
Savings banks may deposit on call in Maine banks or
banking associations or national banks (R. S., chap.
48, 26).
X .— U n a u t h o r i z e d B a n k i n g .
Whoever, not authorized by law, advertises his busi­
ness as that of a savings bank, or receives deposits under
that pretense, forfeits $100 for each offense (R. S., chap.
48, 52); it was so provided in the Revised Statutes, but a
law of 1905 apparently changes the provision by enact­
ing the following: No person, firm, or corporation, ex­
cepting those authorized under Maine or United States
law to conduct a bank or trust company business, may
use as part of their name the words “ bank,” “ savings,”
etc.; the persons violating this either individually or as
members of a partnership or persons interested in a cor­
poration may be punished by fine of not more than
$1,000, imprisonment for not less than sixty days nor
more than one year, or both (1905, chap. 171).
X I.— P e n a l t i e s .
If the clerks of a savings bank do not publish the list
of officers and incorporators required, and return a copy
of this list to the commissioner, any clerk offending is liable
to a penalty of $50 (R. S., chap. 48, 17). If the treasurer




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of a savings bank neglects within sixty days after the
declaration of a dividend to credit it to the proper deposit
account he is punished by a fine of from $100 to $200
(R. S., chap. 48, 29). If the treasurer of a savings bank
fails to publish the annual report of undisturbed deposits
and transmit to the commissioner he is liable to a penalty
of $50 (R. S., chap. 48, 38). Whoever obstructs the
commissioner in the discharge of his duty is fined not exceed­
ing $1,000 or imprisoned not exceeding two years (R. S.,
chap. 48, 43). Any officer of a savings bank who re­
ceives a commission on account of the transaction to which
the bank is a party forfeits $100 for each offense (R. S.,
chap. 48, 40). Any officer of a corporation who reports
falsely to the commissioner when required to report in­
formation with respect to its securities as savings bank
investments, and any officer, employee, etc., of a savings
bank or trust company who undertakes to deceive the
commissioner with respect to the value of the invest­
ments of the bank or trust company, suffers a fine of not
more than $500, imprisonment for not more than two
years, or both fine and imprisonment (1909, chap. 149,
amending R. S., chap. 48, 23). Violations of law by a
savings bank or its officers or trustees, unless otherwise
prescribed, are punishable by a fine of from $100 to $500
(R. S., chap. 48, 51).
TRUST AND BANKING COMPANIES.
(The above is the phraseology of the sections in chap­
ter 48 which apply to this sort of companies. Chapter
96, of 1907, is phrased to apply to “ trust companies;”
and it gives them, in section 1, power to receive deposits.)




Trust

M a i n e

I— Terms
.

of

Companies

In c o r p o r a t i o n .

The proposed incorporators of a trust company apply
to the examiner for a certificate that public convenience
will be promoted by the establishment of the corporation.
If he refuses to issue this certificate, the application may
not be renewed for a year (1907, chap. 96, 3).
Stock must be paid in at its par value in cash (1907,
chap. 96, 6). The minimum amount of paid-in capital
for trust companies is $25,000 in towns or cities of not
more than 5,000; $50,000 in those from 5,000 to 10,000;
$75,000 in those from 10,000 to 20,000; $100,000 in those
from 20,000 to 30,000; and $150,000 in those of over
30,000. Shares must be of $100 each (1907, chap. 96, 8).
The maximum of capital stock for a trust company is
$1,000,000 (1907, chap. 96, 10).
Every trust and banking company must set apart as
a guaranty fund or surplus not less than 10 per cent of
its net earnings for each year until this fund with accumu­
lated interest amounts to one-fourth of the capital stock
(R. S., chap. 48, 81).
The assets of any savings bank connected with a
national or stock bank must be kept separate from the
assets of the national or stock bank (R. S., chap. 48, 34).
All property held in trust, and the accounts concerned
with that property, must be kept separate. Trust funds
and the investments or loans of them are not subject to
the other liabilities of the company (1907, chap. 96, 14).
II. — L iabilities

and

D uties o f St o c k h o l d e r s
D irec t o r s .

and

The shareholders in a trust and banking company are
individually liable for the contracts and debts of the com­
pany to a sum equal to the par value of their shares and




2?9

N at ion a l

M onetary

Commission

in addition to the amount invested in them (R. S., chap.
48, 86).
There must be not fewer than five directors, twothirds of whom must be residents of Maine. At the
option of the stockholders the affairs of the company
may be entrusted to an executive board of not less than
five members, two-thirds of whom must be residents of
Maine, elected from the directors (1907, chap. 96, 11).
Each director must own ten shares of stock (1907, chap.
96, 13). The directors or the executive board constitute
a board of investment; they keep accurate accounts of
loans and investments in such form as the examiner
directs (1907, chap. 96, 12).
Directors who are implicated in making excessive loans
to one person, firm, or corporation, or who vote for loans
to directors, officers, and employees, or are implicated
in the payment of such loans, are personally liable for
the payment of them (1907, chap. 96, 22).
III.— Su p e r v i s i o n .
The commissioner referred to under Savings banks super­
vises trust and banking companies as well (R. S., chap.
48, 79). He determines if public convenience will be
promoted by the establishment of any proposed trust
company (1907, chap. 96, 3). He passes upon the pro­
posed establishment of branches (1907, chap. 96, 21). He
passes upon such reserve depositaries as are not located
in Maine (R. S., chap. 48, 80). When he finds that a
corporation has made an illegal loan, he orders it reduced
(1907, chap. 96, 22).
He has the same control with regard to liquidating
the affairs of a bank or trust company that he has over
savings banks— that is to say, he must, according to
the provisions of Revised Statutes, chapter 48, section
44, apply for an injunction, if upon examination he thinks




230

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Maine

T r u s t

C o m p a n i e s

a company insolvent or in such condition that its continu­
ing business is hazardous for the public; he may apply if
he thinks it has exceeded its powers or failed to comply
with law. The court then grants whatever decree the
facts warrant, including the appointment of receivers if
necessary (R. S., chap. 84, 79).
The commissioner licenses foreign investment corpora­
tions and has authority over them (R. S., chap. 84, 89 et
seq.). (See also 1905, chap. 73.)
reports.

A preliminary report, consisting of a complete list of
stockholders’ names, residences, and number of shares held
by each is filed with the bank commissioner before incor­
poration (1907, chap. 96,6). After the election of directors
the company publishes a list of them (1907, chap. 86, 11).
Every trust company must report its condition at such
times as the bank commissioner requires, and publish the
report as he directs (1907, chap. 96, 18). At least two
directors annually, when notified by the commissioner, re­
port on blanks furnished by him, and publish the report if
he requires (1907, chap. 96, 19). Receivers of banking and
trust companies must report annually, and at such times
as the commissioner requires, the progress made in the set­
tlement of the corporation’s affairs; the commissioner gives
notice of this report and furnishes blanks for it (R. S.,
chap. 48, 44).
(For reports required of trust and banking companies
for purposes of taxation see R. S., chap. 8, 64 et seq.)
Annually by December 1 the commissioner reports to the
governor and council the general condition of each bank­
ing and trust company, making such suggestions as he
deems expedient (R. S., chap. 48, 79).




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EXAMINATIONS.

When all the capital stock of a trust company has been
issued and a statement made to the commissioner, he makes
a preliminary examination to assure himself that the state­
ment is true and that preliminaries have been complied
with (1907, chap. 96, 6). At least two directors make an
annual examination, the result of which they report to the
commissioner (1907, chap. 96, 19). Every bank and trust
company is visited by the commissioner or one of his clerks
acting as deputy once a year, and oftener if he thinks it
-expedient. The affairs are investigated to determine its
condition, its ability to fulfill its obligations, and its com­
pliance with the law. The statement of the examination
made by the commissioner is published in a local news­
paper (R. S., chap. 48, 1 and 42).




IV. — R e s e r v e R e q u i r e m e n t s .
Every trust and banking company having authority to
receive money on deposit must keep on hand in lawful
money or national-bank notes as a cash reserve an amount
equal to at least 15 per cent of its deposits that are subject
to withdrawal on demand or within ten days; two-thirds
of this 15 per cent may be in balances payable on demand,
due from national banks or trust companies of Maine, or
from any trust company located in other New England
States or in New York, approved by the commissioner.
One-third of the 15 per cent may consist of bonds of the
United States, the District of Columbia, any New England
State, and certain enumerated States. When the reserve
falls below the requirement no new loans may be made
(R. S., chap. 48, 80).

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M a i n e

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V.— D isc o u n t

and

C o m p a n i e s

L o a n R estrictions .

No trust company may loan to a person, firm, or corpo­
ration an amount in excess of io per cent of its capital,
surplus, and undivided profits, except on approval of a
majority of the whole investment board, unless secured by
collateral; nor in excess of 25 per cent, except on the
same approval and secured by collateral which in the judg­
ment of a majority of the investment board is of value
equal to the excess of the loan above the 25 per cent.
The discount of bills of exchange and of commercial paper
owned by the person actually negotiating it is not con­
sidered as money borrowed (1907, chap. 96, 16).
No trust company may loan to its directors, officers, or
employees, or make a loan on which an officer, director, or
employee is surety, or to any firm in which an officer,
director, or employee is a member, or to any person or on
the indorsement of any person who is a partner of an officer,
director, or employee, or to any corporation in the man­
agement of which a director, employee, or officer is inter­
ested, until the directors or the executive committee have
by a majority vote, exclusive of the director interested,
approved. The provisions of this paragraph do not pre­
vent a trust company from giving to a person, firm, or
corporation a line of credit for a period of six months to
an amount not exceeding 25 per cent of capital, surplus,
and undivided profits, subject to the restrictions as to per­
centage of entire board and right of interested persons to
vote contained in this paragraph and the paragraph next
preceding (1907, chap. 96,17, amending R. S., chap. 48,82).
Trust and banking companies must not loan on the
security of their own stock unless it is necessary to prevent
loss upon previous debt, in which case the stock must be
gotten rid of within a reasonable time (R. S., chap. 48, 83).




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VI. — In v e s t m e n t s .
The board of directors or the executive board of every
trust company constitutes the board of investment.
They keep a record of all loans and investments,indicating
such particulars as the bank examiner directs (1907, chap.
96, 12). Trust and banking companies must not hold
shares of their own stock unless it is necessary to prevent
loss on a previous debt, in which case the stock must be
disposed of within a reasonable time (R. S., chap. 48, 83).
Every trust company may hold “ such estate, real, per­
sonal, and mixed as may be obtained by the investment
of its capital stock” (1907, chap. 96, 1).
V III. — B r a n c h e s .
No trust company may establish a branch in any city or
town other than that in which the parent institution is
located until it has received a warrant to do so from the
bank commissioner, who is to issue this warrant only if he is
satisfied that public convenience and advantage will be
promoted by the establishment of a branch, and that the
unimpaired capital of the parent institution is sufficient
to comply with the provisions for minimum capital, reck­
oning the aggregate population of the home city and of all
cities and towns in which the company is authorized to
establish branches, including the one now proposed. No
trust company may establish a branch except in its own or
in an adjoining county (1907, chap. 96, 21).
X . — U n a u t h o r i z e d T r u s t C o m p a n y B usiness .
No person, firm, or corporation excepting those duly
authorized under Maine or United States law to conduct
a bank or trust company business may use as part of their
name the words “ bank,” “ savings,” “ savings depart­
ment,” “ trust,” “ trust and banking company,” etc.
234

Mai ne

Trust

Companies

Anyone violating this rule either individually or as a
member of a firm or as one interested in a corporation, is
liable to a fine not exceeding $1,000, imprisonment not
less than sixty days nor more than one year, or both
(1905, chap. 171). No person may, as a private banker
not specially authorized by the legislature, transact any
banking business except that of discount and deposit;
the penalty for this with other offenses enumerated in the
section is $1,000 for each offense (R. S., chap. 48, 2).
XI.— P enalties .

Refusal on the part of officers, agents, etc., of a trust
and banking company to be examined, or any obstruction
of examination, entails a fine of not more than $1,000 or
imprisonment not exceeding two years (R. S., chap.
48, 43). Directors, officers, and employees who are impli­
cated in granting a loan in excess of the amount allowed
to be made to any person, firm, or corporation, and
directors who vote for a loan in violation of the provisions
against loans to officers, directors, and employees, or who
use money or are implicated in the payment of such a loan,
are guilty of a misdemeanor (1907, chap. 96, 22). See
Savings Banks, XI, for the penalty for undertaking to
deceive the bank commissioner as to the value of invest­
ments (1909, chap. 149).




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MARYLAND.
The Maryland statutes are in the Public General Laws,
published in 1904, and in the acts of 1906 and of 1908.
In the Public Laws, Article X I is entitled “ Banks;” and
Article X X III, “ Corporations,” contains certain sec­
tions (318-321) which deal with savings institutions;
others (339-342) which prescribe the conditions on which
trust, surety, and fidelity companies may become surety
on official bonds; and others (94-107, slightly amended
in 1908) which deal with safe deposit, trust, guaranty,
loan, and fidelity companies. The article on banking is
incomplete and much of it not pertinent to the matters
covered by the digest. It is not always clear to what
sorts of banking corporations each section applies. The
language is in one section “ every bank and' incorporated
institution in this State which is in the habit of receiving
deposits and declaring dividends” (5), in another, “ every
banking association authorized by its charter to do a bank­
ing business” (12), in others clearly directed to savings
banks (8, etc.). What makes it seem clear that the article
for the most part is meant to apply to all corporations
doing a banking business is the language of section 37,
which provides that certain named sections of the article
shall not apply to savings banks having no capital stock,
nor to corporations authorized to do a trust, fidelity,
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S t a t e

M a r y l a n d

B a n k s

surety, or deposit business. It is likely, therefore, that all
the provisions given in the digest under “ Banks ” apply to
savings banks and trust companies, except as overridden
by provisions digested under “ Savings banks ” and under
‘‘ Trust companies. ’ ’ The provisions for savings banks and
trust companies are so meager that it has not been thought
worth while to separate them completely under the
headings used generally in the digest. Citations which are
simply numbers in parentheses are to sections in Arti­
cle XI.
BANKS.
I.— T erms

of

I ncorporation.

Every bank in Baltimore must have a capital of not less
than $300,000 nor more than $2,000,000, divided into
shares of $100 each. Not less than $300,000 must be fully
paid in lawful money of the United States before the cor­
poration can do business (21). Every bank located out­
side Baltimore must have a capital of not less than $50,000,
nor more than $500,000, divided into shares of $100 each.
Not until $50,000 has been paid in lawful money of the
United States may the bank begin business (22).
Every stockholder is entitled to one vote for every share
he holds up to ten; to one vote for every additional two
shares up to one hundred; and to one vote for every addi­
tional five shares above one hundred. Shares must have
been held for four months before the election to entitle
the shareholders to vote (25, art. 1). Half-yearly divi­
dends are made to stockholders out of net profits (25,
art. 9).
Eimitations on the amounts of debt which a bank may
owe are stated under V, infra.




237




National

Monetary

II.— L iabilities

and

Commi ssi on

D uties of Stockholders
D irectors.

and

The stockholders in every “ banking corporation” are
liable “ to the amount of their respective share or shares
of stock in such banking institution for all its debts and
liabilities upon note, bill, or otherwise” (29, and constitu­
tion, Art. I ll, sec. 39).
There must be not fewer than five nor more than seven
directors, each a stockholder and a citizen of Maryland (24,
and 25, art. 2). No director may be at the same time
director of any other bank in Maryland. Once a year
the directors lay before the stockholders a statement of
debts remaining unpaid, and surplus profits (25, art. 3).
If the debts of a bank become greater than its capital, the
directors under whose administration the excess is created
are liable personally for the excess (25, art. 7). If the
directors knowingly declare a dividend which impairs the
capital stock the directors implicated are individually
liable to the corporation for the proportion of capital so
divided (25, art. 9). Directors receive only such pay as
is voted at a stockholders’ meeting (25, art. 10).
III.— S upervision .
There seems to be no official charged with the duty of
superintending banks. The treasurer of the State appoints
an examiner for the purpose merely of making examina­
tions (33). When the treasurer of the State is satisfied
that “ any of the associations mentioned in this article”
(this language, broad as it is, does not, of course, include
national banks, although they are mentioned in the arti­
cle) has failed to comply with the provisions of the article,
he declares, with the approval of the governor, that the
charter of the corporation is forfeited, and, with the
assent of the governor, appoints a receiver who acts sub­
ject to the control of the local court (34).
238

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S t a t e

B a n k s

REPORTS.

Every bank reports to the treasurer of the State not
less than five times each year according to the form pre­
scribed by the treasurer. Each report shows the resources
and liabilities of the bank at the close of business on a
past day specified by the treasurer, to whom it is trans­
mitted within five days of the receipt of the request. A
summary of the report is published in a local newspaper.
The treasurer may call for special reports when in his
judgment necessary (12). A further provision of the
same article requires that the treasurer of the State
be furnished with a statement of amount of capital;
amount of debts due to the corporation and from it, speci­
fying those due from and to other banks; deposits; cash on
hand, specifying coin and notes of other banks; value of
real estate held; and amount and value of stocks held—
showing these details at the close of business on the
first Monday of January and the first Monday of July.
These statements are required to be published (25, art. 4).
(For reports required for purposes of taxation see
Public General Taws, Art. E X X X I, sec. 156 et seq.)
Banks must cause to be published in a local newspaper
once a week for three weeks in September of each year a
list of the deposits and dividends unclaimed for three
years or more, with the names of the depositors so credited,
and amounts (5).
EXAMINATIONS.

The treasurer, with the approval of the governor,
appoints an examiner to visit “ each and every association
mentioned in this article, doing business in this State
(excepting state banks which may be members of the
Baltimore clearing association, and as such required reg­
ularly to submit to examination by a national bank




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mission

examiner),” at least once a year, or oftener if in his
judgment necessary (33).
V.— D iscount

and

L oan R estrictions.

No loan may be made by a bank to Maryland or the
United States to an amount exceeding $50,000, or to any
other State of the Union or to a foreign state to any amount
whatever (25, art. 17).
The total amount of debts which a bank may at any
one time owe must not exceed the amount of paid in
capital, but money deposited in the bank “ for safe keep­
ing” is not for this purpose considered as debts of the
bank (25, art. 7).
VI.— I nvestments.

A bank may own only such real estate as is requisite
for the convenient transaction of its business, and such
as has been mortgaged to it, conveyed to it in satisfaction
of debts, or purchased by it at sales on judgments ob­
tained for such debts. Real estate thus purchased at
judgment sale must not be held for longer than three
years, if judicious sale can be made in the three years
(25, art. 13).
A bank must not trade in anything except commercial
paper and bullion, or the produce of its lands or of chat­
tels taken as security, conveyed to it to satisfy debts, or
purchased at judicial sales in enforcing debts. A bank,
however, may make temporary investments of its funds
by purchase of the public debt of the United States, of
any State, of Baltimore, or of the county or city where
the bank is located (25, art. 14).
X I.— P enalties .
If any bank fails to publish unclaimed deposits its
president is liable to a fine of from $50 to $100 (7).
240

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Banks

SAVINGS BANKS.
TERMS OF INCORPORATION.

There may be savings banks without capital stock, for
certain sections of Article X I are expressly made inap­
plicable to “ savings banks having no capital stock” (37);
these sections are 12, the provision for at least five reports
every year; 33, the provision for examinations at least
annually by an examiner appointed by the treasurer; 34,
the provision for voiding charters and appointing re­
ceivers when banks violate the law; and 35 and 36, pro­
visions exempting banks from other examinations, and
providing a scale of fees for examinations. There may
also be savings banks with capital stock, however, for it
is provided that the capital stock of any savings bank
incorporated under the general corporation law must not
exceed $1,000,000 (Public General Laws, Art. X X III,
sec. 321). A section just preceding the one cited requires
directors to make “ such dividends” to the depositors at
least every six months out of the interest and profits of
the institution as will not impair its deposits or credit
(Public General Laws, Art. X X III, sec. 319); the use of
“ dividends” in this section is odd if the corporation con­
templated is one in which there are stockholders.
REPORTS AND EXAMINATIONS.

The provisions for publication of unclaimed deposits
do not apply “ to savings banks nor to institutions which
receive deposits and compound the interest and dividends
as they become due ” (5); that is because the statute pro­
vides especially for that sort of report by savings banks.
In October of every second year the treasurer of each
savings bank delivers to the comptroller a written state­
ment containing the name of every depositor, with the
amount standing to his credit, who has not deposited or
S. D oc. 3S3, 61-2-----16




oAi

X




N at i on a l

M on et a r y

Commi ssi on

withdrawn money for twenty years. This does not apply
to persons known by the treasurer of the savings bank
to be living. The comptroller inserts these statements
in his next report to the legislature (8). These provisions
for reports of unclaimed deposits are in the article on
banks. In the article on corporations the savings bank
sections include a provision requiring directors to appoint
every twelve months five competent members of the cor­
poration as a committee of examination, who after making
an examination publish a report of it in a local newspaper
(Public General Laws, Art. X X III, sec. 319). Reports
of savings banks for purposes of taxation are dealt with in
Public General Laws, Article L X X X I, section 89.
lo an s.

A provision of the savings bank sections in the article
on corporations forbids loans to be made to an officer or
director (Public General Laws, Art. X X III, sec. 318).
PENALTIES.

A special savings bank penalty provided for in the
article on banks is that of $500 for each failure of the
treasurer of a savings bank to report unclaimed de­
posits (9).
TRUST COMPANIES.
(The fact that section 37 of Article X I provides that
certain sections do not apply to corporations authorized
by their charters to transact a trust, fidelity, surety, or
deposit business implies that the other sections of the
article do; and in some cases the terms of the individual
sections may include trust companies— “ every bank and
incorporated institution in this State which is in the habit
of receiving deposits,” for example (5). The provisions
which are expressly withheld from operating on trust
242

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Trust

Companies

companies are the same that were given under savings
banks— five reports a year (12); annual examinations (33);
receivership proceedings for failure to comply with the
provisions of the article (34), etc. The matters covered by
sections 339-342 of Article X X III, prescribing conditions
on which trust, surety, and fidelity companies may become
surety on official bonds, with particular reference to for­
eign corporations, have not been included in the digest.
Sections 94-107, legislating for trust companies upon those
subjects with respect to which trust companies are ex­
empted from the provisions of the banking chapter, are
digested below; these sections are generally made appli­
cable to every “ safe deposit, trust, guaranty, loan, and
fidelity company. ” )
s t o c k h o l d e r ’s

l ia b il it y .

The stockholders in every “ safe deposit, trust, and loan
company” are personally liable for the contracts, debts,
and engagements of the corporation to the amount of their
stock at par, in addition to the amount invested in the
stock (Public General Laws, Art. X X III, sec. 104, amd.
by 1908, chap. 153).
SUPERVISION.

Trust companies which do a “ security or guarantee
business” must deposit securities worth $100,000 with the
state treasurer in trust for the holders of the company’s
guarantees; other trust companies deposit securities
worth 15 per cent of the corporation’s paid-up capital, and
not less than $30,000, in trust for depositors and creditors.
The securities must be of certain sorts (Public General
Laws, Art. X X III, secs. 98 and 106). Doing business
without having made the required deposit entails a $100
a day forfeit (Public General Laws, Art. X X III, sec. 99,
amd. by 1908, chap. 385).




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If it appears to the treasurer from an examination that
a trust company has violated its charter or the law, or is
conducting its business unsafely, he orders a discontin­
uance of the illegal or unsafe practices; if any corporation
fails to obey an order or refuses to report, or if it appears
to the treasurer inexpedient for the corporation to con­
tinue business, he communicates with the attorney-gen­
eral, who institutes proceedings (Public General Laws,
Art. X X III, sec. 97).
REPORTS.

Every trust company which receives money on deposit
or assumes any obligation in Maryland must report semi­
annually its condition at the close of business on the last
days of June and December, showing amount loaned on
bond and mortgage, with a list of the bonds and mort­
gages not previously reported, payments on bonds and
mortgages previously reported, particulars with respect
to stock investments, amount loaned on pledge of securi­
ties with particulars, real estate investments, cash on
hand and on deposit with names of depositaries and
amount on deposit in each, liabilities of the corporation,
amount due depositors, and any other information required
by the treasurer. The treasurer may require additional
reports. He summarizes the condition of each trust com­
pany which reports or is examined, in a report made to
the legislature at each regular session (Public General
Laws, Art. X X III, secs. 94 and 103). Reports for pur­
poses of assessment for taxation are made in accordance
with Public General Laws, Article L X X X I, section 165.
EXAMINATIONS.

The treasurer, either personally or by an appointee,
examines each trust company annually, to determine the
condition and resources of the corporation, the conduct of
244

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Trust

Companies

its affairs, the prudence of its management, its invest­
ments, the security afforded its obligees, and its compli­
ance with its charter and the law (Public General Laws,
Art. X X III, secs. 95 and 96).
LOANS, DEPOSITS, AND INVESTMENTS.

The money held on deposit, or in trust, or the amount
loaned, must never exceed ten times paid-up capital and
surplus, nor may the outstanding loans ever exceed that
amount; this does not apply to court deposits (Public
General Laws, Art. X X III, sec. 100). Among the items
required to be reported are: Loans on bonds and mortgages,
stock investments, loans “ upon the pledge of securities of
whatsoever kind,” and real estate investments (Public
General Laws, Art. X X III, sec. 94).




343




MASSACHUSETTS.
The Massachusetts Revised Laws of 1902 contain three
chapters on the topics with which the digest is concerned:
113, Of savings banks and institutions for savings; 115,
Of banks and banking (a chapter of which much relates
to circulation, and much, with reference to supervision
especially, seems superseded by chapter 590 of 1908,
which, though a savings-bank statute, contains sections,
2-15, of broad enough application to include banks); and
116, Of trust companies; besides chapters dealing with
cooperative banks, etc. The material from chapter 115
(that is to say, practically the whole digest under “ Banks ” )
is characterized by the local banking officials, in a letter
from Mr. Charles L. Burrill, secretary, office of the bank
commissioner, as “ absolutely obsolete and of no use;”
but it is inserted in the digest because it has never been
repealed. Since the date of Mr. BurriH’s letter a statute
of 1909 has in effect forbidden banking by state banks
and even more positively reduced chapter 115 to the
condition of a dead letter, still, however, without actu­
ally repealing it; this new statute amends a section
of chapter 590 of 1908 by adding a provision that no
person, firm, or corporation, except savings banks, trust
companies, and cooperative banks incorporated under
Massachusetts law, and foreign banking corporations
246

State

M assachusetts

Banks

which were doing business and subject to the commis­
sioner’s supervision on June i, 1906, may “ hereafter
transact business under any name or title which contains
the word ‘ bank’ or ‘ banking,’ as descriptive of said
business” (1909, chap. 491, 4, amending 1908, chap. 590,
16). Under this statute, even though it does not com­
pletely repeal the legislation on state banks, the interest
in the material in the digest under “ Banks” (except
such of it as applies to other institutions— see III, IX,
etc.— provisions, chiefly, of chapter 590 of 1908) becomes
academic.
A supplement to the Revised Laws carries amendments
and additions through the session of 1906, and the later
legislation is in the acts of 1907, 1908, and 1909. Chapter
590 of 1908 repeals chapter 113 of the Revised Laws,
amendments to it, and certain other acts, and provides
a complete new savings bank chapter. The references
to the Revised Laws consist of the letters, R. L., then the
chapter, then the section or sections in the chapter which
are cited for the statement just made; the references to
the supplement and the 1907, 1908, and 1909 laws are
by year, chapter, and section.
BANKS.
I.— T erms

of

I ncorporation.

The business contemplated for banks under chapter
115 is that of receiving deposits, loaning, and discount­
ing “ on banking principles,” and issuing circulating notes
(R. L., chap. 115, 30).
lh e capital stock of every bank must be not less than
$100,000 nor more than $1,000,000, paid in in gold or




■247




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Monetary

Commission

silver money, one-half before the bank goes into opera­
tion, the remainder within the ensuing year (R. L., chap.
115, 2). No bank may begin business until the half of
its capital which is paid in has been examined and found
complete by three commissioners appointed by the gov­
ernor (R. L., chap. 115, 3). No stock of a bank may be
transferred until the whole capital is paid in (R. L., chap.
115, 5). No person may hold more than one-half the
capital of a bank exclusive of stock he holds as collateral
(R. L., chap. 115, 6). In addition to the capital to which
a bank is entitled, the State may subscribe an amount
equal to 50 per cent of the capital authorized, in which
case the State takes its dividends (R. L., chap. 115, 7).
Stockholders are entitled to one vote for one share, and
for every two additional shares one vote more, but no
stockholder may have more than ten votes (R. I,., chap.
115, 10).
Dividends may be declared out of net profits every six
months (R. L., chap. 115, 30).
II.— L iabilities

and

Duties oe Stockholders
D irectors.

and

Apart from provision for unlimited liability on circu­
lating notes (R. L., chap. 115, 80), the only special pro­
vision for bank stockholders’ liability seems to be that if
the capital stock is depleted by the directors’ mismanage­
ment those who are stockholders at the time are person­
ally liable, except that no stockholder is liable to pay a
sum exceeding the amount of stock actually held by him
at the time (R. L., chap. 115, 85). Corporations may,
it seems, be stockholders, for these liabilities are, in terms,
put on corporate shareholders (R. L., chap. 115, 84 and 87).
There must be from seven to twelve directors, and for
a bank with a capital of $500,000 or more there must
be at least nine (R. L., chap. 115, 17). Each director
248

State

Massachusetts

Banks

must hold at least five shares of stock and be a citizen of
Massachusetts; no one may be director in two banks at
the same time. A majority of directors must reside or
have their place of business in the county where the bank
is established, or within io miles of the bank (R. T., chap.
115, 18). The legislature may appoint extra directors in
proportion to capital which the State subscribes (R. L.,
chap. 115, 20). The cashier of a bank may not be a
director (R. L., chap. 115, 29). The directors are required
to keep a book for record of discounts and proceedings at
meetings (R. L., chap. 115, 23). In case a bank becomes
indebted beyond twice the amount of its paid-in capital,
exclusive of sums due on account of deposits not bearing
interest, debts between banks, etc., the directors under
whose administration the bank becomes thus illegally in­
debted are personally liable for the excess to creditors of
the bank (R. L., chap. 115, 35).
III.— Supervision .
The recent savings bank act (1908, chap. 590) provides
for officers to supervise all sorts of banking institutions.
There is a bank commissioner appointed for a three-year
term, who must not be interested in a bank, corporation,
or business that requires his supervision. He may engage
in no other occupation. His salary is $5,000 a year
(1908, chap. 590, 2). Information obtained by the com­
missioner and his subordinates from examinations and
reports may be divulged only to officers whose duties so
require (1908, chap. 590, 5). The commissioner, the
treasurer and receiver general, and the commissioner of
corporations constitute a board of bank incorporation
(1908, chap. 590, 4). Among their duties they exercise
supervision over a recently authorized form of coop­
erative corporation, called a “ credit union” (1909, chap.
419). The commissioner may prescribe the manner in




249




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Commission

which the books and accounts of any bank are kept
and the extent to which they must be audited (1908,
chap. 590, 12).
If, in the opinion of the commissioner, a savings bank,
trust company, or other person, partnership, or corpora­
tion doing a banking business, or the officers or trustees
of such institution, have violated any law, he reports to the
attorney-general, who institutes a prosecution for the vio­
lation. If, in the opinion of the commissioner, such a
bank is conducting its business unsafely, he directs the
practices to be discontinued; and if the bank fails to com­
ply or if, in the opinion of the commissioner, a trustee or
officer of the bank has abused his trust, the commissioner
must, after giving a hearing to the directors of the insti­
tution, either report to the shareholders or, with the con­
sent of certain officials, publish whatever facts public inter­
est seems to him to require (1908, chap. 590, 8). If, upon
examination, the bank seems insolvent or in such condition
as to render its continuance in business hazardous, the com­
missioner applies to court to restrain the bank from doing
business. If the bank seems to have exceeded its powers
or failed to comply with law, he may apply for such an in­
junction. As soon as he has applied to the court the com­
missioner takes possession of the affairs of the bank, pend­
ing action by the court. The court may appoint receivers
(1908, chap. 590, 9). During a receivership, if the com­
missioner thinks a receiver has violated his duty he pre­
sents the facts to the court (1908, chap. 590, 11).
Any committee appointed by the legislature may exam­
ine the affairs of any bank. If, upon examination, it is de­
termined by the legislature that the bank has exceeded
its powers or failed to comply with law, its franchises may
be declared forfeited (R. L., chap. 115, 108). One-eighth
of the stockholders in number or interest in a bank may
choose a committee to investigate the bank’s affairs. If,
250

Massachusetts

—

State

Banks

upon examination, this committee considers the bank in­
solvent or in a condition to render further business hazard­
ous, or thinks that the bank has exceeded its powers or
failed to comply with law, the committee reports to a
court, which may enjoin further business by the bank and
appoint receivers (R. L-, chap. 115, no). If the court is
satisfied from certificate of the auditor that a bank is in­
solvent or in a hazardous condition, or has exceeded its
powers, it may proceed as just explained (R. L., chap. 115,
i n ) . If the commissioner thinks a bank or its directors
or cashier has violated the law, he reports to the secretary
of Massachusetts, who notifies the attorney-general to
institute a prosecution (R. L., chap. 115, 114; and 1908,
chap. 590, 5, amd. by 1909, chap. 491, 3). The provisions
of this paragraph are those for supervision contained in
the Revised Taws; they have not been expressly re­
pealed, though the provisions (given in the preceding
paragraph) contained in the act of 1908 seem designed
to supersede them.
For supervision of ticket-selling offices that accept de­
posits, see 1908, chapter 493; 1907, chapter 377; 1906,
chapter 408; and 1905, chapter 428.
REPORTS.

Banks are within the provision of the statute of 1908
that, “ in addition to the reports required by law to be
made,” they must make such other statements to the com­
missioner as he may require (1908, chap. 590, 1 and 13).
The provisions in the Revised Laws with regard to
reports by banks are the following: Banks doing busi­
ness in certain districts of Boston must transmit every
Monday morning to the secretary of the Commonwealth
a statement of amount of capital stock; average amounts
due to and from other banks; deposits; loans; discounts;
specie and lawful money of the United States deposited in




2 51

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National

M on e t a r y

Commission

the bank of deposit of the Boston clearing house; this
statement to be based on the condition of the bank on
each day of the preceding week (R.
chap. 115, 99).
Banks in other less central districts of Boston, and banks
outside of Boston, must, on the first Monday of each
month, transmit to the secretary statements generally
similar. This class of banks base their reports on their
condition on each Saturday of the preceding month (R. T.,
chap. 115, 100). An abstract of weekly and monthly
reports must be published in Boston papers by the secre­
tary (R. L., chap. 115, 102). The secretary must furnish
blank forms for these reports (R. L., chap. 115, 103).
The cashier of every bank must annually make a return
of the condition of the bank on the afternoon of any
Saturday named by the governor. The report must be
sent to the secretary of the Commonwealth within fifteen
days. The items are given in the statute (R. L., chap.
115, 104). The secretary after receiving the annual re­
turns must cause an abstract to be printed, sending a copy
to each bank and one to the legislature (R. L., chap. 115,
107). Receivers must make annual report to the legis­
lature showing their progress (R. L., chap. 115, 118).
The statute of 1908 provides that the commissioner
must annually make a statement to the legislature of the
condition of all incorporated banks, including those in the
hands of receivers, from which he has received a report
during the preceding year, together with such other infor­
mation of the affairs of the banks as public interest may
require, with suggestions relative to the general conduct
and condition of the banks (1908, chap. 590, 15).
EXAMINATIONS.

The commissioner or a subordinate, at least once a year
and whenever he considers it expedient, visits every bank
in order to ascertain its condition, its ability to fulfill its
252

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Banks

obligations, and its compliance with law. The informa­
tion obtained by the commissioner is open only to the
inspection of officials in the course of their duty (1908,
chap. 590, 5). Upon application by five or more officers,
trustees, creditors, or depositors the commissioner must
examine any bank (1908, chap. 590, 7). In case banks
are in the hands of receivers, the commissioner or a sub­
ordinate examines them at least once a year, and oftener
if he considers it expedient. He examines the reports
made by receivers to the appointing court, and presents
to the court any violation of duty by a receiver which he
discovers (1908, chap. 590, 11).
In the sections of the Revised Laws given above before
Reports, are provisions for various examinations: A com­
mittee of the legislature may examine (R. L., chap. 115,
108). A committee chosen by one-eighth of the stock­
holders in number or interest in a bank may examine
(R. L., chap. 115, no). The commissioner must visit
banks; he, as successor to the board of commissioners of
savings banks, is given such powers over banks as certain
repealed savings banks statutes gave that board over
savings banks, and must report to the secretary of Massa­
chusetts violations of law by a bank or its directors or
cashier (R. L., chap. 115, 112, 113, and 115; also 1908,
chap. 590, 5, amd. by 1909, chap. 491, 3). Three com­
missioners appointed by the governor examine as a pre­
liminary, to make sure the capital is paid in in coin, etc.
(R. L., chap. 115, 3).
IV.— R eserve R equirements.
Every bank must keep an amount of specie or lawful
money of the United States equal to 15 per cent of its
liabilities “ for circulation and deposits.” When from
weekly or monthly reports it appears that its average re­
serve is less than that amount, no new loans may be made.




253

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Monetary

Commission

Lawful money of the United States or specie specially
deposited by a bank in Boston in the bank of deposit of
the Boston clearing house, and balances payable on de­
mand from certain other banks, are a part of reserve
(R. L., chap. 1 15, 50).
V.— D iscount

and

L oan R estrictions.

No loan may be made to a stockholder until the full
amount of his shares is paid in (R. L., chap. 115, 5). No
bank may have owing to it on loans made on pledge of its
own stock more than one-half its paid in capital (R. L.,
chap. 115, 31); stock taken as security must be sold within
six months after it becomes the bank’s property (R. L-,
chap. 115, 32). The debts of a bank must not exceed
twice its paid in capital exclusive of sums due on account
of deposits not bearing interest; there must never be due
to a bank more than double its paid in capital (R. L-,
chap. 115, 33). Debts due from one bank to another,
however, and loans directly made by a bank to Massa­
chusetts or the United States, etc., are for this purpose
not debts due (R. L., chap. 115, 34). No bank may
make a loan or discount unless it is payable by the bank
on demand in specie or in bills which the bank is author­
ized to pay out (R. L., chap. 115, 51). Without a special
vote of stockholders, no officer of a bank may be liable
to it to an amount greater than 8 per cent of its paid in
capital, or greater than $40,000. The whole board of
directors must not be liable to an amount exceeding 30
per cent of the capital (R. L., chap. 115, 53). No bank
may loan or discount to a manufacturing corporation
any financial officer of which is also cashier of the bank
(R. L., chap. 115, 54). Upon requisition of the legisla­
ture any bank must loan to the State an amount not
more than 5 per cent of its capital, to be repaid in five
annual installments or in a shorter period. The total of
254

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State

Banks

such loans demanded by the State must not at any one
time exceed one-tenth of the capital of the bank (R. L,.,
chap. 115, 55). Neither the cashier nor any officer under
him may borrow of the bank (R. T., chap. 115, 29).
No bank may issue notes, etc., payable “ at a future
day certain or with interest,” except for money borrowed
of the State, or from a domestic savings bank, etc.;
banks may pay interest on debts due other banks and
due municipalities, however (R. L,., chap. 115, 40).
VI.— I nvestments .
A bank may hold real estate requisite for the convenient
transaction of its business, not exceeding, however, 12 per
cent of the amount of its capital, exclusive of real estate
held on mortgage, received on execution, or taken to se­
cure or satisfy debts (R. T., chap. 115, 39). Any bank is
subject to a penalty if it holds its own stock, except as
security for debts, or neglects to sell stock received as se­
curity within six months after it has become the property
of the bank (R. T., chap. 115, 32). No bank may engage
in trade or commerce, but it may sell property it holds in
pledge (R. L., chap. 115, 38).
V III.— B ranches.

•

These are forbidden (R. T., chap. 115, 30).
IX .— Occupation

of the

Same B uilding.

No savings bank may occupy the same office or suite
of offices with a national bank, trust company, or other
bank of discount, nor occupy any office directly con­
nected by means of doors, etc., with the office of a na­
tional bank, trust company, or other bank of discount
(1908, chap. 590, 19).




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Commission

X .— U nauthorized B anking .
See introductory paragraph. Late legislation makes
banking by state banks practically an impossibility. No
person, firm, or corporation, except savings banks, trust
companies, cooperative banks, and certain foreign banks
that were doing business in the State in 1906, may do
business under a name which contains “ bank” or “ bank­
ing” (1908, chap. 590, 16, amd. by 1909, chap. 491, 4).
X I.— P enalties .
Whoever obstructs an examiner in the course of his
duty is punished by a fine of not more than $1,000, or
imprisonment for not more than one year (1908, chap.
590, 6). An officer or employee of a bank who fails, when
required by the commissioner, to report, or, when so re­
quired, reports falsely, is punished by fine of not more
than $1,000, by imprisonment for not more than three
years, or by both (1908, chap. 590, 14). Occupation by
a savings bank of offices with another bank is forbidden;
“ any such corporation” violating that provision is pun­
ished by a fine of not more than $500— this penalty,
though probably only for the savings bank, may include
the other bank Miose office is shared (1908, chap. 590, 1
and 19). The president, vice-president, or treasurer of
a savings bank who holds the same offices or that of
cashier, in a national bank or trust company or any other
bank of discount, suffers a fine of not more than $500
(1908, chap. 590, 20).
If the cashier is director of a bank, or if he or an officer
under him borrow of the bank, the bank forfeits $500 for
each offense (R. L., chap. 195, 29). A bank which holds
its own stock, except as security for debts, or neglects to
sell stock received as security within six months after it
has become the bank’s own property, forfeits $500 for
256

each offense (R. L., chap. 115, 32). If a bank makes a
loan or discount of which the amount is not payable by
the bank on demand in currency, it forfeits $500 for each
offense (R. L., chap. 115,51). Exceeding the legal amount
of loans to officers is punishable by a $500 fine (R. L.,
chap. 115, 53). Failure of a Boston bank to furnish the
weekly report required by the Revised Laws entails a pen­
alty of $500; failure by a suburban bank, or one outside
Boston altogether, to furnish the monthly report, $25; if
the neglect continues ten days from the first Monday of
any month, there is a forfeit of $500 (R. L., chap. 115,
101). Failure to report to the secretary of Massachusetts
with respect to the Saturday designated by the governor
entails a forfeiture of $100 for each day’s neglect (R. L-,
chap. 115, 105). Obstructing an examination by a com­
mittee of the legislature is punishable by fine of not more
than $10,000 or imprisonment for not more than three
years (R. L., chap. 115, 109). Receivers who fail to report
annually to the legislature forfeit $20 for each day’s neg­
lect (R. L., chap. 115, 118). A bank whose directors fail
to keep a record of discounts and of proceedings at meet­
ings forfeits $500 for each neglect (R. L-, chap. 115, 23).
Failure to furnish a loan demanded by the State entails a
penalty of 2 per cent of the amount per month (R. L.,
chap. 115, 58).
SAVINGS BANKS.
I— Terms
.

of

In c o r p o r a t i o n .

Savings banks are evidently institutions without capital
stock. Members of savings banks must be citizens of
Massachusetts; failure to attend two consecutive annual
meetings is ground for forfeiture of membership (1908,
chap. 590, 27). Before the board of bank incorporation
authorizes the organization of any savings bank they
S D c 33 6 1 - s ----- J
. o . 5,
7




25
17




N a t to n a l

M on e t a r y

Commission

must assure themselves that public convenience will be
promoted by the establishment of the savings bank (1908,
chap. 590, 23).
Before making a semiannual dividend savings banks
set apart from net profits as a guaranty fund not less than
one-eighth nor more than one-fourth of 1 per cent of
total deposits until the fund amounts to 5 per cent of
deposits, beyond which point it must not be increased
(1908, chap. 590, 59). The income of the savings bank,
after expenses and contributions to guaranty fund have
been deducted, is divided among depositors in the follow­
ing manner: An ordinary dividend is declared every six
months out of earnings for that period. There may be
appropriated, from earnings left undivided after the
declaration of a dividend, an amount sufficient to declare
an ordinary dividend; but the total dividends declared
during any twelve months must not exceed the income
during the period without written approval of the com­
missioner. Ordinary dividends must not exceed 2 /2 per
^
cent on amounts which have been on deposit for six
months, or 1% per cent on amounts which have been on
deposit for three months. Savings banks need not pay a
dividend on less than $3 or on fractional parts of a dollar
(1908, chap. 590, 60). Before the meeting called to
declare a dividend the auditing committee must examine
the affairs of the savings bank for the last six months to
determine net earnings (1908, chap. 590, 61). If the net
income for the preceding six months, above the amount
set apart for guaranty fund, does not amount to 1 1 2 per
/
cent of deposits, no dividend is declared except such as the
commissioner approves (1908, chap. 590, 62). Whenever
the guaranty fund and undivided net profits together
amount to io>^ per cent of the deposits at the end of a divi­
dend period, an extra dividend of not less than one-fourth
of 1 per cent may be declared on all amounts which have
258

Savings

M as s a c h u s e t t s

Banks

been on deposit for six months, or not less than one-eighth
of i per cent on all amounts that have been on deposit for
three months; in no case may an extra dividend be paid
which reduces the guaranty fund and undivided profits
together to less than io per cent of deposits (1908, chap.
590, 63).
If necessary to pay depositors, a savings bank, by vote
of its board of investment, may borrow money, pledging
any of its securities (1908, chap. 590, 67).
Chapter 561 of 1907 provides elaborately for the institu­
tion of insurance departments in savings banks.
II.— L iabilities

and

Duties

of

T rustees.

There must be a board of investment of not less than
three, and a board of not less than eleven trustees. No
person may hold office in two savings banks at the same
time. Only one of the persons occupying the office of
president, treasurer, or clerk may be at the same time a
member of the board of investment (1908, chap. 590, 28).
Trustees must meet regularly at least once in three months
to receive the report of the treasurer, etc. A statement,
in the form of a trial balance, is prepared at each regular
meeting showing the condition of the corporation (1908,
chap. 590, 30). The trustees appoint an auditing com­
mittee of not less than two of their number, who cause a
thorough audit of the books, securities, and cash of the
savings bank to be made every twelve months (1908, chap.
590, 32). Failure of a trustee to attend regular meetings
and perform the duties of trustee for six consecutive
months, and bankruptcy, etc., are ground for forfeiture of
office (1908, chap. 590, 34). At least once in each fiscal
year an accurate trial balance must be made of the deposi­
tors’ ledger (1908, chap. 590, 42). Any member of the
board of investment or officer charged with the duty of
investing the savings bank’s funds who becomes indebted







N at i on a l

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to the savings bank or becomes the owner of real estate on
which the savings bank holds a mortgage vacates his
office (1908, chap. 590, 44). Immediately before meet­
ings called to declare dividends, the auditing committee
must examine the affairs for the preceding six months and
report to the trustees the estimated net earnings (1908,
chap. 590, 61).
III.— Supervision .
The bank commissioner and the board of bank incor­
poration, whose appointment is discussed under III, in
Banks, exert their powers under the savings-bank act,
although their authority extends over all banking
institutions. If, in the opinion of the commissioner, a
savings bank has violated the law, he reports the fact to
the attorney-general, who prosecutes. If, in the opinion
of the commissioner, a savings bank is conducting its
business in an unsafe or unauthorized manner, and if it
fails to comply with his order to discontinue the prac­
tices, or if a trustee or officer has abused his trust, the
commissioner, in the case of a savings bank, must report
the facts to the attorney-general, who may after a hear­
ing institute proceedings for removal of trustees or officers,
or such other proceedings as the case may require (1908,
chap. 590, 8). See Banks, III, for the general provisions
requiring the commissioner to institute proceedings
against insolvent banks, to take possession of those banks,
and to sue for a receiver (1908, chap. 590, 9). He may
prescribe rules for bookkeeping, audits, etc. (1908, chap.
590, 12).
The board of bank incorporation has authority to grant
or withhold the certificate that public convenience will be
promoted by the establishment of a proposed savings
bank; this certificate is a prerequisite to incorporation
(1908, chap. 590, 23). Every three years deposit books
260

M as s a c h u s etts

Savings

Banks

are called in for verification under rules approved by the
commissioner (1908, chap. 590, 43). The commissioner
authorizes a declaration of dividends under certain ex­
traordinary circumstances (1908, chap. 590, 62); must be
notified when a savings bank borrows, pledging securities
(1908, chap. 590, 67); and performs certain duties with
respect to investments, including the approval of invest­
ment in bank building. See VI, infra (1908, chap. 590,
68 ).
Provision is made in the statutes for the disposal of un­
claimed deposits (1908, chap. 590, 55 et seq.).
REPORTS.

The clerk of every savings bank publishes in a local
newspapers list of the members and the new officers, after
every election. This list is included in the annual report
of savings banks to the commissioner (1908, chap. 590, 29).
The trustees publish semiannually in a local newspaper the
names of the officers of the corporation charged with the
investing of its funds (1908, chap. 590, 30). The regular
reports are annual. Within twenty days after the last
business day of October the treasurer reports to the com­
missioner in a form prescribed by the commissioner show­
ing the condition of the savings bank at the close of busi­
ness on that day. The following items must be included:
Name of corporation and names of corporators and officers;
place where located; amount of deposits; amount of each
item of other liabilities; public funds, including all United
States, state, and municipal bonds; railroad bonds, streetrailway bonds, telephone bonds, and stock in banks and
trust companies, stating each particular kind, values, and
amount invested in each; loans to municipalities; loans
on mortgage of real estate; loans on personal security;
estimated value of real estate, and amount so invested;
cash on deposit in banks and trust companies, with the




261




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Commission

names of depositaries and amount deposited in each; cash
on hand; the whole amount of interest or profits received,
and the rate and amount of dividends for the previous
year; the times for the dividends; the rates of interest
received on loans; the total amount of loans bearing each
specified rate of interest; the number and total amount of
loans which do not exceed $3,000 each; the number of
open accounts; the number and amount of deposits; the
number and amount of withdrawals; the number of ac­
counts opened and the number closed during the previous
year; annual expenses of the corporation; and such other
information as the commissioner may require (1908,
chap. 590, 37). Every fifth year the report gives other
statistics, including figures showing the amount of de­
posits of various sizes; the amount credited to women, to
guardians, etc., received during the preceding twelve
months (1908, chap. 590, 38). In addition to the reports
required by law, savings banks must make whatever other
reports the commissioner requires (1908, chap. 590, 13).
The treasurer of every savings bank every five years
returns to the commissioner and publishes a statement of
the name, the amount standing to the credit, the last
known address, and the fact of death, if known, of each
depositor who has not deposited or withdrawn for twenty
years. He need not report if the depositor in question is
known to an officer of the bank to be living, nor need he
report deposits for which the book has not been brought
in within twenty years to have interest added or to be
verified, nor need he report deposits which with accumu­
lations are less than $25 (1908, chap. 590, 39).
Each year the commissioner reports to the legislature,
as stated under Banks (1908, chap. 590, 15); the report
of unclaimed deposits must be included in this report
(1908, chap. 590, 39).
262

Massachusetts

—

Savings

Banks

EXAMINATIONS.

The commissioner or a subordinate at least every year,
and oftener if he thinks it necessary, examines every sav­
ings bank to ascertain its condition, its ability to fulfill
its obligations, and its compliance with law (1908, chap.
59°. 5)- On application of five or more officers, trustees,
creditors, or depositors, the commissioner makes a special
examination (1908, chap. 590, 7). Once a year, and
oftener if he thinks it necessary, the commissioner or a
subordinate examines banks in the hands of receivers,
reporting the result of his examinations to the appointing
court (1908, chap. 590, 11). Savings banks and their
officers are subject to examination by committees of the
legislature (1908, chap. 590, 21). The auditing committee
of not less than two trustees make a thorough audit of
the books, securities, and cash of their savings bank at
least once a year (1908, chap. 590, 32). The auditing
committee examine the income, profits, and expenses for
the preceding six months before a dividend is declared
(1908, chap. 590, 61).
V.— Discount, L oan ,

and

Deposit R estrictions.

There is a board of investment which has charge of
loans and investments; it meets at least monthly (1908,
chap. 590, 31).
No president, treasurer, member of a board of invest­
ment, or officer charged with the duty of investing a sav­
ings bank’s funds may borrow from the savings bank or
be surety for loans by it, etc. (1908, chap. 590, 44).
Neither a savings bank nor anyone acting for it may take
a fee, commission, etc., on account of a loan made by the
bank, other than that which appears on the face of the
contract of loan (1908, chap. 590, 45).




263




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Commission

A savings bank may receive on deposit from any per­
son not more than $1,000, and may allow interest on
principal and accumulated interest until the whole
amounts to $2,000; thereafter interest will be allowed only
upon $2,000. This does not apply to deposits by reli­
gious or charitable corporations labor unions, deposits
under order of court, or for the sinking fund of a munici­
pality (1908, chap. 590, 46, amd. by 1909, chap. 491, 7).
For certain other loan provisions, see VI, below.
If necessary to pay depositors, a savings bank may bor­
row money, pledging securities for the loan (1908, chap.
590, 67). See VI, below, for certain restrictions on loans
given under investments because so classified in the
statutes.
VI.— I nvestments.

There is a board of investment of not less than three,
who are in charge of investments (1908, chap. 590, 28).
They meet at least once a month to approve loans, pur­
chases or sales of bonds, stocks, etc. (1908, chap. 590, 31).
The provisions for savings-bank investments are so
extremely long and complicated that the finer distinc­
tions and provisos have had to be ignored here. Stated
in as condensed a form as possible, investments may be:
First.— In first mortgages of real estate in Massachu­
setts. Not exceeding 60 per cent of the value of the real
estate nor more than 70 per cent of the whole amount
of deposits may be thus invested. If the loan is on
unimproved and unproductive real estate, the amount
loaned must not exceed 40 per cent of the value of the
real estate. The board of investment, or two of them,
value the mortgaged premises at least once every five
years.
Second.— (a) In the public funds of the United States
or of any of the New England States. (b) In bonds or
264

Massachusetts

Savings

—

Banks

notes of a Massachusetts county, city, or town, (c) In
bonds or notes of an incorporated district in Massachu­
setts whose debt does not exceed 5 per cent of its property’s
valuation for taxes, id) In the bonds or notes of munici­
palities of the other New England States whose debt does
not exceed, for certain classes, 5 per cent, and for others
3 per cent, of the valuation of the property of the munici­
pality for taxes, (e) In bonds of certain named States,
and the bonds of municipalities of those States which
have 30,000 inhabitants and a debt not exceeding 5 per
cent of the valuation of property for taxes; bonds of
municipalities in other named States having more than
200,000 inhabitants and a debt not exceeding 7 per cent
of the valuation of the property.
Third.— (a) In bonds or notes of a railroad incorporated
in Massachusetts and located wholly or in part there,
which has paid 4 per cent dividends on all its stock for
five years; or in first-mortgage bonds of a terminal com­
pany incorporated in Massachusetts and located there,
if it is owned or operated, or its bonds are guaranteed,
by such a railroad. (6) In bonds or assumed bonds of a
railroad corporation incorporated in any of the New
England States, if at least one-half its road is located in
those States, whether the road is in possession of the com­
pany or leased to another, provided that the bonds are
either secured by a first mortgage of the railroad’s prop­
erty, or by a refunding mortgage as described in (3) or (4)
of (g), or, if the railroad of the corporation is unencum­
bered by mortgage, then the bonds are issued under a
statute providing that after an issue of bonds the railroad
may not execute a mortgage without securing by it pre­
vious liabilities, and provided that this railroad has paid
4 per cent dividends on all its capital stock for five years,
(c) In first-mortgage bonds or assumed first-mortgage




265




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Commission

bonds, or bonds secured by a refunding mortgage as de­
scribed in (3) or (4) of (g), of a railroad incorporated in any
New England State whose road is located wholly or in
part there which have been guaranteed by a railroad de­
scribed in (a) or (b) which is operating its own road, (d)
No bond is made a legal investment by (b) unless the cor­
poration issuing or assuming the bond has during the pre­
ceding year paid in dividends an amount equal to onethird the interest paid on its funded debt direct or assumed.
No bond is made a legal investment by (c) unless the
guaranteeing corporation has during the preceding year
paid in dividends an amount equal to one-third the inter­
est paid on its funded debt, direct, assumed, and guaran­
teed. (e) In mortgage bonds, as described below under
this clause, of any railroad incorporated under the laws
of any of the United States; provided (1) that dur­
ing each of the last ten years the railroad owned 500
miles of line within the United States, or if owning less,
then the gross earnings of the railroad were $15,000,000;
(2) the railroad has paid matured principal and inter­
est of mortgage debt; (3) the railroad has paid 4 per
cent dividends on all its stock; (4) the gross earnings,
including those of controlled roads and those of con­
trolled mines, have not amounted to less than five times
the amount necessary to pay interest on entire debt,
rentals, and interest on debts of controlled lines; but (5)
no bonds are made a legal investment by (g) if the mort­
gage authorizes a total issue of bonds which make the
whole authorized debt of the company exceed three
times its stock; (6) no bonds may be made a legal
investment by (i) or (/), if the mortgage securing them
authorizes an issue of bonds which, added to the total debt
of the guaranteeing corporation, exceeds three times the
capital of the guaranteeing corporation, nor in case the
total debt of the issuing corporation exceeds three times
266

Massachusetts

Savings

Banks

its capital. (/) A “ first mortgage” must be on not less
than 75 per cent of the railroad owned by the company in
question, and in no case less than ioo continuous miles of
road: provided that 75 per cent of the road is connected;
that for five years all the road subject to the mortgage has
been operated by the road which issues, assumes, or guar­
antees the bonds; and that the date of the mortgage is at
least five years prior to the investment. (g) Bonds issued
or assumed by a railroad described in (e) which are secured
by a mortgage which was, at its date or at the date of the
investment, (1) a first mortgage on railroad owned by the
issuing or assuming corporation, except that if not a first
mortgage on 75 per cent of the railroad owned by the cor­
poration, it must be a first mortgage on 75 per cent of the
road subject to the lien of the mortgage at its date; but if
any stocks or bonds are deposited with the trustee of the
mortgage as part of its security, the bonds secured by the
mortgage are not legal investments unless the corporation
owns at least 75 per cent of the total mileage which is
subject to the lien of the mortgage and is represented by
the stocks or bonds; (2) a first mortgage, which is in effect
a first mortgage on all railroad subject to its lien, by virtue
of the irrevocable pledge with a trustee of an entire issue
of bonds that are a first lien on the road of a company
which is operated by the corporation issuing or assuming
the bonds; (3) a refunding mortgage covering at least 75
per cent of the road owned by the corporation at the date
of the mortgage and providing for the retirement of
mortgages which are prior liens, with certain require­
ments, particularly where the mortgaged property is not
owned in fee by the corporation executing the refunding
mortgage; (4) a mortgage on not less than 10 per cent
of a road owned by the corporation issuing or assum­
ing the bonds, but not less than 500 miles of line: provided
that the mortgage is a first or second lien on not less than




267




N ation a l

M one t ary

Commission

75 per cent of the total road covered by the mortgage at
its date and provides for the retirement of all mortgage
debts which are a prior lien; that the bonds secured by the
mortgage mature at a later date and cover 25 per cent
more property than any of the bonds secured by prior lien;
and that the date of the mortgage is five years prior to
that of the investment. (h) Mortgage bonds, or bonds
secured by mortgage bonds, which are an obligation of a
railroad whose refunding bonds are a legal investment under
(3) or (4) of (g) : provided that the bonds are to be refunded
by the refunding mortgage; that the refunding mortgage
covers all the real property on which the mortgage securing
the underlying bonds is a lien; and that, in case of bonds
guaranteed or assumed, the corporation issuing them is
operated by the railroad corporation, (t) Bonds which
have been guaranteed by indorsement by a railroad which
has complied with all the provisions of (e), provided that
the bonds are secured by a first mortgage on the railroad
of a corporation operated by the guaranteeing corporation,
and that, in the case of a leased road the entire capital of
which is not owned by the lessee, the rental includes an
amount to be paid the stockholders of the leased road
equal to at least 4 per cent on that portion of the capital
not owned by the lessee, (f) First-mortgage bonds of a
railroad corporation which has for ten years complied with
(2), (3), and (4) of (e) , provided the bonds are guaranteed
by a railroad company which has complied with all the re­
quirements of (1), (2), (3), and (4) of (e), notwithstanding
that the railroad of the issuing corporation is not operated
by the guaranteeing corporation. (k) Bonds which are a
legal investment are not rendered illegal even though the
corporation issuing, assuming, or guaranteeing them fail
not longer than two years to comply with the requirements
of (4) of (e). No further investment is made during that
period in the bonds of the corporation in question, but if,
268

Savings

Massachusetts

Banks

during the year following its two years’ unsatisfactory con­
dition, it complies with all the requirements of (e), it is then
regarded as having complied with them throughout. (Z
)
Bonds which are a legal investment are not rendered illegal
by the fact that the property upon which they are secured
is acquired by another railroad; and although the issuing
or assuming corporation is consolidated with another, if
the consolidated or purchasing corporation assumes the
payment of the bonds, and so long as it pays interest or
dividends on the securities issued to effect the consolidation
to an amount equal to 4 per cent at least on the capital
of the issuing or assuming corporation, the bonds remain
a legal investment, (m) If a railroad which has com­
plied with all the requirements of (1), (2), (3), and (4)
of (e) for more than five, but less than ten years, is
merged with another railroad, the succeeding corpora­
tion is considered as having complied with the first four
provisions of (e) during those years preceding the date of
merger during which all the merged corporations, if con­
sidered as one corporation, would have so complied; pro­
vided the succeeding corporation continues to comply for
a period making the total ten years, of which total not
less than two years are under the consolidation, (n)
Railroad does not include street railway. The commis­
sioner prepares annually a list of authorized investments
under Third.
Fourth.— Certain investments made prior to the act of
1908 may continue to be held.
Fifth.— In the bonds of any street railway company in­
corporated in Massachusetts and located wholly or in part
there, which has paid dividends of 5 per cent on all its
stock for five years. The commissioner’s annual list in­
cludes those bonds and notes which are authorized under
Fifth.




269




National

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Commission

Sixth.— In the bonds of any telephone company a ma­
jority of whose directors are residents of Massachusetts,
provided that for five years the company has satisfied these
requirements: (i) Its gross annual income has been at
least $10,000,000; (2) it has paid principal and interest
of all its debts; (3) it has paid 6 per cent dividends; (4)
the dividends have not been less than the total amount
necessary to pay all interest; these bonds, moreover, must
be secured either by a first mortgage of 75 per cent of the
property of the company, or by the deposit of bonds and
shares of other telephone companies, under a trust agree­
ment limiting the amount of bonds to 75 per cent of the
value of the securities deposited; for five years, interest
and dividends paid on the deposited securities must have
amounted to not less than 50 per cent in excess of the
annual interest on the bonds secured. Not more than 2
per cent of the deposits of a savings bank may be invested
in bonds of telephone companies. The commissioner’s
annual list of securities that are a legal investment must
show those authorized under Sixth.
Seventh.— In the stock of New England national banks,
or of Massachusetts trust companies, but the corporation
must not hold, both as an investment and as security, more
than 20 per cent of its deposits in this sort of stock; nor in
the stock of any one national bank or trust company more
than 3 per cent of its deposits, nor more than $100,000,
nor more than one-quarter of the capital stock of the bank
or trust company. A savings bank may deposit not more
than 2\ per cent of its deposits in any Massachusetts na­
tional bank and in any Massachusetts trust company, but
the deposit must not exceed $500,000, nor 25 per cent of
the capital and surplus of the depositary.
Eighth.— In loans not for a longer period than one year,
subject to the requirements given below. Not more than
one-third of deposits and income may be thus invested,
270

M as s a c h u s e t t s

—

Savings

Banks

nor may the total liabilities to a savings bank of a person,
firm, or corporation for money borrowed on personal se­
curity, including in firm liabilities those of the members,
exceed 5 per cent of deposits and income; these limitations,
except the one-year limitation, not to apply to loans made
under (2) of (e). These loans may be of the following
sorts: (a) Notes of three or more responsible Massachusetts
citizens; provided that the total liabilities to any savings
bank of a person or firm for money borrowed under this
subdivision, including in firm liabilities those of the mem­
bers, must not exceed 1 per cent of the deposits. (b)
Notes, with one or more substantial sureties or indorsers,
of a Massachusetts corporation, or of a manufacturing
corporation with a Massachusetts commission house as
surety, or of an association or corporation at least half
whose property is located in New England, with a surety
who is a citizen or corporation of Massachusetts, but no
loan of this sort may be made unless an examination of the
borrowing corporation has been made by an accountant
approved by the commissioner. (c) Notes or bonds of gas,
electric light, telephone, or street railway corporations of
Massachusetts that have had annual net earnings for three
years equal to 4 per cent of their capital, and gross earnings
for one year of $100,000. (d) Bonds or notes issued, as­
sumed, or guaranteed by railroad corporations complying
with the requirements of (b) , or (1), (2), (3), and (4) of (e), of
Third. The principal of the securities named in (c) and (d)
must be payable in a time not longer than a year. (e) Notes
of responsible borrowers with a pledge of various collateral,
including (1) mortgages of Massachusetts real estate, if the
note does not exceed 60 per cent of the value of the real
estate, nor 40 per cent if it is unproductive; (2) securities
which are legal investments under Second, Third, Fourth,
or Fifth, at not more than 90 per cent of their market value;
(3) deposit books of depositors, at not more than 90 per




271




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Monetary

Commission

cent of the amount of deposits; (4) railroad stocks which
are legal investments under (a), (b), or (e) of Third, at
not more than 80 per cent of their market value; (5)
other stocks and bonds at percentages settled by the
board of investment, subject to the approval of the com­
missioner. (Changes of collateral under (e) must be ap­
proved by the board of investment— 1908, chap. 590, 31.)
Ninth.— A sum not exceeding the guaranty fund and
undivided earnings of the savings bank, nor in any case
exceeding 5 per cent of its deposits, or $200,000, may,
subject to the approval of the commissioner, be invested
in suitable real estate for business purposes.
Tenth.— A savings bank may hold real estate acquired
by foreclosure of mortgages owned by it, or by purchase
at sales made under such mortgages, or upon judgments
for debts due it, or settlements to secure such debts. This
real estate must be sold within five years, and the bank
may take a purchase money mortgage, notwithstanding
the provisions of First.
Eleventh.— A savings bank may hold stocks, bonds,
notes, or other securities acquired in settlements to secure
debts, but these securities must be sold in five years
(1908, chap. 590, 68, amd. by 1909, chap. 491, 8).
V III.— B ranches.
Savings banks may not do business at any place other
than their own banking house, except that with the per­
mission and under the regulation of the commissioner one
or more branches for the receipt of deposits may be estab­
lished in the city or town in which the banking house is
located, or in towns not more than 15 miles distant in
which there is no savings bank (1908, chap. 590, 36).
IX .— Occupation
*

of the
i

See Banks.
272

S ame B uilding .

M as s a c h u s etts

Savings

Banks

X .— U nauthorized Banking .
No corporation, person, or firm, except savings banks
and trust companies incorporated under Massachusetts
law (except certain foreign corporations subject to super­
vision of the commissioner— 1907, chap. 533), may use a
sign having on it words indicating that the office is that of
a savings bank, nor may such words be used on letter
paper, etc. Business appearing to be that of a savings
bank may not be transacted (1908, chap. 590, 16). The
penalty for violation is $100 a day; the offender may be
enjoined from doing business (1908, chap. 590, 17).
X I.— P enalties .
See Banks for penalties for obstructing examinations;
failure to report or false report; occupation by a savings
bank of offices with another bank; and the holding of
office in a national bank or a trust, company by a savings
bank officer (1908, chap. 590, 6, 14, 19, and 20).
Any officer of a savings bank, or other person in charge
of its property, who obstructs examination by a com­
mittee of the legislature is punished by a fine of not more
than $10,000 or imprisonment for not more than three
years (1908, chap. 590, 21). If the clerk of a savings bank
neglects to notify newly elected officers or to publish the
required list of them, or if he publishes a false list, he is
liable to a penalty of $50 (1908, chap. 590, 29). The treas­
urer of a savings bank who fails to make a return of un­
claimed deposits is punished by a fine of $100 (1908, chap.
590, 39). Whoever violates the provision forbidding the
receipt by a savings bank of a fee for negotiating a loan
from the savings bank, other than that which appears on
the face of the contract of loan, suffers a fine of not more
than $1,000, imprisonment for not more than one year, or
both (1908, chap. 590, 45). Toss of office is the penalty
S. D o c. 3S3, 6 1 -2 ----- 18




273




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Monetary

Commission

for the president, treasurer, member of investment board,
or officer charged with investing funds, who borrows from
the savings bank or becomes owner of land mortgaged to
it (1908, chap. 590, 44).
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

Trust companies are clearly given banking powers; they
may “ receive on deposit, storage, or otherwise money
* * * and other property of any kind. ” Trust com­
panies receiving such general deposits of money must not
give the depositor security (R. L., chap. 116, 12). Prop­
erty received in trust is kept separate from the general
assets of the company; investments, loans, etc., are distinct
and in a trust department (R. L., chap. 116, 24). The
trust department may have a trust guaranty fund accumu­
lated out of profits, invested only in legal trust fund invest­
ments (R. T., chap. 116, 25), and pledged for performance
of fiduciary undertakings (R. L., chap. 116, 26). This
trust guaranty fund must not be transferred to the general
capital while trust obligations are owed; but its income
may be added to the general income of the corporation
when it is not needed to discharge fiduciary obligations
(R. L-, chap. 116, 27).
The capital of every trust company must be not less than
$200,000 nor more than $1,000,000, except that in a city or
town of not more than 100,000 the capital may be not less
than $100,000, divided into shares of $100 par value. The
whole capital must be actually paid in before business is
begun, and no share may be issued till paid for in cash
(R. L.,chap. 116, 5, amd. by 1907, chap. 487). No shares
may be issued till paid for at par in cash (1904, chap. 374,6).
A guaranty fund must be set aside each year of not less
than 10 per cent of net earnings until this fund amounts to
274

Ma s s a c h u s e t t s

Trust

C o mp a n i e s

25 per cent of capital; the guaranty fund must be invested
“ in the same manner as deposits in savings banks may be
invested” (R. L., chap. 116, 29).
Before they are allowed to begin business the incorpora­
tors of a trust company must obtain a certificate that
public convenience and advantage will be promoted by the
establishment of the company. If this is refused the
application may not be renewed until a year later (1904,
chap. 374, 3). Before beginning fiduciary business the
trust company must receive authority (R. L., chap. 116,
20). The issuing of this authorization is at the discretion
of the board of bank incorporation, who also make the
preliminary examination to ascertain that the whole capi­
tal has been paid in in cash and that all requirements
have been complied with, before issuing the certificate
authorizing the trust company to begin business (1904,
chap. 374, 6; and 1908, chap. 590, 4, amd. by 1909, chap.
49B 2).
A recent statute provides for the separation of savings
deposit business in a department of its own. Every trust
company “ soliciting or receiving deposits (a) which may
be withdrawn only on presentation of the pass book or
other similar form of receipt which permits successive
deposits or withdrawals to be entered thereon, or (h) which
at the option of the trust company may be withdrawn only
at the expiration of a stated period after notice of intention
to withdraw has been given, or (c) in any other way which
might lead the public to believe that such deposits are
received or invested under the same conditions or in the
same manner as deposits in savings banks,” must have a
separate savings department (1908, chap. 520, 1). The
loans and investments of these deposits are governed by
the savings-bank statute (1908, chap. 520, 2). These
deposits and the investments or loans of them must not
be mingled with the general property of the trust company




275




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Commission

or be liable for the general obligations of the company until
deposits in the savings department have been- paid in full
(1908, chap. 520, 3). In addition to this security, savings
depositors have an equal claim with other creditors upon
the property of the trust company (1908, chap. 520, 4).

II.— L iabilities

and

D uties of Stockholders
Directors.

and

The stockholders of every trust company are personally
liable for the obligations of the corporation to the amount
of their stock at par in addition to the amount invested in
the shares (R. L., chap. 116, 30, amd. by 1905, chap. 228).
Each director of a trust company must own at least ten
shares of its stock. A majority of them must be citizens
of Massachusetts and there resident; not more than onethird of the directors of one trust company may be directors
of another (R. L., chap. 116, 9).

III.— Supervision .
See Banks for the details of the make up of the board
of bank incorporation, the qualifications of the bank
commissioner, etc. The commissioner, if he thinks a
trust company has violated the law, reports to the
attorney - general, who prosecutes. The commissioner
directs unsafe practices to be discontinued, and may, if
the trust company fails to comply or if he thinks a
trustee or officer of the trust company has abused his
trust, etc., either report to the shareholders or, with the
consent of the treasurer and receiver general, the attorneygeneral, and the commissioner of corporations, publish
the facts as he thinks public interest requires (1908,
chap. 590, 8). If a trust company on examination
appears insolvent or in a hazardous condition, the com­
missioner must, or in cases of apparent violation of law
276

M o s s a c h u s et t s

Trust

Compani es

or exceeding powers may, take possession and apply for a
receiver (1908, chap. 590, 9). The commissioner examines
the affairs of receivers and reports any violation of duty
to the appointing court (1908, chap. 590, 11). The com­
missioner may prescribe the form of keeping books and
accounts of trust companies and the extent to which they
must be audited (1908, chap. 590, 12). The bank
commissioner has authority to determine what trust
companies in Boston may act as reserve agents for other
trust companies; his consent is necessary to use a reserve
agent as such (1908, chap. 520, 10). He notifies a trust
company to make good its reserve when it falls below
the required amount, and if the company fails for sixty
days to do so he applies to a court for a receiver. If
the reserve of a trust company which has been authorized
to act as reserve agent is less than the required amount,
the commissioner notifies the company to make the reserve
good, and if it fails to do so for ten days he may revoke
its authority to act as a reserve agent (1908, chap. 520, 11).
Increases in capital stock must be approved by the com­
missioner (1905, chap. 189; and 1908, chap. 590, 5, amd.
by 1909, chap. 491, 3).
The board of bank incorporation has authority to refuse
to allow the incorporation of a trust company if not
required by public convenience, and to refuse to allow a
trust company to begin trust business if they think it
inexpedient (R. L., chap. 116, 20; 1904, chap. 374, 3; and
1908, chap. 590, 4).
REPORTS.

The recent savings bank act provides that in addition to
reports required by law to be made, trust companies must
make such other statements to the commissioner as he
may require (1908, chap. 590, 13). Every trust company
must when required by the commissioner, but not exceed-




277




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M on e t a r y

Commission

ing five times a year, return to the board a report of its con­
dition at the close of business “ on said d ay” (there seems
to be no day previously specified), detailing the following
items: Capital stock; amount of all money and property in
detail, in the possession or charge of said corporation as
deposits; amount of deposits payable on demand or within
ten days; amount of trust guaranty fund; trust funds or
for purposes of investment; number of depositors; invest­
ments in authorized loans of the United States or any of
the New England States, counties, cities, or towns; invest­
ments in bank stock, railroad stock, and railroad bonds,
stating amount in each; loans on notes of corporations;
loans on notes of individuals; loans on mortgages of real
estate; cash on hand; rate, amount, and date of dividends
since last return; and such other information as the board
of commissioners of savings banks may require. This
return must be made within ten days and must be in the
form of a trial balance, specifying different kinds of
liabilities and assets in accordance with a blank form
furnished by the board. It is published in a local news­
paper (1908, chap. 520, 13; and 1908, chap. 590, 5, amd.
by 1909, chap. 491, 3). Reports are required to be sub­
mitted to the bank commissioner within ten days after
the examinations by the committee of three stock­
holders discussed below. This report is made on forms
furnished by the commissioner, and contains a statement
of assets and .liabilities, including those of the trust
department, together with whatever other information
the commissioner requires. It specifies loans or discounts
which the committee thinks worthless or doubtful and
loans made on collateral which is of doubtful value or not
readily marketable (1907, chap. 319, 2 and 3). For tax
reports, see 1908, chapter 520,12; and 1909, chapter342, 2.

278

M a s s ac hu s et ts

Trust

C o mp a n t e s

The report required to be made by the bank commis­
sioner to the legislature is as stated under Banks (1908,
chap. 590, 15).
EXAMINATIONS.

The general rules for examinations are as stated under
Banks. The commissioner or a subordinate, at least an­
nually, and whenever he considers it expedient, visits
every trust company (1908, chap. 590, 5). On application
of five or more officers, trustees, creditors, or depositors to
the commissioner he must make a special examination
(1908, chap. 590, 7). He examines trust companies in the
hands of receivers (1908, chap. 590, 11).
A preliminary examination is made by the board of bank
incorporation to ascertain that the capital has been paid
in in cash (1904, chap. 374, 6; and 1908, chap. 590, 4, amd.
by 1909, chap. 491, 2). The commissioner may examine
trust companies as he does savings banks, and may employ
an expert for additional examinations of trust .companies
that are acting in a fiduciary capacity. He examines
whenever ordered to do so by a court of competent juris­
diction (R. L., chap. 116, 37; and 1908, chap. 590, 5, amd.
by 1909, chap. 491 ,.3).
The stockholders of every trust company elect an ex­
amining committee of not less than three stockholders, of
which certain specified managing officers of the company
may not be members. This committee, once a year, with­
out notice to the officers or directors, makes a thorough ex­
amination of assets and liabilities, including those of the
trust department. Within ten days after their examina­
tion they report to the bank commissioner as explained
above. If upon receipt of this report, or if upon examina­
tion, a further examination or audit of the affairs of a trust
company seems necessary, the commissioner may cause it
to be made by an expert (1907, chap. 319, amd. by 1908,
chap. 520, 14).




279




)

N at ion a l

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Commission

IV.— R eserve R equirements.

Every trust company must have a reserve equal to at
least 15 per cent of its deposits, exclusive of savings de­
posits and of deposits represented by certificates and not
subject to be withdrawn within thirty days. Every trust
company doing business in Boston must have a reserve
equal to 20 per cent of deposits computed in the same man­
ner (1908, chap. 520, 8). At least two-fifths of this re­
serve must consist of lawful money of the United States,
gold or silver certificates, or national bank notes. The re­
mainder may consist of balances payable on demand, due
from trust companies in Boston authorized as reserve
agents by the commissioner, or from national banks in
Massachusetts and named cities. A portion not exceeding
one-fifth of the reserve may consist of United States or
Massachusetts bonds. The aggregate amount of lawful
money of the United States, gold and silver certificates,
and national bank notes must equal at least 5 per cent of
^all deposits exclusive of those in the savings department
(1908, chap. 520, 9). The commissioner may authorize
any trust company in Boston to act as reserve agent for
trust companies doing business in Massachusetts, but a
trust company must not keep its reserves in such an au­
thorized trust company without obtaining the commis­
sioner’s consent. Not less than one-half of the reserve of a
trust company acting as reserve agent must be in lawful
money of the United States, gold certificates, silver certifi­
cates, or national bank notes, and the remainder may con­
sist of balances payable on demand, due from trust com­
panies in Boston authorized to act as reserve depositaries,
or from national banks in Massachusetts or irj named cities
(1908, chap. 520, 10). While the reserve of a trust com­
pany is below the required amount no new loans or invest­
ments may be made. The commissioner notifies the com-

Massachusett s

—

Trust

Compani es

pany to make good its reserve, and if it fails for sixty days
sues for a receiver. When the reserve of a reserve deposi­
tary is below, the commissioner requires that trust company
to make good its reserve, and if it fails to do so within ten
days he revokes its authority to be a reserve agent (1908,
chap. 520, 11).
V.— D iscount

and

Doan R estrictions.

A trust company may loan its capital or general de­
posits on real property in Massachusetts and on personal
security (R. E-, chap. 116, 13). No trust company may
advance money on notes secured by mortgage of farms
or agricultural or unimproved land outside of Massachu­
setts except on land in New England or New York, nor
may it invest in or make loans upon the securities of a
company dealing in notes secured by such mortgages
(R. E-, chap. 116, 14). No trust company may loan or
discount on the security of shares of its own stock unless
the security is necessary to prevent loss on a previous
debt, in which case the stock must be disposed of within
six months (R. L-, chap. 116, 33).
The total liabilities of a person, other than cities or
towns, for money borrowed, including in the liabilities
of a firm those of its members, to trust companies with a
capital of $500,000 or more, must never exceed onefifth of the surplus and of the paid-up capital; and the
liabilities to any other trust company must not exceed
one-fifth of paid-up capital. But the discount of bills
of exchange drawn in good faith against existing values,
and of commercial paper owned by the person negotiat­
ing it, are not considered as money borrowed (R. L.,
chap. 116, 34).
Trust funds are separated from general assets; loans of
them are appropriated to the security of the trust de­
posits (R. E., chap. 116, 24). Loans of savings deposits




281




N at io n a l

M onet ary

Commission

are handled by the savings department of the trust com­
pany and are appropriated solely to the security and pay­
ment of the savings deposits. They must be made in
accordance with the restrictions on savings bank loans
(1908, chap. 520, 2 and 3).
See further loan restrictions, under VI.
VI.— I nvestments.

A trust company may hold unincumbered real estate
suitable for its business, to an amount not exceeding
25 per cent of its paid-in capital, and in no case exceeding
$250,000 (R. T., chap. 116, 35).
A trust company may invest its capital and general
deposits in stocks, bonds, or other evidences of indebtedness
of corporations (R. L., chap. 116, 13). A trust company
may not invest in the securities of a company dealing
in notes secured by real estate mortgages which would
not be a legal loan for the trust company (R. L., chap.
116, 14). A trust company may not be agent to deal in
securities on which the company could not lawfully loan,
nor may it act as agent to deal in evidences of debts
secured exclusively by mortgage of real estate (R. L.,
chap. 116, 15). A trust company may not invest in its
own shares unless the purchase is necessary to prevent
loss on a previous debt, in which case the stock must be
disposed of within six months (R. L., chap. 116, 33).
There is a separate trust department, the investments
of which are especially appropriated to the security of
trust deposits and are not mingled with the investments
of capital or general assets of the company (R. L., chap.
116, 24). The trust guaranty fund may be invested
only in such securities as trust deposits may be invested
in (R. L-, chap. 116, 25). Trust deposits with a trust
company under order of court may be invested only in

22
6

Massachusetts

—

Trust

C o mp a n i e s

United States securities, securities of any New England
State, of any New England municipality, of named
States, and of the municipalities of the named States, or
in stocks of state or national banks of Massachusetts, or
in first mortgage bonds of New England railroads that
have paid dividends on all their capital for two years, or
in bonds of such a railroad unincumbered by mortgage,
or in first mortgages on Massachusetts realty, or in securi­
ties in which savings banks may invest, or in loans upon
notes, with two sureties, of domestic manufacturing cor­
porations or of individuals with pledge of any of the securi­
ties named, but all real estate acquired by judicial process
must be sold at public auction within two years (R. L.,
chap. 116, 17).
If a trust company receives savings deposits, it must keep
them in a savings department, and must invest them
according to the statutes governing savings bank invest­
ments ; they are appropriated for the security of savings
depositors solely (1908, chap. 520, 1, 2, and 3).
VIII.— B ranches.
The board of bank incorporation may authorize any
trust company to maintain not more than one branch
office, which must be in the city or town in which its main
office is located (1908, chap. 520, 15).
IX.— Occupation

of the

Same B uilding.

See Banks.
X.— U nauthorized T rust Company B usiness.

No corporation, whether domestic or foreign, and no
person or firm, except savings banks and trust companies
incorporated under Massachusetts law, may use a sign,
letter paper, etc., on which appears a name or other words




283




N at i on a l

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Commission

indicating that the business done is that of a savings bank.
See this heading under Savings banks (1908, chap. 590, 16
and 17).
No person, firm, or corporation, except trust companies
incorporated under Massachusetts law, may use the words
“ trust company” in his or its name, or advertise or
solicit or receive deposits as a trust company. Whoever
violates this provision forfeits $100 for each offense for
each day (R. b., chap. 116, 3, amd. by 1909, chap. 491, 1).
X I. — P enalties .
See this heading under Banks for penalties for obstruct­
ing examinations, failing to report, occupation by a savings
bank of offices with a trust company, and violations of the
rule forbidding officers of savings banks to hold office in
trust companies (1908, chap. 590, 6, 14, 19, and 20).

MICHIGAN.
The digest for this State is based upon a reprint of the
laws relating to banking compiled under the supervision
of George A. Prescott, secretary of state, published in
1908, and including all legislation through the 1907 session
of the legislature. Legislation by the 1909 session has
been taken from the later reprint, compiled under the
supervision of Frederick C. Martindale, secretary of state,
published in 1909. The general banking law applies for
the most part to both commercial and savings banks,
which may be combined. On this account these two sorts
of institutions are put under one head in the digest. At
the end of each subhead are collected such few provisions
as relate either to banks alone or to savings banks alone.
There is legislation for trust companies, following the bank­
ing act for the most part, even to the language, and scarcely
less complete. This has been digested under the heading
“ Trust companies.” A constitutional provision in Michi­
gan requires that a general banking law be approved by
a majority of voters at a general election (constitution,
Art. X V , sec. 2); it seems that the trust company laws
are not within the constitutional provision, since banking
powers are expressly denied trust companies (6164).
The references in the digest, following those in the
reprints of the secretary of state, are, where they are
simply numbers in parenthesis, to sections in the Compiled
Laws of 1897, the last revision of the Michigan statutes.
Amendments as indicated in the two reprints are noted
in the digest.







N at ion a l

M onet ary

Commission

BANKS AND SAVINGS BANKS.
I.— T erms

of

I ncorporation.

Incorporation under the general banking law may be
“ to establish offices of discount and deposit to be known
as commercial banks, and also to establish offices of loan
and deposit to be known as savings banks, or to establish
banks having departments for both classes of business.”
All three of these sorts of banks are regulated by the
banking act (6122). The capital stock must be at least
$250,000, except that banks with a capital of not less than
$20,000 may be organized in a city or village of not more
than 1,500; with a capital of not less than $25,000 in a
city or village of not more than 5,000; with a capital of
not less than $50,000 in a city or village of not more than
20,000; and with a capital of not less than $100,000 in a
city of not less than 110,000. Banks having deposits
exceeding $5,000,000 must have a capital of not less than
$400,000 (6090, amd. by 1899, act 265). The capital must
be divided into shares of $100 each (6091). A t least 50
per cent of the capital must be paid in before business is
begun; the remainder must be paid in in installments
of at least 10 per cent on the whole of the capital, payable
at the end of each month from the time the bank is author­
ized to begin business (6094). Any bank which combines
the business of commercial and savings banking must
keep separate books of account, and all transactions
relating to each class of business are governed by the rules
applicable to that sort of banking. Savings investments
must be separated, savings reserves must be separated,
and uninvested savings deposits and investments of sav­
ings deposits are held solely for the payment of savings
depositors (6118, amd. by 1909, act 193).
Directors may declare dividends out of net profits, but
before the declaration not less than one-tenth of the net
286

M ichigan — State Banks and Savings Banks
profits for the preceding dividend period must be carried
to surplus, until the surplus amounts to 20 per cent of
capital (6102).
(For restrictions on banks borrowing, see VI, infra.)
COMMERCIAL BANKS.

The salient feature of a commercial bank seems to be
that, although it may allow interest on accounts or certifi­
cates of deposit, all deposits are payable on demand with­
out notice, unless the contract of deposit otherwise pro­
vides (6113).
SAVINGS BANKS.

The statute distinguishes savings banks by providing
that they “ may receive on deposit money offered by trades­
men, mechanics, laborers, servants, minors, and other
persons; and all deposits in said banks may be repaid to
the depositors, * * * when required at such time or
times and with such interest and under such regulations as
the board of directors of the bank from time to time pre­
scribes” (6115).
II.— L iabilities

and

D uties of Stockholders
D irectors.

and

Stockholders are individually liable for the benefit of
depositors in their bank to the amount of their stock at
par in addition to the stock (6135). See constitutional
provisions for unlimited liability of officers and stock­
holders of banks issuing money (constitution, Art. XV,
sec. 3), and of stockholders of all corporations for labor
(constitution, Art. XV, sec. 7).
There must be not less than five directors, each of whom
must own not less than ten shares of stock (6101, amd.
by 1899, act 265). The directors appoint an examining
committee of directors or stockholders, who must examine




287




N at i on a l

M onetary

Commission

the bank every six months and report to the directors, with
a view to ascertaining what assets of the bank are not of
the value at which they appear on the records (6104, amd.
by 1907, act 65). The directors, or a committee of at
least three of them, must meet monthly to examine
loans, investments, and other transactions since the last
meeting (1909, act 193).
III. — Supervision .
There is a bureau in charge of the execution of laws
relating to banks, trust companies, etc., called the state
banking department (6124). The chief officer is the com­
missioner of the banking department, whose term of office
is four years and whose salary is $3,500 a year. Neither
the commissioner nor his deputy may be interested in bank­
ing business (6125, amd. by 1909, act 103). No one may
be appointed to examine a bank in which he is interested
in any way-. The commissioner and his subordinates must
keep secret information obtained in the course of examina­
tion except so far as public duty requires them to report
(6129, amd. by 1905, act 88).
The commissioner grants a certificate of authority to
begin business, which he may withhold, on consultation
with the attorney-general, if he has reason to believe that
the organization is for other than legitimate purposes
(6096). He approves of reductions in capital stock
(6099). He approves of cities in which banks may be
used as reserve depositaries (6113; and 6116, amd. by
1905, act 262, and by 1907, act 322). When it appears
that a bank is borrowing habitually for the purpose of
reloaning, the commissioner requires the bank to pay off
the borrowed money (6121, amd. by 1905, act 117). He
may call stockholders’ meetings of any bank (6133).
Voluntary liquidations are reported to him (6142) and
288

M ichigan — State Banks and Savings Banks
he approves of consolidations (6143). He has supervision
over extending the corporate existence of banks (1899,
act 143).
With the concurrence of the attorney-general, the com­
missioner institutes proceedings to wind up the affairs of
a bank, under the following circumstances: When a bank’s
reserve has fallen below the required amount and for
thirty days after notice from the commissioner the bank
has failed to make the reserve good (6114; and 6116, amd.
by 1905, act 262, and by 1907, act 322); when by cancel­
lation of unpaid shares the capital is reduced below the
minimum and is not increased to the required amount
within thirty days (6095); and when the directors violate
or allow a violation of the banking law and after warning
from the commissioner fail to make good all damages that
have resulted (6109). If the commissioner is satisfied
that the capital of a bank is reduced below the legal
requirement, and the impairment is not made good as
required by him, or if he is satisfied that a bank has
refused to pay its deposits, or if it has violated the law
or is conducting its business in an unsafe or unauthorized
way, or if it refuses to submit to examination, or if from
an examination or report he concludes that the bank is
in an unsound or unsafe condition, then the commissioner
communicates with the attorney-general and institutes
through him receivership proceedings. The court appoints
the banking commissioner or a subordinate* or some other
person as receiver. Pending the appointment the com­
missioner may take possession of the bank (6144, amd.
by 1909, act 103). The stockholders of the bank may
put it in condition to resume business, in which case the
court discharges the receiver (1909, act 193).

S . D o c. 353, 6 1 —2----- 19




289

Commission
REPORTS.

Every bank makes to the commissioner not less than
four reports a year, at times and according to forms he pre­
scribes. They show resources and liabilities at the close
of business of a past day specified by the commissioner,
and must be transmitted to him within five days after the
receipt of his request. They are published in a local news­
paper. The commissioner may call for special reports
when he thinks them necessary. Every bank must also
report within ten days after declaring a dividend the
amount of the dividend, the amount carried to surplus,
and the amount of excess net earnings (6110). After the
examining committee of the directors of every bank have
made their semiannual examination and reported to the
directors, a copy of the record is sent to the commissioner;
once a year a list of stockholders is sent him (6104, amd.
by 1907, act 65). There is a provision not part of the
banking act that “ every banking * * * or other
incorporated company” must file annually with the sec­
retary of state a list of the number of shares issued, with
the names and addresses of the owners (11364, amd. by
1903, act 35). Receivers must report to the commissioner
all their proceedings (6144, amd. by 1909, act 103).
A provision not part of the banking act requires that
every third year every person, firm, or corporation who is
engaged “ in the trust business or the business of banking
within this State, and as a part of such business, receive
in any manner whatever, moneys, or securities of persons
upon deposit,” must report to the commissioner deposits
where the persons making them have not dealt with them
for three years and the depositary has good reason to be­
lieve that the depositor is dead. The report includes name
of depositor, sum deposited, date and form of deposit,

290

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M ichigan — State Banks and Savings Banks
interest, and amount, with the total of deposits of this
sort (1218).
At the end of every year the commissioner reports to
the governor showing a summary of the condition of every
bank from which reports have been received during the
year, with an abstract of total capital, liabilities, resources,
and lawful money held, and such other information as
the commissioner thinks is required; a statement of the
banks and corporations whose business has been closed,
with details; and details of the conduct of the banking
department (6132).
EXAMINATIONS.

There is a preliminary examination to ascertain the
amount of money paid in on capital, and performance of
other preliminaries (6096). The commissioner or a sub­
ordinate examines, twice or oftener each year and when­
ever required by the directors, the cash, securities, books,
condition, etc., of every bank (6128, amd. by 1903, act
107, and 1905, act 88). He causes a special examination
to be made before allowing a bank to extend its corporate
existence (1899, act 143). An examining committee of
directors or stockholders make an examination at least
once every six months in order to report to the directors
assets which are not of the value at which they appear
on the books (6104, amd. by 1907, act 65).
IV.— R eserve R equirements.
COMMERCIAL BANKS.

Every commercial bank must keep on hand at least 15
per cent of its total deposits, and every commercial bank
in a city of over 100,000 20 per cent of its total deposits, of
which reserve one-half must be in lawful money, and onehalf may be in deposits payable on demand in banks in




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Monetary

Commission

cities approved by the commissioner as reserve cities
(6113). Whenever the reserve of any commercial bank
falls below the requirement the bank must not increase its
liabilities by making new loans or discounts except by
buying sight exchange (6114).
SAVINGS BANKS.

Every savings bank must keep on hand at least 15 per
cent of its total deposits, of which reserve one-third must
be in lawful money, and the balance on deposit, payable on
demand, with banks or trust companies in cities approved
by the commissioners as reserve cities, or invested in
United States bonds (6116, amd. by 1905, act 262, and by
1907, act 322).
V.— Discount, L oan ,

and

D eposit R estrictions.

The total liabilities to any bank of any person, firm, or
corporation for moneys advanced, including in firm or
corporation liabilities those of the members, must not
exceed one-tenth of the capital and surplus of the bank,
but the discount of bills of exchange drawn in good faith
against existing values and the discount of paper owned by
the person negotiating it are not considered as money bor­
rowed. The foregoing limitations, moreover, do not apply
to loans on real estate or other authorized collateral. The
directors, by a two-thirds vote, may allow an increase in the
liabilities to the bank of any person, firm, or corporation,
to a sum not exceeding one-fifth of capital and surplus.
Before any bank loans any of its funds to its officers or
employees the directors must approve (6141, amd. by 1899,
act 265, 1905, act 262, and 1907, act 322). No bank may
take as security a loan upon any part of its capital stock.
The same security in kind and amount must be required
of stockholders and of persons not stockholders (6090,
amd. by 1899, act 265).
292

M ichigan — State Banks and Savings Banks
No bank may give a preference to a depositor or cred­
itor by pledging the assets of the bank as collateral, but a
bank may borrow for temporary purposes and may pledge
assets not more than 50 per cent over the amount borrowed
as collateral. When it appears that a bank is borrowing
habitually to reloan, the commissioner may require the
bank to pay off the borrowed money. These provisions
do not prevent a bank from rediscounting and indorsing
its notes. No bank may issue its certificate of deposit
for the purpose of borrowing money. No bank may make
partial payments upon certificates of deposit (6121, amd.
by 1905, act 117).
(Incidental loan restrictions appear under VI, infra.)
COMMERCIAL BAN KS.

No commerical bank may lend to exceed 50 per cent of
its capital upon mortgage or any other form of real-estate
security, “ and then only upon the adoption of a resolu­
tion by a two-thirds vote of the board of directors stating
to what extent its officers may loan on real estate,
* * * except to secure a debt previously contracted in
good faith on personal security deemed at the time ade­
quate to secure such loan” (6112). Commercial banks
may invest their capital and deposits in negotiable or
commercial paper or loans on personal securities (6113).
SAVINGS BANKS.

Savings banks may issue time and other certificates of
deposit (6117).
V I.— I n v e s t m e n t s .
A bank may hold real estate only for the following pur­
poses: Such as is necessary for the convenient transaction
of its business, including with its banking office other
rented apartments, but this investment must not exceed




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Commission

50 per cent of paid-in capital; such as is conveyed to the
bank in satisfaction of previous debts; and such as it pur­
chases at judicial sales under securities held by it, but
the bank must not bid a larger amount than will satisfy
debt and costs. The last two sorts of real estate must be
sold within thirty days after the expiration of five years
(6100).
No bank may hold any portion of its own capital unless
the purchase is necessary to prevent loss on a previous
debt, in which case the stock must be sold within six
months if it will bring what it cost; and if not sold within
a year at the best price obtainable, then it must be can­
celed (6090, amd. by 1899, act 265).
Not more than one-fourth of the assets of any bank
may be invested in steam-railroad bonds; not more than
one-tenth in the bonds of any one railroad corporation
described in (c) or (d) of the next paragraph; not more
than one-twentieth in the bonds of any corporation de­
scribed in (e), (/), or (g) of the next paragraph, and not
more than one-tenth loaned to any one person, firm, or
corporation on pledge of collateral described in (h) of the
next paragraph (6141, amd. by 1899, act 265; 1905, act
262, and 1907, act 322).
SAVINGS BAN KS.

After a savings bank has set aside its 15 per cent re­
serve, three-fifths of the remainder of savings deposits
must be invested as follows: (a) In bonds of the United
States, or of any State or Territory which has not for ten
years failed to pay debt or interest; (6) in bonds of any
municipality in the United States, if the total debt of the
municipality does not exceed 5 per cent of its assessed
valuation, and by a two-thirds vote of directors munic­
ipal bonds may be purchased if the total liabilities do
not exceed 10 per cent of assessed valuation; (c) in first294

M ichigan — State Banks and Savings Banks
mortgage bonds of any steam railroad of any State, if the
company has for five years paid 4 per cent dividends on
its whole capital stock and has not defaulted for the same
time in payment of principal or interest of mortgage debt
or bonds guaranteed; (d) in first-mortgage bonds of rail­
roads whose lines are controlled by a railroad company spe­
cified in (c), if the controlling company guarantees prin­
cipal and interest of the bonds; (e) in mortgage bonds of
any steam railroad of any State if they have been issued
to retire prior mortgages and to provide for improvements,
provided the company in question has paid 4 per cent
dividends on its whole capital for three years, has a cap­
ital of at least one-third the par value of the bonded
indebtedness, and has not for three years defaulted on
principal or interest of mortgage debt or of bonds guar­
anteed— bonds under (e) must be approved by the secur­
ities commission; (/) in first mortgage bonds of any
electric railroad, street railway, gas or electric light or
power company organized under Michigan law, if the com­
pany has for five years paid 4 per cent dividends on its
whole capital, and has not during the same period de­
faulted in payment of principal or interest of mortgage
debt or of bonds guaranteed; companies in this class
which have not yet been operating five years may satisfy
the requirements otherwise— bonds under (/) must be ap­
proved by the securities commission; (g) in first-mortgage
bonds of steamship companies if the mortgage, entailing
liability not in excess of one-half the cost of the property,
is on steel steamships of certain tonnage on the Great
Lakes; the mortgage must provide for the retirement of
10 per cent of the bonds annually, and certain insurance
requirements must be complied with, etc.— bonds under
(g) must be approved by the securities commission; (h)
in loans secured by any of the above securities; ( 1 in
■)




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loans upon notes or bonds secured by mortgage of unin­
cumbered real estate worth double the amount loaned.
The remainder of the deposits— i. e., two-fifths of those not
held in reserve funds— may be invested in notes, bills, etc.,
secured by deposit with the bank or with a deposit com­
pany, of collateral consisting of personal property or securi­
ties of known marketable value worth io per cent more than
the amount of the loan and interest; or may be deposited in
a bank or trust company in cities in Michigan or elsewhere,
approved by the commissioner as reserve cities. Also, a
portion of the remainder, not exceeding the capital and
additional stockholders’ liability, may be invested in paper
approved by the directors. The deposits in any one bank
must not exceed io per cent of the total deposits, capital,
and surplus of the depositing bank (6116, amd. by 1905,
act 262, and 1907, act 322). The securities commission
that passes upon the securities in (e), (/), (g), and (h),
above, consists of the commissioner, the attorney-general,
and the State treasurer. When an issue of bonds of the
classes in (e) and (/) are presented to the commission, they
examine the condition of the issuing corporation, compar­
ing the issue with the valuation of the corporation’s prop­
erty. The securities commission keeps a record of invest­
ments which it authorizes banks to make (1905, act 262).
V II. — Overdrafts .

The only reference to overdrafts is in the section which
provides that an overdraft of more than ninety days
standing shall not be allowed as an asset of a bank (6121,
amd. by 1905, act 117).
V III. — B ranches.
The constitution gives the legislative power, by a twothirds vote to “ create a single bank with branches”
(constitution, Act XV, sec. 1). This clearly is not con296

M ichigan — State Banks and Savings Banks
cerned with branches of regular state banks or savings
• banks.
X .— U nauthorized B anking .
No incorporated company without express authoriza­
tion of law may be interested in receiving deposits, making
discounts, etc.; any director, officer, or agent of a company
who violates this provision forfeits $1,000 (11351). The
act relative to bankers and banking firms forbids their
advertising, etc., in such a way as to represent themselves
as “ an organized bank,” though they may employ the
words “ bank” and “ banking office” in connection with
the individual or firm name. Violation of the section is
a misdemeanor, punishable by fine of not more than $200
or imprisonment for not more than six months (5275).
X I.— P enalties .
Every bank which fails to report is subject to a penalty
of $100 a day during the delay (6111). Failure to report
unclaimed deposits after being required to do so by the
commissioner of banking entails a penalty of $300 for each
failure, and an additional $10 a day while the report
remains unfiled (1219). Anv company which fails to
report to the secretary of state annually a list of stock­
holders is liable to a fine of not more than $500 (11365).
The officers of a bank whose duty it is to keep a book with
names and residences of stockholders, stock transfers, etc.,
forfeit $100 for every day’s neglect if they fail to keep the
book, and $50 for a refusal to exhibit it to one rightfully
demanding inspection (6134).
Every officer, director, or employee who embezzles,
makes a false entry, reports falsely, with intent to deceive
an examining officer, etc., is imprisoned for not longer
than twenty years (6147). Any officer or employee who
certifies to a check for which there are not funds to the




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Commission

credit of the drawer, any director or officer who receives
a deposit knowing his bank to be insolvent, and any officer
or employee who knowingly assists in a violation of the
banking act is punished by imprisonment for not longer
than five years, fine of not more than $1,000, or both
(6108, 6103, and 6107, amd. by 1899, act 265).
Any bank combining commercial and savings banking
which does not keep separate accounts, separate invest­
ments, etc., suffers a penalty of $50 for each offense (1909,
act 193).
Any person who: First, knowingly makes a false state­
ment in writing to a person, firm, or corporation engaged
in banking or other business, respecting his own financial
condition or that of a firm or corporation with which he is
connected, for the purpose of procuring a loan or credit
from the person, firm, or corporation to whom the false
statement is made; or, second, having made, or knowing
that another has made, a false statement in writing to a
person, firm, or corporation engaged in banking or other
business, respecting his own financial condition or that of
a firm or corporation with which he is connected, after­
wards procures a loan or credit on the faith of the state­
ment, knowing at the time that the statement was false;
or, third, delivers to a note broker a statement in writing,
knowing it to be false, respecting his financial condition or
that of a firm or corporation with which he is connected,
for the purpose of using the statement to further the sale,
pledge, or negotiation of commercial paper, made or
indorsed, etc., by him or his firm or corporation; or, fourth,
having previously delivered, or knowing that another has
previously delivered, to a note broker a statement in writing
with respect to his own financial condition or that of a
firm or corporation with which he is connected, afterwards
delivers to the broker for the purpose of sale, pledge, or
negotiation, on the faith of the statement, any commercial
298

M ichigan — Trust

Companies

paper made or indorsed, etc., by him or his firm or cor­
poration, knowing that the statement is false— is guilty
of a misdemeanor, punishable by fine of not more than
$500 for each offense, or imprisonment for not longer than
six months, or both fine and imprisonment (1909, act 25).
Whoever willfully makes a false statement in writing of his
property valuation or his indebtedness, to obtain credit,
is guilty of a felony, punishable by imprisonment for not
longer than one year and fine not exceeding $1,000 (1909,
act 85). Any person who willfully and maliciously makes
a statement derogatory to the financial condition of a bank,
savings bank, or trust company doing business in Michigan,
or who aids in the circulation of such a statement, or rumor,
is guilty of a felony, punishable by fine of not more than
$5,000, or by imprisonment for not longer than five years,
or both (1909, act 273).
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

The section of the chapter on trust, deposit, and secur­
ity companies which enumerates the powers of such com­
panies provides that “ nothing herein contained shall be
construed as giving the right to issue bills to circulate as
money, or buy or sell bank exchange, or do a general bank­
ing business” (6164). Note that deposits of savings
bank reserves may be made “ in any national bank, trust
company, or bank in cities in this or any other State,
approved by the commissioner,” etc. (6116, amd. by 1905,
act 262, and 1907, act 322). Trust companies, moreover,
may keep their reserves “ in any bank or trust company
approved by the commissioner” (6165).
The capital stock of a trust, deposit, and security com­
pany must be at least $300,000 and not more than
$5,ooo,oo°, except that in cities of less than 100,000 it




299




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must be not less than $150,000. Fifty per cent of the
capital must be paid in in cash before business is begun,
and the rest within six months thereafter (6157). Shares
must be of $100 each (6158).
Dividends may be declared out of net profits, but before
the declaration not less than one-tenth of the net profits
for the preceding dividend period must be carried to sur­
plus until it amounts to 20 per cent of the capital (6162).
II.— L iabilities

and

D uties of Stockholders
Directors.

and

Stockholders are individually liable for all obligations
of the corporation to the extent of the amount of their
stock at par in addition to the amount invested in the
shares (6169).
There must be not fewer than seven directors, each
the owner of at least ten shares of stock (6162).
III.— Supervision .
See III under Banks and Savings banks for provi­
sions dealing with the commissioner, his qualifications,
salary, report to governor, etc. The trust company
act provides that all trust, deposit, and security com­
panies are subject to the inspection and supervision of
the commissioner of the banking department (6172).
It provides for secrecy on the part of him and his sub­
ordinates and forbids examination by anyone interested
in the trust company examined (6174). It gives him
power to call stockholders’ meetings of trust companies
(6177). It provides that he is to be notified of volun­
tary dissolutions (6182) and must approve of consolida­
tions (6183), and that he is to designate banks and trust
companies which may act as depositaries of trust com­
pany reserves (6165). It gives him power to authorize
300

M ichigan — Trust

Companies

trust companies to begin business (6157). The miscon­
duct upon which receivership proceedings may be based
is similar to that in the banking act; if the directors
allow a violation of the trust company act and after
warning from the commissioner fail to make good dam­
ages which result (6162), or if an officer refuses to allow
examination (6175), or if it appears from a report, or
the commissioner has reason to believe, that capital is
impaired or reduced, which deficiency the trust company
fails to make good on ninety days’ notice (6176), or if
the commissioner is satisfied that a trust company has
refused to pay its obligations or has become insolvent, or
that its capital has become impaired, or that it has vio­
lated the provisions of the trust company law, he pro­
ceeds with the approval of the attorney-general for a
receiver (6184).
Every trust company deposits with the state treasurer
not less than 50 per cent of the amount of its capital, nor
more than $200,000 in bonds and mortgages of certain
sorts, to be held by the state treasurer as security for
depositors and creditors (6157).
REPORTS.

Every trust company makes to the commissioner not
fewer than four reports each year at such time and in
such form as the commissioner prescribes. The reports
exhibit resources and liabilities of the corporation at the
close of business on a past day specified by the commis­
sioner. They are transmitted to him within five days
after the receipt of his request and are published in a
local newspaper. The commissioner may call for special
reports whenever they are necessary. In addition each
trust company must report to the commissioner within
ten days after declaring any dividend the amount of the




301




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M on et a r y

Co mmi s s i o n

dividend, the amount carried to surplus, and the amount of
excess net earnings (6170).
Receivers report all their acts to the commissioner
(6184). (See Banks and Savings banks for the list
of stockholders required to be sent every year to the
secretary of state (11364, etc.) and the report of un­
claimed deposits (1218).
EXAMINATIONS.

The commissioner or a subordinate examines once
every year, and when requested by the directors, the cash,
bills, securities, books, condition, etc., of every trust
company, to determine among other things whether the
company transacts its business at the place designated
in its articles of incorporation and whether it complies
with law (6173).
IV.— R eserve R equirements.
Every trust company must keep on hand funds to an
amount equal at least to 20 per cent of its matured obliga­
tions and money due and payable, three-fourths of which
reserve may be kept in any bank or trust company ap­
proved by the commissioner of the banking department
(6165).
V.— Discount

and

L oan R estrictions.

Trust companies may “ loan money upon real estate
and collateral security” (6164).
VI.— I nvestments.
Any trust company may hold personalty which is neces­
sary to carry on its business, or which it is necessary to
acquire in the enforcement of claims, etc.; also real estate,
but only for the following purposes: Such as is necessary
302

Michigan

Trust

Companies

for the convenient transaction of its business, including
with its office other apartments in the same building
which may be rented, but this investment must not ex­
ceed 50 per cent of its paid in capital and surplus; such
as is conveyed to the company in satisfaction of previous
debts; and such as it purchases at judicial sales under
liens held by it, but it must not bid more than is neces­
sary to satisfy debt and costs. Real estate of the second
and third sorts may not be reckoned as an asset for
longer than five years. Real estate may, of course, be
held in trust (6165).
The capital which is required to be deposited in the
state treasury must be invested in bonds secured by
mortgages, or notes and mortgages on unincumbered real
estate in Michigan, worth double the amount secured, or
in securities of the United States, or of any State that has
not defaulted on principal or interest in ten years, or of
any municipality in Michigan or in any other State. The
balance of the capital stock, together with trust funds,
may be invested in or loaned on securities of designated
sorts, or whatever real or personal securities the directors
think proper (6166).
X I.— P enalties .
A trust company which fails to report is subject to a
penalty of $100 a day (6171). See Banks and Sav­
ings banks for the penalties for failure to send annually
a list of stockholders to the secretary of state and for
failure to report unclaimed deposits. If the officer of a
trust company whose duty it is to keep a book for names
of stockholders, transfers of stock, etc., fails to keep the
book he is liable to a penalty of $100 for every day’s
neglect, and if he refuses to exhibit the book to a person
rightfully demanding inspection he is subject to a penalty
of $50 (6178). See also the last paragraph under X I in




y>3




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Commission

Banks and Savings banks, for 1909 statutes which pro­
vide penalties for making various false statements to
procure credit, circulating rumors derogatory to a trust
company’s credit, etc.
Every officer, director, or employee who embezzles or
commits various frauds, including false entries or reports
to deceive an examining officer, is imprisoned for not
longer than twenty years (6187). The directors and
officers of a trust company who receive money or prop­
erty knowing the corporation is insolvent are guilty of
a misdemeanor punishable by fine of not more than
$1,000, imprisonment for not longer than a year, or both.
Officers or employees who assist in the violation of any
provision of the trust company act are guilty of a mis­
demeanor punishable by a fine of not more than $1,000,
or imprisonment for not longer than one year (6162).

304

MINNESOTA.
The Revised Laws of Minnesota, including all statutes
enacted prior to the session of 1905, contain a division
dealing with “ Financial corporations.” This in turn is
divided into “ general provisions” (secs. 2967-2982),
“ banks” (secs. 2983-3008), “ savings banks” (secs. 30093032), “ trust companies” (secs. 3033-3047), “ local build­
ing and loan associations” (secs. 3048-3058), and “ gen­
eral building and loan associations” (secs. 3059-3067).
The digest, which follows this arrangement of the statute,
is confused by the necessity of inserting important statutes,
chiefly of 1909, which seem for the most part properly
under “ General provisions,” and leave it doubtful just
which of the old sections they repeal. One of the 1909 stat­
utes creates the office of superintendent of banks, who takes
over the work formerly in the hands of the public ex­
aminer; but since the statutes all read “ public examiner,”
they are so digested, leaving it for the reader to note that
the new official is now substituted. Under heading “ Gen­
eral provisions ’ ’ are inserted such parts Pf the statute on
financial corporations and such other provisions of the
Minnesota statutes as apply generally to all three kinds of
banking institutions. Under “ Banks,” “ Savings banks,”
and “ Trust companies,” respectively, are inserted the pro­
visions applicable to each class. Where the references
are simply numbers in parenthesis, they are to sections in
the Revised Laws of 1905. Other references are to the
later statutes by year and chapter; they have been ex­
amined through the laws of 1909.
S. D o c. 3S3, 6 i -2-




-20

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GEN ERAL PROVISIONS.
II.— L iabilities

and

D uties

of

D irectors.

There must be at least three directors, who must be
stockholders (2858).
III.— Supervision .
Two late statutes alter the system of bank supervision
materially; one, chapter 201 of 1909, creates a depart­
ment of banking in charge of a superintendent of banks,
provides for a system of examination, etc., and the other,
chapter 179 of 1909, provides for proceedings against de­
linquent corporations and for the liquidation of their
assets.
The department of banking has charge of the execution
of all laws relating to banks, savings banks, trust com­
panies, building and loan associations, and other financial
corporations chartered under the laws of Minnesota; the
chief officer of the department is the superintendent of
banks (1909, chap. 201, 1). The superintendent, ap­
pointed by the governor for a term of three years, must be
a practical banker of not less than five years’ active expe­
rience. He must not, during the term of his office, hold
any other public office, nor be a stockholder, officer, em­
ployee, etc., of any financial corporation within or outside
of Minnesota (1909, chap. 201, 2). He is vested with all
of the authority and takes over all of the duties formerly
in the hands of the public examiner with respect to banks,
savings banks, trust companies, building and loan asso­
ciations, and other financial corporations (1909, chap. 201,
4 and 5). He may appoint eight examiners and certain
other employees; the examiners must have had at least
three years’ active experience in the banking business.
No examiner may examine any corporation in which he
has a direct or indirect interest (1909, chap. 201, 8). The
306

Minnesota

—

General

Provisions

State is divided into eight districts for examination, to
each of which an examiner is appointed (1909, chap. 201,9).
The superintendent’s salary is $5,000 a year (1909, chap.
201, n ).
The public examiner (whose duties have now devolved
upon the superintendent of banks— 1909, chap. 201, 4)
may, under certain circumstances, take possession of the
property and business of a bank, savings bank, or trust
company and hold possession until the corporation resumes
business or is finally liquidated. The circumstances under
which he may so act are the following: Whenever it appears
to him that a bank has violated its charter or any statute,
or is conducting its business in an unsafe or unauthorized
manner, or that its capital is impaired; whenever it refuses
to submit to examination or suspends payment, or fur­
nishes reason for the examiner to conclude that it is in an
unsound or unsafe condition to transact its business, or
that it is unsafe and inexpedient for it to continue business;
and whenever it fails to observe a proper order of the
examiner. This statute provides elaborately for the
liquidation by the examiner of such delinquent banks, the
proof of claims against their assets, the distribution of their
funds to depositors, creditors, and stockholders, etc. (1909,
chap. 179).
Chapter 201 of 1909 provides for the repeal of all laws
inconsistent with it; there is no repealer at all in chapter
179. I he digest accordingly includes in the paragraph
below and in certain paragraphs in III, under Banks,
under Savings banks, and under Trust companies, provi­
sions of the Revised Taws and of later statutes which are,
in all probability, repealed by the 1909 legislation. It is to
be borne in mind also that chapter 201 transfers from the
public examiner to the superintendent of banks all powers
and duties with respect to banks, savings banks, and trust
companies, the examiner’s name is used in the digest




307




N a t io n a l

M o n et a r y

Commission

because it so appears in the statutes, even those of 1909,
except chapter 201.
When the examiner is of opinion that an examined cor­
poration may not operate further without danger to public
interests, he takes possession of its property and reports
to the governor for appropriate action (2968). He super­
vises voluntary liquidations (2969, 2970, and 2971).
Whenever any banking corporation becomes insolvent,
fails to pay its debts, or violates any provision of law, it
may be enjoined by the court from transacting further
business (3179). In certain cases the court may appoint
a receiver (3180).
The examiner, before granting a certificate to an incor­
porating banking institution, must be satisfied that the cor­
poration has been organized for legitimate purposes under
conditions to merit public confidence, and that it has com­
plied with law (2974).
REPORTS.

The eight examiners appointed under the statute of
1909 report to the superintendent immediately after hav­
ing examined the condition of any institution, making such
recommendations as they deem advisable (1909, chap. 201,
10). The superintendent of banks reports annually to the
governor touching his official acts, with abstracts of the
condition of the corporations to which his duties relate,
making whatever recommendations he thinks proper; this
report he must distribute to the corporations under his
charge (1909, chap. 201, 7).
The examiner under the old statute reported to the
governor biennially, giving an abstract of the work of
his department, and the condition of the corporations to
which his duties related; he might make whatever recommedations he thought proper (1907, chap. 128).
After making the examination discussed below, the pub308

Minnesota

General

Provisions

lie examiner is required, if the provision of the Revised
Laws is still in force, to report promptly the condi­
tion of the examined corporation to the governor, es­
pecially with regard to infringements of law. This report
the governor may publish (1584).
EXAMINATIONS.

Under the statute of 1909 the superintendent, through
his examiners, visits, at least twice each year, every state
bank, savings bank, and trust company, inspecting and
verifying its assets and liabilities thoroughly enough
to ascertain if its assets are correctly carried on its books;
he investigates the conduct of these corporations and
their systems of accounting to determine whether they
accord with law and sound banking principles (1909,
chap. 201, 4). The older provisions of the Revised Laws,
given in the following paragraph, seem clearly overridden
by the foregoing.
At least once a year the public examiner was, under
the provisions of the Revised Laws, required to visit
all banking corporations, to inspect and verify their
assets and securities, assure himself of the validity of
their mortgages, and ascertain whether their transactions
were legitimate (1584). The examinations might be
as much more frequent than annual as the examiner
thought necessary. Without previous notice he or his
deputy visited and examined the business and offices
of each corporation; ascertained its financial condition
and its ability to perform its functions, with special refer­
ence to any violations of law (2968).
VII.— Overdrafts .

There is evidently no general objection to overdrafts,
for they are mentioned as a possible liability of the director
of a trust company to his corporation (3045).




309




N at i on a l

M on et a r y

Commission

XI.— P enalties .

Every person who fails to obey an order of the super­
intendent of banks or withholds any information called
for by him for purposes of examination, or who willfully
obstructs or misleads him, or swears falsely, is guilty of
a felony punishable by fine of at least $1,000, or imprison­
ment for at least one year (1909, chap 201, 6).
Any person who (1) makes a false statement to a bank,
savings bank, or trust company respecting his financial
condition or that of another, for the purpose of pro­
curing a loan from the corporation to which the state­
ment is made; or (2) having previously made or having
knowledge that another has made a statement to a bank,
savings bank, or trust company respecting his or another’s
financial condition, afterwards on the faith of the state­
ment procures from the bank, savings bank, or trust
company a loan, knowing that the statement is false;
or (3) delivers to a note broker for the sale or negotiation
of commercial paper to a bank, savings bank, or trust
company, a false statement respecting his own or an­
other’s financial condition for the purpose of having
the statement used to further the sale, pledge, or negotia­
tion of the commercial paper; or (4) having previously
delivered or knowing that another has previously de­
livered to a note broker for the sale or negotiation of
commercial paper a statement respecting his own or
another’s financial condition, afterwards delivers to the
note broker for the purpose of sale, pledge, or negotiation
on the faith of the statement any commercial paper,
knowing that the statement is false with respect to his
own or another’s financial condition, is guilty of a gross
misdemeanor punishable by a fine not exceeding $1,000,
or imprisonment not exceeding five years, or both
(1909, chap. 431).
310

S t a t e

M i n n e s o t a

B a n k s

Corporations failing to report to the public examiner
within ten days after the proper time forfeit $100 per day
(2979). Persons who refuse to testify before the examiner
or who obstruct or mislead him are punished by a fine of
$1,000 or imprisonment for one year (1587).
There is a general provision making it a felony for an
officer or employee of a banking corporation to violate the
provisions of the statutes (2981). It is also a felony for
officers, directors, and employees to receive deposits in an
insolvent bank, punishable by imprisonment for not less
than one or more than ten years or by fine of not less than
$500 nor more than $10,000 (5118).
BANKS.
I.— T erms

of

I ncorporation.

The capital of every bank of discount and deposit must
be at least $10,000 in a municipality of not over 1,000 pop­
ulation; at least $15,000 in one of over 1,000 and not over
1,500; at least $20,000 in one of over 1,500 and not over
2,000; and at least $25,000 in one over 2,000. The capital
must be paid in full in cash (2983); when the bank pre­
sents its certificate of incorporation to the examiner it
must present also the certificate of a solvent bank of the
deposit in that bank to the credit of the proposed bank of
an amount equal to its capital stock (2973.)
At the end of each dividend period one-fifth of net
profits must be set aside before declaring a dividend,
until the surplus equals one-fifth of the capital (2987).
Capital must never be withdrawn in dividends or other­
wise except according to the legal mode of reducing it
(2997).
A bank may conduct a savings department under the
supervision of the state examiner (1909, chap. 178).




3”




%

National

Monetary

•II.— L iabilities

and

Commission

D uties of Stockholders
Directors.

and

Stockholders in banks of discount and deposit are in­
dividually liable for the debts of the bank in an amount
equal to the amount of stock owned by them. Even after
stock has been transferred, this liability continues to rest
upon the transferrer for a year (1907, chap. 137).
Directors of a bank whose capital is not over $15,000
must each own $300 of stock; directors in banks with a
capital exceeding that sum, at least $500 (2986).
III.— S upervision.
A statute of 1909, digested under General Provisions,
provides for dissolution proceedings. The sections given
in the next paragraph, though not expressly repealed,
seem in part inconsistent with the new act.
When a bank is about to become insolvent its managing
officers must report that fact to the examiner. If the
latter is satisfied that the bank is insolvent, that its books
are fraudulently kept, or that it has violated the law, he
may take possession of the bank’s property, may examine
the bank, and apply for a receiver (2998). If a bank fails
to pay up its capital stock, or if its capital stock is im­
paired, it must make up the deficiency within ninety days
after notice from the examiner, or go into liquidation.
If it refuses, a receiver may be appointed. The examiner
has authority to empower the bank to reduce its capital,
avoid the receivership, and continue with smaller capital
(3000). If capital is impaired by reason of cancellation of
shares on which an assessment is unpaid, a receiver may
be appointed if the impairment is not made good in thirty
days (3002).
The examiner has authority over reorganizations and
consolidations (3001 and 3004). He determines what
books must be kept (2991).
312

S t a t e

M i n n e s o t a

B a n k s

REPORTS.

At least four times a year, and at other times if re­
quested by the examiner, every bank must within seven
days transmit to the examiner, in a form prescribed by
him, a report stating its assets and liabilities at the close
of business on a day specified in the report, if it is a special
request, otherwise on the la^business day of the pre­
ceding month. This report is published in a local news­
paper (2990). Annually, banks file, with the register of
deeds and the examiner, a copy of their list of stockholders
with the amount of stock held by each (1907, chap. 137).
The report of the examining committee of the directors of
banks alluded to below is transmitted to the examiner
(2988).
EXAMINATIONS.

The directors appoint certain of themselves as an
examining committee to examine the bank’s condition
semi-annually, and oftener if required. The committee
reports on all assets carried on the books in excess of the
actual value thereof. This report is transmitted to the
examiner (2988).
IV.— R eserve R equirements.

Every bank keeps a reserve equal to one-fifth of its
demand liabilities. One-half of the reserve must be in
cash, including specie, legal tender, and national-bank
notes, and the rest may be in balances due from solvent
banks (2996).
V.— Discount

and

L oan R estrictions.

The total liability to any bank, as principal or surety,
of any person, corporation, or firm, including the liabilities
of the members, must not exceed 15 per cent of the bank’s
capital and surplus, except that if the loans are on first
mortgage of improved farms in Minnesota, the limit is




3*3

i




N ational

M onetary

Commission

20 per cent, though the mortgage loans must never exceed
50 per cent of the cash value of the mortgaged land. The
total liability of any officer or director must never be
more than 10 per cent of stock and surplus. In reckoning
these loan limits, however, discounts are not regarded as
creating liability, if they are of commercial paper of cer­
tain sorts (1907, chap. 156). Loans to directors must be
subject to the same regulations as to others and must be
made by the board and acted upon in the absence of the
applicant (2989).
No bank may loan or discount on the security of its
own stock (2992). .
V I.— I nvestments.
The real estate used by a bank for the transaction of its
business may include premises leased to others, but the
entire cost must not exceed 25 per cent of capital and
surplus. It must hold no other real estate longer than
five years, unless the time has been extended by certificate
of the examiner. The examiner must approve of changes
of location (2995 and 2976).
No bank may be purchaser or holder of its own stock
unless it is necessary to prevent loss on a previously con­
tracted debt. Stock so acquired must be disposed of
within six months (2992).
X.— U nauthorized B anking .

Persons, firms, and individuals doing a banking busi­
ness must consent to supervision, otherwise they are not
entitled to use the word “ bank” on stationery, or in
advertisements, etc. Unauthorized use of the title
“ bank” is a misdemeanor (1907, chap. h i ).
XI.— P enalties .

The penalty for failure to keep proper books is $10 per
day (2991).
314

Savings

M innesota

Banks

SAVINGS BANKS.
I.— T erms

I ncorporation.

of

-The statutes dealing with savings banks evidently con­
template institutions without capital stock. A savings
bank is defined to be a corporation managed by disinter­
ested trustees, solely authorized to receive “ the savings
of small depositors ” (1909, chap. 103). It must be shown
to the examiner that it is expedient to organize a savings
bank (3009), and that preliminary publication has been
made of incorporators’ names, etc. (2973).
The depositors in savings banks receive as nearly as
possible all the profits after expenses and surplus have
been set aside. When the surplus amounts to 15 per cent
of the deposits, at least once in three years the savings
bank divides the excess as an extra dividend, for which
purpose the depositors may be divided according to the
character of their dealings with the bank (1907, chap. 468,
sec. 9).
II. — L iabilities

and

D uties

of

T rustees .

The business of a savings bank is managed by a board
of at least seven trustees, residents of the county of the
bank’s location (2858 and 3014). The bonds which they
give may be sued upon by any person damaged by the
trustees’ breach (3012). If the trustees declare a divi­
dend in excess of that earned, those who vote for it are
liable to the bank (1907, chap. 468, sec. 9).
The trustees must meet at least once a month (1907,
chap. 468, sec. 3). No officer of a savings bank may
engage in lending money, protesting paper, or doing any
other sort of business in or about the bank except as his
duties require (3024). No trustee may have any interest
in the profits of the bank, nor take any compensation for
his services, except when he acts as an officer whose duties




315




N at ion a l

M onetary

Commission

require regular and faithful attendance, or as member of a
committee whose duties require actual service; the board
of trustees, exclusive of the one who is to receive com­
pensation, vote upon his salary. No trustee or officer
may borrow funds or in any manner use funds except in
necessary disbursements authorized by specific resolution
of the board. No officer or trustee is allowed to make
himself liable to the bank for money loaned or in any
other way; nor may he become employed by any other
savings bank (1907, chap. 468, sec. 4).
I l l .— S upervision .

The examiner passes upon the expediency of proposed
organizations (3009). When he believes that a savings
bank is conducting its business in an unsafe or unauthor­
ized manner, he directs the methods to be discontinued.
If the bank refuses to comply or make report, or if the
examiner thinks it unsafe for the bank to continue busi­
ness, he may institute proceedings for removal of trustees,
transfer of corporate powers to other persons, or any other
appropriate action (3030). See General Provisions, III,
for the important statute of 1909 on proceedings by the
examiner against corporations which are in default.
REPORTS.

The trustees report annually, in the form prescribed by
the examiner, the condition of the savings bank at the
end of the preceding calendar year. The report is based
on the examination discussed below, and includes the
items there enumerated (1907, chap. 468, sec. 10).
EXAMINATIONS.

The trustees annually cause a thorough examination to
be made by an expert accountant, showing the savings
bank’s condition at the end of the year, specifying the
316

M innesota

—

Savings

Banks

following: Loans or notes secured by mortgages, with items
as to locality, amounts paid, foreclosures, etc.; value of
bond investments, with particulars; loans on pledge of
securities, with particulars; defaulted interest on obliga­
tions held; investments in real estate; cash on hand, on
deposit, and where deposited; such other information as
the public examiner may require (1907, chap. 468, sec. 10).
Also amount due depositors, and all claims against the
savings bank which may be a charge on its assets; various
items with regard to deposits; their amounts; the amounts
withdrawn; dividends declared; number of accounts, etc.
(3028).
V.— Discount, L oan , and D eposit R estrictions.
No trustee or officer may borrow the funds of a savings
bank nor become liable to the bank as surety (1907, chap.
468, sec. 4). See VI, below, for further loan restrictions.
Savings banks must receive all money offered for deposit
in amounts of not less than $1 nor more than a maximum
fixed by the bank’s by-laws, which must, however, never
exceed $5,000 (3017).
VI.— Investments.

Savings banks must not hold land and buildings for the
transaction of their business in excess of a value equal to
50 per cent of the net surplus of the bank (2976). Savings
banks may hold land sold on foreclosure of mortgages
owned by the bank, or upon judgments in favor of the
bank, or they may take land in settlement of debts, or
in exchange as part of the consideration of land they sell.
This land must ordinarily be sold within ten years of its
acquirement (3021). The authorized securities for sav­
ings bank investment include only the following: First,
United States securities; second, bonds of any State which
has not defaulted within ten years; third, bonds of coun-




317




National

Monetary

Commi ssi on

ties, cities, etc., in Minnesota and neighboring States, or
securities of Minnesota, or securities of cities, counties,
etc., in the United States of at least 3,500 inhabitants,
but the total bonded debt of the municipality must not
exceed 10 per cent of its assessed valuation; fourth, notes
secured by mortgages on unencumbered realty in Minne­
sota and neighboring States worth, if improved, at least
twice, and if unimproved, at least three times, the amount
loaned, but not more than 70 per cent of the money of the
bank must be loaned in this way; fifth, notes secured by
such bonds or mortgages as the bank is authorized to in­
vest in, but the collateral must not be taken for more than
its par value, the securities must equal the full amount
loaned, the loan must be for not more than a year and no
greater to any one person than 3 per cent of the deposits of
the bank— not more than one-fourth of the bank’s deposits
must be thus loaned; sixth, railroad bonds of companies
which have received a land grant from the Government,
if the bonds are a first lien upon the railroad; seventh,
bonds of other railroad companies which are a first lien
upon a railroad within the United States, or in refunding
mortgage bonds of such a railroad, or in the bonds of any
railroad in the United States guaranteed by another rail­
road in the United States, provided that the railroad com­
pany, except one whose bonds are thus guaranteed, has
not within five years failed to pay dividends of not less
than 4 per cent on its whole capital, and has not defaulted
in payment on its bonds— savings banks, however, must
not invest in railroad bonds more than 20 per cent of their
deposits nor more than 5 per cent of their deposits in the
securities of one railroad; eighth, in debenture stock of a
Minnesota railroad, if the stock bears interest at at least
4 per cent and is secured by a first lien on the railroad,
but not more than 5 per cent of the bank’s deposits may
be thus invested (3022, and 1907, chap. 468, secs. 7 and 8).
318

M in n es ot a

—

Trust

Companies

Deposits must be promptly invested, except so much,
not exceeding 15 per cent, as may be required for current
necessary disbursements. This expense fund may be put
into demand loans secured by securities of the first two
classes, or if these loans are not to be obtained, the fund
may be deposited in solvent authorized banking institu­
tions in Minnesota, New York City, or Chicago (3023).
Savings banks must not deal in property or engage in other
business not essential to the transaction of its own (3024).
X.— U nauthorized B anking .

Only savings banks and safe deposit and trust companies
complying with all provisions of the law applicable to the
business done are allowed to make use of letter heads,
advertisements, etc., representing them authorized to
transact that sort of business, or to use “ savings” or
“ trust” in their names, or to solicit or do a savings bank
or trust company business. An exception is made for
state banks, which may conduct and advertise a savings
department. The penalty for breach of these provisions
is $100 a day (2978, amd. by 1909, chap. 178).
X I.— P enalties .
1 he trustee who becomes interested in the savings
bank’s profits, or who takes unauthorized compensation,
or becomes obligated to the bank, or becomes employed
by another savings bank, vacates his office and becomes
ineligible to office in any savings bank. Six months’ neg­
lect of duty by a trustee is also cause for loss of office (1907,
chap. 468, sec. 4).
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

The capital of a trust company must be not less than
$200,000 nor more than $2,000,000. Before it transacts
business at least $200,000 must have been actually paid in







National

Monetary

Commission

in cash, and at least one-fourth of its capital must have
been invested in securities belonging to classes first, second,
third, fourth, seventh, and eighth of the authorized invest­
ments for savings banks. The securities thus invested in
are deposited with the public examiner, as a guarantee for
the trust company’s faithful discharge of its duties. The
company collects the income and may exchange securities
(3033)-

Trust accounts must be kept separate from the com­
pany’s general accounts (3044).
II.— L iabilities

and

D uties

of

D irectors.

Directors must own at least ten shares of stock, and a
majority of them must be residents of Minnesota (3034).
I l l .— Supervision .

The provisions of 1909, chap. 179 (see General Provi­
sions, III), though they do not expressly repeal the fol­
lowing section, seem inconsistent w
rith it: When the offi­
cers of a trust company believe that it is about to become
insolvent, they report to the examiner. If he believes
from that report, or from his own examination, that it is
conducting its business unlawfully or unsafely, or that it
is insolvent, he may take possession of the company’s
affairs for a thorough examination. If necessary, the
examiner may then apply to a court for a receivership.
The court judges of its necessity (3047).
REPORTS.

Trust companies annually render the public examiner a
detailed account of their condition, with such supple­
mentary information in relation to particular transactions
as the examiner may require. A cbndensed statement of
the annual account with a list of the directors, approved
by the examiner, is published in a local newspaper (3046).

Trust

Minnesota
V.— D iscount

and

Companies

L oan R estrictions.

Trust companies may not loan any funds to officers or
employees. No officer or employee may become indebted
to a trust company by means of overdraft or other con­
tract (3045).
V I. — I NVESTMENTS.
The entire cost of land and buildings for the transaction
of a trust company’s business must not exceed 25 per cent
of its capital and surplus (2976).
A trust company may acquire real and personal property
necessary for its business. If it acquires real estate on
foreclosure of a mortgage in the course of its legitimate
business, it may deal with the real estate for its best
interests, and may purchase if necessary at foreclosure or
judicial sale. It may loan money and secure these loans
by mortgage, purchase and sell securities, and may guar­
antee title to securities sold by it (3035). In ordinary
cases trust funds must be invested in the same securities
authorized for savings bank investments (3040). It
must not engage in unauthorized businesses (3045).
V II. — Overdrafts.
No officer or employee may become indebted to his
corporation by means of overdraft or other contract

(3 4 )05
X .— U nauthorized T rust Company B usiness .
See Savings Banks, X.
X I.— P enalties .

Directors who borrow from the trust company are guilty
of larceny (3045).

S . D o c. 3S3, 6i>-a----- a i

I




321




MISSISSIPPI.
The Code of 1906 contains one brief chapter (14), enti­
tled “ Bank statements,” practically the only banking law
of the State. The digest includes this chapter, a few
other sections of the Code relating to banks, and two stat­
utes of 1908. The references that are simply numbers in
parenthesis are to sections in the Code of 1906. Since
the statutes make no effort to provide separately for dif­
ferent classes of banking institutions, the digest is not
divided under the usual three heads; each provision is
given, using the words of the statute, whether “ banks,”
or “ banks and trust companies,” etc. The digest carries
legislation through the session of 1908.
I.— T erms

of

Incorporation.

“ Every bank and every person, corporation, or asso­
ciation of persons * * * organized to receive money
on deposit, issuing, buying, or selling exchange, or doing
a banking business ” must have, in towns of 500 or less, a
capital of not less than $10,000, and in towns or cities of
over 500, not less than $15,000. This must be paid in
in cash before business is begun, and, if the capital is
larger, the additional amount must be paid in in not less
than five equal monthly installments (1908, chap. no).
Any bank with a paid up capital of at least $100,000
may include a trust company business in its transactions
(263). “ Such corporations” (by which trust companies
appear to have been meant) are governed by the same
laws as other banking institutions (264).
322

M i s s i ss i p p i
II. — L ia b il it ie s

General
and

Provisions

D u tie s of S to ckh o ld er s
D ir e c t o r s .

and

There is no provision for liability of shareholders in
banks.
The board of directors “ of every bank” must hold at
least three regular meetings a year to make full investi­
gation of the affairs of the bank (262). The directors, or
a majority of them, “ of all banks, branch banks, and
trust companies” must personally inspect the affairs of
the institution on the first Wednesday of January, April,
July, and October, or within ten days after those days
(1908, chap. no). The latter of the two provisions just
stated seems to override the former in the matter of requir­
ing four inspections a year by directors instead of three.
The director of any “ bank of deposit” who authorizes a
loan in excess of one-fifth of the capital to any officer or
director is individually liable to the bank for loss thereby
sustained (922).

111.— S u p e r v is io n .
Apparently there is no particular official charged with
the supervision of banks; the auditor of public accounts
receives reports, etc.
reports.

“ Every bank and every branch bank and every person,
corporation, or association of persons receiving money on
deposit, or issuing or buying and selling exchange, or
otherwise doing a banking business ” must make a bal­
anced statement to the auditor at least four times a year
with reference to the condition of the bank, its resources
and liabilities, and the amount of indebtedness to the bank
of owners, stockholders, and directors. The auditor fur­
nishes forms. The statements are published in a local
newspaper (1908, chap. 111). The requisitions must be




323




National

Monetary

Commission

made at times known only to the auditor (257). After
providing that a bank may also do the business of a trust
company, it is said that “ such corporation” must make
the same reports as other banking institutions (264); it is
clearly meant that trust companies must make the reports.
Directors of “ banks, branch banks, and trust companies”
after their quarterly inspection must report their findings
to the auditor (1908, chap. no). For reports required
for purposes of taxation see 4273; and for the penalty for
failing to make those reports, 1048.
EXAMINATIONS.

There seems to be no provision for examination by an
official of the State. The board of directors make the
examinations explained above (262, and 1908, chap. no).
V.— D isco u n t

and

L oan R estr ic tio n s .

“ Banks” may loan money to their stockholders; but
“ a bank of deposit” must not loan a sum greater than
one-fifth of its capital to any officer or director (922).
Trust companies (that is what “ such corporation” seems
to mean in the section) may loan “ on real estate or col­
lateral security” (264).
VI.— I nvestments.

Trust companies may own such real estate as is required
for the convenient transaction of their business, and such
as they may acquire in the enforcement or collection of
debts due them (265).
VIII.— B r a n c h e s .

There is a provision in the Code of 1906 forbidding the
establishment of branches; there may be no branch banks
in Mississippi, and no Mississippi bank may establish a
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Provisions

branch in Mississippi or elsewhere (260). For branches
already operating when this statute went into effect it was
provided that there should be set apart and devoted to
each branch not less than $10,000 of the parent corpora­
tion’s capital for the exclusive use of the branch (261).
X .— U n au th o rized B a n k in g .
“ Bank” or “ banking” must not appear in the name of
an institution not authorized by its charter to do a banking
business, and “ trust” or “ trust company” must not ap­
pear in the name of any corporation not authorized by
its charter to transact a trust company business (266).
X I.— P e n a l t ie s .
The penalty for rendering a false statement of the
affairs of a banking corporation is a fine upon the mem­
bers of not less than $100 (1908, chap. n o). Failure to
make the regular statement required within ten days
after the requisition is mailed entails a penalty upon the
bank or banking house of $25 a day (258). If the direct­
ors of any “ bank, branch bank, or trust company ” fail to
make an inspection quarterly and certify their findings to
the auditor, the corporation suffers a penalty of from $100
to $500 for each failure (1908, chap. n o). The officer
or employee of “ any bank” or “ establishment conduct­
ing the business of receiving deposits,” who knowing the
establishment to be insolvent receives deposits without
informing the depositor of its condition is punished by
not more than five years’ imprisonment (1169).




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MISSOURI.
The digest of the banking statutes of Missouri is based
on the compilation of the banking laws published in 1908
by the secretary of state of Missouri. In the Revised
Statutes of 1899 there were, in Chapter X II, three articles
pertinent to our subject: Article VIII, “ Banks of deposit
and discount;’’ Article X II, “ Trust companies;” and
Article X III, “ Savings and safe-deposit institutions.”
The laws of 1907 enacted complete new articles to super­
sede those three, and added Article X X , “ State banking
department.” These new laws went into effect January
15, 1909. It is a provision of the constitution of Missouri
that acts authorizing or creating corporations with bank­
ing powers, except banks of deposit or discount, and
amendments, be submitted to popular vote (constitu­
tion, Art. X II, sec. 26).
The provisions of Article X X are in the main applicable
to all three classes. They have been inserted once under
“ Banks,” and are merely mentioned under “ Savings
banks” and “ Trust companies.” A few’ of the provisions
of Article V III which are applicable only to unincorporated
bankers are inserted; in many respects private bankers
are made subject to the same rules as banks of deposit
and discount (VIII, 29). The references are by article
and section, the Roman figure representing the article;
the Arabic, the section in that article. The statutes have
been examined through those of 1909.
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S t a t e

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B a n k s

BANKS.
I.— T erm s

oe

I n co r po r atio n .

The title of the article on commercial banks is “ Banks
of deposit and discount.” There is no provision forbid­
ding such banks to accept savings deposits, nor does it
seem that such a rule is to be implied from Chapter X III,
section 9, which forbids savings banks to transact a busi­
ness of banking, whether of issue, deposit, or discount,
especially since banks may pay interest on deposits
(VIII, 4).
The cash capital of every bank must be not less than
$10,000, nor more than $5,000,000, and for banks situated
in cities of 150,000 or more, the cash capital must be not
less than $100,000 (VIII, 6). The shares must be not
less than $100 each (VIII, 7). One-half must be paid up
in lawful money before business is begun (VIII, 10).
The remaining half must be paid up in cash within a year
(VIII, n ). The bank commissioner makes a preliminary
examination before granting the certificate of incorpora­
tion (VIII, 5).
Dividends may be declared semiannually, if they have
been earned, but there must be no dividend if the capital
has been impaired so as not to be worth in good resources
the full amount paid in. When the capital stock is
impaired to the extent of 25 per cent, the bank must
cease doing business, unless the capital is made good
within sixty days or reduced equal to the impairment
(VIII, 16).
Before declaring a dividend, every banking institution
must set apart 10 per cent of the net profits for the dividend
period for surplus fund, until it amounts to 20 per cent of
the capital stock (VIII, 21). A further provision for a
larger permanent surplus, important in determining if




3 27




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there are excessive loans, is discussed under V, Loans
(VIII, 20).
Private bankers, that is, those not incorporated, who
receive deposits, sell exchange, etc., must have a paid-up
capital of at least $10,000, and if carrying on business in
a city of 150,000 or more, a paid-up capital of at least
$100,000 (VIII, 27). Private bankers must set apart 20
per cent of each year’s net profits, until they have a sur­
plus of 20 per cent of their capital (VIII, 28).
II.— L ia b il it ie s

and

D u t ie s of
D ir e c t o r s .

S tockh o ld er s

and

It is a constitutional provision that dues from private
corporations may be secured by such means as may be
prescribed by law, but that in no case is a stockholder
to be individually liable in any amount above the amount
of stock owned (constitution, Art. X II, sec. 9). If any
shareholder in a bank transfers his shares before they are
fully paid, he, as well as his transferee, is liable for a year
for whatever is still due (VIII, 7).
The board of directors of every bank consists of from
three to twenty-one shareholders, each a resident of the
State and holder of at least two shares. No shareholder
is eligible if the bank holds a judgment against him.
The board must meet once a month to pass upon the
business since the last meeting (VIII, 9). Any officer or
director who assents to declaring a dividend while the
capital stock is impaired, is personally liable to the
creditors of the corporation for loss occurring because of
the dividend (VIII, 16). Any director or officer of a
bank or banking institution, organized under any law of
Missouri, who receives deposits or creates debts after he
has knowledge of the institution’s insolvency, is indi­
vidually responsible for the obligations so contracted
(VIII, 23). It is a constitutional provision that the
328

M i s s o u r i

S t a t e

B a n k s

officer or director who participates in the reception of
deposits of this sort, or the creation of debts, is guilty of
a crime, and is individually responsible (constitution,
Art. X II, sec. 27).
I l l .— S u p e r v isio n .

There is a state bank department under the control of
a bank commissioner (XX, 2). The commissioner holds
office for four years. He and his deputy must have had
at least three years’ practical experience in banking busi­
ness, or have served three years in some state banking
department. No one interested in a bank or trust com­
pany is eligible (XX, 3). The commissioner’s salary is
$3,500 a year with necessary expenses (XX, 5). The
commissioner and his subordinates must keep secret
information obtained in the course of examinations,
except so far as their public duty may require it to be
divulged (XX, 8). The commissioner and his employees
must not accept payment other than the salary fixed by
law (XX, 19).
If the commissioner has reason to believe that the cap­
ital of any corporation subject to his control is impaired,
he requires the deficiency to be made good. If, from an
examination or otherwise, it appears that any bank, sav­
ings bank, or trust company receiving deposits is con­
ducting its business in an unsafe or unauthorized manner,
the commissioner directs the illegal and unsafe practices
to be discontinued. If any corporation refuses to obey
his orders, or if it appears to the commissioner that it is
unsafe or inexpedient for the corporation to continue
business, or that losses are threatened, etc., the commis­
sioner requires the attorney-general to institute whatever
proceedings the case may require, such as removal of
officers or other remedy. If, from an examination, it is
discovered that a bank, savings bank, or trust company is




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insolvent, or that its continuance in business is dangerous,
and if the official who made the examination recommends
that the bank be closed, then the commissioner may
immediately close the corporation and take charge of its
property. He examines its affairs thoroughly to ascer­
tain its condition, and if he finds it insolvent, requires the
attorney-general to institute proceedings for a receiver.
The commissioner may appoint a special agent to act as
receiver for a period not longer than sixty days. A bank,
savings bank, or trust company may voluntarily put itself
in the control of the commissioner (XX, io). All bank­
ing corporations are forbidden to make a general assign­
ment, and are required to put themselves in the hands of
the bank commissioner instead, if they are threatened
with insolvency (XX, 13). If any of these corporations
refuses to be examined, receivership proceedings may be
instituted (XX, 14). If the corporation’s own stock,
acquired by it under provisions discussed later, is not dis­
posed of within six months, receivership proceedings may
be instituted (XX, 15).
Private bankers are subject, so far as possible, to the
provisions in the above paragraph. Moreover, if they
loan on account of the personal security of one of the
owners of the private bank in excess of 10 per cent of its
capital and surplus, the commissioner may have them
put into the hands of a receiver (XX, 16).
If the commissioner or his subordinate report fraudu­
lently, any one injured by the fraud may sue on the
official’s bond. Neither the commissioner nor any sub­
ordinate may be receiver of a corporation he has exam­
ined (XX, 18).
REPORTS.

In the article applicable only to banks, there is the
requirement that each bank must furnish, whenever so
330

M i s s o u r i

—

S t a t e

B a n k s

required by the commissioner, a statement of its actual
condition at the close of business on a past day designated
by him (VIII, 12), in a form prescribed by the statute,
and including the following items: Resources— Loans and
discounts, undoubtedly good on personal or collateral;
loans, real .estate; overdrafts; bonds and stocks; real
estate (banking house); other real estate; furniture and
fixtures; due from other banks and bankers, subject to
check; cash items; currency; specie; other resources.
Liabilities— Capital stock paid in ; surplus fund; undivided
profits, net; due to banks and bankers, subject to check;
individual deposits, subject to check; time certificates of
deposit; demand certificates of deposit; cashiers’ checks;
bills payable and rediscounts; other liabilities (VIII, 13).
This statement is published in a local newspaper (VIII,
14). The bank commissioner gives no notice of the day
on which he will call for a statement. He makes calls for
statements twice a year, and oftener if he thinks necessary
(VIII, 15). Private bankers are, for purpose of reports
and in every other case where the article on the state
banking department is applicable, made subject to the
same rules that apply to banks (VIII, 29).
In the article on the state banking department, it is
provided that in addition to all other examinations or
reports, every bank, savings bank, and trust company
receiving deposits must have an examination made by at
least three shareholders into all the affairs of the company;
on this examination they base a report including various
particular items, and such others as the bank commis­
sioner may require, which report, within ten days after the
completion of the examination must be filed in the insti­
tution and with the commissioner. He sends out a call
at least every year with blanks for this report (XX, 17).
Whenever a bank, savings bank, or trust company has
been placed in the hands of a receiver, the bank com­




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missioner, if he thinks it necessary, may make special
examinations, the result of which he reports to the court
which appointed the receiver (XX, 12). Whatever re­
ports receivers make to their courts they file duplicates
of with the commissioner (XX, 11). The result of all
examinations during the previous year is embodied in
a report made by the commissioner to the legislature
(XX, 9).
EXAMINATIONS.

A preliminary examination is made by the commis­
sioner before he grants a certificate of incorporation to
any bank or trust company (VIII, 5). At least once a year
the commissioner causes an examination to be made of
every bank and trust company receiving deposits (XX, 9).
Special occasions, when the commissioner makes exam­
inations, were discussed above; he does so when he has
taken possession of the assets of a corporation prior to
proceedings for a receivership (XX, 10) and also when
a corporation has been declared insolvent and placed
in the hands of a receiver, and the interests of the depos­
itors and creditors seem to require an examination
(XX, 12). Also, as above explained, in addition to all
other examinations required, every bank, savings bank,
and trust company receiving deposits must make at least
yearly, by a committee of at least three shareholders, a
thorough examination, on which they base a report in
the form prescribed by the commissioner (XX, 17).
IV.— R eserve R equirements.
Banks must keep an account of cash on hand and cash
due from other banks equal to at least 15 per cent of de­
mand deposits. Whenever the reserve falls below 15
per cent no new loans may be made (VIII, 8).

332

S t a t e

M i s s o u r i
V.— D iscount

and

B a n k s

Doan R estrictions.

No bank may loan to any person or company an
amount exceeding 25 per cent of its capital stock. For
this purpose the bank may consider as capital stock a
permanent surplus, the setting apart of which has been
certified by the commissioner and which can not be
diverted without due notice to the commissioner. This
surplus must be equal to or in excess of 50 per cent of the
capital. The discount of certain commercial paper well
secured is not considered as money borrowed, however
(VIII, 20).
No director or officer of a bank may borrow in excess of
10 per cent of the capital and surplus without the consent
of a maiority of the directors, exclusive of the borrower
(VIII, 9).
No bank, savings bank, or trust company receiving
deposits may loan on the security of its own shares unless
necessary to prevent loss upon a previous debt, in which
case the stock must be gotten rid of in six months (XX, 15).
VI.— I nvestments.

It is a constitutional provision that no corporation may
hold real estate for a longer period than six years, except
such as is necessary and proper for carrying on its legiti­
mate business (constitution, Art. X II, sec. 7).
Banks are prohibited from employing their funds in
commerce by buying and selling goods, etc., but they
are allowed to sell all kinds of property which may come
into their possession as collateral security for loans, or in
the ordinary collection of debts (VIII, 19).
Banks, savings banks, and trust companies are forbidden
to purchase shares of their own stock unless the purchase
is necessary to prevent loss on a debt previously con­
tracted, in which case the stock must be sold within six
months (XX, 15).




333




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Commission

VII.— Overdrafts.
These seem surely allowed in the case of banks, for they
appear as an item in the resources in bank statements
(VIII, 13). IMforeover, it seems they must be generally
permitted in the case of banks, savings banks, and trust
companies, for in the provision for annual examinations
to be made by a committee, it is provided that they exam­
ine into overdrafts (XX, 17).
V III.— B ranches.
Branches are forbidden (VIII, 4).
X .— U nauthorized B anking .
No one may advertise by a sign or in a newspaper or on
letter heads, etc., using the words “ bank,” “ banker,” or
“ banking” unless doing business under United States or
Missouri law (Revised Laws of 1899, sec. 1947)
XI.— P enalties .

If the bank commissioner or his subordinate discloses
information except in the course of duty, he is guilty of a
misdemeanor, punishable by forfeiture of office and a fine
of from $100 to $1,000 (XX, 8). If the commissioner
warns banks of an approaching report, he is guilty of a
misdemeanor, punishable by loss of office and a fine of not
less than $500 (VIII, 15). If the commissioner or a
subordinate is guilty of breach or neglect of duty for which
no other penalty is provided, he commits a felony, punish­
able by imprisonment in the penitentiary for from two to
five years, or fine of from $100 to $1,000, or imprisonment
in a county or city jail for from one month to twelve
months, or both fine and imprisonment (XX, 20).
Officers of banks who refuse to make the semiannual
statement required by the commissioner, or make a false
334

M isso u ri

Savings

Banks

statement, are guilty of a misdemeanor, punishable by fine
of from $100 to $500, or by imprisonment of from one to
twelve months, or by both (VIII, 15). It is also provided
in the article on commercial banks that private bankers
who refuse to render reports or who make false reports or
who violate other provisions of the article are guilty of a
misdemeanor, punishable by a fine of from $500 to $5,000,
or imprisonment of from one to twelve months, or both
(VIII, 29).
Any bank, savings bank, or trust company that fails to
report to the commissioner, within thirty days of the
notification, the result of the examination by the com­
mittee of three stockholders, forfeits $100 per day during
the delay (XX, 17).
The officer of any banking institution, including trust
companies, who receives deposits or creates debts with
knowledge of the institution’s insolvency, commits a
felony, punishable as theft of money to the amount of the
obligation created would be (Revised Laws, 1899, sec.
1945). There are other penal provisions in the Revised
Laws for punishment for false entries in books, altering
or forging instruments, etc. (Revised Laws, 1899, sec. 2000
et seq.).
SAVINGS BANKS.
I-— T erms

of

I ncorporation.

Article X III, “ Savings and safe deposit institutions,”
apparently contemplates organizations with capital stock
(XIII, 2). It contemplates a safe deposit business to be
done in connection with savings banking (XIII, 7), but
savings banks are not allowed to transact a banking busi­
ness of deposit or discount (XIII, 9).
The capital of savings and safe deposit institutions must
be not less than $10,000 in cities of 50,000 or under, not
less than $50,000 in cities of 50,000 to 150,000, and not less




335




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Commission

than $100,000 in cities of 150,000 and over. The capital
must be paid in in lawful money and is regarded as a
guaranty fund for the security of depositors (XIII, 4).
The capital stock must be not more than $5,000,000 (XIII,
15). Shares are of $100 each, apparently (XIII, 2).
Whenever interest at not less than 3 per cent per year
has been paid out of net profits for the current six months
on all savings or trust funds entitled to interest, the
directors may declare out of remaining net earnings a
dividend on the stock not greater than 6 per cent a year.
No dividend, however, may be declared until at least onetenth of the net profits for the preceding six months has
been carried to a guaranty fund; this continues until
the fund amounts to the capital stock. The guaranty
fund must be invested according to the provisions given
later under VI (XIII, 17). If for the preceding six
months the net profits are not sufficient to pay a 3 per cent
dividend for those six months, then whatever excess of net
profits is earned in the succeeding six months over interest
to depositors and contributions to guaranty fund is
applied to arrears of dividends (XIII, 18). When the
guaranty fund amounts to a sum equal to the capital stock,
and interest has been paid and dividends on capital stock
to date, then, if there are still net profits undisposed of, the
directors set aside a sum not exceeding one-fourth of 1
per cent of the total deposits on that day, until the sums
so set aside, known as the indemnity fund, amount to 10
per cent of the whole deposits. This indemnity fund is
held as an added security against loss (XIII, 19). W
rhen
the guaranty fund amounts to as much as the capital stock,
and interest and dividends have been paid to date, and
the indemnity fund has risen to 10 per cent of the whole
deposits, then, if the net profits still amount to 1 per cent
of the deposits that have remained in the bank for at least
one year preceding, these profits are at the end of every
336

M iss ou r i

—

Savings

Banks

three years divided among the depositors whose deposits
have remained in the bank at least one year preceding,
the division being in proportion to the amount of interest
which has been paid on the deposits during the three years
next preceding (XIII, 20). In no case may interest or
dividend be paid until the directors have examined the
condition of the savings bank and have found that the
interest and dividend have been actually earned (XIII, 21).

II.— L iabilities

and

D uties of Stockholders
D irectors.

and

The provision of Article X II, section 9, of the constitu­
tion, that no stockholder in a private corporation is indi­
vidually liable above the amount of stock held, here
obtains.
Every savings bank has from five to thirteen directors
who must be stockholders, and a majority of them must
be citizens of the State (XIII, 5). A director is not dis­
qualified by reason of his being director or officer of another
banking or savings institution (XIII, 6). Neglect of
duties, or borrowing the funds of the savings bank, is
ground for loss of office (XIII, 10). Meetings must be
held once a month (XIII, 11). The directors must
examine assets before declaring a dividend or interest
(XIII, 21). Directors must not receive payment for their
services unless they are such as require regular and faith­
ful attendance, in which case the majority, exclusive of
the director who is being paid, vote the compensation
(XIII, 10 and 24). No one acting for a savings bank may
take a fee for a loan made by the savings bank other than
appears on the face of the contract of loan (XIII, 8).
The constitution makes it a crime for an officer or director
of any banking institution to receive deposits when he
knows the bank to be insolvent (constitution, Art. X II,
sec. 27)
S. Doc. 353,




6 1 - 2 -----22




National

Monetary

Commission

III.— S upervision .
For most of the provisions for supervision of savings
banks, see III, under Banks. It is especially provided in
the article on savings banks, besides, that when it ap­
pears to the bank commissioner from his examination or
report that a savings bank is conducting its business in an
unsafe or unauthorized way, he must direct a discontinu­
ance of the practices, and if the savings bank refuses to
report or to comply with his orders, or if it appears to him
that the corporation should stop business, that it is in a
dangerous condition, or that directors or officers have
been guilty of misconduct, he must institute, through the
attorney-general, whatever proceedings the case requires.
These proceedings may be for orders restraining paying
out undue amounts of funds, or for the removal of officers
or for the appointment of receivers. If the order is one
restraining the savings bank from paying out funds, the
commissioner may take temporary possession of the prop­
erty of the savings bank (XIII, 31).
REPORTS.

Every savings bank reports annually to the bank com­
missioner its condition on the 1st of September. The
reports state the amount loaned on bond and mortgage,
with a list of such loans; the values of bond investments,
with particulars; the amount loaned on pledge of de­
posits, with statement of collateral; the cash on hand
and on deposit, with names of depositaries; the amount
of all assets, and such other information as the commis­
sioner may require (XIII, 26). Also all liabilities on the
morning of September 1; amounts due depositors, in­
cluding dividends, and any other claims chargeable against
the assets. The report states also the amount of deposits
made during the year; amount drawn out; amount of
338

M issou r i

S avings

Banks

interest received and earned; interest paid depositors;
number of accounts opened and reopened; the number
closed; the number open at the end of the year; and
whatever other information the commissioner may re­
quire (XIII, 27). This report is based on an examina­
tion which must be made by not less than three directors
(XIII, 28). In addition to all other reports there is the
annual report after examination by a committee of three
stockholders (Banks, III).
The bank commissioner reports annually to the legis­
lature a statement of the condition of every savings bank
that has reported to him during the preceding two years,
with a list of new savings banks (XIII, 29). The results
of all examinations made within the past year are em­
bodied in the annual report (XX, 9).
EXAMINATIONS.

Every two years, or oftener if necessary, the commis­
sioner examines personally or by an agent every savings
bank in the State (XIII, 30 and X X , 9). The directors
make an examination before declaring any interest or
dividend (XIII, 21). They make a thorough examina­
tion upon which the annual report is based (XIII, 28).
1 here is also the examination by a committee of three
shareholders (see Banks, III).
IV.— R eserve R equirements.

The restrictions on investments include a provision in
the nature of a reserve requirement; 15 per cent of total
assets must be kept as a cash fund on hand or on deposit
in Missouri banks or trust companies, or national banks
in Missouri (XIII, 7).




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V.— Discount, L oan,

and

Commission

Deposit R estrictions.

Savings banks may not loan money upon or discount
notes, bills of exchange, or other personal security (XIII, 9).
Loans may be made to depositors not exceeding 50 per
cent of the amount on deposit from the borrower, in
which case the deposit and book of the depositor are
collateral (XIII, 9).
No director or officer of the savings bank may borrow
the funds of the bank or be indorser for moneys loaned
by the bank (XIII, 10).
(For loans on security of the savings bank’s own stock,
see this heading under Banks.)
Savings banks with a capital of $10,000 may receive
deposits up to $200,000; those with a capital of $25,000
may receive deposits up to $500,000; and those with a
capital of $50,000 may receive deposits up to $1,000,000.
The statute provides that nothing in this article shall be
so construed as to prevent the issuing of certificates of
deposit payable on demand (XIII, 12). Pass books must
be called in every three years and verified. The aggre­
gate amount of deposits received from one individual or
corporation must not exceed $4,000, including dividends
(XIII, 14). In allowing interest to depositors, they may
be classified according to the character, amount, and dura­
tion of their dealings with the savings bank (XIII, 16).
VI.— Investments.
Savings banks may hold real estate as follows: First, a
plot and building for the transaction of the bank’s busi­
ness, from part of which rent may be derived. The cost
must not exceed $100,000 except in cities of over 300,000,
where the cost must not exceed $250,000. Second, such
real estate as is purchased at sales on foreclosure of
mortgages owned by the bank, or upon judgments ren340

M iss ou r i

Savings

Banks

dered for debts due it, or such as is purchased to secure
old debts. All the real estate under second must be sold
within five years (XIII, 8). See the constitutional pro­
hibition upon ownership by any private corporation of
any real estate except that necessary for its business, for
a longer period than six years (constitution, Art. X II, sec.
7). Savings banks must not deal in merchandise, etc.
(XIII, 9).
(For the provisions on purchase of its own stock by a
savings bank, see VI under Banks.)
The funds of savings banks may be invested as follows:
First, in United States securities; second, in Missouri
bonds; third, in bonds of any State that has not de­
faulted in payment on its bonds for five years; fourth, in
bonds of any Missouri municipality that has not defaulted
within five years, provided the bonded debt does not
exceed 5 per cent; fifth, in the bonds of any municipality
of more than 20,000 inhabitants in certain enumerated
States, if the entire bonded debt of the city or county in
question does not exceed 5 per cent of the assessed value
of its property, and if the municipality, “ or the State in
which it is situated, has not defaulted in the payment of
any part of either principal or interest thereof” within
five years; no savings bank may invest more than 25 per
cent of its assets in bonds of municipalities outside of
Missouri, nor invest more than 3 per cent in the bonds of
any one of those municipalities, nor invest in more than
10 per cent of all the bonds issued by any of those munici­
palities, nor invest in the bonds of any of those munici­
palities issued to aid in the construction of a railroad;
sixth, in the first mortgage bonds of any steam railway
the income of which is sufficient to pay all operating
expenses and fixed charges, if the railway is located in
certain specified States, and if it has paid interest on the
bonds for three years; the first mortgage bonds of several




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Monetary

Commission

specified railways are included; seventh, in bonds or
notes secured by first mortgages of unincumbered real
estate worth twice the loan, but if the loan is on unim­
proved and unproductive real estate it must not be more
than 40 per cent of the value of the land— not more than
60 per cent of the funds of the savings bank may be thus
loaned, and a committee of investigation must report on
the value of the land; eighth, in real estate subject to
the limitations given above. Current expenses may be
met by pledging or selling securities. Fifteen per cent of
the whole amount of assets must be kept as an available
cash fund for current expenses. This may be kept on
hand or on demand deposit in Missouri banks or national
banks in Missouri or in Missouri trust companies. The
deposits in any one bank or trust company, however,
must not exceed 20 per cent of the total deposits, capital,
and surplus of the depositor bank (XIII, 7).
X I .— P enalties .

The special savings bank penalties include loss of office,
in the case of the director who borrows of the savings
bank, or who fails to attend meetings or to perform his
duties for three successive months without excuse from
the board (XIII, 10), and the penalty of $100 per day
payable by the savings bank which withholds a report
(XIII, 28). Savings bank officers are within the felony
provision for receiving deposits while insolvent (Revised
Laws, 1899, sec. 1945).
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

The amount of capital stock must be not less than
$100,000, actually subscribed, and the amount authorized
must be not more than $10,000,000 (XII, 7). Before

Trust

M issou r i

Companies

business is begun, one-fourth of the authorized capital
must be actually subscribed, and one-half the subscribed
capital must have been paid in in lawful money (XII, 2).
The bank commissioner makes a preliminary examination
before business is begun (VIII, 5).
Trust companies, whenever a dividend is paid to stock­
holders, must set aside 10 per cent of the net earnings of
the last dividend period for surplus until the surplus
amounts to 20 per cent of the capital (XII, 5b).
Dividends may be declared every six months, or oftener,
but they must not be declared while the corporation is
insolvent, nor when the declaration itself will render the
corporation insolvent (XII, 10).
II.— L iabilities

and

Duties of Stockholders
Directors.

and

Stockholders’ liability is limited by the constitution for
all private corporations to the amount of stock held (con­
stitution, Art. X II, sec. 9).
There must be not less than five, nor more than twentyfive, directors, who must be stockholders in the corpora­
tion, and a majority of them citizens of Missouri (XII, 7).
They must meet at least monthly to pass upon the busi­
ness of the company since the last meeting. The records
at that meeting must show aggregate debts at the time
and the liability of each director and officer to the com­
pany (XII, 9). If the directors knowingly declare a divi­
dend while the corporation is insolvent, they are liable for
the debts of the corporation then existing or thereafter
contracted, unless they record their objection (XII, 10).
See also the constitutional provision making the reception
of deposits under such circumstances a crime (constitu­
tion, Art. X II, sec. 27).




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III.— S u p e r v i s i o n .
See the general provisions for supervision under III in
Banks. If the reserve of a trust company falls below
the 15 per cent required, then the secretary of state
may notify the trust company to make the reserve good;
if it fails to do so within thirty days, then the commis­
sioner may direct the attorney-general to institute what­
ever proceedings the case requires (XII, 5a). A deposit
in certain securities to the amount of $200,000, qualifies
the trust company to act as guardian, etc. (XII, 18).
REPORTS.

Whenever required by the bank commissioner, within
fifteen days of his call, every trust company must furnish
a statement giving such particulars as the commissioner
prescribes of its condition at close of business on a desig­
nated day prior to the call. This statement must be pub­
lished in a local newspaper (XII, 11). There is also the
report of the annual examination by a committee of three
shareholders (see Banks, III).
The commissioner embodies in his report to the legis­
lature, as in the case of banks, the results of his trustcompany examinations (XX, 9).
EXAMINATIONS.

A preliminary examination is made before any trust
company begins business to make sure that the required
capital has been subscribed and paid in, etc. (VIII, 5).
Regular examinations of every trust company receiving
deposits are made by the commissioner or a subordinate
at least once a year, and oftener if necessary (XX, 9).
There is also the examination by a committee of three
shareholders (see Banks, III).
344

I

Missouri

Trust

Companies

IV.— R eserve R equirements.

Every trust company must have in cash on hand and
due from other banks and trust companies an amount equal
to 15 per cent of its demand deposits. If the reserve
falls below the 15 per cent no new loans or discounts
may be made (XII, 5a and 8).
V.— Discount

and

L oan R estrictions.

No director or officer of a trust company receiving
deposits may borrow in excess of 10 per cent of the capital
and surplus without the consent of a majority of the
directors, exclusive of the borrower (XII, 9).
(For provisions dealing with loans by a trust company
on security of its own stock, see V, under Banks.)
VI. — I nvestments.

There is, as before, the constitutional provision that no
corporation may hold real estate for a longer period than
six years, except such as is necessary and proper for carry­
ing on its legitimate business (constitution, Art. XII,
sec. 7). Trust companies may own only such real estate
as is necessary for the transaction of their business and
such as they may acquire in the enforcement and collec­
tion of debts due them (XII, 10). The directors of trust
companies may invest “ the moneys placed in their
charge” in loans secured by real estate or other sufficient
collateral, in United States or Missouri bonds, or in bonds
of Missouri municipalities (XII, 10).
(For provisions dealing with purchase by a trust com­
pany of its own stock, see VI, under Banks.)
V II. — Overdrafts .
These seem to be permitted in the case of trust com­
panies, for it is provided that when the committee of at




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Monetary

Commission

least three shareholders examines a bank, savings bank,
or trust company it takes account, among other things,
of overdrafts (XX, 17).
X I. — Penalties .
The only particular penalty in the article on trust com­
panies is that for refusal to report or for making a false
report; this is a misdemeanor on the part of an officer
or director which entails a fine of not more than $500,
imprisonment of from one to twelve months, or both
(XII, 11).
(For receipt of deposits while insolvent, see Banks, XI.)

346

MONTANA.
Except for a few penal provisions, and except for minor
changes effected by various chapters of the session laws of
1909, all the banking statutes of Montana are in a title at
page 1137 of the Revised Codes of 1907, entitled “ Banks
and banking corporations.” This title is divided into five
chapters: I. Banks of discount and deposit; II. Trust
deposit and security companies; III. Savings banks; IV.
Endowment and investment companies; V. Foreign
banking corporations; VI. Regulation of banking corpora­
tions. Of these, Chapter IV is not treated in the digest, and
Chapter V only very briefly. The provisions of Chapter
I are generally digested under the heading “ Banks,” those
of Chapter III under the heading “ Savings banks,” and
those of Chapter II under the heading “ Trust companies.”
Even this scheme can not be consistently followed, how­
ever, because despite the classification in the code a num­
ber of sections show by their language that the statutes
which form them were not designed to apply strictly to the
sort of corporation designated at the head of the chapter;
indeed the classification in the code, compared with the
language of the sections, shows many variances. Espe­
cially is the word “ bank ” frequently used in such a way as
to suggest that it is meant to include all three sorts of cor­
porations: see 3993, where after speaking of “ any bank,
banking institution, or trust company ” the section refers
to “ such bank; ” see also 3996. It is particularly difficult




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M on e t a r y

Commission

to tell, too, to what classes of corporations the provisions
of Chapter VI apply, composed as it is of various statutes
passed during different sessions, framed in varying terms.
Where, as is in several places the case, the code includes
contradictory sections, both are given, with a statement
showing which is based on more recent enactment. The
question in each case, which section is in force, should be
studied with reference to 3553 et seq., where there are
complicated rules for settling conflicts in the codes, and
with reference to the original enactments found in the
session laws. The language of *each section has been fol­
lowed in the digest so as to indicate its application as
clearly as may be. References, where they are simply
numbers in parenthesis, are to sections in the Revised
Codes of 1907.
BANKS.
I.— T erms

of

I ncorporation.

The capital stock of a bank of discount and deposit
must be not less than $20,000, and must be paid into the
treasury of the bank in cash before business may be begun
(3909) • Dividends may be declared by any “ banking cor­
poration” only from net earnings (3916). Before declar­
ing a dividend a “ banking corporation, trust deposit and
security company or savings bank” must set aside 10 per
cent of the net earnings available for dividends, as a sur­
plus, until the fund amounts to 20 per cent of the capital
of the corporation (1909, chap. 112). They may be de­
clared semiannually on the first Monday of January and
July (3997)-

M o n t a n a
II.— L iabilities

and

S t a t e

B a n k s

Duties of Stockholders
D irectors.

and

"The officers and stockholders of every banking cor­
poration formed under the provisions of this title (see in­
troductory paragraph under Montana for scope of the title
and its chapters) are individually liable for all debts con­
tracted during the term of their being officers or stock­
holders of such corporation equally and ratably to the
extent of their respective shares of stock in any such cor­
poration, except that when any stockholder shall sell and
transfer his stock such liability shall cease at the expiration
of six months from and after the date of such sale and
transfer” (3915). There is another provision, based on a
later act, making the stockholders “ of every corporation
formed under this chapter or which may avail itself of its
provisions ” individually liable “ for all contracts, debts and
engagements of such corporation to the extent of the
amount of their stock therein at the par value thereof in
addition to the amount invested in such shares” (4012).
Note that the words “ this chapter,” have been carried
over from the language of the session laws without read­
justment to the code. The state examiner, F. H. Ray,
considers 4012 inoperative because “ this chapter” prop­
erly refers to chapter 190 of the laws of 1907, which did
not provide for the formation of corporations— a “ corpo­
ration formed under this chapter” is, in Mr. R ay’s opin­
ion, an impossibility therefore. Attention is called, how­
ever, to the continuation of the quotation, above.
Every bank of discount and deposit must have not more
than thirteen directors, who must be citizens of the United
States, and at least three of them residents of Montana.
Each director must own at least ten shares of capital stock
(3912)- After providing for reports by banks, savings
banks, and trust companies, the statutes go on to provide




349




that if “ any such bank ” delays a report one month beyond
the time it is due or willfully violates any provisions of the
act relative to reports, the directors are personally liable
for all the debts of the corporation contracted previous to
and during the period of the neglect (4000).
III.— Supervision.

The state examiner, an official appointed for terms of
four years, and charged with the duty of examining vari­
ous public accounts, etc. (see 208 et seq.), has supervisory
powers over banks, savings banks, and trust companies.
As state bank examiner he approves of increases in capital
stock of “ any corporation organized under the provisions
of this title” (3918 and 4009), or, in the words of another
section, of “ any banking association, trust, deposit and
security corporation, or savings bank organized under the
laws of this State” (4005 and 4009). When any “ bank
organized under the provisions of this title” neglects to
comply with an order within sixty days, or violates any of
the provisions of the title, he makes demand upon the
proper officer to begin an action to annul the corporation’s
existence (3919 and 4009). He passes upon voluntary
dissolutions of banks, savings banks, or trust companies
(4003); he approves of reductions of capital stock
(4006); he approves of reserve depositaries (4010); and
he notifies banks (“ each bank organized under the provi­
sions of this title”) whose reserves have fallen below the
requirements, to make good the deficiency (3921). All
information in reports to the state examiner is con­
fidential and used only in furtherance of his official duties
(3999) • Whenever the examiner, after a full examination
of the affairs of a bank, savings bank, or trust company,
finds evidences of impairment or insolvency, he submits a
statement to the governor and attorney-general; and if
they are satisfied that the impairment or insolvency exists,

M o n t a n a

S t a t e

B a n k s

the attorney-general gives notice to have it made good,
and upon failure sues for a receiver, pending whose appoint­
ment the governor may direct the state examiner to take
charge of the business of the corporation (4004).
REPORTS.

Every bank, savings bank, and trust company must
make to the state examiner not less than four reports
a year at his call, not less than two months to intervene
between calls, according to the form prescribed by him, and
containing a full abstract of the accounts of the bank, its
resources and liabilities, etc. The statement must be
transmitted to the examiner within five days after receipt
of his request and must be published in condensed form in
a local newspaper. The examiner may call for special
reports when in his judgment they are necessary (3996).
Moreover, “ every such bank” must report to the state
examiner within ten days after declaring any dividend
showing the amount of the dividend and the amount of net
earnings in excess of it (3998). “ Every corporation doing
a banking business in this State ” must, besides keeping the
stockholders’ book generally required, post in its office the
names of its directors and the number and value of shares
held by each (3917). For reports required from “ every
bank or banking association organized under the authority
of this State,” for purposes of taxation, see 2503.
EXAMINATIONS.

Proceedings for a receiver are only begun when evidences
of impairment or insolvency are found by the state exam­
iner “ after a full and careful examination of the affairs ” of
a bank, savings bank, or trust company (4004). The state
examiner makes a thorough examination of the affairs of a
bank, savings bank, or trust company before he approves
of its voluntary dissolution (4003). It is the duty of the




351




n et a r y

mmtsston

state examiner once a-year or oftener, without previous
notice, to examine each bank, banking corporation, and
savings bank (the language of this statute does not include
trust companies, although it does investment and loan
companies) and examine their affairs, verify the value and
amount of their securities and assets, and inquire into
violations of law (209).
I V — R eserve R equirements.

“ Each bank organized under the provisions of this
title” must keep in available funds at least 20 per cent of
all immediate liabilities, of which reserve one-half must
consist of balances due from solvent banks and one-half of
cash. When the reserve falls below the requirement, the
corporation must not make any loans or discounts, except
by buying or discounting sight exchange, nor make divi­
dends (3921). There is another section based on more
recent legislation than the one just cited, which provides
that “ every bank ” must keep on hand at least 15 per cent
of its total deposits, of which a portion, to be determined
by the directors, may be deposited in banks in cities of a
certain size approved as reserve banks by the examiner,
and that reserve banks must keep at least 25 per cent of
total deposits in lawful money or deposited in other
reserve banks (4010). The state examiner considers the
second of the above two sections as the operative one.
V.— Discount

and

L oan R estrictions.

Among powers of banks of discount and deposit is that
of “ loaning money on real and personal security” (3911).
The total liability to “ any bank incorporated under the
provisions of this title” of any person, company, or firm
for money borrowed, including in company or firm liabil­
ities those of the members, must never exceed 15 per cent
of the paid-in capital and permanent surplus of the bank,
352

S t a t e

M o n t a n a

B a n k s

but the discount of bills of exchange drawn against existing
values and of commercial paper owned by the persons
negotiating it is not considered money borrowed (3920).
There is a section, based on a later enactment, providing
that the total liabilities of any person, firm, or corporation
to “ any bank ” for money borrowed, including in firm, but
not corporation, liabilities, those of the members, must
never exceed 20 per cent of capital and surplus; this
section excludes discount of bills and commercial paper as
above and loans on warehouse receipts and bills of lading,
from the classification of money borrowed (4011).
It is unlawful for “ any bank, banking institution, or
trust company” to loan to a managing officer without
taking ample security; and when such a loan or one made
to a director exceeds 10 per cent of the capital of the cor­
poration, it must be first approved by a majority of the
directors (3993).
VI

I nvestments.

Among powers of banks of discount and deposit are
those of buying and selling the bonds or stock of Montana
or of any other State or Territory, and the bonds of Mon­
tana municipalities (3911).
Banks of discount and deposit may hold such real estate
as is necessary for the proper transaction of business; such
as is mortgaged to secure previous loans; such as is con­
veyed to the corporation in satisfaction of previous debts;
and such as it purchases at judicial sale under liens held
by i1: (3913)No bank of discount and deposit must hold any portion
of its own capital, or of the capital of any other incorpo­
rated company, unless the purchase is necessary to prevent
loss on a previous debt contracted on security which was
thought adequate at the time; and stock so purchased must
S D c. 3 3 6 — 3
. o S , i-a- 3




353




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Monetary

Commission

not be held longer than six months, if it can be sold for
what it cost or at par (3910).
X .— U nauthorized B anking .

The chapter on foreign banking corporations forbids
them to do any banking business in Montana unless they
comply with various requirements of capitalization,
reserves, reports, limitations on liabilities, examinations,
etc. (3976 et seq.).
It is unlawful to use the words “ trust” or “ trust com­
pany,” “ saving,” or “ savings bank” in the title of any
business unless the business is organized under the Mon­
tana laws relating to trust, deposit and security, and sav­
ings bank corporations. Violations of this provision,
whether individually or as one interested in a firm or cor­
poration, is a misdemeanor, punishable by fine of from
$300 to $1,000, imprisonment for from sixty days to a year,
or both (3992). This provision is inserted under Banks
because it appears in Chap. VI, “ Regulation of Banks;”
it seems to fall more properly under Savings banks and
under Trust companies.
X I .— P e n a l t ie s .

Whenever any “ bank organized under the provisions of
this title ” fails to make good a depleted reserve within
thirty days after notice, it is guilty of a misdemeanor pun­
ishable by a fine of from $100 to $500 (3921). If “ any
bank, banking institution, or trust company” loans to a
managing officer without ample security, or loans to a
managing officer or a director in an amount exceeding 10
per cent of the capital stock, without the approval of a
majority of the directors, the bank or any managing officer
of it violating the rule is liable to a fine of $1,000, and in
addition the officer may be imprisoned for from one to ten
years (3993 and 3994). After providing for reports from
354

M o n t a n a

S t a t e

B a n k s

banks, savings banks, and trust companies, the statutes
proceed to provide that “ if any such bank ” fails to report
it suffers a penalty of $20 a day (4000). Every officer or
other person who wilfully makes a false statement or entry,
with intent to deceive an examiner, reports falsely, etc., is
guilty of a felony, punishable by imprisonment for from
one to ten years (4001).
The following three sections, all inserted in the code,
though 8715 is the latest enactment, seem inconsistent in
part: Banks, savings banks, and trust companies are for­
bidden to receive deposits or transact other business after
they are insolvent, except that they may act as trustee for
depositors, etc., keeping deposits thus made after the
insolvency separate from the general assets of the bank;
any officer, director, etc., knowingly receiving these trust
deposits except in the manner stated in the statute is pun­
ishable by a fine not to exceed $10,000, imprisonment not
to exceed five years, or both (4007). Any officer, agent,
or clerk of a bank, savings bank, or trust company who
receives deposits except in the separate trust manner just
explained, or who makes a false statement, etc., with intent
to deceive an examiner (this portion of 4008 seems in con­
flict with the later passed statute, 4001, above), is subject
to imprisonment for a term not exceeding five years (4008).
No bank, banking house, etc., or party engaged in banking,
loan, or deposit business may accept a deposit if the bank
is unsafe and insolvent; any officer, director, etc., know­
ingly receiving such deposit is guilty of a felony, punishable
by imprisonment for from one to twenty years (8715).
Whenever any provision of the banking laws as they
existed in 1907 is violated, for which no particular penalty
is provided, the violation is a misdemeanor (4014).




355




»

N at i on a l

M on et a ry

Commi ssi on

SAVINGS BANKS.
I.— T erms

of

Incorporation.

Savings banks must have a capital, fully paid in cash
before deposits are received, of not less than $100,000; but
a savings bank may organize on a basis not exceeding
$500,000 capital stock, of which at least $100,000 must be
paid in before deposits are received and the balance within
five years from incorporation, as called for by the directors,
in amounts not exceeding 25 per cent of the unpaid capital
in a year (3946).
The directors “ of each bank’’ (following a provision
applicable to banks, savings banks, and trust companies)
may declare dividends semiannually on the first Monday of
January and July out of net profits (3997). Every cor­
poration organized under the savings-bank chapter was
required, under the provisions of the Code, to set aside
annually at least 5 per cent of net profits as a contingent
fund until “ such surplus” amounted to 20 per cent of
capital (3956). This has been changed, apparently, by a
late statute digested under Banks, I, to require savings
banks to carry to surplus, before each dividend is declared,
10 per cent of the amount available for dividends, until
the surplus equals 20 per cent of capital (1909, chap. 112).
II.— L iabilities

and

D uties of Stockholders
Directors.

and

The officers and stockholders of every savings bank “ are
individually liable for all debts contracted during the term
of their being officers or stockholders of such corporation
equally and ratably to the extent of their respective shares
of the stock in any such corporation, except that when any
stockholder sells and transfers stock such liability ceases at
the expiration of six months from and after the date of
356

M ontana

Savings

Banks

such sale and transfer ” (3953; see also 3915). There is in
the code also the inconsistent provision in 4012, stated
under Banks.
There must be not more than thirteen directors, who must
be citizens of the United States, and at least three-fourths
of them residents of Montana. Each director must own at
least 10 shares of stock (3947). No director of a savings
bank may receive any pay until after whatever interest the
directors have determined to allow depositors has been
provided for (3952). There is also among the sections
requiring reports from banks, savings banks, and trust
companies the provision that if “ any such bank ” delays a
report a month or willfully violates any other provision of
the statute on reports, the directors are personally liable
for all debts of the corporation contracted previous to and
during the period of the neglect (4000)
III.— Supervision .
The digest of the statutes on this topic under Banks ex­
plains the application of the provisions that are there given.
It seems as though all the sections cited there applied
clearly to savings banks, including provisions for R eports
and E xaminations. There is, besides, this section in the
savings-bank chapter; the books of every savings bank
must be open at all times to inspection by the auditor, or
other persons designated by the legislature or the auditor.
Every savings bank must report to the auditor its condi­
tion on the first Monday of January, April, July, and
October, and at such other times as the auditor may call
for reports, showing liabilities and assets, loans on mort­
gages, on collateral, and on personal securities; bonds and
stocks; deposits in banks; and cash on hand (3955). Note,
however, that a section passed in 1907, transfers all the
auditor’s duties under banking laws to the state examiner
(4009).




357




IV. — R eserve R equirements.
See Banks, IV. The provisions of 3921 extend over
all banks organized under the provision of the title, clearly
including savings banks; the language of 4010 is simply
“ every bank.”
•

V.— D iscount

and

L oan R estrictions.

The provisions for limit on the amount of money to be
borrowed by one person, firm, or corporation given under
this head in Banks apply here; there is the same conflict
between 3920, applicable to all banks created under the
title, and 4011, applicable in its terms to “ any bank.”
See also the provision of the savings-bank chapter that no
loan on personal security may be made to any one person
or firm to an amount exceeding $10,000 (3951).
See Banks, V, also for the prohibition upon loans to
managing officers without ample security, and loans to
managing officers or directors without the approval of a
majority of the directors; this section applies to “ any
bank, banking institution, or trust company” (3993),
and, though more recent, is thought, under the quoted
language, not to override the provision in the savings-bank
chapter that no director, officer, or servant of a savings
bank may borrow the funds or deposits of the corporation
or in any way use them in his private affairs (3952).
(See also VI, below.)
VI. — I nvestments.
A savings bank may hold such real estate as is neces­
sary for the proper transaction of its business, not to exceed
$150,000 in value; such as is mortgaged to it; and such as
is purchased at sale on judgment or decree rendered for
money so loaned. A savings bank must not deal in per358

Montana

Trust

Companies

sonal property except such as is necessary for the trans­
action of its business and such as it takes as security (3954).
At least one-half of the capital paid in and one-half of
all deposits must be invested in United States securities,
securities of some State, or securities of Montana munici­
palities on which interest is paid, or loaned on unincum­
bered realty worth at least double the loan. The remainder
may be invested thus or on approved personal security,
but no loan must be made on personal security of less than
two responsible persons or collateral to be approved by
the directors (3951). A savings bank may deposit cash
on hand in a bank or trust company in Montana, but not
more than $50,000 may be deposited with any one corpo­
ration (3958).
V II. — Overdrafts.
There is a penal provision that every officer, teller, or
clerk of a savings bank who knowingly overdraws his
account and obtains the funds is guilty of a misdemeanor
(8714).
X .— U nauthorized Banking .
(See Banks, X.)
X I.— P enalties .
The provisions under this heading seem to be the same
as those under Banks, X I, adding only the penal pro­
visions against overdrafts by savings banks’ officers given
above under VII.
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

Trust companies are given power to “ receive money
from any person or persons, corporation, or company,




359




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Commission

on deposit, at such rate of interest and for such time as
may be agreed upon, for the purpose of loaning and invest­
ing the same” (3927); and they may be formed to “ hold
money on deposit payable, either on time or on demand,
with or without interest” (3937).
The amount of capital stock of a trust company must
be not less than $100,000 nor more than $500,000, divided
into shares of $100 each; $100,000 must be subscribed
and paid in cash before the corporation may begin busi­
ness (3924 and 3936). A later section provides that the
authorized capital stock shall not be more than $10,000,000
(3938). One-half the capital must be stated, in the pre­
liminary papers, to have been paid in in lawful money
(3936). .
Dividends of the profits may be declared every six
months or oftener, but not while the company is insol­
vent nor so as to make it insolvent (3939). Before declar­
ing a dividend 10 per cent of the amount available must
be carried to surplus, until surplus equals 20 per cent of
capital (1909, chap. 112). The provisions of 3997 (see
Banks, I) may apply; that section, following one applica­
ble to banks, savings banks, and trust companies, allows
the directors of “ each bank” to declare dividends semi­
annually, on the first Monday of January and July, out
of net profits.
II.— L iabilities

and

D uties of Stockholders
Directors.

and

The stockholders of every trust company are individ­
ually liable for all debts contracted during the time of
their being stockholders to the extent of the shares held
by them at the time the debts were contracted (3934).
See, however, 4012, the application of which has been
discussed under II in Banks.
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There must be not fewer than three nor more than
twenty-five directors, all of them stockholders and a major­
ity citizens of Montana (3926 and 3938). If the directors
knowingly declare a dividend when the corporation is
insolvent, or such dividends as will render it insolvent,
they are liable for the debts, then existing, and contracted
later while they continue in office (3939). For the pos­
sible application to trust companies of the section making
directors liable for debts contracted while a report is over­
due, see the quoted language under Banks, II (4000);
the state examiner considers this section inapplicable to
trust companies. Directors must make statements of
the affairs of the corporation to exhibit to the stock­
holders at least once a year (3940).
III.— Supervision .
See III under Banks, where the language of the various
sections is indicated to show the extent of the applica­
tion of each one. All sections there given on supervision,
reports, and examinations seem to include trust compa­
nies, except, perhaps, those which cover “ all banks organ­
ized under the title.” Trust companies, although undoubt­
edly organized under the title, may not be banks organ­
ized under the title. There is this section on supervision
in the trust company chapter: The books and records of
a trust company are open to examination by the auditor
of the State or such persons as he or the legislature desig­
nate. Each trust company reports its condition to the
auditor on the first Monday of January, April, July, and
October and at such other times as he desires, showing
liabilities and assets; loans on mortgages, on collateral,
and on personal security; bonds and stocks; deposits; and
cash on hand (3940). Note, however, that a section
passed in 1907 transfers all the duties of the auditor,




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“ under the laws regulating the business of banking,” to
the State examiner (4009).
IV.— R eserve R equirements.

See Banks, IV ; it is questionable if these sections apply
to trust companies, though it may well be that the lan­
guage of 3921, “ each bank organized under the provi­
sions of this title,” may extend to trust companies. It is
more doubtful still if 4010, providing for the reserves of
“ every bank,” applies to trust companies.
V.— Discount

and

Doan R estrictions.

See Banks, V, for the provisions restricting the amount
of loans to one person, firm, or corporation; one of the
sections there given applies to all banks created under
the title (3920), the other to all banks (4011); it is ques­
tionable if either of these, especially the latter, applies
to trust companies. It is unlawful for any bank or trust
company to loan to any managing officer of “ such bank”
without ample security, and when the loan or a loan to
a director exceeds 10 per cent of the capital it must be
approved by a majority of directors (3993).
VI.— Investments.

A trust company may hold all such real and personal
property as is necessary to carry on its authorized busi­
ness, as well as such as it deems it necessary to acquire in
the enforcement or settlement of demands (3928). An­
other section provides that a trust company may own only
such real estate as is acquired for the transaction of its
business and in the enforcement and collection of debts
and liabilities due it (3939). The directors are authorized
to invest the capital “ in good securities;” it is lawful for
a trust company to invest capital and funds in mortgages
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of unincumbered realty in Montana, in stocks or bonds of
Montana or any other State, and in bonds of any Montana
municipality (3930).
X.— U nauthorized T rust Company B usiness.
(See Banks, X.)
X I.— P enalties .
See Banks, X I; the language of each section is there
quoted with sufficient accuracy to suggest the application
as far as the section itself does.




33
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NEBRASKA.
All the statutes of Nebraska dealing with banks, savings
banks, and trust companies in force before the session of
the legislature of 1909 were contained in Chapter 8, at
page 1617, of the compiled statutes of Nebraska, 1907.
This chapter was repealed by an act passed at the 1909
session, printed at page 66 of the session laws of Nebraska
for 1909, which enacts a complete new statute on the
subject of banking. Most of this statute applies to
“ banks,” which term is defined to mean “ any incorpo­
rated banking institution;” the term “ commercial bank”
is defined to mean “ any such banking institution as shall,
in addition to^the exercise of other powers, follow the
practice of repaying deposits upon check, draft, or order,
and of making commercial loans chiefly;” the term “ sav­
ings bank” is defined to mean “ any such banking insti­
tutions as shall, in addition to the exercise of other powers,
follow the practice of repaying deposits only upon the
presentation of pass books, and whose loans are chiefly
made on real-estate security” (3). Trust companies are
not legislated for particularly unless they are within the
definition “ incorporated banking institution.” The stat­
ute applies for the most part to commercial banks and
savings banks indiscriminately; the particular matters in
which savings banks are legislated for separately are given
under that heading in the digest, and of course override,
with respect to savings banks, inconsistent provisions
given under “ Banks;” on all other matters, however, sav­
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ings banks must be taken to be subject to the rules which
govern banks. References in the digest are to sections in
chapter 10 of 1909.
BANKS.
I.— T erms

of

Incorporation.

The language of the quotations given in the preliminaryparagraph above seems to imply that commercial banking
and savings banking may be combined (3); but every
corporation at its organization must in its statement
declare “ the nature of proposed banking business, whether
commercial or savings” (15).
The capital required of commercial banks is as follows:
In no case less than $10,000; if the bank is located in a
village or town of from 100 to 500 inhabitants, not less
than $15,000; in a town or village of 500 to 1,000, not less
than $20,000; in a town or village of 1,000 to 2,000, not
less than $25,000; in a city or village of 2,000 to 5,000,
not less than $35,000; in a city of 5,000 to 25,000, not
less than $50,000; in a city of 25,000 to 100,000, not less
than $100,000; in a city of 100,000 or more, not less than
$200,000. The provisions giving the form in which capital
may be paid in at organization are given under Savings
Banks, although the wording of the statute permits of the
interpretation that these provisions apply to commercial
banks as well (13). Before organizing, each bank files an
oath that “ the capital stock has been paid in as provided
for.” The state banking board must satisfy itself that
the incorporators are persons of integrity and responsi­
bility (16).
No bank may withdraw capital in dividends or otherwise (34). Dividends may be declared semiannually of
so much of net profits as seems expedient, but before the
declaration the bank must carry one-fifth of net profits




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to surplus fund, until the surplus amounts to 20 per cent
of the paid-up capital (28).
II.— L iabilities

and

Duties of Stockholders
D irectors.

and

It is a constitutional provision that “ every stockholder
in a banking corporation or institution” is individually
liable over and above the amount of stock held, to an
amount equal to his shares, for all liabilities accruing while
he remains a stockholder (Annotated Statutes, Cobbey,
1907, sec. 650). The banking statute provides for this
liability, and adds that if a stockholder transfers his shares
knowing the bank to be insolvent, he continues liable (35).
Another section empowers directors “ to levy and collect
assessments on the stock of the banking corporation for
the purpose of repairing and restoring the credit of said
banking corporation, or to repair and restore any defi­
ciency that may occur by reason of the impairment of the
capital stock of said bank” (50).
There must be from three to fifteen directors, who must
be stockholders (26), and a majority of them residents of
the county where the bank is located, or adjacent coun­
ties; every director of a bank capitalized at $50,000 or
less must own 4 per cent of paid-up capital, and of a
bank capitalized at more than $50,000 must own not less
than $3,000 of paid-up stock (12). The board of each
bank must meet at least twice annually for a thorough
examination of the books, records, funds, and securities
of the bank; a certified copy of this record is sent to the
state banking board (26).
III.— Supervision .
The state banking board of Nebraska consists of the
governor, who is ex officio chairman, the auditor of public
accounts, and the attorney-general (5). The governor
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appoints a secretary of the banking board, who must be
an elector of the State and have had three years’ practical
experience in banking. His salary is $3,000 per year, and
the clerk’s salary is $1,500. The governor also appoints
examiners, who must have had three years’ experience in
banking, and who may not have a personal interest in
any bank they examine, nor be nor have been within a
year preceding their appointment, officers or employees
of banks they examine (6). The state banking board,
before granting charters, satisfy themselves that the
incorporators of the bank in question are persons of integ­
rity and responsibility (16). The banking board approves
all reductions and increases in capital stock, and grants
consents to voluntary liquidations (34 and 42) and con­
solidations (41). They approve reserve depositaries (13
and 22).
Any corporation which conducts a banking business
without complying with the statute of 1909 may be put
into the hands of a receiver (2). When reserves fall below
the required amount or capital is impaired, the state
banking board may notify the bank in question to make
good the deficiency; if this is not done within the time
directed, a receiver may be appointed (23). If a bank
takes its own stock and does not dispose of it within six
months, a receiver may be appointed (25). If it appears
to the banking board from an examination or report that
the capital of a bank is impaired, or that the bank is con­
ducting its business in an unsafe or unauthorized manner,
or endangering the interests of depositors, or if the bank
fails to report or to comply with the statute in any other
respect, the banking board institutes through the attorneygeneral a suit for the appointment of a receiver (48). Any
bank examiner, when ordered by the board, may take and
hold possession of a bank for a time sufficient to make a
thorough examination of its condition, and if it is found




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to be insolvent, or to be conducting its business unsafely,
or to be endangering the interests of depositors, then the
examiner may hold possession of all the assets of the bank
until the board can receive his report, and by proper pro­
ceedings institute a receivership (io). A bank may vol­
untarily place its affairs under control of the board by
posting a notice on its door (43). After the banking
board, a bank examiner, or receiver has held possession of
a bank, the stockholders may place it again in condition
to do a banking business, whereupon the board issues
permission for a reopening in the same manner as it origi­
nally granted permission to begin business (50). The
banking board has authority to draw upon the depositors’
guaranty fund in amounts required to pay claims of de­
positors in an insolvent bank; see X II, infra (52). The
authority of a bank examiner, when ordered by the bank­
ing board, or a receiver appointed under the act, to take
and hold possession of all assets of a bank is provided for,
together with their fees (55). If a bank refuses to deliver
possession of its assets to the board or its agent, the board
communicates with a state’s attorney, who applies to
court for an order placing the board or its agent in
charge (56).
REPORTS.

It is a constitutional provision that “ all banking cor­
porations” must publish a quarterly statement of their
assets and liabilities (Annotated Statutes, Cobbey, 1907,
sec. 650). This is taken care of in the banking act by the
requirement that every bank make to the banking board
not less than four reports each year in the form prescribed
by the board (17), including the following items: Amount
loaned on bonds and mortgages; amount loaned on notes,
bills of exchange, overdrafts and other personal securities,
with values of securities; amount of rediscounts and of
368

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past-due paper; real-estate investments with cost; cash
on hand and on deposit, with names of depositaries and
amounts; all other assets; and other information required
by the board. Each report states resources and liabilities
at the close of business on a past day specified by the
board, and must be transmitted to the board within five
days after receipt of request. A summary of the report
is published in a local newspaper (18). Special reports
may be called for by the board (19). Receivers must
make monthly reports to the banking board (58). State­
ments of average daily deposits are required semiannually
to ascertain the bank’s contribution to the depositors’
guaranty fund; see infra (45). After each semiannual
meeting of the board of directors of a bank they forward
to the banking board within ten days a certified copy of
the record of their examination into the bank’s affairs (26).
After each examination by an examiner he reports the
condition of the examined bank to the board (8). A list
of the names and residences of stockholders, shares held
by each, and amount of paid-up capital represented by
the shares must be kept subject to inspection by stock­
holders and creditors (38).
For reports required for purposes of taxation, see An­
notated Statutes, Cobbey, 1907, section 10955, and for
those required of state depositaries, ibid., section 11366.
EXAMINATIONS.

The affairs of every bank are examined as often as the
banking board think necessary, at least semiannually.
No examiner may examine a bank in which he has a per­
sonal interest, nor one in which he is or has been within a
year of his appointment an officer or employee (6). A
bank examiner, when ordered by the board, may take
possession of a bank for a long enough time to make a
thorough examination into its condition, preparatory to
S . D oc. 3S3, 6 1 -2 ----- 24




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the institution of proceedings for a receiver, if they prove
necessary (io). The state banking board may, if they
deem it advisable, order special examinations before
allowing voluntary liquidations (34); another section
seems to make this examination a prerequisite to every
voluntary dissolution (42). The state banking board
makes careful investigation of the affairs of a bank in the
hands of a receiver before allowing it to resume business
(50). The board of directors of every bank make a
thorough examination of its records and funds at each
semiannual meeting (26).
IV.— R eserve R equirements.
In cities of less than 25,000 every bank must keep a
15 per cent reserve, of which two-fifths must be in cash
and the rest may be deposited in depositaries approved by
the state banking board. In cities of over 25,000 the
reserves must be 20 per cent of aggregate deposits, of
which two-fifths are kept in cash and the rest, if desired,
in approved depositaries (22). When the reserves fall
below the requirement, a bank may make no new loans
or discounts, except by discounting or purchasing sight
exchange, nor may it declare dividends, until the reserve
is restored (23).
V.— D iscount

and

L oan R estrictions.

“ The aggregate amount of the rediscounts and bills
payable of any corporation transacting a banking busi­
ness in this State shall at no time exceed two-thirds of its
paid-up capital except for payment of its depositors;”
nor may any commercial bank permit loans and invest­
ments, exclusive of reserve and banking house and fix­
tures, to exceed eight times capital and surplus (24). No
officer, except a director who is not an officer, and no em­
370

N e b r a s k a

State

Banks

ployee of any bank, may borrow the funds of the bank;
no director may borrow without the approval of the
board of directors (32). No bank may loan to any single
corporation, firm, or individual, “ including in such loan
all loans made to the several members or shareholders of
such firm or corporation, for the use and benefit of such
firm, corporation, or individual,” more than 20 per cent of
paid-up capital and surplus, but the discount of bills of
exchange drawn against existing values, and of commer­
cial paper owned by the persons negotiating it, is not con­
sidered money borrowed. The total liabilities of the
stockholders of a bank to the bank must never exceed
50 per cent of paid-in capital and surplus (33).
“ No corporation transacting a banking business shall
make any loan or discount on the security of the shares
of its own capital stock, nor be the purchaser or holder of
any such shares, or the shares of any corporation, unless
such security or purchase shall be necessary to prevent
loss upon a debt previously contracted in good faith; and
such stock so purchased or acquired shall within six
months from the time of its purchase be sold or disposed
of at public or private sale; or in default thereof a re­
ceiver may be appointed to close up the business of the
bank. Provided, that in no case shall the amount of
stock so held exceed 10 per cent of the paid-up capital
of such bank ” (25).
No bank may pay interest on deposits at a greater rate
than 4 per cent a year (27).
V I .— I n v e st m e n t s .

A bank may hold real estate only for the following pur­
poses: Such as is necessary for the convenient transac­
tion of its business, not exceeding one-third of paid-up
capital; such as is conveyed to the bank for debts, and




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such as it purchases at sale under judgment on its securi­
ties, but the bank must not bid a larger amount than is
necessary to satisfy the debts. Real estate acquired in
satisfaction of debts or at judgment sale must not be held
longer than five years and thirty days; at no time may
the total amount of real estate held for any purpose
exceed 50 per cent of paid-up capital (29).
The somewhat confusing section on purchase by a bank
of shares of its own stock or of that of any corporation is
quoted under V, supra (25).
V II.— O v e r d r a f t s .
The only mention of overdrafts is in the section on
reports, which includes overdrafts as one item required to
be reported (18).
X . — U nauthorized B anking .
•
It is unlawful to transact a banking business in
Nebraska except by means of a corporation organized for
the purpose under Nebraska law. No corporation may
receive money on deposit or prosecute a banking business
until it has complied with the provisions of the statute of
1909. The penalty for violation of these prohibitions is
$25 a day and the appointment of a receiver to wind up
the business of the offender (2). A later section of the
statute declares the penalty for transacting a banking
business without having obtained a charter and certifi­
cate to be $50 a day (20). It is reiterated that no person
or persons, exclusive of national banks, are permitted to
prosecute a banking business in Nebraska except corpo­
rations that have complied with the provisions of the
statute of 1909 (5). It is unlawful to transact a banking
business without obtaining a charter from the state bank­
ing board (11).
3 72

N e b r a s k a

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B a n k s

X I. — P e n a l t ie s .
Any corporation failing to report, or transacting a bank­
ing business without first obtaining a charter and a certifi­
cate that the corporation has complied with the deposit
guaranty law (see also X, supra), suffers a penalty of $50 a
day (20). Any person who knowingly subscribes to a false
report or false entry, or exhibits false papers with intent to
deceive an examiner, is guilty of a felony punishable by
imprisonment for from one to ten years (21). Any person
who makes false oath to any statement required in the
reports of average daily deposits on which assessments for
the deposit guaranty fund, is guilty of a felony punishable
by a fine of from $100 to $1,000, or imprisonment of from
one to five years, or both fine and imprisonment (45).
Any examiner who willfully makes a false report with
intent to aid in the operation of an insolvent bank, or who
receives a bribe to induce him not to file the report of an
examination, or who neglects to examine on account of
having received a bribe, is guilty of a felony punishable by
imprisonment from two to ten years (8).
Any officer, director, or employee who pays interest on
deposits at a greater rate than 4 per cent, commits a felony
punishable by a fine of from $100 to $500, or imprisonment
not to exceed three years ,or both (27). Any officer, agent,
or employee knowingly aiding in the receipt of a deposit
after insolvency is guilty of a felony punishable by impris­
onment for from one to ten years (30). Any officer, direc­
tor, or employee who is implicated in the violation of the
section forbidding officers to borrow, and directors to bor­
row without the approval of the board, is guilty of a felony
punishable by a fine not to exceed $1,000, or imprisonment
not to exceed five years, or both (32); any officer, director,
or employee who permits a violation of the section forbid­
ding loans to any individual to exceed 20 per cent of paid




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up capital and surplus, is punishable by a fine not to exceed
$500 (33): the two offenses just named also render the
guilty officer or employee personally liable for loss resulting
to the bank (40). A violation of the section requiring the
president and cashier to keep, subject to the inspection of
stockholders and creditors, a list of the names and resi­
dences of stockholders, etc., is punishable by a fine of from
$50 to $200, or imprisonment for from thirty to sixty days,
or both (38). It is unlawful for an officer or employee to
certify a check drawn upon the bank unless the drawer has
on deposit an amount of credit equal to the face of the
check; on being certified, the amount of the check must be
immediately charged against the account of the drawer (39).
The banking board may pay rewards not exceeding in
any case $500, out of the depositors’ guaranty fund, for the
apprehension of persons violating the statute of 1909 (60).
Where no other punishment is provided, any breach of
the statute is a misdemeanor, punishable by fine of $25 to
$300, imprisonment for thirty to ninety days, or both (61).
The printing or engraving of a false statement that a
bank has taken advantage of the depositors’ guaranty law
is declared to be a violation of the act (14).
X II.— D e p o sito r s ’ G u a r a n t y S y s t e m .
All banks are subject to assessment for a guaranty fund
for the protection of depositors (44). On June 1st and
December 1st of each year every bank files with the bank­
ing board a statement showing average daily deposits for
the preceding six months, exclusive of public money other­
wise secured. A month after the reports are filed the state
banking board levies assessments against the capital stock
of each bank as follows: Within sixty days after the taking
effect of the 1909 statute (effective July 2, 1909), onefourth of 1 per cent of average daily deposits; on January 1,
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1910, one-fourth of 1 per cent of the average daily deposits
for the six months preceding December 1, 1909; on July 1,
1910, one-fourth of 1 per cent of the average daily deposits
for the six months preceding June 1, 1910; on January i,
1911, one-fourth of 1 per cent of the average daily deposits
for the six months preceding December 1, 1910; and on
July 1st and January 1st of each subsequent year, onetwentieth of 1 per cent of the average daily deposits for the
six months ending on each preceding June 1st and Decem­
ber 1st (45). Banks organized after the act of 1909 took
effect pay 4 per cent on the amount of the capital, when
the bank opens for business, this fund to be subject to
adjustment on the basis of average daily deposits as shown
by its first two semiannual statements. The board has
power to adjust rates of assessments of these new banks so
as to require each bank to contribute an equitable sum to
the fund; and its first two assessments, together with its 4
per cent of capital originally contributed, must equal at
least 1 per cent of daily deposits, as shown by the first two
semiannual statements (45a).
Banks are notified of the amount of assessments by the
banking board, whereupon they must at once set apart the
amount of the levy, which they keep as a depositors’ guar­
anty fund payable to the board on demand (46). If the
depositors’ guaranty fund before July 1, 1910, becomes
reduced to an amount less than one-half of 1 per cent of
average daily deposits, or subsequent to July 1, 1910, to an
amount less than 1 per cent of average daily deposits, the
board must levy a special assessment to cover the defi­
ciency ; special assessments must be based on average daily
deposits, and, when required for the immediate payment
of depositors, may be for any amount not exceeding 1 per
cent of average daily deposits in any one year (47).
After the board, an examiner, or a receiver has had pos­
session of a bank, its stockholders may replace it in con-




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dition to do business, but it may not reopen until the
board, after investigation, is of opinion that its funds
are wholly restored and that all advances, if any have
been made, from the depositors’ guaranty fund are fully
repaid with interest (50). Claims of depositors for de­
posits and claims of holders of exchange have priority in
insolvency over all other claims except those for taxes;
they are paid immediately out of the available cash in the
hands of the receiver. If the cash in the hands of the
receiver is insufficient to pay depositors, the court in
which the receivership proceedings are had certifies to the
state banking board the amount required to supply the
deficiency; the board thereupon draws against the deposi­
tors’ guaranty fund to the amount required and transmits
to the receiver these funds, which he applies to pay de­
positors; but the fund is not available to pay depositors
in banks which have not complied with the depositors’
guaranty sections of the statute. These drafts against
the fund are prorated among the solvent banks in which
the fund is kept, in accordance with the amount held by
these solvent banks (52). To the extent of the amount
paid from the guaranty fund to satisfy claims of creditors,
the banking board, for the benefit of the fund, is subrogated
to the rights of “ creditors” (are “ depositors” meant?)
thus paid to participate in the assets of the bank; what­
ever is realized by the receiver through this subrogation
is deposited for the fund in the solvent banks proportion-'
ately to the assessments levied against these banks (53)
SAVINGS BANKS.
Savings banks— that is, “ such banking institutions as
shall, in addition to the exercise of other powers, follow
the practice of repaying deposits only upon presentation
of pass books, and whose loans are chiefly made on real
37 6

Nebraska

Savings

Banks

estate security ” (3)— are, except as noted below, subject to
the rules given under banks. The fact that on beginning
business a bank must state “ the nature of proposed bank­
ing business, whether commercial or savings,” may imply
a prohibition on combining commercial and savings bank­
ing in the same institution (15).
CAPITAL.

The minimum paid up capital of a savings bank is
$15,000; in cities of from 50,000 to 100,000, the minimum
paid up capital is $35,000; in cities of 100,000 or more the
minimum paid up capital is $75,000. This paid up capital

must consist, at the time, of lawful money carried with
depositary banks approved by the banking board, or of
national, state, county or municipal bonds, bank furniture,
and necessary building and lots on which the building is '
situated, free from incumbrance; the bonds must not con­
stitute more than one-half, nor the building, lots, furniture,
and fixtures more than one-third of the paid in capital,
nor the furniture and fixtures more than one-tenth.
The wording of this paragraph admits possibly of the in­
terpretation that these limitations on the form of capital
apply to commercial banks as well as savings banks (13).
DIRECTORS.

The ownership of five shares of the capital stock of a
savings bank qualifies one to be a director (12).
RESERVES.

The section which provides that every bank in cities of
less than 25,000 must keep a reserve of 15 per cent of de­
posits, two-fifths in cash, and in cities of more than 25,000
20 per cent of deposits, two-fifths in cash, proceeds: “ Pro­







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vided further, That savings banks shall have on hand at
all times as a reserve in available funds an amount equal to
at least 5 per cent of their aggregate deposits” (22).
LOANS AND INVESTMENTS.

Savings banks are exempted from the requirement
that loans and investments, exclusive of reserve, bank­
ing house and fixtures, must not exceed eight times
capital and surplus (24). The provisions of the section
forbidding loans to a single firm, corporation, or indi­
vidual in excess of 20 per cent of capital stock and sur­
plus (see Banks, V) do not apply to the securities of
savings banks enumerated in section 36 of the statute
(33). The section named provides that the loanable
funds of a savings bank, except its reserves, must be
invested in bonds of the United States, or of any State,
or of any municipality in the United States, or, when
approved by the state banking board, in other bonds of
known marketable value; or loaned on negotiable paper
secured by the above-named securities; or loaned upon
unencumbered real estate (second-mortgage loans may
be made on improved farm lands, but no loans may be
made on these lands or other real estate “ which, includ­
ing the aggregate amount of incumbrance thereon, shall
exceed 50 per cent of the cash value thereof”) ; or loaned
upon notes secured by collateral security of known
marketable value; or held in cash; or deposited in good
solvent banks. Chattel mortgages may not be taken
by savings banks as collateral (36). Savings banks are
not subject to the restrictions (see Banks, V) upon hold­
ing real estate (29). Pass books are provided for; a
savings bank may issue certificates for legitimate de­
posits, however (37).

Nebraska

Trust

Companies

PENALTIES.

Since the provision forbidding loans to an individual
in excess of 20 per cent of capital and surplus does not
apply to the enumerated securities of savings banks,
the penalty upon officers or employees who loan in
excess of 20 per cent is in so far inapplicable to savings
banks (33).
TRUST COMPANIES.
There is no separate legislation for trust companies;
if they transacted a banking business, they might be
within the term “ bank,” which is defined to mean “ any
incorporated banking institution,” or even within the
term “ commercial bank,” which is defined to mean “ any
such banking institution as shall, in addition to the
exercise of other powers, follow the practice of repaying
deposits upon check, draft, or order and of making com­
mercial loans chiefly” (3). Practically all the provisions
of the 1909 statute apply to “ every corporation trans­
acting a banking business under the laws of this State
or under the provisions of this act.” The compiler has
been assured, however, by E. Royse, esq., secretary of
the state banking board, in a letter dated March 24, 1909,
that trust companies in Nebraska do not do a banking
business.




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NEVADA.
The digest of the statutes of this State is based upon
the pamphlet issued by the state banking board in 1909,
which contains the three statutes under which banking is
conducted. Most of the banking legislation is contained
in the statute at page 251 of the laws of 1909, Chapter
CXCI of that year; references in the digest, where they
are simply numbers in parentheses, are to sections in that
act. The other two important statutes, Chapter XCII
of 1909 (p. 95), and Chapter CLXVI of 1907 (p. 362), are
each cited by the year, the .page on which the statute
begins, and the section. These statutes apply, except
where the language is quoted, indiscriminately to banks,
savings banks, and trust companies; the act at page 251
of 1909, indeed, defines “ bank,” as used in that act, to
include banks, savings banks, and trust companies, and
extends its provisions to all “ individuals, firms, and cor­
porations of any character conducting the business of
receiving money on deposit or otherwise acting in the
capacity of a bank” (60). It must be borne in mind
therefore, that the provisions digested under “ Banks”
are applicable also to savings banks and trust companies.
An old savings bank statute, Chapter XCIII of 1869, was
not thought sufficiently important to deserve a place in
the latest compilation of the statutes of Nevada, issued in
1900, and on the suggestion of the state banking board,
who took counsel of the attorney-general of the State on
the question, it has been omitted from the digest.
380

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BANKS.
I.— T erms

of

I ncorporation.

The statutes do not expressly allow, and, indeed, may
be said by implication to forbid, the combination of com­
mercial and savings banking. A bank before beginning
business must make a statement to the banking board,
setting out, among other things, “ the nature of the pro­
posed banking business, whether commercial or savings”
(16); a corporation may be formed “ for the transaction
of a general banking business, or for the purpose of aggre­
gating the funds of the savings of the members thereof
and others and preserving and safely investing the same
for their common benefit” (1907, p. 362, 1).
“ The paid-up capital stock required to entitle a corpo­
ration to a license” to do a banking business must be as
follows: In no case less than $10,000; in a village or town
with from 100 to 500 inhabitants, $15,000; in a village
or town of from 500 to 1,000, $20,000; in a village or
town of from 1,000 to 2,000, $25,000; in a city or village
of 2,000 to 5,000, $35,000; in a city of 5,000 to 20,000,
$50,000. “ The entire capital stock shall be subscribed,
and at least 80 per cent thereof paid in, before such
license shall be issued * * * ; and such paid-in capi­
tal, including the initial and subsequent payments, shall
consist at the time o f” money, deposits, national, state,
or municipal bonds, bank furniture, building, and the lots
on which the building is situated, free from incumbrance;
the public bonds mentioned must not constitute more
than one-half, nor the building and lots, with furniture
and fixtures, more than one-third, of the paid-in capital,
nor the furniture and fixtures more than one-tenth (14).
Under the previous statute, only 50 per cent of capital
had to be subscribed, and 50 per cent of the subscriptions
paid in in money (1907, p. 362, 3); “ the balance of the




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capital stock remaining unpaid shall be paid in within
two years ” after the bank receives its certificate of incor­
poration (1907, p. 362, 4): although the 1909 statute
clearly overrides these provisions with respect to the
amount of capital required to be subscribed and paid in
at the time of incorporation, the quoted requirement that
the balance be paid in within two years may still be in
effect.
Any corporation transacting a banking business may
semiannually declare a dividend out of net profits, but
before the dividend is declared one-tenth of net profits
must be carried to surplus until it amounts to 20 per cent
of paid-up capital (28). Capital must never be with­
drawn, either in the form of dividends or otherwise.
Dividends may be declared only out of net profits (35).
For limit on borrowing by a bank, see V, infra.
II.— L iabilities

and

Duties of Stockholders
D irectors.

and

There is no legislation on stockholders’ liability; the
constitution of Nevada provides that stockholders in cor­
porations are not to be individually liable for debts or
liabilities of their corporations (art. 8, sec. 3).
There must be not fewer than three nor more than thir­
teen directors. They must hold not fewer than four regu­
lar meetings a year, at which they make examinations
(1907, p. 362, 5). A majority of the directors must be
residents of the county in which the bank is located or
adjacent counties. Each director of a bank capitalized
at less than $50,000 must own one-twentieth of its paid-up
capital, and in a bank capitalized at more than $50,000
must own not less than $3,000 of paid-up capital (13).
Every officer and director violating any provision of the
statute of 1909 is civilly liable for damages to any person

N e v a d a

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B a n k s

injured (57). See also under XI, infra, the provision im­
posing personal liability upon directors who violate the
sections forbidding them to borrow from their bank except
on security approved by the board, and limiting the
amount of loans to any individual and to stockholders of
the bank (33, 34, and 39).
III.— Supervision .
The Nevada state banking board consists of the gov­
ernor, who is ex officio chairman, and four other members,
appointed by him. These appointees hold office for
terms of two years. The board meets twice a year and
at such other times as the governor or any two members
request. Members of the board receive $10 a day while
performing their duties (5). The board has general
supervision and control of banks and banking under the
laws of the State (6). The governor appoints a suitable
person, who must have had at least three years’ experi­
ence in practical banking, to examine banks; this exam­
iner, who is ex officio secretary of the board, must not exam­
ine any bank in which he has a personal interest, or of
which he is, or within a year preceding his appointment
was, an officer or employee (7). His salary is $3,000 a
year (10); the appropriation for his salary in the 1909
statutes, however, was $5,500 (1909, chap. CXL, p. 162,
sec. 85).
The bank examiner, when ordered by the board, has
authority to take possession of any banking corporation,
to retain possession long enough to make a thorough ex­
amination, and if he then finds that the bank is insolvent
or is conducting its business in an unsafe or unauthorized
manner, or is endangering the interests of its depositors,
he has power to hold possession of all its assets until the
board may receive his report and act upon it to have a




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receiver appointed (n ). The board may notify any
bank whose reserve falls below the requirement, or whose
capital is impaired, to replenish reserves or capital within
such time as the board directs; failure to comply is ground
for the appointment of a receiver (24). Whenever it
appears to the board, from an examination or a report,
that the capital of a banking corporation is impaired, or
that the corporation is conducting its business in an
unsafe or unauthorized manner, or is endangering the
interests of its depositors, and whenever a corporation
fails to make a report or to comply with any provision of
the 1909 statute, the board reports to the attorney-general,
who institutes suit for a receiver (44). The board pro­
ceeds for the appointment of a receiver of any corpora­
tion, firm, or individual doing a banking business except
by means of a properly organized corporation (2). Any
bank examiner when ordered by the board, or any re­
ceiver appointed under the 1909 statute, has authority to
hold the assets of a delinquent corporation until its lia­
bilities have been fully discharged (50). After the board,
an examiner, or a receiver has taken possession of a bank,
its stockholders may repair its credit, replenish its re­
serves, and otherwise restore it to proper condition to
transact business, subject to the approval of the board
(46). Any bank may place its affairs voluntarily under
the control of the board by posting a notice on its door
(42). The provisions for proceedings in liquidating a
bank, proof of claims, distribution of assets, etc., are
somewhat detailed; see 47, et seq.
The state banking board passes upon reductions and
increases of capital, upon voluntary dissolutions (35 and
41), and upon consolidations (40), and makes rules and
regulations necessary to carry the 1909 statute into effect
(54). Whenever the bank examiner finds an officer of a
bank or trust company to be dishonest, reckless, or incom­

N e v a d a

S t a t e

B a n k s

petent, he requires the directors of the corporation to
remove him (56A ).
REPORTS.

Every banking corporation reports to the state bank­
ing board not less than four times a year, according to the
form which the board prescribes (18), including the fol­
lowing items: Amount loaned on bonds and mortgages;
amount loaned on notes-, bills of exchange, overdrafts,
and other personal securities, with market value of the
securities; amount of rediscounts and commercial paper
past due; real-estate investments, with cost; cash on
hand and on deposit, with names of depositories, etc.;
and other assets. Each report states resources and lia­
bilities at the close of business on any past day specified
by the board, and must be presented to the board within
five days after receipt of its request. A summary is pub­
lished in a local newspaper (19). Special reports may be
required at any time by the banking board or its chair­
man (20). After an examination the examiner reports
the condition of the examined institution to the board (9).
Reports of proposed reductions or increases of capital
must be made to the banking board (35). Receivers
report to the board monthly (53).
For reports required for taxation purposes, see 1907,
Chap. XCVII, sec. 5.
EXAMINATIONS.

The examiner investigates the affairs of every banking
corporation as often as the board thinks necessary, and
at least twice a year (7 and 9). He has authority, when
ordered by the board, to take possession of a banking
corporation and retain possession for time to make a
thorough examination to determine the bank’s solvency,
etc. (11). The board must cause an examination to be




S . D oc. 353, 6 i-a-

as

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made of any bank which proposes a voluntary liquidation
(41). When a bank has been in the possession of the
board, the examiner, or a receiver, and has put itself in a
position to resume business, the state banking board,
before allowing such resumption, must carefully investi­
gate its affairs (46).
Directors at each quarterly meeting must thoroughly
examine the books and funds of their bank and record the
result on the bank’s books (1907, p. 362, 5).
IV.— R eserve R equirements.
Every banking corporation must have on hand in avail­
able funds an amount equal to 15 per cent of its entire
deposits; two-thirds may consist of balances due from
solvent banks, and one-third must consist of cash. Re­
serve depositaries must maintain a 25 per cent reserve
(23). Cash includes lawful money of the United States
and exchange for any clearing-house association. When
the reserve falls below the requirement, the bank must
not make new loans or discounts except by dealing in
sight exchange nor make any dividends until the reserve
is replenished. The state banking board may notify a
bank delinquent in this respect to make good its reserve
within such time as the board directs (24).
V.— D iscount

and

L oan R estrictions.

No banking corporation may loan to any single corpo­
ration, firm, or individual “ including in such loan all loans
made to the several members of any such firm for the use
or benefit of such firm, corporation, or individual” more
than 30 per cent of paid-up capital and surplus; but the
discount of bills of exchange drawn against existing
values, and of commercial paper owned by the persons
negotiating it, is not considered money borrowed. The
386

N e v a d a

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B a n k s

total liabilities of stockholders to their bank must never
exceed 50 per cent of paid-in capital and surplus (34).
No banking corporation may loan or discount on the
security of shares of its own capital unless accepting this
security is necessary to prevent loss on a previous debt,
in which case the stock must be sold within six months
“ from the time of its purchase.” The amount of stock
“ so held” (this includes stock held as security and owned
outright) must never exceed 10 per cent of the paid-up
capital of the bank (26).
No director, officer, or employee of a banking corpora­
tion may become indorser or surety for loans to others
or be in any manner obligated for money borrowed of his
bank (32). No director, officer, or employee may directly
or indirectly borrow money of the bank unless he gives
good security, the loan and security to be approved by
majority vote of directors, the applicant not voting (33).
No banking corporation may pay interest on time
deposits at a greater rate than 4 per cent a year (27).
The aggregate of rediscounts and bills payable of any
banking corporation must never exceed paid-up capital
and surplus, nor may any corporation allow its loans and
investments, exclusive of reserve, banking house, and
fixtures, to exceed eight times its paid-up capital and
surplus (25).
VI.— I nvestments.

A banking corporation may hold real estate only for the
following purposes: Such as is necessary for the conven­
ient transaction of its business, not exceeding in value
one-third of paid-up capital; such as is conveyed to it for
debts due, and such as is purchased under judgment on
its securities, but at a judgment sale the bank must not
bid more th^n is necessary to satisfy its debts, and real
estate purchased at judgment sale must not be held longer




387
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than five years and thirty days; the total real estate held
must never exceed in value 50 per cent of paid-up capi­
tal (29).
“ No bank or trust campany shall employ its moneys
directly or indirectly in trade or commerce by buying or
selling goods, chattels, wares, or merchandise, and shall
not invest any of its funds in the stock of any other bank
or trust company, nor be the purchaser or holder of any
shares therein, unless such securities or purchase shall be
necessary to prevent loss upon a debt previously con­
tracted in good faith, and stock so purchased or acquired
shall, within six months from the time of its purchase” be
disposed of; after six months, such stock may not be
considered assets. Any bank may, however, sell or acquire
any personal property which comes into its possession as
a collateral for a debt due it, according to the terms of
any contract depositing the collateral, or, if there is no
contract, then the collateral may be sold as on foreclosure
of a chattel mortgage (43).
No corporation may purchase shares of its own capital
stock unless the purchase is necessary to prevent loss on a
previous debt, in which case the stock must be sold within
six months from its purchase; in no case may the amount
of stock “ so held” (both as collateral and by purchase)
exceed 10 per cent of paid-up capital (26).
No bank may permit its loans and investments, exclu­
sive of its reserve and banking house and fixtures, to exceed
eight times its paid up capital and surplus (25).
VII.— Overdrafts.

The only mention of overdrafts in the statutes is where
it appears among the items required in reports of banking
corporations, “ the amount loaned upon notes, bills of ex­
change, overdrafts,” etc. (19).
388

N e v a d a

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B a n k s

V III.— B ranches.
No banking corporation doing business in Nevada may
maintain a branch (30).
X .— U nauthorized B anking
It is unlawful for any corporation, firm, or individual to
do a banking business in Nevada, except by means of a cor­
poration organized for the purpose under the state statutes;
a violation of this section entails a penalty .of $25 a day and
the appointment of a receiver to wind up the business (2).
Another section provides that no person or persons may
transact a banking business except corporations which
have complied with the provisions of the statute of 1909,
except that the act does not apply to national banks (6).
It is unlawful for any person or corporation to do a bank­
ing business without first obtaining a license from the
banking board (12). Any corporation which transacts a
banking business without first obtaining a license is sub­
ject to a penalty of $50 a day (21); compare this penalty
with that first given in this paragraph.
X I.— P enalties .
Any examiner who makes a false report of the condition
of an examined corporation with intent to aid in its opera­
tion while insolvent, or who takes a bribe to induce him
not to file a report of an examination, or who neglects to
make an examination on account of having taken a bribe,
is guilty of a felony punishable by imprisonment for from
two to ten years (9).
Any corporation which fails to make any report required
by the 1909 statute is subject to a penalty of $50 a day
during the delay (21). Any person who makes a false
statement or a false entry in the books of any banking
corporation, or subscribes to false papers, etc., with in-




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tent to deceive an examiner, or who makes a false state­
ment of the amount of assets or liabilities, is guilty of a
felony punishable by imprisonment for from one to five
years (22).
Any officer, director, or employee of a bank which vio­
lates the prohibition upon paying more than 4 per cent in­
terest on time deposits is guilty of a misdemeanor punish­
able by fine of from $100 to $500, imprisonment not to ex­
ceed six months, or both (27). Any director, officer, or em­
ployee of a banking corporation who becomes in any man­
ner obligated for money loaned by his bank forfeits his
office (32). Any director, officer, or employee of a bank
who borrows from his bank, directly or indirectly, without
giving security approved by the directors, or who violates
or allows a violation of the section limiting loans to indi­
viduals and to the stockholders of the bank, is personally
liable for loss suffered on account of his offense by the bank
(33, 34, and 39). Any officer, director, or employee who
violates or allows a violation of the second of the two sec­
tions above referred to, limiting the loans by a bank to any
single corporation, firm, or individual, and to the stock­
holders of the bank, suffers a fine not to exceed $500 (34).
It is unlawful for any officer or employee of a bank to cer­
tify a check drawn upon the bank unless the drawer of the
check has on deposit an amount of credit equal to the face
of the check (38).
Where no other punishment is provided in the statute at
page 251 of 1909, one who violates it is guilty of a misde­
meanor punishable by fine of from $25 to $500, imprison­
ment for from thirty days to six months, or both (55).
Apart from the statute in which the above penalties are
prescribed there are the following: Every officer, direct­
or, agent, etc., of a banking corporation who receives
deposits when he knows that the bank is insolvent, and
every person who is implicated in receiving deposits in
390

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S a v i n g s

B a n k s

this way, is guilty of a felony punishable by imprison­
ment for from one to ten years (1909, p. 95, 1); an older
statute forbids in slightly different terms any president,
director, officer, etc., from assenting to the receipt of de­
posits or the creation of debts by an insolvent institution,
and provides that any offender is individually responsible
for deposits received and debts contracted (1907, p. 362,
11). No officer of a banking corporation may advertise
the amount of capital stock authorized or subscribed
unless he also advertises the amount of capital actually
paid up; violation of this provision is a misdemeanor
punishable by a fine not to exceed $500, imprisonment
not to exceed six months, or both (1907, p. 362, 14).
SAVINGS BANKS.
See introductory paragraph; savings banks are subject
to all the provisions digested under Banks, except as
noted below.
It is provided in the section limiting the loans and in­
vestments of banking corporations, exclusive of reserve,
banking house and fixtures, to eight times paid-up capital
and surplus, that the loans and investments of a savings
bank, “ exclusive of its reserve and banking house fixtures,”
must not exceed ten times capital and surplus (25). Sav­
ings banks are not subject to the section limiting holdings
of real estate. See Banks, VI (29). The funds of a sav­
ings bank, excepting its reserve, must be invested in
United States bonds, or bonds of any State or of a munici­
pality of any State; or loaned upon negotiable paper
secured by such bonds or loaned upon notes or bonds
secured by mortgage on unincumbered real estate (second
mortgages may be taken on improved farm lands; no
loans may be made on these improved farm lands or other
real estate which loans, including the aggregate amount
of incumbrance on the land, exceed 50 per cent of the




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cash value of the land) or loaned upon notes secured by
collateral of known marketable value; or held as cash;
or deposited in good solvent banks. Savings banks may
not loan upon chattel mortgages (36). A savings bank
may issue certificates for legitimate deposits (37).
TRUST COMPANIES.
See introductory paragraph; trust companies are sub­
ject to all the provisions given under Banks. They are
mentioned expressly once or twice in the statute of 1909:
“ No bank or trust company” may engage in trade by
dealing in merchandise, invest its funds in the stock “ of
any other bank or trust company,” etc., see Banks, VI
(43); the bank examiner may order any officer “ of any
bank or trust company ” whom he finds to be dishonest,
reckless, or incompetent to be removed by the board of
directors (56A).

NEW

H AM PSH IR E.

The Public Statutes, 1901, include all New Hampshire
legislation previous to the session of 1901. Some of the
laws contained in that revision, however, are not arranged
in chapters and sections, but are inserted simply naming
the year in which they were passed and the chapter in
that year’s laws. More recent legislation is in the session
laws of 1901, 1903, 1905, 1907, and 1909. The banking
statutes of 1909, although the session laws are not pub­
lished in final form at the time of compiling this digest,
have been obtained through the courtesy of the bank com­
missioners. The board of bank commissioners published
in 1905 a reprint of the statutes dealing with state banks,
savings banks, and trust companies, which forms, in part,
the basis of this digest. Certain provisions not included
in that reprint have been incorporated, together with banking legislation of 1907 and 1909. A chapter on “ Banks
of issue” has been omitted from the digest. Where the
citations are prefixed by the letters P. S., they refer to laws
found in the Public Statutes, even though they may appear
there named by chapter in some year’s session laws.
Pater statutes are cited by the year, followed by the
chapter, and, where necessary, the section in that chapter.
BANKS.
I.— T erms

oe

Incorporation.

There is no express provision in the statutes allowing
banks to receive savings deposits; “ banking and trust




39 3




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Commission

companies” may do so, for the statute for savings bank
investments requires “ savings banks and savings depart­
ments of banking and trust companies ” to invest only in
certain ways (1901, chap. 114, 1), and the penalty for
violating that statute applies to “ any officer or trustee of
a savings bank or savings department of a banking and
trust company” (1901, chap. 114, 5).
(See also Public Statutes, chapter 165, section 18, which
requires “ trust companies, loan and trust companies, loan
and banking companies, and other similar corporations
receiving savings deposits ” to conduct the savings business
separately.)
II.— L iabilities

D uties of Stockholders
Directors.

and

and

The stockholders of a “ banking corporation” are liable
in their individual capacity for the debts of the corpo­
ration to the amount of their stock, and not otherwise
(P. S., 163, 18).
The trustees or directors of savings banks, state banks,
and trust companies meet at least monthly, at which meet­
ing the work for the preceding month of the investment
and other committees is submitted to the board (P. S.,
1895, chap. 105, 2). If a trustee or director is absent for
five successive monthly meetings he forfeits his position
(P. S., 1895, chap. 105, 3). Directors of a state bank or
trust company must own ten shares of stock, unless the
stock of the institution does not exceed $50,000, in which
case five shares are sufficient (P. S., 1895, chap. 105, 8).
If banks are allowed to do a savings bank business, no
doubt the clause making a trustee or officer personally
liable for loss due to his illegal investment of savings
deposits applies (1901, chap. 114, 5). The semiannual
report (see infra) is based on an examination by the
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Banks

directors (P. S., chap. 165, 20, and P. S, 1895, chap.
105, 5).
I l l .— Supervision .

Banks, savings banks, and trust companies are under the
supervision of a board of bank commissioners, consisting
of three residents of New Hampshire, who must not be
indebted to any savings bank or trust company in New
Hampshire, or officers in a savings bank or trust com­
pany ; they must not be agents of persons or corporations
engaged in making loans or selling securities, nor be
officers or stockholders in a corporation engaged in that
business. Not more than two members may be appointed
from one political party (P. S., chap. 162, 2). The term of
office is three years, a new commissioner being appointed
each year (P. S., chap. 162, 3, amd. by 1905, chap. 26, 1).
The salary is $2,500 a year (P. S., chap. 162, 4; amd. by
1905, chap. 26, 2).
If a bank, savings bank, or trust company refuses to allow
an examination, or does not furnish necessary facilities for
the examination, or if the commissioners think it necessary
for public safety that the institution should not continue
to transact business, they petition the court, which may
enjoin further business. Further proceedings may lead
to the appointment of a receiver. The conduct of the
liquidation by the receiver is provided for in some detail
(P. S., chap. 162, 12 et seq.; amd. in part by 1905, chap.
55, 1).
Provision is made for supervision by the commissioner
of examination, verification, etc., of pass books of depositors
in “ every institution under their supervision,” but the
other sections of the act in which this is provided for seem
to indicate that this requirement is made only of savings
banks (P. S., 1899, chap. 72, 2).




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REPORTS.

The provision for semiannual reports from savings banks
is extended to require the same reports from state banks
and trust companies (P. S., 1895, chap. 105, 5). The clerk
of every state bank, savings bank, and trust company must
publish within thirty days of an election a list of the trus­
tees or directors (P. S., 1895, chap. 105, 4). The treasurers
of all institutions under the supervision of the bank com­
missioners balance their books on the last business day in
June of each year and within fifteen days from that time
report to the commissioners on blanks furnished by them,
showing the condition of the institutions. The com­
missioners prescribe what information is required (P. S.,
chap. 162, 8). Receivers of insolvent institutions make
reports as the treasurers of the institutions themselves are
required to do (P. S., chap. 162, 18).
The cashier of every state bank makes a statement of
the condition of his bank on the first Monday of March,
June, September, and December, specifying stock paid in;
debts due secured by a pledge of the bank’s stock (but see
the prohibition on loans on such collateral, stated under
V, infra) ; value of real estate; debts due the bank;
debts due from directors; specie on hand; and deposits
in the bank (P. S., chap. 164, 1). Abstracts of these
quarterly returns must be published by the secretary of
state (P. S., chap. 164, 4).
(Tor reports required for purposes of taxation see Public
Statutes, chapter 57, section 19 et seq., and Public Statutes
1895, chapter 113, section 4.)
The board of bank commissioners files with the secre­
tary of state an annual report containing a statement of the
resources and liabilities of every institution under their
supervision; its earnings between examinations, or for a
twelve month’s period; disbursements for the same pe396

New

Hampshire

—

State

Banks

riod for expenses, etc.; dividends paid; names of cer­
tain officers of each institution, with salaries; kinds and
amounts of stocks and bonds held by each institution with
values; and a statement of the true condition of each
institution. The commissioners make recommendations
in this report (P. S., chap. 162, 9).
EXAMINATIONS.

The board of bank commissioners examines into the
condition and management of banks, savings banks, and
trust companies at least annually, and oftener if directed
by the governor. They inspect books, evidences of debt,
funds on hand, etc., and inquire into the ability of each
institution to perform its engagements, and into its com­
pliance with law (P. S., chap. 162, 6). They make the
same examinations into the affairs of receivers of insolvent
institutions as into the affairs of solvent institutions
(P. S., chap. 162,18). Every state bank, savings bank, and
trust company keeps a particular book or record of loans
and investments, which is exhibited to the trustees and the
commissioners at each examination (P. S., 1895, chap.
105, 6). The directors make a semiannual examination
on which their report is based (P. S., 1895, chap. 105, 5).
V.— Discount

and

L oan R estrictions.

“ No savings bank, state bank, or trust company shall
loan to any person, firm, or its individual members, an
amount in excess of 10 per cent of its deposits or capital
stock, nor purchase or hold both by way of investment
and security for loans, the stock, and bonds of any cor­
poration to an amount in excess of said 10 per cent”
(P. S., 1895, chap. 105, 12). The capital stock of a state
bank or trust company may not be accepted by the bank
or trust company as collateral (P. S., 1895, chap. 105, 9).




397




N at ion a l

Mone tary

Commission

No loan may be made to an officer or director of a state
bank or trust company except by the unanimous consent
of the board of directors (P. S., 1895, chap. 105, 10).
The cashier of a state bank may not be directly or indi­
rectly indebted to it (P. S., chap. 163, 12). No director
of a state bank may be indebted to it directly or indirectly
to an amount greater than one-half the stock in the bank
then held by him. Loans of state banks to any director
must never exceed 3 per cent of the cash capital of the
bank (P. S., chap. 163, 13). Contracts by a director or
other officer of a state bank “ to indemnify any other
person for liability to the bank or subjecting himself to
liability to the bank on account of any other person ” are
void (P. S., chap. 163, 14).
VI. — Investments.
Lvery state bank, savings bank, and trust company has
an investment committee of not less than three of its
directors or trustees (P. S., 1895, chap. 105, 1). No state
bank, savings bank, or trust company may hold as invest­
ment the stock and bonds of any corporation to an amount
in excess of 10 per cent of the capital stock or deposits (the
latter in the case of savings banks presumably) of the
investing corporation (P. S., 1895, chap. 105, 12).
X . — U nauthorized B anking .
Limited partnerships may not be formed to do a banking
business (P. S., p. 381).
X I. — P enalties .
If any bank commissioner in the annual repox"t makes a
statement without having fully examined the condition
of the institution with regard to which his statement is
made, or makes a false statement, he is fined not more
398

New

Hampshire — Savings

Banks

than $1,000, or imprisoned for not longer than five years
(P. S., chap. 162, 10). If the clerk of a state bank, sav­
ings bank, or trust company fails to publish the list of
annually elected directors or trustees or makes a false
publication, he is liable to a penalty of $100; so is any
person who circulates a list of directors or trustees contain­
ing names of persons who have not entered the office and
taken the oath (P. S., 1895, chap. 105, 4). Any director
or trustee of a state bank, savings bank, or trust company
who makes a statement of the condition of the institu­
tion without having fully examined it, or makes a false
statement, is fined not more than $1,000, or imprisoned
foi n°t longer than five years (P. S., 1895, chap. 105, 5).
1 he director of a bank who exceeds the limit of loans from
the bank to him is fined double the excess, one-half of the
fine going to the person who sues (P. S., chap. 163, 13).
Any officer or director of a state bank or trust company
violating any provision of law for which no other penalty
is prescribed is punished by a fine not exceeding $500
(P. S., 1895, chap. 105, 13). Any officer of a state bank
who receives compensation for procuring a loan, indemni­
fying an indorser on paper held by the bank, etc., for­
feits $100 and three times the amount of the compensa­
tion to any person who sues (P. S., chap. 163, 15). Any
state bank which fails to make a quarterly cashier’s report
is fined not more than $1,000 for each offense (P. S., chap.
164, 3)SAVINGS BANKS.
I-— T erms

of

I ncorporation.

There are in New Hampshire guaranty savings banks
with capital stock and mutual savings banks without.
No guaranty savings bank, trust company, or other
similar corporation may begin business until it has satis-




399




National

Monetary

Commission

fied the commissioner that its capital has been paid in
(P. S., chap. 162, 11).
The total yearly expenses of a savings bank must not
exceed $4,000 while the average amount of its deposits is
$1,000,000 or less, and in no given case may exceed the
sum produced by adding to $4,000 one-fifth of 1 per cent
of the excess of deposits over $1,000,000 (P. S., chap.
165, 5)*
Every savings bank annually passes to the credit of its
guaranty fund a sum equal to 10 per cent of its net earn­
ings for the year until the fund equals 5 per cent of
deposits. This guaranty fund may be increased to 10
per cent of deposits (P. S., chap. 165, 16). The special
depositors of a guaranty fund in a savings bank doing
business under the guaranty system may increase the
fund at a meeting of depositors. This increase may be
subscribed for by the special depositors in proportion to
their special deposits, or by other parties in case the special
depositors fail to subscribe for it all. The increase in
the guaranty fund may be on such terms of preference
over the original funds as to dividends and in distribution
of assets as may be determined by vote of the special
depositors (P. S., 1895, chap. 92, 1).
No savings bank may pay more than 3X per cent divi­
dends unless it has accumulated a guaranty fund equal to
5 per cent of its deposits, nor unless its assets as valued
by the bank commissioners exceed the amount due de­
positors by at least 5 per cent; no savings bank having a
guaranty fund less than 5 per cent of deposits, nor any
savings bank whose assets do not exceed deposits by at
least 5 per cent may declare in any year dividends exceed­
ing net income after providing for a guaranty fund. (Act
of April 8, 1909.)

400

New
II.

Hampshire — Savings

L iabilities

and

Banks

Duties of Stockholders
Directors.

and

For stockholders’ liability in “ banking corporations,”
see Banks, II.
The provisions stated under Banks for monthly
meetings of trustees and for loss of office when absent
from five successive monthly meetings apply to the
trustees of savings banks (P. S., 1895, chap. 105, 2 and 3).
Ih e requirement for holding stock as a prerequisite to
eligibility to be a trustee is so framed that apparently to
be a trustee of a guaranty bank one must own ten shares of
the guaranty fund of the institution, unless the guaranty
fund does not exceed $50,000, in which case five shares
qualify (P. S., 1895, chap. 105, 8). No person indebted
to a savings bank is eligible to any office in the bank
unless the loan was made with the consent of all the
trustees (P. S., chap. 165, 2 and 13). No one engaged
in negotiating loans or selling securities in New Hamp­
shire is eligible to be president, treasurer, or a member of
the investment committee of a savings bank (P. S., chap.
165, 3). Trustees may be paid a reasonable compensa­
tion for their services (P. S., chap. 165, 4). Officers and
employees of savings banks, trust companies, etc., are
forbidden to receive compensation for procuring a loan
from the bank (P. S., chap. 165, 30). If any officer or
trustee of a savings bank violates the provisions limiting
savings-bank investments, he becomes, in addition to the
regular penalties, personally liable for losses which may
occur to the bank from his investment (1901, chap. 114, 5).
III.— Supervision.
Savings banks are placed under the supervision of the
board of bank commissioners (P. S., chap. 162, 1). The
S. Doc. 3 S3, 61—
2‘




26

401




N ation al

M on et a ry

Commission

qualification and tenure of this board were stated under
Banks. Guaranty savings banks may not begin busi­
ness until they have satisfied the commissioners that their
capital is paid in (P. S., chap. 162, n ) . The provisions
for proceedings in court against savings banks which
refuse to be examined or which public safety requires to
be closed are as stated under Banks (P. S., chap. 162,
12 et seq.).
A judge, in connection with the bank commissioners, on
petition of the trustees of a savings bank, may scale down
the deposit accounts, if the assets of the bank become worth
less than the total amount of deposits, so as to divide the
loss equitably among depositors. This may be done by the
commissioners themselves when the assets are reduced below
90 per cent of the deposits. If the assets appreciate in
value later, the depositors whose accounts were reduced
receive the excess. If new deposits are received after this
sort of reduction, the business relating to the new deposits
is conducted as though by a separate bank (P. S., chap. 165,
26, 27, 28, and 29). The commissioners may cause the sepa­
ration of a savings bank and a national bank occupying the
same office (IX, infra; P. S., chap. 165, 22). They have
supervision over a verification of deposit books of savings
banks and a corresponding trial balance required every four
years. They require “ every institution under their super­
vision ” to select a competent person to examine and verify
the individual pass books. Depositors are required to
present their books (P. S., 1899, chap. 72, 1, 2, and 4).
REPORTS.

The trustees of every savings bank make an examina­
tion of the affairs of the bank every six months, on which
they base a report in the form prescribed by the bank
commissioners. They publish this report in a local news­
402

N e w H amps hi r e — S a v i n g s

Banks

paper (P. S., chap. 165, 20). The treasurers of all insti­
tutions under the supervision of the bank commissioners
balance their books on the last day of June in each year,
and within fifteen days report to the commissioners on
blanks furnished by them showing the condition of the
institutions (P. S., chap. 162, 8). Receivers report as
so vent institutions do (P. S., chap. 162, 18). As in the
case of banks, the clerk of every savings bank is required
to publish lists of newly elected trustees (P. S., 1895, chap
105, 4).
Every five years the treasurer of every savings bank
makes a list of depositors who have not deposited or with­
drawn funds for twenty years, if they are not known to
the treasurer to be living, or if, though they are dead, their
executors or administrators are not known to the treas­
urer. This list, showing addresses, fact of death, if known,
and amount to the credit of the lost depositors, if it ex­
ceeds $5, is published in local newspapers and transmitted
to the bank commissioners to be published in their report
(P. S., chap. 165, 24).
(For reports for purposes of taxation see Public Statutes,
1895, chapter 113, section 4, and Public Statutes, chapter
165, section 12.)
The board of commissioners, as stated under Banks,
make an annual report. The special item required in it
from savings banks is the statement of unclaimed deposits
(P. S., chap. 162, 9, and P. S., chap. 165, 24).
Examinations.

the trustees of every savings bank, in person or by a
ommittee of the board, make a thorough examination
°
f1ffairs of the savings bank every six months, on
q ,1C1 Clr rePort to the commissioners is based (P. S.,
P
5) 20). Once a year, or oftener if the governor




403




N a t io n a l

M on et a r y

Commission

requires, the board examines the condition and manage­
ment of every savings bank, as in the case of banks (P. S.,
chap. 162, 6). Receivers are examined as the solvent
institutions are (P. S., chap. 162, 18). The record book
of loans and investments is kept for investigation by the
trustees and the bank commissioners as in state banks
(P. S., 1895, chap. 105, 6).
V.— Discount

and

L oan R estrictions.

The guaranty fund of a guaranty savings bank may net
be accepted by the savings bank as collateral (P. S.,
1895, chap. 105, 9). “ No savings bank, state bank, or
trust company shall loan to any person, firm, or its indi­
vidual members an amount in excess of 10 per cent of its
deposits or capital stock, nor purchase or hold both by
way of investment and security for loans, the stocks and
bonds of any corporation to an amount in excess of said
10 p ercent” (P. S., 1895, chap. 105, 12). It seems as
though in this provision the percentage of deposit was
intended to apply to savings banks and the percentage of
capital stock to state banks and trust companies.
No savings bank may loan to one of its officers nor
accept an officer as surety unless all the trustees have
consented (P. S., chap. 165, 13). No officer or employee
of a savings bank may accept a compensation from a bor­
rower to induce a loan (P. S., chap. 165, 30).
(For incidental loan restrictions classified with invest­
ments in the statutes see VI, infra.)
VI.— I nvestments.
Savings banks, like state banks, elect from their trustees
an investment committee of not less than three (P. S.,
1895, chap. 105, 1). No savings bank may hold as in­
vestment and as collateral stock and bonds of any cor­
404

New

Hampshire — Savings

Banks

poration to an amount in excess of io per cent of the depos­
its of the savings bank, or of its capital stock (P. S., 1895,
chap. 105, 12).
The prescribed investments for savings banks are as
follows: First, notes secured by first mortgages of
New Hampshire real estate, but not over 70 per cent
of the value of the property covered may be thus
loaned, and not over 70 per cent of the deposits may
be thus invested. Second, notes secured by a first
mortgage of real estate outside New Hampshire, if im­
proved, occupied, and productive, but not over 50 per
cent of the value of the property may b< thus loaned, and
*
not more than 25 per cent of deposits may be thus in­
vested. Third, in notes secured by collateral in which the
bank is at liberty to invest, of a value at least 10 per cent
in excess of the face of the note. The amount of any one
class of securities thus taken as collateral, added to the
amount of securities of that class which the bank holds,
must not exceed the total limit set for investments in that
class; not more than 25 per cent of deposits may be in­
vested in this manner. Fourth, in notes secured by col­
lateral securities which are dealt with on the Boston or
New Y ork exchange, provided the stock-exchange price
is 20 pei cent in excess of the face of the note; not more
than 25 per cent of deposits may be thus invested. Fifth,
in notes of individuals or corporations with two or more
signers or one or more indorsers, but not exceeding 5 per
cent of deposits may be loaned to one person or corporation
in this class of security, and not exceeding 25 per cent of
deposits may be thus invested. Sixth, in public funds of
the United States. Seventh, in bonds and notes of New
Hampshire or municipalities of New Hampshire. Eighth,
in bonds or notes of any State or Territory of the United
States, and bonds or notes of any city in the other New
England States or in New York, whose net indebtedness




405




N a t ion a l

M onet ary

Commission

does not exceed 5 per cent of the value of property in the
city for taxation, or bonds or notes of counties, towns, etc.,
in those States whose indebtedness does not exceed 3 per
cent. Ninth, in bonds of municipalities of other States or
Territories of the United States whose net indebtedness
does not exceed 5 per cent of the value of their property for
taxation; also bonds of any city of 100,000 in any of those
States whose net indebtedness does not exceed 7 per
cent of the value for taxation. Bonds are not legal in­
vestments if they have been issued in aid of railroads or
for special assessment purposes. Moreover, bonds of
counties, cities, an<? towns of less than 10,000, or of other
municipal corporations of less than 2,000, are not legal
investments. To be legal investments these bonds must
be issued by municipalities that are permitted to levy
taxes sufficient to pay the interest and to provide for sink­
ing funds for their debt. Not exceeding 50 per cent of
deposits may be thus invested. Tenth, in bonds or notes
of railroad companies, except street railways, incorporated
under New Hampshire law, and located wholly or in part
in New Hampshire, but not exceeding 25 per cent of de­
posits may be thus invested. Eleventh, in bonds of any
railroad company, except street railways, incorporated
under the law of “ any of the New England States, whose
road is located wholly or in part in the same, ” and which
is operating its own road and has paid regular dividends for
two years; also bonds guaranteed by such a railroad com­
pany. But not exceeding 25 per cent of deposits may be
thus invested. Twelfth, in bonds of any railroad com­
pany, except street railways, incorporated under the law
of any State or Territory, if it is operating its own road
and has paid regular dividends of not less than 4 per cent
for three years, provided that the capital equals one-third
of the entire bonded debt; also bonds guaranteed by such
a railroad. But not exceeding 25 per cent of deposits
406

New

Hampshire

—

Savings

Banks

may be thus invested. Thirteenth, in first-mortgage bonds
of corporations of New Hampshire, except street railways,
whose net indebtedness does not exceed the paid-in capital
stock; but not exceeding io per cent of deposits may be
thus invested. Fourteenth, in bonds of street-railway
corporations incorporated under New Hampshire law and
located wholly or in part there, and bonds of street-rail­
way corporations located wholly or in part in cities of
30,000 inhabitants or more in any of the other New Eng­
land States, and bonds of street-railway corporations
located wholly or in part in cities of 50,000 or more in any
of the United States, provided that the net indebtedness of
any of these street railways does not exceed the paid-in
capital, and that the corporation has paid dividends of
not less than 4 per cent for five years. But not exceeding
10 per cent of deposits may be thus invested. Fifteenth,
in bonds of telephone, telegraph, or express companies
doing business in the United States, provided the total
indebtedness of the company does not exceed its paid-in
capital, and provided that the company has paid regular
dividends of at least 4 per cent for five years. But not
exceeding 10 per cent of deposits may be thus invested.
Sixteenth, in the stock of any banking or trust company
of New Hampshire, but the amount of such stock held
by any savings bank as an investment and as collateral
must not exceed one-tenth of the total capital of the com­
pany whose stock is held, and not exceeding 10 per cent
of the deposits may be thus invested. Seventeenth, in
stock of any national bank or trust company in the New
England States or in New York, but the amount of such
stock held by any savings bank as an investment and
as collateral must not exceed one-tenth of the total
capital of the bank or trust company whose stock is held
(except in the case of a New Hampshire national bank
or trust company, of which a savings bank may hold not




407




N at ion a l

M on e t a r y

Commission

exceeding 25 per cent of the total capital— amendment of
March 31, 1909), and not exceeding 10 per cent of deposits
may be thus invested. Eighteenth, in stock or notes
of any railroad corporation, exclusive of street railways,
located in the United States, that has paid dividends
of not less than 4 per cent for five years, provided the
capital equals one-third of the bonded debt. Also stock
of any other railroad whose property is leased to such
a railroad at an annual rental of not less than 4 per cent
of the capital of the leased railroad, provided the leased
road has earned dividends of not less than 3 per cent
for three years before the lease. But not exceeding 25
per cent of deposits may be thus invested. Nineteenth,
in stock or notes of any manufacturing company in New
England that^has paid dividends for five years and does
not show a debt exceeding the amount of its paid-in
capital; but not exceeding 10 per cent of deposits may
be thus invested. Twentieth, in stocks or notes of any
parlor-car or sleeping-car company in the United States
whose cars are in use on a railroad whose stock is a legal
investment, provided the company has paid regular divi­
dends of not less than 4 per cent for five years; but not
exceeding 5 per cent of deposits may be thus invested.
Twenty-first, in land and buildings for banking purposes,
the total cost of which must not exceed 10 per cent of
deposits (1901, chap. 114, 1, amd. by 1905, chap. 81, and
1907, chaps. 29 and 67). Twenty-second, in the stock
of any real-estate trust company of New Hampshire
whose property is located in the State, and whose capital
is $100,000 or more, provided its debts do not exceed
one-half its paid-in capital, and provided it has earned
and paid 4 per cent dividends for five years; but not
exceeding 5 per cent of deposits may be thus invested
(act of March 11, 1909). Savings banks may hold and
lease real estate acquired by foreclosure of mortgages
408

N e w H a m p s hi?' e — S a v i n g s

Banks

owned by the bank, but they must pay taxes, etc., out
of the bank’s income (1901, chap. 114, 2). Deposits of
cash on call may be made in authorized banks and trust
companies in New Hampshire or Massachusetts, or in
national banks in New England, New York City, or Phila­
delphia (1901, chap. 114, 3).
IX .— Occupation

of the

Same B uilding .

If a savings bank does business in the same office with
a national bank, the treasurer of the savings bank must
cause a committee of the directors of the national bank to
indorse on the reports of the examinations of the savings
bank which are made to the bank commissioners a cer­
tificate that they examined the affairs of the national bank
at the same time and found them correct (P. S., chap.
165, 21). If the treasurer fails to furnish this certificate
within a time fixed by the commissioners, they may sep­
arate the two banks (P. S., chap. 165, 22).
X .— U nauthorized B anking .
No person, firm, or corporation except savings banks
incorporated in New Hampshire, and trust companies,
loan companies, etc., empowered by their charters, may
use a sign, or printed paper, indicating that the business
is that of a savings bank, or transact business in a way
suggestive of that of a savings bank. The commissioners
may examine the books of any corporation, firm, or indi­
vidual receiving money on deposit to make sure it has not
violated this provision. The penalty for violation is
$100 a day (1907, chap. 112, 2 and 3).
X I.— P enalties .
The penalties stated under Banks hold good for false
reports by a bank commissioner (P. S., chap. 162, 10),




409




I

N ational

M on e t a r y

Commission

failure on the part of the clerk of the corporation to pub­
lish the list of newly elected trustees (P. S., 1895, chap.
105, 4), and false statement or report by trustees or
directors (P. S., 1895, chap. 105, 5). Any officer or
trustee of a savings bank willfully violating any pro­
visions where no other penalty is prescribed forfeits, as
in the case of bank officers and directors, not more than
$500 (P. S., 1895, 105, 13). There is a provision also in
chapter 165 that the violation of any provision of law
by a savings bank or its officer, where no other penalty is
prescribed, is a fine not to exceed $1,000 (P. S., chap. 165,
33). If the treasurer of a savings bank allows private
banking to be carried on in the office of the savings bank
he is fined not more than $1,000, imprisoned not longer
than one year, or suffers both penalties (P. S., chap. 165,
10 and 11). If the treasurer of a savings bank neglects to
publish his report of unclaimed deposits he is fined $100
for each offense (P. S., chap. 165, 25). Any officer or
employee of a savings bank, trust company, etc., who
receives a fee as an inducement for a loan by the bank is
fined not more than $10,000, imprisoned not more than
ten years, or suffers both penalties (P. S., chap. 165, 31).
Any officer of a savings bank, loan and trust company,
etc., who embezzles, or makes false entries or statements,
intending to defraud, or to deceive an officer or some
examining official, is fined not more than $20,000, or
imprisoned not longer than ten years (P. S., chap. 165, 32).
The person appointed to verify depositors’ books in
savings banks suffers, if he makes a false statement of the
result of his examination, a fine of not more than $500, or
imprisonment for not more than one year (P. S., 1899,
chap. 72, 1).

4x0

New

Hampshire

Trust

Companies

TRUST COMPANIES.
I.— T erms

oe

I ncorporation.

The statutes allow trust companies to do a savings
deposit business (P. S., 1901, chap. 114, 1 and 5). More­
over, trust companies, loan and trust companies, etc.,
receiving deposits or transacting the business of a savings
bank must conduct the business as a separate department,
and that department is amenable to the laws governing
savings banks (P. S., chap. 165, 18).
Trust companies are not allowed to begin business until
all their capital stock has been paid in (P. S., chap.
162, n ).
II.— L iabilities

and

D uties op Stockholders
D irectors.

and

If trust companies are within the term “ banking cor­
porations” their stockholders are liable in their individual
capacity only for the debts of the corporation to the
amount of their stock (P. S., chap. 165, 18).
The requirement stated under Banks that directors
meet at least monthly to review the work of the invest­
ment committee and other committees for the preceding
month, and the provision that directors absent from five
successive monthly meetings forfeit their positions hold
good in trust companies (P. S., 1895, chap. 105, 2 and 3).
Every director of a trust company, as in the case of banks,
must own at least ten shares of stock, unless the capital
does not exceed $50,000, in which case five shares are
sufficient (P. S., 1895, chap. 105, 8). No officer or em­
ployee of a trust company may accept a compensation
for inducing the making of a loan by the trust company
(P. S., 165, 30). Officers or trustees of the savings depart­
ment are personally liable for loss which a bank suffers







N at i o n a l

M o ti

6

t a ty

C o r n t n i s s i o 11

through their willful violation of the requirements for
savings-deposit investments (P. S., 1901, chap. 114, 5).
Each semiannual report is based on an examination
which must be made by the directors (P. S., chap. 165,
20, and P. S., 1895, chap. 105, 5).
I l l .— S upervision .

The board of bank commissioners have control over
trust companies (P. S., chap. 162, 1). The provisions for
winding up the affairs of trust companies which refuse to
be examined or which seem to the commissioners to be in
dangerous condition are as stated under Banks (P. S., chap.
162, 12 et seq). R eports and examinations are subject
to the same rules as were given under Banks.
V.— D iscount

and

L oan R estrictions.

See Banks for provisions applicable also to trust
companies forbidding stock in a trust company to be
taken by the company as collateral, forbidding loans to
officers or directors except by unanimous approval of
the board of directors, and forbidding loans to individ­
uals, firms, etc., in excess of 10 per cent of capital stock
of the trust company, and the acceptance as collateral
of such stock and bonds of any corporation as to make
the lender hold an amount in excess of 10 per cent of the
lender’s capital (P. S., 1895, chap. 105, 9, 10, and 12).
See also the prohibition upon the acceptance of compen­
sation by an officer or employee of a trust company for
inducing the company to make a loan (P. S., chap. 165, 30).
V I.— I nvestments .

Every trust company has an investment committee such
as banks have (P. S., 1895, chap. 105, 1). As under
Banks, there is also a prohibition on holding stock and
412

New

Hampshire

Trust

Companies

bonds of any corporation to an amount greater than
io per cent of the capital of the investing trust company
(P. S., 1895, chap. 105, 12).
X I.— P enalties .
See Banks (XI) for penalties upon bank commis­
sioners who report falsely, upon clerks who fail to publish
lists of newly elected directors, and upon directors who
report falsely. See Banks also for the penalty for
violating a law in which no particular penalty is pre­
scribed. The officer or employee of a trust company who
takes a compensation for inducing a loan, etc., suffers
a fine of not exceeding $10,000, imprisonment for not
more than ten years, or both (P. S., chap. 165, 30 and 31).
There is a penalty upon any officer of “ a loan and trust
company” who embezzles, or commits various frauds,
including false entries or statements, of not more than
$20,000 or imprisonment not exceeding ten years (P. S.,
chap. 165, 32).




4:3




I

N EW

JERSEY.

The statutes of this State are in so inconvenient a form
for investigation, there having been no revision since 1895,
that the pamphlets issued in 1906 by the department of
banking and insurance— one containing the laws relating
to banks, banking, and trust companies, the other contain­
ing the savings bank act— have been relied on for the
digest, merely bringing it to date by references to chap­
ters in the laws of New Jersey for 1907, 1908, and 1909.
Each reference in the digest gives the year of the statute
in question, the chapter in that year’s laws, and the
section in the chapter.
BANKS.
I.— T erms

of

Incorporation.

The capital stock of every bank must be not less than
$50,000, and divided into shares of $100 each, all of which
must be paid in in cash before business is begun. No cor­
poration organized under the banking law may issue more
than one class of stock (1899, chap. 173, 1). Before
allowed to begin business the incorporators must show the
commissioner of banking and insurance that the establish­
ment of the proposed bank will be of public service (1899,
chap. 173, 3).
Dividends may be declared out of net profits, but before
the declaration not less than one-tenth of the net profits
for the preceding dividend period must be carried to sur­
plus until the fund amounts to 20 per cent of the capital
(1899, chap. 173, 10).
414

New

Jersey

II.— L iabilities

State

—

Banks

D uties of Stockholders
Directors.

and

and

There is no special provision for liability of stockholders
in banks.
There must be not fewer than five directors, a majority
of whom must be residents of New Jersey. Every director
must hold not less than five shares of stock (1899, chap.
173, 9, amd. by 1906, chap. 190). The board appoints
an examining committee to make an examination as
stated below (1899, chap. 173, 11). If the directors fail to
exact of the cashier a $20,000 bond, they are personally
liable for his defalcations up to that amount (1899, chap.
173, 22).
III.— Supervision .
There is a department of banking and insurance (1891,
chap. 6, 1), of which the chief officer is the commissioner
of banking and insurance, appointed for terms of three
years. The commissioner must not be connected with the
management of any corporation over which he exercises
supervision (1891, chap. 6, 2). His salary is $6,000 a year
(1903, chap. 34) .
The commissioner, before authorizing the incorporation
of a bank, must determine that the establishment of the
bank will be of public service (1899, chap. 193, 3). When­
ever it appears to him from a report or examination that
the affairs of any bank are in an unsound condition on ac­
count of illegal and unsafe investments, or that its liabili­
ties exceed its assets, or that it is violating law, or that
it is inexpedient that the bank continue business, then he
must cause proceedings to be instituted against the bank
as against an insolvent bank, or such other proceedings as
the case may require. If he has reason to conclude that
the bank is in an unsound or unsafe condition, he may
take possession of its assets and retain possession until the




415

n




»

National

Monetary

Commission

proceedings that he has caused to be instituted by the
attorney-general are concluded, or until a receiver is ap­
pointed (1899, chap. 173, 24). If any bank refuses to
submit its affairs to examination, that is ground for pro­
ceedings as against an insolvent bank. If it appears to
the commissioner that any bank has violated the law, or
is conducting its business unsafely, he orders a discon­
tinuance of the practices; if the bank does not comply
with the order, this is ground for the same proceedings
(1899, chap. 173,25). Whenever a bank is insolvent or
suspends its business for want of funds, the attorneygeneral or any creditor or stockholder may petition the
court for the appointment of a receiver. If the court
thinks the corporation insolvent and not about to resume
business in a short time safely, it may issue injunctions,
etc.; or if it is made to appear to the court on application
of the attorney-general that the bank is in an unsound
condition; that liabilities exceed assets; that there has been
violation of law; that examination has not been allowed;
or that it is inexpedient for the bank to continue business,
the court may stop the bank’s business and appoint a re­
ceiver (1899, chap. 173, 29 and 30, amd. by 1906, chap.
156).

Creditors or shareholders of a bank interested to the
amount of $1,000 or more may apply to the court of chan­
cery, which may order a strict examination by persons
appointed by it and make such orders as it thinks neces­
sary (1899, chap. 173, 26). On an application by two or
more directors, creditors, or stockholders of any bank the
court of chancery must appoint one or more commissioners
to examine the bank; if the bank refuses to allow exami­
nation by this commissioner of court, or if after examina­
tion the court thinks public interest demands it, the court
directs the attorney-general to proceed as against an in­
solvent bank (1899, chap. 173, 27).
416

New

Jersey

—

State

Banks

REPORTS.

Every bank makes to the commissioner not less than
four reports annually according to the form he prescribes;
the report shows the condition of the bank at the close of
business on a past day specified by the commissioner, and
is transmitted to him within ten days after receipt of his
request. A summary is published in a local newspaper.
The commissioner may call for special reports when nec­
essary (1899, chap. 173, 13).
Ih e commissioner makes an annual report to the legis­
lature embracing a statement of proceedings taken against
banks, of new banks organized, and a summary of all re­
ports (1899, chap. 173, 32).
EXAMINATIONS.

The directors of every bank appoint from their number
an examining committee who make an examination at least
once every six months; this committee reports to the board
with a special view to showing what assets are not of the
value given them on the books (1899, chap. 173, n ). Reg­
ular examinations by the commissioner or a subordinate
may be made whenever a commissioner thinks it expedient
or at the request of the bank (1899, chap. 173, 23). The
court of chancery may order an examination by a master
of the court, or by other persons, not exceeding three, ap­
pointed by the court, or by one or more commissioners_
see above (1899, chap. 173, 26 and 27).
IV.— R eserve R equirements.
Every bank must keep in available funds an amount
equal at least to 15 per cent of its immediate liabilities;
three-fifths of this reserve may be in balances due from
good solvent banks or trust companies and two-fifths must
be in cash on hand. When reserves fall below, the bank
2
7

S. D oc. 3S3, 6 1 -2 ----- :




417




N at ion a l

M on e t a r y

C o mmi s s i o n

must not make any new loans or discounts, except by
buying sight exchange, nor declare dividends out of profits
(1899, chap. 173, 20).
V.— D iscount

and

L oan R estrictions.

The total liabilities to any bank of a person, firm, or
corporation for money borrowed, including in firm or cor­
poration liabilities those of the members, must never
exceed 10 per cent of the paid-in capital and surplus; this
does not apply to loans to municipalities, and money bor­
rowed is to be construed not to include discount of commer­
cial paper owned by the person negotiating it, discount of
bills of exchange drawn against existing values, and dis­
count of paper based on collateral whose actual value is 10
per cent above the loan (1899, chap. 173, 18).
No bank may loan to officers, directors, or employees,
except upon the approval of a majority of the board of
directors or the executive committee. No bank may
allow its officers, directors, or employees to be liable by
reason of overdrawn account (1899, chap. 173, 12).
No bank may loan on the security of its own shares,
unless the security is necessary to prevent loss on a pre­
vious debt, in which case the stock must be disposed of
within a year (1899, chap. 173, 15). Among general
powers of banks is that of “ loaning money on real and
personal security” (1899, chap. 173, 6).
V I .— I n v e st m e n ts .

Every bank may hold such real estate as is necessary for
the convenient transaction of its business, including with
its banking offices other apartments that may be rented
(but this investment must not exceed 25 per cent of capi­
tal and surplus); such as is mortgaged to it ; such as is
conveyed to it in satisfaction of previous debts; and such
418

New

J er s ey

State

Banks

as it acquires by sale on judgment or decree in its favor.
Except the banking house, real estate must not be held
longer than five years (1899, chap. 173, 6).
No bank may hold its own stock unless the purchase is
necessary to prevent loss on a previous debt, in which case
the stock must be sold within a year (1899, chap. 173, 15).
V II .— Overdrafts .

The only provision with respect to overdrafts appears
to be that which forbids the officers, directors, or em­
ployees of a bank to become liable to the bank “ by reason
of overdrawn account” (1899, chap. 173, 12).
X.— U nauthorized Banking .

No corporation other than a national bank, a trust com­
pany , or a savings bank may be organized to carry on
banking business in New Jersey except under the act of
1899, and except for banks organized under that act, only
savings banks may use the word “ bank” or “ banking”
as part of their name (1899, chap. 173, 1). No bank organ­
ized under other laws than those of New Jersey may trans­
act any business in New Jersey, except to the extent that
similar corporations of New Jersey are allowed to do busi­
ness in the State or country incorporating the bank now
seeking to do business in New Jersey (1907, chap. 35).
XI.— P enalties .

Officers, directors, or employees who are implicated in
loans to officers without the consent of the board of direct­
ors, or in overdrafts by officers, are guilty of a misde­
meanor, punishable by fine of not more than $1,000, im­
prisonment for not more than five years, or both (1899,
chap. 173, 12), Directors, officers, or employees who
make false statements intended to deceive examiners, or




419




N at i on a l

M onet ary

C o mmi s s i o n

subscribe to or make false reports, are guilty of a “ high
misdemeanor” (1899, chap. 173, 14). Any bank which
fails to report is subject to a penalty of $100 a day (1899,
chap. 173, 13). Any person who maliciously circulates
statements affecting the solvency of any bank, or who
aids another to circulate such rumors, is guilty of a mis­
demeanor (1907, chap. 50).
SAVINGS BANKS.
I.— T erms

of

Incorporation.

The savings bank act provides for institutions without
capital stock (1906, chap. 195, 3). At least a majority of
the incorporators must reside in the county where the bank
is to be located and be freeholders in New Jersey (1906,
chap. 195, 2, amd. by 1908, chap. 39). The commis­
sioner does not allow the incorporation unless he believes
that greater convenience of access to a savings bank will
be afforded to a considerable number of depositors, that
the density of population in the neighborhood will afford
it support, and that the incorporators are fit (1906, chap.
195, 8).
Dividends not to exceed 5 per cent a year are regulated
so that as nearly as may be all the net profits are received
by the depositors after such an amount as the managers
deem expedient is reserved for a surplus, which may accu­
mulate up to 15 per cent of deposits. For dividends,
depositors may be divided into classes, so that depositors
in amounts of under $1,000 receive a dividend greater
than depositors of over that amount. When the surplus
amounts to 15 per cent and net profits are accumulated
beyond that point, an extra dividend once every three
years must be paid (1906, chap. 195, 40).

420

New

J e r s ey

II-— L iabilities

—

Savings

and

D uties

of

Banks

Managers .

The business of every savings bank is directed by a
board of managers of not less than nine nor more than
fifteen (1906, chap. 195, 15). At least a majority of the
board of managers must reside in the county where the
bank is located and be freeholders in New Jersey (1906,
chap. 195, 17, amd. by 1908, chap. 39). There must be
meetings every three months (1906, chap. 195, 16). A
manager who borrows from the bank or fails to attend
meetings or perform duties for six months vacates his
office (1906, chap. 195, 18). No manager may have any
interest in the gains or profits of the savings bank except
as a depositor, nor may he take any pay for his services
except such compensation for attendance on meetings or
service on committees as may be fixed by a two-thirds vote
of the board (1906, chap. 195, 20 and 23). The managers,
by a committee of at least three of their number, examine
at the end of each year (1906, chap. 195, 42).
III.— Supervision .

The commissioner of banking and insurance exercises
supervision over savings banks. He determines whether
convenience, necessities of the district, and fitness of the
incorporators warrant allowing the incorporation of a pro­
posed savings bank (1906, chap. 195, 8, 9, and 11). He
may reduce the compensation of savings-bank officers if
it is fixed at an excessive amount (1906, chap. 195, 22).
When it appears to the commissioner, from an examina­
tion or from a report, that a savings bank has violated the
law, or is conducting its business unsafely, he directs the
discontinuance of the illegal or unsafe practices. When­
ever any savings bank does not report, or fails to com­
ply with an order, or it appears to the commissioner that
it is inexpedient to allow the savings bank to continue




421




N a t i on a l

M on e t a r y

C o mmi s s i o n

business, he causes the attorney-general to institute pro­
ceedings for the removal of managers, or for such other
relief as the facts seem to require (1906, chap. 195, 52).
He may proceed in this way, if it appears that the mana­
gers of a savings bank, by keeping permanently uninvested
an undue proportion of the moneys received by them, are
violating the spirit of the rule allowing them to keep tem­
porary deposits pending a chance to invest (1906, chap.
x95> 37)the proceedings by the attorney-general are
directed toward declaring the savings bank insolvent, or
placing it in the hands of a receiver, then the chancellor
of the State may take charge of the savings bank and
manage it (1906, chap. 195, 57). If a savings bank, a
majority of its managers, or three or more depositors hold­
ing deposits of $5,000, petition, showing that the bank is
insolvent, the chancellor causes an examination to be
made or a report to be rendered, whereupon he may make
decrees forbidding payments of deposits, etc. (1906, chap.
195, 58). From then on the chancellor has control over
the savings bank and directs the action of its managers
(1906, chap. 195, 59). If under this control the bank,
after a sufficient time, still appears unable to return its
deposits and pay its debts, then the chancellor stops its
business and appoints a receiver. He orders a final dis­
tribution of assets and adjudges whether the charter of
the bank is void or not (1906, chap. 195, 60). During the
proceedings the chancellor may always order the reception
of new deposits, keeping the investments of them wholly
for the benefit of those depositing (1906, chap. 195, 61).
The commissioner has supervision over voluntary dis­
solutions (1906, chap. 195, 63 et seq.).
REPORTS.

A statement of the names and residences of officers and
location of the proposed bank is transmitted to the com422

New

Jersey

Savings

Banks

missioner before any deposits are received (1906, chap.
I95> 13)- The managers, by a committee of not less than
three of them, examine the affairs of their savings bank
and report the result at the close of business of each
calendar year; this report to the commissioner is made
in January in the form he prescribes. It states the amount
loaned upon bond and mortgage; a list of all bonds and
mortgages upon which interest has been in arrears for six
months; the value of all investments with items; the
amount loaned upon pledge of securities; real estate
investments with values; cash on hand and on deposit;
with names of depositaries and amounts deposited in each.
Also all liabilities, including the amount due depositors,
with dividends, and any other debts or claims chargeable
upon assets; the amount of deposits during the year; the
amount withdrawn; interest or profits received or earned;
dividends credited to depositors; number of accounts
opened and reopened; number closed; number open at the
end of the year; and other reasonable information that
may be required by the commissioner (1906, chap. 195,
42, 43, 44 and 45). The commissioner may call for special
reports when he thinks them necessary (1906, chap. 195,
47). When a receiver of a savings bank has been ap­
pointed by the chancellor he reports to the chancellor
every three months (1906, chap. 195, 62).
Dividends declared by the managers or the receiver of
an insolvent savings bank, that are unclaimed for a year,
are published once a week for four weeks (1906, chap.
I95» 29). Every savings bank includes in its annual
report to the commissioner a statement containing the
name of every depositor who has not dealt with his de­
posit for ten years and whose deposits exceed $50; the
report includes also the amount to the credit of such a
depositor, his last known address, and the fact of his
death, if known. This report is published by the savings




423




N at i ona l

M on e t a r y

C o mmi s s i o n

bank once a week for three weeks for two successive years
(1906, chap. 195, 30).
The commissioner of banking and insurance makes an
annual report to the legislature containing a statement of
the condition of every savings bank that has reported
during the preceding year; the name and location of new
savings banks authorized; the date of their incorporation;
and a particular description of those which, whenever
incorporated, have begun business during the preceding
year (1906, chap. 195, 50). The results of all examina­
tions during the previous year are embodied in the annual
report to the legislature (1906, chap. 195, 51), and also
the returns by savings banks of deposits that have not
been disturbed for ten years (1906, chap. 195, 31).
EXAMINATIONS.

The managers, by a committee of not less than three
of them, examine the condition of their savings bank to
show its condition on December 31 of each year, on which
examination their annual report to the commissioner is
based (1906, chap. 195, 42). The commissioner personally
or by a subordinate examines every savings bank at least
once in two years, and oftener if he thinks it necessary
(1906, chap. 195, 51). If a savings bank, a majority of
its managers, or any three or more depositors whose de­
posits together amount to $5,000 or more, petition the
court of chancery, the chancellor must make an examina­
tion (1906, chap. 195, 58).
V.— Discount, Doan

and

Deposit R estrictions.

No manager or officer of a savings bank may directly or
indirectly borrow its funds or deposits, nor become surety
for any money borrowed from the savings bank (1906,
chap. 195, 20). No savings bank may loan its deposits
424

New

Jersey

—

Savings

Banks

on notes, bills of exchange, or drafts, except upon the ad­
ditional pledge of collateral of the same sort as that in
which investments are allowed, or the stock of national
and state banks, or the stock or bonds of other New Jersey
corporations which have not defaulted in interest or divi­
dends on the collateral loaned upon, within two years.
Even when secured, the loans must not exceed 80 per
cent of the market value of the collateral and the total
of such loans must not exceed 15 per cent of the total
deposits of the bank (1906, chap. 195, 34).
The deposits to the credit of any one individual or
corporation must never exceed $5,000, exclusive of
accrued interest, except in the case of deposits ordered by
a court. Savings banks need not receive sums less than
$1, nor need they allow interest on fractions of a dollar
or for fractions of a month (1906, chap. 195, 25).
V I.— I nvestments.
Moneys deposited with savings banks may be invested
only as follows: First, in securities of the United States.
Second, in interest-bearing bonds of New Jersey, or those
authorized to be issued by any commission appointed by
the supreme court of New Jersey. Third, in the bonds of
any State which has not within ten years defaulted in
principal or interest of any debt. Fourth, in the bonds
of any municipality of New Jersey, if it has not defaulted
in principal or interest on any debt for five years, and if
certain other requirements are satisfied. In any interestbearing obligations except improvement certificates issued
by the municipality in which the bank is situated. Fifth,
in the bonds of cities or counties of other States, provided
the city or county has not defaulted in principal or inter­
est for ten years, and the total indebtedness is limited
to 10 per cent of the valuation for taxes. Sixth, in first




425




N at ion a l

M onet ary

Commission

mortgage or consolidated mortgage bonds of any railroad
company which has paid dividends of 4 per cent on its
entire capital stock for five years. Seventh, in bonds
secured by mortgages that are a first lien on New Jersey
real estate worth double the amount loaned, but not
more than 80 per cent of all deposits may be thus invested,
and in case the loan is on unimproved or unproductive
real estate the loan must be of not more than 30 per cent
of its value. Loans on bond and mortgage must be
approved by a committee of at least three managers.
Eighth, in real estate as follows: A plot on which is a
building required for the convenient transaction of the
company’s business, from some portion of which rent may
be derived, but the cost of the building and lot must not
exceed 50 per cent of the net surplus of the bank unless
the commissioner approves; land purchased at judicial
sales on debts due the savings banks, or taken in settle­
ment to secure such debts, but all real estate thus acquired
must be sold within five years (1906, chap. 195, 33).
Savings banks must not trade in personalty except
such as is necessary for the transaction of the bank’s
business. The business of buying and selling exchange,
selling or collecting commercial paper, etc., must not be
engaged in in the bank (1906, chap. 195, 68).
To meet current expenses, an available fund of not
exceeding 10 per cent of all deposits may be kept on
hand or on deposit in solvent state or national banks in
New Jersey, or may be deposited on call at interest in such
solvent trust companies of New Jersey, New York, or
Pennsylvania, or in such solvent national banks of New
York or Pennsylvania as the managers direct. The fund,
moreover, may be loaned on pledge of the securities which
are legal investments, provided the loan does not exceed 80
percent of the value of the securities (1906, chap. 195, 36,
426

New

Jersey

Savings

Banks

amd. by 1908, chap. 203). Temporary deposits may
be made of the excess of daily receipts over payments
pending an opportunity to invest (1906, chap. 195, 37).
X.— U nauthorized Banking .
Only such corporations as are authorized by law to
receive deposits as savings banks may advertise or solicit
deposits as such a bank. Any one offending against
these provisions forfeits $100 for each offense each day
that it is continued (sec. 46, of the act approved Apr. 21,
1876).
Savings banks incorporated under other laws than
those of New Jersey are allowed to do business in New
Jersey only to the extent that the government incorpo­
rating them allows in its territory savings bank business
to be done by New Jersey savings banks (1907, chap. 35).
X I.— P enalties .
Failure to furnish reports subjects the managers
personally to a penalty of $100 a day (1906, chap. 195, 48).
The officers of a savings bank who fail to make a return
of unclaimed deposits are guilty of a misdemeanor and
liable to a fine of not more than $500 (1906, chap. 195, 32).
A receiver of an insolvent savings bank who fails to
report is removed from his office (1906, chap. 195, 62).
Managers or other officers who make illegal investments
or loans are guilty of a misdemeanor, punishable by a fine
of from $250 to $1,000 or imprisonment for not longer
than two years (1906, chap. 195, 35). As in the case of
banks, it is a misdemeanor to spread rumors affecting the
financial standing of a savings bank (1907, chap. 50).




427




m m i ss i on

I.— T erms

of

I ncorporation.

Trust companies have authority “ to receive money on
deposit to be subject to check or to be repaid in such
manner and on such terms and with or without interest
as may be agreed upon” (1899, chap. 174, 6).
The capital must be not less than $100,000, divided
into shares of $100 each, all of which must be paid in in
cash before the company begins business. Trust com­
panies must not create more than one class of stock (1899,
chap. 174, 1). The commissioner of banking and insur­
ance does not authorize incorporation unless it appears
to him that the establishment of the proposed trust com­
pany will be of public service (1899, chap. 174, 3).
Dividends may be declared out of net profits, but
before the declaration not less than one-tenth of the net
profits for the preceding dividend period must be carried
to a surplus fund until it amounts to 20 per cent of the
capital stock (1899, chap. 174, 13).
Trust deposits must not be mingled with the general
assets or deposits of the corporation; they are not liable
for its general debts (1899, chap. 174, 7).
II.— L iabilities

D uties of Stockholders
D irectors.

and

and

There is no particular provision for liability of trust
company shareholders.
There must be not less than five directors, each of whom
must own not less than five shares of stock (1899, chap.
174, 12, amd. by 1906, chap. 191). The directors must
appoint an examining committee to make examinations
explained below (1899, chap. 174, 14).

428

New

Jersey

—

Trust

Companies

III.— Supervision .
The commissioner of banking and insurance supervises
trust companies (1899, chap. 174, 2). Before acting as
trustee, each trust company must deposit with the reg­
ister of the prerogative court certain securities (1899,
chap. 174, 9, amd. by 1903, chap. 214). The commis­
sioner allows a trust company to be incorporated only if
he thinks its establishment will be of public service (1899,
chap. 174, 3).
When it appears to the commissioner from a report or
examination that the affairs of a trust company are ren­
dered unsound by unsafe investments, or that its liabili­
ties exceed its assets, or that it is violating the law, or that
it is inexpedient for it to continue business, then the com­
missioner notifies the attorney-general, who institutes pro­
ceedings as against an insolvent trust company, or such
other proceedings as the case requires. If upon exami­
nation the commissioner has reason to think that the
trust company is in an unsound condition, he may take
possession of the company’s business until the termina­
tion of the proceedings by the attorney-general, or until
the appointment of a receiver (1899, chap. 174, 22). If a
trust company refuses to submit its affairs to examination,
the attorney-general, on notice by the commissioner, may
proceed as against an insolvent trust company. If it
appears to the commissioner that a trust company has
violated law or is conducting its business unsafely, he
directs the discontinuance of the practices, and if the
company fails to comply with his order, proceedings as
against an insolvent trust company are instituted (1899,
chap. 174, 23). If a trust company becomes insolvent or
suspends business for want of funds, the attorney-general
or a creditor or stockholder may petition the court of




429




N at ion a l

M onetary

Commission

chancery for an injunction and the appointment of a
receiver; the court, if satisfied that the company is
insolvent and can not resume business safely, may issue
injunctions, etc.; or if on petition it appears to the court,
on application of the attorney-general, that a trust com­
pany is being unsoundly conducted or that its liabilities
exceed its assets, that it has violated the law, that it
refuses to be examined, or that it is inexpedient to allow
it to do business, etc., then injunctions may issue and a
receiver may be appointed (1899, chap. 174, 24 and 25,
amd. by 1906, chap. 157).
REPORTS.

Every trust company makes to the commissioner of
banking and insurance not less than two reports each year,
according to the form prescribed by him, showing the
condition of the corporation at the close of business on a
past day specified by the commissioner. This report
must be transmitted to him within twenty days after the
receipt of his request, and a summary must be published
in a local newspaper. The commissioner may call for
special reports (1899, chap. 174, 16).
The commissioner makes an annual “report to the legis­
lature embracing a statement of proceedings taken against
trust companies, of new companies organized, and a sum­
mary of all trust company reports (1899, chap. 174, 27).
EXAMINATIONS.

The commissioner or a subordinate makes an examina­
tion of the affairs of every trust company whenever he
deems it expedient or at the request of the trust company
(1899, chap. 174, 21). The board of directors of every
trust company appoint from the members of the board ax

43 °

New

Jersey

Trust

—

Companies

examining committee to examine the company at least
every six months, and oftener if required by the board,
with special reference to assets which seem to be not of
the value at which they are stated on the books of the
company (1899, chap. 174, 14).
IV.— R eserve R equirements.

Every trust company receiving deposits that are sub­
ject to check or payable on demand must keep in avail­
able funds an amount equal to 15 per cent of demand
liabilities. Four-fifths of this reserve may consist of
balances due from good solvent banks or trust companies,
and one-fifth must be in cash. When the reserve falls
below, the trust company must not make any new loans
except by purchasing sight exchange, nor make any divi­
dends of its profits (1899, chap. 174, 20).
V.— Discount

and

L oan R estrictions.

No trust company has power to discount commercial
paper, nor to make loans on bills, notes, or other evidences
of debt except to a New Jersey municipality, unless the
loans are secured by mortgage upon lands, or by other
securities whose market value exceeds by 10 per cent
the amount of the loan (1899, chap. 174, 7). No trust
company may loan to its officers, directors, or employees
until the board of directors or the executive committee has
approved of the loan by a majority vote. No trust com­
pany may permit its officers, directors, or employees to
become liable to it by reason of overdrawn account (1899,
chap, 174, 15). No trust company may loan on the
security of its own shares unless acceptance of this secur­
ity is necessary to prevent loss on a previous debt. Stock
so acquired must be disposed of within a year (1899, chap.
i?4> 18).




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VI. — I nvestments.
Among trust company powers is the power to hold all
real property necessary for the convenient transaction of the
company’s business, and real property acquired in satis­
faction of debts under judgment, mortgage, etc., or in
settlement of debts. Trust companies also may buy and
sell stocks, promissory notes, bonds, mortgages, and other
securities (1899, chap. 174, 6). No trust company may
purchase or hold shares of its own stock unless the pur­
chase is necessary to prevent loss upon a previous debt,
in which case the stock must be disposed of within a year
(1899, chap, 174, 18).
VII. — Overdrafts.
No trust company may permit its officers, directors, or
employees to become liable to it “ by reason of over­
drawn account” (1899, chap. 174, 15).
X.— U nauthorized T rust Company B usiness.

No corporation may be organized to do a trust company
business in New Jersey except under chapter 174 of 1899,
and no company organized under any other act may use
the word “ trust” as part of its name (1899, chap. 174, 1).
Trust companies incorporated under other than New
Jersey law are allowed to do business in New Jersey to
the extent that New Jersey trust companies are allowed
to do business in the incorporating State (1907, chap. 35).
X I. — Penalties .
Any officer, director, or employee of a trust company
who is implicated in a loan to an officer without the con­
sent of the directors, or an overdraft by an officer (1899,
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C o mp a n i e s

chap. 174,15); any person who maliciously circulates false
rumors affecting the financial condition of a trust com­
pany (1907, chap. 50); and any director, officer, or em­
ployee who makes false entries, false reports, etc., with
intent to deceive an examiner, or subscribe to or make
false reports, is guilty of a misdemeanor, and in the last
case of a high misdemeanor (1899, chap. 174, 17). Every
trust company which fails to report is subject to a penalty
of $100 a day (1899, chap. 174, 16).

S. Doc. 3S3, 61-2-----28




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NEW MEXICO.
The latest revision of the laws of the Territory of New
Mexico was published in 1897. Title 3, beginning at page
157, deals with “ Banks and banking.” There are various
amendments to sections in this title in the session laws of
1899, 1901, 1903, 1905, and 1907. Transcripts of two
statutes of 1909, chapters 96 and 133, have been procured
from the territorial banking officials, who state that these
are the only 1909 laws which affect the digest; they are
digested under the proper headings. The title on banks
and banking in the Compiled Taws is divided into two
parts, the first dealing with banks of discount and deposit
and based chiefly on a statute of 1884, the second dealing
with savings banks and based entirely upon a statute of
1887. These two halves of the title seem quite independ­
ent and conform to the plan of the digest, in treating
first of banks and then of savings banks. Trust companies
are legislated for in chapter 52 of 1903. It is worth
noting that the savings bank statute, in its first section,
provides for the incorporation of “ savings banks and
trust associations,” but in the light of the complete and
more recent legislation on trust companies, it seems
unreasonable to consider the savings bank statute as pos­
sibly applicable to trust companies. Chapter 54 of
1903 transfers the supervisory duties with respect to
banks and savings banks formerly incumbent upon the

New

M ex i co

State

Banks

secretary and the treasurer of the Territory to a new offi­
cer created by the act and called “ the traveling auditor
and bank examiner.” Since chapter 54 of 1903 shifted
to the traveling auditor and bank examiner only those
supervisory duties which had been in the hands of the
secretary and the treasurer of the Territory, it was doubtful
if under that statute the auditor, who had exercised
supervision over trust companies, could properly be
deprived of his former powers; chapter 96 of 1909, how­
ever, provides in section 9 that trust companies are to
be placed “ under the direct supervision of the bank
examiner.” On the strength of this provision the digest
even with respect to trust companies treats the traveling
auditor and bank examiner as the only supervisory
officer. Chapter 96 of 1909 refers to the official simply
as “ the bank examiner;” his full title as stated above
is, under the act establishing the office, “ traveling auditor
and bank examiner.” References in the digest, where
they are simply numbers in parenthesis, are to sections
in the Compiled Taws; later statutes are referred to by
year of passage, chapter, and, where necessary, section.
BANKS.
I.— T erms

of

Incorporation.

The capital of “ a bank of discount and deposit” must
not be less than $30,000, and before the bank begins busi­
ness at least 50 per cent must be paid in in cash; the
remainder must be paid in in cash within a year (244).
The directors, semiannually or oftener, on the first
Monday in January and July, may declare a dividend, but
only out of net profits (250). No dividends are payable




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on shares whose holders are liable, on debts past due, to
the bank (247).
In towns of less than 1,500 inhabitants corporations may
be organized for trade and business, which may, in addi­
tion, transact a general banking business. These corpo­
rations must have a capital of not less than $30,000, of
which not less than $20,000 must be paid in before banking
is begun. The right to transact a banking business, more­
over, is not continued beyond a year unless the whole of
the capital is paid up within that time. Existing corpo­
rations in cities or towns of less than 1,500 inhabitants
may take advantage of the statute allowing incorporation
for these combined purposes when their capital stock has
been paid in in accordance with the act; such corporations
must, however, be capitalized at not less than $30,000.
The accounts of the banking business must be kept sepa­
rate from those of the regular mercantile business (1903,
chap. 109).
II.— L iabilities

and

D uties of Stockholders
D irectors.

and

The officers and stockholders of banking corporations
are individually liable for all debts contracted during the
term of their being officers or stockholders “ equally and
ratably to the extent of their respective shares of stock in
any such corporation or association,” except that the lia­
bility ceases one year from the date of transfer of stock
(252). A shareholder has no vote while his obligations
held by the bank are past due (246).
There must be not more than nine directors, elected
annually (246). If a report is not made within a month
of the time it is due, or if the bank wilfully violates the
statute, the directors become liable personally for all debts
contracted previous to and during the neglect (251).
436

New

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—

State

Banks

III.— S upervision .

The official charged with the supervision of banks is the
“ traveling auditor and bank examiner,” who is appointed
by the governor for terms of two years, must be a skilled
accountant, and receives a salary of $2,000 a year with
$1,200 additional for expenses (1903, chap. 54, 1). All
the duties formerly put upon the secretary or treasurer of
the Territory with respect to banks, savings banks, and
trust companies now belong to the traveling auditor and
bank examiner (1903, chap. 54, 9). If it appears to him
that any bank is insolvent (as defined in 1909, chap.
96, 7) it is his duty to report to the governor, who, if it
appears that such a proceeding is necessary, directs the
bank examiner to take charge of the bank and of its
property. The examiner thereupon makes a thorough
examination and reports to the governor, who, if satisfied
that the bank can not restime business or liquidate its
debts to the satisfaction of its creditors, advises the
attorney-general to institute proceedings for a receiver.
I he bank examiner with the governor’s consent may
appoint a deputy to take charge of an insolvent bank
pending the appointment of a receiver, no bank, however,
to remain in charge of a deputy longer than ninety
days (1909, chap. 96, 4). A bank may voluntarily
place its affairs under the control of the examiner by
posting a notice on its doors (1909, chap. 96, 5). If it
appears that the capital of a bank has been impaired,
the examiner notifies the bank to make the impairment
good in ninety days (1909, chap. 96, 8).
REPORTS.

Banks make semiannual reports in January and July in
the form prescribed by the traveling auditor and bank
examiner, which reports show resources and liabilities




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at the close of business on a past day specified by
the examiner, and must be transmitted to him within
five days after his request. They must be published in a
local newspaper (1909, chap. 96, 1).
The foregoing late enactment seems to supersede the
section formerly in force, which, after providing for the
declaration of dividends “ semiannually or oftener, as
they (the directors) may elect, on the first Monday in
January and July,” proceeded: “ On each of such days
the president or cashier shall make” a full statement to
the bank examiner of the condition of the bank “ on
that day after declaring the dividend, if any be declared.”
The statement was required to contain a full abstract of
the accounts of the bank so as to show its resources and
liabilities. It was published once a week for three weeks
in a local newspaper (250, and 1903, chap. 54, 9).
The bank examiner reports to the governor all his
official doings as examiner, embodying in his report an
abstract of the condition of the assets and liabilities of
the institutions under his charge, with general suggestions
and recommendations (1903, chap. 54, 11).
Banks which have in their possession money against
which no check has been drawn, or of which no other dis­
position has been made, by the owner within three years,
must annually publish for six days in a local newspaper a
list of the names of such depositors, with the amount to
the credit of each, etc. (1899, chap. 62).
For reports required for purposes of taxation see 257,
et seq, with amendments in 1907, chap. 103.
EXAMINATIONS.

The bank examiner visits each bank doing business in
New Mexico except national banks at least annually, and
oftener if necessary, in order to make a full investigation
into its condition (1909, chap. 96, 2).
438

New

Mexico

—

State

Banks

This late enactment does not materially change the
older one under which he was required to visit “ each
of the banking, savings, and other moneyed corporations
created under the laws of the Territory” and thoroughly
examine it at least once a year, verify the validity and
amount of its securities and assets, and inquire into its
observance of the law (1899, chap. 54, 6). A provision
of the Compiled Taws provided that the secretary of the
Territory (whose duties have now devolved upon the bank
examiner under 1903, chap. 54, 9, and 1909, chap. 96, 9)
might at any time appoint a suitable person to examine
“ any corporation incorporated under this act (the savings
bank statute) or any other law of this Territory,” or
might make such an examination himself to determine
the truth of any statement made by the bank or to de­
termine its solvency and the character of its assets (280).
Under the 1909 statute the bank examiner upon taking
charge of a bank must examine its affairs before receiver­
ship proceedings are instituted, and may make an exami­
nation of any bank which is voluntarily liquidated (1909,
chap. 96, 4 and 6).
V.— Discount

and

L oan R estrictions.

Any bank of discount and deposit may “ carry on the
business of banking by discounting on banking principles
upon such securities as the directors or trustees shall deem
expedient, * * * by loaning money on personal se­
curity and by exercising such incidental powers as may
be necessary to carry on such corporation, association, or
business” (246).
The savings bank statute contains provisions for the
maximum amount of individual loans and for curtailing
loans to directors and officers (276); but there seems no
reason to suppose that these provisions are applicable to
commercial banks. The stockholders collectively of any




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bank must never be liable, either as principal or surety or
both, to an amount greater than two-fifths of the paid in
and unimpaired capital (253).
No bank may take as security a lien on any part of its
capital; the same security is required of shareholders as
of others (244).
For provisions for deposits of territorial moneys see 255.
V I.— I INVESTMENTS.
A bank may carry on its business “ by buying or selling
the bonds or stocks of this or any other State or Territory,
or of the United States; also the bonds of any county,
city, town, or school district in this Territory legally
authorized to issue such bonds; gold and silver bullion;
foreign coins and bills of exchange” (246).
It is lawful for a bank to hold real estate only for the
following purposes: Such as is necessary for its accommo­
dation in business; such as is mortgaged to it for previous
loans; such as is conveyed to it in satisfaction of previ­
ous debts; and such as it purchases under judgments or
mortgages held by it; but at such a sale the bank must
not bid more than necessary to satisfy the debt and costs
(248 and 249).
No bank may “ be the holder or purchaser” of its own
stock or the stock of any other corporation unless the pur­
chase is necessary to prevent loss on a previous debt con­
tracted on security which was thought adequate at the
time; stock so purchased must not be held for longer than
six months if it can be sold for what it cost or at par (244).
V III.— B ranches.

The only hint on this subject is that contained in the
requirement of a certificate by the incorporators, which
must state “ the place where the operations of discount
440

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M ex i c o

State

Banks

and deposits of such banking corporation or association
are to be carried on, designating the particular county,
city, or town, at which place such association shall keep
an office for the transaction of its business ” (245).
X.— U nauthorized B anking .

It is unlawful for persons, companies, or associations
other than national banks to carry on a banking business
in New Mexico without compliance with the provisions of
the bank statute. Contracts made with banks doing busi­
ness in violation of the statute are void (254, amd. by
1899, chap. 40).
X I.— P enalties .
Any officer of “ any banking, moneyed, or savings insti­
tution or other moneyed corporation of this territory”
who fails to furnish reasonable facilities to the examiner
is guilty of a misdemeanor, punishable by a fine of not less
than $500, imprisonment for not less than six months, or
both (1903, chap. 54, 8). Any person who refuses the
examiner access to books or papers or who hinders the
complete examination of such an institution is also guilty
of a misdemeanor, punishable by the same penalties (1903,
chap. 54, 10). A failure by “ any banking house” to com­
ply with the provisions of the act requiring reports of un­
claimed deposits to be published renders each director
and managing officer guilty of a misdemeanor, punishable
by six months’ imprisonment (1899, chap. 62, 3). Failure
to make a regular semiannual report is punishable by fine
of $50 a day (1909, chap. 96, 1). Failure by the proper
officer of any bank to make the report required for tax­
ation purposes entails a forfeit of $1,000 (258).
If the president, director, or other officer of any banking
institution is implicated in receiving a deposit, or in the
creation of any debt by his bank in consideration of which




441




mm is s i on
money or property is received into the bank, after he has
knowledge that the bank is insolvent or failing, he is
guilty of larceny (254, amd. by 1899, chap. 40). See also
Savings banks, XI, for the sections of the savings bank
statute, which provide for these offenses (282 and 283);
these sections seem to be applicable to banks, as well as
savings banks, for they forbid the officers of “ any bank
or banking institution organized or doing business under
the provisions of this act or of any law of this territory”
to receive deposits during insolvency, and provide the
penalty for this offense when committed by officers “ of
any bank or banking institution.”
SAVINGS BANKS.
I.— T erms

of

I ncorporation.

The first of the sections headed in the Compiled Taws
“ Savings banks” provides for the incorporation of “ sav­
ings banks and trust associations,” the capital of which
must not be less than $30,000, except in cities and towns
of less than 3,000 inhabitants, in which the capital must
not be less than $15,000. All the capital must be paid in
in cash before business is begun (260, amd. by 1901,
chap. 56).
Each savings bank must create a surplus from its net
earnings by setting apart at least 10 per cent of them
semiannually until the surplus amounts to 40 per cent of
capital (268). The directors may, in January and July,
declare a dividend, if it has been earned, provided the
savings bank is fully solvent without the earnings which
it is proposed to divide; no dividend may be declared
when the capital is impaired so as not to be worth in good
resources the full amount paid in after the payment of all
liabilities, nor when the provisions respecting surplus
fund have not been fully complied with (266). No divi­
442

New

Mexico

Savings

Banks

dends may be paid on stock the holder of which is liable
on debts past due to the savings bank; dividends must be
applied to discharge the liabilities (265).
A savings bank may issue and negotiate its own evi­
dences of indebtedness to an amount not exceeding 90 per
cent of the aggregate of the loans made and held by the
savin8s bank and secured by mortgages of real estate (263).
II. — L iabilities

and

Duties of Stockholders
D irectors.

and

The stockholders of a savings bank “ shall only be in­
dividually liable to the extent of the par value of the
shares of stock subscribed for by them” (273).
There must be not more than nine directors (264). Any
director who assents to declaring and paying a dividend
while the capital is impaired is personally liable to the
amount of his proportion of the dividend if losses occur
on account of its payment (266). If a savings bank fails
to make required reports or wilfully violates the savings
bank statute, the directors are personally liable for bad
debts contracted previous to and during the period of the
neglect (272). Directors or other officers who are impli­
cated in receiving deposits or creating debts with knowl­
edge of the insolvency of the bank are individually respon­
sible for the deposits received or the debts created (282).
I I I — Supervision .

The same official is in control of savings banks (see
Banks, III) as of banks.
See Banks, III, for the provisions of the 1909 statute
which require the examiner to report the insolvency of a
bank to the governor and institute receivership proceed­
ings, appointing a deputy to act as temporary receiver if
necessary; also for the provisions allowing a bank to place




443




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Commission

itself voluntarily in the hands of the examiner; and for
those under which the bank examiner requires impairment
of capital to be made good within ninety days (1909,
chap. 96, 4, 5, and 8). It is not altogether clear that
these provisions are applicable to savings banks; the stat­
ute states that “ for the purpose of examination and
regulation the provisions of this act are hereby made
applicable and extended to trust companies, banks,
building and loan associations, and all territorial institu­
tions ; it is the intent and purpose by this section to place
these institutions under the direct supervision of the bank
examiner’’ (1909, chap. 96, 9). There is an older provi­
sion for action by the examiner when he considers a
corporation in an unsafe condition to continue business,
which, if not superseded by the 1909 act, applies clearly
to savings banks. It provides for action by the examiner,
culminating in the appointment of a receiver (280, and
1903, chap. 54, 9).
Other provisions of the Compiled Taws, probably still
effective, enact that when the capital of a savings bank is
impaired to the extent of 25 per cent by reason of bad
loans or otherwise the savings bank must cease to do
business unless its capital is made good by assessment
within sixty days or reduced to offset the impairment
(266).
REPORTS.

See above, under Supervision, for the possible applica­
tion of chapter 96 of 1909 to savings banks. Under that
chapter “ all banks heretofore or hereafter organized under
the laws of the Territory, including private banks,” must
make semiannual reports in January and July in the form
prescribed by the examiner, exhibiting resources and
liabilities at the close of business on a past day specified
by the examiner, reports to be transmitted within five
444

New

Mexico

Savings

Banks

days after the request and to be published in a local news­
paper (1909, chap. 96, 1). If the language of chapter 96
of 1909 does not make this provision for reports applicable
to savings banks, the provisions of the following para­
graph cover the point:
The directors of a savings bank must, semiannually,
in January and July, and whenever any dividends are
declared, make a full statement to the bank examiner of
the condition of the savings bank on that day, after the
dividend, if any, has been declared; the statement must
show fully the general accounts of the corporation and its
resources and liabilities with details, and must be pub­
lished once a week for three weeks in a local newspaper
(269, and 1903, chap. 54, 9). The bank examiner may
call upon any savings bank to make such a statement
at any time, though it be more than the second time
within a year; he must give no notice to anyone of the day
on which he will call for such a statement, which must
show the actual condition of the bank at the close of busi­
ness upon a designated day prior to the call (270, and 1903,
chap. 54, 9).
The examiner makes a written report to the governor
as stated under Banks (1903, chap. 54, 11).
I he statute requiring the publication of reports of un­
claimed deposits (see Banks, III) applies to “ all national
and territorial banks having banking houses in this Terri­
to ry” (1899, chap. 62).
For reports for purposes of taxation see 1903, chapter
103.
EXAMINATIONS.

Under chapter 96 of 1909 the bank examiner must
visit each and every bank doing business in the Territory
of New Mexico except national banks” at least once a
year, and oftener if necessary, to make full investigation
into its condition (1909, chap. 96, 2).




445




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The older provision for examinations at least once a year
by the traveling auditor and bank examiner (see Banks,
III) includes savings banks. It particularly requires, with
respect to savings banks, that he examine the validity of
the mortgages they hold (1903, chap. 54, 6). A provision
of the savings-bank statute in the Compiled Taws is that
the secretary of the territory (whose duties have now de­
volved upon the bank examiner— 1903, chap. 54, 9) may
appoint some one to make examination of a savings bank,
or make the examination himself, to determine the truth
of any statement made under the provisions of the act or
to determine the solvency of the savings bank and the
character of its assets (280).
If savings banks are subject to the regulation features
of chapter 96 of 1909, the bank examiner, when he has
taken charge of a savings bank as insolvent, makes a
thorough examination, and also may examine banks in
voluntary liquidation (1909, chap. 96, 4 and 6).
V.— Discount

and

L oan R estrictions.

A savings bank may conduct the business of “ loaning
money upon real estate or personal property and upon
collateral, personal, or live-stock security, at a rate of in­
terest not exceeding that allowed by law; and also of buy­
ing, selling, and discounting negotiable and unnegotiable
paper of all kinds, as well as all kinds of commercial
paper” (262).
No savings bank may loan its money to any individual
or corporation, directly or indirectly, or permit any indi­
vidual or corporation to become at any time indebted to
it in a sum exceeding 10 per cent of its paid-in capital, or
permit a line of loans to any greater amount to any indi­
vidual or corporation; nor may a savings bank hold the
name of any of its directors or officers as principal or
446

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M ex i c o

Savings

Banks

surety upon paper, or to an amount greater than 5 per
cent of its capital, unless the borrower deposits with the
savings bank collateral security or executes a mortgage
of personalty or realty (276).
No savings bank may accept improved real estate as
security for a greater amount than 50 per cent of its
value; nor unimproved real estate for a greater amount
than 30 per cent; nor live stock for a greater amount
than 40 per cent (277).
A savings bank may issue and negotiate its own evi­
dence of indebtedness to an amount not exceeding 90 per
cent of the aggregate loans made and held by the bank
and secured by mortgages on real estate (263). Savings
banks may deposit in New Mexico banks or national
banks (275).
V I.— I nvestments .

Savings banks may conduct the business of “ buying
and selling gold, silver, coins of all kinds, uncurrent money;
* * * and also the buying and selling of bonds and
stocks of this or any other Territory or State, or of the
United States; also the bonds or other evidences of
indebtedness of any county, city, town, or school district
in this or any other Territory or State legally authorized
to issue such bonds or evidences of indebtedness” (262).
No savings bank may employ its moneys in trade or com­
merce by buying and selling merchandise; but it may sell
all kinds of property acquired as collateral or in the col­
lection of debts (278).
A savings bank may hold real estate only as follows:
First, a plot on which buildings requisite for its business
are erected, from portions of which rent may be derived,
the cost of the buildings and lot never to exceed 50
per cent of the net surplus of the bank; second, such
real estate as the bank has purchased on foreclosure of




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Commission

mortgages owned by it or upon judgments for debts due
it or in settlements to secure such debts. The second
sort of real estate must be sold within five years (279).
A savings bank may deposit the moneys deposited with
it, or its surplus funds or unemployed capital, in a New
Mexico bank or a national bank (275).
V III.— B ranches.
The only intimation in the statutes on this subject is
in the provision that the incorporators shall certify “ the
principal place where the business of such corporation
shall be carried on, designating a particular county, city, or
town at which place such corporation or association shall
keep an office for the transaction of its business” (261).
X I .— P enalties .

If the president or other officer or director of a savings
bank refuses to make statements required by the bank
examiner, or makes a false statement, the offender is
guilty of a misdemeanor punishable by fine for each
offense of $100 to $500, or imprisonment for from one to
twelve months, or both fine and imprisonment (271). If
a savings bank or its officers or directors fail to publish a
statement for one month beyond the time when it is
required to be made, or willfully violate any provision of
the savings bank statute, the directors become personally
liable for bad debts contracted previous to and during the
neglect (272). Every director and managing officer of a
“ banking house ” which fails to publish unclaimed deposits
is guilty of a misdemeanor, punishable by six months’
imprisonment (1899, chap. 62, 3). The provisions given
under Banks, XI, respecting penalties for failing to fur­
nish facilities to the bank examiner (1903, chap. 54, 8)
and those respecting penalties for refusing access to the
448

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Mexico

Trust

—

C o mp a n i e s

bank examiner to books or papers (1903, chap. 54, 10)
apply to savings banks. If savings banks are required to
report semiannually under chapter 96 of 1909, they are
subject to the penalty of $50 per day during any delay in
making a report (1909, chap. 96, 1).
Any president, director, or other officer or agent of a
bank organized or doing business under the savings bank
statute or any law of the Territory who is implicated in
receiving deposits or in the creation of debts by the insti­
tution with knowledge of its insolvency is individually
responsible for the deposits or debts (282); one who will­
fully commits this offense and fails to make good the loss
to the persons damaged within sixty days after the insol­
vency of the bank has been judicially determined is guilty
of a misdemeanor punishable by fine for each offense of
$100 to $500, or imprisonment of from one month to
twelve months, or both fine and imprisonment (283).
The provision on this topic given under Banks, X I, pro­
viding that such an offense shall be larceny, seems appli­
cable to savings banks as well as to banks (254, amd. by
1899, chap. 40).
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

Trust company powers are enumerated in 1903, chapter
52, 3. A trust company may “ receive upon deposit for
safe keeping money and personal property of every de­
scription.” A majority of the fifteen or more incorpo­
rators of a trust company must be residents of New
Mexico. The capital actually subscribed in good faith
at the time of filing the articles must be not less than
$250,000, of which $100,000 must have been actually
paid in lawful money (1903, chap. 52, 1 and 9). A 1909
amendment allows the incorporation of a trust company
S.

Doc.




353, 61-3----- 29

449




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Commission

in any city, town, or village of less than 7,000 with an
actually subscribed capital stock of not less than $100,000,
of which not less than $50,000 must have been actually
paid in (1909, chap. 133, 1 and 3).
Dividends may be declared semiannually or annually
of so much of the net profits as the directors judge ex­
pedient, but before the declaration of the dividend at
least one-tenth of net profits for the preceding half year
or year must be carried to surplus fund until it amounts
to 20 per cent of the paid-in capital. No dividend may
be declared until at least $250,000 of capital has been
paid in in the case of trust companies in communities of
over 7,000; in those under 7,000, a trust company may not
declare a dividend until its entire capital has been paid in.
Dividends must never exceed net profits on hand (1903,
chap. 52, 7, amd. by 1909, chap. 133, 2).
II.— L iabilities

and

Duties of Stockholders
Directors.

and

The shareholders of every trust company are indi­
vidually responsible for its contracts to the extent of
the amount of their stock at par in addition to the amount
invested in the shares (1903, chap. 52, 15).
There must be not fewer than five directors, each the
owner of not less than 10 shares of capital; a majority
must be citizens of New Mexico. The term of office is
regularly one year (1903. chap. 52, 17, amd. by 1903,
chap. 115).
III.— Supervision.
The following provisions of chapter 96 of 1909 are
applicable to trust companies: If at any time it appears to
the bank examiner that a bank is insolvent he reports to
the governor, who, if it appears that such a proceeding is
necessary, directs the examiner to take charge; the exam450

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Trust

Companies

iner then examines thoroughly and makes a return to the
governor, who, if satisfied that the company can not resume
business or pay its debts, advises the attorney-general to
proceed for a receiver, pending whose appointment the
examiner may place the affairs of the company for not
longer than ninety days in charge of a special deputy
(1909, chap. 96, 4). A trust company may voluntarily
place its affairs under the control of the examiner by post­
ing a notice on its doors (1909, chap. 96, 5). When it
appears that the capital of a trust company has been
impaired, the examiner notifies it to make the impairment
good within ninety days (1909, chap. 96, 8).
I'he provisions of the paragraph next following were
law before the enactment of chapter 96 of 1909, with the
powers and duties mentioned in the hands of the territorial
auditor; since they seem not clearly repealed by chapter
96, they are inserted below with the examiner substituted
for the territorial auditor. It is possible that this substi­
tution may not be altogether justified by chapter 96,
which provides in section 9 that “ for the purpose of
examination and regulation the provisions of this act are
hereby made applicable and extended to trust companies;
* * * and it is the intent and purpose of this section to
place these institutions under the direct supervision of the
bank examiner.”
The examiner notifies any trust company whose
reserve is below the requirement, and if the company
fails to make the reserve good in sixty days, he
may take charge, close the company’s doors, make a
thorough examination, and take such proceedings as
the situation requires (1903, chap. 52, 10); he may act
similarly whenever a trust company fails to report for a
period of thirty days after the time the report is due
(1903, chaps. 52, 11) or refuses to submit to examination
(1903, chap. 52, 12), and whenever the capital of a trust




451




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M o n et a r y

Commission

company, having becoiite reduced below the requirement,
is not made good by assessment on the shareholders
within three months of his requiring the deficiency to be
repaired. When it appears to him that a trust company
has violated its charter or any statute, or is conducting
its business in an unsafe and unauthorized manner, he
orders the company to discontinue these practices; and
whenever, from a thorough examination of its affairs,
it appears to him that it is unsafe for the company to
continue business, he may take charge, close the com­
pany’s doors, and report the facts to the governor, who
must require proceedings to be instituted for the appoint­
ment of a receiver (1903, chap. 52, 15). Failure to sell
within six months its own shares acquired under the
provision permitting their acquisition to prevent loss on
a previous debt, is ground for the appointment of a re­
ceiver (1903, chap. 52, 8).
The auditor of the Territory (probably now the exam­
iner— 1909, chap. 96, 9) has authority to designate reserve
depositaries; apparently any national, state, or territorial
bank may be a depositary and any trust company which
he designates (1903, chap. 52, 10).
There is provision for a deposit of cash or securities on
the strength of which a trust company may serve in a
fiduciary capacity without giving a bond (1903, chap.
52,

6).
REPORTS.

Chapter 96 of 1909, applying under its express terms
to trust companies, requires them to make semiannual
reports in January and July to the bank examiner in the
form which he prescribes, exhibiting resources and lia­
bilities at the close of business on a past day specified by
him, the report to be transmitted within five days after
the request, and to be published in a local newspaper
(1909, chap. 96, 1).
452

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Trust

Companies

Under previous legislation trust companies were re­
quired to report to the territorial auditor four times a
year, showing in detail resources and liabilities of the
company at the close of business on a past day specified by
the auditor; each report was transmitted to him within
fifteen days after the receipt of his request, and was pub­
lished in a local newspaper. The auditor might call for
special reports whenever they seemed necessary (1903,
chap. 52, 11).
Receivers of trust companies report, when required, to
the appointing court (1903, chap. 52, 15). See Banks, III,
for report of bank examiner to governor (1903, chap. 54,
11). The publication of unclaimed deposits is not re­
quired of trust companies unless they can be brought
within the description, “ territorial banks having banking
houses in this Territory” (1899, chap. 62). See 1907,
chap. 103, for reports for taxation purposes required of all
“ joint stock associations doing a banking business.”
EXAMINATIONS.

The bank examiner under the 1909 statute visits every
trust company at least annually, and oftener if necessary,
for the purpose of making a full investigation into its
condition (1909, chap. 96, 2). He examines thoroughly
when he takes oossession prior to the institution of receiv­
ership proceedings (1909, chap. 96, 4); and he may
examine in voluntary liquidations (1909, chap. 96, 6).
The above provision for regular annual examinations is
a parallel to the earlier legislation which required the
examiner to visit at least once in each year without prior
notice “ each of the banking, savings, and other moneyed
corporations created under the laws of the Territory ”
and thoroughly examine them (1903, chap. 54, 6). It
seems to override, however, still another earlier statute
which required the auditor semiannually and at such




453




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Monetary

Commission

other times as he deemed necessary, to make a thorough
examination into the affairs of every trust company either
personally or through a suitable person appointed by him
(1903, chap. 52, 12).
IV. — R eserve R equirements.
Every trust company must keep on hand in lawful
money of the United States an amount at least equal to 15
per cent of its aggregate liabilities other than those for
which a deposit with the State is required to be made.
Whenever its reserve falls below the requirement the
corporation must not increase liabilities by making new
loans, nor make dividends, until the reserve has been
restored. The auditor may notify a trust company
whose reserve is below the requirement to make it good,
and if it fails for sixty days he proceeds as stated under
Supervision. Three-fifths of the reserve may consist of
balances due from any national, state, or territorial banks
or from any trust companies designated by the auditor
(1903, chap. 52, 10).
V.— D iscount

and

E oan R estrictions.

Among trust company powers is that “ to loan money
upon real-estate, personal and collateral security” (1903,
chap. 52, 3, amd. by 1905, chap. 78, 1). No trust com­
pany may loan or discount on the security of shares of its
own stock, except to prevent loss on a previous debt, in
which case the stock must be disposed of within six
months. The total liabilities to a trust company of any
person, firm, or corporation, including in firm or corpora­
tion liabilities those of the members, must never exceed
20 per cent of paid-in capital. The total liabilities of a
director, officer, or employee to his company must never
exceed 10 per cent of paid-in capital (1903, chap. 52, 8).
454

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—

Trust

Companies

Trust companies may become depositaries of territo­
rial moneys to an amount not exceeding 40 per cent of
their paid-up capital (1903, chap. 52, 16).
V I.— I nvestments .

Among trust company powers are those “ to purchase,
invest in, and sell all kinds of government, state, munici­
pal, and other bonds and all kinds of negotiable and nonnegotiable paper and other investment securities” (1903,
chap. 52, 3, amd. by 1905, chap. 78, 1).
No trust company may purchase shares of its own
stock, unless the purchase is necessary to prevent loss on
a previous debt, in which case the stock must be sold
within six months (1903, chap. 52, 8).
A trust company may purchase or lease real estate for
use in conducting its business; it may purchase real
estate under its own foreclosure proceeding, judgment, or
lien, or whenever it may be necessary to protect itself
from loss, but such real estate must be sold as speedily as
possible (1903, chap. 52, 20).
V III. — B ranches.
The articles of agreement must set out “ the name of
the particular city or town and county in which the busi­
ness of the corporation is to be carried on” (1903, chap.
52, 1); the trust company statute contains no further hint
with respect to doing business at branch offices.
X I.— P enalties .

Trust companies may only advertise their actually paidin capital, surplus, and undivided profits, and not their
authorized capital, unless it is fully paid up; the penalty
for violating this provision is $100 to $500 for each offense
(1903, chap. 52, 9). Failure to report entails a penalty




455




N at io n a l

M o n et a r y

C o mmi s s i o n

of $50 a day (1903, chap. 52, 11, and 1909, chap. 96, 1).
Refusal to submit to an examination entails a penalty of
$1,000 on the corporation, and $500 on any particular officer
or director who refuses (1903, chap .52,12). See also chapter 54 of 1903, which creates the office of traveling auditor
and bank examiner; under that statute any officer “ of any
banking, moneyed, or savings institution or other moneyed
corporation of this territory ” who fails to furnish facilities
to the traveling auditor and bank examiner at examinations,
is guilty of a misdemeanor, punishable by fine of not less
than $500 or imprisonment for not less than six months,
or both fine and imprisonment (1903, chap. 54, 8), and
any person refusing the traveling auditor and bank exam­
iner access to books, etc., or hindering examination as
required under the statute, is guilty of a misdemeanor
punishable by the same penalties (1903, chap. 54, ip).
If the president, director, agent, etc., of a trust com­
pany embezzles or issues without authority any certificate
of deposit, etc., or makes a false entry, report, or state­
ment with intent to defraud the corporation or any other
company or individual, or to deceive an officer of the cor­
poration or an examiner, is, together with those who aid
him, guilty of a misdemeanor, for which the penalty is
imprisonment for from five to ten years (1903, chap.
52, 14).
The provision making it larceny to receive deposits
while insolvent (see Banks, III) applies to every “ banking
institution” (254, amd. by 1899, chap. 40).

456

NEW YORK.
The State of New York has a complete banking law
containing general provisions, and provisions dealing
with banks, with savings banks, and with trust com­
panies separately. Individual bankers are, when they ac­
cept the benefits of the banking law, for the most part
treated as banks are. There is separate legislation also
for building and loan associations; cooperative loan asso­
ciations; mortgage, loan, and investment corporations;
safe deposit companies and associations for loaning money
on personal property. The digest treats separately banks,
savings banks, and trust companies, with as little repeti­
tion as possible, inserting the provisions applicable to all
corporations subject to the banking act, only once, under
“ Banks.” Elaborate provisions for circulation (secs.
83-106) are omitted. The legislature of 1909 enacted a
new revision of the statutes of the State, known as the
Consolidated Laws, of which the banking law is chapter 2;
references, where they are merely numbers in parentheses,
are to sections in that chapter.
BANKS.
I.— T erms

of

I ncorporation.

The superintendent of banks, when the necessary
formalities have been complied with by proposed incor­
porators, determines, weighing their character and fitness
and the needs of the locality, whether it is expedient and




457

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National

Monetary

Commission

desirable for them to incorporate as a bank (63). The
capital of banks in villages not exceeding 2,000 must be
not less than $25,000; in cities, villages, or towns exceed­
ing 2,000 and not exceeding 30,000, it must be not less
than $50,000; and elsewhere it must be $100,000 (60).
The superintendent does not authorize beginning business
unless it appears on examination that the requisite capital
has been paid in in cash (12 and 68).
Bank directors may declare semiannual or quarterly
dividends out of net profits, which are defined in 28 and
29; but before declaring a dividend a corporation must
carry one-tenth of its net profits to surplus fund until
the surplus amounts to 20 per cent of the capital (27).
II.— L iabilities

and

D uties of Stockholders
Directors.

and

It is a constitutional provision that the stockholders
of all corporations “ for banking purposes” are individu­
ally liable to an amount equal to that of the stock they
hold for all the debts of their corporations (constitu­
tion, Art. V III, sec. 7); bank stockholders are liable to
the extent of the amount of their stock at par, in addi­
tion to the amount invested in the shares (71).
There must be not fewer than five directors of every
bank. They must all be citizens of the United States,
and three-fourths of them must be residents of New
York. Each director must own at least $1,000 of the
stock of his bank if the bank is capitalized at $50,000 or
over, and if it is capitalized at less, $500 of its stock (69).
The directors of all corporations, whether banks, savings
banks, or trust companies, must meet once a month.
They must appoint officers to report to them, or to a com­
mittee of not fewer than five of them, at each meeting, a
statement of transactions between meetings, this state­
ment to include purchases and sales of securities; dis­
458

V

N e w

York

S t a t e

B a n k s

counts and loans of $1,000 and over, with items as to col­
lateral; and, where the liability of an individual, firm, or
corporation to the banking corporation has increased
$1,000 or more since the last meeting, the name of the
borrower with the collateral furnished by him (42). See
below, under Reports, details of the semiannual reports
and examinations made by directors.
III. — Supervision .
The superintendent of banks of the State, who is chief
officer of the banking department, is appointed by the
governor for terms of three years, and may not be inter­
ested in any banking institution; his salary is $7,000 a
year (3). He may appoint three deputies, and clerks,
examiners, etc. (5). The expenses of the department,
including salaries, are prorated among the institutions
subject to it (7, 158, etc.). No examiner may be ap­
pointed receiver of a bank he has examined (11). It is
within the superintendent’s discretion to determine if it
is expedient and desirable that an application for incor­
poration as a bank be granted, taking into consideration
fitness of incorporators and needs of the locality (60);
also whether the density of population, convenience, re­
sponsibility of incorporators, etc., warrant the establish­
ment of a savings bank as applied for (133 and 134); and
also to settle similar questions in the case of an application
for incorporation as a trust company (183). He passes on
proposed changes of location (31), consolidations (36), and
the advisability of branches (109 and 186). He approves
of reserve depositaries (67 and 198). In case he believes
that the capital stock of any corporation or individual
banker is impaired he orders the deficiency made good in
sixty days, whereupon the directors must assess the
stockholders. If he believes the corporation is violating




459




mm i s s i o n
its charter or the law, or is conducting its business unsafely,
he may order the practices discontinued (17).
If capital is impaired, or if the corporation refuses to
submit to examination, violates its charter or the law,
suspends payment, conducts its business unsafely, or if
from an examination or report the superintendent con­
cludes that it is unsafe or inexpedient for the corporation
to continue business, he institutes, through the attorneygeneral, proceedings for a dissolution (18); failure to make
two successive reports is ground for the same action (22).
He then holds possession, through his regular or specially
appointed deputies, till the corporation can resume busi­
ness or be finally liquidated; the statute provides elabo­
rately for the proceedings, proof of claims, payment of
dividends, etc. (19). When the reserve of a bank, banker,
or trust company falls below the required amount and is
not made good after thirty days’ notice, the superin­
tendent proceeds as against an insolvent corporation (67
and 198).
The superintendent posts weekly in his office a detailed
statement giving items of the banking department’s work
during the preceding week, including the names of corpo­
rations and bankers opening business, names of corpora­
tions opening branches, department appointments, resump­
tions of business, etc. These statements, even after
removed from the superintendent’s bulletin, must be
accessible to any applicant (43).
Banks must keep with the department stocks of the
State or of the United States amounting to $1,000, which
are held by the superintendent as a pledge of compliance
with the banking laws (76).
REPORTS.

Banks and individual bankers report to the superintend­
ent at least once in every three months with respect to a
460

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York

S t a t e

B a n k s

date designated by the superintendent. The report
includes whatever items the superintendent prescribes, in
every case including the amount of those deposits payment
of which is preferred in insolvency (21). It must be made
within ten days of the designated date (22). Within ten
days after each declaration of a dividend banks report
facts concerning their net earnings, the state of their sur­
plus, etc., to the superintendent (27).
Within thirty days after each regular quarterly report is
made the superintendent publishes a summary in an
Albany newspaper used by him for official notices; the
summary contains specified items of the report, including
capital, deposits, specie, securities held, etc., and such
other items as are necessary to inform the public of the
financial condition of the corporation or banker. The
bank or banker publishes the summary in at least one local
newspaper (24). Examiners report the result of each
examination to the superintendent (11), who may, in his
discretion, cause the report to be published (16).
Directors of all banking institutions receive itemized
reports from an officer, at their monthly meetings, as stated
under II (42). The directors of banks in April and Octo­
ber of every year must examine, or cause a committee of
three of them to examine, the books and affairs of the bank,
with reference particularly to loans and discounts, and the
security given for them, and such other matters as the
superintendent may prescribe. Within ten days after
completing this examination the directors file a report in
their bank and a duplicate in the banking department.
The report contains a statement of assets and liabilities;
a detailed statement of loans which in the directors’ opin­
ion are doubtful or worthless; a statement of loans insuffi­
ciently secured, specifying the amount of the loans and the
collateral; a statement of overdrafts; and also a full state­
ment of all matters affecting solvency (23).







M onet ary

Commission

Deposits or other claims of $50 or more unclaimed for
five years must be published for six weeks every year by
the bank or banker with whom the deposit was made (30).
The superintendent submits annually to the legislature
a report showing the condition of the corporations and
bankers reporting to him, with totals summarizing the con­
dition of them all; a statement of those authorized during
the year to begin business, with facts about each; a state­
ment of those who have stopped business during the year;
suggestions for amendments to the banking law; and sta­
tistics of the banking department, its expenses, etc. (25).
He must include also details with respect to liquidations,
dividends in insolvent corporations that are unclaimed,
etc. (19).
EXAMINATIONS.

The superintendent, personally or by an examiner, visits
all banks, trust companies, and individual bankers twice
each year. Inquiry is made as to the condition of the cor­
poration, its management, investments, the security given
its creditors, etc., its compliance with law, and such other
matters as the superintendent may prescribe. He may
require examinations more frequently if he thinks them
necessary (8). An examination must be had at once if a
report is not filed on time (22). There is a preliminary
examination to make sure that capital has been paid in
(12). When the superintendent believes capital is
impaired, he may cause a special examination to be made
to ascertain the amount of the deficiency (17). Creditors
of any banking institution and shareholders whose debts
or shares equal $1,000 or over may apply to court for an
examination by a referee (20). See Reports, for the semi­
annual examination made by directors, the result of
which they report to the superintendent.

462

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B a n k s

IV. — R eserve R equirements.
For a bank or banker having principal place of business
in a borough of i ,800,000 or over, the lawful money reserve,
consisting of lawful money of the United States, gold cer­
tificates, silver certificates, or notes of national banks,
must equal 25 per cent of the deposits, exclusive of deposits
secured by bonds of New York State; for one with principal
place of business in a borough of a population between
1,000,000 and 1,800,000 the lawful money reserve must
be 20 per cent; for one with principal place of business
elsewhere, 15 per cent. Banks located in boroughs of
1,800,000 or over may deposit on call two-fifths of the re­
serve in a bank or trust company which has a capital of at
least $200,000, or a capital of $150,000 and a surplus of
$150,000, and is approved by the superintendent as a de­
positary ; banks located in boroughs of less than 1,800,000
and not maintaining a branch in a borough of 1,800,000 or
over may deposit one-half; banks located elsewhere, threefifths. While the reserve is below the requirement, no
new loans or discounts may be made except by discounting
sight exchange, and no dividends may be declared out of
profits (67).
V.— D iscount

and

L oan R estrictions.

(A)
No bank or trust company may loan to any person,
firm, or corporation an amount exceeding one-tenth of its
capital paid in and surplus. This restriction upon the ag­
gregate amount of loans is subject to the following excep­
tions, however: First, if the bank or trust company has its
principal office in a borough of 1,800,000 or over, it may
loan to any person, firm, or corporation a sum equal to not
more than 25 per cent of its capital paid in and surplus on
security worth at least 15 per cent more than the amount
of the loans; and in smaller boroughs not more than 40 per




463




t

National

Monetary

Commission

cent on such security. Second, it may loan io per cent
of its capital and surplus as first provided, and, beyond
that, if located in a borough of 1,800,000 or over, a further
sum not exceeding 15 per cent of capital and surplus on
security worth at least 15 per cent more than the amount
of the loans, or if located elsewhere 30 per cent upon such
security. Third, purchases of commercial paper drawn in
good faith against actual existing values, and discounts of
paper owned by the person negotiating it may be made, up
to 25 per cent of capital and surplus in the case of a bank
located in a borough of 1,800,000 or over, and in the case of
banks located elsewhere up to 40 per cent. Imposed upon
all these exceptions, however, there is a general proviso
that, with the exception of the liability of the United
States or of New York, or of counties or cities in New
York, the total liability of any one person, firm, or corpo­
ration to the bank must never exceed 25 per cent of the
paid-in capital and surplus of the bank if its principal
place of business is located in a borough of 1,800,000 or
over, and must never exceed 40 per cent if it is located
elsewhere.
(B) No bank or trust company may loan on the securi­
ties of corporations the payment of which is undertaken
severally but not jointly by two or more individuals, firms,
or corporations, first, if the borrowers or underwriters are
obligated to buy the securities collateral to the loan and
have not paid in cash a sum equal to 25 per cent of the
amount that remains due on the purchase; second, if the
bank or trust company making the loan is liable directly,
indirectly, or contingently for its payment; third, if the
loan is for longer than a year; or, fourth, if the loan exceeds
25 per cent of the capital and surplus of the lender.
(C) No bank, savings bank, or trust company may loan
upon security of real estate on which there is a prior in­
cumbrance, if the aggregate unpaid amount on prior in­
464

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Yor k

S t a t e

B a n k s

cumbrances exceeds io per cent of the capital and surplus
of the lender, or if the amount loaned plus the amount
of the prior incumbrances exceeds two-thirds of the ap­
praised value of the real estate. Any real-estate securities
may be taken, however, to secure a loan previously made in
good faith. No bank having its principal place of busi­
ness in a borough of 1,800,000 or over may loan on real
estate to an amount equal to more than 15 per cent of its
total assets; no bank in a village of not over 1,500 in
which there is no savings bank may loan to an amount
equal to more than 40 per cent of its total assets; no bank
elsewhere to an amount over 25 per cent.
(D) No bank, savings bank, or trust company, nor its
officers, directors, or employees, may purchase commer­
cial paper issued by the bank for less than its face value.
(E) No bank, savings bank, or trust company may
deposit in another moneyed corporation, unless that cor­
poration has been voted a depositary by a majority of
the directors of the depositor corporation, exclusive of
directors who are officers or directors of the depositary.
(F) No officer, employee, or person interested in the
management of a bank, savings bank, or trust company
may as an individual loan upon paper offered to the cor­
poration and refused by it.
(G) No officer, director, or employee of a bank may
borrow of his bank without the consent of a majority of
the directors.
(H) No bank or trust company may accept as security
its own shares, unless it is necessary to prevent loss on a
previous debt; and in that case the stock must be dis­
posed of within six months.
(I) No bank, savings bank, or trust company may loan
on the security of the shares of another moneyed corpora­
tion so as to make the lender the holder of more than 10
per cent of the borrower corporation’s stock (27).
S- D oc. 3S 3. 6 1 -2 ----- 30




465




N at i on a l

M on et a r y

Commi s s i on

Banks may take interest at 6 per cent, but not more,
except that exchange may be added when paper is taken
which is payable at another place (74); and demand loans
of not less than $5,000 made on warehouse receipts, bills
of lading, stocks, bonds, etc., may draw interest at any
rate agreed upon (75).
VI. — Investments.
Banks may own stocks or bonds of the United States
and of the State of New York or any municipality of New
York not in arrears, and may hold real estate for their
necessary accommodation in transacting business, on
mortgage to secure loans, on conveyances to satisfy pre­
vious debts, and on purchase under judgments or mort­
gages held by the bank (66).
No bank or trust company may purchase or hold its
own shares unless it is necessary to do so in order to pre­
vent loss on a previous debt; in such case the corporation
must sell within six months (27).
VII. — Overdrafts.
Overdrafts are apparently allowed for both banks and
trust companies, for they are an item required to be
included in the April and October reports of directors (23).
See also the provision in the Penal Law against overdrafts
by officers, etc.— XI, infra.
V III. — B ranches.
Banks are not allowed to open branches except under
the following restrictions: If the bank is located in a city
of over 1,000,000 and its certificate of incorporation
authorizes it, the bank may open branches in that city for
business with the customers of the branch offices only;
this is subject to the discretionary approval of the super­
466

N ew

York

S t a t e

—

B a n k

*

intendent, who passes upon the necessity and convenience
of the branch. The capital of the bank must exceed the
amount normally required by $100,000 for each branch
opened under this law and by $50,000 for each branch
opened before it was enacted (109).
IX. — Occupation

of the

Same B uieding.

No savings bank may do business or be located in the
same room with any bank or national banking association,
or in a room communicating with any bank or national
banking association (27).
X.— U nauthorized B anking .

No person doing a banking business in New York, not
subject to the supervision of the superintendent and not
required to report to him, may use on a sign or on letter­
heads, etc., a name or other words indicating that the
business is that of a bank; the penalty for violation is
$1,000 (112). No bank may transact business without
the certificate of the superintendent (32). No corporation,
without being authorized by law, may receive deposits or
make discounts; notes and other securities given to secure
the payment of money loaned or discounted contrary to
the provisions of this section, are void, and every person
and corporation violating it forfeit $1,000 (107). No
foreign corporation except a national bank is allowed to
do deposit and discount business in New York (108).
See also these provisions of the Penal Law: Any per­
son, association, or corporation other than a moneyed
corporation, who transacts business under a corporate
name containing the words “ trust,” “ bank,” or “ sav­
ings,” etc., is guilty of a misdemeanor (Penal Law, sec.
666). Any person doing banking in New York not
subject to the supervision of the superintendent and not




467

National

Monetary

Commission

required by law to report to him, who uses an office sign
having on it a name or other words indicating that the
office is that of a bank, or who uses stationery, etc., hav­
ing on it a name or other words indicating that the busi­
ness is that of a bank, is guilty of a misdemeanor (Penal
Law, sec. 302).
X I.— P enalties .
If a bank or individual banker delays a report after it
is due, or omits required items, the penalty is $100 per
day until the deficiencies are supplied. Failure to make
two successive reports entails forfeiture of the right to
do business (22). The penalty for failure of the directors
of a bank to file their April and October reports is also
$100 a day paid by the corporation (23). A bank fail­
ing to report unclaimed deposits forfeits $100 a day (30).
The penalty on a bank and its officers for maintaining
a branch illegally is $1,000 a week so long as the branch
is open without the superintendent’s approval (109).
Section 27, restricting loans (see V), provides for penal­
ties for violations of its restrictions: Any person violating
D forfeits three times the face amount of the paper pur­
chased; any person violating F forfeits twice the amount
of the loan; any person violating G forfeits twice the
amount borrowed; and any person or corporation violat­
ing H forfeits twice the nominal amount of the stock.
The penalty for violating the subdivision relative to
declaring dividends and maintaining a surplus is loss of
charter (27).
The following penalties are provided in the Penal Law:
A director of a corporation “ having bank powers’’ who
concurs in a vote of directors by which it is intended
to make a loan or discount to a director or upon paper
upon which a director is liable, to an amount exceeding

468

/




N ew

Y o r k

S t a t e

B a n k s

that allowed by the statute; or a director, trustee, officer,
or employee “ of any corporation to which the banking
law is applicable” who maintains or attempts to main­
tain a deposit of the corporation’s funds with another
corporation on condition that the depositary make a
loan to any director, trustee, officer, or employee of the
depositor; or any officer or employee “ of any corporation
to which the banking law is applicable” who conceals
from or fails to report to the directors any discounts
or loans or purchases or sales of securities between
meetings of directors; or any director, officer, or em­
ployee “ of a trust company” who makes any agreement
on issuing a certificate of deposit whereby the holder
may receive payment before maturity, is guilty of a
misdemeanor (Penal haw, sec. 290). Any officer or agent
“ of any banking corporation” who makes a guaranty or
indorsement on behalf of a corporation whereby it be­
comes liable beyond the legal amount is guilty of a mis­
demeanor (Penal Law, sec. 293). Any officer, director,
or employee “ of any bank, banking association, savings
bank, or trust company” who knowingly overdraws his
account and obtains the funds of the institution, or who
asks or receives a consideration for procuring a loan from
or a discount by the institution or for permitting any
person, firm, or corporation to overdraw an account with
the institution, is guilty of a misdemeanor (Penal Law,
294). Any officer, agent, etc., “ of any bank, banking
association, or savings bank,” and any private banker
who receives any deposit knowing that the bank is in­
solvent, is guilty of a misdemeanor if the amount of the
deposit is less than $25, and of a felony if the amount
of the deposit is $25 or over. The felony is punishable
by imprisonment for from one to five years, fine of from
$500 to $3,000, or both (Penal Law, sec. 295). Every




469




director “ of a moneyed corporation” who participates
in a fraudulent insolvency or violates the law is guilty
of a misdemeanor (Penal Law, sec. 297).
SAVINGS BANKS.
I.— T erms

I ncorporation.

of

Thirteen or more persons, two-thirds of them residents
of the county where the bank is to be located, may become
a savings bank (130), subject to the superintendent’s dis­
cretion in determining whether the convenience of the dis­
trict and the responsibility of the incorporators warrant
granting the application (133 and 134). The statute
evidently contemplates associations without capital stock.
The trustees regulate the rate of interest or dividends,
never over 5 per cent, so that the depositors receive the
net profits of the savings bank. When the surplus that
has accrued through the earning of profits over a 5 per
cent dividend amounts to 15 per cent of the deposits,
then the trustees may divide the accumulation equitably
as an extra dividend; such disposal of surplus must be
made at least once every three years (153). The statutes
provide how the per cent of surplus shall be computed
(i54)Prohibitions on borrowing are given under VI.
II.— L iabilities

and

Duties

of

T rustees .

There must be at least thirteen trustees, who must be
residents of New York. No one may be a trustee who
allows a judgment against him to remain unpaid for
three months, or takes the benefit of a bankrupt or insol­
vent law, or makes a general assignment for creditors. A
majority must not belong to the board of directors of any
one bank or national bank (137). The trustee of a savings
bank vacates his position when he becomes trustee, officer,
470

i

New

York

Savings

Banks

or employee of another savings bank, or borrows from the
funds of his own savings bank, or guarantees money bor­
rowed of his own savings bank, or neglects his duties as
trustee for six months without excuse (140). The trustees
must meet monthly (139); and the provisions of section 42,
concerning meetings of directors and trustees and reports
to them, apply to savings banks. No trustee of a savings
bank is permitted to have any interest in the profits of
the bank, nor to receive payment for his services except
when he is engaged in regular work for the bank; and the
vote of the paid trustee may not be cast to determine his
salary (142 and 155).
If the trustees of a savings bank vote more dividends
than have been earned after deductions for expenses have
been made, they are personally liable to the savings bank
for the excess (153).
III. — Supervision.
The same superintendent, subject to the same general
provisions as were enumerated in discussing banks, has
supervision over savings banks. He proceeds against
savings banks which have violated the law, or which refuse
to allow an examination of their books, etc., as he does
against banks (17, 18, 19, and 22). He may also proceed
against savings banks which violate the spirit of the rule
allowing them to deposit their funds pending good oppor­
tunities to invest (149). He approves savings bank build­
ings and changes of location, and may permit buildings
and lot to exceed 25 per cent of surplus (147). He must
approve all borrowing by savings banks and pledges of
their securities (152).
REPORTS.

Savings banks report semiannually, before August 1 and
February 1, to the superintendent, their condition on the




471




)

M o n et a r y

Commission

mornings of July i and January i, giving items of assets as
follows: the amount loaned on bond and mortgage; a list
of the bonds and mortgages, with the location of mort­
gaged premises not previously reported on; a list of such
previously reported on as have been paid, wholly or in part,
or foreclosed, with the amount of payments; the cost, date
of purchase, date of maturity, rate of interest, par value,
and estimated investment value of all stock or bond invest­
ments, designating each particular kind of stock or bond;
the amount loaned on securities, with a statement of the
collateral; the amount invested in real estate, giving its
cost; the amount of cash on hand; the amount of cash on
deposit, with what banks, and what amounts in each; and
such other information as the superintendent may require.
The statute provides how investment values are to be com­
puted. Items of liabilities must include the amount due
depositors, including dividends. General items must
include: the amount deposited during the previous year
and the amount withdrawn; the amount of interest or
profits earned and the amount of dividends credited to
depositors; the number of accounts opened or reopened;
the number closed; the number open at the end of the
year; and such other information as the superintendent
may require (21). The regular semiannual reports must
be published in a local newspaper (24). A savings bank
may not receive deposits until it has sent the superin­
tendent the names and addresses of its officers (135).
The trustees receive monthly a report from a designated
officer, as before stated (42). Proceedings of the trustees
in voluntary dissolutions must be reported to the superin­
tendent (162 and 163).
Savings banks annually report to the superintendent
concerning accounts of $5 or more that have been dormant
(i. e., neither increased nor diminished, nor pass book pre-

472

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New

York

Savings

Banks

sented for credit of interest) for twenty-two years and
over; the report must give specific facts, including dates,
name of depositor, and nationality of depositor, but not
amount to the credit of the account. The superintend­
ent receives claims for these dormant deposits (30).
When, after dissolution of a'savings bank, unclaimed de­
posits are left with the superintendent, he must include a
statement of them in his annual report to the legislature
(164); see Banks for other items in the report.
The summary published by the superintendent after he
receives a quarterly bank report is not published in the
case of the semiannual reports of savings banks (24).
After each examination the examiner reports the result of
the examination to the superintendent (11), who may cause
the report to be published if he deems it proper (16).
Examinations.

The superintendent, personally or by an examiner,
visits savings banks once in two years, or more frequently
if he thinks it necessary. The examination covers the
same matters as in the case of banks, and the examiner is
subject to the same limitations (8, 11, 12, 16, 20, and 22);
see Banks.
The trustees, by a committee of not less than three of
their number, must twice a year thoroughly examine the
books of the savings bank. The statements of assets and
liabilities forwarded to the superintendent for July 1 and
January 1 is based on this examination (157).
IV.— R eserve R equirements.
Certain provisions with respect to cash allowed to be
held by a savings bank without investment are given in
the last paragraph under VI, infra. They are not require­
ments, however.




473




N a t io n a l

M on e t a ry

V.— Deposit , D iscount,

and

Commission

L oan R estrictions.

Savings banks may limit the amount which one person
or society may deposit. In any case the deposit of one
individual, exclusive of deposits arising from judicial sales
or trust funds or interest, must not exceed $3,000, nor the
deposit of one society, exclusive of accrued interest,
$5,000 (143).
Of the restrictions given under Banks, V, prescribed by
section 27, savings banks are subject to those against
loans on security of real estate, in paragraph C (see V,
Banks); to the prohibition of purchase by the corpora­
tion or its officers, etc., of paper issued by the corporation
for less than its face value, paragraph D; to the rule for
the designation of depositaries, paragraph E; to the pro­
vision that officers may not loan upon paper offered to the
corporation and refused by it, paragraph F; and to the
prohibition against loaning on the security of shares of
another moneyed corporation to such an extent as to make
the lender holder of more than 10 per cent of the bor­
rower’s stock, paragraph I (27).
Savings banks must not loan to their trustees (140 and
142); they must not loan on personal securities (150);
they must not issue certificates of deposit payable on de­
mand or on a fixed day, nor pay interest, except their
regular dividends (152).
See also VI, below.
VI.— Investments.

Savings banks are not permitted to deal in land or per­
sonalty or commercial paper, nor to borrow pledging secu­
rities except with the approval of the superintendent and
by vote of a majority of the trustees (152). They may
hold real estate only for necessary buildings, subject to the
superintendent’s approval; and unless he approves, the
lot and buildings, though part may be rented, must not
474

New

York

Savings

Banks

cost more than 25 per cent of the surplus. Savings banks
may purchase at foreclosure sales on mortgages owned by
them, may purchase at sales on judgments rendered for
debts due them, or in settlements to secure such debts,
but the land so acquired must be sold within five years
(i47)The provisions for investments for savings banks are
minute and complex. Omitting minor distinctions, they
may invest, first, in stocks and bonds of the United
States; second, in stocks and bonds of New York State;
third, in stocks or bonds of any State which has within
ten years before the investment not defaulted in payment
of any debt; fourth, in the stocks or bonds of any city,
town, etc., of New York; fifth, in stocks or bonds of any
city in a State admitted to statehood prior to 1896, which
city since 1861 has not repudiated payment of any debt,
provided the city has a population of not less than 45,000,
was incorporated twenty-five years before the invest­
ment, has not since 1878 defaulted for more than ninety
days on its debts, nor compromised them, and is not at
the time of the investment indebted beyond 7 per cent of
its valuation for taxes, including the debts of municipal
corporations or subdivisions, except counties, that are
included wholly or partly within the limits of the city, but
deducting water debt and sinking fund; sixth, in bonds
and mortgages on unincumbered real property in New
York to the extent of 60 per cent of its value, but not more
than 65 per cent of the whole amount of deposits of the
savings bank may be thus invested; if the real property
is unimproved, the mortgage must not be for more than
40 per cent of the value of the land, and mortgages
must always be approved by a committee of trustees.
Further investments permitted are as follows: (a) First
mortgage bonds of a railroad corporation of New York,
the principal part of whose railroad is located in New




475




N at i on a l

M on et a r y

Commission

York, or first mortgage bonds of any railroad corporation
of any State, controlled and operated as part of the system
of such a New York railroad if a majority of the stock of
the controlled railroad is owned by such a New York rail­
road, or in the refunding bonds of any railroad companies
satisfying the above description; the companies issuing
the bonds must have paid interest on their mortgage debt
and 4 per cent dividends for five years, and the capital of
the issuing corporation must equal one-third of its total
mortgage debt. (6) Mortgage bonds of fourteen named
railroads; also the mortgage bonds of railroads leased,
operated, or controlled by one of the named companies, if
the controlling corporation guarantees the bonds, and if
the company issuing the bonds has earned 4 per cent
dividends for ten years, and its stock equals one-third of
its bonded debt; these bonds must be secured by first or
refunding mortgage, (c) Mortgage bonds of two named
railroads so long as they pay 4 per cent dividends, pro­
vided their capital stock equals one-third their bonded
debt; these bonds must be secured by first or refunding
mortgage. (d) First mortgage or refunding bonds of one
<
named railroad, provided its capital equals one-third its
bonded debt, and provided the railroad is of standard
gauge. Also refunding bonds of another named railroad.
(e) Mortgage bonds of any railroad incorporated in one
of the United States which owns 500 miles of standard
gauge railroad, exclusive of sidings, in the United States,
provided that for five years it has paid principal and in­
terest of its mortgage debt and 4 per cent dividends, and
provided that for five years its gross earnings, including
the earnings of subsidiary companies, have been at least
five times the amount necessary to pay interest on out­
standing debts and rentals, and provided the bonds are
secured by first or refunding mortgage covering 75 per
476

New

York

Savings

Banks

cent of the railroad’s line; these mortgages must not au­
thorize an issue of bonds which, together with outstanding
prior debts, exceeds three times capital stock. (/) Any
railroad mortgage bonds which would be a legal invest­
ment under (e) except for the fact that the railroad issu­
ing the bonds owns less than 500 miles of line, provided
that during the previous five years its gross earnings, in­
cluding those of subsidiary lines, have been at least
$10,000,000. (g) Mortgage bonds of a railroad corpora­
tion described in (e) or (/), or mortgage bonds of a railroad
owned by such a corporation, assumed or guaranteed by
it, provided the bonds are prior to or are to be refunded
by a general mortgage of the corporation, the bonds
secured by which are a legal investment under (e) or (/),
and provided further the general mortgage covers all the
real property upon which the mortgage securing the
underlying bonds is a lien, (h) Any railroad mortgage
bonds which would be a legal investment under (e) or (g) ,
except for the fact that the railroad issuing the bonds
owns less than 500 miles of road, provided the bonds are
guaranteed or assumed by a corporation whose first or
refunding mortgage bonds are a legal investment under
(e) or (/); but no bonds thus guaranteed or assumed are a
legal investment if the mortgage securing them authorizes
a total issue of bonds which, with prior debts of the guar­
anteeing or assuming corporation, exceeds three times its
capital, (i) First mortgage bonds of a railroad whose
entire capital is owned by and which is operated by a
railroad whose last issued refunding bonds are a legal
investment under (a), (e) , or (/), provided these bonds are
guaranteed by the owning and operating company, and
provided the mortgage securing them does not authorize
an issue of more than $20,000 of bonds per mile; but no
bonds thus guaranteed shall be a legal investment if the




477




N at i on a l

M on e t a r y

Commission

mortgage securing them authorizes a total issue of bonds
which, together with prior debts of the guaranteeing com­
pany, exceeds three times its capital stock.
Bonds which have been a legal investment are not
rendered illegal by the sale of the mortgaged property or
by the consolidation of the issuing or assuming railroad
with another railroad, provided the consolidated or pur­
chasing railroad assumes the bonds and continues to pay
interest or dividends, or both, on the securities issued to
acquire the stock of the company taken over or the prop­
erty purchased to an amount equal to 4 per cent of the
capital stock outstanding at the time of the consolidation
or purchase of the issuing or assuming corporation.
Not more than 25 per cent of the assets of a savings
bank may be loaned or invested in railroad bonds; not
more than 10 per cent of its assets may be invested in the
bonds of any one railroad described under (a); and not
more than 5 per cent of its assets in the bonds of any other
railroad (146).
A fund not exceeding 10 per cent of all the deposits may
be held by a savings bank in cash on hand or on deposit
for current expenses, but the deposit in any one depositary
must not exceed 25 per cent of the capital and surplus
of the depositary. This fund may be loaned on pledge of
certain of the securities in which a savings bank may
invest. The loan, however, must never exceed 90 per
cent of the cash value of the securities pledged (148).
This depositing is also subject to the rule that the deposi­
tary must be voted one by a majority of the directors of
the depositor, exclusive of those who are officers of the
depositary (27). Savings banks may deposit tempo­
rarily the excess of current daily receipts over payments
pending a chance to invest (149).

478

New

York

Savings

Banks

V III .— B ranches.
There, is no express provision respecting branches of
savings banks. The provision given under Banks reads:
“ No bank,” etc. (109). The certificate of incorporation
of a savings bank must state “ the place where its busi­
ness is to be transacted, designating the particular city,
village, or town, and, if in a city, the ward therein” (130).
IX.— Occupation

of the

Same B uieding.

(See Banks, IX.)
X.— U nauthorized B anking .

No person, firm, or corporation may use “ savings” in
its business or in advertising, or do a savings deposit
business, except savings banks organized under the New
York statutes, offenders forfeit $100 per day. Despite
the prohibition on unauthorized savings banking, how­
ever, principals of public schools may collect savings
from their pupils and deposit them, using in their circu­
lars such words as “ school savings banks” (160). No
savings bank may transact business without the certifi­
cate of the superintendent (32). See also sections of the
Penal Taw, under Banks, X.
X I.— P enalties .
Failure to report on time entails, as in the case of banks,
forfeit of $100 per day; failure to make two successive
reports entails forfeiture of charter (22). Savings banks
which fail to report unclaimed deposits, etc., forfeit $100
a day during the delay (30).
A savings bank which allows a majority of its trustees
to be members of the board of directors of a bank or
a national bank forfeits its charter (137). Any person




479




m m iss i on
violating the prohibition upon purchase by a savings bank
or its officers, etc., of commercial paper issued by the
bank at less than its face value forfeits three times the
face value of the paper; any person violating the pro­
hibition upon a loan by an officer, etc., on paper which
the savings bank has refused forfeits twice the amount of
the loan (27).
The provisions of the Penal Code discussed under the
head of Banks are in part also applicable to savings banks
See also Penal Law, section 296, which makes it a misde­
meanor for any officer or trustee of a savings bank to
invest its funds in unauthorized securities.
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

The capital of a trust company must be at least $500,000,
except that in cities of less than 250,000 and more than
100,000 the capital may be not less than $200,000; in
cities between 25,000 and 100,000 it may be not less than
$150,000; and in cities under 25,000 it may be not less
than $100,000 (180); this capital must be fully paid in in
cash (184).
The superintendent must be assured that all the capital
has been paid in in cash (12); he has discretion to deter­
mine if the public convenience requires this incorpora­
tion (183).
The provisions for calculating profits before declaring
dividends and for charging losses as reduction of capital
are as they were in the case of banks (28 and 29).
II.- -Liabieities

and

D uties of Stockholders
D irectors.

and

A constitutional provision, before stated, makes the
stockholders of all corporations “ for banking purposes"
480

I

New

York

—

Trust

Companies

individually liable if default is made in the payment of any
debt, for all the debts of the corporation, to the amount
of the stock held at the time of the default (constitution,
Art. VIII, sec. 7). It is provided in the banking law that
stockholders in a trust company are individually respon­
sible for its debts existing at the time it makes default on
a debt, “ but no stockholder shall be liable for the debts
of the corporation to an amount exceeding the par value
of the respective shares of stock by him held in such cor­
poration at the time of such default” (196).
Directors, of whom there must be for each trust com­
pany between thirteen and thirty, must each hold ten
shares of the stock of the company (195). They must
meet once a month and must appoint officers to report
to them or a committee of them the statement of which
details were given under this head in Banks (42). See
Banks, also, for their semiannual examination and re­
port (23).
III.— Supervision .
The general sections of the banking law dealing with
the superintendent and his examiners give him authority
over trust companies. It is within his discretion to bar
incorporation when public convenience will not be fur­
thered by the proposed trust company (183). He ap­
proves reserve depositaries, requires deficient reserves to
be made good, and proceeds against trust companies
which fail to make good their reserves in thirty days as
against insolvent corporations (198). See Banks III, for
his proceedings against delinquent corporations (17, 18,
19, and 22), and for other powers. He authorizes branches
when he has ascertained that public convenience will be
promoted by them (186).
It is provided that every corporation subject to the
banking law “ except banks, savings banks, and domestic
S. Doc. 353. 61-2-----31




481




mmission
corporations specified in articles six and eight of this chap­
ter, engaged in receiving deposits of money in trust in this
State, and required to make a report of its affairs to the
superintendent of banks ” (six and eight are articles deal­
ing with cooperative savings and loan associations and
mortgage, loan, and investment companies) must deposit
with the superintendent securities of various sorts and in
various amounts, to be held by the superintendent in
trust for depositors and creditors, paying the interest to
the corporation (14).
REPORTS.

The reports of trust companies are provided for in the
same terms as are those of banks; they must be made once
in every three months in respect to a date designated by
the superintendent, within ten days after that day, and
must be published in a local newspaper; the superintendent
publishes his summary, as in the case of banks (21, 22, and
24). A designated officer reports monthly to the directors
(42). After each examination, the examiner reports its
result to the superintendent (11), who may publish the
report if he wishes (16). See Banks, for superintendent’s
annual report to the legislature and for directors’ semi­
annual report. The report of unclaimed deposits and
the report of net earnings and surplus after the declara­
tion of each dividend, are required only of “ banks” (27
and 30). Before beginning business a trust company must
file with the superintendent a list of its stockholders, with
address and stock holdings of each (185).
EXAMINATIONS.

Here also trust companies are subject to the same pro­
visions as banks are; they are examined twice a year on
matters previously enumerated (8, 11, 12, 16, 17, 20, 22.
482

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—

N ew

Yo r k

Trust

Companies

and 23); see Banks. Trust company directors make April
and October examinations, such as are required of bank
directors (23). There is a preliminary examination by the
banking department to make sure capital has been paid
in (184).
IV.— R eserve R equirements.

First.— A trust company having a principal place of
business or a branch in a borough which has a population
of 1,800,000 or over must have a reserve fund of at least 15
per cent of its deposits, exclusive of moneys held in trust
not payable within thirty days, exclusive also of time
deposits not payable within thirty days represented by cer­
tificates, and exclusive also of deposits secured by bonds of
New York State. This reserve must consist of either law­
ful money of the United States, gold certificates, silver
certificates, or national-bank notes.
Second^ A trust company having its principal place of
business in a borough which has a population of less than
1,800,000 (provided the trust company has no branch in
a borough of over 1,800,000) must have a reserve of 15 per
cent of the aggregate deposits, exclusive of the same
deposits that were enumerated above. Only two-thirds of
this reserve, however, must consist in the funds prescribed
for the trust companies in the larger boroughs; the other
one-third may be in the shape of deposits subject to call in
a bank or trust company in the State, with a capital of at
least $200,000, or with a capital and surplus of at least
$300,000; the depositary must be approved by the super­
intendent of banks.
Third— A trust company having a principal place of
business elsewhere must hold a reserve equal to at least
10 per cent of its deposits, exclusive of the sorts enumer­
ated in the first paragraph above. Half of this reserve
must be in the lawful money prescribed in the other cases,




483




National

Monetary

Commission

and the other half may be on deposit in a bank or trust
company in the State approved by the superintendent
of banks, with capital of $200,000 or capital and surplus of
$300,000. If the reserve falls below, the company must
make no new loans except by purchase of sight exchange,
nor pay dividends till the reserve is restored (198).
V.— D iscount

and

L oan R estrictions.

Trust companies are subject to most of the provisions
of section 27. The restrictions upon loans to any one
person, firm, or corporation are as stated in paragraph A
under this head under Banks; the restrictions upon loans
made on securities of corporations where payment is
undertaken severally, but not jointly, by two or more
individuals, firms, or corporations are as stated in para­
graph B; the restrictions upon loans upon the security
of real estate are as stated under C. The prohibition
upon purchase by a trust company or any director, etc.,
of paper issued by the corporation for less than its face
value is as stated in paragraph D. The requirements
in choosing depositaries are as stated in E. No officer
etc., may, as an individual, loan upon paper which the
corporation has refused, as stated in F. The prohibition
on holding the corporation’s own shares either as security
or by purchase is as stated in H. The prohibition against
loaning so as to hold more than 10 per cent of a borrow­
ing monied corporation’s stock is as stated in I. Note
that G applies to “ any bank,” and therefore not to trust
companies (27).
No trust company may loan an amount equal to more
than one-tenth of its capital stock to any director or
officer, and no loan may be made to any director or officer
without the consent of a majority of the directors (186).

484

N e w Y or k —

Trust

Companies

VI. — I nvestments.
Trust companies may hold real property that is nec­
essary for their business or that is acquired in satisfaction
of debts under sales, judgments, or mortgages, or in
settlements (186).
Trust companies must invest their capital in bonds and
mortgages on unincumbered real property in New York
not exceeding 60 per cent of the value of the property,
or in stocks or bonds of New York State, of the United
States, or of municipalities of New York. Trust funds
may be invested as capital is, or in securities of any
State, “ or in such real or personal securities as it (the
company) may deem proper ” (193). A trust company may
not hold stock in any private corporation to an amount
exceeding 10 per cent of the capital, surplus, and undi­
vided profits of the corporation holding, nor may a trust
company hold stock of another monied corporation ex­
ceeding 10 per cent of the total stock of the corporation
whose stock is held, except in the case of an adjacent
safe deposit company (194).
See Banks for the prohibition upon a trust company’s
holding its own stock (27).
V II. — Overdrafts.
(See this heading under Banks.)
VIII. — B ranches.
Trust companies are prohibited from doing business
by branch offices in a city not named in the certificate
of incorporation as the place of the company’s business;
written approval of the superintendent, which he may
give or withhold at his discretion, is a prerequisite to
opening a branch; the capital of the company must
exceed that normally required by $100,000 for each
branch (186).




485




National

Monetary

IX.— Occupation

of the

Commission
Same B uilding.

See Banks, IX.
X.— U nauthorized T rust Company B usiness.

Foreign corporations are denied most trust companypowers (186). No trust company may transact business
without the certificate of the superintendent (32). See
also sections of the Penal Taw, under Banks, X.
X I.— P enalties .
The penalties are in general the same as those for
violation of law by banks. Failure to report entails a
forfeit of $100 per day. Failure to make two successive
reports entails forfeiture of charter (22). Failure of
directors to file their April and October reports entails
a $100 a day penalty, paid by the corporation (23).
There is a $1,000 a week penalty for maintaining an
illegal branch (186). See Banks, XI, for the penalties
for violating various provisions of section 27; all are
applicable to trust companies except G, which applies to
“ any bank,” and except the penalty of loss of charter
for violating provisions dealing with dividends and sur­
plus. This latter provision puts certain requirements
on “ any bank” wTh respect to declaring dividends, after
which it requires “ each corporation” to make a report
on dividends, net warnings, etc.
The various misdemeanors specified in the Penal Taw
(see Banks, XI) apply, many of them, to trust companies,
including especially the agreement by an employee of a
trust company with a depositor that the depositor’s cer­
tificates be paid before maturity (Penal Law, sec. 290).
Directors who open a branch without the wr
ritten ap­
proval of the superintendent forfeit $1,000 per week (186).
486

NORTH CAROLINA.
“ Banks ” is the title of chapter 7 of the Revisal of 1905
of the laws of North Carolina. This act as originally
passed applied to commercial banks and savings banks.
Chapter 829 of the public laws of North Carolina for 1907
was designed, according to its title, to amend chapter 7
by placing trust companies under the laws and rules
governing banks. This was done by inserting at various
places in chapter 7 additions extending it to “ banking
and trust, fiduciary, and surety companies.” The result
seems to be that chapter 7 now applies indiscriminately
to banks, savings banks, and trust companies that also
do a banking business; the digest is accordingly not
divided under those three heads. Nevertheless, since
the amendment in certain sections left the language of the
original chapter in such condition that it by no means
clearly applies to all classes, such instances are indicated
in the digest by quoting the doubtful language of the
statute as it now stands. There are, besides, a few
sections which are framed to apply only to one class,
and these also are indicated. The citations are to sections
in the Revisal of 1905 as amended by chapter 829 of 1907.
The statutes have been examined through the special
session of 1908 (at which an act was passed protecting
banks which issued scrip in the panic of 1907 and 1908
from the penalties upon the issue of paper to circulate as
money 1908, chap. 121), and the regular session of 1909.




487




mission
I.— T erms

of

I ncorporation.

The capital stock of a bank, savings bank, or banking,
trust, and surety company must be not less than $5,000
in cities and towns of 1,500 or less; not less than
>10,000 in cities and towns of from 1,500 to 5,000; and
not less than $25,000 elsewhere. The shares must be
of $50 or $100 (222). Before beginning banking, or
banking and trust or surety business, every company
files with the corporation commission a statement con­
taining various items. Nothing may be received in pay­
ment of capital stock but money (225). Fifty per cent of
the capital stock of every bank must be paid in in cash
before business is begun, and the rest paid in in monthly
installments of at least 10 per cent of the whole capital,
in cash; no bank may begin business with less paid-in
capital than $5,000. This provision applies in its terms
as stated only to “ every bank” (224, amd. by 1909, chap.
911). It seems likely that in case of ambiguity the stat­
ute would be read to apply to all three sorts of companies,
on the strength of the legislature’s manifest intention to
make the rules uniform for them all.
The corporation commission may withhold from any
bank, banking, and trust, fiduciary or surety company the
authorizing certificate if it has reason to believe that the
organization is formed for objects other than those con­
templated by the statute (227).
Corporations may combine the business of discount and
deposit banking known as commercial banking, and the
business of operating offices of loan and deposit known as
savings banking (222).
II.— L iabilities

and

Duties of Stockholders
D irectors.

and

The stockholders of “ every bank organized under the
laws of North Carolina” are individually responsible for
488

North Carolina — G e n e r a l Provisions
all contracts and debts of the corporation to the extent
of the amount of their stock at par in addition to the
amount invested in the shares. Here also, although the
general intent of the act of 1907 seems to have been to
bring trust companies within the scope of chapter 7, the
language of the original section has been unchanged and
is as quoted (235).
111 .— Supervision .
The supervision of banking institutions in this State
is in the hands of the corporation commission, a court
of record consisting of three commissioners elected like
other state officers and holding office for six years. They
have control over not banks alone, but also railroads,
telegraph companies, etc. (241, and Revisal of 1905, chap.
20). The corporation commission may make such rules
for the governing of banking institutions as in its judgment
seem wise (240).
I he corporation commisssion appoints a suitable person
or persons to make examinations of individuals and
corporations doing a banking business (246). These
examiners when ordered by the commission have authority
to take possession of ‘ ‘ any bank doing business under
the laws of this State,” and retain possession until a
thorough examination can be made, when, if the examiner
finds that such bank is insolvent or conducting its
business unsafely, then the examiner, if authorized by
the corporation commission, may hold possession of all
the property of “ such bank, corporation, partnership,
firm, or individual” until the commission acts on the
examiner’s report and has a receiver appointed. The
commission has power to institute proceedings for receiv­
ership or for such other relief as is necessary to pro­
tect the creditors. The commissioners may grant sixty
days in which to correct irregularities, or make good




489




N at ion a l

M on et a ry

Commission

deficiencies (250). When a receiver has been appointed he
is under the control of the commission in so far as their
orders do not conflict with the decrees of the appointing
court (1907, chap. 829, sec. 13). If the reports or exami­
nations of persons, firms, or corporations doing a banking,
trust, and surety business show that their liabilities are
equal to their capital stock the corporation commission
has power to make rules for the reduction of their lia­
bilities (242a). The commission has certain authority
over reorganizations (230). Bank examiners have au­
thority to arrest for violation of the criminal laws of the
State relating to banking (251).
REPORTS.

Corporations, firms, and individuals “ transacting a
banking business or banking and trust, fiduciary, and
surety business or banking and real estate business”
make not less than four reports a year to the corpora­
tion commission in the form prescribed by the commission.
The report is published in a local newspaper (242).
Certain reports are required from state depositaries
(5371) and from all banking institutions for purposes of
taxation (5267 et seq.). In the case of persons, firms,
or corporations “ doing a banking and trust and fiduciary
and surety or guarantee business,” the reports show the
trust and surety business as part of the liabilities of the
banking institution (242a). Special reports may be called
for by the commission whenever necessary from “ any
bank, corporation, firm, or individual transacting a
banking business” (243). Once a year, or whenever
called upon, “ every bank” must file with the corporation
commission a list of its stockholders, with the number
of shares held by each (244).

490

*

North Carolina

—

G e n e ra l Provisions

EXAMINATIONS.

If examinations are necessary they may be made, pre­
liminary to granting the authorization to begin business
(226). The examiner or examiners appointed by the
corporation commission examine “ every bank, corpora­
tion, or individual doing a banking business” as often as
may be deemed necessary, and at least once a year (246).
After examining any corporation or individual doing a
banking business the examiners within ten days make a
detailed report to the commission (248). An examiner
when ordered by the commission may take possession of
“ any bank doing business under the laws of this State”
and retain possession for time enough to make a thorough
examination. If this discloses unauthorized transactions
or the like, the examiner, if authorized by the commission
holds the property pending proceedings for a receiver
(250)IV.— R eserve R equirements.

“ Every bank or banking and trust company doing busi­
ness and engaging in a banking, trust, fiduciary, or surety
business and dealing in real estate ” must keep in available
funds a reserve equal to 15 per cent of its deposits. Twofifths of the 15 per cent must be in cash in the vaults of the
bank. Savings banks are required to keep a reserve in
available funds equal to 5 per cent of their deposits (231).
Available funds generally must consist of cash on hand
and balances due from solvent banks. Cash may include
lawful money of the United States and exchange for any
clearing house association. If available funds fall below
the reserve requirement, no new loans may be made except
by discounting or purchasing sight bills of exchange, and
no dividends may be declared (232).




491




National

Mone t ar y

V.— Discount

and

C o mmi s s i o n

L oan R estrictions.

The total liabilities to any “ banking institution or
banking or trust company doing a fiduciary and surety
business and dealing in real estate’’ of any person, com­
pany, or firm for money borrowed including in company or
firm liabilities, liabilities of the members, must never
exceed one-tenth of the paid-in capital of the bank-. The
discount of bills of exchange drawn against existing values,
and generally the discount of commercial paper, are not
considered money borrowed. This section, however, does
not apply “ to banks” with a paid-up capital of $100,000
or less (233).
“ No bank” may hold as pledgee any portion of its own
capital stock (229).
VI.— I nvestments.

“ Banking corporations, banking and trust companies
doing a fiduciary and surety business” may hold real
estate, if it is necessary for the convenient transaction of
their business, including other apartments that may be
rented (this investment not to exceed 25 per cent of capital
and surplus, however); if the real estate is mortgaged to
secure loans due the bank; if it is conveyed to it in satis­
faction of previous debts; or if it is acquired by sale under
execution or judgment in favor of the purchasing bank
(228). “ Such bank and trust company doing a general
banking and trust, fiduciary and surety business and deal­
ing in real estate” must not invest more than 25 per cent
of its capital and surplus in real estate, unless to protect
loans or debts previously contracted, or unless acquired
on sale under execution in its favor (228a).
“ No bank” may purchase its own stock unless the pur­
chase is necessary to prevent loss on a previous debt (229).
492

No r t h C a r o l i n a — G e n e r a l Pr ovi s i ons
X I.— P enalties .
The penalty for failing to report or publish required
statements is $200 (245). Any person who willfully makes
a false statement in the books of any banking institution
or exhibits false papers to deceive an examiner or publishes
a false report is guilty of a felony punishable by imprison­
ment of from four months to ten years (3326). Officers
and directors of banks, who without authority from the
directors issue certificates of deposit, draw negotiable
paper, assign assets, make fraudulent report or state­
ments or aid in doing these things are guilty of a felony.
The same section provides in a common form for embezzle­
ment (3325).
If any bank examiner makes a false report of the condi­
tion of an examined bank with intent to abet the operation
of an insolvent bank or if the examiner accepts a bribe to
induce him not to report an examination, or if he neglects
to examine by reason of having taken a bribe, he is guilty
of a felony, punishable by imprisonment of from four
months to ten years (3324).

493

L-

Jl




__AJaJ




»

NORTH DAKOTA.
The digest for this State is based on the Revised Codes,
1905,and the session laws of 1907 and 1909. The princi­
pal act is one passed in 1905, the language of which refers
continually to “ such association,” an expression which
goes back to “ any association organized under the provi­
sions of this chapter,” and in some instances to “ every
banking association, savings bank, and trust company or­
ganized under this chapter.” It seems likely, therefore,
that the chapter is meant to apply to all three sorts of in­
stitutions. It has been digested under “ Banks ” only, and
a hint is given under “ Savings Banks ” of the various pro­
visions of the chapter which expressly mention savings
banks. Except for the sections in this act which men­
tion savings banks and one or two other provisions of
the codes, savings banks are not subject to particular
laws; so it is readily believed that they are subject to
the banking law. If it is true that trust companies are,
too, they are legislated for also, nevertheless, among the
provisions relating to corporations, under the chapter
“ Organization and management of annuity, safe de­
posit, and trust companies.’ Provisions of this chapter
are digested under the heading “ Trust Companies;” but
the probable application of the bank chapter to trust com­
panies must be also borne in mind. Numbers in par­
entheses refer to sections in the Revised Codes of 1905.
494

North

Dakota

State

Banks

BANKS.
I.— T erms

of

I ncorporation.

No association may be organized under the banking
chapter in cities, towns, or villages of i ,000 or less with a
capital of less than $10,000; in those of 1,000 to 2,000,
with less than $20,000; in those of 2,000 to 3,000, with
less than $30,000; in those of 3,000 to 4,000, with less than
$35>°°o; in those of 4,000 to 5,000, with less than $40,000;
in those of over 5,000, with less than $50,000. At least
50 per cent of the capital must be paid in before business
is begun, and the balance must be paid in in installments
of not less than 10 per cent of the capital at the end of
each month (4641). Shares are of $100 each (4645).
Dividends may be declared semiannually or annually
out of net profits (never from capital; nor may capital be
otherwise impaired— 4650); but before the declaration,
one-tenth of net profits must be carried to surplus until
it amounts to 20 per cent of capital (4648).
“ Every banking association in this State” is exempt
from attachment and execution (4673).
II-— L iabilities

and

D uties of Stockholders
Directors.

and

The shareholders of every association organized under
the banking chapter are individually liable for debts of
the association to the extent of the amount of their stock,
in addition to the amount invested in the shares. This
liability continues for one year after transfer of stock
(4653)Every director must own at least 10 shares of stock
(4649). Iwo-thirds of the directors must be residents of
North Dakota (4639). In January and July of each year
t e directors examine the affairs of the bank, reporting




495




M on et a r y

C o mmi s s i o n

to the state banking board (4667). Any bank officer
or employee who pays out funds on a check for which
there is not the required sum on deposit is personally
liable to the bank for the amount paid (4669). Although
banks which are disposing of loans on real estate may not
guarantee the payment of the loan, the person or officer
who illegally attempts to bind the bank by such guaranty
is liable under it (4639).
III.— Supervision .
There is a state banking board composed of the governor,
the secretary of state, and the attorney-general. This
board holds monthly meetings, and special meetings at
the call of the governor. It controls banks, savings
banks, and trust companies. A t its regular meetings it
examines all reports, and reports of examinations turned
in by the state examiner (4635). The state examiner,
an official who inspects public accounts, etc., is ex officio
superintendent of banks. He does the examining and
reports to the state banking board. He must not be
interested in any association organized under the banking
chapter (4664). His term of office is two years (140).
Every bank is given an official number by the secretary
of state (1909, chap. 43).
The secretary of state withholds permission to begin
business if he has reason to believe the corporation is not
organized for legitimate purposes (4639). Reductions
and increases in capital must be approved by the state
banking board (4646). The board must determine what
are bad debts, and must make and enforce orders for the
disposal of them (4650). The board approves of reserve
depositaries. The board must notify a bank whose
reserve is below the required amount, and if it fails after
thirty days to repair the reserve, the board imposes a
496

North

Dakota

State

Banks

penalty (4655). The secretary of state may withhold a
certificate from a corporation which he has reason to
suppose is formed for other than legitimate objects (4639).
On being satisfied of the insolvency of any banking
association organized under the banking chapter, or of the
violation of any of the provisions of the chapter, the
board, after an examination, takes charge of the insolvent
bank, pending action by a court. The board appoints a
temporary receiver (4668). If it appears that the capital
stock of a bank is impaired, the board must make an
order restraining the declaring of dividends and require
the deficit to be made good (4671). If any bank fails to
pay a judgment against it, the board declares the bank
insolvent and causes a receiver to be appointed (4673).
Insolvency is defined to include failure to make good a
deficiency in reserve, and noncompliance with an order
of the board (4674) • If any bank fails to comply with a
requirement of the board or of the examiner for ninety
days, or for a shorter period if it is specified in the order,
it is deemed to have forfeited its franchise, and the state
banking board, through the attorney-general, must bring
suit to annul the bank’s existence (4663).
REPORTS.

“ Every banking association, savings bank, and trust
company organized under this chapter” must make at
least five reports a year to the state examiner, in a form
prescribed by the banking board, as nearly as possible like
the form for national bank reports. The report shows
resources and liabilities at the close of business on a
past day specified by the examiner, which must, whenever
possible, be the day on which national banks report.
Reports must be transmitted within seven days after
receipt of the examiner’s request, and an abstract must
S . D oc. 3 5 3 , 61 2----- 32




497




be published in a local newspaper. The board may call
for a special report whenever it is necessary (4652).
After the examination made by the directors in January
and July of each year they report the results to the state
banking board with suggestions and criticisms (4667).
The state examiner reports the result of every examina­
tion to the banking board (4664). The temporary re­
ceiver appointed by the state banking board reports as
soon as he has taken charge of a bank (4668). A list of
names of shareholders with amount of stock held by each
is filed twice a year with the state examiner (4670). For
reports required for taxation see 1508 and 1509; for re­
ports from depositaries of public funds see 931.
EXAMINATIONS.

The state examiner, as often as the state banking board
sees fit and at least once a year, examines “ every banking
association, savings bank, and trust company organized
under this law or the law of the State of North Dakota.’’
He reports the result to the board (4664). In the chapter
in the Code on the state examiner, a list of the details
which he must examine is given as follows: Validity and
amount of securities held, what transactions each bank
is carrying on foreign to its legitimate purposes, and its
compliance with law generally. The examiner must re­
port the results of examinations to the governor, who may
publish them (145). The directors, in January and July
of each year, make a thorough examination of the assets
of their bank, examine stocks, checks, certificates of de­
posit, and cashier’s checks, count cash, examine loans
and discounts with collateral, compare the aggregate
with the records, and report the result to the banking
board (4667). When the board is satisfied of the insol­
vency of a bank it takes charge through a temporary
49s

l

North

Dakota

State

Banks

receiver, before doing this the board makes an examina­
tion (4668). The examiner makes a thorough examina­
tion in voluntary dissolutions (4647).
IV.— R eserve R equirements.

Every bank must keep in available funds an amount,
which, after deducting the amount due to other banks,
will equal 20 per cent of total deposits. Three-fifths of
this amount may consist of balances due from good
solvent state or national banks or trust companies, which
carry a reserve sufficient to entitle them to act as deposi­
taries, are located in convenient commercial centers, and
have been approved by the state banking board'; the
remaining two-fifths must consist of actual cash, which
must not include cash items. No paper may be carried
as cash or a cash item except legitimate bank exchange
which will be cleared on the same or the next day. When
reserves fall below the required amount the bank must
not make new loans or discounts, except by purchasing
sight exchange, nor make dividends (4655).
V.

Discount

and

L oan R estrictions.

Among banking powers is that of “ loaning money upon
real or personal security, or both.” No bank may carry
among its assets loans dependent wholly upon real estate
security in an amount exceeding one-half its capital and
surplus, whatever loans on real estate there are must be
upon first mortgage (4639).
The total liability of any person, corporation, or firm,
including in firm liabilities those of the members, for
money borrowed “ and paper of the same parties as
ma ers t ereof, purchased,’’ must not exceed 15 per cent
o paid m capital and surplus, but the discount of bills of
exc ange drawn against existing values, or loans made




499




N at ion a l

M onet ary

Commission

upon produce in transit or store as collateral, if all the
papers are properly hypothcated, are not considered
money borrowed. Moreover, a bank may discount paper
actually owned by the person negotiating it without being
considered as adding to its loans (4657, amended by 1909,
chap. 45). No bank may loan on the security of its own
shares unless it is necessary to prevent loss on a previous
debt, in which case the stock must be disposed of within
six months (4654).
VI. — I nvestments.
A bank may hold only such real estate as is necessary
for its accommodation in business, not exceeding 25 per
cent of a capital of over $10,000, and 30 per cent if the
capital is $10,000 or less; such as is mortgaged for loans
or previous debts; such as is conveyed to the bank in
satisfaction of previous debts; such as is purchased at
judicial sales under liens held by the bank or is pur­
chased to secure debts due it; but no bank may hold real
estate under mortgage or that purchased to secure an
indebtedness for longer than five years (4640).
No bank may hold its own shares unless necessary to
prevent loss on a previous debt, in which case it must
dispose of the stock within six months (4654).
No bank may employ its assets in trade or commerce,
nor invest “ in the stock of any corporation, bank, part­
nership, firm, or association, nor shall it invest any of its
assets in speculative margins of stocks, bonds, grain,
provisions, produce, or other commodities, except that it
shall be lawful for banks to make advances for grain or
other products in store or in transit to market” (4672).
V II. — Overdrafts.
Any bank officer or employee w
rho pays out the funds
of the bank on the order of one who has not on deposit a
500

J

North

Dakota

State

Banks

sum equal to the check is personally liable to the bank
for the amount paid (4669) • The officer or employee of
a bank or savings bank who overdraws his account and
obtains the funds is guilty of a misdemeanor (9282).
X .— U nauthorized Banking .
No person, except national banks, may transact bank­
ing business or use such words as “ bank ” on signs, adver­
tisements, letter heads, etc., without complying with the
provisions of the banking chapter. Violation of this
provision is a misdemeanor punishable by fine of from
$500 to $1,000, imprisonment for not less than ninety
days, or both (4662).
X I.— P enalties .
Overdraft by an officer or employee of a bank or
savings bank a misdemeanor (9282). Every director
of “ a corporation having banking powers” who votes to
loan or discount to a director in an illegal amount is
guilty of a misdemeanor (9277). The state banking
board may impose a penalty of from $100 to $500 on
associations organized under the banking chapter which
fail to make good their reserve within thirty days after
notice (4655). Every officer or employee of any asso­
ciation organized under the banking chapter who knowingly makes false statements, etc., to deceive an examiner,
or subscribes to a false report, is guilty of forgery (4659).
Every association which fails to report forfeits $200 for
each delinquency (4652). Any officer, director, etc., of a
“ banking association” who receives deposits knowing
that the association is insolvent is guilty of a felony,
punishable by fine not to exceed $10,000, imprisonment
not to exceed five years, or both (4660 and 4661; and see
an apparently overridden provision in the Code in 9283).




501




N at i on a l

M onet ary

Commission

“ Any officer of a banking association, savings bank, or
trust company” violating provisions for which no par­
ticular penalty is provided suffers a fine of from $50 to
$500 for each offense (4658). It is a felony not to make
whatever returns the examiner asks for (146). It is also
a felony to hinder examination, punishable by a $1,000
fine or one year’s imprisonment (147).
SAVINGS BANKS.
Savings banks are expressly mentioned in the sections
of the banking act, creating the banking board (4635);
requiring reports (4652); subjecting banks to examina­
tion (4664); etc. See introductory paragraph under this
State.
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

Among the powers of an annuity, safe deposit, surety,
and trust company is that “ to take, accept, and hold on
deposit or for safe-keeping any and all moneys, bonds,
stocks, and other securities or personal property whatso­
ever which any * * * person or persons shall be au­
thorized or required by law or otherwise to deposit in a
bank or other safe deposit;” also the power “ to accept and
receive deposits of money for general savings account
for safe keeping or investment” (4682). Despite these
powers, however, it is provided that “ no such company
shall engage in any banking, mercantile, manufacturing,
or other business except as is * * * expressly au­
thorized” by the trust company chapter (4689).
The capital of a trust company must be not less than
$100,000, divided into shares of $100 each. Not less than
$50,000 must be actually paid in, invested, and deposited
with the state treasurer (4678 and 4679). The full
502

North

Dakota

Trust

—

Companies

amount of the subscribed capital must be paid in within
two years after business is begun (4691).
I I .-U A B iu .n s s

AND Duties of Stockholders
Directors.

and

There is no especial provision for liability of trust com­
pany shareholders.
There must be from nine to fifteen directors, a majority
of whom must be citizens of North Dakota, and each of
whom must own at least 10 shares of stock (4680). Direc­
tors are responsible to the owners of moneys received on
deposit or in trust for the validity etc., of investments
and securities at the time the investments are made and
for the safe-keeping of the securities. Special provisions
in a trust are followed, free from this liability (4683).
III.— Supervision .

See Banks, III, for officials in charge of trust company
business in North Dakota. There is a $50,000 deposit
with the state treasurer required before the corporation
is allowed to begin business. Certain securities permis­
sible for this deposit must be approved by the examiner
and auditor (4678 and 4679). The examiner has over
trust companies all authority conferred upon him over
banking corporations. If it appears from an examina­
tion or report or from other information that a trust com­
pany has committed a violation of law or is conducting
its business unsafely or that the deposit with the state
auditor is insufficient, the examiner orders a discon­
tinuance of the practices or a further deposit. When­
ever the corporation refuses to comply, or it appears to
the examiner that it is unsafe for it to continue business,
he communicates the facts to the attorney-general and
he thereupon is authorized to institute whatever proceed­
ings the case requires (4692).




503




National

Monetary

Commi ssi on

REPORTS.

When acting under appointment of the court a trust
company reports fully to it. It renders the state ex­
aminer a detailed account of its condition on the ist of
June in each year and such further accounts as he re­
quires. A condensed statement of the annual report,
approved by the examiner, must be published in a local
newspaper (4690). Note that the banking chapter on
reports includes trust companies in terms (4652).
Examinations.

The state examiner once in every six months and with­
out notice to the trust company, examines it, exercising
such authority as he does over banks (4692). Note here
also that trust companies are mentioned in the section
providing for examination of banks (4664).
V.— Discount

and

L oan R estrictions.

A trust company may loan ‘ ‘ upon such securities as
may be deemed advisable by its board of directors”
(4682) . Loans to officers, directors, and employees are
forbidden (4689).
VI.— Investments.
A trust company may hold such real estate and personal
property as may be necessary for the convenient trans­
action of its business, etc.; real estate acquired by
foreclosure in settlement of debts, etc., may continue to
be held if the directors think best. It may purchase at
foreclosure, judgment sales, etc. (4632). The directors
may invest “ all moneys received * * * on deposit
or in trust * * * in such securities as are not * * *
expressly prohibited” by the trust company chapter
(4683) .
504

North

Dakota

Trust

Companies

The $50,000 deposit and certain trust funds must be
invested in a prescribed way: In United States bonds;
North Dakota bonds; bonds of other States that are
approved by the auditor and examiner; bonds of certain
North Dakota municipalities; and first mortgages of
unincumbered real estate in North Dakota worth three
times the loan (4678 and 4688).
V II.— Overdrafts.
Directors, officers, and employees of a trust company
must not become indebted to the company “ by means of
any overdraft * * * or other contract” (4689).




55
0




OHIO.
In 1908 the legislature of Ohio, in an act printed at page
269 of the laws of Ohio for that year, provided a complete
set of rules for the organization of banks and their inspec­
tion. This statute supersedes the various banking laws
appearing in Bates’ Annotated Ohio Statutes, sixth edi­
tion, 1908, except those with regard to deposits of public
moneys in banks and the reports of such depositaries
(Bates’ Statutes, secs. 1136-1 etseq.,2M& 1536-655); and
those prohibiting banking by limited partnerships (sec.
3141). In another act found at page 528 of the laws
of 1908 the legislature regulated the organization and
inspection of building and loan associations and savings
associations. This digest covers simply the act dealing
with banks, provisions of which are applicable to banks,
savings banks, and trust companies. So many of the
provisions apply to those three classes indiscriminately
that the digest is arranged under four heads: (1) Those
provisions which apply to all; (2) those which apply to
“ commercial banks;” (3) those which apply to savings
banks; (4) those which apply to trust companies. The
numbers in parenthesis refer to sections of the act. No
legislation is here digested which is more recent than the
session laws of 1908. There was a special session in 1909,
at which, however, no laws were passed affecting the
topics covered by the digest.

Ohio

Ge n e r a l

P rovisions

GENERAL PROVISIONS.
I-— T erms

of

I ncorporation.

Any number of persons not less than five, a majority of
whom are citizens of Ohio, may establish “ a commercial
bank, a savings bank, a safe deposit company, a trust com­
pany or * * * a company having departments for
two or more or all of said classes of business” (i). All
these corporations must have a capital stock (18). If a
corporation combines two or more classes of business, it
must keep separate books of account for each class and the
transactions relating to each class are governed by the pro­
visions of the act specifically applicable to the particular
class (35).
The general provisions for capital are as follows: The
capital must be divided into shares of $100 each. The
capital of a commercial bank shall not be less than $25,000;
of a savings bank not less than $25,000; of a commercial
bank and savings bank not less than $25,000; of a com­
mercial bank and safe deposit company not less than
$25,000; of a savings bank, commercial bank, and safe
deposit company not less than $50,000; of a trust company
not less than $100,000; of a trust company and safe de­
posit company not less than $100,000; of a trust company
and savings bank not less than $100,000; of a trust com­
pany , savings bank, and safe deposit company not less than
$125,000; and of a trust company, savings bank, com­
mercial bank, and safe deposit company not less than
$125,000 (2). The entire capital stock must be sub­
scribed and at least 50 per cent paid in before the corpora­
tion can begin business; the rest must be paid in in
monthly installments of at least 10 per cent, payable at
the end of each month after the superintendent of banks
has authorized the corporation to commence business (11).




507




National

M on e t a r y

C o mmi s s i o n

The board of directors of any corporation may declare
a dividend of as much of the net profits as they shall deem
expedient, providing first for all expenses, losses, interest,
and taxes due. Before declaring a dividend, however,
not less than one-tenth of the net profits for the preced­
ing dividend period must be carried to a surplus fund
until the surplus amounts to 20 per cent of the capital (29).
II-— L iabilities

and

Duties of Stockholders
Directors.

and

An amendment to section 3 of Article X III of the con­
stitution, adopted in 1903, limits the liability of a stockholder for the debts of his corporation to the amount
unpaid by the stockholder on his stock.
There must be not fewer than five nor more than thirty
directors (6 and 22). They must meet at least once a
month (22). Each director must own at least five shares
of stock and three-fourths of the directors must be resi­
dents of Ohio (25). The board of directors may appoint
an executive committee, to consist of at least three
directors, to meet not less frequently than once a month,
and to approve or disapprove all loans and investments,
subject to the control of the board of directors (23). A
committee of two directors or stockholders must be
appointed annually by the board of directors to examine
the assets and liabilities of the corporation and to report
to the directors. This report is filed with the superin­
tendent of banks (30).
III.— Supervision .
The state official in charge of banking is the superin­
tendent of banks. His term is four years (78), and his
salary $5,000 a year (82). Neither he nor the examiners he
appoints may be interested in banking (87). They are not
50 8

Ohio

G e n e r a l

Provisions

allowed to receive extra pay (95). They must keep secret
all information obtained in the course of examinations,
except that which the public duty requires them to report
(106). No person employed by the superintendent may
be appointed receiver of a banking institution (107).
No business may be done until the superintendent has
authorized the corporation to begin (10). The superin­
tendent may withhold his certificate that the corporation
has complied with law if he has reason to believe that the
corporation has been formed for any other purpose than
the legitimate business contemplated by the statute (16).
Under certain circumstances the superintendent may
institute proceedings for a receivership. He must do so
if by the cancellation of stock of a delinquent holder the
capital of the corporation is reduced below the legal
minimum and is not increased to that point by addi­
tional subscriptions within sixty days from the date of
the cancellation (14); also if a corporation has refused to
pay its depositors, or is insolvent, or if its capital has been
impaired for a period of ninety days, but in certain cases
the corporation may show that the interests of its deposi­
tors, creditors, and stockholders will not be endangered
by allowing it to continue business, under which circum­
stances the superintendent must not apply for the receiver
(41); also if a corporation refuses to be examined (99);
if it appears from a report that the capital of a corpora­
tion is impaired, and upon examination the superin­
tendent finds an impairment, which the corporation does
not make good after written notice (100 and 101); if any
banking institution fails to maintain its required reserve
and upon notice from the superintendent fails to make
good the reserve (52, 58, and 75); if a banking institution,
having purchased shares of its own stock to save itself
from loss on a previous debt, fails to dispose of the stock
on thirty days’ notice from the superintendent (53).




509




»

National

Monetary

Commission

The superintendent may order a banking institution to
sell certain securities which he considers undesirable (500
57b 70b
,
).
REPORTS.

All banking institutions report to the superintendent
not less than four times each year, at such times and in
such form as he requires (108). The reports exhibit in
detail and under appropriate heads a statement of
resources, assets, and liabilities at the close of business
of any past day specified by the superintendent; the day
is uniform throughout the State (109). The reports are
required to be sent to the superintendent within ten days
after receipt of his request, and they must be published in
a local newspaper (no). The superintendent may call for
special reports whenever he thinks them necessary ( in ) .
At the end of each fiscal year the superintendent reports
to the governor, giving a summary of the condition of all
reporting companies, with an abstract of their total
capital, liabilities, and resources, classifying the report
by corporations, specifying the amount held by the report­
ing banks in lawful money, and adding whatever other
information he thinks necessary. This report also includes
a statement of corporations whose business has been
closed, with figures as to their liabilities and the amount
paid their creditors; items with regard to the conduct of the
department and its receipts from fees and penalties (114).
EXAMINATIONS.

Permission to begin business is not given until the
superintendent has made a preliminary examination to
assure himself that the proper amount of capital has
been paid in, and that the names and residences of
directors have been furnished, and that other prelim­
inary requirements of law have been complied with (15).
510

Ohi o

—

General

Provisions

The superintendent or one of his examiners at least
twice a year must thoroughly examine the cash, bills,
securities, accounts, and affairs of all banking corpora­
tions (96). If the board of directors or the stockholders
of a banking institution request it and the superintendent
thinks such an examination desirable, a special examina­
tion may be made (93). All examinations must be made
without previous notice to the corporation examined (104).
A committee of at least two directors or stockholders is
appointed annually by the board of directors to examine
the assets and liabilities of the corporation and to report
the result to the board of directors. These reports are
filed with the superintendent (30).
V.— Discount

and

L oan R estrictions.

No banking corporation is allowed to loan money on
pledge of shares of its own capital stock, unless so taking
them is necessary to prevent loss upon a debt previously
contracted (53). No loan is allowed to be made to an
officer of any banking corporation unless duly authorized
by a majority of the directors. When so authorized the
loans must be made and secured in the same manner as
loans to other persons (23). (See also VI, below.)
VI.— I nvestments.

No banking corporation is allowed to purchase or hold
its own shares unless the purchase is necessary to prevent
loss upon a previous debt, and stock so purchased must
be sold within six months from its purchase on thirty days’
notice from the superintendent of banks (53). No bank­
ing corporation may invest more than 20 per cent of its
capital and surplus in any one stock, security, or loan,
unless it be in obligations enumerated in paragraphs (6),
(c), and {d) of section 50, digested under Banks, VI,




5“




infra, or in a building and vaults (64); as appears under
Banks, however, there may be a greater single loan than
this 20 per cent, by a commercial bank, if it is on farm­
land mortgage (47).
Overdrafts.

Although there is no provision in the act expressly
authorizing overdrafts, it seems clear they were contem­
plated as permissible, for in limiting the amount of indi­
vidual loans both by commercial banks and by savings
banks the act contains the expression, “ including over­
drafts ” (47 and 63).
X.— U nauthorized Banking .

Corporations are not allowed to use names likely to
mislead the public as to the character or purpose of the
business authorized by the charter (3). No banking cor­
poration is allowed to advertise by newspaper, letter
head, etc., a larger capital than is actually paid in (38).
No banking institution incorporated under the laws of
any other State is permitted to do any banking business in
Ohio except to lend money (80).
XI.— P enalties .

An officer or employee who certifies checks fraudulently
suffers fine of not more than $5,000, or imprisonment not
more than five years nor less than one year, or both (33).
Officers and employees who are guilty of any of the frauds
enumerated in section 44 are punished by imprisonment
not more than thirty years, or fine not exceeding $10,000,
or both (44). All persons connected with a banking insti­
tution who fail to appear when summoned to testify by the
superintendent or refuse to answer forfeit $100 (97). Any
person connected with a banking institution who aids in
51-2

—

O h i o

S t a t e

B a n k s

the receipt of funds when he knows the bank is insolvent
suffers a fine of not more than $5,000, or imprisonment not
more than five years, or both (116).
Corporations advertising a larger capital than actually
paid in forfeit $500 for every offense (38).
If the superintendent or one of his employees fails to
keep official information secret or makes false reports, he
loses his office and suffers fine of not more than $500, or
imprisonment for not less than one year or more than five
years, or both. He is besides liable to the party damaged
by his disclosures (106).
If a company fails to submit a report or to publish one
after ten days’ notice from the superintendent, it is sub­
ject to a penalty of $100 a day (112).
BANKS.
IV .— R eserve R equirements.

Commercial banks must keep a reserve of at least 15
per cent of the total deposits. Six per cent of demand
deposits and 4 per cent of time deposits must be kept in
the vaults of the bank in lawful money, national-bank
notes, or bills, notes, and gold and silver certificates of the
United States. The part of the reserve not kept in the
vaults of the bank must be kept subject to demand in
other banks or trust companies designated as depositaries
by the directors in a resolution which they certify to the
superintendents of banks (51).
V.— Discount

and

Doan R estrictions.

A commercial bank may receive deposits on which
interest is allowed. It may lend on personal security,
and discount, buy, and sell negotiable paper (49). The
loan to any one person, firm, or corporation must not
S. D oc. 353, 6 1-:




-33

513




N at i on a l

M onet ary

Commission

exceed 20 per cent of the paid-in capital and surplus of
the bank unless the loan is secured by a first mortgage on
improved farm property in a sum not to exceed 60 per
cent of the value of the property. The total liabilities,
including overdrafts, of any person, company, or firm, to
any bank, either as principal debtor or as endorser, for
money borrowed, must not exceed 20 per cent of the
paid-in capital stock and surplus. Discount of com­
mercial paper, however, is not considered as lending
money (47).
Doans by a commercial bank upon real estate security
may be made only upon a general resolution by a twothirds vote of the directors, stating to what extent the
officers may loan on real estate. The aggregate amount
of such loans must not exceed 50 per cent of the capital,
surplus, and deposits, except that a bank that combines
commercial and savings business may lend up to 60 per
cent on real estate if authorized by two-thirds of the
directors. Doans made on real estate must be upon real
estate in Ohio or in immediately adjacent States, and must
not exceed, inclusive of prior incumbrances, 40 per cent
of the value of the real estate, if unimproved, or 60 per
cent if improved (48).
See also VI, below.
VI.— I nvestments.

Commercial banks may hold real estate only as follows:
(a) Real estate on which its business buildings are erected,
but the cost of this real estate must not exceed 60 per cent
of capital and surplus; (6) real estate mortgaged to the
corporation to secure loans; (c) real estate purchased by
the corporation at sales for closing liens held by the cor­
poration, but this real estate must be sold within five
years; (d) leasehold for business purposes (46).
<14

O h i o

S a v i n g s

B a n k s

Commercial banks may invest their capital, surplus, and
deposits in or loan them upon the following: (a) Personal
or collateral securities; (b) securities of the United States
or foreign governments; (c) bonds of States of the United
States; (d) securities of political subdivisions of States
of the United States and of Canada; (e) mortgage bonds
of any corporation which has paid dividends at 4 per cent
for four years, but the bank must not invest in this sort
of security at a rate of more than 80 per cent of the mar­
ket value of the bonds, and the superintendent may order
that undesirable securities be sold within six months;
(/) notes secured by mortgages on realty where the amount
loaned, including prior incumbrances, is not over 40 per
cent of the value of the realty if unimproved and not over
60 per cent if improved; but not more than 50 per cent
of the capital, surplus, and deposits of a bank may be
invested in real estate securities of this sort (50).
SAVINGS BANKS.
IV.— R eserve R equirements.

Savings banks are required to keep as a reserve the
same percentage of their total deposits as commercial
banks are, but savings banks may invest one-half of the
reserve required to be kept in vaults in the securities
enumerated in (b) and (c) of section 50 (supra); and
where the reserve of any savings bank required to be kept
in its vaults is over $500,000, that excess may be invested
in securities of the United States (56).
V.

D iscount, L oan ,

and

Deposit R estrictions.

Ihe total liabilities, including overdrafts, of any person,
firm, or corporation to a savings bank for money bor­
rowed, must not exceed 20 per cent of the capital and




515




N a t i on a l

M on et a ry

Commission

surplus, but the discount of business paper is not considered
as money borrowed (63).
Any savings bank may receive on deposit any sum of
money that may be offered for deposit by any person,
firm, or corporation, or by any municipality or State, or
that may be ordered deposited by any court. It may pay
such interest as is agreed upon (55).
See also VI, below.
V I.— I nvestments .
Savings banks may hold land as commercial banks
may (54; and see 46).
After providing for their reserve, savings banks may
invest the residue of their funds in, or loan money on,
discount, buy, or sell commercial paper, and may invest
their capital, surplus, and deposits in, and buy and sell the
following: (a) The securities mentioned in (a), (b), (c),
[d), 0), and (/) of section 50 [supra), except that savings
banks may loan not more than 75 per cent of capital,
surplus, and deposits on notes secured by mortgage of
realty. Loans on personal security must be on the obli­
gation of more than one person, must be payable not
more than six months from their date, and must not exceed
in the aggregate 30 per cent of the capital, surplus, and
deposits of the investing savings bank. (6) Stocks which
have paid dividends for five consecutive years; also
bonds and notes of corporations, if the board of directors
or the executive committee of the investing savings bank
so vote. Savings banks shall not invest in stock of other
banking corporations. The superintendent may order
undesirable securities sold within six months. (c) Prom­
issory notes, if secured by collateral approved by the
directors (57).

516

I

Ohi o

—

T r u s t

C o m p a n i e s

TRUST COMPANIES.
I.— T erms

of

I ncorporation.

There are the following special provisions for the capital
of trust companies: No trust company may accept trusts
until the paid-in capital of the corporation is not less
than $100,000 and until the corporation has deposited
with the state treasurer $50,000 if its capital is $200,000
or less, and $100,000 if its capital is more than $200,000.
This deposit may be in cash, in bonds of the United
States, of Ohio, of municipalities in Ohio or in other
States, and in first-mortgage bonds of railroad corporations
that have paid dividends of 3 per cent for five years.
The treasurer holds this fund as security for the com­
pany s performance of trusts. The securities may be
exchanged (69). The trust deposits, accounts, invest­
ments, etc., are required to be kept separately (73 and 76).
III. — Supervision .
Control of the trust business is assured by the deposits
with the state treasurer (69).
Examinations.

A court in which a trust company is acting as trustee
has authority to appoint persons to investigate the cor­
poration with respect to the trust in question. Courts
may examine trust companies which they purpose making
trustees (77).
IV.— R eserve R equirements.
Trust companies are required to keep the same reserve
as savings banks {supra), but they need not keep a reserve
1 pon trust funds (75).




517




National

Monetary

V.— Discount

and

Commission

L oan R estrictions.

No trust company is allowed to lend except on security
of bonds or stocks such as the corporation is allowed to
invest in, or mortgage on real estate where the amount
loaned, inclusive of prior encumbrances, does not exceed
60 per cent of the value of the real estate. No trust com­
pany is allowed to lend to any one person, firm, or corpora­
tion more than 20 per cent of its capital and surplus (72).
See also VI, below.
VI.— I nvestments.

Trust companies may hold real estate as commercial
banks may {supra, 46). This is, however, exclusive of
trust property (66).
The capital and surplus of trust companies, the de­
posits, and, unless the terms of a trust provide for other
investment, the trust funds must, over and above the
reserve, be invested in or loaned on the following: (a) The
securities mentioned in ( b), (c), (d), {e), and (/) of section
<
50 {supra), but trust companies are not allowed to loan
more than 60 per cent of the capital, surplus, and de­
posits on notes secured by mortgage on real estate, and
the investment in notes so secured may be made only if
the directors approve; (6) stocks which have paid divi­
dends for five years and bonds when they are authorized
by the majority of the directors or the executive com­
mittee, but the superintendent may order undesirable
securities sold within six months; (c) promissory notes
when secured by collateral approved by the directors.
Trust funds, together with the capital and surplus of
the trust company, may be invested also in ground rents
when authorized by the directors. Not more than 20 per
cent of the capital and surplus may be invested in any
one security or loan unless it be the securities in (6), (c),
and {d) of section 50, or in providing a building and vaults
(70 and 71),
518

O K L A H O M A .
During the session of 1907-8, the legislature of Okla­
homa passed an act, found at page 125 of the session laws,
designed apparently to be a complete banking law. Two
other laws on banking passed at that session, namely, that
on page 145 and that on page 152, are both marked in the
session laws as having been repealed by the act at page
125; since the act at page 125 became a law later than the
other two, and repealed all laws inconsistent with it, it
seems safe to assume that the acts at page 145 and 152
are, as stated in the session laws, repealed. The only
other statute on the subject of banking passed after the
revision of the territorial statutes of Oklahoma in 1903
and prior to 1908 is a 1905 act, that is clearly repealed by
the recent banking law. Various amendments to the
recent law, made still more recently, by the 1909 legisla­
ture, are included in the digest. In the Revision of 1903
is a chapter (VIII) on “ Banks and banking,” of which
many sections are found in the recent banking act. It
seems clear that the recent act, in repealing all acts incon­
sistent with it, meant to wipe out this chapter. Conceiv­
ably some of its provisions are still law, but if so the points
to be determined are matters of statutory construction too
nice to warrant hazarding opinions on them in this digest.
The chapter in the Revision of 1903 is for these reasons
disregarded. There is a chapter in the Revision of 1903




519




N a 11 o n & l

]VI o n

bt

a ty

Commission

at page 381 that deals with trust companies. Whether the
statute of 1907-8, the terms of which are for the most part
applicable to “ banking corporations,” or the trust com­
pany statute, which in its title is stated to apply to “ sav­
ings and trust companies,” applies to savings banks is a
matter of doubt. The heading “ Savings banks,” is there­
fore abbreviated in the digest; the provisions of the act of
1097-8 are digested under the title “ Banks,” and those of
the trust company chapter under the title “ Trust compa­
nies.” The Roman figures in parenthesis refer to the
article of the act of 1907— and the Arabic figures refer
8,
to the section in the particular article, as renumbered
by the 1909 amendments; this way of citing that act is
adopted because so many of the references in the digest are
thus shortened. Other citations explain themselves.
• BANKS.
I.— T erms

of

I ncorporation.

Banks are forbidden to do any business beyond the
regular banking powers enumerated in the statute, unless
they have complied with the laws of the state relating to
trust companies (I, 3).
Incorporators must be approved by the commissioner
(I, 1).

The capital stock must be fully paid up. It must be
not less than $10,000 in towns of 500 or less; not less than
$15,000 in towns of from 500 to 1,500; not less than $25,000
in cities and towns of from 1,500 to 6,000; not less than
$5°,000 in cities of 6,000 to 20,000; and not less than
$100,000 in cities of over 20,000 (I, 4, amd. by 1909, p.
121). The shares are of $100 each (I, 1).
520

O k l a h o m a

State

Banks

Dividends may be declared from net profits, but before
the declaration, not less than one-tenth of the net profits
for the last preceding period must be carried to surplus
fund until the fund amounts to 50 per cent of the capital.
Dividends must be declared on January 1 and July 1, if
at all, and must be reported to the bank commissioner
(I, 23). Capital must never be withdrawn (I, 25).
(For restrictions on power to borrow, see V, infra.)
— L iabilities

and

D uties of Stockholders
Directors.

and

The shareholders of every bank are additionally liable
for the amount of stock owned and no more (I, 9).
d here must be from three to thirteen directors, each the
holder of $5°° of the stock of the bank. Any director or
other person who participates in a violation of the banking
laws is liable for all damages which the bank, its stock­
holders, depositors, or creditors may sustain. There must
at be least two regular meetings a year, at each of which the
directors examine thoroughly the affairs of the bank (I, 6).
Any bank officer or employee who pays out the funds of
the bank on check, order, or draft when the drawer has
not the proper sum on deposit is liable to the bank for
the amount paid (I, 30).
HI • Supervision.
—

The officer charged with the general duties of supervising
banks is the bank commissioner, who holds office for four
years, must not be an officer or employee of any bank
or person interested financially in a bank, and must have
had at least three years’ practical experience as a banker
(III, 1). His salary is $2,500 a year; he has eight assist­
ants (III, 4, amd. by 1909, p. 119).
The bank commissioner must approve of the proposed
incorporators of a banking corporation (I, 1). The bank




521




National

Monetary

Commission

commissioner fixes the maximum interest which banks
may pay upon deposits, and when it appears from a report
that a bank has received deposits in excess of ten times
paid-in capital and surplus, deposits of other banks not
included, he requires the bank to make the necessary in­
crease in capital and surplus within thirty days, or cease
receiving deposits (I, 3, amd. by 1909, pp. 120, 121).
The commissioner approves of increases or decreases in
the capital stock of banks (I, 5). He may remove
unfit officers of banks (I, 7). He has authority in case
of a violation of any of the provisions of the act by the
officers or directors of any bank to close it and liquidate it
(I, 8). If the reserve of any bank falls below the require­
ment, he notifies the bank to make it good, and if it fails to
do so for thirty days he takes possession of it as insolvent
(I, 11). Banks may voluntarily place their affairs under
his control (I, 20). When a bank appears to be borrowing
habitually for the purpose of reloaning, the commissioner
requires it to pay off the borrowed money (I, 31). When
the capital of any bank is impaired, the commissioner
notifies it to make the impairment good within sixty days
(I, 32). If any officer of a bank refuses to submit its
affairs to inspection, or interferes with examination, the
commissioner may proceed to wind up the bank’s business
(I, 35). In general, whenever any bank or trust company
voluntarily places itself in the hands of the commissioner,
or is adjudged insolvent or to have forfeited its franchise
to conduct a banking business, or whenever the commis­
sioner is satisfied of the insolvency of a bank or trust com­
pany, he may, after examining its affairs, take possession
of it and wind up its business (II, 4).
REPORTS.

A list of names of stockholders, residences, and amounts
held by each, is sent the commissioner as a preliminary
522

O k l a h o m a

S t a t e

B a n k s

to receiving his certificate of incorporation (I, 2). At least
four times a year, and oftener if called upon, every bank
reports to the commissioner in the form he prescribes,
showing the resources and liabilities of the association at
the close of business on a past day specified. This report
must be transmitted to the commissioner within ten days
after receipt of his request. It is published in a local news­
paper. The commissioner may call for special reports
whenever he thinks them necessary; they must relate to a
date prior to the call (I, 17). The requirement of reports,
whenever the commissioner calls for them, and at least
four times a year, is extended to trust companies and such
national banks as have taken advantage of the depositors’
guaranty fund protection (III, 7). Ten days after a divi­
dend is declared every bank must forward to the commis­
sioner a statement of the dividend and the amount carried
to surplus and undivided profits. Within ten days after
the first of January every bank must send to the commis­
sioner a statement of receipts and disbursements for the
preceding year (I, 18). The examinations which directors
make at least twice a year at regular meetings are recorded
and forwarded to the bank commissioner (I, 6). A list of
names and residences of shareholders, with the number of
shares held by each, is sent to the commissioner each year
(I, 34). Reports to the commissioner of average daily
deposits for the preceding year are required, in order to
determine assessments for the guaranty fund (II, 2, amd.
by 1909, pp. 122, 123).
EXAMINATIONS.

The bank commissioner or one of his subordinates visits
every bank and trust company at least twice a year and
oftener if he thinks it advisable, to make a full examina­
tion into the condition of the corporation (III, 3). The
commissioner makes a preliminary examination when the




523




mmission
capital stock of any bank has been paid in in order to
ascertain whether that and other preliminaries have been
complied with (I, 2). The directors of banking associa­
tions, at regular meetings held at least twice a year,
thoroughly examine the affairs of the bank (I, 6). In case
of voluntary liquidations, the commissioner makes an
examination to be certain that all liabilities have been
paid (I, 21). Whenever any bank or trust company volun­
tarily puts itself into the hands of the commissioner, or
whenever a bank or trust company is adjudged insolvent
or to have forfeited its franchise, or whenever the commis­
sioner is satisfied of the insolvency of a bank or trust com­
pany, he examines its affairs before taking possession
(II, 4). After he has, with the assistance of the guaranty
fund, seen the institution through its difficulties, he exam­
ines it, if its stockholders have undertaken to put it in con­
dition to resume business, before allowing it to reopen, in
order to make sure its assets are repaired, advances from
the guaranty fund repaid, etc. (II, 8).
IV.— R eserve R equirements.
Every bank is required to have on hand in available
funds the following sums: In towns or cities of less than
2,500, an amount equal to 20 per cent of entire deposits;
in cities of over 2,500, an amount equal to 25 per cent of
entire deposits. Two-thirds of this reserve may consist
of balances due from good solvent banks approved by the
bank commissioner; one-third must be cash. Moreover,
any bank that has been made depositary for the reserve
of another bank must keep a 25 per cent reserve. When
the available funds fall below the requirements, the bank
in question must not increase its liabilities, except by deal­
ing in sight exchange, nor make dividends, until the reserve
has been restored. The commissioner in notifying such a
bank of its delinquency may refuse to consider as reserves
524

O k l a h o m a

State

Banks

balances due from associations which fail to furnish infor­
mation required by him to enable him to determine their
solvency (I, n ).
V.— Discount, Doan ,

and

D eposit R estrictions.

Among the powers of banking corporations is that of
lending money on chattel and personal security, or on real
estate secured by first mortgages running not longer than
a year; but the loans on real estate must not exceed 20
per cent of the loans of the bank (I, 3, amd. by 1909, pp.
120, 121). No bank may loan on shares of its own stock
unless it is necessary to take this security to prevent loss
upon a previous debt, in which case the stock must be
gotten rid of within six months (I, 10 and 39).
The total liabilities to any bank of any person, company,
or firm for money borrowed, including in firm or company
liabilities those of the members, must not exceed 20 per
cent of the capital of the bank paid in; the discount of
bills of exchange and of commercial paper actually owned
by those discounting it is not considered as money bor­
rowed (I, 12). Ihe total indebtedness of the stockholders
of any incorporated bank to the bank must never exceed
50 per cent of its paid-up capital (I, 39). No active manofficer of any bank organized under Oklahoma law
may borrow from his bank, directly or indirectly (I, 14).
Compare with the last-stated provision the older one,
which made it a misdemeanor for the director of any cor­
poration having banking powers to vote a loan or discount
which would make the total loans and discounts exceed
three times the capital paid in, or to vote a loan to a
director in an amount in excess of one-third of the
paid-in capital (R. S., 1903, 2545).
Banks must not pledge their assets as collateral so as to
give depositors or creditors a preference, but any bank may
borrow for temporary purposes not more than 50 per cent




525




mmission
of its paid-up capital, pledging assets as collateral. When­
ever it appears to the commissioner that a bank is bor­
rowing habitually in order to reloan, he may require it to
pay back the money borrowed. Any bank may redis­
count and indorse its negotiable notes (I, 31).
No bank may receive deposits in excess of ten times its
paid-up capital and surplus, deposits of other banks not
included (I, 3, amd. by 1909, pp. 120, 121).
V I.

— I nvestments.

A bank may hold such real estate as is necessary for the
convenient transaction of its business, but this must not
exceed in value one-third of the paid-in capital; such real
estate as is conveyed to the bank in satisfaction of pre­
vious debts; and such as the bank purchases at judicial
sale under securities held by it, provided it does not bid
more than enough to satisfy the debt and interest. Except
the real estate held for its own accommodation in business,
the bank must not hold real estate longer than five years;
within thirty days after the expiration of that time it
must sell it (I, 37). No bank may engage in trade or com­
merce, nor invest its funds in the stock of any other “ bank
or incorporation,” nor hold shares of its own stock, unless
necessary to prevent loss on a previous debt, in which case
it must sell the stock within six months from the date it
acquired it (I, 10).
VII. — Overdrafts.
Any officer or employee of a “ bank, banking associa­
tion, or savings bank” who knowingly overdraws his
account is guilty of a misdemeanor (R. S., 1903, 2550).
X .— U nauthorized Banking .
It is unlawful for any individual, firm, or corporation
to receive deposits or do a banking business except under
526

O k l a h o m a

S t a t e

B a n k s

the banking or trust company statute. Violation of this
prohibition, either individually or as a member of some
association or corporation, is a misdemeanor, punishable
by a fine of from $300 to $1,000, by imprisonment of from
thirty days to one year, or both (I, 16). An officer who
receives deposits in a bank after its authority to transact
a banking business has been revoked is subject to the same
penalty (I, 36).
X I.— P enalties .
Officers, directors, etc., who make false reports, false
entries in books, etc., in order to deceive anyone concerned
with the condition of the bank, are guilty of a felony, pun­
ishable by a fine of not more than $1,000, imprisonment
of not more than five years, or both (I, 13). Any officer,
director, etc., who receives deposits with knowledge of
his bank’s insolvency is guilty of a felony, punishable by
a fine of not more than $5,000, imprisonment for not more
than five years, or both (I, 15). Officers, directors, em­
ployees, etc., who fail to perform duties required by the
statute, or fail to conform to the requirements of the com­
missioner, are guilty of a felony, punishable by a fine of
not more than $1,000, imprisonment of not more than five
years, or both (I, 26). Any active managing officer of a
bank who borrows from the bank, and any officer author­
izing such a loan, is guilty of larceny of the amount bor­
rowed (I, 14)- It is also a felony to certify a check for
which there are no funds (I, 28), or to commit various
frauds in the nature of embezzlement (I, 29). The bank­
ing board may pay sums of $500 out of the guaranty
fund as rewards for securing the conviction of an officer,
director, etc., who violates the law (I, 27).
If any officer or employee of a bank advertises the
deposits of the corporation as guaranteed by the State of
Oklahoma, he is guilty of a misdemeanor punishable by a




527




fine not to exceed $500, imprisonment for thirty days, or
both (II, 7, amd. by 1909, pp. 123, 124).
Failure to report subjects a bank to a penalty of $50 a
day (I, 19).
The bank commissioner, or assistant, who neglects to
perform any duty or makes a false statement, or is guilty
of misconduct in office, commits a felony, punishable by
removal from office in addition to any other penalties that
may be provided (III, 8).
XII.— D epositors’ G uaranty S ystem .

In Article II of the act of 1907-8 as amended, are found
the special Oklahoma provisions for the depositors’ guar­
anty fund. This fund is under the control of the state
banking board, composed of the governor, the lieutenantgovernor, the president of the board of agriculture, the
state treasurer, and the state auditor (II, 1). The second
section of the act was amended by the 1909 legislature to
provide a somewhat different system of assessment from
that originally designed. The section as amended levies
an assessment against the capital stock of every bank and
trust company organized or existing under the Oklahoma
statutes in order to create a guaranty fund equal to 5 per
cent of the average daily deposits of the institution during
its continuance in business. The assessments are payable
one-fifth during the first year and one-twentieth during
each of the following years until a 5 per cent assessment
has been fully paid. Whatever assessments were paid
under the statute before it was amended are credited to the
banks making them. Every year each bank and trust
company reports the average daily deposits for the preced­
ing year. After the 5 per cent assessment has been fully
paid, no additional assessments are levied except those
required by emergencies and those made necessary by
increased deposits in banks. Whenever the guaranty
528

■

Oklahoma

—

State

Banks

fund is reduced below 5 per cent of all deposits by reason
of payments to depositors of failed banks,-the board levies
emergency assessments sufficient to restore the impairment
up to 5 per cent, but the aggregate of these emergency
assessments must never in any one calendar year exceed 2
per cent of average daily deposits of all banks and trust
companies. If the amount realized from emergencv as­
sessments is insufficient to pay claims against all failed
banks, the board delivers to each depositor having an un­
paid deposit a certificate of indebtedness bearing 6 per cent
interest. These certificates are payable out of emergency
assessments which the board levies from year to year until
all the certificates with their accrued interest are fully paid.
As rapidly as the assets of failed banks are realized upon
by the commissioner they are applied to the repayment to
the guaranty fund of all moneys paid out to depositors,
and toward refunding emergency assessments. Seventyfive pei cent of the depositors’ guaranty fund is invested
for the benefit of the fund in state warrants or other secu­
rities of the sort in which state funds are invested (II, 2,
amd. by 1909, pp. 122, 123). Banks and trust companies
organized after the enactment of the statute pay 3 per
cent of their capital when they open for business, which
amount constitutes a credit fund subject to adjustment at
the end of a year on the basis of average deposits. This
3 per cent payment is not required of consolidations of
institutions which have complied with the statute (II, 3).
Whenever a bank or trust company voluntarily places
itself in the hands of the commissioner, or when it is in­
solvent or has forfeited its franchise, or whenever the com­
missioner is satisfied of its insolvency, he may, after due
examination of its affairs, take possession and liquidate
it (II, 4). The depositors of such an insolvent bank or
trust company are to be paid in full; and if the available
cash is insufficient to do this then the banking board draws
S- D oc. 353, 6 1 -2 ----- 34




529




N at io n a l

M on et a ry

Commission

upon the guaranty fund and makes, if necessary, additional
assessments so as to pay these depositors. The State has,
for the benefit of the guaranty fund, a first lien upon all the
assets of the insolvent corporation (II, 5). The bank
commissioner liquidates the corporation with full receiver’s
powers (II, 6).
The commissioner delivers to every bank or trust com­
pany which complies with the provisions of the statute a
certificate stating that safety to its depositors is guaran­
teed by the depositors’ guaranty fund of Oklahoma.
This certificate is displayed in the place of business of the
corporation, which may also advertise to the effect that it
is protected by the guaranty fund. No bank, however,
may be permitted to advertise its deposits as guaranteed
by the State of Oklahoma (II, 7, amd. by 1909, pp. 123,
124).
After the commissioner has taken possession, a bank or
trust company may nevertheless place itself in condition
to do business again, but may not reopen until the com­
missioner has carefully investigated its affairs and has
assured himself that its credits and funds are repaired and
all advances from the guaranty fund have been fully
repaid (II, 8).
SAVINGS BANKS.
There seems to be no legislation dealing specifically
with savings banks. The act of 1908, when it says
“ banks” and “ banking corporations,” may or may not
be interpreted to include savings banks. The restriction
upon receipt of deposits while insolvent (I, 15), given
under Banks, probably does not apply to savings banks,
but a similar provision in the Revised Statutes, with higher
penalties, perhaps does, for its language is “ bank, banking
house, * * * company, corporation, or parties en­
gaged in the banking, broker, or deposit business” (R. S.,
530

Oklahoma

Trust

Companies

1903, sec. 2551). Also the provisions making directors
guilty of a misdemeanor if they loan beyond three times
the capital stock of the corporation or loan to a director
in excess of one-third of the capital stock seem applicable
to savings banks, for the language is “ any corporation
having banking powers” (R. S., 1903, sec. 2545). The
provision making it a misdemeanor for any officer or em­
ployee to overdraw his account is made applicable specific­
ally to savings banks (R. S., 1903, sec. 2550).
One section of the act of 1907-8 applies to savings banks:
“ All savings associations which do not transact a general
banking business” must keep on hand in actual cash 10
per cent of deposits, and a like sum invested in good bonds
of the United States, Oklahoma, or municipalities of
Oklahoma, worth not less than par (I, 11).
TRUST COMPANIES.
I.— T erms

of

I ncorporation.

Among trust company powers is that “ to receive money
in trust or on general deposit with or without interest
* * * and to accept and receive savings accounts”
(R. S., 1903, sec. 1122, amd. by 1905, pp. 150, 151).
Moreover, in the prohibition on unauthorized banking is
the exception, “ except as authorized by this act (i. e., the
banking law of 1907-8), or by the laws relating to trust
companies” (I, 16).
The capital stock of every trust company must be not
less than $100,000 in towns of less than 10,000, and not
less than $200,000 in towns of over 10,000. One-half
must be paid in before business is begun. The other half
of the capital stock must be paid in within six months
after organization. The total capital must not be more
than $10,000,000 (R. S., 1903, sec. 1124; and 1903, p. 85).




531




Dividends may be declared every six months or oftener,
but not while the corporation is insolvent nor so as to
render it insolvent (R. S., 1903, sec. 1125).
II.— L iabilities

and

D uties of Stockholders
D irectors.

and

Every stockholder in a trust company is individually
liable for the debts of the corporation to double the
amount that is unpaid on the stock held by him (R. S.,
1903, sec. 1134).
There must be not less than five nor more than twentyfive directors, stockholders in the corporation (R. S., 1903,
sec. 1124). If the directors knowingly pay dividends
when the corporation is insolvent, or so as to make it
insolvent, they are liable for all debts contracted while
they are in office (R. S., 1903, sec. 1125).
I l l .— Supervision .

Trust companies are subject to the provisions of Article
II, section 4, of the act of 1907-8, which allows the bank
commissioner to take possession of insolvent corporations.
A section of the old trust company statute, moreover, pro­
vided that if after examination a trust company was found
insolvent the “ bank examiner of this Territory” should
immediately take charge of the assets of the company;
he should then make a thorough examination and if satis­
fied that the company could not resume business or liqui­
date its debts he should institute proceedings for a
receiver (R. S., 1903, sec. 1135)- This is, no doubt,
superseded by the 1908 statute, wffiich provides for the
commissioner’s acting as receiver (II, 4).
Trust companies deposit $50,000 in certain securities to
secure their fiduciary obligations. If the sum named is
less than one-half the annual premiums and compensa532

Oklahoma

Trust

Companies

tions of any company, it must be increased to equal that
fraction (R. S., 1903, sec. 1133, amd. by 1905, pp. 151
et seq.).
REPORTS.

Full reports of the condition of each trust company
were, by the trust company act in the Revised Statutes,
required to be exhibited by the directors to the stock­
holders annually before elections. The same section pro­
vided that whenever the secretary of the treasury
required, each trust company should, within fifteen days
from the secretary’s call, furnish a statement in the form
the secretary prescribed, showing the condition of the
corporation at the close of business on a past day, a
summary of this statement being published in a local
newspaper (R. S., 1903, sec. 1126). This requirement
must for the most part be superseded by the provision of
the 1908 statute, which gives the bank commissioner
power at any time he deems it necessary, and at least
four times a year, to call upon every trust company for
a report of the company’s condition on a given past day
(III, 7). Trust companies subject to the guaranty fund
system must also report average daily deposits at the end
of the year, as required of banks (II, 2, amd. by 1909,
pp. 122, 123). Trust companies must annually report the
amount of their premiums and compensations to deter­
mine the amount of their deposit with the state treasurer
(R. S., 1903, sec. 1133, amd. by 1905, pp. 151 et seq.).
EXAMINATIONS.

The bank commissioner or a subordinate at least twice
a year, and oftener if he deems it advisable, visits each
bank and trust company that is subject to the provisions
of the 1908 statute to examine the condition of the
company’s affairs (III, 3).




533




»

N at ion a l

M onet ary

Commission

See Banks, III, for the examinations required to be
made at the beginning and at the end of the commission­
er’s possession of a trust company as receiver (II, 4
and 8).
V.— Discount

and

L oan R estrictions.

If trust companies are “ corporations having banking
powers,” then it is a misdemeanor for directors to vote
to make a loan whereby the total loans of the corporation
are made to exceed three times its paid-in capital, or to
make a loan to a director, or upon paper upon which
he is liable, to an amount exceeding one-third of the
paid-in capital (R. S., 1903, sec. 2545).
Trust companies have power to loan on “ real estate
and collateral security. ’ ’ The notes and debentures issued
by any trust company must not exceed ten times the
paid-up capital, and they must not exceed the amount
of the first mortgages pledged to secure them (R. S., 1903,
sec. 1122).
VI.— Investments.

Trust companies have power to buy and sell bonds of
Oklahoma, all other kinds of government, state, or
municipal bonds, all kinds of negotiable and nonnegotiable paper, “ stocks, and other investment securities”
(R. S., 1903, sec. 1122). The directors of a trust company
have power to invest “ the moneys placed in their charge”
in loans secured by real estate or other sufficient col­
lateral, in United States or Oklahoma bonds, and in the
bonds of any State or municipality in Oklahoma or in the
Indian Territory. Trust companies may hold only such
real estate as required in the transaction of their business
and such as they acquire in the enforcement of liabilities
due them (R. S., 1903, sec. 1125).
534

Oklahoma

Trust

Companies

V II.— Overdrafts .
The only provision relative to overdrafts is that stated
under Banks, making every officer or employee of any
“ banking association” who knowingly overdraws his
account guilty of a misdemeanor (R. S., 1903, sec. 2550).
X .— U nauthorized B anking .
See X, under Banks.
X I.— Penalties .
The penalties given under Banks are none of them
framed in language inclusive of trust companies, although
such a penalty as that upon officers who advertise that
deposits are guaranteed by the State of Oklahoma ought
to be applicable to the two sorts of institutions indis­
criminately.
Under the trust company act officers or directors who
refuse to make statements required of them, or make
false statements, are guilty of a misdemeanor, pun­
ishable by a fine not exceeding $500, imprisonment of
from one to twelve months, or both (R. S., 1903, sec.
1126). If trust companies are “ corporations engaged in
banking, broker, or deposit business” then any officer,
director, etc., of a trust company who receives deposits
with knowledge of the insolvency of the company is
guilty of a felony, punishable by imprisonment “ in the
territorial prison” for not less than ten years, imprison­
ment in the county jail for not more than one year, fine of
not more than $10,000, or both fine and imprisonment
(R. S., 1903, sec. 2551). (See also Revised Statutes, 1903,
section 2545, making it a misdemeanor for directors of
“ any corporation having banking powers” to vote loans
in excess of three times the capital paid in, or to vote a loan
to a director exceeding one-third of the paid-in capital.)
X II.— D epositors’ G uaranty S ystem.
See XII, under Banks.




535




O R EG O N .
The most recent revision of the statutes of Oregon, that
of 1902, by Bellinger and Cotton, contains only a few, and
those very unimportant, provisions with regard to banks.
The most important legislation on the topic is in chapter
138 of the laws of 1907, though chapters 148 and 265 of
the same year also contain banking provisions. The session
laws from 1902 through 1909 contain nothing that has been
thought worth incorporating in the digest. References in
the digest, where they are simply numbers in parenthesis,
are to sections of chapter 138 of 1907. There is no sepa­
rate legislation for savings banks and trust companies,
but chapter 138 provides that “ any person, firm, or corpo­
ration (except national banks) having a place of business
within this State where credits are opened by the deposit
or collection of money or currency or negotiable paper
subject to be paid or remitted upon draft, receipt, check, or
order shall be regarded as a bank or banker and as doing
a banking business under the provisions of this a c t” (7).
Moreover, section 8 specifically places savings banks under
the provisions of the act, and section 35 expressly makes
the word bank inclusive of the banking or savings depart­
ment of any trust company that does a banking or savings
business. The provisions digested under “ Banks,” there­
fore, must be considered applicable to savings banks and
trust companies as well.

O r e g o n

S t a t e

B a n k s

BANKS.
I.— T erms

of

I ncorporation.

Banking corporations may be formed to do a banking
business, a savings banking business, or both (8). Al­
though not expressly authorized to do a trust-company
business, that power may be inferred from the section
which, after limiting real-estate holdings, provides that
these restrictions do not apply to real estate bought with
other funds than the capital and resources nor to real
estate held in trust (15). Trust companies may clearly do
a banking business, for the statute provides that they may
use the name “ trust company” without compliance with
the act if they are not doing a banking business; besides,
companies which have any other department than a bank­
ing department must conduct it separately (9).
The requirement for capital declares that it is unlawful
for any person, firm, or corporation to transact a banking
business without “ capital stock as follows:” In cities,
villages, and communities of 1,000 or less, $10,000; in
those of 1,000 to 2,000, $25,000; in cities of 2,000 to 5,000,
$30,000; in cities of 5,000 and upward, $50,000 (8).
Presumably these requirements are for minimum capital.
At least 50 per cent of the capital must be paid in before
business is begun; the remainder must be paid in within
six months (10).
Dividends may be declared out of net profits, but before
they are declared not less than one-tenth of the net profits
for the preceding dividend period must be carried to sur­
plus until the surplus amounts to 20 per cent of the paid
capital (17).




53T




N at i o n a l

M on e t a ry

II-— L iabilities

and

Commission

D uties of Stockholders
D irectors.

and

There is no particular provision for stockholders’ lia­
bility in banks.
Banking corporations must have not fewer than three
directors (8), each of whom must own at least $500 par
value of stock. A majority must meet at least once every
three months and examine the affairs of the bank (16).
If the directors knowingly allow any officer, director, or
employee, or the state bank examiner or one of his em­
ployees, to borrow funds of their bank in an excessive or
dishonest manner, each director participating in the loan
is personally liable for all damage which any person sus­
tains in consequence (22).
111.— Supervision .

There is a board of bank commissioners composed of the
governor, the secretary of state, and the state treasurer,
who appoint a bank examiner for terms of four years.
The examiner must have had at least three years’ practi­
cal experience in banking or have served for three years
in some state banking department. While in office he
may not have any interest in any banking business (1),
nor may any of his assistants (3). The examiner’s salary
is $3,000 a year (5). The examiner and his assistants are
forbidden to disclose any information obtained in the per­
formance of their duties except so far as the banking act
makes it incumbent upon them to publish the informa­
tion. Names of depositors and debtors, amounts of de­
posits and debts, must only be disclosed in the course of
duty (33). Banks or bankers may present charges against
the examiner to the board of bank commissioners, who,
after a hearing, may remove him from office (41).
538

O r e g o n

—

S t a t e

B a n k s

The bank examiner approves of reserve depositaries (23).
If by canceling unpaid shares the capital of a bank is
reduced below the minimum and is not increased to the
required amount within thirty days, the bank’s affairs
may be wound up (11). If upon examination or from a
report it appears that capital is reduced by impairment or
otherwise, the examiner requires the bank to make good
the deficiency. He may examine the bank later to see if
the deficiency has been made good; if it has not been, he
proceeds for a dissolution (29). These proceedings may
follow not only impairment of capital, but a finding by the
examiner from examination or report that a bank is insol­
vent or in a condition to render continuation of business
hazardous, or a finding that it has exceeded its powers or
failed to comply with law. Ih e examiner reports to the
board of bank commissioners and may take immediate
possession of the bank s affairs. If the board, after inquiry
into the facts, consider it necessary in the interests of
creditois, etc., or if they believe the bank is in a condition
to render further business hazardous, or has exceeded its
powers, failed to comply with law, failed to submit to
examination and publish reports, or if they believe its
capital is impaired, they may report to the attorney-gen­
eral, who thereupon proceeds in the name of the bank
examiner to cause the bank to discontinue business. A
receiver is appointed by court (30).
REPORTS.

Calls are made by the bank examiner for reports simul­
taneously with the issue of calls by the Comptroller of the
Currency for national-bank reports. The reports, in the
form prescribed by the examiner, show total resources
and liabilities on a past day specified by him, and must
be transmitted to him within ten days after receipt of
his request. Abstracts of them are published in a local




539




%
N at io n a l

M onet ary

Commission

newpaper (24). The examiner annually reports to the
board of bank commissioners, showing the published ab­
stract of the last report of each bank, any other proceed­
ings done by him, the condition of banking business in the
State, and the affairs of the examiner’s office (25).
The examiner reports to the board deposits in any bank
which have not been added to or reduced for seven years.
The board prescribes how the examiner is to publish these
facts (42). The cashier or secretary of every institution
in which deposits of money are made returns every second
year to the secretary of state a statement of the amount
standing to the credit of every depositor who has not
deposited or withdrawn money for more than seven years,
showing also the last known address of the depositor and
the fact of his death, if known. The reporting officer
publishes these statements weekly for four weeks in a
local newspaper. Where the depositor is known to be
dead, the deposit need not be reported (1907, chap. 148, 1).
The secretary of state biennially reports these deposits to
the attorney-general, and they are treated as having
escheated to the State (1907, chap. 148, 2, amd. by 1909,
chap. 36).
(For reports required for purposes of taxation see 1907,
chapter 265, sections 2, 5, and 6, for reports from deposi­
taries of public funds see chapter 135 of the laws of 1907.)
EXAMINATIONS.

At least once a year, and oftener if the examiner thinks
it necessary, he must without previous notice examine the
affairs of every bank (26). All examinations must be
personally conducted by the examiner (5). Incidental to
proceedings for a receivership may be an examination by
the examiner (29), and an “ inquiry into the facts” by the
board of bank commissioners (30). A majority of the
directors of every bank at their meeting at least every
540

O r e g o n

S t a t e

B a n k s

three months must examine all loans, paper, securities,
liabilities, and resources of the bank (16).
IV.— R eserve R equirements.
Every bank doing business in cities or towns of less than
50,000 must keep on hand in actual cash or balances due
from good solvent banks to be approved by the examiner
not less than 15 per cent of demand liabilities and 10 per
cent of time deposits. Every bank doing a business in
cities of over 50,000 must keep on hand in the same form
not less than 25 per cent of demand liabilities and 10 per
cent of time deposits. At least one-third of the reserve
percentages must be in cash (23).
V.— Discount

and

L oan R estrictions.

The total liability to any bank of any person, firm, or
corporation for money loaned, including in firm or com­
pany liabilities those of the members, must never exceed
25 per cent of paid-in capital and surplus, but the discount
of bills of exchange drawn in good faith against existing
values and the discount of paper owned by the persons
negotiating it, and loans secured by real estate, personal
property, warehouse receipts, etc., are not within this
limitation, if the loan does not exceed 75 per cent of the
value of the paper, warehouse receipts, or personal prop­
erty, nor exceeds 50 per cent of the value of the real
estate, if that is given as security (20).
No officer, owner, or employee of a bank, nor the bank
examiner, nor any employee of his, is allowed to borrow
from the bank, whether he gives security or not, without
the approval of a majority of the directors or an executive
board or discounting committee chosen by a majority of
the directors (22).
No bank may take its own capital stock as collateral
except when necessary to prevent loss on a previous debt,




54i




I

N at ion a l

M onet ary

Commission

in which case the stock must be sold within twelve
months (13).
VI.— Investments.
Real estate may be held only as follows: Such as is nec­
essary for the transaction of the bank’s business, including
banking offices and certain premises in the same building
which may be rented, but this investment must not exceed
50 per cent of capital, surplus, and undivided profits; such
real estate as is taken by the bank in satisfaction of pre­
vious debts; such real estate as the bank purchases at
sale under decrees or foreclosures under securities held by
it. Except for the first sort of real estate, none may be
held for longer than five years; if not then sold, it may
not be carried as an asset (15). The lots on which the
banking building is situated must be unincumbered (8).
No bank may purchase its own stock except when nec­
essary to prevent loss on a previous debt, in which case
the stock must be sold within six months (13).
V III.— B ranches.
Every bank with one or more offices in Oregon must
maintain at every office a capital not less than that
required for the organization of separate banks (35).
X.— U nauthorized B anking .

Except national banks, no person, firm, or corporation
may carry on a banking business except on compliance
with the act of 1907, nor may, without compliance
with it, use the terms “ bank,” “ banker,” “ bankers,”
‘‘ banking house,” or “ trust company.” Trust companies
which do not do a banking business may use the term
“ trust company” without compliance with the banking
statutes. Any person, firm, or corporation that violates
542

O r e g o n

S t a t e

B a n k s

these provisions after thirty days’ notice from the exam­
iner is guilty of a misdemeanor, punishable by fine of
from $20 to $100 a day (9). It is forbidden to advertise
in any way greater capital, surplus, or undivided profits
than are maintained (35).
XI.— P enalties .

Owners or officers of any bank who receive deposits
with knowledge of the bank’s insolvency are guilty of a
felony punishable by fine of not more than $1,000, impris­
onment not exceeding two years, or both (18). Owners,
officers, and employees who certify to checks for which
there is not the required amount to the credit of the
drawer are guilty of a misdemeanor, punishable by fine
not to exceed $1,000 (21). Failure to furnish and publish
the reports to the examiner is punishable by fine upon the
owners and officers of the offending bank of $50 a day (24).
Failure by the cashier or secretary to report dormant
deposits to the secretary of state is punishable by fine of
from $50 to $1,000, imprisonment of from ten to ninety
days, or both (1907, chap. 148, 3). Officers, owners, or
employees who misrepresent the condition of their bank
to the examiner are punished by fine of $1,000, impris­
onment for not less than six months, or both (27).
If the examiner proceeds maliciously or without reason­
able cause against a bank for insolvency, impairment of
capital, etc., he is not only liable on his bond for damages
resulting, but guilty of a felony punishable by a fine of not
less than $1,000, imprisonment for not more than two
years, or both (30). If the examiner or his assistant
discloses information outside his duty he is punished by
a fine of $1,000, imprisonment for not less than six months,
or both; he also loses his office (33).




543




See preliminary paragraph under this State. Savings
banks are subject to all the provisions of the act of 1907
(7). Savings banking and regular banking business may
be combined (8).
TRUST COMPANIES.
Trust companies, if they have a place of business
“ where credits are opened by deposit or collection of
money or currency or negotiable paper subject to be
paid or remitted upon draft, receipt, check, or order”
are subject to all the provisions of the act of 1907 (7).
They may call themselves “ trust companies” without
being subject to the act only if they do no banking busi­
ness (9). There is a provision in section 9 which, though
not wholly clear in its application, seems to mean that
trust companies must keep their trust department dis­
tinct from their banking or savings banking department.
After forbidding the use of certain words except upon
compliance with the act, and prescribing that trust com­
panies may call themselves by that name without com­
pliance with the act if they do not do a banking business,
the section goes on: “ No assets, funds, properties, or
investments of any other department shall be included in
any statement of such banking or savings department as
herein defined, and all such capital, assets, funds, proper­
ties, and investments of such banking or savings depart­
ment shall be kept separate and distinct from all other
capital, assets, funds, properties, and investments of such
company.” See also the provision of section 35, which
provides that the word bank in the statute is to include
the banking or savings department of any trust company
doing a banking or savings business.
544

PENNSYLVANIA.
The condition of the statutes of this State makes it par­
ticularly difficult to determine just what the law is on
many particular points. Instead of being reenacted in the
form of revised laws they have been collected from time
to time in various editions of Purdon’s Digest, where it is
often hard for the reader to tell what has been repealed
and what is still in force. The banking statutes are
reprinted in convenient form in a reprint compiled under
an act of assembly, by direction of the commissioner of
banking, by William Brown, jr., and Charles T. Brown, of
the Philadelphia bar. The digest is based on this reprint,
which includes legislation up to 1907; for later laws, the
digest is based on a pamphlet edition, issued by the
banking department, of those acts of 1907 which relate to
banking, and on the published statutes of 1909. There
must be considerable doubt what the law is on many
points, these places are indicated, and the ambiguous lan­
guage is quoted. The two most important statutes are
the banking act of 1850 and the banking act of 1876.
These two and their amendments are digested under
“ Banks;” they seem not to apply to other classes of bank­
ing institutions. Mr. John W. Morrison, deputy commis­
sioner of banking in Pennsylvania, states that the act of
1850 is now obsolete. Since it has never been repealed,
however, it is included in the digest, but, together with
other statutes which Mr. Morrison declares to be obsolete,
is, when inserted, inclosed in brackets. Citations in the
digest follow the citations in the reprint above referred to.
S. Doc. 3S3, 61-2— • 5
3




545

I— Terms
.

of

In c o r p o r a t i o n .

It is a constitutional provision that no corporation “ to
possess banking and discounting privileges” may be
organized without three months’ public notice at the place
it is intended to be located, and that no charter may be
granted for longer than twenty years (Const., art. 16,
sec. i i .)
No corporation may be organized under the act of 1876
with a less capital than $50,000 if its principal place of
business is in a town of more than 5,000, nor with a less
capital than $25,000 if its principal place of business is in
a town of less than 5,000. Shares must be of not less than
$50 each (act 13th May, 1876, sec. 5, P. L., 161, amd. by
act 3d May, 1909, No. 230). Banks having capital divided
into shares of more than $50 each may reduce the par
value of each share, but not so as to make it under $50
(act 14th June, 1879, sec. 1, P. L., 94). At least 50 per
cent of the stock of any association incorporated under the
act of 1876 must be paid in before business is begun, and
the remainder in installments of at least 10 per cent of the
whole capital every month (act 13th May, 1876, sec. 9,
P. L., 161). A statute in 1883 provided that whenever a
banking company had a capital subscribed of which not
all had been paid in, and certificates had been issued for
unpaid stock, the company could decrease its capital to
the amount paid in, but must not decrease its capital to
less than $200,000 (act 22d June, 1883, sec. 2, P. L., 155).
[The act of 1850 provided a system of voting whereby
each share, not exceeding two, entitled the holder to one
vote; each two shares above two not exceeding ten
entitled him to one vote; each four shares above ten not

546

i

It



■

Pennsylvania

—

State

Banks

exceeding thirty, one vote; every ten shares above thirty
not exceeding fifty, one vote; above fifty, additional shares
conferred no right to vote whatever. Under this act also
shares had to be held three months before the election to
be voted on (act 16th April, 1850, sec. 10, art. 4, P. U.,477).
This was altered with respect to “ the banks of this Com­
monwealth ” so that every share not exceeding ten entitled
the holder to one vote; every two shares from ten to
twenty, one vote; every five shares from thirty to one
hundred, one vote; and every ten shares above one hun­
dred, one vote (act 17th April, 1861, sec. 2, P. L., 342).]
The act of 1876 provides that “ in all elections for directors
and otherwise” every shareholder is entitled to one vote
on each share of stock he holds (act 13th May, 1876, sec.
14, P. U, 161).
[By the act of 1850 dividends must be declared at least
twice a year on the first Tuesday of May and November,
payable within ten days thereafter; these dividends must
not exceed net profits, nor may they impair capital (act
16th April, 1850, sec. 10, art. 12, P. L., 477)-] Under the
act of 1876 directors of corporations may declare quar­
terly 01; semiannual dividends out of net profits, payable
within fifteen days after the declaration; before declaring
a dividend, however, each corporation must carry “ at
least one-tenth of net profits for the preceding quarter,
if it is a quarterly dividend, and at least one-tenth of the
net profits of the preceding half year, to its surplus”
until the surplus amounts to 25 per cent of capital (act
13th May, 1876, sec. 16, P. U., 161). Capital must not
be withdrawn, and dividends may be declared only out
of net profits (act 13th May, 1876, sec. 24, P. U., 161).
(Bor liabilities which a bank is allowed to incur see
V, infra.)




547




m m iss i on
II.— L iabilities

and

D uties of St o c k h o l d e r s
D irectors.

and

There was an act passed in 1874 which made stock­
holders in “ banks, banking companies, saving-fund insti­
tutions, trust companies, and all other incorporated com­
panies doing the business of banks, or loaning and dis­
counting moneys as such,” personally liable for debts and
deposits to double the amount of the capital held by each
(act n th May, 1874, sec. 1, P. L., 135). Under the act
of 1876 also, the shareholders of “ any corporation formed
under this a c t” are individually liable for “ all contracts,
debts, and engagements” of the corporation up to the
amount of their stock at par in addition to the par value
of the shares (act 13th May, 1876, sec. 5, P. U , 161).
For corporations organized under the act of 1876 there
must be not less than five directors, all citizens of the
United States and of Pennsylvania, and each the holder
of at least ten shares of the capital of the corporation.
One director must be president and another vice-president,
but cashiers, clerks, and tellers are ineligible (act 13th
May, 1876, sec. 12, P. L., 161). Under the same statute,
if directors of corporations make dividends which
impair capital, those who consent are liable individually
to the corporation for the stock divided (act 13th May,
1876, sec. 16, P. L., 161). A statute of 1901, applicable
apparently to all corporations, allows the stockholders to
fix the number of directors as they choose, except that
there must be not fewer than three (act 19th April, 1901,
P. L., 80).
[Earlier legislation with regard to directors is briefly as
follows: No judge or person holding office under the
State in the treasury department, or in land offices, etc.,
may be director of a bank (act 27th January, 1819, sec.
3, 7 Sm. L., 148). Bank directors under an act passed
548

Pennsylvania

—

State

Banks

in 1843 were eligible three years out of any four, but no
person was allowed to be a director of more than one
bank at the same time (act 18th April, 1843, sec. 8,
P. I/., 309). 1he act of 1850 required the affairs of every
bank to be conducted by thirteen directors, all citizens
of the United States and stockholders of the bank; it
forbade any one to be directors in two banks and forbade
the governor and certain public officers to be directors
(act 16th April, 1850, sec. 10, P. L., 477). It was later
enacted that the number of directors should not be less
than five nor more than thirteen (act 17th April, 1861,
sec. 1, P. U., 341). The act of 1850 again provided that
directors should only be eligible for three years out of
any four except the president (act 16th April, 1850, sec.
10, art. 2, P. U., 477). The same act forbade directors,
except the president (extended to include vice-president
act 13th April, 1859, sec. 1, P. fi., 613) to take any pay
unless granted in stockholders’ meeting (act 16th April,
1850, sec. 10, art. 6, P. T., 477). The same act required
a general meeting of stockholders annually, at which time
the directors must make a statement of the affairs of
the bank (act 16th April, 1850, sec. 10, art. 9, P. fi., 477).
The same act made directors who declared dividends
which impaired capital liable to the corporation for the
capital divided (act 16th April, 1850, sec. 10, art. 12,
1 . U., 477)* I he same act provided that, in insolvency
occasioned by fraud of the directors, those implicated in
the fraud should be liable to stockholders and creditors
for proportionate shares of losses (act 16th April, 1850,
sec. 40, P. U., 477)-] Another act provided that when­
ever “ any bank, now or that may hereafter be incor­
porated under any law of this Commonwealth” should
be declared fraudulently insolvent, the assignees of the
bank should sue those who were officers and directors at
the time of the assignment and those who had previously




549




I

N at i on a l

M on et a r y

C o mmi s s i o n

been officers and directors by whose act the insolvency
had been caused, to get judgment for a sum equal to the
outstanding paper issues and certificates of deposit of the
bank (act 12th April, 1867, sec. 1, P. L-, 71).
Ill. Su p e r v i s i o n .
—

An act passed in 1895 covers most of the points under
supervision. It establishes a banking department at the
head of which is the commissioner, who is to take care that
the laws of the State in relation to banks, trust companies,
savings banks, cooperative banking associations, surety
companies, building and loan associations, etc., are being
executed (act 1 ith February, 1895, sec. 1, P. U., 4). Unin­
corporated bankers are put under the supervision of the
commissioner by act 7th June, 1907, P. L., 461. The
commissioner is appointed for a term of four years with a
salary of $6,000. Neither he nor his subordinate may be
interested in any corporation subject to their supervision,
nor may they divulge information acquired in department
work (act n th February, 1895, secs. 2 and 16, P. L., 4).
Whenever it appears from a report, or the commissioner
has reason to believe, that the capital of any corporation
subject to the supervision of the department is reduced
below the legal amount, or below the amount certified as
being paid in, the commissioner requires the deficiency to
be made good; and if the corporation fails for sixty days to
make the impairment good the commissioner communicates
the facts to the attorney-general, who proceeds in court for
a dissolution (act 1 ith February, 1895,sec. 6, P. L., 4). In
case any corporation refuses to submit its affairs to exami­
nation or is found to have violated any law of the State, the
commissioner proceeds through the attorney-general as
before (act n th February, 1895, sec. 8, P. L., 4). If from
an examination the commissioner has reason to believe
that a corporation is in an unsound condition or is doing
550

Pennsylvania

State

Banks

business contrary to public interests, or if for thirty days
after his notification reserves are not made good (act 8th
May, 1907, P. L., 189), the commissioner proceeds through
the attorney-general for a receiver; if the commissioner
thinks it immediately necessary he may, after a hearing
before the attorney-general, appoint a temporary receiver
(act n th February, 1895, sec. 9, P. L., 4). When a re­
ceiver is appointed, on motion of the attorney-general, at
the instance of the commissioner of banking, of the assets
of any corporation, any previously appointed receiver
must turn over possession to the one thus appointed (act
23d April, 1909, No. 117).
The following provisions were law before the act of 1895.
If they continue in force it is with the commissioner in
place of the auditor-general; the act of 1895 provides for
substitution (act n th February, 1895, sec. 10, P. U , 4).
When the auditor-general has notified a corporation sub­
ject to the act of 1876 that it has committed an act of
insolvency, he appoints a special agent to make inquiry; if
this verifies the auditor’s belief, the auditor applies to a
court for a receiver (act 13th May, 1876, sec. 27,P.U., 161).
Acts of insolvency under the statute of 1876 are defined in
sections 11 and 26. [Under the act of 1850 the auditorgeneral could require certain returns from banks and when
it appeared from a return that the limit of liabilities set by
the act of 1850 had been violated, he could give notice to
the governor, who would thereupon declare the charter
of the bank forfeited (act 16th April, 1850, sec. 18, P. I
477). Under the same act failure to redeem all obliga­
tions, notes, certificates of deposit, etc., in gold or silver
coin was ground for requiring a general assignment and
dissolving the bank (act 16th April, 1850, sec. 27, P. U,
477). Under the act of 1850 also the maintenance of a
branch, without express authority from the legislature,




551




National

Monetary

Co m m i s s i o n

was ground for loss of charter (act 16th April, 1850, sec.
50, P. T., 477)-]
Under late legislation, the commissioner of banking
approves of reserve depositaries (act 8th May, 1907,
P. L., 189), and performs certain duties with respect to
selecting state depositaries (act 17th February, 1906, sec. 1,
P. L., 45).
REPORTS.

The prevailing statute on this subject provides that
every corporation subject to the supervision of the bank­
ing department, makes to the commissioner not fewer
than two reports of its condition each year in the form
prescribed by him stating resources and liabilities on a
past day specified by the commissioner; the report is
transmitted to him within five days after the receipt of
his request and an abstract of it is published in a local
newspaper. The commissioner may call for special re­
ports. This statute of 1895 enacts that the reports
required by it are in lieu of all reports required by earlier
laws (act n th February, 1895, sec. 5, P. U., 4). In the
same act it is provided that the commissioner makes an
annual report to the governor setting forth the condi­
tion of all corporations reporting to him; a statement of
the corporations under the supervision of the department
whose business has been closed during the year; sugges­
tions for amending the statutes; and details of depart­
ment administration (act 11th February, 1895, sec. 12,
P. U., 4). A late statute requires banks, savings banks,
and trust companies to give with especial completeness
in their reports to the commissioner their liabilities, to
depositors, etc., and for money borrowed (act 12th June,
1907, P. U., 525).
The following provisions of earlier laws deal with re­
ports (if they are still law, it is with the commissioner sub552

Pennsylvania

—

State

Banks

stituted for the auditor in all matters except taxation—
act n th February, 1895, sec. 10, P. U., 4): One statute
required banks, savings institutions, and other corpora­
tions to publish in a local newspaper once a year, a state­
ment of dividends over $5, unclaimed for three years,
setting forth the names and residences of the persons
entitled to the dividends and their amounts (act 6th
March, 1847, secs. 1 and 3, P. L., 222). Banks, together
with all corporations receiving deposits of money, must
publish annually names, residences, dates of deposits,
and balances of depositors who have not dealt with their
deposits for three years, and are now due over $10 (act
6th March, 1847, secs. 2 and 3, P. L., 222). [Under the
act of 1850, the cashier of each bank was required to for­
ward the auditor annually a list of persons who had not
dealt with their deposits or dividends for three years (act
16th April, 1850, sec. 52, P. B., 477), and directors were
required to make a statement annually to stockholders
(act 16th April, 1850, sec. 10, art. 9, P. L., 477). Under
the act of 1850 the auditor required the cashiers of banks
to make quarterly returns of the affairs of their banks,
which returns he tabulated for the legislature (act 16th
April, 1850, secs. 11, 12, 13,14, and 18, P. U., 477). Under
the same statute a bank making an assignment was
required to report to a local court a full statement of its
affairs containing certain specified items (act 16th April,
1 ^5°, sec- 42> F- F., 477)-] The act of 1876 requires the
directors of corporations subject to it to keep a list of
names and residences of stockholders, with the number
of shares held by each, which list must be sent annually
to the auditor-general (act 13th May, 1876, sec. 15,
P. U., 161). The same statute requires the cashier of every
bank to make a full statement of the condition of the
corporation on the day previous to the declaration of
each dividend setting forth amount of capital paid in,




553




National

Monetary

Co mmi s s i on

balances due to other banks, amount due to depositors,
total of debts and greatest amount of debts since last
previous statement, amount of paper, coin, etc., on hand,
value of realty and personalty held, amount of undivided
profits, liabilities to the corporation of directors and
officers, and amount of liabilities to the corporation of
stockholders (act 13th May, 1876, sec. 17, P. T., 161).
The same statute requires the cashier of every corpora­
tion subject to it to publish every six months in a local
newspaper a statement of the corporation’s condition,
setting forth total assets and total liabilities (act 13th
May, 1876, sec. 22, P. T. 161), and requires publication
of a notice in voluntary dissolution (act 13th May, 1876,
sec. 25, P. T., 161). Reductions of capital stock must
also be published (act 22d June, 1883, sec. 2, P. L., 155).
An act passed in 1897 requires every bank to report
certain facts to the auditor-general for purposes of taxa­
tion (act 15th July, 1897, sec. 1, P. L., 292).
(For reports of private bankers, see act 7th June, 1907,
sec. 1, P. L., 559)EXAMINATIONS.

These are covered by an amendment to the act of 1895,
passed in 1901, clearly the last statute on the subject;
it provides that the commissioner must examine or cause
to be examined, as often as he deems proper, the affairs
of every corporation subject to his supervision (act 29th
May, 1901, sec. 1, P. L., 345). The papers, funds, etc., of
banks are at all times subject to the inspection of their
directors, and the minutes, etc., are subject to the inspec­
tion of any committee of the legislature (act 16th April,
1850, sec. 10, Art. 15, P. T., 477, and act 13th May, 1876,
sec. 19, P. T., 161). [The act of 1850 provided that in
insolvency the court should appoint auditors to make a
strict investigation of the affairs of the bank to verify the
554

Pennsylvania

State

Banks

report made by directors (act 16th April, 1850, sec. 43,
P. E., 477).] Under the act of 1876 an examination must
be made immediately upon the commission of an act of
insolvency (act 8th May, 1907, P. L. 189).
IV.— R eserve R equirements.

Banks, savings banks, and trust companies which re­
ceive deposits are subject to the following rules for
reserves: (1) Every corporation receiving money subject
to be paid out on demand must have a reserve equal to
at least 15 per cent of demand liabilities. The whole
fund may, and at least one-third of it must, consist of
lawful money of the United States, gold certificates, silver
certificates, national-bank notes, or clearing-house cer­
tificates representing specie or lawful money deposited
for the purpose. One-third or less may consist of United
States bonds, Pennsylvania bonds, bonds of Pennsylvania
municipalities, and bonds which are a legal investment for
savings banks. The rest of the reserve fund above the
cash and bonds above stated may consist of moneys on
deposit subject to call in any Pennsylvania bank or trust
company approved by the commissioner, or in any bank
or trust company located in a city which is under United
States statute a reserve city and approved by the com­
missioner. (2) Every bank, savings bank, or trust com­
pany receiving deposits payable at a future time must
keep a reserve equal to 7^ per cent of time deposits. The
fund may consist in part of cash and clearing-house cer­
tificates as described above, and in part of the bonds
described above; or it may consist of money on deposit
subject to call in the banks and trust companies specified
above. Not more than one-tliird of this reserve fund may
consist of bonds, however. (3) If the reserve falls below
the amount required, the corporation must not increase
its liabilities or purchase anything except sight exchange;




555




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it must not declare dividends. The commissioner notifies
a bank whose reserve funds are below the requirement
(act 8th May, 1907, P. L., 189).
V.— D iscount

and

L oan R estrictions.

The latest provisions on this topic are those enacted
in 1901: No director of “ any banking institution, trust
company, or savings institution having capital stock”
may receive as a loan any amount greater than 10 per
cent of the paid-in capital and surplus, and the gross
amount loaned to officers and directors and to firms
in which they are interested must not exceed at any
time 25 per cent of the paid-in capital and surplus (act
June, 1901» sec. 1, P. L., 561, and act 13th May, 1876,
sec. 21, P. L., 161). None of the above-named corpora­
tions may take as security for a loan or discount a lien
on any part of its capital stock; the same surety must
be required of shareholders as of those not shareholders
(act 14th June, 1901, sec. 2, P. L., 561). “ Banks char­
tered under the provisions of the laws of the Common­
wealth” are authorized to lend on the security of bonds
and mortgages on unincumbered real estate in Penn­
sylvania not in excess of their time deposits and to invest
their funds, not exceeding 25 per cent of capital, surplus,
and undivided profits, in the purchase of such mortgages
(act 10th July, 1901, sec. 1, P. L., 639).
Previous to this legislation the topic of loans was dealt
with in the act of 1876 in the following provisions; All
associations incorporated under the act have power to
hold as collateral real or personal estate, including secu­
rities of the Lnited States, individuals, or corporations;
interest may be paid on deposits only of correspondents
outside Pennsylvania (act 13th May, 1876, sec. 7, P. L.,
161). No directors of any corporation under the act of
1876 may receive as a loan an amount greater than 10
556

Pennsylvania

State

Banks

per cent of the paid-in capital, and the gross amount
loaned to all officers and directors, or firms in which
they are interested, must not exceed 25 per cent of the
paid-in capital (act 13th May, 1876, sec. 21, P. L., 161).
No corporation under that act is allowed to take as
security a lien on any part of its capital; the same security
is required of shareholders as of those not shareholders
(act 13th May, 1876, sec. 23, P. L., 161).
[Earlier legislation included the following provisions:
Certain banking companies were in an act of 1824 required
to loan one-fifth of their capital to the farmers, mechanics,
and manufacturers of the district in which each bank
was established, if proper applicants were found, and
they were required whenever the legislature applied to
lend not exceeding 5 per cent of their paid-in capital to the
State (act 25th March, 1824, sec. 8, 8 Sm. E., 236). The
banks of the Commonwealth under an act of 1829 were
authorized to negotiate loans to or to purchase the stock
of this Commonwealth not in excess of one-third of the
capital stock of the corporation. It was provided that
nothing in the act should authorize 1‘ such purchases of
any individual or corporation, except such as shall be
taken in satisfaction of debts previously contracted ”
(act 23d April, 1829, sec. 1, P. T., 3601). Some years
later banks were authorized “ to offer for and subscribe
to the whole or part of any loan or loans to this Com­
monwealth” (act 14th April, 1835, sec. 1, P. L., 439).
The statute of 1850 forbade any director of a bank to
appear as drawer or indorser for an amount greater than
3 per cent of the paid-in capital stock; the gross amount
discounted for or loaned to all directors and officers and
to the firms in which they were interested was not allowed
to exceed 6 per cent of paid-in capital. Actual business
paper bona fide drawn by directors in the course of their
private business and later presented by the holders for




557




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Monetary

Commission

discount are not within this prohibition, however (act
16th April, 1850, secs. 23 and 51, P. L., 477). A later
statute provided that no director of a bank should bor­
row of the bank a greater amount at any one time than
5 per cent of the paid-in capital; the gross amount loaned
to all directors and officers and to firms in which they
were interested was forbidden to exceed 6 per cent on
the paid-in capital stock (act 17th April, 1861, sec. 1,
P. E., 341).
There has been the following legislation on liabilities
allowed banks: By the act of 1850 the total liabilities
of any bank, exclusive of capital, were forbidden to
exceed three times the paid-in capital; the debts of any
kind were forbidden to amount to more than four times
the capital stock paid in (act 16th April, 1850, sec. 17,
P. L., 477). A similar later statute forbids the total
liabilities of any bank, exclusive of its capital, to exceed
three times the amount of the paid-in capital, except
that when the deposits exceed one-fourth of the capital
the excess may not be counted as a liability for this
prohibition; debts due and to become due to a bank are
forbidden ever to amount to more than four times the
paid-in capital., loans to the State excepted (act 22d
April, 1854, sec. 1, P. L., 467).]
VI.— Investments.

The latest legislation on this topic was in 1901. The
section of the act of 1876 providing for holdings of real
estate was then amended to make it lawful for any asso­
ciation incorporated under the act of 1876 to hold such
real estate as is necessary for its accommodation in busi­
ness; such as is mortgaged to it; such as it purchases at
sales under judgments, decrees, or mortgages held by the
corporation or purchases to secure debts due it. Except
for that required for its business, no bank is allowed to hold
558

Pennsylvania

—

State

Banks

real estate longer than five years (act 19th April, 1901, sec.
1, P. I,., 79). Another act of the same year allows the
improvement of real estate held by a bank, erection of any
buildings, etc., of which portions may be rented. This
statute forbids a bank to reduce its surplus for this purpose
below 50 per cent of what its amount was when the
improvements were begun (act 21st May, 1901, sec. i,P .L .,
288). No bank, trust company, or savings institution
having capital stock may hold its own capital unless
the purchase is necessary to prevent loss on a previous
debt contracted on surety thought adequate at the time,
or unless stock is forfeited for nonpayment of install­
ments. Stock so purchased must not be held for longer
than six months if it can be sold for what it cost the cor­
poration (act 14th June, 1901, sec. 2, P. L., 561). Banks
may invest their funds not exceeding 25 per cent of their
capital, surplus, and undivided profits in the purchase of
mortgages on unincumbered Pennsylvania real estate, and
they may purchase for investment any interest-bearing
bonds or other obligations of any corporation or individual
(act iotli July, 1901, sec. 1, P. L., 639).
A statute of 1861 provided that banks might “ hold for
more than five years property taken or received by assign­
ment, execution, or otherwise in payment of debts to said
banks” (act 17th April, 1861, sec. 2, P. L., 342).
(For provisions for investments in the act of 1850 see act
16th April, 1850, sec. 10, art. 13, P. T., 477.)
It is a constitutional provision that no corporation shall
engage in any business except that authorized in its char­
ter, nor hold real estate except what is necessary and proper
for its business (constitution, art. 16, sec. 6).
[An act of 1829 authorized banks to loan to the State
and buy stock of the State, but forbade banks to make
“ such purchases of any individual or corporation, except
such as shall be taken in satisfaction of debts previously




559




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Commission

contracted * * * provided the amount of such loans
made or stock so held shall not exceed one-third part of the
actual capital stock of such bank or corporation (act 23d
April, 1829, sec. 1, P. L., 360).]
V III.— B ranches.
[The act of 1850 provided that every bank was forbidden
to maintain in any way a branch or agency without the
express authority of an act of legislature (act 16th April,
1850, sec. 50, P. T., 477)-] The act of 1876 provides that
the usual business * * * be transacted at an office
or banking house in the place specified ” (act 13th May,
1876, sec. 6, P. T., 161).
X.— U nauthorized B anking .

There is an old statute providing that no company incor­
porated by the laws of any other State than Pennsylvania
may establish in Pennsylvania “ any banking house or
office of discount and deposit,” under penalty of a $2,000
forfeit on every person concerned (act 28th March, 1808,
sec. 1,4 8 m . U , 537).
A 1909 statute, restricting the use of “ trust” to corpo­
rations under the supervision of the banking department,
allows individuals to act in a trust capacity as they could
before the act. It then proceeds: “ Nothing in this act
shall be deemed to authorize any person, copartnership,
* * * or corporation, except such as report and are
under the supervision of the commissioner of banking
* * * to solicit or receive deposits” (act 22d April,
1909, No. 75).
X I.— P enalties .
Every director, officer, hgent, etc., of a bank or trust
company who m^kes a false statement, entry, etc., or
exhibits false papers to deceive an examiner or makes a
560

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—

State

Banks

false report is guilty of a misdemeanor punishable by fine
not to exceed $1,000, imprisonment not to exceed two
years, or both (act 8th May, 1907,P.F., 180). (Seeforprevious legislation act 1st May, 1861, sec. 36, P. F., 342.)
Any officer, Cierk, employee, etc., of a bank, savings bank,
or trust company, who embezzles, or who puts forth a cer­
tificate of deposit, draws an order or bill of exchange, etc
or makes a false entry in a book or report, with intent to
defraud or to deceive an officer of the institution or a
bank examiner, and any person aiding in the commission
of one of these offenses, is guilty of a misdemeanor, punish­
able by fine of $500 to $5,000, or imprisonment for from six
months to five years, or both (act 23d April, 1909, No. 119).
the act which requires reports by banks, savings banks,
and trust companies to include with especial completeness
all liabilities, provides for a penalty in case of violation of
fine not over $1,000, imprisonment not over one year or
both (act 12th June, 1907, P. F., 525). If the commis­
sioner or a subordinate discloses information had in the
course of department business, except as authorized by the
statute, he is guilty of a misdemeanor punishable by a
$1,000 fine and dismissal from his employment (act n th
February, 1895, sec. 16, P. F., 4). Banks, savings banks,
and trust companies which fail to report are subject, at the
discretion of the commissioner, to a penalty of $20 a day
(act n th February, 1895, sec. 5, P. F., 4).
Any person who circulates a false report derogatory to
the financial condition of a bank, trust company, or other
financial institution, or who aids another in so doing, is
guilty of a misdemeanor, punishable by fine of not more
than $5,000 and imprisonment for not more than five
years (act 23d April, 1909, No. 121).
Several statutes on receipt of deposits during insolvency
culminate in one which declares any officer of a bank, sav­
ings bank, or trust company who receives money from a
S. Doc. 3 53, (,i- 2-----36




561




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depositor with knowledge that the bank is insolvent guilty
of embezzlement punishable by a fine of double the amount
received and imprisoned from one to three years (act 9th
May, 1889, sec. 1, P. L., 145).
(For the enumeration of certain misdemeanors by offi­
cers of corporations, among which banks are mentioned—
mutilation of books, false statements, etc.— and for the
punishment of these misdemeanors, see act 12th June,
1878, secs. 3, 4, and 5, P. U., 196.)
[Under the old legislation forbidding directors to hold
office for more than three years out of four, the director
who violated the statute was fined from $500 to $2,000
and was thereafter ineligible to be a director of any Penn­
sylvania bank (act 18th April, 1843, sec. 8, R. L., 309).
The president, director, or officer of any bank who violated
the provisions of the act of 1850 when no particular pun­
ishment was provided was guilty of a misdemeanor pun­
ishable by fine not to exceed $1,000 and imprisonment
not to exceed three years (act 16th April, 1850, sec. 16,
P- L .,477).]
Corporations of all sorts which fail to publish dividends
unclaimed for three years, and deposit-receiving corpora­
tions which fail to publish deposits unclaimed for three
years, and the cashiers and treasurers of those corpora­
tions, are liable to the person in whose name the unclaimed
sum stands, or that person’s representative, for the money
and 12 per cent interest (act 6th March, 1847, sec. 3, P. L.,
222).
[Under the act of 1850 illegal branches forfeited the
charter of the bank establishing them and entailed as an
additional penalty the payment of quadruple taxes (act
16th April, 1850, sec. 50, P. L., 477).]

562

Pennsylvania

Savings

—

Banks

SAVINGS BANKS.
I.— T erms

of

Incorporation.

The constitutional provision that no corporation “ to
possess banking and discounting privileges” may be
organized without three months’ public notice applies, no
doubt, to savings banks (constitution, art. 16, sec. n ) .
Savings banks formerly existed in Pennsylvania both
with and without capital stock (act 17th April, 1872, secs.
1 and 4, P. T., 62).
Under an act passed in 1883, no savings bank with
a capital stock might decrease its capital to less than
$50,000 (act 22d June, 1883, sec. 2, P. L., 155). Savings
banks with a capital stock might decrease the par value of
shares to $50 (act 14th June, 1879, sec. 1, P. U., 94).
The most recent statute on these questions, however,
contemplates savings institutions conducted for the ben­
efit not of stockholders, but of depositors. Two-thirds
of the incorporators must reside in the county where the
corporation is to be located (act 20th May, 1889, sec. 1,
P. U, 246). The auditor-general (see act n th February,
1895, sec. 10, P. U, 4, which puts all the auditor’s duties on
the commissioner of banking), before allowing the incor­
poration, ascertains whether greater convenience of access
to savings banks will be afforded to a considerable number
of depositors by opening the proposed bank, whether the
density of population in the neighborhood promises
adequate support, and whether the incorporators are re­
sponsible and fitted (act 20th May, 1889, sec. 3, P. U , 246).
Dividends, not to exceed 5 per cent a year on the deposits,
aie lcgulated so that the depositors receive the net profits
of the corporation after the trustees have deducted such
amount as they think necessary as a surplus fund for the
security of depositors, which, up to the amount of 15 per




563




N ational

M on et a ry

Commission

cent a year of deposits, the trustees may accumulate
against loss. Dividends may be regulated by classes ar­
ranged according to the dealings of the different depositors
with the savings bank. When the surplus amounts to 15
per cent of deposits, then, once in three years the accumu­
lation beyond that point must be divided as an extra
dividend (act 20th May, 1889, sec. 22, P. L., 246). The
provision of an earlier law, that savings banks without
capital stock must divide at the end of every year accumu­
lations over a surplus equal to 15 per cent of liabilities,
seems overridden (act 17th April, 1872, sec. 1, P. L., 62).
II. — L iabilities

and

D uties of Stockholders
T rustees .

and

Stockholders in “ banking companies, saving fund
institutions, * * * and all other incorporated com­
panies doing the business of banks or loaning or discount­
ing moneys as such in this Commonwealth’’ are individu­
ally liable for debts and deposits to double the amount
of the capital stock held by each (act n th May, 1874,
sec. 1, P. L., 135)Every savings bank trustee must be a resident of Penn­
sylvania (act 20th May, 1889, sec. 28, P. L., 246). There
must be not fewer than thirteen trustees; in case of in­
solvency of a savings bank, occasioned by the fraudulent
conduct of the trustees, those trustees who caused the in­
solvency are liable to depositors and creditors individually,
each for his proportional share of the loss (act 20th May,
1889, sec. 11, P. L., 246). No trustee may have any
interest in the profits of the savings bank, nor take pay
for his services except when his duties require regular
attendance at the savings bank, in which case a majority
vote of the trustees, exclusive of the trustee interested,
fixes the compensation (act 20th May, 1889, secs. 12 and
564

Pennsylvania

Savings

—

Banks

27, P. L., 246). A trustee of a savings bank forfeits his
office by becoming the trustee or employee of another
savings bank, or by borrowing the funds of his bank, or
by failing to attend meetings or to perform duties for six
months (act 20th May, 1889, sec. 13, P. T., 246). If
trustees declare interest or dividends in excess of those
earned by the savings bank, those trustees who vote for
such declaration are individually liable to the corporation
for the excess declared (act 20th May, 1889, sec. 22, P. L.,
246). The trustees must examine at least annually, with
a special view to comparing depositors’ ledger with general
ledger (act 20th May, 1889, sec. 25, P. L., 246).
I l l .— Supervision .

The act passed in 1895, digested under Banks, III,
covers savings banks. The banking department, with the
commissioner at its head, is in charge of the laws relating
to savings banks. Section 6, providing that reductions
of capital, if not made good after sixty days’ warning from
the commissioner, are ground for proceedings for a disso­
lution, applies, according to its language, to “ every cor­
poration subject to the supervision of the banking depart­
ment, but the provision applicable to mutual savings
banks seems to be the following: Whenever it appears to
the commissioner from a report “ of any corporation not
having any capital stock and doing business exclusively
foi the benefit of depositors, or from the examination of
a corporation of that sort, that it has violated the law or is
conducting its business unsafely, the commissioner orders
a discontinuance of the unauthorized practice, and if the
corporation fails to comply, or whenever it appears to the
commissioner that it is unsafe for the corporation to con­
tinue business, or that a trustee has been guilty of mis­
conduct, the commissioner communicates the facts to the
attorney-general, who proceeds as the case may require,




565

sp
!




possibly for the removal of trustees, for the transfer of
corporate power to other persons, etc. The court applied
to may decree a dissolution (act n th February, 1895, sec7, P. T., 4). The section given under Banks, authorizing
the commissioner to institute through the attorneygeneral the same sort of proceedings, in case a corpora­
tion refuses to submit to examination, applies to “ any
corporation” (act n th February, 1895, sec. 8, P. L., 4).
If the commissioner, after an examination, concludes that
a corporation is in an unsound condition, or that it is con­
ducting its business contrary to the interest of the public,
he advises the attorney-general, who sues for a receiver;
pending the appointment the commissioner may appoint
a temporary receiver. This section applies to “ any cor­
poration with or without capital” (act n th February,
1895, sec. 9, P. L., 4). Savings banks are within the terms
of the statute providing for the same proceedings as those
just given in case reserves fall below the required amount
and are not made good after thirty days’ notice from the
commissioner (act 8th May, 1907, P. T., 189).
Whatever duties are by other acts incumbent upon the
auditor-general, the act of 1895 transfers to the com­
missioner (act n th February, 1895, sec. 10, P. L., 4)the auditor-general or one of his examiners finds that the
trustees of a savings bank are violating the spirit of the
provisions allowing savings banks to deposit temporarily
pending investment, they report to the attorney-general,
who proceeds against the corporation (act 20th May, 1889,
sec. 18, P. L., 246). The auditor-general may withhold
authority to begin business if he does not think that the
location, fitness of incorporators, etc., warrant granting it
(act 20th May, 1889, sec. 3, P. L., 246).
If savings banks are within the term “ banking insti­
tutions,” they may be depositories of state moneys, in
which case, certain duties with regard to their selection
566

I

Pennsylvania

Savings

—

Banks

devolve upon the commissioner (act 17th February, 1906,
P. L., 45).
REPORTS.

Every corporation subject to the supervision of the
banking department makes to the commissioner not fewer
than two reports a year in the form prescribed by him,
stating resources and liabilities on a past day specified by
him; the report is transmitted within five days after re­
ceipt of his request and an abstract is published in a local
newspaper. He may call for special reports. He makes
an annual report to the governor as stated under Banks
(act n th February, secs. 5 and 12, P. L., 4). A late stat­
ute requires savings banks to report very completely in
respect to liabilities, both to depositors, etc., and for money
borrowed (act 12th June, 1907, P. L., 525).
It was provided in the savings-bank act of 1889 that each
savings bank should report annually to the auditor-general
in a form prescribed by him, stating the following: The
amount loaned on bonds and mortgages, with a list, and
the location of the mortgaged premises not previously re­
ported, and a statement of previously reported mortgages
that have been paid, foreclosed, etc.; the cost and value of
stock investments; amount loaned on pledge of securities;
amount invested in real estate; cash on hand and on de­
posit, with names of depositaries and amount deposited in
each; and such other information with respect to assets as
the auditor-general requires; also liabilities, amounts due
depositors, including dividends, and other claims which are
a charge upon assets; amount deposited during the year
and amount withdrawn; interest or profits received or
earned; dividends credited to depositors; number of ac­
counts opened or reopened, number closed, and number of
accounts open at the end of the year (act 20th May, 1889,
sec. 23, P. E., 246). Savings banks having capital stock




567




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Commission

must report for purpose of taxation (act 15th July, 1897,
sec. 1, P. L., 292).
Early legislation given under Banks provided that banks
and savings institutions authorized to declare dividends
among stockholders should publish for four weeks in each
year in a local newspaper a statement of unclaimed divi­
dends over $5, with names, residences, etc., of the persons
in whose favor the dividends were declared, and that “ each
of the said banks, savings institutions,” etc., and “ each
and every saving-fund society,” etc., authorized to receive
deposits should annually publish a statement of names and
residences of depositors who had not dealt with their de­
posits for three years and who were due at least $10, dates
of deposits, amounts, etc. (act 6th March, 1847, secs. l >2>
and 3, P. L., 222). There are provisions for reporting to
the auditor-general, and later paying into the state treas­
ury, deposits unclaimed for thirty years (act 17th April,
1872, secs. 2 and 3, P. L., 62). Decreases in capital must
be published (act 22d June, 1883, sec. 2, P. L., 155).
EXAMINATIONS.

Every corporation subject to the supervision of the
banking department must be examined by the commis­
sioner or a subordinate as often as he thinks proper (act
29th May, 1901, sec. 1, P. E. 345). Besides the provision
for examinations in the recent banking act just given, there
were the following provisions in the savings bank statute:
The auditor-general and a local court, once in two years
must each appoint an examiner to investigate savings
institutions, upon whose examination certain proceedings
might be based not unlike those provided in the statute of
1895, but the savings-bank statute on this point seems
clearly overridden by the act of 1895 (act 20th May, 1889,
sec. 24, P. E., 246). The savings-bank act also required
the trustees to make a thorough examination at least once
568

Pennsylvania

Savings

—

Banks

a year of the affairs of the savings bank to make sure that
the balances in the depositors’ ledger are accurate, etc.
(act 20th May, 1889, sec. 25, P. L., 246).
IV.— R eserve R equirements.
See this heading under Banks.
V.— Discount, L oan ,

and

D eposit R estrictions.

See first paragraph under this heading in Banks; the
provisions limiting directors’ loans, and prohibiting loans
on the bank’s own capital, apply to savings banks with
capital; the provision authorizing mortgage loans and lim­
iting their amount, applies, if savings banks are within the
quoted language.
The following provisions are part of the savings-bank
act: No trustee or officer of a savings bank may directly
or indirectly borrow its funds or deposits, nor be surety,
nor in any manner an obligor for moneys borrowed of his
savings bank (act 20th May, 1889, sec. 12, P. L., 246). No
savings bank may loan deposits on notes, bills of exchange,
or drafts, or discount notes, bills of exchange, or drafts (act
20th May, 1889, sec. 19, P. L., 246). The aggregate de­
posits to the credit of one individual or corporation at any
one time must not exceed $5,000, exclusive of accrued
interest (act 20th May, 1889, sec. 15, P. L., 246).
[If savings banks are within the language, “ any bank in
this Commonwealth,” they are subject to the limitations
on incurring liabilities given under Banks, V.]
VI.— I nvestments.
If savings banks are within the language “ any bank or
banking company of this Commonwealth,” they may
improve the real estate held for the accommodation of
their business by erecting new buildings, etc., and may




569




N at io n a l

M on e t a vy

C o tn m t s s i o n

rent premises, but must not reduce for this purpose the
surplus below 50 per cent of its amount when the improve­
ments were begun (act 21st May, 1901, sec. 1, P. L., 288).
No savings bank having a capital stock may hold any of
its capital, unless the purchase is* necessary to prevent
loss of a previous debt contracted on surety thought
adequate at the time, or in case of forfeiture of the stock
for nonpayment of installments; and stock so purchased
must not be held for longer than six months if it can be
sold for what it cost the corporation (act 14th June, 1901,
sec. 2, P. B., 561). “ Banks chartered under the pro­
visions of the laws of the Commonwealth of Pennsyl­
vania’’ may loan on the security of bonds and mortgages
on unencumbered real estate in Pennsylvania not in
excess of their time deposits and may invest their funds
not exceeding 25 per cent of their capital, surplus, and
undivided profits, in the purchase of such mortgages.
They may purchase any interest-bearing individual or
corporate obligation (act 10th July, 1901, sec. 1, P. L.,
639)A statute of 1889, providing for the extension of charters
of financial corporations, enacted that savings banks
without capital, renewing charters after 1889, would do
T
so on condition they have no powers of a bank of dis­
count, and may loan deposits only on first mortgage of
Pennsylvania land, on securities of the United States,
Pennsylvania or Pennsylvania municipalities, or on “ any
other good and valid securities” (act 10th May, 1889,
sec. 1, P. L., 185).
Special provisions of the savings-bank statute are the
following: Savings banks may hold real estate only as
follows: Such as is necessary for the immediate accom­
modation of the bank in its business; such as has been
mortgaged to it to secure previous debts; such as it pur­
chases at judicial sale under lien held by the bank, or
570

Pennsylvania

Savings

—

Banks

purchases to secure debts due it (act 20th May, 1889,
sec. 8, P. L., 246). No savings bank may deal in real
estate or any commodities except as authorized by the
act, and except such personalty as is necessary for the
transaction of its business (act 20th May, 1889, sec. 21,
P. L., 246). Deposits may be invested only as follows:
(1) In United States securities; (2) in Pennsylvania se­
curities; (3) in securities of any State which has not
within ten years defaulted in payment of principal or
interest of a debt; (4) in securities of municipalities in
any State; (5) in any bonds and mortgages on unin­
cumbered improved real estate in Pennsylvania. Pending
an opportunity to invest, a savings bank may tempo­
rarily deposit in banks or trust companies (act 20th May,
1889, secs. 17 and 18, P. U., 246).
X.— U nauthorized B anking .

See this heading under Banks.
X I.— P e n a l t i e s .
If savings banks are within the expression “ any bank,”
then their officers, directors, agents, etc., who commit the
offenses named first under Banks, X I (false statements,
etc.), are subject to the penalty there given (act 8th May,
1907, P. U., 180). Savings banks are clearly within the
provisions of the act which punishes failure to set out lia­
bilities to depositors, for borrowed money, etc., in full in
reports, by a fine on the offending officer of $1,000, impris­
onment for one year, or both (act 12th June, 1907, P. U.,
525). The punishment for receiving deposits during in­
solvency is as given under Banks, XI. For certain offi­
cers’ offenses made misdemeanors in the case of savings
banks in common with other corporations see act 12th
June, 1878, secs. 3, 4, and 5, P. U., 196.




571




N at ion a l

Mo ne t ary

Commission

The penalty for failing to report under the savingsbank act was forfeiture of $100 per day (act 20th May,
1889, sec. 23, P. E., 246); but see the later act creating
a banking department, which provides that if any cor­
poration subject to the supervision of the banking depart­
ment fails to make a report it is subject, at the discretion
of the commissioner, to a penalty of $20 per day (act
n th February, 1895, sec. 5, P. E., 4). See Banks, X I, for
penalty for disclosure of department information by an
official (act n th February, 1895, sec. 16, P. E., 4), for
penalty for not publishing unclaimed dividends and
deposits (act 6th March, 1847, sec. 3, P. E., 222), for
penalty for embezzlement and other frauds by officers,
clerks, employees, etc. (act 23d April, 1909, No. 119), and
for penalty for circulating a false report derogatory to the
financial condition of any “ financial institution” (act 23d
April, 1909, No. 121).
TRUST COMPANIES.
I.— T erms

of

Incorporation.

See Banks, I, for the constitutional provision requiring
notice of the organization of a corporation with banking
privileges.
If trust companies do a banking business, it must be
under an act authorizing them “ to receive deposits of
moneys and other personal property, and issue their
obligations therefor” (act 29th May, 1895, sec. 1, P. L.,
127). Ih e capital stock of a trust company must not be
increased to exceed $2,000,000 (act n th January, 1885,
sec. 2, P. E., i n ) . It must not be decreased to less than
$50,000 (act 22d June, 1883, sec. 2, P. L., 155). Shares
may be of as small a par value as $50 (act 14th June,
1879, sec. 1, P. E., 94).
572

Pennsylv ania
II.— L iabilities

and

Trust

Companies

Duties of Stockholders
Directors.

and

(See Banks, II.) The provision for double liability
includes “ trust companies, and all other incorporated
companies doing the business of banks or loaning and dis­
counting moneys as such” (act n th May, 1874, sec. 1,
P. L., 135).

III.— Supervision.
See Banks for explanation of supervisory officials and
for proceedings against insolvent corporations, etc. (act
n th February, 1895, secs. 1,2, 6, 8, 9, and 16, P. L., 4; and
act 8th May, 1907, P. L., 189). For trust companies, as
state depositaries, see act 17th February, 1906, P. L., 45.
There seems no reason to suppose that the provisions of
the acts of 1876 and of 1850, with regard to supervision,
given under Banks, apply to trust companies. With
regard to reports the provisions from the act of the
n th of February, 1895, given under Banks, apply, as
well as those of act n th June, 1907, P. L., 525, requir­
ing liabilities to be reported with particular complete­
ness. Trust companies seem also within the provisions
of the statute of the 6th of March, 1847, given under
Banks, requiring unclaimed dividends of over $5 and
unclaimed deposits of over $10 to be reported annually.
Reductions in capital must be published (act 22d June,
1883, sec. 2, P. L., 155). The provisions of the acts of 1850
and 1876, given under Reports under Banks, III, may
probably be ignored in the case of trust companies. E xami­
nations are held as often as the commissioner thinks
proper (act 29th May, 1901, sec. 1, P. L., 345).
IV.— R e s e r v e R eq u ir e m e n ts .
(See Banks, IV.)




573

j




IV a 1 1 o n d l

M on et a ry

V.— Discount

and

Commission

L oan R estrictions.

Trust companies are within the provisions of two of the
sections passed in 1901. No director may receive a loan
greater than 10 per cent of the paid-in capital and surplus,
and the gross amount loaned to all directors and officers
and to firms in which they are interested must not exceed
25 per cent of paid-in capital and surplus. No trust com­
pany may take as security a lien on its own capital; the
same surety must be required of shareholders as of persons
not shareholders (act 14th June, 1901, secs. 1 and 2, P. L.,
561).
Trust companies may loan money “ on real and personal
securities” (act 29th May, 1895, sec. 1, P. L., 127).
VI.— Investments.
No trust company may hold its own capital unless the
purchase is necessary to prevent loss on a debt previously
contracted on surety deemed adequate at the time, or in
case of forfeiture of the stock for nonpayment of install­
ments; stock so purchased must not be held for longer than
six months if it can be sold for what it cost (act 14th June,
1901, sec. 2, P. L., 561). Trust companies may “ invest
their funds in
* * * real and personal securities”
(act 29th May, 1895, sec. 1, P. L., 127).
X.— Unauthorized T rust Company B usiness.

No person, firm, or corporation, except corporations
under the supervision of the banking department of Penn­
sylvania, or some other State, may advertise or use “ trust ”
as part of its name. Violation of these rules entails a
penalty of not more than $500 for each offense (act 22d
April, 1909, No. 75).

574

Pennsylvania

—

Trust

Companies

X I.— P enalties .

See Banks, X I, for penalties for false statements, false
entries, etc., and for not reporting liabilities with especial
completeness (acts 141 and 331 of 1907); for penalty
for disclosure of information by a department official and
for failure of a trust company to report (act n th February,
1^9 5 >secs. 16 and 5, P. L,., 4); for penalty for embezzle­
>
ment and other frauds by officers, clerks, employees, etc.
(act 23d April, 1909, No. 119); and for penalty for circu­
lating false reports derogatory to a trust company’s finan­
cial condition (act 23d April, 1909, No. 121). The act of
the 12th of June, 1878, alluded to under Banks, includes
trust companies, and the penalties for receiving deposits
in an insolvent trust company (act 9th May, 1899, sec. 1,
P. T., 145), and for failing to publish unclaimed dividends
and deposits (act 6th March, 1847, sec. 3, P. L., 222), are
as given under Banks.




575




RHODE ISLAND.
In the General Laws of 1896, chapter 178 treated of
“ banks and institutions for savings” and chapter 179 of
“ returns of banks and institutions for savings.” These
two chapters, together with whatever few amendments
had been made to them, and the other Rhode Island legis­
lation on banks and trust companies were repealed by an
act passed in 1908, chapter 159a. This act, at the present
writing, covers the whole banking system of Rhode Island;
references in the digest are to sections in it. Mr. William
P. Goodwin, bank commissioner of the State, assured the
compiler, in a letter dated April 23, 1909, that the 1909
session of the legislature had passed no laws affecting the
matters covered by the digest.
BANKS.
I.— T erms

of

I ncorporation.

It is clear that commercial banks are allowed to receive
“ savings or participation deposits” (50, 55, 68, etc.).
Shares of stock may be issued only when paid for in
cash, and the whole capital must be issued before busi­
ness is begun (10).
II.— L iabilities

and

D uties of Stockholders
Directors.

and

There is no provision for double liability of stockhold­
ers, the provision to that effect in section 9 of chapter 178

Rhode

Island

State

Banks

of the General Laws having been repealed by 1908,
chapter 1590.
Every director of a bank or trust company must own
shares to the amount of $500 par (70).
III.— S upervision.

The incorporation of banks, savings banks, and trust
companies is overseen by a board of bank incorporation,
consisting of the bank commissioner, the general treasurer,
and the attorney-general (4). The commissioner is ap­
pointed for terms of three years and receives a salary of
$4,000 (29). Neither he nor his deputy may be inter­
ested in a national bank in Rhode Island or a banking
institution organized under Rhode Island law, nor in any
business that requires his supervision. He must not be
indebted to a banking institution organized under Rhode
Island law nor be interested in an investment, broker­
age, or loan business (30). Information obtained by the
commissioner or a subordinate in the course of duty
must be kept secret (32). The commissioner must ap­
prove of such depositaries of bank and trust company
reserves as are located outside of Rhode Island (54).
The board of bank incorporation passes upon the public
con\ enience and advantage likely to accrue from the estab­
lishment of a bank, savings bank, or trust company. If
they