inhabitants but less than 25,000 inhabitants, 35 persons shall subscribe for share capital of at least $7,500; (c) in places having more than 25,000 inhabitants but less than $50,000, 50 persons shall subscribe for share capital of at least $10,000; (d) in places having more than 50,000 inhabitants but less than 100,000, 75 persons shall subscribe for share capital of at least $15,000; (e) in places having 100,000 or more inhabitants, 100 persons shall subscribe for share capital of at least $20,000. The Board, however, reserves the right to require a larger number of subscribers or a larger amount of share capital to be subscribed or both. The size of the incorporated or unincorporated place shall be determined by the Board in accordance with the latest Federal census. The minimum amount of share capital required to be subscribed in accordance with this section shall be payable immediately following the issuance of the charter to the Federal association and shall have been paid in cash before organization of the Federal association will be deemed completed.

§ 142.4 Surety bond for organization secretary; collection of subscriptions. If any money is to be collected on subscriptions before the bonding of the permanent officers of the Federal association, the organization committee shall procure from a responsible surety company or other surety, acceptable to the Board, a surety bond covering the secretary of the organization committee in an amount equivalent to at least the minimum amount required to be paid in cash following the issuance of the Federal charter. Thereupon the secretary is authorized to collect such cash subscriptions. Such bond shall name the Federal Home Loan Bank of the district in which the proposed association is to be located as obligee, and shall be delivered to such Federal Home Loan Bank. It shall guarantee the safekeeping of such funds and their delivery to the Federal association after the issuance of the charter and after the bonding of the permanent officers. In the event of the failure to complete organization of the Federal association, it shall guarantee the return of the amounts collected on subscriptions to the respective subscribers, or their assigns. No portion of such funds shall be spent and no expense shall be incurred against such funds prior to completion of the organization of the Federal association. Prior

to completion of organization of the Federal association as prescribed by § 142.14, no business shall be transacted, except to procure the required subscriptions, perfect the temporary organization, petition for a charter, and complete the organization after the charter is issued.

§ 142.6 Organization by transfer of assets. In the event a thrift and homefinancing institution desires to transfer a substantial portion or all of its assets to a new Federal association to be organized, or in the event it is desirable to transfer a substantial portion or all of the assets formerly held by such an institution to such a Federal association, five citizens of the community where such assets are located may file the following petition for a charter (referred to in this part as a "Petition for Charter (Organization by Transfer of Assets)") and submit a statement of the assets proposed to be transferred and the consideration to be paid therefor:

The undersigned respectfully petition for the issuance of a charter as a Federal savings and loan association. In support of our petition we submit the following:

(1) Formal application for permission to organize such an association was made and approved by

(2) The petitioners are attaching hereto an itemized statement of assets and securities which it is proposed to transfer to the proposed new Federal savings and loan association by the

Association (Company)

or by its legally constituted successors or assigns. Transfer of such assets must first be approved by the Home Loan Bank Board. After such approval, share accounts in the proposed Federal savings and loan association shall then be issued in exchange for assets transferred to the proposed new association. It is understood that such share accounts must be issued on a basis approved by the Home Loan Bank Board and the owners of such assets.

(3) The petitioners have complied in all respects with the Home Owners' Loan Act of 1933, and with the rules and regulations of the Home Loan Bank Board governing the organization of a Federal savings and loan association.

(4) The petitioners have incurred no expense in connection with the formation of such association which is chargeable to the

association. No expense will be incurred, and no money will be collected on account of such an association prior to the issuance of a charter, unless the organization committee secretary be bonded. An organization committee has been formed, of which the undersigned petitioners are the duly elected officers. They will serve as such until officers of the association are elected and qualified. They will proceed to organize the said association upon the issuance of the charter.

(5) The petitioners desire to promote thrift and home ownership in their community by the accumulation of funds for home financing in accordance with the provisions of said act and the rules and regulations made thereunder.

(6) The petitioners request the issuance of a charter under the name and style of Federal

Savings and Loan Association

111

or such other name as to the Board may appear to be appropriate.

(7) Wherefore, petitioners pray that they, their associates and successors, be incorporated and made a body corporate under said name and style, with all the rights, powers, privileges, and immunities, and subject to such conditions and restrictions as are provided in said act and the rules and regulations made thereunder.

If it appears to the Board that the incorporation of such Federal association is within the intent of the statute, and if the assets to be so transferred are approved for transfer for the consideration proposed, the Board will issue a charter in the form of Charter K prescribed by § 142.9. Organization may be perfected under such charter by the legal transfer of such assets to such Federal association, the issuance of membership certificates evidencing share accounts, the holding of organization and directors' meetings, the bonding of officers and employees, and the completion of organization as in other cases.

In all other respects, such Federal association from the time of organization shall operate as other Federal associations under the Federal statutes, its charter and bylaws, and the rules and regulations in this chapter. The provisions of § 142.14 as to limitation of time, and the principles laid down in § 142.18 shall apply to organization under this section. If such State-chartered institution proposes to continue business the Board may require a definite agreement that such State-chartered institution shall not thereafter acquire new investors' accounts or make loans except for

the purpose of refinancing its own existing loans; and if the management of such State-chartered institution is to be identical in part or in whole with the management of the new Federal association, the Board may require the execution of an operating agreement to provide for a fair division of expense and equitable operating arrangements.

§ 142.9 Charter and bylaws-(a) Issuance of Charter K. If the Petition for Charter is approved, the following charter (referred to in this part as "Charter K") shall be issued:

CHARTER K

Pursuant to the provisions of section 5 of the Home Owners' Loan Act of 1933, the following charter is hereby issued:

1. Name. The name of the Federal savings and loan association hereby chartered (hereinafter referred to as the "association") is Federal Savings and

Loan Association

2. Office. The home office of the association shall be located at in the County of of

State

No office of the association shall be moved from its immediate vicinity except as may be provided in regulations made by the Home Loan Bank Board.

3. Objects and powers. The objects of the association are to promote thrift by providing a convenient and safe method for people to save and invest money and to provide for the sound and economical financing of homes. The statute, this charter, and rules and regulations made thereunder provide for examination and supervision and at the same time for the protection of all private rights concerned, and shall be construed in keeping with the best practices of local mutual thrift and home financing institutions in the United States.

The association shall act as fiscal agent of the Government when designated for that purpose by the Secretary of the Treasury, under such regulations as he may prescribe, and shall perform all such reasonable duties as fiscal agent of the Government as he may require. The association may act as agent for any other instrumentality of the United States when designated for that purpose by any such instrumentality.

The association shall have perpetual succession and power to sue and be sued, complain and defend in any court of law or equity; to have a corporate seal, affixed by imprint, facsimile or otherwise; to appoint officers and agents as its business shall require, and allow them suitable compensation; to have bylaws not inconsistent with the Constitution or laws of the United States, this charter, and rules and regulations of the Home Loan Bank Board, providing for the management of its property and regulation and government of its affairs; to wind up and dissolve, merge, consolidate, or re

organize in the manner provided by law and rules and regulations made thereunder; and to conduct business in the territory of the United States except as otherwise limited in this charter. The association may purchase, hold, and convey real and personal estate consistent with its objects. purposes, and powers, may mortgage or lease any real and personal estate; and may take such property by gift, devise, or bequest. Unless authorized by the Home Loan Bank Board, the association may not invest in an office building or buildings for the transaction of the business of the association an amount representing the cost of land and buildings in excess of the sum of its undivided profits and reserve accounts.

In addition to the foregoing powers expressly enumerated, the association shall have power to do all things reasonably incident to the accomplishment of its express objects and the performance of its express powers. The association shall have such powers as are conferred by law and shall exercise its powers in conformity with the Home Owners' Loan Act of 1933 and all laws of the United States as they now are, or as they may hereafter be amended, and with the rules and regulations made thereunder which are not in conflict with this charter.

4. Members. All holders of share accounts of the association and all borrowers therefrom shall be deemed and held to be members thereof. In the consideration of all questions requiring action by the members, each holder of a share account shall be permitted to cast one vote for each $100, or fraction thereof, of the participation value of his share account. A borrowing member shall be permitted, as a borrower, to cast one vote, and to cast the number of votes to which he may be entitled as the holder of a share account. No member, however, shall cast more than 50 votes. Voting may be by proxy. Any number of members present at a regular or special meeting of the members shall constitute a quorum. A majority of all votes cast at any meeting of members shall determine any question. The members who shall be entitled to vote at any meeting of the members shall be those owning share accounts and borrowing members of record on the books of the association at the end of the calendar month next preceding the date of the meeting of members.

5. Directors and officers. The association shall be under the direction of a board of directors of not less than 5 nor more than 15, as determined and elected by the members. Directors shall be elected by ballot from the membership of the association, and a director shall cease to be a director when he ceases to be a member. At the first meeting of members of the association, directors shall be elected to serve until the first annual meeting and until their successors are duly elected and qualified. Thereafter directors shall be elected for periods of 3 years and until their successors are elected and qualified, but provision shall be made for the election of approximately one-third of the

board of directors each year. In the event of a vacancy, including vacancies created by an increase by vote of the members of the number of directors within the limits hereinabove specified, the board of directors may fill the vacancy, if the members fail so to do, by electing a director to serve until the next annual meeting of the members, at which time a director shall be elected to fill the vacancy for the unexpired term. At its meeting, which shall be held as soon as practicable after the annual meeting of members, the board of directors shall elect a president, one or more vice presidents, a secretary, and a treasurer. It may appoint such additional officers and employees as it may from time to time determine. The offices of secretary and treasurer may be held by the same person, and a vice president may also be either the secretary or the treasurer. The term of office of all officers shall be one year or until their respective successors are elected and qualified; but any officer may be removed at any time by the board of directors. In the absence of designation from time to time of powers and duties by the board of directors, the officers shall have such powers and duties as generally pertain to their respective offices.

6. Share capital. The share capital of the association shall consist of the aggregate of payments upon share accounts and dividends credited thereto less redemption and repurchase payments. The participation value in the share capital of each share account held by a member shall be the aggregate of payments upon such share account and dividends credited thereto less redemption and repurchase payments. Share accounts of $100 or multiples thereof may be known as investment share accounts, consisting of full-paid income shares. All other share accounts shall be known as savings share accounts. Payments upon share accounts shall be called share payments. Outstanding share accounts, if any, created pursuant to a previous charter of the association issued by the Federal Home Loan Bank Board, the Federal Home Loan Bank Administration, or the Home Loan Bank Board shall continue to be known and treated as provided in the Federal charter in effect at the time each such share account was created, until exchanged for investment or savings share accounts. Share accounts may be issued for cash, or property in which the association is authorized to invest, and, in the absence of actual fraud in the transaction, the value of property taken in payment therefor, as determined by the board of directors, shall be conclusive. All share accounts shall be nonassessable, and no holder thereof shall be responsible for any losses incurred by the association beyond the loss of the participation value of his share accounts at the time the loss is determined. 7. Ownership of share accounts. All share accounts shall be represented by share account books containing a certificate of membership and evidencing the participation value of the share account, except that investment share accounts may be represented by separate membership certificates. Share

accounts may be purchased and held absolutely by, or in trust for, any person, including an individual, male, female, adult or minor, single or married, a partnership, association, and corporation. The receipt or acquittance of any member, including a minor person or a married woman, who holds a share account shall be a valid and sufficient release and discharge of the association for any payment to such person on any share account. Two or more persons may hold share accounts jointly in any manner permitted by law. Trustees and other fiduciaries, including, but not limited to, fiduciaries empowered to invest in first mortgages, may invest in share accounts. Share accounts shall be transferable only upon the books of the association and upon proper application by the transferee and the acceptance of the transferee as a member upon terms approved by the board of directors. The association may treat the holder of record of share accounts as the owner for all purposes without being affected by any notice to the contrary unless the association has acknowledged in writing notice of a pledge. The association shall not directly or indirectly charge any membership, admission, repurchase, withdrawal, or any other fee or sum of money, for the privilege of becoming, remaining, or ceasing to be a member of the association.

8. Power to obtain advances. The association shall have power to obtain advances of not more than an amount equal to one-half of its share capital on the date of the advance. A subsequent reduction of share capital shall not affect in any way outstanding obligations for advances. The association shall not have power to obtain advances from any source other than a Federal home loan bank of more than an amount equal to 10 percent of its share capital on the date of the advance. The association may pledge or otherwise encumber any of its assets to secure its debts. The association shall not accept deposits from the public or issue any evidence of indebtedness except for advances. It shall not represent itself as a deposit institution.

ac

9. Reserves, undivided profits, and dividends. As of June 30 and December 31 of each year, after payment or provision for payment of all expenses and appropriate transfers to the reserve required below, and additional transfers to other reserve counts, and provision for an undivided profits account, the board of directors shall declare as dividends the remainder of the net earnings of the association for the 6 months' period. All dividends shall be declared as of said dividend dates. board of directors may declare dividends as of said dividend dates payable out of the amounts remaining from previous periods in the undivided profits account. Profits to holders of share accounts shall be termed dividends (except bonus payments) and shall not be referred to as interest. The association shall maintain the reserve re

The

All

quired for insurance of accounts by sufficient credits on each dividend date. If and whenever the aggregate reserves of the association (less reserve for bonus) are not equal to 10 percent of the share capital, the association shall, at each dividend date, transfer to reserves (other than reserve for bonus) a credit equivalent to at least 5 percent of the net earnings of the association, until such aggregate reserves are equal to 10 percent of the share capital. Any losses may be charged against reserves. Dividends upon investment share accounts shall be promptly paid in cash as of the dividend date. Dividends on savings share accounts shall be credited to such share accounts on the books of the association as of the dividend date. holders of share accounts shall participate equally in dividends pro rata to the participation value of their share accounts; provided that the association shall not be required to credit dividends on inactive share accounts of $5 or less. Except as provided above, dividends shall be declared on the participation value of each share account at the beginning of the dividend period, plus the share payments made during the dividend period (less amounts repurchased and noticed for repurchase and, for dividend purposes, deducted from the latest previous share payments), computed at the dividend rate for the time invested, determined as provided below. The date of investment shall be the date of actual receipt of such share payments by the association, unless the board of directors fix a date, not later than the tenth of the month, for determining the date of investment of payments on either investment or savings share accounts or on both types of share accounts. Share payments, affected by such determination date, received by the association on or before such determination date, shall receive dividends as if invested on the first of such month. Share payments, affected by such determination date, received subsequent to such determination date, shall receive dividends as if invested on the first of the next succeeding month. All holders of share accounts, shall be entitled to equal distribution of net assets, pro rata to the value of their share accounts, in the event of voluntary or involuntary liquidation, dissolution, or winding up of the association.

10. Bonus and bonus reserve. In order to stimulate systematic thrift and to provide regular funds for the financing of homes, the members, by bylaw provision, may obligate the association to pay a cash bonus as follows:

(a) Short-term bonus. If, after the adoption of the bonus plan, a member desiring a short-term bonus shall agree to make regular monthly share payments of any specified amount on a savings share account until the participation value thereof shall equal 100 times the agreed monthly payment, and if the agreed monthly payments shall be made each and every month thereafter until the participation value thereof shall equal 100

times the agreed monthly payment, without a delay of more than 60 days in the payment of any monthly payment and without any prepayment of more than 12 months and if during such period no application has been made for repurchase of any part of such savings share account, the bonus shall be payable on the date on which the participation value of such savings share account shall equal or exceed 100 times the agreed monthly payment. The bonus rate on such shortterm savings share account shall be one-half of 1 percent per annum and the amount of the bonus shall be determined as follows: Divide the dollar amount of each semiannual dividend declared on such savings share account by a figure equal to twice the annual rate of percent of such semiannual dividend declared. The amount of the bonus is the sum of the quotients obtained.

(b) Long-term bonus. If, after the adoption of the bonus plan a member desiring a long-term bonus shall agree to make regular monthly share payments of any specified amount on a savings share account until the participation value thereof shall equal 200 times the agreed monthly payment, and if the agreed monthly payments shall be made each and every month thereafter until the participation value thereof shall equal 200 times the agreed monthly payment, without a delay of more than 60 days in the payment of any monthly payment and without any prepayment of more than 12 months, and if during such period no application has been made for repurchases of any part of such savings share account, the bonus shall be payable on the date on which the participation value of such savings share account shall equal or exceed 200 times the agreed monthly payment. The bonus rate on such long-term savings share account shall be 1 percent per annum and the amount of the bonus shall be determined as follows: Divide the dollar amount of each semiannual dividend declared on such savings share account by a figure equal to the annual rate of percent of such semi-annual dividend declared. The amount of the bonus is the sum of the quotients obtained.

The members, by amendment of the bylaws, may abolish the bonus plan as to savings share accounts opened after the date of such repeal of the bonus plan.

Simultaneously with the declaration of each semi-annual dividend after the adoption of the bonus plan, the board of directors shall transfer out of net earnings to an account designated "reserve for bonus" an amount, which, together with existing credits to such reserve is sufficient to pay the bonus on all savings share accounts then entitled to participation in such reserve in accordance with the provisions of this section. The board of directors may transfer any excess in such reserve to the undivided profits account.

11. Redemption. At any time funds are on hand for the purpose, the association shall have the right to redeem by lot, or otherwise

as the board of directors may determine, all or any part of any of its share accounts on a dividend date, by giving 30 days' notice by registered mail addressed to the holders at their last address recorded on the books of the association. The association shall not redeem any of its share accounts when there is an impairment of share capital or when it has applications for repurchase which have been on file more than 30 days and not reached for payment. The redemption price of share accounts redeemed shall be the full value of the share account redeemed, as determined by the board of directors, but in no event shall the redemption price be less than the repurchase value. If a share account which is redeemed is entitled to participate in the reserve for bonus, the amount of such accrued participation shall be paid as part of the redemption price. If the aforesaid notice of redemption shall have been duly given, and if on or before the redemption date the funds necessary for such redemption shall have been set aside so as to be and continue to be available therefor, dividends upon the share accounts called for redemption shall cease to accrue from and after the dividend date specified as the redemption date, and all rights with respect to such share accounts shall forthwith, after such redemption date, terminate, except only the right of the holder of record to receive the redemption price without interest.

12. Repurchase. The association shall have the right to repurchase its share accounts at any time upon application therefor and to pay to the holders thereof the repurchase value thereof. Holders of share accounts shall have the right to file with the association their written applications to repurchase their share accounts, in part or in full, at any time. Upon the filing of such written applications to repurchase, the association shall number and file the same in the order received and shall either pay the holder the repurchase value of the share account, in part or in full as requested, or, after 30 days from the receipt of such application to repurchase, apply at least one-third of the receipts of the association from holders of share accounts and borrowers, to the repurchase of such share accounts in numerical order; Provided, That if any holder of a share account applies for the repurchase of more than $1,000 of his share account or accounts, he shall be paid $1,000 in order when reached, and his application shall be charged with such amount as paid and shall be renumbered and placed at the end of the list of applications to repurchase, and thereafter, upon again being reached, shall be paid a like amount, but not exceeding the value of his account, and until paid in full shall continue to be so paid, renumbered, and replaced at the end of the list. When an application to repurchase is reached for payment as above provided, a written notice shall be sent to the applicant by registered mail at his last address recorded on the books of the association, and, unless the applicant shall apply in person or in writing for such repur