chase payment within 30 days from the date of mailing such notice, no payment on account of such application shall be made and such application shall be cancelled. The board of directors shall have the absolute right to repurchase not exceeding $100 of any one share account or accounts of any one holder in any one month in any order regardless of whether or not such holder has filed an application for repurchase. Holders

of share accounts filing written application for repurchase shall remain holders of share accounts until paid and shall not become creditors. Dividends upon a share account, to the extent of the amount of the application to repurchase all or part thereof, shall be discontinued while such share account remains upon the repurchase list. The repurchase value of share accounts of the association shall be the participation value thereof.

13. Loans and investments. The association may make loans to holders of share accounts on the sole security of their share accounts. To secure such loans the association shall obtain a lien upon, or a pledge of, the share account. Upon any default on any such loan, the association may, without any notice to or consent of the share-account holder, cancel on its books share accounts pledged and apply such share accounts in payment on account of the loan. No such loan shall exceed 90 percent of the repurchase value of the share account securing such loan. No such loan shall be made when the association has applications for repurchase which have been on file more than 30 days and not reached for payment.

The association may also lend its funds on the security of first liens upon homes, or combination of homes and business property, within 50 miles of its home office; provided, that not more than $20,000 shall be loaned on the security of a first lien upon any property; except that not exceeding 15 percent of the assets of the association may be loaned on other improved real estate without regard to said $20,000 limitation, and without regard to said 50-mile limit, but secured by first lien thereon; and, provided further, that the association may lend, without the requirement of amortization of principal, not exceeding 50 percent of the appraised value of the security of a first lien upon improved real estate, but the aggregate amount of such loans and of all other loans made pursuant to this sentence, without regard to the $20,000 limitation and without regard to the 50-mile limit, shall not exceed 15 percent of the assets of the association, without the prior written approval of the Home Loan Bank Board. The association, if converted from a State-chartered institution, may continue to make loans in the territory in which it made loans while operating under State charter. The association shall not make any loans to an officer, director, or employee, except loans on the sole security of share accounts owned by such officer, director, or employee, and except loans on the security of a first lien upon the home or combination of home and business property owned and

occupied by such borrowing officer, director, or employee. The association may lend an amount not exceeding 75 percent of the value of the security of a home or combination home and business property, and may lend an amount not exceeding 50 percent of the value of the security of other improved real estate, provided that the association may lend a higher percentage of the value of any such security when authorized by the members of the association and by regulations made by the Home Loan Bank Board.

The association may invest without limit in obligations of, or obligations guaranteed as to principal and interest by, the United States, in obligations of Federal home loan banks, and in other securities approved by the Home Loan Bank Board. The association may also invest in stock of a Federal home loan bank.

No

No loans shall be made upon the security of real estate until at least two qualified persons selected by the board of directors shall have submitted a signed appraisal of the real-estate security for such loan. loan shall be made when the borrower is required to pay to the association or to another person in connection with the loan any unreasonable or unlawful charge or fee. The association shall ascertain the total amount paid by each borrower to it and to any other person in connection with the loan, and furnish to each borrower upon the closing of the loan a loan settlement statement, indicating in detail the charges or fees such borrower has paid or obligated himself to pay to the association or to any other person in connection with such loan, and a copy of such statement shall be retained in the records of the association.

14. Loan plan. Loans on real estate shall be made on one of the following bases:

(a) Repayable in monthly installments, equal or unequal, beginning not later than 30 days after the date of the advance of the loan, sufficient to retire the debt, interest and principal, within 20 years; provided, however, that the loan contract shall not provide for any subsequent monthly installment of an amount larger than any previous monthly installment; and provided further, that in the case of construction loans the first payment shall not be later than 4 months after the date of the first advance.

(b) To the extent permitted by this charter, repayable within 5 years from date with or without any amortization of principal but with interest payable at least semiannually.

The monthly payments required shall be applied first to interest on the unpaid balance of the debt and the remainder to the reduction of the debt until the same is paid in full. The primary obligation shall be secured by a mortgage or other instrument constituting a first lien or the full equivalent thereof upon the real estate securing the loan according to any lawful and well recognized practice which is deemed best suited to the transaction. In keeping with the best loan practices in the territory, the instru

ment securing a loan on real estate shall provide for full protection to the association and shall be recorded. It shall provide specifically for full protection with respect to insurance, taxes, assessments, other governmental levies, maintenance, and repairs. It may provide for an assignment of rents and for such other protection as may be lawful or appropriate. The association may pay taxes, assessments, insurance premiums, and other similar charges for the protection of its interest in the property on which it has loans. All such payments may, when lawful, be added to the unpaid balance of the loan. The association may require life insurance to be assigned to the association by its borrowers as additional collateral for real-estate loans. The association may advance premiums on any life insurance held as additional collateral for realestate loans if the association has a first lien on the policy. Such premium advances may, when lawful, be added to the unpaid balance of the loan. The association may require that the equivalent of one-twelfth of the estimated annual taxes, assessments, insurance premiums, and other charges upon realestate security, or any of them be paid in advance to the association in addition to interest and principal payments on its loans so as to enable the association to pay such charges as they become due from the funds so received. The association shall keep a record of the status of taxes, assessments, insurance premiums, and other charges on all real estate on which the association has made loans or which is owned by the association. The board of directors shall from time to time determine the rate of interest, premiums, fees, and other charges to be made in connection with loans by the association. In fixing such charges full consideration shall be given to sound and economical home financing in the territory in which the association operates. Borrowers shall have the right to prepay their loans without penalty; except that when the amount prepaid equals or exceeds 20 percent of the original principal amount of the loan, not more than 90 days' interest on the amount prepaid may be charged, provided the loan contract makes provision for such penalty. All loans on the security of real estate shall be made in accordance with this section unless the Home Loan Bank Board approves another loan plan upon application from the association for such approval.

15. Evidence of corporate existence. This charter, or a certified copy hereof under the seal of the Home Loan Bank Board, shall be evidence of the corporate existence of the association.

16. Amendment of charter. No amendment, addition, alteration, change, or repeal of this charter shall be made unless such proposal is made by the board of directors of the association, and submitted to and approved by the Home Loan Bank Board, and is thereafter submitted to and approved by the members at a legal meeting. Any amendment, addition, alteration, change, or

Each such charter shall create the legal rights and duties intended by the parties; and after each such charter is issued, the Federal association shall be operated within the limits prescribed by section 5 of the Home Owners' Loan Act of 1933, and shall be subject to the provisions of its charter, its bylaws, and the rules and regulations of this part, and any amendments thereof. Federal associations heretofore chartered (provided no preferred shares are outstanding) may amend their charter as an entirety by a majority vote cast at a regular or special meeting of members adopting a Charter K with the same name and office prescribed by their present charter and upon filing the following petition (referred to in this part as a "Petition for Amended Charter K"):

PETITION FOR AMENDED CHARTER K
HOME LOAN BANK BOARD

Washington, D. C.

The undersigned, pursuant to section 202.9 of the Rules and Regulations for Federal Savings and Loan Associations, respectfully petitions the Board to issue an amended charter in the form of Charter K to the undersigned, fixing the name and home office of the undersigned which its present charter prescribes.

The undersigned, by its secretary, hereby certifies that the members at a regular (special) meeting duly adopted the following resolution:

"Be It Resolved, That the present charter of this association be amended to read in the form of Charter K, prescribing the present name and home office fixed by the present charter of this association."

In witness whereof, the Secretary of the undersigned has hereunto affixed his hand and the seal of the undersigned this day of 19---

By

FEDERAL SAVINGS AND LOAN ASSOCIATION

[CORPORATE SEAL]

The Board will issue to any such Federal association a Charter K fixing the

name and the home office of the association which the present charter prescribes, unless the Board when petitioned approves a change of name or location.

(b) Bylaws (1936) prescribed. Each Federal association having a Charter K shall operate under the following bylaws (referred to in this part as "Bylaws (1936)") unless and until other bylaws have been adopted by the association and have been approved by the Board:

BYLAWS (1936)

FEDERAL SAVINGS AND LOAN

ASSOCIATION

1. Annual meetings of members. The annual meeting of the members of the assoclation for the election of directors and for the transaction of any other business of the association shall be held at its home office at 2 o'clock in the afternoon on the third Wednesday in January of each year, if not a legal holiday, or if a legal holiday then on the next succeeding day not a legal holiday. The annual meeting may be held at such other time on such day or at such other place in the same community as the board of directors may determine. At each annual meeting, the officers shall make a full report of the financial condition of the association and of its progress for the preceding year, and shall outline a program for the succeeding year.

2. Special meetings of members. Special meetings of the members of the association may be called at any time by the president or the board of directors, and shall be called by the president, a vice president, or the secretary upon the written request of members holding of record in the aggregate at least one-tenth of the share capital of the association. Such written request shall state the purposes of the meeting and shall be delivered at the home office of the association addressed to the president.

(a)

3. Notice of meetings of members. Notice of each annual meeting shall be either published once a week for the two successive calendar weeks (in each instance on any day of the week) prior to the date on which such annual meeting shall convene, in a newspaper printed in the English language and of general circulation in the city or county in which the home office of the association is located, or mailed postage prepaid at least 15 days and not more than 30 days prior to the date on which such annual meeting shall convene to each of its members of record at his last address appearing on the books of the association. Such notice shall state the name of the association, the place of the annual meeting and the time when it shall convene. A similar notice shall be posted in a conspicuous place in each of the offices of the association during the 14 days immediately preceding the date on which such annual meeting shall convene. If any mem

ber, in person or by attorney thereunto authorized, shall waive in writing notice of any annual meeting of members, notice thereof need not be given to such member.

(b) Notice of each special meeting shall be either published once a week for the two consecutive calendar weeks (in each instance on any day of the week) prior to the date on which such special meeting shall convene, in a newspaper printed in the English language and of general circulation in the city or county in which the home office of the association is located, or mailed postage prepaid at least 15 days and not more than 30 days prior to the date on which such special meeting shall convene to each of its members of record at his last address appearing on the books of the association. Such notice shall state the name of the association, the purpose or purposes for which the meeting is called, the place of the special meeting and the time when it shall convene. A similar notice shall be posted in a conspicuous place in each of the offices of the association during the 14 days immediately preceding the date on which such special meeting shall convene. If any member, in person or by attorney thereunto authorized, shall waive in writing notice of any special meeting of members, notice thereof need not be given to such member. 4. Meetings of the board of directors. The board of directors shall meet regularly without notice at the home office of the association at least once each month at the hour and date fixed by resolution of the board of directors, provided that the place of meeting may be changed by the directors. Special meetings of the board of directors may be held at any place in the territory in which the association may make loans specified in a notice of such meeting and shall be called by the secretary upon the written request of the president, or of three directors. All special meetings shall be held upon at least 3 days' written notice to each director unless notice be waived in writing before or after such meeting. Such notice shall state the place, time, and purposes of such meeting. A majority of the directors shall constitute a quorum for the transaction of business. The act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors. All meetings of the members and of the board of directors shall be conducted in accordance with Robert's Rules of Order.

5. Resignation of directors. Any director may resign at any time by sending a written notice of such resignation to the office of the association delivered to the secretary. Unless otherwise specified therein, such resignation shall take effect upon receipt thereof by the secretary. More than three consecutive absences from regular meetings of the board of directors, unless excused by resolution of the board of directors, shall automatically constitute a resignation, effective when such resignation is accepted by the board of directors.

6. Powers of the board. The board of directors shall have power:

(a) To appoint and remove by resolution the members of an executive committee, the members of which shall be directors, which committee shall have and exercise the powers of the board of directors between the meetings of the board of directors;

(b) To appoint and remove by resolution the members of such other committees as may be deemed necessary and prescribe the duties thereof;

(c) To fix the compensation of directors, officers, and employees; and to remove any officer or employee at any time with or without cause;

(d) To extend leniency and indulgence to borrowing members who are in distress and generally to compromise and settle any debts and claims;

(e) To limit share payments which may be accepted;

(f) To reject any application for share accounts or membership; and

(g) To exercise any and all of the powers of the association not expressly reserved by the charter to the members.

Endorse

7. Execution of instruments, generally. All documents and instruments or writings of any nature shall be signed, executed, verified, acknowledged, and delivered by such officers, agents, or employees of the association or any one of them and in such manner as from time to time may be determined by resolution of the board of directors. All notes, drafts, acceptances, checks, endorsements, and all evidences of indebtedness of the association whatsoever shall be signed by such officer or officers or such agent or agents of the association and in such manner as the board of directors may from time to time determine. ments for deposit to the credit of the association in any of its duly authorized depositaries shall be made in such manner as the board of directors may from time to time determine. Proxies to vote with respect to shares or accounts of other associations or stock of other corporations owned by or standing in the name of the association may be executed and delivered from time to time on behalf of the association by the president or a vice president and the secretary or an assistant secretary of the association or by any other person or persons thereunto authorized by the board of directors.

8. Membership certificates. One of the officers or an employee designated by the board of directors shall manually sign and deliver a membership certificate to each person upon the initial payment on a share account of the association or upon the making of a real-estate loan by the association.

9. Seal. The seal shall be two concentric circles between which shall be the name of the association. The year of incorporation, the word "incorporated", or an emblem may appear in the center.

10. Amendment. These bylaws may be amended at any time by a two-thirds affirma

tive vote of the board of directors, or by a vote of the members of the association. Each and every amendment shall be subject to the approval of the Home Loan Bank Board, and shall be ineffective until such approval shall be given, except that, without the approval of the Home Loan Bank Board, section 1 of the bylaws may be amended so that the time of day for convening the annual meeting may be fixed at any hour not earlier than 10 a. m. or later than 9 p. m., and a new section providing for a bonus may be added as provided in the rules and regulations for Federal savings and loan

(c) Availability and delivery of charter and bylaws to members. Each Federal association shall cause a certified copy of its charter and bylaws to be made available to members at all times in each office of the association, and shall deliver to each member upon admission to membership a true copy of its charter and bylaws as amended. A copy of each subsequent amendment, if directed by the Board, shall be furnished to all members.

(d) Amendments to charter. The provisions of this paragraph shall be deemed to be the approval by the Home Loan Bank Board of the proposal by the board of directors of any Federal association operating under Charter K of any one or more of the following amendments to said Federal association's Charter, provided such Federal association follows the requirements of section 16 of its Charter in adopting any such amendments:

1. Amendment to paragraph (a) of section 10 adding the following additional language at the end thereof:

Provided, however, That if a member who has agreed to make regular monthly share payments under this paragraph shall apply for the repurchase of his account in part or in full, or shall fail to meet any of the other terms of his bonus agreement after such share account has reached at least 50, but less than 100, times the agreed monthly payment upon his share account in accordance with the terms hereof, such member shall be entitled to receive, in addition to the repurchase value of his share account, a bonus equivalent to 50 percent of the amount of the "reserve for bonus" which is at the time of such repurchase, properly al

locable to his share account. Any holder

of a share account who entered into a shortterm bonus agreement prior to the adoption of the preceding sentence and who is complying with the terms of his agreement shall be entitled to the partial bonus therein authorized.

2. Amendment to the first subparagraph of paragraph (b) of section 10 adding the following additional language at the end thereof:

Provided, however, That if a member who has agreed to make regular monthly share payments under this paragraph shall apply for the repurchase of his account in part or in full, or shall fail to meet any of the other terms of his bonus agreement after such share account has reached (a) at least 50, but less than 100, times the agreed monthly payment upon his share account in accordance with the terms hereof, such member shall be entitled to receive, in addition to the repurchase value of his share account, a bonus equivalent to 25 percent of the amount of the "reserve for bonus" which is, at the time of such repurchase, properly allocable to his share account; (b) at least 100, but less than 150, times the agreed monthly payment, 50 percent of such amount; and (c) at least 150, but less than 200, times the agreed monthly payment, 75 percent of such amount. Any holder of a share account who entered into a longterm bonus agreement prior to the adoption of the preceding sentence and who is complying with the terms of his agreement shall be entitled to the partial bonus therein authorized.

3. Amendment inserting the following section 14.1 between sections 14 and 15:

14.1 Additional lending powers. All loans shall be made in accordance with sections 13 and 14 of this Charter unless the Home Loan Bank Board, upon application from the association for such approval, approves another loan plan, practice or procedure or permits a higher percentage of the appraised value of the security to be loaned. Such authority shall be in addition to, and not in abrogation of, any existing authority or procedure provided in this Charter.

4. Amendment repealing the last sentence of section 4 and adding the following provisions in lieu thereof: "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 such meeting. The number of votes which each member shall be entitled to cast at any meeting of the members shall be determined from the books of the association as of the end of the calendar month next preceding the date of such meeting. Those who were members at the end of the calendar month next preceding the date of a meeting of members but who shall have ceased to be members prior to such meeting shall not be entitled to vote thereat."

5. Amendment of the fourth sentence of section 6 by striking the period at the end thereof and adding the following: "or, if to be repurchased within fifteen months, as short-term savings share accounts."

and amendment of the tenth sentence of section 9 by striking the period at the end thereof and adding: "and short-term savings share accounts."

[Res. 52, 12 F. R. 6453, 6686, as amended by Res. 103, 12 F. R. 7355]

§ 142.10 Organization meeting; acceptance of charter and bylaws; election of directors. Promptly upon the receipt of the charter, the temporary officers shall call a meeting of the subscribers for share capital. The notice of such meeting shall be mailed to each subscriber at least 5 days prior to the date of such meeting. Subscribers who subscribe for a majority of the share capital subscribed, present in person or by proxy, shall constitute a quorum. Any action taken at any such meeting under the charter and bylaws shall be deemed an acceptance by the association of Charter K and bylaws (1936). The directors shall be elected according to the provisions of the charter and the bylaws, and such other action may be taken by the subscribers as is permitted by the charter and bylaws.

§ 142.11 First meeting of directors; election of officers. Immediately after election, the board of directors shall hold its first meeting. At such meeting it shall elect officers as prescribed by the charter and bylaws and shall take such other action as may be necessary to permit the association to be operated in accordance with section 5 of the Home Owners' Loan Act of 1933, as amended, its charter and bylaws, and the rules and regulations in this subchapter.

§ 142.12 Bonds for directors, officers, employees and agents. Each Federal association shall provide and maintain a fidelity bond covering its directors, officers, employees or agents in the form and amount required by the Federal Savings and Loan Insurance Corporation.

[4 F. R. 3788]

NOTE: The Standard Form 22 of Savings and Loan Blanket Bond was approved as an acceptable form of fidelity bond for use by any Federal savings and loan association which may desire to use such bond in complying with § 142.12 [Bd. Res., 5 F. R. 691]

§ 142.13 Transfer of cash. In the event that payments on subscriptions for