§ 15.1

Scope and application.

(a) On and after October 1, 1964, each national bank shall promptly notify the Comptroller of the Currency whenever a change occurs in the ownership of its outstanding voting stock of sufficient magnitude to effect a change in control of the bank.

(b) Any loan or loans made by a national bank and secured or to be secured by 25 per centum or more of the outstanding voting stock of an insured bank or insured savings and loan association shall be reported as specified in § 15.3. [31 F.R. 6955, May 12, 1966, as amended at 35 F.R. 19982, Dec. 31, 1970]

§ 15.2 Change in control-own bank.

(a) It shall be the duty of the president or other chief executive officer of a national bank to submit a report to the Comptroller of the Currency whenever he believes that a change in controlling ownership of his bank has taken place. If there is any doubt concerning whether a particular change in ownership is sufficient to effect a change in control, such doubt shall be resolved in favor of submitting a report to the Comptroller. The report shall be in letter form and shall contain the following information to the extent that it is known to the person making the report: (1) The number of shares involved; (2) the identity of the sellers (or transferors); (3) the names of the purchasers (or transferees); (4) the names of the beneficial owners if the

shares are registered in another name; (5) the purchase price; (6) the total number of shares owned by the sellers (or transferors), the purchasers (or transferees); and (7) beneficial owners both immediately prior to and after the transaction.

(b) The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the bank.

§ 15.3

Report of loans secured by stock of other insured banks.

(a) Whenever a national bank makes a loan or loans, secured, or to be secured, by 25 per centum or more of the outstanding voting stock of an insured bank or insured savings and loan association, the president or other chief executive officer of the lending bank shall promptly report such fact to the Board of Governors of the Federal Reserve System where the shares of a member bank are pledged or to the Federal Deposit Insurance Corporation where the shares of a nonmember insured bank are pledged or to the Federal Savings and Loan Insurance Corporation where the shares of an insured savings and loan association are pledged. No report need be made in those cases where the borrower has been the owner of record of the stock for a period of 1 year or more, or the stock is that of a newly organized bank or savings and loan association.

(b) The reports required under this section shall contain, to the extent that it is known by the person making the report, the same information called for in § 15.2.

[31 F.R. 6955, May 12, 1966, as amended at 35 F.R. 19982, Dec. 31, 1970]

§ 16.1 Authority and scope of application.

(a) This part is issued under the general authority of the national banking laws, R.S. 324 et seq., as amended; 12 U.S.C. 1 et seq., and contains the rules applicable to national banks concerning the public offering of their capital debentures and the public offering of equity securities of new national banks.

(b) This part shall apply to any public offering of capital debentures of an existing national or District of Columbia bank, and to any public offering of a security of a new national bank (one which has not yet received its charter) by, for, or on behalf of such bank unless specified herein to the contrary.

§ 16.2 Requirement of offering circular.

No existing national bank shall publicly offer or sell any of its capital debentures and no new national bank shall publicly offer or sell any of its securities unless such securities shall have been made the subject of an offering circular filed in the Office of the Comptroller of the Currency and declared effective. § 16.3

Content of offering circular.

The offering circular filed pursuant to this part shall contain at a minimum the following information:

(a) Issuer. On the front page of the offering circular: (1) the exact name and address of the issuing national bank; (2) the following statements in capital letters printed in boldface Roman type at least as large as 10-point modern type and at least 2 points leaded:

(i) The debentures (or notes) shall not represent deposits and will not be insured by the Federal Deposit Insurance Corporation or any other Government agency.

(ii) These Securities Have Not Been Approved Or Disapproved By The Comptroller Of The Currency Nor Has The Comptroller Passed Upon The Accuracy Or Adequacy Of This Offering Circular.

(b) Distribution. On the same page referred to in the preceding paragraph state: (1) the number of and dollar amount of securities being offered; (2) the per security and aggregate offering price and the per security and aggregate proceeds to be received by the national bank; (3) the proposed means of distribution; and (4) the expenses to be incurred in connection with the offering.

(c) Use of proceeds. A brief statement of the intended uses of the proceeds of the offering.

(d) Business of the bank. A brief statement as to the history and nature of the bank's present or proposed operations including a description of its premises and facilities.

(e) Financial statements. (1) As to the offering of capital debentures of an existing national or District of Columbia bank, the information called for in Part 18 of this chapter, plus comparable information as of a date no more than 90 days prior to filing the offering circular.

(2) As to new national banks, a pro forma statement of capital, surplus and balance sheet as of the date it is contemplated business will be commenced.

(f) Management. (1) The full names and complete residence addresses of all present or proposed directors and principal officers and their principal occupations during the past 10 years.

(2) For such of the persons specified in the preceding paragraph who will receive in the current fiscal year of, who have received remuneration in the past fiscal year in excess of $25,000 per year from the national bank, the aggregate amount of remuneration received by all such persons.

(3) A brief description of any present or contemplated bonus, retirement, pension, stock option, or other similar plan or provisions and the class of persons covered.

(4) Any present or proposed material interest or transaction between the bank and any director, or officer thereof, other than in the ordinary course of banking business. Describe any such interest or transaction that occurred within the preceding 3 years; if none, so state.

(g) Principal security holders. To the extent known:

(1) The percentage of outstanding securities which will be held as a group, by directors and principal officers and the percentage of such securities which will be held by the public if all the securities offered are sold; and

(2) The name, address, and relationship to the national bank of any person who beneficially owns or will own 10 percent or more of the outstanding capital stock of the national bank.

(h) Capitalization and long-term debt. State in tabular form as of a date within 90 days of filing, the title of and amount in each category of capital and long-term debt account, the amount authorized or

to be authorized, and the amount to be outstanding, assuming all the securities being registered are sold.

(i) Description of securities. (1) In the case of equity securities; briefly describe, if applicable, the dividend, voting, liquidation, preemptive, and conversion rights, redemptive and sinking fund provisions, and liability to further calls or assessment.

(2) In the case of debt securities; briefly describe, if applicable, the provisions with respect to interest, conversion, maturity, redemption, amortization, sinking fund, or retirement; the provisions with respect to the kind and priority of any lien securing the issue; the provisions restricting the declaration of dividends or requiring the maintenance of any ratio of assets, creation or maintenance of reserves or the maintenance of properties; the provisions permitting or restricting the issuance of additional securities, withdrawal of cash deposited against such issuance, incurring of additional debt, release or substitution of assets securing the issue, modification of the terms of the security, and any other similar provisions.

(j) Legal proceedings. Any material pending or threatened legal proceedings to which the national bank is a party or of which any of its property is the subject.

§ 16.4 Filing of and use of offering circular.

(a) No person on behalf of or for a new or existing national bank shall offer to sell or solicit any offer to buy any capital debenture or note or other securities of a national bank subject to this part being publicly offered by a national bank unless prior to, or at the time of such offer or solicitation, a copy of an offering circular which has been filed pursuant to this part is furnished to the potential purchaser by the person making the offer or solicitation.

(b) No securities of a new or existing national bank subject to this part shall be sold, or confirmation of sale relating thereto be delivered after sale, by, for, or on behalf of the bank unless at the time of sale or prior to such sale, the purchaser of such security has received an offering circular declared effective by the Comptroller of the Currency.

(c) The offering circular shall be used in accordance with this part until the completion of the distribution of the securities. If the distribution is not com

pleted within 12 months from the effective date of the offering circular, an amended offering circular shall be filed and a revised offering circular shall be used in accordance with this part as for an original offering circular. In no event shall an offering circular be used which is false or misleading in light of the circumstances then existing.

(d) Filings shall be made in quadruplicate and may be printed, lithographed, typewritten, or prepared by similar process resulting in clearly legible permanent copies. One copy of all filings made pursuant to this part shall be manually subscribed by the national bank's Chief Executive Officer and Cashier.

Any written advertisement (or other written communication, if not accompanied by an offering circular) or any film, radio, or television broadcast, which refers to a present or proposed public offering of securities subject to this part may be published, distributed, or broadcast only after the filing of an offering circular covering such securities, and provided that it contains no more than the following information:

(a) The name and address of the issuer of the security;

(b) the title of the security, the dollar amount and number of securities being offered, and the per-unit offering price to the public; and

(c) where a copy of the offering circular may be obtained.

bank and the Comptroller of the Currency. Such bylaw or amendment may provide that the notification shall be made in writing and delivered or mailed to the President of the bank and to the Comptroller of the Currency not less than 14 days nor more than 50 days prior to any meeting of stockholders called for the election of directors, provided however, that if less than 21 days' notice of the meeting is given to shareholders, such nomination shall be delivered or mailed to the President of the bank and to the Comptroller not later than the close of the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholders:

(a) The names and addresses of the proposed nominee;

(b) The principal occupation of each proposed nominee;

(c) The total number of shares that to the knowledge of the notifying shareholders will be voted for each of the proposed nominees;

(d) The name and residence address of the notifying shareholder; and

(e) The number of shares owned by the notifying shareholder.

If a national bank duly adopts the foregoing notice requirements, any nomination for director not made in accordance therewith, may be disregarded by the chairman of the meeting and votes cast for each such nominee may be disregarded by the vote tellers. In the event the same person is nominated by more than one shareholder, the nomination shall be honored and all shares shall be counted if at least one nomination for that person complies with this part. (R.S. 324 et seq., as amended; 12 U.S.C. 1 et seq.) [30 F.R. 7275, June 2, 1965]

Appendix C-Reconcilement of Capital Accounts.

Appendix D-Reconcilement of Valuation and Contingency Reserves.

AUTHORITY: The provisions of this Part 18 issued under R.S. 324 et seq., as amended, secs. 12, 13, 48 Stat. 892, 894, as amended; 12 U.S.C. 1 et seq., 15 U.S.C. 781, 78m. § 18.1 Scope and application.

(a) Every national bank, except banks the securities of which are subject to registration pursuant to section 12(b) or section 12(g) of the Securities Exchange Act of 1934 (15 U.S.C. 78), shall mail a written report containing, as a minimum, the financial and other information called for by this part, to each of its stockholders in time to be received by them prior to the bank's annual meeting, but in no event later than 60 days after the close of the fiscal year.

(b) Banks the securities of which are subject to registration pursuant to section 12(b) or section 12(g) of the Securities Exchange Act of 1934 (15 U.S.C. 78) shall furnish to security holders annual reports in accordance with § 11.5(c) of Part 11 of this chapter.

(c) The term "financial statements" as used in this part should be deemed to include all supporting schedules, instructions, and related forms.

(d) This part incorporates by reference all instructions and interpretations of this Office relating to financial reporting to stockholders which are presently outstanding and as may be amended hereafter.

(e) Certain instructions which assume a basis of full accrual accounting apply only to those banks within the scope of § 18.3 (a), (b), and (c).

[36 F.R. 15035, Aug. 12, 1971]

§ 18.2 Definition of terms.

Unless the context otherwise requires, the following terms shall have the meaning indicated in this section:

(a) Valuation reserve. A "valuation reserve" is an account established through an appropriate charge representing management's judgment as to possible loss or value depreciation in a specific class of assets, such as loans or investment securities. Loan loss reserves established pursuant to the Treasury tax formula should be separately disclosed and may be considered valuation reserves; these reserves should be included in reserves on loans and securities.

(b) Reserve for Contingencies. A “reserve for contingencies" is an account

which represents capital reserves set aside for possible or unforeseen decreases or shrinkages in book values of assets or for other unforeseen or indeterminate liabilities, not otherwise reflected on the bank's books. Reserves for possible security losses, reserves for possible loan losses, and other contingency reserves that are established as precautionary measures only shall be included in the capital accounts, as they represent segregations of undivided profits.

(c) Significant Subsidiary. The term "significant subsidiary" means a subsidiary meeting either of the following conditions:

(1) The investments and advances in the subsidiary by its parent plus the parent's proportion of investment and advances in such subsidiary by the parent's other subsidiaries, if any, exceed 5 percent of the equity capital accounts of the parent (bank); or

(2) The parent's proportion of the gross operating revenues of the subsidiary exceeds 5 percent of the gross operating revenue of the parent (bank).

(d) Material. The term "material" when used to modify any item of assets or liabilities means an item exceeding 3 percent of total assets; when used to modify any income or expense item, it means an item exceeding 5 percent of gross operating revenue.

(e) Significant. The term "significant❞ refers to information which would be considered necessary to evaluate the condition and operations of a bank.

[32 F.R. 7071, May 10, 1967, as amended at 34 F.R. 20043, Dec. 23, 1969]

(a) For all fiscal years beginning after December 31, 1967, any bank subject to the jurisdiction of this Office, with total resources of $100 million or more shall prepare all its financial statements subject to this part on the basis of accrual accounting. Where the results would be only insignificantly different for particular accounts, a cash basis of reporting may be used.

(b) For all fiscal years beginning after December 31, 1968, any bank subject to the jurisdiction of this Office, with total resources of $50 million or more shall prepare all its financial statements subject to this regulation on the basis of accrual accounting. Where the results would be only insignificantly different for particular accounts, a cash basis of reporting may be used.

(c) For all fiscal years beginning after December 31, 1969, any bank subject to the jurisdiction of this Office, with total resources of $25 million or more shall prepare all its financial statements subject to this regulation on the basis of accrual accounting. Where the results would be only insignificantly different for particular accounts, a cash basis of reporting may be used.

(d) For all fiscal years beginning after December 31, 1967, any bank subject to the jurisdiction of this Office and not subject to the reporting requirements of paragraphs (a), (b), or (c) of this section, shall prepare all of its financial statements subject to this regulation so that its installment loan function and related tax provisions are on the basis of accrual accounting, or alternatively, such bank, as a footnote to the balance sheet, must disclose the amount of unearned income on installment loans carried in the undivided profits or other capital accounts.

(e) Notwithstanding the foregoing paragraphs (a), (b), and (c) of this section, income items of trust department functions may be reported on a cash basis.

[32 F.R. 7071, May 10, 1967]

§ 18.4 Consolidated statements.

(a) All majority-owned significant subsidiaries shall be consolidated with the parent.

(b) All majority-owned bank premises subsidiaries-whether or not significant subsidiaries-shall be consolidated with the parent.

(c) Any lien on bank premises owned by the bank or its majority-owned bank premises subsidiary, which has not been assumed by the bank or its subsidiary, should be reported in a parenthetical item, "(Bank premises owned are subject to $___. liens not assumed

by bank or its subsidiaries)", immediately following the "bank premises and equipment" account in the Balance Sheet, Appendix A.

(d) Nonsignificant subsidiaries may also be consolidated provided a consistent policy of consolidation is used.

(e) Minority interests in the net assets of consolidated subsidiaries shall be shown in each consolidated balance sheet as a liability. The aggregate amount of profit and loss accruing to minority interests should be stated separately in the consolidated profit or loss statement.