such expenses will be incurred; (3) no money will be collected on account of such association prior to issuance of a charter to it by the Board; (4) an organization committee has been created (naming such committee and the officers thereof); and (5) the organization committee will organize such association upon the issuance of a charter by the Board and will serve as temporary officers of such association until officers thereof are elected by such association's board of directors as provided in § 543.6.

(b) Filing. The petition for charter, together with evidence of compliance with the conditions prescribed by the Board in approving the application for permission to organize, including the original and a duplicate copy of subscriptions to capital, shall be promptly submitted in duplicate to the Board through the Federal home loan bank of the district in which such association is to be located.

§ 543.5 Issuance of charter.

The Board will take action issuing or denying a charter after receipt of evidence as to compliance by the applicants with the conditions prescribed by the Board. The action of the Board shall be final. If a petition for charter is approved by the Board a charter will be issued as provided in § 544.1 of this subchapter.

§ 543.6 Completion of organization.

(a) Organization meeting. Promptly upon receipt of a charter for a Federal association, the temporary officers thereof shall call a meeting of the subscribers to such association's capital; the notice of such meeting shall be mailed to each such subscriber at least 5 days prior to the date of such meeting. Subscribers who have subscribed for a majority of such Federal association's capital, present in person or by proxy, shall constitute a quorum for the transaction of business. At such organization meeting directors of such Federal association shall be elected according to the provisions of the association's charter and bylaws, and such other action may be taken by such subscribers as is permitted by such charter and bylaws; any action taken at any such meeting under such charter and bylaws shall be deemed an acceptance by such Federal association of its charter, and of the bylaws, which shall be in the form provided in $544.5 of this subchapter.

(b) First meeting of directors. Immediately after election, as hereinabove provided, the board of directors of such Federal association shall hold its first meeting and shall at that time elect officers of the association as prescribed by its charter and bylaws and shall take such other action as may be necessary to permit such association to be operated in accordance with section 5 of the Home Owners' Loan Act of 1933, as amended, the association's charter and bylaws, and these rules and regulations. When such officers have been bonded as provided in § 545.12 of this subchapter, they shall forthwith collect the sums due on subscriptions to such Federal association's capital.

(c) Membership in Federal home loan bank. Upon issuance of a charter to a Federal association it shall promptly qualify as a member of a Federal home loan bank.

(d) Insurance of accounts. Upon the issuance of a charter to a Federal association it shall promptly meet all requirements necessary to obtain insurance of its accounts by the Federal Savings and Loan Insurance Corporation.

(e) Failure to complete. The organization of a Federal association is not completed until the organization meeting of subscribers to its capital and the first meeting of its directors have been held, as hereinabove provided, and the permanent officers have been bonded and such association is in possession of the minimum amount of cash required to be paid in on subscriptions to its capital: Provided, That the Board may specify additional requirements before organization shall be deemed to have been com pleted. In the event that the organization of a Federal association is not so completed within a period of 6 months after the issuance of its charter, or within such additional period of time as the Board may for good cause grant, such charter shall become void and all amounts collected by such association on subscriptions to its capital shall thereupon be returned to the respective subscribers to such capital or to their assigns.

[23 F.R. 9891, Dec. 23, 1958, as amended at 37 F.R. 11054, June 2, 1972]

Any member of a Federal home loan bank may convert itself into a Federal association upon such terms and conditions as the Board may prescribe and upon a vote of not less than 51 percent of the votes cast at a legal meeting called to consider such action: Provided, That such member shall comply with all laws, if any, of its jurisdiction which expressly provide for conversion into a Federal association, and with the rules and regulations in this subchapter. § 543.9 Preliminary application.

(a) Form. Any member of a Federal home loan bank that desires to convert into a Federal association, hereinafter referred to as "applicant", may, after approval by its board of directors, file its preliminary application for conversion in form prescribed by the Board; any institution which is not a member of a Federal home loan bank but which is eligible to apply for such membership may likewise file simultaneously its application for such membership and its preliminary application for conversion. (The Board has prescribed a form of "Preliminary Application for Conversion into a Federal Association", copies of which may be obtained from the Federal Home Loan Bank Board, Washington, D.C., or from any Federal home loan bank.)

(b) Filing. A preliminary application for conversion into a Federal association shall be filed in duplicate with the Board through the Federal home loan bank of which the applicant is or proposes to be

come a member. The applicant shall submit such financial statements and such other information as the Board may require and shall pay all costs, as determined by the Board, arising out of the Board's consideration of the application; the applicant shall also submit with its preliminary application a statement showing the plan of conversion, which shall specify the location of the home office and any branch offices to be maintained by the Federal association and provide for (1) appropriate reserves and surplus for the Federal association; (2) satisfaction in full or assumption by the Federal association of all creditor obligations of the applicant; (3) issuance by the Federal association of its savings accounts to the holders of withdrawable accounts of the applicant in an amount equivalent to the value of their accounts, including the present value of any preferences to which any of such holders are entitled; and (4) issuance by the Federal association of its savings accounts to all holders of guarantee, permanent, reserve fund, or other nonwithdrawable capital stock of the applicant in an amount equivalent to the value of such stock.

(c) Board action. The Board will consider the preliminary application for conversion, together with such information and reports of examination, audit and appraisal as may have been submitted to or required by the Board, and will either approve or disapprove such application; approval may be conditional. [23 F.R. 9891, Dec. 23, 1958, as amended at 36 F.R. 13680, July 23, 1971] § 543.10

Approval by members.

Upon approval by the Board of a preliminary application for conversion into a Federal association the applicant shall proceed promptly to comply with all conditions prescribed in such approval and to obtain the vote of its members required by the laws of the jurisdiction to which the applicant is subject, if any, which expressly provide for conversion into a Federal association, and in any event to obtain the vote required by section 5 (i) of the Home Owners' Loan Act of 1933, as amended, in favor of the plan of conversion as approved by the Board, and to comply with all other necessary legal formalities; the Board reserves the right to cancel its approval of a preliminary application for conversion into a Federal association in the event an applicant fails to obtain promptly the

approval of its members as provided in this section.

§ 543.11 Formal application.

(a) Form. Upon approval by its members of the plan of conversion, as provided in § 543.10, the applicant may file its formal application for conversion into a Federal association in form prescribed by the Board. (The Board has prescribed a form of “Application for Conversion into a Federal Association", copies of which may be obtained from the Federal Home Loan Bank Board, Washington, D.C., or from any Federal home loan bank.)

(b) Filing. The formal application for conversion into a Federal association shall be filed in duplicate with the Board through the Federal home loan bank of which the applicant is or proposes to become a member; such application shall be accompanied by evidence satisfactory to the Board showing compliance by the applicant with all conditions prescribed by the Board in its approval of the preliminary application for conversion into a Federal association and, unless the applicant is insured by the Federal Savings and Loan Insurance Corporation, by formal application for insurance of accounts.

(c) Issuance of charter. No formal application for conversion into a Federal association will be approved by the Board unless the applicant shall have been approved for membership in a Federal home loan bank. Upon approval by the Board of a formal application for conversion into a Federal association, the Board will issue a Charter, as provided in § 544.1 of this subchapter; conversion into a Federal association is completed upon the issuance of such charter and upon compliance with all relevant requirements of law, if any, which expressly provide for such conversion.

§ 543.12 Organization after conversion.

Upon issuance of a Federal charter, as provided in § 543.11, a legal meeting of the members of such Federal association shall be held promptly, after due notice unless held upon a valid adjournment of a previous legal meeting. At such meeting directors shall be elected and such other action shall be taken as is necessary fully to carry into effect the conversion as approved by the Board and to operate such Federal association in accordance with the law and the rules and regulations in this subchapter. Im

§ 544.1 Issuance of charter.

(a) Charter N. Except as provided in paragraph (b) of this section and in § 544.2, the following form of charter, which shall be known as Charter N, will be issued on and after the effective date of the rules and regulations in this subchapter, upon approval by the Board of any petition for a charter for a Federal association pursuant to the provisions of subsections (a) or (1) of section 5 of Home Owners' Loan Act of 1933, as amended:

at

2. Office. The home office shall be located in the County of State of-----

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; and, in the accomplishment of such objects, It shall have perpetual succession and power: (1) To act as fiscal agent of the United States 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 United States as he may require and to act as agent for any other instrumentality of the United States when designated for that purpose by any such instrumentality; (2) To sue and be sued, complain and defend in any court of law or equity; (3) To have a corporate seal, affixed by imprint, facsimile or otherwise; (4) To appoint afficers and agents as its business shall require, and allow them suitable compensation; (5) To adopt bylaws not inconsistent with the Constitution or laws of the United States and rules and regulations adopted thereunder and this charter: (6) To raise its capital, which shall be unlimited, by accepting payments on savings acounts representing share interests in the association; (7) To borrow money; (8) To lend and otherwise invest its funds; (9) To wind up and dissolve, merge, consolidate, convert, or reorganize; (10) To purchase hold, and convey real and personal estate consistent with its objects, purposes, and powers; (11) To mortgage or lease any real and personal estate and take such property by gift, devise, or bequest; and (12) To exercise all powers conferred by law. In addition to the foregoing powers expressly enumerated, this association shall have power to do all things reasonably incident to the accomplishment of its express objects and the performance of its express powers. It shall exercise its powers in conformity with all laws of the United States as they now are, or as they may hereafer be amended, and with all rules and regulations which are not in conflict with this charter, now or hereafter made thereunder. 4. Members. All holders of the association's savings accounts and all borrowers therefrom are members. In the consideration of all questions requiring action by the members of the association, each holder of a savings account shall be permitted to cast one vote for each $100, or fraction thereof, of the withdrawal value of his 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 savings 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 savings 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. All savings accounts shall be nonassessable.

5. Directors. The association shall be under the direction of a board of directors of not less than 5 nor more than 15, as fixed in the association's bylaws or, in the absence of any such bylaw provision, as from time to time expressly determined by resolution of the association's members. Each director of the association shall be a member of the association, and a director shall cease to be a director when he ceases to be a member. Directors of the association shall be elected by its members by ballot; Provided, That in the event of a vacancy in the directorate, including vacancies created by an increase in the number of directors, the board of directors may fill such vacancy, if the members of the association fail so to do, by electing a director to serve until the next annual meeting of the members. 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.

shall

6. Withdrawals. The association have the right to pay the withdrawal value of its savings accounts at any time upon application therefor and to pay the holders thereof the withdrawal value thereof. Upon receipt of a written request from any holder of a savings account of the association for the withdrawal from such account of all or any part of the withdrawal value thereof, the association shall within 30 days pay the amount requested; Provided, That if the association is unable to pay all withdrawals requested at the end of 30 days from the date of such requests, it shall then pay all withdrawals requested in accordance with such methods and procedures as to amounts and allotments of funds for such purposes as shall be provided in regulations made by the Federal Home Loan Bank Board in effect at the date of the request for withdrawal. Holders of savings accounts for which application for withdrawal has been made shall remain holders of savings accounts until paid and shall not become creditors.

7. Redemption. At any time sufficient funds are on hand, 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 savings accounts on June 30 or December 31, by giving 30 days' notice of such redemption by registered mail addressed to the holder of each such savings account at his last address as recorded on the books of the association. The association may not redeem any of its savings accounts when there is an impairment of its capital or when it has any request for withdrawal which has been on file and unpaid for more than 30 days. The redemption price of each savings account redeemed shall be the full value thereof, as determined by the board of directors, but in no event shall the redemption price be less than the withdrawal

amount of such savings account. If a savings account which is redeemed is entitled to participate in any reserve for bonus, the amount in such reserve for bonus which is properly allocable to such savings account shall be paid as part of the redemption price thereof. If any notice of redemption shall have been duly given, and if the funds necessary for such redemption shall have been set aside so as to be and to continue to be available for that purpose, earnings upon such account shall cease to accrue from and after the date specified as the redemption date and all rights with respect to each such account shall forthwith, after such redemption date, terminate, except only the right of the holder of record of such savings account to receive the redemption price there of without earnings.

8. Loans and investments. The association may make any loan or investment authorized by statute and the rules and regulations made by the Home Loan Bank Board and in effect on August 15, 1949; it may make such additional loans and investments as may thereafter be authorized by amendments of the said rules and regulations.

9. Power to borrow. The association may borrow money in an aggregate amount not exceeding one-half of its capital; the amount which may be borrowed from sources other than a Federal home loan bank shall not exceed one-tenth of such capital. Notwithsanding the foregoing limitations, the association may, with prior approval by the Federal Home Loan Bank Board, borrow from a Federal home loan bank or from any Federal agency or instrumentality without limitation, upon such terms and conditions as may be required by such bank or agency. The association may pledge and otherwise encumber any of its assets to secure its debts.

10. Reserves, surplus, and distribution of earnings. The association shall maintain general reserves for the sole purpose of meeting losses; such reserves shall include the reserve required for insurance of accounts. Any losses may be charged against general reserves. If and whenever the general reserves of the association are not equal to at least 10 percent of its capital, it shall, as of June 30 and December 31 of each year, credit to such reserves an amount equivalent to at least 5 percent of its net earnings for the 6 months' period, or such amount as may be required by the Federal Savings and Loan Insurance Corporation, whichever is greater, until such reserves are equal to at least 10 percent of the association's capital. As of June 30 and December 31 of each year, after payment or provision for payment of all expenses, credits to general reserves and such credits to surplus as the board of directors may determine, and provision for bonus on savings accounts as authorized by regulations made by the Federal Home Loan Bank Board, the board of directors of the association shall cause the remainder of the net earnings of the association for the 6 months' period to be distributed promptly on its savings accounts,

ratably, as declared by the board of directon to the withdrawal value thereof; in lieu of or in addition to such net earnings, any of the association's surplus funds may be likewise distributed. Such net earnings shall be credited to savings accounts or paid, as directed by the owner. All holders of savings accounts shall participate at the same rate and on the same basis in the distribution of earning Provided, That the association is not required to distribute earnings on short-term savings accounts or on accounts of $10 or less Except as provided above, earnings shall be declared on all savings accounts of record at the close of each such 6 months' period, on the withdrawal value of each such account at the beginning of the said 6 months' period, plus the payments made thereon during such period (less amounts withdrawn, and, for purposes of participation in earnings, deducted from the latest previous payments), computed at the declared rate for the time invested, determined as provided below. The date of investment shall be the date of actual receipt of such payments by the association, unless the board of directors fixes a date, not later than the tenth of the month, for determining the date of investment of payments on savings accounts or designated classes thereof. Payments, affected by such determination date, received by the association on or before such determination date shall receive earnings as if invested on the first of such month. Payments, affected by such determination date, received subsequent to such determination date shall receive earnings as if invested on the first of the next succeeding month. Notwithstanding any other provision of its charter, the association may distribute net earnings on its savings accounts on such other basis and in accordance with such other terms and conditions as may from time to time be authorized by regulations made by the Federal Home Loan Bank Board. All holders of savings accounts of the association shall be entitled to equa distribution of assets, pro rata to the value of their savings accounts, in the event of voluntary or involuntary liquidation, dissolution, or winding up of the association.

11. 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 Federal Home Loan Bank Board, and is thereafter submitted to and approved by the members at a legal meeting. Any amendment, addition, alteration, change, or repeal so acted upon and approved shall be effective, if filed with and approved by the Federal Home Loan Bank Board, as of the date of the final approval of, or as fixed by, the members. FEDERAL HOME LOAN BANK BOARD, By

(Chairman)

Attest:

(Secretary)