A bank incorporated in a state under a special charter or general statute may be converted into a national bank unless such conversion is forbidden by the laws of the state. A trust company organized under state law may be permitted to convert itself into a national bank provided it complies with all the conditions of the law, and divests itself of all its trust company business except such as the Federal Reserve Board may specifically authorize it to retain as provided by the Federal Reserve Act. In the conversion of a state bank there is not a dissolution of the state corporation, but merely a change of title and governmental supervision; the bank is still liable for all obligations and may enforce all contracts made with it as a state corporation. The conversion must be approved by the Comptroller of the Currency.

For conversion into a national bank the law requires that the shareholders owning not less than 51 per cent of the capital stock grant by vote to the directors authority to execute the articles of association and organization certificate and to convert the bank into a national bank, and these and all other papers in connection with the conversion must be executed by a majority of the directors. The minimum number of directors by which the affairs of a national bank can be directed is five; if the state bank has less than that number of directors an increase should be effected under the state law, prior to the execution of any conversion papers other than the application.

The state bank converting must have capital paid in and unimpaired equal to the amount required of a national bank. If it must increase its amount of capital in order to convert, the increase may be made under the state law and the bank may then convert, or the state bank may go into liquidation and reorganize, the deciding factor as to which course to pursue being the requirements of the laws of the state in which the bank is located. Should the bank increase its capital before conversion, the Comptroller of the Currency requires that this increase be certified to him by the state bank commissioner or superintendent of banks.

A state bank converting into a national bank is not required to issue new certificates of stock; the old certificates may simply be stamped to show the new corporate title and the date of change, but it is better to issue new certificates. Owing to the fact that the old certificates may be retained, it happens that a few national banks have shares of more or less than $100. Whenever the capitalization is increased or decreased the $100 denomination is introduced.

Before a charter is granted to a state bank applying to convert, an examination of its assets is made by the bank examiner in that district and his report is forwarded to the Comptroller. The converting bank must contribute $100 for the expense of this investigation, which is conducted in the same manner and to the same purpose as in the case of the organization of a new national bank.

Certain classes of assets permissible to state banks are forbidden to national banks, and at conversion into a national bank a state bank must liquidate such assets and cease acquiring them in the future. Moreover, the directors must certify to the Comptroller that the converted bank will purchase no prohibited assets, in accordance with the restrictions governing excessive loans, loans secured by real estate, stocks of other corporations, and the like.

Under the Federal Reserve Act a state bank converting into a national bank is permitted to keep any branch or branches which it may have at time of conversion.