The first thing to be decided in starting a bank is whether the bank is needed. This is no doubt a trite observation; and yet many mistakes are made by starting banks where they are not needed. Usually the mistake is not in selecting a town where the business is too small to support a bank, but in establishing another bank where such facilities are already adequate. Over-competition has practically destroyed banking profits in many localities. Therefore, before starting a bank, be sure that it is needed.

Having become satisfied, after diligent investigation, that the business of a particular locality requires a new bank, the next question of importance for the mover of the enterprise is to select the men whom it is desirable to interest in the organization. Naturally, the men who have capital will be the first to suggest themselves; but it is well not to lose sight of the fact that character is also a most desirable constituent of those who are starting a bank. Some men bear such high reputations that they are known to be incapable of associating themselves with anything unworthy of public support. Such men will add strength to a bank, though their moneyed capital may not be large.

When enough good men can be interested-say ten or twelvea preliminary meeting should be called and a spokesman selected to explain the reasons for launching the bank, its prospects for success and who are expected to take stock.

The importance of starting right suggests the propriety of having a legal adviser, so that all laws relating to incorporation may be fulfilled.

One of the first questions to arise is, shall the bank be organized under the State or the National banking laws; in other words, shall it be a State bank or a National bank? A careful examination of both the State and National banking laws will show that while there is much similarity in the powers granted by both, it is evident that

the restrictions as to the general management of banks are, as a rule, more rigid in the National Banking Law than in those of the laws of most of the States.

It is also shown that in a period of thirty-five years since the passage of the original National Banking Act only about 360 National banks failed, an average of about ten a year, and that dividends have been paid in winding up the affairs of these banks to the amount of about seventy-five per cent.

The relative profits to be obtained under the State and National systems depend upon circumstances. National banks are under some prohibitions which tend to restrict their earning capacity in certain localities. Profits on circulating notes and Government deposits are now so small as to be hardly worth considering. On the other hand, a National bank enjoys a degree of prestige, perhaps, from the character of its charter. In reserve cities the National form of organization will be generally found preferable, since only a National bank can act as a reserve agent for other National banks. State banks, in some States, are permitted to establish branches-a privilege not now accorded to National banks.

THE AMOUNT OF THE CAPITAL STOCK.

The next point to be considered is the amount of capital stock. The National Banking Law provides that in towns with a population not exceeding 3,000 a bank must have a capital of not less than $25,000; where the population does not exceed 6,000, at least $50,000 will be required; where the population is over 6,000 and under 50,000 the sum of $100,000 will be required, and in cities of 50,000 and over the sum of $200,000 is the minimum. Thus the amount of capital stock depends somewhat upon the population, also upon the character of the business of the community, some classes of business requiring much more accommodation than others, and as the National Banking Law limits the loaning power of a National bank to any one individual or corporation, on his or its own paper, to ten per cent. of the capital stock, the importance of this point is easily

seen.

It is of course more difficult to pay satisfactory dividends upon a large capital, unless a bank has some unusual facilities, consequently, except in the large cities where the demand for money is extremely heavy, it is considered wise banking to have a moderate capital and build up large deposits. I have several banks in mind, that have come to my personal attention, with capital ranging from $100,000 to $300,000, and deposits from $2,000,000 to $20,000,000. These banks pay large dividends, and their stock is almost unpurchasable.

The question of capital stock being decided, the next in importance is the name; and, simple as this may appear, it sometimes has much to do with the success of the bank. In organizing a National bank, it is well to bear in mind that the word National must form a part of the title.

The foregoing preliminaries having been settled, the next important step will be the securing of subscribers for the stock. This is generally placed in the hands of a committee.

Great care should be exercised in selecting those who are to be the stockholders, for it is here that much of the controlling power lies, and, while under any possible laws a bank may be injured or wrecked by its officers, yet its directors, primarily, and officers, secondarily, are the representatives of the stockholders.

Section 5133 of the National Banking Law provides that all stockholders of a bank must be "natural persons," that is, individuals who can legally hold and control property in their individual right -not corporations, firms, or associations.

As some who desire to be stockholders may be married women, and the laws of the several States differ as to their rights in regard to the holding of property and agreements made by them, also as to the forms of acknowledgment of papers executed by them, any organization papers bearing the signatures of women must be accompanied by the statement that, under the laws of the State, they had the power to be parties to the organization.

While the matters mentioned above are being attended to a letter should be sent to the Comptroller of the Currency at Washington, D. C., stating in full the wishes of the meeting, giving the desired name of the bank, the location and the proposed capital, and asking for instructions and for the proper blank forms. This should be signed by at least five of the contemplated stockholders with a statement of their business, and their financial standing, and endorsed by a member of the United States House of Representatives or a United States Senator for that State, or some person of some prominence vouching for the standing of the applicants. If this application be approved by the Comptroller a pamphlet will be received giving full instructions how to proceed, also blank forms in duplicate for the articles of association and for the organization certificate.

The name applied for will be reserved by the Comptroller for sixty days for the sole use of the bank first applying for it, during which time it is presumed that the bank will have completed its organization.

The following is the general form in use for the articles of association and organization certificate:

FORM OF ARTICLES OF ASSOCIATION.

For the purpose of organizing an association to carry on the business of banking, under the laws of the United States, the undersigned, subscribers for the stock of the association hereinafter named, do enter into the following articles of association :

First. The name and title of this association shall be "The

Second. The place where its banking-house or office shall be located and its operations of discount and deposit carried on, and its general business conducted shall be

shareholders. The

Third. The board of directors shall consist of first meeting of the shareholders for the election of directors shall be held at on the or at such other place and time as a majority of the undersigned shareholders may direct.

Fourth. The regular annual meetings of the shareholders for the election of directors shall be held at the banking-house of this association on the second Tuesday of January of each year; but if no election shall be held on that day it may be held on any other day, according to the provisions of section 5149 of the Revised Statutes of the United States; and all elections shall be held according to such regulations as may be prescribed by the board of directors, not inconsistent with the aforesaid provisions of the said section 5149 of the Revised Statutes and of these articles.

thousand dol

Fifth. The capital stock of this association shall be lars, to be divided into shares of one hundred dollars each; but the capital may be increased, according to the provisions of section 5142 of the Revised Statutes, to a sum approved of by the Comptroller of the Currency; and in case of the increase of the capital of the association, each shareholder shall have the privilege of subscribing for such number of shares of the proposed increase of the capital stock as he may be entitled to according to the number of shares owned by him before the stock is increased.

Sixth. The board of directors, a majority of whom shall be a quorum to do business, shall elect one of their number to be President of this association, who shall hold his office (unless he shall be disqualified, or be sooner removed by a two-thirds vote of all the members of the board) for the term for which he was elected a director; and they shall have power to elect a VicePresident, who shall also be a member of the board of directors, and who shall be authorized, in the absence or inability of the President from any cause, to perform all acts and duties pertaining to the office of President except such as the President only is authorized by law to perform; and to elect or appoint a Cashier, and such other officers and clerks as may be required to transact the business of the association; to fix the salaries to be paid to them, and to continue them in office, or to dismiss them, as, in the opinion of a majority of the board, the interests of the association may demand.

They shall also have power to define the duties of the officers and clerks of the association, to require bonds from them, and to fix the penalty thereof; to regulate the manner in which elections of directors shall be held, and to appoint judges of the elections; and, generally, to do and perform all the acts that it may be legal for a board of directors to do under the Revised Statutes aforesaid; and they shall also have the power to make all by-laws that it may be proper and convenient for them to make, not inconsistent with law, for the