§51b–1 Consideration of Preferred Stock in Determining Impairment of Capital; Dividends; Retirement

Summary

If a bank’s capital includes preferred stock, the bank’s capital is judged by the stock’s par value when deciding if the capital is impaired — even if the preferred stock would pay more than par value when retired or liquidated. If the bank has capital notes or debentures like the ones the Reconstruction Finance Corporation can buy under section 51d, the bank’s capital can be treated as not impaired so long as the sound value of its assets is at least as much as its total liabilities (counting capital stock), but ignoring those RFC-type notes or debentures and any debts the bank agreed to put below them. Preferred stock issued under the Emergency Banking and Bank Conservation Act of March 9, 1933 must pay cumulative dividends based on what the bank paid for the stock. On retirement, holders can get up to the purchase price plus any accumulated dividends if the articles of association say so and the Comptroller of the Currency approves. If the bank goes into voluntary liquidation or a conservator or receiver is appointed, common stockholders get nothing until preferred holders are paid in full as allowed in those approved articles, not exceeding purchase price plus accumulated dividends.