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

Summary

When a bank’s capital includes preferred stock, the bank’s capital strength is judged by the stock’s face (par) value, even if holders would get more than that if the stock is retired or the bank is closed. If the bank has capital notes or debentures the Reconstruction Finance Corporation may buy under section 51d, the bank’s capital can still be treated as not weakened if the sound value of its assets is at least equal to its total liabilities, including capital stock, but leaving out those notes or debentures and any obligations explicitly subordinated to them. Holders of preferred stock issued under the Emergency Banking and Bank Conservation Act (approved March 9, 1933) are entitled to cumulative dividends based on the bank’s purchase price for the stock. On retirement they may receive a payment up to the original purchase price plus any accumulated dividends, as allowed in the bank’s articles with the Comptroller of the Currency’s approval. If the bank goes into voluntary liquidation or a conservator or receiver is appointed, common shareholders get nothing until preferred shareholders are paid in full under those same limits.