Montana Code 32-1-452. Dividends, surplus, losses, and bad debts
32-1-452. Dividends, surplus, losses, and bad debts. (1) The directors of a bank may, at certain times and in the manner as the bank’s bylaws prescribe, declare, and pay dividends to the stockholders of so much of the net undivided profits of the bank as may be appropriated for that purpose, but every bank shall, before declaring any dividend, carry at least 25% of the bank’s net earnings for the period covered by the dividend to the bank’s surplus, until the surplus is 50% of the bank’s paid-up capital stock. The whole or any part of the surplus may at any time be converted into paid-in capital, but the surplus must be restored as provided in this subsection until the surplus amounts to 50% of the aggregate paid-up capital stock. A larger surplus may be created.
Terms Used In Montana Code 32-1-452
- bank: as used in this chapter means any corporation that has been incorporated to conduct the business of receiving money on deposit or transacting a trust or investment business, as defined in this chapter. See Montana Code 32-1-102
- Department: means the department of administration provided for in Title 2, chapter 15, part 10. See Montana Code 32-1-109
- Net earnings: means the excess of the gross earnings of a bank over expenses and losses chargeable against those earnings during any 1 year. See Montana Code 32-1-109
- Surplus: means a fund paid in or created under this chapter by a bank from its net earnings or undivided profits that, when set apart and designated as surplus, is not available for the payment of dividends and cannot be used for the payment of expenses or losses so long as the bank has undivided profits. See Montana Code 32-1-109
- Undivided profits: means the credit balance of the profit and loss account of a bank. See Montana Code 32-1-109
- Writing: includes printing. See Montana Code 1-1-203
(2)A bank must receive prior approval from the department to pay a dividend if:
(a)the bank is rated lower than a 1 or a 2 using the uniform financial institutions rating system adopted by the federal financial institutions examination council; or
(b)the dividend would reduce the tier 1 leverage ratio below 8%, or the bank has a tier 1 leverage ratio below 8% when the dividend is declared.
(3)The department may require a bank to suspend the payment of any or all dividends until all requirements imposed in writing on the bank by the department have been met.
(4)Losses sustained by a bank in excess of the bank’s undivided profits may be charged to and paid from the surplus, but the surplus must be restored in the manner provided in subsection (1) in the amount required by this chapter.