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Regular Session, 2010
SENATE BILL NO. 484
BY SENATOR DUPLESSIS
BANKS/BANKING. Provides relative to payment of dividends or stock by state banks.
(8/15/10)
AN ACT1
To amend and reenact R.S. 6:263, relative to capital, surplus, and dividends of state banks;2
to provide relative to state bank dividends and stock purchased or redeemed; to3
require capital surplus; and to provide for related matters.4
Be it enacted by the Legislature of Louisiana:5
Section 1. R.S. 6:263 is hereby amended and reenacted to read as follows: 6
ยง263. Cash dividends Dividends; stock repurchase purchased or redemption7
redeemed; capital surplus required8
A. The board of directors of a state bank may not declare or pay any9
dividends in cash dividends or property for a period of two years from the issuance10
of its certificate of authority or for such shorter period as the commissioner may11
prescribe. Thereafter, the board of directors of any a state bank may quarterly,12
semiannually, or annually declare or pay cash or property dividends on shares of13
its capital stock by complying with the provisions of this Section and the bank's14
articles of incorporation and bylaws.15
B. No A state bank shall not declare or pay cash or property dividends16
may be declared or paid, or purchase or redeem shares of its capital stock unless17 SB NO. 484
SLS 10RS-987 ORIGINAL
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Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
the bank has unimpaired surplus equal to that equals or exceeds fifty percent of the1
outstanding capital stock of the bank. The bank's unimpaired surplus shall not be2
reduced below fifty percent by as a result of the payment of any combination of3
cash dividend or property dividends, or the purchase or redemption of any4
shares of its capital stock.5
C. A state bank may purchase or redeem its own stock if after such purchase6
or redemption the bank is in compliance with applicable statutory and regulatory7
capital requirements, and its remaining unimpaired surplus equals or exceeds fifty8
percent of the outstanding capital stock of the state bank remaining after such9
purchase or redemption, provided that:10
(1) Prior approval of the commissioner shall be required if the total of all11
year-to-date cash or property dividends declared and paid by the state bank and12
amounts used to redeem or repurchase by the state bank's stock during any one year13
bank to redeem or purchase shares of its capital stock would exceed the total of14
the bank's year-to-date net profits of that year income combined with the its net15
profits income from the immediately preceding year. For the purposes of this16
Section, "net profits" is defined as the remainder of all earnings from current17
operations and other assets, after deducting from the total thereof all current18
operating expenses, paid and accrued cash dividends on preferred stock, if any, all19
federal and state taxes, cash dividends on common stock paid or accrued, and all of20
the following:21
(a) Amounts paid or accrued to redeem or repurchase stock for the payments22
of cash dividends.23
(b) The value of all property paid in dividends.24
(c) Amounts paid or accrued to redeem or purchase shares of the bank's25
capital stock over the calculation period.26
(2) Negative net profits income shall not be rounded to zero in the27
calculation.28
(2) D. A state bank shall not purchase or redeem shares of its capital stock29 SB NO. 484
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words in boldface type and underscored are additions.
when its combined capital stock and unimpaired surplus is accounts are less than,1
or such purchase or redemption would reduce its combined capital stock and2
unimpaired surplus accounts below, the aggregate amount payable on liquidation3
upon any issued shares which have a preferential right to participate in the assets in4
the event of liquidation and that remain after the purchase of or redemption and5
cancellation of any shares in connection therewith.6
(3) Stock which has been redeemed or repurchased must be accounted for7
under the par method of accounting.8
(4) Stock purchased or redeemed is E. Shares of a state bank's capital stock9
acquired pursuant to R.S. 6:416(B) shall be canceled and thereby restored to the10
status of authorized and unissued shares, unless the articles provide otherwise, except11
that stock of the state bank acquired pursuant to R.S. 6:416(B) shall be canceled12
upon the expiration of the period permitted under that Section unless prior to that13
date the stock had been disposed of by the state bank.14
(5) The redemption or repurchase of a state bank's own stock or the stock of15
its parent company may not be effected for the sole purpose of speculation or to16
evade any applicable requirements of federal or state law. Such acquisitions must17
comply with all applicable federal and state securities laws.18
F. Shares of a state bank's capital stock purchased or redeemed by the19
bank shall be deemed cancelled and thereby restored to the status of authorized20
and unissued shares unless the bank's articles, bylaws, or a resolution of the21
board of directors provides that such shares may be held as treasury stock22
following the purchase or redemption thereof.23
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Alan Miller.
DIGEST
Present law prohibits the board of directors of a state bank from declaring or paying any cash
dividends for a period of two years from the issuance of its certificate of authority or for
such shorter period as the commissioner of financial institutions may prescribe. Thereafter,
the board of directors of any state bank may quarterly, semiannually, or annually declare
dividends on its stock by complying with the provisions of present law and the bank's
articles of incorporation and bylaws. SB NO. 484
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words in boldface type and underscored are additions.
Proposed law prohibits the board of directors of a state bank from declaring or paying any
dividends in cash or property for a period of two years from the issuance of its certificate of
authority or as the commissioner may prescribe. Thereafter, the board of directors of a state
bank may declare or pay cash or property dividends on shares of its capital stock by
complying with the provisions of present law, and proposed law, and the bank's articles of
incorporation and bylaws.
Present law provides that no cash dividends may be declared or paid unless the bank has
unimpaired surplus equal to 50% of the outstanding capital stock of the bank. The bank's
unimpaired surplus shall not be reduced below 50% by the payment of any cash dividend.
Proposed law prohibits a state bank from declaring or paying cash or property dividends, or
purchasing or redeeming shares of its capital stock unless the bank has an unimpaired
surplus that equals or exceeds 50% of the outstanding capital stock of the bank. Proposed
law further prohibits the bank's unimpaired surplus from being reduced below 50% as a
result of the payment of any combination of cash or property dividends, or the purchase or
redemption of any shares of its capital stock.
Present law authorizes a state bank to purchase or redeem its own stock if after such
purchase or redemption the bank is in compliance with applicable statutory and regulatory
capital requirements, and its remaining unimpaired surplus equals or exceeds50% of the
outstanding capital stock of the state bank remaining after such purchase or redemption,
provided that:
1. Prior approval of the commissioner shall be required if the total of all cash dividends
declared and paid by the state bank and amounts used to redeem or repurchase the
state bank's stock during any one year would exceed the total of its net profits of that
year combined with the net profits from the immediately preceding year. For the
purposes of present law, "net profits" is defined as the remainder of all earnings from
current operations and other assets, after deducting from the total thereof all current
operating expenses, paid and accrued cash dividends on preferred stock, if any, all
federal and state taxes, cash dividends on common stock paid or accrued, and
amounts paid or accrued to redeem or repurchase stock over the calculation period.
Negative net profits shall not be rounded to zero in the calculation.
2. A state bank shall not purchase or redeem its stock when its combined capital stock
and unimpaired surplus is less than, or such purchase or redemption would reduce
its combined capital stock and unimpaired surplus below, the aggregate amount
payable on liquidation upon any issued shares which have a preferential right to
participate in the assets in event of liquidation and that remain after the purchase of
redemption and cancellation of any shares in connection therewith.
3. Stock which has been redeemed or repurchased must be accounted for under the par
method of accounting.
4. Stock purchased or redeemed is canceled and thereby restored to the status of
authorized and unissued shares, unless the articles provide otherwise, except that
stock of the state bank acquired pursuant to R.S. 6:416(B) shall be canceled upon the
expiration of the period permitted under that Section unless prior to that date the
stock had been disposed of by the state bank.
5. The redemption or repurchase of a state bank's own stock or the stock of its parent
company may not be effected for the sole purpose of speculation or to evade any
applicable requirements of federal or state law. Such acquisitions must comply with
all applicable federal and state securities laws.
Proposed law requires prior approval of the commissioner if the total of all year-to-date cash
or property dividends declared and paid by the state bank, and amounts used by the state SB NO. 484
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Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
bank to redeem or purchase shares of its capital stock exceeds the total of the bank's year-to-
date net income combined with its net income from the immediate proceeding year, after
deducting all of the following:
1.Amounts paid or accrued for the payments of cash dividends.
2. The value of all property paid in dividends.
3. Amounts paid or accrued to redeem or purchase shares of the bank's capital stock
over the calculation period.
Proposed law prohibits negative net income from being rounded to zero in the calculation.
Proposed law prohibits a state bank from purchasing or redeeming shares of its capital stock
when its combined capital stock and unimpaired surplus accounts are less than, or such
purchase or redemption would reduce its combined capital stock and unimpaired surplus
accounts below the aggregate amount payable on liquidation upon any issued shares which
have a preferential right to participate in the assets in the event of liquidation and that remain
after the purchase or redemption of any shares.
Proposed law requires that shares of a bank's capital stock acquired pursuant to present law
be cancelled and restored to the status or authorized and unissued shares upon the expiration
of the period permitted under present law unless prior to that date the stock has been
disposed of by the bank.
Proposed law requires that shares of a state bank's capital stock purchased or redeemed by
the bank be deemed cancelled and thereby restored to the status of authorized and unissued
shares unless the bank's articles, bylaws, or a resolution of the board of directors provides
that such shares may be held as treasury stock following the purchase or redemption thereof.
Effective August 15, 2010.
(Amends R.S. 6:263)