§ 1133 Bank Shareholder Distribution Limits

This law lets a bank give money to its owners, but only up to the biggest of three numbers: what the bank has saved up, what it earned last year, or what it earned this year.

Key Takeaways

•The bank needs the commissioner’s prior approval before giving out money.
•The payout can’t be bigger than the highest of retained earnings, last year’s profit, or this year’s profit.
•This rule makes sure the bank keeps enough money to stay healthy.

Example

A community bank wants to pay a dividend to its shareholders after a good year.

The bank can only pay out an amount that is no larger than the highest of its saved earnings, last year's profit, or this year's profit, and it must get the commissioner’s okay first.

How to Calculate

Distribution ≤ max(Retained Earnings, Net Income_last_fiscal_year, Net Income_current_fiscal_year)

Find the bank’s retained earnings (the money it has kept from past years).
Find the net income for the last fiscal year (profit earned last year).
Find the net income for the current fiscal year (profit earned so far this year).
Compare the three numbers and pick the biggest one.
The distribution to shareholders can be any amount up to that biggest number, but not more.

Bank XYZ wants to pay a dividend.

Result: The biggest number is $8,000,000, so the bank can distribute up to $8,000,000 to shareholders (with commissioner approval).

Notwithstanding the provisions of Section 1132, a bank or a majority-owned subsidiary of a bank may, with the prior approval of the commissioner, make a distribution to the shareholders of such bank in an amount not exceeding the greatest of: (a) The retained earnings of the bank; (b) The net income of the bank for its last fiscal year; or (c) The net income of the bank for its current fiscal year. (Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)

This law lets a bank give money to its owners, but only up to the biggest of three numbers: what the bank has saved up, what it earned last year, or what it earned this year.

Key Takeaways

•The bank needs the commissioner’s prior approval before giving out money.
•The payout can’t be bigger than the highest of retained earnings, last year’s profit, or this year’s profit.
•This rule makes sure the bank keeps enough money to stay healthy.

Example

A community bank wants to pay a dividend to its shareholders after a good year.

The bank can only pay out an amount that is no larger than the highest of its saved earnings, last year's profit, or this year's profit, and it must get the commissioner’s okay first.

How to Calculate

Distribution ≤ max(Retained Earnings, Net Income_last_fiscal_year, Net Income_current_fiscal_year)

Find the bank’s retained earnings (the money it has kept from past years).
Find the net income for the last fiscal year (profit earned last year).
Find the net income for the current fiscal year (profit earned so far this year).
Compare the three numbers and pick the biggest one.
The distribution to shareholders can be any amount up to that biggest number, but not more.

Bank XYZ wants to pay a dividend.

Result: The biggest number is $8,000,000, so the bank can distribute up to $8,000,000 to shareholders (with commissioner approval).

Key Takeaways

Example

How to Calculate

Key Terms

References

§ 1133 Bank Shareholder Distribution Limits

Key Takeaways

Example

How to Calculate

Key Terms

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References