§412:3-403  Dividends and othercapital distributions.  (a)  No Hawaii stock financial institution shalldeclare or pay any dividends or make any other capital distribution to itsshareholders except pursuant to its articles of incorporation, this section,and section 414-111; provided that if section 414-111 is inconsistent with thissection, the provisions of this section shall control.

(b)  In this section, "capitaldistribution" means:

(1)  A distribution of cash or other property by anyHawaii stock financial institution to its owners made on account of thatownership, but excluding any dividends consisting only of shares of the capitalstock of the financial institution or rights to purchase such shares;

(2)  A payment by any stock financial institution torepurchase, redeem, retire, or otherwise acquire any of its shares or otherownership interest, including any extensions of credit to finance an affiliatedcompany's acquisition of those shares or interests; or

(3)  A transaction that the commissioner determines,by order or rule, to be in substance a distribution of capital to the owners ofthe financial institution.

(c)  A Hawaii stock financial institution shallnot make any capital distribution in an amount greater than its retainedearnings then on hand or if after such capital distribution the financialinstitution shall not have the minimum paid-in capital and surplus required bythis chapter.  For purposes of this section the amount of retained earnings onhand, capital and surplus shall be determined in accordance with generallyaccepted accounting principles, except that:

(1)  All loans and extensions of credit on whichinterest has been delinquent for one year or more, or upon which a finaljudgment has been unsatisfied for more than one year and interest has beendelinquent for one year or more, unless and to the extent the same are wellsecured or in the process of collection shall have been charged down;

(2)  All assets which the commissioner may haverequired to be charged down pursuant to section 412:3-109, shall have beencharged down; and

(3)  Any loss sustained or charge made by a Hawaiifinancial institution as provided in this subsection shall be netted firstagainst any reserve established therefor, then charged to retained earnings,then to surplus, and then to capital.

(d)  Before making any capital distribution,each Hawaii stock financial institution, except for a nondepository financialservices loan company, shall, until its capital and surplus equal at least onehundred thirty-three per cent of its initial minimum capital and surplusrequired under section 412:3-209, transfer to surplus from its retainedearnings at least twenty-five per cent of its net profits from the precedingfiscal year. [L 1993, c 350, pt of §1; am L 2002, c 40, §19]