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Paid-in and Unimpaired Capital and Surplus [Banks & Banking]
Understanding Paid-in and Unimpaired Capital and Surplus [Banks & Banking]
Definition & Meaning
The term paid-in and unimpaired capital and surplus refers to the total amount of funds that a bank has received from its shareholders, minus any losses that have not been accounted for. This includes the balance of paid-in share accounts and deposits at a specific point in time. Additionally, it factors in the undivided earnings account, which reflects the bank's retained earnings after accounting for all losses and net earnings or losses. Notably, reserves are not included as part of the surplus.
Table of content
Legal Use & context
This term is primarily used in banking and financial regulations. It is relevant for assessing a bank's financial health and stability, particularly in compliance with federal regulations. Understanding this term is crucial for professionals in finance, banking, and legal fields, especially when preparing financial statements or evaluating a bank's capital adequacy. Users can find legal templates related to banking regulations on platforms like US Legal Forms.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
For instance, if a bank has $1 million in paid-in share accounts and $200,000 in undivided earnings, but has incurred $50,000 in losses without reserves, its paid-in and unimpaired capital and surplus would be calculated as follows:
The primary statute governing this term is 12 USCS § 1795a, which outlines the definitions and requirements for capital and surplus in the context of federal credit unions and banking regulations.
Comparison with related terms
Term
Definition
Difference
Capital
The financial resources that a bank has for its operations.
Paid-in and unimpaired capital and surplus specifically refers to the net balance after losses, while capital may include other forms of funding.
Surplus
The amount remaining after all liabilities have been deducted from assets.
Paid-in and unimpaired capital and surplus excludes reserves, while surplus may include reserves.
Common misunderstandings
What to do if this term applies to you
If you are involved in banking or finance and need to assess paid-in and unimpaired capital and surplus, consider reviewing your financial statements carefully. You may benefit from using legal templates available on US Legal Forms to ensure compliance with regulations. If your situation is complex or involves significant financial implications, consulting a legal professional is advisable.
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Fines for non-compliance with capital requirements
Key takeaways
Frequently asked questions
Capital refers to the financial resources available for operations, while surplus is the remaining amount after liabilities are deducted. Paid-in and unimpaired capital and surplus specifically accounts for shareholder contributions and retained earnings.
No, reserves are explicitly excluded from the calculation of paid-in and unimpaired capital and surplus.
Review the paid-in and unimpaired capital and surplus along with other financial statements. Consider using legal templates for compliance and reporting.