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Attorney General Marty Jackley

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OFFICIAL OPINION NO. 75-114, The use of capital stock and paid-in surplus to meet losses of permanent stock savings and loan associations

STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL

June 20, 1975

Mr. James V. Guffey, Secretary
Department of Commerce and Consumer Affairs
State Capitol Building
Pierre, South Dakota 57501

OFFICIAL OPINION NO. 75-114

The use of capital stock and paid-in surplus to meet losses of permanent stock savings and loan associations

Dear Mr. Guffey:

This office has received your request for an official opinion which asks the following question:

What restrictions, if any, are there on the use of capital stock and paid-in surplus to meet losses by State Chartered Permanent Stock Savings and Loan Associations in South Dakota?

The Legislature has provided for the organization of savings and loan associations in SDCL 52-4. It has also authorized two types of savings and loan associations, mutual associations and permanent stock associations. In SDCL 52-4-18 minimum capital requirements to be met within twelve months of the date of approval are set out. SDCL 52-4-19 then states that twenty percent of the permanent stock requirement of ยง 52-4-18 is paid-in surplus; going further it states "this paid-in surplus may be used by the association for payment of dividends and operating expenses with the superintendent's prior approval."

Also, I must point out that SDCL 52-9-5 requires the establishment of a reserve account, for the sole purpose of absorbing losses, and fixes a percentage of total savings account liability that must be in the reserve account on certain specified anniversaries. Although SDCL 52-9-6 provides for minor exceptions to SDCL 52-9-5, all savings and loan associations must have a reserve account. In that the purpose of the reserve account is to absorb losses, this account must be used for paying any losses before a savings and loan association can turn to other accounts.

Therefore, it is my opinion that by the terms of SDCL 52-4-19 a permanent stock association can request approval of the Director of Banking and Finance for the use of paid-in surplus to cover losses in excess of the reserve account. However, I could not find statutory authority for the use of capital stock to meet losses incurred by a permanent stock savings and loan association.

Respectfully submitted,

William Janklow
Attorney General

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