(a) Restriction on dividends. Dividends shall be available only from undivided earnings, if any.

(b) Payment of dividends if undivided earnings depleted. The board of directors of a “well capitalized” federally insured credit union that has depleted the balance of its undivided earnings account may authorize a transfer of funds from the credit union's regular reserve account to undivided earnings to pay dividends, provided that either—

(1) The payment of dividends will not cause the credit union's net worth classification to fall below “adequately capitalized” under subpart B or C of this part; or

(2) If the payment of dividends will cause the net worth classification to fall below “adequately capitalized,” the appropriate Regional Director and, if State-chartered, the appropriate State official, have given prior written approval (in an NWRP or otherwise) to pay a dividend.

[65 FR 8584, Feb. 18, 2000, as amended at 67 FR 71093, Nov. 29, 2002]