Many people are inquiring when another dividend will be paid depositors of the defunct First National Bank of Lumberton. Mr. T. L. Johnson, attorney for the receiver, states that no dividend may be expected for at least 60 days, and that Receiver McConihe will give public notice when another dividend is ready to be paid.
Editor’s Note: In the 1920s when a bank failed, depositors money was frozen and they couldn’t withdraw their savings. Today, the FDIC insures deposits up to $250,000, but FDIC didn’t come into existence until 1933. Under the law in 1926, a bank that went under and shut its doors went to a receiver. The receiver’s duties were to sell off the bank’s assets—loans, buildings, furniture, securities. The money was distributed to depositors in installments. Those installments were called dividends to depositors. It wasn’t a profit-sharing dividend or interest or a bonus. It was partial repayment of frozen deposits. In summary, in 1926 depositors became creditors when a bank failed. Repayments to them were called dividends. And the receiver was the liquidator of the bank’s assets. Stocks in a failed bank become worthless; a failed bank can only pay dividends to stockholders if there’s money left over after the receiver has repaid every penny to every creditor—a rare occurrence. Sometimes wealthy bank officers who had committed some sort of fraud were given the opportunity to avoid jail time by restoring lost funds to the bank, but most did not take advantage of this.
From the front page of the Robesonian, Lumberton, N.C., Thursday, Oct. 21, 1926
newspapers.digitalnc.org/lccn/sn84026483/1926-10-21/ed-1/seq-1/
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