What is a Small Bank? A Comprehensive Legal Overview

Q: How does being classified as a small bank affect my banking experience?

Small banks may have different regulatory requirements that can influence their lending practices and community involvement.

Q: Can a small bank become a large bank?

Yes, if a small bank&#039;s assets exceed $1.098 billion, it will be classified as a large bank and subject to different regulations.

Definition & Meaning

A small bank is defined as a financial institution that, as of December 31 of either of the two previous calendar years, has assets totaling less than $1.098 billion. Within this category, an intermediate small bank is a specific type of small bank that has assets of at least $274 million but less than $1.098 billion as of December 31 of both of the previous two calendar years. This classification is important for regulatory purposes and helps determine how banks are assessed under the Community Reinvestment Act.

Table of content

Legal Use & context

The term "small bank" is primarily used in the context of banking regulations, particularly in relation to the Community Reinvestment Act (CRA). This act encourages banks to meet the needs of the communities in which they operate, particularly low- and moderate-income neighborhoods. Understanding whether a bank qualifies as a small or intermediate small bank can affect its regulatory obligations and the types of assessments it undergoes. Users can manage related forms and compliance procedures through resources like US Legal Forms.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A local bank with assets of $900 million is classified as a small bank. This classification allows it to be evaluated under specific CRA requirements tailored for smaller institutions.

Example 2: A regional bank with assets of $300 million qualifies as an intermediate small bank, which subjects it to different regulatory assessments compared to larger banks. (hypothetical example)

Relevant laws & statutes

The primary regulation governing small banks is the Community Reinvestment Act (CRA), which is codified in Title 12 of the Code of Federal Regulations, Part 228. This law aims to ensure that banks serve the needs of their local communities, particularly in underserved areas.

Comparison with related terms

Term	Definition	Key Differences
Small Bank	A bank with assets under $1.098 billion.	Focuses on community needs and has specific regulatory requirements.
Intermediate Small Bank	A small bank with assets between $274 million and $1.098 billion.	Subject to different CRA assessments than smaller or larger banks.
Large Bank	A bank with assets of $1.098 billion or more.	Faces more stringent regulations and assessments under the CRA.

Common misunderstandings

What to do if this term applies to you

If you are considering banking with a small bank or are a small bank owner, it is essential to understand the regulatory requirements that apply to your institution. You may want to explore US Legal Forms for templates and resources that can assist in compliance and documentation. If your situation is complex, consulting a legal professional can provide tailored advice.

Find the legal form that fits your case

Browse our library of 85,000+ state-specific legal templates.

This field is required

Quick facts

Definition: A bank with assets under $1.098 billion.
Intermediate small bank: Assets between $274 million and $1.098 billion.
Regulatory framework: Community Reinvestment Act.

Key takeaways

Frequently asked questions

What is the asset limit for a small bank?

The asset limit for a small bank is less than $1.098 billion as of December 31 of either of the prior two calendar years.