Following our recent purchase of two branches, we acquired goodwill and core deposit intangible assets. Does the legal lending limit calculation include goodwill and core deposit intangible assets?

No, the lending limit calculations do not include goodwill and core deposit intangible assets.

Federal regulations limit loans to any one borrower to 15% of the bank’s capital and surplus. “Capital and surplus” means “a national bank’s . . . Tier 1 and Tier 2 capital calculated under the risk-based capital standards applicable to the institution as reported in the bank's or savings association’s Consolidated Reports of Condition and Income (Call Report).” Both the OCC capital rules and the FFIEC Call Report instructions clarify that Tier 1 and Tier 2 capital generally does not include goodwill or other identifiable intangible assets.

Consequently, while there are some very limited and complex exceptions, generally goodwill and core deposit intangible assets are excluded from the lending limit calculations.

For resources related to our guidance, please see:

OCC Lending Limit Regulations, 12 CFR 32.3(a) (“A national bank's or savings association's total outstanding loans and extensions of credit to one borrower may not exceed 15 percent of the bank's or savings association's capital and surplus….”)

OCC Lending Limit Regulations, 12 CFR 32.2(c) (“Capital and surplus means . . . A national bank's or savings association’s Tier 1 and Tier 2 capital calculated under the risk-based capital standards applicable to the institution as reported in the bank's or savings association's Consolidated Reports of Condition and Income (Call Report) . . . .”)

FFIEC Call Report, Schedule RC-R—Regulatory Capital, Item 6 and Item 7, Page 62 (“Common Equity Tier 1 Capital: Adjustments and Deductions … 6. LESS: Goodwill net of associated deferred tax liabilities (DTLs) . . . 7. LESS: Intangible assets (other than goodwill and mortgage servicing assets (MSAs)), net of associated DTLs”)

FFIEC Call Report, Schedule RC-R—Regulatory Capital, Items 27-34, Page 62 (Lists the items to include and deduct from Tier 2 capital, but does not mention goodwill or other intangible assets)

OCC Capital Adequacy Standards, 12 CFR 3.22(a) (“A national bank or Federal savings association must deduct from the sum of its common equity tier 1 capital elements the items set forth in this paragraph (a): (1) Goodwill, net of associated deferred tax liabilities (DTLs) in accordance with paragraph (e) of this section, … (2) Intangible assets, other than MSAs, net of associated DTLs in accordance with paragraph (e) of this section”)