We are not aware of any restrictions on members of the same family simultaneously serving as voting directors on a community bank board, provided they are duly elected or appointed.

We do recommend exercising caution regarding loans to directors or corporations in which the directors have a controlling interest when such loans require board approval (for example, because they exceed certain thresholds in the laws governing lending limits). In order to avoid potential conflicts of interest in such situations, we recommend adopting a policy that requires these directors to recuse themselves and abstain from voting when a fellow board member who is a family member seeks board approval for a personal loan or a loan to a corporation in which the family member has a controlling interest.

For resources related to our guidance, please see:

• Illinois Banking Act, 205 ILCS 5/16(a) (“(1) Directors shall be elected as provided in this Act. . . . The existing directors shall hold office until their successors are elected and qualify.”)

• Illinois Banking Act, 205 ILCS 5/37(1) (“No state bank shall make any loan or extension of credit in excess of the limits, as determined by the Commissioner, at any one time outstanding each to its president, or to any of its vice presidents or its salaried officers or employees or directors or to corporations or firms, controlled by them, or in the management of which any of them are actively engaged, unless such loan or extension of credit shall have been first approved, by the board of directors. The Commissioner shall prescribe such limits by rules.”)

• Illinois Administrative Code, 38 Ill. Adm. Code 340.30 (“Any loan or extension of credit by a state bank to any of its . . . directors or to corporations or firms controlled by them . . . must receive the prior approval of the board of directors of the bank if such loan or extension of credit exceeds the higher of $25,000 or 5% of the bank's capital, surplus and undivided profits when aggregated with all other loans or extensions of credit then outstanding by the bank to that person or to any corporation or firm controlled by that person . . . . In no event shall a state bank make any loan or extension of credit to any . . . directors or to corporations or firms controlled . . . in an amount that, when aggregated with all other loans or extensions of credit then outstanding by the bank to that person or to any corporation or firm controlled by that person or in the management of which that person is actively engaged, exceeds $500,000, except with the prior approval of the board of directors of the bank.  When the bank's board of directors votes on a specific loan or extension of credit to the bank's . . .  director or to a corporation or firm controlled by them . . . , that officer, employee or director shall not be present during the discussion of such loan or extension of credit and shall abstain from participating in the vote.”)

• Illinois Savings Bank Act, 205 ILCS 205/6010 (“No savings bank may make a loan to any person owning 10% or more of its capital stock, any affiliated person, agent, or attorney of the savings bank, either individually or as an agent or partner of another, except in accordance with laws and regulations applicable to similar transactions to which banks are subject.”)

• Illinois Savings Bank Act, 205 ILCS 205/1007.05 (“The term ‘affiliated person of a savings bank or insured institution’ means the following: (1) a director, officer, or controlling person of a savings bank or insured institution; . . .”)

• FDIC Lending Limits, 12 CFR 337.3(a) (“{I}nsured nonmember banks are subject to the restrictions contained in subpart A of Federal Reserve Board Regulation O (12 CFR part 215, subpart A) to the same extent and to the same manner as though they were member banks.”)

• FDIC Lending Limits, 12 CFR 337.3(b) (“For the purposes of compliance with §215.4(b) of Federal Reserve Board Regulation O, no insured nonmember bank may extend credit or grant a line of credit to any of its executive officers, directors, or principal shareholders or to any related interest of any such person in an amount that, when aggregated with the amount of all other extensions of credit and lines of credit by the bank to that person and to all related interests of that person, exceeds the greater of $25,000 or five percent of the bank's capital and unimpaired surplus, or $500,000 unless (1) the extension of credit or line of credit has been approved in advance by a majority of the entire board of directors of that bank and (2) the interested party has abstained from participating directly or indirectly in the voting.”)

• Regulation O, 12 CFR 215.2(h) (“Insider means an executive officer, director, or principal shareholder, and includes any related interest of such a person.”)

• Regulation O, 12 CFR 215.2(n) (“Related interest of a person means: (1) A company that is controlled by that person; or (2) A political or campaign committee that is controlled by that person or the funds or services of which will benefit that person.”)