There are several exceptions to Regulation O’s prohibition on loans to executive officers exceeding $100,000 (or 2.5% of the bank’s unimpaired capital and unimpaired surplus, if that amount is lower), as discussed below. However, we are not aware of any exceptions for loans to executive officers that are secured by stock portfolios (provided no other exceptions apply).

Regulation O’s $100,000 lending limitation generally applies to loans made to executive officers, with several exceptions, such as for loans financing the education of the executive officer’s children or the purchase or improvement of the executive officer’s residence, among others. Notably, there is an exception for loans made to executive officers that are secured by “bonds, notes, certificates of indebtedness, or Treasury bills of the United States” or “by a perfected security interest in a segregated deposit account in the lending bank.” However, we are not aware of an exception that would apply to loans secured by a stock portfolio.

Additionally, we note that both Illinois and federal law prohibit a bank from making a loan secured by shares of its own stock.

For resources related to our guidance, please see:

• FDIC Lending Limits, 12 CFR 337.3(a) (“[[i][/i]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.”)

• Regulation O, 12 CFR 215.2(e)(1) (“Executive officer of a company or bank means a person who participates or has authority to participate (other than in the capacity of a director) in major policymaking functions of the company or bank, whether or not: the officer has an official title; the title designates the officer an assistant; or the officer is serving without salary or other compensation. The chairman of the board, the president, every vice president, the cashier, the secretary, and the treasurer of a company or bank are considered executive officers, unless the officer is excluded, by resolution of the board of directors or by the bylaws of the bank or company, from participation (other than in the capacity of a director) in major policymaking functions of the bank or company, and the officer does not actually participate therein.”)

• Regulation O, 12 CFR 215.5(c) (“A member bank is authorized to extend credit to any executive officer of the bank:

(1) In any amount to finance the education of the executive officer’s children;

(2) In any amount to finance or refinance the purchase, construction, maintenance, or improvement of a residence of the executive officer, provided:

• (i) The extension of credit is secured by a first lien on the residence and the residence is owned (or expected to be owned after the extension of credit) by the executive officer; and
• (ii) In the case of a refinancing, that only the amount thereof used to repay the original extension of credit, together with the closing costs of the refinancing, and any additional amount thereof used for any of the purposes enumerated in this paragraph (c)(2), are included within this category of credit;

(3) In any amount, if the extension of credit is secured in a manner described in § 215.4(d)(3)(i)(A) through (d)(3)(i)(C) of this part; and

(4) For any other purpose not specified in paragraphs (c)(1) through (c)(3) of this section, if the aggregate amount of extensions of credit to that executive officer under this paragraph does not exceed at any one time the higher of 2.5 per cent of the bank’s unimpaired capital and unimpaired surplus or $ 25,000, but in no event more than $100,000.”)

• Regulation O, 12 CFR 215.4(d)(3)(i) (“The general limit specified in paragraph (d)(1) of this section does not apply to the following: (A) Extensions of credit secured by a perfected security interest in bonds, notes, certificates of indebtedness, or Treasury bills of the United States or in other such obligations fully guaranteed as to principal and interest by the United StatesExtensions of credit secured by a perfected security interest in a segregated deposit account in the lending bank