On April 9, 2015, the US Board of Governors of the Federal Reserve System issued a final rule expanding the applicability of its Small Bank Holding Company Policy Statement (“Policy Statement”) to include certain savings and loan holding companies and raising the asset threshold of the Policy Statement from $500 million to $1 billion in total consolidated assets. This rulemaking will allow a greater number of community banks to qualify for the advantages of being deemed a small bank holding company.

Small bank holding companies are exempt from the requirement to maintain consolidated regulatory capital ratios; instead, regulatory capital ratios only apply at the subsidiary bank level. This rule allows small bank holding companies to use non-equity funding, such as holding company loans, to finance growth and/or to use leverage to fund share repurchases and otherwise provide liquidity to shareholders.

The final rule implements a law passed in December 2014 by Congress. It will become effective 30 days after publication in the Federal Register. The Federal Reserve Board press release is available at:

http://www.federalreserve.gov/newsevents/press/bcreg/20150409a.htm.

The draft final rule is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20150409a1.pdf.