Title 12, Banks and BankingRelease 119-110
§1831u Interstate Bank Mergers
Title 12 › CHAPTER 16 — FEDERAL DEPOSIT INSURANCE CORPORATION › § 1831u
Summary
Allows federal approval of mergers between banks in different States starting June 1, 1997, even if a State law would otherwise forbid the merger. A merger cannot be approved under this rule if the bank’s home State passed, after September 29, 1994 and before June 1, 1997, a law that applies the same to all out-of-State banks and expressly bans such mergers. A merger can be approved earlier than June 1, 1997 if every home State involved already had a law that applies equally to out‑of‑State banks and expressly allows interstate mergers. A host State may set non-discriminatory conditions on a branch that result from a merger, but those conditions cannot unfairly single out out‑of‑State banks and may not require action after May 31, 1997. A branch may be bought without buying the whole bank only if the State allows it; that branch is treated as a bank located in that State for these rules. States’ minimum-age rules for banks stay in place, but a bank that has existed at least 5 years may be acquired even if the State requires more. A shell bank that was created just to buy an existing bank is treated as having the same age as the bank or branch it will acquire. Banks applying for an interstate merger must follow host State filing rules that do not discriminate and are like rules the State applies to other nonbank companies, and must give the host State’s bank supervisor a copy of the application. The federal agency cannot approve a merger if the resulting bank would control more than 10 percent of all insured deposits in the United States. The agency also cannot approve a merger that would give the resulting bank 30 percent or more of a State’s deposits when the merging banks already both have branches in that State, unless the State law allows a higher share or the State supervisor approves without discrimination; this does not apply to mergers among affiliated banks. The agency must consider community reinvestment records and may approve only if each bank is adequately capitalized when filing and the resulting bank will be well capitalized and well managed. After merger, unused charters must be surrendered on request. States keep their taxing power and may apply a share‑value tax to a branch of an out‑of‑State bank. Antitrust laws still apply. The resulting bank may keep and run old offices and may open branches where any merging bank could have before. If a bank is failing or being helped by the federal insurer, the agency may waive many of these rules. Key terms: “adequately capitalized” — same meaning as in the related law; “branch” — a domestic branch; “home State” — where the bank is chartered or its main office is; “host State” — a State other than the home State where a branch is or will be; “interstate merger transaction” — a merger approved under these rules; other defined terms follow the law.
Full Legal Text
Title 12, §1831u
Banks and Banking, Source: USLM XML via OLRC
(a)Approval of interstate merger transactions authorized
(1)In general
Beginning on June 1, 1997, the responsible agency may approve a merger transaction under section 1828(c) of this title between insured banks with different home States, without regard to whether such transaction is prohibited under the law of any State.
(2)State election to prohibit interstate merger transactions
(A)In general
Notwithstanding paragraph (1), a merger transaction may not be approved pursuant to paragraph (1) if the transaction involves a bank the home State of which has enacted a law after September 29, 1994, and before June 1, 1997, that—
(i)applies equally to all out-of-State banks; and
(ii)expressly prohibits merger transactions involving out-of-State banks.
(B)No effect on prior approvals of merger transactions
A law enacted by a State pursuant to subparagraph (A) shall have no effect on merger transactions that were approved before the effective date of such law.
(3)State election to permit early interstate merger transactions
(A)In general
A merger transaction may be approved pursuant to paragraph (1) before June 1, 1997, if the home State of each bank involved in the transaction has in effect, as of the date of the approval of such transaction, a law that—
(i)applies equally to all out-of-State banks; and
(ii)expressly permits interstate merger transactions with all out-of-State banks.
(B)Certain conditions allowed
A host State may impose conditions on a branch within such State of a bank resulting from an interstate merger transaction if—
(i)the conditions do not have the effect of discriminating against out-of-State banks, out-of-State bank holding companies, or any subsidiary of such bank or company (other than on the basis of a nationwide reciprocal treatment requirement);
(ii)the imposition of the conditions is not preempted by Federal law; and
(iii)the conditions do not apply or require performance after May 31, 1997.
(4)Interstate merger transactions involving acquisitions of branches
(A)In general
An interstate merger transaction may involve the acquisition of a branch of an insured bank without the acquisition of the bank only if the law of the State in which the branch is located permits out-of-State banks to acquire a branch of a bank in such State without acquiring the bank.
(B)Treatment of branch for purposes of this section
In the case of an interstate merger transaction which involves the acquisition of a branch of an insured bank without the acquisition of the bank, the branch shall be treated, for purposes of this section, as an insured bank the home State of which is the State in which the branch is located.
(5)Preservation of State age laws
(A)In general
The responsible agency may not approve an application pursuant to paragraph (1) that would have the effect of permitting an out-of-State bank or out-of-State bank holding company to acquire a bank in a host State that has not been in existence for the minimum period of time, if any, specified in the statutory law of the host State.
(B)Special rule for State age laws specifying a period of more than 5 years
Notwithstanding subparagraph (A), the responsible agency may approve a merger transaction pursuant to paragraph (1) involving the acquisition of a bank that has been in existence at least 5 years without regard to any longer minimum period of time specified in a statutory law of the host State.
(6)Shell banks
For purposes of this subsection, a bank that has been chartered solely for the purpose of, and does not open for business prior to, acquiring control of, or acquiring all or substantially all of the assets of, an existing bank or branch shall be deemed to have been in existence for the same period of time as the bank or branch to be acquired.
(b)Provisions relating to application and approval process
(1)Compliance with State filing requirements
(A)In general
Any bank which files an application for an interstate merger transaction shall—
(i)comply with the filing requirements of any host State of the bank which will result from such transaction to the extent that the requirement—
(I)does not have the effect of discriminating against out-of-State banks or out-of-State bank holding companies or subsidiaries of such banks or bank holding companies; and
(II)is similar in effect to any requirement imposed by the host State on a nonbanking corporation incorporated in another State that engages in business in the host State; and
(ii)submit a copy of the application to the State bank supervisor of the host State.
(B)Penalty for failure to comply
The responsible agency may not approve an application for an interstate merger transaction if the applicant materially fails to comply with subparagraph (A).
(2)Concentration limits
(A)Nationwide concentration limits
The responsible agency may not approve an application for an interstate merger transaction if the resulting bank (including all insured depository institutions which are affiliates of the resulting bank), upon consummation of the transaction, would control more than 10 percent of the total amount of deposits of insured depository institutions in the United States.
(B)Statewide concentration limits other than with respect to initial entries
The responsible agency may not approve an application for an interstate merger transaction if—
(i)any bank involved in the transaction (including all insured depository institutions which are affiliates of any such bank) has a branch in any State in which any other bank involved in the transaction has a branch; and
(ii)the resulting bank (including all insured depository institutions which would be affiliates of the resulting bank), upon consummation of the transaction, would control 30 percent or more of the total amount of deposits of insured depository institutions in any such State.
(C)Effectiveness of State deposit caps
No provision of this subsection shall be construed as affecting the authority of any State to limit, by statute, regulation, or order, the percentage of the total amount of deposits of insured depository institutions in the State which may be held or controlled by any bank or bank holding company (including all insured depository institutions which are affiliates of the bank or bank holding company) to the extent the application of such limitation does not discriminate against out-of-State banks, out-of-State bank holding companies, or subsidiaries of such banks or holding companies.
(D)Exceptions to subparagraph (B)
The responsible agency may approve an application for an interstate merger transaction pursuant to subsection (a) without regard to the applicability of subparagraph (B) with respect to any State if—
(i)there is a limitation described in subparagraph (C) in a State statute, regulation, or order which has the effect of permitting a bank or bank holding company (including all insured depository institutions which are affiliates of the bank or bank holding company) to control a greater percentage of total deposits of all insured depository institutions in the State than the percentage permitted under subparagraph (B); or
(ii)the transaction is approved by the appropriate State bank supervisor of such State and the standard on which such approval is based does not have the effect of discriminating against out-of-State banks, out-of-State bank holding companies, or subsidiaries of such banks or holding companies.
(E)Exception for certain banks
This paragraph shall not apply with respect to any interstate merger transaction involving only affiliated banks.
(3)Community reinvestment compliance
In determining whether to approve an application for an interstate merger transaction in which the resulting bank would have a branch or bank affiliate immediately following the transaction in any State in which the bank submitting the application (as the acquiring bank) had no branch or bank affiliate immediately before the transaction, the responsible agency shall—
(A)comply with the responsibilities of the agency regarding such application under section 2903 of this title;
(B)take into account the most recent written evaluation under section 2903 of this title of any bank which would be an affiliate of the resulting bank; and
(C)take into account the record of compliance of any applicant bank with applicable State community reinvestment laws.
(4)Adequacy of capital and management skills
The responsible agency may approve an application for an interstate merger transaction pursuant to subsection (a) only if—
(A)each bank involved in the transaction is adequately capitalized as of the date the application is filed; and
(B)the responsible agency determines that the resulting bank will be well capitalized and well managed upon the consummation of the transaction.
(5)Surrender of charter after merger transaction
The charters of all banks involved in an interstate merger transaction, other than the charter of the resulting bank, shall be surrendered, upon request, to the Federal banking agency or State bank supervisor which issued the charter.
(c)Applicability of certain laws to interstate banking operations
(1)State taxation authority not affected
(A)In general
No provision of this section shall be construed as affecting the authority of any State or political subdivision of any State to adopt, apply, or administer any tax or method of taxation to any bank, bank holding company, or foreign bank, or any affiliate of any bank, bank holding company, or foreign bank, to the extent such tax or tax method is otherwise permissible by or under the Constitution of the United States or other Federal law.
(B)Imposition of shares tax by host States
In the case of a branch of an out-of-State bank which results from an interstate merger transaction, a proportionate amount of the value of the shares of the out-of-State bank may be subject to any bank shares tax levied or imposed by the host State, or any political subdivision of such host State that imposes such tax based upon a method adopted by the host State, which may include allocation and apportionment.
(2)Applicability of antitrust laws
No provision of this section shall be construed as affecting—
(A)the applicability of the antitrust laws; or
(B)the applicability, if any, of any State law which is similar to the antitrust laws.
(3)Reservation of certain rights to States
No provision of this section shall be construed as limiting in any way the right of a State to—
(A)determine the authority of State banks chartered by that State to establish and maintain branches; or
(B)supervise, regulate, and examine State banks chartered by that State.
(4)State-imposed notice requirements
A host State may impose any notification or reporting requirement on a branch of an out-of-State bank if the requirement—
(A)does not discriminate against out-of-State banks or bank holding companies; and
(B)is not preempted by any Federal law regarding the same subject.
(d)Operations of the resulting bank
(1)Continued operations
A resulting bank may, subject to the approval of the appropriate Federal banking agency, retain and operate, as a main office or a branch, any office that any bank involved in an interstate merger transaction was operating as a main office or a branch immediately before the merger transaction.
(2)Additional branches
Following the consummation of any interstate merger transaction, the resulting bank may establish, acquire, or operate additional branches at any location where any bank involved in the transaction could have established, acquired, or operated a branch under applicable Federal or State law if such bank had not been a party to the merger transaction.
(3)Certain conditions and commitments continued
If, as a condition for the acquisition of a bank by an out-of-State bank holding company before September 29, 1994—
(A)the home State of the acquired bank imposed conditions on such acquisition by such out-of-State bank holding company; or
(B)the bank holding company made commitments to such State in connection with the acquisition,
the State may enforce such conditions and commitments with respect to such bank holding company or any affiliated successor company which controls a bank or branch in such State as a result of an interstate merger transaction to the same extent as the State could enforce such conditions or commitments against the bank holding company before the consummation of the merger transaction.
(e)Exception for banks in default or in danger of default
If an application under subsection (a)(1) for approval of a merger transaction which involves 1 or more banks in default or in danger of default or with respect to which the Corporation provides assistance under section 1823(c) of this title, the responsible agency may approve such application without regard to subsection (b), or paragraph (2), (4), or (5) of subsection (a).
(f)Applicable rate and other charge limitations
(1)In general
In the case of any State that has a constitutional provision that sets a maximum lawful annual percentage rate of interest on any contract at not more than 5 percent above the discount rate for 90-day commercial paper in effect at the Federal reserve bank for the Federal reserve district in which such State is located, except as provided in paragraph (2), upon the establishment in such State of a branch of any out-of-State insured depository institution in such State under this section, the maximum interest rate or amount of interest, discount points, finance charges, or other similar charges that may be charged, taken, received, or reserved (or in the case of a governmental entity located in such State, paid) from time to time in any loan or discount made or upon any note, bill of exchange, financing transaction, or other evidence of debt by—
(A)any insured depository institution whose home State is such State shall be equal to not more than the greater of—
(i)the maximum interest rate or amount of interest, discount points, finance charges, or other similar charges that may be charged, taken, received, or reserved in a similar transaction under the constitution or any statute or other law of the home State of the out-of-State insured depository institution establishing any such branch, without reference to this section, as such maximum interest rate or amount of interest may change from time to time; or
(ii)the maximum rate or amount of interest, discount points, finance charges, or other similar charges that may be charged, taken, received, or reserved in a similar transaction by a State insured depository institution chartered under the laws of such State or a national bank or Federal savings association whose main office is located in such State without reference to this section; and
(B)any governmental entity located in such State or any person that is not a depository institution described in subparagraph (A) doing business in such State, shall be equal to not more than the greater of the State’s maximum lawful annual percentage rate or 17 percent—
(i)to facilitate the uniform implementation of federally mandated or federally established programs and financings related thereto, including—
(I)uniform accessibility of student loans, including the issuance of qualified student loan bonds as set forth in section 144(b) of title 26;
(II)the uniform accessibility of mortgage loans, including the issuance of qualified mortgage bonds and qualified veterans’ mortgage bonds as set forth in section 143 of such title;
(III)the uniform accessibility of safe and affordable housing programs administered or subject to review by the Department of Housing and Urban Development, including—
(aa)the issuance of exempt facility bonds for qualified residential rental property as set forth in section 142(d) of such title; and
(bb)the issuance of low income housing tax credits as set forth in section 42 of such title; and
(IV)the uniform accessibility of bonds and obligations issued under the American Recovery and Reinvestment Act of 2009;
(ii)to facilitate interstate commerce through the issuance of bonds and obligations under any provision of State law, including bonds and obligations for the purpose of economic development, education, and improvements to infrastructure; and
(iii)to facilitate interstate commerce generally, including consumer loans, in the case of any person or governmental entity (other than a depository institution subject to subparagraph (A) and paragraph (2)).
(2)Rule of construction
(A)In general
No provision of this subsection shall be construed as superseding or affecting—
(i)the authority of any insured depository institution to take, receive, reserve, and charge interest on any loan made in any State other than the State referred to in paragraph (1); or
(ii)the applicability of section 1735f–7a of this title, section 85 of this title, or section 1831d of this title.
(B)Applicability
This subsection shall be construed to apply to any loan or discount made, or note, bill of exchange, financing transaction, or other evidence of debt, originated by an insured depository institution, a governmental entity located in such State, or a person that is not a depository institution described in subparagraph (A) doing business in such State.
(g)Definitions
For purposes of this section, the following definitions shall apply:
(1)Adequately capitalized
The term “adequately capitalized” has the same meaning as in section 1831o of this title.
(2)Antitrust laws
The term “antitrust laws”—
(A)has the same meaning as in subsection (a) of section 12 of title 15; and
(B)includes section 45 of title 15 to the extent such section 45 relates to unfair methods of competition.
(3)Branch
The term “branch” means any domestic branch.
(4)Home State
The term “home State”—
(A)means—
(i)with respect to a national bank, the State in which the main office of the bank is located; and
(ii)with respect to a State bank, the State by which the bank is chartered; and
(B)with respect to a bank holding company, has the same meaning as in section 1841(o)(4) of this title.
(5)Host State
The term “host State” means, with respect to a bank, a State, other than the home State of the bank, in which the bank maintains, or seeks to establish and maintain, a branch.
(6)Interstate merger transaction
The term “interstate merger transaction” means any merger transaction approved pursuant to subsection (a)(1).
(7)Merger transaction
The term “merger transaction” has the meaning determined under section 1828(c)(3) of this title.
(8)Out-of-State bank
The term “out-of-State bank” means, with respect to any State, a bank whose home State is another State.
(9)Out-of-State bank holding company
The term “out-of-State bank holding company” means, with respect to any State, a bank holding company whose home State is another State.
(10)Responsible agency
The term “responsible agency” means the agency determined in accordance with section 1828(c)(2) of this title with respect to a merger transaction.
(11)Resulting bank
The term “resulting bank” means a bank that has resulted from an interstate merger transaction under this section.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
The American Recovery and Reinvestment Act of 2009, referred to in subsec. (f)(1)(B)(i)(IV), is Pub. L. 111–5, Feb. 17, 2009, 123 Stat. 115. For complete classification of this Act to the Code, see
Short Title
of 2009 Amendment note set out under section 1 of Title 26, Internal Revenue Code, and Tables.
Amendments
2010—Subsec. (b)(4)(B). Pub. L. 111–203 substituted “will be well capitalized and well managed” for “will continue to be adequately capitalized and adequately managed”. 2009—Subsec. (f)(1). Pub. L. 111–83, § 563(a)(1), inserted “(or in the case of a governmental entity located in such State, paid)” after “received, or reserved” in introductory provisions. Pub. L. 111–32 substituted “evidence of debt by—” for “evidence of debt by”, inserted subpar. (A) designation, redesignated former subpars. (A) and (B) as cls. (i) and (ii), respectively, realigned margins, and added subpar. (B). Subsec. (f)(1)(B). Pub. L. 111–83, § 563(a)(2)(A), substituted “governmental entity located in such State or any person that is not a depository institution described in subparagraph (A) doing business in such State” for “nondepository institution operating in such State” in introductory provisions. Subsec. (f)(1)(B)(i)(III)(aa). Pub. L. 111–83, § 563(a)(2)(C)(i)(I), inserted “and” at end. Subsec. (f)(1)(B)(i)(III)(bb). Pub. L. 111–83, § 563(a)(2)(C)(i)(II), struck out “, to facilitate the uniform accessibility of provisions of the American Recovery and Reinvestment Act of 2009” after “section 42 of such title”. Subsec. (f)(1)(B)(i)(III)(cc). Pub. L. 111–83, § 563(a)(2)(C)(i)(III), struck out item (cc), which read as follows: “the issuance of bonds and obligations issued under that Act, to facilitate economic development, higher education, and improvements to infrastructure, and the issuance of bonds and obligations issued under any provision of law to further the same; and”. Subsec. (f)(1)(B)(i)(IV). Pub. L. 111–83, § 563(a)(2)(C)(ii), added subcl. (IV). Subsec. (f)(1)(B)(ii), (iii). Pub. L. 111–83, § 563(a)(2)(B), (D), added cl. (ii) and redesignated former cl. (ii) as (iii). Subsec. (f)(2). Pub. L. 111–83, § 563(b), designated existing provisions as subpar. (A), inserted heading, redesignated former subpars. (A) and (B) as cls. (i) and (ii), respectively, of subpar. (A), realigned margins, and added subpar. (B). 1999—Subsecs. (f), (g). Pub. L. 106–102 added subsec. (f) and redesignated former subsec. (f) as (g).
Statutory Notes and Related Subsidiaries
Effective Date
of 2010 Amendment Pub. L. 111–203, title VI, § 607(c), July 21, 2010, 124 Stat. 1608, provided that: “The
Amendments
made by this section [amending this section and section 1842 of this title] shall take effect on the transfer date.” [For definition of “transfer date” as used in section 607(c) of Pub. L. 111–203, set out above, see section 5301 of this title.]
Effective Date
of 2009 Amendment Pub. L. 111–83, title V, § 563(c), Oct. 28, 2009, 123 Stat. 2184, provided that: “The
Amendments
made by this section [amending this section] shall apply with respect to contracts consummated during the period beginning on the date of enactment of this Act [Oct. 28, 2009] and ending on
December 31, 2010.” Pub. L. 111–32, title V, § 504(b),
June 24, 2009, 123 Stat. 1880, provided that: “The
Amendments
made by subsection (a) [amending this section] shall apply with respect to contracts consummated during the period beginning on the date of enactment of this Act [
June 24, 2009] and ending on
December 31, 2010.”
Reference
Citations & Metadata
Citation
12 U.S.C. § 1831u
Title 12, Banks and Banking
Last Updated
Sep 22, 2026
Release point: 119-110