Legal Definitions - state bank

A state bank is a financial institution that has received its official charter and operating license from a specific state government, rather than from the federal government. This means its primary regulatory oversight comes from the banking authorities of the state in which it was chartered. While state banks are regulated by their respective states, they are also often subject to federal oversight, especially if they participate in federal programs like deposit insurance through the Federal Deposit Insurance Corporation (FDIC).

Here are some examples to illustrate what a state bank is:

• Example 1: Community Lending in Ohio
  Scenario: "Ohio River Bank" is a small, independently owned financial institution that operates exclusively within several counties in Ohio. It was founded and granted its charter by the Ohio Department of Financial Institutions, which regularly examines its operations to ensure compliance with state banking laws. It offers checking accounts, savings accounts, and small business loans primarily to residents and businesses within its local Ohio communities.

  Explanation: This bank is a state bank because its legal authority to operate comes directly from the state of Ohio, and its primary regulator is a state-level agency. Its focus on serving local Ohio communities is also characteristic of many state-chartered institutions.

• Example 2: Regional Expansion from a State Charter
  Scenario: "Southern Plains Financial" began as a bank chartered by the state of Oklahoma. Over several decades, it grew significantly, opening branches in neighboring states like Texas and Kansas. Despite its multi-state presence, its original charter remains with the state of Oklahoma, and it continues to be primarily regulated by the Oklahoma State Banking Department, in addition to federal regulators.

  Explanation: This demonstrates that a bank can expand its operations beyond its chartering state and still be considered a state bank, as long as its foundational license to operate was granted by a state government rather than the federal government.

• Example 3: State-Specific Financial Programs
  Scenario: The state of California implements a new program to provide low-interest loans for small businesses adopting environmentally friendly practices. "Golden Coast Bank," which holds a charter from the state of California, is one of the financial institutions authorized by the state government to administer these specific loans to eligible businesses within California.

  Explanation: This example highlights how a state bank, being chartered and regulated by a state, often plays a crucial role in implementing state-level financial initiatives and serving the specific economic and policy needs of its chartering state.