Making loans seems to be a pretty straightforward and
time-honored concept that ought to be well understood, especially
among those in the banking industry.
But legal restrictions on where certain banking activities can
take place have pushed the understandable into a quagmire in
which only lawyers thrive.
In Oklahoma, the issue has been addressed in terms of what
activities are allowed at the specialty facility known as loan
production offices. These offices _ which unlike branches are not
restricted by number or location _ allow banks to go to any
market they choose to solicit loan business.
Loan production offices are not restricted presumably because
they bring in money from elsewhere and stimulate the local
economy. They are just the opposite of the worst characterization
of a banker _ one that goes into a community and siphons off
deposits to fund loans and thereby growth elsewhere.
Oklahoma law allows loan production offices to take loan
applications, but loan decisions and funding cannot be made at
The same is true for another type of limited-service banking
office, known as the extended facility. Extended facilities are
prohibited from making loans. State law allows banks to establish
up to two such locations, one within 1,000 feet of the main bank
and the other within three miles of the main bank.
Questions arise in the operation of these facilities when
bankers seek to re-create their traditional business _ making
loans _ in ways that fit with modern customers who demand
State bankers already jockeying for position in a highly
competitive environment have used both loan production offices
and extended facilities to gain entrance to markets that would
otherwise be off limits due to the state's branching laws.
The actions are not limited to the large banks, either.
Small-town banks with limited loan possibilities have opened loan
production offices in urban areas to provide growth opportunities
for their shareholders. For example, long before it acquired a
branch in Oklahoma City, the First National Bank of Tonkawa had
established a loan production office here.
As bankers try to make their products and services ever more
convenient for customers of the '90s, they push the legal
restrictions as far as they will bend _ without breaking out of
compliance, of course.
While the state Legislature has pointed to the physical place
where the loan decisions and funding are done to determine where
a loan is "made," others see the whole thing as a process:
Solicit customer, get application, analyze application, make
decision on loan, fund it and disperse it. …