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Bill would loosen residency rules to let Nebraska state‑chartered banks recruit out‑of‑state directors
Summary
LB 250 would modernize Nebraska’s board‑residency statute (Neb. Rev. Stat. 8‑126) to allow a bank’s board majority to meet residency requirements by living in Nebraska, within 25 miles of the main office, or in a county where the bank or its branches are located; proponents said the change helps multistate community banks recruit expertise while preserving department oversight.
Senator Mike Jacobson introduced LB 250, a bill proposed at the request of the Nebraska Bankers Association to modernize residency requirements for state‑chartered bank directors.
Jacobson said the measure updates a statute with roots in the mid‑20th century and would require state‑chartered banks to make "reasonable efforts" to have a majority of directors who meet one of three residency criteria: reside in Nebraska, live within 25 miles of the bank’s main office, or live in the county of the main office or in a county where the bank has branches.
Proponents testified that the change responds to the reality that many Nebraska community banks now operate branches in neighboring states and need flexibility to recruit directors with relevant expertise. Mike Nelson, a longtime banker associated with First Tier Bank, described his institution’s multistate footprint and the effect of the current statute on board composition.
"Of our 100% total assets, 13% are corporate, 17% are Nebraska, 31% are Colorado, 39% are Wyoming," Nelson said, using his bank’s asset distribution to explain why adding a director in a neighboring state could make sense while preserving Nebraska representation on the board.
Committee members pressed on how "reasonable efforts" will be interpreted. Senator Jacobson acknowledged the phrase is not precisely defined in the bill and said regulators would likely scrutinize attempts that clearly avoided local representation (for example, a board made entirely of out‑of‑state residents). He also noted that directors are fiduciaries with potential personal liability and that officers & directors liability insurance is a standard recruiting tool but does not protect against negligence.
Industry groups including the Nebraska Bankers Association and Nebraska Independent Community Bankers urged the committee to advance LB 250, saying the bill would help banks balance board representation across the states where they operate and recruit qualified directors while leaving final director approvals to the Department of Banking and Finance.
No formal action or vote was recorded at the hearing; proponents asked the committee to move the bill to general file for further consideration.
