Three financial agencies issued last week the host state loan-to-deposit ratios used to determine compliance with a segment of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency released the ratios that would determine compliance with Section 109 of the Act.
Section 109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for deposit production while also prohibiting branches of banks controlled by out-of-state bank holding companies from operating primarily for deposit production.
Section 109 also provides a process to test compliance with statutory requirements, with the first step in the process being a loan-to-deposit ratio test comparing compares a bank’s statewide loan-to-deposit ratio to the host state loan-to-deposit ratio for banks in a particular state.
A second step is conducted if a bank’s statewide loan-to-deposit ratio is less than one-half of the published ratio for that state or if data are not available at the bank to conduct the first step. The second step requires the appropriate agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches.