Bulletin lists annual ‘host state loan-to-deposit ratios’ for CRA compliance

Annual “host state loan-to-deposit ratios” (LTDs) – which help in determining whether banks are meeting Community Reinvestment Act (CRA) requirements — were published in a bulletin by the Office of the Comptroller of the Currency (OCC) Wednesday, updating data released in 2016.

The ratios were issued on June 21, 2017; OCC’s bulletin Wednesday had as a subject line “Prohibition Against Interstate Deposit Production.”

The LTD ratios are used to help inform specific tests for determining whether an interstate bank is lending appropriately in host states where it has branches, in conformance with CRA obligations. Released by the OCC in bulletin 2017-37, the ratios apply to banks that have covered interstate branches; its does not apply to federal savings associations. Additionally, the data for the ratios exclude banks designated for Community Reinvestment Act (CRA) purposes as wholesale or limited purpose, credit card banks, and special purpose banks.

The OCC noted that its regulation, which implements the CRA, prohibits the use of interstate branches primarily for deposit production. The regulation includes specific tests for determining whether an interstate bank is lending appropriately in host states where it has branches, OCC said.

Under its rule, a process is provided to test compliance with statutory requirements. The first step in the process, OCC said, involves an LTD ratio test that compares a bank’s statewide LTD ratio with the host state LTD ratio for banks in a particular state.

A second step is conducted if a bank’s statewide LTD 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.

A bank failing both steps is in violation of the regulation and is subject to sanctions by the appropriate agency, the comptroller’s office said

OCC Bulletin 2017-37: Annual Host State Loan-to-Deposit Ratios

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