Banking agencies update state loan-to-deposit ratios for 2020

State loan-to-deposit ratios for 2020 are now public, replacing last year’s ratios, to help to determine whether a bank may establish or buy a branch (or branches) without triggering prohibitions on doing so primarily for producing deposits.

The ratios – issued for all 50 states plus the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands – exclude wholesale or limited-purpose Community Reinvestment Act (CRA)-designated banks, credit card banks and special-purpose banks. They are based on data as of June 30, 2019.

Released Tuesday by the federal banking agencies, the ratios inform a process the agencies use to test compliance with statutory requirements. (Those requirements also prohibit branches of banks controlled by out-of-state bank holding companies from operating primarily for the production of deposits.)

The second compliance step is determining 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 agencies stated. The second step requires the appropriate federal banking 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 section 109 and is subject to sanctions by the appropriate agency, according to the agencies.

New Jersey has among the highest of the ratios, at 102%; Delaware has among the lowest at 59% (although the Virgin Islands clock in at 42%).

Agencies issue host state loan-to-deposit ratios