The use of state loan-to-deposit (LTD) ratios to ensure against banks using interstate branches primarily for deposit production is explained in a bulletin issued Wednesday by the Office of the Comptroller of the Currency (OCC).
The OCC, Federal Reserve Board, and Federal Deposit Insurance Corp. (FDIC) earlier this month published updated state loan-to-deposit ratios for 2020. Those ratios 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 requirements are imposed under section 109 the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act. The requirements do not apply to federal savings associations, the OCC noted in its bulletin.
The 2020 ratios use data as of June 30, 2019 (updating data last released May 28, 2019). The ratios exclude banks designated for Community Reinvestment Act (CRA) purposes as wholesale, limited-purpose, or special-purpose banks.
Regulators use a two-step process to determine whether the act’s requirements are being met. First, the bank’s statewide LTD ratio is compared with the host state LTD ratio for banks in a particular state. 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 OCC must determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches. “A bank that fails both steps is subject to sanctions by the OCC,” the bulletin notes.