Agencies update ‘host state loan-to-deposit’ ratios for 2021

Ratios used to determine whether a bank may establish or buy a branch (or branches) without triggering prohibitions on doing so primarily for producing deposits were released Friday by federal banking agencies.

The “host state loan-to-deposit” ratios replace those issued in June 2020.

The ratios 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, 2020, and were issued for all 50 states plus the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.

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.)

According to the agencies, federal law generally prohibits a bank from establishing or acquiring branches outside of its home state primarily for the purpose of deposit production. The prohibition was enacted, the agencies said, to ensure that interstate branches would not take deposits from a community without the banks reasonably helping to meet the credit needs of that community. Additionally, branches of banks controlled by out-of-state bank holding companies are prohibited from operating primarily for the purpose of deposit production.

New Jersey posted the highest ratio (which is the ratio of a bank’s loans to its deposits in a particular state where the bank has interstate branches) at 102%; Delaware was the state with the lowest ratio at 51%; the territory of the Virgin Islands had the lowest overall ratio of 45%.

Agencies issue host state loan-to-deposit ratios

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