On August 9, the Federal Reserve Board, the FDIC, and the OCC released the current host state loan-to-deposit ratios for each state or U.S. territory, which the agencies use to determine compliance with Section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. Under the Act, banks are prohibited from establishing or acquiring branches outside of their home state for the primary purpose of deposit production. Branches of banks controlled by out-of-state bank holding companies are also subject to the same restriction. Determining compliance with Section 109 requires a comparison of a bank’s estimated statewide loan-to-deposit ratio to the yearly host state loan-to-deposit ratios. If a bank’s statewide ratio is less than one-half of the yearly published host state ratio, an additional review is required by the appropriate agency, which involves a determination of whether a bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches. Banks that do not meet the compliance requirements are subject to sanctions by the OCC. Notably, Section 109 is not applicable to federal savings associations or community banks with covered interstate branches.
Buckley LLP has combined with Orrick, a global law firm focused on serving the technology & innovation, energy & infrastructure and finance sectors. Founded more than 150 years ago in San Francisco, Orrick today has offices in 27+ markets worldwide. Clients worldwide call on our teams for forward-looking commercial advice on transactions, litigation and compliance matters.
Learn more at orrick.com and subscribe to our InfoBytes newsletter to have the latest news, events, and developments affecting the financial services industry delivered every week to your inbox.