Return to Prohibition Against Use of Interstate Branches Primarily for Deposit Production (153 KB PDF)
Bank with branches outside of its home State.
Bank, consisting only of a main office, controlled by an out-of-State bank holding company.
Covered interstate branches under a multi-tiered bank holding company structure.
VI. EXAMINATION CHECKLIST
IDENTIFY COVERED INTERSTATE BRANCHES SUBJECT TO SECTION 109 EVALUATION
| Question | Response Yes |
Response No |
|---|---|---|
| 1. Does the bank have any covered interstate branches? Determine:
(a) if the bank has established or acquired any branches outside the bank's home State pursuant to the interstate branching authority granted by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, or |
Yes
|
|
(b) whether the bank, including a bank consisting of only a main office, is controlled by an out-of-State bank holding company as defined in section 2(o)(7) of the Bank Holding Company Act of 1956. Note: If the answer to both (a) and (b) is No, no further review is necessary. |
Yes | No |
| 2. Have any covered interstate branches been covered interstate branches for one year or more? If any of a bank's covered interstate branches within a particular state have been covered interstate branches for one year or more, then all of the bank's covered interstate branches within that state are subject to review.
Note : If the answer is No, no further review is necessary. |
Yes | No |
ASSESS COMPLIANCE WITH THE LOAN-TO-DEPOSIT (LTD) RATIO SCREEN
| Question | Response Yes |
Response No |
|---|---|---|
|
3. Does the bank have sufficient data to calculate a statewide LTD ratio(s) in each respective host State for covered interstate branches subject to section 109? Note: For each host State where the answer is No, proceed to #5. |
Yes | No |
| 4. For each host State where a covered interstate branch exists, calculate the bank's statewide LTD ratio. Is the statewide LTD ratio equal to or greater than one-half of the host state LTD ratio?
Note : For each host State where the answer is Yes, the bank complies with section 109 and no further review is necessary. For each host State where the answer is No, proceed to #5. |
Yes | No |
PERFORM CREDIT NEEDS DETERMINATION
| Question | Response Yes |
Response No |
|---|---|---|
5. For each host State identified in #3 or #4, is the bank reasonably helping to meet the credit needs of the communities served by the bank in the host State? When making this determination, consider the following items: |
Yes | No |
� Whether the covered interstate branches were acquired under circumstances where there was a low LTD ratio because of the nature of the acquired institution's business or loan portfolio; |
Yes
|
No
|
� Whether the covered interstate branches have a higher concentration of commercial or credit card lending, trust services, or other specialized activities, including the extent to which the covered interstate branches accept deposits in the host State; |
Yes
|
No
|
� The most recent ratings (overall rating, multistate MSA rating, and State ratings) received by the bank under the Community Reinvestment Act (CRA); |
Yes
|
No
|
� Economic conditions, including the level of loan demand, within the communities served by the covered interstate branches; |
Yes
|
No
|
� The safe and sound operation and condition of the bank; and |
Yes |
No |
� The CRA regulation, examination procedures, and interpretations of this regulation. Note: If the bank passes the credit needs determination test, the bank complies with section 109 and no further review is necessary. If the bank fails the credit needs determination test but the LTD ratio screen has not yet been conducted, go to #6. If the bank fails the credit needs determination test and has failed the LTD ratio screen, go to #7. |
Yes |
No |
DETERMINE IF SANCTIONS ARE WARRANTED
| Question | Response Yes |
Response No |
|---|---|---|
| � Calculate the statewide LTD ratio for each host state where the bank failed the credit needs determination test. Is this ratio equal to or greater than one-half of the host State LTD ratio?
Note: If the answer is Yes, the bank complies with section 109 and no further review is necessary. If the answer is No, the bank is in noncompliance with section 109 (go to #7). |
Yes | No |
| � After consultation with agency management, are sanctions warranted? | Yes | No |
VII. EXAMPLES OF COVERED INTERSTATE BRANCHES
A. Bank with branches outside of its home State.
Bank A whose home state is New York is an interstate bank with branches in New York and in Pennsylvania . Its branches in Pennsylvania were established or acquired under the Interstate Act. Bank A's home state is New York and its host state is Pennsylvania . The Pennsylvania branches are covered interstate branches subject to the section 109 review. Bank A's statewide loan-to-deposit ratio in Pennsylvania is compared to the host state loan-to-deposit ratio for Pennsylvania . The section 109 screen is conducted at the same time as a bank's Community Reinvestment (CRA) examination. |
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B. Bank, consisting only of a main office, controlled by an out-of-State bank holding company.
A bank holding company whose home state is New York controls two banks, Bank B and Bank C. Bank B whose home state is New York is an intrastate bank with only New York branches and is not subject to the section 109 review. Bank C's home state is Connecticut and it is subject to the section 109 review because it is controlled by an out-of-state bank holding company whose home state is New York . Bank C's statewide loan-to-deposit ratio in Connecticut will be compared to the host state loan-to-deposit ratio for Connecticut . The section 109 screen is conducted at the same time as a bank's Community Reinvestment (CRA) examination. |
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C. Covered interstate branches under a multi-tiered bank holding company structure.
This example illustrates the requirement to look to the top tier bank holding company when determining whether to conduct the section 109 review. The top-tiered bank holding company has a home state of New York and has two subsidiary bank holding companies in different states, one in Pennsylvania and one in Connecticut The first subsidiary, Bank Holding Bank Pennsylvania, has a home state of Pennsylvania and has two subsidiary banks, Bank J and Bank K. Bank J has a home state of Pennsylvania and Bank K has a home state of New York . Banks J is subject to section 109 review because it is controlled by an out-of-state top tier bank holding company, whose home state is New York . Bank J's statewide loan-to-deposit ratio in Pennsylvania will be compared to the host state loan-to-deposit ratio for Pennsylvania . Bank K, whose home state of New York, is not subject to review for section 109 compliance because an out-of-state bank holding company does not control it (that is, the top-tiered controlling bank holding company also has a home state of New York). Bank K also does not have interstate branches that would be subject to a section 109 review. The second subsidiary bank holding company, Bank Holding Company Connecticut , has a home state of Connecticut and has two subsidiary banks, Bank L and Bank M. The first subsidiary bank, Bank L, whose home state is New York , is an interstate bank with branches in New York and in Pennsylvania . Bank L's interstate branches in Pennsylvania are subject to the section 109 review. Bank L's statewide loan-to-deposit ratio in Pennsylvania will be compared to the host state loan-to-deposit ratio for Pennsylvania . The second subsidiary bank of Bank Holding Company Connecticut is Bank M, whose home state is Connecticut . Bank M is an interstate bank with branches in Connecticut and in New York . Bank M is subject to section 109 review because it has a home state of Connecticut and is controlled by an out-of-state top tier bank holding company, whose home state is New York. Bank M's statewide loan-to-deposit ratio in Connecticut will be compared to the host state loan-to-deposit ratio for Connecticut . Bank M's branches in New York also are subject to the section 109 review because Bank M is an interstate bank with a home state in Connecticut . Bank M's statewide loan-to-deposit ratio in New York is compared to the host state loan-to-deposit ratio for New York . The section 109 screen is conducted at the same time as a bank's Community Reinvestment (CRA) examination. |