Currently we have a loan production office in a county where we have no other services. This area has not been added to the Bank’s Assessment Area since the originated loan amounts are minimal to other loans in our market area. Therefore, we have considered a “secondary service area” and monitor the dollar amounts compared to our other lending.

I am wondering if there is a percentage of originated loans that we could use as a safety net before considering having this added to our assessment area?

Also, if we get to the point of having to consider an assessment area, I am assuming that a branch would be expected for deposit products and other services. What would be the timeframe that would be expected for a branch opening?

The Regulation gives banks a wide latitude when it comes to defining your Assessment Area. You are required to include any geographies in which you maintain deposit-taking facilities and your main office. Any geographies within an Assessment Area must be contiguous. You cannot arbitrarily avoid LMI areas and you can't substantially overlap MSA's. Other than that, however, you have quite a bit of discretion when it comes to delineating each Assessment Area. You don't have to have a deposit-taking branch in an AA, but anywhere you have a deposit-taking branch must be included in your AA's. So you don't have to worry about eventually being required to open a deposit-taking facility where you LPO is just to comply with the Regulation.

It is not good to be focused exclusively on the technical requirements of the Regulation. We recommend to banks that they consider the performance implications of their Assessment Area configuration because all performance measurements are "performance context" driven and performance context is almost totally based on Assessment Area configuration. In your case, you would have to be cognizant of the loan volume and geographic distribution generated by the LPO as well as the demographics and loan markets in the potential expanded area. You should know how those demographics and loan markets will affect your performance standards under the Regulation.

As Len said, the bank would open a branch when the bank feels it makes financial sense to do so based upon the impact it has made via lending and market potential. In the meantime, keep an eye on the lending volume vs your AA. It sounds like a lot more growth would have to occur before there was a potential impact on the bank's AA.