FDIC tells Ohio Valley to stop offering RALs

(Reuters) - Bank holding company Ohio Valley Banc Corp said it has been told by a U.S. regulator to stop offering refund anticipatory loans (RALs) after the current tax season -- an action expected to hit the company's results.

The company, which saw a 13 percent decline in fourth-quarter earnings, received a recommendation from the Federal Deposit Insurance Corp to stop offering RALs through third parties.

Ohio Valley expects charge-off rates on RALs in 2011 to be no higher than what it experienced in 2010.

The FDIC recommendation will not affect the bank's offering of other tax refund products, the company said.

RALs are short-term loans lasting 7-14 days till taxpayers get their refunds from the IRS and have proven highly profitable for the banks that fund them. But U.S. regulators have come down hard on RALs as they carry unduly high interest rates.

Earlier this week, Republic Bancorp received a notice from the FDIC on its RAL issuance.

Shares of the Gallipolis, Ohio-based company, which has a market value of $78.7 million, closed at $19.65 on Friday on the New York Stock Exchange.

(Reporting by Rachel Chitra in Bangalore; Editing by Don Sebastian)