FDIC on Host State Loan-to-Deposit Ratios

The FDIC today released for the first time ‘host state loan-to-deposit ratios’, which are the ratios of total loans in a state to total deposits from the state for all banks that have that state as their home state. The Fed said the data are being released in order to “determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.”

More on section 109 of the Interstate Act: In general, section 109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production. Section 106 of the Gramm-Leach-Bliley Act of 1999 amended coverage of section 109 of the Interstate Act to include any branch of a bank controlled by an out-of-state bank holding company. To determine compliance with section 109, the appropriate agency first compares a bank’s statewide loan-to-deposit ratio2 to the host state loan-to-deposit ratio for a particular state. If the bank’s statewide loan-to-deposit ratio is at least one-half of the published host state loan-to-deposit ratio, the bank has complied with section 109. A second step is conducted if a bank’s statewide loan-to-deposit ratio is less than one-half of the published ratio for that state or if data are not available at the bank to conduct the first step. The second step requires the appropriate banking agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches. A bank that fails both steps is in violation of section 109 and subject to sanctions by the appropriate agency.

For each home state bank, the calculation is done based on the percentage of the bank’s total deposits attributable to branches located in its home state (determined from the summary of deposits), and applied this percentage to the bank’s total domestic loans (determined from the call reports) to estimate the amount of loans attributable to the home state. The host loan-to-deposit is then calculated by separately totaling the loans and deposits for the home state banks, and then dividing the sum of the loans by the sum of the deposits. The FDIC said will release this data on an annual basis.

Table: FDIC

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