Host State Loan-to-Deposit Ratios
To Determine Compliance with Interstate Branching Legislation
September 13, 1999
Circular No. 11183

To All State Member Banks, and Branches and Agencies of Foreign Banks, in the Second Federal Reserve District:

The following is from a statement by the federal banking agencies:

The Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have issued the host state loan-to-deposit ratios that the banking agencies will use to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Act). These ratios update data released on August 13, 1998.

Section 109 prohibits any bank from establishing or acquiring a branch or branches outside of its home state under the Interstate Act primarily for the purpose of deposit production and provides a two-step process to test compliance with the statutory requirements.

The first step involves a loan-to-deposit ratio screen that compares a bank's statewide loan-to-deposit ratio to the host state loan-to-deposit ratio for banks in a particular state.

The second step requires the banking agencies to determine if 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 is subject to sanctions by the banking agencies.

The host state loan-to-deposit ratios document is available on the Board of Governors' PDF website. The ratios are updated annually. Questions on this matter may be directed, at this Bank, to Janice A. Oser, Examining Officer, Compliance Examinations Department.