Agencies Issue Host State Loan-to-Deposit Ratios
August 31, 2004
Circular No. 11639

To All Depository Institutions and Others Concerned in the Second Federal Reserve District:

The Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency 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. These ratios update data released on May 22, 2003.

Section 109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for the purposes of deposit production. The section also prohibits branches of banks controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production.

To determine compliance with section 109, the appropriate agency first compares a bank’s statewide loan-to-deposit ratio 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.

Press release OFFSITE
Joint agency notice OFFSITE PDF

Robert Gutierrez
Examining Officer
Legal and Compliance Risk Department