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Federal Reserve Bank of Dallas ROBERT D. McTEER, JR. DALLAS, TEXAS PRESIDENT AND CHIEF EXECUTIVE OFFICER 752 6 5 -59 0 6 September 11, 1998 Notice 98-83 TO: The Chief Executive Officer of each financial institution and others concerned in the Eleventh Federal Reserve District SUBJECT Host State Loan-to-Deposit Ratios DETAILS The Board of Governors, along with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, has issued the host state loan-to-deposit ratios. The ratios will be used by the banking agencies to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. ATTACHMENT The host state ratios are attached. MORE INFORMATION For more information, please contact Dean Pankonien at (214) 922-6154. For additional copies of this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely yours, For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) SECTION 109 HOST STATE LOAN-TO-DEPOSIT RATIOS The Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, and the Office of the Comptroller of the Currency (“the agencies”) today are making public the host state loan-to-deposit ratios' that the agencies will use to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Act). Section 109 o f the Interstate Act prohibits a 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. Section 109 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 ratio2 to the host state loan-to-deposit ratio for a particular state. If the bank’s statewide loan-to-deposit ratio in a state is at least one-half of the published host state loan-to-deposit ratio for that state, the bank has complied with section 109. If the bank’s ratio is less than one-half, the second step in section 109 requires the agencies to determine if the bank is reasonably helping to meet the credit needs of the communities served by the bank. A bank that fails both steps is in violation of section 109 and subject to sanctions by the agencies. The agencies will update the host state loan-to-deposit ratios on an annual basis. ' The host state loan-to-deposit ratio is the ratio of total loans in a state to total deposits from the state for all banks that have that state as their home state. For statechartered banks and FDIC-supervised savings banks, the home state is the state where the bank was chartered. For national banks, the home state is the state where the bank’s main office is located. 2The statewide loan-to-deposit ratio relates to an individual bank and is the ratio of a bank’s loans to its deposits in a particular state where the bank has interstate branches. I of 5 Section 109 of the Interstate Banking and Branching Efficiency Act Host State Loan-to-Deposit Ratios (Excludes wholesale or limited purpose CRA-designated banks and credit card banks.) Host State Loan-toDeposit Ratio State Alabama 94% Alaska 73% Arizona 79% Arkansas 69% California 88% Colorado 66% Connecticut 88% Delaware 78% District of Columbia 43% Florida 85% Georgia 91% Hawaii 104% Idaho 74% Illinois 86% Indiana 90% Iowa 74% Kansas 68% Kentucky 92% Louisiana 76% Maine 95% Maryland 81% Massachusetts 86% Michigan 98% Minnesota 91% Mississippi 72% 2 of 5 Section 109 of the Interstate Banking and Branching Efficiency Act Host State Loan-to-Deposit Ratios (Excludes wholesale or limited purpose CRA-designated banks and credit card banks.) State Host State Loan-toDeposit Ratio Missouri 75% Montana 84% Nebraska 75% Nevada 67% New Hampshire 81% New Jersey 70% New Mexico 63% New York 84% North Carolina 100% North Dakota 73% Ohio 105% Oklahoma 69% Oregon 97% Pennsylvania 92% Rhode Island 67% South Carolina 82% South Dakota 91% Tennessee 91% Texas 69% Utah 96% Vermont 86% Virginia 83% Washington 111% West Virginia 82% Wisconsin 93% Wyoming 83% 3 of 5 Section 109 of the Interstate Banking and Branching Efficiency Act Host State Loan-to-Deposit Ratios (Excludes wholesale or limited purpose CRA-designated banks and credit card banks.) ' Host State Loan-toDeposit Ratio State American Samoa 74% Federated States o f Micronesia 56% Guam 71% Puerto Rico 93% Virgin Islands 64% Due to the legislative intent against imposing regulatory burden, no additional data were collected from the institutions to implement section 109. However, since insufficient lending data were available on a geographic basis to calculate the statewide ratios directly, the agencies used a proxy to estimate the host state loan-to-deposit ratio. The agencies calculated the host state loan-to-deposit ratios using data obtained from the Call Reports and Summary of Deposits reports, as of June 30, 1997. For each home state bank, the agencies calculated 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 Report) to estimate the amount of loans attributable to the home state. The host state loan-to-deposit ratio was 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. Banks designated as limited purpose or wholesale banks under the Community Reinvestment Act (CRA) were excluded from the host state loan-to-deposit calculation, recognizing that these banks could have very large loan portfolios, but few, if any, deposits. Credit card banks, which typically have large loan portfolios but few deposits, were also excluded, regardless of whether they had a limited purpose CRA-designation. 4 of 5 The host state loan-to-deposit ratios, and any changes in the way the ratio is calculated, will be made publicly available on an annual basis. 5 of 5