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l l★K Federal Reserve Bank of Dallas September 16, 1999 DALLAS, TEXAS 75265-5906 Notice 99-81 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, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have issued the host state loan-to-deposit ratios. The banking agencies will use the ratios to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. Section 109 prohibits any bank from establishing or acquiring a branch or branches outside its home state under the Interstate Act primarily for deposit production. Also, it 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. ATTACHMENT The host state ratios are attached. MORE INFORMATION For more information, please contact Eugene Coy in the Banking Supervision Department at (214) 922-6201. For additional copies of this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254. 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. 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 ratios1 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 of 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. 1 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. 2 The 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. 1 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 Alabama 95% Alaska 76% Arizona 79% Arkansas 71% California 87% Colorado 62% Connecticut 79% Delaware 80% District of Columbia 71% Florida 95% Georgia 93% Hawaii 100% Idaho 74% Illinois 84% Indiana 90% Iowa 74% Kansas 71% Kentucky 92% Louisiana 79% Maine 96% Maryland 82% Massachusetts 84% Michigan 97% Minnesota 101% Mississippi 73% 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 78% Nevada 68% New Hampshire 85% New Jersey 70% New Mexico 68% New York 88% North Carolina 100% North Dakota 90% Ohio 106% Oklahoma 68% Oregon 80% Pennsylvania 97% Rhode Island 69% South Carolina 80% South Dakota 93% Tennessee 88% Texas 66% Utah 100% Vermont 83% Virginia 84% Washington 115% West Virginia 83% Wisconsin 92% Wyoming 73% 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.) State Host State Loan-toDeposit Ratio American Samoa 81% Federated States of Micronesia 52% Guam 68% Puerto Rico 93% Virgin Islands 68% 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, 1998. 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. 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. 4 of 5 5 of 5
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