Host state-to-loan-deposit ratios of 98% were recorded by both Arizona and New Jersey in the year ending June 30, 2023, the highest ratios of all the states and territories, the federal banking agencies said Friday.
Puerto Rico had the lowest ratio, according to the report, at 43%. The median ratio was 82%, according to data released by the agencies.
Host state loan-to-deposit ratios that are used to evaluate compliance with the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the Interstate Act). According to the agencies, each respective host state loan-to-deposit ratio shows the ratio of total loans in a state to total deposits in the state for all banks that have that state as their home state. These ratios released Friday replace those issued in May 2023.
Under the Interstate Act, a bank is barred from establishing or acquiring branches outside of its home state primarily for the purpose of acquiring additional deposits. “This prohibition seeks to ensure that interstate bank branches will not take deposits from a community without the bank also reasonably helping to meet the credit needs of that community,” the agencies said in their release.
The agencies said they used a proxy to estimate the ratios, since insufficient lending data were available on a geographic basis to calculate the host state loan-to-deposit ratios directly, the agencies said.
“Accordingly, the agencies calculated the host state loan-to-deposit ratios using data obtained from the Consolidated Reports of Condition and Income (call reports) and Summary of Deposits Surveys (summary of deposits), as of June 30, 2023,” the agencies said. “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 reports) 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.”
Section 109 Host State Loan-to-Deposit Ratios (PDF)