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Agencies issue host state loan-to-deposit ratios, Section 109

SECTION 109 HOST STATE LOAN-TO-DEPOSIT RATIOS

The Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) (collectively, 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).

In general, section 109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production.

Section 106 of the Gramm-Leach-Bliley Act of 1999 amended coverage of section 109 of the Interstate Act to include any branch of a bank controlled by an out-of-state bank holding company.

See full release:

Grok Summary

Summary This is a joint notice from the Federal Reserve Board, FDIC, and OCC (the agencies) dated May 1, 2026. It publicly releases the host state loan-to-deposit ratios that regulators will use in 2026 to evaluate compliance with Section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (as amended).

Key Purpose of Section 109

Section 109 prevents banks from using interstate branches primarily for deposit production (i.e., gathering deposits in a host state while making few or no loans there). It aims to ensure that out-of-state banks contribute to meeting local credit needs rather than just extracting deposits.

Compliance Test (Two-Step Process)

  1. Primary Screen: Compare the bank’s estimated statewide loan-to-deposit ratio in the host state to the published host state ratio.
    • If the bank’s ratio is at least 50% of the host state ratio → it complies.
  2. Secondary Review (if it fails the first test or data is unavailable): The agency assesses whether the bank is reasonably helping to meet the credit needs of communities served by its interstate branches.
    • Failure of both steps can lead to sanctions.

The ratios exclude wholesale/limited-purpose CRA banks, credit card banks, and special purpose banks. They are estimated using Call Report and Summary of Deposits data as of June 30, 2025 (a proxy method due to limited geographic lending data).

Published Host State Loan-to-Deposit Ratios (as of June 30, 2025)

Here are selected examples from the table (full list covers all states and territories):

  • High ratios (strong local lending relative to deposits): Maine (94%), Massachusetts (96%), New Hampshire (96%), New Jersey (96%), Michigan (93%), District of Columbia (93%), Wisconsin (90%).
  • Lower ratios: Puerto Rico (55%), Virgin Islands (52%), Delaware (61%), New Mexico (61%), South Dakota (61%), Minnesota (65%), Wyoming (64%), North Carolina (64%).
  • Most states fall in the 70–90% range (e.g., California 83%, Florida 84%, New York 68%, Texas 72%, Virginia 86%).

These ratios are updated and published annually.

Purpose of This Release

  • Transparency and predictability: Banks with interstate branches can benchmark their lending activity in each state against these published thresholds.
  • Regulatory compliance tool: It gives examiners and banks a standardized, data-driven way to enforce the anti-deposit-production rule without imposing heavy new reporting burdens.

Effects on Banks and Loans

  • Minimal direct impact on most banks: This is not a new regulation or capital/liquidity requirement. It is routine annual guidance. Banks already subject to interstate branching rules have been operating under this framework for decades.
  • Encourages balanced lending: Banks expanding or operating branches out-of-state have an incentive to maintain reasonable loan volumes in those host states (at least half the published ratio) to avoid scrutiny or sanctions. This supports the original intent of promoting local credit availability.
  • Low burden: The agencies explicitly note they avoid extra data collection to minimize regulatory burden. The proxy method uses existing reports.
  • Potential implications:
    • Banks with very deposit-heavy interstate operations (low loans in host states) may face added pressure to originate more loans locally or risk enforcement actions.
    • It has little effect on purely in-state banks or those without significant interstate branching.
    • In states with lower published ratios (e.g., territories or certain rural/low-lending states), the threshold for compliance is easier to meet. In high-ratio states, banks must lend more aggressively relative to deposits.

Overall: This is standard, low-impact housekeeping that maintains the balance between interstate banking efficiency and local community credit needs. It does not meaningfully tighten or loosen bank lending standards or capital rules.