Loan-to-Deposit Ratio (LDR)

The LDR (total loans divided by total deposits) is a key metric used in the context of the Community Reinvestment Act to assess a bank’s commitment to meeting local credit needs within its assessment areas. It is utilized in the following ways:

• Addresses concerns about deposit flight: Historically, concerns existed that banks collected deposits locally, including LMI neighborhoods, but then channeled those funds outside of those communities.
• Encourages local investment: The CRA encourages banks to reinvest locally, particularly in LMI areas. The LDR helps evaluate if a sufficient proportion of deposits in a community is being reinvested back into that community through loans.
• Measures lending activity within assessment areas: The ratio helps regulators determine if a bank is making sufficient volume of loans within its defined assessment areas, including LMI geographies.

Historical quarterly loan-to-deposit ratios for Evolve Bank & Trust are illustrated below: