Loan-to-Deposit Ratio: A Bank Funding and Liquidity Indicator

The loan-to-deposit ratio (LDR) compares a bank's loans with its deposit funding.

A common formulation is:

Loan-to-deposit ratio = loans ÷ deposits

Example

If a bank has $9 billion of loans and $10 billion of deposits:

$9 billion ÷ $10 billion = 90%

What the ratio can tell you

A higher LDR generally means more of the deposit base has been deployed into loans. That can support earning-asset yields, but it can also leave less balance-sheet flexibility if deposit funding becomes more expensive or volatile.

A lower LDR can indicate more liquidity or unused lending capacity, but it can also reflect weak loan demand or a larger securities and cash portfolio.

There is no universal ideal ratio

The appropriate level depends on factors such as:

• deposit stability and mix;
• wholesale borrowing capacity;
• securities and cash holdings;
• loan type and duration;
• seasonal balance-sheet patterns;
• acquisition activity; and
• the bank's broader liquidity-risk framework.

An 85% ratio at one bank is not automatically safer or more profitable than a 95% ratio at another.

Definitions can differ

Banks may use period-end loans and deposits, average balances, gross loans, net loans, or different treatments of held-for-sale loans and brokered deposits. Investors should confirm the issuer's exact definition before comparing peers.

The company-level investor ratio is also different from regulatory interstate-branch loan-to-deposit screens, which can use state-specific definitions and purposes.

Investor interpretation

Use LDR alongside deposit growth, deposit costs, uninsured-deposit exposure, wholesale funding, Net Interest Margin, and regulatory liquidity disclosures. The ratio is a balance-sheet funding indicator, not a complete liquidity test.

Sources

• National Bank Holdings 2025 Form 10-K
• FDIC interstate loan-to-deposit framework

Explore more topics in the Financial Research Encyclopedia.