How do I calculate the loans-to-deposits ratio for a bank?

Divide total loans by total deposits and multiply by 100. For the standard calculation, use net loans (total loans minus the allowance for credit losses) from the bank's balance sheet. A bank with $1.5 billion in net loans and $1.8 billion in deposits has a ratio of 83.3%.

The Formula

Loans-to-Deposits Ratio = (Total Loans / Total Deposits) × 100

The calculation is a single division. Take total loans from the bank's balance sheet, divide by total deposits, and express the result as a percentage. For a bank with $1.5 billion in total loans and $1.8 billion in total deposits, the ratio is 83.3%. That figure tells you the bank has lent out about 83 cents of every dollar deposited.

Net Loans vs. Gross Loans

The choice between net loans and gross loans affects the result more than people often expect. Gross loans represent the total outstanding loan balance before subtracting the allowance for credit losses (ACL). Net loans equal gross loans minus the allowance. The difference is typically 1% to 2% of the loan balance, but it can be larger for banks carrying elevated credit risk or building reserves ahead of expected losses.

The standard calculation uses net loans, which is the figure reported on the face of the balance sheet. Some analysts prefer gross loans for a cleaner view of lending activity since the allowance reflects a reserve estimate rather than actual loan performance. When comparing ratios across different sources or research reports, verify which loan figure was used. A bank reporting $1.5 billion in gross loans with a $20 million allowance would show 83.3% using gross loans but 82.2% using net loans against that same $1.8 billion deposit base.

Where to Find the Inputs

Both numbers come from the consolidated balance sheet in a bank's 10-K or 10-Q filing.

Net loans (often labeled "loans, net of allowance" or "loans and leases, net") appears in the assets section

Gross loans and the allowance for credit losses are typically disclosed separately, either on the face of the balance sheet or in the notes to the financial statements

Total deposits appears in the liabilities section

Both inputs are point-in-time balance sheet figures, so use the same reporting date for numerator and denominator. Mixing loans from one quarter with deposits from another produces a misleading result.

The Algebraic Cross-Check

The loans-to-deposits ratio connects to the other two balance sheet composition ratios through a clean algebraic relationship. Loans-to-deposits equals loans-to-assets divided by deposits-to-assets. If a bank's loans-to-assets ratio is 65% and its deposits-to-assets ratio is 80%, the loans-to-deposits ratio works out to 81.25% (0.65 ÷ 0.80).

This relationship is useful as a sanity check. If you've already calculated loans-to-assets and deposits-to-assets for a bank, you can derive loans-to-deposits without going back to the raw numbers. If the three ratios don't reconcile, one of the inputs was entered incorrectly.

Reading the Result

The percentage tells you how aggressively the bank is deploying its deposit funding into loans. A ratio of 80% means the bank has lent out 80 cents of every deposit dollar, with the remaining 20% held in securities, cash, or other liquid assets.

Most banks fall somewhere between 70% and 90%. Below 70% often signals conservative lending or weak loan demand in the bank's markets. Above 90% means the bank is lending beyond what its deposit base can comfortably support, likely relying on wholesale funding or borrowings to fill the gap. Neither extreme is automatically good or bad, but both warrant investigation into the underlying cause.

The ratio also varies predictably by bank type. Community banks focused on relationship lending often run between 75% and 85%. Large banks with diversified business lines may carry lower ratios because they hold proportionally more securities and trading assets. Banks in high-growth markets sometimes push above 90% during expansion phases before deposit gathering catches up.

Common Calculation Mistakes

The most frequent error is mixing time periods. Using loans from the most recent quarterly balance sheet but deposits from an annual 10-K will distort the ratio, especially if loan growth or deposit flows shifted between those dates. Always pull both figures from the same filing and the same reporting date.

Another mistake is double-counting. Some balance sheets break loans into subcategories (commercial real estate, residential mortgage, consumer) alongside a total line. Use the total, not the sum of subcategories, which may include reclassifications or adjustments that don't add up cleanly to the reported total.

Off-Balance-Sheet Exposure

For banks with significant unfunded loan commitments and letters of credit, the on-balance-sheet loans-to-deposits ratio understates total credit exposure relative to the deposit base. A bank showing 80% on its balance sheet might effectively be closer to 95% once unfunded commitments are included.

The on-balance-sheet ratio remains the standard measure and the one most commonly reported. But analysts evaluating funding adequacy sometimes calculate an adjusted version that adds unfunded commitments to the numerator, giving a fuller picture of how much lending capacity the bank has committed relative to its core funding.