---
title: "Loan Growth Rate: definition, formula, and thresholds"
description: "The loan growth rate is the year-over-year percentage change in a bank's gross loans and leases. It measures how fast the bank is expanding its core earning-asset base."
canonical_url: https://www.bankregreports.com/glossary/loan-growth-rate/
source: BankRegReports
category: "Liquidity & Balance Sheet"
units: "%"
schedule: "Schedule RC"
---

# Loan Growth Rate

> The loan growth rate is the year-over-year percentage change in a bank's gross loans and leases. It measures how fast the bank is expanding its core earning-asset base.

## Formula

```
Loan Growth Rate = (Gross Loans & Leases now - Gross Loans & Leases one year ago) / Gross Loans & Leases one year ago
```

The current period's gross loans and leases is compared with the balance at the same quarter one year earlier, expressed as a percentage. Using the year-ago quarter removes the seasonality that a quarter-over-quarter comparison would introduce.

## Why it matters

Loan growth is the engine of a bank's revenue, but rapid growth is one of the most reliable early warnings of future credit problems: books that expand far faster than peers often do so by loosening underwriting, and the losses surface a few years later. Supervisors treat outsized loan growth as a risk signal, not just a good-news story.

## How to read it

Low-to-mid single-digit growth tracks a stable economy. Double-digit growth well above local peers warrants a look at what is driving it: a new market, an acquisition, or thinner credit standards. Sustained negative growth can signal runoff, tightened credit, or a bank managing down risk.

## Thresholds

| Range | Reading | What it means |
|---|---|---|
| 3-10% | Healthy | Sustainable expansion in line with the economy. |
| 0-3% | Slow | Flat book; check demand and strategy. |
| 10-20% | Fast | Above-peer growth; verify underwriting held. |
| > 20% | Rapid | Outsized growth is a leading credit-risk flag. |


## Worked example

A bank with $900 million of gross loans a year ago and $990 million today posted 10% loan growth. If peers grew 5%, an examiner would want to understand the extra 5 points: a new lending team, a hot market, or eased standards.

## Questions

### Why do regulators treat fast loan growth as a risk?

Because credit losses lag origination. A bank that grows its loan book far faster than peers has usually competed on price or terms, and the resulting weak loans do not default until a year or more later. Rapid growth concentrated in one loan type, such as commercial real estate, is an especially watched pattern.

### Is negative loan growth a bad sign?

Not necessarily. Loans can shrink because a bank is deliberately de-risking, because borrowers are paying down debt, or because demand is soft. It is read in context with asset quality and strategy rather than as an automatic negative.

## Sources

- [FFIEC Call Report Schedule RC (Balance Sheet)](https://www.ffiec.gov/sites/default/files/data/reporting-forms/FFIEC031_FFIEC041_202606_i.pdf) (PDF)
- [FFIEC UBPR User's Guide - Summary Ratios](https://www.ffiec.gov/data/ubpr)

## Related metrics

- [Total Loans & Leases](https://www.bankregreports.com/glossary/total-loans/): Total loans and leases is the gross amount a bank has lent out (commercial, real estate, consumer, and agricultural credit) before subtracting the allowance for credit losses. It is usually a bank's largest asset and its primary earning engine.
- [Asset Growth Rate](https://www.bankregreports.com/glossary/asset-growth-rate/): The asset growth rate is the year-over-year percentage change in a bank's total assets. It captures how fast the balance sheet is expanding or contracting.
- [Deposit Growth Rate](https://www.bankregreports.com/glossary/deposit-growth-rate/): The deposit growth rate is the year-over-year percentage change in a bank's total deposits: a direct read on whether its funding base is growing, stable, or running off.
- [Commercial Real Estate Concentration Ratio](https://www.bankregreports.com/glossary/cre-concentration/): The CRE Concentration Ratio measures supervisory commercial real estate loans (construction and land development + multifamily + non-owner-occupied CRE + loans to finance CRE not secured by real estate) as a percentage of Tier 1 capital plus the allowance for credit losses. The interagency guidance threshold of 300% is the most-watched CRE risk indicator in community banking.

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