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Letter 16: Out-of-Territory Loans

It has come to the attention of this department that banks are extending an increasing volume of credit to individuals and/or business firms which are located beyond the normal trading area of the lending bank. Of particular concern, with regard to these out-of-territory loans is the recent trend pointing toward a substantial increase in volume and a higher than normal degree of credit risk. It is fair to say that in the vast majority of cases where banks have experienced serious loan problems, the out-of-territory loans constituted the major cause.

Bkg. Ltr. #16 March 8, 1974, Commissioner Mildenberg