Kansas holds the distinction of holding a pretty steady ratio that regulators look at to determine whether a bank can branch into another state, one FDIC official said Friday.
The ratio, which regulators call the host state loan-to-deposit ratio, is used by the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency to decide whether a bank has a history of merely collecting deposits and doing little lending.
A 1994 federal law prohibits banks from establishing or acquiring branches outside their home states just to collect deposits.
The ratio is based on the total loans and deposits of banks based or chartered in a given state.
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Banks wanting to expand their branches outside of their home state must have a loan-to-deposit ratio in their home state that is at least one half of the host state loan-to-deposit ratio for the state it wants to expand into. For example, if a Kansas bank wanted to expand into New York and it had a statewide loan-to-deposit ratio of 80 percent, it would likely pass muster with regulators because New York's host state loan-to-deposit ratio is 67 percent.
The ratios, which are updated every June 30, were released last week by the three regulators. And Kansas came in at an 80 percent host state loan-to-deposit ratio.
"Kansas is remarkably stable if I look over the past 10 years," said Janet Gordon, senior policy analyst for the FDIC's division of supervision and consumer protection. "It has not bounced around very much."
It was a bit surprising for Kansas' host state loan-to-deposit ratio to remain consistent over the past year, given the recession.
"This year we found, overall, there was a decline in the loan-to-deposit ratios," Gordon said.