By Russ Brown
One day in the summer of 2018, bank executive Todd Ziegler of Lexington got a call from his son, Patrick, 23, in Denver wanting him to try something new in the area of finances on his cell phone.
“He taught me something I had never done before: moving money from his account to mine,” Ziegler recalled. “And it really worked well. It seems like I learn something new every day.”
Ziegler, Central Kentucky market president for Republic Bank, almost certainly isn’t alone. The same could probably be said for many of his banking peers throughout Central Kentucky, thanks not only to rapid developments in the technological field but Kentucky’s booming economy.
Entering 2018, the banking community in Central Kentucky, as well as throughout the state, reflected the optimism it felt from its customers in expecting another good year as the continuation of a strong 2017. And they haven’t been disappointed.
For example, Ziegler says Republic’s net income for the second quarter increased by 50 percent and its year-to-date income is up 43 percent over 2017, its stock price has moved from $33 to as high as $49 and the bank has experienced double-digit growth in both loans and deposits.
Luther Deaton Jr., chairman, president and CEO of family-owned Central Bank & Trust, says his bank’s earnings also have been “much better” during the first six months of this year, and others in the banking business echo that success story.
Deaton, a 40-year veteran of the banking business, was recently elected president of the American Bankers Association (ABA), becoming the first Kentucky banker to serve as an officer on the board of directors.
“We’ve grown, profits are up. I think most banks have had a pretty good year, even better than I expected,” Deaton says of the Central Kentucky banking community as a whole.
Numerous factors have contributed to the health of the industry, or as Ziegler puts it, “a lot of elements move the needle and contribute to our growth.” Chief among those are technology and regulation, according to Louis Prichard, president and CEO of Kentucky Bank.
“Those are the fastest moving parts in banking,” Prichard says, adding that Paris-based Kentucky Bank is in the process of developing and introducing several new services that will be appealing to customers who are focused on convenience.
John Gohmann, PNC Regional President, Lexington, says 65 percent of the bank’s customers are using alternative banking channels, so PNC is investing heavily to create efficient technology and “seamless services” to help meet that demand.
Ziegler noted that Republic is introducing one of the latest tech advances – interactive teller machines, or ITMs. They are similar to ATMs, but with more capabilities, including a touch screen that allows customers to interact with a live representative and complete a wider range of transactions.
Meanwhile, banking officials cite the biggest impacts coming from a loosening of regulations by the federal government, tax cuts, the friendly business climate under Gov. Matt Bevin’s administration and the overall health of the economy, not only in Kentucky but nationwide.
Deaton says that a major factor is a rollback of some damaging roadblocks to growth, and that in May thousands of small and medium-sized banks were freed from thousands of strict rules.
“Since then, changes are happening quickly, you’ve got to keep up daily as they go into effect,” Deaton said. “Dodd-Frank (Wall Street Reform and Consumer Protection Act of 2010) hurt the consumer. There are some things consumers need to protect them, but Congress tried to take the banker’s judgment out of it, and you can’t do that. People couldn’t understand why they couldn’t get a mortgage loan through, and it was due to all the procedures and regulations we had to follow.”
Says Ziegler: “I think our area is seeing some lift from the economic policies from the federal level down to the local level. It’s a more favorable environment today.”
Virtually all indicators support bankers’ excitement over their current position, including the Kentucky Department of Financial Institutions’ annual report, which provides evidence of a thriving business.
The department supervises 124 state-chartered banks, with assets ranging from $22 million to Republic’s $5 billion. Combined assets of all Kentucky banks totaled $52 billion. While the total number of supervised banks decreased from 133, total assets held by banks increased by 2.5 percent in 2017.
With mortgages more available and interest rates remaining low, the resale home market and both residential and commercial construction are booming. Scott County is currently a hot home market, and Fayette, Jessamine, Woodford and Clark counties have also seen significant growth.
“The home market is very hot right now,” Prichard said. “Supply and demand are always factors in any business, and many of our communities are experiencing low inventory of available homes, which has created a sellers’ market. We are working with home buyers to provide decisions and pre-qualifications so they can act quickly when they find a home, and we are also working with developers to ensure they have the funding they need to increase the available new-home inventory.”
All say they have seen an increase in small business activity, pointing out that it is a very good economic environment; small business owners remain optimistic and are looking to expand despite the uncertainty over potential tariff impacts.
Linda McMahon, administrator of the U.S. Small Business Administration, was in Louisville on Jan. 26 as part of her Ignite Tour of all 68 SBA offices and said a study by the National Federation of Independent Business (NFIB) showed that this is the highest level of optimism that small businesses have had since they’ve been keeping record.
“So it’s a great time to go into business,” McMahon said. “Our economy is booming. We do have programs that are available for entrepreneurs to get access to capital – they can use SBA – but also there are some regulatory reductions that have given community banks an ability to loan more money now. There’s more capital available for small businesses, and then once they’re in business, there is a marketplace.”
As an indication of the overall current strength of banking and of their desire to contribute to the well-being of the communities they serve, six Kentucky-based banks recently joined forces to launch a $150 million infrastructure fund to support public-private partnership projects, in which state and local governments can partner with private companies to finance and build large projects that might otherwise not be possible.
The creation of the Commonwealth Infrastructure Fund (CIF) is led by six of the largest community banks in the state: Commonwealth Bank & Trust; Stock Yards Bank & Trust; Central Bank & Trust; Kentucky Bank; Traditional Bank; and United Bank & Capital Trust.
The fund is described as “an innovative, private fund established to provide debt financing to private-sector firms participating in public infrastructure projects at both the state and local levels.”
Furthermore, Kentucky Bank, as part of its outreach program in Lexington, donated $10,000 this year to the Big Brothers Big Sisters of the Bluegrass (BBBS) to support its William Wells Brown Elementary School Plus Mentoring program.
The gift will help support the School Plus program that began in 2015 with funding from the Lexington-Fayette Urban County Government. Since 2015, BBBS has supported more than 35 children at William Wells Brown by pairing them with adult mentors who meet at the school during the school day or in the afterschool program for one hour, once a week.
What is the long-term future of banking in Central Kentucky? That’s impossible to know for sure, of course, but executives say there’s no reason to believe it won’t continue to prosper.
“The only reason it couldn’t continue is if interest rates get out of hand and tie up lending,” Deaton said. “But outside of that it could continue indefinitely if it is managed properly and things don’t get off-balance where you’re paying more for deposits than you’re getting from loans.”
Further growth expected
Gohmann says PNC’s economists expect the regional economy will continue to grow moderately in the near term.
“And this is a plus since many of our area’s core economic drivers respond strongly to macroeconomic trends,” Gohmann added. “Regional growth will be broad-based and will include manufacturing, transportation, education, healthcare, finance and professional services.”
While Kentucky can’t stay totally insulated from national economic problems, Ziegler says the state doesn’t seem to be as susceptible to financial ups and downs as are other parts of the country.
“We don’t tend to have as much volatility,” Ziegler said. “We’re fairly steady, relatively speaking. We haven’t had the double-digit increases in property values in general, nor have we had a significant backup either. Employment has been pretty steady, too. We tend not to go to higher unemployment levels of other parts of the country.”
Bank of Lexington
Bank of the Bluegrass & Trust Company
Bankers’ Bank of Kentucky
Branch Banking & Trust Co. (BB&T)
Central Bank & Trust Co.
Century Bank of Kentucky Inc.
Citizens Guaranty Bank
Citizens Commerce National Bank
City National Bank
Community Trust Bank Inc.
Cumberland Valley National Bank & Trust Co.
Farmers Deposit Bank
Farmers National Bank
Field & Main Bank
Fifth Third Bank
First Financial Bank
First Southern National Bank
First State Bank of the Southeast
Guardian Savings Bank
Old National Bank
Peoples Exchange Bank
Republic Bank & Trust Co.
South Central Bank
Town & Country Bank and Trust Co.
Commonwealth Credit Union
Greater Kentucky Credit Union
Health and Education Federal Credit Union
Kentucky Employees Credit Union
KUE Federal Credit Union
Lexington Postal Credit Union
Members Heritage Federal Credit Union
Metro Employees Credit Union
Park Community Federal Credit Union
University of Kentucky Federal Credit Union
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