Kentucky bankers are a conservative lot, so if their collective outlook on the economy has grown optimistic – even if it’s not exactly enthusiastic – that counts for a lot. Consumers have paid down their debt loads the past five years and are beginning to feel good about rising home equity, which is central to their general financial well being. Employment levels have slowly improved and while still not strong the needle keeps moving away from the danger zone. Interest rates remain at historic lows and should stay that way at least through the end of 2014.
Worldwide demand for bourbon continues to grow, and distillers are expanding. The Kentucky Bourbon Trail is lifting tourism. The business community remains cautious and still sees uncertainty regarding healthcare policy, but balance sheets are healthy – owners and managers as well as bankers are poised to pursue new opportunities. Bourbon is producing a shot in the arm for Greater Louisville, but Eastern Kentucky coal country will have a hangover as long as current regulatory conditions continue. The commonwealth economy is nearing the critical mass of consumer confidence that will produce a virtuous cycle of spending, home construction, rising demand and hiring that will reinforce ongoing growth and better times.
“With branches in more counties than any other bank, we have a broad view of Kentucky’s economy. On the business side, we’ve seen the automobile industry rebound nicely with Ford and Toyota recently announcing expansions in Kentucky. On the other hand, energy and healthcare, two drivers of our economy, face changes and companies in those sectors may spend the year adjusting before they’re able to focus on growth. On the consumer side, we expect the home mortgage market to continue to shift from refinances to new purchases. Last year, we expanded again in Owensboro, adding 300-plus jobs to our U.S. Bank Home Mortgage office.”
William “Bill” Jones, Division Manager
U.S. Bank Community Banking
“Business leaders are still taking a cautious approach to borrowing due to continuing uncertainty surrounding the U.S. economy. Recent financings have resulted primarily from strategic acquisitions, and we expect this trend to continue throughout 2014. As the Kentucky economy continues to mend, we continue to grow and add new clients in our commercial banking business; our focus in helping companies growing globally helped differentiate us in the marketplace.”
Paul Costel, Kentucky President
Chase in Kentucky
“The U.S. economy continues recovering at a very slow pace. With diverse drivers, Kentucky’s economy did not weaken as dramatically as other areas. Central Kentucky felt the greatest stress but is showing the greatest improvement. We see improvement in most communities we serve in Kentucky, West Virginia and Tennessee; coal and natural gas are negatively impacted by oversupply (winter weather has lowered gas supply) and low prices; coal also has a regulatory burden. Eastern Kentucky will continue to have significant stress. Conditions continue to vary within the state by region, and improvement will continue at a slow pace. The diversity of the geographic areas Community Trust serves allowed us to continue our history of profitability. We are poised to seize opportunities as the economy recovery continues.”
Jean R. Hale, Chairman, President and CEO
Community Trust Bancorp
“In 2014, Forcht Bank is optimistic our local and national economies will continue to improve. We anticipate businesses to remain conservative with their cash and working capital. The housing market continues to make modest gains, and consumers are seeing equity restored to homes. Increase in equity will improve the financial situation of many homeowners and put them in a better position to sell or buy new homes. While we continue to see changes in our industry, our mission remains unchanged in providing a level of customer service that exceeds our competition.”
Tucker Ballinger, President
“CUB is cautiously optimistic about 2014. Confidence at the small business level is improving and owners are beginning to pursue expansions. Profits are improving and, while cautious about hiring, business owners continue to look for opportunities to make operations more efficient. Loan demand was steady the last six months of 2013 and continued into 2014. Housing is improving in single-family homes, new construction and multi-family projects. We are very active in the affordable housing/Low Income Housing Tax Credit market. Interest rates have trended up but are still very affordable compared to historic levels. We expect the broad economy and unemployment in our markets to continue their gradual positive trend and for overall consumer confidence to increase.”
David M. Bowling, CEO
Citizens Union Bank
“According to the Federal Reserve, U.S. commercial banking in 2013 increased lending by $137 billion; efficiently took in over $500 billion in deposits; improved online banking services; and rewarded shareholders with higher dividends and stock prices. In 2014, U.S. banks will continue to implement a very complicated Dodd-Frank law, while taking cues from the Federal Reserve as to when and if short-term interest rates may start to improve. Overall, banks should follow an improving U.S. economy as we move further from the Great Recession – and balance sheets improve for businesses and individuals. Look for real U.S. GDP growth to move from the 2 percent range to the 3 percent range during the year. Good news.”
Tom Partridge, President & CEO
Fifth Third Bank Kentucky
The outlook for our micro-economy looks very good for 2014. Central Kentucky will continue to benefit from strong growth in the distilled spirits industry, especially bourbon. Distilleries are in an aggressive expansion mode trying to keep up with increasing demand that will continue to stimulate not only with the distilleries but contractors and service industries. The auto industry in our region has been fairly robust with Tier 1 and Tier 2 suppliers adding employees. The Ford plants in Louisville are a big factor. The success of the Bourbon Trail and downtown Bardstown’s distinctions as a Kentucky Certified Cultural District, as The Most Beautiful Small Town in America by Rand McNallyand Travel Leisure magazine, and as “One of the best small towns to locate a business” by Site Selection Magazine contributed to tourist and retail traffic.
Frank B. Wilson, President CEO
Wilson & Muir Bank & Trust Co.
“In 2014, Kentucky Bank expects marginal economic growth not only in its 10 Central and Eastern Kentucky counties but throughout the state. Improved employment will be a driver of any sustained growth. Kentucky unemployment is likely to be around 6.7 percent most of the year; as a result, we expect the economy to grow at a 2 percent rate. Home refinancing has virtually stopped; the shift will be towards home purchases, but we do not expect significant residential real estate market growth. Commercial loan growth is improving, but borrowers are still cautious about the uncertainty of the economy – surrounding the healthcare Affordable Care Act and additional regulatory burdens on businesses. Despite these uncertainties, Kentucky Bank has been able reach record growth in assets.”
Louis Prichard, President
“We are optimistic. Good news on real estate values in the commonwealth markets we serve will create additional lending opportunities. Rates remain very favorable for borrowers and, subject to our ability to help our clients overcome the intense regulatory burden, we continue to lend at good levels. Consensus is that rates will stay low as the economy rebounds slowly, which should present lots of buying/lending opportunities. Soundness and solvency, balanced with generating returns, are the banking industry’s new imperatives. Strong credit quality and capital levels well position Republic to take on growth opportunities for our clients and the communities we serve.”
Steve Trager, Chairman and CEO
“PBI Bank’s general sentiment is that Kentucky’s economic and business environments will continue to show progress in 2014. Challenges remain, however, as levels of uncertainty and caution are elevated in many areas, including overall increase in business regulations and associated costs. We expect continued incremental GDP growth in 2014 of around 2 percent, and a continued low interest-rate environment, but with increasing risk that rates may rise on the long end of the treasury yield curve.”
John T. Taylor, President and CEO
“A heavy regulatory environment, increase taxes and a new entitlement program in the form of healthcare will continue to put a chill on business expansion, true employment and capital expenditures. This will continue to affect banking industry lending efforts. The industry enjoyed higher earnings last year but primarily due to a reduction in loan loss provisions and litigation reserves along with slight improvement in loan demand. The industry will try to uncover loan demand in 2014 that fits within the government regulatory regime while continuing to improve its asset quality, a task easier said than done. An increase in consolidation of the industry is still forecast primarily due to the inability of smaller banks to mount the escalating cost of government compliance.”
Ballard Cassady, President and CEO
Kentucky Bankers Association
“Talk with any community banker these days and you’ll likely hear concerns over continued margin compression, dramatically increasing regulatory costs and stiff competition for quality lending opportunities. While we share these sentiments, our forecast for 2014 is one of cautious optimism. The once debt-burdened consumer is on firmer footing and spending more wisely. Unemployment persists but by most measures is incrementally improving. With housing prices stabilizing, consumer confidence is slowly being restored. Businesses are reaping the benefits of expense reductions and productivity enhancements implemented since 2008. These positive indicators lead us to believe there will be opportunities for modest revenue growth in 2014.”
Linda Rumpke, President and CEO
Town and Country Bank and Trust Co.
“Kentucky needs to create new high-value job opportunities, and funding for education is at the heart of that. The governor has proposed tax reform that can create revenue to fund pension reform and increase support for education, but the legislature doesn’t appear inclined to address it. If we are going to create better jobs, a well-trained workforce is essential. Recovery from the recession has been slightly better than the nation as a whole. Consumer spending is recovering and the housing industry is rebounding. Interest rates should continue at current levels at least through the end of 2014, fueling growth in home construction and sales. The slow-growth economy has challenged community banks to adopt new standards and strategies. Our bank is working closely with customers to build upon available opportunities that will lead to better growth and prosperity for our communities.”
Luther Deaton Jr., Chairman, President & CEO
Central Bancshares Inc.
“We envision modest economic growth in Central Kentucky during the spring and summer months as businesses and consumers shake off the doldrums from a cold and snowy winter. Short-term interest rates will remain at historically low levels throughout the period, while longer term rates trade in a fairly narrow range close to where they are now. Relatively low mortgage rates should be a bright spot for our community as consumers move up to larger homes. High profile development projects such as CentrePointe in downtown Lexington will add fuel to our local economic engine.”
Bill Alverson, President
“Our economy continues to progress modestly despite numerous headwinds, but there are fair odds that 2014 could surprise on the upside. Housing has stabilized and continues to recover with normalized inventory levels, mortgage interest rates remain at historic lows, and banks are eager and ready to lend to qualified borrowers. Corporate America is well capitalized and many companies find themselves post-recession to be as efficient as ever and well-positioned for growth. The headwinds look like consumer and corporate confidence combined with an ever-changing and expanding regulatory environment. With the potential of improving confidence, we maintain a positive outlook and remain optimistic.”
Heath W. Campbell,
President, Kentucky Region
Branch Banking & Trust
“Louisville-Lexington’s economic performance will be in line with the nation in 2014 with the area’s jobless rate breaking through 6 percent around mid-2015. The success of the Louisville-Lexington economy over the coming years will be credited to the market area’s diverse industrial base. It hosts a wide array of large, successful employers from auto manufacturing to education to professional services. This sustains its ability to weather most economic turbulence and to suffer less through downturns. UK and UofL are stable sources of employment and attract young people to the area. Other big players such as Toyota, GE, Ford and UPS provide well-paying jobs in dynamic industries that respond strongly to the business cycle.”
Charles P. Denny, Regional President