Kentucky participates in survey on community banking

Report finds that more online services needed

FRANKFORT, Ky. (Sept. 25, 2014) — A new report, “Community Banking in the 21^st Century: Opportunities, Challenges and Perspectives,” details conditions facing today’s community bankers.

State regulators in 30 states held town hall meetings with more than 1,300 community bankers from April to July. The town hall summaries provide insight from the industry on the state of community banks.

The Department of Financial Institutions hosted three regional town hall discussion meetings, in Morehead, Dawson Springs and Bardstown, that drew a total of 34 bankers. The meetings revealed:

• Opportunities include increased loan demand, expansion for some, and finding ways to improve staff efficiency.
• Competition includes credit unions, national banks, regional banks, the Farm Credit System and other nonbank entities.
• Mobile and online banking services and other technology-based products and services are needed in order to compete, but there are many hidden costs.
• New documentation requirements have removed some of the personal relationship from banking and encourage standardized products instead of customized products.
• A regulatory environment that is constantly changing poses challenges – and staffing costs have increased for banks as they work to stay on top of new rules.

A comprehensive survey administered by state bank commissioners in 38 states, including Kentucky, was added in this second community banking report. More than 1,000 community bankers participated, providing key data that helps quantify the challenges facing community banks today, and outlining how these banks are responding to market conditions. The Federal Reserve and the Conference of State Bank Supervisors (CSBS) selected the questions and compiled the results of the nationwide survey.

The Fed and CSBS focused a significant number of questions on mortgage lending, since bankers have been vocal about the associated compliance burdens. The results provide a glimpse into the industry’s thinking:

• The respondents were largely state-chartered banks operat­ing in a single state and engag­ing in traditional banking activities.
• While the ability-to-repay (ATR) and the qualified mortgage (QM) rules have only recently taken effect, bankers have made the initial business decision on how they would respond to the new rules.
• Banks con­tinue to see opportunity in res­idential mortgage lending but have a mixed view of non-QM lending.
• Assessing the ATR and QM standards against current exposures, bankers generally identified a low level of nonconformance, suggest­ing the rules may generally be in line with bank practices while still requiring significant changes in operations.