Since high gas prices, job losses, economic bailouts, home foreclosures, bank failures and the stock market nosedive, people are more reluctant to spend or invest their money. Now the American economy is in an economic recession. The question maybe on most Morehead residents’ minds is: Are our local banks secure?

Bankers representing Kentucky Bank, Citizen’s Bank, US Bank and Whitaker Bank gave exclusive interviews with The Morehead News concerning the bank security issue.

President of Whitaker Bank Terry Ensor said the recession has affected banks in different ways.

“The majority of banks have been affected more by the lack of confidence in the economy with consumers not requesting loans at the pace they were in the past,” Ensor said.

The condition of the economy has caused his bank to take precautions in its lending practices.

“Our bank has been somewhat cautious over the years in lending and therefore we do not have the losses occurring in the banks you hear about in the news,” Ensor said. “We have no sub-prime loans on our books and have not taken any stimulus money.”

Ensor said the main reason for Rowan County and Morehead’s financial stability is the great opportunity for jobs.

“Our banks here in Rowan County are somewhat protected from bad economic conditions with the presence of the hospital, the university and other local industry,” he said. “These local businesses have provided steady, fair-paying jobs in our county for many years. These steady jobs have prevented our local economy from experiencing the large swings in unemployment and layoffs.”

Ensor described what he thought caused this nation’s financial collapse.

“The main problem with our national economy centers on the sub-prime mortgages that have been packaged and sold as an investment to the larger money center banks,” he said. “The practice of loaning in excess of 100 percent of the value on a home can be risky. If the borrowers have financial problems that cause them to not be able to pay the mortgage payment, the bank will have problems getting their money back on the mortgage in a foreclosure situation, especially if there is a downturn in the market and the home is worth less than the loan payoff.”

Customers of his bank can rest assured that their accounts are safe because of the recent increase in the FDIC (Federal Deposit Insurance Corporation) insurance amount, he said.

“Presently the FDIC has given our depositors additional assurance that their deposits are safe by increasing the insurance coverage to $250,000 until Dec. 31, 2009,” he said.

He hopes the increase of the FDIC insured amount will be permanent.

“I would hope this amount of coverage would continue into the future due to the increase in the amount of money now in circulation,” he said. “ The $100,000 FDIC insurance coverage was not enough due to the size of all banks’ deposit accounts today.”

Ensor has hopes that the economy will bounce back.

“The economy and the banking industry will recover over time,” he said. “Our free enterprise system is still working. With the level of expertise in government and the private sector, we will rebound with stronger companies; with much better management, selling and manufacturing items that the consumer desires and can afford.”

There are some good things that would come out of this recession, he said.

“Our consumers in the future will be better managers of their money,” he said. “They will think before they spend and their purchases will be based on wise judgment.”

Consumers will also think twice when it comes managing their credit card spending, he said.

“ Unlike today’s unmanageable credit card debt, the future will see smaller balances on credit cards and more than the minimum payment being made each month, hopefully the balance being paid in full each month,” Ensor said.

Although his bank took a couple hits due to the economic crisis, Kentucky Bank’s CEO/President Louis Pritchard said his bank is in good shape.

“Well, it has affected us in a couple of ways,” Pritchard said. “First of all in terms of people seeking credit. There’s not that many people who were interested in any kind of lending transaction. People were extremely reluctant to borrow money.”

The practices of the banks that failed earlier this year has caused Pritchard’s bank to be cautious when making loan decisions.

“For the most part, certainly we are looking at transactions more carefully,” Pritchard said. “If there are qualified borrowers out there we will try to meet every need they have.”

When it comes to lending practices, Kentucky Bank is not that different than any other bank in this region, he said.

“We all have been in the position to want to help people and loan them money,” Pritchard said. “Kentucky banks have been far more conservative than most banks in our state. Generally we have not had many of the problems they (national banks) have had.”

According to Pritchard, the bank crisis resulted from banks practicing a particular loan operation called Subprime Lending.

Subprime lending is a financial term that was popularized by the media during the “credit crunch” of 2007 and involves financial institutions lending to borrowers who do not meet prime underwriting guidelines, according to Wikipedia, the free encyclopedia.

“I would dare say there are few locally owned based banks that got into the subprime lending where those banks got into lot of trouble,” he said. “I think those banks that engaged in those practices did a lot to not only harm themselves but they did a lot to the detriment of their customers.”

However when it comes to his bank, he said he was very confident in its financial status. He believes his customers should feel safe in banking with his financial institution.

“One thing is that we’ve finished an examination by the deposit corporation,” he said. “We were able to obtain our rating by the FDIC and we are satisfied with that rating.”

Pritchard could not divulge the rating his bank received because it is a part of his institution’s policy to keep that information private. He did say that his bank’s assets are solid.

“We feel very good about our capital,” he said. “It exceeds of our definition of a well capitalized bank. We are extremely liquid. We have a lot of money on hand to lend. Those two things make us a strong bank.”

Vice President/Senior Security and Loan Officer of the Citizen’s Bank of Morehead Ryan Neff said his bank is doing well.

“I think we’re strong,” Neff said. “We are as strong as we have ever been. Our bank has been here for 80 years with the same name. I think that says a lot for us. Most community banks in the nation are just as strong.”

Customers can feel safe leaving their finances in his bank’s hands, he said.

“We are a small community bank,” Neff said. “We have not taken the risks other banks have and that is why we are in the positive situation we are in.”

Neff said his bank’s lending practices are basically the same as they have always been. The failures of some major banks have caused Neff’s bank to be more careful about lending practices.

Neff rated his bank on a scale of 1 to 10 with 1 being the worst and 10 being the best.

“There are some areas where we have had to watch more closely,” Neff said. “I can say with complete confidence that we are a 10. We are safe and we are strong. The events that have happened on Wall Street have nothing to do with us.”

Neff said owning and operating a bank in a small town acts as a safety net for the financial security of banks.

US Bank Assistant Vice President Joyce Messer said her bank is also in good shape.

“We are very very strong,” Messer said. “US Bank has been here for 100 years. We are No. 1 with peer banks our size. We are the sixth largest bank in the United States. This is what has caused us to have an increase in deposits. We have many different benefits of the larger banks.”

Messer said US Bank is considered a local bank.

“Decisions made at this bank are done locally,” Messer said. “We have people who are making those decisions that know the community and what is going on in the community.”

Customers can feel confident in US Bank, Messer said.

“On a scale of 1 to 10, I’d have to say we are a 10 and that’s not just my opinion,” she said. “ People don’t have to worry about US Bank or buying stock. US Bank stock is what other brokers are recommending that people buy. Our stock is the only one they are recommending.”

Some banks have been taken over by the FDIC because they have become unable to pay debts. This is one thing Messer said her customers do not have to worry about.

The bank representatives who were interviewed said they thought the country would bounce back from the economic crisis.

“I firmly believe there are cycles in the economy,” Neff said. “We’re in what is obviously a recession. I believe we will come out of this.”

Pritchard said good things have already begun to happen that led him to believe the economy will make a positive turnaround.

“The FDIC has raised the limit for bank customers as far as the protection of our customers,” Pritchard said. “ I do not know of a customer in Kentucky that lost a dime in their deposits.

“As of late, we have seen some restoration of confidence in the stock market,” Pritchard said. “If people would hold on to their investments, they would generally return to where they have been.”

Recommended for you