As Wall Street's roller coaster ride in wake of the financial crisis sent shockwaves around the world, Kentucky bankers have been scrambling to assure customers of the solvency of their banking institutions.
"I'm thankful to say there is no chaos over here," said Steve Trager, CEO and Chairman of Republic Bank.
"We've exercised good risk management over the last five years and beyond, and thankfully we've been responsible lenders over the last five years ... as a result we have not experienced some of the delinquency and the loan challenges that some of the big banks have," he said, adding that the bank is seeing its strongest year ever despite the dismal economy. "Folks have come to the conclusion that we are a very, very safe place for their money."
In fact, Republic has seen an uptick recently in deposits and loan requests as customers from other banks are starting to come through their doors, according to Trager." I'm going to say a 10 percent increase, which is a rough estimate, on the number of calls that we're getting."
Lexington-based Central Bank has been experiencing much of the same action according to its Chairman, President and CEO Luther Deaton, Jr. "We have had new customers that have come to us for loans and we have made new customer loans, and we've taken care of our existing customers," he said.
"We're carrying on business as usual, but people want to know what's going to happen and nobody knows what's going to happen," Deaton said in reference to the governmental bailout package passed by Congress. He also admitted he's not a fan of the term 'bailout.' "It needs to be defined as an asset purchase Ö They're not giving anybody anything, they are purchasing assets at a discounted rate and hopefully they hold on to them until things turn around and they can get the money back that they're putting into these, hopefully moreÖ it is a deal for the country."
Both Republic and Central have managed to stay clear of the headlines during the financial crisis, but not all banks doing business in Lexington have remained out of analysts' ire.
National City Bank has taken a drastic hit to its stock price during the past few months, but local National City President Harry Richart said the stock price doesn't tell the full story of the bank.
"It's the one immediate indicator, but I think the bigger question is what's the safest and soundest Ö how much liquidity, those are the kinds of things that people don't always get a chance to see," he said.
When asked about the short term and long term viability of his bank, Richart said: "We've done a number of things. While raising the capital, we have isolated and set our mortgage problems aside, which are not near as large as others. Our operating lines of business are really functioning very, very well. We've got an outstanding executive team now in place and our prospects are very, very good three weeks, three months and it'll look better in three years than it does in the short run."
While it stands to reason an increase in some bank's deposits and loan requests would mean a decrease in others', Richart says local National City branches have not been turning customers away from loans nor losing much in deposits as a result of the crisis.
"We're like all the rest of our competitors, we're open for business, especially in this state - - I think all over. We're still open, we have not had (to turn customers away)," he said.
"We've spent a lot of time Ö talking to our clients making sure they understand where our safeness and soundness rests, and that their deposits and their loans are fine with us. We're trying to reach out of everybody, that's what we're spending our time doing," Richart said.
Deaton and Trager both credit their ability to weather this financial storm by staying conservative and loaning only to customers instead of buying loans.
"We're unique," Deaton said. "We're owned (mostly) by two ladies, Jane and Joan Kincaid Ö and we don't have to keep our stock up, we don't have to play that game, and we didn't get greedy - - they don't want that.
"If you remember, they went through Kentucky Central, they owned a big portion of Kentucky Central, and you see what happened to it. And they then said 'look, I'm not going to put this bank in this shape anymore; we're going to be conservative and we're going to take care of the communities we serve and we're not going to do crazy things.' That's exactly what we did," Deaton said.
Trager's bank follows much the same philosophy. "Every loan we make is through a Republic associate, not a mortgage broker, we don't buy loans from anybody else, every loan we make is to a customer in our market," He said. "We have been fortunate enough to stick with what we know best and in the long run that tends to payoff."
But both have seen an increase in loans in or nearing default.
"There's an increase in non-current loans (loans 90 or more days past due). Fortunately, we did a good job of underwriting those loans going in, so our customers are able to find us and we're able to work out difficult situations with those customers," Trager said. "Whereas if you got your loan from a mortgage broker or some other national source, it's a challenge because you don't know who to call."
The same is true for Deaton. "Have we made bad loans? Absolutely. We're in the risk business, but we've not gone out and bought bad investments and done all those crazy things," Deaton said.
Overall, these problems may have more to do the economy than clients. "There are less people that can pay us today than could pay us a year ago," Trager said.