Kentucky Bankers Likely To Discuss Opting Out At Annual Convention

Kentucky community bankers will be celebrating another solid year when they meet in Lexington this week for their annual convention, but they'll have to reckon with a host of national issues that could radically transform their profession.

Loans and assets at Kentucky banks grew slightly, while the loan-loss provision decreased 23% last year, according to Sheshunoff Information Services Inc.

Despite a 5% decrease in total net income from the $526 million earned in 1993, bankers interviewed were enthusiastic about their performance.

"Historically we've been strong, and last year we were as strong as we've ever been," said Gary M. Traughber, president and chief executive of Elton Bank and Trust Co. and president of the Community Bankers of Kentucky.

The 300 bankers, representing 60 community banks, who will be attending the 13th annual convention will likely discuss several controversial topics.

Topping the list is interstate banking and branching. The Kentucky General Assembly will not convene until 1996, so no action will be taken this year on the Riegle-Neal Interstate Branching and Banking Act.

"It's No. 1 on the list," said Orson Oliver, president of the Bank of Louisville. "I'd say 99% of us are for opting out, but we'll probably get a fight from the banks owned by out-of-state banks."

In Kentucky, which is surrounded by seven states, that's quite a few. The four largest banks are owned by out-of-state companies.

Mr. Oliver's bank is the largest independent bank in the state, with $1.2 billion of assets. Despite its location near the border with Indiana, he expressed no interest in being allowed to branch there.

"They've got some good community banks over there," he said. "If they can't get good service there though, they can always come here."

If branching is eventually allowed, the state would also have to address the taxation issue. Branching likely would mean a greater percentage of market share for out-of-state banks, which would enjoy the benefit of not having to pay Kentucky taxes.

The result, unless some sort of reform is enacted, would be a competitive advantage for the larger regionals and a loss of tax revenue for the state, bankers fear.

The proposed repeal of the Glass-Steagall Act, which separates commercial and investment banking, has also generated discussion, including rumors about possible bank alliances with some of the brokerage houses in the area, such as Hilliard & Lyons and J.C. Bradford, bankers said.

Consolidation activity has slowed in the state, and some analysts believe it won't heat up again.

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