2019 Journal of Community Bank Case Studies

Juniata College

FIRST PLACE:

acquired in 2018, and adding almost $.5 million to Kish’s income. A further review of noninterest expenses was conducted as this was higher for Kish than the peer group average. The most significant expenditure in this category is salaries and employee benefits which in 2018 accounted for 60.8% (58.7% in 2014). In the period under consideration, there was an increase in absolute salary expenses stemming from building the team to support growth and preparing for the succession of many key roles. Additionally, the expansion of the company into different service areas added to this expense. Kish’s President and Chief Operating Officer, Mr. Greg Hayes also noted the impact of state bank ‘shares tax’. Banks in Pennsylvania are required to pay Pennsylvania ‘shares tax’, a tax that is imposed on the bank’s level of capital, as opposed to a traditional state business income tax. Thus, higher capital levels that were imposed on Pennsylvania banks following the Great Recession create a much higher tax burden that is independent of whether or not the bank is generating any net income. The addition of ancillary services by the company in the period under review also prompted the question of potential acquisitions and/or mergers. At this time, Kish plans to continue to focus on organic growth rather than growth through bank acquisition. The last earnings indicator considered was return on equity (ROE), as presented in the Annual Report for Kish Bancorp, Inc. With the rise in net income outpacing growth in equity over the 5-year span, ROE increased

At this time, Kish plans to continue to focus on organic growth rather than growth through bank acquisition.

1.14% in 2018). Nonetheless, it must be kept in mind that Kish, in the period from 2014 to 2018, experienced a slightly higher increase in assets when contrasted with PG5. On speaking with Mr. Baxter about this figure, he advised that Kish plans to see a return on assets (after deducting investment securities which are mark to market) of 0.80% in 2019 and that the long- term goal is to increase it to over 1.00%. In analyzing the positive performance of noninterest income for Kish, this income was found to come from a number of sources. It primarily consists of service fee income on deposit accounts, gains on investment securities as well as income generated from non-core banking activities such as property and casualty insurance sales, travel agency commissions, wealth management revenue, and employee benefits consulting services. While there were fluctuations in the level of gains, most other sources of income were relatively stable over the 5-year period with benefits consulting being

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