2019 Journal of Community Bank Case Studies

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2019 COMMUNITY BANK CASE STUDY COMPETITION

Kish expects to continue this loan growth in the future, but not at the same pace as in the past five years. Mr. Baxter projects loan growth to be around 8% in 2019, compared to 11% in 2018. The slowdown in the economy is expected to impact on growth in 2019 and has been factored into the projected 8% figure. Notwithstanding the potential slowdown, Mr. Collins, Kish’s Chief Credit Officer, believes that there is some insulation from economic downturn in the State College market, which sees significant investment in the surrounding area due to its

proximity to various Penn State University campuses. Capital Levels and Planning Kish has experienced some fluctuation in its Tier 1 Capital Ratio in the period from 2014 to 2018 with an overall decrease of 1.4%. Nonetheless, the figure greatly exceeds Basel III’s requirement of 6% (4% in 2014) and is comfortably above the level at which it can be considered ‘well capitalized’. An almost identical trend was identified in the

bank’s Total Capital Ratio for the same period and while this is again significantly above the level to be considered well capitalized, it is in the lower percentiles as compared to other banks. In conclusion, though Kish is considered well capitalized by regulatory standards, it does lag behind its peer group in this respect. However, this is not a cause for concern, as Kish is not in need of a ‘war chest’ for acquisitions, and due to its continued focus on organic growth, is generating capital through retained earnings at a significant rate to support this growth. Due to the fact that capital is a significant area of regulatory scrutiny it is something that the bank manages very tightly and reviews on regular basis through in-depth stress testing. With respect to future planning, the bank is focused on innovation through technology in support of their customers expanding needs

Kish’s Tier One Capital Ratio (to risk-weighted assets)

Kish

Capital Adequacy

Well Capitalized

14% 12% 10%

8% 6% 4% 2% 0%

Percentage

2014

2015

2016

2017

2018

Year

Kish’s Total Capital Ratio