A devoted community bank working in Appalachian Kentucky for more than a century
In the initial testing of our developing search engine, we found that the state with the highest weighted score for banks and credit unions, on average, is Kentucky, Better Bank Options’ home state. Although the program is still in development, these first tests surprised us. Even with the current weighting system, we have not revealed a wealth of particularly strong community banks in our state, but I have some theories about why Kentucky came out on top in our initial testing.
For one, instead of counting all “quality” lending as equal, we were previously scoring lending for housing, small businesses and small farming separately, which hurt the score of banks and credit unions which specialize in one type of lending. We’re working on a way to change that in our weighting now. Banking institutions in Kentucky may do, generally, more lending in all three of these areas of lending, rather than doing a spectacular amount of lending in any particular area.
Additionally, while there may be many CDFIs in states with higher rates of poverty (Kentucky is the state with the 5th highest poverty rate, including the District of Columbia), Kentucky’s highest rates of poverty are concentrated in a one region--Appalachia. Portions of the Appalachian region of Kentucky have been largely abandoned by the banking industry, as small-town banks shut down from a lack of deposits and large banks have no interest in coming in to take their place. Other parts of the state, however, may have had just enough circulating capital to keep the good community banks without tempting mega-banks from taking over.
First State Bank of the Southeast is one of the more exceptional institutions in Kentucky in that they’ve been working in the Appalachian region of the state for more than a century, and in some towns with higher poverty rates than most of the state, but have still managed to stay effective in their hometown while also expanding to other markets. While two of their ten locations are in Lexington, KY, a fairly sizeable city, it’s clear from their site that they have a small-town focus and a passion for getting to know the personal banking needs of the small communities they serve.
Originally serving Pineville, KY, since 1899, First State Bank eventually joined with The Lexington Bank and a community bank in Williamsburg in 2000, to form First State Financial. They continued to open branches throughout the region, and even purchased an insurance company in 2008 in order to provide more complete financial services to their customers. In 2017, they adopted their original name to pay homage to the original founder and owner George H. Reese, who had a reputation in the community and as a banker of being an extremely dependable and trustworthy individual. They emphasize his legacy throughout their website and assumingly their banking practices, making them a fairly large banking institution which still has a small-town bank feel. The chairman of their board is even a descendant of George Reese’s.
This Better Banking Option would have done well in our original weightings, as they do a significant amount of lending in all the areas we look for. Three-quarters of their housing focus, which makes up 36% of their portfolio, goes to low- and moderate-income census tracts. The also do a significant amount of small business lending, at 12.3% of their assets, and a fair amount of small farm lending, at 0.67% of their assets. They also do a significant amount of lending, with a net-loans-to-deposits ratio of about 96.13%. With a satisfactory CRA rating and a positive return on assets, First State Bank of the Southeast looks from their statistics as safe as they are effective in their communities.
First State Bank is a great example of a solid community bank boosting the scores for banks in Kentucky (don’t forget to keep reading our articles to get more updates on what’s going on with our developing Better Banking Options search engine!). We would recommend them to anyone looking to invest in community development loans in Southeast Kentucky. They offer both online and mobile banking, so anyone interested can deposit in this Better Banking Option, bringing capital into small-town communities in Appalachia. Check out their website to get started today!