KENTUCKY BANKER MAGAZINE November 2013
As we celebrate our 25th Anniversary, we express our sincere appreciation for the support and loyalty of our customers.
Our goal, like that of the Community Banks we serve, continues to be delivering the leading, strongest customer service in the correspondent banking industry. We look forward to the future and the continued opportunity to care for our customers.
800.248.3229 | 502.695.3000 | www.bbky.com
EXECUTIVE
CONTENTS KBA STAFF
Ballard W. Cassady Jr. - bcassady@kybanks.com President & CEO Debra K. Stamper - dstamper@kybanks.com EVP / General Counsel / Director of Compliance Paula B. Cravens Sturgeon - pcravens@kybanks.com Director of Education Solutions Selina O. Parrish - sparrish@kybanks.com Director of Vendor Solutions Matthew E. Vance - mvance@kybanks.com Chief Financial Officer
STAFF Miriam Cole - mcole@kybanks.com Executive Assistant Paula Cross - pcross@kybanks.com Education Services Coordinator Jamie Hampton - jhampton@kybanks.com Education Services Coordinator Natalie Kaelin - nkaelin@kybanks.com Assistant General Counsel Chris Kelso - ckelso@kybanks.com Manager of AIB Education Solutions Michelle Madison - mmadison@kybanks.com IT Manager Lanie Minton - lminton@kybanks.com Administrative Assistant Tammy Nichols - tnichols@kybanks.com Convention & Membership Services Coordinator Katie Rajchel - krajchel@kybanks.com Staff Accountant Yvonne Savage - ysavage@kybanks.com PAC Services Coordinator Angie White - awhite@kybanks.com Director of Communications / Marketing Steve Whitlow - swhitlow@kybanks.com Systems Engineer Consultants John P. Cooper - jcooper@kybank.com Governmental Affairs Consultant KBA Insurance Solutions Chuck Maggard - cmaggard@kybanks.com President & CEO Brandon Maggard - bmaggard@kybanks.com Account Representative Audrey Whitaker - awhitaker@kybanks.com Insurance Services Coordinator KBA Benefit Solutions Lisa Mattingly - lmattingly@kybanks.com Director of Sales & Service Lane Hettich - lhettich@kybanks.com Service Manager Donna McCartin - dmccartin@kybanks.com Account Representative HOPE of Kentucky Billie Wade - bwade@kybanks.com Executive Director
Cover
Becky Wilkes, Rustic Barn Scenes of Kentucky Photo Contest
COLUMNS Chairman’s Corner.........................5 Straight Talk.................................6 My Two Cents...............................8
DEPARTMENTS Education.....................................20 Products and Services...................18 Making News................................21 On the Move................................26
FEATURES Emerging Leader Spotlight.............13 CUB 125th Anniversary..................16 SSBCI..........................................21 Brownfields in Kentucky Part 2.......22
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STRATEGIC DIRECTION As banks slowly emerge from recent economic and credit deterioration, having the right partners can be crucial in navigating the industry’s new challenges and complexities. MCM’s Financial Institutions Services Team offers more than the traditional tax and accounting services. In addition to our established governance and risk management practices, we’re also well positioned to help financial institutions define and prioritize strategic initiatives. Whether its board development, strategic mentoring or creating project management, MCM advisors provide solutions to keep clients on the path to success. Contact us to ensure you’re headed in the right direction. Henry Hawkins, CPA Financial Institution Services Director henry.hawkins@mcmcpa.com 502.882.4490
E. Shane Satterly, CPA shane.satterly@mcmcpa.com 859.514.7771
Louisville | Lexington | Frankfort | 502.749.1900 | www.mcmcpa.com
Don’t forget to fill out your Emerging Leader nomination form today! Deadline is December 1, 2013 If you have not received your application materials, please contact Natalie Kaelin:
nkaelin@kybanks.com (502)736-1299
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CHAIRMAN’S CORNER No matter how busy we become, we need to reserve time to extend a helping hand to our families, friends, colleagues, and co-workers. It is crucial we pass down the knowledge only experience imparts. The KBA’s Emerging Leader Program is a step in that direction. Open discourse between our most experienced bankers and the shorter tenured but talented newcomers to our profession is crucial to our health and vitality as an industry.
Neil Bryan KBA Chairman
My last college roommate was quite a character. He was a Navy Corpsman who had seen the horrors of the Vietnam War while trying to save the lives of his Marine compadres on the battlefield. Despite dealing with death and the carnage of war on a daily basis, he had survived with his sense of humor intact. He certainly needed it living in an apartment with me. We were polar opposites in many ways. While he was battle scarred and worldly, I was pretty naïve. Looking back on it I now realize I had pretty much fallen off the turnip truck earlier that day. His laughter at my expense was generally good natured. Despite our differences, he taught me a lot about life. That may be the most recurrent refrain in my life….. he /she taught me a lot! Parents, teachers, preachers, friends and foes taught me lessons that have been invaluable. I owe them a debt I can never repay. Their most valuable gift may have been the time they took to show me a better way in life and in business. The experience made the commitment to help the novice. They understood what I so often forget. When I know something, I think everyone else knows it as well. The reality is somewhat different.
They need our knowledge. We need their energy that comes packaged in the optimism of youth. The challenge for community banking is considerable in today’s environment. Our industry is being reshaped by a wave of rules and regulations intended to cure the ills that led to the Great Recession. New realities are being mandated almost daily as a result of this protracted economic downturn. The Depression shaped the lives of many of my mentors. When hard times hit, they knew from experience what had to be done to survive. They showed us the way to not only survive adversity, but to prosper despite tough times. Our mentors were survivors. They were the people who conquered their considerable problems with hard work, wisdom, faith, and self confidence. They left both the world and our industry a better place. Those principles may seem a little old fashioned and out of vogue in today’s world. As we work together to leave behind our legacy, let us not forget what has stood the test of time. Passing on our accumulated knowledge to the next generation may not sound very exciting. I do believe it is the best legacy we can provide to a new generation of bankers to enable them to deal with the first difficult economic times many of them have experienced.
Neil Bryan
In life we all need mentors. We need people who will help us understand and laugh at our foibles while teaching us life’s lessons in a constructive manner.
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STRAIGHT TALK
A Lesson from the Past Tocqueville spent nine months traveling throughout the U.S. in search of America’s “essence” – from Michigan to New Orleans with a stop in Oldham County, Kentucky – gaining the perspectives of America’s farmers and settlers. But he spent most of his time along the east coast in Boston, New York and Philadelphia. Our democracy’s best and brightest warmly received this French aristocrat, from presidents to bankers and lawyers – even Charles Carroll, the last surviving signer of the Declaration of Independence. His extensive notes of such interviews led to his astute reflections on America’s social and political institutions, which he published as Democracy in America. If we had a required reading list for American citizens (and I think we should), Democracy in America would be near the top, for its place in history in framing and shaping political discourse.
How many times have you said or heard, “Our world is going to Hell in a hand basket“ or “ What is the matter with people these days?” or “Where are all the reasonable people?” I hear it (okay, and say it) every day. Whether I’m looking at events through a banker’s lens or just a father’s, I’m feeling the same deep apprehension. Where are we going – and what put us on that trajectory? In a democracy, “we the people” are ultimately responsible for that trajectory. As those we elect to public office gain a sharply escalating amount of control over our private and economic lives (with no historical precedent for that ever turning out well), we have to look critically at ourselves – at the way we conduct ourselves in the political sphere. Two books, written nearly two centuries apart, can help us do that in a deeper way: Democracy in America (1838) by Alexis de Tocqueville and Bowling Alone: The Collapse and Revival of American Community (2000) by Robert Putnam. Both need a little context to be appreciated. Alexis de Tocqueville, a French aristocrat, came to America in 1831 to study our prison system. But his deeper interest was in America’s young democracy and its attempt to find the right balance between liberty and equality. His passion for political ideas was sharpened by having parents who narrowly avoided the French Revolution’s guillotine by spending a time of exile in England. You become a keen observer of such things when your life depends on it.
Tocqueville wrote with eloquence and clarity on essentially every fundamental issue for our democratic republic, but the one I think about most these days is the importance of ‘free associations’ to our political health. He admired our constant associating, both public and private: our churches and our associations and leagues and societies, designed for this and that common interests or goals. He wrote, “Nothing, in my view, deserves more attention than the intellectual and moral associations in America.” He saw Americans banding together to solve problems and pursue goals that, in his native France, only aristocrats or government took on. As a result, he wrote, “Feelings and opinions are recruited, the heart is enlarged, and the human mind is developed by no other means than by the reciprocal influence of men upon each other.” These associations brought Americans together in ways that enabled them to overcome their selfish interests through a clearer understanding of the common good. More recntly, Robert Putnam, a social scientist on the Harvard faculty, revisited Democracy in America and saw that Tocqueville, as an outsider, had properly valued something we had underestimated – that our associations were a source of ‘social capital’ that sustains civic virtue, those habits we cultivate in ourselves for the ultimate good of our communities. He put it, as succinctly as his profession permits: Whereas physical capital refers to physical objects and human capital refers to the properties of individuals, social capital refers to connections among individuals – social networks and the norms of reciprocity and trustworthiness that arise from them. In that sense social
Let me know what you think: bcassady@kybanks.com November 2013 | 6
capital is closely related to what some have called “civic virtue.” The difference is that “social capital” calls attention to the fact that civic virtue is most powerful when embedded in a sense network of reciprocal social relations. A society of many virtuous but isolated individuals is not necessarily rich in social capital. Putnam’s work with that idea was published in his 2000 book Bowling Alone: The Collapse and Revival of American Community. His title used as an example of his theory, the bowling leagues of his own youth, which have dwindled in number even as the number of bowlers has doubled. In deeper reflection on his basis thesis, Putnam wrote, “A society characterized by generalized reciprocity is more efficient than a distrustful society, for the same reason that money is more efficient than barter…Trustworthiness lubricates social life. Frequent interaction among a diverse set of people tends to produce a norm of generalized reciprocity.” Sure, social climate is always evolving. But Putnam offered a lot of evidence that, over the last 50 years, we’ve had a stark decrease in association across our communities. From professional societies to neighborhood committees, forums for building up social capital are disappearing, and with them, our connections with friends, neighbors, and strangers. If we don’t find a way to reverse that, Putnam believes, we will lose the essential heart of democracy in America. Putnam had his critics, and he answered them well enough to persuade me that we minimize his arguments at great cost to ourselves and our American way of life. I used to put complaints about our youths’ preoccupation with their tech toys at the expense of face-to-face engagement in the same category as my parents’ attitude toward rock and roll—now, I’m not so sure.
with those having an opposing perspective. Tocqueville and Putnam together have given me deeper insight into how all this plays out at the level of our federal government, especially its executive and legislative branches. After decades of dwindling numbers of associations to build a basis for empathy, the path of compromise has come to hold little appeal. Political majority has become a blunt instrument to be used with indifference and anger. Not so long ago, President Reagan and Speaker O’Neill played cards in a private room in the capital and leveraged that association into political compromise and problem-solving. The wisest of our pundits highlight with deep concern the absence – the seeming impossibility – of such an association today. If that’s a demonstration of how completely we have exhausted civic virtue and social capital, our dilemma becomes this: how do we re-build them – and can it be done in time? I don’t have answers, but I’m prepared to join others in searching for them. For starters, I don’t think we can hold those we elect more accountable than we hold ourselves. If we do, we’ll lose the only chance we’ve got to reclaim the America that was worthy of Tocqueville’s praise. If ever a problem required a ‘bottom up’ approach, it’s surely this one. Our political malaise started in our own towns and cities; our cures must start there as well. As bankers, we’ve had a role in community health that we’ve got to keep fighting to preserve. For my part, I’m fighting harder with a clearer sense of what is at stake. Tocqueville famously said, “When the past no longer illuminates the future, the spirit walks in darkness.” If we don’t find new ways to regenerate the virtues and social capital we’ve lost, the darkness that we bequeath our children and theirs could turn out to be a truly dark age.
The issue has its place in every generation. As professionals we find “shortcuts” to bypass the social element of work and complete projects solo (a distinguishing trait of Generation X, it’s said), without help from others who may have faced similar situations. Elevators used to be a place where you could strike up a conversation with a stranger; now initiating conversation seems forced and trivial with no shared sense of value in that conversation. Those elevators start to feel like a microcosm, with the macrocosm being the public square where our political discourse shapes the quality of our political decision-making. Our social capital feels exhausted to the point we can only speak at rather than
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MY TWO CENTS PLUS SOME
If It Walks Like an Appraiser and Talks Like an Appraiser, Is It an Appraiser? of Professional Appraisal Practice (USPAP); and delineates what activities are appropriate under the license/certification obtained. In Kentucky, appraisal licensure/certification may be obtained in the following categories: • Associate—a person of this classification is required to work under the supervision of a fully certified appraiser in the area for which the supervising appraiser is properly credentialed.
We are still receiving some questions about appraisals and appraisal reviews. I am going to try to answer all your questions about who can conduct appraisals and appraisal reviews in this article. Appraisals may be performed by persons who are not certified or licensed under state law. Licensing/ certification in Kentucky is strictly voluntary. HOWEVER, laws and regulations require that collateral property for certain types of loans (i.e. federally-related loan transactions) be performed by a licensed/certified appraiser. In addition, regulators may deem it to be unsafe or unsound to have appraisals, in certain other instances, to be completed by anyone other than a licensed/certified appraiser (i.e. unique commercial property). Once your bank determines that it is necessary or desirable to hire a licensed/certified appraiser to perform an appraisal, you have to make sure that you hire the right one. Licensed/certified appraisers in Kentucky are obligated to follow the laws and regulations applicable to licensed/certified appraisals. (KRS Chapter 324A and 201 KAR Chapter 30.) These laws and regulations give the Kentucky Real Estate Appraisers Board the oversight authority for licensed/certified appraisers; establishes initial and ongoing qualifications for obtaining and retaining appraiser licensing/certification; sets performance standards in accordance with Uniform Standards November 2013 | 8
• State Licensed Appraiser—a person of this classification may appraise non-complex 1-4 unit residential properties with a transaction value less than $1 million and complex 1-4 residential units with a transaction value less than $250,000. • State Certified Residential—a person of this classification may appraise 1-4 unit residential properties without regard to transaction value or complexity. • State Certified General—a person of this classification may appraise all types of properties. Although licensure is not required to perform appraisals (but is required by regulators for certain types of loans), once it is obtained the specific type of licensure restricts the appraisal activities that the appraiser may perform. That means that a licensed bank employee, with a State License, may perform internal appraisals on non-complex 1-4 unit residential properties up to $1 million, but may not perform an internal appraisal on a commercial piece of property, even if the bank is not required to obtain an appraiser in the specific transaction at hand. That is because once they obtain state issued credentials, appraisers are bound by the terms under which those credentials are issued. And that issue muddies up the area of appraisal reviews as well. Again, I will state that there is NO requirement that appraisal reviews be conducted by a licensed appraiser. Section XV of the Interagency Appraisal and Evaluation Guidelines provides guidance specifically relating to appraisal reviews and provides that a qualified reviewer “should be independent...insulated from any influence by loan
production staff. ...should possess the requisite education, expertise, and competence to perform the review commensurate with the complexity of the transaction, type of real property, and market.” Further, the guidelines go on to explain the manner by which small or rural institutions can accomplish this given their unique issues.
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Having said that it would seem that (a) if a reviewer is not required to be licensed, and (b) if you can properly train a non licensed reviewer, then (c) a licensed appraiser serving as a reviewer would be even better and “easier” to train--even on properties outside the scope of their license. However, that is not the case. As I stated earlier, Kentucky appraisal licensing/ certification is voluntary. No one is required to be licensed in order to complete an appraisal or an appraisal review. Once someone is licensed, however, they submit to the jurisdiction and oversight of the KREAB and applicable laws and regulations. One such law is KRS 324A.030(8), which provides: “A person (in this instance meaning a licensed appraiser) shall not provide appraisal, appraisal review, or appraisal consulting assignments or perform any of the duties usually performed by a licensed or certified real property appraiser for a federally related transaction unless the person at the time holds a license or certification of real property appraiser issued and validly existing under the laws of the Commonwealth of Kentucky, as provided in this chapter.” That means that once you are licensed, you are subject to the limitations of your license. Thus, if you are only licensed on residential property, you cannot perform an appraisal review on commercial property and vice versa. However, if you are not licensed, you can do either. If you have an employee who is licensed in one area, but not the other, they can avoid the limitations of their license by placing it in escrow. As a side note, I will caution you that certain other considerations should be taken when considering which appraiser to hire. The lowest price should not be given the most consideration. Things like experience in the specifics of the property (especially if it is unique) and knowledge of the geographic area are among some of the considerations to be taken into account.
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November 2013 | 9 NG-13114 KBAHalfPg5.indd 1
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A Kentucky Housing Forum was held on Ocotber 15, 2013. This meeting was the first of future regular meetings to be attended by representatives of industries impacted by housing laws and trends. The photo to the right is of the attendees at the meeting, which included the KBA, the Kentucky Association of Realtors, Kentucky Real Estate Appraiser Board, Home Builders Association of Kentucky, Kentucky Society of Architects, Associated General Contractors of Kentucky, Kentucky Real Estate Commission, Community Associations Institute of Kentucky (condo associations), Kentucky Housing Corporation and others.
Rick Harp (left), President of Farmers Bank & Capital Trust Co. stands with Dr. John D. Sutterlin (right) at the unveiling of Dr. Sutterlin’s portrait which will hang at the Farmers Bank main office in downtown Frankfort. Dr. Sutterlin joined the Board of Directors in 1976 and served as Chair from April 1996 until his retirement in April of 2013.
Anthem Blue Cross and Blue Shield. We believe healthy employees make for a healthy business. Research shows that companies with wellness programs have less sick leave, lower direct health care costs and fewer worker’s compensation claims.* That’s why Anthem Blue Cross and Blue Shield offers a variety of health and wellness programs. They all work together to help your employees manage and improve their health. Learn more about what Anthem Blue Cross and Blue Shield has to offer at anthem.com/connects2.
* The Economic and Health Impacts of Obesity, Institute on the Costs and Health Effects of Obesity, National Business Group on Health, February 2009. Anthem Blue Cross and Blue Shield is the trade name of Anthem Health Plans of Kentucky, Inc. Independent licensee of the Blue Cross and Blue Shield Association. ®ANTHEM is a registered trademark of Anthem Insurance Companies, Inc. The Blue Cross and Blue Shield names and symbols are registered marks of the Blue Cross and Blue Shield Association. 36501KYAENABS 3/13
November 2013 | 11
Modifying Processes for Garnishments of Accounts Containing Federal Benefit Payments — New rules effective as of June 28, 2013 by P. Branden Gross Most financial institutions have already modified their processes to conform with the interim federal rule, 31 C.F.R. 212, effective May 1, 2011, establishing procedures to protect certain federal benefit payments (“Protected Amount”) from a garnishment order against a customer’s account (“Protected Account”). The Department of the Treasury, the Social Security Administration, the Department of Veteran Affairs, the Railroad Retirement Board and the Office of Personnel Management (“Agencies”) have recently finalized 31 C.F.R. 212, effective June 28, 2013 (“Federal Rule”). Financial institutions should ensure their existing processes comply with the amendments and clarifications to the Federal Rule. The Federal Rule now allows a financial institution to impose a garnishment fee on any funds (other than a federal benefit payment) that are deposited into the Protected Account within five days after the account review. The financial institution may check the Protected Account at any time during that five-day period to determine whether such additional funds were deposited. The Agencies have also emphasized that the Federal Rule’s restrictions only apply to the Protected Account, and that the customer agreement and any applicable laws may authorize a financial institution to collect garnishment fees from a non-protected account. Even though a financial institution must still conduct an account review to determine whether there is a Protected Amount, the Federal Rule amended the definition of “protected amount” to provide that the account balance be calculated as of the time of the account review, rather than at the opening of business on such date. However, the Federal Rule does not require a financial institution to conduct unnecessary account reviews if it has determined not to take any action affecting an account. For example, if a financial institution has already conducted an account review and
paid the obligation in the garnishment order in full, then the financial institution is not obligated to conduct any additional account reviews. The Agencies have clarified that “during the account review period, the financial institution must allow an account holder unimpeded access to funds in the account.” Therefore, until the financial institution has finished the account review process, it shall not freeze or hold the funds in the account or cancel the customer’s access to debit cards. In addition, the Federal Rule expanded the definition of “garnishment order or order” to clarify that the following collection actions fall within its purview: (1) orders directly issued by a State, State agency or municipality (rather than only orders issued by a court); (2) garnishment orders issued by a court clerk or an attorney in his capacity as a court official; and (3) restraining orders to freeze assets and seizures in criminal actions. The Federal Rule’s notice provision also changed. It now provides that a financial institution needs to deliver notice to its customer when the Protected Account contains funds in excess of the Protected Amount. A financial institution is not obligated to give notice to a non-debtor joint account holder of the Protected Account. Also, the Federal Rule does not specify the means to deliver the notice to the customer as such notice may be governed by a customer agreement or any applicable laws. The Federal Rule continues to protect financial institutions from liabilities and penalties for failure to tender funds under a garnishment order, so long as the financial institution complies with the Federal Rule in good faith.
M&P will be happy to discuss or answer questions on the new rules for “Modifying Processes for Garnishments of Accounts Containing Federal Benefit Payments.”
M&P is a leading banking and finance law firm representing financial institutions, businesses and individual clients throughout Kentucky and Indiana.
MorganandPottinger.com P. Branden Gross is of counsel at Morgan & Pottinger, P.S.C.
THIS IS AN ADVERTISEMENT.
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LOUISVILLE
NEW ALBANY NASHVILLE
Emerging Leader Spotlight: Jaime Steele Coffey
In October, the Emerging Leaders met in Lexington at Keeneland. We met to discuss the highlights of the trips throughout the year and the speakers we have been privileged to hear in previous months. The KBA wanted feedback for next year’s Emerging Leader class. It was unanimous that everyone enjoyed the trip to Washington D.C. and the convention at the Greenbrier. The conference in Lexington as well as the trip to Frankfort were events many of us had never experienced. The months we traveled to Louisville to the KBA office for the chance to listen to different speakers were educational and gave us a look into different aspects of banking. Everyone found the chance to net-
work with other bankers around the state was very beneficial. In Washington, the conference in Lexington, and the convention at the Greenbrier, each Emerging Leader was paired with a seasoned banker. We all enjoyed getting to know our assigned banker. It was a great opportunity to learn from their experiences and see how bankers from different banks, and different areas in the state, manage their bank. Everyone in the Emerging Leader class will continue to benefit from the contacts we have made with fellow Emerging Leaders. We all know we will be able to look to each other for guidance in banking for many years to come. The idea was discussed in our meeting to include the inaugural Emerging Leader class in one or two events in the coming years, and to keep having each Emerging Leader class attend functions for years to come. This idea was very well received by all. We all felt it would be very beneficial for the next generation of bankers to spend time together and
develop relationships with fellow bankers who are our age and who have similar goals for the future. Our October meeting at Keeneland was a celebration of our year as Emerging Leaders, and a day to enjoy horse racing, good food, and great company. Each month I have looked forward to seeing and spending time with my fellow Emerging Leaders. As the year draws to a close, I honestly can say this has been a great opportunity. Each month I have enjoyed meeting and discussing the different aspects of banking. The knowledge I have obtained will benefit my career now and in the future. I will miss the monthly meetings and spending time with my new friends. I hope to see all of them in the future at conferences, training, and at future Emerging Leader meetings each year. I am thankful the KBA developed this program and that I had the opportunity to take part in it and to have had some great experiences.
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Halloween at Citizens Bank & Trust, Campbellsville It was quite the celebration at Citizens Bank & Trust in Campbellsville. The staff takes their “bank holidays” seriously. It’s safe to say no one messes with a bank where Batman, Ironman, and the Incredible Hulk all work. Rooftop Superheros and pictured below: Matt Hopper Loan Officer aka Batman, Mark Johnson President/ CEO aka Iron Man, Josh Myers Loan Officer aka The Hulk.
November 2013 | 14
AIB in the News Malissa Combs, People’s Bank of Kentucky earned her AIB Banking & Finance diploma recently. Malissa was promoted to Head Teller. Malissa is pictured here with Tony Kinder, Chris Kelso, and President James Hay. Congratulations Malissa!
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125th Anniversary for Citizens Union Bank
This year Citizens Union Bank (CUB), Shelbyville, is celebrating their 125th anniversary. Over those 125 years the bank has survived many economic calamities that could have knocked the feet out from under them, yet today CUB stands strong and proud. To honor their loyal customers both past and present, as well as their employees and predecessors in helping to make that possible, the bank held weeklong customer appreciation celebrations at all of their branch locations throughout the Louisville metro area. This area includes: Shelby, Oldham, Spencer, and Bullitt Counties as well as their central Kentucky locations in Hardin and LaRue Counties, culminating with an Open House at their Main Office location in Shelbyville. David Bowling, President of Citizens Union Bank, stated “Even though 1888 was a place in time when life was much simpler, the words of the bank’s founders still ring true today. We believe the Bank has grown and prospered over the years because we have always tried to remember that for us to prosper the communities around us must also prosper. At CUB we continue to be committed to our customers and our communities first.” Throughout the history of Citizens Union Bank its success has always been based on the strong belief in working to make a difference in the lives of its customers and in the communities it serves. Since 1888 CUB has invested millions of dollars in the Shelby County community and the communities where they have offices. From financing local residential development and small businesses, November 2013 | 16
to investing in the area schools, to sponsoring local, civic and school events, to making monetary donations and to thousands of hours of employee time; CUB has always been committed to community service. That is why in the celebration of their 125th anniversary, the bank looked for a way to really make a big difference in the communities in which they are located. Beginning in August, the bank’s employees split up into groups of 15 teams, and those teams were each given $1,000 to donate to the community organization of their choice, for a total of $15,000. Each team member was given the opportunity to choose an organization and then the teams voted on which one they would donate to. The presentations of the checks have been made over the past few weeks, and can be viewed on the bank’s Facebook page at Citizens Union Bank, Shelbyville KY. On Monday, October 14th, the bank was closed for Columbus Day; however the fifteen teams of employees spent the day contributing their time to work at the various organizations they had chosen. Over this entire week of October 14th through October 18th, each CUB employee was given a pad of 25 coupons that they are using to do random acts of kindness throughout the communities in which they live and work. Each time an employee does a random act of kindness they are leaving behind a coupon that says they are doing the kind act in honor of Citizens Union Bank’s 125th Anniversary. This will amount to over 4,500 random acts of
KBPAC “Secret Agent Getaway for 2” Braggin Rights to Board
Citizens National Bank of Paintsville Board members standing from left Paul David Brown Jr, Chair Gregory Meade, Lynn Dorton Mullins, Bob Hutchison, Marvin Butch Walker, L. Barrett Frederick; seated left Robin Cooper and G. Larry Conley and the Greenbrier at Sulphur Springs, WV.
Citizens National Bank’s Board and Executive Committee were issued a challenge between them
to see which group could collect the most donations during August for the KBPAC Raffle Campaign drawing to take place at the KBA Convention at the Greenbrier. While the competition was neck and neck for a couple of weeks, the Board pulled away in the end with the win. The board had donations of $1,040 and the Executive Committee had donations of $310. Needless to say this challenge was a big success at CNB with a grand total of $1,350 collected for the KBPAC. Thank you to the BOD and Executive Committee of Citizens National Bank for making it happen! kindness in the communities the bank serves! Customer appreciation week was held at all CUB branches, and the 125th anniversary open house was held on Friday, October 18th at the Bank’s main office location in Shelbyville. The Bank was honored with a citation from the state of Kentucky and a proclamation from the city of Shelbyville. Picture to right: Mr. Thomas L. Hardesty, Mayor of Shelbyville, spoke at the celebration to congratulate the bank on their 125 years of serving the Shelby County market.
PRODUCTS AND SERVICES
KBA ENDORSED DIRECT CONNECT MERCHANT SOLUTIONS CHANGES NAME TO
STREAMLINE PAYMENTS Same Company, Ownership and Service – New Trademarked Name KBA endorsed, Direct Connect Merchant Solutions, an industry leading card processing provider, announced on October 1, 2013 the re-branding of its company to Streamline Payments. The company offers a multitude of credit card processing services to thousands of merchants throughout the country. The company’s growth in its first five years can be attributed directly to the experienced industry professional representatives it employs. A Kentucky Corporation, based in Louisville, with representation throughout the state, Streamline Payments will save your customers money with competitive discount rates and fees. Streamline Payments also funds transactions at next day speed for all major card types. The attention and support their organization will provide to this program will undoubtedly increase your fee income from the merchant processing services that you provide to your business clients. Since credit card processing is Streamline Payments’ sole business, they can inform you on changes in their industry, and keep you on the leading edge of electronic payment solutions. Their experiences and attention to this business will benefit the KBA members and keep your customers in compliance with the card associations requirements. Below is a brief list of merchant products that are available to you and your customer’s through the KBA and Streamline Payments’ program: • Free cost comparison and consulting services • Free Setup/reprogramming • Free Virtual Terminal • Low Cost Dial and IP Point of Sale Solutions/ with free reprogramming for merchants with existing equipment • Cash Advance terminals for the bank branches • Next Day Funding and one Statement for all Card types including American Express • Electronic Check Services-Guarantee and Verification • Free Online Reporting We know you will be pleased with the customer service provided by this Kentucky based company and the increased fee income that will be generated from the merchant processing services provided by Streamline Payments. For immediate attention, contact Selina Parrish at the KBA at (502) 736-1282. We look forward to hearing from you!
James W. Beach (Represents Group 5) Chairman, President & CEO Peoples Bank & Trust Company Owenton
Congratulations to the 2013-2014 KBA Board Members
G. Anthony Busseni (Represents Group 6) President & CEO Century Bank of Kentucky, Inc. OFFICERS Lawrenceburg Neil S. Bryan (KBA Chairman) President & CEO, The Farmers Bank of Milton, Milton OFFICERS Katherine Reese Capps (Represents Group 7) ryan (KBA Chairman) & CEO H. Lytle Thomas (KBAPresident Vice Chairman) he Farmers Bank of Milton, Milton First State Financial, Inc. President & CEO, Heritage Bank, Burlington Middlesboro mas (KBA Vice Chairman) Louis Prichard (KBA Treasurer) O, Heritage Bank, Burlington Stephen Miller (Represents Group 8) President & CEO, Kentucky Bank, Paris CEO chard (KBA Treasurer) Peoples Bank of Kentucky, Inc. David P. Heintzman (Past KBA Chairman) CEO, Kentucky Bank, Paris Chairman, President & CEO, Stock YardsFlemingsburg Bank & Trust Company, Louisville zman (Past KBA Chairman) A. Wilson (Represents Ballard W. Cassady, Jr., (PresidentGreg & Chief Executive Officer) Group 9) ock Yards Bank & Trust Company, Louisville PresidentLouisville & CEO Kentucky Bankers Association, The First Commonwealth Bank (President & Chief Executive Officer) Prestonsburg kers Association, Louisville THRIFT REPRESENTATIVES GROUP REPRESENTATIVES Don D. Jennings (Represents Thrifts) Wade Berry (Represents Group 1) Vice Chairman & CEO President & (Represents CEO First Federal Savings Bank of Frankfort Don D. Jennings Thrifts) Farmers Bank & Trust Company Frankfort Vice Chairman & CEO Marion First Federal Savings Bank of Frankfort Glenn Meyers (Represents Thrifts) Frankfort Michael H. Mercer (Represents Group 2) CEO President & CEO Kentucky Federal Savings & Loan Association Glenn Meyers (Represents Thrifts) First Security Bank of Kentucky Covington CEO Central City Savings & Loan Association Kentucky Federal BANK SIZE REPRESENTATIVES Covington Frank B. Wilson (Represents Group 3) President & CEO Mr. William Alverson BANK SIZE REPRESENTATIVES Wilson & Muir Bank & Trust Company Bardstown
Mr. William Alverson
Thomas J. Smith, III (Represents Group 4) CEO President American BankInc. & Trust Company, Inc. Traditional Bank, Bowling Green Lexington JamesGriffin W. Beach (Represents Group 5) Elizabeth McCoy Chairman, President & CEOat Least $200 M; (Represents Banks with Assets Peoples Bank & Trust Company less than $1B) Owenton President & CEO Planters Bank, Inc. G. Anthony Busseni (Represents Group 6) Hopkinsville President & CEO Century Bank of Kentucky, Inc. EDUCATION ALLIANCE REPRESENTATIVE Lawrenceburg Lanie W. Gardner Katherine Reese Capps (Represents (Represents KBA Education Alliance) Group 7) President CEO Executive Vice&President StateBank Financial, Inc. First First National of Muhlenberg County Middlesboro Central City PECStephen COMMITTEE REPRESENTATIVE Miller (Represents Group 8) CEO W. Fred Brashear, Peoples Bank II of Kentucky, Inc. (Represents Participating Employer Committee) Flemingsburg President & CEO Hyden Citizens Bank (Represents Group 9) Greg A. Wilson Hyden President & CEO The First Commonwealth Bank Prestonsburg THRIFT REPRESENTATIVES
less than $ President & Planters B Hopkinsvi
EDUCAT
Lanie W. G (Represen Executive First Natio Central Ci
PEC COM
W. Fred B (Represen President & Hyden Cit Hyden
President Traditional Bank, Inc. Lexington
Elizabeth Griffin McCoy (Represents Banks with Assets at Least $200 M; less than $1B) President & CEO Planters Bank, Inc. Hopkinsville EDUCATION ALLIANCE REPRESENTATIVE Lanie W. Gardner (Represents KBA Education Alliance) Executive Vice President First National Bank of Muhlenberg County Central City PEC COMMITTEE REPRESENTATIVE W. Fred Brashear, II (Represents Participating Employer Committee) President & CEO Hyden Citizens Bank Hyden
November 2013 | 19
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UPCOMING EDUCATION EVENTS & SEMINARS IRA Basics Evening Program Pegasus Program November 7 Elizabethtown November 12 Paducah November 13 Madisonville November 14 Bowling Green November 18 Morehead November 19 Hazard November 20 Somerset November 21 Lexington Bankers Brew for Bank Directors & Management November 15 Lexington November 19 Bowling Green Lending Compliance Update Pegasus Program December 4 Elizabethtown December 5 Paducah December 6 Bowling Green December 9 Lexington December 16 Somerset November 2013 | 20
IRA Administration Pegasus Program December 3 Lexington December 5 Elizabethtown December 9 Hazard December 10 Somerset December 11 Paducah December 12 Bowling Green Training for Loan Assistants and Loan Processors Seminar December 10 Lexington December 11 Bowling Green Credit Administration Seminar: Seven Effective Habits January 29 Bowling Green January 30 Lexington Intro to Consumer Lending & Key Ratio Analysis Seminar / Two-day Program February 27 & 28 Bowling Green March 13 & 14 Lexington
Loan Documentation Workshop / Two-day Program April 1 & 2 Bowling Green April 3 & 4 Lexington Cash Management Seminar April 9 Louisville Trust Based Selling May 7 Bowling Green May 8 Lexington
MAKING NEWS
Treasury’s State Small Credit Initiative (SSBCI): A Tool for Kentucky Bankers by Clifton Kellogg, Director of the State Small Business Credit Initiative (SSBCI)
As the Director of the State Small Business Credit Initiative, and as a former community bank CEO, I understand well the challenges of providing credit to borrowers. While the economic climate is improving, community banks still face challenges extending loans that meet their business goals and are acceptable to the examiners. As a result, many credit-worthy small businesses still continue to face difficulties finding the credit they need to expand and grow. This mismatch between available credit and credit-worthy borrowers is where SSBCI can be most useful. While SSBCI is a US Treasury program, it is administered by the states and the decision on how to use the funds is a state-by-state decision. Kentucky has chosen to use the funds to provide credit enhancements through three separate programs offered by the Kentucky Cabinet for Economic Development: 1. Kentucky Capital Access Program (KYCAP) 2. Kentucky Loan Participation Program (KYLPP) 3. Kentucky Collateral Support Program (KYCSP) Of the funds allocated to Kentucky, 85 percent are still available for use by small business lenders. This is an opportunity for your bank to build profitable, as well as safe and sound customer relationships. From a regulatory standpoint, both the FDIC and the OCC have written favorably about SSBCI program on their websites. Bankers say that SSBCI programs complement Small Business Administration (SBA) programs in several ways: For instance, loans that need credit enhancement but do not justify the cost of securing a SBA guarantee are a good fit for SSBCI programs. SSBCI programs may be used to cover loans to non-profits or for revolving lines of credit. SSBCI programs can also be used for bridge financing during the construction phase until takeout by the SBA 504 debenture. Bankers who have used the program are also impressed by its simplicity of use and minimal paperwork burden. Why should you be interested? SSBCI can help your bank meet small business customer needs in a safe and sound manner. That means profitable banking business, and expanding access to capital for your customers. We invite you to learn more about the SSBCI programs offered by the State of Kentucky by visiting http://www.thinkkentucky.com/smallbizlending/ or contacting Don Goodin at Don.Goodin@ky.gov.
November 2013 | 21
Brownfields In Kentucky: A New and Innovative Approach (Part 2) By: Adam T. Goebel and Lea Pauley Goff
The process to avail oneself of the liability protec-
tion afforded by Kentucky’s new Brownfield statute is straightforward. At the present time, the Cabinet is applying its interim guidance to transactions under the new statute. The public comment period for the proposed regulations is open until October 31, 2013, and the regulations should become final by early next year. For issues not specifically addressed by the Cabinet’s interim guidance or the regulations, it is anticipated that the Cabinet will follow EPA guidance developed for the BFPP defense.
description of engineering controls or institutional controls, a plan for construction management, if applicable, and a description of the methods employed to ensure that the property use will not interfere with any remediation or expose the public or the environment to an unacceptable risk of harm.
The anticipated value of the PMP is the ability to define in writing acceptable practices at the site. A common example for a lender would be a site where, if the lender takes title, it will need to take some actions to ensure that the property is in an acceptable and safe In general, if the subject property is a Brownfield condition for marketing. The lender needs to be able and the potential purchaser wants to take advantage to identify in the PMP the actions it will take. So long of Kentucky’s Brownfield program, it will complete a as the lender follows the PMP it will retain its liabilBrownfield Liability Relief Eligibility Form. Under the ity protection, even if contamination is inadvertently proposed regulations, a Brownfield is defined as prop- mobilized despite precautions taken.. A PMP can also erty where a release of hazardous substances or petro- be an effective tool if any demolition needs to occur leum occurred before acquisition, or there is a “poten- because the party can define the manner in which it tial or perceived” presence of such a release. Both the will conduct those activities. Moreover, if the site is applicant and a professional engineer or a professional one where the only ongoing obligations are periodic geologist must sign the application form. The applicant monitoring, the PMP should be relatively simple in must certify that it satisfies the eligibility requirements that access would need to be provided to conduct the set forth in KRS 224.1-415. It is important to note that monitoring or any other act that is part of the remedy. the existence of a promissory note and a mortgage be- Therefore, the existence of contamination should not tween a lender and a responsible owner is not deemed pose a significant obstacle to taking title. to be a contractual affiliation that would disqualify the lender under KRS 224.1-415(6). Once the application is submitted, the Cabinet, under the proposed regulations, shall issue in writing within With respect to the certification by the professional 30 days either a Notice of Eligibility, a determination engineer or geologist, he or she must certify that, af- that the application is incomplete or a final determinater conducting “all appropriate inquiry” (e.g. a proper tion that the application does not meet the requirePhase I), (1) all known releases predate acquisition, (2) ments of KRS 224.1-415. Under the proposed regulaall appropriate inquiry was performed in accordance tions, the Notice of Eligibility will be effective for 180 with industry standards, and (3) the intended future days, which may be extended for an additional period use of the property will not interfere with characteriza- of time. After receiving a Notice of Eligibility, the aption and remediation. The applicant must include with plicant, upon obtaining legal title to the property, shall the application a copy of the Phase I and the Property submit a deed evidencing its ownership within 60 days Management Plan (PMP) for the site of acquisition. The Cabinet then issues a Notice of Concurrence, which states in writing that the property The Cabinet has provided guidance on the contents of owner is not liable for responding to contamination at the PMP. The proposed regulations also address the the site. contents of the PMP. In general, the PMP must provide a reasonable description of the planned future use of Two additional points are noteworthy. First, if the the property, a description of any remedy in place, a property owner discovers contamination that was November 2013 | 22
previously unidentified, it must provide notice to the Cabinet identifying the discovery and stating that the certification in its previous application is also applicable to the newly discovered contamination. By giving this notice, the property owner will not be liable for responding to newly discovered contamination. Second, the Cabinet shall revoke its Notice of Concurrence if the applicant provides a false application. In addition, the Cabinet may, in its discretion, revoke a Notice of Concurrence if the applicant does not follow the PMP. Providing a false application and failing to follow a PMP are the only two acts that allow the Cabinet to revoke a Notice of Concurrence. A Lender’s New Choices In Underwriting, Loan Administration And Enforcement of Mortgages The process under Kentucky’s new Brownfield program offers new possibilities for transactions involving contaminated property. Concerning new transactions, lenders will want to know, during underwriting, whether a borrower has obtained a Notice of Eligibility from the Cabinet with respect to the reviewed transaction. This fact will impact any analysis of the liabilities faced by a borrower. In addition, lenders will want to understand the contents of the PMP to determine whether, and how, the obligations in the PMP affect underwriting. In transactions where the borrower who obtained a Notice of Concurrence defaults, or even where the borrower is liable for the contamination because the transaction is an existing loan or the borrower could not obtain a Notice of Concurrence, a lender has the new, and perhaps more attractive options, of foreclosure or taking a deed in lieu of foreclosure under the new brownfield statute. The lender can assess the condition of the property and decide whether taking possession under the statute with a PMP is in its interests. A lender can achieve a level of certainty concerning its non-liability through the Notice of Concurrence and the PMP. Moreover, the lender will be able to market the property to prospective purchasers and, assuming they meet the eligibility requirements, the prospective purchasers will be able to receive a Notice of Concurrence. Prospective purchasers will have an
understanding of their potential obligations at the site by way of the lender’s already approved PMP. These facts may enhance the ability to sell contaminated property. If a lender is contemplating taking title, the lender should have a Phase I performed, as the existence of a Phase I is fundamental to obtaining liability protection under the statute. A lender must assess the appropriateness of the timing for a Phase I because the Phase I may not be more than 180 days old at the time of the application. Similarly, a lender must assess the right time during the work out phase of the loan to submit an application to the Cabinet because any Notice of Eligibility issued by the Cabinet is only effective for 180 days. Other than potential time constraints created by the proposed regulations, the main consideration will be whether taking title and implementing a PMP is the route that will preserve the lender’s collateral and maximize a return. One may envision a number of scenarios where the ability to receive assurances from the Cabinet concerning the lender’s non-liability; coupled with the ability to define one’s obligations at the site, will result in foreclosure or a deed in lieu being a more attractive option. Time will tell whether the procedures established by the Cabinet will result in an increase in the redevelopment of previously contaminated property. However, the Cabinet has definitely established an innovative approach that should provide more certainty to prospective owners than has previously existed. The Cabinet, namely Tony Hatton, the Director of the Division of Waste Management and, Shawn Cecil, who has spearheaded the new program, should be commended for devising an innovative approach that attempts to serve the needs of owners and lenders in developing Brownfields while, at the same time, complying with the Cabinet’s charge to protect human health and the environment. In any transaction involving property with environmental issues, a lender must be well aware of requirements of KRS 224.1-415 and have an understanding of how to utilize the new statute in connection with the transaction. November 2013 | 23
MAKING NEWS
Central Bank Named a 2013 Best Banks to Work For Central Bank has been named one of the Best Banks to Work For. The program, which was initiated in 2013 to identify, recognize, and honor the best banks to work for in the nation, is a project of American Banker and Best Companies Group. To be considered for participation, banks had to fulfill the following eligibility requirements: - Have at least 50 employees working in the US; - Be a Commercial Bank, Thrift, Mutual Association, Mutual Savings Bank, Savings and Loan Association, or a Savings Bank. In all, 35 banks achieved “Best Bank” status in this inaugural program. The full Best Banks to Work For list is featured in the November issue of American Banker Magazine and is available online at AmericanBanker. com.
Determining the Best Banks to Work For involved a two-step process. The first step consisted of evaluating each participating bank’s workplace policies, practices, and demographics. This part of the process was worth approximately 25% of the total evaluation. The second part consisted of employee surveys aimed at assessing the experiences and attitudes of individual employees with respect to their workplace. This part of the process was worth approximately 75% of the total evaluation. The combined scores determined the top banks and the final ranking. Best Companies Group managed the overall registration and survey process and also analyzed the data and used their expertise to determine the final rankings. For more information on the Best Banks to Work For program, visit www.BestBankstoWorkFor.com or contact Jackie Miller at 877-455-2159.
Industry Experience, Personalized Service The Alexander Thompson Arnold CPAs team understands the strategic, operational and regulatory issues your financial institution faces. If you need an independent auditor to make relevant recommendations for your unique situation, the ATA team wants to serve you. Services we offer: - Financial Statement Audits - Internal Audit Co-sourcing & Outsourcing - Compliance Reviews - Loan & Deposit - Tax Preparation & Planning - Business Valuations - Employee Benefit Plan Audit & Administration - Assistance with Mergers & Acquisitions - IT Audits & Much More
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ATA Financial Institutions Leadership Team: Steve Carmichael, CPA Kevin Howell, CPA Mark Downing, CPA Jack Matthis, CPA, CBA Judy Rainey, CPA Hope Cooper Murray, Kentucky 270.753.2424 Milan, Tennessee 731.686.8371 Dyersburg, Tennessee 731.285.7900
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November 2013 | 25
ON THE MOVE
Jeremy Gray has joined United Bank in Versailles as Assistant Vice President, Commercial Lender.
Central Bank Chairman, President and CEO, Luther Deaton, Jr., has announced the promotion of Lesley Keller to Marketing Officer Manager.
Additional On the Move Announcements (Not Pictured) First Financial Service Corporation (NASDAQ: FFKY) today announced an addition to the senior leadership of the Company and its subsidiary, First Federal Savings Bank of Elizabethtown. Rob Whartenby has joined the Company and the Bank and will become the Bank’s Executive Vice President and Chief Credit Officer when the appointment is approved by the Federal Deposit Insurance Corporation. Mr. Whartenby joins the Company with 30 years of experience in the financial services industry. Mr. Whartenby held several leadership roles with First Tennessee Bank N.A., most recently developing and managing the Syndicated Credit department. Mr. Whartenby holds a bachelor’s degree in Economics from Rhodes College in Memphis, an MBA from Boston University, and has a Six Sigma Green Belt Certification.
November 2013 | 26
Corey Beyerle of First Capital Bank of Kentucky was promoted to Assistant Vice President / Cash Management Officer.
Citizens Union Bank is pleased to announce that Ben Wathen has been promoted to Sr. Vice President/ Retail Banking. His office will be located at CUB’s Main Office in Shelbyville.
General Banking School Graduates Congrats to the 2013 GBS Graduates who received the following Graduate School Scholarships: Graduate School of Banking at the University of Madison-Wisconsin David Kunze Whitaker Bank Corporation Kathy Jones Community Financial Services Bank Graduate School of Banking at Louisiana State University Jason McFarland First & Farmers National Bank Graduate School of Banking at Colorado Cindy Burton Bank of Lexington
Do you have someone that is
ON THE MOVE?
_______________ Submit any promotions, new hires or recognitions for possible submission to KENTUCKY BANKER
TO: LANE HETTICH lhettich@kybanks.com
KENTUCKY BANKER...
promoting your bank and your community!
ON THE MOVE KBPAC - Jeans Day at Citizens National Bank, Paintsville
Citizens National Bank Staff Support KBPAC and UK
CNB choose a day in October for a KPBAC Jean Day since the KBA was established October 21, 1891. Staff could donate $5 to KBPAC to wear jeans with UK attire October 25, 2013. Staff donated $260.00 and shared their pictures from Ashland, Grayson, Paintsville, Pikeville, and Russell.
Ashland’s (from left) Crystal Campbell, Sharon Blum, Carlie Fyffe, Olanda Thomas, Kristy Turner, Annette Meade
Paintsville’s Tanner Stambaugh, Vicky Fannin, Melissa Castle
Grayson’s Mitzie Heaberlin, Beth Waugh, Kim Day
Paintsville’s Caroleene Gambill, Joyce Lemaster, Ladonna Goble, Annie Jones, Tina Powers
Citizens National Bank has now exceeded their $2,150 goal for the 2013 KPBAC Campaign!
Russell’s Barbara Smith, Samantha Smith, Pam Howard
Pikeville’s Latisha Cash, Pam Sammons, Jessica Jude
Paintsville’s Josh Barker, Judy Frazier