Q: What should be the focus of community banks?
A: This is an easy question. The focus of a community bank should be serving its community, making loans to people and businesses in its community and, especially during this period, helping to ensure that its customers survive. 

Q: What are the best opportunities for growth in community banks?  Biggest hurdle?
A: I am not worried about growth. My focus for my bank is safety, soundness and taking good care of my customers. The biggest hurdle is applicants qualifying for loans. We are doing a lot of cash flow lending; cash flow is really important right now. In this economy, it can be very difficult to have customers qualify.

Q: As a whole, what do you think community banks are doing right? 
A: Community banks do a great job of taking care of their local community, being involved in the community and being responsive to its needs. 

Q: Where do you see the community banking industry in ten years?
A: I fear that the increased regulation and other forces may make community banks a rarity in ten years. These added regulations are making it expensive to do business. 

Q: What is the thing you look forward to every morning when you wake up? 
A: I love my job. I love the people. I love helping out people with loans, getting good deals done and seeing our customers succeed. 

Q: How has the economic downturn affected your lending?
A: We are refocusing our loan and diversifying our portfolio. We used to almost behave as an old style savings and loan. We are now moving to smaller commercial loans, doing some automobile loans and will do construction loans for our customers that are building their own homes. We are staying away from shopping centers and gas stations. Also, we are not really doing A&D loans. I am not sure where the diversification will take us ultimately, but this is a good exercise for us.

About Kilby and the Bank of Fincastle
John F. Kilby has served as the President of the Bank of Fincastle since 1987. The Bank of Fincastle was chartered in 1875 in Fincastle, Virginia. Today, it operates five branches in Botetourt and Bedford counties in Virginia and has approximately $ 177 million under assets. More information can be found by visiting the Bank of Fincastle's website.

The Secure and Fair Enforcement for Mortgage Licensing Act (the "SAFE" Act), enacted on July 30, 2008, mandates a federal registration system for employees of banks, credit unions and their subsidiaries who engage in the business of residential mortgage loan origination. Specifically, the Act requires mortgage loan originators to register with the Nationwide Mortgage Licensing System and Registry ("Registry") before engaging in any origination activities involving residential mortgage loans; the registration period is expected to start on January 31, 2011.

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In the wake of recent judicial decisions by the North Carolina Business Court and Eastern District Bankruptcy Court that "muddied the waters" for contractor lien rights, the North Carolina Bar Association Construction Section Lien Law Committee is drafting proposed legislation to reform North Carolina's lien and bond laws contained in General Statutes Chapter 44A. Given the vast changes in the lending, title insurance and construction industries since the last major revision in 1971, the Committee has solicited comments on the draft legislation from interested parties, including those in the financial industry.

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In an effort to recover more than $2.5 billion, the FDIC announced earlier this month that it had authorized lawsuits against more than 100 directors and officers of failed banks. It wasted no time in showing it was serious. On January 14, 2011, the FDIC filed lawsuits against certain directors and officers of failed Integrity Bank, of Alpharetta, Georgia, and 1st Centennial Bank, of Redlands, California. Both complaints read like dark novels describing alleged bank mis-management and the problems and forces (both internal and external) that have faced community banks over the past several years. In the Integrity complaint, the FDIC contends that the lending practices of Integrity were geared to "accommodate excessive growth, lacked appropriate checks and balances and rewarded irresponsible lending."

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