Wednesday, July 17, 2002
Peoples says no '02 profit
Shareholders told it 'will be nonexistent'
By James McNair, email@example.com
By Patrick Crowley, firstname.lastname@example.org
The Cincinnati Enquirer
CRESTVIEW HILLS Peoples Bank of Northern Kentucky expects to make no money in 2002 because of loan writeoffs, legal expenses and the need to maintain its financial underpinnings in the wake of the Erpenbeck fiasco, bank president Merwin Grayson said after a special meeting of Peoples shareholders Tuesday night.
It (profit) will be nonexistent because we are taking all of our earnings and putting it toward our capital, paying the cost of litigation and maintaining a high degree of liquidity in the bank, Mr. Grayson said.
The eight-branch bank, which has more than $200 million in assets, is under review by the Federal Deposit Insurance Corp. and is part of an FBI bank-fraud investigation of the Erpenbeck Co., a home builder based in Edgewood. The FBI is looking into the misappropriation of millions of dollars in bank loans and home-purchase proceeds by Erpenbeck employees over the past 2 years.
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Mr. Grayson said the bank wrote off all identifiable losses in its Erpenbeck portfolio in June, an amount he put at $5 million. Peoples Bank had lent about $8 million to the Erpenbeck Co. and to members of the Erpenbeck family.
During the nearly two-hour meeting, attended by about 70 of the bank's 220 shareholders, questions were raised about the bank's ability to weather the crisis. Mr. Grayson reiterated that Peoples has the wherewithal to survive, provided that other banks and title companies involved in home closings contribute to help make up the $17 million allegedly diverted by Erpenbeck employees into the home builder's accounts at Peoples.
We've said we have responsibility, and we will pay our share, Mr. Grayson said. But other parties have to pay as well.
More than 200 Erpenbeck home buyers have filed a class-action lawsuit against Peoples, and the home buyers' lawyer, Stan Chesley, wants Boone County Circuit Judge Jay Bamberger to order a quick judgment. Peoples in turn named 14 banks and 23 title companies as third-party defendants that should help compensate the consumers.
Peoples has been the subject of takeover rumors, and its recent difficulties prompted a $25 million run by depositors, most of which has been replaced by fresh deposits. Mr. Grayson said the bank is not in any merger talks.
We've had inquiries, and I would imagine that we would continue to have inquiries
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