Tuesday, July 23, 2002
Peoples Bank may go on block
Directors meet to discuss prospect of sale, merger
By Patrick Crowley, email@example.com
The Cincinnati Enquirer
CRESTVIEW HILLS The directors of Peoples Bank of Northern Kentucky, an independent bank facing millions of dollars of liability due to its role in the Erpenbeck scandal, met Monday night to discuss selling or merging the bank.
Board member Mark Arnzen, a Fort Mitchell lawyer whose firm represents the bank, confirmed that a potential merger or sale to another financial institution was on the agenda for the meeting of the 17-member board. The bank's 200 shareholders would have to approve a merger or sale.
The FBI and other federal agencies are investigating the Erpenbeck Co. and Peoples Bank. No charges have been filed, but both the building company and the bank are facing millions of dollars in civil lawsuits over the fiasco, which has left some homeowners with double mortgages.
BANK OF KENTUCKY
Assets: $510 million
Earnings: $7.1 million in 2001
Branches: 17 in Boone, Kenton, Campbell and Grant counties
Stock ticker and exchange: BKYF, over the counter
Outstanding shares of stock: 5,964,465
Share price: $23, with the price rising 11.5 percent in the past year
Prominent board members: Rodney Biz Cain, founder and chairman of Wiseway Plumbing and Electrical Supply, Boone County; Ruth Seligman Doering, president and CEO of Charles Seligman Distributing Co., Crescent Springs; R.C. Durr, president of R.C. Durr Co., Boone County; Wayne Carlisle, chairman of the board, Carlisle Equipment Group, Wilder
Source: Bank of Kentucky 2001 annual report and first quarter 2002 financial statement
There is a lot on the table right now, and we're looking at a lot of different areas, Mr. Arnzen said during a brief interview at Peoples' headquarters here as board members arrived for the meeting.
I can't say anymore right now because nothing has been decided. But we're doing what we've been doing all along, looking at various ideas to make sure we do what's best for the bank.
Mr. Arnzen would not mention any potential suitors. A source close to the situation, however, said The Bank of Kentucky, a bank with assets of $507 million and 17 branchesand based in Burlington, is among the banks interested.
By comparison, Peoples Bank has assets of about $200 million and eight branches.
Robert W. Zapp, Bank of Kentucky president and chief executive officer, could not be reached Monday to comment on whether it was in any merger or acquisition talks.
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But in an interview last week, Mr. Zapp said even if the bank was interested in Peoples, he could not discuss it publicly. Mr. Zapp did confirm that The Bank of Kentucky made an overture to Peoples shortly after news of the Erpenbeck scandal broke in late April.
I told them to let me know if they were looking for partners, we would be interested in talking to them, Mr. Zapp said.
The Peoples source also said that the Bank of Kentucky recently purchased $10 million of Peoples' loan portfolio, part of an overall sale of about $20 million in loans that Peoples sold to raise capital and to make up for $25 million in deposits that flowed out of the bank in the weeks following news of the bank's connection to the Erpenbeck scandal.
About $20 million of the $25 million in lost deposits has been recovered through the sale of loans and by selling certificates of deposits on the national market, Peoples president Merwin Grayson has said.
Just last week, following a board meeting with about 70 of the shareholders, Mr. Grayson said the bank was working to remain independent but that offers had come in. He was not more specific at the time and gave no indication that a deal was possible or imminent.
Peoples has admitted liability for at least a portion of $16.7 million in checks that were made out to various banks at property closings involving the sale of homes and condos built by The Erpenbeck Co. of Edgewood.
The checks were diverted into Erpenbeck Co. accounts at Peoples, instead of paying off the construction loans they were intended to satisfy.
Peoples has filed suit in Boone County Circuit Court trying to recoup some of the $16.7 million from other banks and area title companies involved in the Erpenbeck closings. Settlement talks between Peoples, the 14 banks and 23 title companies have been held to resolve responsibility for the $16.7 million in checks, but no deal has been struck.
The FBI and other federal agencies are investigating the Erpenbeck Co. and Peoples Bank.
Bert Ely, a Washington, D.C., banking consultant and former bankruptcy examiner, said Peoples could be a prime takeover target.
Peoples, arguably, is more vulnerable because of its problems, Mr. Ely said. In a sense they are damaged goods, though maybe not that damaged. The big question mark is how much this whole fiasco is going to cost them.
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