American Founders Bancorp in Lexington, Ky., is looking at ways to shrink its balance sheet to help strengthen its capital position.

The $380 million-asset company announced Monday that it plans to close one of its Lexington branches by the end of October, leaving it with three branches in its hometown. The company agreed in August to sell its branch in Shelbyville, Ky., to MainSource Financial (MSFG) in Greensburg, Ind., in a deal that should close by the end of the year. MainSource will also obtain $37 million in loans and $37 million in deposits.

The refocusing is an initiative led by Barry Brauch, who became the company’s chief executive in July. Brauch, who succeeded John Taylor, joined American Founders in 2007 as its chief financial officer. Taylor was hired as the president at Porter Bancorp (PBIB) in Louisville, Ky.

"We have made steady progress in strengthening our balance sheet, controlling costs and increasing revenues, we believe placing more attention in these key areas will help us improve earnings and capital levels necessary for us to grow," Brauch said in a press release. "We anticipate that we will end 2012 on a positive note and enter 2013 with more innovative products and services for our customers.”

American Founders Bank was adequately capitalized at the end of the second quarter, with a total risk-based capital ratio of 8.03%. Banks with total risk-based capital ratios below 8% are considered undercapitalized.

The company also plans to unload its foreclosed assets, hiring Freedom Realty Exchange to sell the properties through an online auction set to end on Oct. 11. The portfolio includes residential and commercial properties.

The company had $8.6 million of foreclosed assets at June 30. It reported a loss of $4 million for the first half of 2012, compared to net income of $89,000 a year earlier.

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