Its first big acquisition finished, Bank of Kentucky is gearing up for more growth with an aim to become northern Kentucky's largest bank by the end of 2005.
Buying the troubled Peoples Bank of Northern Kentucky vaulted $780 million-asset Bank of Kentucky over U.S. Bancorp of Minneapolis to No. 2 in deposits in the Kentucky suburbs of Cincinnati, with a 14% share. Cincinnati's Fifth Third Bancorp remains No. 1, with 23% of the deposits, according to the Federal Deposit Insurance Corp.
Bank of Kentucky completed its purchase of Peoples and the majority of its $207 million of assets Nov. 22 - passing on bad loans associated with fraud - and moved from Florence to Peoples' headquarters in nearby Crestview Hills three days later. The eight Peoples branches it acquired gave it 25, all in the Cincinnati suburbs.
Chief executive officer Robert Zapp, who started Bank of Kentucky in 1990 after a few years at Fifth Third, wants to augment organic growth with more acquisitions.
He has his sights on banks with $100 million to $300 million of assets both in northern Kentucky and extending south to Lexington and Louisville. They make up what is called the Golden Triangle, which is Kentucky's fastest-growing area and has its highest median income, according to Eric Thompson, the associate director of business and economic research for the University of Kentucky in Lexington.
Said Mr. Zapp: "There are a number of community banks around the state, and many have not developed an exit strategy for shareholders. And our stock is trading at a real nice price, so we think we have a number of prospects in our area."
The stock price of the parent company, Bank of Kentucky Financial Corp., has risen 34%, to $26, over the past 12 months; it is thinly traded on the Nasdaq bulletin board.
Its strong stock has made Bank of Kentucky the "acquirer of choice" for many banks with assets of $50 million to $200 million, said Lee Burrows, managing director with Trident Securities in Atlanta, a division McDonald Investments Inc.
"What really gives them a leg up is Bob Zapp proactively building relationships with banks in markets that he views as attractive, and this disciplined approach seems to be working," Mr. Burrows said.
The Peoples deal serves as evidence. Bank of Kentucky initially bought $10 million of assets from the struggling bank, and when its problems continued to mount Bank of Kentucky proposed a full asset sale.
Mr. Zapp, who was with Fifth Third when it bought Boone State Bank in 1987, said his former employer is formidable but not untouchable.
Bank of Kentucky cannot rely on acquisitions alone if it is to move ahead of Fifth Third - it also has to grow internally, Mr. Zapp said. With that in mind, it has employees visiting businesses and following up on references to pick up customers from larger banks and draw in new small and midsize businesses.
"It's hard work, but we are being aggressive and knocking on a lot of doors," Mr. Zapp said.
