The company that founded the nation's first Internet-only bank is being bought by a larger Kentucky bank.

Lexington-based Cardinal Bancshares has agreed to be acquired by Area Bancshares, Owensboro, for about $109 million in stock. That's about 1.88 times Cardinal's March 31 book value.

Cardinal founded Security First Network Bank as an Internet operation in October 1995 but spun it off last May and retained no ownership. Area Bancshares was one of five bank holding companies to invest in First Network then.

The merger would give $1.1 billion-asset Area a statewide franchise. It already operates subsidiaries in Owensboro, Hopkinsville, Bowling Green, Russellville, Glasgow, and Calhoun, as well as a consumer loan company. Cardinal, with $631 million of assets, has subsidiaries in Lexington, Louisville, Somerset, Springfield, and Harlan.

"This transaction substantially expands the merged companies' presence in Kentucky, allowing each of our banks to be a larger, stronger player in the communities they serve," said Thomas R. Brumley, president and chief executive officer of Area.

Cardinal's subsidiaries would retain their separate identities under Area. The transaction, subject to shareholder and regulatory approval, is expected to close in the fourth quarter.

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