First Corbin Bancorp Inc. was created just last week through the merger of nine small Kentucky banks and immediately ranks among the state’s 10 largest bank holding companies.
The nine banks, which will continue to operate independently, have a combined $820 million of assets, 27 branches, and roughly 1.1% of the state’s deposits, according to Federal Deposit Insurance Corp. data.
More important than size, though, is that their combination lets them share capital so that banks in slower-growing markets can shift capital to those in more robust markets, said Roger Alsip, First Corbin’s chief financial officer.
“It allows us to move capital from one to another without having to go out to individual shareholders,” he said.
The company, which was formed Jan. 1 in Corbin, Ky., will also have better access to secondary and capital markets than the banks had individually, Mr. Alsip and other observers said.
The nine banks are Boone National in Burlington, Campbellsville National, Deposit Bank and Trust Co. in Greensburg, First National of Lexington, Laurel National in London, PRP National in Pleasure Ridge Park, Somerset National, Tri-County National in Corbin, and Williamsburg National.
Kentucky businessman Terry Forcht founded or co-founded eight of the nine banks from 1989 to 2002. He also was the primary shareholder at 117-year-old Deposit Bank and Trust, and Mr. Alsip said that combining the nine banks has simplified Mr. Forcht’s investments.
Though it does not intend to do so, the company could reap significant savings from combining their charters into one. For example, Virginia banker Worth Harris Carter Jr. last week merged 10 banks he owned into a single institution, Carter Bank and Trust in Martinsville, with $2.5 billion of assets. When the merger plan was announced in July, Mr. Carter told American Banker that the combination would save his company $500,000 a year in examination fees alone.
But Mr. Alsip said that combining charters is not in First Corbin’s game plan. Because all the banks are focused on serving small businesses, he said, it is important for them to retain their identities and market themselves as hometown banks.
“That’s our niche,” Mr. Alsip said, though he added that the company is combining certain back-office and administrative functions, including loan reviews.
Corbin has no intention of going public, he said.
Joseph M. Ford, a partner in the Austin law firm DLA Piper US LLP, said that in the days of unit banking it was common for investors to own many banks, as Mr. Forcht did before creating First Corbin.
“In a sense, this arrangement that you are talking about is a throwback to a pattern of ownership that was very popular in the ’60s and ’70s,” Mr. Ford said.
It is easier for banks to raise capital, he noted, if they are part of a holding company. Trust-preferred securities “have been the favored form of financing for community banks in the past couple of years,” he said, and under current regulations, trust-preferreds can be issued only by holding companies.
Mr. Alsip also said that he expects First Corbin to get better deals in the secondary markets because it can package loans from the nine banks into larger pools.
