The past five years have not been easy for community banks. Yet, at a time when many are struggling with tighter profit margins and heightened regulatory requirements, Indiana-based Your Community Bank has smoothly expanded its operation into the Lexington market.
In April 2013, Lexington-based First Federal Bank became the first FDIC-insured Kentucky bank to close since September 2009. Your Community Bank entered into an agreement with the FDIC to take control of three of First Federal’s branch locations, assuming all of the failed bank’s deposits and purchasing almost all of its assets. The deal expanded the bank’s presence in Kentucky, where Your Community also operates locations in Louisville and Bardstown.
Under the leadership of Lexington native Jeff Koonce, a 27-year veteran of community banking who was named president of the bank’s central Kentucky market in August, Your Community is moving beyond the initial acquisition phase of its entry into the market. Koonce now has turned his attention to fortifying Your Community’s position in Lexington by recruiting top-notch talent to capitalize on high-value market segments, he said. He is also encouraging his staff to get out of the office and do what he feels community banks do best — take an active role in the community and develop face-to-face relationships with customers.
“We work really hard at hiring very customer-centric, talented bankers, and then let them go and build relationships, because that’s what good community banking is all about,” Koonce said.
One key area of opportunity for Your Community in the central Kentucky market is commercial lending, Koonce said, and the company recently hired Bret Angelucci as vice president and senior commercial lender to help the bank expand its reach in that arena.
“We’ve really found a niche in our market in terms of opportunities in the small business arena,” Koonce said. “I think we are an excellent commercial lender in this market, and we have a strong staff that can back that up.”
Koonce also intends to build a solid, localized mortgage lending team, he said, building on the former strength of First Federal in that market segment.
The move into Lexington has exceeded expectations, said James Rickard, president and chief executive officer of Community Bank Shares of Indiana, the holding company for Your Community Bank, based in New Albany, Ind.
“This would have been a natural transition for us as we expand in Kentucky,” said Rickard, himself a University of Kentucky alum. “Lexington is a competitive market, but when we looked at this, we thought that there was tremendous opportunity for growth.”
And while the economic slowdown has been difficult for many community banks, Rickard said Community Bank Shares of Indiana took some conservative steps in 2008 and 2009 to solidify its financial position. As a result, the company has enjoyed 14 consecutive quarters of above-average earnings, and American Banker magazine recently ranked Community Bank Shares of Indiana among the nation’s top 200 community banks, based on its three-year average return on equity.
“We are entering from a position of strength,” Rickard said. “We are in a position where we are always looking for opportunities to expand, ... if it fits with our culture and can be accretive to our shareholders.”
According to a regulatory filing update on the First Federal acquisition submitted to the SEC in August, the company estimated its acquisition and integration costs at between $300,000 and $350,000. As a result of the transaction, Your Community Bank acquired approximately $93.6 million in total assets in fair value, including loans with a reported fair value of $63.6 million. The bank assumed slightly more than $87 million in deposits, which represented an increase of roughly 14 percent to the company’s total deposits of $622.5 million as of March, along with $4.4 million in Federal Home Loan Bank advances. Community Bank Shares recorded a bargain purchase gain of $1.9 million in the second quarter as a result of the transaction.
During the transition, Your Community Bank also maintained First Federal’s Georgetown branch and its Lane Allen Road location in Lexington to help former First Federal customers through the turnover, but those locations ultimately were closed down by the FDIC. Rickart said that the bank did let go some operational staff where redundancies occurred, but it has maintained its branch office staff, and Koonce said the bank is looking to expand its workforce as more opportunities arise.
Your Community Bank has 20 locations across Indiana and Kentucky, including its three locations in Lexington. As of June 30, Your Community Bank’s deposits in the Lexington area were listed at just shy of $48.6 million, according to the FDIC’s website, and its market share in the Lexington-Fayette MSA was .57 percent.