Insider Louisville has written a lot about Lexington-based American Founders Bank since 2010 because – let’s face it – AFB has been the Keith Richard of banks, somehow still alive after surviving years of wretched excess.
AFB has been under federal sanctions longer than any other bank in the state. Though finally, the bank is showing tangible signs of improvement and direction after five very bad years.
We got a news release today that AFB is refocusing on business customers in Lexington and Louisville, and leaving a secondary market and dumping a branch.
From the release:
To center most of its resources on the core markets of Lexington and Louisville, AFB is selling its Shelbyville branch to MainSource Bank. This transaction is expected to close by the end of the year. The Bank also plans to close its Southland financial center at 2100 Southview Drive in Lexington by the end of the month.
(Editor’s note: American Founders has a large Louisville branch and offices at 1200 Forest Bridge Road, just off North Hurstbourne Parkway.)
AFB also is now offering a new courier service for its commercial customers that shuttles deposits and financial paperwork between the bank and business clients.
AFB has unveiled a new website, upgraded its online banking services, added new mobile banking applications for iPhone and Android users, as well as personal finance budgeting software online. The bank also offers transfers and payments to accounts owned by other people, or held at other financial institutions online or via text message.
Finally, AFB has contracted Freedom Realty Exchange to sell its OREO (properties that were collateral from bad loans) through an online auction. The auction, which ends Thursday, has both residential and commercial properties. (For more information or to see the properties, go to www.fre.com/138G8.)
Which sounds like someone has a bead on where this institution is going.
Still, this is one of those atypical posts where you have to know the back story before the news makes sense.
To recap, the Federal Deposit Insurance Corp., one of the federal regulatory entities that oversees banks, first sanctioned AFB back in 2007, forcing out most of its management over sordid charges you can read about here.
The FDIC hit the bank again in 2010 with new sanctions requiring the bank to increase Tier 1 capital, cut off credit to lenders already in arrears and to submit plans to improve management and to return to profitability.
Then, John Taylor, the CEO brought in 2007 to clean up the AFB mess, bolted this summer to be president and CEO at PBI Bank, which is an even bigger mess. Barry Brauch became American Founders CEO in July.
So, how is the new management doing?
Better, according to our friends at BankTracker, an investigative journalism partnership between MSNBC and American University’s School of Journalism. The BankTracker site gives you an instant snapshot of bank health via its own proprietary formula for measuring “troubled asset ratio,” the ratio of assets and cash on hand over losses and troubled assets, or the loans people have stopped paying.
As you can see by the handy BankTracker chart at right, AFB’s troubled asset ratio had dropped to about 54 as opposed to a peak of 80 in June, 2011 at the height of its troubles.
True, it declared a loss of $4 million for the second quarter of 2012 as opposed to a tiny profit for the same period one year ago. BUT, AFB also cut its troubled assets almost half – down to about $12 million as of June 30 as opposed to $22.5 million as of June 30, 2011. Also, OREO is down by half, and the bank has no loans 90-days over due, all signs of a significant write down. But this is a guess since privately held banks don’t have to reveal write-downs or recapitalizations.
The news release does at least acknowledge issues, unlike most troubled banks:
“The last few years have been challenging for American Founders Bank, along with many other banks in Kentucky and across the nation,” Brauch said. “While 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. We anticipate that we will end 2012 on a positive note and enter 2013 with more innovative products and services for our customers.”
About American Founders Bank: Founded in 2001, American Founders Bank Inc. (AFB) provides banking products and services for individuals and businesses across Kentucky, with four locations in Lexington, two in Louisville and one in Shelbyville. AFB’s products include consumer checking products, commercial checking products, savings accounts, certificates of deposit, individual retirement accounts, credit cards and loan products.
