Monticello Bankshares, the Holding Company for the Monticello Banking Company, Monticello KY has acquired Banco Harlan, the Holding Company for the Bank of Harlan, in Harlan, KY.  Subject to Shareholder and Regulatory approval, the recent announcement would result in a $700 million bank Holding Company with 16 offices located in 8 Kentucky counties in South Central and Eastern Kentucky.

The deal is a combination of cash and stock.  Cash totaling $8,571,171 along with 284,002 shares will be paid for the company.  Certain non-eligible shareholders of Banco Harlan will receive $379.09 per share, mostly for those living out of state.

This appears to be a good fit for both companies.  It is an opportunity for a South Central Kentucky company to move into the mountains of Eastern Kentucky.  While there may be a limited number of loan opportunities in Eastern Kentucky, most of the banks in that area of the state have a low cost of funds.  In this case, the Bank of Harlan has a funding cost of .21% which is less than half Monticello’s funding cost of .55%.  The banks in Kentucky average .45% overall.  In terms of Yield on earning assets, Monticello indicates a yield of 4.23%, around 92 basis points better than Bank of Harlan’s 3.31%, which will provide a better margin.  In comparison, the state average is 4.28%

Some sources indicate that the Bank of Harlan apparently sold for around 90% of book value.  If that’s true, it seems to be a fair price given the economic situation, the market, and the performance of the bank.  Bank of Harlan’s net income for the first 6 months of this year was $218,000 for a ROA of .32% and ROE of 2.89%. 

In my visits with banks, there are many companies that indicate they don’t want to sell but are looking for partnership opportunities.  This transaction seems to be a good partnership opportunity for both institutions.

 If you are interested in partnering with a bank or other financial services company, whether you are buying or selling, feel free to contact me to discuss.  All discussions will be kept confidential, and I will be honest and straight forward with you, as well as help you find what you seek if it is available. Additionally, we offer other banking services, information of which is available on our web site www.MilyncoFinancial.com (see Bank statistics below).

Combined Transaction

$Millions

 *FDIC 1^st 6 months

**Headquarters

Information Sources:  FDIC 6/30/16, WYMT.com, Harlan Daily Enterprise