Alexander Coolidge

acoolidge@enquirer.com

BB&T Corp. Monday said it agreed to buy the Bank of Kentucky for $363 million in cash and stock.

The deal would give Winston-Salem, North Carolina-based BB&T its entrance to the Cincinnati market, pending shareholder and regulatory approval. BB&T is the nation's 17th largest bank holding company with assets of $184.7 billion, according to Federal Deposit Insurance Corp. data.

BB&T CEO Kelly King said Greater Cincinnati is an attractive growing market with a diverse $100 billion economy that is contiguous with his company's footprint. He said the bank will pursue large, medium and small commercial customers here.

"Cincinnati's got all that – it is very, very attractive to us," King told The Enquirer in an interview. He added none of Bank of Kentucky's 346 jobs will be cut as a result of the acquisition.

BB&T's deep pockets transforms Bank of Kentucky from a bank operation that could make a maximum loan of about $20 million to one that can easily lend a large business $200 million to $300 million.

King acknowledged the move will step up competition with Cincinnati-based rival Fifth Third.

"(Fifth Third CEO) Kevin Kabat is a good friend and a good banker - I have a lot of respect for him - but we intend to be the best bank in the region and yes, we will be going aggressively after opportunities there. We believe in friendly competition."

King is scooping up branches from competitors and seeking whole-bank acquisitions as he pushes his company into new regions including Texas, even as other regional banks hesitate to join the flurry amid stricter regulations.

Kabat told an investor conference in New York Monday that he plans to focus on growing his business instead of acquiring new ones. "My appetite hasn't changed from what I've talked about in the last couple of years," he said. K"I'm not particularly optimistic that 2015 is the year that happens."

Bank of Kentucky CEO Bob Zapp said his bank has been exploring a sale since spring when it decided it couldn't grow fast enough organically or make appealing acquisitions itself. Zapp said he wanted to grow the bank with $1.9 billion in assets into an institution with $3 billion in assets in the next few years.

"We couldn't hit our numbers that we wanted to hit," said Zapp, who headed Fifth Third's operations in Kenton County before he helped found Bank of Kentucky in 1990 to restore an independent, local bank to Northern Kentucky.

Zapp declined to name local banks he approached about potentially acquiring the company.

The Bank of Kentucky, based in Crestview Hills, is the largest bank in Northern Kentucky and the seventh largest in the Cincinnati region with $1.6 in deposits and 32 branches. Thirty-one of the branches are in Boone, Campbell, Gallatin, Grant, Kenton and Pendleton counties; the bank has a lone branch in Ohio, on Fourth Street in Downtown Cincinnati.

That Ohio branch will be BB&T's first in the state. It already operates in Kentucky and has one branch in Indiana.

King said BB&T could easily look to expand further into Ohio and the Midwest. The Bank of Kentucky deal comes the week after BB&T announced it was buying 41 branches in Texas from Citibank.

"This is an opening, a gateway into the Midwest," King said.

BB&T said it expects the deal will add to earnings per share in the first year after it's completed.

The stock and cash deal represents a 26.6 premium over the Bank of Kentucky's 14-day average share price of $37.13. To recoup that, BB&T will aggressively court new commercial clients.

BB&T officials said that Cincinnati was a "new and attractive contiguous market," adding that the deal would make BB&T the second largest bank in Kentucky. The company has 1,844 branches in 12 states and the District of Columbia.

Shares in the Bank of Kentucky's parent, the Bank of Kentucky Financial Corp., stood at $46.56 in morning trading.

Under the agreement, Bank of Kentucky Financial shareholders will receive 1.0126 shares of BB&T common stock and $9.40 cash for each share they hold.

The acquisition would be BB&T's biggest since it bought insurance businesses from the Crump Group for $570 million in 2012, according to Standard & Poor's Capital IQ.

BB&T said in a news release it plans to create a new banking region that includes Northern Kentucky and Cincinnati.

Andrew Hawking, currently the bank's chief lending officer, would be named the region's president. Mark Exterkamp, currently the bank's executive vice president of retail banking, would become retail and small business banking manager.

Zapp, 62, would become the chairman of BB&T's local advisory board.

Bloomberg News contributed.