The Fort Mitchell bank trying to seize A. William “Bill” Erpenbeck's mansion over a $400,000 loan default is in the market for a new president.

        Richard M. Thomas, president and CEO of First National Bank of Northern Kentucky, said Monday that he has agreed to step down as soon as a successor is found. He said his reasons were personal and unrelated to the rash of bad loans reported in the bank's second-quarter financial statement filed last week with the government.

        “I told the board about two weeks ago that I intend to change careers, retiring or experiencing symptoms of burnout, whatever you call it,” Mr. Thomas, 46, said. “I'm looking at several opportunities, but none of them have anything to do with banking.”

        Two members of First National's board of directors, however, told the Enquirer that bad loans factored into the discussion about Mr. Thomas.

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INVESTIGATION

If you have any additional information on the business dealings of the Erpenbeck Co. or Peoples Bank of Northern Kentucky - or on the involvement of any parties not yet identified in our coverage - please email Enquirer business reporter James McNair at jmcnair@enquirer.com or Kentucky Enquirer reporter Patrick Crowley at pcrowley@enquirer.com.

        “There was some concern about that,” said Joel Newman, chairman of First National and owner of LN Concrete Material Corp. in Erlanger. Mr. Thomas “made the decision to leave, and the board concurred with him.”

        A Louisville company, Financial Management Consulting Group, is conducting the search for Mr. Thomas' replacement. Managing partner Tim Finn said he was retained several months ago to help the bank with planning and strategic issues, including the matter of bad loans.

        “The board of directors was interested in developing a very sound strategy to take this company to new heights, and that strategy also involves addressing some present issues,” Mr. Finn said. “To get to new heights, the bank needs to address its asset quality issues.”

        In its latest filing with the Federal Deposit Insurance Corp., for the three months ended June 30, the 10-year-old First National Bank of Northern Kentucky reported a 110 percent increase in net income and a 7.1 percent increase in total assets - to $148.9 million - from the preceding quarter. It also maintained the requirements for the FDIC's highest rating for capitalization.

        At the same time, though, the bank's loan problems grew during the second quarter. Its portfolio of nonperforming loans - those not generating interest - and loans more than 30 days overdue grew materially, pushing its ratio of noncurrent loans to 3.5 percent, up from 2.98 percent. By comparison, only 0.64 percent of The Bank of Kentucky's loans were noncurrent as of June 30. At Citizens Bank of Northern Kentucky, the figure was 1.59 percent.

        Unlike Peoples Bank of Northern Kentucky, whose financial exposure to the Erpenbeck Co. could make it extinct by year-end, First National Bank of Northern Kentucky did not make extensive loans to the home builder or its owners. But, like most banks in Greater Cincinnati, it did count Erpenbecks among its clients.

        Bill Erpenbeck, president of the Erpenbeck Co. until late March, financed his Crestview Hills mansion with a $450,000 mortgage from First National in 1994. As his company did with suppliers, customers and creditors, Mr. Erpenbeck defaulted on the note. When the bank filed for foreclosure in April, it said he owed $398,655 in principal and accrued interest.

        The case has since been complicated by a federal claim on the house. The FBI alleges that the property was paid for in part with proceeds of bank fraud.

        First National also made a $380,000 loan to a Pigeon Forge, Tenn., tourist attraction owned in part by Mr. Erpenbeck's father, Tony Erpenbeck. The simulated precious-gem-panning operation employs Ben Schmidt, a partner in the defunct Ben-Mar Investments scam of the mid-1990s. He testified in a Bankruptcy Court deposition that Tony Erpenbeck owned one-third of Pigeon Forge Mining Co.

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