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Frank Hilton, left, and his team at Citizens National Bank are joining Russ Marquart at Empire Bank. If regulators approve the deal, it's expected to close in mid-October.
Frank Hilton, left, and his team at Citizens National Bank are joining Russ Marquart at Empire Bank. If regulators approve the deal, it's expected to close in mid-October.

Empire Bank to buy Citizens National

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A decade ago, Citizens National Bank Chairman and CEO Frank Hilton signed off on a marketing campaign that spurred catch phrases such as “Merge? No thanks, not us” and “Still not merging.”

Today, he’s saying the purchase of CNB by Empire Bank is one of the best things that can happen for the bank’s employees and customers.

“Our borrowers will now have access to combined assets of more than $1 billion,” Hilton said.
“This should have nothing but a positive impact for our customers.”

On July 14, Empire and CNB announced the two had entered into a definitive agreement, with
Empire committing to buy CNB for an undisclosed amount. As long as the acquisition is approved by regulators, Empire President and CEO Russ Marquart said the purchase should be final by mid-October.

Until regulatory approval, day-to-day operations will continue as usual for both banks, while bank management continues to put together a merger plan, Marquart said.

Benefits to bank customers on both sides will be noticeable after the deal is complete, he said, pointing out clients will have access to more than 20 branches. According to Federal Deposit Insurance Corp. reports, Empire Bank’s total assets as of March 31 were $852.9 million, and CNB’s total assets were $270.1 million.  

“We’ll be the second-largest bank in the Ozarks based on local deposits, and all of our customers and staff will be able to take advantage of the benefits and economies of scale available in the area,” Marquart said.

At the end of the first quarter, Empire’s total deposits were $733.3 million and CNB’s were $219.3 million, according to the FDIC. The deposit growth to a combined $952.6 million would move Empire into the No. 2 spot past Liberty Bank, whose first-quarter deposits were $772.8 million in the Springfield Metropolitan Statistical Area. Great Southern Bancorp’s is the leader in the MSA, with total first-quarter deposits of $2.8 billion.

Beyond the hefty addition of capital, both bank leaders feel as if their institutions will benefit from similar philosophies. Hilton points to CNB’s slogan, “Banking as it should be,” which has stayed with the company since it opened in March 1989.

“Basically, it means we believe in real solid, good old-fashioned customer service,” Hilton said, adding that Empire may not share the slogan, but the company shares an approach to customer service.

The no-merger marketing stance, which came after a series of community bank mergers and acquisitions in the early part of the decade, took a back seat as the residential real estate market began to backslide in 2008.

“I think the only thing we can say is that times have changed,” said Hilton, noting that the bank held a high concentration of loans in speculative residential lending and residential development. “We had too much of a concentration in what would have been good loans a year earlier.”

By mid-2009, CNB’s troubled assets began to rise, climbing to a troubled asset ratio of 133.6 percent by the end of first-quarter 2010, according to the Investigative Reporting Workshop at Banktracker.com.

At the same time, Banktracker.com, which developed the troubled asset ratio as a tool to gage the financial stress on a bank, reports a national median ratio of 15. Empire Bank’s troubled asset ratio as 13.8.

CNB has been operating under a cease-and-desist order from the FDIC since April 2009, and Hilton said under the order, the bank was really only allowed two options: raise capital or find a buyer.

“We were only able to raise about half the necessary capital,” he said. “As time goes on, you do what you need to do, keeping what’s best for your customers and employees in mind.”

Even though Banktracker.com pegs CNB’s total troubled assets at more than $29 million, Marquart said Empire’s debt-free holding company and more than $1 billion in equity capital puts it in a strong position to absorb the debt.

“We did a lot of analysis. This didn’t just happen overnight,” he said. “We see this is as an opportunity to gain significant market share. Probably most importantly, we see this as an opportunity to acquire a group of bankers that are intelligent and have a good relationship with customers.”

John Twitty, Empire Bank board member and City Utilities general manager, said the pluses and minuses of an acquisition were carefully weighed.

“I think it’s important to remember that Citizens, for about 20 years, had a fine reputation in the community, and that’s the basis of what I would say are those strong customer assets, those strong HR assets,” Twitty said. “Challenges in the recent past? Certainly. But I think Empire and Central Bancompany are certainly strong enough and well positioned enough to address them.”

As the purchase moves forward, Marquart said, the next steps include the decision as to which regulatory agency will review the application.

The legal team of Empire’s Jefferson City-based holding company, Central Bancompany, should make that determination and submit a completed application by the last week of July, Marquart said. One of two government agencies will have final say on the acquisition, said Greg Hernandez, spokesman for the Federal Deposit Insurance Corp.

“Depending on how the structure winds up being … that could be the FDIC, which is the primary regulator for Empire, or it could be the Treasury Department, because that’s the primary regulator of Citizens National,” he said.

While the banks await approval, there are still decisions left to be made, including an analysis of facilities to determine whether individual branches remain open, Marquart said.

As for employees, he said Empire is committed to doing its best to retain as many staff as it can, looking to find appropriate work where there is duplication of positions.

For the next few months, at least, Hilton said he’s on board. Marquart said he is looking forward to discussing Hilton’s ongoing employment with the bank, though the two are still exploring those options.

“I think the biggest early challenge will be to merge those organizations. There are already steps under way to do that, and then they’ll begin to work through some of those assets that need to be addressed,” Twitty said.

“I suspect a year from now, the economy generally in America, and generally in Springfield, is going to be better and there’s nothing that’s going to help all of that more than a rejuvenated economy.”[[In-content Ad]]

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