The urge to mere: fusion of Georgia's Citizens Trust and First Southern will create fifth largest Black bank - Banking News

Black Enterprise, Oct, 1997 by Eric L. Smith, Paula M. White

"It's exciting isn't it?" With a few understated words, Gregory Baranco, chairman of First Southern Bank in Lithonia, Georgia, sums up the last few days since announcing this summer that his bank would be merging with Atlanta's Citizens Trust Bank--an alliance that will create the fifth largest black-owned financial institution in the country. The new structure, which will retain the Citizens Trust name, will now be headed by First Southern President James E. Young.

Pre-merger, Citizens Trust was listed as No. 7 on the BE FINANCIAL 25 list with $145 million in assets, eight locations and a staff of 148. First Southern made its inaugural appearance on this year's BE FINANCIAL 25 list at No. 24 with assets of $58 million, three locations and a staff of 41. Once the merger is completed following regulatory approval, the banks' combined assets will approach $197 million.

This deal follows an aborted merger attempt five years ago. But, after the resignation of Citizens Trust President William Gibbs in June, both sides rekindled talks. "Once we began discussions again, it became dearer that there was synergy here and an opportunity to strengthen both institutions by considering a merger," says Young.

Herman Russell, chairman of Citizens Trust, will remain as chairman of the new institution and Baranco will become the firm's vice chairman. The executive office will be based out of the Citizens Trust headquarters in downtown Atlanta.

"Now we will have more capital to work with and we can make larger loans and have a greater impact on this community," says Russell. "This merger also sends a very important message. Here are two of the top African American finance institutions getting together. I hope it's just the beginning of other minority-owned firms getting together."

Baranco, who is also co-CEO of the Baranco Automotive Group in Lilburn, Georgia, adds, "As a group, we have to look at mergers and acquisitions as a possible means for growth. [African Americans] have been very jealous of our ownership and we've got to get beyond our personal desires and look at adding value for both our customers and share-holders." One immediate benefit of the merger is that the new bank will now have higher legal lending limits due to its larger capital base, enabling the bank to handle larger loans.

No final decisions have been made about the board structure or senior management for the new holding company. The merger w ill be a tax-free exchange, with each outstanding share of First Southern stock being converted into 1.508 shares of stock of the combined company.

The mandate of leading this new financial company falls squarely on Young, a former loan officer and vice president in charge of equal employment opportunities for Chase Manhattan Bank. He's been with First Southern since 1993. Since that time, the bank's assets have nearly tripled, from 520 million to nearly $60 million, and the bank's loan delinquency rate fell to 2% from about 16%.

"The limitation for [black banks] has always been size, and it gave our potential customers another reason not to bank with us," says Young. "We're limited in the amount of loans we can make, in the number of locations and the number of ATMs. All of that only feeds into the notion that minority banks are somehow less than the major banks. This merger represents an opportunity for us to go beyond that."