Four years ago Greene County Bancshares Inc. in Greeneville, Tenn., did not have a single branch in Nashville; upon completing its $164 million deal for Civitas BankGroup Inc., it would have $1.2 billion of assets and the No. 9 deposit share in Tennessee's second-largest metropolitan market.
"It's just such a phenomenal market, and we have made a very conscious decision to try to grow our base there," said Stan Puckett, the chairman and chief executive officer of the $1.8 billion-asset Greene County. The deal "is really a very exciting piece to that strategy."
Greene County announced late Thursday that it was buying the $944 million-asset Civitas, of Franklin. The deal, by far the largest in Greene County's 117-year history, reflects Mr. Puckett's commitment to the Nashville metropolitan statistical area — the 10th-largest deposit market in the Southeast.
"It's certainly a very sensible move, given the fact that they've been trying to build up in the Middle Tennessee market, and it gives them some talented people, as well," J. Corey Shipman, an analyst at Stanford Financial Group.
Greene County entered the Nashville market in 2003, when it acquired the $168 million-asset Independent Bankshares Corp. in Gallatin, Tenn., for $30 million. Since then it has continued to expand in the area by acquiring and building branches.
Civitas' main subsidiary, Cumberland Bank, has 12 branches in five Nashville-area counties. Greene County has 49 Tennessee branches (including 10 in the Nashville area), one in North Carolina, and one in Virginia.
To reflect its recent growth beyond its home county in eastern Tennessee, the company said last week that its Greene County Bank would be renamed GreenBank. The branches are expected to be rebranded in April.
Civitas has been in turnaround mode since late 2004. At the time it owned five banks scattered throughout Tennessee and had an efficiency ratio above 85%. It has since sold off three of the banks and a 50% stake in a fourth, and though its efficiency ratio has improved, to 70.54% at Sept. 30, it is still above the average for banking companies its size.
Mr. Shipman said that Civitas is "in the middle-late innings" of its turnaround. "Most of the heavy lifting has been done."
Mr. Puckett agreed with that assessment. "We do feel like this is a bank that has made a real turnaround, and we feel like it's just starting to reach its potential, so the timing is good," he said.
Richard Herrington, Civitas' president and CEO, is a longtime Tennessee banker. He founded Franklin Financial Corp. in 1989 and ran it until 2002, when he agreed to sell it to Fifth Third Bancorp. (The deal was held up for regulatory reasons and did not close until 2004.) Mr. Herrington joined what was then Cumberland Bancorp in late 2002 and renamed it Civitas in mid-2003.
Mr. Puckett said that Greene County is in negotiations with Mr. Herrington, and that no decision has been made on whether he would join that company. Mr. Puckett said that he is committed to retaining Civitas' key lenders, and that he is confident he can.
"They have an incredibly talented and experienced team of lenders and bankers there, people who have spent their whole 20-to-30-year career in those markets," he said. "That may be the most attractive component of the whole transaction."
Greene County is expected to hold off on further acquisitions while it integrates Civitas, but Mr. Puckett said that future deals would not necessarily be confined to Tennessee.
"We're not consumed with the state that a bank is in. We are consumed with the market and the talent of the bankers," he said. "If there is a good market with great bankers in another state, we would be interested."
The deal for Civitas is expected to close next quarter.
