Sterne Agee plans to buy Georgia bank

Sterne Agee Group Inc. has requested permission to form a bank holding company by acquiring 100 percent of the voting shares of Pearson, Ga.-based Sum Financial Corp. and its subsidiary, the Citizens Exchange Bank.
Sterne Agee, which filed an application with the Federal Reserve Board, doesn’t currently own any shares of the bank holding company.

The Birmingham-based brokerage firm plans to merge the bank with The Trust Co. of Sterne Agee Inc., which would complement its existing financial services businesses and allow it to offer correspondent banking services, according to the company’s application filed in recent months with the Federal Reserve Board.

Its application is currently pending approval with the Georgia Department of Banking and Finance, and a final decision hasn’t been made.

“We are very pleased to have reached an agreement to purchase a bank, which is a key component to our strategic plans,” said Jim Holbrook, chairman and CEO of Sterne Agee Group in a statement. “The addition of a bank will greatly expand the products that Sterne Agee can offer its clients.”

Sterne Agee representatives declined to make further statements about its plans, citing its “confidential nature.”

The merger would allow the company to establish a branch at the trust company’s office in Birmingham that will serve as the principal office of the bank, according to the application.

The resulting bank will offer services to community banks such as treasury management, bond accounting/safekeeping, asset/liability modeling and management, correspondent lending services, interest rate hedging techniques, mortgage lending services and more.

“These correspondent banking services are designed and offered to help community banks and depository institutions provide products and services in their communities,” the application said.
“It’s unusual to see an Alabama firm wanting to acquire a Georgia entity,” he said.
 

Ramachandran said the application process for a holding company formation typically takes 30 to 60 days, but the current banking environment has caused a lag in the process.

Ramachandran said Sterne Agee has to also get approval from other regulating agencies.
 

Citizens Exchange Bank, which has $27.6 million in assets, was founded in 1943 and currently has one branch in Pearson, Ga., with nine employees. The sellers of the bank and its parent company serve on the board of directors of the bank.
The application said that through the merger of Citizens Exchange Bank and The Trust Co. of Sterne Agee and through additional direct capital injections, Sterne Agee plans to provide more Tier 1 capital to Sum Financial and the bank.
 

Sterne Agee’s management, legal counsel and loan review specialists performed a due diligence review of all accounting, contractual, procedural, organizational and operational aspects of Sum Financial and Citizens, the application said.
According to third quarter data from the Federal Deposit Insurance Corp. , Citizens had a Tier 1 leverage ratio and Tier 1 risk-based capital ratio – both key measurements of a bank’s financial strength – of 9.4 percent and 21.4 percent, respectively. Bank regulators typically require a Tier 1 leverage ratio of at least 8.5 percent and a Tier 1 risk-based capital ratio of 10 percent.
 

David Oliver, senior vice president of communications and marketing for the Georgia Bankers Association , said most of the acquisitions in recent years have been through FDIC-assisted transactions of failed banks. Previous to Georgia’s uptick in bank failures, he said a number of financially healthy institutions were being acquired.
 

“We’ve seen those acquisitions for a variety of reasons,” he said. “An institution may have wanted to come into Georgia to establish a banking presence because it was a growing state. Or other reasons of acquiring a banking charter that would allow them to potentially expand their business here, do banking where they didn’t previously have the opportunity to do that.”

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