Southern Missouri to Leverage Low-Cost Citizen Deposit Base for Lending Growth

Southern Missouri Bancorp Inc. is looking to leverage Citizens Bancshares Co.’s low-cost deposit base to support its loan growth.

Southern Missouri, based in Poplar Bluff, Mo., is pushing further north into the Show-Me State, particularly into the Kansas City area, with its planned acquisition of Citizens. Once the deal closes, Southern Missouri hopes to leverage Citizens’ cash to expand its lending capacity and follow its “strong pipeline,” the chairman and CEO said. Greg Steffens said S&P Global Market Intelligence.

“Their liquidity gives us a much lower cost than what we have,” Steffens said. “We see the opportunity to expand some lending operations and part of their footprint.”

Non-interest bearing deposits made up 26.4% of Citizens Bank and Trust Co.’s total deposit base as of June 30, compared to just 15% at Southern Bank as of the same date.

Citizens’ credit quality and its lending niches, which include commercial and industrial real estate, commercial real estate and construction, have made it an attractive target, according to Southern Missouri president and chief administrative officer Matthew Funke.

“We’re looking for someone who is in good markets and someone who provides a good source of deposits,” Funke said. “They have both.”

Piper Sandler analyst Andrew Liesch applauded the deal, saying Sept. 21 that Citizens’ strong deposit base and liquidity position should reduce southern Missouri’s reliance on higher-cost CDs. The acquisition also brings a trust and investment management business, Liesch said, as well as complementary small business loans and vertical banking services for agribusiness.

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SNL Picture

Citizens is the largest banking target Southern Missouri has ever pursued, based on the target’s assets of $998.8 million as of June 30 and a reported deal value of $140 million. The planned purchase is the 14th largest U.S. banking deal announced so far in 2022, according to data from S&P Global Market Intelligence.

Given the size of the transaction, Southern Missouri will have its hands full of integration and is unlikely to pursue new mergers and acquisitions in the coming year, Steffens said.

“This is the largest asset size and the most number of branches we’ve taken,” Steffens said. “We will focus on system integration and conversions and work to drive loan growth.”

SNL picture

In the longer term, however, Southern Missouri could still turn to mergers and acquisitions to fill in the gaps in its Missouri coverage.

“There are markets between our Springfield footprint and the Kansas City market,” Funke said. “We would have some longer-term interest and we believe we have opportunities to continue to grow through mergers and acquisitions.”