The pending sale of Citizens Bank in Geneva, Ala., will mean the end of the small town's last homegrown bank.

Genala Banc, the parent of the $170 million-asset bank, agreed on Thursday to sell to Bank of the Ozarks (OZRK) in Little Rock, Ark., for $27.3 million in cash and stock. The company wasn't forced to sell, but concerns were growing over margin pressure, rising operating costs, and increased expenses tied to regulation, says Roy Dowdy Jr., the bank's president and chief executive.

"It's getting harder and harder for small banks to have the necessary staff to [implement] compliance rules and have the technology to meet the growing demands in the future," adds Dowdy, 72, who is already making post-retirement plans. "I have some pecan trees I take care of and I have a woodworking shop."

Citizens Bank is well-capitalized and remained profitable throughout the downturn, but Dowdy says more small banks like his are going to go away. "Ten years from now, there will be very few community banks around," he says. "It's going take at least a billion-asset bank — and I'd say even a $10 billion-asset bank — to survive in the regulatory environment."

Indeed, mergers are picking up in the Southeast. With 45 deals announced through Oct. 1, the region has had the second-highest number of bank acquisitions this year, according to Banks Street Partners, an Atlanta investment bank. The Midwest is the most-active region, with 65 mergers. Genala is the third banking company to sell in Alabama this year.

Dowdy says his conservative philosophy of limiting service to the 5,000 citizens of Genala went from a blessing to a curse in recent years. He was determined to only accept local deposits. The bank limited its asset investment to loans and municipal bonds from Alabama. Challenges arose for the century old bank when loan demand weakened and returns from its bond investments dwindled. While profitable, the company lacked the resources to expand beyond its home state.

"We made the decision to look for someone else," Dowdy says. "We felt like Bank of the Ozarks is growing much larger, and it's one of most profitable banks around."

The $3.8 billion-asset Bank of the Ozarks has primarily acquired failed banks in recent years. Genala Banc is its eighth acquisition since 2010.

Geneva Banc "provides a nice link between" Mobile, Ala., and Bainbridge, Ga., George Gleason, Bank of the Ozarks' chairman and chief executive, said in a press release. Citizens Bank's customers "will continue to enjoy ... the same quality of friendly hometown banking to which they have become accustomed, as well as benefitting from an enhanced menu of financial services and technology options."

Dowdy, who will retire at year end, says that a representative for Bank of the Ozarks visited the bank after the agreement was signed to reassure employees they would be treated well. "That sits well with our people and with their concern over being employed," he says.

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