Can a town of 348 support more than one bank branch?
Yes, according to the Federal Reserve Board, which rejected a request last week from UnionBancorp Inc. to keep Citizens First State Bank of Walnut, Ill., from building a branch in Manlius.
The $663 million-asset UnionBancorp, of Ottawa, Ill., which has the only branch in Manlius, wrote in a May 29 letter to the Fed that the town of 348 people cannot support another.
The Fed disagreed and granted Citizens First permission to build its branch. The Fed reasoned that though the town’s population has dipped, deposits there and in surrounding towns are on the rise.
Citizens First is the sole subsidiary of the $70 million-asset Citizens Bancshares Inc., also in Walnut.
Kent J. Siltman, the president and chief executive officer of both the bank and the parent company, said it already has an automated teller machine in Manlius and branches in neighboring towns and wants to put a full-service branch there to serve its customers better.
“We can give them a little more convenient place that allows us the chance to do more business with them — and get some more customers as well,” Mr. Siltman said.
But UnionBancorp argued in its letter that the competition could leave the small town without any branches. “If such competition leads to protracted periods of inadequate profitability, it is very conceivable that the community could end up with no bank branches if both competitors decided that they cannot compete profitably in such a small marketplace,” the letter said.
Citizens First had the No. 1 deposit share in Bureau County, where Manlius is located, as of June 30, 2005, with 34.81%, according to statistics from the Federal Deposit Insurance Corp. UnionBancorp’s UnionBank was fourth, with 11.09%. Bureau County has 23 branches.
On Aug. 9 the Fed said it decided to approve the application after looking at Citizens First’s business plan, financial history, and capital adequacy.
Though the populations of Manlius and Bureau County dropped slightly from 2000 to 2005, deposits in the county increased nearly 14%, to $776 million, according to FDIC statistics. In Manlius, deposits grew 8.8%, to $25 million.
Mr. Siltman said he did not take UnionBancorp’s letter personally.
“That is certainly their right to do that, and I have no ill will against them,” he said.
UnionBancorp said Scott A. Yeoman, its president and chief executive officer, was out of the office and unavailable for comment at press time. Last month his company announced a merger-of-equals deal with Centrue Financial Corp. in Fairview Heights. The combined company would have $1.3 billion of assets and 38 branches in Illinois.
Citizens First plans to use a prefabricated building for its branch. Mr. Siltman said the goal is to start construction this month and have the branch up and running by mid-October.
“We’re not doing anything elaborate; we’re just starting out with a prebuilt bank facility there and [will] see where it goes from there,” he said.
