CITBA Financial Corporation And Merchants Bancorp Agree To Merge

MOORESVILLE, Ind. and CARMEL, Ind., May 8, 2013 /PRNewswire/ -- CITBA Financial Corporation (CITBA) (OTC: CBAF), Mooresville, IN, the bank holding company of Citizens Bank, and Merchants Bancorp (Merchants)(private), Carmel, IN, the bank holding company of Merchants Bank of Indiana, announced today they have signed a definitive agreement for the merger of Merchants with and into CITBA.  CITBA will be the surviving corporation, and will be renamed Merchants Bancorp.  Citizens Bank will be merged with and into Merchants Bank of Indiana. 

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CITBA serves the retail banking needs of Morgan, Johnson and Hendricks County markets with eleven locations, and has $375 million in assets, 133 employees, and over 400 shareholders.  Merchants focuses on several aspects of mortgage and agricultural lending and wealth services from four Central Indiana locations, has $1.2 billion in assets, 74 employees, and 8 shareholders.  Merchants Bank of Indiana owns P/R Mortgage & Investment Corp., a leading multi-family housing mortgage company in the Midwest United States. 

"I am very excited about the combination of our two strong community banks with complimentary business models.  This unique opportunity creates an exceptional community bank with multiple revenue streams and a strong foundation for further growth," stated Lynn Gordon, President & CEO of CITBA and Citizens Bank, who is expected to continue to head the regional banking operations of Merchants in the current Citizens Bank market areas following the merger.  "Both banks will be working closely together to ensure a seamless transition for customers and employees.  Customers will not experience any changes to their accounts or banking routines."

Steve Mills, Chairman of CITBA and Citizens Bank, added, "We are delighted to become a part of the Merchants organization and believe the combination created by our two companies will enable us to better serve our customers through increased convenience as well as the addition of broader financial services. Our shareholders will continue their investment in Central Indiana banking through their ownership of CITBA shares (renamed Merchants) and benefit from economies of scale.  This would have not have been possible without the excellent work of all of our employees during these past years of economic recession that affected all banks in our country, including our senior management team led by Lynn Gordon, our President and CEO."

Michael F. Petrie, Chairman and CEO of Merchants, commented, "The combined companies provide strong synergies that will promote the geographic expansion of our product and service lines without job loss.  In fact, we expect this merger to create more job opportunities, allow us to provide better services to our customers, be better stewards to our communities, and reward our shareholders. We are proud to join the CITBA family in remaining a 'Hoosier Owned – Hoosier Operated' community bank."

Under the terms of the agreement, Merchants shareholders will exchange each of their 10,000 shares for 370.7908 shares of CITBA stock resulting in ownership of 80% of all outstanding CITBA shares. 

Shares of CITBA will not be changed by the merger.  Existing shareholders will keep their share certificates with no need to exchange them for new certificates, despite the name change.  Current CITBA shareholders, however, are expected to benefit in the future from higher earnings per share and dividends per share in the first year following the completion of the merger.

Merchants, which is owned by Mr. Petrie and Randall D. Rogers and their families, is presently treated as a corporation taxable under Subchapter S of the Internal Revenue Code of 1986, as amended (the IRC).  Following the transaction, the resulting company will be treated as a corporation under Subchapter C of the IRC.  The transaction is expected to result in certain tax accruals that will reduce Merchants' shareholders' equity.  The amount of such tax accruals will be determined as of the closing date of the merger.  The merger agreement includes certain protection to both Merchants and CITBA in connection with the actual tax accruals.  The transaction is expected to be completed in the third quarter of 2013, subject to regulatory and CITBA shareholder approval.  

Merchants was advised by Mike Renninger of Renninger & Associates, LLC and represented by John Tanselle of Krieg DeVault LLP.  CITBA was advised by Craig Mancinotti of Austin Associates, LLC and represented by Mark Barnes of Mark Barnes Law PC.

FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking statements.  These statements include, but are not limited to, the respective descriptions of CITBA's and Merchants' financial condition, results of operations, asset and credit quality trends, profitability and statements about the expected financial benefits and other effects of the affiliation between the two companies.  Forward-looking statements can be identified by the use of the words "anticipate," "believe," "expect," "intend," "could" and "should," and other words of similar meaning. These forward-looking statements express management's current expectations or forecasts of future events and, by their nature, are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those in such statements.  Factors that might cause such a difference include, but are not limited to: expected cost savings, synergies and other financial benefits from the affiliation might not be realized within the expected time frames and costs or difficulties relating to integration matters might be greater than expected; market, economic, operational, liquidity, credit and interest rate risks associated with the combined entity's businesses; competition; government legislation and policies; the ability of the combined entity to execute its business plan; changes in the economy which could materially impact credit quality trends and the ability to generate loans and gather deposits; failure or circumvention of internal controls; failure or disruption of information systems; significant changes in accounting, tax or regulatory practices or requirements; and, new legal obligations or liabilities or unfavorable resolutions of litigations.  These forward-looking statements are made only as of the date of this press release, and neither CITBA nor Merchants undertake an obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release.

For more information, contact:

CITBA Financial Corporation -        Lynn Gordon     President & CEO  (317)831-0110           
Merchants Bancorp -                      Michael Petrie    Chairman & CEO  (317)569-7420

SOURCE CITBA Financial Corporation