Staff Photo by John Rawlston/Chattanooga Times Free Press The main branch of the Citizens Tri-County Bank is located in downtown Dunlap, Tenn.

DUNLAP, Tenn. - When a small bank in rural Sequatchie County opened nearly 40 years ago here in a trailer, its founders didn't anticipate it would one day grow to have an eight-county reach.

"We planned to have only two or three branches, but they just kept coming," said H. Glenn Barker, chairman and chief executive of Citizens Tri-County Bank. "We took advantage of opportunities as they've come along ... and every time we acquire a branch or acquire a bank, we get some good employees."

Last week, the $500 million financial institution announced its third bank acquisition, with plans to acquire the Citizens Bank of Spencer, Tenn., which has $44 million in assets.

The acquisition is pending federal approval, which is expected to take 60 to 90 days. Terms of the deal were not disclosed by the privately held banks.

Thirty miles north of Dunlap along Highway 111, the Citizens Bank of Spencer, in Van Buren County, is "a natural fit" in the growth plan of Citizens Tri-County, Barker said. In addition to expanding the bank into its eighth county, the acquisition will provide customers an added banking location and give Citizens Bank customers access to all of Citizens Tri-County's services, said C. Ann Smith, president and chief financial officer of Citizens Tri-County.

Ben McManus, chairman of the 97-year-old Citizens Bank of Spencer, said he will retire when the merger is complete, but all of his employees will stay on. He said the decision to merge the banks came from a need to be more technologically advanced and offer services such as Internet banking, something the small rural lender has been unable to do.

From 2008 to 2010, Citizens Bank lost $3.9 million in capital, dropping from a high point of $5.6 million in 2008 to $1.7 million two years later, matching 1992 capital levels, according to data from the Federal Deposit Insurance Corp.

"This is not a very good time to expand, you know, but when opportunity comes along you take advantage of it," Barker said, referring to the economic climate.

The loss of two major manufacturing industries in Sequatchie County - Tecumseh and Seymour Tubing Inc. in 2008 and 2009 respectively - coupled with the national economic downturn has made the last several years "pretty tough" on Citizens Tri-County and banking as a whole, Barker said. Despite soaring foreclosure rates and layoffs in the area, the bank has continued to expand.

"I think we're in an area that's economically oppressed anyway and I think sometimes it's a little bit easier to operate in those than when you get in an area like Atlanta or some place where it really booms," he said. "We don't really boom, so we don't really bust, I guess."

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Brad Barrett, president of the Tennessee Bankers Association, said that's typical of rural areas with historically high unemployment rates.

"Businesses adapt to that kind of environment, including banks," Barrett said. "I think while everybody has been impacted [by the economy], everybody hasn't been impacted to the same degree because some markets didn't enjoy the huge growth that other markets did."

Though rural bank consolidations are not uncommon, he said there has been little consolidation in the area in the last three to five years. He said some industry observers predict more merger activity in the coming years, but he's unsure how much of it will occur in Southeast Tennessee.

Barker said there are no other acquisitions on the horizon for the bank, but it is always open to growth opportunities.