In my current game I have conquered three such NPC settlements the snathi, the poplar and the ironeers? at any rate i beat the settlements, then killed the sovereigns that were stood outside (taking the town before ending the faction). However the settlements do not level up like other settlements, which they blatantly should.
these are considered minor races and there cities never grow... they provide access to kingdom/empire specific races only.. When I play kingdom i raze the one that have the ogre resource as I can not use it..
Im afraid them being considered minor races makes no sense to me and here is why. Irrespective of if they have an ogre camp i can use or whatever, when i conquer the town, i conquer the town and it becomes one of my settlements. There is no holdover bonus from it having been a neutral npc's settlment beyond a couple of extra items for sale at the merchant just from that one town.
The settlement still lists available tiles, still earns income and food and research based on what I build there, still has what troops i train and station there etc..etec.. there is absolutely no justification or reasoning for preventing the settlements from growing normally. Having to raze it and then build on the spot again to have it be able to grow is an act of absolute pointlessness.
Hence why I believe it is a bug and not an intended aspect.