Community Bank Merger &
Acquisition – What Are Its Plus Points
Community bank merger & acquisition not only saves a loss making bank unit from getting
bankrupt but also helps its shareholders from losing their investment and its employees from losing
their jobs. Merger also enables the acquired bank to proceed with an expansion plan in a new
conomy depends a lot on banks, who serve as great sources for loans and allow space to
customers to keep their deposits and savings. Community banks have many local
branches that people use daily. They not just earn good business but also deliver profits
to their shareholders and customers including hundreds of thousands of office
employees, managers and business owners. When a community bank merger & acquisition takes
place, it brings out several benefits to the customer community and bank owners as well.
Community bank merger & acquisition benefits everyone including banking organizations,
employees, shareholders, and account holders. Banks that undergo merger can succeed in cutting
down expenses, and ultimately passing on these savings to bank account holders in the form of
low cost service and products. Community bank merger & acquisition is also considered as a
reliable method to prevent the loss making banks from getting bankrupt, and such type of merger
has remarkable benefits for both account holders and bank officials.
If a bank has higher number of customers, then it will have more opportunities to earn
money by opening accounts and offering services to the existing customers. For future
expansion, a community bank can consider to open new branches, invest in real estate,
train staff and pay advertising price, or it can acquire or merge with a different bank. When
a large bank enters into a financial activity like merger with a small one, it can save
significant money on payroll, legal fees and advertising. A community bank merger &
acquisition also assures to bring profits to the acquired bank. It is because when the
acquiring bank decides to build new branches in place of merger, the small bank will have
to cut expenses to compete with it for business and that may bring down its profits.
Significant Reduction In Expenses
With the merger of two different banks, a new bank entity is formed which experiences a
significant reduction in the overall expenses in a number of ways. Health insurance
programs for a larger group of employees of the company become less expensive because
the higher number of insured employees make the insurance companies to come up with
good offers or give a discount on payout amount. The merged bank entities are able to save
money by removing the operational cost of one department after the merging. The
processing fees for transactions also come down with community bank merger &
acquisition as it facilitates more in house transaction processing than before.
A Growing Network Of ATMS and Branches
It is the account holders who are benefited from community bank merger & acquisition as
they get easy access to a growing network of ATMs and branches. This indicates that
account holders can go anywhere but still can get instant access to their bank accounts. In
addition to this, a merged bank has more money deposits and sees less risk in approving
the loans. A failed loan recovery might ruin the prospects of a small sized bank than a
larger one. That's why lending conditions are generally flexible at large banks, and it
enables the account holders to secure credit cards and loans more easily.
When a bank becomes bankrupt, the employees are at high risk of losing their jobs and
stockholders to lose their investment. According to an M & A advisor, a community bank
merger & acquisition should be attempted well before the bankruptcy to help revive the
failing bank. The acquiring bank takes possession of the loss making bank entity's assets at
a low cost, which satisfies the shareholders, and retains the job of employees of the
merged bank. Not all agree that community bank merger & acquisition is a good practice.
The truth is that larger banks can invite bankruptcy with reckless lending. However,
banking mergers can help strengthen their financial status.