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Economy 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.
Business Expansion
- 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.
Avoid Bankruptcy
- 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.
Jacob M Willis has taken part in community bank merger & acquisition process only once. He can compete with any expert M & A advisor in defining the common benefits banking merger.
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