How community banks can navigate a consolidating industry

Nearly every business sector in the United States is feeling the effects of consolidation. Mergers and acquisitions are occurring regularly in technology, insurance, retail, manufacturing — even banking and finance..Why do banking mergers and acquisitions happen?For community banks, there are many reasons why a merger or acquisition might be considered. Every situation is unique, but here are a few of the main reasons:1. A need for scale: Many banks face a math problem where size matters. Some of the factors involved include:• The cost of complying with large and complex regulatory requirements, and of investing in technology to compete in today’s digital world.• The difficulty of finding, attracting, retaining and affording specialized talent.• The challenges of serving older customers who value in-person business at the same time as a younger generation that prefers digital, online options.2. A drive for core deposits: Community banks are often an attractive acquisition target due to the “stickiness” of their deposit base.3. No succession plans: For some family-owned banks, the next generation of bankers simply isn’t waiting in the wings.How community banks can stand outSo, given these challenges, is there a future for smaller, independent community banks? Absolutely. Often, consolidation can stifle innovation, flexibility and responsiveness — areas where community banks can thrive.How Bell can helpHaving an adequate lending limit to meet larger customers’ growing credit needs can be challenging for community banks. By building strong relationships with other banks, like Bell, smaller banks can better compete for larger credits and punch above their weight in the industry.If your bank is in need of additional capital — whether to make an acquisition, as part of a merger transaction, or for growth or other purposes — we can help. Contact us today. Lynn Paulson is senior vice president and director of agribusiness development for Bell Bank, one of the largest independently owned banks in the nation. He writes and speaks about agricultural lending and finance, the global economy and the ag economy. Paulson has expert knowledge of the agricultural industry, having worked in ag lending for more than 40 years and as a recently retired owner and operator of a Benson County, N.D., family farm.