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Understanding the effects of the merger boom on community banks

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  • Julapa Jagtiani

Abstract

The merger boom in the U.S. banking industry has caused the number of banking organizations in the nation to fall by nearly a third since 1990. Most of this contraction has involved small community banks. ; A common perception is that most of these small banks are being absorbed by large banks. The disappearance of small banks is raising concerns in many communities because small banks are often a major source of personal services and relationship lending to local businesses and depositors. ; Jagtiani investigates the merger boom in detail and suggests that the merger boom actually has the potential to strengthen the community banking sector, as some community banks are taken over by other, more efficiently run community banks located in the same state. Thus, the community banks that have survived the merger boom may be in a good position to continue serving the local businesses and depositors who value personal service and relationship lending.

Suggested Citation

  • Julapa Jagtiani, 2008. "Understanding the effects of the merger boom on community banks," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 29-48.
  • Handle: RePEc:fip:fedker:y:2008:i:qii:p:29-48:n:v.93no.2
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    References listed on IDEAS

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    1. Timothy H. Hannan & Steven J. Pilloff, 2009. "Acquisition Targets and Motives in the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1167-1187, September.
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    8. David A. Becher & Terry L. Campbell, 2005. "Interstate Banking Deregulation And The Changing Nature Of Bank Mergers," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 28(1), pages 1-20.
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    10. Gayle L. DeLong, 2003. "Does Long-Term Performance of Mergers Match Market Expectations? Evidence from the US Banking Industry," Financial Management, Financial Management Association, vol. 32(2), Summer.
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    Cited by:

    1. Cyree, Ken B., 2010. "What do bank acquirers value in non-public bank mergers and acquisitions?," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(3), pages 341-351, August.

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