Why Are Banks Merging Like Crazy?

Interview with Michael Glotz and Robert Mitchell (May 18, 2009): Richmond Bizsense (www.richmondbizsense.com):

Richmond BizSense: We’ve had at least three mergers between community banks in the last 2 months, what is driving this trend?

Michael Glotz: From the buyers point of view it’s a good time to increase distribution of their products. There are a number of Eastern Virginia banks that have acquired institutions in Richmond. In some cases you might consider a lot of these institutions a bargain so they can increase distribution in a target market and do it at what appears a really good price relative to what they would have paid a few years ago.

RBS: What about from a seller’s perspective?

Glotz: Bank sellers have looked at their business models and in a number of cases they have depleted capital because of significant charge offs due to problem loans or due to their marketable securities dropping. They may not have capital to lend. They are not profitable and they need to hook up with a healthier institution. In some cases, their employees and their facilities and their customer base have value even if they are losing money.

Read the full interview