Pub. 9 2014-2015 Issue 1

May | June 2014 21 Extraordinary Service for Extraordinary Members. All correspondent. All community banks. All the time. Some hesitate when times are tough. Not United Bankers’ Bank, the nation's first bankers' bank. UBB's "First for Your Success" credo means never wavering on its promise to provide community banks with a robust portfolio of operations, lending, investment, and special services. Look to UBB—first! For more information, contact Chris Denney at UBB at (800) 752-8140 or chris.denney@ubb.com. The EFT You can TRUST NetWorks is the Electronic Funds Transfer (EFT) service provider that Nebraskans have used and learned to trust like family for over 30 years. Our highly experienced staff is extremely knowledgeable and resourceful when it comes to assisting your institution. Give us a call to learn more about our services, you’ll have the opportunity to talk to someone who truly cares about and understands your EFT service needs. www.netseft.com Toll Free 800-735-6833 Local 402-434-8202 the picture, if not at closing, within a reasonably short period of time. The difference today is that we’re seeing (and have been involved in) mergers in which the two parties actually are fairly equal in size. Rather than one side buy- ing out the other shareholders for 100 percent cash, these mergers involve an exchange of shares, with some or all of the shareholders of the smaller institu- tion staying on board. Here are three examples based on actual deals: Scenario 1: Two community banks operate in ru- ral markets that have some overlap at the edges. Both banks are historically strong performers, and the bank presi- dents developed a working relationship over the years. The two banks agreed that together, they would be able to go after larger loans and spread out expenses to operate more efficiently. As a single merged institution, the president (also the previous owner) of the smaller bank gave up control as he exchanged his shares for shares in the slightly larger acquirer, but stayed on to run his location as he always had. Scenario 2: Two rural banks are based in different markets, but compete with branches in a regional hub. The banks share similar core competencies. This situation is more of an “acquisition,” with one side making an offer accepted by the other side. However, the consideration is a combination of stock and cash, with some owners from the selling bank electing to remain shareholders in the new, combined bank. The controlling shareholders of the acquiring bank end up trading a controlling interest in a smaller bank for a minority interest in a larger bank due to the dilution created by the newly issued shares. Scenario 3: Two different bank holding companies share a measure of common owner- ship, but operate in different markets. In an effort to increase efficiency, the majority owners decide to merge the two institutions together, eliminating a holding company and merging bank charters. The senior officers from both banks will remain, with potential title changes for some, but this allows skill sets from the managers to be leveraged and the new institution doesn’t lose any experience or relationships those managers have. The mechanism of the transaction is an exchange of stock at the holding company level. In each of these transactions, by ac- cepting stock in the larger institution instead of taking a cash buyout, some or all of the shareholders are making a bet that the new, combined bank will have a brighter outlook than either would have had before themerger. They involve parties who are realistic about the challenges their banks face, but who understand that community banking is still a great business model. 