What a Bank Merger Means for Customers

When your bank announces a merger, you might be left feeling somewhat apprehensive. You might worry that some of the services you rely on to manage your finances could disappear during the merger process. Thankfully, those concerns are rarely the reality.

In most cases, bank mergers don't end up having much impact on customers' day-to-day banking—and any changes you do experience are likely to be positive. For example, the new bank might offer more products and services to help meet your financial needs.

To understand more about how bank mergers work, here are some fast facts and handy definitions, followed by a few tips on what to expect if your bank is part of a merger.

What's a bank merger?

A bank merger happens when two banks join to form one company, with new ownership and legal structure. It's typically considered a friendly purchase, as the two banks have agreed to pool their resources. Mergers generally occur between two organizations of the same size or with similar resources.

A bank might decide to merge with another bank to reduce costs or expand into a new market. It also helps a bank scale up and acquire more customers, which means more capital to work with. Having more capital allows banks to offer more lending options to consumers.

Two banks could also decide to merge to fill technology or product gaps. One bank might have a great commercial lending team, while the other might offer wealth management expertise. By merging, the new bank can provide better resources to customers.

With a merger, sometimes nothing changes beyond the bank's name. In other cases, more products and services are added to improve customers' overall experience.

Just because your bank has merged with another doesn't mean you have to look for a new bank. In most cases, there will be plenty of consistency between the bank you're used to and the new one.

The difference between a merger and an acquisition

While mergers and acquisitions are often talked about together, they're actually distinct scenarios. Understanding the difference between a merger and an acquisition can help shed some light on what's happening when your bank is part of one of these transactions.

A bank acquisition happens when one company buys another—usually smaller—company. The smaller bank becomes part of the larger bank and ceases to operate independently. Depending on the terms of the deal, the bank might keep its original name, or it could be absorbed within the larger bank.

A bank might decide to acquire another bank to expand its business reach and improve its market share. Acquisitions also help banks become more efficient in their operations. When an acquisition happens, banks can consolidate their existing infrastructure around compliance, risk management and information technology.

Sometimes the acquired bank might be struggling with business, while the acquiring bank is a much stronger-performing institution. When this is the case, the acquisition can benefit customers significantly because they'll now have access to the resources and peace of mind that come from working with a higher-performing bank.

What to expect when your bank is part of a merger or acquisition

From a customer standpoint, you might find it hard to tell the difference between a merger and an acquisition. Either change might mean that your bank changes its name, or that it opens new branches in a new part of town. Often, the process can take years to finalize.

When your bank merges or is involved in an acquisition, you'll get mail and digital notices that walk you through the changes and help you prepare. Here are a few areas where you might notice some changes.

Day-to-day banking

When most people voice concerns about what a bank merger means for their finances, they're usually worried about their day-to-day experience. This might include ATM and branch visits, handling direct deposits and making withdrawals.

Beyond a name change, your everyday banking activities likely won't change much during or after a merger. You don't need to worry that your paycheck suddenly won't deposit or that your mortgage will change. In many cases, the people powering your local branch will remain in place as well. You can go about your regular banking activities just as you did before.

Keep in mind that if you have deposits at both banks before they merge, your account could end up over the threshold of being insured by the FDIC up to $250,000 at one institution. You may need to move some funds around between your savings and checking accounts to make sure each is at or under the $250,000 FDIC insurance limit.

More branch and ATM locations

When two banks combine, they may be able to expand their footprint in different local markets. For example, if one bank has established its presence in the Southeast and the other has a bigger presence in the Northeast, merging may allow them to better serve customers up and down the eastern corridor.

More branch and ATM locations may become available after a merger or acquisition, giving you more flexibility and convenience to complete your financial transactions.

Potential for lower fees

Mergers and acquisitions allow banks to reduce costs, especially in parts of the business where their operations overlap. Consolidating business operations, outside vendors and technology systems can lead to cost savings that are passed on to customers.

These might take the form of lower bank fees for things like checking and savings accounts, lower origination and transaction fees for auto or business loans, or better perks within a customer loyalty program.

While interest rates for mortgages and certificates of deposit won't change, there could be changes to the interest rates on your savings and money market accounts.

Possible new products or services

One benefit of being a customer during a merger is that your bank may be able to expand its offerings. These new offerings can make your life easier if you're used to juggling banks or using multiple providers to meet your financial needs.

Before a merger or acquisition, one bank may specialize in serving small business customers, while another bank's expertise may be in mortgage lending. Merging enables them to offer you a wider range of services to meet all of your needs, whether you're buying your first home, starting a business or saving for retirement.

Here are a few new services you might see after a bank merger or acquisition:

• Credit cards
• Financial advisory services
• Mortgages
• Personal and small business loans
• Retirement accounts

Talk with your local banker to see which new products or services make the most sense for you. In fact, you might find better rates on credit cards or loans after the merger than the rates you have at other financial institutions.

An enhanced digital experience

Today, many banks have customer portals where you can access all of your account information, move funds and pay bills with just a few clicks. They might also offer a mobile app where you can access your account, find ATMs and pay for purchases on the go. By merging, banks may be able to deliver an even better digital experience.

With a merger or acquisition, a bank can expand its digital capabilities without having to build them from the ground up or vet new technology vendors. The combined entity can provide new, improved experiences. For example, a bank might offer more self-service technologies to help with the application process for a mortgage, car or business loan.

Coming together for a purpose

Mergers and acquisitions are a way for banks to better adapt to the market and meet customer needs. If both institutions involved keep the customer experience front and center as they create a new company, they can bring their people, processes and technology together to build something better than what came before.

At the end of the day, your bank wants to make sure you're comfortable and happy with the services they offer. Don't hesitate to reach out to your local branch if you have any concerns about what to expect.