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We postulate that combining two banks with similar set of products
and business models does not lead to increased performance for
several reasons. While true that some overhead is eliminated,
additional overhead is created because of the merger. The merged
institution may save some costs in removing some C-suite personnel
and board seats, but the larger institution may now need an additional
layer of management, or while a CFO is removed, a treasurer or Capital CDC is a leading, private, non-profit provider of
controller is required. Larger banks also need more compliance, audit, small business financing throughout Texas, New Mexico,
and treasury personnel, thus negating much of the perceived cost-
savings of a merger. If the basic building blocks of the two merged and Arkansas. In 1993, the U.S. Small Business
institutions are the same, we have rarely seen one plus one equal more Administration (SBA) certified Capital CDC to act as a
than two.
facilitator of the SBA’s 504 Loan Program and to act as a
Conclusion catalyst for economic development. Since that time,
Scale in banking may be a myth. There are other reasons to get bigger
but profitability is often not one of them. Capital CDC has worked with thousands of small
businesses and partnered with hundreds of financial
The M&A business is a large money maker for some investment
bankers, however, the efficiency that scale in banking promises are institutions to finance building acquisitions, construction
mostly either ephemeral or not realized. There is scale that community projects, and equipment loans.
banks can, and we argue must, gain on the operating side. This
involves re-evaluating their business model and harnessing their front- We pride ourselves on providing the best possible customer
line employees to achieve efficiency. It is a basic business strategy that service to our borrowers and lending partners, as well as to
most larger banks and some community banks deploy. It involves the
basic strategy of understanding and measuring efficiency, profitability our staff. Our recognized success shows our continued
and unit costs to achieve optimal performance. The strategy does not dedication to constant improvement and growth.
require M&A activity, or a new system or new hires.

Don Keesee
Senior Business Development Officer Associate
Member
479-629-8135

Preferred
Solutions
Provider
A RKANSAS | 9 | Fall 2024
COMMUNITY BANKER