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The Community Bank Multiplication Factor

We believe local investments have the best returns.

When a community bank lends money to a local business, it’s likely that much of the money will be used and spent locally.

1) Deposit Money

When you choose to bank locally, your deposits make a positive impact on our local community!

2) Loan

Your deposits are returned to the community in the form of loans for local businesses, farms, and homes.

3) Money Multiplier

Suppose a local farmer deposits $10,000 at our bank. We hold 10%, $1,000, in reserves (as required by the Federal Reserve Bank) and lend out the remaining $9,000. We lend that money to a local business that needs a new delivery vehicle. The business spends the money at a local automobile dealer, who then deposits the $9,000 back at the bank. Again, we hold 10%, $900, and lend out the remaining $8,100. This time we lend the $8,100 to a neighbor for a home improvement project. The cycle keeps repeating. In the end, that $10,000 deposit turns into about $90,000 in loans invested into our local economy. It’s what economists call the money multiplier.

4) Benefit the Community

Local businesses receiving loans sustain and grow their business, which keeps and creates new jobs in our communities. Those gainfully employed citizens deposit a portion of their earnings in the bank, but also spend much of it at local businesses. When money is deposited locally, invested locally, and spent locally, our communities prosper!