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PCBB Banc Investment Daily March 11, 2013
Banc Investment Daily
March 11, 2013


At a recent party supporting the performing arts, we were struck by the number of community bankers in attendance. This event specifically supports a major regional festival that is a big driver of commerce and tourism in the area, so the event brought out many of the important business people in the community. We talked to quite a few community banker friends of course, asking them how business was going and the areas of greatest concern to their banks right now. This part of the country entered the economic downturn somewhat later than other places, but the impact is pretty standard with other geographic areas. Most bankers agreed was bumping along, but not showing major improvement. Primary concerns were margin compression due to the low interest rate environment, heavy competition over the very few qualified borrowers and difficulty generating earnings in general. Credit problems were mostly handled, so this was a brighter spot. The event also provided an opportunity to chat with business owners to see where they were on the spectrum. In that regard, one conversation stood out as both an example of a smart strategy to build business with a specialized product and what should translate into an opportunity for bankers. The business owner has a retail shop in a small town, selling museum-quality craft goods. This is obviously very high end, but it is a product line very much related to the local culture. As the number of tourists has declined in his retail store, this business owner came upon an opportunity to sell first through a French retailer and then a Japanese subsidiary of the same retailer. He seized upon the opportunity and has since built a substantial international business, both distributed by foreign retailers and through the internet. The business owner said he sells more in Japan than anywhere else, despite a slow local economy likely driven by relatively attractive currency levels. The opportunity for his community bank lies in the transaction of his international transfers. Certainly there are new regulations regarding disclosures for international transfers, but that should not dissuade you. Leaving the business to the bigger banks isn't a good option because you can't get them back easily and the large banks will lock the customer down even further as they engage in heavy cross-selling, as sure as the sun rises and sets. The internet has simply made the world smaller and this type of good customer is exactly the type community bankers should want. International activities can also produce fee income, so they are certainly worth a look. Rates are low and the best prediction now is that it will remain that way until 2015, so earnings will be difficult to generate. International services provide a good opportunity for community bankers to earn fee income and we can help. Our fully- outsourced solution and sophisticated team of experts is actively helping community bankers navigate the regulatory landscape and capture more fee income and they can do the same for you. Usually when people think of the international businesses, they think of manufacturing or software. That is why we wanted to point out this business can come from anywhere. Driving by this retail shop, next to the cow pasture, few would imagine it to be a sophisticated international business. By understanding your small business customers and what they do, you can focus your efforts on their needs as you continue to build your business no matter the environment. Give us a call or email to find out how easy it really is to offer your customers international services and book more fees for your bank.