Community banks play an important role in serving residents and businesses across Utah, while the state’s industrial banks also serve their unique niche clients. As of the second quarter of 2022, Banking Strategist reports 4,612 community bank charters in the U.S., and nearly half are headquartered in smaller, rural counties with populations less than 50,000.
Many community and industrial banks recognize that their growth plans are tied to their need for technology tools and specialized lending capabilities to deliver a better customer experience.
Over the years with Zions Correspondent Banking, I’ve come to recognize the challenges many community banks face in managing growth and profitability. More and more are finding the need for a full range of credit, treasury, and liquidity products to serve their commercial clients.
As community and industrial banks work to expand their quiver of tools as their clients’ needs evolve, they may consider the benefits of these services:
Fed Funds
Fed Funds Sweep Accounts can seamlessly allow banks to manage balances by moving them into an overnight interest-bearing account that can earn added revenue.
Letters of Credit
As more Utah companies expand overseas, community and industrial banks may find a need for commercial and standby letters of credit for both domestic and international deals.
Foreign Exchange
Community and industrial bank clients need tools to mitigate foreign currency exposure and execute cross-border transactions. Correspondent banking can offer the safe conversion and transfer of funds online for current rates worldwide. By expanding services to clients, banks can better support their customers’ global business objectives.
Commercial Card
More and more banks are finding value in utilizing commercial cards, not only for their employee expenses but also for paying vendors. In doing so, community and industrial banks can maximize their opportunities for revenue share.
Third-Party Solutions
Some third-party service providers offer loan programs for those with additional liquidity. Other services can assist in tax incentives for banks wanting to invest in renewable energy. When community and industrial banks look to enhance their software, digitized records/information, cash machine automation and recycling, a correspondent banking relationship can help. Additional third-party offerings can include employee retention credits and financial or strategic advisors.
Safekeeping
Banks can enhance their liquidity by using safekeeping accounts. Online safekeeping allows banks to find the latest information on their accounts.
Investment Portfolio Reporting
Banks can enhance their portfolio management by using Investment Portfolio Reporting solutions. These pull all data from all of a bank’s investment sources into one program, enabling customizable data reports.
Capital Markets
Bank clients seeking to maximize their investment needs and objectives may want to participate in the fixed income market. A correspondent banking relationship can help bridge community and industrial bank gaps for their institutional clients to work with registered representatives.
Asset-based Lending and Factoring
Community and industrial banks with commercial clients who need customized solutions can explore specialized credit programs. Asset-based lending (ABL) can provide working capital through a modified factoring product to assist with cash flow needs based on the creditworthiness of commercial accounts receivable. As an alternative to conventional financing, this can be a stable and flexible source of funding that ensures available liquidity and flexibility for growing or transitioning businesses. From start-ups to financially sound companies with seasonal needs, ABL and factoring can provide working capital solutions tailored to clients’ requirements and industry.
Treasury
As more and more of their business clients seek automated payment and cash flow solutions, community and industrial banks can utilize correspondent banking relationships to deliver their treasury solutions. These capabilities can include private-labeled lockbox, check image and traditional clearings and wires, online banking, brokered deposit programs and excess balance accounts.
As community and industrial banks strive to grow their services to meet clients’ needs, a correspondent banking relationship can enhance their offerings.
Phil Diederich manages Correspondent Banking at Zions Bancorporation, N.A. A veteran banker, he has 38 years of industry experience, 24 years of which have been serving community banks through correspondent banking. He and his team can be reached at 800-737-6470.
Zions Bank currently maintains more than 700 community bank correspondent relationships across the country in 48 states and Guam, including both community banks and industrial banks in Utah. Helping advance more economic opportunity for traditionally underserved communities, Zions also provides banking services to 44 minority-owned (MDI) banks. We currently have a relationship with 85% of community banks and 84% of industrial banks in the Utah market.
