Reduce liability for losses on commercial accounts by adhering to four requirements.
The Community Bank Advantage
It is true that people tend to support what they help create. Those who participate in and support community development are to be thought of and treated as part of the community development team. By definition, communities represent an intersection of interests by virtue of place. This seems a tidy concept until one realizes that there exist as many divergent notions of community direction as is noted on the city limits sign enumerating population. Fortunately, for community banks, the call to shepherd is just as basic as the other inevitabilities of life: weather, work and the want of economic growth.
Leadership or participation by community bankers at the local level is as important in developing consensus for progressive programs and plans as it is in avoiding potential disaster. By contributing the knowledge and experience possessed within a bank’s professional staff, the community reaps rewards, which otherwise would not be possible. It is, of course, common practice to measure the pulse of local developments by encouraging staff to engage in the community through participation in local activities such as clubs, chambers of commerce, economic development boards and even elected office. And in this banks should participate generously, because ultimately it serves the interests of the bank as well.
Local governments often represent, if not the largest corporate enterprise in the community, certainly one of the most significant forces affecting the community’s economic condition. This is evident through the dimension of the tax base. Local governments command tax bases, as measured by valuation, in the billions for the more demographically endowed areas but even small to modest governments have purview in the realm of tens to hundreds of millions. And while local governments are among the largest corporations in any given community, it is often the case that elected officials are unfamiliar with even some of the mildly sophisticated mechanisms of administration and finance. Here, there is an opportunity for a trusted adviser.
Add Value Locally
As the pendulum swings back to more of a local focus, those seeking services will look more and more for local sources of value. In the uncertainty caused by a malaise of the current economic and political environment, we seek the comfort of something sensible and tangible, something that provides a sense of confidence and structure.
For instance, community bankers have long provided a combination of investment vehicles to their local entities to provide earnings on local monies while still affording the necessary degree of liquidity. Often, the bankers are able to refer public finance professionals who aid the municipality in successfully bringing a bond issue to market. Importantly, investment strategies are provided for funds as they are expended in concert with the construction outlays. The need for prudent, well-founded suggestions from a community bank to the local government always exists.
And while the path to assisting local governments typically involves traditional services, the occasional need for a more complex product should not dissuade engagement by the community bank. They, too, have trusted advisers in their correspondent banks. Collateral services, swaps, bond underwriting and securities portfolio management are all within reach. These services and more may be easily leveraged and brought to bear for the benefit of the community.
Facilitating focus in a common direction through a synthesis of interests is important for community progress. This is a proper role of the community banker who may expect no immediate or direct profit from the engagement but who also knows that through community leadership in league with other business leaders profitable relationships will be initiated or enhanced for the local community.
Community bankers know that the more valuable they become, the more the marketplace will reward them. Give first. Become known as a resource. The bank’s value is linked to its knowledge and willingness to help.
John Harris is vice president in the capital markets group at Country Club Bank, Kansas City.
Copyright (c) February 2013 by BankNews Media