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DANIEL R. MATHIS

The trend in the banking industry is consolidation, driven by a desire to improve internal efficiencies. Banks are generally moving away from the personalized mortar-and-steel branch banking on every corner to electronic processing services.

This fact is manifested in grocery stores and other consumer marketplaces, where more and more ATM machines are popping up.

We also read on a regular basis about bank “mergers,” “shut-downs,” and “relocations.” But what does this consolidation-efficiency syndrome mean to a local businessperson, the entrepreneur who needs financing to grow his enterprise? Will that business owner have to sacrifice personal banking relationships and industry expertise for electronically efficient banking?

Based on my 27 years in the Southern California banking industry, I’ve determined that there are basically two categories of business clients those who simply need an institution to house and move their money, and those who need a banker who will provide experienced business advice, industry knowledge, and sophisticated financial solutions. The latter type business needs a reliable resource based on a consistent relationship with a specific banking officer.

However, some of the changes taking place today hinder the needs of the middle-market business person, such as:

-Merger-driven efficiencies can directly reduce the level of personal service available to clients;

-Rotating new bank officers are constantly challenged by learning about old customers;

-Inexperienced loan officers are restricted to cookie-cutter options limiting their abilities to meet ever-changing client needs.

With consolidation accelerating in the banking industry, many business clients will find it much more difficult to find a banker who genuinely understands their specific needs.

This problem actually represents a tremendous growth opportunity for some mid-size banks willing to focus resources towards the business community. It also presents some opportunities to local entrepreneurs who might be willing to review their banking options based on their needs.

However, finding these banks can be confusing and frustrating to a busy businessperson, because almost every bank and savings and loan serving the Los Angeles community promotes itself as a “business bank.”

But there are a few ideas that can be used to determine if a bank really is a business bank. One is seeking a referral from another successful business in the same industry, your CPA or your business attorney. They generally work with quality bankers and know those business-relationship officers who are experienced, dedicated to specific industries, and have the authority to produce results for their clients.

Another source of information is a bank’s annual report, where you can determine the ratio of commercial loans to consumer loans. If a bank has more than 25 percent of its loans categorized as consumer, you may want to continue looking.

And perhaps an easier solution is to return some calls you’ve received from bankers and interview them on the phone to see if they know anything about your industry. That assumes, of course, that you can get through the bank’s electronically efficient voice mail system.

Probably one of the more challenging banking questions facing business owners today is: Can they find a bank that offers personal, knowledgeable service and efficient, sophisticated product? The answer is yes, but the field is limited and requires the business owner to do some homework.

Why is this challenge important? Our local economy thrives on small and middle-market companies. There are approximately 22 million non-agricultural businesses operating in the United States. Almost 99 percent of those are classified as small businesses. During the last half century the number of small businesses has increased steadily, and currently provides 67 percent of initial job opportunities, employs 53 percent of the primary work force, and is responsible for nearly 50 percent of the gross domestic product.

It is critical today that these business owners have the availability of quality financial solutions locally, and not be restricted to mass market options like ATMs or grocery stores.

Technological advances and the expanding global marketplace will almost definitely change the deliverance of financial services available to the public, along with a continued change in the institutions that are providing these services. The change will probably be even more dramatic than we anticipate, since already more than $1 trillion currently moves electronically each day between U.S. banks.

The ultimate question is not whether or not electronic processing is the wave of the banking industry’s future. The question is whether or not this is good for business, particularly medium-sized businesses that typically need much more attention and expert advice than an ATM in the local grocery store or a “revolving door” banker is able to offer.

Daniel R. Mathis is president and chief operating officer of Imperial Bank, an Inglewood-based institution with $3.3 billion in assets.

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