Banker's Crystal Ball

Banking Q&A

By Peter J. Brennan, Orange County Business Journal

Monday, February 25, 2019

Local business leaders are beginning to express concerns—note the quarterly measures of optimism by Orange County think tanks, for instance—on the strength of the local economy. Bankers can be canaries in the OC coal mine, able to sense a good outlook by, for instance, a rise in loan requests, or a faltering financial future via spikes in delinquent loan payments. Executive Editor Peter J. Brennan asked OC’s leading bankers for their 2019 outlook. Edited responses are below.

Ash Patel
Chief Executive
Ash Patel

Mike Helmuth
OC Market President
Mike Helmuth

Commercial Bank of California, Irvine

Some say we’re experiencing the best economy in more than 30 years, including low unemployment and slowed but ongoing, job creation. California State University-Fullerton and Chapman University forecasts predict continued expansion, albeit at a slightly slower pace.

All sounds positive.

But local banking has what appears to be a 2020 storm on the horizon. Short-term interest rates are rising, the yield curve is flattening and many OC banks reported slowed year-over-year growth at the close of 2018.

We’re at a fork in the road.

Down one path, the next 18 months is a time of caution: banks will not reach for extra risk just to close another deal. We temper confidence with prudence.

Down the other, we remind ourselves we’re entrepreneurs and continue to develop new revenue streams with products to support our clients’ holistic business needs.

Orange County has blossomed into a technology powerhouse and it’s time we used that to help businesses reach their full potential. A key growth area for many OC banks is developing and deploying fintech products.

So far, this has typically taken the form of banks buying or partnering with payment processers—creating a void.

As organizations consolidate, innovation is temporarily stifled, even as demands by business owners for streamlined financial capabilities continue to rise. Banks that have completed their acquisitions or finalized partnerships have a great opportunity. Banks must maintain financial strength as they launch new fintech products and platforms.

The state EDD shows 98,000 OC businesses with less than 20 employees; many don’t have access to capital. Banks can offer solutions to lower the cost of managing financial operations while removing barriers to entry for lending via automated technology.

Read the full story here [OCBJ subscription required].