Independent Banker - January 2023 - 48

6
There are a lot
of low-margin
businesses out
there. While it may
be low-hanging
fruit, just realize
what the overall
return is before
jumping in. "
-Eric Weikart,
Cornerstone Advisors
DIVERSIFY REVENUE STREAMS
Community banks need to consider what other things they can provide
to customers that encourage them to stay with the bank and drive
future revenue, Epperson says. Maybe it's integrated technology that allows
customers to monitor their aging parent's finances, or it might be analytics that
help small businesses better manage their finances. " These types of unique,
value-added offerings make it more likely that customers won't bolt just for a
higher interest rate, " he says.
There may also be ways to diversify within existing business lines. Within
lending, for instance, some community banks are highly focused on SBA loans,
but if that particular niche drops off precipitously, it becomes a liability. " It's
great to have expertise, but you also want to have expertise in multiple areas so
that you don't put all your eggs in one basket, " Malzahn says.
Grand Rapids State Bank found a way to further diversify its lending revenue
in early 2022 by introducing personal lines of credit for individuals. The move
was initially based on a customer request, but after investigating the potential,
it seemed like a good opportunity to make recurring revenue, Lee says. He notes
that the bank has created a few dozen new lines since February 2022.
Before leaping into a new area, however, community banks need to make sure
they understand the profitability potential, Weikart says. It can be tough to move
the needle in areas like wealth management, for example, where the margin is
low. " There are a lot of low-margin businesses out there, " he says. " While it may
be low-hanging fruit, just realize what the overall return is before jumping in. "
Also be mindful of taking on too much risk. Trying new things in deposits or
treasury management-where the risk isn't as great-could be advisable. But
during times of economic uncertainty, community banks might want to avoid
taking on undue risks in areas they don't have experience in, Toft says. It would
be unwise, for instance, for a community bank that doesn't currently focus
on construction lending to start making speculative new construction loans,
he says.
48 // ICBA Independent Banker //January 2023
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Independent Banker - January 2023

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Table of Contents
Independent Banker - January 2023 - Cover1
Independent Banker - January 2023 - Cover2
Independent Banker - January 2023 - Table of Contents
Independent Banker - January 2023 - 2
Independent Banker - January 2023 - 3
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