The Irvine, California, commercial bank had reported $686 million in deposits and $736 million in assets as of June 30. Its one remaining physical location was only part of the infrastructure through which it served customers.
Among its range of services, as it described itself as a “community based business bank,” Nano offered businesses online banking, remote deposit capture and treasury-management services that included ACH origination and wire transfers. It also made commercial real estate, commercial and industrial and small business loans.
The commercial relationships did not disappear when Nano failed. Nano Banc’s failure provides a real-world test of what happens to technology-enabled commercial banking relationships when the institution providing them fails.
After California regulators closed Nano on Sept. 25, the FDIC transferred substantially all of its deposits to Sunwest Bank. Sunwest said the deposits it assumed totaled approximately $605 million, along with $227 million in loans.
The transaction effectively moved Nano’s deposit relationships from one commercially focused bank to another. Sunwest serves businesses and entrepreneurs through commercial lending, treasury management and technology integrations that connect banking with accounting, ERP, accounts receivable, accounts payable and payment-processing systems.
Nano’s sole Irvine branch was also part of the transfer. The FDIC said it would reopen Monday (Sept. 28) as a Sunwest branch, while Nano depositors automatically became Sunwest depositors.
The combination provides a current example of how technology has changed the operating reach of a commercial bank. A business banking relationship can encompass deposits, credit, payments and cash management without requiring a correspondingly large branch network.
We note that Nano’s failure does not establish that the model created additional risk. California regulators attributed its closure to significant financial losses, deteriorating financial condition, failure to comply with an enforcement order and a multiyear history of management problems and regulatory violations.
Commercial Banking Moves Through the Operating Account
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For a business customer, the bank relationship reaches into the company’s daily cash flows.
Money comes in through receivables. Payments go out to employees and suppliers. Companies move funds between accounts, send wires, originate ACH payments, deposit checks, borrow and monitor liquidity.
PYMNTS reported this summer that banks are expanding treasury platforms as corporate customers seek better ways to manage cash, payments, liquidity and working capital.
PYMNTS reported in July that KeyCorp said about 91% of its commercial loans were to customers that also used the bank for deposits, payments or capital-markets services. Among its commercial deposits, 82% of balances were held in operating accounts.
Regions said the proportion of its customers using treasury-management services had risen from 57% to more than 66% over roughly five years. The numbers are useful for a different reason: They quantify how much of commercial banking now occurs around the operating relationship rather than a single product.
Technology Expands What a Small Physical Network Can Do
Nano provides a smaller-scale example.
The bank’s remote deposit capture allowed business customers to deposit checks electronically. Its online services gave customers another way to interact with their accounts, while treasury capabilities covered payment functions businesses use as part of normal operations.
A commercial bank no longer needs a branch visit for every interaction that makes up a business banking relationship. Technology can connect the bank to a customer’s receivables, payments and cash-management processes throughout the business day. In this case, the physical location survived under a different name. The deposit relationships moved with it.
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