In its Semiannual Risk Perspective, the OCC said strategic risk remains high as banks consider business model changes and face revenue challenges.

This was the OCC’s number one risk concern! Rising interest rates pose a challenge to bank revenue as mortgage lending slows and C&I lending lags the economy. In fact if real wage growth continues the Fed may raise interest more than twice this year.

What’s the answer? Careful planning. There are a number of low risk alternatives to grow revenue in community banks.

First, focus on existing customers. Selling more of what you have to customers already on the books is much easier than developing new products or selling to new customers.

Second, carefully review your trade area. Are there gaps in branch coverage near customers similar to those you service? What’s the relative growth rate in population, income, and employment across your market?

Third, fee income growth. When you grow revenue without growing the balance sheet you avoid a number of risks. Are you maximizing fee income? Are there new services that would appeal to customers in your market? I think more elaborate safe deposit is an obvious one.

All of this work is more effective when it’s included in a comprehensive strategic planning exercise. Organizing the plan means you’re much more likely to execute it effectively and as a byproduct you have something to show to the OCC when they ask about your strategic risk.