When middle market exporters and importers-companies with annual sales in the $20 to $300 million range-look for the right trade bank these days, it can sometimes be a daunting exercise.

Diamond Walnut, a cooperative in Stockton, California that sells over $100 million a year in processed nuts to Europe and Japan, finally decided the time for a change had arrived; its banking relationship of 50 years had become a poor fit.

John Santillano, Diamond's credit and banking manager, found that the larger the bank had become, the more he and his staff felt lost in an institutional maze, more like "a number than an individual." But, while the old bank's interest had waned, plenty of others were eager to bid for its business. "We narrowed it down to four or five," he reports.

Diamond Walnut finally chose Bank of the West, a California regional middle market lender that has made trade a priority. "We were interested in their ability to offer a package of services, including treasury management, foreign exchange, and collections, as well as some credit."

The bank is owned by BNP-Paribas, a large French institution. "We see BNP's big overseas presence as a selling point," Santillano said. Diamond is sometimes paid in euros, and Bank of the West-BNP has the expertise to manage foreign exchange exposure very skillfully, he added.

Otis McAllister, a San Francisco exporter-importer of processed-packaged foods ($70 million a year), tells a comparable story. Its former bank was helpful, but too small for some of the trade services it requires, and "the large banks aren't interested in our business," says Rob Westerlund, Chief Financial Officer.

His search led to Union Bank of California, which has a long history in trade services, and focuses on middle market importers and exporters. Union Bank is providing collections and payments, as well as working capital (Otis has a revolving line that rolls over each month). The bank works with the U.S. Export-Import Bank on the credit line.

San Antonio Trade Group, in Texas, also found it necessary to search for a good bank "fit" for its equipment exports (it sells a lot of construction equipment in Mexico). It chose RZB Finance in New York, a finance company unit of RZB Bank, an internationally active Austrian institution that specializes in delivering U.S. Ex-Im Bank guarantees and insurance programs to U.S. middle market exporters focused on key emerging markets.

Behind these experiences is a towering trend: the continuing consolidation among commercial lenders. Fifteen years ago, the U.S. had over 14,000 banks; today they number fewer than 9,000.

And, choosing from that earlier roster, middle market traders could usually find banks that were interested in their business, and capable of delivering what they needed. It's true, this was more the case in the trading cities along the coasts, but long-distance relationships also were available.

Now, the march of consolidation has often (but not always) meant that the enlarged institutions have abandoned smaller and middle sized firms, often in both their domestic and international activities. And, ironically, in the past the largest banks had the most sophisticated trade know-how and dominated the field. Nowadays, however, they often deal only with a narrow clientele: sizable corporate customers and hefty minimum size transactions.

But, there's good news, along with the bad out there, for the middle market. For one thing, consolidation has given more reach to some banks that have chosen to stick with middle market firms, not abandon them. For another, some regional lenders or specialty institutions are now owned by foreign-based banks that have made trade a top priority.

Union Bank of California, for example, combines a middle market focus in California, Oregon, and Washington with the reach and resources of its parent, Bank of Tokyo Mitsubishi, one of Japan's largest (Bank of Tokyo was originally created to serve Japanese trade).

The California bank has 18 overseas offices, very unusual for a regional institution, but also relies occasionally on its parent's network. Regarding trade, "we have by design a middle market focus," says Walt Trask, Regional Vice President for global trade services.

Bank of the West is now wholly owned by Bancwest Corporation (also the parent of First Hawaiian Bank), which is owned by BNP-Paribas in France, one of Europe's largest, and a top contender in global trade. BNP has divided the U.S. market into two segments: it handles the trade deals of the large corporations, while Bank of the West pursues the middle market. In 2003, BNP-Bank of the West was the third most active user of Export-Import Bank programs.

William Snyder, Senior Vice President and manager of the trade department, notes that Bank of the West had traditionally focused on importers, "but for the past two years we've been going after exporter business aggressively."

At RZB Finance, in New York, Vincent Herman, Vice President, stresses: "Our real market niche is middle market companies that don't get adequate export support from their banks." He's on the road much of the time looking for equipment and machinery deals that need getting done with Ex-Im Bank programs.

Meanwhile, on the good news front, M&T Bank, a large multi-state lender, bought Allfirst Bank, a leading trade player, last year, with results that have been a big plus for middle market traders. Not surprisingly, the deal was followed closely by the Ex-Im Bank in Washington, which had relied on Allfirst to deliver its programs.

The two banks that meshed brought separate benefits. M&T, in Buffalo, NY, had a large branch network, while Baltimore's Allfirst had been a top participant in Ex-Im insurance and guarantee facilities for years. The combined $50 billion (assets) institution now handles the underwriting on its export equipment deals and working capital finance in Baltimore, while marketing trade services throughout the enlarged network.

Significantly, M&T chose to retain Allfirst's strategy of doing export business with companies that are not core customers (what banks like to call "one off" deals). This had made it possible for Allfirst to mount a nationwide business. But, with a huge in-house customer roster, the combined bank will now be doing a balance of export transactions with both core and non-core customers.

And, for exporters focused on Latin American markets, Miami hosts several banks that are looking nationwide for equipment deals on a "one off" basis (just as long as Ex-Im Bank will cover most of the risk).

These are smallish institutions, with mostly Latin American shareholders (not necessarily banks) that have the know-how and the international networks to handle a growing volume of business. They look for transactions among U.S. exporters as well as on the buyer side in Central and South America.

In 2003, three were active participants in Ex-Im Bank programs, using the U.S. agency's guarantees and insurance to support sales of construction machinery, hospital facilities, and telecom equipment. Hemisphere National Bank did 35 deals with Ex-Im, Plus International Bank did 37, and Pinebank did six.

At the same time, many middle market traders turn to specialty finance companies rather than to banks for their requirements. These are small firms, created by ex-bankers, that do nothing but trade business.

In Richmond, Virginia, Ex-Im Trade Finance, run for 20 years by David Shepardson, handles imports and exports, delivering working capital and arranging letters of credit and other payments.

In Los Angeles, World Trade Finance, run by Berndt Hermann for 12 years, focuses on export working capital, and works closely with both Ex-Im Bank and the Small Business Administration.

The bottom line: middle market traders just have to spend more time finding the right "fit" with their banks. The right institutions are out there, and they are trying to find their target exporters and importers. It's a fast-changing environment. We'll keep you posted on who they are, and what they are doing. Stay tuned.