Independent Banker - February 2024 - 30

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step for banks to take, however.
" You're totally dependent on what
you're seeing on paper from what
the lead banker in the participation
has done, " says Chris Cole, executive
vice president and senior regulatory
counsel at ICBA. And for many
community banks, they don't need
to pursue participation loans when
their existing borrower demand has
remained relatively stable, he adds.
Developing best practices
As with any loan, a bank needs
to conduct its own underwriting
and credit assessment to guide
decision-making.
" After the closing, a participation
loan that is on our books is treated
just like a loan that we originate
ourselves, as far as keeping up with
financial statements, tax returns and
things of that nature, " says Gore. The
bank needs to monitor that loan to be
aware of any variation in the credit
quality to identify changes in risk
factors. " If we have a $1.2 million
participation piece on our books, the
examiner is going to look at it just
like a $1.2 million perm loan that we
originated ourselves, " he adds.
One of the tools that can help
participation loans go smoothly is a
document sharing portal. It's helpful
to have a process to track all the
different documents, as well as a
shared site where all parties can post
and access various documents. In
addition, it's important to have good
communication and set expectations
so that everyone is on the same page
regarding roles, responsibilities,
pricing and fees and the overall
process, advises Native American
Bank's Smith.
We'll be at ICBA LIVE!
Investment Products and Solutions for
the Community Bank Market.
Visit us in Booth #931 at ICBA LIVE and discover how
we serve community banks with loan participations and
investment allocation needs.
At the end of the day, successful
participation lending comes down to
relationships. " It's a lot easier to work
in these situations where you already
know and have a relationship than just
a cold call to some other institution, "
Smith says.
In some cases, Native American
Bank might bring another bank into
a deal, and the hope is that banks
will call on them when they have an
opportunity. So, there is an underlying
sense of working together so it
isn't just a one-way street, he says.
" When we work with banks, we try to
encourage a reciprocal relationship. "
Beth Mattson-Teig is a writer
in Minnesota.
612.376.4000 | 800.328.4000 | colliers.com (find us under services)
Colliers Mortgage is the brand used by Colliers Mortgage LLC and Colliers Funding LLC.
Colliers Securities is a member SIPC/FINRA.
New digital platforms for participation lending
Some banks turn to fintechs to increase efficiency in participation
lending. Don Shafer, cofounder and chief evangelist of Quilo, a
digital lending and syndication platform, says some community
banks with excess funding capacity can build a loan portfolio with
the metrics, unit cost, efficiency and yield of a much larger financial
institution. " Any community bank that needs higher earning assets
on the balance sheet can do that without hiring anybody and without
impacting operations, " he says.
http://www.colliers.com
Independent Banker - February 2024

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