Independent Banker - September 2021 - 37

Next: Best practices for your bank's blog 
analysts like Vining Sparks, ICBA
Securities' endorsed broker-dealer,
can assist sellers in identifying
marketable portions of a loan
portfolio, including an estimate of
the secondary market value and
the pros and cons of retaining or
releasing the servicing of the loans.
Blinders off
Once a package of loans has been
identified for an originator to sell,
the agent will assist in locating
several prospective purchasers.
It's not unusual for a portfolio of
$20 million to be distributed among
four different community bank
purchasers. The purchasers, for
their part, and to their satisfaction,
are usually able to review each loan
file prior to settlement.
It's common for them to have some
latitude in picking loans that are
favorable for their market footprint.
I've also heard from loan investors
that examiners are generally
accepting of this strategy, especially
if the buyer can demonstrate that
due diligence was performed preFalling
loan-to-deposit ratios
Commercial banks up to $1 billion in assets
1,000
100
200
300
400
500
600
700
800
900
June 19 Sep. 19 Dec. 19 March 20 June 20 Sep. 20 Dec. 20 March 21
Source: FDIC
purchase and the loans meet the
buyer's own underwriting criteria.
Popular demand
Several factors are at play that are
increasing the number of community
banks willing to buy another
institution's loans. First, traditional
loan demand remains spotty at best
and, as mentioned previously, many
banks have an overabundance of
deposits that need to be put to work.
For another, buying loans can be a way
for the purchaser to effi ciently diversify
its geographic or product risk. And
credit quality nationally has remained
astonishingly solid, so possibly the
most obvious downside is within
tolerable limits.
Education on Tap
Webinar series resumes
ICBA Securities and Vining Sparks will host their next segment of
the 2021 Community Banking Matters webinar series on Sept. 14
at 10 a.m. Central. Justin Sparks and Dennis Porcaro will present
their popular Municipal Market Update. Visit icbasecurities.com to
register. One hour of CPE credit is off ered.
Quarterly bank industry update
Vining Sparks' Marty Mosby will present his quarterly Bank Advisory
and Strategic Services webinar on Sept. 23 at 10 a.m. Central. Bank
profitability, industry risk and the M&A environment will be discussed.
Visit viningsparks.com to register.
Of course, there wouldn't be a
secondary market for nonconforming
loans unless they had higher yields
than alternatives, which includes
investment securities. That is certainly
the case at the moment. There is
a wide range of possible returns,
determined by average lives, collateral
and servicing arrangements, but it's
not uncommon for a high-quality
loan package to have 150 basis points
(1.5%) higher yield than a comparable
bond. Secondary loan purchases can be
a viable strategy for community banks
seeking to build out a more complete
balance sheet. 
Loans
Deposits
64%
66%
68%
70%
72%
74%
76%
78%
80%
82%
LTD%
Jim Reber, CPA, CFA (jreber@
icbasecurities.com), is president
and CEO of ICBA Securities, ICBA's
institutional, fixed-income brokerdealer
for community banks
independentbanker.org Q 37
$ in billions
Loan-to-deposit %
http://www.icbasecurities.com http://www.viningsparks.com http://www.independentbanker.org
Independent Banker - September 2021

Table of Contents for the Digital Edition of Independent Banker - September 2021
