Since we started seeing Halloween decorations in August, I felt it was high time we started thinking about the holiday season. More specifically, as it relates to community banking. And still more specifically, about a checklist for the balance sheet. There are some seasonal items that bear attention prior to, and immediately after, year-end. So let’s take a look at what may be on the radar for the fourth quarter. GAIN/LOSS HARVESTING I have the same access to industry-wide bank performance reports that any of you do, and I also make it a point to ask bankers how their years are going while traveling the country. The numbers and the commentary have been in sync this year, which isn’t always the case. It sure looks like 2025 is going to conclude favorably for community banks in general. By extension, that means a lot of you are going to be ahead of budget. That happy dynamic will naturally lead management teams to consider options for fine-tuning their earnings. There are some current variables that give bankers a lot of flexibility in timing their income recognition. For example, the average bond portfolio has a market loss of about 5%, which is the lowest percentage since March 2022. This means that some individual positions have gains, and some have losses. So there are probably some combinations of sale candidates that can produce the desired amount of realized income/loss. A friendly reminder: If your bank is looking for gains, make sure they are not from tax-free bonds. This brings up a related activity … SBA SECONDARY MARKET The Small Business Administration’s flagship 7(a) program set a record of $37 billion of closed loans in fiscal 2025. This means more banks have more SBA products in their loan portfolios than ever, and the guaranteed portions (usually 75%) are probably the most liquid loans on a bank’s balance sheet. They can quickly be sold to one of the consortium of SBA poolers at substantial gains. Because the guarantees are always going to demand a premium in the secondary market (due to their full-faith-and-credit status and floating rate structure), many sellers will wait until the fourth quarter to sell, when the bank’s annual earnings are coming into focus. Inside scoop: The poolers are usually besieged with bid lists as the last quarter progresses, so most reduce their bids to smooth out their purchase commitments. Some years, it takes until February for market indigestion to subside. So the suggestion here is to sell your Making a List, Checking It Twice Year-End Is Approaching. Here Are Some Seasonal Reminders. By Jim Reber, President & CEO ICBA Securities, ICBC Preferred Provider and ICBC Associate Member 16 | INDEPENDENT REPORT
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