Pub. 2 2021 Issue 3

9 ISSUE 3 | 2021 Jim Reber, CPA, CFA is the president and CEO of ICBA Securities, ICBA’s institutional, fixed- income broker-dealer for community banks. Connect with Jim jreber@ Reality: Qualitative features of certain MBS pools that can limit the borrowers’ ability to refinance. Prepayment friction can occur when the average principal balances in a pool are lower than conventional loans (e.g., maximum $125,000) or when the properties are in states that impose onerous taxes in a refi (e.g., New York or Florida). Rev Could be: A verb meaning to increase a motor’s speed by accelerating while the clutch is disengaged. Reality: As an adjective, it’s short for Revenue, a type of municipal bond. Munis are repaid via two main tax streams. For General Obligation (GO) bonds, ad valorem property taxes are usually the source. For Revs, income from some specified service or activity (e.g., utilities, parking, tolls) is designated for debt service. SOFR Could be: A New Yorker’s pronunciation for a long, upholstered piece of furniture used for seating. Reality: An acronym for Secured Overnight Financing Rate. 2021 may be the year that the preferred index for interest rate swaps in the U.S. will finally transition away from the London Interbank Offered Rate (LIBOR) and into SOFR, with an assist from banking regulators. There is usually a degree of correlation between SOFR and LIBOR. FMSI 913.955.3355 FMSI is a small business founded and located in Kansas, specializing in assisting community banks to succeed, a mission consistent with core CBA values. We have partnered with community banks for nearly 25-years providing core advisory services including asset/ liability, investment, and liquidity management. FMSI advisors actively assess market conditions and bank balance sheets of different size, mix, and capital levels. Market conditions are constantly changing presenting opportunities and challenges for CBA member banks. Interest rates are increasing for the first time in nearly a decade and now is a perfect time to partner with a trusted, industry leader. Establishing an FMSI relationship provides confidence your bank is optimizing the balance sheet, deploying necessary strategies, maximizing profitability, and managing balance sheet risks. FMSI is a Kansas CBA Endorsed Provider TAP Could be: A pressurized valve that dispenses malt beverages. Reality: A Federal Home Loan Bank program to issue a series of bullets (see Bullets) in a specified window of time without the need to submit new registrations for each bullet. The result is that a given TAP issue is likely to have a larger total size and improved liquidity. Close Could be: The final distribution of all of the proceeds of a bond issue to end investors. Reality: The end of this column. 