PARTICIPATION OR SYNDICATION For banks that want to increase their return on assets and diversify their portfolios with larger business clients, one of the first questions is which model to use: a participation or syndication. While they are similar, they do have some unique characteristics: • Participation: Several banks can partner in a participation agreement, but all the work goes through the lead lender, who works directly with the borrower. The participants buy shares of the loan from the lead lender, so borrowers may not know who the other participants are. If the loan defaults, only the lead lender can deal with the borrower. There are a number of ways to join a loan participation. PCBB offers a loan participation product for buying and selling loan participations. • Syndication: Two or more banks can join together in a loan syndication and make a loan to a borrower. The syndication agreement sets out the relationship rules for the lenders, and an administrator services the loan. The borrower would work with each syndicate lender for the portion of funding that the lender supplied, and any decisions regarding the loan are made through the administrator. Which form a bank chooses depends on its own situation, needs and policies. It may also be subject to opportunities and what terms borrowers will accept. Not all borrowers are keen on taking out a loan that has multiple banks as sponsors, but according to CCIM Institute, a community real estate education organization “with properly drafted agreements, there is very little practical difference in the customers’ borrowing experience under either format.” New opportunities in the large commercial loan market can be attractive to community banks due to the possibility of expanding their geographic reach, gaining new clientele, and reducing concentration risk. To get over the hurdle of loan size, community banks may need to consider loan syndications or participations to secure these larger business customers and potentially gain their loyalty and future business. To continue this discussion or for more information, please contact PCBB SVP & Northwest Regional Manager Matt Helsing at mhelsing@pcbb.com or visit www.pcbb.com. Dedicated to serving the needs of community banks, PCBB’s comprehensive and robust set of solutions includes cash management, international services, lending solutions, and risk management advisory services. Recognized by American Banker as one of the “Best Banks to Work For” in 2022. Anne Benigsen President SOCIAL ENGINEERING NETWORK MONITORING BY COMMUNITY BANKERS FOR COMMUNITY BANKS www.acivitas.com VULNERABILITY SCANS PENETRATION TESTING Chris Tuzeneu VP – Information Security INDEPENDENT REPORT | 29
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