Together, let ’s make it happen. Craig McCandless Call me at 406.850.3790 Based out of Billings, Mont. serving Montana, Wyoming and Idaho Why choose Bell as your bank’s lending partner? Leverage our large lending capacity, up to $20 million on correspondent loans. Our lending limits are high enough to accommodate what you need, when you need it. We do not reparticipate any loans. ■ Commercial & ag participation loans ■ Bank stock & ownership losses ■ Bank building financing ■ Business & personal loans for bankers EQUAL HOUSING LENDER Member FDIC 28934 Offset to falling rates Maybe the biggest benefit to owning bonds at prices less than 100 is that their returns will be inversely related to general market rates. When interest rates fall, the “optionality” comes “in-the-money,” and some bonds get called away. To the extent they’re owned at discounts, their yield-to-call is enhanced. This is true for all bonds: agencies, MBS and even munis at discounts. Further, since most all community banks have interest rate risk profiles built for rising rates, investments that out-perform as rates fall can help offset the margin compression likely to occur. Perhaps best of all, discount bonds’ yields will automatically (magically?) increase as interest rates decline, without the need to sell the investments. All told, owning bonds at prices less than par can help bring stability to the cash flows while lessening exposure to falling rates. It can also feed the needs, however subliminal, to get a bargain price while improving future chances for unrealized gains. Paradoxical? I’d call it logical. Jim Reber (jreber@icbasecurities.com) is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks. Continued from page 14 The Community Banker 15
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