This makes sense for any financial institution unless it has no borrowing capacity, is leveraged as far as is feasible, or has exposure to rising rates. By all indications, most community banks have room on all these fronts. Each time the bank pays down borrowings with existing cash flow, the bank is removing low-yielding bonds, relatively high-cost borrowings and is de-levering. All the while, it has greatly boosted its overall bond portfolio yield and hasn’t booked any losses on sales. And at the end of this two- to three-year period, voilà! The bank owns a high-yielding set of bonds, hopefully with unrealized gains, free and clear. Of course, this isn’t to say that bonds purchased early in 2023 won’t have some dip in their values, at least initially if the FOMC continues to push rates higher. Generally, though, 5% yields have proven to be quite attractive over longer periods. A little creativity can help get those five percenters on board. That’s something even a professional joke writer can’t poke fun at. ■ Jim Reber (jreber@icbasecurities.com) is President and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks. ICBA Securities/Stifel 2023 Road Show ICBA Securities and its exclusive broker Stifel are presenting half-day conferences in several locations in upcoming months. We will be in Boston, MA, on May 2; Kansas City, MO, on May 10; Denver, CO, on June 21; and Atlanta, GA, on June 27. There is no cost to attend, and CPE credit is offered. To register, visit icbasecurities.com. Economic Insight Live Dr. Lindsey Piegza, Stifel’s Chief Economist, presents her next quarterly economic outlook webcast on April 6 at 12 pm CST. For more information, contact your Stifel sales representative or Jim Reber. 2023 Issue 2 | 21
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