Pub. 1 2021 Issue 6

December 2021 | 21 I think the banking regulators in the 17th century (and the 21st, for that matter) would agree. Lending is generally good. MIKE HART Account Executive - MO, AR, KS mhart@myservion.com myservion.com We provide financial institutions and borrowers the support they need to reach their financial goals. Re-envision your mortgage strategy. partnership channels Correspondent Retail Wholesale Delegated Conventional FHA, VA, USDA Jumbo/Non-Conforming Quality control Contract processing Contract closing Servicing Appraisal review mortgage products additional services Servion Mortgage is a DBA of Servion, Inc. NMLS #1037 Equal Housing Lender Jim Reber (jreber@icbasecurities.com) is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks. community banks have purchased securities with much more price volatility than they’ve ever purchased before. While this doesn’t necessarily foretell a massive market value drop, the collective postures of bond portfolios have more exposure to rising rates than usual. The good news is that credit risk, as it relates to both loan and bond portfolios, remains quite solid. “Fortune brings in some boats that are not steered.” — Cymbeline In what I contend is a triumph of capitalism, the broker-dealer industry has pivoted and produced a lot of bond structures that either didn’t exist in 2017 or whose supply was so minimal that they were almost impossible to find. Two that are more visible are taxable municipal bonds, and “prepay friction” mortgage-backed securities (MBS). Taxable munis comprised 8% of newly printed supply in 2017; last year, that share had grown to fully 30%. Prepay friction MBS are being effectively employed to normalize cash flow and help maintain net interest margins. “I like not fair terms and a villain’s mind.” — The Merchant of Venice I think the Bard suggests that anything that seems too good to be true … well, you know the rest. Where this hits home (or the office) in the recent past was the roll-out of the aforementioned PPP program. Initially, many community banks were skeptical of the terms and of the SBA’s ability to administer the ambitious plan. As it turns out, ICBA members were very pleased with the outcome, both with community banks’ ability to cultivate new business and with the fee income that was realized. And finally … “The lady doth protest too much, methinks.” — Hamlet Apparently, bank examiners were a thing in 17th-century England, too. ■