Squeeze Play This combines several of the tactics already mentioned in this column. The batter will attempt a bunt simultaneously with a runner attempting a steal of home. If the ball is successfully put in play by the hitter, the run scores, and the hitter is credited with a run batted in. For a community bank, its corollary is a leverage transaction. An institution with adequate capital can purchase assets simultaneously with adding the related debt that results in higher earnings, an acceptable risk profile and improved return on equity. Just like baseball’s squeeze play, a lot of care must be exercised to improve the chances of this strategy having an ideal outcome. And finally … The Long Ball This is not a recommendation! The long ball, aka the home run, is the single most gamechanging play in the sport. Home runs win games, home run hitters are revered and home run kings have fat contracts. Lost in the glory is that many of the long ball hitters strike out frequently. If a community bank wants to ramp up its returns by increasing its risk, either by buying long durations, uncertain cash flows or marginal credit quality, it can expect some swings and misses. As Ernest Lawrence Thayer wrote back in 1888: “… there is no joy in Mudville — mighty Casey has struck out.” Batter up! Jim Reber (jreber@icbasecurities.com) is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks. The Show-Me Banker Magazine | 25
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