Pub. 10 2021 Issue 3

11 Fall | 2021 Plug the Leak Many portfolio managers are now focused on limiting further extension risk. That should not be terribly difficult to do, as most securities that have any seasoning to them have already been repriced to a longer expected maturity. Prepayment “speeds” have slowed from their peaks in the spring, and most models are predicting relatively consistent speeds for the near future. Nonetheless, not all MBSs are created equally. Collateral with 10- to 20-year finals typically can continue to prepay with some consistency even if interest rates rise. Of course, the scheduled principal repayments will be much greater for shorter pools than for 30-year pools, independent of prepays. A variation on this theme is to buy “structure,” which usually means a CMO. Recently issued CMOs have low pass-through rates (“coupons”) relative to the borrowers’ rates on the underlying collateral. This allows investors to keep their book prices closer to par, which will preserve book yields if prepayments were to kick back into high gear. Bond Accounting Solution ICBA Securities’ exclusive broker, Vining Sparks, provides state-of-the-art bond accounting services for nearly 400 community banks at competitive prices. For more information, contact your Vining Sparks sales rep. Q4 Economic Update ICBA Securities and Vining Sparks will produce their next Economic Outlook webinar on Oct. 14 at 10 a.m. Central. Economists Craig Dismuke and Dudley Carter will discuss monetary policy, tapering and the economy’s emergence from the pandemic. Visit icbasecurities.com to register. One hour of CPE credit is offered. We Are All About You. YHB has a team of dedicated professionals who specialize in providing expert services to community banks. They have committed their entire career to helping banks thrive and no one has more experience than your YHB team. We are relentless in our pursuit of providing you the resources and personalized service you deserve. At YHB, we knowwhat it takes to help you succeed because we know community banks . Internal Audit | External Audit | IT Controls & Governance | Tax Services Never settle for less. Choose the experts at YHB. Jim Reber jreber@icbasecurities.com is president and CEO of ICBA Securities, ICBA’s institutional, fixed- income broker-dealer for community banks. So, there you have a revisiting of the portfolio changes during 2021. By being on top of the changing complexion of your community bank’s investments, you can minimize your disappointments. Avoiding the constant sorrow of portfolio management – with apologies to the Soggy Bottom Boys – can be your milestone accomplishment of the year.