“This is Jim Reber.”
“Hi Jim, Charlie Brown from Community Trust Bank calling. Do you have a minute to chat?”
“You bet, Charlie! Good to hear from you. Tell me how your 2025 concluded and what your plans for 2026 look like.”
“Somehow, we once again beat the budget, and we had an ambitious budget. I’m proud of our team, and we also had some good luck. Loan demand for most of our products, except for mortgages, was up quite a bit. And, as it’s been a full five years since the pandemic and near-zero rates, a lot of our five-year balloons finally—finally—reset higher.”
“Sounds to me like your banking fundamentals are all in place. What’s lucky about that?”
“Well, after two-plus years of an inverted yield curve, it feels lucky to have some slope. We’re actually able to boost our lending rates some and drop our deposit rates without causing any runoff. We saw some margin expansion and balance sheet growth. I think even more than that, our past-dues are nearly nonexistent. So, we’re counting our blessings.”
“I’m happy to tell you, Charlie, that you sound like a lot of other community bankers I’ve talked to lately. It seems the industry is doing great. And if regulatory relief plays out like ICBA hopes it does, it just might be fun to run a bank over the next couple of years.”
“Jim, this brings me to what I’m calling about. We have two major events that are going to take place in 2026. We have been accumulating a lot of capital in the past couple of years, and as I’ve said, our balance sheet is rock solid. You mentioned regs changing, and the Community Bank Leverage Ratio [CBLR], which we’ve opted into, is giving us room to grow. We feel like we can responsibly add some assets, both loans and bonds, and finance them with a combination of wholesale funding options. Does that sound crazy?”
“No, sir, it does not. It sounds responsible. But have you addressed what this is going to do to your interest rate risk? The reason I ask is that the yield curve, as you’ve correctly mentioned is no longer inverted, is still not very steep. You’re probably going to be adding some longer assets and shorter liabilities. Am I right?”
“Right you are. But we have been asset-sensitive since 2024 when the big deposit hiccup played out after Silicon Valley Bank’s meltdown. So, we’re actually improving our asset/liability profile. And since a portion of the assets we’re adding will be bonds, what do you like?”
“Charlie, this isn’t terribly novel, but good old-fashioned agency MBS [mortgage-backed securities] have some advantages. The president’s directive for Fannie and Freddie to buy some product will run its course in a couple of months, so yields should stay market driven. Supply is sufficient, liquidity is good and prepayments shouldn’t be a factor. Corporate bonds don’t seem to have enough spread to give them appeal, and the tax-free sector is still for retail buyers.”
“All good thoughts. We are inclined to use several different wholesale sources for the financing, and our forecast is to see a couple of rate cuts this year, so initially we may be using some money-market equivalents. I might ask you to weigh in on the leverage before we pull the trigger.”
“Glad to help. Now, you mentioned you had two major events this year. What can you tell me about the other one?”
“I’m retiring. It’s been a great run over the last couple of decades, and the time has come. With earnings and capital and credit quality all trending positively, I’m comfortable that the next generation of management is going to take the bank onward and upward. I have a couple of months to go, but I wanted you to know I appreciate all that ICBA and ICBA Securities has done to help grow the bank and keep us independent.”
“Well, interestingly, I’m nearing retirement, too. You’re right about the great run. I’ve been privileged to meet the best of the best bankers on earth, and I’m sincere in saying I’ve learned as much from them as they have from me. I’m grateful I’ve had an employer that’s given me a lot of latitude to travel and see the members on the road, and I’ve been put in print many times. I’m always humbled to go to conventions and have bankers introduce themselves to me. I, too, will be around for a while to help get our new endorsed broker-dealer, The Baker Group, situated with ICBA and our state partners, and I have every expectation they will do a great job helping banks like yours continue their success. They’ve got the products and services and the education offerings that Community Trust Bank needs.”
“I’m now doubly glad I called. Thanks for your advice and support through the years. And we’re going to keep relying on ICBA Securities.”
“Charlie, congratulations on a terrific career in a terrific industry. I’ve thoroughly enjoyed our chats. Here’s to your long and healthy retirement.”