Independent Banker - April 2021 - 35

Next: Are real-time international payments possible? 
at risk, one of the more important
measurements of interest rate
exposure. This calculation quantifi es
the dollar and percentage change to
capital in changing rate environments,
typically plus 3% and 4%.
CPR
Could be: Cardiopulmonary
resuscitation, an emergency
procedure to restore one's heartbeat.
Reality: An acronym for conditional
prepayment rate, the means by
which models like BAM (see above)
are quantifi ed in yield tables.
CPR assumes a certain number
of prepayments occur in a given
forecast yield environment and
displays these amounts as an
annual rate.
Participants in the
Education on Tap
2021 Bond Academy
registration opens
ICBA Securities and its
exclusively endorsed broker,
Vining Sparks, present
the ICBA Bond Academy
April 19-22. This virtual
event teaches portfolio
management fundamentals
and off ers up to eight hours
of CPE credit. To register for
this complimentary program,
visit icbasecurities.com
Webinar series continues
ICBA Securities and
Vining Sparks present
the next webinar in the
2021 Community Banking
Matters series on April 13
at 10 a.m. Central. Rick
Redmond will discuss LIBOR
Update: Are You Ready? Visit
viningsparks.com to register
for either event. One hour of
CPE credit is off ered for each.
Friction
Could be: Resistance to motion
of one object moving relative
to another.
Reality: Qualitative features of
certain MBS pools that can limit
the borrowers' ability to refi nance.
Prepayment friction can occur when
the average principal balances in a
pool are lower than conventional
loans (e.g., maximum $125,000) or
when the properties are in states that
impose onerous taxes in a refi (e.g.,
New York or Florida).
Rev
Could be: A verb meaning to
increase the speed of a motor by
accelerating while the clutch is
disengaged.
Reality: As an adjective, it's short
for Revenue, a type of municipal
bond. Munis are repaid via two main
tax streams. For General Obligation
(GO) bonds, ad valorem property
taxes are usually the source. For
Revs, income from some specifi ed
service or activity (e.g., utilities,
parking, tolls) are designated for
debt service.
SOFR
Could be: A New Yorker's
pronunciation for a long, upholstered
piece of furniture used for seating.
Reality: An acronym for Secured
Overnight Financing Rate. It looks
like 2021 will be the year that
the preferred index for interest
rate swaps in the U.S. will fi nally
transition away from the London
Interbank Off ered Rate, or LIBOR,
and into SOFR, with an assist from
fixed-income market
... are quite fond of
creating acronyms and
nicknames to define
these new terms. In
some cases, they're
clever, logical and easy
to recall. In other cases,
they're curious.
banking regulators. There is usually a
degree of correlation between SOFR
and LIBOR.
TAP
Could be: Pressurized valve that
dispenses malt beverages.
Reality: A Federal Home Loan Bank
program to issue a series of bullets
(see above) in a specifi ed window
of time without the need to submit
new registrations for each. The
result is that a given TAP issue will
have a larger total size with likely
improved liquidity.
Close
Could be: The fi nal distribution of
all of the proceeds of a bond issue to
end investors.
Reality: The end of this column. 
Jim Reber, CPA, CFA (jreber@
icbasecurities.com), is president
and CEO of ICBA Securities, ICBA's
institutional, fixed-income brokerdealer
for community banks
independentbanker.org Q 35
http://www.icbasecurities.com http://www.viningsparks.com http://www.independentbanker.org
Independent Banker - April 2021

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