Independent Banker - June 2022 - 18

PORTFOLIO
creates opportunities to attract new
customers, build relationships and
bring new deposits to the bank and
cross-sell products.
Brentwood Bank in Bethel Park,
Pa., generated steady residential
mortgage volume in 2020 and 2021
with roughly 200 loans per year
totaling $55 million, which is about
50% more than the volume it did
in 2019. Despite the slowdown in
market activity, the community bank's
strategic plan calls for ramping up
residential mortgage loans within its
loan portfolio.
Two of the areas Brentwood Bank is
focused on to generate new business
are construction loans and jumbo
loans. Thomas Bailey, president
and CEO at the $850 million-asset
community bank, notes that once
you get into either type, it can be a
more complicated process. " We try
to help customers understand some
of the things they need to be thinking
about, " he says. " Being able to sit
down and partner with the customer
can be a really important part of the
relationship for some borrowers. "
Bailey is quick to point out that
Brentwood Bank does not compromise
on credit. However, it can assist
borrowers on deals where there are
some unique aspects involved, such
as financing a home that has a well on
the property or a home with a lot of
acreage. " Because we do warehouse
some loans, " he says, " we can do some
things that some of the online lenders
aren't interested in because they don't
fit the Freddie Mac or Fannie Mae
guidelines specifically. "
Community banks can differentiate
themselves in working with borrowers
on deals that don't fit into the typical
box, adds Stovall. For example,
mortgages are underwritten based
on income, and if the income is not
adequate, an underwriter from a big
" A lot of those nonbanks are competing strictly
on price, and as a small community bank,
we can't do that. We have to compete on
service. We have to be faster, and we have
to be more responsive. "
-JOSH PREJEAN, BANK OF ZACHARY
bank might not care if a client has a
high level of savings. " That's where
a community bank can work with a
customer by looking at things a little
differently, " he says. Other examples
might be high-net-worth customers
who might be looking to obtain a
mortgage on a vacation home or an
investment property. Those situations
are more challenging to underwrite
in the post-Great Recession market.
" A community bank can come in and
look at that with a more concierge
type of approach, " Stovall adds.
Carving out a niche
in construction
Some community banks are finding
opportunities to provide construction
loans to customers building homes
QUICK STAT
$4.4
trillion
The amount of annual mortgage
origination surpassed this figure
in both 2020 and 2021
Source: Fannie Mae
18 Q ICBA Independent Banker Q June 2022
in the supply-constrained housing
market. According to the U.S. Census
Bureau, housing starts on 1-4-unit
homes jumped 17% year-over-year to
1.27 million in February.
" Doing the construction loans has
been a way for us to increase our
mortgage business, without having to
go out and compete directly with the
nonbanks, " says Prejean. About 60%
of Bank of Zachary's $182 million
loan portfolio is secured by loans
to 1-4-unit homes. The shortage of
existing for-sale homes and rising
home prices is driving construction
building in the Baton Rouge market.
For example, a house that sold for
$300,000 a few years ago now might
sell for $450,000, notes Prejean.
" People are getting a little bit of
sticker shock and saying, 'If I'm
going to pay $450,000 on this house,
I might as [well] just build my own
house and have it be perfect and
brand new and exactly what I want,' "
he says.
However, construction loans tend
to be more complex than a purchase
or refinance, which is where lender
expertise can make a difference, notes
Prejean. For most borrowers, building
a home is a new experience. People
don't realize that Bank of Zachary
doesn't just give them all the money
Independent Banker - June 2022

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