Independent Banker - March 2021 - 34
PORTFOLIO PORTFOLIO MANAGEMENT
The big " if "
General market munis have gained favor among community bankers.
By Jim Reber, ICBA Securities
T
his column has been several
decades in the making.
Historically, broker-dealers like
Vining Sparks that underwrite,
position and sell municipal bonds
to community banks have been
reluctant to promote general market
(GM) munis to their customers. Since
the creation of the bank qualifi ed
(BQ) muni market in 1986, banks
have mostly eschewed general
market munis.
However, over the past few years
or so, depositories have gradually
become more accepting of this sector
of the market, and its attendant risks
and benefi ts.
In 2021, with liquidity-rich
balance sheets and very low funding
costs, many community banks have
gone headfi rst into the deep end
with GM issues. There are some
compelling reasons for this. For one,
it expands the universe of available
bonds at a time when the overall
muni market has stalled out at
around $3.9 trillion-where it's been
for a decade. For another, an investor
can fi nd much larger block sizes than
are available with BQs. For another,
even when controlling for liquidity
and risk, GMs usually yield more
than BQs.
We'll examine why there has been
a noticeable shift in sentiment among
municipal bond investors.
Focus on funding cost
So what's the rub with general
market munis as it relates to
community banks? There are actually
several layers of " ifs. "
Let's go back to the basics of the
Tax Equity and Fiscal Responsibility
Act, or TEFRA, penalty. A bank is
required to add back to income,
when calculating its tax liability,
100% of the cost of funds it incurred
to fi nance its position in GMs.
However, if the organization's munis
34 Q ICBA Independent Banker Q March 2021
Independent Banker - March 2021
Table of Contents for the Digital Edition of Independent Banker - March 2021
Table of Contents
Independent Banker - March 2021 - Cover1
Independent Banker - March 2021 - Cover2
Independent Banker - March 2021 - Table of Contents
Independent Banker - March 2021 - 2
Independent Banker - March 2021 - 3
Independent Banker - March 2021 - 4
Independent Banker - March 2021 - 5
Independent Banker - March 2021 - 6
Independent Banker - March 2021 - 7
Independent Banker - March 2021 - 8
Independent Banker - March 2021 - 9
Independent Banker - March 2021 - 10
Independent Banker - March 2021 - 11
Independent Banker - March 2021 - 12
Independent Banker - March 2021 - 13
Independent Banker - March 2021 - 14
Independent Banker - March 2021 - 15
Independent Banker - March 2021 - 16
Independent Banker - March 2021 - 17
Independent Banker - March 2021 - 18
Independent Banker - March 2021 - 19
Independent Banker - March 2021 - 20
Independent Banker - March 2021 - 21
Independent Banker - March 2021 - 22
Independent Banker - March 2021 - 23
Independent Banker - March 2021 - 24
Independent Banker - March 2021 - 25
Independent Banker - March 2021 - 26
Independent Banker - March 2021 - 27
Independent Banker - March 2021 - 28
Independent Banker - March 2021 - 29
Independent Banker - March 2021 - 30
Independent Banker - March 2021 - 31
Independent Banker - March 2021 - 32
Independent Banker - March 2021 - 33
Independent Banker - March 2021 - 34
Independent Banker - March 2021 - 35
Independent Banker - March 2021 - 36
Independent Banker - March 2021 - 37
Independent Banker - March 2021 - 38
Independent Banker - March 2021 - 39
Independent Banker - March 2021 - 40
Independent Banker - March 2021 - 41
Independent Banker - March 2021 - 42
Independent Banker - March 2021 - 43
Independent Banker - March 2021 - 44
Independent Banker - March 2021 - 45
Independent Banker - March 2021 - 46
Independent Banker - March 2021 - 47
Independent Banker - March 2021 - 48
Independent Banker - March 2021 - 49
Independent Banker - March 2021 - 50
Independent Banker - March 2021 - 51
Independent Banker - March 2021 - 52
Independent Banker - March 2021 - 53
Independent Banker - March 2021 - 54
Independent Banker - March 2021 - 55
Independent Banker - March 2021 - 56
Independent Banker - March 2021 - 57
Independent Banker - March 2021 - 58
Independent Banker - March 2021 - 59
Independent Banker - March 2021 - 60
Independent Banker - March 2021 - 61
Independent Banker - March 2021 - 62
Independent Banker - March 2021 - 63
Independent Banker - March 2021 - 64
Independent Banker - March 2021 - 65
Independent Banker - March 2021 - 66
Independent Banker - March 2021 - 67
Independent Banker - March 2021 - 68
Independent Banker - March 2021 - 69
Independent Banker - March 2021 - 70
Independent Banker - March 2021 - 71
Independent Banker - March 2021 - 72
Independent Banker - March 2021 - 73
Independent Banker - March 2021 - 74
Independent Banker - March 2021 - 75
Independent Banker - March 2021 - 76
Independent Banker - March 2021 - Cover3
Independent Banker - March 2021 - Cover4
https://www.nxtbook.com/mspc/independentbanker/october2024
https://www.nxtbook.com/mspc/independentbanker/september2024
https://www.nxtbook.com/mspc/independentbanker/august2024
https://www.nxtbook.com/mspc/independentbanker/july2024
https://www.nxtbook.com/mspc/independentbanker/june2024
https://www.nxtbook.com/mspc/independentbanker/may2024
https://www.nxtbook.com/mspc/independentbanker/april2024
https://www.nxtbook.com/mspc/independentbanker/march2024
https://www.nxtbook.com/mspc/independentbanker/february2024
https://www.nxtbook.com/mspc/independentbanker/january2024
https://www.nxtbook.com/mspc/independentbanker/december2023
https://www.nxtbook.com/mspc/independentbanker/november2023
https://www.nxtbook.com/mspc/independentbanker/october2023
https://www.nxtbook.com/mspc/independentbanker/september2023
https://www.nxtbook.com/mspc/independentbanker/august2023
https://www.nxtbook.com/mspc/independentbanker/july2023
https://www.nxtbook.com/mspc/independentbanker/june2023
https://www.nxtbook.com/mspc/independentbanker/may2023
https://www.nxtbook.com/mspc/independentbanker/april2023
https://www.nxtbook.com/mspc/independentbanker/march2023
https://www.nxtbook.com/mspc/independentbanker/february2023
https://www.nxtbook.com/mspc/independentbanker/january2023
https://www.nxtbook.com/mspc/independentbanker/december2022
https://www.nxtbook.com/mspc/independentbanker/november2022
https://www.nxtbook.com/mspc/independentbanker/october2022
https://www.nxtbook.com/mspc/independentbanker/september2022
https://www.nxtbook.com/mspc/independentbanker/august2022
https://www.nxtbook.com/mspc/independentbanker/july2022
https://www.nxtbook.com/mspc/independentbanker/june2022
https://www.nxtbook.com/mspc/independentbanker/may2022
https://www.nxtbook.com/mspc/independentbanker/april2022
https://www.nxtbook.com/mspc/independentbanker/march2022
https://www.nxtbook.com/mspc/independentbanker/february2022
https://www.nxtbook.com/mspc/independentbanker/january2022
https://www.nxtbook.com/mspc/independentbanker/december2021
https://www.nxtbook.com/mspc/independentbanker/november2021
https://www.nxtbook.com/mspc/independentbanker/october2021
https://www.nxtbook.com/mspc/independentbanker/september2021
https://www.nxtbook.com/mspc/independentbanker/august2021
https://www.nxtbook.com/mspc/independentbanker/july2021
https://www.nxtbook.com/mspc/independentbanker/june2021
https://www.nxtbook.com/mspc/independentbanker/may2021
https://www.nxtbook.com/mspc/independentbanker/april2021
https://www.nxtbook.com/mspc/independentbanker/march2021
https://www.nxtbook.com/mspc/independentbanker/february2021
https://www.nxtbook.com/mspc/independentbanker/january2021
https://www.nxtbook.com/mspc/independentbanker/december2020
https://www.nxtbook.com/mspc/independentbanker/november2020
https://www.nxtbook.com/mspc/independentbanker/october2020
https://www.nxtbook.com/mspc/independentbanker/september2020
https://www.nxtbook.com/mspc/independentbanker/august2020
https://www.nxtbook.com/mspc/independentbanker/july2020
https://www.nxtbook.com/mspc/independentbanker/june2020
https://www.nxtbook.com/mspc/independentbanker/may2020
https://www.nxtbook.com/mspc/independentbanker/april2020
https://www.nxtbook.com/mspc/independentbanker/march2020
https://www.nxtbook.com/mspc/independentbanker/february2020
https://www.nxtbook.com/mspc/independentbanker/january2020
https://www.nxtbook.com/mspc/independentbanker/december2019
https://www.nxtbook.com/mspc/independentbanker/november2019
https://www.nxtbook.com/mspc/independentbanker/october2019
https://www.nxtbook.com/mspc/independentbanker/september2019
https://www.nxtbook.com/mspc/independentbanker/august2019
https://www.nxtbook.com/mspc/independentbanker/july2019
https://www.nxtbook.com/mspc/independentbanker/june2019
https://www.nxtbook.com/mspc/independentbanker/may2019
https://www.nxtbook.com/mspc/independentbanker/april2019
https://www.nxtbook.com/mspc/independentbanker/march2019
https://www.nxtbook.com/mspc/independentbanker/february2019
https://www.nxtbook.com/mspc/independentbanker/january2019
https://www.nxtbook.com/mspc/independentbanker/december2018
https://www.nxtbook.com/mspc/independentbanker/november2018
https://www.nxtbook.com/mspc/independentbanker/october2018
https://www.nxtbook.com/mspc/independentbanker/september2018
https://www.nxtbook.com/mspc/independentbanker/august2018
https://www.nxtbook.com/mspc/independentbanker/july2018
https://www.nxtbook.com/mspc/independentbanker/june2018
https://www.nxtbook.com/mspc/independentbanker/may2018
https://www.nxtbook.com/mspc/independentbanker/april2018
https://www.nxtbook.com/mspc/independentbanker/march2018
https://www.nxtbook.com/mspc/independentbanker/february2018
https://www.nxtbook.com/mspc/independentbanker/january2018
https://www.nxtbook.com/mspc/independentbanker/december2017
https://www.nxtbook.com/mspc/independentbanker/november2017
https://www.nxtbook.com/mspc/independentbanker/october2017
https://www.nxtbook.com/mspc/independentbanker/september2017
https://www.nxtbook.com/mspc/independentbanker/august2017
https://www.nxtbook.com/mspc/independentbanker/july2017
https://www.nxtbook.com/mspc/independentbanker/june2017
https://www.nxtbook.com/mspc/independentbanker/may2017
https://www.nxtbook.com/mspc/independentbanker/april2017
https://www.nxtbookmedia.com