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Using a Loan Marketplace to Manage Liquidity and Expand Loan Portfolios

Interstate Bank (ISB) began operations in 1957 with a vision of better serving its local customer base in the Texas Panhandle. By 2004, the bank saw enough continuous growth and success to expand beyond Perryton, Texas, and into Amarillo.

Like many community banks across the country, ISB’s liquidity grew significantly over the last several years and throughout the COVID-19 pandemic. So, by 2021, it was seeking new opportunities to expand its loan portfolio. But given the bank’s size, ISB found it challenging to source sufficient loan acquisitions that met its target requirements.

Finding loans to buy is frustrating for a bank our size. In the past, we have had to turn to five different sources to access five different types of loans. So having just one place to turn to that we can trust to help us with the entire process is a game changer.

Danny Skarda
Chairman and CEO,
Interstate Bank

ISB came across only limited deals through local relationship networks and found it increasingly challenging for the already-busy team to allocate the time and resources necessary to find new sources through other channels.

Discovering a New Way to Source Loans

Fortunately, ISB executives learned about CSI Loan Marketplace, a nationwide platform for evaluating, buying and selling loans. The bank saw this digital exchange as an opportunity to rebalance portfolios and optimally align with target relationship profiles, as well as efficiently source new loan originations and build new partnerships in their community and beyond.

“Finding loans to buy is frustrating for a bank our size, said Danny Skarda, ISB Chairman and CEO. “In the past, we have had to turn to five different sources to access five different types of loans. So having just one place to turn to that we can trust to help us with the entire process is a game changer.”

And the CSI Loan Marketplace did rapidly change the game for ISB. Within a few days, the entire bank team logged into the marketplace to search for relevant loan purchase and participation opportunities. They also set up their buyer preferences on the platform to ensure that, as originators posted new, relevant deals, the system would notify the team immediately.

In addition to quickly engaging with the online technology platform, Skarda also worked closely with CSI Loan Marketplace’s transaction team to discuss the bank’s strategic balance sheet needs and targeted transaction parameters.

Exploring New Opportunities and Partners

Shortly after ISB joined the CSI Loan Marketplace, the transaction team presented the bank with several opportunities within their geographic and structure requirements. Some were from non-bank originators, which showed ISB the potential for partnerships in new channels and the diverse and consistent array of loan participations those partnerships might open.

ISB continued to connect with potential opportunities in the marketplace from bank and non-bank originators over the next few months. While they did not immediately find the perfect deal, they broadened their network of potential partners for future transactions while building market insight to better guide and refine their strategy.

Two Transactions in Two Months

Then, in April 2022, ISB found and connected to a commercial real estate (CRE) Bridge-to-HUD loan participation that met the bank’s size and origination requirements. The opportunity had been posted by a large commercial real estate originator with extensive experience working with community banks on loan participations across the United States.

After connecting directly and completing their due diligence, the ISB team decided to move forward with the transaction, pending approval from the bank’s board. Since this was a new channel for ISB, the NBFI originator and the Marketplace transactions team worked closely together to provide the information and insight needed to facilitate the board’s review and approval.

It wasn’t long before ISB saw another CRE multifamily opportunity posted by a different non-bank originator. As a result of their experience on the first transaction, the bank closed on its second CRE participation through the Marketplace shortly thereafter.

From Early Adopter to Active Advocate

Since completing the second participation a few months ago, the bank continues to engage with opportunities across CSI Loan Marketplace, now conducting due diligence on a third opportunity with one of the same non-bank origination partners.

According to Skarda, the challenges of deploying liquidity and finding new loan opportunities are in the past. ISB is not only an active Marketplace member, but also an advocate eager to share its experience and successes using the digital exchange technology to find new partners.

Through the CSI Loan Marketplace, ISB set out to accelerate loan purchases in the secondary market, deploy liquidity and improve its loan-to-deposit ratio. Looking back, the bank has completed two Commercial Real-Estate (CRE) participations (with more on the horizon), connected to various additional opportunities, and partnered with a non-bank originator, all with transactional support.

Ultimately, the CSI Loan Marketplace has provided a more efficient and effective solution for ISB to manage its liquidity portfolio and balance sheet, broaden its partner network and close more loan transactions.

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