Issuing/Refinancing Trust Preferreds

Much more is involved in issuing trust preferreds than just getting a rate quote and completing some documents. Holding companies that effectively use trust preferreds do so by analytically approaching the bank’s capital structure, growth plans, and balance sheet. In addition, board education and presentation is also part of the process.

The cost of issuing trust preferreds has plummeted. Fees have disappeared and spreads have collapsed. The result is that trust preferreds are now the cheapest capital source for banks. They have even become competitive with some higher cost borrowings, such as holding company loans, despite their significantly more favorable terms.

Over the past several years, the issuance of trust preferreds by banks has become commoditized – with many investment bankers’ programs offering similar terms and pricing. The difference is service. Instead of just issuing the trust preferreds or, worse yet, issuing them and jumping into a transaction which is contrary to the institution’s needs, it is important that banks utilize the consulting and analytic resources available to them.

There are currently many options, including fixed and floating rate coupons. In addition, it is possible to achieve funding as quickly as two weeks.

For issuers with existing high-cost trust preferreds on their balance sheet who want to take advantage of today’s very tight spreads and no fees, rate and spread locks are available.
How we can help.

Our Investment Strategies Department is available to consult with institutions, analyze their needs, evaluate alternatives, and recommend solutions consistent with the bank’s objectives.

To support the decision-making process, we have developed a suite of tools and resources, called the Trust Preferred Analysis Kit, to facilitate the trust preferred issuance process. The kit includes:

• Board of Directors / Management Presentation in PowerPoint
  
• Growth and Capital Planning Model
• Trust Preferred Refinance Analysis (for refinancings of existing trust preferred issues)

All of these are customized for your bank.

Most importantly, the use of trust preferreds is only a part of the overall goal of increasing shareholder returns. To that end, we do not view the trust preferred issuance as the culmination of events but rather one step along the road. Before, during, and after issuing a trust preferred, our strategists are available to develop plans, evaluate opportunities, review the investment portfolio, evaluate leverage alternatives, and provide other assistance in managing the balance sheet.

Whether this is your first trust preferred issuance or just the latest one, our tools and resources could be the key to your success.

How to Get Started

1. Complete Request Form.

2. We will send you your customized Trust Preferred Analysis Kit via mail or email.

For additional information, please contact your ICBA Securities' account representative or Meredith Allen at 800-422-6442.