How Bell Can Help Your Community Bank

5/10/2023 8:00:00 AM

Correspondent Banking

Q&A: How Bell Can Help Your Community Bank

No assets, 2 employees. That was the start of Bell Bank’s correspondent banking department back in 2003. Our correspondent team is now a thriving part of Bell, with 21 employees and more than $1 billion in committed assets, in partnership with our correspondent banks.  When many banks stopped offering correspondent services during the recession, Bell actually expanded our sales and underwriting staff and looked to grow.

“We zigged when everybody else was zagging,” says Tom Ishaug, Bell’s correspondent banking manager. “As others dropped out, we continued to buy participations and offer bank stock loans to help other community banks and keep our relationships strong.”

That decision indicates Bell’s commitment to our correspondent banking relationships.

Read on for Tom’s answers to common questions about correspondent banking at Bell and how we can help your community bank.

Q: What’s the value of correspondent banking for Bell’s clients?

A: We help you manage many different credit-risk scenarios within your loan portfolios and on your balance sheets. We assist with legal lending limits, in-house limits and concentration issues. For some banks, we also provide liquidity solutions or risk-based capital solutions by purchasing loans to help with loan-to-deposit goals or risk-based capital ratios. 

With bank stock lending, we help many banks with mergers or acquisitions by providing lines and term debt to the bank holding company and by providing loans to investors and directors for injection into the holding company. Bank merger and acquisition activity has been robust the last several years, and lending in this arena is a growing portion of our portfolio.

If a loan structure doesn’t fit your bank’s asset-liability committee (ALCO) requirements, call us anyway. If it works for us, we can take a higher percentage of the loan, and the participating bank can retain the servicing fee and the customer relationship.

Q: Who does Bell work with in the correspondent segment?

A: Our customers are primarily other community banks, and our mission is to help them succeed and grow. We have some relationships with publicly traded banks as well.

Our customers’ asset sizes are anywhere from $10 million all the way to $20 billion. We want to partner with as many banks as possible in the regions we serve.

We also work with bank holding companies and individuals with ties to the community banking world, including directors, shareholders and real estate entities with common bank ownership.

Q: Where are Bell’s correspondent banking commitments?

A: We conduct most of our business in:

  • North Dakota
  • South Dakota
  • Minnesota
  • Wisconsin
  • Iowa
  • Nebraska
  • Montana
  • Wyoming
  • Arizona
  • Utah

We are willing to work with community banks across the upper Midwest and have relationships with banks in:

  • Indiana
  • Michigan
  • Kansas
  • Missouri
  • Illinois
  • Idaho
  • Colorado

We have one relationship in Washington as well. We want to add to our banking relationships in existing markets as well as establish a presence in new markets, including Colorado and Arizona. We will look at deals from almost anywhere, especially if the lead bank might be one we already work with. For example, we recently completed a deal in Ohio led by an Iowa bank.

Having our correspondent bankers located in and dedicated to their local markets shows our long-term commitment to those markets. For example, it works well to have someone from Madison or Milwaukee covering Wisconsin, because they speak the local language and know the markets they cover (and being a Packers fan doesn’t hurt!)

Q: What loans and services does Bell’s correspondent banking team offer?

A: For the most part, it’s all credit-related, so we buy loan participations and sell loans out of Bell’s direct loan portfolio. We also work on bank stock, bank investor, bank building and bank ownership loans.

We do not sub-sell loans in which we participate; if we buy a $10 million loan participation, we hold it all on our books, so we do not share your bank or customer information with other banks.

Because of our size and appetite for deals, we can help community banks with larger deals on our own without needing to find other participants. Our goal is to take all of a deal offered to us. We have general hold limits determined by risk rating and type of loan, but we try to meet the needs of your request.

Q: Does Bell originate loans in more remote markets of correspondent banks?

A: We try to stay out of the markets and not compete with the banks we do business with on a participation basis.

If we originate loans in your area, it could be the type of deal where a bank in that area may not want to be the lead bank for a variety of reasons, such as for a hospital in a rural setting or a large manufacturer in a local market with very large credit needs.

We also have clients based out of Fargo who work regionally, so they may have a loan or commercial real estate need in one of our correspondent areas. In these situations, we’ll keep a percentage of the loan relationship, and we’ll also look for some bank partners in that market to buy a participation in the loan. We’re trying not to do business in our partners’ back yards. If we do, we want to work with you to make you part of the deal.