Embarking on their sixth year as the No. 1 lender of Small Business Administration loans in Michigan, Republic Bancorp Inc. may also be embarking on a debut SBA-backed securitization in the near future, sad Tom Menacher, Republic's executive vice president and chief financial officer.
"Up until this point in time we've never had quite enough volume to be our own securitizer," said Menacher. "We typically sell the guaranteed portion, on an individual, loan by loan basis, to players such as GFC, Morgan Keegan, Prudential and others who pool them and securitize them."
One of the idiosyncrasies of SBA securitization, Menacher said, is that to issue asset-backeds a company must have enough loans at a particular interest rate in similar coupon pools.
Because in the past, Republic did not have enough loans of similar coupons to pool, securitization had not been a viable option. "From our standpoint on the execution, it's been a little simpler to sell them on a loan by loan basis, to someone who's large enough to sell them as a securitization," said Menacher.
Republic's loan portfolio has grown to $36 million through Sept. 30 from $28 million a year ago. Menacher expects the loan portfolio to reach $50 million by year's end.
"You probably need to get to levels where we're at today, where you can begin to offer securities with similar coupons."
Republic Bank has been securitizing mortgage-backed loans and selling them into Fannie Mae and Freddie Mac type securities for years, Menacher said.