Latest / The Money and Banking Law Podcast with Joe Silvia / Understanding How Financial Institutions Raise Capital with Matt Shields

Transcript

Understanding How Financial Institutions Raise Capital with Matt Shields · The Money and Banking Law Podcast with Joe Silvia

0:01
Hello and welcome to the Money in Banking Law
0:03
Podcast with Joe Silvia, brought to you by Duane
0:05
Morris, an international law firm with roughly
0:08
30 offices and 1 ,000 lawyers all over the world.
0:11
I'm your host, Joe Silvia. I'm a former Federal
0:13
Reserve lawyer who represents banks, fintechs,
0:16
and financial services clients on M &A, payments,
0:19
and regulatory matters at Duane Morris. I'm also
0:22
a core member of our banking, fintech, and digital
0:24
assets and blockchain practices. Now, while we
0:27
can't provide legal, financial, investment, or
0:29
tax advice on the podcast, our goal for the Money
0:32
in Banking Law podcast is to inform and educate
0:34
our clients and friends on both the fundamental
0:37
concepts and structure of the banking ecosystem,
0:39
as well as critical developments in the law and
0:41
regulation of money in banking. Thanks for joining
0:43
us today. As always, if you have any questions
0:45
from any of our podcast episodes, please reach
0:48
out to me at jsylvia at dwaynemorris .com. On
0:52
this episode, we're talking about capital raising
0:54
for financial institutions with Matt Shields,
0:57
who joins us from Performance Trust. Welcome,
1:12
Matt. Great to have you. I really appreciate
1:14
you being here. It's good to have another great
1:15
friend on. Can you start by giving the audience
1:19
a little bit of your background, where you came
1:21
from, what you're focused on, and what you're
1:23
doing with Performance Trust? Absolutely. Thank
1:26
you, Joe, for having me on. Excited to share
1:28
kind of what we're seeing in the market today.
1:31
Backing up a bit for me, I started my career
1:33
working with community banks in 2004. I had the
1:37
pleasure of working at Fig Partners for 10 years,
1:39
then had a stint of about five years at Hubdy
1:42
Group. and now I've been at Performance Trust
1:44
for almost nine years. Most of my time today
1:47
is spent raising capital in the forms of debt,
1:50
equity, or preferred for financial institutions.
1:54
Primarily that means community banks, but we
1:57
have worked with other companies outside the
1:58
world of community banking as well. That's great.
2:02
I really appreciate it. So where do you think
2:04
things sit early in 2026? What do you have generally
2:11
as an expectation for this year and, you know,
2:15
whether it's different from the past? But what
2:17
are you looking at for this year as expectations?
2:21
Yeah, 2026, I think the expectations are high
2:24
in a positive way. You know, 2025, we really
2:27
saw a rebirth of, first and foremost, subordinated
2:30
debt, which was extremely robust. You know, myself
2:34
and you have worked on a handful of deals over
2:35
the years. We were extremely busy in 2020, 21,
2:39
22. Those markets kind of quieted down after
2:42
the initial rate shock we all experienced and
2:45
really came back to life in 2025. And so as we
2:48
start out 2026, I think a lot of that momentum
2:51
that we saw in 2025 is carried into 2026. And
2:54
I'll add, outside of just the subdebt world,
2:56
it's really expanded to common equity as well.
3:00
Bank valuations in general have moved up pretty
3:03
nicely, the back half of 25 and into 26. So for
3:07
many years, we were limited mostly to subordinated
3:10
debt because equity valuations were so depressed.
3:12
And now with most or many bank stocks trading
3:15
at healthier levels, it affords us the conversation
3:17
to bring common equity to the table as well.
3:20
So when we're working with our banks, it's really
3:22
talking a lot about subdebt and probably a little
3:24
bit more than we have in the past about common
3:25
equity when that makes sense for the conversation
3:27
as well. Yeah, absolutely. Are those conversations
3:31
about the equity side of things, are those coming
3:35
from the banks themselves or are they more performance
3:40
trust saying this is also an option that maybe
3:43
you haven't thought of in the past five or six
3:46
or seven years because of the valuation metrics,
3:49
because of other things? Is it more from the
3:52
banks that are starting to think about the equity
3:53
side as opposed to debt or is it just another
3:56
option for them? Yeah, I'd say the fastball for
4:00
us at PT are banks $5 billion and below. So we've
4:03
spent years and years educating banks, not only
4:05
on sub -debt, but now kind of limping into common
4:08
equity as part of that conversation as well.
4:10
And for many of the institutions, they've taken
4:12
advantage of the years of subordinated debt,
4:14
and maybe they continue to have opportunities
4:16
on the M &A side, on growth side, organically,
4:20
lift outs of teams, or for whatever reason, they
4:22
might need more capital. And for some banks,
4:26
that are tapped out on sub -debt and maybe can't
4:27
issue more. Common equity can maybe be the right
4:30
capital alternative for them. So there's education
4:32
on that front. We continue to see liquidity needs
4:36
for shareholders. It is always a topic of conversation,
4:40
and oftentimes that can be rectified through
4:42
common equity. That might be just an uplisting
4:45
to OTC. It could be a full IPO, or it could be
4:48
some sort of private placement that provides
4:50
liquidity to shareholders. So there's a lot of
4:53
education occurring. I think a lot of banks,
4:56
need to get smart and getting smarter around
4:59
the Russell. And when it makes sense to uplist
5:02
from the OTC and into the NASDAQ and does common
5:04
equity, new common equity come alongside of that?
5:07
Those are all healthy conversations we're having
5:09
for banks today that maybe sub debt is or isn't
5:12
the right answer for them. That's a great point.
5:14
So stepping back a little bit, you mentioned
5:18
kind of the education of banks and boards of
5:21
directors and so forth. Where do Where do some
5:26
of your conversations start when someone is affirmatively
5:30
looking to raise money? What are those initial
5:35
steps that you and or the banks should really
5:41
be thinking about in getting ready for a capital
5:44
raise? Yes, I think PT is a little bit unique
5:48
in our process. We tell banks and investors that
5:52
we are as much an education company as we are
5:54
an investment bank. Yes, we provide investment
5:57
banking services, balance sheet strategies, asset
5:59
liabilities, enterprise risk, you name it. A
6:02
lot of the things that banks need to be successful
6:04
participants in their community. But I think
6:06
what we do is we start out by understanding who
6:08
the institution is and making sure we understand
6:11
the strategies that they want to take and make
6:13
sure they understand who they are. In most of
6:15
those conversations, I think oftentimes if it's
6:18
balance sheet specific, it might have historically
6:20
started with the treasurer. But today, as our
6:23
expertise has matured, most of those conversations
6:25
really start and end with the CEO and the CFO.
6:29
And then when it comes time to really hit yes
6:31
or no, the board is brought in. But most of the
6:34
education is brought up through the CFO and the
6:37
CEO, making sure they understand what types of
6:40
capital are afforded to them. Because just because
6:42
you're a bank that's... a billion or two billion,
6:45
common equity may or may not be the right answer,
6:47
or it might not even be available to you if you're
6:49
a private institution, depending on the shareholder
6:51
makeup, and what management is willing to commit
6:54
to potentially new investors. So again, we like
6:57
to start out by understanding who they are, what
6:59
they want to be, understand who that bank is
7:02
and how it acts in multiple rate scenarios. That's
7:04
one thing we preach a lot, is understanding what
7:07
your bank does and how it reacts, whether interest
7:09
rates go up or down. That's important clarity
7:11
that any investor is going to want. Once we have
7:14
that framework and that discussion head, it leads
7:16
to capital and then understanding what type of
7:18
capital best suits the needs of the company and
7:20
the strategies that they have. Yeah, that's great.
7:22
You mentioned taking steps to come off the OTC
7:28
market and look at the Russell and otherwise.
7:31
Are there specific... metrics that you typically
7:35
will look at for that with respect to an institution,
7:38
whether it's outstanding shares, capital, liquidity
7:42
issues, or is it something different that maybe
7:46
banks need to be thinking about? Yeah, I think
7:49
the OTC is a great interim step for banks that
7:52
want to kind of limp into being a public company.
7:54
It absolutely provides them a public ticker.
7:57
It provides their shareholders access through
7:59
online brokerage systems. It gives them a more
8:02
formalized professional. way to exchange shares.
8:05
That being said, there's a segment of investors
8:08
that can and cannot participate on OTC. And so
8:12
when you think about maximizing the liquidity
8:14
of your company, of your stock, NASDAQ and NYSE
8:18
have really become the de facto exchanges for
8:20
community banks. Now, for most community banks,
8:23
I'd say the conversation seems to come up most
8:25
frequently for banks when they start getting
8:27
around that level of, can you be added to the
8:30
Russell Index? And that Russell index is oftentimes
8:32
a catalyst for liquidity. And so of late, that
8:36
market cap has been, when you're around $150
8:39
-ish million in market cap, having a conversation
8:41
about going from the OTC to NASDAQ or from the
8:44
OTC going to NYC or going from being a private
8:47
company to a full -blown public company can make
8:50
a lot of sense. That market cap seems to be an
8:53
appropriate size to attract good institutional
8:56
following, if that's part of your strategy. good
8:58
institutional interest for new investors, and
9:01
provide enough liquidity to make it worth your
9:04
while, the costs associated with being a public
9:05
company and providing enough liquidity in the
9:07
marketplace for investors to buy and sell over
9:10
time. Yeah. Is there anything that you would
9:15
specifically advise a bank that's either on the
9:25
OTC or not currently publicly traded in terms
9:30
of preparation for becoming a more full blown
9:35
publicly traded company? Is it, I mean, I'm imagining
9:39
it's some, some combination of good governance,
9:44
good documentation, get your house in order kind
9:47
of things, disclosures and so forth. But is there
9:51
anything from maybe more of the financial side
9:54
that that you look to in educating these clients
9:58
to understand what it means to become public
10:01
and what it will look like going forward? What
10:05
do they need to do to prepare for that? Yeah,
10:08
I mean, they need to first and foremost make
10:10
sure they have a good regulatory partner like
10:12
yourself, someone that's been there, done that.
10:14
As you think about filing Ks and Qs. It's a heavy
10:16
lift, and a CFO that wears many hats in a community
10:20
bank, anywhere from being the CFO to the janitor
10:23
to HR, it gets a lot harder as a public company
10:26
with quarterly filings. As you mentioned, you
10:30
need to make sure your board is knowledgeable
10:32
about what it means to them to be a public company
10:35
and what type of information they can share in
10:38
and around the community that maybe they could
10:39
share in the past as a private company versus
10:41
as a public company. So there's no shortage of
10:44
disclosure and education from an accounting standpoint.
10:47
It's typically six months to a year to make sure
10:50
your balance sheet and audited financials are
10:52
clean and in a manner that can be digested kind
10:55
of in a public venue. And then you kind of have
10:57
to rinse and repeat every quarter that comes
10:59
about with earnings. You have to get educated
11:02
and practice around telling your story to the
11:05
institutional marketplace. As a public company,
11:08
what you say and do will be seen most likely
11:11
by the public. So non -deal roadshows, getting
11:15
on the road, telling your story, attending conferences,
11:17
and being able to tell your story in a professional
11:22
and clean manner to investors that might want
11:25
to invest in your company are all kind of practices
11:27
and procedures that a company would have to take
11:29
on if they really want to become a fully -blown
11:31
public company. That's great. Let's kind of move
11:35
back into the market trends, what you're seeing.
11:38
Are there any trends that you're seeing for 2026
11:43
that either are new or somewhat unique with respect
11:48
to capital raising or what some of the clients
11:50
might be thinking about or asking you as their
11:53
financial advisor? Yeah, the greatest trends
11:57
we've been experiencing for really the better
11:59
part of a year or so is subordinated debt. As
12:02
I mentioned, if we look back to 2020, 21, 22,
12:05
billions and billions of dollars were issued
12:08
by community banks in the form of subordinated
12:10
debt. Most of that are 10 -year notes with a
12:13
five -year non -call provision, which means after
12:17
that five -year anniversary, most of those institutions
12:19
are going to think about, hey, should I refinance
12:21
this subdebt? Should I pay it off? Should I let
12:24
it float? And so those decisions are being had
12:27
all over the place with banks of all shapes and
12:29
all sizes. For performance trust alone, if I
12:32
look at the amount of banks that we've issued
12:34
capital for and how many of those banks issued
12:36
five years ago, and so are really having those
12:39
conversations today, for us, it's about a billion
12:41
to $2 billion worth of sub -debt we issued around
12:44
2021 alone. And so those banks, now the five
12:48
-year anniversary is coming up, whether it be
12:49
this month, next month, or later this year, are
12:51
starting to run the math and think about what
12:53
should we do with that. Should we let it float?
12:55
For many banks, they are fortunate to issue at
12:58
kind of really tight spreads. And so the back
13:01
end floating rate might be lower than where we
13:03
can issue for them today. I'd say today, as it
13:06
relates to rates, we're issuing anywhere from
13:08
the low sixes to kind of the mid sevens, depending
13:11
on the bank. And that's all pre -tax. So very
13:14
attractive levels today for banks to issue capital
13:17
that will most likely feel like tier one of the
13:18
bank and be durable for five years with no covenants,
13:22
no collateral. There's just a lot of subordinated
13:24
debt that can and probably will be refinanced.
13:27
In addition to that, there's a lot of liquidity
13:29
coming back on the balance sheets of both banks
13:32
and institutional investors. And bank subdebt
13:34
has been a place that's been a really great place
13:36
to be, with the exception of a couple of hiccups
13:38
we've seen over the past couple of years. Absolutely.
13:42
And I know from our time working together on
13:45
some of these deals, there's very... generalized
13:49
types of disclosures as to what the money is
13:51
going to be used for, right? What are the notes
13:53
going to be used for? How's the debt going to
13:55
be spent? Has that changed or is that changing
14:00
in your mind? Are people focusing more on using
14:03
the debt for acquisitions? Is it going to be
14:05
this refinance type of scenario more than anything
14:08
you think? I mean, what are you seeing out there
14:11
for the market participants in using capital?
14:16
The refinance is a big part of the story. And
14:18
most of the companies that are refinancing today
14:20
are bigger, stronger, faster than they were five
14:22
years ago. So they might have $20 million outstanding
14:24
and they might want to refinance and do a little
14:26
bit more just to give them a little bit more
14:28
dry powder. They have more equity capital. They
14:30
have a larger balance sheet. They have more opportunities.
14:33
The refinance is certainly one. As M &A continues
14:36
to be active and continues to heat up, we think
14:39
in 2026, subordinated debt for a lot of banks
14:42
is a great way to fund that acquisition or to
14:44
buffer capital ratios. And then just general
14:46
corporate general corporate purposes, as you
14:48
mentioned, organic growth. Things have been strong
14:51
and continue to be strong. And sub debt is a
14:53
very inexpensive way to fund that growth. So
14:55
those are really the three areas that we're seeing
14:57
most conversations around sub debt today. That's
15:01
fascinating. I remember some of the rates that
15:05
we would. lock in for clients back in 21 and
15:08
20 and 2020 and they were uh kind of like having
15:11
a mortgage rate at two and a half or three percent
15:13
it's like you don't want to get rid of it but
15:14
uh at some point things change yep but it's interesting
15:19
that's a great point and we talk about that a
15:21
lot with our clients to say man i wish i had
15:23
issued at three and a half or i think the lowest
15:25
we ever did was maybe three percent um you know
15:28
five or so years ago but as you look at spreads
15:30
today and you think about a bank that issued
15:33
sub -debt at the tightness of spreads five years
15:36
ago at 3%, there really weren't a lot of options
15:39
to redeploy that capital. Loan growth was quiet.
15:42
The securities market was extremely low. So your
15:46
ability to lever that capital was really tough.
15:48
Today, although you're issuing at 6 .5%, 6%,
15:51
whatever it might be, there's a lot of options
15:53
out there to either lend at rates higher than
15:56
that. or invest into securities of all different
15:58
shapes and sizes that make that capital really
16:01
easy to be leveraged. And so it feels a little
16:04
bit less opportunistic issuing at 6 % than it
16:08
did at 3%, but the reality is your ability to
16:10
lever that capital in a profitable way today
16:12
is probably easier than it would have been when
16:14
you issued at 3%. Now, granted, if you were smart
16:16
enough to issue a bunch at 3%, wait around and
16:19
do nothing until rates shut up, you absolutely
16:20
won. But that wasn't the reality of what most
16:23
people did. Right. Yeah, that's absolutely right.
16:27
So when you're walking clients through not only
16:33
the structure, but the use of the capital and
16:36
what the financials look like post -transaction,
16:39
how far out are you typically looking in terms
16:42
of those pro formas? like you mentioned, leveraging
16:45
what you're acquiring in the capital raise or
16:48
the debt that you're issuing? How far out are
16:50
the bankers thinking about servicing that debt
16:53
and what they're doing with it? Yeah, I'd say
16:56
our process is probably a little bit more robust
16:58
than most. I mean, we typically like to look
17:00
at a bank and their balance sheet over a one
17:02
year and a three year time horizon. And then
17:04
we want to stress test that bank over, again,
17:06
multiple scenarios. So we want to know what you
17:08
look like today. And we want to know what happens
17:10
if rates go up 200, go down 200 and everywhere
17:13
in between. So we really have a good sense of
17:15
how your bank is going to act in multiple scenarios,
17:17
as well as stress testing it for credit issues.
17:22
We haven't seen any real credit issues for quite
17:24
some time. But that is part of banking, and we
17:26
do expect it to kind of normalize this year and
17:28
look into the future. So once we understand all
17:31
that, we typically like to make sure we understand
17:33
where the bank is going to be a year from now,
17:34
three years from now, and then sometimes even
17:36
longer. And that process will really help us
17:38
illuminate what type of capital is the right
17:40
solution for them. It might be sub -debt or it
17:43
might be common equity, again, depending on what
17:44
they're thinking about doing with that capital.
17:46
And are there common touch points every quarter,
17:51
six months, every other year that – Banks might
17:54
reach out to you or you might be reaching back
17:56
out to clients to touch base on how the capital
17:59
raise went overall, how the money is being deployed
18:04
and used. Are there regular touch points that
18:08
you try and make sure that you hit with clients?
18:12
Yeah, I think there's two different levels of
18:14
touch points. If it's the world of equity capital,
18:17
it's probably more robust. And so both performance
18:20
trust, if we help issue for someone common equity,
18:22
and the institutional investors or the investors
18:24
are probably going to have more active dialogue.
18:26
That could be quarterly or at least semi -annually
18:28
discussing kind of what's going on in the balance
18:31
sheet, what our earnings look like, and the like.
18:33
Sub -debt, typically, if you're a good, strong,
18:36
healthy community bank and you issue subordinated
18:37
debt and you're making your payments and your
18:39
balance sheet doesn't change dramatically, you're
18:42
probably not going to hear from your note holders.
18:44
We certainly keep our eyes on our issuers quarterly
18:47
and look at their financials and make sure we
18:49
understand what's going on. But if things are
18:51
going as expected, there's really not many conversations
18:54
to be had between debt issuers and, you know,
18:57
us at Performance Trust and the note holders.
18:59
Yeah, that makes sense. That's interesting that
19:05
it's, I mean, I was expecting that you were going
19:11
to have a positive outlook, right? We've heard
19:13
a lot of folks talking about positive outlook
19:15
for M &A, for banking generally with interest
19:17
rates and so forth. So it's not surprising that
19:19
you've got the positive outlook with respect
19:21
to capital raising. And I think that's probably
19:23
even more so the case as we hear about more M
19:28
&A on the horizon and folks wanting to raise
19:30
capital for that specific purpose. But I wonder.
19:35
Some of the conversations that I've had over
19:38
the past few years with especially smaller community
19:41
banks is that they are potentially looking at
19:47
options for shareholder liquidity. And you mentioned
19:50
this earlier on, but options for shareholder
19:52
liquidity because of a couple of reasons, whether
19:54
the shareholder base is getting older, they're
19:57
trying to plan for their estates going forward,
20:00
or if the shareholders are in fact the C -suite
20:05
or certain directors who are looking for a liquidity
20:08
event because they've been involved with it for
20:10
20 or 30 years. Has that been a robust amount
20:16
of conversation in terms of using it for basically
20:20
a succession planning tool in some ways? Yeah,
20:24
absolutely. It seems like more and more banks
20:27
that we're engaging with that maybe want to consider
20:30
a sale or consider a significant equity offering.
20:35
There's some liquidity that's been pent up there.
20:36
It could have been a private investment of a
20:39
private equity company that now is five, six,
20:41
seven years into their investment and needs some
20:43
liquidity. It could be an aging board that has
20:46
no real succession plan for management. And so
20:49
the only path there is liquidity. So IPO and
20:52
equity offering certainly can be a path without
20:56
liquidity for those shareholders. A sale is one
20:58
that you know kind of gets that maximum value,
21:01
that terminal value. So there's always a tug
21:03
and pull between the bank remaining independent
21:04
through maybe going public or an equity raise
21:07
and then ultimately selling for a higher valuation.
21:10
And I wouldn't be surprised that most of those
21:12
folks that are liquidating or need out and want
21:14
liquidity want to get paid as high as possible.
21:16
And that's typically going to be through a sale
21:18
as opposed to an equity raise. I think those
21:22
things are accurate. And I think you talked about
21:23
being optimistic in 2026. We certainly are optimistic
21:26
on where the capital markets are today. I'd say
21:29
we're equally cognizant of the fact that capital
21:33
markets can open and close off of one bad headline.
21:36
And so we're extremely passionate about making
21:38
sure our clients understand the opportunities
21:41
they have today to really issue almost any types
21:43
of capital. The markets are open for if you're
21:46
a good, strong, healthy bank and taking advantage
21:48
of that window while it's open because it could
21:50
close tomorrow as quickly as it reopens. Yeah,
21:54
that's a good point. So I know we're getting
21:57
short on time and I want to be respectful of
21:58
your time, but maybe another question, but a
22:02
different angle. Are there situations where a
22:07
bank comes to you and says, hey, we want to raise
22:11
capital, whether through debt or equity? And
22:15
this is our story. And you go through everything
22:18
and you say, you know what? I don't know that
22:20
it makes sense for you to do this. Are those,
22:24
I mean, I'm sure they're relatively few and far
22:27
between, but is there any consistency as to why
22:31
Performance Trust or any other investment bank
22:34
would say, you know what? I don't think you're
22:36
either not ready or it's just not appropriate
22:38
for you or. this isn't the right story to tell.
22:42
Is there any consistency with where you would
22:44
say, you know what, let's hold off? On the equity
22:48
front, absolutely. Typically, when we're working
22:51
with equity investors, they're institutional
22:53
investors. And there's often times where banks
22:55
just aren't ready, aren't mature enough. don't
22:58
understand kind of what comes along with that.
23:00
And so an equity investment from those type of
23:03
investors, which can be great long -term investors,
23:05
but you really need to up your game and you need
23:07
to know what you're getting into. So there's
23:08
often times where through conversations with
23:10
us, we determine that equity capital is not the
23:13
right answer. That conversation can certainly
23:16
go to subordinated debt. I think we've been really
23:19
actively talking about subordinated debt for
23:21
banks, even if they don't have a transaction
23:24
today or even if they don't have a team they
23:26
want to bring on today. The cost of capital and
23:28
the spread tightening being what it is today,
23:30
it still can be a really nice part of your capital
23:33
stack and a really nice war chest to build. And
23:36
so it's rare that subordinated debt doesn't fit
23:39
a long -term strategy of a bank because it's
23:41
a 10 -year instrument. Depending on who that
23:44
bank is, there's usually a good opportunity over
23:46
some period of time to capitalize on that sub
23:48
-debt and kind of park it. while you're waiting
23:51
to deploy it. But I'd say those conversations
23:53
around capital not being the right option for
23:55
you is more so around common equity and making
23:58
sure the bank is ready for what that entails.
24:00
Great, thanks. Is there anything else before
24:03
we kind of wrap up here? Anything else that you
24:05
want the audience to know about either you or
24:08
Performance Trust or what you see on the horizon?
24:12
Yeah, I think the one other nugget I'd talk about
24:14
as it relates to subordinated debt, there's been
24:16
conversations and you on the legal side might
24:18
have more insight than me, but of the small bank
24:20
holding company threshold lifting from $3 billion
24:23
to something higher. Maybe that's $5, maybe that's
24:25
$10. And so I think about all the banks that
24:27
are currently $3 billion to, let's say, $10.
24:30
They can't rely on sub -debt the same way the
24:32
banks below $3 billion can. So if that regulatory
24:35
threshold gets lifted, I do think it opens up
24:37
the landscape for a lot of those banks to take
24:40
advantage of sub -debt in the same way smaller
24:42
banks are. That could really kind of shift the
24:44
dynamic of banks that have had to focus maybe
24:47
more on preferred capital or common equity back
24:50
into the land of sub -debt. And so kind of maybe
24:53
throw off kilter for a little bit, the supply
24:55
and demand. And so again, we're really passionate
24:58
about what the opportunity looks like today for
24:59
community banks to issue sub -debt. If that goes
25:01
up even higher from a $3 billion to higher, I
25:04
think we'll see even more activity in the world
25:06
of sub -debt from those larger banks. Yeah, I
25:09
100 % agree. I mean, we've kind of already seen
25:11
some of the regulators talk about community banking
25:14
really being institutions that are under $30
25:17
billion in assets. Wow. A lot more than the $10
25:21
billion that we had been previously talking about.
25:23
So upping the small bank holding company policy
25:27
statement from $3 billion to $5 or $10 doesn't
25:30
seem like that far -fetched of an idea, at least
25:32
at this point to me. So I absolutely agree that
25:34
that would be really fascinating going forward.
25:38
Yeah, the really cool part about that, I'd say,
25:40
is the really cool part, if that happens and
25:42
those larger banks are able to utilize subordinated
25:44
debt to kind of fund their business, fund their
25:46
growth. it usually will mean those banks should
25:48
be even more profitable, right? Because that
25:50
cost of capital is significantly less than common
25:52
equity or in most cases preferred. And so it
25:55
would be great to see kind of increased profitability
25:57
roll into some of those banks and help kind of
25:59
the bank stock valuations that, if you look over
26:02
like a three -year or five -year horizon, haven't
26:04
been great. We've seen a tick up of late, but
26:07
that could add some more kind of earnings power
26:10
to the banks and hopefully some more momentum
26:11
into community banking in general. Yeah, no,
26:14
I absolutely agree. A hundred percent. Matt,
26:16
this has been great. I really appreciate you
26:18
being with us. I really appreciate the time for
26:20
our audience that, that needs your support. Where,
26:23
where can they find you professionally? Yeah,
26:26
LinkedIn is always an easy option. I'd say my
26:29
email, I'm pretty responsive as well. Just mshields
26:32
at performancetrust .com or visit our website.
26:35
There's a robust amount of connections, information,
26:39
contact information on our website. So feel free
26:41
to reach out with any questions. I would love
26:43
to help in any way we can. Yeah, awesome. I really
26:46
appreciate it again, Matt. It's been fantastic.
26:48
Hopefully you'll come back and we can kind of
26:50
double check on your predictions for 2026 and
26:52
going forward. Absolutely. Thank you, Joe. Of
26:56
course. So that's all for today. If you have
26:58
any questions from this or any of our podcasts,
27:00
please let me know at jsylvia .dwaynemorris .com
27:04
or you can reach out to any of your favorite
27:06
Dwayne Morris lawyers. Be sure to like and subscribe
27:08
wherever you do get your podcasts. I appreciate
27:10
everybody listening in. Stay tuned for new episodes
27:13
coming regularly by Dwayne Morris and the Money
27:16
and Banking Law Podcast. Thanks so much.