At the start of April, Third Coast Bank closed a deal with EJF Capital in which it expects to obtain capital benefits and reduce part of its commercial real estate (CRE) balance sheet concentration.

EJF securitised $100m of Third Coast Bank’s freshly originated $200m loan to an undisclosed large private real estate development firm, according to sources involved in the deal.

The transaction takes on a somewhat unique structure and is the first public example of a securitization done on a single newly originated CRE loan of this size. It could serve as a blueprint for other US regional banks looking to deploy securitization tools to tackle CRE concentration.

Third Coast Bank expects to reduce its risk-weighted assets, lower its construction and land development loan concentrations, and diversify its balance sheet as a result of the transaction.

This comes when US regional banks are looking to target CRE concentration on their books.

“Because a lot of small banks do loans against CRE, these types of transactions could potentially enable similarly situated banks to expand the size of loans they can make while preventing balance sheet concentration issues,” said Neal Wilson, co-CEO and co-CIO of EJF Capital, a global asset manager with $5.4bn in assets under management.