What is LoanLayering®?

Invictus takes publicly available loan balance data, released quarterly for every bank in the U.S., and uses a long-term history, bank acquisition history and a sophisticated algorithm to estimate origination dates for portions of the loan balance. Having established balances by origination period, we combine with market data and then project forward likely balances and income from each layer. The projections reveal the likely future income from each loan category.

Invictus believes the inherent riskiness of each loan is largely determined from the economic factors at the time of the loan compared to today. Hence we assign a "risk per quarter" value to each quarter per loan category. The result is an instantly understandable visual assessment of the riskiness of any loan book. (In the image below, red and orange layers represent the riskier quarters of origination, yellow is neutral, greens are least risky and pale blue is a projection of trend. The blue vertical line indicates the current quarter.)

Because we run our model on 6000+ FDIC-insured banks, we are in a unique position to combine data for any number of banks, or all banks in a geographic area. Doing so allows us to look at aggregate loan demand and see regional or national trends. The graph at right is the aggregated U.S. LoanLayering view for Real Estate Residential Senior.

LoanLayering® gives us:

  • An accurate estimate of the maturity profile or "loan run-off";
  • An accurate estimate of revenue contribution by loan category (quarterly yield by layer magnitude, using assigned interest rates and spreads);
  • The ability to apply different stress factors for different vintages of loans: pre-recession, recession era to present;
  • The ability to analyze riskiness of the loan book based on quarter of origination of the loan;,
  • Pro forma future balances on a quarterly/semiannual/annual basis.

LoanLayering and the pro forma balances projected forward two years enable us to estimate:

  • Earnings contribution to capital (relative and specific) of existing portfolios as loans mature during the stress horizon.
  • Liquidity created by loans maturing in existing portfolios.
  • Profitability due to different redeployment strategies vis-à-vis liquidity created by loan maturities.
  • Capital under different redeployment strategies, incorporating earnings contribution of redeployed assets.
  • FreeCapital, the new metric for bank viability and growth opportunities


These estimates lead to valuable and exclusive information on the bank's future financial situation. The results are used by bank management to address:

  • The bank's capital adequacy under new capital guidelines through the stress horizon, which affects stock repurchases and dividend policies;
  • The impact of different strategic initiatives on profitability and capitalization;
  • Liability strategies to optimize strategic loan initiatives;
  • Competitive constraints and positioning;
  • Enhanced regulatory interaction and communication;
  • Profitability and Regulatory Capital implications of asset acquisitions and/or M&A;
  • Implications of different pro forma interest rate scenarios.