Buried in the second-quarter banking data is a category growing 30% a year that now accounts for roughly one of every seven dollars of US bank loan growth — and the vast majority of banks report none of it at all. Securities-based lending (SBL) has quietly become bigger than the entire home equity line of credit market, it is concentrated at a handful of institutions that are not community banks, and the customers taking these loans are the wealthiest households in every community bank's market. I have been through the data, the regulations, and the excuses, and here is where I landed: the risk objections do not survive contact with the evidence, the rules actually favor the product, and the real constraint — as it has been all year, in every corner of this industry — is the decision.

As a banker and consultant, I probably shouldn't admit to being a banking geek, but banking is an industry I genuinely enjoy. It's not only my profession, but also a personal passion and hobby. For example, I read the FDIC's Quarterly Banking Profile every quarter the way other people might read baseball box scores. Most quarters the FDIC's data categories finish in the order you expect. Not this one. In the second-quarter data, the FDIC named two categories as the leading engines of loan growth, and neither is a loan most bankers have ever made: lending to non-depository financial institutions, and loans to purchase or carry securities. That second category, securities-based lending, grew $131 billion, or 29.7%, over the year, to $573 billion, per S&P Global Market Intelligence. Run it against total loan growth of roughly $885 billion and the math is blunt: about one of every seven dollars of loan growth in banking is now credit collateralized by investment portfolios. For scale, residential mortgages grew 1.1%. And the relationship commercial lending where community banks live — the FDIC's own community banking research describes an industry concentrated in commercial real estate, small business, and agricultural credit — was healthy but pedestrian by comparison: the median bank grew total loans 1.65% in the quarter, while banks above $100 billion grew 2.29%. The growth went where most banks are not.

A definition before we go further, because the product goes by several names. Securities-based lending covers two legally distinct products with one economic engine. A margin loan is credit to buy securities, capped by regulation at half the stock's value. A securities-backed line of credit — banks usually call them pledged asset lines, SBLOCs, liquidity access lines — is a loan against a portfolio that may be used for nearly anything except buying more securities: the house renovation, the tax bill, the business investment, the bridge to a closing. Both are floating-rate demand loans, callable at any time, marked against the collateral daily. The economic engine underneath both is the same: the customer has appreciated assets, does not want to sell them and realize the gain, and would rather borrow against them. Add the $1.5 trillion of margin debt at the brokerages — a record — and total securities-backed credit in America now approaches $2 trillion.

Where Are the Loans

Look at the table and notice what is on it and what is missing. Every name is a national brokerage firm, a custodian, or a specialist bank built for this product. There is not a community bank on the list, and the concentration is no accident: the Federal Reserve's own research found the consumer side of this market roughly 85% concentrated at just two institutions. The winners are not hiding their strategies — they state them on earnings calls. Schwab's CEO told analysts in July that clients "have large gains with big embedded capital gains, and so they don't want to sell… they have a life they want to live," and that only about 0.5% of Schwab clients borrow, against an industry average near 4% — which is his way of saying the runway is enormous. Wells Fargo's CEO called securities-based lending "a key driver of loan growth," noted his customers hold "trillions in assets at other financial institutions," and backs the words with money: Wells now pays its advisors 75 basis points on SBL balances, more than double what it pays on mortgages. UBS took a national bank charter in March largely to do more of this. PNC brought the product down-market to $200,000 households in July. And Raymond James supplies the proof that this is not exclusively a giant's game: it bought TriState Capital, a branchless bank that built its entire franchise lending through independent advisors, and that book is now $24.8 billion, 44% of Raymond James's entire loan portfolio.

Displacement You Cannot See From the Branch

Here is why this belongs on a community bank board agenda and not just a wealth management conference panel. Bank securities-based lending, at $573 billion, is now larger than the entire national home equity line of credit market, at $459 billion — and it is growing two and a half times as fast. Now read what the loans are for: PNC markets its new offering for "home renovation, critical emergency, luxury purchase, debt consolidation or an unexpected tax obligation." That is the home equity use case, word for word. The wealthy customer who once borrowed against the house from the bank that knew the house now borrows against the portfolio from the custodian that knows the portfolio — at a closing measured in days, sometimes minutes, with no appraisal, no title work, and no visit to anyone's office.

The displacement is invisible from inside the branch, and I want to be precise about why. Community bankers report healthy home equity demand, and they are not wrong — the HELOC business is doing fine. What they cannot see is the borrowing that never reaches them — the top of their customer base, quietly reweighting to where the investments live. Readers of our September series will recognize the mechanics, because this is quiet switching's wealthy cousin. The checking account stays open. Nothing closes. The borrowing, the sweep balances, and eventually the whole relationship migrate to the custodian — and households with more than $500,000 of investable assets hold 61% of US deposits, so the migration is happening precisely where the deposit franchise lives. The consolidation data confirms the direction: American households cut their financial relationships from 2.7 to 2.4 in two years, Fidelity has overtaken Bank of America as the most widely held provider, and 22% of $1 to $5 million households now use a single provider. The winner of that consolidation is whoever holds the investments, because that is now where the lending happens too.

Competition is no longer only banks and brokerage firms. Robinhood's margin book more than doubled in a year to $21.6 billion. Fintech lenders now advance up to 70% against portfolios at rates that undercut the incumbents. Crypto-backed lending reached $67 billion, up 49% — and the profile of those borrowers should get a community banker's full attention: doctors, lawyers, and professionals using the loans for mortgages and business investment. That is not a speculator. That is the next-generation customer of every bank reading this, borrowing against an asset class their banker does not recognize as collateral, at rates a competent, regulated lender could beat by hundreds of basis points.

Excuses, Examined

So why does the vast majority of the industry report zero? I went through the candidate explanations one at a time, and they sort into two piles.

The excuses first, because they are the ones bankers reach for. It is not regulation — the rules favor this product. A national bank gets an additional 10% of lending-limit headroom for loans fully secured by readily marketable collateral, and the capital rules let a well-margined, regularly revalued position carry the collateral's risk weight down to a 20% floor — materially lighter than the 100% weight on the C&I loan the bank makes instead. We found no documented examiner friction anywhere. It is not credit risk — The Bancorp, a $9 billion bank running a quarter of its loan book in securities- and insurance-backed lines, carries non-accruals of three basis points. And it is not the economics — published pledged-asset-line pricing runs SOFR plus 240 to 440 basis points, which is not a thin spread by any definition community banking uses.

Now the real barriers. The first is distribution, and it is the binding one: this borrowing follows the wealth relationship, and 84% of banks lack tailored wealth services even for mass-market investors. Every success story in this market runs through a wealth channel — whether it is a brokerage, an advisor network, or a white-label partnership. We found no exception. The second is operational — the product requires daily collateral marks, advance-rate grids by asset class, and call management — exactly what a legacy loan system does not do, which is why even sophisticated regional adopters bought platforms rather than building. The third is knowledge, and this finding startled me. There is no OCC handbook booklet for securities-based lending, no dedicated section in the FDIC's examination manual, and no banking-school course on it. The entire infrastructure community banks use to learn a new product — examiner playbooks, association training, peer curricula — simply does not exist for the fastest-growing loan category in the country. The Federal Reserve itself calls the sector "understudied." When bankers tell me it feels unfamiliar, they are right. It is unfamiliar by institutional design.

But notice what the honest sort reveals: the barriers that are real — distribution, technology, training — are all purchasable or fixable, and the barriers that are permanent-sounding — risk, regulation, and economics — are not real. That is the pattern we keep finding everywhere this research program looks, and it leads to the same verdict every time. "Too risky" is a rationalization. The shelf is stocked. The constraint is the decision.

This Is Not Just a Consumer Product

Before the playbook, one more finding that widens the market — because the doctors and lawyers are only half the story. The premise that securities-based lending is an individuals-only product is already false at the largest retail custodian: Schwab's own pledged-asset-line FAQ lists partnerships, LLCs, and corporations as eligible borrowers, alongside trusts. Merrill openly markets its Loan Management Account for "business startup or expansion or acquisitions"; Wells Fargo Advisors pitches capital for business growth; U.S. Bank cites small business owners covering payroll and operating expenses — and notes that nonprofits are pledging endowment funds as collateral for operating liquidity. The business owner pledging a personal portfolio for working capital, an acquisition, or a partner buy-in gets a cleaner regulatory path than most bankers assume — non-purpose credit carries no Regulation U advance-rate cap at all.

Start With Your Trust Department

If your bank holds trust powers, you have less excuse than anyone — because you already own the two scarce assets this entire market runs on: the wealth relationship and custody of the collateral. Be precise about the three account types, because the fiduciary rules treat them differently. Agency and investment-management accounts are the clean channel — the client owns the assets, can pledge them, and your trust accounting system already prices them daily; lending against the agency book is the closest community-bank analog to what the custodians do. Personal trusts, where the bank is trustee, are the conflicted case — lending your own money against assets you control as fiduciary sits squarely in Regulation 9's conflict provisions, requires borrowing power in the instrument and documented authorization, and some institutions route those loans to an unaffiliated lender for exactly that reason. Retirement accounts are off the table entirely — pledging IRA assets is a prohibited transaction. But the agency book alone is a franchise: the thousand-plus banks with trust powers sit directly in the path of the wealth transfer, twenty-eight trust charters are queued at the OCC to compete for the same fiduciary business, and a trust division that does not lend against the assets it already custodies is leaving this entire thesis on the table for a custodian to collect.

And wealth transfer deserves more than a passing mention, because it is the untapped market inside the untapped market. Cerulli projects $124 trillion changing hands through 2048, $105 trillion of it to heirs and more than $60 trillion to Millennials and Gen Z — and here is the fact that should reorganize every wealth strategy discussion: among people who have already received an inheritance, only 20% kept the benefactor's advisor. Four of five relationships come loose at the moment of transfer. That makes inheritance the largest money-in-motion event in banking history, arriving one estate at a time — and the settlement itself creates the lending need: estates borrow to pay taxes and expenses and to equalize distributions without forced sales, and heirs need liquidity months before assets distribute. A bank sitting at that table — administering the estate, custodian of the portfolio, or simply banking the family — can be the lender at exactly the moment the incumbents' grip breaks. The big brokerage firms know it; it is why Wells Fargo's 2026 grid pays extra for multi-generational relationships anchored on $5 million households. The community bank's version of that play is the trust department, the estate settlement file, and a securities-backed line offered before the heirs' new advisor — whoever that turns out to be — offers one first.

For everyone else, the entry paths are productized. White-label the way TIAA does behind The Bancorp. Rent the rails the way Wintrust and Old National did. The deposit network channel your bank likely already uses for reciprocal deposits now carries a securities-lending partnership. None of this requires building a brokerage.

As to risk: these are demand loans against market-priced collateral — the bank can call them at any time, and the collateral is repriced every day. Credit losses are near zero, but the book is the most rate-sensitive in banking, because every loan floats with the market: when the Federal Reserve raised rates from near zero to above 5% between 2022 and 2024, borrowers paid balances down roughly 20% rather than carry suddenly expensive lines; when rates came back down, the same balances returned at 30 to 60% growth. Growth underwritten at today's funding costs should be stress-tested against the last cycle — and the moment that tests every program is the forced liquidation of a wealth client's portfolio into a falling market, triggering exactly the tax bill the product was sold to avoid. Underwrite the collateral fairly, haircut the concentrated positions, war-game the call procedures, and remember the First Republic lesson, stated precisely: never fund a wealth flywheel with flighty deposits and long assets. The product did not sink that bank. The balance sheet around it did.

My final comment: here is the number I would put in front of every bank board this quarter — one in seven dollars of industry loan growth is a product you do not offer, secured by assets your best customers already own, under rules that favor you, with technology you can rent. Your wealthiest customer is borrowing this year. The only question the data leaves open is from whom.

CCG Catalyst advises banks and credit unions on wealth strategies, lending products, and vendor selection. If your board is weighing whether securities-based lending belongs in your growth plan, reach out to our team at www.ccgcatalyst.com.

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By: Paul Schaus | Founder & Managing Partner, CCG Catalyst Consulting

Disclaimer: The views expressed in this article represent the perspective of CCG Catalyst Consulting based on our direct experience advising financial institutions. This commentary is intended to stimulate industry discussion and does not constitute legal, accounting, or regulatory advice.