Tuesday, January 14, 2025

Bonds Gone Bad

Bank earnings remained below par for 2024 due to continued net interest margin pressures. As a result, many financial institutions amplified their misery by turning unrealized losses in their relatively low-yielding bond portfolios into actual losses by selling their underperforming bonds.

In my book, Squared Away-How Bankers Can Succeed as Economic First Responders, I referred to the phenomenon of further impairing already impaired earnings by making strategic investments in your bank as "pulling into the pits." The difference between what I recommended in the book versus what has transpired is that I was referring to strategic investments in technology, products, lines of business and people to build a financial institution that is relevant, even important to its constituencies. If macroeconomic factors, such as the interest rate environment, led to a suboptimal ROA, why not make it an even less optimal ROA by investing in the bank's future?

Overcoming bad balance sheet decisions in a zero-rate environment was not exactly what I had in mind unless, and I hope my conjecture is correct, some of the increased interest income generated by higher-yielding bonds leads to strategic investments needed to build an enduring financial institution. I suspect, however, it's just to have better earnings in 2025. Not better capital, mind you, but the promise of better earnings. 

Some may take exception to me calling bond-buying decisions made during the pandemic era as bad. And I will admit, I do not sell bonds nor consider myself a bond expert. I leave that to your fixed-income advisors. With a particular shout-out to those who did not advise clients to "go long" in a zero-rate environment or at least hedge if they went long. Special mention to those who admitted to making a bad call if they advised clients to go long.

In hindsight, buying long-term bonds in a historically low interest rate environment doesn't sound like a great strategy though what were the alternatives given such excessive liquidity? One alternative would have been to stay on the shorter end of the curve as short-term yields moved in tandem with rising rates. But according to the below tables and charts, it looks like we didn't do that. The below charts, courtesy of S&P Capital IQ are from all banks between $1B-$10B in total assets where the information is available. I went through the list and eliminated some specialty banks like Charles Schwab Bank, etc. It yielded 600 banks and savings banks. In the table, one column is when rates were zero (pandemic era), and the second column is when the Fed tightened.










During the period when rates plummeted to zero as a result of the pandemic, and liquidity rushed into financial institutions as a result of government stimulus and a flight to safety and liquidity for consumers and businesses, bank securities portfolios grew 83%.

What did they do with the money? Bought long-term bonds, as each maturity/repricing bucket grew more in the over one year and beyond bucket than the 0-12 months buckets. The greatest growth was in the 3-5 year bucket. Over five years grew 192%. This bond buying might result from "present bias", which Gemini AI defined as the tendency to overvalue present rewards without considering future consequences. Such as, I don't know, selling a lot of those bonds at a loss that will take three years to earn back and, in many cases, raising capital causing shareholder dilution. It requires an assumption that current conditions, good or bad, will continue indefinitely.  Present bias is the only rationale I could conjure for Silicon Valley Bank's unhedged bond portfolio. 

In the rate runup from 2Q22 to 3Q23, securities portfolios declined 7.8%. One reason is we thought customers would stick with us through thick and thin. Maybe through thin, but not through thick. FDIC-insured financial institutions hemorrhaged $1 trillion in deposits while money market mutual fund assets grew by the same amount. Now we needed the securities portfolio for liquidity. This time also included the high-profile failures of three banks. One had the signatory of the Dodd-Frank Act on its board. 

That fact is irrelevant to this article but I like to bring it up whenever the opportunity presents itself.

Although the overall securities portfolio declined, bonds with maturities or reprices in less than three years grew. Long-term bonds declined to help us meet liquidity needs. We ran off long-term bonds and bought short-term ones. This makes sense to me because the interest rate environment was so unpredictable. We had an inverted yield curve during this time. It would have been nice, however, if we bought long-term bonds at peak interest rates, not trough. But this is Monday morning quarterbacking.  

My point is that if we are elevating rates over liquidity in our bond portfolio, remember Covid! If we thought we had loyal customers that don't demand competitive deposit rates, remember post-Covid Fed tightening!

In terms of making hypothetical losses into actual losses and prioritizing rate over liquidity in our bond portfolios, this chart visualizes consequences.














In a couple of weeks I will be heading off to Bank Director's Acquire or Be Acquired conference. There will be plenty of presenters with snappy looking charts describing how loss-sales make sense. And in some cases these transactions may make sense. I had a BOLI person extoll the virtues of taking an exit fee hit to trade for higher paying BOLI. I got off the call thinking "let's sell off some BOLI!" Note: I don't have BOLI. Sometimes critical thinking skills take a back seat to the compulsion to act, thinking if everyone else is doing it perhaps we should too.

If we are selling off assets at a loss, we must perform a post-mortem to create long-term institutional knowledge as to what happened to lead to it and how can we learn from it to apply to future situations. Let's not waste an "ahh crap" moment. Let's make us smarter, and our bank better.


~ Jeff



Friday, December 27, 2024

Financial Metrics of Credit Unions vs. Banks

I often hear that credit unions (or mutual banks) don't have to maximize profits because they don't have shareholders.

This is technically correct. Shareholders demand a return in the form of capital appreciation on the stock and the dividends paid per share, also known as total shareholder return (TSR). Credit Unions, however, do have owners that they call members. Members may pay little attention to the increase or decrease in the value of what they own because they are comfortable under the umbrella of NCUA insurance (much like depositors with FDIC insurance). This comfort might not make them salivate in anticipation of their CUs next quarterly Call Report. Members rarely hold CU executives accountable for financial performance.

But financial performance has meaning. Credit Unions primary source of capital is retained earnings. And if they have sub-optimal profits because of a lack of expense or pricing discipline, there is less retained earnings and therefore less capital to support growth or serve as a buffer for hard times. 

In addition, if CUs are inefficient and squander resources deep in the bowels of their infrastructure, there is less for members/depositors, employees, or their communities, i.e., their stakeholders. In this sense, TSR has a different meaning: total stakeholder returns. For example, some credit unions pay special dividends to depositors if they have good earnings and sufficient capital.

This month Robins Financial Credit Union, a $4.6 billion in asset CU in Georgia, paid a $20 million member rebate, representing about $74 per member and 45 basis points of its ROA. The reason they did it: their YTD ROA was 1.31% and their net worth/assets was 16.12%. Combine that with a clean balance sheet (0.41% delinquent loans/total loans) and there were ample resources to return that solid performance to their members. It's their money, right?

But the CUs that don't deliver that performance or have that capital position and strong balance sheet, management teams and trustees are reticent to return that money to members. Or other stakeholders for that matter.

Below is a series of charts that compares and contrasts the financial performance of banks + thrifts and credit unions with between $1 billion and $10 billion in total assets. Banks were controlled for those with less than 20% of their loan portfolio in commercial real estate loans to mitigate the differences in bank vs credit union balance sheets. This yielded only 118 banks because of the commercial loan restriction, versus 319 credit unions. I used medians so a few outsized banks or CUs didn't skew an average. The median-sized bank was $2.1 billion in total assets and the median CU was $2.2 billion. 

Here are the results (courtesy of S&P Capital IQ):




 



















Banks had a 41 basis points year-to-date advantage (1.00% vs .59%) in ROAA although banks pay federal taxes. Apply that to the median CU size of our sample ($2.2B in total assets) and that equates to $9 million. Perhaps that disadvantage is precisely because the measured CUs pay a special dividend to members, although banks' cost of interest-bearing liabilities was 1.21% more than CUs. Perhaps the salary and benefits per FTE is greater at CUs than banks, or their community support costs more. This we can't tell from the above charts. 

CUs will have to reflect on if that is true. 

Is it true that the 82 basis points disadvantage to banks in year-to-date non-interest expense to average assets, which equates to $18 million, is because CUs pay their people more, or provide that much more in community support?

Whether you have shareholders or not, running your business for the benefit of stakeholders should be your guiding star. You are doing stakeholders no favors by running it sub-optimally and wasting resources on inefficiencies deep in the bowels of your organization. Wouldn't it be great to have a full end-of-year bonus pool where you reward your most productive and loyal employees, have the pricing discipline to deliver a special dividend to your most loyal core depositors, or be able to meet some social needs in your community?

Profit performance matters, no matter which stakeholder(s) you favor.


Happy New Year to my readers!


~ Jeff


Note: My firm does two things to help create the culture for more optimal profit performance for financial institutions: 1) Profitability Measurement-we measure the profitability of lines of business and products on an outsourced basis so management teams can measure and maintain accountabilities for profit trends at much more granular levels than their Call Report; and 2) Process Improvement- we dispatch a team to analyze processes, resource and technology utilization and make recommendations for greater efficiencies. This is sometimes tough to do internally due to resource constraints and experiences outside of the organization. Follow the links to learn more or reach out to me. 


Thursday, December 19, 2024

Guest Post: Financial Markets and Economic Update-Fourth Quarter 2024

 Drones

On the night of December 12th, I saw reports from friends that they were personally seeing (and some videoing) the drones that have been filling the skies of New Jersey and Pennsylvania.  Their reports came from Doylestown, Willow Grove, Perkasie, Phoenixville, and Conshohocken.  Countless reports were coming in from the Lehigh Valley and the Poconos of large drones flying in formation and hovering in place.  Our government has no answers about the drones that were first reported flying in New Jersey on November 18th.  They are dismissing the reports, saying people are seeing planes (even though they are hovering). and saying there is no risk.  We can bring the drones down (safely with technology that they use in Europe to bring down drones at soccer games) and see what they are and what’s on board.  Very strange indeed.  Because we are not bringing them down, it makes me think that they are government assets, potentially scanning for radiation, according to one corporate executive who manufactures drones and identifies what he thinks is the exact make and model of drone.  Are they scanning for radiation, spying for the Iranians or Chinese, or just crazy operators who like to fly drones at night?  We don’t know because our government won’t tell us.  Stay tuned!

Instead of speculating, I decided to wait and see what the Federal Reserve did with rates December 18th.  They lowered the Fed Funds rate by .25% to a range of 4.25% to 4.50%. as expected, and I believe they made up their minds long ago.  By the Chairman’s admission, they are still restrictive in policy.  I think they don’t want to weaken employment or the economy before our new President takes control in January.  By the way, the Trump team is concerned that inflation is not falling and are not calling for rate cuts.  The team’s arrival cannot come soon enough.  The Fed also released their quarterly projections, showing they think GDP will decline from 2.5% in 2024 to 2.1% in 2025 and they show an unemployment rate that rises to 4.3% and stays there.  The surprise is that they show PCE inflation not dropping fully to the 2.00% target until 2026.  We are so close, but why are we waiting two years?  Why?  Stock markets reacted very badly after the news of the rate cut and Powell’s press conference.  The Dow was down over 1,000 points to close in negative territory for the tenth consecutive day.  Ugh, another overreaction.

Inflation

The decline in the year-over-year inflation rates has stalled in the past few months.  The biggest declines came during the period when the Fed was allowing the M2 money supply to outright contract on a y-o-y basis.  That stopped this past April and M2 has been slowly growing ever since.  Does that mean that the Fed should not lower rates?  No, the Fed was overly restrictive when Fed Funds was at 5.50% and they are still restrictive at 4.50%.  Inflation was a critical issue this election cycle.  People are feeling the effects of cumulative inflation, up 20% since early 2021, and high prices and they need strong wage growth (on a real basis above inflation) to catch up.

It is still driving me crazy! People still refer to the CPI and say it is not at the Fed’s target of 2.0%.  It will not be!  The Fed targets PCE (and headline PCE at that) and monitors core PCE in setting their targets; the PCE and CPI indices are constructed differently with different weightings of components.  PCE covers urban and rural areas and changes weightings monthly to account for consumers substituting different goods when prices change.  The CPI covers only urban areas and weightings are adjusted once a year.  The Fed favors headline PCE and that is their target.  We can certainly use CPI but it must be adjusted to compare to PCE.

In research from November, 2017, Noah Johnson of the BLS showed analysis of the two indices.  He showed that CPI has exceeded PCE by 100 basis points over the past 50 years.  I read a research report by Bloomberg (some time ago) that showed the spread to be lower at lower rate levels and they adjusted the spread to 50 basis points for the past 10 to 15 years.  So, if the Fed target for PCE is 2.0%, CPI can be 2.5% and they still meet their target.  We are getting so close but frustratingly far away on some measures: PCE in October was 2.3% (September 2.1%), core PCE in October was 2.8% (September 2.7%), CPI in November was 2.7% (October 2.6%) and core CPI in November was 3.3% (October 3.3%).  GDP’s PCE for 3Q24 was 3.7% compared to 2.8% in 2Q24, sharing a 3 handle with core CPI, so that is worrying people.  The other PCE measures are trending so slowly to 2.0%.  People worried that CPI rose in November, but one of the main causes was a large increase in egg prices due to Avian bird flu.  Should the Fed change rates based on egg prices?

Based on a Fed Funds rate of 4.50% and inflation measures, is the Fed tight/restrictive?  Yes, certainly they are based on a spread to PCE of 2.2%, core PCE of 1.7%, CPI of 1.8%, and core CPI of 1.2%.  Comparing Fed Funds to nominal GDP in 3Q24 of 5.0%, the spread is -.5% and not tight.  Granted, when the Fed eased yesterday, nominal GDP was 4.7% prior to today’s final revision.

GDP, and Should We Look at GDI Too?

Anyone who knows me knows that I am a fan of Dr. Lacy Hunt’s writings on the Fed, rates, and the economy.  His continued research has convinced me to look at the average of two economic production measures: GDP- tracks expenditures on final goods and services produced, and GDI- sum of the income received by all those who produce the goods and services, and not just focus on GDP.   Both are contained in the quarterly GDP reports.

Real GDP in 3Q24 was +3.0%, 2Q24 was+3.0%, and 1Q24 was +1.6%.  Real GDI for 3Q24 was +2.1%, 2Q24 was +2.0%, and 1Q24 was +3.0%.  It’s a mixed picture, right?  Shouldn’t they equal?  The short answer is yes and attempts are made during annual benchmark revisions.  But the average of GDP and GDI is more consistent: for 3Q24, it was +2.6%, in 2Q24 was +2.5%, and in 1Q24 was +2.3%.  It gives a smoother picture of the growth trend, which is clearly lower than headlines for GDP would indicate.

I think the lower trend of the average of GDP and GDI is why the Fed started to ease.  The nominal average of GDP and GDI for 3Q24 was +4.5% (equal to FF), for 2Q24 was +5.1% (was .4% under FF) and 1Q24 was +5.4% (.1% under FF).  The Fed generally eases policy when Fed Funds exceeds nominal GDP, or better yet, the nominal average of GDP and GDI.

November, 2024

What a month it was!   For me personally, I went to Disney World with family and reconnected with Florida cousins.  We toasted my one-year retirement anniversary at lunch on November 8th.  But the election dominated the news, with Donald Trump regaining the White House for a second term.  He swept all of the swing states by connecting with everyday people.  His promises on immigration, securing the border and deportations, lower taxes for consumers, seniors on social security, and businesses, improving trade with tariff strategies, lower inflation by ramping up production dramatically for oil and natural gas, cutting costs of government using DOGE, and putting an end to endless wars resonated with voters.  He has surrounded himself with businessmen and some surprising picks to run the government agencies, with a promise to cut regulations that are strangling banks and corporations.  It’s music to Jamie Dimon’s ears, although I’m a little sad that he is not part of the new administration.  He’ll continue in the role of consultant to Trump, as has been the case for many months.

Stocks rallied wildly during November at the promise of lower taxes and an improved business environment.  Bitcoin’s price exploded from 66,000 in October to 106,000 the other day, or +61% due to the Trump effect of supporting Bitcoin.  The DJIA has struggled this month, with the December 18th  selloff the 10th consecutive day of declines (but up 14% y-t-d), the S&P 500 and Nasdaq achieved new handles of 6,000 on the S&P (up 25% y-t-d), and Nasdaq of 20,000 (up 34% y-t-d).  Trump had the honor of ringing the opening bell on the NYSE on December 12th.

The markets perceive improved GDP growth with less government cash flooding the economy and crowding out business, although the Fed’s projections from yesterday show a decline in GDP from 2.5% this year to 2.1% next year.  A lower budget deficit would be a welcome relief for the bond market roller coaster, where yields plunged in September upon the first Fed rate cut of .50%, only to have long-term yields rise by 70 to 80 basis points, while the short-term rates fell 100 basis points so far.  The yield curve has gone from inverted (10 yr to 2 yr and 10 yr to 3 month), to flat, to steepening very quickly.  The budget deficit for 2024 was -$1.8 trillion, or 6.1% of GDP, and was -$1.7 trillion in 2023.  The Trump goals include reducing the deficit to GDP to 3% or less.  Debt is at $36.2 trillion and interest to service that debt was $950 billion in 2024.  Debt-to-GDP is at 120.7% in 3Q24; long periods above 90% will reduce GDP potential by one-third.

And speaking of government, on December 18th, Congressional and Senate leaders tried to jam a 1,547 page “continuing resolution” down the throats of Congress and the American people.  It was loaded with incredible spending and unrelated “perks,” such as giving a gigantic pay raise to Congress while many American people can’t make ends meet, sheltering Congress members from subpoenas (wow!), giving state and local workers an extra social security payment, allowing Congress members to opt out of Obamacare when all of us cannot, providing money to upgrade the NFL Washington Commanders’ stadium (why?), paying for the destroyed bridge in Baltimore that should be paid for by private insurance, paying $10 billion to keep a government agency in the business of censorship of conservatives for another year, and a restrictive debt ceiling.  The list goes on and on.  Elon Musk, Donald Trump, and JD Vance put an end to this outrage and back room dealing.  This bill is now thankfully off the table.  The deadline for a spending bill is December 20th  at midnight or else the government shuts down.  Stay tuned but the American people did not vote for this…

What About Other Indicators?

We can’t forget my other favorite indicators; watch them and you know what’s fundamentally happening and what will eventually happen.

-           M2 growth y-o-y- From the Fed H.6 report, y-o-y growth in M2 money supply for October was +3.1%, September was +2.6%, August was +2.0%, and July was +1.3%.  Y-o-y growth turned positive in April, 2024 after 16 months of y-o-y declines, which hadn’t happened since 1931-1933.  Milton Friedman said M2 growth should equate to nominal GDP growth, so the Fed is still restrictive.  Dr. Hunt indicates that the rate cuts by the Fed are needed to reverse the negative and low trend growth of M2.  And don’t forget, they are still doing QT, or reducing their bond portfolio, which also drains money from the system.

-          The dollar was volatile all year.  Standing at 106.84 on December 12th, with a low of 100.16 on September 27th, but it is now up +5.4% from the level at December 31, 2023 of 101.33.  This is good news for fighting inflation as import prices will be lower on a relative basis and this will help to keep inflation down; however, it may not be the best news for exports.  China is experiencing deflation for the last six quarters and factory prices there have declined y-o-y for 26 months in a row, according to the WSJ and that is good news.

-          Leading economic indicators- Surprise!  In today’s release, the LEI rose +.3% for November (the Trump effect), after declining for 30 of 31 months since April, 2022 with only a small increase in February, 2024.  The index fell below 100 (100=2016) in September and November equaled that level at 99.7.  Go figure.

-      Housing- Y-o-y home prices are still increasing with Case Shiller at +4.6% in September and FHFA at +4.4%.  Average mortgage rates for new 30-year loans are 6.72% while the average mortgage rate currently on homes in the US is 3.78%.  No wonder there is no inventory on the market.  New construction continues to be slow.  Zillow showed how unaffordable housing really is- today, a salary of $106,500 is needed to buy a house at the average sale price; in 2020, that same salary was $59,000.

-   Employment- The unemployment rate in November was 4.2%, up from 3.7% one year ago.  In November, payrolls rose by 227,000 after two grim months, but household employment fell by -355,000.  Unemployed persons now total 7.14 million and the pool of available workers is 12.63 million.  Over the past year, full-time jobs have fallen by -1.34 million to 133.39 million while part-time jobs have grown by 106,000 to 37 million, with likely few benefits for the latter.  This is hardly a robust employment market.  Remember the August announcement that at least 818,000 “jobs” will be pulled out of totals for 2024 as they simply did not exist.  Perhaps that was due to the Philadelphia Fed monitoring job growth and showing that there were job losses that began in 2Q24.  This could explain the Fed rate cuts.

-     Productivity- In 3Q24, it ran at +2.2% following 2Q24’s rate of +2.5%.  Wages can rise greater than inflation targets if productivity runs close to its long-term average of +1.5%.  Currently, in November, the wage growth was +4.0% y-o-y, which is okay if productivity stays above 2.0%.

-    Crude Oil- The latest price is just below $70 per barrel, equal to where we started 2024.  If we can increase production dramatically (the goal may be an increase of 3 million barrels per day), a decline in oil prices can lead inflation lower.

 

Finally. 2024 has been a great ride.  There’s more time to travel, to write, to be with family and friends.  People ask me if I miss working.  The answer will always be yes, I do.  I especially miss my colleagues.  They probably have missed me saying throughout the year that “Christmas will be here before you know it.”   Christmas is less than a week away and I pray that all of you find time to relax and enjoy life.  I wish you all a very Merry Christmas and a Happy 2025!!!

I appreciate all of your support!  Thanks for reading!  DLJ 12/19/24


Dorothy Jaworski has worked at large and small banks for over 30 years; much of that time has been spent in investment portfolio management, risk management, and financial analysis. Dorothy recently retired from Penn Community Bank where she worked since 2004. She is the author of Just Another Good Soldier, and Honoring Stephen Jaworski, which details the 11th Infantry Regiment's WWII crossing of the Moselle River where her uncle, Pfc. Stephen W. Jaworski, gave his last full measure of devotion.


Disclaimer: This publication is provided to you solely for educational and entertainment purposes.  The information contained herein is based on sources believed to be reliable but is not represented to be complete and its accuracy is not guaranteed.  The expressed opinions, views, and estimates are those of the author as of this date and are subject to change without notice.  The author cannot provide investment advice but welcomes all of your comments.

Tuesday, December 10, 2024

Banking's Top 5 Total Return to Shareholders: 2024 Edition

There have been some humbling moments in Top 5 recognitions, with some award recipients failing and one voluntarily liquidating. Although we seek long-term performance in our 5-year lookback to mitigate the risk of banks that stoke performance with risky bets, we are reminded that banking is a long game. Business models built to endure do so over different economic cycles. And in today's world, economic cycles tend to last more than five years. Having said that, I am here to count numbers with minimal subjectivity (although there is some), and if they have the best five-year total return to shareholders within the criteria mentioned below, they are most likely on the list.

For the past thirteen years, I searched for the Top 5 financial institutions in five-year total return to shareholders because I support long-term strategic decision-making that may not benefit next quarter's or even next year's earnings. And I am weary of the persistent "get big or get out" mentality of many industry pundits. If their platitudes about scale are correct, then the largest FIs should logically demonstrate better shareholder returns, right?

Not so over the thirteen years I have been keeping track. The first bank to crack the Top 5 over $50 billion did so in 2020. As a reference, the best SIFI bank in five-year total return this year was JPMorgan Chase at 46th overall. Although one might argue that First Citizens BancShares of Raleigh is a SIFI as it had $220 billion of total assets, roughly the size of Silicon Valley Bank when it failed. The  FDIC designated SVB as systemically important.

My method was to search for the best banks based on total return to shareholders over the past five years. I chose five years because banks that focus on year-over-year returns tend to cut strategic investments come budget time, which hurts their market position, earnings power, and future relevance more than those that make those investments. I call this "pulling into the pits" in my book: Squared Away-How Can Bankers Succeed as Economic First Responders. Short-term focus is a common trait of banks that focus on shareholder primacy over stakeholder primacy.

Total return includes two components: capital appreciation and dividends. However, to exclude trading inefficiencies associated with illiquidity, I filtered out those FIs that trade less than 1,000 shares per day. I changed this from 2,000 shares as it was pruning too many fine institutions. But the 1,000 shares/day minimum naturally eliminates many of the smaller, illiquid FIs. I also filtered for anomalies such as recent merger announcements as a seller, turnaround situations (losses suffered from 2018 forward), mutual-to-stock conversions, large ECIP recipients, and penny stocks. 

As a point of reference, the S&P US BMI Bank Total Return Index for the five years ended December 6, 2024 was 34.55%.

Before we begin and for comparison purposes, here are last year's top five, as measured in December 2023:

#1.  M&F Bancorp, Inc. (OTCPK: MFBP)
#2.  The Bancorp, Inc. (Nasdaq: TBBK)
#3.  Citizens Bancorp Corporation (OTCPK: CZBS)
#4.  First Citizens BancShares, Inc. (Nasdaq.GS: FCNC.A)
#5.  FFB Bancorp (OTCQX: FFBB)


Here is this year's list:



#1. The Bancorp, Inc. (Nasdaq: TBBK)


Founded in 2000, this $8.1 billion financial institution remains one of the few banks in the U.S. that specializes in providing private-label banking and technology solutions for non-bank companies ranging from entrepreneurial start-ups to those in the Fortune 500.  They provide white-label payments and depository services (think Paypal, Chime) and deploy that funding into specialized lending programs such as lending to wealth management firms, commercial fleet leasing, and real estate bridge lending. Note their asset size, because their value as the BaaS bank for Chime is that they are under $10 billion in total assets and not subject to the Durbin Amendment portion of the Dodd-Frank Act that fixes interchange income pricing. It has not been all sunshine and rainbows for TBBK. They were under an FDIC consent order from 2014 through 2020 relating to their BSA and OFAC compliance and their relationship with third parties seeking access to the banking system. So in 2019, when our 5-year measurement period began, they were under that cloud. Bankers considering becoming a BaaS provider to such third parties should read their order. Having said that, they posted a 2.75% ROA and 26.56% ROE year-to-date and that surpassed their aspirational goal (which they disclosed) of having a >2% ROA and >20% ROE. They put it out there and got it done! And have delivered a 397% five-year total return to their shareholders and third straight Top 5 accolade and topping our list this year! 



#2 Northeast Bank (NasdaqGM: NBN)

Northeast Bank is a full-service bank headquartered in Portland, Maine that had $3.9 billion in total assets and seven branches at September 30, 2024. It offers personal and business services to the Maine market, and sports a national lending platform which purchases and originates commercial loans, mostly secured by real estate, and SBA loans, on a nationwide basis. It has a nationwide digital bank, ableBanking, that offers online savings products to consumers nationwide to assist in funding its nationwide lending program. The Bank is currently offering shares for sale at-the-market to support future growth. Its national lending program represents all but a small percentage of its entire loan portfolio. Two thirds of its deposits are time deposits, resulting in an LTM (their fiscal year ends September 30th) cost of funds of 4.16%. By way of comparison, we do a quarterly flip book for Massachusetts that shows all MA banks cost of funds was 2.48%. New England financial institutions generally have higher cost of funds. But not that much higher. This is because there are a lot of loans to fund! And the bank's yield on loans was 9.30%. I know what you're thinking, but so far their NPLs/Loans was 1.31% at September 30th. With a net interest margin of 5.06%, having relatively higher NPLs than those with NIMs with a 2-handle makes sense.  This resulted in a 1.97% LTM ROA and 17.09% ROE and a 370% 5-year total return to shareholders. Well done!




Since 1997, Coastal Community Bank, the wholly owned bank subsidiary of Coastal Financial Corporation, has delivered a full range of banking services to small and medium-sized businesses, professionals, and individuals throughout the greater Puget Sound (Washington) area through a traditional community bank branch network in its three-county market. The bank consists of two segments: 1) the traditional community bank, and 2) CCBX, which is its Banking as a Service (BaaS) division started in 2018. Prior to starting CCBX and for the year ended 2017, the Company had $806 million in total assets and $5.4 million in net income for an ROA of 0.73%. As of or for the latest twelve months ended September 30, 2024, the Company had $4.1 billion of total assets, $40.9 million net income and a 1.10% ROA. Their CCBX segment continues to evolve, particularly with enhanced regulatory scrutiny of BaaS banks. CCBX is focused on expanding products with existing partners rather than partner growth. What has this bifurcated business model delivered? A 351% five-year total return and place on the JFB Top 5 in two of the last three years! Well done!


#4 First Citizens BancShares, Inc. (NasdaqGS: FCNC.A)


First Citizens Bank was founded in North Carolina in 1898 as the Bank of Smithfield. In 1935, R.P. Holding was elected Chairman and President of First-Citizens Bank & Trust, a family legacy of leadership that lasts to this day.   First Citizens includes a network of more than 500 branches and offices in 30 states spanning coast to coast, and a nationwide direct banking business. In January 2022, First Citizens did a tangible book value accretive merger of equals with CIT Group. And followed that savvy deal with another tangible book accretive deal by completing the failed Silicon Valley Bridge Bank acquisition in the first quarter 2023. Concern about maintaining SVB accounts has dissipated as the bank has more loans and more deposits now than in the first quarter 2023. For the LTM ended September 30, 2024, net interest margin was 3.68%, ROA was 1.19%, and ROE was 12.74%. Its efficiency ratio pre-SVB was 61% and now it is 55%. Economies of scale were realized. All this accretive deal making and prudent management has resulted in a brass ring for shareholders in the form of a 327% five-year total return. Congratulations!





New to the JFB Top 5 is Las Vegas based GBank Financial Holdings, Inc. Like most things Vegas, this is a unique financial institution. Founded in 2007, GBank operates two full-service commercial branches in Las Vegas. It conducts business nationally through its SBA lending business that is a top 10 national 7(a) lender by volume. Through its partnership with BankCard Services (BCS), it has established relationships with gaming companies, skills gaming companies, and payments and wallet provider companies. This likely explains why the CEO of MGM and general counsel of Great Canadian Gaming Corporation are on the company's board. It has also struck an agreement with MasterCard to provide pre-paid card services. At and for the LTM ended September 30, 2024 it had a mere $1.0 billion in total assets but had net income of $13.4 million leading to an ROA of 1.82% and ROE of 16.54%. This is the smallest bank in our Top 5, yet it enjoys an average daily trading volume of over 15,000 shares. Only in Vegas! Congratulations for your Top 5 recognition and huzzah to your shareholders who enjoyed a 294% 5-year total return! 



There they are. Interesting there is no bank that I would deem a traditional community bank. Be it BaaS, nationwide lending, focus on a niche such as v/c and p/e ecosystems, or gaming. All 5 have a unique path to delivering to their shareholders. And 4 of 5 are less than $10 billion in total assets. GBank is 1/10th that size.   

The evolution of this august list tells me that having something other than "plain vanilla" is driving performance and shareholder returns. 



~ Jeff




Note: I make no investment recommendations in this article or this blog.

Tuesday, November 05, 2024

2024 Ranking Banking by Bank Director-Jeff For Banks Version

Bank Director Magazine recently came out with its Ranking Banking report for 2024. The analysis was performed by Piper Sandler using the following criteria:

"The report uses year-end 2023 data from S&P Global Market Intelligence. It uses four metrics to gauge the performance of public commercial and savings banks as defined by S&P. The metrics are core return on average assets and core return on average equity, tangible common equity to tangible assets, and nonperforming assets to loans and other real estate owned. Each bank is ranked on each metric, and the sum of the rankings produces a final score. Total shareholder return was excluded because some over-the-counter banks are thinly traded, making the metric unfair as a comparison."

I concurred with a Bank Director writer about the challenge with total shareholder return, as I rank top five banks every year on total shareholder return and had to use a minimum average daily trading volume to reduce the incidence of thinly traded banks topping the list because someone traded 300 shares immediately prior to my lookback. 

Here is the reports top 25 banks. Note that lower total score is better because if you are ranked 1st in a category, only 1 is added to the score whereas if ranked 25th, then a 25 is added.


Click on image to see it larger.

It's a good list with fine institutions that have obviously outperformed. I wanted to take another cut at it though. One is I wanted to push it forward to second quarter 2024 (the list was year ended 2023). Another critical addition is to determine if each bank was trending favorably in each metric. One thing I have learned being in the banking industry is momentum is critical to success. Particularly in an industry whose revenues are driven from their balance sheet. Meaning that tomorrow's sales doesn't equate to this quarter's profits. This quarter's profits were driven by sales two to four quarters ago. Net interest income is typically greater than 80% of community bank revenues. And the commercial real estate loan you booked today will contribute to profits next quarter, not necessarily this one. And the same for that business checking account.

So trend is critical to a bank's success. So I added trend to each category and awarded five points for every negative trend, and no points for positive ones, in sticking with the lower is better score used by Bank Director. 

I should note some differences in categories. One is I used five quarter averages, meaning I looked back to the second quarter 2023 through the second quarter 2024. And I used NPAs/Assets as the asset quality metric. Here are the results.


Click on image to see it larger.

The top 2, Westamerica and Farmers & Merchants (California) are the same, meaning they not only outperformed the group in the Bank Director cut using 2023 numbers, but the above metrics and trends as well.

Big differences, however, happened from the Bank Director list. Cashmere Valley Bank, for example, dropped from number 7 on the Bank Director list to number 15 here. It wasn't because of their trends. They recorded positive trends from 2Q23 to 2Q24 in ROAA, ROAE and tangible equity/assets. In the Bank Director report, they were compared to 300 financial institutions. In the above table, they are only compared to the top 25 identified by Bank Director. Cashmere was high average in most categories when compared to 300. Ranking them a solid seventh because of their consistency. They received no such love when compared only to the top 25. 

Moving significantly up in rankings were International Bancshares, from 24th to 5th, and 1st Source, also from tied for 24th to 8th. It was asset quality that dropped International in the Bank Director list, landing them 275th of 300 because the other metrics had them ranked well (number 1 in ROAA in the Bank Director report). Because asset quality in the above table only penalized them with a 22nd out of 25, they rose on the list. And shouldn't banks compare risk to reward? International Bancshares five quarter NPAs/Assets average was 57 bps. Not exactly a three-alarm fire.

1st Source, however, got their bump from positive trends in all four metrics measured, even though they were only 12th in ROAA and 18th in ROAE. Things are moving in the right direction. And as I mentioned, trend is important because revenues are mostly from balance sheets. And balance sheets move more like aircraft carriers than speed boats. 

I would vote for including trend information in Bank Director's next Ranking Banking report. Because it is so critical in telling the story of who is performing well and who will continue to perform well.


~ Jeff


Monday, October 14, 2024

Putting the "Community" Into Community Banking

Community banking has almost achieved Kleenex or Xerox fame, being generalized to the point of meaninglessness. PNC ($557 billion in total assets) calls itself a "Main Street Bank."  Citadel Credit Union's website is CitadelBanking.com. 

One of my Navy division officers once told me, "Be careful pointing fingers, because the rest are pointing back at you." And the dilution of what it means to be a community bank has been diminished not just by interlopers pretending to be sheep in wolf's clothing, but also regulators, and unfortunately, community banks themselves. The so-called fingers pointing back at us. We have not done a good job explaining what a community bank is.

Here is what @Victaurs said about a community bank on his or her substack:



"A community bank in the U.S. is generally defined as a depository or lending institution that primarily serves businesses and individuals in a small geographic area. These banks emphasize personal relationships with their customers and often have specialized knowledge of their local community and customers. They tend to base credit decisions on local knowledge and nonstandard data obtained through long-term relationships, rather than relying solely on models-based underwriting used by larger banks."


There are attributes that community banks should yell loudly from the rooftops. Because "buy local" has the greatest impact if you deposit your hard-earned money locally. Because a community bank:

- Lends 70%-80% of every dollar you deposit within your community to businesses that need capital and people that need homes.

- Donates almost exclusively to local non-profits in the communities it serves such as food pantries, affordable housing initiatives, and local youth sports organizations.

- Leaders from community banks are typically leaders in your communities, on school boards, Rotary clubs, and libraries.

- Community banks assess a borrowers' ability and willingness to pay loans back based on more than financials laid out in spreadsheets, but also based on local knowledge of the borrower, business, and markets.

- A community bank thinks your business and personal banking needs are important. Think back to the pandemic when small businesses couldn't get their big bank on the phone. They called community banks. Why? Because those businesses weren't "small" to them. 


For some reason, we have not been able to break through the public's perception that a community bank is somehow less than a big bank. Less safe and secure. Fewer products. Low tech. None of which are usually true. So why do people perceive that it is true? Again, the other fingers are pointing back at us.


What To Do

My first recommendation to distinguish a community bank from others (big banks, fintechs, other financial intermediaries), is to improve our messaging as to content and frequency. In today's digital world, we don't need a Capital One ad budget to deliver our message to our target audience early and often. I'm in a swing state and I receive political messages daily via ads, content (paid and free), and old-school direct mail. When I traveled to California recently, I got none of this, telling me that you don't have to plaster ads across large geographies. Just the geographies where we operate. This can really elevate the importance of bank marketing from what James Robert Lay of the Digital Growth Institute said: "financial marketers have been viewed internally as ‘kids who play with paint and crayons." It matters where people and businesses bank. But only if people and businesses know why it matters.

My next recommendations come from past posts because I believe now as I did then, that community banks can elevate their importance to the communities they serve. They can matter more. They would be missed if they were not there.

Build a small business banking platform. I asked Google Gemini AI who were the top 5 market cap firms in the S&P 500 and what year did they start. The response:

The top 5 companies in market capitalization in the S&P 500 as of October 2024 are:

Apple: Founded in 1976   

Microsoft: Founded in 1975   

Alphabet (Google): Founded in 1998

Amazon: Founded in 1994   

Nvidia: Founded in 1993

All started as small businesses. In addition to extraordinary founders with awesome business ideas, all needed seed capital and loans. And now they employ hundreds of thousands of people. Community banks can increase their participation in what may be the next Amazon. I wrote two articles on how they can do this. The first, Build Your Own Small Business Loan Platform confesses to a seldom discussed blind spot in how community banks build communities: they only like lending with real estate as collateral. In that post I described a bank that had several alternatives on how a community bank can make capital available to small businesses, only a couple of which would actually be on the bank's balance sheet if those loans were outside of the bank's risk appetite. It could be started today and deployed in a matter of months, if a bank chooses to do it.

Small businesses don't need loans early in their existence. They need capital. That is why I wrote Shark Tank twelve years ago. I hatched this idea prior to writing about it and bounced it off of the CEO of a New York bank when he was Chairman of the ABA. His response: "Jeff, that isn't banking." But I have not given up on the idea because there are new Bill Gates and Jeff Bezos out there who don't need loans because they don't have the cash flow yet to service loans. But they need capital.  And those who can be significant employers in your communities may not be lucky enough to get the attention of p/e firms. But a local angel fund run by the community bank? Heck I bet you could get the big banks to be an investor in it.

Another idea is to build a Financial Wellness Center (FWC) as a profit center to serve the needs of the low-mod income families in your markets. I'm talking beyond CRA. I'm talking impact. Help people go from Low to Mod, Mod to Middle, and so on. And do so profitably. I suggested how to do this in my recent article Financial Wellness as a Profit Center. Sure there are others doing it for altruistic reasons. Without using profit as your goal posts, you will have an activity that begs for resources and is a drain to the bottom line. Instead, build one that supports itself and is a beacon of hope in your communities. 

My last idea on how to distinguish a community bank from all others is: Adopt a higher purpose. Community financial institutions, in my experience, donate 4%-8% of pre-tax profit to local charities in the communities they serve. They sprinkle their giving here and there and do social media posts talking about it. But what if they focused effort and resources for championing a cause. For example, Bombas Socks donates a pair of socks to a homeless shelter each time you buy a pair from them. As their business model grew, they began donating other clothing items most in need at shelters. What could your higher purpose be?  Perhaps you can marry the Financial Wellness Center idea to your higher purpose: Elevate the financial well-being of every community we are in. And then create measurables to see how you are doing. Wouldn't it be a great selling point to keep your top-performing employees and attract others? Would customers stay with you longer and not demand the best price? Would your community be better off with you in it?  

Make no mistake, I already believe that community banks are critical to the success of their communities and feeding the American Dream of entrepreneurship and home ownership. I offer my suggestions to take that strategic advantage to the next level. Make your institution indispensable and you will be unbreakable.


~ Jeff


   


  



Wednesday, October 02, 2024

Guest Post: Financial Markets and Economic Update- Third Quarter 2024

Financial Markets Update – Third Quarter 2024

I had a fantastic September traveling to France and Luxembourg with my sisters.  We joined my dear friend, Elisabeth, Thanks GIs Association, and other American families for the dedication ceremony of a new monument to the 11th Infantry Regiment, who fought in the Dornot-Corny battle along the Moselle River in 1944 for their freedom.  My Uncle, Stephen W. Jaworski, was killed in action during these battles just south of Dornot.  We spent quality time with our French friends/family.  We joined Thanks GIs for lunch with the Mayor of Noveant, who surprised us with a posthumous Medal of Honor award to Stephen from the town.  It was another emotional day, and later we visited Stephen’s gravesite at the Luxembourg American Cemetery to honor him.  These were powerful, emotional events and I will always be proud to represent Stephen, our family hero.

Where is the Recession?

I’ll start this subject again this quarter by saying I believed we would get recession by now; my timing has been horribly early and wrong.  All the signals have been there for two years; the index of leading economic indicators has been down 27 of the last 28 months, consumers are using borrowing to get them through as inflation ravages household budgets, and an inverted yield curve, which is generally a precursor of recession, lasted about two years.  Interestingly, the 10-year to 2-year Treasury spread, which was -37 basis points at June 30th, turned positive in September after 26 months and is now +23 basis points.  The 10-year to 3-month Treasury spread is still inverted, as short-term rates wait for more Fed action.  The spread was -101 basis points at June 30th and is still widely negative at -81 points today.  Remember, it is the re-steepening of the yield curve after a prolonged period of inversion that heralds recession and Fed easing.

You wouldn’t know we have recession risk when stocks are rampaging; markets crashed for a day on August 5th but recovered in mere days.  Year-to-date, the S&P 500 is up +21%, Nasdaq is up +23%, and the DJIA is up +12%.  But unemployment took a turn for the worse with July’s numbers, reported in August and some economists point to the Sahm Rule (recession occurs when the unemployment rate rises +.5% in a short period), with the unemployment rate at 4.2% in August being +.8% over the low in 2023 of 3.4% to say recession could be starting.  I’ve been suspicious of the fictional payroll numbers and equally unreal JOLTS report.  In August, the BLS announced that they would cut 818,000 jobs from the payroll reports of the past 12 months as part of their benchmark revision process.  It’s the largest since 2009!  The pool of available workers is high again at 12.75 million persons and the unemployed now total 7.1 million.  Full-time jobs are down -1,021,000 in the past 12 months while part-time jobs, likely without benefits, are up +1,055,000.  Payroll and household job growth has weakened considerably since July.

Gold is signaling concern as it trades at new highs, currently $2,658 per ounce.  Safe havens are not always bonds.  Anticipated slowdowns in the economies of the US, China, and Europe led to oil prices declining to $68.64 per barrel and gas prices declining to $3.22 per gallon, according to AAA.

GDP

The latest Federal Reserve projections from September for GDP are for +2% growth this year and next year, despite 2Q24 GDP being +3.0% and the Atlanta Fed GDP Now being +2.9% for 3Q24.  By the way, Chairman Powell called 2% GDP growth “solid.”  It’s sad that we have lowered our standards.  The Fed and many others believe (or maybe they hope) that we will have a soft landing.  This is a familiar refrain.  Before every recession since 1980, economists and market participants believed the economy would have a soft landing; in fact, the elusive soft landing was achieved only once since then- in 1996 by Maestro Greenspan.  More than likely, the US will experience a weak recession…if the Fed keeps lowering rates.

The world’s best banker, Chase’s Jamie Dimon, recently warned about a scenario that is worse than recession; he says not to discount the possibility of stagflation like the 1970s, with slow growth, rising inflation, and rising unemployment.  I would add that we should not discount the possibility of inflation falling far below Fed targets if they remain stubbornly tight.

The Fed

I was not surprised at the 50 basis point cut in the Fed Funds rate in September.  I’ve continually complained that the Fed Funds rate was too high.  I think it came down to the Fed regretting that they did not cut rates in July (as all hell broke loose with unemployment right after that), so they are playing catch-up.  But I ask, in what universe does a 5% Fed Funds rate make sense?  Short-term Treasury yields and SOFR rates are all in the 4s, one-year to 10-year Treasuries all have 3 handles, and very long-term Treasuries are in the low 4s.  But a 5 handle on Fed Funds?  Even bankers disagree, as the FF effective is 4.83%, toward the lower end of the 4.75% to 5.00% range.  So yes, we’re happy with the first 50 basis points two weeks ago, but there is a lot more work to do.  I think the Fed will “catch up” again and do 50 basis points in November.  That FOMC meeting occurs after Election Day, so they won’t get any political questions.  And 2025?  The Fed themselves project the rate cutting phase will continue through the year.

Inflation

Everybody hates inflation!  Thankfully, inflation continues to head down toward Fed targets, albeit slowly for some measures.  Fed targets are based on the BEA reported PCE and core PCE numbers, published monthly and quarterly.  The most recent monthly report for August had PCE at +2.2% y-o-y and core PCE at +2.7% y-o-y.  From the GDP report, 2Q24 PCE was +2.5% and core PCE was 2.8%, both y-o-y.

In terms of CPI, August was +2.5% y-o-y and core CPI was +3.2% y-o-y.  Remember that CPI historically is higher than PCE by +.5%, so 2.5% would be a good goal to have on CPI.  Core CPI is stubborn and declining more slowly than expected.  Before we celebrate too much, can you say “supply chain issues?”  We have the threat of dock workers going on strike October 1st at ports along the east coast of the US and across the Gulf coast to Texas.  What would this disruption mean especially since there is so much need in states like Florida, North Carolina, and Tennessee after Hurricane Helene destroyed so many communities with massive rain and flooding.

Chairman Powell stated that wage growth is not contributing to inflation.  He also called the labor market “solid,” but we will forgive him for that one.  The figure was +3.8% y-o-y for August.  Remember that wages can increase in a 2% inflation target environment and, if productivity is decent (historically +1.5%), can grow +3.5% on average.  2Q24 productivity was +2.5% and 1Q24 was +.4%, making the y-t-d average +1,5%, precipitating Powell’s comments.  The wage growth percentage for August is getting closer to this goal.

The inflation narrative really is broken down into two parts:  the level of the inflation index and the marginal rate of change.  The level of CPI is up +19.7% since the end of 2020, including food +21.8%, shelter +22.7%, and energy +33.8%.  It is the level of CPI, with no decline in sight, that frustrates consumers the most.  Victory in getting the marginal change down to a low level does not reduce their grocery, housing, utility, and energy bills.  High prices have pushed consumers to turn to credit cards to take care of everyday needs; credit card balances outstanding have ballooned to $1.34 trillion with an average rate of 23%, and more telling, a delinquency rate of 9%.

Restrictive Fed

Was Fed Funds at 5.5% restrictive?  Yes!  Let’s have a look:

FF less CPI of 2.5%= 3.0%; FF less core CPI of 3.2%= 2.3%; FF less PCE of 2.5%= 3.0%; FF less core PCE of 2.8%= 2.70%; FF less nominal GDP 2Q23 of 5.5%= 0.0%; 1Q24 of 4.6%= 0.9%; FF less nominal GDP 4Q23 of 4.8%= 0.7%.

Not to be forgotten are two other key elements in this tightening cycle- QT and M2.  QT continues at a pace of $60 billion sales or runoff per month from the Fed’s balance sheet.  To date, the balance sheet is down $1.5 trillion from its peak.  It’s hidden tightening in that $1 trillion of QT is believed to be the equivalent of +100 basis points of tightening.

M2 continues its slight growth, according to the H.6 Money Stock report.  In August, M2 grew by +2.0% y-o-y compared to July +1.3% y-o-y.  Between December, 2022 and March, 2024, M2 declined on a y-o-y basis, which was the first time that has happened since 1931 to 1933.  Don’t go there; I think the Fed was trying to offset wild government spending but decided not to risk it anymore.  Milton Friedman suggested that M2 growth should equate to output, or nominal GDP.  That’s been 4% to 5%, so M2 is restrictive and far away from equilibrium.

Speaking of government spending, the deficits are out of control, at a projected -$1.9 trillion for fiscal 2024 compared to -$1.7 trillion in 2023.  Debt outstanding is $35.3 trillion, or 121.7% of GDP as of 2Q24; when the debt to GDP ratio exceeds 90% for over five years, the negative effect on GDP is about -33% of trend.  Interest expense on debt will now top $1 trillion per year, or $3 billion per day.  Ridiculous!  Given the habit of our government of printing tons of money to hand out like candy, I am afraid of what they’ll do when we have recession.  Maybe Jamie will be right.

What does it all mean?  Recession signals are around but not impacting us yet.  Stocks, bonds, and data can all turn on a dime.  Short-term rates should continue to decline, with the Fed having some catch-up to do.  Inflation is headed down, at least the marginal change part.  Long-term rates have some room to decline, which includes mortgage rates, which are about to drop below 6%- finally!  No one will move out of their home when they have a low-rate mortgage.  The average mortgage rate in the US is 3.78%, so don’t expect too much from housing.  Unemployment is the wild card.  If it keeps getting worse, the Fed will respond more aggressively.  Those affected in many states by Hurricane Helene will have a huge task in front of them to rebuild their homes, roads, bridges, and communities after last week’s flooding and devastation.  Give them the strength to do so.

I appreciate all of your support!  Thanks for reading!  DLJ 09/30/24


Dorothy Jaworski has worked at large and small banks for over 30 years; much of that time has been spent in investment portfolio management, risk management, and financial analysis. Dorothy recently retired from Penn Community Bank where she worked since 2004. She is the author of Just Another Good Soldier, and Honoring Stephen Jaworski, which details the 11th Infantry Regiment's WWII crossing of the Moselle River where her uncle, Pfc. Stephen W. Jaworski, gave his last full measure of devotion.



Disclaimer:  This publication is provided to you solely for educational and entertainment purposes.  The information contained herein is based on sources believed to be reliable but is not represented to be complete and its accuracy is not guaranteed.  The expressed opinions, views, and estimates are those of the author as of this date and are subject to change without notice.  The author cannot provide investment advice but welcomes all comments.