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. 

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

 Drones

On the night of December 12^th, 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 18^th.  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 8^th.  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 18^th  selloff the 10^th 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 12^th.

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 18^th, 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 20^th  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 12^th, with a low of 100.16 on September 27^th, 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.

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!

#3. Coastal Financial Corporation (Nasdaq: CCB)

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!

#5 GBank Financial Holdings, Inc. (OTCQX: GBFH)

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.