tag:blogger.com,1999:blog-2354335166449804432024-03-14T15:35:52.983-04:00Jeff For BanksA blog designed to provide an outlet for Jeff's and other unvarnished opinions on community financial institutions. Sometimes serious, other times not, Jeff's opinions are his own and may not represent the opinions of his esteemed employer.Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.comBlogger472125tag:blogger.com,1999:blog-235433516644980443.post-67402187093406119572024-02-19T16:28:00.004-05:002024-02-19T20:36:44.411-05:00President's Day: The Great Refrainer<p style="text-align: justify;">Why not Calvin Coolidge? In a time when we administer clarion calls to the government that "SOMETHING MUST BE DONE!", Coolidge would likely respond, "no it doesn't."</p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5Jre0Q0yKkM9BXjS8dpg2CoR6r81rHnGqZ5cGrM1q3jsaVKrq5EzXKMS9-xizi0PcdDhM3JRzYRsVT6BW8JTUZKDdbG4MtU4TVujg_k11yh2-ANj5-_9fQjiGvpy_8V3_j_r-D0_kgT6sth6scu7LxgBshvdZjQTDZGVfvmhujIDHfCC25d9dEW-ZwMM/s500/Coolidge2.jpeg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="500" data-original-width="389" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5Jre0Q0yKkM9BXjS8dpg2CoR6r81rHnGqZ5cGrM1q3jsaVKrq5EzXKMS9-xizi0PcdDhM3JRzYRsVT6BW8JTUZKDdbG4MtU4TVujg_k11yh2-ANj5-_9fQjiGvpy_8V3_j_r-D0_kgT6sth6scu7LxgBshvdZjQTDZGVfvmhujIDHfCC25d9dEW-ZwMM/s320/Coolidge2.jpeg" width="249" /></a></div><p style="text-align: justify;">It is with this admiration of our 30th president, the Great Refrainer, the one that presided over the Roaring Twenties when life improved significantly for all Americans, that I read the official results of the 2024 <a href="http://www.brandonrottinghaus.com/uploads/1/0/8/7/108798321/presidential_greatness_white_paper_2024.pdf" target="_blank">Presidential Greatness Project Expert Survey</a> administered by professors from the University of Houston and Coastal Carolina University.</p><p></p><p style="text-align: justify;">The survey was issued to members of the American Political Science Association and asked them to rate each president on a greatness scale of 0-100 with 100 being the greatest. Where did Calvin Coolidge rank of the 46 presidents measured... 34th of 46, between Richard Nixon and Chester Arthur.</p><p style="text-align: justify;">I disagree. I full-throated disagree. And Silent Cal signed the Immigration Act of 1924 that was designed to reduce immigrants from, among other countries, Italy. Note my last name. By that measure, I should dislike Coolidge. But I don't.</p><p style="text-align: justify;">Because Coolidge's philosophy about the United States is in his probably best-known quotes: "the chief business of the American people is business." He was pro-business, and anti-government intervention in economic affairs. Some criticize that this laissez faire attitude led to the stock market crash of 1929 and the subsequent Great Depression. And non-existent regulation likely played a role in the crash. But there is credible evidence that the actions of Coolidge successors likely caused and extended the Great Depression.</p><p style="text-align: justify;">The dramatic stock market crash was probably fueled by wild speculation because of the economic expansion that happened under Coolidge's watch. Coolidge ascended to the presidency from vice president in 1923, when Warren Harding passed away suddenly. In 1923, the GDP was $803 billion, and in 1929 when Coolidge departed for Herbert Hoover, GDP was $977 billion, a 22% increase.</p><p style="text-align: justify;">What was Coolidge's greatest attribute: restraint. In a letter to his father when he was Governor of Massachusetts he said "It is much more important to kill bad bills than to pass good ones." Where are you today Calvin!</p><p style="text-align: justify;">The truth is, he wouldn't make it in today's politics. Doing nothing is not considered a good attribute. I would agree with that to this extent: doing nothing to reduce the myriads of laws and regulations imposed on us by an ever-expanding government bureaucracy would be bad. And I think Coolidge-like leadership would set about righting this listing ship. Restraint in advancing government. Action in reversing its advance.</p><p style="text-align: justify;">Silent Cal was his nickname, but truth be told he had two press conferences per week and used the newfangled radio to speak directly to Americans. It takes explanation why he would do nothing, such as when post WWI veterans lobbied for a pension, or when farmers lobbied for aid. No and no. And Coolidge was a farmer!</p><p style="text-align: justify;">After he won the presidency in his own right in 1924, and as a result of unprecedented prosperity and human advancement while he was president, he was poised for a landslide victory in 1928. Except he chose not to run. That's what he said to the press: "I choose not to run in nineteen twenty-eight." How many president's today would bask in such popularity, stare in the face of sure victory, and say, "no thank you, it's time for someone new"? </p><p style="text-align: justify;">Coolidge might very well have been our humblest president. He didn't seek the limelight, spent most of his time in office reducing taxes and the government. He balanced every budget. And the Federal budget was lower when he left office than when he came in. He didn't need big spending resume bullet bills that were not absolutely necessary. And at the height of his popularity, he walked away.</p><p style="text-align: justify;">No, the American Political Science Association got it wrong. They clearly do not value government restraint, humility, and freedom. Coolidge, however, took seriously our Constitution and the context from which it was written. </p><p style="text-align: justify;">Some other notable quotes that made Coolidge such a great president courtesy of <a href="https://www.azquotes.com/author/3231-Calvin_Coolidge" target="_blank">AZ Quotes</a>:</p><p style="text-align: justify;"><br /></p><p style="text-align: center;"><i>"Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent."</i></p><p style="text-align: center;"><br /></p><p style="text-align: center;"><i>"Unless the people, through unified action, arise and take charge of their government, they will find that their government has taken charge of them. Independence and liberty will be gone, and the general public will find itself in a condition of servitude to an aggregation of organized and selfish interest."</i></p><p style="text-align: center;"><i><br /></i></p><p style="text-align: center;"><i>"Don't expect to build up the weak by pulling down the strong."</i></p><p style="text-align: center;"><i><br /></i></p><p style="text-align: center;"><i>"You can't increase prosperity by taxing success."</i></p><p style="text-align: center;"><i><br /></i></p><p style="text-align: center;"><i>"Wherever despotism abounds, the sources of public information are the first to be brought under its control."</i></p><p style="text-align: center;"><i><br /></i></p><p style="text-align: center;"><i>"You can't know too much. But you can say too much."</i></p><p style="text-align: center;"><i><br /></i></p><p style="text-align: center;"><i>"A government which lays taxes on the people not required by urgent public necessity and sound public policy is not a protector of liberty, but an instrument of tyranny. It condemns the citizen to servitude."</i></p><p style="text-align: center;"><i><br /></i></p><p style="text-align: center;"><i>"Silence can never be misquoted."</i></p><p style="text-align: center;"><i><br /></i></p><p style="text-align: center;"><i>"Doubters do not achieve; skeptics do not contribute; cynics do not create."</i></p><p style="text-align: center;"><i><br /></i></p><p style="text-align: center;"><i>"Collecting more taxes than is absolutely necessary is legalized robbery."</i></p><p style="text-align: center;"><i><br /></i></p><p style="text-align: center;"><i>"It is difficult for men in high office to avoid the malady of self-delusion. They are always surrounded by worshipers."</i></p><p><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com1tag:blogger.com,1999:blog-235433516644980443.post-79346307168605777232024-02-12T11:04:00.000-05:002024-02-12T11:04:04.280-05:00Analyst Insights: Two Banks that Deliver to Shareholders<p style="text-align: justify;">Be curious. That's how I approach Twitter ("X"). Yes, there are some dumpster fire opinions. But then again, there are some real valuable insights that I and we can learn from. And this most recent string by bank analyst Perry Weinstein is one of them that I thought should not be lost to a tweet stream. </p><p style="text-align: justify;">Perry's perspective is clearly focused on shareholder value and may be viewed as shareholder primacy, a sometimes derogatory term because pursuing shareholder value could be done at the expense of other stakeholders, such as employees, customers, and communities.</p><p style="text-align: justify;">But the pursuit of shareholder value need not be a zero-sum game, if executed correctly... i.e. not at the expense of stakeholders. In that context, his observations on QCR Holdings, Inc. ($QCRH), an $8.5 billion bank from Moline, IL, and CF Bancshares, Inc. ($CFBK) a $2.1 billion bank from Columbus, OH are very valuable. To the curious.</p><p style="text-align: justify;">I offer the string without edits. References to "I" means Perry.</p><p><br /><br /></p><p></p><div class="css-175oi2r" style="align-items: stretch; background-color: white; border: 0px solid black; box-sizing: border-box; display: flex; flex-basis: auto; flex-direction: column; flex-shrink: 0; list-style: none; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; position: relative; z-index: 0;"><div class="css-175oi2r" style="align-items: stretch; background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: flex; flex-basis: auto; flex-direction: column; flex-shrink: 0; list-style: none; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; position: relative; z-index: 0;"><div class="css-175oi2r r-1s2bzr4" style="align-items: stretch; background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: flex; flex-basis: auto; flex-direction: column; flex-shrink: 0; list-style: none; margin: 12px 0px 0px; min-height: 0px; min-width: 0px; padding: 0px; position: relative; z-index: 0;"><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span style="background-color: rgba(0, 0, 0, 0); font-family: inherit; font-style: inherit; font-variant-caps: inherit; font-variant-ligatures: inherit; font-weight: inherit; text-align: inherit; white-space: inherit;">1/25 I like to touch on a topic that can get overlooked, decision making, and how past decisions or lack thereof, can give an investor a better understanding of what will occur in the future. I will highlight $QCRH and $CFBK.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span style="background-color: rgba(0, 0, 0, 0); font-family: inherit; font-style: inherit; font-variant-caps: inherit; font-variant-ligatures: inherit; font-weight: inherit; text-align: inherit; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span style="background-color: rgba(0, 0, 0, 0); font-family: inherit; font-style: inherit; font-variant-caps: inherit; font-variant-ligatures: inherit; font-weight: inherit; text-align: inherit; white-space: inherit;">2/25 Past actions/decisions give the best insights into a management team's acumen, capabilities, willpower, and its pursuit of excellence...effort lol.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">3/25 Before we start, a summary of a quote by Einstein that perfectly captures the concepts being discussed; doing the exact same think and expecting a different result is the definition of insanity.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">4/25 Look how much $CFBK accomplished in just over 4 years. (1/2)</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">1. Raised capital in late 2019.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">2. Launched its equipment finance group - 11/2020</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">3. Agreed to sell 2 branches in weak markets - 12/2020</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">5/25 Look how much $CFBK accomplished in just over 4 years. (2/2)</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">4. Entered Indianapolis on 5/2021, a top 2 Midwest market with Columbus, another market $CFBK is in.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">5. Shuttered large parts of its mortgage operations in stages, first in 7/2021 and later in early 2023</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">6/25 Selling branches is not easy, but it was best for shareholders. Management did not prioritize how things were or what certain people "might like". This management team clearly continues to question how things were/are and are relentlessly trying to improve.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">7/25 These actions make it clear what $CFBK's management team will prioritize in the future... shareholder value.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">8/25 Due to these decisive decisions/actions, $CFBK has positioned itself to be a very desirable target, with a market presence in the two fastest growing markets in the Midwest, Indianapolis and Columbus.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">9/25 $QCRH is another great example of a management team prioritizing long-term shareholder value, not how things are or what certain individuals might like.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">10/25 Past actions taken by $QCRH:</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">1. In 2018, started its LIHTC lending line.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">2. Instead of doing what was "easy" and raising capital, $QCRH decided to sell its least profitable charter, Rockford Bank and Trust, to bring in the capital to support its robust growth.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">11/25 These two decisions are what first prompted me to closely follow this organization. This management team, led by Larry and Todd, demonstrated its focus on long-term shareholder value, rather than what other banks do or prioritizing how things were.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">12/25 Now let's discuss what we can learn from the actions that $QCRH's management team DID NOT take that maximized shareholder value. $QCRH did not raise capital and despite earnings skyrocketing, $QCRH has resisted raising its dividend...interesting, what does this tell us?</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">13/25 Not raising its dividend clearly demonstrates to me that $QCRH's management team understands the key principles of Deploying Capital Most Profitably.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">14/25 Capital priorities for banks:</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">1. Balance sheet growth-regulatory must</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">2. Use excess capital for acquisitions, business or bank, and share repurchases.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">3. Dividends: If a bank always trades at a high premium to earnings, like CBU, increasing the dividend is more appropriate.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">15/25 Great banks ALWAYS have excess capital in order to take advantage of unforeseen opportunities. Understanding the value of time, not having to use excess capital immediately, is another quality I look for in a management team.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">16/25 To summarize, topflight management teams continuously find more profitable ways to deploy excess capital than simply increasing the dividend.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">Now let's discuss what we can learn from inaction that harms shareholder value.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">17/25 A few blatant examples come to mind:</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">1. A bank that continues to be over-branched</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">2. A bank that has core fee businesses, wealth management, trust, insurance, that continue to be subscale and these businesses are more like "Hobbies" than businesses.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">18/25 These examples are telltale signs that a management team is content, not willing to make tough decisions to cut expenses, and lacks motivation to find ways to scale fee income businesses. </span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">19/25 With the new proposal for higher capital requirements for certain banks, do you think capital light businesses are less valuable or more valuable? Do higher capital requirements increase or decrease the profitability of loans, a capital-intensive business?</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">20/25 Another example is when a management team waits for a merger to close because "it will be easier to make changes." A merger announcement is no excuse to postpone actions that can be taken TODAY to improve shareholder value.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">21/25 If I see a bank that possesses one or more of these "telltale signs", it is evident to me that this franchise is run like a bank not a business. So, what does this tell you about management?</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">22/25 Management is not asking the question "what can we do to increase profitability?" Great management teams always ask "can we do this better?" A curious mindset is vital. Often, in this type of organization, there are too many layers of management.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">23/25 An overcrowded exec team results in a slow acting bank, causing any positive changes to take forever, if at all.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">A noncentralized management team can produce a lack of proper information flow to the very top. The CEO could very well not know, but that is no excuse.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">24/25 A CEO needs to have an "I can attitude" and do it yourself mind set. If not, the cycle continues. The best CEO's take responsibility for everything and don't say "well it's not my job."</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;">25/25 In summary, understanding "the why and how" a management team both thinks and makes its decisions can be incredibly helpful in better predicting future returns. Actions or lack thereof, are clear signs of the capabilities and motivations of a given management team.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><span class="css-1qaijid r-bcqeeo r-qvutc0 r-poiln3" color="inherit" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; display: inline; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; font-weight: inherit; line-height: inherit; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; text-align: inherit; text-overflow: unset; white-space: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><br /></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;">//Note: This post or this blog does not offer investment advice.//</div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" dir="auto" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 17px; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: inherit; text-overflow: unset; white-space-collapse: preserve;"><br /></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: justify; text-overflow: unset; white-space-collapse: preserve;"><span style="background-color: rgba(0, 0, 0, 0); text-align: inherit;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtO7C7B2ZpJ4ipJs6mT9OMgT99cprtnDTWPf1eyIwX8xCOxYtfgi143zEyA2dObKqDiznuJKhX6lrXaGvb_k2sReZ19qhFLteqH3bpDA_lTu6ysZhNzzrsIA8gkKQHhacNKRoJlK12vPCPJa5X4kt4rgj4M2YeooVPUqPfoYB5w4APcJWeZ2auNUECpbQ/s281/Weinstein.png" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="281" data-original-width="222" height="281" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtO7C7B2ZpJ4ipJs6mT9OMgT99cprtnDTWPf1eyIwX8xCOxYtfgi143zEyA2dObKqDiznuJKhX6lrXaGvb_k2sReZ19qhFLteqH3bpDA_lTu6ysZhNzzrsIA8gkKQHhacNKRoJlK12vPCPJa5X4kt4rgj4M2YeooVPUqPfoYB5w4APcJWeZ2auNUECpbQ/s1600/Weinstein.png" width="222" /></a></div>Perry is currently the CEO of </span><a href="https://pcwadvisors.com/index.html" style="background-color: rgba(0, 0, 0, 0); text-align: inherit;">PCW Advisors</a><span style="background-color: rgba(0, 0, 0, 0); text-align: inherit;">, a financial consulting firm focused on the community banking industry. PCW Advisors looks to serve community bank focused investment funds by providing unique and customized analysis that is significantly different than traditional research. Perry combines a deep understanding of the fundamentals of bank investing with a more specialized emphasis geared towards understanding decision making, to provide clients with actionable ideas. Before launching PCW Advisorsin December 2021, Perry worked as an analyst at Hovde Group, Ares Management, MJC Partners, and BDO. Perry’s work has earned </span><a href="https://pcwadvisors.com/client-testimonials.html" style="background-color: rgba(0, 0, 0, 0); text-align: inherit;">high praise</a><span style="background-color: rgba(0, 0, 0, 0); text-align: inherit;"> from many prominent investors in the financial sector. More recently, Perry’s work on the strategic side has received positive reviews from community bank management teams.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: justify; text-overflow: unset; white-space-collapse: preserve;"><span style="background-color: rgba(0, 0, 0, 0); text-align: inherit;"><br /></span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: justify; text-overflow: unset; white-space-collapse: preserve;"><span style="background-color: rgba(0, 0, 0, 0); text-align: inherit;">Perry graduated from the University of Southern California with a Business Administration degree. He holds licenses Series 7, 63, 79, 86 and 87.</span></div><div class="css-1rynq56 r-bcqeeo r-qvutc0 r-1qd0xha r-1inkyih r-16dba41 r-bnwqim r-135wba7" data-testid="tweetText" id="id__brku6aorg6" lang="en" style="background-color: rgba(0, 0, 0, 0); border: 0px solid black; box-sizing: border-box; color: #0f1419; display: inline; font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; line-height: 24px; list-style: none; margin: 0px; min-width: 0px; overflow-wrap: break-word; padding: 0px; position: relative; text-align: left; text-overflow: unset; white-space-collapse: preserve;"><p class="MsoNormal"><o:p></o:p></p><div style="text-align: justify;"><span style="background-color: rgba(0, 0, 0, 0); text-align: inherit;">Contact Information: <br /></span>Email: <a href="mailto:Perry@pcwadvisors.com">Perry@pcwadvisors.com</a></div><p class="MsoNormal"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><span face="Calibri, sans-serif" style="line-height: 107%;"><div style="text-align: justify;"><span style="background-color: rgba(0, 0, 0, 0); text-align: inherit;">Phone: 310-384-6153</span></div></span></div></div></div></div>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-68063186075235734542024-02-01T16:37:00.000-05:002024-02-01T16:37:09.220-05:00How Did Banks Fare During Fed Tightening?<p style="text-align: justify;">Now that the debate is turning from Fed tightening to when the Fed will start dropping rates, we took a look at how financial institutions fared during the tightening cycle, using the quarter ended December 31, 2021 as the base period. The Fed began tightening at its March 17, 2022 meeting with a 25 basis points increase in the Fed Funds Rate and ended July 26, 2023.</p><p style="text-align: justify;">Before providing observations, here are some relevant ratios that I reviewed for all U.S. banks and savings banks (not S&Ls), amounting to over 4,000 institutions, and divided them up into asset size cohorts. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhK3xUp0u-gE_fp0N1IfwRJFPyksOtrVd_voruWpRwszPz_dCrkLH1y7rmFVRpu614sfGzQ4E-h32yUkhcOB_tcjtiA29SYBBkt90M75kosdpU4O0ZFOYA1Oleqhwuy8aHJw0uckIFJglm3Q3GWJODxuJQcPYObS2ZQcqTs_W983hKf42NcCsVr7vOADaY/s634/2024%20Deposit%20Growth.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="202" data-original-width="634" height="176" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhK3xUp0u-gE_fp0N1IfwRJFPyksOtrVd_voruWpRwszPz_dCrkLH1y7rmFVRpu614sfGzQ4E-h32yUkhcOB_tcjtiA29SYBBkt90M75kosdpU4O0ZFOYA1Oleqhwuy8aHJw0uckIFJglm3Q3GWJODxuJQcPYObS2ZQcqTs_W983hKf42NcCsVr7vOADaY/w554-h176/2024%20Deposit%20Growth.png" width="554" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZy4jov6wHI-f27k9oD58uT3aIihJuNH88G_pDlJtoIX_hNfGWMJ1IZ4z-w1l5l9gvZPHmu57WHUMvruS-MiHZP9alViyNVARwIBFtKPeaRWjT_V9ABnlef2_QC__hClgeOe9eFHs30CR216YIVfDELjZM5z3kgg6XhnWtEqTaor0JAapH_CZg7Bc3Q3E/s634/2024%20Liquidity%20Ratio.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="182" data-original-width="634" height="159" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZy4jov6wHI-f27k9oD58uT3aIihJuNH88G_pDlJtoIX_hNfGWMJ1IZ4z-w1l5l9gvZPHmu57WHUMvruS-MiHZP9alViyNVARwIBFtKPeaRWjT_V9ABnlef2_QC__hClgeOe9eFHs30CR216YIVfDELjZM5z3kgg6XhnWtEqTaor0JAapH_CZg7Bc3Q3E/w553-h159/2024%20Liquidity%20Ratio.png" width="553" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpmmXWljogkkCVNCeIR24h-fHUCagdMECYtciScewnoEN7KF8-s59JhVQJFTbdXbJQ_upc-1fwzP4TTyNUdKnOAlHRyjGpCvcar3MVhBYHAtVXwP5UoxcwFc3k1OfBelYWcw77BOfGUeRSznjMK9SoIpm2hkuuxYEksP9ch7bR2iurMLi065TFAcQXFaA/s634/2024%20COF.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="182" data-original-width="634" height="159" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpmmXWljogkkCVNCeIR24h-fHUCagdMECYtciScewnoEN7KF8-s59JhVQJFTbdXbJQ_upc-1fwzP4TTyNUdKnOAlHRyjGpCvcar3MVhBYHAtVXwP5UoxcwFc3k1OfBelYWcw77BOfGUeRSznjMK9SoIpm2hkuuxYEksP9ch7bR2iurMLi065TFAcQXFaA/w552-h159/2024%20COF.png" width="552" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfUpA7p3r0xZw68BtMEA3SI8QInpVQGdVuZJpCdkCotFEfL0el43ZX-XJQErjjcU6Bc9OhStQOXdzTLknRXub-XPxHJC08UnVqLEuO3tvdFqidf_4DBPLvrGDYKJs0eJ0FHOberbN-eCYMSVDW9Xg5GbC5_lMn15LNeJN0y6prpXYWrcF5Ea6bDEbmKOY/s634/2024%20YOEA.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="182" data-original-width="634" height="159" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfUpA7p3r0xZw68BtMEA3SI8QInpVQGdVuZJpCdkCotFEfL0el43ZX-XJQErjjcU6Bc9OhStQOXdzTLknRXub-XPxHJC08UnVqLEuO3tvdFqidf_4DBPLvrGDYKJs0eJ0FHOberbN-eCYMSVDW9Xg5GbC5_lMn15LNeJN0y6prpXYWrcF5Ea6bDEbmKOY/w552-h159/2024%20YOEA.png" width="552" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhl7KS2_NdQkr5Zp57YAVEYWsJrJkfQbTplYFBTDjYI1h3-DeKj60BiZThvNr5uDtf4pAvAgeHe9J3aJY42rht5_f9zebnVakrVQlsFGrk2GWHOvnxg6Lga-yEDtAWJr6j8tnKlykyTd0q-iJoA_KXNp-r8akfkdELlpPtmheJN81xcDOwjVZbLWcfHr4Y/s634/2024%20NIM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="182" data-original-width="634" height="159" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhl7KS2_NdQkr5Zp57YAVEYWsJrJkfQbTplYFBTDjYI1h3-DeKj60BiZThvNr5uDtf4pAvAgeHe9J3aJY42rht5_f9zebnVakrVQlsFGrk2GWHOvnxg6Lga-yEDtAWJr6j8tnKlykyTd0q-iJoA_KXNp-r8akfkdELlpPtmheJN81xcDOwjVZbLWcfHr4Y/w555-h159/2024%20NIM.png" width="555" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgCV-guUlc-zNCy965OVThEn4ZM9p_cS7jRJugVAYDUDTlYLsnPz87ESwWOhwUa3kmDJHaqql6aT8Umbkx-7Nnn7Ktt2451vtYpPmtagYCSxEN49pUdOnbR9Z7-bXI06FM5goQQY3vCLfEJuGTtLDgCN_9RZX2JL5AI6q-LxZYB21fc91G_157mPRHOkY0/s634/2024%20Efficiency%20Ratio.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="182" data-original-width="634" height="160" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgCV-guUlc-zNCy965OVThEn4ZM9p_cS7jRJugVAYDUDTlYLsnPz87ESwWOhwUa3kmDJHaqql6aT8Umbkx-7Nnn7Ktt2451vtYpPmtagYCSxEN49pUdOnbR9Z7-bXI06FM5goQQY3vCLfEJuGTtLDgCN_9RZX2JL5AI6q-LxZYB21fc91G_157mPRHOkY0/w558-h160/2024%20Efficiency%20Ratio.png" width="558" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj24boVLZFCfovTc-1wMiGPAI-JQt1iWDWdWHt7yZ28QUmNgH80r5IT4A1nFrYSfLPQluzd8Iocj0q1Lw0USI0GJ10cmdqMdv-TW_1BEHuZ-wY_9JTNzeCn_ITzO9ZXa89vn4TES34xROITUzW3AdDaf7Nk0Eiq5h4UyrKuD_-INpGs-Qbz774iSFA-6Lo/s634/2024%20Expense%20Ratio.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="182" data-original-width="634" height="161" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj24boVLZFCfovTc-1wMiGPAI-JQt1iWDWdWHt7yZ28QUmNgH80r5IT4A1nFrYSfLPQluzd8Iocj0q1Lw0USI0GJ10cmdqMdv-TW_1BEHuZ-wY_9JTNzeCn_ITzO9ZXa89vn4TES34xROITUzW3AdDaf7Nk0Eiq5h4UyrKuD_-INpGs-Qbz774iSFA-6Lo/w560-h161/2024%20Expense%20Ratio.png" width="560" /></a></div><div><br /></div><div><br /></div><div style="text-align: justify;">Deposit declines, much talked about in the media and banking circles, was limited to those financial institutions over $50 billion in total assets. All other asset cohorts grew deposits during the Fed's tightening.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">If you look at the liquidity ratios during 4Q21, you may note that no matter the asset size, financial institutions were flush with liquidity, mostly as a result of government stimulus. If the government prints trillions of dollars, it is bound to end up in bank accounts. This is when only the most farsighted bankers were executing a funding strategy. We just didn't need the funding. Seems bizarre typing that last sentence.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><div>The liquidity ratio calculation: (Cash & Due + Securities + Fed Funds Sold & Repos - Pledged Securities) / Total Liabilities</div><div><br /></div></div><div style="text-align: justify;">And look how the liquidity ratios tumbled. This data is from Call Reports. And for 1Q23, that would be period end March 31, 2023, post SVB and Signature failures. Every asset size cohort declined from 4Q22 to 1Q23, and from 1Q23 to 2Q23. Aside from the trend though, financial institutions maintained manageable liquidity ratios. The under $1B and over $50B entered the tightening cycle with 35% liquidity ratios. They ended it in the low 20's. Still strongly liquid. The challenge was that the dramatic increase in interest rates decreased the value of securities, and bankers therefore didn't want to sell them and turn a hypothetical loss into an actual one.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">They were what I termed "psychologically illiquid." And today you see that playing out as fourth quarter earnings come out and many banks are taking losses in their securities portfolio to bolster liquidity and pay down high-cost borrowings.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The last increase in Fed Funds came at the beginning of the third quarter 2023 with a 25 basis points increase. During the quarter, the financial institutions over $50B experienced a 24 bps cost of funds increase. The $10B-$50B cohort experienced a 37 bps increase. I anticipate when we run this for fourth quarter all cohorts will increase in cost of funds, but at a slower pace as the gap narrows between actual Fed Funds and bank deposits. The Fed Funds is close to what a depositor could get in a money market mutual fund or short-term treasury. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Net interest margins increased for every asset sized cohort between 4Q21 and 3Q23, except for the anomalous $1B-$5B group. This might surprise readers. But those sizable liquidity ratios in 4Q21 were as a result of ballooned investment portfolios earning under 2%. The prescient bankers had them in 1.5% short-term securities. Others reached to squeeze more margin and this move proved costly. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The highest NIM cohort at 3Q23 was $5B-$10B who, coincidentally, had the lowest liquidity ratio at 4Q21. In other words, they didn't have to extend their investment portfolio to squeeze out 25-50 bps more because they had a relatively larger loan book. Those financial institutions cost of funds increased more than those smaller than them, but less than those larger than them. So their battle to maintain funding impacted them similarly to all others even though they were technically less liquid. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Perhaps because they were not psychologically illiquid. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Bankers often ask what size I think they should be to generate efficient profitability. My answer is that it is different by geography, strategy, and management teams. In the Midwest, where NIMs tend to be larger and costly infrastructures smaller, a bank can be smaller and efficiently profitable. Look at some of their profit numbers there. In the Northeast, where competition is significant and NIMs are smaller and expenses are greater, you have to be larger.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In terms of asset sizes throughout the country, you see Efficiency Ratios declining as asset sizes increase. In terms of the Expense Ratios (non-interest exp./AA), the $5B-$10B cohort is best. This may be the last sized cohort that has an over 80% reliance on net interest income for revenue. As you get larger, there are more significant fee-based contributions which typically add expense to this ratio but do not add assets, driving Expense Ratios up. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We did measure top quartile for each of the above ratios and in terms of Expense Ratios, nearly every size category hovered at or below 2% for top quartile performers. If bankers consider their money no different than the bank down the street and can't convince customers that they should pay higher (or accept lower in terms of deposits) for service, convenience, local decision making, speed, relationships, reliability (think PPP) and deposit dollars being invested in their communities, then sub 2% Expense Ratios will likely be the new norm. And size plays an important role in driving down that number.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Size also plays a role in trading multiples, as I wrote about in 2018 (link: <a href="https://www.jeff4banks.com/2018/08/the-real-reason-for-bank-scale-trading.html" style="text-align: left;">Jeff For Banks: The Real Reason for Bank Scale: Trading Multiples (jeff4banks.com)</a>).</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEionk4X5Zrkmtvl9mQUcdoSCimhFZQxR0_W5pBIIbZN58skwDntjsejnjDDyGlKoQDQf_niZwOoHPlRB5eBb5CEiGGRWvY-zkWRtSDaj7INPY6y2L1gIS4mooTBnVIQ6wjuH5XGjIiqTZQLunWokicjLM-GMNqyRC_WDW72BRkQEqVvwMUHL2YPqzOilHM/s526/2024%20Trading%20Multiples.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="262" data-original-width="526" height="250" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEionk4X5Zrkmtvl9mQUcdoSCimhFZQxR0_W5pBIIbZN58skwDntjsejnjDDyGlKoQDQf_niZwOoHPlRB5eBb5CEiGGRWvY-zkWRtSDaj7INPY6y2L1gIS4mooTBnVIQ6wjuH5XGjIiqTZQLunWokicjLM-GMNqyRC_WDW72BRkQEqVvwMUHL2YPqzOilHM/w502-h250/2024%20Trading%20Multiples.png" width="502" /></a></div><br /><p style="text-align: justify;">Back then, price-to-tangible book multiples were nearly equal for $5B-$10B banks and the largest banks. Not today. And the highest p/e multiples at this January 9th cut were in the $10B-$50B cut. Bank valuations are wonky at this writing and it is difficult to make any conclusions. But if you have enough trading volume to allow investors to get in and out without moving the market, you would be at an advantage from those that have little liquidity. Individual investors continue to yield ground to institutional investors and those funds need to be able to exit. And if sale is the only way they can exit, then consolidation is sure to pick up.</p><p style="text-align: justify;">Those are my observations. I would enjoy hearing yours.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-63456060882886189542024-01-20T14:11:00.000-05:002024-01-20T14:11:43.879-05:00Top 3 Jeff4Banks.com Blog Posts of 2023<p style="text-align: justify;">I am always interested in learning what bankers and those that serve them are interested in reading. And since I have been writing industry articles and insights since 2010, clicks to my blog are a good indicator. Over the past two years I have been re-posting articles written here on LinkedIn. Usually a number of days after writing it. Prior to that I would put one or two paragraphs of the article on LinkedIn, followed by a link to Jeff4Banks.com. The new way lowers traffic to this site. But the number of clicks is directionally correct on what most interests readers.</p><p style="text-align: justify;">The below top three are not necessarily from this year. In fact, the most read of 2023 was from 2013, ten years prior. Go figure?</p><p>Here were the top three most read articles of 2023:</p><p><br /></p><h4 style="text-align: left;">Loan Pricing: Must It Be So Complicated</h4><p>URL: <a href="https://www.jeff4banks.com/2013/09/loan-pricing-must-it-be-so-complicated.html">Jeff For Banks: Loan Pricing: Must It Be So Complicated? (jeff4banks.com)</a></p><p>Publish date: September 6, 2013</p><p style="text-align: justify;">Amazing that a 10-year old post rose to the top of the list. It is difficult for me to understand what resurrects an old article. Perhaps a web browser search. Perhaps a banker forwarded it around to their colleagues. Or perhaps there were a lot of bankers trying to improve loan pricing at their institution.</p><p style="text-align: justify;">No matter the how, I'm pleased with the interest in simplifying loan pricing to account for the market, risk, and profitability of the individual loan. The next evolution of creating a culture of loan pricing discipline is to measure lender profitability by adding the spread of all the loans and deposits in their book, and assessing the cost per account times number of accounts. Then hold the head of commercial lending accountable for the continuous profit improvement of commercial lending products and the commercial lending line of business. That would be bottom-up accountability, which would inevitably lead to a more profitable financial institution.</p><p style="text-align: justify;">One can dream.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: left;">Bankers: Please End This Practice. Or It Will End You.</h4><p>URL: <a href="https://www.jeff4banks.com/2023/05/bankers-please-end-this-practice-or-it.html">Jeff For Banks: Bankers: Please End This Practice. Or It Will End You. (jeff4banks.com)</a></p><p>Publish date: May 21, 2023</p><p style="text-align: justify;">Prior to the Fed's quantitative tightening began in the first quarter of 2022 I was warning bankers that "a business model based on the sleepiness of your depositors is unsustainable." Before you accuse me of being Captain Obvious, know that I said this in 2018 during the prior Fed tightening cycle and before the pandemic. I felt so strongly about it that there is a chapter in my book about it, which I wrote in 2021. Again, prior to the 2022 Fed tightening. </p><p style="text-align: justify;">Does it make me happy that so many bankers read this article? Yes. Will it make me happier if bankers act on the recommendations or formulate their own funding strategies? Yes times two. </p><p style="text-align: justify;"><br /></p><h4 style="text-align: left;">Predicting the Next Banking Crisis Is a Fool's Game. Not Learning From the Last One: Equally Foolish</h4><p>URL: <a href="https://www.jeff4banks.com/2023/06/predicting-next-banking-crisis-is-fools.html">Jeff For Banks: Predicting the Next Banking Crisis Is a Fool’s Game. Not Learning From the Last One: Equally Foolish (jeff4banks.com)</a></p><p>Publish date: June 2, 2023</p><p style="text-align: justify;">This was an interesting top read as it was the speech I delivered to the general session of the New Jersey Bankers' Association annual convention at The Breakers in West Palm Beach, Florida. I might have looked stunned in the klieglights while delivering it but truth be told I saw my hotel room bill before delivering it. </p><p style="text-align: justify;">In my remarks I summarized lessons learned from each crisis since the S&L crisis of the late 1980's. And how each crisis was different than the last. There were themes worth noting, however. Credit risk, interest rate risk, and concentration risk have been part of every crisis. As an example, take the tech meltdown of 2001. This was a virtual non-event for the vast majority of banks because they had very low exposure to the tech sector. They were not concentrated in it. Fast forward to Silicon Valley Bank's exposure to startups funded by VC or P/E firms. That concentration cost them the bank.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">There you have it. First a mea culpa: last year I only wrote 20 articles, far fewer than "content managers" tell me I need to keep the interest of readers. I write and research these articles myself (mostly). And they are time consuming, and I found myself with less time last year. I will try to do better for readers.</p><p style="text-align: justify;">Thank you so much for reading my content. I welcome your questions, challenges, and even kudos. I love the kudos but I have thick enough skin to know my readers' challenges are to sharpen my opinions and help to move our industry forward.</p><p style="text-align: justify;"><br /></p><p>~ Jeff</p><p><br /></p><p><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-26059229470171345622023-12-28T13:15:00.005-05:002023-12-29T09:10:32.988-05:00Bankers: Here's What We Do<p style="text-align: justify;">I work for The Kafafian Group, a community financial institution consulting firm based in Bethlehem, Pennsylvania. Many of my readers might not know what my firm does, so I want to dedicate this post to the problems we help community bankers solve.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Here is what <a href="https://kafafiangroup.com/" target="_blank">The Kafafian Group</a> does:</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><a href="https://kafafiangroup.com/lp/performance-measurement/" target="_blank">Performance Measurement</a>- We measure a financial institution's <b><i>line of business and product profitability</i></b> on an outsourced basis. We <b><i>feed customer profitability systems</i></b>. We do this on an outsourced basis, meaning we custom build the model based on how the institution is managed. If line of business profitability, we follow the institution's org chart. If product profitability, we follow their </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjrl9HGDm6sn5jETzjiNHIbdElDwY93FM5smtQNds1bts7moOhOATrTv2YECvhVMFqLoZYEcs38dV6akm8DvoGk0RbiqavhlkAz0adKK2DRLV-Rp6jCEXR5teSA63af1oa4yiBfRGz6MLHD9O4ef7bUmFOOgwT0xXLmvCJLGKtJuheqOZXtnn0qZuvc_LM/s817/Kafafian%20logo.png" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="465" data-original-width="817" height="124" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjrl9HGDm6sn5jETzjiNHIbdElDwY93FM5smtQNds1bts7moOhOATrTv2YECvhVMFqLoZYEcs38dV6akm8DvoGk0RbiqavhlkAz0adKK2DRLV-Rp6jCEXR5teSA63af1oa4yiBfRGz6MLHD9O4ef7bUmFOOgwT0xXLmvCJLGKtJuheqOZXtnn0qZuvc_LM/w218-h124/Kafafian%20logo.png" width="218" /></a></div>product list. We do the costing, funds transfer pricing, report building, and education. We have yet to fail setting up a client on their own profitability system. And we've built our own solution because we found other solutions so challenging. We offer an online portal where clients can view their reports down to the general ledger level. And they can download anything they see within the portal for their own analysis and dashboards. If you want the head of commercial lending or retail banking to take ownership of the continuous improvement of their spreads so the bank can improve its net interest margin, you must first measure it. Our competition in this line of business are software solutions providers. But our real competitor is indifference. <i>You no longer have to be indifferent to how well those responsible for deposit or loan generation are also responsible for continuous improvement in deposit or loan spreads.</i><p></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Contact Ben Crowley if you want this level of accountability at your institution: <a href="https://kafafiangroup.com/team/benjamin-t-crowley/">Benjamin T. Crowley - The Kafafian Group, Inc.</a></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><a href="https://kafafiangroup.com/services/strategic-management/" target="_blank">Strategic Planning</a>- Unlike Performance Measurement where there are very few competitors to us, there are many competitors in strategic planning. We bring a team approach to the engagement using our knowledge from our industry experience and other lines of business to benefit clients. We tailor our service to the needs of the client without dogmatic and rigid processes, although we do suggest processes that work. We believe strategic plans should be made with the best possible data, using the best that your management team has to offer in terms of strategic direction. We suggest one-on-one interviews to avoid group think and uncover critical issues that are difficult to determine in groups. We make suggestions based on our experience, both in banking and with the hundreds of financial institutions we have had the honor to serve. We draft your plan based on data, interviews and a group retreat. We guide your institution into creating an operating plan, or the "how" to strategy execution. We develop projections based on what success would look like in plan execution. The plan should identify the institution you strive to become and chart your path to getting there. Without direction, any road is the right road. With a well thought out plan, course modifications can be made with confidence. Resources can be allocated efficiently. And personnel can be hired and developed with successful plan execution in mind. Some financial institutions consider strategic planning a regulatory exercise or look to do it themselves to save money. Is there a more important question than "what do we want to be?" and "how do we intend to differentiate?" An outside facilitator can ensure planning gets done in a disciplined process that gives your financial institution the best opportunity to succeed at serving its stakeholders.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">We also perform ancillary services such as an institution's <i><b>Risk Appetite statement</b></i>, clarifying the risks the board and management are willing to take in plan execution. We also do <b><i>Capital Planning</i></b>, identifying how much capital will be needed for plan execution and capital impacts of various adverse events and how the institution would enhance capital should those events come to pass. We perform <b><i>360 strategic alternative reviews</i></b>, identifying who a financial institution can reasonably purchase and how much they can pay, who would be strategic partner candidates, and who can buy the institution and how much they can pay. We do this unpassionately because knowing this information helps management teams create aspirational plans. We also do <b><i>regulatory business plans</i></b> for de novo banks, mutual to stock converting banks, and banks switching charters.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Contact me if you would like to discuss strategic planning or any of our ancillary services: <a href="https://kafafiangroup.com/team/jeffrey-p-marsico/" style="text-align: left;">Jeffrey P. Marsico - The Kafafian Group, Inc.</a></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><a href="https://kafafiangroup.com/services/profit-process-improvement/" target="_blank">Process Improvement</a>- In every institution we have served with process improvement services we have found onerous processes, inefficient technology utilization, and silos prohibiting a near frictionless employee or customer experience. Most of these engagements result in cost savings as resources are allocated to unneeded processes, or technology can do the job. Most seasoned bankers have been through these types of engagements and have a bad taste about them because overbearing consultants come in and make declarations and pronouncements. Not so with us. We take a partnership approach where we keep supervisors informed every step of the way so there are no surprises. We think the engagement goes smoother and our recommendations more informed if we ask, for example, the head of wire transfer why the system isn't used to its fullest or why the institution is applying belts and suspenders processes to sending a wire. Supervisors may not agree with one of our process improvement recommendations, but they'll know about them before they end up in our report. It is a solemn responsibility that the institution be better situated with scalable processes when we leave from a process improvement engagement than when we started.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Contact Jill Pursell if you are considering improving processes for scalability, near frictionless customer and/or employee experiences, and/or cost savings: <a href="https://kafafiangroup.com/team/jill-a-pursell/" style="text-align: left;">Jill A. Pursell - The Kafafian Group, Inc.</a></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><a href="https://kafafiangroup.com/services/financial-advisory/" target="_blank">Financial Advisory</a>- Whole bank mergers and acquisitions, fee-based lines of business, branch transactions, fairness opinions, valuation services for private financial institutions, 360-degree strategic alternatives analysis, are all part and parcel to our Financial Advisory line of business. One client told us he felt he was getting JPMorgan service from a community financial institution consultancy, a duty we continuously sharpen in a changing environment and a badge we wear with honor. We consider this line of business complementary to our consultancy so we are responsive to client needs without the typical reticence to engage in talks about combining for fear of going down a slippery slope. Once a client determines to pursue a transaction based on the facts of it, we pursue it to achieve success based on the client's definition of success. We put our experience and transaction accomplishments against any in the business. </p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Contact Rich Trauger if you are considering a strategic combination or any of our ancillary services: <a href="https://kafafiangroup.com/team/richard-b-trauger-jr/" style="text-align: left;">Richard B. Trauger, Jr. - The Kafafian Group, Inc.</a></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><a href="https://kafafiangroup.com/services/management-advisory/" target="_blank">Management Advisory</a>- We do a menu of different things based on our individual and collective skill sets that are difficult to categorize but fall under the Management Advisory umbrella. Examples of engagements we are or have executed on: interim executive officer, management assessments, board evaluations, executive coaching, technology implementation, organizational structure, general ledger mapping, data needs and governance, regulatory assistance based on formal orders or memorandums, etc. Our talented staff with over a century of banking and bank consulting experience are drawn upon to successfully complete the engagement to the client's satisfaction. </p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Contact Chris Jacobsen if you are considering an engagement that may fall under our expertise to see if we are a fit. <a href="https://kafafiangroup.com/team/christopher-jacobsen/" style="text-align: left;">Christopher Jacobsen - The Kafafian Group, Inc.</a></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">That's it! If you are a client, we sincerely thank you for your trust in us and leveraging our capabilities to improve your financial institution.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">If you're thinking of becoming a client, please contact us. We are not pushy salespeople calling you weekly wondering "where are you at?" If we are a fit for your needs, let's roll!</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Happy New Year!</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-78153892810257902942023-12-16T10:11:00.001-05:002023-12-16T10:11:39.838-05:00How Did Your ALCO Model Hold Up?<p>My firm did a sample data run for a client that included all commercial banks in NY, NJ, PA, and MD between $500 million and $1.5 billion in total assets to see how various banks did in balance sheet and income statement ratios during the course of the Fed tightening run from year end 2021 until the third quarter 2023. Some interesting insights relating to their 1-year cumulative repricing gap that the banks reported on their call reports:</p><p><br /></p><p>
</p><ul style="text-align: left;"><li style="text-align: justify;"><span style="font-family: "Times New Roman", serif;">At 12/31/21, of the 68 banks that met the criteria,
only 10, or 15% had a 1-year cumulative negative gap. This is defined as
rate sensitive assets (assets that are expected to mature or reprice
within 1 year) less rate sensitive liabilities (liabilities that are
expected to mature or reprice within 1 year). If rates went up, so the
theory goes, the 85% of banks with a positive 1-yr cumulative gap, should
see net interest margin go up as assets reprice faster than liabilities. This made sense because the Fed Funds Rate at this time was 0-25 bps and bankers positioned their balance sheets accordingly.</span></li></ul><span style="font-family: "Times New Roman", serif;"><div style="text-align: justify;"><span> </span></div></span><ul style="text-align: left;">
<li class="MsoListParagraph" style="margin-left: 0in; text-align: justify;"><span style="font-family: "Times New Roman",serif; mso-fareast-font-family: "Times New Roman";">At 12/31/22, after 450 bps of Fed rate hikes, 48 of the
68 banks, or 71%, had a better net interest margin for the quarter ended
12/31/22 than the quarter ending 12/31/21. Since 85% of them had positive
one-year cumulative gaps, their ALCO assumptions mostly worked.<o:p></o:p></span></li>
</ul><span style="font-family: "Times New Roman", serif;"><div style="text-align: justify;"><span> </span></div></span><ul style="text-align: left;">
<li class="MsoListParagraph" style="margin-left: 0in; text-align: justify;"><span style="font-family: "Times New Roman",serif; mso-fareast-font-family: "Times New Roman";">At 9/30/22, only 13 banks, or 19% showed a negative
one-year cumulative gap. Meaning 81% thought their net interest margin
would increase in a rising rate environment. Between 9/30/22 and 9/30/23,
53 banks, or 78%, had a <i>lower </i>net interest margin. How could their ALCO
assumptions be so wrong?</span></li></ul><div style="text-align: justify;"><br /></div><ul style="text-align: left;"><li style="text-align: justify;"><span style="font-family: "Times New Roman", serif;">By 9/30/23, the 1-year negative cumulative gap had nearly tripled to 30, or 44%. Interesting because the Fed Funds Rate was zero-25bps at 12/31/21 and almost everyone knew rates would inevitably go up. It makes sense that so few </span><i style="font-family: "Times New Roman", serif;">considered</i><span style="font-family: "Times New Roman", serif;"> themselves liability sensitive at 12/31/21. I'm actually surprised so few (44%) consider themselves negatively gapped right now. Declining rates are far more likely than rising rates. The most recent Fed dot plot predicts Fed Funds declining in 2024.</span></li></ul>
<div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgoTjoY0-sZeY8asKu2fMgK3PLumrislk9lDKGZNfKMuqDKuWADtan7MLTfsigutXQw6DrMSWOfCPWd4XiWezHExhvPwbikJ06369WL7zt0CF5CzJ2_ToxQGaW-qDw3127i3hNoDD1Si48bugm06p7x86Ib-5vk2uJZARGMYZC9OUnyBOti1Q6dUuW5mnM/s1334/2023%20Cumulative%20Gap%20mismatch%20infographic.png" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="745" data-original-width="1334" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgoTjoY0-sZeY8asKu2fMgK3PLumrislk9lDKGZNfKMuqDKuWADtan7MLTfsigutXQw6DrMSWOfCPWd4XiWezHExhvPwbikJ06369WL7zt0CF5CzJ2_ToxQGaW-qDw3127i3hNoDD1Si48bugm06p7x86Ib-5vk2uJZARGMYZC9OUnyBOti1Q6dUuW5mnM/w572-h320/2023%20Cumulative%20Gap%20mismatch%20infographic.png" width="572" /></a></div><br /><p class="MsoListParagraph" style="text-align: justify;"><br /></p><p class="MsoListParagraph" style="text-align: justify;"><span style="font-family: "Times New Roman", serif;"><br /></span></p><p class="MsoListParagraph" style="text-align: justify;"><span style="font-family: "Times New Roman", serif;"><br /></span></p><p class="MsoListParagraph" style="text-align: justify;"><span style="font-family: "Times New Roman", serif;"><br /></span></p><p class="MsoListParagraph" style="text-align: justify;"><span style="font-family: "Times New Roman", serif;"><br /></span></p><p class="MsoListParagraph" style="text-align: justify;"><span style="font-family: "Times New Roman", serif;"><br /></span></p><p class="MsoListParagraph" style="text-align: justify;"><span style="font-family: "Times New Roman", serif;"><br /></span></p><p class="MsoListParagraph" style="text-align: justify;"><span style="font-family: "Times New Roman", serif;"><br /></span></p><p class="MsoListParagraph" style="text-align: justify;"><span style="font-family: "Times New Roman", serif;"><br /></span></p><p class="MsoListParagraph" style="text-align: justify;"><span style="font-family: "Times New Roman", serif;"><br /></span></p><p class="elementtoproof"><span style="font-family: "Times New Roman", serif; text-align: justify;">When I asked my colleagues what they thought, here is what a couple of them had to say:</span></p><p class="MsoNormal" style="text-align: center;"><i style="text-align: left;">If I recall from my ALCO committee days… ALCO models largely did not rate shock 450-500 points and if they did, that type of move seemed quite far out of the realm of possibilities. In a 200-300 model, spreads would have mostly held up. My guess is that the duration of money market accounts in most ALCO models were in the 3-6 year time frame but when rates went up 500 points in the real world, these longer duration "core deposits" actually left the bank or repriced much faster than anticipated as banks worked to retain these accounts. Also, many banks were using CDs to retain these accounts and shifting deposits out of these longer duration products into 6-12 month CDs shortened the liability duration averages (in models) and increased the liability sensitive nature of most banks.</i></p><p class="MsoNormal" style="text-align: center;"><i>Deposit duration assumptions in ALCO models built for 'normal' markets simply did not hold up in recent quarters.</i></p><p class="MsoNormal" style="text-align: center;">~ <a href="https://kafafiangroup.com/team/benjamin-t-crowley/" target="_blank">Ben Crowley, Managing Director, The Kafafian Group, Inc.</a></p><p class="MsoNormal"><br /></p><p class="MsoNormal" style="text-align: center;"><i>I think bankers overestimated the loyalty of their
depositors following the pandemic & PPP, coupled with a sustained low
rate/high liquidity environment. These factors led to a false sense of security
that low-cost deposits were there to stay. When the national and super regional
banks began raising rates they were reluctant to follow – until it was too
late. They quickly learned that customers were not loyal and deposit attrition
happened so fast that they had to raise rates more aggressively than anticipated
to retain remaining deposits and attract funds to replace what they had
lost. <o:p></o:p></i></p><p class="MsoNormal" style="text-align: center;"><i>Service is important. But you still have to price competitively.</i></p><p class="MsoNormal" style="text-align: center;">~ <a href="https://kafafiangroup.com/team/christopher-jacobsen/" target="_blank">Chris Jacobsen, Managing Director, The Kafafian Group, Inc.</a></p><p class="MsoNormal"><br /></p><p class="MsoNormal">~ Jeff</p><p class="MsoNormal"><br /></p><p></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-39905645671057868922023-12-10T15:44:00.000-05:002023-12-10T15:44:41.652-05:00Banking's Top 5 Total Return to Shareholders: 2023 Edition<p><span style="font-family: inherit; text-align: justify;"></span></p><div class="separator" style="clear: both; text-align: justify;"><br /></div><p></p><div style="font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvVoZqHpKl-xsuyFTcpb_t5jY36GMB8gkQb67M1jKrifRXdmvowWKYRoZUtM2Hh95_UiGA8bSmW1hZoOqMpciCueDx49a20_H3fcPWbTHBo-WV-BFWFOtYyJqv-hfxgu1Rf0rBGVN7Ma4JnCLV9w7d7FxYuTPVG6cNcfqXUcHFEqUT40du-C9RH-LUABk/s300/stand%20out%20among%20crowd2.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="199" data-original-width="300" height="199" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvVoZqHpKl-xsuyFTcpb_t5jY36GMB8gkQb67M1jKrifRXdmvowWKYRoZUtM2Hh95_UiGA8bSmW1hZoOqMpciCueDx49a20_H3fcPWbTHBo-WV-BFWFOtYyJqv-hfxgu1Rf0rBGVN7Ma4JnCLV9w7d7FxYuTPVG6cNcfqXUcHFEqUT40du-C9RH-LUABk/s1600/stand%20out%20among%20crowd2.jpg" width="300" /></a></div>What a difference a year makes! Although the 2022 Top 5 are holding their own and two of them remain in today's Top 5, the 2021 edition included one bank that failed (SVB Financial Group) and one that is voluntarily liquidating (Silvergate). So as with all lists, and especially banking lists where risks don't rear their ugly head until calamity, readers should evaluate each financial institution on their own. I am here to count numbers, and if they have the best five-year total return to shareholders within the criteria mentioned below, they are on the list.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;"><span style="font-family: inherit;"><br /></span></span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;"><span style="font-family: inherit;">For the past twelve 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?</span></span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;"><br /></span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;">Not so over the eleven 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 29th overall. Although one might argue that First Citizens BancShares of Raleigh is a SIFI as it climbed to the 19th largest in the country with its Silicon Valley Bridge Bank acquisition from the FDIC, and that the FDIC designated SVB as systemically important.</span></div></div></div><div style="font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;"><span></span><span></span><br /></span></div></div></div><div style="font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;">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: <i><b><a href="https://www.amazon.com/Squared-Away-Bankers-Economic-Responders/dp/0982693826/ref=tmm_pap_swatch_0?_encoding=UTF8&qid=1670882762&sr=8-1" target="_blank">Squared Away-How Can Bankers Succeed as Economic First Responders</a></b>.</i> Short-term focus is a common trait of banks that focus on shareholder primacy over stakeholder primacy.</span></div></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;"><span></span><span></span><br /></span></div></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;"><span>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, and penny stocks. </span><br /><span></span><span></span><br /></span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;">As a point of reference, the S&P US BMI Bank Total Return Index for the five years ended December 7, 2023 was <b>23.32%.</b></span></div></div></div><div style="font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;"><span></span><span></span><br /></span></div></div></div><div style="font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;">Before we begin and for comparison purposes, here are<b> <a href="https://www.jeff4banks.com/2022/12/bankings-top-5-total-return-to.html" target="_blank">last year's top five</a></b>, as measured in December 2022:</span></div></div></div><div style="font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;"><span></span><span></span><br /></span></div></div></div><div style="font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;">#1. Communities First Financial Corporation (Now FFB Bancorp) (OTCQX: FFBB)</span></div></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;">#2. Coastal Financial Corporation (Nasdaq: CCB)</span></div></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;">#3. OFG Bancorp (NYSE: OFG)</span></div></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;">#4. First BanCorp (NYSE: FBP)</span></div></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;">#5. The Bancorp, Inc. (Nasdaq: TBBK)</span></div></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit;"><span></span><span></span><br /></span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><br /></div></div></div><div style="font-variant-east-asian: normal; font-variant-numeric: normal; text-align: justify;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><h3 style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; margin: 0px;"><span style="font-family: inherit; font-size: small;">Here is this year's list:</span></h3><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;"><b>#1. <a href="https://www.mfbonline.com/" target="_blank">M&F Bancorp, Inc.</a> (OTCPK: MFBP)</b> </span></div><div><span style="font-family: inherit;"><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxzuj12x50fz_jxRMoJvY02gr_z9YF8iFryCMwd_jlj2m44ZBOZGac7EgUhoEM-lI6rHDhgV6FGgkuvSPYKk49GGmlFKIfdXPuXNdnpnELPBw68ak3rI9H7jTvaxSeUpBmQiRnvOaJq6-RlnjyM_izBi5bdMd7APJn4at6RbzjdC6JA1n4ZkPsV0RUvW4/s250/2023%20M-F%20Bank.png" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="48" data-original-width="250" height="48" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxzuj12x50fz_jxRMoJvY02gr_z9YF8iFryCMwd_jlj2m44ZBOZGac7EgUhoEM-lI6rHDhgV6FGgkuvSPYKk49GGmlFKIfdXPuXNdnpnELPBw68ak3rI9H7jTvaxSeUpBmQiRnvOaJq6-RlnjyM_izBi5bdMd7APJn4at6RbzjdC6JA1n4ZkPsV0RUvW4/s1600/2023%20M-F%20Bank.png" width="250" /></a></div>M&F Bancorp, Inc. is the bank holding company for M&F Bank, headquarted in Durham, NC. The bank was founded in 1907 and has operated continuously since 1908 with branches in Durham, Raleigh, Charlotte, Greensboro, and Winston-Salem. It is a Minority Depository Institution (MDI) and is one of only a few North Carolina banks designated by the U.S. Treasury as a Community Development Financial Institution (CDFI). As both an MDI and CDFI, it applied for and received $80 million from the Emergency Capital Investment Program (ECIP) distributed by the U.S. Treasury to be used to help underserved communities bounce back from the Covid-19 pandemic. Prior to the ECIP investment the bank had $370 million in total assets and $40 million of equity. It had $447 million of assets and $121 million of equity at September 30, 2023. So the relative size of the ECIP investment was very significant. The additional capital, according to the bank, will be used to support businesses in low-income communities that have been disproportionately impacted by the pandemic and further its mission to provide capital, resources, and support communities that continue to be affected by systemic neglect. Prospective shareholders must believe in them, resulting in a <b>601%</b> 5-year total return to shareholders. Well done and best of luck leveraging the ECIP capital for good!</span></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;"><b>#2. <a href="https://thebancorp.com/" target="_blank">The Bancorp, Inc. </a>(Nasdaq: TBBK)</b></span></div><div><br /></div><div><span style="font-family: inherit;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGBXutIQgz1IW9ntzJigdJLMZpLwjlgo2h2JjOyV4JYUBz1fDNllW7v6ZwwA52c-6oCTobqVPeWXXv6pcZccineXTw2fyqRr4s8hQdA2u0yZsoQRxiDUUij0TxddHAucH6HLTc4GDpyKiQtkWXRKrUdZnhELchSWT8OJ2byLQb6Kx0Ofa84_wFYRa_sJA/s221/bancorp%20logo.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="91" data-original-width="221" height="91" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGBXutIQgz1IW9ntzJigdJLMZpLwjlgo2h2JjOyV4JYUBz1fDNllW7v6ZwwA52c-6oCTobqVPeWXXv6pcZccineXTw2fyqRr4s8hQdA2u0yZsoQRxiDUUij0TxddHAucH6HLTc4GDpyKiQtkWXRKrUdZnhELchSWT8OJ2byLQb6Kx0Ofa84_wFYRa_sJA/s1600/bancorp%20logo.png" width="221" /></a></div>Founded in 2000, this $7.5 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. Bankers considering becoming a BaaS provider to such third parties should read this order. They posted a 2.53% ROA and 26.12% 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 <b>334%</b> five-year total return to their shareholders and their second straight Top 5 accolade! </span></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;"><br /></span></div><div><br /></div><div><b>#3 <a href="https://ctbconnect.com/" target="_blank">Citizens Bancshares Corporation</a> (OTCPK: CZBS)</b></div><div><br /></div><div><div class="separator" style="clear: both; text-align: justify;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJ-tK0FeNbbsFElNRKDT4simMxWPpfYHu6dVJUSvVLZzl6V4C5Afnw8qXgnBs_v_9QoKyaG9SsaZzyzFTjB4E50swzRCWfBqSRuUDBCP7Fd3KJG7rjqVGW2nsJ8-wRPy96jFvDICCKhp-CqMndytJ-FbaKrMXhnhB0-ojs-OY9p2fQDsT7dyetl-jzFZk/s306/2023%20citizens%20logo.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="48" data-original-width="306" height="48" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJ-tK0FeNbbsFElNRKDT4simMxWPpfYHu6dVJUSvVLZzl6V4C5Afnw8qXgnBs_v_9QoKyaG9SsaZzyzFTjB4E50swzRCWfBqSRuUDBCP7Fd3KJG7rjqVGW2nsJ8-wRPy96jFvDICCKhp-CqMndytJ-FbaKrMXhnhB0-ojs-OY9p2fQDsT7dyetl-jzFZk/s1600/2023%20citizens%20logo.jpg" width="306" /></a></div>In 1921, Citizens Trust Bank opened its doors on Auburn Avenue in Atlanta. Its founder, Heman Perry, served as the first chairman of the board. The bank was the brainchild of Perry because he was denied being served in a white-owned store. So that Black businessmen could own and operate businesses independently of white-owned financial institution, Perry and four other partners, collectively known as the "Fervent Five", formed Citizens Trust Bank. Like M&F Bank above, CTB received over $95 million of ECIP, in addition to a $5 million investment from TD Bank as a result of its MDI and CDFI status. As a result of these investments, the bank has grown over 65% since 2019. Although deposits declined 20% since year end 2022, the bank has delivered a 2.01% year to date ROA and a 23.10% ROE. This growth and performance resulted in a <b>303%</b> five-year total return. Well done Citizens Bancshares and Citizens Trust. You are doing well by doing good!</div></div><div><br /></div><div><br /></div><div><br /></div><div><b>#4 <a href="https://www.firstcitizens.com/" target="_blank">First Citizens BancShares, Inc.</a> (NasdaqGS: FCNC.A)</b></div><div><b><br /></b></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZEiPiyhhpv16TdPYSwIWg9kkAwT_0FN8L6qCgYP4OAUhTNwPn7qdKvADBsCxBWPhBg0RZSg1rrMCm999KPExKZXPdkxybLdOfb-otCUfNpEo6fZyM27lrO_UyVlg7oLRo7881nofH5ylF2JlM9s15mbREF1uk8yax2662nurp1k9WMT5LlAm9fylUghs/s256/2023%20First%20Citizens%20Logo.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="38" data-original-width="256" height="38" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZEiPiyhhpv16TdPYSwIWg9kkAwT_0FN8L6qCgYP4OAUhTNwPn7qdKvADBsCxBWPhBg0RZSg1rrMCm999KPExKZXPdkxybLdOfb-otCUfNpEo6fZyM27lrO_UyVlg7oLRo7881nofH5ylF2JlM9s15mbREF1uk8yax2662nurp1k9WMT5LlAm9fylUghs/s1600/2023%20First%20Citizens%20Logo.png" width="256" /></a></div><br />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. For the third quarter 2023, net interest margin was 4.10%, ROA was 1.42%, and ROE was 14.95%. All this accretive deal making and prudent management has resulted in a brass ring for shareholders in the form of a <b>261%</b> five-year total return. Congratulations!</div><div><br /></div><div><br /></div><div><br /></div><div><b>#5 <a href="https://investors.ffb.bank/corporate-profile/default.aspx" target="_blank">FFB Bancorp</a> (OTCQX: FFBB) </b></div><div><br /></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxAmlYusI1hhDM7kPEhU9RKZnKAVVJ0rdxi4UMc0oMWez5QUHPfwMeNCr9TCQjRcN5PAQZK0Cn4tijhbigXcAU7U7FiAC9_8IIhUzle_nvc1hmsw1cAfPPoEKki3WWeAg0OxtyFnbjuEfWgrSeWHsUXVCzj6oXkAoGdi4aZv3OtwObO5k1t80zrgHjKcQ/s1400/2023%20FFB%20logo.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1400" data-original-width="1400" height="145" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxAmlYusI1hhDM7kPEhU9RKZnKAVVJ0rdxi4UMc0oMWez5QUHPfwMeNCr9TCQjRcN5PAQZK0Cn4tijhbigXcAU7U7FiAC9_8IIhUzle_nvc1hmsw1cAfPPoEKki3WWeAg0OxtyFnbjuEfWgrSeWHsUXVCzj6oXkAoGdi4aZv3OtwObO5k1t80zrgHjKcQ/w145-h145/2023%20FFB%20logo.png" width="145" /></a></div>FFB Bancorp is the bank holding company for FFB Bank. You might recognize it from being number 1 in in last year's Top 5 as Communities First Financial Corporation and Fresno First Bank. No merger. They changed their name. The Bank opened in 2005 dedicated to meeting the banking needs of Central California businesses and individuals through their sole location in Fresno and online. At the end of 2021, prior to the Fed starting to raise interest rates, the Bank's yield on loans was 4.99%. For the YTD ended September 30, 2023, after the Fed raised rates 525-550 basis points, the yield on loans was 6.30%, or a 1.31% increase. For deposits, the Bank's cost of funds increased 34 basis points for that same period, from 7 basis points to 41. How you ask? Sixty five percent of their deposits are non-interest bearing. Takes pressure off in a rising rate environment. Net interest margin went from 4.22% to 5.09%. Looks like their interest rate risk model was spot-on. This performance led to a five-year total return to shareholders of <b>204%</b> and a second straight year on the JFB Top 5. Congratulations! </div><div><br /></div><div><br /></div><div>There they are. Interesting that two of the top 5 were MDIs and CDFIs that received ECIP capital. I am rooting that they will continue to deliver to shareholders as they serve their higher purpose improving the economic mobility of their customers. </div><div><br /></div><div>The evolution of this august list tells me that having something other than "plain vanilla" is driving performance and shareholder returns. </div><div><br /></div><div><br /></div><div><br /></div><div>~ Jeff</div><div><br /></div><div><br /></div><div><br /></div><div><br /></div><div>Note: I make no investment recommendations in this article or this blog.</div><div><br /></div></div></div>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-1444027882402642592023-11-28T12:58:00.001-05:002023-11-28T13:05:14.789-05:00Describe the Future of Banking in Buzzwords<p style="text-align: left;">I asked Google Bard, a large language model tool, the following: "Describe the future of banking in the United States in buzzwords." Here is what it came up with...</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEguizUCHHH8ryJzv6uZ_cvcFaJxaQ0IUWZsdkZEdpk3Mz33hyizGjMrotM1vDUCIVv4RqurbmalNRnqrcBgFMTLbLEOgfgB4osIDo6ujPrKeHR0qX5rzM0mkxZ7hJL9whr8hRxFVyRH3LcltU9Q328DclT5Tvxtp07aGTgfRQ12HrxrpHK2RQU-Bg6sxv0/s1280/artificial-intelligence-6767502_1280.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="853" data-original-width="1280" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEguizUCHHH8ryJzv6uZ_cvcFaJxaQ0IUWZsdkZEdpk3Mz33hyizGjMrotM1vDUCIVv4RqurbmalNRnqrcBgFMTLbLEOgfgB4osIDo6ujPrKeHR0qX5rzM0mkxZ7hJL9whr8hRxFVyRH3LcltU9Q328DclT5Tvxtp07aGTgfRQ12HrxrpHK2RQU-Bg6sxv0/s320/artificial-intelligence-6767502_1280.jpg" width="320" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><span style="background-color: white; color: #1f1f1f; font-size: xx-large; white-space-collapse: preserve;">∞</span></div><p></p><p data-sourcepos="1:1-1:87" style="background-color: white; color: #1f1f1f; margin: 0px 0px 24px; text-align: left; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><i>Sure, here is a description of the future of banking in the United States in buzzwords:</i></span></p><ul data-sourcepos="3:1-3:64" style="background-color: white; color: #1f1f1f; margin: 4px 0px; padding-inline-start: 36px; text-align: left;"><li data-sourcepos="3:1-3:64" style="margin-bottom: 10px;"><p data-sourcepos="3:3-3:169" style="margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"></p><span style="font-family: inherit;"><i><b>Hyperpersonalization</b>: Banking services will be tailored to the individual needs and preferences of each customer, using data analytics and artificial intelligence.</i></span><p></p></li><li data-sourcepos="5:1-5:90" style="margin-bottom: 10px;"><p data-sourcepos="5:3-5:90" style="margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><i><b>Embedded finance</b>: Banking services will be integrated into everyday activities, such as shopping, paying bills, and managing finances.</i></span></p></li><li data-sourcepos="7:1-7:95" style="margin-bottom: 10px;"><p data-sourcepos="7:3-7:95" style="margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><i><b>Decentralized finance (DeFi)</b>: DeFi technologies, such as blockchain and cryptocurrencies, will disrupt traditional banking models and create new opportunities for financial inclusion.</i></span></p></li><li data-sourcepos="9:1-9:90" style="margin-bottom: 10px;"><p data-sourcepos="9:3-9:90" style="margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><i><b>Open banking</b>: Open banking APIs will allow third-party providers to access and share customer financial data with their consent, enabling new and innovative banking products and services.</i></span></p></li><li data-sourcepos="11:1-12:0" style="margin-bottom: 10px;"><p data-sourcepos="11:3-11:231" style="margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><i><b>Banking as a service (BaaS)</b>: Banks will provide their core banking infrastructure and services to other companies, such as retailers and telecommunications providers, to expand their reach and offer new products and services.</i></span></p></li><li data-sourcepos="13:1-14:0" style="margin-bottom: 10px;"><p data-sourcepos="13:3-13:171" style="margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><i><b>Voice banking</b>: Voice assistants will become a primary way for customers to interact with their banks, providing convenient and hands-free access to banking services.</i></span></p></li><li data-sourcepos="15:1-16:0" style="margin-bottom: 10px;"><p data-sourcepos="15:3-15:148" style="margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><i><b>Data-driven decision-making</b>: Banks will use data analytics to make better decisions about product development, marketing, and risk management.</i></span></p></li><li data-sourcepos="17:1-17:31" style="margin-bottom: 10px;"><p data-sourcepos="17:3-17:31" style="margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><i><b>Artificial intelligence (AI) and machine learning (ML)</b>: AI and ML will be used to automate tasks, improve customer service, and detect fraud.</i></span></p></li><li data-sourcepos="19:1-20:0" style="margin-bottom: 10px;"><p data-sourcepos="19:3-19:120" style="margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><i><b>Cybersecurity</b>: Banks will continue to invest in cybersecurity measures to protect customer data from cyberattacks.</i></span></p></li></ul><p><span style="font-family: inherit;"><i><span style="background-color: white; color: #1f1f1f;"></span><span style="background-color: white; color: #1f1f1f;"></span></i></span></p><p data-sourcepos="21:1-21:212" style="background-color: white; color: #1f1f1f; margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><i>These buzzwords represent some of the key trends that are shaping the future of banking in the United States. Banks that are able to adapt to these trends will be well-positioned for success in the years to come.</i></span></p><p data-sourcepos="21:1-21:212" style="background-color: white; color: #1f1f1f; margin: 24px 0px; text-align: center; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit; font-size: x-large;">∞</span></p><p data-sourcepos="21:1-21:212" style="background-color: white; color: #1f1f1f; margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;">Should I start to worry?</span></p><p data-sourcepos="21:1-21:212" style="background-color: white; color: #1f1f1f; font-size: 16px; margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><br /></span></p><p data-sourcepos="21:1-21:212" style="background-color: white; color: #1f1f1f; font-size: 16px; margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;">~ Jeff</span></p><p data-sourcepos="21:1-21:212" style="background-color: white; color: #1f1f1f; font-size: 16px; margin: 24px 0px; white-space-collapse: preserve; word-break: break-word;"><span style="font-family: inherit;"><br /></span></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-65248876514564474222023-11-16T14:41:00.002-05:002023-11-20T10:17:45.539-05:00How Will We Fund That Low Rate, Low Covenant Loan?<p style="text-align: justify;"><a href="https://www.linkedin.com/in/ehmccormick/" target="_blank">Emily McCormick</a>'s (<a href="https://www.bankdirector.com/" target="_blank">Bank Director Magazine</a>) most recent <a href="https://www.linkedin.com/pulse/trouble-rates-emily-mccormick-bdlwf" target="_blank">Common Threads newsletter post</a> on LinkedIn got me thinking. How did that 5.5%-6% loan, described by Jeff Rose, CEO of Ambank Holdings, get to committee or even make it past the lender?</p><p style="text-align: justify;">Banking is one of those businesses that requires bankers to be less stupid than their competitors. And when competitors start funding 6% loans with 5% money, they start pulling those in their competitive eco-system with them. Or they'll lose the loan. At closing, we don't know how well that loan will perform during an economic downturn. But we priced no credit spread into it. Heck, we didn't price cost into it, or interest rate risk, or liquidity risk, or risk-adjusted return on capital. </p><p style="text-align: justify;">So how can such a loan make it past the lender on that sales call?</p><p style="text-align: justify;">Culture. As one bank CEO once told me, "you can't believe the improvement in lenders' negotiating ability when you tell them it's ok to lose the loan."</p><p style="text-align: justify;">I recently spoke at the ABA Bank Marketing Conference on why product management is greater than product (a chapter in my book, <a href="https://www.amazon.com/Squared-Away-Bankers-Economic-Responders/dp/0982693826/ref=tmm_pap_swatch_0?_encoding=UTF8&qid=1700161917&sr=8-1" target="_blank">Squared Away</a>). In such a culture, you would have a director of product management, likely the CMO. But the product managers themselves would be sprinkled throughout the bank as close to the product as feasible. So the product manager for, say, the commercial real estate product would be an up-and-coming middle manager in that department. And he/she would be tasked with the continuous profit improvement of the commercial real estate product.</p><p style="text-align: justify;">In comes Lender Hotshot wanting to do that 6% deal. If transfer priced at the FHLB blended 4-year borrowing then Hotshot would be assessed a 4.9% cost of funds, generating only 1.1% spread. If the prior quarter's CRE product spread was 3%, then Hotshot's loan would reduce the profitability of the product. If Hotshot went further out on the yield curve and was assessed, say, a 5.3% cost of funds, now he/she would only get a 0.7% spread on that loan. Multiply that by all the hotshots you have out there trying to produce volume.</p><p style="text-align: justify;">But if Hotshot is only held accountable for volume, he/she is all good, right? Hotshot sits high on the lender production board.</p><p style="text-align: justify;">But if the culture is continuous improvement, and the yardstick is profit, would this be so? If Hotshot was held accountable for the continuous profit improvement of his or her loan portfolio, credit quality, spread growth, would they even consider doing that six percent deal let alone bring it to their boss or a loan committee where committee members would ask "why so thinly priced" or "why the seven-year deal." The unspoken answer: "I have a $25 million production goal and this is what needs to be done to get the deal done." We created this culture.</p><p style="text-align: justify;">In the product management culture, it would matter. That sharp SVP of CRE would have an interest in appropriately priced deals. He/she would interact with Hotshot to determine if there are product features that could help get deals done that don't reduce the profitability of the CRE product.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsoWCVpx21Y8BPGIbn7bf7DX9QqZ1yqUUzZrjh3peoMBdtFdIFznjUrP2QTznrTOMoWsar1Cu-PxpaHo9Ll13aFq-W_0tNrQXnlG8TZmZRejARjBTPQ1txMk8Fd939GgJgmt2eSps36ROm4Eu29W01sUEMGy_IUOXGv6XpDXwFEOWTyj3CuIvxf5im7to/s1347/2023%20Lender%20Profitability%20Keyser%20Soze.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="748" data-original-width="1347" height="290" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsoWCVpx21Y8BPGIbn7bf7DX9QqZ1yqUUzZrjh3peoMBdtFdIFznjUrP2QTznrTOMoWsar1Cu-PxpaHo9Ll13aFq-W_0tNrQXnlG8TZmZRejARjBTPQ1txMk8Fd939GgJgmt2eSps36ROm4Eu29W01sUEMGy_IUOXGv6XpDXwFEOWTyj3CuIvxf5im7to/w521-h290/2023%20Lender%20Profitability%20Keyser%20Soze.png" width="521" /></a></div><br /><p style="text-align: justify;">And Hotshot would get their quarterly profitability report, that not only measures their book of business, but also highlights those lenders that are top quartile in terms of profitability, spread growth, profit improvement. Maybe Hotshot will want to be on those lists. Maybe Hotshot is incented to be on those lists. Maybe Hotshot has been given permission to walk away from that six percent deal. Armed with that leverage, maybe they can get a better deal from that borrower. Or at least not hurt the profitability of his/her portfolio, the CRE product, or the bank's net interest margin.</p><p style="text-align: justify;">But to get that culture. You have to measure it.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-32083310332221973152023-11-03T12:57:00.000-04:002023-11-03T12:57:18.141-04:00Guest Post: Financial Markets & Economic Update 4Q23 by Dorothy Jaworski<h2 style="text-align: left;"><u><span style="font-family: "Times New Roman",serif; font-size: 12pt; mso-bidi-font-family: Arial;">Financial Markets
& Economic Update - Fourth Quarter 2023</span></u></h2><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p> </p><h4 style="text-align: justify;"><u>Summer Update</u></h4><p class="MsoNormal" style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9BZOP7XnxbYGQd_25rceVHUiDxstOPDPjAgHUgy66_uWzylxALfcAzUWivKHLDqUWR3akZvgOtR13MNYxb85xFeUjyy694bT9TxVFdpAVA3UkgmCDkIzE-cq-gOaDxaMKPag7d13LZzNa2dqJVBJvHulgbK-iSXGdlCAe0YEsRoqKYRfwGo-0hCkxnNk/s216/dj%20new.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="216" data-original-width="170" height="216" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9BZOP7XnxbYGQd_25rceVHUiDxstOPDPjAgHUgy66_uWzylxALfcAzUWivKHLDqUWR3akZvgOtR13MNYxb85xFeUjyy694bT9TxVFdpAVA3UkgmCDkIzE-cq-gOaDxaMKPag7d13LZzNa2dqJVBJvHulgbK-iSXGdlCAe0YEsRoqKYRfwGo-0hCkxnNk/s1600/dj%20new.jpg" width="170" /></a></div>On this warm October day, I am staring at my Bloomberg screen, still
heartbroken over the Phillies Phailure. Now,
all of our hopes ride with the Eagles. Interest
rates are all elevated, with the 2-year Treasury yield at 5.01% and the 10-year
at 4.85%, which is up by over 100 basis points since June 30, 2023. Most of the inversion between these two
yields is gone. The 3-month T-Bill is at
5.45%, so there remains some inversion to the 10-year yield. Stocks are down again today and have been
down all week. Gold has reclaimed $2,000
per ounce and its status as a safe haven, with all that is going on with war in
the Middle East. Too bad Treasuries are
not as much of a safe haven. Markets
sent Treasury yields higher in reaction to huge deficit spending and a Federal
Reserve intent on pushing rates higher, keeping them “higher for longer” with
large price risk as everyone has learned for the past three years.<o:p></o:p><p></p><p class="MsoNormal" style="text-align: justify;">Some argue that, because we saw real GDP rise by +4.9% in 3Q23, that the
economy is robust and strong.” Yes, it
was for that quarter, but, if you read my last newsletter, the summer of fun
meant that quarter would be stronger, as the last stages of pandemic pent-up
demand saw excess savings spent with abandon.
YOLO- You Only Live Once! People
traveled on vacations with their newly renewed passports, enjoyed entertainment
(can you say Taylor Swift and Barbie?), and ate out at their favorite
restaurants. Now the harsh reality will
sink in and El Nino is sure to give us a cold winter. Inflation is still elevated, even while it
slowly declines from 2022’s peaks. We
will continue to fall toward the Fed target of 2.0% but it takes time and
patience.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p><h4 style="text-align: justify;"><u>Index of Leading Economic Indicators</u></h4><p class="MsoNormal" style="text-align: justify;">I just finished studying a chart of the year-over-year changes in the
index of leading economic indicators, or “LEI,” going back to 1960. For <u>every</u> period of sustained y-o-y
declines in LEI, recession has either begun or followed quickly. The LEI fell again in September, 2023 by -.7%
and is down y-o-y by -7.8%. The index began
to decline in March, 2022 (no surprise that the Fed started tightening that
month), and has been down for 18 months in a row; the LEI is down -11.1% since
March, 2022 to 104.6. In July, 2022, the
LEI began to decline y-o-y, yet we have not been in recession or see one
imminently.<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">The chart showed eerily similar patterns of declines in 1990 and
2000-2001. Unsurprisingly, the largest
declines occurred starting monthly in March, 2006 and on a y-o-y basis in
September, 2006 and continued to November, 2009. The largest monthly decline took place in
May, 2009 at -27.2% y-o-y with the index reaching a low of 75.7. We all remember the Great Recession, which
began in 2007, but the LEI knew it as early as March, 2006. This time will be no different and patience
is required.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">By the way, there are sister indices to the LEI, the coincident for
current conditions and the lagging index for 6 to 9 months ago. Both are relatively stable, indicating the
economy has been and currently is okay.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p> </p><h4 style="text-align: justify;"><u>Are Rates Restrictive</u>?</h4><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">Do you remember what it means for Fed policy to be “restrictive?” It means getting the Fed Funds rate above
inflation so that a positive number, or real rate, would result after
subtracting inflation from the Fed Funds rate.
Every inflation measure that I track closely is below current Fed Funds
of 5.50%, resulting in restrictive rates of varying degrees.<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">Fed Funds is 1.40% over September’s annual core CPI of 4.1% and 1.80%
over annual headline CPI of 3.7%. Fed
Funds is 3.10% over 3Q23 core PCE of 2.40% and 2.60% over the PCE deflator of
2.9%. Fed Funds is 1.10% over the
annualized 3Q23 employment cost index of 1.1% and is 1.30% over the most recent
data for wage growth of 4.2%. So, yes,
rates are restrictive. And the FIBER
leading inflation index and M2 money supply are both falling year-over-year, by
-1.2% and -3.6% respectively, so inflation will continue to trend downward. Fed Chairman Powell stated “You know
restrictive only when you see it.” Well,
you be the judge… I believe that the Fed is done raising rates; they just don’t
know it yet. And looking ahead to the
2024 Presidential Election, they clearly would want to be on the sidelines.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p><h4 style="text-align: justify;"><u>Risks to the Economy</u></h4><p class="MsoNormal" style="text-align: justify;">We were growing real GDP 2.1% to 2.7% for the four quarters ended 2Q23
and then experienced an outlier of +4.9% in 3Q23. Yeah, the summer of fun. Consumer spending accounted for one-half of
GDP. Businesses built inventories adding
1.30% to GDP. Housing made a small
positive contribution after a string of negative quarters. Much of the data was weak, so it’s doubtful
that we can keep repeating this pace.<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">The risks are many. We have an
aggressive Fed threatening more rate hikes.
Long-term interest rates just increased by 100 basis points in the past
few months, in a time when inflation is falling. Government spending and huge budget deficits
are upsetting investors. Mortgage rates
are now close to 8.00%; affordability is at its lowest point since 1989,
according to the National Association of Realtors. Low inventories of homes has hurt sales. No one will give up their 3.00% mortgage for
an 8.00% one. Usually high interest
rates would put a damper on home price increases and we might expect prices to
outright decline. But not in this
market. Prices are stubbornly high and
rising, with August y-o-y increases of +2.2% for the Case Shiller 20, +2.6% for
Core Logic, and +5.6% for the FHFA. </p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">China is having its own economic troubles and supply chains could suffer
again. And what a time for the UAW to go
on strike- demanding outsized pay raises and slowing production at the Big
Three automakers and hurting their suppliers.
Thankfully, they appear to be close to agreement. According to Cox, one-half of Americans
cannot afford a new car. Sales will be
affected by both the strike and affordability.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">Some banks have tightened credit and there is also weakening demand for
bank credit as small businesses are hurting from higher costs and higher
interest rates. Huge amounts of
government debt and business debt, including commercial real estate, are
repricing over the next two years at higher rates. Real bank credit (excluding inflation) has
been falling for the past 12 to 24 months.
Generally, GDP would be falling in this situation.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">Finally, one more thought about the Fed.
They have raised interest rates by 5.25% since March, 2022, let almost
$1 trillion of their bond portfolio mature without replacement and allowed M2
money supply to decline y-o-y starting in December, 2022 for the first time
since the 1940s and at the fastest pace since the 1930s. September was -3.6% and July and August were
both -3.9%. Leads and lags for M2
changes are thought to be 12 to 18 months.
The Fed has been pushing inflation lower, but, if they really believed
in policy lags and looked at the LEI and M2 y-o-y declines, they would ease
right now. I wonder what Maestro would
do.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p><h4 style="text-align: justify;"><u>Where is Recession</u>?</h4><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">Be patient. It will come. High interest rates- both short-term and
long-term- an aggressive Fed, the LEI, and an inverted yield curve are all
precursors of a recession. The yield
curve is less inverted than it was earlier this year, due to large increases in
longer-term rates. This actually plays
into the recession forecasts. The
inverted curve is the precursor of recession, but it is the re-steepening of
the yield curve that is the sign of imminent recession.<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">I mentioned the LEI earlier. It
has been falling on a monthly and y-o-y pace that is always associated with
recessions- big ones and small ones. Do
not ignore this and other indicators as they always teach us something.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">M2 is falling. Inflation is
responding by falling. It was the
massive increase in M2 in 2020 and 2021 (and beyond!) along with
pandemic-related supply chain disasters that led to inflation. It will be the decline in M2 that reduces
it. The FIBER leading inflation index is
still falling on a y-o-y basis, and is currently -9.2% from its high in March, 2022.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">The major surveys, including ISM, S&P, and the local Philly Fed,
continue to show weakness in terms of current conditions and outlook. Inflation has tamed down in most of
them. Stock markets have been very
volatile and are mostly down since the summer months. Are they all sensing that the summer of fun
is over? Profits have been mostly
positive for the 3Q23, but probably not enough to make the past 12 months
positive. We shall see.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p><p class="MsoNormal" style="text-align: justify;">I was in Switzerland in July and I regret that I did not have the time
to visit CERN, the home of the Large Hadron Collider. The LHC has been running heavy ions through
the system for the past five weeks, ending on October 30th. What will we learn from this? Maybe the LHC really is changing our world,
turning economics upside down, and leading to outcomes that are unexpected
given our knowledge of the past. As
always, thanks for reading!<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p></p><p>
<span style="font-family: "Times New Roman",serif; font-size: 12pt; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">D. Jaworski 10/28/23</span></p><p><span style="font-family: "Times New Roman",serif; font-size: 12pt; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><br /></span></p><p><br /></p><p><span style="font-family: "Times New Roman",serif; font-size: 12pt; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"></span></p><div><span style="font-family: "Times New Roman",serif; font-size: 12pt; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><div style="font-family: "Times New Roman"; font-size: medium; margin: 0px;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEieUNwETzB-WNjzWsvog7ALE7jFJHOK1bT37xmOF13xcFs4J8YU1t8BUUMIycnudcF8hOXyyxeBCq2h-gptLy3EkMnVwmYq2QX26ocfe-VBEmRjZL0NIxwTDo3J6CVG84-YuMk3v5z97AA/s1600/penn+community+bank+logo.png" style="clear: left; float: left; margin-bottom: 16px; margin-right: 16px;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEieUNwETzB-WNjzWsvog7ALE7jFJHOK1bT37xmOF13xcFs4J8YU1t8BUUMIycnudcF8hOXyyxeBCq2h-gptLy3EkMnVwmYq2QX26ocfe-VBEmRjZL0NIxwTDo3J6CVG84-YuMk3v5z97AA/s1600/penn+community+bank+logo.png" /></a><span><div style="text-align: justify;"><span style="font-family: times, "times new roman", serif;"><a href="https://www.linkedin.com/in/dorothy-jaworski-23a89648/" target="_blank">Dorothy Jaworski</a></span><span style="font-family: times, "times new roman", serif;"> 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 has been with <a href="https://www.penncommunitybank.com/home/home">Penn Community Bank</a> and its predecessor </span><span style="font-family: times, "times new roman", serif;">since November, 2004. She is the author of <span><i><a href="http://www.amazon.com/Just-Another-Soldier-Dorothy-Jaworski/dp/1499102666/ref=sr_1_1?ie=UTF8&qid=1406494270&sr=8-1&keywords=another+good+soldier">Just Another Good Soldier</a></i></span>, and <i><a href="https://www.amazon.com/Honoring-Stephen-Jaworski-Dorothy-L/dp/1539553981/ref=sr_1_1?ie=UTF8&qid=1486141468&sr=8-1&keywords=dorothy+jaworski" target="_blank">Honoring Stephen Jaworski</a></i>, which details the 11th Infantry Regiment's </span><span style="font-family: times, "times new roman", serif;">WWII</span><span style="font-family: times, "times new roman", serif;"> </span><span style="font-family: times, "times new roman", serif;">crossing of the Moselle River where her uncle, Pfc. Stephen W. Jaworski, gave his last full measure of devotion.</span></div><div><span style="font-family: times, "times new roman", serif;"><br /></span></div></span></div></span></div><p><span style="font-family: "Times New Roman",serif; font-size: 12pt; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><br /></span></p><p><span style="font-family: "Times New Roman",serif; font-size: 12pt; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><br /></span></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-46477780462431083302023-10-30T17:23:00.004-04:002023-10-30T17:23:52.171-04:003 Ideas for Your Deposit Strategy<p style="text-align: justify;">The 2022-23 Fed monetary tightening caused disruption to our depositor base. We either lost deposits to Treasuries, money market mutual funds, or disintermediated into higher cost deposits within our bank. In this video short, I suggest three ideas to improve your deposit strategy as follows:</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">1. Identify "dead money" in your depositor base and pro-actively deepen your relationship with them.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">2. Create "companion accounts", as described by our friend Neil Stanley from The <a href="https://thecorepoint.com/" target="_blank">CorePoint</a>, to lure the money we've lost back into our bank.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">3. Manage the mix. Determine which accounts are "accumulation" versus "store of value."</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Listen to the three-and-a-half-minute video for greater context. Or contact me at jmarsico@kafafiangroup.com or 717.468.3208. </p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">What are your ideas for a deposit strategy? </p><p style="text-align: justify;"><br /></p><div class="separator" style="clear: both; text-align: center;"><iframe allowfullscreen="" class="BLOG_video_class" height="380" src="https://www.youtube.com/embed/tzAsNuU-2Ng" width="456" youtube-src-id="tzAsNuU-2Ng"></iframe></div><br /><p style="text-align: justify;"><br /></p><p><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-54036956956215511712023-09-24T12:19:00.001-04:002023-09-24T12:19:20.682-04:00A Banker's Dream Dashboard<p style="text-align: justify;">We talk about what we would like our bank to be, to our customers, employees, community and shareholders (if we have them). We build a strategy that is more often than not preaching differentiation versus cost advantage. We analyze our customers, markets, and our personnel to devise a plan that has the potential to deliver to our stakeholders.</p><p style="text-align: justify;">Then we go back to our day-to-day and do none of the things we talked about. We go back to managing support functions on their budget, delaying strategic investments that could make them more scalable, efficient, and not people-dependent to mitigate the threat of the availability of talent. Because the investment wouldn't yield results until the end of year two, and we got a budget to keep.</p><p style="text-align: justify;">We go back to incenting lenders on volume, even though we have a strategic aspiration of being in the top quartile of net interest margin. Our brand, according to our latest Net Promoter Score, should allow us to succeed at not having to be "best price." But we incent on volume because, hey, lenders are accustomed to volume goals, and we can't measure spreads per lender. </p><p style="text-align: justify;">We measure branch managers on deposit growth or open-close ratios. Again, it's easy to pull those numbers. And branch managers don't have the sophistication to understand a branch profit and loss statement, right? And we can't measure that anyway.</p><p style="text-align: justify;">So our accountabilities fall on the same old things that are not particularly in alignment with our strategy and likely have unintended consequences that hold us back. </p><p style="text-align: justify;">You manage what you measure. And we are selling ourselves, our people, our customers and shareholders short by only measuring what our systems can do. Imagine if a branch manager owned their P&L, and therefore were empowered to make rate exceptions, fee decisions, and budget decisions that are balanced to continuously improve the profitability of their branch. It would certainly bring customers closer to decision makers, which can be a competitive advantage for the community financial institution if only it benefitted from strategic execution.</p><p style="text-align: justify;">As I see it, holding employees accountable for their actions, all the way down the line, consistent with strategy, will build that execution culture so many institutions crave. Yet it remains elusive. It doesn't have to be.</p><p style="text-align: justify;">I've constructed a branch dashboard that I think will motivate branch people to work every day at improving the financial performance of their branch, and therefore the bank, while giving them ownership of decision-making to benefit all stakeholders.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPzkbQh9BjYQOyK46LYAtYlwnQlMUAEqA7kL0WabWTlCB_gN2WElASCizuXuTZu9kHrOi1eFMrrTQXnAoRHt59__kRFU0aBlOCJmVtYPgNE-dRHcYlFx8Cc-2cfKM1dI6H4xx7GFmx0r22TttGbz9Qnf5CM7_UFjbqPRwbRaeS7_lI1aOcBohzlCcIESg/s897/2023%20Dashboard%20ROA%20ROE.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="505" data-original-width="897" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPzkbQh9BjYQOyK46LYAtYlwnQlMUAEqA7kL0WabWTlCB_gN2WElASCizuXuTZu9kHrOi1eFMrrTQXnAoRHt59__kRFU0aBlOCJmVtYPgNE-dRHcYlFx8Cc-2cfKM1dI6H4xx7GFmx0r22TttGbz9Qnf5CM7_UFjbqPRwbRaeS7_lI1aOcBohzlCcIESg/w533-h300/2023%20Dashboard%20ROA%20ROE.png" width="533" /></a></div><br /><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgx4XJnCQ8J3ZpuaEyFTxbum52R_OL9SJ4nEy5F5KwumLTuWcxNPU-KX5Zz6d035ahRXtMybextnQGFrB02v0TzG23Hy2aOaAgJr7q_ACkjMBYRzimg9W_nlcac52Z9-7YNYmBVo-Z0XMUxG0DBzzv78sRhgttP-iopmLGt95mdfzSvTHL-0DGIiVGN3TU/s897/2023%20Dashboard%20NIM%20Exp%20Ratio.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="505" data-original-width="897" height="299" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgx4XJnCQ8J3ZpuaEyFTxbum52R_OL9SJ4nEy5F5KwumLTuWcxNPU-KX5Zz6d035ahRXtMybextnQGFrB02v0TzG23Hy2aOaAgJr7q_ACkjMBYRzimg9W_nlcac52Z9-7YNYmBVo-Z0XMUxG0DBzzv78sRhgttP-iopmLGt95mdfzSvTHL-0DGIiVGN3TU/w532-h299/2023%20Dashboard%20NIM%20Exp%20Ratio.png" width="532" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3GDB1NwUDhs5U8LAN8xwd5hvslnnYYv3DcDmX6QNYQVbfUCWhpGffk8AxNUnPJbfO-pm7wdpXSS3qWHTED0YJcmLljyg4-ruuQ_01lkcReLMVeb8cQYv1uRfuRpdvPD_dWloIXc3tFfuIELmZ4vCD_O9ZC2-FmqdjNO6wooBOHLNJrJ_UyIoGwjVHmt4/s928/2023%20Dashboard%20Branch%20Roa%20Spreads.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="505" data-original-width="928" height="280" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3GDB1NwUDhs5U8LAN8xwd5hvslnnYYv3DcDmX6QNYQVbfUCWhpGffk8AxNUnPJbfO-pm7wdpXSS3qWHTED0YJcmLljyg4-ruuQ_01lkcReLMVeb8cQYv1uRfuRpdvPD_dWloIXc3tFfuIELmZ4vCD_O9ZC2-FmqdjNO6wooBOHLNJrJ_UyIoGwjVHmt4/w515-h280/2023%20Dashboard%20Branch%20Roa%20Spreads.png" width="515" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-7mfgvYF0mh9sz315Z6E-q5BxpSSEgdm2GkotOgefg6kPl8X0sD1PL_0lCqKLyOV0r7spTTaEw9cvryckBj0N-laGg8BGTUch4wZzt_akOV7xO9TKXKF5IL9joTOHiQK5IoAlOfm7hq2iWUf_i_YhWb3GhW1eJt8DnQrQTlnSipvYrredHLZSUUMTre0/s928/2023%20Dashboard%20Branch%20Core%20Accts%20Etc.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="745" data-original-width="928" height="417" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-7mfgvYF0mh9sz315Z6E-q5BxpSSEgdm2GkotOgefg6kPl8X0sD1PL_0lCqKLyOV0r7spTTaEw9cvryckBj0N-laGg8BGTUch4wZzt_akOV7xO9TKXKF5IL9joTOHiQK5IoAlOfm7hq2iWUf_i_YhWb3GhW1eJt8DnQrQTlnSipvYrredHLZSUUMTre0/w520-h417/2023%20Dashboard%20Branch%20Core%20Accts%20Etc.png" width="520" /></a></div><br /><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: justify;">Imagine that conversation with the regional manager or retail executive about how to improve the numbers that they see everyday on the dashboard. They would know those customers with the highest deposit balances yet not the highest cost of deposits. Keeping those customers satisfied would do much more to help branch profitability than the rate shopper that wants top of market. That would drive up the branches cost of deposits, decrease its spread, and profitability. But the high balance customer that doesn't demand top rate, but competitive rate, is worth knowing and increasing deposit costs to maintain that relationship.</div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;">Now, we wait until that customer calls to complain. That's our strategy. Wait for our high balance yet profitable customer to call and complain about the terribly low rate we are paying them. It's an unsustainable strategy. Empower our relationship managers to make decisions that balance the needs of stakeholders. </div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;">But to do that, we must measure consistent with our strategy. And reward those top quartile performers we know are at our bank. If we only measured to be consistent with what we believe we know. If we don't measure it, we can't manage to it. </div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;">We can measure it, and should.</div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: left;">~ Jeff</div><div class="separator" style="clear: both; text-align: left;"><br /></div>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-42005705191716668672023-07-28T11:05:00.000-04:002023-07-28T11:05:52.638-04:00Career in Banking Advice from The Pro's<p>I recently moderated a Risk Management Association (RMA) panel focused on managing risk in today's environment. Since the panel were seasoned bankers, the audience also wanted to hear some nuggets of wisdom about managing their careers in banking.</p><p>The question I asked: If you could give career advice to your 25 year-old self, what would it be?</p><p>The panelists were: </p><p>Mike Allen, President of Harford Bank. A career banker with multiple financial institutions, including the long-admired Mercantile from Maryland, Mike elevated up the credit and lending vertical to his current position.</p><p>Kevin Benson, President of Rosedale Federal S&L Association. Kevin was a regulator before becoming senior lender at Rosedale, and ultimately to his current position.</p><p>Mark Semanie, Maryland Market President, Wesbanco. I first met Mark when he was CFO of a community bank, rising to COO of a different bank that was acquired by Wesbanco, giving way to his current position. Mark did not come into banking until his mid 30's.</p><p>Three great leaders, all from different backgrounds. Here is my take on how they responded to my career advice question.</p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><iframe allowfullscreen="" class="BLOG_video_class" height="266" src="https://www.youtube.com/embed/smPst1f2dXU" width="320" youtube-src-id="smPst1f2dXU"></iframe></div><br /><p><br /></p><p><br /></p><p><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-283190098060317982023-07-13T12:23:00.000-04:002023-07-13T12:23:39.636-04:00Sins of Our SIFI<p style="text-align: justify;">Another day, another big bank faux paus. On July 10, the Consumer Financial Protection Bureau (CFPB) issued a <a href="https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/cfpb_bank-of-america_2023-CFPB-0007_01_2023-07.pdf" target="_blank">consent order</a> (CO) against Bank of America, N.A. (BofA), claiming, among other things, that BofA opened credit card accounts for new customers without their consent. The next day, the Office of the Comptroller of the Currency (OCC), exacted a $60 million fine for prior sins that were based on a 2022 exam and subsequent <a href="https://www.occ.gov/static/enforcement-actions/ea2023-019.pdf" target="_blank">consent order</a> regarding double fees charged to customers as a result of ACH representments.</p><p style="text-align: justify;">Not a red-letter day for BofA.</p><p style="text-align: justify;">But can it be for the community banks that would covet the customers that make up the $1.9 trillion in BofA deposits?</p><p style="text-align: justify;">If past is prologue, we shouldn't get too excited. Wells Fargo was slapped with a similar CO back in 2016, while they were third in the nation in deposit market share. They're still third. Even though a subsequent CO limited their growth to under five percent. The good news is they only grew deposits 2.1% annually, while others in the top 10 deposit market share averaged 7.1% annual growth. But still, Wells grew deposits $169 billion since receiving their 2016 fake account order, which has been subsequently lifted.</p><p style="text-align: justify;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjH0LbG39TVBgG_F6XetzH22UqIWEB8bdcpn6cZba11qnNEwQd6pM_3UUqGdAHg0HQPH4aSHkvRFhLhhhzD2VdD7EN7iYvjmqLd2opI4CNEdejFlviSADGMDB1QR2W2Ii3cE5oUL-vtFHldvjl2ZjknyAs5iqHdwvzwMikd9pJ6ZQcFqPH377cHH1SEBHI/s569/Top%2010%20Deposit%20Growth%202016-2023q1.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="333" data-original-width="569" height="298" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjH0LbG39TVBgG_F6XetzH22UqIWEB8bdcpn6cZba11qnNEwQd6pM_3UUqGdAHg0HQPH4aSHkvRFhLhhhzD2VdD7EN7iYvjmqLd2opI4CNEdejFlviSADGMDB1QR2W2Ii3cE5oUL-vtFHldvjl2ZjknyAs5iqHdwvzwMikd9pJ6ZQcFqPH377cHH1SEBHI/w511-h298/Top%2010%20Deposit%20Growth%202016-2023q1.png" width="511" /></a></div><br /><p style="text-align: justify;">So, as I told a banking friend, however community financial institutions react to BofA's wrongdoing, or don't react, it should be different than what we did in reaction to Wells' 2016 CO.</p><p style="text-align: justify;">It's not like the BofA news isn't bad. Let me give you some of the CFPB language in the CO in Article IV, subsections 24-31:</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">Respondent's (BofA) Violations of Law Regarding Account-Opening Practices</h4><p style="text-align: justify;">24. During the Account-Opening Findings Period, Respondent offered an array of Consumer Financial Products or Services, including savings and checking accounts (deposit accounts) and credit cards.</p><p style="text-align: justify;">25. During the Account-Opening Findings Period, one factor that Respondent considered when evaluating financial center employees’ overall performance and incentive compensation was the number of new Consumer Financial Products or Services that were opened and used by the consumer.</p><p style="text-align: justify;">26. During the Account-Opening Findings Period, in response to sales pressure or to obtain incentive rewards, Respondent’s employees sometimes submitted applications for and issued credit cards without consumers’ consent. These acts or practices were contrary to Respondent’s policies and procedures and involved a small percentage of Respondent’s new accounts.</p><p style="text-align: justify;">27. It was Respondent’s practice to obtain consumer reports in the course of considering consumers for new credit cards.</p><p style="text-align: justify;">28. Respondent used or obtained consumer reports to consider consumers for new credit cards even when the consumers had not applied for or did not want the products and where Respondent did not otherwise have a permissible purpose for the consumer reports.</p><p style="text-align: justify;">29. During the Account-Opening Findings Period, Respondent sometimes generated associated fees from credit card accounts opened without consumers’ consent. </p><p style="text-align: justify;">30. Respondent’s acts or practices described herein may have negatively impacted consumers including through fees charged; impacts to consumer credit profiles; the loss of control over personal identifying information; the expenditure of consumer time and effort investigating the facts and seeking closure of unwanted accounts; and the need to monitor and mitigate harm going forward.</p><p style="text-align: justify;">31. Respondent has addressed a root cause of Relevant Account-Opening Practices—individual sales goals and sales-based compensation—by eliminating sales goals both for compensation incentives and for performance management for financial center employees primarily responsible for the sale of consumer credit card accounts as of January 1, 2023.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">So What?</h4><p style="text-align: justify;">In a separate CO, the OCC cited violations of law against BofA for charging customers a $35 overdraft fee, and if re-presented by merchants the next day and there were still insufficient funds, charged an additional $35 fee for the same item. This practice was said to have ended in 2021.</p><p style="text-align: justify;">Representment issues and the disclosures were recently a regulatory hot-button issue in bank exams. And, truth be told, others may have done it without even knowing it was being done. These double-fees were not very big to a traditional community financial institution and it is possible when the deposit accounts were set up, they were not set up to identify representments when automatically assessing fees. </p><p style="text-align: justify;">But still, the timing of the CO coinciding with the fake accounts opened as a result of the sales culture within BofA is certainly a bad look.</p><p style="text-align: justify;">The question; will this bad look result in community financial institutions finally making a successful case to younger depositors and small businesses that their deposit dollars belong with them and not the SIFI banks?</p><p style="text-align: justify;">I hope so. But hope is not a strategy.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-13099898403201166072023-06-12T09:05:00.003-04:002023-06-13T17:26:16.667-04:00Does Your Bank Matter?<p style="text-align: justify;">My firm is debating the direction of the banking industry so we can present, discuss, and debate with our clients, particularly how they can succeed in the current and emerging environment. In the past, I have advocated for "stakeholder primacy"; if you mattered to your employees, customers, shareholders and communities you would surely have an enduring future. If an enduring future is what you aspire to.</p><p style="text-align: justify;">If you mattered to your employees, your retention rate for those you want to retain will be greater than your competitors. Higher retention usually means greater employee satisfaction through employee development, engagement and empowerment, career opportunities, competitive compensation and benefits, work-life balance, and overall satisfaction with how your bank is making a difference. These higher performing employees reduce process friction and customer pain points, delivering a superior customer experience.</p><p style="text-align: justify;">If you matter to customers, you would understand their individual needs and deliver banking services to them without them having to think about it or worry about it. If they have an issue, they know who to call and that person is empowered to solve it for them without being bounced around. They are comfortable that their bank and banker will balance the needs of the customer with the needs of the bank and its other constituencies. They feel good banking with you because you serve some higher purpose in your community. They won't dump you for small rate variation or loan terms. They are your greatest promoters, reducing new customer acquisition time and resources.</p><p style="text-align: justify;">If you matter to your community(s), you would be missed if your bank was not there. If you are dedicated to elevating the financial wellbeing of your customers, for example, then their net worth and overall financial happiness will improve over the long term. You help elevate those in need to a sustainable level. You lift low-to-mod income households to middle class households, and so on. You are committed to the financial literacy of all that bank with you. Yes, without your bank, there would be a hole in your community. </p><p style="text-align: justify;">Better employees that stay with you to serve your higher purpose in your community are delivering a superior customer experience to customers that are comfortable paying you for the service you deliver and the value you bring to them and the community. This delivers superior financial performance to shareholders. I've discussed how to <a href="https://www.jeff4banks.com/2018/02/for-banks-acquire-or-be-acquired-is.html" target="_blank">calculate earning your right to remain independent in a prior post</a>, and banks should do this regularly to ensure they are holding themselves accountable to deliver to shareholders.</p><p style="text-align: justify;">But the brass ring is to matter not just to shareholders. But to matter to all of your stakeholders.</p><p style="text-align: justify;">Below is a list of the largest of the 223 bank merger deals that happened in 2013. Ten years ago. Do stakeholders miss these banks? When you build your strategy, build one where you will be missed if you were gone. It's a great legacy.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjig6emiSygRQQdDpZZ4g1g9DALIaDa2K8dcemxhbCHDXAb9vtjzG_bIBr9Ku0kFWjl_moXzzQ-oTyI3fM3kZbYVNicmLlYErTqIC14MfDepCR5LurFFvloQxA3X2GEIfLbdHalbfXdMHeiEQDubHxuLH9BoWWZGRfzBnXe0daLsdKD3OcqmI2GTeK/s1218/Tombstones%202013%20w%20grass-1.png" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1218" data-original-width="1000" height="703" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjig6emiSygRQQdDpZZ4g1g9DALIaDa2K8dcemxhbCHDXAb9vtjzG_bIBr9Ku0kFWjl_moXzzQ-oTyI3fM3kZbYVNicmLlYErTqIC14MfDepCR5LurFFvloQxA3X2GEIfLbdHalbfXdMHeiEQDubHxuLH9BoWWZGRfzBnXe0daLsdKD3OcqmI2GTeK/w578-h703/Tombstones%202013%20w%20grass-1.png" width="578" /></a></div><br /><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2_jTEKX_Eyz0ns-S6UIXXP25jRem-PwBwK4kVgokojTym1tsRHisWIcGE6Oiy0hEN0i_n-Win_Cs_MR0EXDjAHwiYPBKy08L_3jrs31OdnhGLPAy4I87PRKoOL0UtK3uLZV8Gcm4MOXDnY7JpdWgyey_-GdjCFIM5XKg36ea3T-M7a5sNZ1Gfruls/s1224/Tombstones%202013%20w%20grass-2.png" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1224" data-original-width="986" height="716" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2_jTEKX_Eyz0ns-S6UIXXP25jRem-PwBwK4kVgokojTym1tsRHisWIcGE6Oiy0hEN0i_n-Win_Cs_MR0EXDjAHwiYPBKy08L_3jrs31OdnhGLPAy4I87PRKoOL0UtK3uLZV8Gcm4MOXDnY7JpdWgyey_-GdjCFIM5XKg36ea3T-M7a5sNZ1Gfruls/w577-h716/Tombstones%202013%20w%20grass-2.png" width="577" /></a></div><br /><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-29935736176417083642023-06-02T16:16:00.000-04:002023-06-02T16:16:11.563-04:00Predicting the Next Banking Crisis Is a Fool’s Game. Not Learning From the Last One: Equally Foolish<p> <i><b>//Jeff Marsico remarks to the 2023 New Jersey Bankers' Association Annual Convention: May 19, 2023//</b></i></p><p><br /></p><p style="text-align: justify;">Four decades ago, the prolonged savings-and-loan crisis devastated the industry. Between 1980 and 1995, more than 2,900 banks and thrifts with collective assets of more than $2.2 trillion failed. More recently and by comparison, the mortgage meltdown and subsequent global financial crisis took down more than 500 banks between 2007 and 2014, with total assets of nearly $959 billion.</p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4s5bMFwEE1BsKj1I_5I1WoRidxb6MtnE8Grx8RP6_OR9nTOSPgpIS5_XSJp4XFfGwvN0UoZ4WTFlIBYlfDs0g-Pwjg3INHdOpbm4oNfspql39KlKHyWwUAL3TYdxLMwTyd5HYju2erv27xsWCdTCQFc5XBj4IdahDefOcTAsRk_0mGhHqSfVIJHpK/s1280/crisis-ge1a8d6f4c_1280.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="959" data-original-width="1280" height="163" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4s5bMFwEE1BsKj1I_5I1WoRidxb6MtnE8Grx8RP6_OR9nTOSPgpIS5_XSJp4XFfGwvN0UoZ4WTFlIBYlfDs0g-Pwjg3INHdOpbm4oNfspql39KlKHyWwUAL3TYdxLMwTyd5HYju2erv27xsWCdTCQFc5XBj4IdahDefOcTAsRk_0mGhHqSfVIJHpK/w217-h163/crisis-ge1a8d6f4c_1280.jpg" width="217" /></a></div>Outside of those two crisis periods, American banking failures have generally been uncommon, at least since the end of the Great Depression. Between 1941 and 1979, an average of 5.3 banks failed a year. There was an average of 4.3 bank failures per year between 1996 and 2006, and 3.6 between 2015 and 2022. Before SVB, Signature, and First Republic, in fact, it had been over two years since the last bank failure.<p></p><p style="text-align: justify;">Because our industry has been fairly stable except for a few extraordinary periods, doesn’t mean we can’t learn from tough times as both crises had long germination times and were predicated on factors that were both known and observable. </p><p style="text-align: justify;">The recession of 1990 was caused, in part, to the decade-long S&L crisis. The crisis stemmed from a variety of factors, but none contributed to the meltdown more than inflation and the attendant interest rate increase. The early 1980s was a difficult time for the United States, as consumers faced rising prices, high unemployment, and the effects of a supply shock—an oil embargo—which caused energy prices to skyrocket. The result was stagflation, a toxic environment of rising prices and declining growth, sinking the economy into recession.</p><p style="text-align: justify;">To fight inflation, the Fed raised rates aggressively (familiar?). And S&L’s had long-term, lower yielding mortgages funded by shorter term deposits. The old borrow short, lend long strategy. Struggling to raise asset yields, S&L’s turned to commercial real estate, junk bonds, even art to combat rising deposit costs. </p><p style="text-align: justify;">I want to read to you the FDIC’s conclusion from their An Examination of the Banking Crisis of the 1980’s and Early 1990’s. This will be fun.</p><p style="text-align: justify;"><br /></p><p style="text-align: center;"><i>“The regulatory lessons of the S&L disaster are many. First and foremost is the need for strong and effective supervision of insured depository institutions, particularly if they are given new or expanded powers or are experiencing rapid growth. Second, this can be accomplished only if the industry does not have too much influence over its regulators and if the regulators have the ability to hire, train, and retain qualified staff. In this regard, the bank regulatory agencies need to remain politically independent. Third, the regulators need adequate financial resources. Although the Federal Home Loan Bank System was too close to the industry it regulated during the early years of the crisis and its policies greatly contributed to the problem, the Bank Board had been given far too few resources to supervise effectively an industry that was allowed vast new powers. Fourth, the S&L crisis highlights the importance of promptly closing insolvent, insured financial institutions in order to minimize potential losses to the deposit insurance fund and to ensure a more efficient financial marketplace. Finally, resolution of failing financial institutions requires that the deposit insurance fund be strongly capitalized with real reserves, not just federal guarantee.”</i></p><p style="text-align: center;"><br /></p><p style="text-align: justify;">My lesson learned to the regulators, read your past lessons learned. To you, <b>manage your interest rate risk</b>. Before becoming desperate and trading interest rate risk for credit risk. This crisis hatched the more sophisticated ALCO tools we have today. Currently, not many (if any) financial institutions have experienced negative spread as they did in the early 80’s. Yet.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">The dot-com bubble recession began in March 2001 and lasted only 8 months. High-tech employment fell from 12.1 percent of all jobs in 2001 to 11.3 percent in 2004, a decline of 1.1 million jobs, as the high-tech sector was harder hit by the bursting of the bubble and its aftermath than other sectors of the economy. By comparison, non-high-tech industries lost 689,000 jobs between 2001 and 2002 but recovered the lost jobs by 2004.</p><p style="text-align: justify;">What caused a dot-com bubble? In the late 90s, low interest rates made speculative equity investments more attractive than bonds, and at the same time, innovative internet companies grew in popularity among retail investors, professional traders, venture capitalists, and the like (familiar?). When the Taxpayer Relief Act of 1997 passed, the top capital gains tax rate was lowered, providing yet another incentive for equity speculators to pour money into the fledgling internet industry. The Y2K scare also had companies pouring money into tech firms.</p><p style="text-align: justify;">Between 1995 and its peak in March 2000, the Nasdaq Composite stock market index rose 800%, only to fall 740% from its peak by October 2002, giving up all its gains during the bubble. Lesson learned, <b>meteoric rises are often accompanied by gravitational falls</b>. And it is so difficult to be the odd-one out at the cocktail party full of those that participated in the ascent… during the ascent. Taking your own punch bowl away when the party is getting good takes fortitude.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">The Great Recession, in contrast to the relatively short dot-com bubble recession, officially lasted from December 2007 to June 2009, the longest recession since the Great Depression. What caused it? Economists cite as the main culprit the collapse of the subprime mortgage market — defaults on high-risk housing loans — which led to a credit crunch in the global banking system and a precipitous drop in bank lending. Who would’ve thought lending $1 million to a San Francisco cab driver to buy a house at 100% loan to value would go bad?</p><p style="text-align: justify;">And quite frankly, I did not know there were so many tranches to mortgage-backed securities. Although community banks did not lend to sub-prime borrowers in any meaningful way, did we participate? In many respects, community banks were caught in the cross-fire through the purchase of those mbs instruments – and subsequent trial through public sentiment. We took a serious reputational hit. </p><p style="text-align: justify;">According to the FDIC, the causes of the 2008-09 financial crisis lay partly in the housing boom and bust of the mid-2000s; partly in the degree to which the U.S. and global financial systems had become highly concentrated, interconnected, and opaque; and partly in the innovative products and mechanisms that combined to link homebuyers in the United States with financial firms and investors across the world. Capiche? (credit default swaps anyone?).</p><p style="text-align: justify;">In 1991 FDICIA was passed into law. It had a provision that prohibited assistance to failing banks if FDIC funds would be used to protect uninsured depositors and other creditors (hmm, think about that in light of recent events)—but the act also contained a provision allowing an exception to the prohibition when the failure of an institution would pose a systemic risk.</p><p style="text-align: justify;">In 2008, by relying on the provision that allowed a systemic risk exception, the FDIC took two actions that maintained financial institutions’ access to funding: the FDIC guaranteed bank debt and, for certain types of transaction accounts, provided an unlimited deposit insurance guarantee. In addition, the FDIC and the other federal regulators used the systemic risk exception to extend extraordinary support to some of the largest financial institutions in the country in order to prevent their disorderly failure, setting precedent for what we now know as Too Big to Fail (TBTF), or Systemically Important Financial Institutions (SIFI).</p><p style="text-align: justify;">Although community banks did not play a significant role in subprime lending, the runup and subsequent decline in real estate values had a profound impact on their safety and soundness. Most of the more than 500 financial institutions that failed were community banks. When your construction loan is greater than what a builder can reasonably recover, when your home or commercial mortgage is larger than its value, you’re going to have bad loans. We knew there was tremendous hubris in the subprime market. We thought since we were only tangential players, we were insulated. What we found out is the interconnectedness of real estate values and the contagion that it can cause. </p><p style="text-align: justify;">Remember K Bank in Maryland? In 2006, the then $686 million in asset bank made $8.8 million, or 1.38% on assets and 16.38% on equity. They were killing it in construction and development loans. At industry events they had that wry grin saying, “yeah, we perform better than you.” After losses of $24 and $23 million, respectively in 2008 and 09, the regulators in 2010 said enough is enough. M&T assumed their $411 million of loans and securities with a $289 million FDIC loss-share agreement. Let those numbers sink in a bit. It didn’t take long for the profit GOAT to become, well, an actual pig. Lesson learned, <b>beware of how a runup in asset prices might impact your assets and diversify accordingly</b>. </p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">After the Great Recession, we had over 10 years of economic expansion, albeit anemic economic expansion. Economists were rubbing their crystal balls trying to accurately predict when the next recession would begin so that they could seal their celebrity on CNBC. But it never came. Instead, Covid came.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">So many extraordinary things happened during Covid that I’m not certain if they will ever repeat themselves in our lifetimes. Most lessons were for bureaucrats. I think we have enough experience to know bureaucrats don’t learn well. They learn short, forget long. </p><p style="text-align: justify;">A substantial yet brief recession ensued. Followed by extraordinary government support that came in multiple trillion dollar plus fiscal stimulus packages so competing administrations could outdo one another on government assistance funded by ridiculous sums of debt, largely purchased by the Fed. Money supply expanded wildly. This amount of stimulus shielded our loan books from experiencing any material losses. </p><p style="text-align: justify;">And what happens when the government prints money? Inflation. I think I learned that in economics 101 or reading anything written by Milton Friedman. Perhaps bureaucrats would benefit from a brief stroll through an econ book. Not written by Paul Krugman.</p><p style="text-align: justify;">Recall that the S&L crisis was caused, in part, by inflation and the subsequent rapid rise in interest rates orchestrated by the Fed. Well, this time, the Fed raised rates faster because they misdiagnosed inflation as transient. Or, the cynic might read it as, our Chairman is up for renomination and we won’t raise rates until he owns the gavel. </p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">The Fed Funds rate was zero in December 2021. It didn’t take a rocket scientist to predict rates would go up. And we positioned our balance sheets accordingly. And in December 2021 our liquidity positions were so strong we didn’t know what to do with the money. Good times.</p><p style="text-align: justify;">Some of us took our liquidity and bought longer-term bonds – at historically high prices - to try and increase yield. Most banks consider their securities portfolio as first and foremost for liquidity. When you elevate yield over liquidity, bad things can happen. Don’t get me wrong, giving up yield for liquidity could also be bad. But there are different degrees of bad. But, no worries, right, AOCI was excluded in regulatory capital ratio calculations, and we could hide some of that interest rate risk in HTM securities. </p><p style="text-align: justify;">Then we realized we needed a special exemption from our FHLB’s regulator to borrow money from our FHLB if our GAAP equity or tangible equity was below zero. I remember being at a Bank CEO Network event in Denver when CEO’s learned of this knowledge nugget. Some seemed panicked. </p><p style="text-align: justify;">But we still had plenty of liquidity, right? Rates were rising fast, but we weren’t raising our deposit rates accordingly. Our deposit betas were phenomenally low. We thought our customers would stay with our bank, no matter what. We bragged about it in our earnings releases.</p><p style="text-align: justify;">Then depositors woke up. First municipalities and larger commercial customers, and more sophisticated retail depositors. Even I started to wake up. I don’t get angry at my bank that often, but when I found out I was earning .01 percent on my money market account when the Fed Funds rate rose to five, I was angry. My bank was taking advantage of me because I didn’t babysit my money. They will not be my bank for long. I – like many – will use technology to move my money but keep my account open – costing the bank money. </p><p style="text-align: justify;">But what of SVB, Signature, and First Republic? Three different banks and business models. All were enviable in some sort of way. All suffered extraordinary runs on their bank due to large unrealized losses on both HTM and AFS securities, peculiarities in the p/e world, uninsured deposits, crypto, and old school panic via new school technologies and social media. </p><p style="text-align: justify;">For community banks, it’s not as much about the uninsured deposits or even the AOCI. We were concerned about the panic. The extraordinary measures taken by our government and us in employee and depositor communications, makes panic less likely.</p><p style="text-align: justify;">Our pressure on deposits was because we let the difference between what we paid depositors and what they could earn in alternatives become too large. And we should’ve been able to predict this – but we did not want to be honest and thought our customers were all ours. At the end of tightening cycles, deposit betas have risen like hockey sticks. And given the transparency of deposit pricing and the ease of moving money from our bank to alternatives, why did we think it would be different?</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Our lesson learned in this most recent crisis, in my opinion: <b>don’t let market rates get too far ahead of what you pay depositors</b>, unless you think it’s worth those two or three quarters of superior cost of funds to aggravate your depositors and force them to seek alternatives and lose trust in you. <b>Be extremely cautious elevating yield over liquidity in your securities portfolio</b>… I would’ve liked to have been a fly on the wall at SVB when they decided to deploy their extraordinary liquidity position in long-term (and relatively low yielding) bonds without hedge. <b>Revise our contingency funding plans to ensure that the liquidity will be available if 400 of our banking friends are waiting in line at the same time and at the same window</b>. And <b>ensure our business continuity plans or crisis management plans includes a communication plan to employees and customers to restore confidence in our bank</b> even when confidence in banking has been shaken.</p><p style="text-align: justify;">So, to summarize my lessons learned from every crisis in the last 35 years:</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">-<span style="white-space: pre;"> </span>Manage your interest rate risk;</p><p style="text-align: justify;">-<span style="white-space: pre;"> </span>Meteoric rises are often accompanied by gravitational falls. Recognize the rise;</p><p style="text-align: justify;">-<span style="white-space: pre;"> </span>Beware of how a runup in asset prices might impact your assets and diversify accordingly;</p><p style="text-align: justify;">-<span style="white-space: pre;"> </span>Don’t let market rates get too far ahead of what you pay depositors;</p><p style="text-align: justify;">-<span style="white-space: pre;"> </span>Be extremely cautious elevating yield over liquidity in your securities portfolio;</p><p style="text-align: justify;">-<span style="white-space: pre;"> </span>Revise our contingency funding plans to ensure that the liquidity will be available if there is a run on your liquidity resources; </p><p style="text-align: justify;">-<span style="white-space: pre;"> </span>Ensure our business continuity plans or crisis management plans includes a communication plan to employees and customers to restore confidence in our bank.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">So what of the next crisis? Will it be non-residential real estate? We’ve had pretty frothy real estate runups – in terms of rental rates and insurance expenses despite increasing vacancy rates. Will it be commercial office space as the pandemic chased workers out of office buildings only to have them slowly return, if they return at all? Will it be retail commercial real estate, as the pandemic accelerated our preference for online shopping making zombie mall owners desperately looking for alternatives? Spread of the Ukraine war? </p><p style="text-align: justify;">So many questions that we at The Kafafian Group toyed with the idea of having a fun conference to debate emerging risks to banking called “Predictapalooza” where we would have industry pro’s stand up and make some “what if’s” to help us shape our risk management practices. Outside the box what if’s, such as what are the chances and how should we prepare for, I don’t know, a worldwide pandemic?</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">I don’t know what the next crisis will be. And I’m skeptical about those that say they know.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">What I do know is that almost everyone in this room has been through every crisis I discussed. They were all different. They all forced us to learn from them and make adjustments on how we managed our balance sheet and our banks. And they’ve all made us better bankers and more capable to handle what “crisis” comes next.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">We learn and we move on. It’s all we can do.</p><p style="text-align: justify;"><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-73816440239160871022023-05-24T09:07:00.000-04:002023-05-25T20:37:01.690-04:00Memorial Day: Remember Sergeant (USMC) Rafael Peralta<p style="text-align: justify;">Rafael Peralta was born April 7, 1979 in Mexico City. He graduated from San Diego's Morse High School in 1997. But he had to wait to receive his green card before he could enlist. In 2000, he received it, and on that very day he enlisted in the U.S. Marine Corps as a rifleman. He would later become a U.S. citizen while serving. </p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_qGIj96XvxIt9hXD4f7o6aYe45dnIPaiM0APgNhex2-P1gkgtZ1IxAdayOE6xwHCt7Q-TVPTVKzRxtUKXmS3maAzVDyxmNgAz-00YC3TIZEUqjqKT5MFcDeTwPdsOOgM9iXU-zwFMI8xSu22lRp_hVmyajW3SrKKYA9Y0WzVT-Tl60CWaNAuAlFQg/s455/peralta.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="455" data-original-width="300" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_qGIj96XvxIt9hXD4f7o6aYe45dnIPaiM0APgNhex2-P1gkgtZ1IxAdayOE6xwHCt7Q-TVPTVKzRxtUKXmS3maAzVDyxmNgAz-00YC3TIZEUqjqKT5MFcDeTwPdsOOgM9iXU-zwFMI8xSu22lRp_hVmyajW3SrKKYA9Y0WzVT-Tl60CWaNAuAlFQg/s320/peralta.jpg" width="211" /></a></div>In 2001, Peralta was deployed overseas when his father died in a workplace accident. He returned home to San Diego where he was stationed at Camp Pendleton while he took care of family affairs. In 2003, he transferred to Marine Corp Base Hawaii at Kaneohe Bay, and reenlisted. He was assigned to 1st Battalion, 3rd Marine Regiment, 3rd Marine Division. In 2004, he along with his other battalion mates, were deployed to Iraq in support of Operation Iraqi Freedom. He was a scout leader.<p></p><p style="text-align: justify;">On November 15, 2004, Peralta and his squad were heavily engaged in Operation al Fajr, commonly known as the second Battle of Fallujah. They successfully cleared six houses that morning. At the seventh house, the point man in the squad opened the door to a back room and immediately came under close-range automatic weapons fire from multiple insurgents. It was an ambush.</p><p style="text-align: justify;">While attempting to get out of the line of fire, Peralta was severely wounded. As the insurgents fled the building, one threw a grenade that came to rest near Peralta's head. Without hesitation, he pulled the grenade to his body to absorb the brunt of the blast saving the lives of the Marines that were only a few feet away. Peralta succumbed to his wounds.</p><p style="text-align: justify;">He pulled the live grenade to his body to absorb the blast which he knew would kill him and save his fellow Marines. </p><p style="text-align: justify;">Let's pause for a moment.</p><p style="text-align: justify;">For his actions, Sgt Peralta was posthumously awarded the Navy Cross and Purple Heart. He is buried at Fort Rosecrans National Cemetary in San Diego. In 2007, the command post for the 31st Marine Expeditionary Unit at Camp Hansen in Okinawa named "Peralta Hall" in his honor. </p><p style="text-align: justify;">To further honor the heroism of Sgt Peralta, the U.S. Navy, in 2017, commissioned an Arleigh Burke destroyer the U.S.S. Rafael Peralta (DDG-115). On the ship's website, in welcoming new sailors to the Peralta, the ship's captain states: "Our ship emblazons proudly the name of an American hero, a Marine who sacrificed his own life so others might live. Our motto, 'Fortis Ad Finem', which translates to 'Courageous to the End', is a testament of his dedication to his country and his fellow Marines. Every Sailor in Rafael Peralta must strive to earn the right to represent such fortitude and devotion."</p><p style="text-align: justify;">As you enjoy the long Memorial Day weekend, I ask that you remember Sgt Peralta, and all of the more than 4,300 Americans that gave their last full measure of devotion during the Second Iraqi Conflict.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"><br /></p><p><br /></p><p>Sources: <a href="https://www.history.navy.mil/browse-by-topic/people/namesakes/rafael-peralta.html">Sergeant Rafael Peralta (navy.mil)</a></p><p><a href="https://www.surfpac.navy.mil/Ships/USS-Rafael-Peralta-DDG-115/Welcome/">Welcome (navy.mil)</a></p><p><a href="https://www.britannica.com/event/Iraq-War/The-surge">Iraq War - The surge and the end of the war | Britannica</a></p><p><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-52667033498163424512023-05-21T16:12:00.000-04:002023-05-21T16:12:41.790-04:00Bankers: Please End This Practice. Or It Will End You.<p style="text-align: justify;">I recently spoke at a banking conference where I challenged bankers to end the practice of relying on sleepy depositors that don't demand top rate. You know, the practice of allowing bankers to raise deposit rates only if the customer calls and complains.</p><p style="text-align: justify;">When I challenged bankers that they can't claim to be trusted advisors to their customers if they engage in this practice, I got push back. Push back because most bankers in the room likely practiced it. I heard, "what would you like us to do?" or "where were you with this advice in 2017 or 2018?"</p><p style="text-align: justify;">To the second question, my response was "it's in my book." And it is. Chapter 10: The Hot Rate Stalemate, where I wrote "paying 1/3 the market rate on a customer's savings, and then bragging about it in your investor presentations, can't be a way to strengthen relationships and increase the amount of business you do with them." </p><p style="text-align: justify;">But that book, <a href="https://www.amazon.com/Squared-Away-Bankers-Economic-Responders/dp/0982693826/ref=tmm_pap_swatch_0?_encoding=UTF8&qid=1684696830&sr=8-1" target="_blank">Squared Away: How Can Bankers Succeed as Economic First Responders</a> was written in 2021. And it was hardly a best seller. Actually, it did rise to #1 in Banks and Banking on Amazon for one week. Aside from that, not many people have it on their bookshelf. Aside from my family. Well, at least they say they'll read it... someday.</p><p style="text-align: justify;">However, the reference in the book was to a blog post written in 2018, titled <a href="https://www.jeff4banks.com/2018/05/hot-rates-swipe-left.html" target="_blank">Hot Rates, Swipe Left</a>. Also in 2018, in a blog post titled <a href="https://www.jeff4banks.com/2018/03/a-time-of-reckoning-for-your-banks-core.html" target="_blank">A Time of Reckoning for Your Bank's Core Deposits</a>, I wrote "a business model based on the sleepiness of your depositors is unsustainable." I encourage you to read both posts if wondering question number two, what would you like us to do?</p><p style="text-align: justify;">What this tells me is not that I haven't been in front of this issue, but that nobody reads what I write or hears me when I speak. Or that the practice is so ingrained in bankers that we need to pass the generational torch to put a silver stake in it.</p><p style="text-align: justify;">If you continue to read this article, you must be interested in breaking from the time-honored tradition of screwing your customers that don't pay attention to the rate you are paying them. Maybe "screwing your customers" is harsh. But what would you call paying depositors significantly below the market because they are not paying attention to what you are doing? Sometimes, the truth hurts. But doesn't make it an untruth.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">What To Do</h4><p style="text-align: justify;">But there are practical considerations. Say you have $500 million in a money market product. Let's call it product 360, as representative for a product code on your core system. If you abandon the practice of making rate adjustments only for those that realize you are paying them materially under market rates and call you to complain, you would reprice $500 million in deposits! Disaster, right?</p><p style="text-align: justify;">Let's take my bank, who I would normally leave anonymous but since I'm only attributing fact, I'll talk frankly. Truist was paying me .01% on my money market. When I finally woke up and realized it, Fed Funds was five percent. When I called, they said they would raise it to 3.5%. When I told the branch banker that I didn't appreciate being taken advantage of because I wasn't babysitting my money she said, "sorry." Good thing they inserted the "i" in their name as a hedge.</p><p style="text-align: justify;">But if a bank increased product 360 by 349 basis points to $500 million in balances, this would add $17.5 million of annual interest expense. Even if this hypothetical bank could increase their new production loan yields by 349 basis points, it would not keep up with the $17.5 million because yield on loans would increase slowly. </p><p style="text-align: justify;">That money market account was only one of many deposit accounts I have at the bank. The others, including my checking account, I was not too price sensitive. One was for storing money for future home renovations, another saving for a future automobile, a third was a wash account for business traveling expenses. </p><p style="text-align: justify;">If when opening accounts, the bank learned the purpose of the account, and classified accordingly, they would be able to hold steady on pricing, at least not increase rates to market for those accounts I considered "store of value" accounts. These accounts are meant for accessibility, safety, and frictionless transaction processing. Maybe their product codes would be 320 and 330. So as rates rise, pricing committees know they don't have to keep pace with the market. Maybe their names would be Fort Knox Savings, where your deposits are insured up to the FDIC limit and beyond because of reciprocal deposit features, and is easily accessible via mobile, online, and your local branch.</p><p style="text-align: justify;">But for those I want to keep pace with the market, you would reprice without having me check the rate you are paying me, recognizing it is below market, and having me call to complain. I'm not saying you have to keep pace with the market. I do get FDIC insurance, and the benefit of the branch and possibly a person to call on the phone. That's worth something.</p><p style="text-align: justify;">Your brand should also be worth something. So often in strategy sessions I hear that a bank's brand is a strength. And sometimes this assertion is because of third party customer and non-customer surveys. But most times it's a feeling. It should be more than that. I wrote about this in 2019 in a post titled, <a href="https://www.jeff4banks.com/2019/04/bank-brand-value-calculated.html" target="_blank">Bank Brand Value: Calculated!</a></p><p style="text-align: justify;">For this tightening cycle, it is probably too late to change your deposit pricing strategy. The fault in the strategy can be easily diagnosed by the hockey stick increase in your cost of funds. In recent remarks to a group of bankers, I said "our lesson learned in this most recent crisis, in my opinion: don't let market rates get too far ahead of what you pay depositors, unless you think it's worth those two or three quarters of superior cost of funds to aggravate your depositors and force them to seek alternatives and lose trust in you."</p><p style="text-align: justify;">But the solution requires you to segregate depositors interested in "store of value" or "accumulation" accounts. Something we have some work to do in order to successfully execute on.</p><p style="text-align: justify;">What is your deposit strategy?</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-35412966202705355552023-04-27T12:44:00.002-04:002023-04-28T12:42:14.281-04:00Bankers: What Problem Are You Trying to Solve?<p style="text-align: justify;">Finovate Spring 2023 is coming up in late May and the social medial buildup is palpable. Industry pundits in the know about everything financial technology and financial technology firms will soon be clinking martini glasses saluting each other and telling stories about their profitability and number of bank installs they have under their belt. </p><p style="text-align: justify;">I was actually joking about the last two things.</p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXIItTpM_F0MmlIn9aroLW2q13xlAbGPLqeN8ghPatOpV92EBPVI1OMOEwsN-v9xu4BFYpXFLb97J-l07Y1wjIFnQb9DR5CRxl3HTf-mN-a1V_7BeEp8DChUYk0kAvk0NxWNNKvUyWSZ2Ga7QJg7VYTGKsy0VZCJyVUwXAwtlleLXZ8UcQ7OxsDS8m/s321/finovate.png" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="86" data-original-width="321" height="86" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXIItTpM_F0MmlIn9aroLW2q13xlAbGPLqeN8ghPatOpV92EBPVI1OMOEwsN-v9xu4BFYpXFLb97J-l07Y1wjIFnQb9DR5CRxl3HTf-mN-a1V_7BeEp8DChUYk0kAvk0NxWNNKvUyWSZ2Ga7QJg7VYTGKsy0VZCJyVUwXAwtlleLXZ8UcQ7OxsDS8m/s320/finovate.png" width="320" /></a></div>I will occasionally look at <a href="https://finovate.com/best-of-show-award-winners-since-2007/" target="_blank">past Finovate "Best of Show" winners</a>. It is a veritable "who" of financial technology firms. Not a typo. I never heard of most of them and know of no bank that implemented most of the winning solutions.<p></p><p style="text-align: justify;">Truth be told, though, Finovate is a good forum to learn about what is out there, and what firms rise to the top as Best of Show because of the niftiness of their solution. There are enough financial technology solutions that fall under the "nifty" category to make a banker's head spin. So who do you follow up with once you decamp from Finovate Spring?</p><h4 style="text-align: justify;">"What Problem Are You Trying to Solve?"</h4><p style="text-align: justify;">Forget about solutions or the universe of what is out there. Prior to fintech becoming a buzzword, bankers have been solving problems. Problems regarding regulation, risk, operations, and customer needs. Fintech is not something new, as I frequently cite when telling people I produced microfiche in the basement of my first bank. In 1985.</p><p style="text-align: justify;">One of the speakers at Finovate Spring is <a href="https://www.icba.org/about/our-team/biographies/charles-e-potts" target="_blank">Charles Potts</a>, Chief Innovation Officer at ICBA. I recently teamed up with Charles at a New York bank's strategic planning retreat. During his presentation, he was asked a question about the sheer number of solutions out there. His answer: "what problem are you trying to solve?"</p><p style="text-align: justify;">Sometimes when I hear financial technology promoters, it seems like this question escapes them. As if having a cool solution out there is enough for a banker to give it a look. Do fintechers stock the checkout aisle of the supermarket? Skip the Skittles. Bankers have better things to do. </p><p style="text-align: justify;">I am obviously cautioning bankers against this vendor centric approach. Just because it's cool, out there, and a fintecher is telling you that you are a dinosaur if you don't get innovating doesn't make it a good strategy for your bank.</p><p style="text-align: justify;">How would a customer centric, or, gasp, a strategy centric approach work?</p><p style="text-align: justify;">Strategy. Yes, let's start with strategy. We often hear lofty aspirational goals in vision statements that sit atop a bank's strategy. One such goal goes something like this: "We improve the financial well-being of our customers."</p><p style="text-align: justify;">When asking the banker how, the lofty vision starts to crumble and you get some anecdote about when they sent a banker to the local high school to teach kids to balance check books. </p><p style="text-align: justify;">The Problem: How to improve the financial well being of our customers? Now we have a problem in search of a solution. And perhaps this banker might recall <a href="https://finovate.com/videos/finovatefall-2021-array/">Array</a>, a Finovate Fall 2021 Best of Show winner that helps people improve their credit scores, protect their identity, and inform the financial institution about making the right offers to customers to improve their financial well-being. In this regard, the financial institution can measure how they are doing in improving the financial well-being of their customers by how much they improved their customers' credit scores.</p><p style="text-align: justify;">Many bankers have a similar vision for their bank. When I ask if they have a personal financial management solution with their online banking tool, many say yes. Ok, is it standard to set up customers when they open accounts, or are your branch people calling existing customers and making appointments for them to set it up, either virtually or in-branch?</p><p style="text-align: justify;">Well, no. And by the way, our branch people don't even know we offer it and if they did they certainly wouldn't know how to set customers up on it. They don't use it themselves.</p><p style="text-align: justify;">Wouldn't it be nice if you made it standard practice to do so, and measure the trend in average net worth of all customers that use it? So you can say, ya know, "We improve the financial well-being of our customers."</p><p style="text-align: justify;">That is how you take a problem (tracking the financial well-being of our customers) and search for a solution. Instead of finding a cool solution at Finovate and looking for a problem for it to solve.</p><p style="text-align: justify;"><br /></p><p>~ Jeff</p><p><br /></p><p style="text-align: justify;">By the way the highlight of that bank strategy retreat in which Charles and I spoke was Brooklyn Brewery afterwards!</p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaLvfGPVm_sZcN2-K8K2dENUs2m66koRo1_d1QkW6YqUT_ODwbDs_DNN0mCjI7aPHj3bd7KlXPnRcdYizxdIUb6bqb1jB72cbMEpeNLGsyMaV-5hNnSc_vlifUiYNKRlsaSf9GgZaT0eUji42YM7DKg0XpYYquyCAtJ6S8ghGjYAjeH7D2fxRcy7_F/s2048/jeff-charles.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1536" data-original-width="2048" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaLvfGPVm_sZcN2-K8K2dENUs2m66koRo1_d1QkW6YqUT_ODwbDs_DNN0mCjI7aPHj3bd7KlXPnRcdYizxdIUb6bqb1jB72cbMEpeNLGsyMaV-5hNnSc_vlifUiYNKRlsaSf9GgZaT0eUji42YM7DKg0XpYYquyCAtJ6S8ghGjYAjeH7D2fxRcy7_F/s320/jeff-charles.jpg" width="320" /></a></div><br /><p><br /></p><p><br /></p><p><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-38464163690183161652023-03-27T16:51:00.005-04:002023-03-28T07:37:31.003-04:00Calculating a Bank's Uninsured Deposits<p>The critical fact contributing to the Silicon Valley Bank and Signature Bank's demise was the level of uninsured deposits at each institution, estimated to be at 94% and 90% respectively. Many community bankers received concerned calls after the bloody weekend of March 10th through 12th from depositors that had deposits that exceeded the FDIC insured limits.</p><p>Most financial institutions, particularly community financial institutions, have jumbo deposits, as deposits over $250,000 are known, nowhere near SVB and Signature. </p><p>But how much do they have? I recorded this tutorial so you can calculate on your own using publicly available data.</p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><iframe allowfullscreen="" class="BLOG_video_class" height="405" src="https://www.youtube.com/embed/CSNetCgAAnY" width="487" youtube-src-id="CSNetCgAAnY"></iframe></div><br /><p>Apologies for using "unsecured" so often in the video when I meant uninsured.</p><p><br /></p><p>Youtube link if you have difficulty viewing here: https://youtu.be/CSNetCgAAnY</p><p><br /></p><p><br /></p><p><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-57676959589291071162023-03-05T11:14:00.000-05:002023-03-05T11:14:14.038-05:00Philadelphia Union's Jim Curtin is Wrong About Ted Lasso<p style="text-align: justify;">Ted Lasso is a fictious coach for a fictitious 2nd division English football (soccer) league. So why was the reigning U.S. soccer league (Major League Soccer-MLS) coach of the year dissing on him?</p><p style="text-align: justify;">Jim Curtin is a candidate for the U.S. men's national soccer team (USMNT). And he was asked about Lasso in an interview. The context was that U.S. coaches are challenged to land coaching jobs in the most competitive leagues in the world. Jesse Marsch, probably the American (from Wisconsin) that has succeeded most, just got sacked by Leeds United of the topflight English Premier League (EPL). Does the fictitious Ted Lasso promote the stereotype that U.S. coaches are somehow inferior to British, German, or French coaches?</p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEoVhtkKYeZIt10Y49vj_rsYAaIhB4s5wbOd69O6dzFnFDsNFojaR0DQW7slwB90hvPKVfBlgix2drHbWT8BkBFTj3v83gSbx3DTpi3ozlkQ7zcEGb31eTpIROQuyzh4e3_E724Otdk5J5jP_gpffAdD-hPfWSoUiKrVvTSKrw-eODNoUHEy6OTK7r/s1125/Lasso-Curtin.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1125" data-original-width="1125" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEoVhtkKYeZIt10Y49vj_rsYAaIhB4s5wbOd69O6dzFnFDsNFojaR0DQW7slwB90hvPKVfBlgix2drHbWT8BkBFTj3v83gSbx3DTpi3ozlkQ7zcEGb31eTpIROQuyzh4e3_E724Otdk5J5jP_gpffAdD-hPfWSoUiKrVvTSKrw-eODNoUHEy6OTK7r/s320/Lasso-Curtin.jpg" width="320" /></a></div>In my opinion, this is a fundamental misunderstanding of the show and fictitious coach, played by Jason Sudeikis. It is not making fun of American coaches, or Ted Lasso. Just the opposite. It is making fun of soccer elitism and the world's resistance to the U.S. elevating its game, standing, players and coaches in a world dominated by other countries. In soccer, the world does not want us to succeed. It's their sport. <p></p><p style="text-align: justify;">For background, Lasso was recruited by AFC Richmond (fictitious club) by an owner that was going through a divorce and the wife hired Ted to tank the team because she despised her husband so much. Ted was an ex-college football (US football) coach.</p><p style="text-align: justify;">Lasso came from Kansas. And in the show, has a thick accent, 70s moustache, and is armed with an endless supply of homespun anecdotes. He knows little of soccer. In fact, the show is based on a <a href="https://youtu.be/6KeG_i8CWE8" target="_blank">commercial </a>done by Sudeikis years ago to promote EPL games in the United States. In that commercial, Lasso knew very little about soccer, embraced a disparaging nickname, and played the fool. Watch the video to get the picture if you're not familiar with it.</p><p style="text-align: justify;">That is the premise of the show. And if that is as far as you got, you understand Curtin's comments.</p><p style="text-align: justify;">But there's more. Much more. I'm not here to tell you that Lasso's coaching style is correct compared to other coaching styles. But I am here to tell you that a primary job of a coach is to maximize the talents of those under their charge. Not only so they play well but also play well as a team.</p><p style="text-align: justify;">Notice I did not say the primary job of a coach is to have extensive tactical experience at the sport they are coaching. In fact, many great coaches rely on the tactical knowledge of assistants. Was Phil Jackson (Chicago Bulls) a great tactician, or did he make superstars play well together?</p><p style="text-align: justify;">Notice I did not say the primary job of a coach is to have a great resume or played the game at the highest levels. Bill Belichick (New England Patriots) played center for the unheralded Wesleyan University. He was captain of the lacrosse team.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">Here are the traits that make Ted Lasso a case study in leadership.</h4><p style="text-align: justify;"><b>Surround yourself with leaders that complement you</b>. Lasso's first assistant coach appointment was his friend and fellow football coach (Beard) because he knew that Beard would tell him the truth, whether he liked it or not. Beard also kept discipline in practice. His next appointment was the equipment manager (Nate) because Lasso realized that Nate had superior tactical knowledge of the game. His final appointment was a newly retired player (Roy Kent) giving the staff the credibility they needed with the players and its fans. </p><p style="text-align: justify;"><b>Have humility</b>. Lasso did not present himself as a soccer expert. That was the reason he surrounded himself with Nate and Kent. In fact, in their final game in season 2, Lasso implemented Nate's formation and announced it as Nate's formation to the team and anyone who asked. That level of honesty and humility actually had Nate suspicious that if the formation foundered, it would be easy to blame Nate. But in watching the show, you understand that would not be the case. Lasso would've shouldered the blame. How many coaches shine the spotlight on their assistants? Humility also allows you to hire people you believe better than you. I have seen bank CEOs make poor hires in key positions because they would feel threatened by strong and smart people around them. If you hire weaklings to make you feel better or more secure about yourself, you are limiting your organization. Lasso did not want to limit his team to support his ego. Because his ego was virtually nonexistent.</p><p style="text-align: justify;"><b>Team members react better to positive reinforcement</b>. If your objective is to elevate individuals to be motivated to pursue a goal then <a href="https://www.psychologytoday.com/us/blog/happiness-in-world/201309/which-kind-feedback-is-best" target="_blank">positive reinforcement is more effective than negative</a>. In spite of old school coaching styles which is a seemingly continuous barrage of negative feedback, this is less effective. Mind you, there is a place for negative feedback that encourages players and the team to make course corrections in pursuit of a goal. And Lasso does deliver negative feedback in a positive manner. At times it seems like a maddingly positive manner. But this is part of his charm and the stereotype the show's writers are trying to promote. To make him look like a simpleton to make soccer elitists feel a little better about themselves. Lasso has no such pretense (see "Have humility"). </p><p style="text-align: justify;"><b>Make personal connections to your team.</b> Each team member has different backgrounds, different needs, and different motivators. Lasso takes the time to get to know each individually and treats each differently according to their needs. Although perhaps Lasso's weakness is he seems to want players to like him, he certainly puts in the time and effort to show he cares about their success and happiness on an individual level. Although we want our teams to function as a cohesive unit, we must recognize that our team is made up of a collection of individuals. Lasso gets it. And his players want to deliver for themselves, their teammates, and him.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Lasso isn't setting U.S. soccer coaches back 20 years. It is using his success in spite of promoting extreme stereotypes to mock the peculiar elitism found in soccer around the world. If AFC Richmond succeeds, as I suspect the show will play out, how will that promote the belief that U.S. coaches aren't ready for prime time? </p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-76418653340871135562023-02-26T11:39:00.003-05:002023-02-28T16:55:52.255-05:00Bank Shareholder Liquidity Matters<p style="text-align: justify;">Annually 1,500 bankers and those that advise them gather in the Arizona desert for Bank Director's <a href="https://www.bankdirector.com/conferences/acquire-or-be-acquired-2024/register/" target="_blank">Acquire or Be Acquired (AOBA) conference</a>. In spite of the conference name, it's not all about bank M&A, or the <a href="https://www.jeff4banks.com/2018/02/for-banks-acquire-or-be-acquired-is.html" target="_blank">Hobson's Choice</a> of hunting or being hunted.</p><p style="text-align: justify;">And I usually try to bring to Jeff4Banks.com readers at least one of the takeaways I gleaned from the conference. In a prior post, I highlighted a sidebar conversation I had with a fellow industry pro on <a href="https://www.jeff4banks.com/2023/02/how-does-chatgpt-describe-economy-and.html">ChatGBT</a>. Here, I want to focus on a session I attended that I think would be valuable to all readers that are private, or trade thinly on exchanges like Pink Sheets.</p><p style="text-align: justify;">This post is a complement to one that I did a year ago titled, <a href="https://www.jeff4banks.com/2022/05/why-bank-shareholder-succession-matters.html" target="_blank">Bank Shareholder Succession Matters</a>. Are our retail shareholders aging? Will they soon want to exit, or pass down their shares to heirs that may or may not be interested in holding a thinly traded bank stock with opaque value? For larger, publicly traded financial institutions, this might not be a strategic challenge because they trade significant amounts of shares per day and over half of their shareholders are institutional, many of whom automatically buy into shares that trade on indices. </p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhaN87UuF3IGw-eHtH4DG4pb7s639GbxNF5CnGdThMsUcJsAfW1tbril4tmeJa1TptR8r96baDY7ma7YK8HmZeV_4oUda4kCMxQ-GC9yIw-oZ0qv945aIRQPK4swMm5qUPBHa-XsVwse9VTMJ9Fr7gsMmhnXzC2Xt80dE6rUVVGn1WqIn2O1RKogl5D/s350/NEW_OTCQX_logo.gif" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="70" data-original-width="350" height="64" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhaN87UuF3IGw-eHtH4DG4pb7s639GbxNF5CnGdThMsUcJsAfW1tbril4tmeJa1TptR8r96baDY7ma7YK8HmZeV_4oUda4kCMxQ-GC9yIw-oZ0qv945aIRQPK4swMm5qUPBHa-XsVwse9VTMJ9Fr7gsMmhnXzC2Xt80dE6rUVVGn1WqIn2O1RKogl5D/s320/NEW_OTCQX_logo.gif" width="320" /></a></div>But for most of you, shareholder liquidity takes intentional effort. And at AOBA, <a href="https://www.linkedin.com/in/laurakhamilton/" target="_blank">Laura Hamilton</a> of OTC Markets Group, Inc., and <a href="https://www.linkedin.com/in/ciaran-mcmullan/" target="_blank">Ciaran McMullan</a>, former CEO of Suncrest Bank CA extolled the benefits of OTC listing, particularly OTCQX market listing in a session titled How to Maximize Your Stock as Currency.<p></p><p style="text-align: justify;">Having Ciaran onstage with Laura as a case study added credibility to the presentation. Suncrest started in 2008 with a $19 million capital raise, and did three small follow-ons of $5, $8, and $7 million to support growth. Ten years after opening Suncrest did another $25 million raise led by p/e firm Castle Creek Capital LLC. During its existence Suncrest acquired three banks, one a smaller deal for $8 million, then another for $20 million and another much larger, at $69 million. All deals included Suncrest stock in the consideration. And to do stock deals, your stock has to be considered valuable by the target.</p><p style="text-align: justify;">Suncrest sold in 2022 to CVB Financial Corp. for $234 million for 162% of tangible book when regional targets were selling for 146% of tangible book. It was a success story, and Ciaran attributed part of the success to having a liquid and visible stock via the OTCQX.</p><p style="text-align: justify;">According to their presentation, the OTCQX Best Market offers transparent and efficient trading of established, investor-focused U.S. and global companies. To qualify for listing, companies must meet high financial standards, follow best practice corporate governance, demonstrate compliance with U.S. securities laws, be current in their disclosure, and be sponsored by a third-party advisor. </p><p style="text-align: justify;">Banks can leverage OTC Markets' Bank Reporting Standards to complete their Reg D or registered offering to trade on OTCQX, whereas NASDAQ and NYSE require full SEC registration pursuant to the '34 Act, which can be costly and burdensome. OTC Markets offers a diverse network of 90+ broker-dealers, including some of the largest community bank trading brokers such as Raymond James, DA Davidson, Janney Montgomery Scott, Piper Sandler, and KBW Stifel. It graduates a bank that trades thinly out of the CEO's desk or on the Pinks when a shareholder has a block of shares to trade from "I got a guy/gal", to "we have a market and trading volume." </p><p style="text-align: justify;">The cost, according to their presentation, was a $5,000 application fee, and $24,600 annually. Not a significant financial cost, and much of the disclosure and governance requirements are already in place at most banks. According to the presentation, the bid-ask spread was 2%, compared to 1.95% for NASDAQ, and OTCQX average shares per trade was slightly larger than NASDAQ. </p><p style="text-align: justify;">More important were some tips Ciaran had to achieve greater liquidity and visibility for your shares:</p><p style="text-align: justify;">- Increase your share count. Suncrest did it through follow-on offerings and using stock in deals. In addition, a bank could do stock splits or stock dividends.</p><p style="text-align: justify;">- Hold unique earnings webcasts, open to all stakeholders, and pick a hot-topic each quarter to add value to attendees and be different from the blah, blah, blah earnings webcasts from larger financial institutions.</p><p style="text-align: justify;">- Implement incentives for all staff to be shareholders. ESOP, DRIP, stock and option awards, etc.</p><p style="text-align: justify;">- All staff should be part of your investor relations programs. They'll be asked in the community about the bank and its prospects. Why not educate them about bank valuations and where the bank stands in terms of performance and valuation to peers?</p><p style="text-align: justify;">- Build credibility through transparency. There can be power through your shareholder disclosures. </p><p style="text-align: justify;">- Work to get every customer interested in owning your shares.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">There is psychological value for existing and would-be shareholders that know if they need to liquidate your shares that they can. It might be the difference between them buying or wanting to buy or being "not interested." Hiding in the Pinks or being private might exclude large populations of potential investors, leaving you few options when your older shareholder base wants to liquidate. </p><p style="text-align: justify;">Implement your plan before you need it. Because when you need it, will be too late.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-59936241631655797302023-02-04T16:08:00.001-05:002023-02-04T16:08:50.184-05:00How Does ChatGPT Describe the Economy and Banking?<p style="text-align: justify;">At Bank Director's <a href="https://www.bankdirector.com/conferences/acquire-or-be-acquired-conference-2023/" target="_blank">Acquire or Be Acquired conference</a>, I had a sidebar conversation with a longtime friend and banking industry investment banker about ChatGPT, which stands for Chat Generative Pre-Trained Transformer. <a href="https://www.zdnet.com/article/what-is-chatgpt-and-why-does-it-matter-heres-everything-you-need-to-know/" target="_blank">As described by ZDNet.com</a>, "ChatGPT is a natural language processing tool driven by AI technology that allows you to have human-like conversations and much more with a chatbot. The language model can answer questions, and assist you with tasks such as composing emails, essays, and code."<br /></p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCVkfPfbN_hHNZE5qoXyizq5wQKL0buDYvwWg3dKhidCRhO_k8YJ0TjEUjKg-WTFeMOk9W8YJUWWFWzdF2Edsl751h8CvPXOOg2nWj9qvb_2lFokWzsQpubUzEtb6c-Oqi0ZXicI13rRh2GeBpQl9yb_mVxknLx28Aug8BcbbxknegwUyYO0fjFiO8/s1920/ai-generated-7720849_1920.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1920" data-original-width="1829" height="217" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCVkfPfbN_hHNZE5qoXyizq5wQKL0buDYvwWg3dKhidCRhO_k8YJ0TjEUjKg-WTFeMOk9W8YJUWWFWzdF2Edsl751h8CvPXOOg2nWj9qvb_2lFokWzsQpubUzEtb6c-Oqi0ZXicI13rRh2GeBpQl9yb_mVxknLx28Aug8BcbbxknegwUyYO0fjFiO8/w207-h217/ai-generated-7720849_1920.jpg" width="207" /></a></div><br />On its <a href="https://chat.openai.com/chat" target="_blank">website</a>, ChatGPT describes its limitations as may occasionally generate incorrect information, may occasionally generate harmful instructions or biased content, and has limited knowledge of the world and events post 2021. It's in its "feedback" phase from the public. It is open to anyone.<p></p><p style="text-align: justify;">Will this replace the need to get information from humans, at least beyond what ChatGPT "learns" from humans by their writing? I'm not convinced. But I wanted to give it a try with relevant banking questions. Here are the results.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">Me to ChatGPT: Describe the current economic situation in the United States.</h4><p style="text-align: justify;"><b>ChatGPT</b>: The current economic situation in the United States is characterized by growth and recovery following the impacts of the COVID-19 pandemic. The economy has been supported by fiscal stimulus, including government spending and relief programs, and a strong rebound in consumer spending. The labor market has also improved, with unemployment declining and job growth picking up. However, some industries and workers continue to struggle, and inflationary pressures and supply chain disruptions have created some challenges. Overall, the US economy is on a path of recovery, but the pace and strength of the recovery will depend on the course of the pandemic and the success of vaccination efforts. </p><p style="text-align: justify;"><b>My take</b>: This looks like it's from one year ago, consistent with ChatGPT's disclosed current limitations. But TV talking heads should be worried.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">Me to ChatGPT: What is the outlook for the US economy?</h4><p style="text-align: justify;"><b>ChatGPT</b>: The outlook for the US economy is generally positive, with continued growth and recovery expected in the near term. Factors supporting this outlook include the ongoing rollout of COVID-19 vaccines, improving consumer and business confidence, and accommodative monetary policy from the Federal Reserve. However, there are also potential challenges and uncertainties that could impact the outlook, such as the pace of vaccine distribution, the emergence of new COVID-19 variants, and the possibility of inflationary pressures. Additionally, the implementation of new policies by the government, such as changes to taxes and regulations, could also influence economic outlook. Overall, the US economy is expected to continue growing, but the pace and strength of the expansion will depend on a number of factors, both domestically and globally. </p><p style="text-align: justify;"><b>My take</b>: Future predictions look like canned responses. And there is similar language in the first and second inquiries.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">Me to ChatGPT: What is the outlook for US banks?</h4><p style="text-align: justify;"><b>ChatGPT</b>: The outlook for US banks is generally positive, with the industry expected to continue recovering from the impacts of the COVID-19 pandemic. The improving economic conditions and the steady growth in loan demand are expected to boost revenue for banks. Additionally, low interest rates, which have been maintained by the Federal Reserve, are expected to continue supporting profits for banks by reducing borrowing costs for customers and increasing the spread between interest earned on loans and interest paid on deposits. However, the ongoing pandemic and the potential for rising defaults and loan losses in certain sectors remain risks for the banking industry. Additionally, regulatory changes and increasing competition from fintech companies could also impact the outlook for banks in the future. Nevertheless, the US banking industry is expected to remain stable and continue to support the broader economy in the near term.</p><p style="text-align: justify;"><b>My take</b>: I could envision a bank analyst saying the same thing on CNBC at the beginning of 2022. </p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">I asked the "best bank in the US" and it punted, saying it was subjective and gave me some criteria people consider when determining the best. Subjective questions might be a challenge.</p><p style="text-align: justify;">Overall, I believe AI will evolve into a tool to weigh against our opinions. But I'm not sure, lacking context, discernment, and other "gray" factors, if it will surpass good old-fashioned judgment and common sense. </p><p style="text-align: justify;">Potential bank use cases of generative AI, aside from the questions above: Research on certain industries to help determine credit risk, such as "How did the hotel industry perform in the 2008 recession?"; Vendor management due diligence, such as "Where can I find third-party reviews on the nCino loan operating system?"; Talent management, such as "What do Generation Z want from their employers?"; Assistance in cyber security measures, such as "Describe the 2021 Kaseya ransomware attack."; And make content writing easier by asking specific questions that used to take more research, such as "Describe the impact on small business from the 2017 tax cut."</p><p style="text-align: justify;">The tool is still new and evolving. It has the potential to streamline research that helps make decisions. However, as I mentioned, it will not do well in replacing discernment, context, and gray areas where community banks tend to operate.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"> </p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0tag:blogger.com,1999:blog-235433516644980443.post-76696096144867882672023-01-26T18:58:00.000-05:002023-01-26T18:58:17.865-05:00The Difference Between a Community Bank and a Big Bank<p style="text-align: justify;">I recently spoke to a community group, and subsequently a community bank all-staff meeting regarding the definition of a community bank. The FDIC has defined community banks in their <a href="https://www.fdic.gov/resources/community-banking/report/2020/2020-cbi-study-full.pdf" target="_blank">December 2020 Community Banking Report</a> that either exclude or include the following criteria:</p><div class="separator" style="clear: both; text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlK1S75RgrlMzhg7EcvQ4oDK8QhhVKHzA-Yf4gSTXOlOIYYb_h9EWWLjBzbvkPQIOtgx38Jfn-EwQhuqGsbC2S4Uz1eZX3Fsk-UIiy7qJQsre2C88Uy76KBOD3EfXCqr4tid21uftPG5WOsojnXWaqttnjiimJVogDWxu7Ld3aweVpC2MGbVPG8kIa/s1444/FDIC%20Def%20of%20Community%20Banks%202020.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="309" data-original-width="1444" height="130" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlK1S75RgrlMzhg7EcvQ4oDK8QhhVKHzA-Yf4gSTXOlOIYYb_h9EWWLjBzbvkPQIOtgx38Jfn-EwQhuqGsbC2S4Uz1eZX3Fsk-UIiy7qJQsre2C88Uy76KBOD3EfXCqr4tid21uftPG5WOsojnXWaqttnjiimJVogDWxu7Ld3aweVpC2MGbVPG8kIa/w611-h130/FDIC%20Def%20of%20Community%20Banks%202020.png" width="611" /></a></div><div style="text-align: justify;"><br /></div><blockquote style="border: none; margin: 0 0 0 40px; padding: 0px;"><blockquote style="border: none; margin: 0 0 0 40px; padding: 0px;"><div class="separator" style="clear: both; text-align: left;"><br /></div></blockquote></blockquote><span style="text-align: justify;"><div>Seems complicated. Especially when a community bank could have no office with more than $8.24B in total deposits but could have no more than $1.65B in total assets. A pretty small asset size, in my opinion. But the FDIC did confess that a community bank was not easily defined. </div></span><div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEggj3xIFnZfwYIM0kiT_0x0rwJKgCKFQnWv2rdV93hKzB6vlM05boqb8lUBAni9JI_ZDYWEeW5mZWqPI0a6CKhtJQ96M3K_s_ByHDMIpKIb3HFxKpX-DZICGjpsg7D2Vix4V0L58FPh0daxdEGaSMchZkBcYk3Z9vf28t7Ss518BHD8FPC2lsW_y6gg/s661/Truist-ENB.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="332" data-original-width="661" height="201" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEggj3xIFnZfwYIM0kiT_0x0rwJKgCKFQnWv2rdV93hKzB6vlM05boqb8lUBAni9JI_ZDYWEeW5mZWqPI0a6CKhtJQ96M3K_s_ByHDMIpKIb3HFxKpX-DZICGjpsg7D2Vix4V0L58FPh0daxdEGaSMchZkBcYk3Z9vf28t7Ss518BHD8FPC2lsW_y6gg/w400-h201/Truist-ENB.png" width="400" /></a></div><br /><div style="text-align: justify;"><br /></div><div style="text-align: justify;">If you ask me, the definition of a community bank is more subjective. Here is how I defined the difference between a community bank and a big bank.</div><p style="text-align: justify;"><br /></p><p style="text-align: justify;">A community bank lends depositor money here.</p><p style="text-align: justify;">A big bank lends a little here, there, and everywhere.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">A community bank is vested in the success of the communities it serves. When the community(s) suffer, so does the bank.</p><p style="text-align: justify;">A big bank is hardly vested in the success of any one or a few communities.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">A community bank's risk management practices, such as lending to certain industries, making character loans, deposit availability, etc. are made near the customers most impacted by those practices.</p><p style="text-align: justify;">A big bank makes risk management decisions at headquarters in a location far, far away.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Community bank customers get the bank's A-team.</p><p style="text-align: justify;">If you're not a very large borrower with eight figure loan needs, you're likely getting a bench player, if you get a player at all. You might end up with a bot named Michele or Michael.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Community bank leaders are at your churches, in your restaurants, at the ballfields, and in your community organizations.</p><p style="text-align: justify;">Big bank leaders are not.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Communities are better for having community banks in them. Is that true for big banks?</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p></div>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com1tag:blogger.com,1999:blog-235433516644980443.post-20210962667047207062022-12-27T15:09:00.000-05:002022-12-27T15:09:05.992-05:00Finovate Best of Show 5 Years Later<p style="text-align: justify;">Among bankers, there is anxiety. Anxiety from outsiders promoting newfangled technologies that must be adapted in order for their bank to be relevant. Anxiety from insiders chiding them to innovate because this customer or that customer asked about some piece of technology their other bank has. Anxiety from conferences that feature young speakers touting shiny objects.</p><h3 style="text-align: justify;">Anxiety</h3><p style="text-align: justify;">There is little benefit to anxiety if it doesn't result in action. And knowing where and when to act is critical in a changing industry like ours. The more we create and later hone the formula for making strategic decisions that result in positive action, the less anxious we will be.</p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJt1Lr5Jf8MjMeRGwNOLUc4AeBNkAcukNfCdrR0VMt_x19ti-AZ2jOjw918h7L_ZYXNu6W8kQ37E_ysfk_FOQTMqNPuUyKdzji_NXDOresMqPj5WQWqdVKUFsyBKfnYUZhe5aQVSSNiIGvOnxu28L5lbAx7Q_y9BQr4vS6SqHVHSZfzT5eNa4b41LX/s1920/gifts.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1280" data-original-width="1920" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJt1Lr5Jf8MjMeRGwNOLUc4AeBNkAcukNfCdrR0VMt_x19ti-AZ2jOjw918h7L_ZYXNu6W8kQ37E_ysfk_FOQTMqNPuUyKdzji_NXDOresMqPj5WQWqdVKUFsyBKfnYUZhe5aQVSSNiIGvOnxu28L5lbAx7Q_y9BQr4vS6SqHVHSZfzT5eNa4b41LX/s320/gifts.jpg" width="320" /></a></div>For example, if you empower employees to present innovation ideas to your executive team or a committee, do so in a systematic way. Have the employee build a business case. A business case that you would have created the template and provided instructions on how the employee should proceed in getting their innovation idea considered and possibly adopted. Not a process so cumbersome it inhibits adoption of great ideas. But cumbersome enough to provide the needed filters to not chase shiny objects. Such as...<p></p><p style="text-align: justify;">1) Must we do it (as in CECL)? 2) Is it consistent with strategy (as in demanded by high lifetime value (LTV) customers)? 3) Will it make us more efficient in how we run the bank (lower expense and/ or efficiency ratio)? 4) Will it improve the customer experience (and extend customer longevity, shorten sales cycles, improve pricing power)? 5) What is the cost? And, as you will note from the rest of this article, 6) Longevity of solution(s) provider.</p><p style="text-align: justify;">Only then would you move to the solutions to solve the problem or innovate. But what solutions? Does it depend on the last conference attended by an employee? How much longevity does the solutions provider have?</p><p style="text-align: justify;">This is increasingly on the minds of bankers. Many solutions providers in the fintech space are very young, don't have many installations, and have yet to turn a profit. Does it mean they are not viable alternatives to your bank? Not necessarily. But bankers want to ensure if they partner with a solutions provider, they will be viable into the future. And ideally would not have sold to a big three core processor that increases core dependency.</p><p style="text-align: justify;">That is why I occasionally look at Finovate best of show companies. To see where they are now because they were much ballyhooed by a top trade show in the country for fintech solutions. It should be instructive to bankers that evaluate solutions and implement a disciplined innovation culture, without creating such roadblocks that slow bankers down into becoming the bank they need to be for long-term relevance.</p><p style="text-align: justify;"><br /></p><h3 style="text-align: justify;">Finovate Best of Show: Fall 2017</h3><p style="text-align: justify;"><a href="https://finovate.com/finovatefall-2017-best-show-winners-announced/" target="_blank">Five years ago, these were rated the best</a>. I include the description from Finovate five years ago, and where they are today.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">Envestnet</h4><p style="text-align: justify;"><b>2017 Finovate Description</b>: Envestnet was recognized for its Financial Health Check that leverages account and transaction-level data to measure and score overall financial health across multiple dimensions including spending, savings, borrowing, and planning.</p><p style="text-align: justify;"><b>Today</b>: Envestnet continues to transform the way financial advice and insight are delivered by powering financial advisors and service providers with technology solutions that work toward expanding a holistic financial wellness ecosystem. It has over 108,000 advisors working for more than 6,000 companies including 18 of the 20 largest banks. Although reporting positive EBITDA in the four years and year-to-date (9/30/22) since being named best of show, it has reported net losses in two of the four full years and year to date. </p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">Finn.ai</h4><p style="text-align: justify;"><b>2017 Finovate Description</b>: Finn.ai was chosen for its Virtual Banking Assistant, powered by artificial intelligence and available via channels ranging from Facebook Messenger to Amazon Alexa. It makes everyday banking simple and easy for customers.</p><p style="text-align: justify;"><b>Today</b>: Finn AI was purchased by Glia in June 2022 where it remains a leading AI-powered virtual assistant platform for banks and credit unions, partnering with major FIs including ATB Financial, BECU, United Federal Credit Union, EQ Bank, Civista Bank and Truist Momentum.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">Jiffee</h4><p style="text-align: justify;"><b>2017 Finovate Description</b>: Jiffee won best of show for its tap & pay mobile technology that turns any device into a payment terminal, enabling for consumers to pay anywhere and everywhere without relying on plastic credit and debit cards. </p><p style="text-align: justify;"><b>Today</b>: Jiffee is a white-label mobile payment and authorization platform that securely confirms the identities of both parties on either side of a transaction. Jiffee is owned by Neontri, formerly Braintri, a private fintech based in Warsaw, Poland that entered the U.S. market in 2019. There were no financials available and no list of U.S. users on their website.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">Sensibill</h4><p style="text-align: justify;"><b>2017 Finovate Description</b>: Sensibill was selected for its <i>+Pulse</i> solution that helps spot revenue opportunities from on- and off-card purchase data, providing targeted prospect list for personalized, in-app campaigns. </p><p style="text-align: justify;"><b>Today</b>: Canada-based Sensibill is a customer data platform designed specifically for the financial services industry with an AI-powered, ethically sourced first party data with real-time actionable insights that help FIs drive personalization at scale. They claim over 60 million users across over 150 FIs in North America and the U.K. In October 2022, Sensibill was acquired by fintech aggregator Q2.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">SpyCloud</h4><p style="text-align: justify;"><b>2017 Finovate Description</b>: SpyCloud was selected for its monitoring and alert service that helps organizations better understand their employee and customer digital footprints by giving them visibility into their exposed credentials actively being traded in the underground.</p><p style="text-align: justify;"><b>Today</b>: Spycloud's products leverage a proprietary engine that collects, curates, enriches and analyzes data from the criminal underground, driving action so enterprises can proactively prevent account takeover and ransomware. Its customers include half of the ten largest global enterprises, mid-size companies, and government agencies around the world from its Austin, Texas headquarters. It has been funded with four rounds for over $58 million, the latest raise occurring in 2020. </p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">Sustainably</h4><p style="text-align: justify;"><b>2017 Finovate Description</b>: Chosen for its social good platform for consumers and businesses that turns the spare change from shopping into micro-donations to philanthropic causes. </p><p style="text-align: justify;"><b>Today</b>: As best I can tell, Sustainably, a U.K. based 2016 startup that helped businesses and consumers earmark spare change from purchases to their charity of choice, shut down this year. Although this fintech did not make it, the idea could advance an FIs higher purpose by helping their customers fulfill <i>their </i>higher purpose.</p><p style="text-align: justify;"><br /></p><h4 style="text-align: justify;">Voleo</h4><p style="text-align: justify;"><b>2017 Finovate Description</b>: Voleo was selected for its social trading app that makes it easy for people to invest together, saving time and money, while simultaneously leveraging the collective wisdom of networked investors to pursue market-beating returns.</p><p style="text-align: justify;"><b>Today</b>: According to its website FAQ, effective June 2020, Voleo USA, Inc. closed its US brokerage. Although they claimed their user base swelled dramatically, Covid-19 had cut off traditional funding sources and since they were not yet profitable, their parent company indicated it was unable to continue to support the operating losses. </p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">Of the seven Finovate Fall 2017 Best of Show, three continue to operate independently. Two were acquired, and two shuttered. This exemplifies the anxiety bankers experience when selecting partners. There is vendor risk that the solution might not make it, as is usual when partnering with relatively new firms/ solutions. Take solace that your partner selling to a larger technology firm is usually a good thing, perpetuating the solution and its evolution.</p><p style="text-align: justify;">However, there is risk. And bankers must assess the risk when selecting a solution partner. But only after going through the disciplined process outlined at the beginning of this article so you have a better chance of avoiding shiny objects.</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;">~ Jeff</p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p>Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.com0