Trim return of capital. Disclosure: long CIZN Modified disclosure: I’m not really long CIZN

As these regionals bring down spread revenue guidance 0-10% for 2q it seems to be about the midpoint of the industry. Several banks will grow NII nicely in 2Q. There are many many others, some highlighted in recent 5 Points, that will be hurt severely and need to…

"University Bancorp in Ann Arbor, Michigan, jumped from third in last year's ranking to claim the No. 1 spot this year, with a three-year average ROAE of 35.62%". While likely relying more on two years previous results, a nice distinction for @LangeRanzini and $UNIB

"A serious credit crunch is going to be tough to avoid. Liquidity must be rationed. Cash flows from maturing bonds and loans at many institutions will be directed to pay down wholesale borrowings or fund deposit outflows for now".

$SOFI is up 88% in a month. Followers recall laughing at CEO Noto’s ROE math, but longs are laughing now. Is it because of student loan refi’s or higher estimates? No, the data suggest it is just a call option game

Steve Didion sighting as he casually posts the tweet of the year. I would have included Miller but every topic can’t be about CFST.

Stand outs setting a constructive, partnership culture. To balance it out I encourage @FredEarle4 and @OurBank3 to share your talents and drag the Quagliano types buying ✈️ and 🚁 . @Catahoula_Value @thebankzhar @Aureliusltd28 @SirBaby6

Instead of treating stakeholders like muppets. For example Sally Pope Davis at GSAM has invested with Scott Dueser at $FFIN for 19 years because of servant leadership. Rob Alexander at $FBSI, Hoppy Cole at $FBMS. So please share some CEOs who you consider…

In honor of @MaxfieldOnBanks while he’s with family, let’s touch on a favorite topic of his - low ego bankers. After some recent run ins with nasty levels of ego I am reminded the value of long-term partnerships with bankers who think like partners…

@Catahoula_Value Sherrod Brown and Tim Scott are both open to it so barring some technical snag it seems likely

@Catahoula_Value Sherrie Brown and Tim Scott are both open to it so barring some technical snag it seems likely

@colarion I see from NB's 2022 AR that 15% of workforce is dedicated to cannabis banking. NB opened a new Specialized Banking Center (SBC) to service the industry. The SAFE Banking Act has passed the House 6-7 times. Do you think that it will ever pass Senate?

“Talk amongst yaselves” as Mike Myers used to say on SNL. “I’ll give you a topic”, Needham Bank takes over Eastern’s cannabis business. (Needham is converting).

Allocating capital today to the banks that went heavily long mortgage backed securities

@alluvialcapital @Ron284Ron I'm pretty sure nothing has changed...you under-estimated the level of traditional and sleepy.😂 If you want to see what bank websites looked like 20 years ago, I don't think that this one has changed much. Special sauce here was an equity portfolio.

@Catahoula_Value Finally they put it up on the website! Thank you Catahoula for your twitter value add

Here's a big shout-out to a well-regarded bank analyst on Twitter @colarion, who Joel Barrett quoted at the 2023 TNB SH Meeting (29 - 31 minute mark). While his joke brought the house down, this year's meeting was a masterclass on running a community bank during rising rates.

In fairness yesterday USB and CFG both said quarter was coming along inline (CFG said teens ROE on track, USB said PPNR and tax same outlook)

It would be constructive to see more fundamental foundation supporting banks today vs jerky jerk sector rotation. But it could help relax deposit concerns at a few spots.

To clarify HTM, this means the bank has $158mln of tangible common equity, and they bought about 1.6bn of bonds they intend to hold. Those are worth about $260mln less than their purchase price. So just one datapoint, and yes their deposits also have value.

Here is an interesting situation. Some of you know Republic First (FRBK), not to be confused with First Republic, since they are so different. FRBK has deferred coupons on its sub debt and has a HTM mark of 180% of tangible common equity.

Look at our sharpe ratio

CMBS office dq ripping in May but the rest of CRE is surprisingly tame (Trepp).

Somebody showed up for work at the San Francisco Fed

This account is not here to grow 100,000 followers, but to give & get constructive ideas and feedback. Investing well with banks requires gathering datapoints and details from all corners. Value nerds reading 10Qs and CRE rags are welcome here!

Lending at many banks may remain slightly positive due to increases in things like home values, and the whole process is helpful in resetting fixed rate loan prices. But overall it is disinflationary vs 2022.

This comes from listening to about 50 bankers over the last month. it is in most bank conference calls and slide decks (WFC from yesterday below). This is part of why many on this site are saying “The Fed is done”.

On the demand side, more CRE projects don’t pencil, so borrowing demand is lower. On the supply side banks focus on credit and take care of their own customers ahead of growth. They also are taking care to preserve liquidity and capital right now. So less lending.

What happens to bank lending when deposit costs rise quickly? The Fed is thinking about this and gathering data for July rate hike. Well, the answer is…

Headlines about Wells Fargo taking office losses, but actual statements made are more nuanced. Something about credit being “extremely strong” (But two sentences later “things are ok” so we need some technical definitions)

A good question is how best to time this “event”. My sense is the ball is in motion, but the scope of target industries is broad. Hopefully among the few thousand that read this a few will give color on how it is unfolding or not. Thanks in advance!

This deserves much more study than a few tweets so I’ll address in a future note. @kieranwgoodwin did an insightful talk about this as well which you may have seen:

What ends up happening? Perhaps restructuring increases in coming months, across private credit and equity. Their lenders in turn tend to be Wall Street entities, “fund finance” lenders as well as CLOs which are then tranched.

BDC investors and the allocator marketplace don’t seem to mind yet. Perhaps 6x+ EBITDA lending is an all weather strategy. But it’s not. Verdad recently published a survey that tore private equity creditworthiness apart (

To be fair 6x is not a line - borrowers can unitranche with private credit (sub 6 plus mezz) or use bank plus mezzanine, in which lenders expect a measure of default.

ZIRP with quantitative easing is the ideal petri dish for this strategy. Today however, these are typically loans that levered more than OCC advises. The OCC was right, 6x is fairly rich. When 6% cost of debt migrated to 11%, cash flow gets pressured further.

Allocators began to allocate away from volatile public equities when private credit, levered 50%, does similar returns with little to no volatility (typically supporting PE buyouts).

The door opened for private, non-bank credit to explode, which it did.

In 2013 a butterfly flapped its wings when the OCC wrote that banks should not lend over 6x ebitda.

@Catahoula_Value Appreciate your reading and poetry

Managing a bank's balance sheet is more like arranging choreography for a tango than designing moves for a line dance. In other words, orchestrating both the left (assets) and the right (liabilities) side of the balance sheet to move together. Result = The Magic!

This observation is "spot on," there are literally masterpieces overlooked here. After Vincenzo Peruggia boosted the Mona Lisa in 1911, for over two years the Louvre maintained an open spot formerly occupied by the painting. Patrons visited the museum to stare at an empty wall.

Haskell has a good contrarian streak

Instead of a ban, we can: - Update deposit insurance limits, which banks want and pay for anyway. - Levy a bill with the FT for publishing fake news on WAL. In the meantime Mr. Mason can help himself - consider swaps, asset sales, and an evolved deposit strategy.

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