BankForward Consulting, LLC - Advancing A New Model for Community Banking
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Muni Bond Price Discovery: Don’t Get Picked Off!
Enablement vs. Entitlement
A Surprise (to me, anyway) in Comparing Judicial vs. Non-Judicial State NPA's
Torture Numbers and They'll Confess To Anything
Does Strategy Matter?


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Bob's Blog

Muni Bond Price Discovery: Don’t Get Picked Off!

It’s the worst kept secret in the brokerage business: community bank CFOs and investment managers rarely seek pre-purchase validation on prices paid for investment securities. If the yield and the structural characteristics look good, most are apt to pull the trigger.  That is a painful, expensive mistake—especially in today’s muni market.
Municipal bond price levels have skyrocketed in 2012---particularly since the November elections.  Bond traders are on the prowl in search of inventory.

Enablement vs. Entitlement

First a divisive, partisan tale--and then a personal reflection
A woman in a hot air balloon realized she was lost.She lowered her altitudeand spotted a man in a boat below. She shouted to him,

"Excuse me, can you help me? I promised a friend I would meet him an hour ago,
but I don't know where I am."
The man consulted his portable GPS and replied, "You're in a hot air balloon,approximately 30 feet above ground elevation of 2,346 feet above sea level.

A Surprise (to me, anyway) in Comparing Judicial vs. Non-Judicial State NPA's

I've had opportunity to speak with senior management from several thrift charters over the past couple of weeks. During two conversations in particular--one each with an Illinois and an Indiana thrift--executives complained that the judicial foreclosure process in their states was extending the time necessary to resolve residential mortgage NPA's, foreclose and turn around rehabilitated properties for sale.  By comparison, they said, non-judicial states had more streamlined processes to take control of properties and get them off their balance sheets.

Torture Numbers and They'll Confess To Anything

On the front page, above the fold in the April 4th edition of American Banker, a graph is prominantly displayed that shows compelling growth in C&I lending from September 2010 through the first quarter of this year.  The accompanying story on page 10 includes relatedgraphic details, but you'll need your AB credentials to read the full article.
While the trend looks comforting, it probably left most bankers wrinkling their brows, wondering why they haven't seen anything like that in their own board reports.

Does Strategy Matter?

 There are eight distinct lending strategies and least five intentional funding strategies a banker can pursue in building a balance sheet. Think that strategy doesn't matter? Check out the interactive graph using the interactive graph on the Bank Intelligence website.  It's a thought-provoking tool.

Brilliant But Flawed

Peter Wallison, a respected fellow at the American Enterprise Institute, published an insightful op ed piece in the December 3-4 weekend WSJ that appears to be getting wide circulation across the web.  The article makes several important points about regulatory shortcomings leading up to the financial crisis of 2007...but I differ materially with one of his prime contentions.  Read his article first...then consider my response below (I also posted this response with the article on WSJ.

Documenting Assumptions Along The Boulevard of Broken Dreams

“Borrowing short-term at a near risk-free rate and lending at a longer and riskier yield has been the basis of modern-day finance. The further out the Fed moves the zero bound towards a system-wide average maturity of seven to eight years, the more credit destruction occurs.”
                                - Bill Gross quoted in the

What's A Portfolio Manager To Do?

Those who follow my occasional thoughts on the direction of the economy, investments and interest rates know that “morbidly fascinating” is a phrase I’ve come to use in framing our American predicament.  Looking back on this past week, I do wish that my choice of words was less appropriate. 
The Saturday, August 6 edition of theWall Street Journalis a keeper.  If you haven’t seen it, get one and read it.  I’ve placed mine atop the stack I keep that heralds above-the-fold headliners like Bear Stearns, Lehman Brothers and Fannie Mae.

Salvage Efforts In The Skittish Landscape of Community Banking

Early this year I began a search for metro Atlanta community banks with good market demographics, a strong deposit base and non-performing assets (NPA’s) that have been written down to a level such that the bank’s remaining capital plus ½ of the loan loss allowance would serve as sufficient cushion against any "burn" on newly invested capital.  My investment premise has been that new capital can be injected into qualified targets at a fraction of book value, and that cost efficiencies in combination with a focused business plan could yield compelling returns for a targeted set of community banks over the coming 3-5 years (investment premise available in a separate document).

A Response To The Question: Can Community Banks Survive?

One of my all-time favorite cartoon comic strips is Frank & Ernest.  The strip features two bums spouting earthy one-liners of wit and wisdom.  A particular favorite that I recall from way back during the Carter administration featured Ernest in a supermarket check-out line, purchasing a package of ground round.  The caption reads: "Isn't $1,645,469.83 a little steep for a pound of hamburger?!?!"(I searched Google to try and post the cartoon, but alas...).  Here's the point: during the late 1970's, people began to believe that 13% inflation was going to be with us forever, and society began to think and extrapolate accordingly.